(1) A local authority for the purposes of Part V of the principal Act or a county council may (if they think fit) establish a fund to be called "the housing insurance fund" with a view to providing a sum of money which shall be available for making good all such losses damages costs and expenses in relation to houses provided by such authority or council or in respect of which such authority or council has advanced money as may from time to time be specified in a resolution of the council of such local authority or the county council (in this section referred to as "the specified risks").
(2) The establishment of a housing insurance fund under this section shall not prevent the local authority or county council from insuring in one or more insurance offices against the whole or any part of all or any of the specified risks.
(3) In each year after the establishment of the housing insurance fund the local authority or county council shall pay into that fund either—
(4) When the housing insurance fund shall amount to the prescribed amount (as hereinafter defined) the local authority or county council may if they think fit discontinue the yearly payments to the fund but if the fund is at any time reduced below the prescribed amount the local authority or county council shall recommence and continue the yearly payments to that fund in accordance with subsection (3) of this section until the fund be restored to the prescribed amount.
(5) The local authority or county council shall provide the yearly payments aforesaid by contributions from the general rate fund or county fund as the case may be.
(6) ( a) Except so far as the housing insurance fund and the proceeds of sale of securities in which that fund is invested may be necessary to meet losses damages costs and expenses in consequence of the specified risks all moneys for the time being standing to the credit of the fund shall (unless applied in any other manner authorised by any enactment) be invested in statutory securities and the interest and other annual proceeds received by the local authority or county council in respect of such investments shall be carried to the general rate fund or county fund as the case may be;
( b) In addition to the sum required to be paid into the housing insurance fund by subsection (3) of this section the local authority or county council shall in every year so long as the fund is less than the prescribed amount carry to the credit of that fund out of the general rate fund or county fund as the case may be an amount equal to the interest and other annual proceeds carried to the general rate fund or county fund as the case may be in pursuance of the last preceding paragraph;
( c) If and so long as the housing insurance fund amounts to the prescribed amount the interest and other annual proceeds received by the local authority or county council in respect of or on investments forming part of the insurance fund and carried to the general rate fund or county fund as the case may be appropriated in the accounts of the local authority or county council to the housing department of the local authority or county council.
(7) ( a) The housing insurance fund shall be applied to meet any losses damages costs or expenses sustained by the local authority or county council in consequence of the whole or any part of all or any of the specified risks in the order of the dates on which such losses damages costs or expenses become ascertained and if at any time and from time to time the insurance fund shall be insufficient to make
good any such losses damages costs or expenses the local authority or county council may with the sanction of the Minister borrow at interest under and subject to the provisions of Part IX of the Local Government Act 1933 such sums of moneys as will be necessary to make up the deficiency;
( b) The amounts of the annual charges in respect of interest on and repayment of principal of any sums borrowed in pursuance of this subsection and the amounts of any such deficiencies as aforesaid not made up by borrowing shall be paid out of the general rate fund or county fund as the case may be.
(8) In this section the "prescribed amount" means such sum as may from time to time be prescribed by the local authority or county council.—[ Mr. John McKay.]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."I do not want to trespass too much upon the time of the Committee, but I believe that this Clause raises a question of some importance to the authorities. The Clause provides a good deal of elasticity. The whole question of the specified risks which the authorities undertake, would have to be decided and they would also decide the question of the total accumulated money which the fund should contain when at its full capacity. They will also decide what contribution and what premium will be needed every year. In addition, local authorities or county councils would have the option of deciding what prescribed money was necessary to fulfil all the obligations they had in mind. If this Clause were passed the authorities would have three options: first, to contribute the full amount that they think necessary to cover their liabilities; secondly, to continue insuring outside their own funds altogether, if they so wished; and, thirdly, to have a mixed position of insuring part of their liabilities with their own fund and dealing with private companies for the remainder of their liabilities. It will be seen that once local authorities are given the power they will have full control and full opportunity to decide in accordance with the needs of their own locality. Each locality, of course, has its varying situation. Some authorities might find it necessary to insure part of their property by means of this fund while others might find that they preferred a mixed method. I cannot see, therefore, that there can be any criticism of the Clause provided we can agree on the principle. The Clause lays down that contributions shall come from the general rate fund or the county fund in order that the new fund may be built up. It also provides that when the money is accumulated it shall be invested in statutory securities and that the interest and other proceeds shall go to the general rate fund or the county fund and shall then be transferred to the housing fund. The Clause goes on to deal with the position where, after a time, when the prescribed amount which the local authority considered sufficient to meet their own liabilities has been acquired, the authority may cease contributing. It indicates that in the case of an exceptional position where the authority find, through very unfortunate circumstances, that they cannot meet the liabilities which have fallen upon them, they have power to borrow money with the consent of the Minister. Provision is also made that any other deficiencies can be met by the general rate fund. It is not my intention to go into any more details. From our experience at Wallsend we think that this Clause ought to be inserted into the Bill so as to give these authorities the power to deal with the situation in accordance with their local position. There may, of course, be something wrong with the drafting of the Clause, but the chief point which arises is this: is this a necessary step and is it a step which would be useful and helpful to the local authorities? The answer to that question will depend upon the experiences which various representatives have had in their localities. I have not attempted to obtain any evidence to substantiate the point, but in Wallsend we find that over a ten-year period we have contributed to the insurance companies four times the amount that we have obtained in respect of liabilities which have arisen. I think that if we investigated the position over many of the local bodies doing this kind of thing—and, as far as I can gather, there are various methods of dealing with the point—we shall find that there is a tremendous gap between the contributions which have to be paid and what is received to meet the liabilities. Our experience at Wallsend suggests that from a business point of view, it would be far better if the authorities had the power to set up a fund of this character in order to deal with their own liabilities. If the Minister cannot agree at the moment to accept this Clause as it is drafted, we should be very pleased if he would indicate that he would consider the position later. We seek largely to ventilate the point more than to do anything else and to find out what is the Minister's view on this matter; and, also, if possible, to obtain some of the local experiences of other representatives. If we can have some discussion of the matter and some indication from the Minister that he realises that this is important and worthy of consideration, and an assurance that he will take the matter into consideration in the near future after getting some evidence about it, we shall really have attained the end that we seek.
I am very much obliged to my hon. Friend for putting his case in such lucid and moderate terms. If I had thought there was very much substance in the complaint that was made, I should have considered the matter earlier, but I cannot think that the local authorities in this regard are indeed suffering any serious disabilities. There is no obligation upon the local authority to insure at all. I should have thought that a local authority that had a substantial number of houses, most of which were semidetached, could properly have carried the onus. A very large number of authorities, in fact, do.I see no reason why a local authority over a period of years should continue to pay premiums to insurance companies in excess of any reasonable risk it itself has incurred. In the event of damage to one of its houses, it can of course, carry that on the repairs account and should make provision for it in the repairs account. If the house is a total loss, that is a risk the local authority runs. I should have thought myself that that was a risk a local authority could quite prudently run, and that therefore there was no need for the local authority to run a residual risk. To have a separate account for the loss of houses seems unreasonably complicated, because in the overwhelming number of cases the local authorities could meet the cost of rebuilding houses out of their ordinary annual funds. Therefore, my reply to my hon. Friend is that if I thought there was a substantial case I should certainly look at it sympathetically, but my own view is that the local authorities themselves can quite easily face the risk and ought not to be encouraged to evolve novel means of dealing with it. In any case, I am sorry to say that I could not accept the new Clause in its present form because it is not technically correct. I hope that with this explanation, my hon. Friend will not find it necessary to push the matter any farther.
I beg to ask leave to withdraw the Motion.
Motion, and Clause, by leave, with-drawn.
Bill, as amended (in the Standing Committee and on recommittal), considered.