HL Deb 14 July 1967 vol 284 cc1398-403

1.38 p.m.

Order of the Day for the Second Reading read.


My Lords, I beg to move that this Bill be read a second time. Its purpose is to provide funds for the Public Works Loan Commissioners to lend to local authorities and certain other bodies. The Bill, however, also contains certain amendments to the Public Works Loans Act 1965. All local authorities will, in 1967–68, be able to borrow from the Public Works Loan Board a quota based on a percentage of their reckonable capital payments in the year. On this basis most authorities will get 34 per cent., but authorities in the less prosperous regions (to which Devon and Cornwall have been added) will receive 44 per cent. The smaller authorities whose quota, on these percentages, would be less than £100,000 will continue to be allowed to borrow up to the full amount. In addition, there is a supplementary quota which allows local authorities to raise from the Public Works Loan Board 30 per cent. (40 per cent. in the less prosperous areas) of the borrowing required for the purpose of complying with the restrictions on temporary borrowing. Local authorities have recently been given until March 31, 1969, instead of until. March 31, 1968, to bring their temporary borrowing to within the limits laid down in 1963.

These are new proposals which officials discussed with representatives of the local authority associations on March 26. The proposals were further discussed at a meeting between the Chief Secretary to the Treasury and elected representatives of the Associations on April 3. The change makes it easier to predict the call upon the Exchequer. The estimates have been widely out in past years but for 1967–68, it is expected that net Exchequer issues will amount to £480 million, with gross Public Works Loan Board issues of £620 million.

Clause 1 of the Bill provides for £900 million to be put at the disposal of the Commissioners, and it is expected that this amount will last until early in 1969. As on previous occasions, provision has also been made permitting the Public Works Loan Board to undertake to make loans from funds which will be made available under the next Act. This is done because it is necessary to ensure the continuity of the Board's business; the Commissioners are empowered to enter into commitments of £50 million over and above the cash provision of £900 million. In the past, each Act has operated from the date on which it has received Royal Assent, and any provision under the previous Act remaining unused has lapsed and has, therefore, been wasted. The present Bill contains an innovation, in that it enables the Treasury to appoint the day upon which Clause 1 comes into effect; and the "waste" can, therefore, be avoided. The day is to be appointed by means of an order which will be laid in the form of a Statutory Instrument before both Houses of Parliament.

Clause 2 contains purely technical provisions amending defects that have become apparent in the Public Works Loans Act 1965. The explanation is very technical. Prior to the Public Works Loans Act 1965, the Commissioners were legally required to secure their loans by a mortgage on land or revenue, most loans, in practice, being secured on revenues. The procedure involved time and labour for the Public Works Loan Board and the borrowers. In 1965 formalities were greatly simplified. The 1965 Act created a new form of borrowing for local authorities—borrowing by agreement with the Board, loans being automatically charged on the revenues of the borrower without the need for execution of a mortgage. Section 2(2) of the 1965 Act also empowered authorities whose borrowing is governed by the Local Government Act 1933 and the Local Government (Scotland) Act 1947 to borrow, by agreement with the Board, and provided that the money so raised should be covered by the automatic charge on the revenues of the borrower created by Section 197 of the 1933 Act or Section 261 of the 1947 Act. This part is quite satisfactory.

Section 2(3) of the 1965 Act, however, which deals with the few authorities whose borrowing is not governed by the 1933 and 1947 Acts, is defective in two respects. First, it does not take into account the fact that the Acts relating to some of the authorities contain lists of permitted methods of borrowing, thus raising the implication that other methods of borrowing are not open to these authorities. The effect of this has been that some authorities, including river authorities, have not been able to take advantage of the simplified borrowing procedure introduced by the 1965 Act but have had to continue to execute mortgage deeds. They have quite naturally requested that they should be able to adopt the simplified procedure. This is achieved by subsection (1) of Clause 2 of the Bill, which establishes the power of these authorities to borrow by agreement with the Board.

The second defect occurs in Section 2(3) of the 1965 Act, which imposes an automatic charge on revenues in every case where an authority (other than those covered by the two Local Government Acts) borrows by agreement with the Board. For some of the authorities concerned, however, other legislation already provides for loans raised by them to be automatically charged on the revenues. Subsection (2) of Clause 2 of the Bill therefore limits the scope of Section 2(3) of the 1965 Act to those authorities whose legislation does not already provide for an automatic charge. This same subsection also contains a consequential extension to the definition of "automatic charge" which occurs in Section 2(5) of the 1965 Act.

Subsection (3) of Clause 2 amends paragraph 3 of the Schedule to the 1965 Act. Sections 29 and 30 of the Public Works Loans Act 1875 dealt with capital repayments of loans and the transfer or discharge of security for loans, and contained references to mortgages, which were defined in an earlier section of the Act as including a charge under the Act. Paragraph 3 of the Schedule to the 1965 Act put charges on revenues by virtue of Section 2 of the 1965 Act on all fours with charges under the 1875 Act. However, it failed to cover the automatic charges on revenue created by other legislation and is therefore amended by subsection (3) of Clause 2 of this Bill. This equates automatic charges on revenues, whether by virtue of the 1965 Act or by virtue of other legislation, with charges under the 1875 Act. It renders unnecessary the references in paragraph 3 of the Schedule to the 1965 Act to Sections 29 and 30 of the 1875 Act and these references are therefore deleted by the Bill.

My Lords, those are the technical changes that lie within the Bill. In moving it I would assure noble Lords opposite, in particular, that this is one of those Bills that become rather an annual event, in the sense that we need to provide new moneys for local authorities to be able to borrow so that they can carry out their own particular developments in their areas. I beg to move

Moved, That the Bill be now read 2a.—(Lord Shepherd.)

1.48 p.m.


My Lords, I feel that I owe your Lordships an apology for inflicting myself upon your Lordships yet again. This must be almost as distasteful to you as it is to me. However, I merely wish to thank the noble Lord for having introduced this Bill and for having explained to us what it is about. As he said, it is an annual Bill and it provides for £900 million, which is no small sum. I gather that the amounts coming from the Public Works Loan Board in the current year will be less than last year, and I assume that this indicates a move towards a natural money market, as opposed to a move towards a market which provides loans at subsidised rates of interest. That seems to me to be a good thing.

The Government have taken the step fairly recently of removing stamp duty, and this has proved to be successful. It always seemed to me to be illogical that one public department should tax another public department, because this can be of no value to anyone and can only complicate the machinery and be a waste of time.

I should like to conclude by asking the noble Lord one question, which I think is important. Under the National Plan it was assumed that 4¼ per cent. at constant prices would be the growth rate of the public sector and this allowed a growth rate of 8½ per cent. a year for local authority expenditure, which is the figure that local authorities have been using in their planning and budgeting. In view of the fact that the Chancellor of the Exchequer now talks about 3 per cent., is one to understand that this figure of 8½ per cent., which the local authorities have been using, and on which they have been planning, is now to be revised, or it is likely to be adhered to? If the noble Lord could give me some indication of that I should be grateful. Meanwhile, I thank him again for introducing this Bill, and I would also take the opportunity of thanking the members of the Public Works Loan Board, who I believe give their services free, for the work they do.


My Lords, it is not for the noble Earl to apologise for having spoken but for us to congratulate him on his stamina and his great versatility. He has spoken on many subjects this morning—I can only imagine that on the Front Bench opposite there is no organised trade union. This may well be the case, and if he needs the protection of a trade union, I am quite sure we might find some chapel secretary on this side to give protection in future.

The noble Lord was quite right to draw our attention to the problem of local authority spending, or, for that matter, general public expenditure in relation to our own economic growth. This is a matter which Governments have to balance year by year, although of course one tries to plan further ahead for the benefit of those who have to make long-term planning. We have now contained public expenditure overall to 4¼ per cent., and in fact during the last two or three years we have been able to keep it below that figure. This is due to the fact that our own economic growth is not all we should wish to see. In terms of local authority growth rates, my right honourable friend, the Chancellor of the Exchequer, said in his Budget speech that the Government had launched an exercise to bring our long-term expenditure programme into line with the growth prospects after 1970 and to reconsider priorities between the different long-term programmes. In accordance with this, the Government are now very much engaged in this review of public sector expenditure as a whole, including expenditure of local authorities.

This is a very complex subject. The review is still going on and I should therefore be very foolish (and at this time of day I do not intend to be foolish) to answer the noble Earl too firmly. But I will certainly give the noble Earl an undertaking, recognising the importance not only to our well-being but also to our long-term development, that as soon as it is possible to make a statement this will be done in Parliament; because, quite clearly, local authorities, in particular, should have a target upon which they can exercise their own planning. I hope that the noble Lord will be content with those few words, and I hope the House will now give this Bill a Second Reading.

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