HL Deb 02 December 1952 vol 179 cc685-98

5.10 p.m.

Order of the Day for the Second Reading read.


My Lords, this is a fairly simple Bill, but it provides machinery for the expenditure of fairly large sums of money. While I will not explain the Bill in detail, I will try and give a fair picture of it. I would suggest that the simplest way to look at the Bill is to divide it into two parts—the first part comprising Clauses 1 and 2, which make provision for future supply to the Local Loans Fund, and the second part comprising Clauses 3 to 6, which make a settlement of advances which have been made in the past. The first part, as I have called it, is more or less in standard form—indeed, with the exception of one item, it is identical with a Bill passed in December, 1951. It would, however, be a mistake to regard this Bill as in any sense of the word an annual one. It is a Bill passed when necessary, to ensure that adequate funds are available for the Local Loans Fund. It is true, however, that in recent years, for reasons of Parliamentary control, a Bill of this character has been passed every year. If, however, for any reason the funds went more quickly or more slowly, the next Bill would be presented accordingly, sooner or later. The time period is from one Act to the next.

Clause l enables the Public Works Loans Board to advance or, as the Act says, to issue £500 million from the time when the Act comes into force until the next Act is due on the Statute Book. The House may be interested to know that from December 7 last year until November 21 of this year £414million has in fact been so advanced, and that the sum fixed last year will probably be exhausted somewhere about the end of January, 1953. By the middle of December, when we hope that this Bill will be on the Statute Book, the sum advanced will probably be of the order of about £450 million. Accordingly, we think that the sum of £500 million Provided in this Bill will be roughly sufficient, especially considering one further factor which I shall mention in a moment.

Clause 2 lays down that the aggregate of the sums advanced (which I have already mentioned), plus outstanding commitments, shall not exceed £1,050 million. This is an increase of £100 million over the figure in the Act of December, 1951. Your Lordships may like to consider for a moment the means by which we reached the figure in this Bill. Up to November 21 of this year, commitments and advances have aggregated £926 million, and by the middle of December they should reach the figure of £950 million. The total sum which can be committed under the existing Act is £950 million, and that will he reached by the middle of December. We think that that is probably running matters a little close and that the figure should be rather higher. Moreover, the carry forward—you will appreciate that there is a carry forward from one year to the other—will probably be in the order of about £510 million. On the whole, of recent years commitments have tended to be rather higher than advances, and we have arranged for advances of £500 million. By adding the commitment of £510 million we get a figure of £1,010 million. We think that a reasonable advance on that to £1,050 million will probably be about adequate.

I mentioned earlier that there was one further factor, and I ask the indulgence of the House to refer to it. It is not strictly within the terms of the Bill, but I think noble Lords will expect me to say a word on the subject. The Government's decision has already been announced that Section 1 of the Local Authorities Loans Act, 1945, will not this year as has been the case for a number of years, be included in the Expiring Laws (Continuance) Act. The effect of this will be that local authorities may go to the market for loans should they so wish. As a certain amount of extremely unfounded anxiety has been expressed on this matter, perhaps I may make one or two points abundantly clear. First, there is no intention of forcing local authorities on to the Stock Exchange. In so far as local authorities decide to avail themselves of those facilities, they will be able to do so by agreement with the Treasury. In the second place, we do not in fact expect that very large sums will be raised in this way,

Thirdly, this is not such a big step as might appear at first sight. Local authorities have always been able to borrow from private lenders, subject, of course, to certain restrictions. Those restrictions laid down that the sums borrowed could not be marketed on any stock exchange—they were, in fact, what is known as private mortgages. The second restriction was, that a ceiling was fixed which was set at roughly the same level as the local authorities had been accustomed to operate before the Act of 1945. With the dropping of Section 1 of the 1945 Act, all these restrictions will fall away and there will be no ceiling at all to private mortgages. There is every reason to believe that local authorities will welcome this arrangement, for which they have so often asked. Indeed, this is not surprising, because it gives them much greater flexibility in the manner in which they can raise their loans, so that they are in the most convenient form and of the most convenient duration for their especial requirements.

Now may I turn to what I have called the second part of the Bill, that is to say, Clauses 3 to 6? This part deals with the settlement of past advances. I should like to comment on the obviously high standard of detailed Parliamentary control which was demanded under Victorian legislation. Under the Acts of 1875 and 1887, if it was necessary to write off any advance, it had to be done by Statute. If your Lordships care to look in the Schedule, you will see that in this Bill we are proposing to write off from one borrower the sum of £38 0s. 5d. That will stand on the Statute Book. I think it is something that we must bear in mind in these days. The procedure by which this is done involves two stages. Clause 3 writes off the principal sum shown in the First Schedule from the assets of the Local Loans Fund. The interest is not included here because interest on loans is not regarded as an asset of the Fund. This clause, however, still leaves a liability due to the Exchequer. Clause 4 takes the matter a stage further. It first extinguishes the principal of the loan already dealt with under Clause 3 as a debt due to the Exchequer, and thereafter remits the arrears of interest on that loan. Secondly, it extinguishes the principal of loans made under the Agricultural Credits Act, 1923. They are shown in Part I of the Second Schedule. These loans have already been written off the Local Loans Fund by Act of Parliament, and they are now being written off, both in respect of capital and interest, as a debt to the Exchequer.

Clause 5 relates to the remission of arrears of interest on two further loans where the principal is believed to be assured. Clause 6 settles loans made from the Local Loans Fund in Northern Ireland before 1921. Many of these were for an eighty years' period, and would have dragged on in small payments until pretty well the end of the century. These matters in future will be handled by the Government of Northern Ireland and the appropriate sums deducted from their share of reserved taxes. This action has been taken with the full agreement of the Government of Northern Ireland. I beg to move that the Bill be now read a second time.

Moved, That the Bill be now read 2a.— (The Earl of Selkirk.)

5.20 p.m.


My Lords, I am sorry to trespass upon the patience of the House at this late hour on a topic of this kind, and I am well aware that the subject matter of the Bill before the House is largely concerned with finance. But, notwithstanding those two points, I and my noble friends feel that it is advisable that your Lordships should know something about the details of this measure before we agree to its passing. The noble Earl has indicated to you that under the Bill the powers to raise money for the purpose of local loans are to be increased from £950 million to £1,050 million. I would say at once that that rather indicates a willingness on the part of the Government to lend money to local authorities. We are, however, particularly interested because of the way in which loans are spent. It may interest noble Lords if I give one or two figures indicating the way in which the money has been spent during the present year. Some £274,000,000 has been spent on housing; £45,500,000 on education;£14,500,000 on public health, and £60,500,000 on miscellaneous items. I understand, too, that the number of applications to the Fund for loans for the past year was 19,366, and of that vast number not a single application has been declined.

The noble Earl has mentioned that hitherto, or in the past, local authorities have had the right of either taking their loans from the Public Works Loans Commission or of going to the City or to the banks for their purposes. That I think was largely true up to the year 1945. But in that year the noble Viscount, Lord Waverley, who was then Chancellor of the Exchequer, asked Parliament to say that for the purpose of these loans, and for the time being, local authorities should get their loans only through the Commission. That authority which Lord Waverley secured from Parliament is now to be swept away, so that in future, as in the distant past, local authorities can decide in agreement with the Government whether they should go to the Public Works Loans Commission, or whether they should go elsewhere. Noble Lords who sit on this side of the House have no objection to that principle. We believe that if the local authorities feel they can get better service from the banks or the City for their purposes, they ought to have the right to go there, representing, as they do, a large population in their particular areas. What we are somewhat in doubt about, under the present proposal, is whether there will be perfect freedom for the local authority in deciding whether the money should come from the Commission or from the City.

If we have some doubt about it, I think it is due to the way in which the Bill was introduced in another place and to the explanations that were there given. I will admit at once that the noble Earl has been very definite. He has not skated round the rink; he has indicated that no compulsion is going to be used. But in the other place it appeared, first of all, that those authorities wanting large sums of money were to be asked by the Government to relieve the Government of their responsibilities and go to the City. I will quote the exact words from the speech of Mr. Boyd-Carpenter.


Will the noble Earl kindly tell us the column?


These words appear in the OFFICIAL REPORT, Commons, Vol. 507, Col. 965, towards the bottom of the page: But some of the largest authorities will be asked to assist the Government in financing their programme by issuing their own stocks. This development will enable the Government to release the authorities from the statutory obligation referred to. Later Mr. Boyd-Carpenter said—Col. 966: but I must warn the House not to magnify the importance of this development. It must not be thought that we intend to exclude a number of authorities from the Fund and force them on to the stock market. He went on to add: We are simply adding the stock market to the sources of finance that will be available to them, but we have to see the extent to which such issues will be practicable and—this is the key to the whole thing—we intend to proceed in agreement with the authorities concerned, and we shall have regard to the capacity of the market to accommodate local authority borrowing on reasonable terms. What we should like to know is the meaning of that language. Accepting for the moment that compulsion is not going to be used, will influence be brought to bear? Will undue persuasion be exercised? Will there be delay in making the loan, in order to get agreement for what the local authorities propose? I will accept the word of the noble Earl on that issue. I should have accepted the word of the Minister who made the speech in the House of Commons, but if it had been clearer, doubts would not have arisen in our minds. It has been suggested—and I myself will only mention it, because I think it worthy of consideration—that as there is now a growing deficit in the Budget for the year, the Government may be anxious to relieve themselves of payments to the Commissioners in order that their Budget may be balanced. I should like the noble Earl, if he will, to indicate that the Government have no intention of doing that.

Now I want to come to two of the clauses in the Bill, and then I shall have finished. Clause 3 deals with a loan, originally of £141,590, made to the Kenfig Homes, Ltd., which was a public utility company, for the housing of miners employed by Messrs. Baldwin, Ltd. the big steel people. Of that loan there is now outstanding or recoverable, so we understand, the sum of £39,940. This Bill proposes to wipe that sum off as being irrecoverable. I am indebted to my honourable friend, one of the Commissioners, the Member for Islington, West, for particulars in relation to this loan. When it was advanced, interest of 6½ per cent. was charged. It seems to me that a rate of interest of that kind is altogether out of proportion to the purpose in mind, and it is not remarkable that, with an annual payment of that kind, something went wrong with the arrangements and that by the year 1928, of 170 houses built under the scheme 70 were standing empty, without tenants. It may be asked: Where did the tenants go? They had to live somewhere if they continued to work for this firm. The answer is this: the Penypont Rural District Council, the authority for the area, were able to get money advanced from the Government at a much lower rate than 6½ per cent. and they began to build working-class houses in the vicinity. They were able to do it at lower rents than the public utility company were charging.


Will the noble Lord tell us in what year all this happened?


The years were between 1921 and 1924. That is some time ago. This debt has been hanging on for a long time. It is not surprising that when the Rural District Council began to meet with success in erecting working-class dwellings at lower rates the miners living in the public utility houses began to move over. So we had the spectacle that moneys advanced by the Government for the same purpose to two separate bodies were being used in competition with each other. I do not doubt that the money advanced to the Rural District Council will be paid, and would be unlikely to become a bad debt. But surely it is a matter for consideration, especially for the future, that when we advance money for the housing of the working classes, we should advance that money to organisations or institutions which have some chance of surviving, and upon whom we can depend to meet the claims which arise from the transaction.

The other reference is to Clause 4. This covers the years 1923 to 1928. During these years there was advanced, under the Agricultural Credits Act, 1923, the sum of £4,750,000 to farmers, either to develop their holdings or to provide themselves with houses or other buildings on their holdings. Of that sum, £3,500,000 has been returned to the Government and there is now a loss of £132,000. This Bill proposes to wipe out that loss. The Bill gives the names of the farmers to whom this money was allotted. It shows that of these, forty-seven became bankrupt and forty-seven lost their farms through not being able to earn their living thereon.

I want to draw attention to this point because it gives a picture of the terrible state of farming in England between the two wars. In those days we not only favoured competitive enterprise but we practised it, and the competitive enterprise was not merely between farmers in this country but between farmers in all countries of the world. As that competition waxed and waned, prices for agricultural produce went up and down. Perhaps your Lordships will permit me to give you these figures. In the years 1932 and 1939 the price of wheat per bushel in this country was 55 cents—giving it in the international monetary unit—but in the years 1929 and 1937, the price went up to 140 cents.


Are these Canadian cents?


They are American cents. I am giving these figures from the statistics of the United Nations Food and Agriculture Organisation, which deals with the buying and distribution of wheat. It can be well understood that British farmers, working under conditions of that kind, where prices ranged from 55 to 140 cents, were not working under favourable conditions. It is not surprising, therefore, that many went bankrupt and many defaulted in respect of this loan.

I want to make an appeal to Her Majesty's Government. I should like them to realise that at present the farming community are enjoying prosperous times because public enterprise has come in to regulate the conditions of production and distribution under which they live. I hope that the Government, pledged as I know they are in certain directions to competitive enterprise, will not throw the farmer back into those conditions. I ask this because I saw in the Press recently an indication that the Ministry of Food had entered into consultations with the National Farmers' Union under which, if they get agreement, the selling of cattle would go back to the old system of public auction. It was actually stated in the Press that the farmers would not object to sending their cattle to public auction provided that something in the nature of a deficiency payment was established to be met by the Government. In this House we all ought to agree that, in dealing with agriculture, we should co-operate under public control to ensure that not only is the land properly cultivated but also that the produce of the land should be marketed so as to give a fair deal to the farmers and a fair deal to the consumers. We do not propose to object to this Bill. We want it passed because it meets some of the circumstances with which we ourselves should have had to deal. But we think it right, when a Bill of this character is before your Lordships' House, that we should not give our assent without knowing something about the subject with which we are dealing.

5.39 p.m.


My Lords, I have listened with interest, as I am sure have other members of the House, to the speech of my noble friend Lord Shepherd. I do not remember an occasion in either House when a Bill of this kind elicited such a number of relevant and important points which brought it from the rather dull area of strict finance to those of public weal and private enterprise. I am going to confine myself to adding only one question.

When I was Financial Secretary to the Treasury some twenty years ago, it became my duty, as it does of all Financial Secretaries, to raise and reduce, according to the circumstances of the day, the price at which money was lent to local authorities and others. My noble friend has pointed out—and it was referred to by the noble Earl who introduced this measure—that outside the strict provisions of this Bill, but related to them, is this intention of the Government to get rid of the limitations with which local authorities were hedged round, in seeking to raise their finances elsewhere. The question I want to ask the noble Earl is this: When that intention is implemented, as I understand by allowing to fall into desuetude one of the expiring laws of the country, is the position so far as local authorities are concerned going to be precisely the same as it was before that Bill became a law, or will there still be some difference? I was under the impression that when that Act was no longer kept in being, the local authorities would have the same rights as they had before. The noble Earl shakes his head. My noble friend behind read out an extract from the speech of the Minister in another place, and I am not very clear as to precisely what the position of those local authorities who prefer to borrow on their own will be. Perhaps we shall be able to have a word of enlightenment on that subject.

Just to illustrate the point, I may say that what I understood—I may be wrong —is that it paid the smaller local authorities to borrow through the Local Loans Board, but it paid the larger local authorities to borrow directly. It paid them for two reasons: first, because there was a certain amount of local patriotism which led a number of local people to subscribe, even though they got a smaller rate of interest. They wanted to be patriotic and to support Manchester, Birmingham, Glasgow, or wherever it might be. From the point of view of the local authority, they also saved a certain amount of money because they did not have to pay the small turn which was made by the Local Loans authority. I hope, therefore, that the noble Earl will tell us whether the position is now going to revert to what it was before 1945 or, if that is incorrect, what is the difference between the position as it will be and as it was in those days.

There is only one further point. My noble friend said something about the Government doing this in order to help balance the Budget. As I understood what my noble friend meant—and it is a question to which I should like to have an answer—it is this. It is, of course, not a question of the "above the line" balancing of the Budget, because that will not be affected in the slightest by this proposal. Do I understand that there is a difference in the financial accounting when money is raised for the local loans authorities and lent out to authorities, as distinct from when authorities borrow on their own? Does that make a difference, and if so in what way, to the "below the line" balance or unbalance that there may be in the Budget? If I remember aright, a few years back, when Sir Stafford Cripps was Chancellor of the Exchequer, he produced a very large surplus above the line to compensate for the large adverse balance below the line. In the current year the present Chancellor of the Exchequer is providing only a comparatively small surplus, and I should like to know whether there is any substance in the suggestion of my noble friend that the Government will be glad to push off these loans on to private borrowing by the local authorities, and whether they really get any appreciable amount of advantage below the line by so doing.

5.44 p.m.


My Lords, may I first of all thank noble Lords for welcoming what is, after all, the main purpose of this Bill? I am grateful to the noble Lord, Lord Pethick-Lawrence, for commenting on the breadth of discussion which the noble Lord, Lord Shepherd, introduced into his remarks, because I really must emphasise that, important as this Bill is, it is not an occasion for a general debate on economics, and certainly not an occasion upon which to review the whole agricultural policy of the last thirty years. I hope the noble Lord will excuse me if I do not follow him into every particular point he has made.


My Lords, I will agree at once that if I had enlarged upon the subject of economics, I should have been out of order in connection with this Bill. But I think I was entitled to say that here is a body of farmers who the Government say went bankrupt and to indicate that, in my view, their bankruptcy was due to the wrong system under which they were working. That is all I have tried to do.


I was not for a moment suggesting that the noble Lord was out of order. I agree that when you come to expenditures there is practically no subject which the Rules of this House would not cover. But I hope he will not expect me to follow him into these asides.

The noble Lord, Lord Pethick-Lawrence, has asked about the position of the local authorities, as did the noble Lord, Lord Shepherd, which is really the main point. I do not think that what the Financial Secretary said in another place is capable of any interpretation other than that I myself stated. We believe that a number of local authorities are anxious to take advantage of this facility. They will not be forced to do so. The noble Lord asked whether they would be in a different position from what they were before 1945. The answer is that in certain particulars they will be. They will be in a material way, because I understand that the rule before then—of course this goes back to pre-war days, because there was not a great deal of money spent during the war—was that local authorities with a rateable value, I think it was, of £200,000 in England, and £250,000 in Scotland, were expected to make their own arrangements on the Stock Exchange. I am not prepared to say that they could not go to the local loans. We feel that they should be free to do what they wish to do, and we do not propose to exercise any pressure to make them do that. I think that is the main point the noble Lord made.

I do not want to go into Budget figures, but if the noble Lord would care to examine the last Budget he will see that there is a considerable surplus on the Estimates above the line, which, of course, to some extent balances the deficit below the line, which is similar to what happened in some of the Budgets to which the noble Lord referred in the course of his remarks. The fact that we are providing in this Act everything which was provided last year, and, indeed, the year before, does indicate the point which both noble Lords raised, that there is no intention at the moment of saving from the taxation point of view. The figure is actually bigger by £100,000 in regard to commitments, and in regard to advances it is the same as it was last year. Therefore, at the moment there is no suggestion at all of saving. There are, of course, a number of reasons why local authorities may want to adopt this method. One is that the particular form of loan, and particularly the duration, may be exactly the type which they want. When you have a rate which is the same—that is the object: the open market rate would be the same as the rate which would operate for local funds—then there is no question of very great pressure one way or the other. It is merely a question of convenience. For instance, there is no suggestion of putting up the rate of local funds to force local authorities on to the market.

I do not think there is any other question I might mention, except that the noble Lord, Lord Shepherd, made a complaint that at some previous period there was competition between house builders to find tenants. I think that that is a situation which most of us would welcome to-day. Apparently it existed, according to some source of information upon which the noble Lord drew, but about which I was not quite clear. But the matter, in any case, is rather outside the scope of this Bill.


But would the noble Earl welcome a condition of affairs in which there was competition resulting in empty houses, and in which the losses to be incurred fell upon the Government?


This, of course, is going back thirty years. But I may say that I should welcome a condition of affairs in which there were empty houses. Indeed, I look forward to the time when there will be empty houses—that is to say more houses than there are people who want to live in them. That is a state of affairs which, from whichever angle it may be viewed, would be of advantage. But this, as I say, is a little away from the subject of this Bill. I think I have answered the major points which have been raised. The noble Lord, Lord Shepherd, referred to co-operation under public control as applied to agriculture. With great respect, I would say that agriculture is undoubtedly guided under public control but it is still a matter for each individual farmer. I do not think that the noble Lord would desire anything other than that agriculture should be under the control of individuals.


The noble Earl said that he thought he had answered all the major questions, but there was one question which I put to him to which I should like an answer. I may have put the question rather on the spur of the moment, but he did not answer it. The question is one of little more than academic interest, but I should appreciate it if he could give me an answer, not necessarily immediately—perhaps he will have the matter looked into and let me have an answer privately. The question is this: When a local authority borrows through the Local Loans Fund, does that alter the "below the line" balance on the Budget, compared with what the position would be if the authority borrowed directly on its own? Would that alter the account?


I would rather the noble Lord asked me that separately. He will appreciate that, so far as this Bill is concerned, there is no control of borrowing at all. The Control of Borrowing Order is an entirely different Order, exercised by the Treasury. The volume of borrowing, whether under local loans or from other sources, will remain under the control of the Treasury as such; and, accordingly, they can decide how big that figure will be. I think, however, that I had better let the noble Lord have the information in due course.


I quite accept that.

On Question, Bill read 2a, and committed to a Committee of the Whole House.

House adjourned at six minutes before six o'clock

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