SHIPBUILDING INDUSTRY [MONEY] (Hansard, 30 April 1970)

§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
I should like to ask a 1563 question on the Money Resolution which provides for money to be paid out of the Consolidated Fund in support of the higher level of£600 million. I understand that there will be further loans upon public funds. Since the banks have already reached 5 per cent. of their deposits in advances under similar legislation to this Bill and the export credit guarantee arrangements, they will be reimbursed with an extra£200 million which might be lent under the Bill by the authorities. Therefore, under the Bill a figure of up to£200 million can be lent to the banks at cheap interest rates. This will not be paid by the banks directly because they are already up to their ceilings. There will be further financial burdens on the Treasury via the Bank of England.
It is odd that this is not mentioned in the Resolution. It is also odd that the Bill says: No expenditure by the Minister in consequence of the Bill is at present foreseen. I am prepared to accept that there is some explanation for this apparent discrepancy, but it will be helpful if we are told why there should be this apparent omission.

§ The Paymaster-General (Mr. Harold Lever)
I hope that I can put the hon. Gentleman's mind at rest on this matter. The Minister of Technology gives guarantees to banks on loans made. Against those guarantees the banks are prepared to lend at a fixed rate of 5½per cent. There is no cost to the Exchequer unless the shipowner defaults on the loan, and no net costs to the Exchequer unless security for the loan is insufficient to repay the bank. The Ministry is advised on security requirements and, so far, there has not been a single case of default. So there is no reason to anticipate any difficulty.
The Ministry's limit of liability under the scheme is at any one time, so that the money revolves in the end. We have the limit, and, as soon as it is repaid, we can go up to the limit again.
The Money Resolution carries forward the technical Amendment first introduced by the Shipbuilding Industry Act, 1969, under which any amounts paid out by the Minister on guarantees, so far as they have not been received by him, are ex- 1564 cluded from the amount available to him for guarantees. So that produces the limit satisfactorily provided by the Money Resolution.

§ Mr. Simon Wingfield Digby (Dorset, West)
We are not only concerned with the joint stock banks. They are only able to finance money up to 5 per cent. of their deposits for shipbuilding and export credits. When they have exceeded that figure, the surplus has to be provided by the Bank of England. We want to know how that money is provided by the Bank of England and where the cost falls.

§ Mr. Lever
This Bill does not control the Bank of England or the joint stock banks. It merely gives the Minister power to give a guarantee of£600 million on a revolving basis. It is up to the Minister to see where he can get the money. When he gets the money offered from one quarter, he takes it. As long as he keeps within the statutory limit of£600 million, when the fund starts to revolve, that allows him to give guarantees above the first£600 million, and all is well. I cannot see what is troubling the hon. Gentleman.

§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
With the leave of the House, despite the fact that I am such a novice—

§ Mr. Deputy Speaker (Mr. Sydney Irving)
Leave is not normally accorded in a case like this without an explanation from the Chair.

§ Mr. Arthur Lewis (West Ham, North)
I object.

§ Mr. Deputy Speaker
Order. It would be satisfactory if the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) spoke on the sitting down of the Minister.

§ Mr. Arthur Lewis
I object. The hon. Gentleman has not the leave of the House.

§ Mr. Deputy Speaker
Order. It would be more convenient if the hon. Gentleman the Member for Cirencester and Tewkesbury made his remarks on the sitting down of the Minister.

§ Mr. Ridley
In that case, before the right hon. Gentleman sits down, I do not think that he has quite got the point. It is that the passing of the Bill will enable 1565 £500 million to be advanced by the banks. The banks have an arrangement that, when they have advanced£500 million. they can draw from the Bank of England the excess to support the amount above£500 million. Therefore, since they are already on their ceiling, there will be money coming from the Bank of England which will fall eventually upon public funds.

§ Mr. Lever
I had not realised the hon. Gentleman's point. He claims knowledge of what goes on between the Bank of England and the joint stock banks, which is no concern of ours on this Money Resolution. This enables the Government to guarantee borrowing undertaken by the banks. What the joint stock banks do as regards the Bank of England is nothing to do with this Money Resolution.
For the record, I am now sitting down.