PUBLIC WORKS LOANS BILL (Hansard, 23 July 1956)

LORD HAWKE
My Lords, this is a Bill which we pass at intervals of a year or so, to enable the National Debt Commissioners to provide out of the Local Loans Fund money required by the Public Works Loan Board to lend to local authorities and similar bodies. The last Bill, which was passed in March, 1955, authorised advances of £500 million, of which £406 million had been used up to July 13 last, This Bill has a rather different background from the last, as different arrangements for local authority borrowing are now in operation. Before the war larger authorities were expected to make their own arrangements for borrowing from the market. From 1945, they had to come to the Public Works Loan Board for all their borrowing. Since 1952, local authorities have been free to borrow outside the Board but were still entitled to go to the Board if they wished. The latest move has been that since the Autumn Budget the onus has been put on borrowers to try to get money elsewhere 51 before going to the Board. The arrangement regarding commitments has also been changed, in that borrowers have to go to the Board within one month of the money actually being required. By this means we avoid the former long list of problematical future commitments. Rates of interest have also advanced and are now related to the rates at which larger authorities can borrow in the markets. The net result of these changes in policy and procedure is that it is not necessary to provide such large sums as before. This Bill, therefore, is for a figure of £300 million of loans, with £400 million for the total of loans plus commitments. We expect this to last rather over a year. I beg to move that the Bill be now read a second time.

§ LORD PETHICK-LAWRENCE
My Lords, the noble Lord who has introduced this measure has pointed out that it is in a slightly different form, or rather has a slightly difference purpose, from previous Bills of this kind that have been brought before your Lordships' House from another place for a great many years past. The noble Lord was, of course, quite correct in his explanation of the differences. I well remember a few years back when the late Lord Shepherd was rather anxious about the effect of the change which enabled major authorities to go into the market, instead of having to apply to the local loans authorities, as they were during the war, because of the effects upon the Budget and the picture of the overall finances. He was right in thinking that it had an effect, because it took the borrowings of those authorities who went direct to the market out of the figures that appear "below the line" in the Budget. I did not feel very strongly about that, because it was a voluntary procedure, which it was open to major local authorities to use or not, as they desired. But, of course, as the noble Lord, Lord Hawke, has said, the position is now greatly changed. Only a few months ago the Treasury came to a decision, which was announced by the Chancellor of the Exchequer, that all local authorities must try to get their money on the open market before coming to the Local Loans Fund at all. That is why the amount which 52 appears in this Bill is substantially smaller than that contained in previous Bills.
The only point I want to make to-day is that those who are looking at the Budget and considering how far the Government are making provision to meet all liabilities must not be deceived by the fact that the amount "below the line," so far as this is concerned, is less than it would have been under the old scheme. It is true that under another decision of the present Chancellor of the Exchequer an additional item relating to the nationalized industries is included "below the line." I should not like to go into that to-day, because that would be taking us away from the subject of this Bill; but what successive Chancellors of the Exchequer have done in the last calendar year is to exclude from the below-the-line figures the items relating to these local authorities who now go to the open market and to include the items from the nationalised industries. I do not know which way the balance would lie, but the fact must be realised that the presentation of the whole picture in the Budget, above and below the line has been greatly modified by this change, and in the future, it will be impossible to make any adequate comparison between the current year and previous years.
It has always been my view that the Chancellor of the Exchequer is not only responsible for the affairs of the State but is, in a sense, the finance Minister for the country as a whole, and, therefore, it is his business to see that the finances of the country are sufficient to provide for the financial needs of the country. Of course, that is the difficulty about this whole matter of inflation. The Chancellor of the Exchequer is aware that that is a very necessary condition of stability in the British economy, and that where that stability does not exist there may well be inflation, with disastrous consequences. I welcome the fact that the Chancellor of the Exchequer is providing larger surpluses of above-the-line figures, because that enables us more readily to meet our requirements. But that comes into the question of this Bill only because the change of the method of financing local authorities is important in considering whether the Chancellor of the Exchequer is providing or not providing sufficient finances for the purpose.
53 That is all that I want to say about the Bill. In the main, the object of the Bill is one of which we all must approve. Where local authorities cannot get their funds from one source, we must provide the fund; and for a long time past that has been provided by successive Bills like this. So far as I am concerned, and I think that this would be the view of my colleagues on these Benches, the Bill has our support and we have no further desire to pursue any discussion of its merits.

LORD HAWKE
My Lords, I thank the noble Lord, Lord Pethick-Lawrence for his remarks, which I think are incontestable. I think that this arrangement would enable the Chancellor of the Exchequer to fulfil that task which he regards as his most important one. We believe that the "swopping over" of the nationalised industries for the local authorities will help us to avoid inflation.