National Loans Act 1968

The National Loans Fund

1

• (1) The Treasury shall have an account at the Bank of England, to be called the National Loans Fund.

• (2) Money paid into the National Loans Fund shall form one general fund to meet all outgoings from the Fund, and daily statements of all money paid into and out of the Fund, in such form as the Treasury may direct, shall be sent by the Bank of England to the Comptroller and Auditor General.

• (3) The Comptroller and Auditor General shall from time to time at the request of the Treasury grant credits on the National Loans Fund for sums payable out of the Fund under this or any other Act and, subject to section 18 of this Act, all payments out of the National Loans Fund shall be made by the Treasury in accordance with credits so granted.

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) In section 1(2) of the Parliament Act 1911 (which defines the Money Bill as one dealing exclusively with subjects which include the imposition of charges on the Consolidated Fund) after “Consolidated Fund” there shall be inserted “the National Loans Fund”.

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) No provision in any Act requiring money to be paid into the Exchequer shall be construed as requiring or authorising money to be paid into the National Loans Fund.

• (8) Where the intention is that money be paid into the Consolidated Fund it shall be sufficient to enact that it be paid into the Consolidated Fund (instead of enacting that it be paid into the Exchequer).

Government lending

Substitution of National Loans Fund for Consolidated Fund in scheduled enactments

2

The enactments in Schedule 1 to this Act (which—

• (a) authorise advances or loans out of the Consolidated Fund, or

• (b) create commencing capital debts or other obligations to the Consolidated Fund, or

• (c) authorise payments out of the Consolidated Fund which are to be repaid out of Votes),

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . shall be amended in accordance with those Schedules.

Local loans

3

• (1) The Treasury may issue out of the National Loans Fund such sums as are required for making loans of the descriptions set out in Schedule 4, subject to the limit in section 4.

• (2) Interest on local loans shall be paid at such rates as the Treasury may determine from time to time in accordance with section 5 of this Act.

• (3) All sums paid or applicable in or towards the discharge of the principal or interest of any local loans, whether before or after the coming into force of this section, shall be paid by the Treasury into the National Loans Fund:

• (4) Any sum payable in respect of Irish land purchase annuities which, but for the provisions of this section, would be payable into the Local Loans Fund under section 26(2) of the Government of Ireland Act 1920, or under any other enactment, shall be paid into the National Loans Fund.

• (5) Subject to the limit in this Act, . . . , the Treasury’s power of making local loans shall include power to enter into undertakings to make local loans.

• (6) The Treasury shall, as respects each financial year, prepare ... an account of local loans made in the financial year, and of the sums paid or applicable in the financial year in or towards the discharge of the principal or interest of local loans, whether before or after the coming into force of this section, and send it to the Comptroller and Auditor General not later than the end of November next following the end of the financial year and the Comptroller and Auditor General shall examine, certify and report on the account and lay copies of it, together with his report, before each House of Parliament.

• (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (11) The Public Works Loans Act 1875 and any enactments amending that Act shall apply to local loans.

• (12) In this Act “local loans” means loans made, in pursuance of this section, of the descriptions set out in Schedule 4 to this Act.

Power to make local loans

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• (1) The aggregate of—

• (a) any commitments of the Treasury outstanding in respect of undertakings entered into by them to grant local loans; and

• (b) any amount outstanding in respect of the principal of any local loans;

shall not at any time exceed £115 billion or such other (lower or higher) sum, not exceeding £135 billion, as the Treasury may from time to time specify by order made by statutory instrument.

• (2) No order shall be made under this section unless a draft of it has been laid before and approved by a resolution of the Commons House of Parliament.

Rates of interest

5

• (1) This section has effect as respects any rate of interest—

• (a) which under any provision in Schedule 1 to this Act is to be determined in accordance with this Act, or

• (b) which is to be determined by the Treasury under section 3 of this Act,

and, where any enactment passed after this Act provides for the payment of interest on advances or loans made out of the National Loans Fund, and for the rate at which that interest is to be payable to be determined or approved by the Treasury, then, except as otherwise expressly provided, this section has effect as respects that rate of interest.

• (2) For any loan or class of loans the Treasury may determine or approve either—

• (a) a fixed rate of interest, that is to say a specified rate or a formula rate which is to be applied, throughout the period of the loan or any loan of that class, with the value which it has when the loan is made, or

• (b) a variable rate of interest, that is to say a formula rate which is to be applied, for each of the successive periods of the loan or any loan of that class which are of a length specified in the determination or approval (in this section referred to as interest periods), with the value which it has at the beginning of that period;

and in this subsection “formula rate” means a rate which is so expressed (whether by means of a formula or otherwise) that it will or may have different values at different times.

• (3) The Treasury shall, on each occasion when they determine or approve a fixed rate of interest for a loan or class of loans, satisfy themselves that the rate would be at least sufficient to prevent a loss if—

• (a) the loan, or any loan of that class—

• (i) were made forthwith, and

• (ii) were met out of money borrowed by the Treasury at the lowest rate at which the Treasury are for the time being able to borrow money (of whatever amount) for a comparable period, and on other comparable terms, and

• (b) the interest on the money so borrowed, together with the Treasury’s expenses of borrowing, were set off against the interest received on the loan.

• (4) The Treasury shall, on each occasion when they determine or approve a variable rate of interest for a loan or class of loans, satisfy themselves that the rate would be at least sufficient to prevent a loss if—

• (a) the loan, or any loan of that class,—

• (i) were made forthwith,

• (ii) were to be repaid at the end of its first interest period, and

• (iii) were met out of money borrowed by the Treasury at the lowest rate at which the Treasury are for the time being able to borrow money (of whatever amount) for a comparable period, and

• (b) the interest on the money so borrowed were set off against the interest received on the loan.

• (5) If at any time the Treasury are satisfied that a rate of interest determined or approved for a class of loans would not meet the requirements of subsection (3) or, as the case may be, subsection (4) above if it were determined or approved at that time, that determination or approval shall be withdrawn at the earliest convenient time, and, subject to subsection (5A) below, from that or such later time as may be convenient another rate determined or approved in accordance with subsection (3) or, as the case may be, subsection (4) above shall come into force for further loans of that class.

• (5A) If, in the case of a loan of any class,—

• (a) an undertaking was given to the person to whom the loan was to be made that the rate of interest which would apply to that loan would be that which, at a time specified in or determined in accordance with the undertaking, was or would be in force for loans of that class, and

• (b) before the loan was in fact made, the determination or approval of that rate of interest was withdrawn by virtue of subsection (5) above or otherwise ceased to be effective,

the rate of interest which applies to that loan shall be that which was in force for loans of that class at the time specified in, or as the case may be determined in accordance with, the undertaking.

• (5B) In subsection (5A) above “undertaking” means an undertaking given by the person by whom the loan in question was to be made and, where that person is not the Treasury, given by that person with the consent of the Treasury.

• (6) The Treasury may in determining or approving a rate of interest take into account any consideration justifying a rate higher than that required by sub-section (3) or (4) above.

• (7) Different fixed rates of interest may be determined or approved in respect of loans which are to be made for the same length of time, and different variable rates of interest may be determined or approved for loans which are to have interest periods of the same length.

• (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rates of interest on local loans

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• (1) Subsection (2) below shall have effect for the construction—

• (a) of references in the enactments set out below to the rate of interest in respect of any particular class of loans to local authorities, and

• (b) of references in any other enactment passed, or in any document made, before 27th February 1964 (the date of passing of the Public Works Loans Act 1964) to the rate fixed by the Treasury under section 1 of the Public Works Loans Act 1897 in respect of loans of a particular class.

The said enactments are—

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• section 83(2) of the Housing (Scotland) Act 1935

• paragraph 5(1) proviso of Schedule 7 to the Housing (Scotland) Act 1950

• . . .

• paragraph 7(1) proviso of Schedule 3 to the Housing (Financial Provisions) Act 1958

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• section 11(2)(a) of the Housing (Scotland) Act 1962

• section 3(4) of the Local Authorities (Land) Act 1963

• section 7(4) of the Local Government (Development and Finance) (Scotland) Act 1964.

• (2) Any such reference shall be construed, where the time in question falls after 31st March 1968, as a reference to the rate at that time determined by the Treasury in respect of local loans of the class in question made on the security of local rates or, where more than one rate is so applicable, to such one of those rates as the Treasury may from time to time direct either generally or with respect to any particular enactment or document.

The Treasury shall cause any such direction to be published in the London and Edinburgh Gazettes as soon as may be after the giving of the direction.

• (3) For the purposes of this section—

• (a) the expression “local rate” means any rate levied or assessed, the proceeds of which are applicable to public local purposes, and which is levied on the basis of a valuation of property, and includes any sum which, though obtained in the first instance by a precept, certificate or other instrument requiring payment from some authority or officer, is or can be ultimately raised out of such a rate as aforesaid,

• (b) the expression “security of local rates” includes a security guaranteed by a local rate.

Use of National Loans Fund for other purposes

Exchange Equalisation Account

7

Government annuities

8

• (1) All immediate life annuities mentioned in section 8(1) of the Government Annuities Act 1929, and all immediate savings bank annuities, shall be charged on and issued out of the National Loans Fund, with recourse to the Consolidated Fund.

• (2) Accordingly in the said Act,—

• (a) in sections 8(1), 19 and 24(3) in Part I, and

• (b) in sections 41(1)(3), 55 and 59(3) in Part II,

for “Consolidated Fund” there shall be substituted “ National Loans Fund ”.

Profits of note issue

9

• (1) Subject to subsection (5) below, amounts payable to the Treasury under section 6(1) of the Currency and Bank Notes Act 1928 (profits of the Issue Department of the Bank of England) shall be paid into the National Loans Fund.

• (2) The assets held in the said Department shall be valued, at market prices, at such times and in such manner as may be agreed between the Treasury and the Bank of England, but at least once in each financial year.

• (3) If, as the result of any such valuation, the value of the assets then held in the said Department falls short of the total amount of the Bank of England notes then outstanding, the Treasury shall assume a liability to the said Department of an amount equal to the difference.

• (4) Any liability assumed under subsection (3) above—

• (a) shall be included among the assets held to cover the fiduciary note issue in accordance with section 3(1) of the Currency and Bank Notes Act 1928,

• (b) shall be subject to such conditions as to repayment and other matters as may be agreed between the Bank of England and the Treasury, but shall not bear interest,

• (c) shall be charged on the National Loans Fund with recourse to the Consolidated Fund.

• (5) So long as any part of any liability assumed under subsection (3) above is outstanding, any amount due to be paid to the Treasury under section 6 (1) of the Currency and Bank Notes Act 1928 shall instead be applied towards meeting that liability.

Payments to be made out of Votes

Payments to be made out of Votes and not out of Consolidated Fund

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• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) The Board of Trade shall pay out of money provided by Parliament such sums as are required to enable the Board—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) to make advances to the National Film Finance Corporation under the Cinematograph Film Production (Special Loans) Act 1949.

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Payments under Planning Acts

Payments under Planning Acts

11

National debt

Power of Treasury to borrow

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• (1) Any money which the Treasury consider it expedient to raise for the purpose of promoting sound monetary conditions in the United Kingdom and any money required—

• (a) for providing the sums required to meet any excess of payments out of the National Loans Fund over receipts into the National Loans Fund, and

• (b) for providing any necessary working balance in the National Loans Fund,

may be raised in such manner and on such terms and conditions as the Treasury think fit, and money so raised shall be paid into the National Loans Fund.

• (1A) The terms (as to interest or otherwise) on which any balance for the time being in the National Loans Fund is to be held shall be such as may be agreed between the Treasury and the Bank of England.

• (2) For the purpose of raising money under this section the Treasury may create and issue such securities, at such rates of interest and subject to such conditions as to repayment, redemption and other matters (including provision for a sinking fund) as they think fit.

• (3) For the avoidance of doubt it is hereby declared that the power to raise money under this section extends to raising money either within or outside the United Kingdom and either in sterling or in any other currency or medium of exchange, whether national or international.

• (4) The principal of and interest on any money borrowed under this section, and of any money due under securities issued under this section, and—

• (a) any sums required to be set aside for the purpose of any sinking fund established under this section,

• (b) any other sums to be paid by the Treasury in accordance with the terms on which they borrow,

• (c) any expenses incurred in connection with the raising of money or the issue, repayment or redemption of securities under this section,

shall be charged on and paid out of the National Loans Fund with recourse to the Consolidated Fund.

• (5) The power to raise money under this section extends—

• (a) to raising money through a Post Office company (within the meaning of Part 1 of the Postal Services Act 2011) such a company of national savings certificates, and by the issue of the stamps and tokens described in section 35 of the Finance Act 1961 (national savings stamps and gift tokens), and

• (b) to raising money by the issue of Treasury Bills under the Treasury Bills Act 1877.

• (6) In raising money under this section by the creation and issue—

• (a) of tax reserve certificates, national development bonds, or premium savings bonds, or

• (b) of national savings certificates,

any stock of forms prepared before the passing of this Act may be employed, pending the printing and issue of new forms, notwithstanding that the forms were prepared by reference to the raising of money under the National Loans Act 1939 or, as the case may be, section 7 of the National Debt Act 1958, and any security so issued shall be valid and effectual as if purporting to be issued in pursuance of this section instead of purporting to be issued in pursuance of the said Act of 1939 or the said Act of 1958.