§ 12. Mr. Arthur Jones
asked the Chancellor of the Exchequer to what extent local authorities requiring funds beyond their overdraft facilities will be adversely affected by the Bank of England's instructions to clearing banks operative from 1st July limiting overdrafts to specific amounts.
§ Mr. Joel Barnett
The new overdraft arrangements were proposed by the clearing banks in response to a general request from the Bank of England, endorsed by the previous administration, for steps to be taken to reduce excessive fluctuations in the demands for bank credit. The local authorities are currently estimating the effect upon them of these arrangements but it is likely to be relatively small.
§ Mr. Jones
Does the hon. Gentleman agree that there must be some effect and that to this will be added the high labour costs which local authorities are having to meet this year, the continuing high level—almost unprecedented—of interest rates, and the reluctance of ratepayers to meet their rate bills this year? Is he aware that I was interested in what the Chancellor had to say about his deep concern for the financial situation of local authorities? Will he tell us what proposals there are to speed up the payment of the rate support grant, and whether there are any other special measures in hand to assist local authorities in the especially difficult circumstances of this year?
§ Mr. Barnett
We are considering the resolution passed by this House dealing with the rate support grant, as the hon. Member would expect in the light of what happened. The additional costs would not be more than £1 million or £2 million, compared with the total local authority expenditure of around £9,000 million.
§ Mr. Cant
Does my hon. Friend appreciate the dire distress of many county treasurers? Is he aware that the Staffordshire County Council, whose finance meeting I attended on Monday 1539 morning, has already spent the whole of its £6 million contingency fund as a result of factors outside its own jurisdiction, many of which are associated with inflation and budgetary measures? Does my hon. Friend realise that county treasurers are being forced into the money market and are having to pay 15 per cent. for yearling bonds? Will he give them some immediate help before he introduces the customary Rate Support Grant Increase Order in December?
§ Mr. Barnett
I am afraid that I cannot promise to do that. We are aware of the serious problems of local authorities, but they have to be considered in the context of the whole economic situation, which my right hon. Friend the Chancellor of the Exchequer is studying at present.