§ 11.30 p.m.
§ The Financial Secretary to the Treasury (Mr. Patrick Jenkin)I beg to move,
That the Northern Ireland Loans (Increase of Limit) Order, 1971, a draft of which was laid before this House on 24th March, be approved.After the very full debate which the House had earlier today on the subject of Northern Ireland, I believe that I can speak to the Motion briefly. The Order is the first of its kind and it is right that I should give a brief explanation of how it comes before the House and what it does.As the House will know, the United Kingdom Government have lent to the 402 Northern Ireland Government for many years to help to meet the latter's capital spending needs. Since 1950 this has been done under the Miscellaneous Financial Provisions Act of that year, as amended by subsequent legislation. Each time that the borrowing limit had to be increased, a new statutory provision was necessary. Under the Finance Acts of 1965, 1967 and 1969, the limit was progressively increased to £70 million, £120 million and £170 million respectively.
This procedure had proved very cumbersome, so the previous Government, in last year's Finance Act, introduced a more up-to-date and permanent arrangement. Section 35 of that Act did three things. First, it provided that there should be no more borrowing under the 1950 Act as amended. Second, it established a new borrowing power with a limit of £50 million. Third, it provided that that limit of £50 million could be increased by Order: such an Order could increase the limit by up to £50 million, but there should be no more than three such Orders under the Section.
This is the first of such Orders and it increases the limit from £50 million to £100 million as from 1st May this year. The Select Committee on Statutory Instruments has laid a Report on the Order only this afternoon.
The Order is necessary because the Northern Ireland Government have already borrowed £38 million of the original £50 million permitted under the Act and will probably need to borrow about £70 million in the present financial year. The capital requirements of the Northern Ireland Government are increasing as their programme of improving the housing and infrastructure of the Province goes on, and these requirements are in excess of what they can hope to raise from local or open market borrowing.
It might help the House if I point out that the Northern Ireland Government lend to local authorities in the Province on exactly the same conditions as the Public Works Loan Board does in Great Britain—that is, each authority borrows a quota from the Government and is expected to raise the remainder of its needs in the market while the Government stands behind it as lender of last resort if it is unable to do this.
The Northern Ireland Government also finance the Electricity Board for 403 Northern Ireland in much the same way, lending the Board part of its requirements in the first instance and standing behind it if it is unable to find the rest of the money in the market. Almost the whole of the Northern Ireland Government's borrowing from the National Loans Fund is required for the on-lending I have described.
Perhaps it would be right that in this context I should from this Dispatch Box reaffirm what was said by the right hon. Member for Cardiff, South-East (Mr. Callaghan) in his discussions with the Northern Ireland Government on 9th and 10th October, 1969 and published as a White Paper—Cmnd. 4178—paragraph 12 of which stated that the then Home Secretary—that is, {the right hon. Gentleman—
affirmed the intention of the United Kingdom Government to cover the agreed capital requirements of Northern Ireland on a continuing basisThis means that they are able to turn to the National Loans Fund as their main source of borrowing. They borrow also by Ulster Savings Certificates and stock issues, which is welcome as a supplement to their borrowing from the National Loans Fund. But it seems right that they should have the reassurance, which I affirm tonight, of this availability of funds from the National Loans Fund.I have spoken but briefly, as is appropriate, I think, at this time of night. If any right hon. or hon. Members have queries to raise, I shall do my best to answer them.
§ 11.35 p.m.
§ Mr. Kevin McNamara (Kingston upon Hull, North)We welcome that the Financial Secretary now has to come before the House in this way so that we may question him about the way in which the money is to be used or spent, since this is, in fact, a loan from the United Kingdom taxpayer, including the Ulster taxpayer, to the Northern Ireland Government.
The sum involved is not small. To what extent is it a general sum being made available at the request of the Northern Ireland Government, following the agreement made with my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) when Home Secretary, 404 and to what extent is it a sum agreed for specific projects in relation to housing and the infrastructure? To what extent are the specific projects for which money is requested brought to the attention of Her Majesty's Government, and to what extent are they agreed?
Second—the hon. Gentleman said that a lot of the money would go to housing —what will be the position when we have a central housing authority? Will it be just a block sum allocated to the central housing authority, and what will be the responsibility of both the Northern Ireland Government and Her Majesty's Government for the whole Kingdom in supervising the affairs of that authority?
§ 11.37 p.m.
§ Mr. Rafton Pounder (Belfast, South)I shall follow the hon. Member for Kingston upon Hull, North (Mr. McNamara) in putting one or two questions, not making a speech. I shall omit one of my questions, for the hon. Gentleman has raised it already, that is, to ask whether this money earmarked for something special or provided in a general sense.
My recollection is that, shortly before the election, the then Home Secretary agreed a five-year development programme for Northern Ireland, and this was subsequently endorsed by the incoming Administration. Do I take it, therefore, that this £50 million is part of the funding of the British Government's assistance to that five-year programme, or is it in a separate and special category?
§ Mr. McNamaraWhen opening the main debate earlier today, the Home Secretary said that the five-year development programme was being looked at again in any event.
§ Mr. PounderI realise that, but although it is being looked at again, I presume that that is on the periphery of the examination which is taking place rather than in the nature of a fundamental reappraisal of the whole programme which had been agreed prior to June and endorsed subsequently. Perhaps my hon. Friend the Financial Secretary will clear up that apparent misunderstanding between the hon. Gentleman and myself.
As there may be two further Orders covering comparable amounts later, am I right in assuming that there will be 405 nothing to prevent a future Order, or, indeed, this one, being used for industrial inducements, or is one tied to infrastructure, the Northern Ireland Government's lending to local authorities, and allied subjects?
My hon. Friend said that the British Government stood as lender of last resort. This raises, therefore, the question of the position of Northern Ireland stock, as I understand it, in better times it would have been possible for the Northern Ireland Government to go to the open market to raise the money, but in view of our current difficulties this is deemed a cleaner way. This question of Northern Ireland stock is one that I find raised with me occasionally by the Belfast Stock Exchange. Apparently it does not have a Treasury rating, and therefore does not occupy a rather privileged position that Treasury stocks usually do when they go to the open market. I hope that my hon. Friend can comment on this, because seemingly it presents certain underwriting problems and tax problems for those who acquire such stock. Since Northern Ireland is so clearly part of the United Kingdom, and Her Majesty's Government do stand as the lender of last resort, if there is this anomaly would not it be possible by means of the Order or another Order to tidy it up and have Northern Ireland stock on all fours with ordinary Treasury stock?
§ 11.41 p.m.
§ Mr. James Molyneaux (Antrim, South)Did the reference by my hon. Friend the Financial Secretary to improving the infrastructure of the Province include such matters as the further development of the motorway system and the Belfast Airport complex, now that the airport is being transferred to a Northern Ireland authority?
§ 11.42 p.m.
§ Mr. James Callaghan (Cardiff, South-East)The House will not want to deny the passage of this Order, but some interesting points have been raised to which I am sure the Financial Secretary will want to reply.
I believe that there would not be much joy for Northern Ireland in going to the capital market for these loans. It would have to pay much more for them than it would presumably pay to the 406 Treasury. But this brings me to my first question. Can the hon. Gentleman tell us what rate of interest is being nominally charged to the Northern Ireland Government? Section 35(4) of the Finance Act, 1970 lays down that
Loans … shall be repaid at such times and by such methods, and interest thereon shall be paid at such rates and such times, as may from time to time be determined by the Treasury; …The hon. Gentleman will probably be able to tell some of his colleagues that they are doing much better out of the Treasury than they would if they went to the open market for some of these loans.How is the £50 million accounted for? Is there any publication which sets out how this capital sum has gone quite quickly? If I caught the Financial Secretary's figures aright, he said that £170 million had gone in the past 20 years, and now it is £50 million in one year, since May, 1970. If that is right it means that there has been, as we hope, a substantial stepping up in the development programme, and now we are asked for another £50 million.
Does the hon. Gentleman have any idea how long this tranche is expected to last the Northern Ireland Government? There are two further tranches that he can take, but I think that the House would like to know how long he expects it to last, and, more important, how is it being spent, and how will it be accounted for. Before we vote £50 million, it would be useful to the House to have some idea how the first £50 million has been spent. That seems a reasonable request. I am sure that it is going for such things as housing and roads—at least, I assume so.
I have one particular point in connection with Harland and Wolff. It has had a loan of, I think, £8 million, which I believe derived from the Shipbuilding Industry Board, and an investment grant of £5 million. The Board will be wound up at the end of the year. There is little doubt that Harland and Wolff will have a substantial need for cash over the next year or two, until it has worked off the orders that it attracted from Mr. Onassis at, I regret to say, a substantial loss. Mr. Onassis is a very lucky man. He has had ships built for him very cheaply. He could afford not to take a dividend on his capital.
407 If it is in need of the money and the Shipbuilding Industry Board is to be wound up, as we understand and which I regret, will the management of Harland and Wolff be able to qualify for grants or loans from the fund to enable it to carry on business? This is a remarkable enterprise, one of the most exciting I have seen. The only thing I regretted was that in a total labour force of 8,500, only 500 were Catholics and 8,000 were Protestants. This is a ratio which we must try to change. However, it is a most remarkable establishment, and it would be wrong if the winding-up of the Shipbuilding Industry Board were to prevent Harland and Wolff from getting the cash needed.
§ 11.47 p.m.
§ Mr. Patrick JenkinI am grateful for the welcome given to the Order by both sides of the House.
A number of hon. Members have asked to what use the money whch is to be lent under the Order will be put by the Northern Ireland Government. Under the Finance Act, 1970, lending from the National Loans Fund to Northern Ireland must be on expenditure which, in the opinion of the United Kingdom Treasury, is of a capital nature, and from time to time the projects on which the money may be spent are described in general terms in agreements between the two Governments.
The current administrative arrangements cover lending—that is, on-lending —by the Northern Ireland Government to local and public authorities, acquiring land for new towns and lending for certain agricultural purposes. To some extent, this answers the question by the hon. Member for Kingston upon Hull, North (Mr. McNamara). The United Kingdom Government do not attempt to specify in detail upon what the Northern Ireland Government may spend the money they borrow from the National Loans Fund. They establish certain broad categories which operate for the time being, but the agreement is, as always, open to renegotiation and new arrangements establishing different categories can be substituted.
In that way, the precise use of the money within the broad rules of the Finance Act, 1970, is entirely a matter 408 within the responsibility of the Northern Ireland Government and is not subject to scrutiny by Whitehall. That means that one must look to publications of the Northern Ireland Government to find out how the money has been spent. It is not detailed in this country. I am told that there are publications, in much the same way as we would have for our National Loans Funds, detailing the expenditure which the Northern Ireland Government have made drawing on the money they have borrowed.
§ Mr. McNamaraWill the hon. Gentleman explain to what extent, if at all, Whitehall agrees or acquiesces in the priorities as established by Stormont? Does Whitehall always accept them automatically, or does it suggest that there may be different emphases in different places?
§ Mr. JenkinI have no doubt that there is a continuing dialogue within the arrangements which exist for supervising the financial dealings between the two countries, but it would be quite wrong for my Department to attempt in any way to dictate to the Stormont Government what it should do with money which is broadly within its responsibility. Apart from laying down the broad general categories which I have described, that is the limit of the interference by Westminster.
I am informed, however, that money that the Northern Ireland Government borrows from the National Loans Fund in the current financial year will be used for lending as to one-half to local authorities in Northern Ireland, mainly for housing and environmental services, education and road, one quarter to the Northern Ireland Housing Trust and new towns, and the remaining one-quarter to the Electricity Board for Northern Ireland to replace the maturing market debt and for new capital expenditure. The motorway was mentioned by my hon. Friend the Member for Antrim, South (Mr. Molyneaux). How money is allocated as between motorways and other road and infrastructure spending is entirely within the competence of the Northern Ireland Government.
My hon. Friend the Member for Belfast, South (Mr. Pounder) asked what was the relationship of the money lent 409 under the order and the money to be spent on the five-year development programme. The money lent to the Northern Ireland Government under the order forms part of the capital resources available to the Northern Ireland Government to meet the expenditure on its £75 million five-year programme. As has been said, this programme covers urban development, housing and various other matters, some of which are within the terms of the Finance Act, 1970, and some of which are not.
To the extent that money is available under that Act and this order for that programme, the Northern Ireland's Government's own resources can be deployed on the matters which are outside the terms of that Act. There is nothing to prevent any future order or new agreement between the two Governments from altering the current parameters of the expenditure of money borrowed from the National Loans Fund.
The right hon. Member for Cardiff, South-East asked about the lending terms. The broad answer is that the loans made by the National Loans Fund are broadly on the same terms that the United Kingdom Government can get when they go to the market in this country for loans of comparable length or comparable terms. As such, the Northern Ireland Government is paying broadly the current gilt-edged rate.
The right hon. Member was entirely right—he knows vastly more about this than I, having been at the Treasury much longer—when he told my hon. Friend that these were probably better terms than the Northern Ireland Government itself could hope to obtain if it went itself to the market. I am sure that I shall not be misunderstood if I say that in this context the Northern Ireland Government's own powers to go to the market are of the same nature as the borrowing powers of major local authorities in Great Britain. It has always been established practice that 410 those authorities do not get a Treasury guarantee, and so their stock is not gilt-edged. If the Treasury needs to give a guarantee, it is better that the Treasury should itself borrow and then lend on through the National Loans Fund. I believe that most people would regard that as the right course.
The right hon. Gentleman asked how long this tranche of the borrowing might be expected to last. Perhaps some clue is given in the figures which I gave, that, of the first £50 million in last year's Act, £38 million has already gone, and the spending in the current financial year is estimated to be about £70 million. So one would expect to have to come back with another Order within the twelvemonth. But this very much depends on how the spending goes.
Finally, questions were asked about Harland and Wolff. From the categories which I gave earlier in answer to the hon. Member for Kingston upon Hull, North it is apparent that this money is not available for industrial investment, but the fact that it is available to meet environment, roads, housing and other purposes means that Northern Ireland Government's own resources are available for lending to Harland and Wolff and for any other industrial purposes. Indeed, the Harland and Wolff loan is not dependent on the Shipbuilding Industry Board. This is a matter entirely for the Northern Ireland Government and is in accordance with their statutory powers to lend and to make grants to industry.
I hope that I have answered all the points raised in this short debate and that the House will feel it right to agree to the Motion.
§ Question put and agreed to.
§
Resolved,
That the Northern Ireland Loans (Increase of Limit) Order, 1971, a draft of which was laid before this House on 24th March, be approved.