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Public Works Loans Bill

Volume 319: debated on Tuesday 2 February 1937

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Order for Second Reading read.

5.40 p.m.

I beg to move, "That the Bill be now read a Second time."

As the House is aware, the Public Works Loans Bill is generally a non-contentious Measure, and on this occasion there is nothing in the Bill of a contentious character. Its main purpose is to fix the amount which may be advanced from the Local Loans Fund during the period between its passing and the passing of its successor to the Public Works Loans Commissioners for use by them in advances to local authorities. The amount proposed in the Bill is £20,000,000, which is the same as that fixed in the Act of 1935. This provision is dealt with in the first Clause of the Bill. Clause 2 provides for the writing-off from the assets of the fund of certain advances which are not likely to be recovered. In accordance with the provisions of Section 15 of the National Debt and Local Loans Act, 1887, provision will be made in the Estimates to be laid before the House for payments to the fund of the amount to be written off, if the Bill becomes law. Except for an amount of £200 due from the Trustees of Eyemouth Harbour these advances are not remitted but remain as a debt to the Exchequer. Clause 3 deals with the sum due from the Eyemouth Harbour Trustees, which differs from other sums in this respect, that for the reasons set out in the Financial Memorandum it is proposed to remit this sum of £200, together with the interest due. There is nothing unusual in the Bill this year. It follows lines which are well known to the House and which have been accepted on previous occasions. Therefore I formally move the Second Reading and shall be glad to answer any questions which may arise in the course of the Debate.

5.44 p.m.

I want to repeat very strongly the protest I made when the last Public Works Loans Bill was discussed, at the extraordinary dilatoriness with which the Local Loans accounts are presented to this House. This is an important Bill; it deals with large sums of money. It involves £20,000,000 this year, but the accounts on which we are supposed to discuss the Bill are now two years old. The very latest accounts bring us only up to March, 1935, and it is impossible, seriously to discuss a Bill when our accounts are so hopelessly out of date. Moreover, there is nothing in the accounts themselves which can justify such extraordinary delay. Unquestionably the accounts are complicated, but anybody who knows anything about accounts and the activities of the Local Loans Commissions knows perfectly well that the accounts can be made up by any accountant in a couple of days. Yet it is 11 months since last year's accounts ended, and there are still no accounts before the House. There is no excuse for that extraordinary delay.

I would like, in passing, to compare the dilatoriness of the Treasury with the attitude of the Public Works Loans Commissioners who, within three months of the end of the year, had issued their report, which is a great deal more complicated and requires a great deal more work than the mere balancing-up of the actual accounts, for it is a report on the work done and a very careful analysis of the year's figures. Nevertheless, that report is available within less than three months of the end of the year, whereas the mere balancing-up of the accounts apparently takes a full 12 months. I suggest to the Financial Secretary that the House is not being treated with the respect to which it is entitled. The House has no right to discuss a Bill based on accounts which are 24 months out of date.

I would like also to remind the right hon. Gentleman that the Public Works Loans Act, 1935, contained a Clause to the effect that the accounts were to be recast, but now, in 1937, we are still discussing this matter on the basis of the accounts in their old form. There is no difficulty in this matter. The accounts should be published at latest by June. The Commissioners are able to issue their report, which means that the accounts are made up, and they are able to issue their complicated analysis of those accounts, and the Treasury could issue their balance sheet by the same time. In order that we might be able to discuss these matters within a reasonable time, the Public Works Loans Bill ought to be introduced in June; the Bill ought to follow immediately the accounts are issued, and not be pushed in at any time, irrespective of whether or not we have the current accounts.

I ask hon. Gentlemen opposite to realise that I am not trying to make a party point of this, for it is a matter for the House of Commons and it concerns hon. Gentlemen opposite just as much as it concerns us. I suggest that the point is an important one, for the accounts of the Public Works Loans Board are by no means in a healthy state. It may be a surprising suggestion that a fund which has shown a surplus on income of over £2,000,000 for several years should be in an unhealthy state, but the fact remains that there are in the accounts and the activities of the Public Works Loans Board certain things which will ultimately make that account entirely insolvent, and the insolvency will be due to the extraordinarily incompetent way in which the Public Works Loans Board has been financed in the past.

I would like for a moment or two to deal with the history of this financing. Until 1920 the capital involved in this annual Bill was comparatively small, not amounting to more than £78,000,000, but from 1920 to 1932, owing to the immense expansion in housing activities by local authorities, something like £211,000,000 in cash was borrowed. In other words, during the 12 years from 1920 to 1932, three-quarters of the present cash capital of the fund was borrowed, and it was borrowed on local loans 3 per cent. stock which was issued at fantastic discounts, in some cases as low as 50, redeemable at par. The result is that, although the cash borrowing was only £211,000,000, the stock issued was £350,000,000. Hon. Members will find the melancholy facts stated on page 5 of the accounts, where they will see that there is an adverse balance on the Local Loans Fund of £125,500,000. The price which the Government pay for the money borrowed is 4½ per cent., within a few coppers, but they are busily engaged in lending that money at 3¼ per cent., so that on every loan they make there is a definite loss of interest amounting to 1¼ per cent. During the last three years—1934–35, 1935–36, and 1936–37—they have lent something like £35,000,000; the net loss has been £400,000 a year, arid the bulk of that money has been lent for 40 years. The £20,000,000 with which the present Bill deals will again be lent at 3¼ per cent., and will again involve the country in a heavy annual loss, which will be added to the £400,000 a year that has already been lost. Year by year, unless there is an extraordinary rise in rates of interest, the activities of the Local Loans Board will steadily reduce that annual surplus until it becomes an annual deficit.

Another interesting point, which equally is fraught with trouble for the future, is that the bulk of the loans to local authorities are made upon a basis of repayment known as annuities. The effect of an annuity basis for repayments is that a fixed annual sum is repaid over a given period of years, part of that sum being interest and part of it capital. At the beginning of the period, a very large proportion is interest and a very small proportion capital, but at the end of the period a very large proportion is capital repayment and a very minor fraction interest, the result being that over the next few years there will be a steadily increasing repayment of capital. I notice that when there were fairly stable conditions and when there was £78,000,000 borrowed at 3 per cent. and lent at about 3 per cent., the repayments and loans more or less balanced each other; but the tremendous expansion of borrowing by local authorities from 1920 to 1932 and the tremendous borrowing by the Public Loans Board to meet that, will mean that although repayments of the present loans are low, they will increase steadily, and the probability is that towards the end of the period of repayment of loans granted from 1920 to 1932, there will be an enormous influx of money to an amount far greater than can be laid out. The result will be that the Local Loans Board will not only be lending at 1¼ per cent. per annum loss, but may find itself with steadily accumulating funds for which there is no outlet except Government stock, which pays an even lower rate than is obtained from the local authorities. Therefore, it is very probable that the annual deficit will be increased on that account also. It is possible already to see this process of a steady increase in repayments at work. In 1932, the repayments amounted to £7,700,000, whereas the figure for 1935 was £10,000,000 repayments, an increase of £2,250,000.

That is not entirely due to the action of the sinking fund. Part of it is due to heavy premature repayments, but even premature repayments are likely to increase as the period of time when the money has been borrowed at high rates runs out, and the local authorities can make repayment on a much smaller penalty premium than at the present time. Consequently, from whatever point of view one looks at the matter, the financial condition of the fund will be in a rather parlous state in a very few years. I am well aware that at the present moment the Board is lending out more than the repayments, and that there is no immediate prospect of its having surplus funds; but that increased activity in making loans is due almost entirely to the Slum Clearance Act passed by the Labour Government, and unless the activities under that Act continue during the next 20 or 30 years, which seems to me unlikely, the time will come when the fund will have a large amount of surplus money of which it cannot get rid.

While referring to the question of premiums on premature repayments, I would ask the Financial Secretary to explain why it is that the Treasury have made an arrangement by which, when a local authority wishes to repay earlier than is prescribed in the terms of its mortgage deed, the Treasury charge a premium, but when a private borrower under the Agricultural Credits Act wishes to repay, he is not charged a premium, the premium being credited to the Public Works Loans Fund at the expense of public money? If hon. Members will look at the accounts of the Public Works Loans Board for the last 5o years, they will find that not a penny has been lost by loans to local authorities—I am not referring to harbour boards and such bodies, but to local authorities. Very heavy losses have been made on account of loans under the Agricultural Credits Act. Yet borrowers under that Act, who are bad borrowers, are placed in a very much more favourable situation when it is a matter of a premature repayment than are the municipal authorities who have been absolutely gilt-edged in their repayments. I think that is a point which the Financial Secretary ought to explain.

The Local Loans Account is an excellent example of how financing ought not to be done. The money ought to have been borrowed at 3, 4, 5 or 6 per cent. as the case might be, and issued at par with power to redeem. Instead of that it was issued as low as 50, redeemable at par, with the result that those people who took up local loans stock at 50 have all this time been receiving 6 per cent. on their money, and if at any future time there is a surplus in the hands of the board, the people who have lent the money will receive not merely the 6 per cent., but a premium of 100 per cent. That is an example of thoroughly bad financing.

6.2 p.m.

I do not think the Bill ought to go through without attention being called to the table in Part II of the Schedule relating to loans under the Agricultural Credits Act. That Act has resulted in real losses in past years, but the losses in most cases have related to loans granted under the early operation of the Act, in 1923 and 1924. With the natural tendency in those days to lend money, so that men could be enabled to own their own farms, there may have been some justification for making loans to borrowers who were not very stable financially. But some of the loans which we are writing off to-day are of a later date. The last one, for example, is dated 1928, and by this time I should have thought that the Treasury would have been able to value a farm more closely than was possible at the beginning of the scheme, and also that they would have been better able to assess the ability of the tenant and prospective owner of the farm to keep up his payments.

I call attention in particular to the first loan in Part II of the Schedule. This relates to Bottom Lodge Farm, Sawtry, in the county of Huntingdon, and the date of the loan is 1927. The farm was valued at £4,000 in 1926, and in July, 1934, seven years later, the board were advised to accept an offer of about half, or £2,300 to be exact. That seems an enormous drop in value in seven years, particularly at a period when agricultural values were more or less stabilised. The last case in point of time seems to be an extraordinary one. The loan was granted in 1928, and amounted to £787. It was advanced on the property known as Gamble Mead, Wivelsfield, in the county of Sussex. In the same year the borrower defaulted and the board took possession of the property. It was put up for sale by auction but the reserve price was not reached. A tenant was eventually found but the tenant failed and refused to pay rent. An order for forfeiture of the lease was obtained with a judgment for about £50, and that has not been paid either. It seems to be an extraordinarily bad case, and I hope that the Treasury will not have to bring such cases to the House again.

There is one other point. These cases have all been dealt with by the board some time ago. I do not know whether their policy has been to make the best of a bad job, and get these items cleared off their accounts as soon as possible, or to see whether, if the borrower is allowed to stay in the farm, it is possible for him, over a period of years, to make good. I suggest that now when agricultural prices are rising and when agriculture is beginning to look more prosperous, a more humane policy ought to be adopted, whatever may have been done in the past, so that the tenant borrower who has some reasonable chance of making a farm a success should be allowed to do so.

6.7 p.m.

I do not propose to follow my hon. Friend the Member for Chesterfield (Mr. Benson) over all the ground which he has so ably covered. I think it possible that there may be a simple explanation of the first point which he raised. However, I shall not try to debate the Government's case for them, and I leave that explanation to the Financial Secretary. As to his second point, namely, that of lending at a lower rate than the rate at which the money was originally borrowed, I submit that my hon. Friend's case requires an answer, and I hope the Financial Secretary will tell us what is the justification of the line taken by the Public Works Loans Board in this respect.

Before I come to the question of general principle which I propose to raise, I would like the right hon. and gallant Gentleman to explain a difficulty which presents itself to me in these accounts. There may be a simple explanation of this point also, but the fact that it is not apparent to me shows that the presentation of the accounts is not as clear as it ought to be, if they are to be followed by people—possibly obtuse people—like myself. In the statement of particulars attached to the Bill relating to loans under the Agricultural Credits Act to private individuals, we find details of a loan made to two persons named William and Albert Edward Barnes. An advance was made to these gentlemen in 1927. In this table the purpose of the loan is indicated and then the amount, which is £3,000. The next column sets out the amount repaid, which is given as £1,927. Does that mean the amount repaid by the borrowers themselves? If it is the amount which the borrowers themselves had already repaid before defaulting, there ought to be some explanation of the figures which follow. If £1,927 of the original amount has been paid, then obviously £1,073 is left outstanding, but on examining the observations at the side of the table we find that in 1934 the board were advised to accept an offer for the property of £2,300, plus tenant right amounting to £92, and the property was accordingly disposed of. Yet when they accepted the offer of £2,300 we are told that £1,073 still had to be written off. I confess I do not understand it. The same principle appears to apply in each of these cases. As I say, there is probably a simple explanation which presents itself at once to the right hon. and gallant Gentleman, and I hope he will take us into his confidence and tell us the answer to this puzzle. The farm having been sold for £2,300 I cannot understand how £1,073 could still be left outstanding, and I think an explanation on that point would be helpful to all of us.

Having presented that proposition to the right hon. and gallant Gentleman, I wish to support what was said by my hon. Friend the Member for Chesterfield in relation to the treatment accorded to borrowers under the Agricultural Credits Act compared with that accorded to the public authorities. I am interested in the operation of the Agricultural Credits Act, because I had the privilege of presiding over the committee which dealt with that Measure upstairs, a good many years ago now, and I have not heard of any serious complaints as to its operation. Its purpose was to help farmers to borrow at a cheaper rate than they would otherwise be able to obtain, and so to assist the carrying on of farming operations. There were critics of the Measure then who said that in practice it would not make borrowing much easier for the farmers as compared with borrowing in the ordinary way from the banks. However, the discussion on that point is now all over; the Measure has become an Act, and there it is.

My hon. Friend submitted that the Public Works Loans Commissioners seem to be more indulgent towards borrowers who happen to be agriculturists than they are to public authorities, and that is an important point. My hon. Friend justly claims, and it is something of which the country ought to be proud, that the public authorities who borrow from the Commissioners have an admirable record in the matter of meeting their liabilities, vis-a-vis the Public Works Loans Board. When we remember the serious vicissitudes through which local authorities in various parts of the country have passed during the last few years, it is a triumph for them that they have done so well. But as they have done so well, it is a rather serious matter if the suggestion can be sustained that the Public Works Loans Commissioners are more indulgent to private borrowers than to these very good customers, the public authorities. My hon. Friend referred to the question of repayments. There are two classes of people to whose cases I would direct the attention of the Financial Secretary. One class does not, strictly speaking, come within the purview of our discussion, but I may be allowed to cite the case in order to make the contrast complete. There are local authorities who borrow from the Public Works Loans Commissioners and then lend that money to private concerns such as companies.

They lend to individuals also, but for the moment I am concerned with companies. For instance, there are cases in which public authorities have borrowed from the Commissioners and then lent to colliery companies to enable those companies to build houses in their areas. A case has been brought to my attention lately—not from my own area—of a local authority borrowing money from the Commissioners and lending to a colliery company. In time this company sold out to another company, and the second company proceeded at once to give notice to the local authority that it proposed to repay the loan. This created a problem because the company avoided paying anything by way of premium to the local authority in exchange for the right to repay before the appointed time. The local authority cannot repay to the Public Works Loans Commissioners without paying a premium, but the company to whom the loan was sublet could escape it. The consequence was that this authority was mulcted in a bill of something like £17,000—a pretty stiff proposition. I believe that the Treasury has made arrangements with the Rural District Councils' Association, and perhaps the Urban District Councils' Association as well, that when local authorities repay their loans before the appointed time, they can be excused three-quarters of the premium. Even so, it does seem a little hard that local authorities should in cases like this be mulcted in an unfortunate financial burden. I wonder whether in cases where a company has borrowed from the local authority and repays the loan, the local authority concerned can be excused having to pay a premium to the Public Works Loans Commissioners.

The other case to which I wish to draw attention is a little difficult. It is not one for which I can charge the Treasury or the Public Works Loans Commissioners with any special responsibility, but I venture to bring it before the Treasury once again. It is to the interests of the Treasury and the Government and, indeed, of local government generally, that heavy financial burdens should be lightened as much and as speedily as possible, because the more these burdens are lightened the more efficiently will local authorities be able to discharge their responsibilities. My hon. Friend the Member for Ebbw Vale (Mr. Bevan) and I come from very distressed areas, and I would ask the Treasury once again to see whether they cannot, through the Public Works Loans Commissioners, come to the aid of local authorities such as we represent. I have stated this case here before, and I venture to do it again because it is important. There are local authorities which in the days immediately after the War, found themselves with vast schemes of public improvement confronting them. They had embarked on them under pressure from the Government. Reports by Government authorities had called attention to the necessity for this, that and the other, and in the pre-war days the local authorities had determined to go ahead with this or that scheme. Then the War came. The Government said the schemes must stop and they brought the whole Government machinery to compel them to be stopped. It was public policy that made the Government insist upon the stopping of these works.

The result was that a job which was begun before the War for £250,000 could not be completed after the War for less than £750,000. As a case in point, there is an authority in my area which proposed to construct a sewerage scheme to serve six local authorities, and it was to cost about £250,000. The War came and the scheme was stopped. When the War ended and we wanted to resume the work, we found that in the new circumstances a task which was to cost us £250,000 would cost us nearly £800,000. Similarly, a water scheme which would have cost £750,000 before the War cost nearly £2,000,000 after the War. Because the Government had held up this work we had, after the War, to scramble with innumerable local authorities all over the country in order to get a lender for these vast sums of money. There was such a struggle for a potential lender in the money market that the lenders were in a position to lay down their own terms. They said, "Before we will lend you money not only must you agree to pay a higher rate of interest, but you shall not have the money unless you accept the loan without the possibility of repayment for another 30 or 40 years." In the case I have mentioned we had to borrow—not from the Public Works Loans Commissioners it is true, but from insurance companies—at the rate of 7¼ per cent. We have seen money become cheaper and cheaper until it can now be obtained at from 2½ per cent. to 3 per cent., and yet we in the distressed areas are condemned for another 20 years to pay 7¼ per cent. It is a monstrous proposition and a colossal burden upon the local authorities. It has effects in other ways. In order to meet this enormous burden, rents of houses have to be fixed at shillings per week more than they need be, so that the people are crippled on every hand.

I admit that this is not directly the job of the Public Works Loans Commissioners, but I think that the Government, through the Commissioners, should really face the problem and see whether they cannot bring some sort of machinery to bear, even to the extent of providing mandatory compulsory powers, to bring to an end these dreadful burdens that are imposed on local authorities. The Conversion Loan was, after all, the application of compulsion to people who had lent money to the State. Why should not these companies be compelled to undergo some sacrifice in order to relieve the local authorities of this disastrous burden? We cannot charge the Public Works Loans Commissioners with any failure in this matter, because it is not directly their affair, but I seize this opportunity to ask the Treasury to consider the powers under which the Loan Board has to borrow and to see whether, in the course of amending these powers, they cannot do something to remedy a grievance which is very distressing to many local authorities. If they could do that, it would bring a message of hope to many areas.

6.27 p.m.

I can speak again only with the leave of the House, and, if that is granted, it would perhaps be convenient if I answered some of the points raised during the Debate. I do not know whether I can answer all without notice, but I will attempt to deal with as many as possible. The hon. Member for Chesterfield (Mr. Benson) raised the question of the date of the publication of the accounts of the Local Loans Fund. He pointed out that the report of the Public Works Loan Board was available for 1935–36, but he complained that the Local Loans Fund account was not before hon. Members for a recent period. I have been looking into that matter because I recognise that it would be convenient for the House to have this account before it for as recent a date as possible when considering this Bill. This year the winding-up of the surplus income account has involved a certain amount of inter-Departmental discussion on the details of winding-up and, in particular, on the valuation at which the assets of the surplus income account should be transferred to the Local Loans Fund. This has contributed to the delay in introducing these accounts, which are not yet available and will not be available for a few weeks. I have made a note of the hon. Member's point, which has in fact been raised before, and I hope that it will be possible in a normal year to have the accounts out considerably earlier. I cannot promise that the accounts will be publisher at a date before the Bill is presented to the House, because that depends on Parliamentary time, which is not under my control, and it also depends on the requirements of the fund. The Bill is not, strictly speaking, an annual one which comes in a particular month of each year, but it is presented as required in order to put the fund in a position to meet its obligations.

Would it not be correct to say that the Bill is almost invariably introduced every 12 months, despite the fact that not more than 20 or 30 per cent. of the fund may have been dissipated. Two years ago a Bill was introduced despite the fact that there was still £12,000,000 available. Therefore, is it true to say that the time at which the Bill is presented must be conditioned by the state of the fund? It is the Parliamentary practice, to which there have been very few exceptions, that it shall be an annual Bill.

I think my answer stands, that it does not follow that the Bill must be presented in a particular month each year, though in point of practice it has in general been an annual Bill. The last Bill was presented in 1935 and this one was actually presented, I think, before we rose for Christmas, though it is being dealt with now. As regards the finding of Parliamentary time, the hon. Member will appreciate that that is a matter about which I cannot make any promise, but the point has been noted. I think I have given an answer which will satisfy the House. It is right to point out, as I think the hon. Member did mention, that the report of the operation of the Public Works Loan Board is available and gives a great deal of information which is germane to the matter we are discussing. As to the other points which have been raised, the hon. Member for Chesterfield took rather a gloomy view about present conditions and about the future of the fund, but that is not the view we take. The Treasury, which never sleeps—

—keeps an eye on the condition of the fund and constantly oversees its operations. The position, I am advised, is that the fund is at present solvent and that the fears which the hon. Member has expressed are not generally entertained. This is a time of low money rates, but who will be bold enough to prophesy that these rates will always continue? The hon. Member's gloomy forecast was based principally on not only a continuance but perhaps even a lowering of money rates. When we come to the question of borrowing, the hon. Member seemed to suggest that at one time the Treasury was asleep. I must take him up on that issue. The borrowings for this fund in the years 1920, 1921 and 1922 were certainly made at a time when money was dear. The issues were made at a figure which, of course, represented the condition of the money market at the time. Since 1922 there has been no public issue of stock, and the point I wish to make is that at that time no one could have borrowed money more cheaply than, in fact, was done. It was an absolute necessity that money should be borrowed, because of the great demand—

I am sorry to interrupt the Financial Secretary, but he has missed my point. I know perfectly well that one could not borrow money at less than, say, 6 per cent. at that time, but I strongly protest against the fact that with the money so borrowed there was issued at that time 3 per cent. stock at a discount. In 1920 it was issued at 50 and in 1923 at 60.

The last public issue was in January, 1922, at 57, which fairly represented the conditions at that time.

The point at issue is not the question of floating a loan at a rate of 3 per cent. or 6 per cent. The difference is over the question of issuing a loan at par on a 5 or 6 per cent. basis and issuing a loan on a 3 per cent. basis, which had to be issued at about 50 or 60. The result, when the second course is adopted, is that there is an immense premium to be paid upon redemption, which would not have been the case had the loans been floated round about par at a rate of interest corresponding to the rate ruling at the time.

I do not think the hon. Member was in his place when the hon. Member for Chesterfield spoke, but I understood him to refer to borrowings over a long period up to 1932 and I pointed out that these borrowings were made during that earlier period and that the last public issue was, in fact, in January, 1922. I appreciate the point which the hon. Member makes, but I do not think that any of us could say at the present time that those who conducted those operations could have prophesied the future with that degree of certainty which hon. Members now seem to think they ought to have. The position of the fund, as I am advised, is not what the hon. Member would suggest.

Another point made in the Debate had relation to premiums on repayment. Both the hon. Member for Chesterfield and the hon. Member for Caerphilly (Mr. Morgan Jones) dealt with the question of the premium charged to local authorities. I speak particularly of cases where local authorities had lent the money again, it had been repaid to them, and they then had this money to dispose of and were asking that it should be taken back as quickly as possible. He mentioned the fact, which I had also intended to speak of, that there have been discussions between the Treasury and the Urban District Councils Association on this subject. Possibly the hon. Member saw in the August issue of "Local Government Finance," which is the official journal of the Institute of Municipal Treasurers and Accountants, a full account of those discussions. I will read an extract from it to show that an effort is being made to meet the local authorities on this matter. The article says in relation to loans from the Public Works Loans Commissioners:
"The institute, acting in co-operation with the Urban District Councils Association, recently discussed with the Treasury the position of local authorities who have borrowed from the Public Works Loans Commissioners for the purpose of making advances for the purchase of houses under Sections 59 or 92 of the Housing Act, 1925, or other similar enactments. Some authorities have been obliged to accept premature repayment of sums so advanced, but have been unable to repay these sums to the Commissioners without having also to pay the premium normally charged by the Commissioners in such circumstances. The association and the institute ask that the arrangement by which sums prematurely repaid to a local authority on account of advances under the Small Dwellings Acquisition Acts may be repaid by the authority to the Commissioners without premium should be extended to similar advances under the Housing Acts. The council are glad to report that the Treasury have agreed for the time being to forego 75 per cent. of the premium normally due on premature repayment of part of a loan from the Commissioners where the money has been borrowed for the purpose of making advances for house purchase under the Housing Act, 1925, or other similar enactments, and where the local authority has been obliged to accept premature repayment. Further, the Treasury have expressed their willingness to afford special treatment to cases where, in their opinion, the payment of even a quarter of the normal premium would involve real hardship to the authority. Where 25 per cent. of the normal premium exceeds the produce of a rate of one penny in the pound, consideration may be given to the further reduction of, or, in an exceptional case, to the complete waiver of the premium. The concession is, of course, conditional on the resources of the Local Loans Fund continuing to be sufficient to support it."
That deals with the point which the hon. Member raised, and, I think, shows that every effort is being made to meet that situation as it arises.

Will the hon. and gallant Member explain why private borrowers under the Agricultural Credits Act are given the full benefit in similar circumstances at the cost of the Treasury?

I cannot deal with all the questions raised to-day, but I think that is a question which has been discussed on previous occasions when similar Bills have been before us. The treatment of certain private borrowers, who are very often not in a position to make any satisfactory repayments, has been throughout rather different; and beyond that I cannot say anything except that every effort is made to secure fair treatment as between private borrowers and local authorities in this matter.

I am sorry to keep interrupting, but the hon. and gallant Member has not understood my point. He refers to private borrowers who cannot make any satisfactory repayments. If a private borrower pays the whole of his mortgage off in one lump sum, instead of paying it off over a period of years, he ought, in equity, to pay a premium because of the drop in the interest rates. If, however, he is a borrower under the Agricultural Credits Act that premium is credited when he repays the sum to the Local Loans Fund, but instead of it coming out of his pocket, as a similar repayment would come out of the pocket of a local authority, the Treasury pays the premium which the operator should have paid because he has repaid the whole sum.

That is a point which I should like to have an opportunity of looking into.

The position of private borrowers has frequently been discussed when we have had similar Bills to this before us. I did not at first appreciate the point which the hon. Member made, and was treating it as the case of those who could not repay at all. I should like to have notice of the point he has now made, because I took him up wrongly. The hon. Member for North Kensington (Mr. Duncan) was, I think, dealing with those who are borrowers under the Agricultural Credits Act, and whose debts are being written off. I would remind him that we are not remitting the sums completely, but are transferring the claim against the debtor from the Board to the Exchequer. As regards our policy towards these private persons, he asked that it should be borne in mind that, with the improvement in the agricultural situation, there was a possibility that some of them might, with a little careful handling, come into a position where they could repay the sums fully. That certainly will be fully borne in mind.

The hon. Member for Caerphilly raised a point of detail in the Financial Memorandum. It was rather a point of detail, but I quite appreciate that as Chairman of the Public Accounts Committee and with his interest in such matters, he is anxious to be assured that things are absolutely right. He referred to page 4 of the Financial Memorandum and asked why it was that under the heading of "Observations" the board were advised to accept an offer of £2,300, whereas the amount to be written off still stands as £1,072. He asked why it was that, having accepted that money, there was so much to be written off. The point is explained by what follows under the same heading. After the figure "£2,300," we find:
"plus tenant right amounting to £92 7s. and the property was accordingly disposed of. After paying all expenses there was a deficiency of £1,072 6s. 10d."
That was after paying all expenses and arrears of interest. What makes up the difference is the heavy arrears of interest which were paid. That kind of thing occurs in other and similar cases.

I may be very stupid, but I am afraid I must ask the hon. and gallant Gentleman for a further explanation. What is the meaning of the column "Amount repaid"? Does that mean that the borrowers concerned repaid in principal and interest £1,927 13s. 2d. out of the £3,000? After that was paid, you proceeded to sell the farm, and received £2,300 for it. After the payment of £1,927, only about £1,000 was left. If you received £2,300 for the farm, how can the sum be said to be written off?

The explanation given covers that question. The arrears of interest added to the paying of the expenses accounted for the deficiency. One other point raised by the hon. Member for Caerphilly and of greater importance, but which, I think he agrees, is rather outside the power of the Commissioners, was as to the position of local authorities who had been forced after the War to borrow on very unfavourable terms and for a long period, and as to the effect which the interest charges were having upon their finances, the rent of their houses and other things. I can only say that I have taken careful note of what he has said. It would require legislation to enable the Commissioners to deal with a question of that kind.

I have attempted to answer in brief all the questions which have been raised upon what, the House will agree, are very technical points. I should require notice to answer some of them more fully. I repeat that the substance of the Bill presents nothing unusual, because it deals in the ordinary way with the requirements of the Public Works Loans Board. I hope that the House will now be content to give the Bill a Second Reading.

Question, "That the Bill be now read a Second time," put, and agreed to.

Bill read a Second time.

Bill committed to a Committee of the Whole House for Thursday.—[ Sir H. Morris-Jones.]