Skip to main content

Local Authorities' Borrowing

Volume 436: debated on Tuesday 15 April 1947

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Let us turn to the local authorities. The capital needs of the local authorities are met in two ways. They borrow either on the credit of the State through the Local Loans Fund, or on their own credit in the stock market or by mortgage. Since the present Government took office, the amount drawn by local authorities from the Local Loans Fund is £117 million. Of this, £100 million has been drawn since June, 1946, when, on my instructions, the rate of interest was reduced from 3½ to 2½ per cent., a lower level than it had ever stood at before.

Therefore, on this £100 million drawn since that time, the local authorities enjoy an annual saving of over £500,000 a year. To this must be added the further saving to the ratepayers of more than £1,000,000 a year if this year's drawings on the Fund run as I estimate. Further, on their own credit the local authorities have converted £29 million of stocks in the market since our cheap money drive began, to rates of 2¾ per cent. in the early stages, improving later to 2½ per cent. The saving so far on these conversions has been £600,000 a year. The local authorities have been helped to make these welcome savings for their ratepayers because they have had behind them the strong arm of the National Debt Office, which has underwritten all these conversions, without charging any commission, but has made a useful profit for the taxpayer by well-timed unloading of stocks which some of the previous holders were too slow-witted to take the offer to convert. These add up to a considerable total. The interest savings to private industry have also been large—let this not be omitted—both on the conversion of debentures and on new issues. Indeed, many industrialists admit that cheap money has enabled them to put their house in order, by reducing the interest rate on their prior charges.

These are not only substantial gains; they are enduring gains. They are gains which stand high out of reach of the tides that ebb and flow from week to week on the Stock Exchange. Apart from the Floating Debt, all these are long-term issues, and the lower rates of interest will, therefore, apply throughout the whole long lifetime of these loans, no matter what may happen between now and their terminal dates. Finally, I repeat these are gains which benefit the whole community, section by section, right throughout the national life. But I

would add that these are only a beginning. The volume of borrowing which has taken place so far, during the period of the cheap money drive, is small compared with that which we have in prospect during the next few years. It is in the years ahead that the nation will derive still more substantial and lasting benefits from a resolute adherence to the cheap money policy. It is our intention resolutely to adhere to it. So long as the National Debt endures—and that may be for a long time yet—the Chancellor of the Exchequer must be on the side of the borrowers of money as against the money lenders, on the side of the active producer as against the passive rentier.