HC Deb 29 November 1973 vol 865 cc570-3
10. Mr. O'Halloran

asked the Chancellor of the Exchequer how many London boroughs, including the Greater London Council, are participating in the Treasury scheme to obtain foreign currency loans ; and what amount he estimates will be borrowed by them over the net two years.

Mr. Patrick Jenkin

Most London boroughs participate in the arrangements whereby the GLC borrows on behalf of London as a whole and offers part of the proceeds to individual boroughs. It is not possible to forecast how much will be borrowed in future.

Mr. O'Halloran

I am grateful to the right hon. Gentleman for his reply. In view of the large capital programme of the Greater London Council and the London boroughs, especially relating to housing, will he give an undertaking that he will extend the scheme further?

Mr. Jenkin

My right hon. Friend feels that the present arrangements, whereby the GLC borrows and then passes on some of the proceeds to the boroughs, is working fairly well. It is primarily a matter of negotiation between the boroughs and the GLC.

Mr. Marten

What is the total sum borrowed by the public corporations and the local authorities overseas under the scheme? Has it yet reached £1,000 million?

Mr. Jenkin

Yes, it is of that order of magnitude

Mr. George Cunningham

Is the right hon. Gentleman aware that the borough of Islington is grateful for the new capacity to borrow abroad at interest rates ½ per cent. below those which would otherwise apply? It will be of great assistance. Is he aware that this facility conceals the even worse balance of payments situation which would have existed under the old arrangement?

Mr. Jenkin

I am aware that an application has been received from Islington for borrowing. The application is being considered in the normal way. On the hon. Gentleman's second point, I disagree with him entirely. The scheme offers a sensible way of financing a temporary balance of payments deficit. I explained during the debate last week that we are borrowing in this way through the public sector on normal commercial terms and that the repayment schedule stretches over a good many years ahead. It is, in the circumstances, a sensible thing to do.

14. Mr. Ridley

asked the Chancellor of the Exchequer what is the total amount borrowed by public industries and public and local authorities overseas since June 1970.

Mr. Patrick Jenkin

The total amount borrowed in foreign currencies by nationalised industries and local authorities for domestic purposes between June 1970 and 31st October 1973 amounted to approximately £1,100 million at current rates of exchange.

Mr. Ridley

Will my right hon. Friend say what is the point in borrowing long in currencies which are appreciating steadily against us when we have a floating exchange rate and could perfectly well attract the necessary funds in our own currency on short term?

Mr. Jenkin

With respect to my hon. Friend, I think it is a reasonable and proper way to finance a temporary deficit. If one can borrow on these terms in the Eurodollar and other markets at favourable rates compared with rates for borrowing from domestic sources, it is thoroughly sensible for the industries to do so. I hope that my hon. Friend might be able to agree with that.

Mr. Dalyell

Is it not true that, whereas the figure was about £1.100 million, it is now nearer £2,000 million?

Mr. Jenkin

There is some confusion between pounds and dollars. I have been quoting figures in pounds, as did my hon. Friend the Member for Banbury (Mr. Marten) in an earlier supplementary question. The figure is something over 2,000 million dollars.

Sir Harmar Nicholls

Is my right hon. Friend satisfied that he is receiving full co-operation from local authorities in restraining their spending during this time of stringency?

Mr. Jenkin

I hope that the local authorities will take note of what I said last Thursday to the Society of County Treasurers. It is of the utmost importance that all parts of the public sector should contribute to the slowing-down of the rate of public expenditure if we are to be able to steer our resources into the balance of payments and the investment that we need.

Mr. Healey

If the right hon. Gentleman really believes that, would it not be much more sensible for him to borrow direct from the IMF short-term at interest rates only one-third of those at which local authorities and others are borrowing from the Euro currency market? By smothering our balance of payments deficit, is he not inflicting a loss of £70 million a year by his own account on our balance of payments?

Mr. Jenkin

Nobody is trying to smother anything. What we are doing, and doing successfully, by borrowing on normal commercial terms through the public sector, through the Euro market and other overseas markets, is obtaining enough to finance our deficit. That is a sensible thing to do. In the meantime rights with IMF remain intact and can be drawn upon if occasion arises.