LOCAL LOANS (INCREASE OF LIMIT) (Hansard, 6 May 1980)

§ The Financial Secretary to the Treasury (Mr. Nigel Lawson)
I beg to move. That the draft Local Loans (Increase of Limit) Order 1980, which was laid before this House on 1 May, be approved.
Although this is the first such order under the provisions of the Finance Act 1978, it succeeds previous orders under the provisions of the Finance Act 1975. Regular attenders of these debates will be aware that the order does not itself sanction any increase in local authority capital spending. Capital expenditure by local authorites is controlled by the Government in various other ways, and the proposal in the Local Government, Planning and Land (No. 2) Bill now before the House will further tighten that control.
The order, therefore, does not affect public expenditure in any way, nor does it affect the public sector borrowing requirement. It affects simply the extent to which local authorities borrow from the Government via the Public Works Loan Board rather than from the markets.
I think the whole House will join me in expressing thanks to the Public Works Loan Commissioners for the services they render with such skill and dedication on an entirely voluntary basis, and also to the entire staff of the Public Works Loan Board.
As a sensible move of rationalisation introduced by the Government which will result in staff savings and various economies, the Public Works Loan Board has been merged effectively with the National Debt Office to form the National Investment and Loan Office. That is the main burden of the order, and I commend it to the House. I shall be happy to answer any questions which the right hon. Member for Widnes (Mr. Oakes) cares to put.

§ Mr. Gordon Oakes (Widnes)
I join the tribute paid by the Financial Secretary to the Treasury to the Public Works Loan Commissioners.
Having listened to the hon. Gentleman's introduction, I wonder why the order has been introduced at all. Perhaps the Financial Secretary will explain exactly what is proposed. At 1.30 a.m. we are proposing to increase by £3,000 million 236 the amount of money that can be spent by the Public Works Loan Board.
Under section 78 of the Finance Act 1978 the amount provided by the Labour Government was £3,000 million, with provision to increase it by not more than £3,000 million by affirmative resolution of the House. The maximum amount of £3,000 million has been taken by the Government, effectively doubling the amount of money that the Board is allowed to spend. The figure under the 1975 Act—it was an Act, not an order—was £2,000 million. That was increased to £3,000 million in 1978. Conservative Members may also be interested to know that under the Finance Act 1972—when a Conservative Government were in office—the figure was £1,000 million. That figure was increased to £2,000 million in 1975. The figure of £1,000 million at that time covered moneys from the Public Works Loan Board, but it also included water undertakings. A separate order increasing the limits for water undertakings was introduced by the Government in January this year which was approved. In 1972, water undertakings were the responsibility of local government.
The Financial Secretary says that this does not affect the public sector borrowing requirement, that in any case local authorities will be pinned down by the Local Government, Planning and Land (No. 2) Bill, and that if the Government did not get the increase this way, they could get it in some other way from the market. Nevertheless, a further explanation is needed from the Government—given their stance on monetary policy—as to how they can justify asking the House for an increase of £3,000 million in this manner.
We have spent many hours tonight discussing £70 million for the Port of London Authority. We are now discussing £3,000 million very late at night. The purpose of the Acts of 1972, 1975 and 1978, introduced by successive Governments by affirmative order procedure, was that these matters could and should be debated by the House. It is unfair of the Government to bring an order of this nature, under affirmative order procedure, before the House at this time of night, when it deserves and merits a full debate.

§ Mr. Roger Moate (Faversham)
Will the right hon. Gentleman explain why, 237 if this is an order that increases the public sector borrowing requirement by £3,000 million—I find it difficult to believe that the order does that—he is the sole hon. Member on the Labour Benches? I cannot believe that, if it were as serious as he suggests, he would be there on his own.

§ Mr. Oakes
If the hon. Gentleman will read the order, he will see that what I say is correct. It raises the limits on the amount of money that can be expended by the Public Works Loan Board from £3,000 million to £6,000 million. I am the solitary hon. Member on this side of the House because the Opposition are not opposing the order. However, I should like the Financial Secretary to expand further his remarks about the effects of the Local Government Planning and Land (No. 2) Bill that we are currently debating in Committee. Part VIII of that Bill, particularly clause 51 places the most severe constraints on local authorities, in that they will be given a certain amount of money for capital expenditure. The Government have said that, within that limit, the local authorities can spend the money as they wish.
I ask the Financial Secretary what we are debating tonight. It is no use him saying that the Government want an increase of £3,000 million for the Public Works Loan Board, and then trying to placate his hon. Friends by saying that even though the extension of the limits is granted, under the Local Government Planning and Land (No. 2) Bill, the local authorities will be severely constrained as to the amount of money that they can borrow.
What is this all about? Why was the order introduced in such a way? I agree that sanction is given in the Finance Act 1978, but would it not have been better to insert a suitable clause in the Finance Bill that we shall soon be debating? There was no order in 1979. There may have been orders between 1972 and 1975 and 1975 and 1978 because power was given to the Government of the day to act in that way. However, in 1972, 1975 and 1978 there was a clause in the Finance Bill. That is a far more debatable procedure than even an affirmative resolution. The three-yearly cycle means that next year we shall be due for a clause to appear in the Finance Bill.
238 I do not think that an order involving £3,000 million should go through the House undiscussed and undebated. I should like to know from the Financial Secretary in somewhat greater detail how the Government intend to operate clause 51, part VIII of the Local Government, Planning and Land (No. 2) Bill in the light of the order. I hope that he will spell that out, for local authorities especially.

§ Mr. Lawson
I am happy to answer the questions of the right hon. Member for Widnes (Mr. Oakes). If he considers the order to be of some importance, as he professes, he might have taken the trouble to do his homework, which he has manifestly not done. He says that the local authorities would like some guidance. It is clear that the authorities know a great deal more about this than he does.
The right hon. Gentleman began by saying that we are taking the maximum available under the Finance Act 1978, which was enacted by the Labour Government of which he was a member. That is not true. The 1978 Act enabled the £3,000 million of Public Works Loan Board lending to be taken at once followed by three further tranches of £3,000 million. We are concerned only with the first of those tranches. There is power under the legislation passed by the Labour Government for two further tranches.
The right hon. Gentleman said that he did not know what happened between 1975 and 1978. I shall tell him. The Finance Act 1975, which was enacted by a Government of which he was a member, similarly gave power for several tranches of £2,000 million. The right hon. Gentleman's Government took the first tranche of £2,000 million in 1975, a further £2,000 million in 1976 and another £2,000 million in 1977. They went for the last tranche of £2,000 million again in 1977 and for £3,000 million in 1978. There were five increases of the limit between 1975 and 1978 whereas this is the first in the two years from 1978. I hope that it will be well over a year before we seek an increase.
The right hon. Gentleman complained about the timing of the debate, which I welcome no more than he does. However, I took part in the previous debate—I do not think that he did, so he is new to the order—and that took place well 239 after midnight. There has been a custom for the orders to be taken well after midnight. The pressure of parliamentary business is an inescapable fact. The timing of the debate is not something that I welcome but it is not something that the right hon. Gentleman should throw at the Government.
The right hon. Gentleman said that he was surprised that a Government who are so concerned about monetary control should introduce such a measure. In so far as there is a shift from local authorities' borrowing from banks to borrowing from the board, that can assist monetary control. It is therefore fully consistent with our policy.
The right hon. Gentleman may have been misled, because our parliamentary procedure is rather unsatisfactory and misleading. Increases in borrowing from the Public Works Loan Board do not influence the total amount of local government borrowing. They have less influence on local government expenditure. However, those increases represent gross amounts. As well as borrowing from the Public Works Loan Board, local authorities repay those sums. The net amount of borrowing in economic and monetary terms is not measured by the current procedure.
The legislation provides that gross new borrowing should be controlled. That is a fact of life that has obtained for some time. Over a period of years, local government borrowing will increase. Total Government borrowing also increases, because there is a positive borrowing requirement each year. It is our firm policy—unlike the previous Labour Government—to bring that borrowing requirement down progressively. We wish to see it reduced from its present level of about 3¾ per cent. of gross domestic product, to about 1½ per cent. of gross domestic product in 1983–84. I assure the House that this proposal is fully consistent with that overall policy and strategy.