PUBLIC WORKS LOANS (NO. 2) BILL. (Hansard, 24 October 1946)

§ THE MINISTER OF CIVIL AVIATION (LORD NATHAN)
My Lords, it is now about six months since the Public Works Loans Bill was passed and the Royal Assent given to it. That Bill provided for the Public Works Commissioners to be entitled to make loans to the extent of £100,000,000, and it was contemplated at that time that that sum would suffice for a period of about a year. Actually since that date the Commissioners have, up to the end of last month, made advances to the amount of about £33,000,000. If the normal procedure were all that had to be taken into account, there would be no need to trouble your Lordships' House with the Bill now under consideration. There is, however, a situation to be taken into account which arises out of the Local Authorities Loans Act of 1945.
Under that Act, local authorities were, broadly speaking, placed under the compulsion of seeking loans from no source save the Public Works Loans Board. The procedure is for the Commissioners to give their approval in principle to prospective loans when the projects are put forward by the authorities requiring to raise money for them at a particular time in the future. Doubts were raised as to the power of the Commissioners to enter into commitments towards the local authorities in regard to their future projects if the maturing of the commitments would cause them to extend the limit for actual advances tinder the current Public Works Loans Act. The Law Officers, who were consulted upon this matter, advised that the Commissioners could not lawfully commit themselves finally to making loans in excess of the amount placed at their disposal by the current Act, although they could enter into provisional commitments subject to Parliamentary sanction in due course.
The whole position was reviewed in the light of that advice and it became apparent that the lending powers of the Commissioners would nearly be exhausted by the end of this month, for in addition to the £33,000,000 actual advances since the Act became law the Commissioners had, by the end of September, entered into unconditional commitments amounting to about £100,000,000 and, as a temporary expedient, had given provisional undertakings as regards a further £22,000,000—those provisional undertakings 695 being subject, of course, to Parliament making the moneys available in due course. Obviously it would be most unsatisfactory to local authorities if as a matter of regular practice the Commissioners were only able to enter into provisional commitments and if to that extent the local authorities were left in the air as regards the moneys coming to them for the financing of their projects. The Government therefore concluded that the right course was to ask Parliament to authorize a further issue to the Commissioners as a matter of urgency and to take steps to clarify the position for the future.
It is for that reason that Clause 1 of the present Bill proposes a new limit of £250,000,000 for the actual advances to be made by the Commissioners before a further Bill is introduced. It is difficult to estimate the rate at which local authorities will call on the Loans Fund during the next year or so, but clearly their demands for capital expenditure will be considerable. Clause 2 of the Bill is designed to reconcile the statutory position with the procedure for administering the Local Authorities Loans Act of 1945, to which I have already referred. The clause empowers the Commissioners to enter into commitments provided that at no time during the currency of the Bill do their live commitments when added to the actual cash advances exceed £500,000,000. Although this figure is large, the Commissioners will start the period with some £130,000,000 of commitments already incurred and they should be equipped with adequate powers to enable them to cope with the great capital schemes now in course of preparation.
In Clause 3 advantage is taken of this Bill to remove an anomaly. In 1935 the general provisions as to the minimum rate of interest on loans from the Local Loans Fund were abolished, but specific restrictions in the case of loans to housing associations and certain other borrowers under the Housing Acts remained in force. The general trend of interest rates has rendered a minimum rate of 3⅛ per cent, inappropriate and the removal of this minimum will make it possible for all borrowers from the Local Loans Fund to share the benefits of the cheaper rates now prevailing. The Bill is urgently needed to ensure the continued smooth 696 flow of funds to local authorities for the great capital schemes entrusted to them. Of the projects put forward in terms of the money required, some 90 per cent, are in relation to housing and electricity In view of the urgency of this Bill and in order to remove as soon as maybe an anomaly which has disclosed itself, I ask your Lordships to give this Bill a Second Reading.

§ VISCOUNT SWINTON
My Lords, I agree that this is a Bill to which your Lordships should give a Second Reading. I shall have only one or two words to say upon it. I find it a little difficult to reconcile all that was said by the noble Lord in introducing this Bill with the reasons given for the Bill in another place. As I understand it, this Bill is needed for two purposes. First of all because the Law Officers have held that the Commissioners have no power to make an undertaking for a future advance unless they have, so to speak, a sum in the till which will cover it. Now if the Treasury and the Commissioners have entered into illicit commitments, quite obviously we have got to make honest women of them, and pass this Bill. I have every sympathy with that, because I recollect that many years ago the Law Officers discovered that I had been doing certain things which everybody considered quite proper, but which were wholly illegal. I was personally liable for a few million pounds because what I had done could only be done by the Board of Trade, and not by the President. No Board of Trade had existed for a hundred years. In these circumstances, I would hasten to give my support to this whitewashing and legitimizing measure.
I understand it is also required for another purpose and on that I do want to say a word. Of course, the whole system under which the local authorities do not go on the market themselves but come to the Commissioners is obviously a very sensible and right one. It was introduced by the National Government, so of course it is right. Obviously it would also be quite out of date to have any figure of interest put in. Years ago, I think it was three and one-eighths. This measure should have the advantage of whatever is the lowest money rate possible at the 697 time. When the earlier Bill, giving authority for the year was introduced, the Financial Secretary to the Treasury said that he thought £150,000,000 would be all that would be required for the year. Now it is said that that estimating was not very good, and indeed it was not. What is going to be required, not as coverage for the Commissioners' future undertakings, but for actual advances, is not going to be £150,000,000 but £250,000,000. I do not think the House should part with this Bill without placing on record its view, and its very definite view, that estimating should not be of that loose character.
The Treasury has a very great reputation, and always has had, for accurate estimating. It is a most extraordinary thing how year after year, as the Budgets come round, even astronomical figures are estimated by the Treasury. But it really is rather alarming how hundreds of millions of pounds change hands to-day, and unless we have at least six ciphers at the end of a figure, it does not seem to be worth talking about. I do not think we should just pass without a single word an estimate which is wrong by £100,000,000. It may be quite right that more demands have come in since which have been authorized, and if indeed some more expenditure is required for housing than the mere modest estimate which was expected—if a hit more money is going out for housing than they thought was necessary—and that is going to mean more houses coming more quickly, then certainly nobody in this House is going to refrain from giving it the fullest possible authority and encouragement.
But with great respect—and I am sure the Secretary of State for India will confirm this with all his old Treasury knowledge—there is no political controversy between us over this measure. Careful estimating is very important, and it is all wrong that the Government should come with some round figure and say, "I want an omnibus authority for £250,000,000 because I may spend somewhere nearly up to that." That is not good enough. It is not the way estimates are presented to the House of Commons. Expenditure should be accurately estimated, and if the Government find that they are going to spend more then they should come back to Parliament just as they do for a supplementary estimate from the spending department. In the same way, when it comes to this borrowing 698 and lending they should present us with accurate estimates of what is going to be required If they find that an estimate is likely to be exceeded then they should come back to Parliament. It will not take long. I do make that point very definitely, and I am sure that the noble Lord who is leading the House will endorse it, because it is a very very important principle.

§ LORD PETHICK-LAWRENCE
My Lords, I think there has been a slight misunderstanding in the mind of the noble Viscount on this point. In the first place, I do not agree that you can give accurate estimates in a Bill of this kind. This is a sum which has always been in excess of the amount required in a given time. Very strict care is taken by the Commissioners of Inland Revenue who deal with the matter. There are two points in which the noble Viscount was mistaken. In the first place, he said early in his speech that this is a Bill to put straight something which has been done wrong. That is not the case.

§ VISCOUNTS SWINTON
They were on the verge of doing wrong.

§ LORD PETHICK-LAWRENCE
They were on the verge of so doing, and before they overstepped the line the matter is being put right by this Bill. The second point with regard to which the noble Lord was mistaken is that the dates are different, and that is what he does not appreciate. In the original Bill the period envisaged was a year from that date, that is, from last March, and it would still almost certainly be true that the charges thrown upon this Fund by the decisions of the Commissioners will not exceed the £150,000,000 before the end of the period. Each Local Loans Bill ends with the start of the new Bill, and the estimate needed is that for a year from to-day, which carries on for twelve months from now, and the amount sufficient to allow for the actual expenditure will be £250,000,000. It is not in place of the £150,000,000, but in place of the unfinished part that would have been used, which is about £120,000,000, plus whatever may be paid out in addition over the following year when the original year comes to an end up to a year from now. I hope I have made that clear.

§ VISCOUNT SWINTON
I am obliged to the noble Lord, because it was certainly not at all clear when it came from another place. We were left under exactly the opposite impression.

§ LORD PETHICK-LAWRENCE
Estimates cannot be of the hard order, but at the same time these Bills are designed for a certain period, and Parliament is informed how long the sum is expected to last. I do not think there was any misinformation in the original case. Now that a new Bill is necessary a new figure is forthcoming, and in addition to that there are the amounts which are put forward without the money actually being required. I hope the noble Viscount will be satisfied with that explanation.