PUBLIC WORKS LOANS BILL (Hansard, 4 December 1952)

§ THE EARL OF SELKIRK
My Lords, I beg to move that this Report be now received. In moving this Motion, may I venture to answer two points which were raised by the noble Lord, Lord Pethick-Lawrence, in the course of the Second Reading debate?
First, he asked whether the position of local authorities would be the same as it was before 1945. I replied that it would not. If I may, I should like to expand that a little. Before 1945, with trifling exceptions, it was the rule that local authorities with rateable values of over £200,000 in England and over £250,000 in Scotland were debarred from going to the Board, except county councils borrowing for educational purposes or any local authority who wished to borrow under the Small Holdings Acquisition Act. Moreover, local authorities might borrow for any purpose up to a specified amount based on the proceeds of Savings Certificates sold in their areas. In the second place, before 1945, the purposes for which local authorities could borrow from the Public Works Loans Board were restricted by various Acts. These restrictions were removed by Section 2 of the 1945 Act, and there is no intention of reimposing them. Therefore, the local authorities will have considerably wider latitude in raising loans.
The noble Lord's second question was this: when a local authority borrows from the Local Loan Funds, does that alter the "below the line" balance on the Budget compared with what the position would be if the authority borrowed on their own account from the market? The simple answer to that is, "Yes, it would affect the 'below the line' balance." Loans granted by the Board 777 appear in the financial statement below the line in the ordinary way, and have to be met either from the surplus above the line or from surplus income below the line, or, alternatively, from Government borrowing On the other hand, if an authority borrow on their own account, either by private mortgage or by the issue of stock on the market, the National Accounts do not reflect this and the surplus or deficit on items below the line are unaffected.

§ LORD PETHICK-LAWRENCE
My Lords, I should like to thank the noble Earl for furnishing me with this information for which I asked, and which I did not expect him to be able to give on the previous occasion. I am glad that he has taken this opportunity to give the information required. With regard to the first point, I appreciate that local authorities who want to borrow money independently of the Public Works Loans Board will be in a more free position when this Bill receives the Royal Assent than they were before 1945, and I think that is a good thing. With regard to the second point, I can see that on paper there is the difference to which the noble Earl refers; that in one case the figure appears below the line on the expenditure side, and when a local authority borrows directly from the public it will not appear below the line on the expenditure side. But there never has been any exact accounting. There has been no attempt to make the surplus above the line exactly correspond with the deficit below the line. There has been only some provision above the line to go part of the way to meeting the deficit below the line. As I said, on paper the position has changed, but in actual fact it remains the same. If local authorities borrow from the public directly, that still is a drain upon the resources of the country as a whole. Therefore I hope that if the Treasury and the Chancellor of the Exchequer succeed through this proposal in pushing off on to the general public liabilities that would otherwise have fallen on the Treasury, they will not think that justifies them in providing a smaller surplus above the line to meet the deficit.

§ THE EARL OF SELKIRK
My Lords, may I thank the noble Lord for what he has said? Of course, there are two rival 778 views on this theory, but as the subject is not strictly within the terms of the Bill perhaps he will excuse me if I do not pursue it any further.