HC Deb 30 June 1982 vol 26 cc911-2

Lords amendment: No. 5, in page 2, line 29, leave out from "(2A)" to end of line 33 and insert The reference in sub-paragraph (1) above to money borrowed by a local authority includes a reference to the interest for the time being payable in respect of that money.

4.25 pm
The Under-Secretary of State for Wales (Mr. Wyn Roberts)

I beg to move, That this House doth agree with the Lords in the said amendment.

The House will recall that the purpose of what was clause 3(1), when we last considered it, is to prevent any doubt arising about the creditworthiness of English and Welsh authorities once they no longer have unlimited ability to raise revenue at any time of the year. As originally drafted, the clause adopted the Scottish model of making the interest payable on a local authority's borrowing a first charge on its revenues. That was done by adding to schedule 13(11) of the Local Government Act 1972, in which money borrowed is already secured as a charge on the authority's revenues. However, the majority of prospectuses issued assume that money borrowed under the 1972 Act carries interest as well as principal and that that they are secured as equal charges on an authority's revenues.

Therefore, the amendment makes it clear that the phrase "money borrowed" includes interest. That confirms what many people had already thought to be the position and avoids any problem of discrepancy between existing and future prospectuses. The amendment is an acceptable and welcome clarification for the lending institutions. Like the original provision, it meets any anxieties about the future creditworthiness of local authorities.

Mr. Harry Cowans (Newcastle upon Tyne, Central)

We debated this matter at length in Committee. It is a tragedy that the debate in the other place was all about interest or capital as a first demand on local authorities.

Before the Bill, the first demand on a local authority was with those who were employed by it. In the event of a local authority going bankrupt, which was unthinkable until the Bill was introduced, the first charge on a local authority was in respect of those who served it, its employees. I thought that in the other place the substance of the Committee debate would have been picked up.

There was great anxiety that for the first time in local government no thought is to be given to the employees. Provision is made for employees elsewhere. For instance, under companies Act legislation, when the receiver comes in, the first charge on the company is the employee. The debate in the other place concerned only whether capital or interest should be the first priority for the local authority. The Bill will force local authorities to borrow money from the City at extraordinary rates of interest. It gives no thought to the employees.

4.30 pm

The Bill should be entitled "The Local Government Finance (No. 2)"—or any number up to eight—"Afterthought Bill". The Government are legislating by afterthought. In what he said about the title my hon. Friend the Member for Blaydon (Mr. McWilliam) might have suggested that the word "afterthought" should be included. The Lords amendment is yet another afterthought. It is disgraceful. It takes no account of the situation that existed before the Bill was introduced. Public sector employees were protected, as private sector employees are. The amendment deals only with money and not with people.

I believed that we were elected to this House to protect people's interests, but, having read the amendment, it would appear that I am wrong and that we were sent here to protect capital to the detriment of local government employees. Will the Minister deal with that? The issue was neglected in Committee and again in the other place. We need a concrete answer so that the people who are fortunate—unfortunate, perhaps after the Bill is enacted—enough to be employed in local government know that they have the same protection as they had before the Bill was introduced.

Mr. Wyn Roberts

I am well aware of the point that the hon. Member for Newcastle upon Tyne, Central (Mr. Cowans) makes, but he would be the first to acknowledge that the amendment and the Government's general proposals in the Bill to add to local authorities' credit-worthiness are very much in the interests of their employees. It is in their interests that their employers' credit rating should be beyond doubt.

Question put and agreed to.

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