§ EARL GREY
My Lords, I beg to ask His Majesty's Government whether it is their intention that the Regulations to be issued by the Treasury in accordance with Section 7, subsection (1), of the Housing and Town Planning Bill now before the House shall provide that local authorities or other bodies, in receipt of loans under the Bill, shall obtain the benefit of any lower rate of interest should the Government be able to borrow at such lower rate during the peiod of the loans in question.
§ LORD SOMERLEYTON
My Lords, the Regulations to be made by the Local Government Board with the approval of the Treasury under Clause 7 of the Housing, Town Planning, etc., Bill, will deal with the contribution to be made out of public funds towards the loss incurred in connection with the approved housing schemes carried out by local authorities and county councils. The Regulations to be made under Clause 19 of the Bill will deal with the amount of the annual payment to be made out of public funds towards the cost of approved schemes carried out by public 88 utility societies and housing trusts. Draft regulations have been issued in the form of Command Papers dealing with the assistance to be given to local authorities (Cmd. 127) and to public utility societies and housing trusts (Cmd. 128).
The rate of interest on loans advanced by the Public Works Loan Commissioners to local authorities and public utility societies for the purpose of assisted housing schemes will not be dealt with by these Regulations. The terms and conditions on which such loans will be advanced will be determined by the Treasury in pursuance of sub-clause (4) of Clause 7 of the Bill in the case of loans to local authorities, and will be governed by the provisions of the Housing Acts and Public Works Loans Acts as amended by the Bill in the case of public utility societies.
The Treasury do not propose that, if there is subsequently a fall in the rate of interest at which the Government could borrow, the loan charges to local authorities and public utility societies as originally fixed should be reduced. In the case of local authorities the annual subsidy will be fixed (provisionally when the scheme is completed, and finally in 1927) at such a sum as will cover the estimated annual loss, less the produce of a penny rate, and this subsidy will remain unvaried (subject only to fluctuations in the amount produced by a penny rate) during the period allowed for the repayment of the loan. In the case of public utility societies and housing trusts the annual subsidy will be a fixed contribution, determined, for purposes of calculation only, on the basis of a percentage (30 per cent.) of the loan charges which would be payable if the whole capital had been borrowed from the Public Works Loan Commissioners.
It may, however, be assumed that any general fall in the rate of interest which would enable the Government to borrow on easier terms will also enable local authorities and public utility societies to borrow in the open market at a lower rate, and there will be nothing to prevent them from doing so and paying off any loans which they may have raised from the Public Works Loan Commissioners subject to the terms of any Treasury Regulations for the time being in force. In those circumstances the ratepayers (in the case of a local authority) would secure the benefit 89 of the lower rate if the reborrowing were effected after 1927 when the subsidy is finally fixed, inasmuch as the amount of the subsidy will not be reduced. The members of a public utility society would likewise secure the benefit of any such arrangement irrespective of the date when the reborrowing was effected, as in the case of such a society the Exchequer subsidy, calculated as above described, will not be subject to readjustment in 1927. It will also be open to local authorities and public utility societies who have raised their capital from sources other than the Public Works Loan Commissioners to take advantage, by means of reborrowing, of any general fall in the market rate of interest, if the terms on which the original loans are raised admit of this.
I have answered this question on behalf of my noble friend Lord Peel, who is unavoidably prevented from attending, and I trust that the answer given will be satisfactory to the noble Earl.