I move that the Bill be now read a Second Time. The purpose of this Bill is, in effect, to give authority to raise a further £6,000,000 for the purpose of the Local Loans Fund. The House will remember that by sub-section (3) of Section 4 of the 1935 Act, which established the Local Loans Fund on a statutory basis, authority was given in respect of issues made from the fund after the appointed day to raise up to £5,000,000. It is now desired to secure authority to raise an additional £6,000,000, the position of the fund being that already £3,943,307 have been advanced from the fund, and that there are commitments which will absorb a balance in the fund of £1,056,693 within the next four or five months.
There are also two subsidiary matters dealt with in the Bill. One is making good a deficiency of over £91,000 which existed on the establishment of the fund. The deficiency arose in this way, that the non-statutory local loans account was financed from the Exchequer by means of grants-in-aid voted annually on a sanction or commitment basis, as distinct from an issues basis. This necessitated the provision of so much money each year as, with repayments by borrowers, would cover the full amount of all loans sanctioned in the year, without regard to the amount likely to be required for actual cash issues.
The position was that the local loans account carried a large and growing surplus cash balance which, as it could not be invested, and had to be carried on deposit account, earned only deposit interest, while the account itself was indebted to the Exchequer for interest on the advances made to it at the full borrowing rate. The deficiency which existed has now to be made good. It does not put the Exchequer in any worse position; it merely puts the account upon a proper basis.
In addition, there is also a minor amendment connected with Section 16 of the Act of 1935. Under Section 4 of the present Bill it is proposed that where a debt is due to the fund by a local authority, by a subsidiary local authority, that if necessary, if a default arises, that default can be made good from moneys payable to the parent body, if the parent body acts as the guarantor for the subsidiary local authority.