PUBLIC WORKS LOANS BILL (Hansard, 1 December 1953)

LORD HAWKE
My Lords, on behalf of my noble friend, Lord Selkirk, I beg to move that this Bill be read a second time. To your Lordships, the Second Reading of this Bill is obviously not an event of great consequence. To me, however, this is something of an occasion, for it is the first time that any of my family has spoken from this Dispatch Box. Moreover, it is 182 years since one of my family last spoke for the Government in another place, when my great-great-great-grandfather, Sir Edward Hawke, defended in his last speech the naval policy of Lord North's Administration. That is a long interval and I hope your Lordships will not think that I am making up for lost time in presenting a Bill calling for the expenditure of £500 million.
A Bill of this nature is produced more or less every year to enable the National Debt Commissioners to put the Public Works Loan Commissioners in funds, to enable them to make loans to local authorities and other bodies for housing, education and so on. In addition, this Bill enables the Board to make commitments to lend in advance of the actual lending. We are asking that there shall be 856 power to advance up to £500 million in cash, with the proviso that advances plus commitments shall not exceed £1,200 million at any one time. The existing authority, the Public Works Loans Act, 1952, was passed nearly a year ago, giving authority for advances of £500 million, with a total limit on advances plus commitments of £1,050 million. Of this authority there is still a margin of advances, as only some £364 million has been paid out against the limit of £500 million. But commitments of another £608 million bring the total of advances plus commitments to £972 million, which is getting rather near the total authority of £1,050 million, which at the present rate would expire probably early in January. For this reason it is necessary to present this Bill now. Any balance of last year's authority to make loans lapses on the passing of the new Act, and new loans start to be made both as the result of the commitments which carry forward or from fresh commitments entered into.
When this Bill becomes law we may well be carrying forward over £600 million of commitments, and therefore we decided to ask for a rather larger total limit this year—£1,200 million instead of £1,050 million—although we propose to keep the figure of £500 million for advances. Whether, in the outcome, this figure will last exactly a year, we cannot tell; it is our best guess, having regard to all the circumstances. If we prove to be wrong, no great harm results, because the next Bill can be presented either earlier or later than a year ahead. I should like to emphasise that this Bill in no way whatever controls the capital programme of the local authorities; it merely enables them to have a source of cash to borrow. I therefore hope that it will be a non-contentious Bill. I beg to move.

§ LORD SILKIN
My Lords, I should like to begin by congratulating the noble Lord on his first appearance at the Box. I do not know whether he regards this as a sort of rehabilitation of the family fortune; if he does, he has certainly succeeded. He spoke with complete assurance and in an entirely uncontroversial manner, and on personal grounds I 857 wish him every possible success in the future. As the noble Lord rightly said, this is a Bill in more or less common form. It is introduced from time to time, roughly at intervals of about a year, and it in no wise controls the capital expenditure of the local authorities.
There are just three points I should like to make. In the first place, this is, I think, the first Bill since local authorities were given freedom to borrow elsewhere. I should have thought that that freedom would have been hardly necessary if there had been rather more flexibility in the conditions under which the Public Works Loan Board were allowed to lend money to local authorities. As noble Lords are aware, before they can borrow money at all, local authorities have to get loan sanction from the appropriate Minister, and it is the custom, at the same time as they apply for loan sanction, to apply for a loan to the Public Works Loan Board. The loan sanction is accompanied by a statement of the period over which the loan has to be repaid. It is a maximum period—in the case of housing it is normally sixty years; in the case of other services it may depend upon the estimated life of the work which is required to be done. But the Public Works Loan Board were apparently instructed in 1946 that they must never lend money for a shorter period than the period of the loan sanction, so that if a local authority wants to repay a loan, say a housing loan, in a shorter period than sixty years, the Public Works Loan Board are not allowed to agree to such an arrangement; and in that case the local authority is compelled to go outside to raise its money.
There may be a variety of reasons why the local authority may want to repay the loan earlier than the period of the loan sanction, but they cannot do it—and for a curious reason. The reason given is that in a number of cases there is a subsidy attached to the particular service, and this subsidy may be on a percentage basis—that is, on a percentage of the loan charges; and if the repayment is over a shorter period, it automatically increases the actual loan charge, and would thereby increase the Government subsidy. This is a very small point, however, and it applies to not more than 10 per cent. of the expenditure of the local authorities. Most of the expenditure is 858 by way of a fixed subsidy, as in the case of housing. This is really a sore point among local authorities, and although I know that the Minister of Housing and Local Government, as well as the Chancellor of the Exchequer, are aware of this point, and are discussing it, it has been a matter for complaint over a number of years. I trust that the noble Lord will convey to those who instruct him the hope that this will be settled in the very near future, and that more flexibility will be permitted to the Public Works Loan Board in that respect.
My second point is that, for a reason which I do not understand, the Board charge a fee of 4s. for every £100 advanced. On the £500 million which is sought to be secured under this Bill, the fees will amount to £1 million. If it could be stated that that is to reimburse the Public Works Loan Board for their expenses, there world he no comment, but the expenses of the Public Works Loan Board amount to about £70,000 a year. There seems to be no reason why they should charge £l million in fees to the local authorities, in respect of these advances. In addition, the Government charge 5s. per £100 as stamp duty in respect of these loans. That again, altogether, amounts to 9s. per £100, to be paid away for no apparent reason, and is another sore point among the local authorities. I hope that the noble Lord will be able to go to his masters on that point as well.
Lastly, there is the question of commitments. The commitments on this occasion, together with the amount available for advances, are to be £1,200 million. As I said earlier, every time that a local authority gets a loan sanction, or applies for a loan sanction, it applies automatically for a loan from the Public Works Loan Board, whether, in fact, it needs to borrow from the Public Works Loan Board or not. In a number of cases, the local authorities have no intention of borrowing from the Board. Nevertheless, that is put down as a commitment, so the Public Works Loan Board has am enormous number of commitments which it is never likely to be called upon to fulfil. In fact, this figure of £1,200 million is entirely unrealistic. Nevertheless, it governs the duration of this Bill As soon as the £1,200 million of commitments has been exceeded, whether it is 859 likely to be spent or not, another Bill has to be introduced. It is not a very serious point, but in dealing with these astronomical figures it is just as well to be realistic, and the figure of £1,200 million is not a realistic figure of the commitments of the Public Works Loan Board. My Lords, those are three points—not major points but points of comment on this Bill. On the need for the Bill, and on the merits, there can be no possible argument, and we shall put no difficulty in the way of its passage through this House.

LORD HAWKE
My Lords, I must first of all thank the noble Lord, Lord Silkin, for the kind words which he said about me personally. I should also like to thank him for giving me notice, more or less, of the points which he was going to raise. I hope to be able to satisfy him on them. First, let us take the question of repayment of these loans before the fixed time upon which they were granted. As he says, there are two sorts of works generally involved. One sort of work attracts a percentage grant from the Government; the other sort of work attracts a fixed grant from the Government. As Lord Silkin says, when a loan in respect of work carrying a percentage grant from the Government is paid off earlier than expected, the instalments are larger than expected, the percentage is larger than expected, and a larger sum falls on the Exchequer than was to be expected.
I think the noble Lord must admit that from the point of view of accurate estimating, accurate budgeting and general tidy financing, it is rather important to know what the amount of these grants is going to be from year to year. If local authorities are going to pay back unexpectedly in shorter periods, it does make the position very difficult for the Chancellor. But, of course, as the noble Lord says, those particular types of works are not the majority. The majority are types of works which carry a specific subsidy—housing in particular. There the same argument could not apply. My right honourable friend has been in consultation with local authorities for some little time to see whether the local and administrative difficulties which undoubtedly exist can be cleared up, and though it is too early yet to say 860 whether the outcome will be entirely favourable, I think I can say that some of the difficulties seem to be dissolving. I think that answers the point with regard to works which carry a fixed subsidy. I will certainly bring to the notice of my right honourable friend the arguments which the noble Lord has advanced in respect of those works which carry a percentage subsidy.
As to commitments, the noble Lord, Lord Silkin, says that the figure of commitments is entirely unrealistic. Well, it is difficult to prove or disprove that statement, because no one really knows. Local authorities do not know from time to time which of these commitments they really intend to take up as loans in the end. In some cases a commitment can disappear because the work is not proceeded with. In other cases, it can disappear because the money has been raised locally or through a bank. In other cases, the local authorities can go to the Stock Market, and that commitment then becomes a dead one. We have no compulsory powers to compel local authorities to notify the Board when they regard a commitment as dead. From time to time, however, Treasury circulars go out to the local authorities, if there is any reason to believe that the list has become rather swollen. One went out fairly recently; I understand that, as a result, some £50 million of commitments was knocked off. But up to date we have not been embarrassed, because this year, for instance, we still have authority which will carry us over the normal year which is the lifetime of this Bill. So one cannot say that we have really been embarrassed. As regards the fees of the Board, in the last year they were of the order of £750,000—the noble Lord was talking of the future when he talked about £1 million—and the expenses were of the order of £80,000.

§ LORD SILKIN
I was making merely a simple arithmetical calculation on the basis of 4s. per £100 on the £500 million.

LORD HAWKE
Of course the £500 million last year has not been used up. The figures are of the order of that magnitude. I admit that that is a substantial sum to come in to the Board, but it is paid straight into the Exchequer. I think one can really regard that as a contribution towards the very expensive and heavy charges that are incurred in raising the 861 money and administering the loans. At any rate, I will bring to the notice of my right honourable friend the fact that he promised in another place to look into this question. But the money goes into the Exchequer and is not kept by the Public Works Loan Board. I think I have answered all the points the noble Lord raised. I am sorry I cannot answer them to please him better; that is the best I can do.