HL Deb 09 July 1913 vol 14 cc805-14

THE EARL OF DUNMORE rose to move for a Return showing—

  1. (a) the limitations placed by various Acts of Parliament upon the borrowing powers of each class of local authority in the United Kingdom, specifying each local authority separately; and
  2. (b) the cases in which by subsequent Public Acts of Parliament provision has been made whereby money for various purposes is to be excluded from being reckoned as part of the debt of a local authority for the purposes of the limitation on borrowing previously imposed by Parliament; and
  3. 806
  4. (c) the cases in which by private legislation the borrowing powers of any local authority have been extended beyond the powers allowed under the general law.

The noble Earl said: My Lords, I should like to preface my remarks by saying that this Motion is not dictated by any spirit of antagonism or even necessarily of criticism. There are many members of this House who have had considerable experience in local government and I have no doubt possess a much more intimate knowledge of local finance than I can pretend to, and I think they will endorse my words when I say that the great increase in the outstanding loans of local authorities during recent years is a matter which demands the serious consideration of Parliament. Local finance is a somewhat complex subject, and I think it is apt to be more complex, certainly more difficult to follow, if one plunges into a mass of figures. I therefore propose to quote only two sets of figures in order to indicate the extent of local indebtedness.

The first comparison is with regard to National Debt and Local Debt. For the year ended March 31, 1912, the nominal amount of the funded National Debt was £602,000,000; for the year 1909–10, which is the latest period for which the figures are obtainable, the outstanding loans of the local authorities of the United Kingdom amounted to £620,000,000. Apparently, therefore, the Local Debt was something like £20,000,000 over the National Debt. In that same year the loans of the local authorities of England and Wales amounted to £536,000,000; the valuation of England and Wales for the Poor Rate was less than £216,000,000. Therefore the indebtedness of the local authorities was about two and a-half times the amount of the Poor Rate valuation.

A great deal of this indebtedness is due to the action of Parliament in constantly adding to the purposes for which local authorities may borrow. Indeed, a great deal of the responsibility for local indebtedness rests on legislation which the local authorities are called upon to carry out, and it is for this reason that I venture to call the attention of the House to the methods on which Parliament is proceeding. As indicated in paragraph (a) of my Motion, various Acts of Parliament place a limitation on the borrowing powers of local authorities; but these limitations vary for different local authorities, and are spread over a considerable number of Acts of Parliament. Therefore it is very difficult—in fact, it is almost impossible—to get a general view of the position. For instance, the expenditure of the local authorities is limited under the Public Health Acts of England and Wales so that the total loans shall not exceed the assessable value for two years of the premises assessable within the district of the local authority. As your Lordships are aware, there is a great deal of miscellaneous expenditure thrown upon the various local authorities under the provisions of the Public Health Acts. Then there is a limitation upon county councils. They are limited as to loans to one-tenth of the annual rateable value of the county, and that limitation cannot be exceeded without the sanction of Parliament. There are limitations on boards of guardians and on parish councils. A board of guardians is limited to one-quarter of the total annual rateable value of the union, and a parish council is limited to one-half of the assessable value. That is, roughly; an outline sketch of the general limitations on the borrowing powers of local authorities. Those limitations are scattered throughout various Acts of Parliament passed in 1875, 1888, 1889, and 1894. The only other observation which one might make is that the areas overlap—in fact, the borrowing within a county area becomes cumulative.

Passing to paragraph (b) of my Motion, I would ask the House to consider the manner in which Parliament is constantly infringing upon the limitations of the local borrowing powers. Hardly a session goes by without one or more Bills being passed by Parliament giving fresh powers of borrowing to some local authority, together with a provision—a provision which has become almost a common form in these days—that the money borrowed for the purposes specified in the Bill is not to be reckoned as a part of the debt for the purpose of the limitations on borrowing imposed by Parliament under previous Statutes. I do not wish to weary the House with numerous instances, but I would like, if I may, to give your Lordships two or three examples taken haphazard. Under the Small Holdings Act, 1908, county councils are given power to borrow for the purpose of providing small holdings, but by Section 52 money so borrowed is not to be reckoned as part of the county debt for the purpose of the limitations imposed by the Local Government Act. Then in the Housing of the Working-classes (Ireland) Act, 1908, there is an unusually strong provision in Section 2 which lays down that the money borrowed for the purposes of the Act, whether borrowed before or after the passing of the Act, is not to be reckoned as part of the debt for the purposes of the limitation under the provisions of the Public Health (Ireland) Act, 1878. Under the Town Planning Act, 1909, borough councils and urban and rural district councils are the local authorities. They are given powers of borrowing for the purposes of the Act, with the proviso that the money so borrowed is not to be reckoned as part of the debt under the Public Health Act, 1875.

The provisions of these Acts are excellent. I think that therein lies the danger of our present system. Public opinion makes an advance in respect of some branch of local administration. Then proposals are brought before Parliament and an Act is passed. There is an instance this session. I have no doubt that in a short space of time the House of Commons will have passed the Mental Deficiency Bill. That is a measure which excites no Party controversy; its objects are unimpeachable. You will find in that Bill a clause such as I have been describing. Nor is this confined only to public legislation. Local authorities—in particular, I think, the big municipalities—find it very convenient to come to Parliament in order to get their borrowing powers extended by private legislation. The result of all this is that Parliament is unconsciously whittling away the provisions which it set up, and which presumably were set up as financial safeguards.

It was suggested a long time ago that there should be an annual budget of local expenditure in order that Parliament might have an opportunity of reviewing every year the financial position of the local authorities of the United Kingdom in the same way as they review at present every year our Imperial expenditure. I think a good deal might be said in favour of that proposal. At any rate, under our present system there is no method by which one can get a general view of local finance. Indeed, it is very difficult to trace the Statutory provisions relating to Local Debt. The Return for which I ask is, perhaps, somewhat comprehensive, but I nave no doubt that the Local Government Board possess a great deal of the information desired, and I venture to think that that information will be useful not only to those of us who are interested in local finance, but it will be useful when that large and somewhat complex question of the readjustment of local and Imperial finance comes to be considered by Parliament. Before I sit down I should like to say once more that I am not criticising local authorities. I am endeavouring to obtain authoritative information on a matter which is not only of local but of national importance.

Moved, That there be laid before the House a Return showing—

  1. (a) the limitations placed by various Acts of Parliament upon the borrowing powers of each class of local authority in the United Kingdom, specifying each local authority separately; and
  2. (b) the cases in which by subsequent Public Acts of Parliament provision has been made whereby money for various purposes is to be excluded from being reckoned as part of the debt of a local authority for the purposes of the limitation on borrowing previously imposed by Parliament; and
  3. (c) the cases in which by private legislation the borrowing powers of any local authority have been extended beyond the powers allowed under the general law.—(The Earl Dunmore.)


My Lords, the noble Earl prefaced his remarks by saying that he did not think he was so well informed as many other members of your Lordships' House on local finance, but I think from the remarks which fell from him we shall all agree that he has made himself thorough master of the subject. Though I am afraid I cannot follow him into the figures which he gave, I quite agree that the whole question of Local Loans demands attention. They certainly are increasing in an alarming way, and the figures which the noble Earl quoted in comparing the National Debt with the Local Debt were certainly rather startling.

Coming at once to the noble Earl's Motion, I may say that it will be quite possible to issue a Return dealing with paragraphs (a) and (b). The noble Earl is, perhaps, aware of the Table which is contained in the Report of the repayment of loans by local authorities which was made by a Select Committee of the House of Commons in 1902. If he is not acquainted with that Table—which he will find at page 264 and following pages of the Report —it is possible that it may be sufficient for his purpose either as it stands or brought up to date, and if he would confer with the officials of the Local Government Board it might facilitate the giving of the Return asked for.

But with regard to paragraph (c) of the Motion it would be very difficult to give the Return. A great many local Acts are passed every year giving powers to local authorities, and almost without exception they include some additional borrowing powers. To make a Return including all these cases, even covering a limited number of years, would be a long and laborious business, and the results, I think, would not be commensurate with the time and trouble involved. It really would necessitate an immense amount of labour, because several thousands—I do not think I am exaggerating in using that number—of local Acts would have to be looked up. As to paragraphs (a) and (b), however, the Local Government Board will be glad to give the noble Earl the information he desires.


My Lords, I am glad that the noble Viscount sees his way in the main to grant the wish of my noble friend who made so interesting a speech in moving for this Return. I cannot help feeling very strongly the way in which, certainly without the knowledge of the ratepayers and almost without the knowledge of Parliament, these very considerable powers of borrowing are given to local authorities, and I really think that Parliament itself, in justice to its own views of expenditure, ought to take some little means to make more public and bring home what is being done in this direction. To say that the check on this expenditure lies with the ratepayers is a truism. At the same time every one knows that in local elections you are dealing with ratepayers who think in shillings, and it is absolutely useless putting before them these questions of millions, which convey nothing to them at all. Very few members even of your Lordships' House are really aware how great a pressure there is of rates in certain places, and how much has been added by Bills which in themselves look absolutely innocent and which hardly seem to have the smallest effect on local expenditure.

I made a suggestion some sessions ago which was received very favourably on both sides of the House, but on which no action was taken, and I venture to renew it now with the desire that even before the end of this session we should consider whether some Sessional Order should not be passed which would enable us to call the attention of Parliament to what it is doing in this matter. In this House we do not deal with the financial stage of general Bills, but in the House of Commons every financial point which can in any way affect the Exchequer is obliged to be printed in the Bill in italics, in order to call the attention of Parliament to the fact that they are putting a charge on the Exchequer. I venture to think that any provision in a Bill which puts a charge on the ratepayers should, by order of this House, be printed in italics, so that the attention of your Lordships and of the public may be called to the fact that there is a proposal to add to the local charges. Without some provision of this kind there really is no means of our finding out what we are doing; and, as my noble friend has pointed out, in the last few years it has become not an occasional but almost a habitual practice, not merely to put charges on the local rates by the Bills that are passed, but to put those charges beyond and outside the limitations which Parliament has laid down in each particular to prevent over-borrowing and overspending.

My noble friend and I have had together a pretty considerable experience of what the London County Council has done in this respect, and I can assure your Lordships that, without any question of Party or even policy, it is possible by close scrutiny and by bringing home to those concerned what they are doing to limit very considerably these charges which it is endeavoured to set up. And there are some cases, of which I could give instances, in which we have in this House unwittingly laid what seems to be a power but what practically becomes an obligation on local authorities to borrow and to spend considerable Sums which I think would be regarded as avoidable. In many of these cases when a permissive power is given it very often becomes almost a necessity that it should he adopted by the local authorities; and the joint effect of all these permissive powers has undoubtedly been to carry borrowing by local authorities to a point which, even if it be necessary in the interests of the public, becomes an enormous charge on the local exchequer.


My Lords, there is one consideration which appears to me to be germane to both the speeches to which we have listened from the other side of the House but was not alluded to in either—namely, the distinction which it is necessary to draw in this matter of local borrowing in particular, because we draw it so far as we can in matters of national borrowing, between productive and unproductive expenditure. No hint was given in the very interesting speech of the noble Earl opposite, or in that of the noble Viscount, that such a distinction could be held to exist. But it is a distinction of the most profound importance when the figures of either national or of local indebtedness come to be considered.

For instance, when you compare the figures of the National Debt, as the noble Earl did, with the figures of local indebtedness it is surely reasonable to ask what is represented by the one and by the other. That debt which represents the remains of the cost of the Napoleonic wars, however necessary it may have been to incur it—for, indeed, if it had not been incurred perhaps none of us would have been sitting here at this moment—cannot be compared, for instance, with the kind of debt which we in India pile up in the building of railways or the financing of great schemes of irrigation. The two things are really hardly comparable, and ought perhaps not to be called by the same name. One is indeed an investment, and the other often represents something like a dead loss. Of course it is necessary, even in considering the most productive expenditure—expenditure which will pay both interest and sinking fund and be disposed of in due course—in the making of a work which is to the general benefit, to consider the effect on the national credit. But, however much that may be the case, no reasonable person would compare the debt involved, for instance, in the South African war with the debt involved in the completion of the great scheme of Irish land purchase. They are not comparable things, and ought not to be spoken of in precisely the same terms. And that difference surely offers at any rate one reason for the exclusion of certain subjects from the limitations imposed by Parliament upon the indebtedness which different local authorities are entitled to incur, because it may in particular cases be reasonable to take into account to what extent the indebtedness of a particular 'local authority has been for productive or for purely unproductive purposes.

With regard to the interesting suggestion made by the noble Viscount opposite I do not, I confess, recall the debate to which he alludes, in which he said that a suggestion that certain parts of public, and I assume also of private, Bills should be printed in italic's in order to show that thereby a certain burden might be thown upon the rates was brought by him before this House. I should be sorry to dismiss the suggestion off hand, and I conceive that in some cases it might serve the purpose of calling the attention of a possible burden on the rates to the minds of those who would otherwise have neglected it altogether. But whether the effect would be either as prompt or as complete as the noble Viscount appeared to anticipate I confess I have some doubts. I am afraid that the sentences printed in italics would, after their first novelty had worn off, tend to be slurred over, and that they might not receive all the attention which the noble Viscount would desire them to have. But, as I said, I should be sorry to throw cold water on the suggestion, and I should be quite willing, if noble Lords opposite desire it, to concert with them in consulting the authorities of the House, and in particular the Lord Chairman of Committees, as to what in their opinion the effect of such a technical alteration of our printing proceedings would be. I am sure the noble Viscount will not expect me to say more than that, and I hope that that rather limited promise may satisfy his desires in that direction.


My Lords, I am quite prepared to admit the distinction which the noble Marquess has just drawn between remunerative and unremunerative expenditure, but whether a loan is for remunerative or for unremunerative purposes the total local debt is a mortgage on this country, in the same sense that the National Debt is a mortgage, and it therefore deserves the same careful consideration of Parliament. But I submit that it receives certainly no consideration as a whole, and extremely little consideration in detail. I associate myself with the suggestion of the noble Viscount, Lord Midleton, that it would call attention to Bills which are going to impose a fresh burden on the rates if the provisions involving this charge were printed in italics; but I should like to add that I think such Bills ought to be brought in by a responsible Minister. That would add one more safe-guard. As regards the Return for which I move, I gathered from the noble Viscount opposite that he was going to meet me so far as paragraphs (a) and (b) are concerned, but only in so far as referring me to a certain Table, which I confess I once tried to wade through but which does not put the information concisely or make it very easy to gather.


The Table to which I referred could be brought up to date; or if it is not in the shape which the noble Earl would like perhaps he would confer with the officials at the Local Government Board, who would try and give him the information in the form he desires.


As long as it is in intelligible form and easy to understand I shall be quite satisfied. I withdraw paragraph (c) from my Motion, as the noble Viscount says it would entail a great deal of work. But perhaps he would inquire whether the Local Government Board could give me the information asked for in paragraph (c) from 1903. I think they might have that information in their possession. But in any case I withdraw paragraph (c) from my Motion to-day


I will inquire whether the Local Government Board have the information from the year the noble Earl mentions, and if they have I am sure they will be very glad to give it to him

On Question, Motion, as amended agreed to and ordered accordingly.