§ Mr. Oakesasked the Chancellor of the Exchequer if he will make a further statement about foreign borrowing by local authorities.
§ Mr. Harold LeverAs I said in the House on 16th April, the Government wish to encourage local authorities who have the necessary statutory powers to consider the possibility of borrowing foreign currency at medium and long term for the benefit of the reserves, and Clause 14 of the Finance Bill, published yesterday will remove an existing impediment by enabling authorities to pay interest gross of tax on such borrowings. The Government are also prepared to extend to local authorities, in appropriate cases, the special arrangements for dealing with exchange uncertainties which I announced for nationalised industries in my Answer to my hon. Friend the Member for Chislehurst (Mr. Macdonald) on 14th February. Further details are given in a separate notice issued by the Treasury today and obtainable on inquiry at the Treasury or the Bank of England.—[Vol. 777, c. 405–6.]
The text of the notice is as follows:
NOTICE
FOREIGN CURRENCY BORROWING BY LOCAL AUTHORITIES
As the Financial Secretary to the Treasury announced in answer to a Question in the House of Commons today, the Government 247W has decided that local authorities as well as nationalised industries should be encouraged to cover a proportion of their borrowing needs in the international and foreign capital markets if they have the requisite statutory powers. While it is not envisaged that anything but a small proportion of their capital needs can be met by borrowing in this way, it is considered that such borrowing would provide a significant and useful benefit to the United Kingdom balance of payments, provided that the borrowing is done at medium or long term. In appropriate cases, the Treasury will be prepared to make special arrangements to relieve the local authorities of the exchange uncertainties associated with borrowing foreign currencies.
Specific Treasury consent will be needed for each borrowing operation of this kind. Before giving consent, the Treasury will need to be satisfied that the terms and conditions, including the currency, size and timing, of the borrowing are appropriate, both in relation to the United Kingdom balance of payments and to the prevailing conditions in international and foreign capital markets. In order to ensure orderly arrangements for foreign currency borrowing, local authorities who are considering the possibility of borrowing abroad should in the first instance consult the Treasury.
These arrangements will not apply to borrowing in sterling area currencies, or borrowing through a sterling area country; they apply only to borrowing in the currency of a country outside the sterling area.