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Hornsey Borough Council (Loan From Prudential Assurance Co)

Volume 414: debated on Thursday 25 October 1945

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asked the Minister of Health whether he is aware that Hornsey Borough Council is saddled until 1950 with a loan of £50,000 from the Prudential Assurance Company at a rate of interest of 7 per cent.; that the Company have refused to reduce this interest to a figure more in conformity with prevailing rates; and whether he will sanction a loan to enable Hornsey Borough Council to convert this debt into one bearing a lower rate of interest.

I am aware of this transaction. I understand that the outstanding amount in respect of this loan is about £16,000. The council have power without the consent of any sanctioning authority to borrow for the purpose of paying off any moneys previously borrowed by them which are intended to be repaid forthwith, but I understand that the company are not prepared to accept the immediate repayment of the balance of the loan.

In view of the refusal of the company to be reasonable in this matter, and the policy of the Government in regard to cheap money, is there any action the Minister can take to prevent this company demanding its full pound of flesh under the bond?

It is very difficult for me to answer such a question as that on the spur of the moment. All companies of this sort must base their plans on expectation of loans maturing at certain dates, and it would be very difficult to interfere with estimates of that sort. It would be very disturbing if that principle were universally applied.

May I ask the Minister whether the trouble is not that the Prudential have managed to inveigle a large number of local authorities into what are called "no break" clause agreements which land them with this iniquitous rate of interest?

I think my hon. Friend will now realise that since the extension of the powers of the Public Works Loans Board, fortunately, contemporary local authorities do not get into those difficulties.

Can the Minister reveal the political complexion of the local authorities at the time when this loan was made?