§ 3.34 p.m.
§ The Chairman
I think that the first two Amendments, in the name of the hon. Member for Coventry, South (Miss Burton), those in page 1, line 7 and line 8, can be taken together.
§ Miss Elaine Burton (Coventry, South)
Yes, Sir Charles.
I beg to move, in page 1, line 7, after "Where", to insert:the Minister is satisfied that a permanent building society does not discriminate between borrowers or prospective borrowers according to their sex and".On 12th November last, a statement appeared in The Times of which I wish to read two paragraphs, as they are both relevant to today's discussion—and I think that the Minister of Housing and Local Government knows which paragraphs they are. The statement read:A spokesman of the Building Societies Association, whom the Government consulted in framing their plans, admitted yesterday that, although there is no hard and fast rule prescribed in building society practice, women are discriminated against simply because they are reckoned to be less credit-worthy.The societies argue that a man's future can be predicted with more certainty over a long period of years than a woman's.I do not think that I can accept that, Sir Charles. The statement went on to say:If a woman in search of a mortgage is young the society must take account of the fact that she may soon change her circumstances by marriage, when the husband will not be legally liable for repaying the loan. If she is less than young the society must bear in mind that she may retire, even from a well-paid job, earlier than a man.It seems to me that these conditions apply against the young and the not so young, the married and the single, and the type of woman who would be liable to be exempted from them quite escapes my comprehension. As may well be imagined, such a shocking statement caused considerable interest and surprise. 394 It caused a good deal of publicity in the local and in the national Press, but it was not until 10th December—four weeks later—that there appeared in The Times a letter from the Secretary of the Building Societies Association denying that that statement was accurate. That was a remarkably long time-lag for so important a statement to be denied.
I was not made aware of the Building Societies Association's denial of any part of the statement until about three weeks after 12th November. That was as a result of a letter I sent to the Association. Otherwise, I imagine that I would not have known about the matter at all.
I wonder whether, at this stage, the right hon. Gentleman could help me. I know that it was not his statement—and, of course, he is very glad that it was not—but I did see him after the December debate, when he was most courteous and helpful in listening to the points that I had to make. The question of whether or not the spokesman of the Building Societies Association did say to The Times, for its statement of 12th November, that women were "discriminated against" is important. Perhaps the right hon. Gentleman could tell the Committee now whether he believes that the Association still stands by the fact that it did not use those words, and that The Times was in error. I shall be much obliged if he could comment on that point.
§ The Minister of Housing and Local Government and Minister for Welsh Affairs (Mr. Henry Brooke)
I think that any reply should be given after the case for an Amendment has been put. Be that as it may, neither I nor the Building Societies Association can, I think, be held responsible for a report in a newspaper—even one as reputable as The Times—which was based on a verbal statement of which there is no record. Later in the debate on the Amendment, I shall be able, on behalf of the Government, to give the official views of the Association on the matter.
§ Miss Burton
I thank the right hon. Gentleman for that statement. It does not get us a great deal further, of course. I think that I know the official views of the Association—I have read them—but the evidence I have to put forward does not exactly bear them out.
395 If one accepts the statement contained in the letter of 10th December from the Secretary of the Building Societies Association, the words "discriminated against" were not used. If we take those out, we are still left with the fact that, although it is not prescribed building society practice, women are reckoned to be less creditworthy. I do not know whether the Secretary of the Association wishes also to withdraw that statement. If he does, I can only say that The Times must have been very lax that day and will not have much left of the report of the interview which took place.
The question whether building societies do reckon that women are less creditworthy than men is of great importance. The suggestion is really so ridiculous that I think the best thing is to try to kill it by ridicule, which is always the best way of killing anything in this country. It is no use being angry. One can only be sorry that such out-of-date ideas exist.
The Building Societies Association, through its Secretary, has said—this was in The Times of 10th December—that… the policy of most of its members is to treat a woman applicant for a loan in exactly the same way as a man if she is in regular employment and earning a sufficient income. In such cases there is no discrimination on grounds of sex and no male guarantor is normally required".That is obviously what everybody would expect. The only comment I have is that every single case which has come to my notice, from every part of the country, has arisen over the requirement for a male guarantor.
I did not myself hear it, but I gather that, in an "Any Questions" programme at the beginning of December, after we had tried to air this matter in the House by a deferred Question, members of the panel, four men, were asked about this and were quite horrified that, in these modern days, such antiquated ideas should exist. They hardly thought it possible. The following week, which was the week beginning 7th December, I think, in the "Any Answers" programme, it was said that a great many women had written to the B.B.C. giving their names and addresses, all of them saying that they had been asked for male guarantors. It seems that we cannot quite agree with the statement of the Secretary of the Building Societies Association. 396 That is why I have moved the Amendment.
After the preliminary account in The Times, and the publicity given to it in the Press, without my seeking it at all, certain enterprising journalists and other people began to make inquiries in all parts of the country and even in Northern Ireland to find out whether I was on a winner or a loser. It was extremely interesting to read in the Press, as I did, that, for instance, estate agents in Belfast who had been questioned on these matters all agreed that there was a good deal in the contention I was making that women were discriminated against simply on grounds of sex when they applied for mortgages.
The National Union of Women Teachers felt very strongly on the matter and said that a good many of its members in regular employment and guaranteed jobs had been refused mortgages without a male guarantor. The Birmingham and District Property Owners' Association, through its Secretary, Mr. Wilson, whom I do not know at all, said the same, as did the Birmingham women's organisations. I am sure that all right hon. and hon. Members will agree that this is not a party matter. If all these different sources agree, there must be something in it.
Apart from those general inquiries, which, as I said, I did not set on foot, I myself approached business and professional women's organisations. I asked them to comment on the matter and to give me examples. They have done so, and I laid the information before the right hon. Gentleman in the last debate, going to see him afterwards to give him the details. Since then, a good deal more has come to my notice. I do not propose to weary the Committee by going over every detail of what I said on the last occasion, but I should like to put before it certain examples which indicate the state of affairs which exist. I put them under the heading—which is not of my making but which, I think, cannot be bettered—"No man, no money".
My first example, which I am sure nobody will defend, concerns a single woman, in the north of England, teaching in a permanent post and receiving the maximum salary. When she asked for a mortgage, the building society insisted that she should have the support of a man's 397 signature. What made her so angry, apart from that, was that it did not seem to matter whom she asked, what he did or what money he was earning, because he would have no financial liability at all. Even if she died before he did, he had no liability to carry out the agreement. It was simply that a male signature had to be given. I submit to all right hon. and hon. Members, wherever they may sit in the Committee, that that really is ridiculous.
Next, I will give the example of a widow who holds a senior executive position as an office manager. This woman approached a building society for a mortgage. She was very skilled in the details of the matter, for she explained to me how she was within the creditworthiness—a horrid word—demanded by that society. A person has to earn enough money per week to be able to meet the outgoings called for by the mortgage, and she was within that requirement. Also, she had references from her employers and references from her hank manager as to her financial status. She was told by the building society that she could not have a mortgage without a male guarantor. In fact, she was told that it was no use her even filling in an application form.
I was cheered, when I mentioned this matter in the House on 15th December last, to find that the hon. Member for Orpington (Mr. Sumner) agreed with what I said and added that he himself had met this particular difficulty in regard to young widows. Only last night I received a letter from a widow, and I should like to read what she says, because it shows the general trend:I am a widow, 55 years of age, and, on my husband's death nearly five years ago, I returned to the teaching profession. Now I have become a victim of the Rent Act and, as the tenant of a decontrolled house in which I have lived for 23 years, I have had to make efforts to find other accommodation. One of the obstacles has been the unwillingness of building societies to grant a mortgage. My age, of course, is a stumbling block, but I was told repeatedly that, as I was in a pensionable job, a mortgage could probably be arranged but I should have to find a male guarantor.… I thought that, in view of the debate in the House this week, you might be interested in one more confirmation of your contention.Having dealt with the single woman and the widow, I come now to the last 398 category, if I may call it that, the married woman. I will cite two examples. The first concerns a woman who applied to three building societies, each of which refused to grant her a mortgage without her husband as guarantor. She says—I should have thought that this was justified—that, as the house was being built with her money and as the leasehold was in her name, such a requirement seemed unfair and unreasonable. I am sure that hon. Members would agree with that.
Since the last debate, I received a short letter from a married woman who was in receipt of a four-figure income. She wanted to raise a £1,000 mortgage on a cottage worth just under £2,000, which would seem to be a relatively safe low percentage loan. She says:At the time, I was earning a four-figure salary with a number of additions including a guaranteed bonus.This woman approached a building society which would grant the mortgage only with a guarantee from her husband, a freelance commercial artist then living in a strange district and having no immediate prospects of any kind of earned income. I submit that in this year 1959 that is quite indefensible.
I have also had some advice about the Married Women's Property Act. I do not intend to venture far into those dangerous waters, but I was told that when inquiries were being made among estate agents in Belfast one or two who wanted to find a reason for this discrimination trotted out the old excuse of the provisions of that Act. Of course, that horse will not run, because I think that the Married Women's Property Act specifically permits a married woman to enter into contracts to the extent of her separate property, and an earned income of her own must be presumed to count as separate property. So we can get that one out of the way altogether.
I hope that I have been able to convince both sides of the Committee on this Amendment. As a result of publicity, debates in the House, discussions on the B.B.C. and on television, more and more letters and more and more complaints are coming in. I am sure that the Minister knows that they are not all from people who share my political views. I received a letter this morning from a woman who started by saying that she was a Conservative. She went on to state 399 what she said about the Conservative agent who had called and with whom she had raised these questions.
There is in the country on the part of single women, widows and married women an absolute conviction that discrimination is shown by some building societies. I wish to be fair and I am prepared to concede that in some cases it may be on the part of the headquarters of the building society. Equally, I think that it occurs in branches of the building society where the local manager has got a bit above himself and interpreted these matters in a way which he should not have done.
I hope that the right hon. Gentleman will be able to accede to our Amendment. In view of what I have put forward, it is not the slightest use the Building Societies Association saying that this discrimination does not exist. It does exist, and I have proved it. However, that is beside the point. Equally, I do not think that it is any use the Association going on to say that it will in future investigate any cases brought to its notice.
A great many people whose cases I have not quoted in the House have written to me in a private capacity. Some of them live in small towns and have been most anxious that their private affairs should not be discussed. That is very right and proper. I am sure that a number of them have no desire, should they be turned down in future, to have all the details thrashed out in public. As the Bill proposes that taxpayers' money should be used for this purpose I am convinced that there is not a single hon. Member who would not agree that taxpayers' money should be used for the benefit of all taxpayers, irrespective of sex. That makes sense.
I have given some more examples in addition to those which were given on 15th December. I ask the Minister to help us because this is not only a case of justice being done. It is a case of justice being seen to be done. Although the White Paper talks about the building societies granting loans to any creditworthy person, many women have no faith in the Building Societies Association whatsoever when it comes to creditworthiness. We therefore ask the Minister to accept the Amendment.
§ Sir Herbert Butcher (Holland with Boston)
The hon. Lady the Member for Coventry, South (Miss Burton) always moves Amendments in a most agreeable manner, and I should like to compliment her on her speech. I regret, however, that she did not make the background as clear as she might have done.
I speak as a director of a building society, and I say to the hon. Lady that she must view the problem in the light of the circumstances which have been obtaining for many years, namely, that building societies have been unable to meet the demands made upon them from borrowers of all kinds, and that because of the shortage of money they have had to discriminate between many different kinds of people and property and have been unable to satisfy many people whom they would be pleased to accommodate.
The problem must be viewed in the light of those circumstances, because it is those circumstances which the Bill is designed to some extent to assist. The hon. Lady quite rightly said that discrimination against women might take place at headquarters or at the local office. The beauty of the building societies is not only that they lend money; they also aid people in finding homes and lend on the best possible security.
One of the reasons for the Bill is that, on the whole, pre-1919 property is not as good security as property built later. It has, therefore, been discriminated against. I also ask the hon. Lady to bear in mind that the local manager, invited to lend money to a school teacher aged 55 and within range of retirement age, or to a young man and his wife with a family of two or three young children living in lodgings, is entitled to exercise some discretion and discrimination. If the manager decides in favour of the young family, it is very hard on the elderly school teacher, but life is like that, and it would have been still harder had his discrimination and discretion been exercised on behalf of the elderly teacher.
§ Dr. Edith Summerskill (Warrington)
The hon. Member's analogy is not quite correct. Would the hon. Member be prepared to lend money to a school teacher of the same age as the young man?
§ Sir H. Butcher
I think that the answer is possibly yes and possibly no. In 401 making the loan in one case, one would be lending to a single lady and housing one person. In the other case, one would be lending to the head of a family, and housing perhaps two, three or four persons.
§ Dr. Summerskill
The hon. Member is now getting into deep water. Would not he agree that probably a school teacher with a settled income and without dependants is a better risk than the young man with a large family?
§ Sir H. Butcher
That is the point. There is a combined security behind the building society loan. First, there is the creditworthiness of the borrower, and, secondly, the value of the underlying security. There must be some discretion in these matters in the hands of the lender, who is lending the savings of ordinary people.
§ Mr. Harold Wilson (Huyton)
A moment or two ago the hon. Gentleman said that it was more desirable to lend to a man with two or three children than to a school teacher aged 55. Then when he was pressed by my right hon. Friend the Member for Warrington (Dr. Summer-skill) he said that it was a question of creditworthiness. Is he saying that building societies lend money in terms of social desirability in providing homes for more persons, or is he saying that the criterion is purely one of creditworthiness?
§ 4.0 p.m.
§ Sir H. Butcher
I am grateful to the right hon. Gentleman for his intervention. I would have thought that he, at least, would have apprehended an argument briefly stated. There are two considerations, both of which are in the mind of the lender, and to both of which he may give some importance—the amount of importance resting within his discretion. The first is the underlying security. If the property concerned is a ramshackle old property, with gas lighting, and no garden, or space for a garage, and overlooking a slaughterhouse, he will not lend to a male or a female. On the other hand, he is concerned with the creditworthiness of the borrower. If a person endeavoured to purchase a property upon which he could not maintain the instalments, however desirable the property the building society still would not lend, 402 because of the person's lack of ability to repay.
§ Mr. H. Wilson
The hon. Member has suggested that I did not comprehend a simple argument. I comprehended it perfectly. As he says, it is a question of monetary risk, first, in respect of the property and, secondly, in respect of the people to whom the money is to be lent.
In reply to my right hon. Friend the hon. Member was arguing that it would be right to select a young family man rather than an older teacher, on the ground that that choice would mean that he would be providing housing accommodation for more persons in one house that would be the case if he favoured the school teacher. I understand his latest argument, but was not he, earlier, trying to argue that apart from monetary and security considerations there was a case for discrimination upon social grounds?
§ Sir H. Butcher
I am not suggesting that there is a case for any kind of discrimination. I merely suggest that if somebody has to go without, the person who is lending the money has to make some choice, and if he happens to make it one way there is no reason for complaint.
I often wonder whether all the cases to which the hon. Lady has referred as being turned down have been turned down on the basis of sex. I cannot think of anything less sex-conscious than a building society. In one case, which probably figures in the hon. Lady's files, and which concerns the society of which I am a director, a single lady, aged 40, who was a school teacher, earning a good salary and entirely creditworthy in every way, made an application in respect of a bungalow which she proposed to purchase, in South-East London. The society refused the loan, and I am sure that she told the hon. Lady that this was a case of shameless discrimination on grounds of sex.
The real reasons were that the lady in question wanted to purchase the leasehold of a house in a predominantly freehold area, which is always an adverse factor in connection with resale; the floor area of the property was only 570 feet super; the local surveyor took the view that the demand on resale would be extremely limited; the property had an unattractive outlook at the back, and finally, the lady in question not having employed surveyors, she was paying £400 too much.
403 The hon. Lady has mentioned numerous cases where applications made by women have been refused, but many men's applications have been refused for almost the same reasons. I regard it as wrong that any discrimination should be made upon a basis purely of sex, but there are certain fundamentals which must be observed. It is a fact that men and women are not alike; that circumstances occur in a woman's life which do not occur in a man's and, furthermore, that with limited funds there must be some measure of discretion. I believe that the Amendment is unnecessary.
§ Mr. G. R. Mitchison (Kettering)
Will the hon. Member give us the benefit of his experience, as a director of a building society, as to the practice of asking for male guarantors? Do men have to provide female guarantors?
§ Sir H. Butcher
I have made inquiries on this point. In certain cases a guarantor is required, but the sex of the guarantor is entirely a matter of discretion. It is the creditworthiness of the guarantor to which one society, at least, directs its attention, except in the case of husband and wife, when the whole basis behind the building society movement is the question of a home. If the husband and wife are upon such terms that upon their entry to the home which it is assumed they will jointly occupy they are not prepared to cross-guarantee each other, then my building society will not wish to be concerned in the business. It is the experience of building societies that broken homes bring the houses concerned into possession.
§ Dr. Summerskill
The hon. Member has just said that the sex of the guarantor does not enter into the matter. Can he tell us of a case where he has invited a woman who is creditworthy to guarantee another woman?
§ Sir H. Butcher
The hon. Lady does not understand the procedure. It is not the responsibility of building societies to find guarantors. That is the responsibility of the proposed borrower. It is he or she who submits the guarantor, whom the society will approve or not approve as creditworthy.
§ Dr. Summerskill
Has a society approved a case where a woman who is creditworthy guarantees another woman?
§ Mr. G. Lindgren (Wellingborough)
The last thing that we want is to have the discussion upon an Amendment such as this developing into a feminist one, and an argument about the relative merits of the sexes. I intervene as a trade unionist. My trade union—the Transport Salaried Staffs Association—caters both for men and women, and since nationalisation we have been able to secure equality for men and women doing equal work.
Many examples have come to our notice where we are quite satisfied that discrimination has been exercised purely upon the basis of sex. I want to follow up the point made by my right hon. Friend the Member for Warrington (Dr. Summerskill), but before doing so I would say straight away that building societies have a perfect right to discriminate upon the basis both of the property concerned and the creditworthiness of the individual. There is a considerable discrimination as between men. A railway clerk is much more likely to get a loan from a building society than is a bricklayer. That is simply because, as a railway clerk, he has guaranteed employment, whereas the bricklayer's employment is quite haphazard, especially under a Tory Government.
But we know of a number of cases where women in fairly responsible and pensionable jobs, and who have a salary which is adequate to bear the burden of repaying the building society, have been asked to find guarantors. I can understand women objecting to having to find male guarantors. Unless he is one of the family it may be difficult for a person acting as a male guarantor to explain why he is doing so in respect of a single woman. In one case that I have in mind a young woman went to the chief in her office and said, "Would you do it for me?" He said, "I would be only too pleased, but what is my wife going to say when she finds out?" That is the difficulty.
As for the point raised by my right hon. Friend the Member for Warrington, a number of the women of whom I have spoken have offered other women as guarantors but have still been refused. The building societies' excuses have been 405 very much the same as those given by my hon. Friend the Member for Coventry (Miss Burton).
There is a further aspect of the matter which I regard as unfair. Women within the British Transport Commission service retire at 55, and I agree that there is discrimination as between men and women, because men retire at 60, again, I think, not without some reason. When the woman is in the 35 to 40 years of age range, and makes application for a loan, a building society has often queried what her income was to he after she retired. Naturally, she would tell them what her superannuation payments had been, and also the fact that part of the superannuation arrangement provides that there should be a year's salary as a lump sum payment on retirement, in addition to the weekly payments that carry on.
The building societies have, in fact, in the case of women but not of men in the railway service, tried to secure a lien on the lump sum payments as a means of trying to complete the mortgages, by the time they finish their service with the Transport Commission, purely on a basis of discrimination because women were concerned, and not on the basis of creditworthiness. We, as trade unionists, object to that. We agree that it is the building societies' money, and their assessment of the property and the creditworthiness of the individual concerned, and, if they are not satisfied that their money is safe, it is their job to deal with the application accordingly.
What we object to is the case in which, where the building society's money is safe, and where the loan would be given to a man, it is refused, particularly on the basis of a requirement for a male guarantor. We support the Amendment purely on the grounds of justice and fairness between one member of the community and another.
One last word on the attempt to drag in the red herring that building societies are concerned with social service. I am not going to say anything about building societies as such, but to say that they are concerned with social service is just not true. They are in this business for the money they can get out of it. and they are not going to take a risk.
§ Mr. Nigel Fisher (Surbiton)
I do not think that the hon. Gentleman is being quite fair. Where two cases are before 406 a society—and, as a director of a society, I have often had to deal with this problem—and where the merits are very evenly balanced one way or another, the good society, and, I think, most societies, will come down on the side of the greatest social need, other things being equal.
§ Mr. Lindgren
I do not know what the association between Tory Members of Parliament and the building societies is, but I have always looked upon building societies as money-lending organisations. If a building society has got into a position in which its "kitty" is so low that it has only enough money to lend on one house, if it has to weigh up on the basis of social values as between two applications of equal merit, except that one man has three children and the other two, I would say to the hon. Member for Surbiton (Mr. Fisher), who intervened very courteously and who makes statements in the House which he believes to be true, that I do not think that that happens, but that it operates much more on the basis of money.
The point I was wanting to make is that, in my experience in dealing with this matter, concerning the houses which women members of my trade union have been trying to buy, they have not been houses of the three-bedroom, parlour type, which normally the young married man buys, but, on the contrary, small maisonettes at Wembley, or Harrow, or other London suburbs, or even perhaps outside. They are houses built by private enterprise which, in fact, very often, are not suitable for married persons unless those married persons are without children.
Therefore, purely on that basis, I support the Amendment, and I hope that my right hon. and hon. Friends will do so in the Division Lobby if the Minister cannot give us a satisfactory reply.
§ 4.15 p.m.
§ Mr. H. Brooke
In this context, if there is anything less sex-conscious than a building society, it is myself.
I and all my right hon. and hon. Friends in the Government are determined that this imaginative scheme of ours shall operate equally for the benefit of men and women. We stand by everything that was published in the White Paper. The building societies will have regard, as is stated in the White Paper, 407 to the creditworthiness of the borrower, as well as to the suitability of the security which the house offers. No one could carry on and operate a scheme of that kind if that were not the case.
The point at issue, to which considerable attention has been drawn, is whether, in fact, the building societies do put a particular interpretation of their own on the word "creditworthiness" and assume that a woman is, intrinsically, less creditworthy to the extent that she needs a male guarantor, or to the extent that some other special conditions have to be fulfilled.
All of us will recognise that people do vary in their ability to meet the obligations which they will incur if they receive an advance for house purchase. Men will differ according to age and income, and women also according to age and income; while women may also differ according to the marital state—or not: I do not know. What we want to secure, and I am sure that the whole Committee is at one in this, is that there shall not be a private gloss upon that phrase "creditworthiness" so as to make it operate against women.
The hon. Lady the Member for Coventry, South (Miss Burton) drew attention to a paragraph in The Times published in November, and the Secretary of the Building Societies Association has subsequently stated that that paragraph did not correctly represent the policy of the Association. Though I know that the hon. Lady is familiar with it, I hope she will forgive me if I read it to the Committee, because I think that it should be on record. This is the statement made by the Building Societies Association on 4th December:Whether to make an advance and, if so, how much to lend, to any particular applicant on the security of any property is essentially a matter for the directors of each building society to determine. The Association could not, even if it so wished, fetter the discretion of directors in such a matter.Subject to this, the Association believes that the policy of most of its members is to treat a woman applicant for a loan in exactly the same way as a man if she is in regular employment and earning a sufficient income. In such cases there is no discrimination on grounds of sex and no male guarantor is normally required.Where a house is nominally being bought by a married woman but on the strength of her 408 husband's income and position, a different situation is presented and in such cases the guarantee of the husband is usually required.It must be remembered that, at the present time, most building societies have far more applications for loans than they can meet and therefore some women may be unable to obtain a loan immediately, but this applies equally to male applicants.Following that, we had a debate on the Second Reading of the Bill now before the Committee and the hon. Lady called the attention of the House to 11 or 12 cases, extending over a period of years in different parts of the country, in which she had evidence that women applicants appeared, at least, to have been discriminated against on grounds of sex alone. She said very frankly in her speech today that it was not definitely clear that it was because of policy laid down by the directors of the society at headquarters; it may have been a local representative of the society applying a rule of his own.
I want to say that, because the hon. Lady has been very frank with the House and with me about this, and she has told the Committee today that, following that debate, in which I undertook to look into any further information which she gave me, we had a talk. She gave me certain information. She asked me not to reveal the identity of individuals. I have observed that, but it did enable me to ascertain in most—not all—of the cases, as she will agree, which society it was which was concerned. As I promised her I would do, I followed that up.
I should at this point like to read to the Committee a Written Answer I gave in the House to one of my hon. Friends on 22nd January, referring to this matter. I said:I have had further discussions with the Building Societies Association, and they have confirmed the statement made on 4th December that the policy of most of their members is to treat a woman applicant for a loan in exactly the same way as a man if she is in regular employment and earning a sufficient income. The Council of the Association have sent a copy of this statement to all their members commending it to them. The Council also wrote to 11 societies which might have been concerned with the cases quoted by the hon. Member for Coventry, South (Miss Burton) on 15th December. All are members of the Association, and all have given an unqualified assurance that the Association's statement represents their own policy and has their complete support. The Association have further promised that they will investigate any cases of alleged discrimination against women 409 applicants provided that the necessary details are supplied."—[OFFICIAL REPORT, 22nd January, 1959, Vol. 598, c. 55.]That, I think, makes perfectly clear the attitude of the Association and the action which it has taken.
I think that the hon. Lady will grant me that some of those cases—not all, but some—are from the past, and that it is quite possible that there may have been a change of policy between the date of the letter which she received from some lady or another and present. It was particularly interesting, I thought, that the inquiries made into the headquarters policy of 11 societies, whose names the hon. Lady furnished to me, showed that the official policy of all those societies is that there shall be no sex discrimination and that they accept the Association's view.
What we want to do—and I am sure we are all at one in this—is to secure that this scheme is operated in a way which avoids sex discrimination, and I think that the Association has certainly given powerful assurances on this matter.
The hon. Member for Wellingborough (Mr. Lindgren) said that if I did not accept this Amendment on behalf of the Government he thought that the Opposition should vote against us. I hope that no such action will be taken, because I cannot really believe that the Amendment, as it stands, is a sensible one. It would import into the qualifications for trustee status a question about the practice and behaviour of the building society in question which really has no relevance whatever to its position of financial soundness, on which it should be decided whether that society obtains trustee status or not. I cannot think that that is the hon. Lady's intention. I do not know whether she noticed, when she tabled the Amendment, that it would have that, I think, quite indefensible, result.
If I sense the opinion of the Committee correctly, I believe I am right in saying that it is the desire of both sides that this scheme to which the Bill leads up shall be operated fully in the manner outlined in the statement by the Building Societies Association which I have read to the Committee; that is to say, that though each society must retain its discretion in determining the creditworthiness of any individual regardless 410 of sex there should be no bias against a woman on any ground whatever provided that it is recognised all the time that it is the creditworthiness of the individual, whether man or women, which is to be judged.
What I suggest should happen, if the hon. Lady will be good enough not to press this Amendment, is that I should have further talks with the building society movement in the light of this debate. I do not think I need draw the building societies' attention to the debate, because I think that it will be read by them with care. But I will certainly give an undertaking to that effect—to have these talks with the building society movement, and to see what is the best way of devising that the desire of the Committee shall be met and the policy outlined in the Building Societies Association letter applied, so that we can all feel confident that no discrimination on grounds of sex will be exercised; though there must be discrimination, and there should be, on grounds of the creditworthiness of the individual applicant regardless of sex, and, of course, on the ground of the suitability of the security which the house offers.
§ Mr. W. R. Williams (Manchester. Openshaw)
If the right hon. Gentleman fails to come to an agreement with the Association on a suitable formula, will he still find ways and means, before we reach the next stage of the Bill, to put into effect the basic principle contained in this Amendment?
§ Mr. Brooke
That will be my aim. I am sure the hon. Member realises that even when the Bill has gone through Parliament there will need to be agreement with each building society which desires to come into the scheme.
§ Mr. Mitchison
I listened to the debate in December, and I have listened to the debate today. What we are considering now is whether a particular responsibility should be put on the Minister in this matter.
The position seems to me to be this. We have, in the first place, a reputable newspaper; in the second place, at least three Members of the Committee speaking of cases in which there has been credit discrimination on account of sex, and it seems to me that the demand for a male 411 guarantor necessarily implies something of the sort; and we have had, against that, two hon. Members, both directors of building societies, speaking from their experience; and the right hon. Gentleman giving us the results of the inquiries which he made of the Building Societies Association.
On that matter, I take three points. The first one is that there are societies, including at least one very large and reputable society, against which I say nothing whatever in this matter, which are not members of the Building Societies Association. There are many others, and the answer given by the Building Societies Association may or may not bind its members. It certainly does not bind anyone else.
It is not like the case of the local authority associations, to which the right hon. Gentleman is no doubt accustomed. This Association is only a partial representative of the building society movement. I turn to what the Building Societies Association did, in fact, reply. It said the first time, and confirmed the second time, that most of its members adhered to the practice of not discriminating by reason of sex. If we are to accept that as sufficient, when an Association not fully representative of the movement can speak only in relation to most of its members, I am led to the conclusion that there is something in the charge of sex discrimination.
It was very easy for the Building Societies Association, if it was in a position to do so, to say that none of its members did anything of the sort, but on neither occasion, when it had the opportunity, did it say so. To put it at its very lowest, in my mind and, I am certain, in the minds of many hon. Members and of those who will read about this debate, there is some considerable doubt whether societies do not discriminate on account of sex.
I would put it further and say that my conclusion at the end of the debate is that there certainly had been such a practice. I notice that the Minister himself referred to a probable change of policy. That is to say, when there was trouble in the House of Commons about it there was a change of policy on the part of building societies, and their answers relating to present and future were phrased accordingly.
412 But if, as a result of debates in the House of Commons, they had changed their policy and improved it in this respect, what is the guarantee that, when they have their trustee status and their Government money in certain cases, they will not slip back into the former error of their ways? That is the real point. Once we come to the possibility of the present existence of discrimination, and the far more definite possibility that there was a good deal more of it before there was a row about it, have we to do anything about it?
The right hon. Gentleman's answer is, "No, you need not do anything about it. If the society is solvent you are not concerned with its moral behaviour." I do not think that we ought to accept that, and I doubt whether the Committee would be willing to accept it. I doubt whether the right hon. Gentleman, if he had been confident of his facts, would have put forward that remarkable argument.
We are being asked, in effect, to direct public money into the hands of a certain number of building societies. In connection with that, quite rightly, we wish to secure ourselves of their solvency, but, if there are cases of sex discrimination, are we free from responsibility and are we to say, "It does not matter a bit. Provided that they are rich enough they can do what they like"? That is what the right hon. Gentleman's argument amounts to.
Suppose that we have a building society which, in some form or another, was subsidising an obviously immoral practice. Nobody in the Committee would wish it to be supported with public money, and the mere fact that by so doing it had attained a high degree of solvency would not justify its support. This is not a highly immoral practice in that sense, but discrimination between men and women in matters of buying a house is certainly anti-social; and it is the responsibility of the Committee to see that where there is, at any rate, doubt whether the practice exists we take some security to stop it in the case of societies which will receive public money. It will be a lamentable shirking of our responsibility if we fail to do something about this.
That is the present position, but the Minister says, "Leave it to me. I am going to talk to them again." These conversations have taken place before, and will no doubt happen again. I am 413 quite certain that the right hon. Gentleman gave us an honest account of them, but it is not a satisfactory state of affairs when the right hon. Gentleman has known all about the difficulty since December and he can say no more now than, "I have seen the necessity of talking to them again and I shall do so."
We do not want the people responsible under the Bill for questions of financial solvency to have anything to do with it. It is not a matter for the Chief Registrar, or for the Treasury. This is the responsibility of the right hon. Gentleman himself, as Minister of Housing and Local Government. This is a matter in connection with the provision of houses and, for that reason, it is he who is dealing with the Bill and not the Treasury.
We say that it is the right hon. Gentleman's responsibility, when he is giving this public money under conditions to certain building societies, to see about their conduct in this matter. If he is satisfied that there is nothing in it and there is no sex discrimination, he will fulfil the condition which we seek to insert in the Bill and no more will be said. But he will be answerable for the discharge of that duty to the House of Commons.
On the other hand, if the right hon. Gentleman is not satisfied—and I can understand his desire to talk to the societies again about it—surely he should be the first to welcome the obligation which the Amendment would lay upon him and the opportunity which it would give him to ensure that building societies were doing what we all recognise to be the right thing. I say without hesitation, at the end of the debate, that I am quite definitely of the opinion that there is some discrimination on the ground of sex and that there has been more in the past.
I have re-read the speeches made in the December debate and I have considered what the right hon. Gentleman has said. If somebody asked me, "Yea or nay, do you think there is discriminantion?" my reply would be, "I think that there is and certainly there has been in the past, and unless something of this sort is put in the Bill there is no guarantee that the discrimination which exists, and no doubt has been damped down in view of these debates, would not recur."
414 I cannot understand why the Minister declines responsibility in the matter. If the Government are satisfied, well and good. All that they then submit to is Questions from hon. Members in the House. If they are not satisfied, they certainly should accept this responsibility. I earnestly hope that they will reconsider the matter. If the right hon. Gentleman is prepared to say that he does not like the form of words, but will introduce an Amendment at a later stage to this effect, I am sure that my hon. Friend the Member for Coventry, South (Miss Burton) will accept that from him. Otherwise, we must regard the right hon. Gentleman's speech as a very unsatisfactory denial in so far as it was a denial, of what appears to be the practice, and a refusal of responsibility in a social issue which we on this side of the Committee cannot accept.
§ Miss Burton
I am glad that my right hon. and hon. Friends on the Opposition Front Bench have taken the line that they have, because I was not satisfied with the Minister's reply. I honestly believe that the Minister is anxious that there shall be no discrimination. I thought so when I saw him privately and I think so now. I will not go back over all this, but the statement quoted by the Minister on 4th December arose only because we made such a fuss in the House that something had to be done.
It is blatantly obvious that there is sex discrimination on the question of the male guarantor, because if a male guarantor was not asked for a lot of these complaints would disappear. Everyone I have received has been on this question and I have also had put to me the point raised by my right hon. Friend the Member for Warrington (Dr. Summerskill), that never in any organisation which has been in touch with me has there arisen the point that a woman has been accepted as a guarantor. Whatever she earned, she was unacceptable.
I hope very much that the Minister, in his further discussions, will be able to prevail upon the building societies to insist upon some wording such as the Amendment contains, but I have no wish to withdraw the Amendment. I hope we shall go to a Division, because I think there is discrimination.
§ Mr. H. Brooke
Let us be quite clear about what is happening. The Opposition are now proposing to vote for an 415 Amendment which would make the availability of trustee status to a building society dependent on certain practices which it followed or did not follow in making advances; practices which I think, in the eyes of all sensible people are irrelevant to the question whether it is a suitable depository for trust funds. I have made the position of the Government clear. This is not a Socialist State, where the Government can give orders to everybody—[HON. MEMBERS: "This is public money."] That is exactly what I was referring to in my speech. Building societies are independent bodies which have contributed greatly to the better housing of the people. The Bill is based
§ on the concept of agreements between the Government and individual building societies.
§ I have assured the Committee that in the light of this debate I shall have further discussion with the Building Societies Association to secure that this imaginative scheme is operated in a manner which avoids sex discrimination. Having been given that assurance, the Opposition now wish to carry to a vote the application of this discrimination in the quite irrelevant case of trustee status.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 211, Noes 237.419
|Division No. 29.]||AYES||[4.44 p.m.|
|Ainsley, J. W.||Evans, Edward (Lowestoft)||McGhee, H. G.|
|Albu, A. H.||Fernyhough, E.||McInnes, J.|
|Allaun, Frank (Salford, C.)||Finch, H. J.||McKay, John (Wallsend)|
|Allen, Arthur (Bosworth)||Fitch, Alan||McLeavy, Frank|
|Allen, Scholefield (Crewe)||Fletcher, Eric||MacMillan, M. K. (Western Isles)|
|Awbery, S. S.||Foot, D. M.||MacPherson, Malcolm (Stirling)|
|Bacon, Miss Alice||Forman, J. C.||Mahon, Simon|
|Balfour, A,||Fraser, Thomas (Hamilton)||Mainwaring, W. H.|
|Bellenger Rt. Hon. F. J.||Gaitskell, Rt. Hon. H. T. N.||Mallalieu, E. L. (Brigg)|
|Bence, C. R. (Dunbartonshire, E.)||George, Lady Megan Lloyd(Car'then)||Mann, Mrs. Jean|
|Beswick, Frank||Gibson, C. w.||Marquand, Rt. Hon. H. A.|
|Blackburn, F||Greenwood, Anthony||Mason, Roy|
|Blenkinsop, A.||Grenfell, Rt. Hon. D. R.||Mikardo, Ian|
|Blyton, W. R.||Grey, C. F.||Mitchison, G. R.|
|Boardman, H.||Griffiths, David (Rother Valley)||Monslow, W.|
|Griffiths, Rt. Hon. James (Llanelly)||Moody, A. S.|
|Bonham Carter, Mark||Griffiths, William (Exchange)||Morris, Percy (Swansea, W.)|
|Bottomley, Rt. Hon. A. G.||Grimond, J.||Morrison, Rt. Hn. Herbert (Lewis'm, S.)|
|Bownen, E. R. (Cardigan)||Hale, Leslie||Mort, D. L.|
|Bowen, E. R. (Cardigan)||Hamilton, W. W.||Moss, R.|
|Bowles, F. C.||Hannan, W.||Moyle, A.|
|Boyd, T. C.||Hastings, S.||Mulley, F. W.|
|Braddock, Mrs. Elizabeth||Hayman, F. H.||Noel-Baker, Francis (Swindon)|
|Brookway, A. F.||Henderson, Rt. Hn. A. (Rwly Regis)||Noel-Baker, Rt. Hon. P. (Derby, S.)|
|Broughton, Dr. A. D. D.||Herbison, Miss M.||Oliver, G. H.|
|Brown, Rt. Hon. George (Belper)||Hobson, C. R. (Keighley)||Oram, A. E.|
|Brown, Thomas (Ince)||Holman, P.||Oswald, T.|
|Burke, W. A.||Holmes, Horace||Owen, W. J.|
|Burton, Miss F. E.||Houghton, Douglas||Paget, R. T.|
|Butler, Herbert (Hackney, C.)||Hughes, Cledwyn (Anglesey)||Paling, Rt. Hon. W. (Dearne Valley)|
|Butler, Mrs. Joyce (Wood Green)||Hughes, Emrys (S. Ayrshire)||Paling, Will T. (Dewsbury)|
|Castle, Mrs. B. A.||Hughes, Hector (Aberdeen, N.)||Palmer, A. M. F.|
|Champion, A. J.||Hunter, A. E.||Pannell, Charles (Leeds, W.)|
|Chapman, W. D.||Hynd, J. B. (Attercliffe)||Pargiter, G. A.|
|Chetwynd, G. R.||Irvine, A. J. (Edge Hill)||Parker, J.|
|Cliffe, Michael||Irving, Sydney (Dartford)||Parkin, B. T.|
|Clunie, J.||Janner, B.||Pearson, A.|
|Coldrick, W.||Jeger, George (Goole)||Peart, T. F.|
|Collick, P. H. (Birkenhead)||Jeger, Mrs. Lena(Holbn & St. Pncs. S.)||Pentland, N.|
|Corbet, Mrs. Freda||Johnson, James (Rugby)||Plummer, Sir Leslie|
|Craddock, George (Bradford, S.)||Jones, Rt. Hon. A. Creech (Wakefield)||Popplewell, E.|
|Cronin, J. D.||Jones, Jack (Rotherham)||Prentice, R. E.|
|Crossman, R. H. S.||Jones, J. Idwal (Wrexham)||Price, J. T. (Westhoughton)|
|Davies, Rt. Hon. Clement (Montgomery)||Key, Rt. Hon. C. W.||Price, Philips (Gloucestershire, W.)|
|Davies, Ernest (Enfield, E.)||King, Dr. H. M.||Probert, A. R.|
|Davies, Harold (Leek)||Lawson, G. M.||Proctor, W. T.|
|Deer, G.||Ledger, R. J.||Randall, H. E.|
|Dodds, N. N.||Lee, Frederick (Newton)||Rankin, John|
|Donnelly, D. L.||Lee, Miss Jennie (Cannock)||Reeves, J.|
|Dugdale, Rt. Hn. John (W. Brmwch)||Lewis, Arthur||Reid, William|
|Ede, Rt. Hon. J. C.||Lindgren, G. S.||Reynolds, G, W.|
|Edelman, M.||Logan, D. G.||Rhodes, H.|
|Edwards, Rt. Hon. John (Brighouse)||Mabon, Dr. J. Dickson||Robens, Rt. Hon. A.|
|Edwards, Rt. Hon. Ness (Caerphilly)||McAlister, Mrs. Mary||Roberts, Albert (Normanton)|
|Edwards, Robert (Bilston)||McCann, J.||Roberts, Goronwy (Caernarvon)|
|Edwards, W. J. (Stepney)||MacColl, J. E.||Ross, William|
|Evans, Albert (Islington, S.W.)||MacDermot, Niall||Royle, C.|
|Shinwell, Rt. Hon. E.||Stones, W. (Consett)||Wells, Percy (Faversham)|
|Short, E. W.||Stross, Dr. Barnett (Stoke-on-Trent, C.)||Wells, William (Walsall, N.)|
|Silverman, Julius (Aston)||Summerskill, Rt. Hon. E.||Wilkins, W. A.|
|Simmons, C. J. (Brierley Hill)||Sylvester, G. 0.||Willey, Frederick|
|Skeffington, A. M.||Taylor, Bernard (Mansfield)||Williams, David (Neath)|
|Slater, Mrs.. H. (Stoke, N.)||Thomas, George (Cardiff)||Williams, Rt. Hon. T. (Don Valley)|
|Slater, J. (Sedgefield)||Thomson, George (Dundee, E.)||Williams, Richard (Openshaw)|
|Smith, Ellis (Stoke, S.)||Thornton, E.||Wilson, Rt. Hon. Harold (Huyton)|
|Sorensen, R. W.||Timmons, J.||Winterbottom, Richard|
|Soskice, Rt. Hon. Sir Frank||Tomney, F.||Woodburn, Rt. Hon. A.|
|Sparks, J. A.||Usborne, H. C.||Woof, R. E.|
|Spriggs, Leslie||Viant, S. P.||Yates, V. (Ladywood)|
|Steele, T.||Warbey, W. N.|
|Stewart, Michael (Fulham)||Watkins, T. E.||TELLERS FOR THE AYES:|
|Storehouse, John||Weitzman, D.||Mr. John Taylor and Mr. Rogers|
|Agnew, Sir Peter||Erroll, F. J.||Lindsay, Hon. James (Devon, N.)|
|Aitken, W. T.||Farey-Jones, F. W.||Lindsay, Martin (Sollhull)|
|Allan, R. A. (Paddington, S.)||Fell, A.||Linstead, Sir H. N.|
|Alport, C. J. M.||Finlay, Graeme||Lloyd, Maj. Sir Guy (Renfrew, E.)|
|Anstruther-Gray, Major Sir William||Fisher, Nigel||Longden, Gilbert|
|Arbuthnot, John||Fort, R.||Loveys, Walter H.|
|Armstrong, C. W.||Freeth, Denzil||Lucas, Sir Jocelyn (Portsmouth, S.)|
|Ashton, H.||Gammans, Lady||Lucas-Tooth, Sir Hugh|
|Atkins, H. E.||Garner-Evans, E. H.||Macdonald, Sir Peter|
|Baldwin, Sir Archer||George, J. C. (Pollok)||Mackeson, Brig. Sir Harry|
|Balniel, Lord||Gibson-Watt, D.||Maclean, Sir Fitzroy (Lancaster)|
|Barber, Anthony||Glover, D.||McLean, Neil (Inverness)|
|Barlow, Sir John||Glyn, Col. Richard H.||Macleod, Rt. Hn. Iain (Enfield, W.)|
|Barter, John||Godber, J. B.||Macmillan, Rt. Hn. Harold (Bromley)|
|Batsford, Brian||Goodhart, Philip||Macmillan, Maurice (Halifax)|
|Gough, C. F. H.||Macpherson, Niall (Dumfries)|
|Baxter, Sir Beverley||Gower, H. R.||Maddan, Martin|
|Bell, Philip (Bolton, E.)||Graham, Sir Fergus||Maitland, Cdr. J. F. W. (Horncastle)|
|Bennett, F. M. (Torquay)||Green, A.||Maitland, Hon. Patrick (Lanark)|
|Bennett, Dr. Reginald||Gresham Cooke, R.||Manningham-Buller, Rt. Hn. Sir R.|
|Bevins, J. R. (Toxteth)||Grosvenor, Lt.-Col. R. G.||Markham, Major Sir Frank|
|Bidgood, J. C.||Gurden, Harold||Marlowe, A. A. H.|
|Biggs-Davison, J. A.||Hall, John (Wycombe)||Marshall, Douglas|
|Bingham, R. M.||Harris, Frederic (Croydon, N.W.)||Mathew, R.|
|Birch, Rt. Hon. Nigel||Harris, Reader (Heston)||Mawby, R. L.|
|Bishop, F. P.||Harvey, Sir Arthur Vere (Macclesf'd)||Maydon, Lt.-Comdr. S. L. C.|
|Black, Sir Cyril||Hay, John||Milligan, Rt. Hon. w. R.|
|Body, R. F.||Heald, Rt. Hon. Sir Lionel||Mott-Radclyffe, Sir Charles|
|Boyd-Carpenter, Rt. Hon. J. A.||Hicks-Beach, Maj. W. W.||Nairn, D. L. S.|
|Boyle, Sir Edward||Hill, Rt. Hon. Charles (Luton)||Neave, Airey|
|Bromley-Davenport, Lt.-Col. W. H.||Hill, Mrs. E. (Wythenshawe)||Nicholls, Harmar|
|Brooke, Rt. Hon. Henry||Hill, John (S. Norfolk)||Nicholson, Sir Godfrey (Farnham)|
|Browne, J. Nixon (Craigton)||Hinchingbrooke, Viscount||Noble, Michael (Argyll)|
|Bullus, Wing Commander E. E.||Hobson, John (Warwick & Leam'gt'n)||Nugent, G. R. H.|
|Burden, F. F. A.||Holland-Martin, C. J.||Oakshott, H. D.|
|Butcher, Sir Herbert||Hope, Lord John||O'Neill, Hn. Phelim (Co. Antrim, N.)|
|Butler, Rt. Hn. R.A. (Saffron Walden)||Hornsby-Smith, Miss M. P.||Orr-Ewing, C. Ian (Hendon, N.)|
|Campbell, Sir David||Horsbrugh, Rt. Hon. Dame Florence||Page, R, G.|
|Carr, Robert||Howard, Gerald (Cambridgeshire)||Panned, N. A. (Kirkdale)|
|Cary, Sir Robert||Howard, Hon. Greville (St. Ives)||Partridge, E.|
|Channon, P.||Howard, John (Test)||Peel, W. J.|
|Chichester-Clark, R.||Hughes Hallett, Vice-Admiral J.||Peyton, J. W. W.|
|Cole, Norman||Hughes-Young, M. H. C.||Pickthorn, Sir Kenneth|
|Cooke, Robert||Hulbert, Sir Norman||Pilkington, Capt. R. A.|
|Cooper-Key, E. M.||Hurd, Sir Anthony||Pitman, I. J.|
|Cordeaux, Lt.-Col. J. K.||Hutchison, Michael Clark (E'b'gh, S.)||Pitt, Miss E. M.|
|Corfield, F. V.||Hutchison, Sir Ian Clark(E'b'gh, W.)||Powell, J. Enoch|
|Craddock, Beresford (Spelthorne)||Hutchison, Sir James (Scotstoun)||Price, David (Eastleigh)|
|Crosthwaite-Eyre, Col. O. E.||Hylton-Foster, Rt. Hon. Sir Harry||Ramsden, J. E.|
|Crowder, Sir John (Finchley)||Iremonger, T. L.||Rawlinson, Peter|
|Cunningham, Knox||Irvine, Bryant Godman (Rye)||Redmayne, M.|
|Dance, J. C. G.||Jenkins, Robert (Dulwich)||Remnant, Hon. P.|
|Davidson, Viscountess||Jennings, J. C. (Burton)|
|D'Avigdor-Goldsmid, Sir Henry||Jennings, Sir Roland (Hallam)||Ridsdale, J. E.|
|de Ferranti, Basil||Johnson, Dr. Donald (Carlisle)||Robertson, Sir David|
|Digby, Simon Wingfield||Johnson, Eric (Blackley)||Robinson, Sir Roland (Blackpool, S.)|
|Dodds-Parker, A. D.||Jones, Rt. Hon. Aubrey (Hall Green)||Roper, Sir Harold|
|Donaldson, Cmdr. C. E. McA.||Keegan, D.||Ropner, Col. Sir Leonard|
|Doughty, C. J. A.||Kerr, Sir Hamilton||Russell, R. S.|
|du Cann, E. D. L.||Kershaw, J. A.||Scott-Miller, Cmdr. R.|
|Duncan, Sir James||Kirk, P. M.||Sharples, R. C.|
|Duthie, W. S.||Lambton, Viscount||Smithers, Peter (Winchester)|
|Eccles, Rt. Hon. Sir David||Lancaster, Col. C. G.||Smyth, Brig. Sir John (Norwood)|
|Eden, J. B. (Bournemouth, West)||Leavey, J. A.||Spearman, Sir Alexander|
|Elliott, R.W (Nc'castle upon Tyne, N.)||Leburn, W. G.||Speir, R. M.|
|Emmet, Hon. Mrs. Evelyn||Legge-Bourke, Maj. E. A. H.||Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)|
|Errington, Sir Eric||Legh, Hon. Peter (Petersfield)||Stanley, Capt. Hon. Richard|
|Stevens, Geoffrey||Thompson, R. (Croydon, S.)||Ward, Dame Irene (Tynemouth)|
|Steward, Sir William (Woolwich, W.)||Thornton-Kemsley, Sir Colin||Webbe, Sir H.|
|Stoddart-Scott, Col. Sir Malcolm||Tiley, A. (Bradford, W.)||Webster, David|
|Storey, S.||Tilney, John (Wavertree)||Whitelaw, W. S. I.|
|Stuart, Rt. Hon. James (Moray)||Turton, Rt. Hon. R. H.||Williams, Paul (Sunderland, S.)|
|Studholme, Sir Henry||Tweedsmuir, Lady||Williams, R. Dudley (Exeter)|
|Summers, Sir Spencer||Vane, W. M. F.||Wills, Sir Gerald (Bridgwater)|
|Sumner, W. D. M. (Orpington)||Vaughan-Morgan, J. K.||Wilson, Geoffrey (Truro)|
|Taylor, William (Bradford, N.)||Victors, Miss Joan||Wolrige-Gordon, Patrick|
|Teeling, W.||Wakefield, Edward (Derbyshire, W.)||Woollam, John Victor|
|Temple, John M.||Wakefield, Sir Wavell (St. M'lebone)|
|Thomas, Leslie (Canterbury)||Walker-Smith, Rt. Hon. Derek||TELLERS FOR THE NOES:|
|Thomas, P. J. M. (Conway)||Wall, Patrick||Colonel J. H. Harrison and|
|Thompson, Kenneth (Walton)||Ward, Rt. Hon. G. R. (Worcester)||Mr. Bryan.|
§ Mr. H. Wilson
I beg to move, in page 1, line 9, after "society", to insert:complies with the provisions of the Schedule (Conditions of approval: pool fund) to this Act and".I do not think that I need detain the Committee very long in moving this Amendment. The Minister may say that it is in the wrong place, or that it is in the wrong form; and, of course, if the right hon. Gentleman will say that he agrees with it in principle, and will find some other means of dealing with the matter, that might be a fair point which we would wish to consider.
As is known, there are many building societies, and, as the right hon. Gentleman has said, they have performed a valuable function in aiding house development and building over the years. They are also valuable and important channels for saving. There are some very big societies, many of medium size and one or two extremely small ones. What I have to say does not necessarily relate to any particular size of society.
It is within the recollection of the Committee that within the last few years, and from time to time, individual societies have found themselves in financial difficulties which, of course, means that serious problems arise, particularly for the investors in those societies. I think the Minister will agree that I am addressing myself here to a question which is very relevant to the problem of trustee estate. If investors find that a society, for one reason or another, is in trouble, then, as we know, great anxiety is caused. It is not impossible—indeed, it has happened within not very distant memory—that the savings of families may be wiped out by the collapse of a building society. There have been one or two cases in recent years—I will not refer to the most spectacular case which occurred within the last few weeks, because that might be sub judice. But 420 there have been other cases, not so spectacular and not subject to any kind of legal or criminal proceedings, where, for one reason or another—it may be mismanagement, or it may be termed just bad luck—the society in question ran into financial difficulties. Then one of the larger societies has taken over the society in difficulty and has guaranteed the servicing of the investments which have been made and the loans made to that society.
I submit to the Committee that it is a rather invidious problem, and a tough job, for a big society to take over a smaller one and to deal with its problems. Unfortunately, as I understand—the Minister will correct me if I am wrong—the building societies have no powers in their articles of association or under the building society regulations, or the regulations operated by the Registrar, to get together with any kind of guarantee fund and step in to assist a society which may be in difficulties.
With other things and in other organisations such funds do exist. An outstanding example is that of the Lloyds underwriters. If, for reasons of mismanagement or defalcation or for any other reason, there is a danger that obligations may not be met, Lloyds as a whole, or the guarantee fund operated by Lloyds, can be brought into the rescue, so that the good name of Lloyds is always preserved. That would be a valuable provision in the case of the building society movement.
I am sure that the Committee would agree that it is undesirable that a building society should get into difficulty in the ways in which I have mentioned, and there may be one or two methods by which this could be avoided. Two or three building societies might want to get together to help to carry another society through a difficult period. Or it may be that a loan would be given from a central fund—perhaps on condition that there 421 was some internal reorganisation, or perhaps not.
As I understand, all that can be done at present is that a bigger society can absorb the smaller society lock, stock and barrel, with all that that means. Very often it means the absorption of useful outlets in terms of new branches in areas where the absorbing society may not be well established; but, at the same time, it may also mean that the absorbing society may have to take over some useless assets which it would not otherwise seek to acquire. The loyalty of individual societies to the movement as a whole has been such that very often in case of need a building society will step in, but that places an unfair strain on the loyalty of that society.
I take it that I am in order in referring to the proposed Schedule to the Act which is referred to in the Amendment. We suggest in that Schedule that regulations be made to enable the establishment of a pool, or guarantee fund, or whatever title may be required, and that any of the societies benefiting under the provisions of this Act should be required to make payments into that pool; that the management of the pool be laid down in a certain manner, with the members of a board to be appointed by the Minister, and so on, and the Minister to have power to make directions requiring returns, audited accounts and all the rest of it. Then, as I say, if any building society gets into difficulty there is a guarantee fund which could step in.
If the Minister says that this is not the way to do it, but that there might be a case for allowing building societies to club together to make loans, that might be a fair argument. But I think that the difficulty which we are facing in relation to this Amendment—we have already faced it in relation to the Amendment disposed of a few minutes ago, and I think that we shall find it as we go through the Committee stage of the Bill—is that the Government have come along with this Measure to provide certain financial assistance to the building societies for doing a job which the Government set out for them without having a proper investigation of the whole of the other aspects of building society law and practice, some aspects of which are now very much out of date.
422 We have another Amendment on the Notice Paper—I should be out of order in pursuing it in detail now—relating to foreign business. There, again, we have a case where, perhaps, present law and practice are very much too restrictive compared with the needs of the modern situation. I should have liked the Minister to have said that he was going to have a complete inquiry into all these legal aspects and questions of practice, but, of course, I cannot go into them all on this Amendment.
I hope, therefore, that the Minister will tell us that he accepts that there is a problem in respect of building societies that get into difficulties and that either by accepting this Amendment or in some other way he is prepared to alter existing law and practice so that the building society movement as a whole can come to the rescue of societies in difficulties without having to take the rather awkward and complicated procedure by which one building society steps in.
§ The Economic Secretary to the Treasury (Mr. F. J. Erroll)
I am replying to the speech made by the right hon. Member for Huyton (Mr. H. Wilson), because questions relating to the status of building societies fall to the Treasury Ministers Ito answer, as the Chief Registrar, as outlined in the opening lines of the Bill, has a special responsibility for supervising building societies.
Perhaps I might just remind the Committee that the objects of Clause 1 are to approve building societies for investment by trustees and for Government loans. I want to touch particularly on the point about investment by trustees. The Clause will require, if passed, that four conditions should be met which are detailed in Appendix 2 of the White Paper. The object of the Amendment under discussion, as I see it, is that a new and additional condition should be insisted upon, which is outlined in the proposed new Schedule.
I suggest to the Committee that the four conditions are surely already enough without introducing a further condition, but I recognise the merits of the proposal. Intrinsically, the idea for a pool fund can have strong arguments adduced in its favour, but I submit that it would be inappropriate to make contributions to or membership of a pool fund one of the conditions for trustee status. Furthermore, 423 the scheme outlined in the proposed new Schedule would mean that approved societies would be compelled to contribute to the pool, but the pool would have to come to the assistance of all societies, whether approved or not. It would, therefore, represent a burden on the approved societies, by having to help out non-approved societies as well as any approved society which might be in temporary difficulty.
§ Mr. Mitchison
If the hon. Gentleman will look at the proposed new Schedule again, I do not think that he will find that that is quite so. It is really paragraph 3 of the Schedule, which says:The purpose of the pool fund shall be to provide financial assistance to any building society … in such cases, in such form and amount and subject to such conditions as the Board in each case may decide, subject to such regulations or directions (if any) as the Minister may think fit to make or give under this paragraph.The Minister could, therefore, select any group of building societies as suitable or unsuitable for that assistance.
§ Mr. Erroll
I am grateful to the hon. and learned Gentleman for that explanation, because I had read the paragraph as meaning any building society. I should have thought that an exclusion so great as to include only approved societies would have been big enough to warrant a mention in the Schedule as drafted. However, I appreciate the explanation which has been given.
As I say, in the course of arguments and discussions about the merits and disadvantages of a pool or guarantee fund the building society movement is, I think, generally against the idea, but in the arguments which I am now going to introduce I am not influenced by that but by certain general conditions which I hope will meet with the agreement of the Committee.
First, as I have said, it represents the introduction of a new condition for trustee status, and since the building society movement as a whole is against the establishment of a pool fund it would mean that we would have to carry this additional condition against the wishes of the movement, on whose co-operation we are naturally and inevitably relying for the successful implementation of the Bill after it has been passed.
424 Secondly, there are sound arguments against the establishment of such a fund as it might well reduce incentive to prudent and careful management on the part of some building societies, because, in the last resort, they would know that there would always be the pool fund to fall back on. It might, in some extreme cases, lead to a certain amount of inefficiency or, indeed, to excessive risk-taking.
§ Mr. H. Wilson
If those arguments are valid, will the hon. Gentleman say why they do not apply to Lloyds?
§ Mr. Erroll
I should have thought that the comparison between the building society movement and Lloyds was a very unwise one to pursue, because in the case of Lloyds, the underwriters and their friends are involved to the last penny of their personal capital, whereas the whole point of the building society movement is to protect the investors, whether they make deposits or subscribe to societies, from any loss greater than the amount of their investment. To be a subscriber to Lloyds involves an altogether different degree of risk. Therefore, a pool fund, if agreed upon by members of Lloyds, would, I should have thought, be appropriate for a risk which is altogether greater than that which arises when one invests in a building society.
§ Mr. Mitchison
The point seems to me to be the same in both cases. What about the Law Society and defaulting solicitors?
§ Mr. Erroll
I have noticed an increasing amount of adverse comment by the larger solicitors on the ground that they are being called upon to pay up to meet the defalcations of defaulting solicitors.
In any case, however, there is a very severe practical objection to accepting this proposal because it would require a considerable amount of consequential legislation of a sort outside the scope of the present Bill. Building society powers for investment are limited under Section 25 of the Building Society Act, 1874, as amended by Section 17 of the 1894 Act, to trustee securities. Thus a building society cannot make loans to other societies in need, nor can it contribute to a pool for the purpose of aiding other societies because that would not itself have trustee status, If any society approved under the Bill got into difficulties its own trustee status would probably 425 be withdrawn, so it would not be possible for other societies to invest in it either individually or as members of a pool. Be that as it may, we on this side of the Committee feel that the danger of an approved society running into difficulties is likely to be very small indeed. It is the purpose of the conditions set out in Appendix II to make certain that the risk is absolutely minimal.
The right hon. Gentleman referred to several matters appertaining to building society legislation which he wished had been covered in the Bill and which he would like to have seen much broader in scope. The fact remains that the Bill is limited in scope to the purposes that were outlined on Second Reading. The question of a pool fund is one of those broader issues which might have been properly considered on a Bill to amend building society law generally.
The Government are considering the question of the possible need to amend building society legislation. Therefore, any proposal to set up a central guarantee or pool fund, whether on the lines suggested by the Amendment or on any other basis, would properly fall to be considered in the context of a general amending Bill. In view of the explanation I have given, I hope that hon. Members opposite will not wish to press the Amendment any further, as, clearly, it would not be practicable to introduce it into the Bill.
§ Mr. H. Wilson
I am sorry that the Economy Secretary, at least until the last few minutes of his reply, argued his case on so narrow a front. He seemed to suggest that the building society legislation was finalised in 1894 and that whatever was appropriate in the days of Sir William Harcourt is considered appropriate today, and that although this major approach has been made, completely changing the basis of the building society movement by means of public money, whatever restrictive practices were forced by the Government upon the building society movement in 1874, as amended by the 1894 Act, would be appropriate today.
I am sorry that the hon. Gentleman took that view. I can understand him arguing—in fact, I anticipated this when moving the Amendment—that it might not be the right way to do what we propose and that it is arguable perhaps that 426 it should not be made a fifth condition for the granting of trustee status. Although I considered the hon. Gentleman's arguments to be fairly thin when he was talking about insurances and guarantee funds, that was why I perceived a little glimmer of light towards the end of his speech. I cannot accept his argument that an insurance fund of this kind would be an incentive to bad management. He might as well say that none of us should be compulsorily insured against third party damage, because it makes us more careless with our driving.
§ Mr. Wilson
I do not know. Having regard to the consequences to any sufferers from, perhaps, not bad driving, but pure accidents, the hon. Gentleman will, however, realise the desirability—indeed, the necessity—of compulsory third party insurance. Perhaps there ought to be a little more third party insurance in the building society movement. The hon. Gentleman, however, says that it is not appropriate to do it in this Bill. That is one reason why we regret that the Government did not approach the whole business on a broader front.
I would like to make sure that I understood the purport of the hon. Gentleman's last few words. Did I understand him to say that the Government are considering the whole question of building society legislation and the restrictions laid upon the societies under present legislation? If so, what is happening? Are the Government currently having talks with the building society movement about it? Are they proposing to set up, as might be appropriate, an independent inquiry into the 1894 Act, the 1874 Act and all the rest, to bring legislation before the House?
Before we can decide our attitude about the Amendment and the hon. Gentleman's reply, can he take us a little more into his confidence? Are the Government currently having discussions or are they merely thinking about it in the vague sort of way that we sometimes hear from Treasury Ministers during a Finance Bill and never hear about it again afterwards, or have they actually had discussions? Will he enlighten us a little more?
§ Mr. Erroll
I would not like it to be thought that the only legislation appertaining to building societies was passed 427 in the nineteenth century. There has been legislation in this century, notably the 1939 and 1940 Acts. As regards my earlier concluding remarks, I will go no further than to say what I said then, that the Government are considering the question of possible need to amend building society legislation generally.
We have, naturally, maintained contact with the building society movement, but I would not go so far as to say that anything in the nature of definite discussions are taking place at present. It is a question of doing one thing at a time. We are anxious to see the Bill through and to see how it works before going further. That is as far I can take my earlier remarks.
§ Mr. Mitchison
I intervene, first, to make it clear that in this Bill we could propose nothing more than something on the lines of the Amendment. We were restricted to the cases in which there was a Government advance and a question of trustee status. We could not, therefore, deal with the building society movement as a whole. For that reason, if it is possible to get a satisfactory assurance from the Economic Secretary, we should much prefer that than to press the Amendment.
We recognise that because of the character of the Bill the Amendment is necessarily limited and more limited than we should wish it to be if we had a free hand in imposing conditions on a broader basis. The main question, however, seems to me to be this. There is a most serious public interest in securing and maintaining public confidence in building societies. They have rendered valuable service, as we all know. Unfortunately, almost every year—I do not want to exaggerate, but that is about right—there is financial trouble with some society or another. Sometimes it is a large society, sometimes a smaller one.
We fully recognise that the type of societies about which there is likely to be trouble are probably not those who would apply for, let alone secure, trustee status under the Bill. What happens at present, however, is one of two things. Either the society is left entirely to itself, in which case the people who suffer are the depositors and the general public's confidence in the building society movement 428 suffers, too. Otherwise, the only alternative is absorption.
There has been trouble lately about absorption. We had the rather new phenomenon of a number of societies competing in what came to be as near a take-over bid for one society as, I suppose, one could have in the building society movement. I am not saying whether it was good or bad, but it wants to be looked at. When one finds that the only alternative to bankruptcy, liquidation or whatever one calls it, is absorption, surely we must look a little bit further.
I should like an assurance from the hon. Gentleman that his and the Government's consideration of this matter will definitely include some form of collective assistance for building societies in difficulties. I do not ask him to give an assurance that he will accept it, but I hope that it will be considered.
I would add one other thing. A distinguished city gentleman, not having read Edward Gibbon as he should have done, recently compared the Prime Minister to St. George. Gibbon has a little to say about St. George. The hon. Gentleman will remember the story. The dragon was about to eat the lady when St. George rescued her. If the only remedy for ladies in distress is to be eaten by a large dragon—that is to say, a larger building society—surely the comparison with St. George must be very malàpropos. Let us hope that the Economic Secretary and the Government will devise some rescuer for distressed building societies by other means than eating them.
Can we have an assurance from the hon. Gentleman, to put it very shortly, that the Government will consider the possibility and the advisability—I am not asking them to accept it—of collective assistance for building societies in financial difficulties?
§ Mr. Erroll
I should like to stick to the assurance which I gave earlier, that we will consider the question of a possible need to amend building society legislation generally. If it was felt that there was a desire for such a collective fund or pool fund and that it was necessary to place that on a legislative basis, it would be considered along with everything else. That is as far as I can take the Committee.
§ Mr. Mitchison
The hon. Member has not been very definite. Will the Government consider whether it is right that there should be provision for financial assistance? It is not merely a question of what the building societies want. It is a question of what is right in the public interest, and that means the depositors and the investors.
§ Mr. H. Wilson
We are in some difficulty about knowing whether to press the Amendment. The Economic Secretary has moved a little in the direction we want, but we want him to be more specific. We are more than willing to withdraw the Amendment if we feel that something will come out of doing so. All that the hon. Gentleman has said, in fixed terms, is that the Government will consider the desirability of any changes in building society legislation. I asked him whether the matter was being discussed. He has not yet told us. I understood him to say that the present view of the building societies was against a pool of this kind. How he got to know that if the matter has not been discussed with the building societies I do not know, unless he has done it by some form of telepathy.
I wish that the hon. Gentleman were not so rigid in sticking to the form of words which he used. He is a very independently-minded Minister, as he showed us last night when he bowed to the wishes of the House, quite rightly and very graciously. He was given a form of words a week last Thursday, or whenever the brief was prepared, and he has read those words as inflexibly as the American Secretary of State. The difference between him and the American Secretary of State is that the hon. Gentleman can understand arguments when they are put to him.
Arguments have been adduced this afternoon and I should have thought that in the light of those arguments he would be prepared to say that he would look at the matter again, not merely the question of a pool, but, for instance, a question to which he drew attention, the right of building societies to give loans to or invest in other building societies to help them over a difficult period.
Entirely without commitment—this will not cost him anything—will the hon. Gentleman look at the specific problem before deciding to recommend legis- 430 lation? If he will give such an assurance, we will be prepared to withdraw the Amendment. Will he give an assurance that he will look at the problem in those terms?
§ Mr. Erroll
I was anxious to ensure that the Amendment did not appear in the Bill since it was not appropriate to the Bill. The right hon. Gentleman has suggested that the Committee should divide on the much wider issue of whether we should consider the whole broad question of the setting up of a central fund or pool fund.
Nevertheless, to show that I am trying to be as helpful as possible, I shall he glad to give an assurance that we will consider the matter, as the right hon. Gentleman said, without commitment. We shall certainly consider the matter on the broad lines which have been outlined this afternoon. I therefore hope that the right hon. Gentleman will not seek to press the Amendment to a Division.
§ Mr. H. Wilson
Since the latest piece of paper received by the hon. Gentleman has enabled him to be a little more accommodating, I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. W. R. Williams
I beg to move, in page 1, line 9, after "society", to insert:has according to its latest annual account and statement assets amounting to not less than one hundred thousand pounds and".
§ The Temporary Chairman (Sir Robert Grimston)
It may be convenient with this Amendment to take that in page 2, line I, leave out from "as" to "he" and insert:are set out in the Schedule (Conditions on which the Chief Registrar shall have power to approve building societies for purposes of trustee status) to this Act".and that in line 2, after "section", insert:provided that he shall not withhold approval of a society solely on the ground that the total assets of the society amount to less than five hundred thousand pounds".
§ Mr. Mitchison
Will it also be convenient to include the Schedule mentioned in the first of those two Amendments?
§ Mr. Williams
I hope that the amiable relationship between the Minister and my hon. Friend will continue during our discussion of this matter, since this is a very important amendment for many of the building societies. On studying the Bill, and after consulting some building societies, it seemed to me that there were at least two defects in connection with the proposed agencies. The first was the reluctance of the Minister of Housing and Local Government to make the fullest possible use of local authorities in connection with this scheme. I cannot discuss that on this Amendment, but I thought that I had better place on record the fact that I regard that as a defect in the scheme.
The second defect relates to the building societies which are made the appropriate media for carrying out the provisions of the Bill. My Amendment deals with what we regard as the discrimination between the larger and smaller societies. We consider that that bias is both unfair and unhealthy for the scheme itself.
The purpose of the Amendment is to enable the Government to have second thoughts on the subject. We hope to convince them that the scheme will benefit considerably if we apply to it the traditions, experience, knowledge and administrative capacity of many of the comparatively small societies. Hon. Members will know that the Treasury requirements for the selection of societies for the scheme are set out in Appendix 2 of the White Paper. One requirement, and perhaps the basic requirement, is that the total assets of a selected society must not be less than £500,000. We regard that figure as very much too high and we suggest that it should be not less than £100,000.
I am not sure whether the decision to fix the figure at £500,000 is attributable to the Government's acceptance of a proposal by the building societies movement that they should give trustee status to deposits. If that is so, and if that is the principal reason, I am sure that the smaller societies never envisaged that that would result in their exclusion from a progressive scheme of this kind.
In his Second Reading speech on 15th December last year the Minister laid great stress on stability. It was right 432 and proper that he should do so, and my hon. Friends and I wholeheartedly agree with him. Stability must be the basic requirement of any scheme of this kind. I also agree with the Minister that trustee status must not be lightly conferred on any society, be it large or small. The Minister of Housing and Local Government admitted that size does not of itself ensure stability; how right he was. History fully supports him. Experience here is the same as in the boxing field; the bigger they are, the heavier they seem to fall.
Had the Minister issued, in the Bill, instructions to the Chief Registrar of Friendly Societies to apply the common test of stability to every society, whether large or small, we should have no quarrel with him on that aspect of the matter, and I feel sure that the smaller societies would have had no cause for grievance or complaint. Then, the conditions would have been common to all societies and would have been fair all round.
The Parliamentary Secretary started to wobble from this very firm line when he said that as a general rule the larger enterprise was more stable. I am not too sure that he has good grounds for such a broad generalisation as that. I should have thought that the Minister and the Treasury would agree that one important test of stability was longevity. The length of time that a concern has been in business without any default or failure and with no defection, should be one good test.
I have tried to test the case put forward to me by the smaller societies from this angle. I have taken the trouble to look through the "Building Societies Year Book" for 1958 and it was a very interesting experience, because I came across some very interesting facts which have encouraged me still more to put down this Amendment and to ask my hon. Friends to support it. I found out from that book that quite a number of these very small societies had been in existence for well over three-quarters of a century. Some of them are nearly one hundred years old. They have a long record and, as far as I can detect, there have been no failures whatsoever in connection with their work or administration.
As far as I can see, they have served successive generations, many of them generations of working-class men and 433 women in industrial areas in this country, through good times and had, through booms and slumps. They have given first-class service, and most of them have very progressive outlooks. They have been able to meet the ever-changing requirements and needs of their shareholders and of the people who have deposited money with them.
I shall not weary the Committee with quotations from the Year Book, but I would refer to three or four of these societies on the question of longevity. The Gainsborough Society was established in 1870 and was incorporated in 1910. The Grantham Society was established in 1875 and was incorporated in the same year. The Grimsby and Cleethorpes Society was established in 1866 and was incorporated in 1875. Now comes my own personal interest when I refer to a very well-known society in my own constituency, the Failsworth Permanent Building Society, which was established in 1876 and was incorporated in the same year.
I claim that this long existence, without trouble or failure whatsoever, reflects not only the stability of those societies but the confidence which thousands of ordinary men and women have reposed in them for that long time. Thousands of people have trusted these smaller societies, but the Minister of Housing and Local Government, and the Chancellor of the Exchequer, through the Treasury, do not trust them.
When I look at examples like this, I become very doubtful about the claim of the party on the Government benches to look after the interests of the small man and the small businesses. We hear quite a lot about that. It is clear to me, in this case, at any rate, that the small society is being sacrificed to big business, to the big fellows. It seems queer that the Tories, who always claim to believe in decentralisation, are forcing centralisation by means of this Bill, in connection with their scheme.
§ Mr. Graham Page (Crosby)
I do not intervene obstructively, but constructively. I do not Think that the hon. Member mentioned the assets of the small businesses, but it would complete his argument if he could do so.
§ Mr. Williams
I am obliged to the hon. Gentleman for trying—I say "trying"—to be constructive. I was dealing with the long existence, the longevity, of the 434 societies, but, if necessary, I could get figures to prove that their status and assets are quite sufficient. If the hon. Member will wait a little longer I can get the figures for the Failsworth Permanent Building Society, which I regard as typical of the societies of which I am talking. He will find that I can tell him not only the assets, but the reserves as well.
When the Government have a few plums to distribute they do not look at the smaller societies but at the big fellows, whose only advantage, as far as I can see, is size and size alone. There seems a large measure of ingratitude on the part of the Government in their attitude towards the smaller societies. It is accepted that in past years it has usually been the smaller societies, with their local conditions and personnel, which have responded to the appeals of successive Ministers of Housing and Local Government to advance loans on the older types of property.
The larger ones and the more centralised and regionalised ones, during the same period, seem to have laid down very firm, and, in many cases, harsh, limits of property age, irrespective of the actual condition of the property itself. I imagine that they have laid down those harsh conditions because they wish to avoid allowing their local officers and offices to discriminate between types of older properties.
It seems, therefore, a little unfair that the larger societies, which have been so lukewarm in trying to deal with these social problems in the past, will, under the Bill, be reaping where they sowed not. That is very unfair. The smaller societies are solidly behind us in this Amendment because they feel they have not been treated reasonably well nor with any degree of gratitude. They took the risks, but the larger ones are now reaching out for the fruit.
I am informed that the standard laid down by the Building Societies Association for a society to be regarded as sound enough to qualify for membership of that Association provides minimum requirements of 2½ per cent. reserves and 7½ per cent. liquid assets. The Committee will know that the Association does not ask anything about the size of the society, but simply asks what its reserves and assets are. If they reach 2½ per cent. and 7½ per cent. respectively, it is accepted into full membership of the Association.
435 I should think that the Association is very jealous of its reputation and very keen to ensure that membership brings with it stability, honesty, integrity and all the other qualities. Therefore, I cannot see why a higher standard, or a different standard, should be imposed by the Minister and the Treasury than the one imposed by the Association about the standing, stability and strength of a particular building society.
§ Mr. Fisher
I do not, of course, claim to speak for the Building Societies Association—I have no right to do so—but I should be very surprised if the Association would agree to so low a limit as £100,000 in the matter of size. I do not think that it has said that and I do not think its wishes are that the limit should be so low.
§ Mr. Williams
I said that I was informed that was the position. It is no use the hon. Member shaking his head. I have been informed by one of the building societies, which actually is a member of the Association, and the figures I have quoted to the Committee are those given to me by a member association of the general Association of the building societies. If the hon. Member has any better information than that, no doubt he will disclose it to the Committee. I said that I was informed that was the case and I have given the source of my information. I am inclined to think that the information is correct.
I should perhaps answer the points raised by the hon. Member for Crosby (Mr. Page). The Failsworth Society qualifies easily for membership of the Association, with assets of £¼ million and reserves of £12,000. Judged from a purely arithmetical viewpoint, the Fails-worth Society is at least twice as sound as the basic requirements laid down by the Minister for the larger building societies. I believe that what is true of the Failsworth Permanent Building Society is equally true of many other societies I have mentioned.
I wish to refer to some words uttered by the Minister of Housing and Local Government in the Second Reading debate. The right hon. Gentleman said:… it is claimed that many smaller societies have got balance sheets just as strong as the larger societies.436 The right hon. Gentleman added:I certainly do not disagree with that.If that is so and he agrees that, comparatively speaking, they are as strong as the others, it seems quite unfair and unjustifiable that they should be excluded from the Bill. Finally, there is the adverse effect on their future of the decision of the Government to exclude these smaller societies. I am sorry to have to quote the Minister again. In the same speech he said:It is also said that to exclude the smaller societies from this will lead to withdrawals of deposits from them and to their ultimate disappearance.He went on to say:The smaller societies play a valuable part in attracting savings, especially from local people, and I do not believe for one moment that to exclude them from this scheme will hamper them."—[OFFICIAL REPORT, 15th December. 1958; Vol. 597, c. 789.]The right hon. Gentleman may honestly believe that, but, of course, he is not personally affected and he can well afford to be optimistic in what he is going to believe. I tell him that his optimism is not contagious among the smaller societies. His optimism is not shared by those who will have the responsibility of guiding the societies' work in future and of having regard to their requirements. I am here this afternoon to tell the Committee that the smaller societies, the Failsworth Society, in particular, feel aggrieved and frustrated. They feel there is great danger that many of the deposits which would come to them if they were allowed to take their rightful place in this developing scheme will not come to them. They have been frustrated and they should have been in the scheme.
I appeal to the Minister to give very careful consideration to this feeling of the small societies. I remember that when I was a young lad in Wales, Welsh people had to rely a great deal on them. I know that in industrial Lancashire they had to rely on them to a large degree when many of the large societies were not in existence. I ask the Minister to give serious consideration to my plea. I say "plea" advisedly because they could do great work in this scheme and I think it a great pity that a place has not been found for them.
§ Mr. Maurice Macmillan (Halifax)
I do not propose to detain the Committee for very long, particularly after the very 437 able argument of the hon. Member for Manchester, Openshaw (Mr. W. R. Williams) about the rights and uses of small societies. For various reasons, which I think are perfectly obvious, I cannot quite go along with him in thinking that the qualifications for membership of the Building Societies Association must necessarily be the same as the qualifications for trusteeship status. Various societies may well he excluded on those grounds. Nor am I quite happy about his proposal to isolate one condition out of the four referred to by the Economic Secretary and put that one alone into the Bill. That is why I have tried to link this particular condition of size to those others which are specified in Appendix II of the White Paper.
I hope that the Minister will at least be able to do something, if not on the lines we suggest this afternoon, to help the smaller societies, particularly as it is not only the question of qualifying for the loan but of trusteeship status.
During the Second Reading debate the Parliamentary Secretary, while admitting that size does not necessarily mean that a concern is sound and stable, said that in judging industrial companies as fit for trustee investment the criterion of size of about £1 million was not uncommon. I would respectfully submit to him that the criteria suitable to an industrial or commercial undertaking are not necessarily those which are suitable to a mutual undertaking such as a building society In any case, in this particular instance, the other criteria which are set out in the White Paper are added to that which would normally obtain with an industrial investment society.
Apart from all that, the Bill is so worded that it says only that the Registrar may grant trusteeship status. It is therefore obviously open to him to exclude a society even if it fulfils all the other criteria, unless I am completely wrong in my reading of the Bill. To some extent the reserve ratio that is demanded of a building society to qualify for trusteeship status in itself contradicts the need for the size criterion to be quite so stringent. In imposing a lower limit to the percentage of free reserves, the Minister is implicitly saying that size is not all, for it is, as has been pointed out before, the smaller societies that do, in 438 fact, have bath larger percentages of free reserves and larger percentages of their funds as liquid assets. I therefore suggest that in the new Schedule which stands in my name, perhaps a way out of this difficulty could be found by combining the criterion of size with the criterion of reserves, and that if we are willing to lessen the safeguards on the one hand we do so only to the extent that we tighten them up on the other.
Before I actually turn to the Schedule itself—and I understand that I am in order in so doing—I should like to say one word about the position of the smaller societies. I do not think anyone in the Committee has any doubt that they are worth-while organisations. The Minister said quite rightly that trusteeship status was not to be granted lightly. I think also that we in this House should take the point that it is not to be withheld lightly either. In some way that is what we are in danger of doing by insisting on such a rigid criterion of size.
It has been brought to my attention that already advertisements and several mentions in the Press have been made implying that certain societies at least, under the terms of the White Paper, would have been worthy of trusteeship status, with the obvious implication that others which did not fulfil the White Paper's criteria would not. Whether we like it or not, this introduces an element of discrimination, however unintentional, which inn the long run, to put it at its lowest, will not benefit the smaller societies.
There is a further point which I have made before and to which I should again like to draw the Minister's attention. This system is giving an incentive to societies which are very nearly but not quite large enough in their total assets to increase their assets. I do not see how they can do that without having the incentive also to increase their profits and maintain the higher rate of mortgage. It is surely contrary to the spirit which underlies the whole building society movement to encourage a society to direct its policy to attract funds and then decide on the terms it can offer rather than see how much it can provide a needed service with the money which is available.
With regard to the smaller societies, the hon. Gentleman the Member for Openshaw pointed out that many of them are long-lived, an issue which I do not think is 439 very relevant in the case of a larger society but which is certainly relevant in the case of a smaller society which must be sound if, even at a low level, it has been continued over a long time without difficulties. They are also more local. They are more concerned with the individual who wants to buy a house to live in, rather than with helping to finance builders' operations for selling owner-occupier houses in large quantities. They have done a great deal more of this business in connection with the older and cheaper property, the type of property selling at £600 to £700 as opposed to £1,600 and £1,700. These tend to be working-class as opposed to middle-class houses. They tend to be terraced houses and to be nearer where people work rather than in the suburbs or near the estates. Despite the fact that the 500 smaller societies were doing only 3 per cent. of the total building society business, they were doing 12½ per cent. of the business of this nature in pre-1919 houses. They are being precluded by this Bill from taking a further part in that part of the business in which they already play a not inconsiderable rôle in the building society movement.
On the Second Reading debate, I felt that the whole question of trusteeship status was too important not to be laid down in detail in the Bill and too important to be left in vague terms which were open to change. Now I am not so sure. Certainly I do not think that it is wise to lay down and specify one of the four criteria mentioned by the Financial Secretary. The main reason why I have put down the proposed new Schedule is not primarily to lay down in the Bill conditions on which the Chief Registrar shall have power to approve building societies but to find some means of trying to introduce a link between the question of the size of the total assets and the proportion of those assets held as free reserves.
In its essence the Schedule which is down in my name is Appendix II to the White Paper. There is in principle no difference at all, and I have introduced no new criterion and no new condition for granting trusteeship status. What the Schedule does is to alter two of the conditions as set out in the White Paper so as to make possible the inclusion of some smaller societies, provided that those 440 smaller societies, in return, so to speak, for the size qualification being relaxed on their behalf, can meet more stringent conditions as to reserves.
I have suggested these conditions somewhat arbitrarily, I must confess to the Committee. In so far as the total assets of the society were those as laid down by the size criterion of £500,000, the proportion of free reserves would be the same, that is, 2½ per cent. For the smaller societies, between £250,000 and £500,000, perhaps a figure of 3½ per cent. would be more suitable, and if one were to include societies between £100,000 and £250,000, the building societies' own suggested figure of 5 per cent. could be used. In parenthesis, I am aware that the 5 per cent. as envisaged by the building societies and the 5 per cent. as envisaged by the Government are not the same, because they are not calculated on the same basis.
The rest of the somewhat long-winded Schedule is merely taken up with extending the rate at which societies shall reach the required percentage of free reserves to cover the three separate categories, and it is consequential on the initial Amendment.
I do not think that I can press my Amendment, because I realise that it may not be desirable to limit the Minister too much in setting out the qualifications for trusteeship status. It has already been suggested that, although a size criterion of £500,000 might be desirable now, there might come a time in the future when that qualification could be relaxed. I, for one, should be very reluctant to press an Amendment which would make such a thing more difficult. Nor do I claim that the Schedule as set out on the Order Paper is right or, indeed, workable. I must confess to not having sufficient technical knowledge to know in detail whether it is.
I hope that the Minister will examine the whole question of the smaller societies in order to ascertain whether there is not some method by which he can extend trusteeship status to those among them which deserve it. There seems to be a general feeling that, although we should like to extend it to many of them who deserve it, we do not see how it can be done. I ask the Minister whether he can find a method of doing it, even if it means requiring further safeguards from the 441 smaller societies in other directions, and even if it means that he cannot do it now but can hold out some hope for the future that they, too, will be able to have the benefits of trusteeship status which, we all agree, the work which they have done for the movement has earned them.
§ Mr. Roderic Bowen (Cardigan)
I rise to associate myself with the observations of the hon. Member for Manchester, Openshaw (Mr. W. R. Williams). I also agree with most of what was said by the hon. Member for Halifax (Mr. Maurice Macmillan).
Before I make any further observations, it is my duty to declare my interest in these Amendments. I am a director of a small building society which would be affected if they were carried. It seems to me that it is quite unreasonable to exclude the smaller, stable building societies from taking part in the implementation of the Bill. As I see the position, the Bill itself does not provide for any exclusion on size, but it is intended that the regulations should be on the lines of Appendix II of the White Paper, which refers to the total assets of a society as being not less than £500,000.
If the regulations are framed on those lines, I understand that about two-thirds of the building societies now operating in this country will be excluded solely on the basis of size. We have not the regulations before us, but, as I understand the position, the regulations will give the Chief Registrar the power to approve a building society, provided that certain conditions are complied with; that is to say, he is not required to approve a building society simply because it complies with these regulations. He will still have an overall discretion whether a society can bring itself within those regulations.
All we are asking, as I understand it, is that there should not be a rigid limitation based solely upon size. The Chief Registrar will have complete discretion to decide whether a society which is smaller than those at present considered suitable for the implementation of this Bill will, in fact, be a suitable instrument. It seems to me that the Government should welcome the additional facilities for implementing the Bill which could be provided by solid, stable building societies with excellent records of public service 442 which are at present excluded solely upon the ground of size.
I do not wish to repeat all the arguments. Most of the ground has already been covered extremely well, but I should like to associate myself with one or two points which have been made, in particular. There can be no doubt that the effect of regulations on the lines of Appendix II 2 (b) would be to put the smaller societies, those which did not qualify for trusteeship status under the Bill, in an unfavourable light as compared with the societies which came within its scope. I feel that this is extremely unfair to societies which have rendered a great public service, particularly in the field with which we are concerned with this Bill, namely, public help in relation to the purchase of older types of houses.
What will be the effect if there is this rigid qualification as to size? It will encourage building societies to expand at the expense of reserves. That is one of the effects. It is interesting to note that the building societies in this country which have the fastest expansion record are those, in the main, which have the lowest reserve ratio. That is something which should be deprecated.
Incidentally, most of the smaller societies can comply with the provisions about reserves contained in the White Paper. Indeed, they far more than comply with them. In one examines their balance sheets in that respect one finds that they come out of the examination far better than many of the much bigger societies.
If we lay down a size test, we shall encourage amalgamations undertaken with the sole object of qualifying for trustee status and Exchequer advances. The swallowing up of these smaller societies by bigger societies, or a movement whereby two or three societies come together for that purpose, should be deprecated. These small societies, carrying out their work largely through local, personal, intimate contacts, have rendered a service that the larger, more remote and impersonal societies would find it difficult to give. The Government should certainly not artificially foster a squeezing-out of the small building society, which would be the effect of the regulations proposed in Appendix II of the White Paper.
443 I hope that, on second thoughts, the Minister will decide that he can make use of these small societies in implementing this Bill, and will realise that he can rely upon the discretion of the Chief Registrar in deciding which societies, irrespective of their size, are, by their record, their present balance-sheets and the whole history of the operations, fit for trustee status and to deal with the Exchequer advances envisaged in this Bill.
§ Mr. Norman Cole (Bedfordshire, South)
I want to support what has been said by my hon. Friend the Member for Halifax (Mr. Maurice Macmillan). We have been very much emphasising the size of the assets of these societies, but a number of other criteria have to be met before a society is approved for trustee status. Those criteria are reasonably stringent. I suggest to my hon. Friend the Economic Secretary that the size of the assets may be one consideration, but another is the general soundness of the society as represented by the degree to which it meets those criteria.
My hon. Friend the Member for Halifax put this very fairly, indeed, when he said that this granting of trustee status should not be lightly withheld, any more than it should be lightly given. It is something that should receive very serious consideration. Numbers of these small societies, whose longevity and stability have already been emphasised, cannot meet the criterion of size of assets. Although the other criteria contained in the proposed regulations are more than met by the small societies they have not, at present, assets amounting to £500,000. I imagine that when their assets reach that figure they will be included, but that could be some time ahead.
I therefore hope that the Economic Secretary will look at this again. This is the time to do it, when we are starting this great new operation. He would give a great boost to the work of the building societies as a whole, large and small, but particularly to the smaller ones. If it is not possible to do this when the new regulations are framed, I should like him to assure the Committee that this matter will receive consideration after six, nine or twelve months' working of the Bill.
444 It is very important that we should not lightly lay down an arbitrary line that excludes societies which have everything except size—longevity, stability, respect and esteem, and the character of their work—to recommend them, Indeed, in the work they have been doing for just this older kind of property to which the Bill applies, they have been doing excellent service.
§ 6.15 p.m.
§ Mr. Fisher
I recognise that we are in a difficulty with the Bill as it stands in that building societies must have assets of £500,000 to qualify for receipt of Government loans and, more particularly, for trustee status for investments.
It is that that is really worrying the small societies. It is a very real difficulty, because, applying this £500,000 standard, only about 150 of the 341 societies which are members of the Building Societies Association will be able to participate under the Bill, or obtain trustee status for their deposits. That is not because the majority of them are in any way unsafe or disreputable. They are no doubt admirably run, and probably have a good ratio of reserves and a high liquidity. It is simply because they are small local societies; and, as such, will be excluded on grounds of size alone.
These smaller societies will not mind very much if they do not receive the Government loan money for the advances on the older pre-1919 houses. That is not a particular attraction for any society, whether it be large or small. The Government loans will be made at a rate only ½per cent. lower than the building societies charge their borrowers, and that ½per cent. margin between the rate at which they lend and the rate at which they will borrow barely covers the cost of administration. Administrative costs, on average, are about 0.55 per cent. Therefore, if anything, the average building society will be out of pocket under the Bill, and will certainly not have anything left over for provision for reserves or taxation. No building society will do very well out of the Government loan money—
§ Mr. Mitchison
That may be the average rate but, of course, in other cases it covers advertisements, which do take a considerable part of the expense.
§ Mr. Fisher
I appreciate that, and I am grateful to the hon. and learned Gentleman for pointing it out.
One asks oneself why the smaller societies are so anxious to be included, and I think that the undoubted reason lies in the trustee status which is to be conferred. That is the only reason, because in return for a great deal of extra work and responsibility which the Bill places upon them the Government have given the building societies the quid pro quo that they have long desired and to which they have long felt entitled. My hon. Friend the Member for Aldershot (Sir E. Errington), whom I am sorry not to see in his place at the moment, sought this for them in his Trustee Investment Bill in 1956.
Those of us who supported him on that occasion thought his plea well justified, not only from the point of view of the building societies but from that of trustees and the beneficiaries of trusts. We thought then, and I still think, that shares in building societies are a far better and safer investment today than undated Government stock. Those of us who have lost money in Consols or 3½ per cent. War Loan or 2½ per cent. Treasury stock feel that very much.
Trustee status will bring in trustee investment. It will bring in a new flow of money to those building societies which qualify for it. That is why they want inclusion, and that is why the smaller societies want the £500,000 limit reduced. Inclusion will mean more funds, but exclusion will mean, not enhanced but diminished status. Instead of the advantage of more funds flowing in, the smaller societies will actually have the positive disadvantage of appearing—only appearing—in the public mind as being less safe than the slightly larger society which, perhaps, only just qualifies under the Bill. That, I think, is the real rub of the smaller societies' grievance.
Nevertheless, we must have certain standards for trustee status. Obviously, there must be a minimum figure of reserves. Obviously, societies must have a whole-time manager or secretary and operate from a recognised and separate office of their own. Also, there must be some size requirement. That is why I cannot support the Amendment in page 2, line 2, in the name of the hon. Member for Huddersfield, West (Mr. Wade) and his 446 hon. Friends, because that suggests no size limit at all. The hon Gentleman the Member for Manchester, Openshaw (Mr. W. R. Williams) and my hon. Friend the Member for Halifax (Mr. Maurice Macmillan) suggest a limit of £100,000. I myself regard that as still too low for trustee status. I should have been willing to accept a figure of about £250.000 or £300,000, but not lower than that.
Trustees have a very serious responsibility to their beneficiaries and, indeed, the Government have a serious responsibility to the trustees. I think I am right in saying that the standing of a borrower whose securities have trustee status is controlled by the Treasury, and quite rightly so. I believe that it should remain so. At whatever level the size limitation is fixed, there will always be complaints from certain local societies which just fall below it. That is inevitable. It is very bad luck on those smaller societies which just happen to fall outside the requirement. I acknowledge that, but, after all, this Bill is not designed for the benefit of building societies, whether they be large or small. It is an important and extremely wide-ranging. Government Measure. If the Treasury feels that it cannot go below the £500,000 limit in the trustee context—and there is a great deal to be said for that view—I do not think we should press my hon. Friend to concede these Amendments.
§ Mr. James MacColl (Widnes)
I have listened with very great care and attention to what has been said, because, unlike most hon. Members who have taken part in the discussion, I have no connection at all with building societies. I have neither lent money to one nor borrowed money from one, and I have had no connection with the building society movement.
I am bound to say that the trend of the discussion has left me very much concerned about what is proposed. It is all very well for the hon. Member for Surbiton (Mr. Fisher) to say that the Bill is not intended to benefit building societies. In fact, of course, it will be for the benefit of building societies which attain trustee status under it. Whatever may be the motive or the intention behind the Bill, the fact remains that the Government are dispensing a favour; they are giving a privilege and a piece of prestige to certain selected building 447 societies which will be bound to influence people who are minded to lend them money.
Most people do not know what trustee status means, and they know precious little about how institutions acquire trustee status. What they do know is that some society has trustee status, and that that is a respectable institution, whereas another society which is not able to advertise that it has trustee status will inevitably, by implication, be regarded as less respectable and not as good for investment.
It must be common ground that that distinction is not a true one. The larger societies are not, for that reason, more efficiently run or more solvent. It may well be that a small society is far more effective and valuable and better run than a large one. It is an extremely dangerous thing for the Government to do anything to encourage among investors the feeling that a lot of chromium plate, a large building and a great deal of advertising —the sort of things associated with big institutions—indicate solvency, prudent management, and so forth. The public should be encouraged to feel that solidity, worth, good character and good management are the qualities which really matter to those who wish to invest money. Therefore, for the Government to go out of their way to give this special privilege attaching to size seems to me to be most imprudent.
The hon. Member for Surbiton produced the usual argument that one has to draw the line somewhere and, wherever one draws it, people will complain because they happen to come below it. The answer to him is that if one has to draw the line somewhere, most societies, which are well run and solidly managed, should come on the right side of it. It is quite plain that the figures which the hon. Gentleman himself quoted about the members of the Building Societies Association show that many of them, which are thoroughly well-run organisations, would be on the wrong side of the line as it is proposed to be drawn. That, surely, must be an argument against such a limitation.
It is wrong for the Government, just because they want to carry out a policy for their own ends, to discriminate by the Bill against the worthy, honourable and 448 well-run societies, and I feel that they ought to consider the matter again.
§ Sir Cyril Black (Wimbledon)
I am sure that all hon. Members sympathise with the plea which has been addressed to the Government to consider whether something can be done to ease the situation of the smaller building societies under the proposals of the Bill. It is fairly general ground, I think, on both sides of the Committee that there should, at any rate, be some size requirement governing the conferment of trustee status. The hon. Member for Manchester, Openshaw (Mr. W. R. Williams), whose speech, if I may say so with respect, was a very appealing, moderate and reasonable one and to which I listened with very great care and interest, pleaded not that there should be no size requirement but that the size requirement of £500,000 which the Government propose is too high and that a more appropriate figure would be £100,000, as he proposes in his Amendment.
It is, of course, a fact that wherever one draws the line, at £500,000, at £250,000 or at £100,000, there will always be societies which fall just below it which will experience the disappointment and even the indignation which has been expressed this evening on behalf of those who happen to be just under the £500,000 line. By reducing the size requirement, one may reduce the number of societies feeling disappointment because they happen to fall just below it, but, if there is a size requirement at all, it necessarily follows that there will be some above the line and some below it. Those below it will, of course, feel disappointed. The problem is not solved by reducing the size requirement to £100,000 or to any other figure, although the scope of the disappointment may be reduced thereby.
I feel that it may have been inferred from some of the speeches that the limitation of £500,000 was something desired and supported by the larger societies as being in their interests and to the detriment of the smaller societies. The Committee will know, I think, that I have been a director for about twenty years of one of the larger building societies. I know fairly well the minds of the directors of most of the larger building societies, and I am quite certain that all who are connected with larger societies recognise that there is a very legitimate place for the 449 small local society. We do not want to see the small local societies put out of business. We do not want to see them in any way penalised or adversely affected by this Bill or by any Government action. In our judgment, the smaller societies play a vital part in the building society movement as a whole, and to suggest that the £500,000 limitation is something desired and supported by the large societies in their own interests is to do a disservice and an injustice to those large societies.
A most excellent smaller society in my division, the Wimbledon Building Society, is in the somewhat strange position that, according to its last published accounts, its total assets are £482,000, so that under the proposal that we are considering it would have fallen on the wrong side of the line by some £18,000 at the end of 1957. It may well be that by the time the 1958 accounts are available there will have been a rate of growth sufficient to put it just above the line. This is a society which for many years has served the local public. No one could possibly question its stability and the security which it offers to investors, and I am sure that if the £500,000 figure were to stand some societies will feel disappointment at being just too small to qualify.
I take the view that the Bill as a whole represents a very notable advance for the building society movement. It may well be that the conditions as proposed are not precisely correct at every point—it would be strange if they were—but I do not personally feel inclined at this stage to jeopardise in any way the passage of a Bill which seems to me to be wholly beneficial in its purpose by arguing about something which, however one may regard it, is a matter of detail. But if the figure of £500,000 is adopted for the time being, I feel that an assurance should be given on behalf of the Government that it is not a once-and-for-all figure which will never be reconsidered and which can never be altered in any circumstances. If experience of the working of the Bill shows after a reasonable number of months that the limit could be safely reduced to a lower figure, I hope that the Minister will take appropriate action to reduce it.
I am not inclined to vote against the Bill on the £500,000 figure if an assurance can be given that the amount will 450 be reconsidered in the light of experience of the working of the Bill.
§ Mr. Erroll
Like my hon. Friend the Member for Wimbledon (Sir C. Black), I very much enjoyed listening to the speech of the hon. Member for Manchester, Openshaw (Mr. W. R. Williams) and I enjoyed the proposals, ingenious in detail, of my hon. Friend the Member for Halifax (Mr. Maurice Macmillan). I appreciate his modesty in saying that perhaps his proposals had not been worked out exactly correctly in detail. I assure him that I read them fully appreciating that that might be the case and I would not seek to criticise his propositions solely on the ground of accuracy or otherwise of any of the details.
I was fully aware, long before this Committee stage, that the proposed requirement, one of a number, of a minimum amount of assets to be held by a society as a qualification for trustee status and for inclusion in the scheme had aroused some criticism among members of the smaller societies. I have received many letters on the subject, some direct and some forwarded to me by hon. Members. I should like to say straight away and categorically that the proposal of the £500,000 limit implies no criticism whatsoever of the manner in which the smaller societies are conducted and in no way casts any doubt upon their financial soundness. There are many small societies whose reserve position compares favourably with those of larger societies, and I have no doubt that they are efficiently run.
However, we should not consider this proposal merely from the point of view of the building societies. We must consider the larger aspect. Trustee status is not to be lightly conferred. We have a definite responsibility to the general body of trustees, as my hon. Friend the Member for Surbiton (Mr. Fisher) said, which is entitled to regard any addition to the list of trustee investments as being of the same high standard as those already on the list.
A private organisation whose deposits are to be given this status should be of such size as to command general confidence in its financial and administrative resources. I should like to remind the Committee of the sort of company which trustee status building societies will be 451 joining. It would obviously be burdensome to the Committee if I were to read out the whole of the investments at present authorised by the Trustee Act, 1925, as amended.
I should, however, like to mention some of the more important trustee investments. They comprise United Kingdom and Northern Ireland Government Guaranteed Stocks, certain Dominion and Colonial Government Stocks, the Stock of the Bank of England, all securities of local authorities, certain stocks of public boards and certain prior charges of the older public utilities. Therefore, building societies which qualify will be joining a distinguished company.
§ Mr. Mitchison
Has the Economic Secretary investigated the present average or total depreciation of trustee securities on the books of building societies? Could he give us any estimate, either in relation to the societies with assets of over £500,000, or all societies?
§ Mr. Erroll
I can certainly assure the hon. and learned Gentleman that I have looked at the matter, but I would not be prepared to give him those figures at this moment.
The hon. and learned Member for Cardigan (Mr. Bowen) referred particularly to the work of the smaller societies, and in referring to a particular society he used the phrase "a small intimate society serving local needs". I do not doubt its excellence or its suitability for that purpose, particularly in a relatively remote area, but I question whether" a small intimate society serving local needs" ought to go on the trustee list which I have read.
§ Mr. Erroll
I must repeat that it is only one of the conditions that has to be fulfilled. We do not want to regard this as the sole condition. It is only one of a number. My right hon. Friend the Minister of Housing and Local Government explained this to the House on Second Reading, but I hope the Committee will not object if I repeat, with additions, the argument he then used.
As I have said, we accept that size in itself does not assure stability, but the larger the society the more likely it is 452 to be able to withstand economic pressures. The proposed limit of £500,000 should ensure that a society complies with all the other conditions—I should like to underline that point—as a substantial measure of financial stability. It may be argued, as has been said by several hon. Members, that we perhaps stuck at £500,000 and we could indeed come down, as one Amendment suggests, to £400,000 or, as another Amendment suggests, we could come down to £100,000.
From the arguments put forward, it would appear that the Government have taken the highest possible figure they could get away with, whereas, in actual fact, I think that we would have been entitled to take a much higher figure than £500,000. It might well have been £1 million, as I shall seek to show the Committee.
The concept of a size limit as a qualification for trustee status, whether for a private company, public company or a building society, is not new. Proposals have been made from time to time for extending the investment powers of trustees by allowing them to invest in the shares of ordinary companies. Such proposals invariably confine the extended powers to companies with a capital exceeding some such figure as £1 million or higher. This has been usually accepted in the ensuing discussion as reasonable and I have never heard such a proposal criticised on the ground that it would reflect adversely on the credit or stability of smaller companies, which, of course, would be absurd.
My hon. Friend the Member for Surbiton referred to the Trustee Investment Bill which my hon. Friend the Member for Aldershot (Sir E. Errington) introduced into the House in 1956. That Bill would have allowed trustees to invest in the deposits of building societies with assets of not less than £5 million. It is true that that was challenged from both sides of the House, but it was suggested during the course of the debate that a reasonable figure or a right limit would have been about £2 million, four times as big as the limit that we have proposed in the Appendix to the White Paper.
In short, in deciding the matter we have to strike a proper balance between. on the one hand, our desire to cover as large a proportion of the building society 453 movement as we reasonably can and, on the other, to safeguard the interests of trustees and their beneficiaries.
Therefore, given that the other safeguards which will he prescribed are carried through, we have thought it reasonable to keep the limit down to £500,000. This takes in an important proportion of the building society movement. It may interest hon. Members to know that the adoption of this figure means that the societies which qualify by size alone amount to about 243 societies, which together account for more than 97 per cent. of the assets of all permanent and incorporated societies.
Not all those societies will necessarily fulfil all the requirements, but on our present estimate and subject to the Registrar's final approval, we estimate that those which will fulfil all requirements and thus qualify will have assets amounting to over 88 per cent. of the total assets in the building society movement. Thus, by going down as far as £500,000, we have taken in a very large proportion of the total assets of the movement.
I can imagine an hon. Member asking whether we could not go just a little lower. If we went down another £100,000 and made the limit £400,000. in itself still a substantial figure, only 20 or 30 more societies would be admitted and they would represent a very small fraction of the total assets of the building societies. I was grateful to my hon. Friend the Member for Wimbledon for reminding the Committee of the frequent difficulty in which we find ourselves in drawing the line, because wherever we draw it there is always somebody on the wrong side of it. I very much hope that the society to which he referred, the Wimbledon Building Society, will have made the grade, at least on the ground of size, by the time that its 1958 report appears.
If, however, we were to reduce the size qualification to £100,000, it would increase the number of societies eligible by size alone to no less than 480, although, of course, many would fail to pass the other tests. Such a reduction on this scale would open the field of trustee investment to a large number of comparatively small organisations with inadequate resources and status and it would inevitably increase the risk of the unsound society slipping through the net.
454 From the figures I have given, I hope that the Committee will agree that in proposing to fix the figure at £500,000 we have come down a good deal lower than recent public discussion would have suggested we would be able to come, whereas to go a good deal lower would be to bring in societies which do not qualify to appear on the list of trustee status stocks when one looks at the list as it stands at present.
Several hon. Members have referred to the disadvantages to small societies because, if they were unable to claim trustee status, they might have difficulty in raising the necessary funds. That is an exaggerated and unnecessarily pessimistic view. The very fact that these societies are, as the hon. and learned Member for Cardigan suggested, so often small and intimate and helped along, rightly and properly, by local interests and by local personalities, should ensure their access to sources of funds which will not be unduly influenced by whether there is trustee status or not. They are also able to offer other advantages.
For those that do wish to go ahead, however, it is not just a matter of the larger swallowing up the smaller. There is probably scope for two or more small societies merging or amalgamating into a single society which, on the ground of size, might then qualify. I do not think that freedom to do that would be in any way regarded as a retrogressive movement and in appropriate cases it might well be the best thing to do.
In short, therefore, we feel that once the Bill has received the Royal Assent, we should proceed with the issue of the regulations substantially as drafted in Appendix II and retaining the proposed qualification of £500,000. One advantage, however—and this point I would like to make to my hon. Friend the Member for Halifax—of having the conditions prescribed by regulation instead of having them written into the Act is that these regulations can always be altered or amended at some time in the future without the necessity of fresh legislation. As they will be subject to annulment procedure, the House would not lose control over any subsequent changes.
My hon. Friend the Member for Wimbledon pointed the way when he reminded me of what I was going to mention, namely, that as the conditions will 455 be laid down by regulation, it will be possible to make amendments from time to time when we see how the Act works out. One of the conditions which could be amended if it became obviously right to do so would be the size qualification. For the time being, however, I hope the Committee will agree that we are right to stick to the figure of £500,000 total assets as an essential qualification, thereby striking the right balance between the size and status of existing trustee stocks and the proper and legitimate aims and ambitions of the smaller societies.
§ Mr. Mitchison
We have just had from the Economic Secretary what we should expect, a very Treasury speech. To listen to what he had to say, one would have thought that the main object of the Bill was to confer trustee status in some mysterious way on building societies. There is no proposal in the Bill to confer trustee status on building societies. If there were, I would not know what it meant. There is a limited proposal to confer trustee status on deposits in building societies, but that is not the same thing. The difference is material.
The main object of the Bill is nothing whatever to do with trustee status. Its object is to enable money to be made available for certain purposes of social importance. It may be that the small and intimate society has to be considered in relation to those purposes and to what extent it can serve them, and some quiet hobnobbing over the fire in Wales may result in a social advantage. It is that which has to be weighed as the major consideration.
In the light of that, I want to say a word or two, first, about what we have to decide tonight. We have before us three Amendments to which hon. Members have been referring. The first is a simple one, simply to reduce the figure of £500,000 in the agreed scheme to £100,000. The second is rather more complicated, because, while making the same reduction, it tightens up the provisions relating, I think, to liquidity. The third, the Liberal one, is a more general one, since, in effect, it leaves it to the Chief Registrar, and, I suppose, could be properly put in this way—that he would be entitled to disregard that particular consideration if he were satisfied as to the questions of reserves and liquidity.
456 The object of all these three Amendments has been to let in some smaller societies, and to do so while safeguarding the position of the depositors, who are the people concerned in this matter. We were given an imposing list of the bodies which issue securities which already have trustee status, and I could have added parish councils, but that, perhaps, would have been a rude interruption. They are small enough very often. Their total assets are rather difficult to estimate, but they are surely comparable with the building societies, if companies are to be compared with them. That does not seem to me to be the right way of looking at the matter at all.
What, in fact, has happened about trustee status is that all those building societies have bought irredeemable stock, and, owing to the financial policy of the Tory Government, there has been a very heavy depreciation in the irredeemable Government stock. If we take the Building Societies' Year Book and look at the difference between the value of that stock when it was bought, and its present market value, we shall find a very large gap indeed. Accordingly, the scheme carefully provides for the market value and not the book value to be taken into account. One does not think that the British Government will default, but one thinks, when talking about trustee status especially for building societies, that there are other aspects of the securities in which they invest than the mere fact that, in due course, if there is a promise to redeem, they will be redeemed, and, anyhow, if they are British Government securities, interest will be paid meanwhile.
There are other aspects of the matter, and the real point which we have to look at is this. First, will these societies contribute substantially to the real object of the Bill, which is to get money, and to use them as agents of the Government, in order to get certain improvements and repairs done to a number of houses, which repairs, so the Government say, would not be done otherwise? I do not think that the Bill will have a very large effect, and I have never thought so. The hon. Gentleman who has been talking about the Halifax Society—or, if he did not, we knew what he was thinking about—knows perfectly well that the Halifax Society has already made a very large 457 contribution in respect of this kind of house.
I do not think that what we are doing now will make very much difference to that. From the solemn language in which this has been discussed occasionally, one would have thought that this was a revolutionary project which would change the whole condition of houses, and the arrangements under which they are improved and maintained. It is nothing of the sort. It is a very minor Measure indeed, and, so far as its social consequences are concerned, all that we can do is to see that they are carried out as well and as thoroughly as possible within the scope of the Bill.
I therefore approach this question of trustee status of deposits by saying to myself that all these societies can be useful in this regard. Having said that, I ask myself whether there are any of them so "dicky" that nobody ought to be allowed to deposit money with them—not taking up their shares, but depositing money with them—on the basis of getting trustee security. I have been looking at the point, and I entirely agree that. when we look at the smaller societies, taking those within the range between £100,000 and £500,000 assets, they differ very considerably in regard to reserves and liquidity.
What we are considering are the deposits of these societies, and I look at the Failsworth Society, to which my hon. Friend referred. There are 12 depositors, not of very large amounts, and in this society, as in so many others, the hulk of the money is in shares, because the shares attract a higher rate of interest. This practice of putting in deposits on any large scale I do not say is confined to, but very largely results from, the investment of funds by companies and institutions which cannot take up shares in a building society under the present law.
I am not saying that there is anything wrong in that, but, looking at the reality of the matter, the societies which have the large deposits are, by and large, the larger societies. Therefore, when we are considering the 12 depositors in the Failsworth Society, it is fair to remember that they have a very much smaller stake, and if the society is smaller, so, too, is the amount of risk to be estimated.
458 I would have thought that the right way to look at this was not to be too strict in the matter. We can provide quite easily in these regulations for the withdrawal of this sanction. We could leave the matter rather more to the Chief Registrar than it is left at present, but I repeat that the main object must be to see that we get a society which can make a contribution to the real purpose of the Bill, and, on the other hand, that we do not lead depositors to put their money into something unsafe because it is to have trustee status.
I would have thought that it was quite easy to go well below the limit of £500,000 and meet the latter contingency, and that it was among the smaller societies that we are really most likely to find quite a lot of help for the major object of the Bill. My only difficulty about that is, in fact, that these smaller societies are doing this kind of thing already. It is, therefore, possible that, whatever we may do here will not add very much to what they are doing. They have done the hard work, and have not been given trustee status for their depositors as a reward. The laurel crown will be kept for some of the larger societies which may not have made so big a contribution. There is not very much justice in all this, and I am bound to say that I do not believe that any real risk would be run by the enlargement of the amount.
When we come to the question of which Amendment to accept, I would say at once that I think it is difficult for us here to lay down hard and fast terms. I would rather have had the Amendment of the hon. Member for Halifax (Mr. Maurice Macmillan), or that of the hon. and learned Member for Cardigan (Mr. Bowen) than the Bill at present. Either of them is on the right lines, but I think ours is a sensible proposal, and it has the advantage of being a very simple one. I do not believe that it would do any harm, and, personally, I think it is the best of the three. The worst of the four possibilities is the one in the Bill. It will keep out a large number of societies which could make a useful contribution to what ought to be the principal purpose of the Government.
The trouble about this is that it is not merely a question of the safety of deposits that has to be considered. It is the effect which it will have on the 459 reputations of these societies, and that is the real trouble. If a society gets a trustee status, undoubtedly it will advertise the fact. It is quite legitimate that it should, and building societies spend a great deal of money, comparatively, on advertising. They will score by getting trustee status for their deposits. Their deposits may be a quite small proportion of their assets. That will not matter. It will be their reputation which will help them.
There will be a corresponding effect in the depreciation of the smaller societies which are and have been doing useful work and which might have been helped to extend it. I would have gone to the very limits of safety. There must be safety, of course, but I would have gone to the limits of safety in the interests of the main purpose of the Bill. That is why I thought that the Economic Secretary's speech was very much a Treasury speech; and that on a Bill which is not really a Treasury matter, although this part of it relates to the Treasury. The hon. Gentleman was putting forward about trustee status a rather bogus argument, if I may so say so without offence to him, from the financial point of view, but omitted the consideration of the smallness of the deposits in so many cases, and the real risk in trustee status, and neglected the main thing.
I want to raise one more question, and raise it at this point only quite shortly, in the hope that it may be considered by the Government. It has been put to me. If we look at the agreed scheme we shall find that we have to take the market value of the trustee securities. It is relevant to liquidity. I forget for a moment whether it is relevant to reserves or not, but it is certainly relevant to liquidity. When there is War Loan and the rest of it we can ascertain the marke
§ value quite easily, but many building societies lend to local authorities, and, of course, those loans very often have no market value at all. They are special loans and they are taken in at the actual amount lent. They appear in the balance sheet of the building society in this form: "Trustee securities—" so much; underneath, "Unquoted and interest." The unquoted, I think, represents those loans or loans of that character.
§ I wonder whether the hon. Gentleman would look at this question and would consider whether that is the right way of treating that security. I am not asking him to take the depreciated value of it. I am simply pointing out that there is this artificial element in it. Perhaps I would regard that as a slight argument for being a little more lenient in another respect, because, clearly, a building society which has to make investment in that form of trustee security will get a rather lower actual liquidity than a society which has the same amount invested in 31- per cent. War Loan and has considerable depreciation in it as a result of the Government's financial policy.
§ To sum up, I think that the Government ought to have given an undertaking that they would look at this Amendment again in the light of what has been said today in support of all three Amendments. They have failed to do so, and have stuck rigidly to the £500.000 limit, perhaps because it is part of an agreed scheme. In those circumstances, I would advise my right hon. and hon. Friends to protest against this rigidity and this misconception of the real purpose of the Bill by going into the Lobby in support of one of these Amendments, and that, under the rules of order, will have to be the first one.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 179, Noes 203.463
|Division No. 30.]||AYES||[7.5 p.m.|
|Ainsley, J. W.||Blackburn, F.||Broughton, Dr. A. D. D.|
|Allaun, Frank (Salford, E.)||Blyton, W. R.||Brown, Thomas (Ince)|
|Allen, Arthur (Bosworth)||Boardman, H.||Burke, W. A.|
|Allen, Scholefield (Crewe)||Bonham Carter, Mark||Burton, Miss F. E.|
|Awbery, S. S.||Bottomley, Rt. Hon. A. G.||Butler, Herbert (Hackney, C.)|
|Bacon, Miss Alice||Bowden, H. W, (Leicester, S.W.)||Butler, Mrs. Joyce (Wood Green)|
|Balfour, A.||Bowen, E. R. (Cardigan)||Castle, Mrs. B. A.|
|Bence, C. R. (Dunbartonshire, E.)||Bowles, F. G.||Champion, A. J.|
|Benson, Sir George||Boyd, T. C.||Chetwynd, G. R.|
|Beswick, Frank||Braddook, Mrs. Elizabeth||Cliffc, Michael|
|Bevan, Rt. Hon. A. (Ebbw Vale)||Brockway, A. F.||Clunie, J.|
|Collick, P. H. (Birkenhead)||Key, Rt. Hon. C. W.||Rankin, John|
|Craddock, George (Bradford, S.)||King, Dr. H. M.||Reynolds, G. W.|
|Crossman, R. H. S.||Lawson, G. M.||Rhodes, H.|
|Davies, Rt. Hon. Clement (Montgomery)||Lee, Frederick (Newton)||Roberts, Goronwy (Caernarvon)|
|Davies, Harold (Leek)||Lindgren, G. S.||Rogers, George (Kensington, N.)|
|Davies, Stephen (Merthyr)||Logan, D. C.||Royle, C.|
|Deer, G.||Mabon, Dr. J. Dickson||Shinwell, Rt. Hon. E.|
|Delargy, H. J.||McAlister, Mrs. Mary||Short, E. W.|
|Donnelly, D. L.||McCann, J.||Silverman, Julius (Aston)|
|Dugdale, Rt. Hn. John (W. Brmwch)||MacColl, J. E.||Silverman, Sydney (Nelson)|
|Ede, Rt. Hon. J. C.||MacDermot, Niall||Simmons, C. J. (Brierley Hill)|
|Edwards, Rt. Hon. John (Brighouse)||McGhee, H. G.||Skeffington, A. M.|
|Evans, Albert (Islington, S.W.)||Mclnnes, J.||Slater, Mrs. H. (Stoke, N.)|
|Evans, Edward (Lowestoft)||McKay, John (Wallsend)||Slater, J. (Sedgefield)|
|Fernyhough, E.||McLeavy, Frank||Smith, Ellis (Stoke, S.)|
|Finch, H. J.||MacMillan, M. K. (Western Isles)||Sorensen, R. W.|
|Fitch, Alan||MacPherson, Malcolm (Stirling)||Soskice, Rt. Hon. Sir Frank|
|Fletcher, Eric||Mahon, Simon||Sparks, J. A.|
|Foot, D. M.||Mainwaring, W. H.||Spriggs, Leslie|
|Forman, J. C.||Mann, Mrs. Jean||Steele, T.|
|Fraser, Thomas (Hamilton)||Mason, Roy||Stewart, Michael (Fulham)|
|George, Lady Megan Lloyd (Car'then)||Messer, Sir F.||Stones, W. (Consett)|
|Gibson, C. W.||Mitchison, G. R.||Summerskill, Rt. Hon. E.|
|Grenfell, Rt. Hon. D. R.||Monslow, W.||Sylvester, G. O.|
|Grey, C. F.||Moody, A. S,||Taylor, Bernard (Mansfield)|
|Griffiths, Rt. Hon. James (Llanelly)||Morris, Percy (Swansea, W.)||Thomas, George (Cardiff)|
|Griffiths, William (Exchange)||Morrison, Rt. Hn. Herber (Lewis'm, S.)||Thomson, George (Dundee, E.)|
|Hale, Leslie||Mort, D. L.||Thornton, E.|
|Hamilton, W. W.||Moyle, A.||Timmons, J.|
|Hannan, W.||Mulley, F. W.||Usborne, H. C.|
|Hastings, S.||O'Brien, Sir Thomas||Viant, S. P.|
|Hayman, F. H.||Oliver, C. H.||Warbey, W. N.|
|Healey, Denis||Oram, A. E.||Watkins, T. E.|
|Henderson, Rt. Hn. A. (Rwly Regis)||Oswald, T.||Weitzman, D.|
|Herbison, Miss M.||Padley, W. E.||Wells, Percy (Faversham)|
|Hobson, C. R. (Keighley)||Paling, Rt. Hon. W. (Dearne Valley)||Wells, William (Walsall, N.)|
|Holman, P.||Palmer, A. M. F.||Wilcock, Group Capt. C. A. B.|
|Houghton, Douglas||Pannell, Charles (Leeds, W.)||Wilkins, W. A.|
|Hughes, Cledwyn (Anglesey)||Parker, J.||Willey, Frederick|
|Hughes, Emrys (S. Ayrshire)||Parkin, B. T.||Williams, David (Neath)|
|Hughes, Hector (Aberdeen, N.)||Pearson, A.||Williams, Rt. Hon. T. (Don Valley)|
|Hunter, A. E.||Peart, T. F.||Williams, Richard (Openshaw)|
|Hynd, J. B. (Attercliffe)||Pentland, N.||Winterbottom, Richard|
|Irving, Sydney (Dartford)||Plummer, Sir Leslie||Woodburn, Rt. Hon. A.|
|Isaacs, Rt. Hon. G. A.||Popplewell, E.||Woof, R. E.|
|Jay, Rt. Hon. D. P. T,||Prentice, R. E.||Yates, V. (Ladywood)|
|Jeger, George (Goole)||Price, J. T. (Westhoughton)|
|Johnson, James (Rugby)||Probert, A. R.||TELLERS FOR THE AYES:|
|Jones, Jack (Rotherham)||Pursey, Cmdr. H.||Mr. Holmes and Mr. John Taylor.|
|Jones, J. Idwal (Wrexham)||Randall, H. E.|
|Aitken, W. T.||Bullus, Wing Commander E. E.||Freeth, Denzil|
|Allan, R. A. (Paddington, S.)||Burden, F. F. A.||Gammans, Lady|
|Amery, Julian (Preston, N.)||Butcher, Sir Herbert||Garner-Evans, E. H.|
|Anstruther-Gray, Major Sir William||Carr, Robert||Glover, D.|
|Arbuthnot, John||Cary, Sir Robert||Glyn, Col. Richard H.|
|Armstrong, C. W.||Channon, P.||Godber, J. B.|
|Ashton, H.||Chichester-Clark, R.||Goodhart, Philip|
|Atkins, H. E.||Clarke, Brig. Terence (Portsmth, W.)||Gower, H. R.|
|Baldock, Lt.-Cmdr. J. M.||Cole, Norman||Graham, Sir Fergus|
|Baldwin, Sir Archer||Cordeaux, Lt.-Col. J. K.||Green, A.|
|Balniel, Lord||Corfield, F. V.||Gresham Cooke, R.|
|Craddock, Beresford (Spelthorne)||Grimston, Hon. John (St, Albans)|
|Barber, Anthony||Crosthwaite-Eyre, Col. O. E.||Grosvenor, Lt.-Col. R. G.|
|Barlow, Sir John|
|Barter, John||Crowder, Sir John (Finchley)||Gurden, Harold|
|Batsford, Brian||Crowder, Petre (Ruislip—Northwood)||Hall, John (Wycombe)|
|Baxter, Sir Beverley||Cunningham, Knox||Harris, Reader (Heston)|
|Dance, J. C. G||Harrison, Col. J. H. (Eye)|
|Bell, Philip (Bolton, E.)||Davidson, Viscountess||Harvey, Sir Arthur Vere (Macclesf'd)|
|Bevins, J. R. (Toxteth)||Deedes, W. F.||Heald, Rt. Hon. Sir Lionel|
|Bidgood, J. C.||de Ferranti, Basil||Hicks-Beach, Maj. W. W.|
|Biggs-Davison, J. A.||Donaldson, Cmdr, C. E. McA.||Hill, Rt. Hon. Charles (Luton)|
|Bingham, R. M.||Doughty, C. J. A.||Hill, Mrs. E. (Wythenshawe)|
|Birch, Rt. Hon. Nigel||du Cann, E. D. L.||Hill, John (S. Norfolk)|
|Bishop, F. P.||Duncan, Sir James||Hobson, John(Warwick & Leam'gt'n)|
|Black, Sir Cyril||Elliott,R.W.(Ne'castle upon Tyne.N.)|
|Holland-Martin, C. J.|
|Boyle, Sir Edward||Emmet, Hon. Mrs. Evelyn|
|Braine, B. R.||Errington, Sir Eric||Horobin, Sir Ian|
|Bromley-Davenport, Lt.-Col. W. H.||Erroll, F. J.||Horsbrugh, Rt. Hon. Dame Florence|
|Brooke, Rt. Hon. Henry||Fell, A.||Howard, Gerald (Cambridgeshire)|
|Brooman-White, R. C.||Finlay, Graeme||Howard, Hon. Greville (St. Ives)|
|Browne, J. Nixon (Cralgton)||Fisher, Nigel||Howard, John (Test)|
|Bryan, P.||Fraser, Hon. Hugh (Stone)||Hughes Hallett, Vice-Admiral J.|
|Hughes-Young, M. H. C.||Maitland, Hon. Patrick (Lanark)||Scott-Miller, Cmdr. R.|
|Hulbert, Sir Norman||Manningham-Buller, Rt. Hn. Sir R.||Sharpies, R. C.|
|Hurd, Sir Anthony||Markham, Major Sir Frank||Shepherd, William|
|Hutchison, Michael Clark(E'b'gn, S.)||Marlowe, A. A. H.||Smyth, Brig. Sir John (Norwood)|
|Hutchison, Sir Ian Clark (E'b'gh.W.)||Marshall, Douglas||Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)|
|Hylton-Foster, Rt. Hon. Sir Harry||Mathew, R.||Steward, Sir William (Woolwich, W.)|
|Irvine, Bryant Godman (Rye)||Mawby, R. L.||Storey, S.|
|Jennings, J. C. (Burton)||Maydon, Lt.-Comdr. S. L. C.||Stuart, Rt. Hon. James (Moray)|
|Jennings, Sir Roland (Hallam)||Milligan, Rt. Hon. w. R.||Studholme, Sir Henry|
|Johnson, Dr, Donald (Carlisle)||Nairn, D. L. S.||Summers, Sir Spencer|
|Johnson, Eric (Blackley)||Neave, Airey||Sumner, W. D. M. (Orpington)|
|Jones, Rt. Hon. Aubrey (Hall Green)||Nicholls, Harmar||Taylor, Sir Charles (Eastbourne)|
|Kaberry, D.||Nicholson, Sir Godfrey (Farnham)||Taylor, William (Bradford, N.)|
|Keegan, D.||Noble, Michael (Argyll)||Teeling, W.|
|Kershaw, J. A.||Oakshott, H. D.||Temple, John M.|
|Kirk, P. M.||O'Neill, Hn. Phelim(Co. Antrim, N.)||Thomas, Leslie (Canterbury)|
|Lambton, viscount||Orr-Ewing, C. Ian (Hendon, N.)||Thomas, P. J. M. (Conway)|
|Lancaster, Col. C. G.||Page, R. G.||Thompson, R. (Croydon, S.)|
|Leavey, J. A.||Pannell, N. A. (Kirkdale)||Thornton-Kemsley, Sir Colin|
|Leburn, W. G.||Partridge, E.||Turton, Rt. Hon. R. H.|
|Legge-Bourke, Maj. E. A. H.||Peel, W. A.||Tweedsmuir, Lady|
|Legh, Hon. Peter (petersfield)||Peyton, J. W. W.||Vane, W. M. F.|
|Lindsay, Hon. James (Devon, N.)||Pickthorn, Sir Kenneth||Wakefield, Edward (Derbyshire, W.)|
|Lindsay, Martin (Solihull)||Pilkington, Capt. R. A.||Wakefield, Sir Wavell (St. M'lebone)|
|Linstead, Sir H. N.||Pitt, Miss E. M.||Walker-Smith, Rt. Hon. Derek|
|Lloyd, Maj. Sir Guy (Renfrew, E.)||Powell, J. Enoch||Ward, Rt. Hon. G. R. (Worcester)|
|Longden, Gilbert||Price, David (Eastleigh)||Ward, Dame Irene (Tynemouth)|
|Loveys, Walter H.||Price, Henry (Lewisham, W.)||Webbe, Sir H.|
|Lucas, Sir Jocelyn (Portsmouth, S.)||Ramsden, J. E.||Webster, David|
|Lucas-Tooth, Sir Hugh||Rawlinson, Peter||Williams, Paul (Sunderland, S.)|
|Mackeson, Brig. Sir Harry||Redmayne, M.||Wills, Sir Gerald (Bridgwater)|
|Maclean, Sir Fitzroy (Lancaster)||Remnant, Hon. P.||Wilson, Geoffrey (Truro)|
|McLean, Neil (Inverness)||Ridsdale, J. E.||Wolrige-Gordon, Patrick|
|Macmillan, Maurice (Halifax)||Robinson, Sir Roland (Blackpool, S.)||Wood, Hon. R.|
|Macpherson, Niall (Dumfries)||Robson Brown, Sir William||Woollam, John Victor|
|Maddan, Martin||Ropner, Col. Sir Leonard|
|Maitland, Cdr. J.F.W. (Horncastle)||Russell, R. S.||TELLERS FOR THE NOES:|
|Mr. Gibson-Watt and Mr. Whitelaw.|
§ Mr. G. W. Reynolds (Islington, North)
I beg to move, in page 1, line 10, after "reserves", to insert:survey fees, other charges to members.The Amendment refers to survey fees and other charges whereas the Bill refers only to "other matters" which together with requirements as to assets and liabilities, liquid funds and reserves will be looked at when the Chief Registrar decides whether or not to grant trustee status to a society.
I was under the impression on Second Reading that the main job of the Bill was to assist in house purchase, but from what we have heard about the importance of trustee status I am now driven to the conclusion that the main purpose is to grant trustee status to building societies, with a slight concession by the societies in relation to 95 per cent. mortgages in exchange for that status.
I understand that most members of the Building Societies Association at present reckon to charge a survey fee on a scale suggested or recommended by the Association. I am told that on a house-purchase price of £2,000, or slightly above or below that figure, which the Bill has in mind, the recommended survey fee is £5. I have no objection to that. It seems a 464 reasonable fee. The building societies with which I have been in touch seem to comply with that recommendation, that is, building societies which are members of the Association. I have also been in touch with one reliable society which is not a member of the Association, but which, I understand, charges a similar survey fee.
I am not sure, however, that some of the smaller societies accept this recommendation. When a society advances on mortgage money lent to it by the Government, and the rate of interest is limited to ½ per cent. above the rate at which the money was borrowed, there may be some temptation to some societies, particularly those which are not members of the Association and which are not bound by a professional code of conduct, to think that there is an opportunity of securing a little more profit by adding a few pounds to the survey fee. It is for that reason that I should like to see the Chief Registrar have power, when approving a society, to say that the survey fees should be at a certain level, or, as far as this type of mortgage is concerned, that that condition should be written into the agreement between the society and the Government when money is advanced to it.
465 As to the other charges, I have particularly in mind the premium which some societies insist upon as a condition of granting a mortgage. The fact that this practice exists is recognised by the Government, because in the outline of the agreed scheme in the White Paper, "House Purchase", it is stated under paragraph (e) that:No premium or any other charge shall be payable to a Society by a borrower as consideration for an advance on mortgage.This is being insisted upon where a society uses Government money to provide a mortgage. It is in the outline scheme, but I notice that the scheme can be altered on three months' notice, after a review, at the request of the Minister or the Association or on six months' notice by the Government. I should prefer to see this condition more tightly tied up in the Bill or in regulations made under it rather than that it should appear only in this outline of the agreed scheme.
As to premiums, I would refer back to what was said a few minutes ago by the Minister and to the impressive list of investments covered by trustee status, including Government stock, local authority stock and certain public utility stock. The Minister said, in effect, "We have here a first-class security with a first-class name and the Government do not want to do anything that might lower the status or the standard of the trustee investment." To accept for trustee status a building society which follows this unscrupulous practice of insisting upon payment of a premium before it makes an advance will not exactly enhance the idea of trustee stocks in any way. The Minister was concerned about keeping up the reputation of trustee stocks, and I submit that we should not accept any building society which follows this practice.
I would refer hon. Members to an interesting article which appeared in the Observer of Sunday last, by Hilary Maugham, entitled "Mortgage Fallacy" in which the writer says of complaints against building societies:There is another complaint. Some societies demand an entrance fee, though it is not always called by that name. In one case, the charge varies from 3 per cent. to 5 per cent. of the total borrowed—and that can amount to a tidy sum. Nor can you get it back if you pay off your mortgage. Let me add, in some haste, that all building societies do not 466 insist on this charge. The Halifax and the Abbey National, for instance, do not.Some societies charge between 3 per cent. and 5 per cent. membership fee on the amount to be advanced, and they then offer to lend money to the applicants. No money is paid over. The building society does not need any investment money coming in to meet the investment charge. It does not lend money. All it does is to add £50 or more to the amount owed to it by the member to whom it is granting a mortgage. The society charges interest on money which the mortgagee has never received, and later, when the mortgage and interest is repaid,.it makes no attempt to refund his membership fee to him.
This is an exceedingly sharp practice and not one we would wish to be carried on by a building society recognised as suitable, for its deposits, to be given trustee status. If the Minister really believes in keeping up this level of private investment he should not allow any society recognised for trustee status to carry on such a practice. While the Government are recognising that there should be no premiums for the 95 per cent. mortgages under the new scheme, I suggest that as a condition of being recognised for trustee status they should insist that the societies drop this practice altogether. If it is bad for mortgage advances under the new scheme it is equally bad for any mortgage advanced, whether the money comes from the Government or from the normal sources of capital of the building societies.
As regards survey fees, in order to be on the safe side there is a great deal to be said for giving the Registrar power to insist on a maximum level of survey fee in the interests of safeguarding the borrower who goes to the building society.
§ Mr. Arthur Skeffington (Hayes and Harlington)
I am glad to support my hon. Friend the Member for Islington, North (Mr. Reynolds) in what is a reasonable Amendment in the public interest. The question of survey fees was raised by myself and others during the Second Reading debate of the Bill. It would be an excellent safeguard to the borrower if in order to achieve trustee status building societies had to have a scale of survey fees approved by the Registrar 467 or, alternatively, if it were clearly specified in the agreement between the Ministry of Housing and Local Government and the societies. This should be a scale reasonable in all the circumstances.
I have one or two examples of quite small societies which charge far above the normal professional rate. In some cases they charge 10 guineas for a very perfunctory survey. As I mentioned on a previous occasion, all the society is concerned with is to assure that it will not put its money into an edifice that will not last as long as the period of the loan. Unfortunately, that is the only concern of the building society.
I made another point during the Second Reading debate which is worth remembering. Generally speaking, although the unfortunate borrower has to pay this fee, which may sometimes be excessive, he has no right to see the certificate. I should have hoped that that Ministry would, if not by legislative enactment, at least bring to the notice of the societies which want trustee status that it is fair that the borrower should see the survey report for which he is paying.
This matter was strongly commented on by Mr. Justice Devlin in a court case in 1949 where, although there had been a survey, a new house collapsed. He said that building societies might consider whether the great help which they give to people who want to own their own houses might not be extended by giving them the benefit of the expert advice for which the prospective owner is himself paying. Although the building societies promised to do this, nothing happened. I raise this point because I hope that building societies will take note. Many people feel indignant that they have to pay for a report which they do not see.
The other point mentioned by my hon. Friend, additional charges—by which he had particularly in mind premiums, I believe—is also important. It seems to me wrong to fleece the borrowers, because that is what it amounts to, of another £50 or £100 for membership of the society before they can get the loan, and then to make them pay interest on this cash premium in addition. This is most unfair. To put it no lower, it is an unethical practice. If these societies are 468 to be given a special status in the minds of the public for investment purposes, that practice ought not to be permitted, not only in connection with money advanced to them by the Government, but at all. It should not be part of their general practice anyway, because it cannot possibly be defended. Obviously this is only another pretext for getting extra cash out of the borrower for the society.
These things are not always done by the small societies. Some societies have a very good record in this matter, others have not. So long as these defects remain, it will be true to say, as I and others have said, that the building societies really have no interest in the borrower or the house, that they are not performing a social service, but are merely money lenders. It would be a good thing for their reputation if they were induced to give up these practices which have given them a bad name and are not in the public interest.
§ Mr. Erroll
The Amendment proposed by the hon. Gentleman the Member for Islington, North (Mr. Reynolds) really falls into two parts: first, the question of controlling survey fees, and secondly, of controlling what may be loosely classed together as "other charges", although as the hon. Member for Hayes and Harlington (Mr. Skeffington) pointed out, both he and his hon. Friend mainly have in mind premiums, whether overt or disguised.
As regards survey fees, the Registrar has no evidence to suggest that these are presently payable at exorbitant rates. They are usually payable to independent surveyors and are therefore on the normal scale, so that no unwarrantable profit accrues to societies. As regards other charges, particularly premiums, which might be charged to borrowers in relation to normal interest charges when mortgages are obtained, experience has shown that where a building society is under pressure from the Registrar not to make a charge in this form, the society has achieved a similar profit by imposing an excessive rate of interest for a short period. The net effect of what I have said is that it would be extremely difficult to frame regulations which would effectively deal with the practice mentioned by the two hon. Gentlemen.
There is another aspect of the matter to be taken into account, namely, that it 469 is mainly the smaller societies who seem to be indulging in these doubtful practices involving excessive survey charges. Probably those societies might be too small to qualify on grounds of size. I put that point in a rather interrogatory way in the hope that either the hon. Gentleman or his hon. Friend may be able to confirm that their anonymous examples relate to societies under the half million mark for total assets.
§ Mr. Erroll
No, but mainly. Any regulations introduced, even if it were a straightforward matter to introduce them, would not catch the smaller societies but only those applying for trustee status. I think that it would be better to rely on the discretion of the Registrar when he is considering an application by a building society for approval, because he will have to take into account the conditions which we propose to impose and which are listed in Appendix 2 of the White Paper. Even if those are satisfied, he will still retain discretion, and that discretion can be usefully exercised in the case of any society which qualifies on all other grounds, but which nevertheless resorts to practices of the sort described.
In the last resort, public opinion can do a good deal to stamp out practices of this sort. Now that there is plenty of competition among building societies, it should be possible for most people when faced with an exorbitant charge of this sort to say, "Thank you very much; I would rather go elsewhere". I hope that the Committee will accept my explanation and not press the Amendment to a Division, because I sincerely submit that it would not be practicable to try to frame regulations to control the items suggested.
§ Mr. Albert Evans (Islington, South-West)
I found it difficult to follow the argument of the Economic Secretary. I should have thought that it would be easy for him to accept the Amendment. Other items are mentioned in the Clause—liabilities, liquid funds, reserves, and so on. This practice of charging excessive survey fees and added charges to members, such as entrance fees, could be dealt with in the same way.
470 There is no question but that some societies indulge in the practice of charging excessive survey fees. One correspondent has informed me—and I have only his statement for it—that some building societies are closely linked with firms of surveyors who work hand in glove with the societies, the amount of the survey fees being arranged between the firm of surveyors and the building society concerned.
Undoubtedly, some societies impose extra charges on borrowers. That is known to be so and the Government have admitted it. When the building societies use Government money, the Government insist that no premium or any other charge shall be payable to the society. If the Government are aware of this unsavoury practice, this exploitation of the borrower—and the Government admit their awareness because they safeguard the position when Government money is involved —why does the Economic Secretary refuse to deal with it now?
Why does he decline to insert one or two simple words so that it will be known that in future the societies are not to be allowed to pursue these devious methods of exploiting borrowers? I am sure that the Economic Secretary can easily accept the Amendment and that no difficulty will arise if he does so. Surely the regulations which are to be drawn for the guidance of the Registrar can be framed to cover this matter.
§ Mr. J. A. Sparks (Acton)
The Economic Secretary said that in certain cases the Chief Registrar had made representations to certain building societies about the charging of premiums and that as a consequence the societies concerned had ceased to charge premiums but had sought recoupment in a different way. Are we to understand from that that the Chief Registrar has the power to do what the Amendment is proposing, namely, to make representations to the building socities on this matter of the charging of premiums?
If we knew what authority the Chief Registrar possessed for the control of this kind of abuse, that would be very helpful, because it may well be that the power is already there but more or less dormant and not sufficiently exercised. If the Registrar has this power, it is difficult to see how any society in receipt of State 471 money could seek to recoup itself by increasing its interest rate, since the interest rate would be fixed—unless the society were to disqualify itself from further receipts of State money. The power of the Chief Registrar is important in this connection. If we knew what his power was, it would help us to reach a conclusion.
§ Mr. Reynolds
I am surprised by one point which was made by the Economic Secretary, that apparently the Chief Registrar is aware of this practice having been operated by certain building societies and has somehow dropped a hint or put some pressure on them about it. We then had the admission that once the attention of the societies was drawn to the practice, they dropped it but apparently started a slightly different practice, possibly charging an extra ½ per cent. interest over the first two or three years of the mortgage, or something like that.
If this sort of thing is going on at the moment, will it continue when the societies have been granted trustee status? If the Government are unable to stop it now, will they make any attempt to stop it when certain building societies have been granted trustee status? Will those societies be able to play about with the Chief Registrar in this way, and as soon as he draws attention to one thing, find another way round and, presumably, as soon as he draws attention to that, find another way of getting money out of the unfortunate borrower? If this is the limit of the control which the Registrar has over the societies, we ought carefully to consider whether any of them should be granted trustee status.
I am amazed that this sort of thing can happen. I was not aware that the Registrar had drawn the attention of certain societies to this practice and presumably expressed his displeasure with it. If he cannot control them at the moment, can he not be given greater power to control them in future? If we are to give the societies trustee status, the registrar should be given more control over them than he seems to have at present.
I draw attention to one paragraph towards the end of the draft memorandum which has been agreed between the Government and the societies. It is the paragraph in which provision is made for houses erected between 1st January, 1919, 472 and 1st January, 1940. There is there what is virtually an obligation, which is undertaken by building societies recognised for the purposes of the scheme, which says that if the societies are to get Government money to assist them with houses built before 1919, they will, with their own money, try to do roughly the same sort of thing for houses built after 1919. I notice that it says that the term shall be at least as favourable as for the older houses.
How will the Government make sure that the building societies give terms at least as favourable in each case if at the moment they are able to get round any suggestions which the Registrar makes? How will the Government be able to ensure, once an agreement has been made, that the building societies will not evade their responsibility for those older houses? I suggest they can only see that the building societies keep their part of the bargain for houses built between 1919 and 1940 by having a regulation governing the charges they make for mortgages. Otherwise, if the experience of the Registrar in the past is any guide, I do not see how he or the Government can do anything about it in future.
This is a racket. It is all very well for the Minister to say that if the borrower does not like the terms of one building society he can go to another, but he forgets that the majority of people buy a house only once in a lifetime. They go to an estate agent for advice. They have never bought a house before and 90 per cent. of them have not the least idea of what they should do. Many of them do not want to buy a house, but that is the only way in which they can get somewhere to live. They are completely in the hands of the estate agent, who asks, "Have you a solicitor?" Probably they have never had any contact with solicitors and he suggests a solicitor's name to them. He then asks, "Where are you going to borrow the money?" Most estate agents seem to have agreements with building societies. I may be wrong, but I have always assumed that they suggest the society which gives them the best commission if they push its business. They naturally recommend that society to their clients.
If the client finds that he has to pay £50 or £100 premium, in the majority of cases he will accept that and meet the charge because he will not realise that it is an 473 exceptional charge, as he has never come across a building society before. Such people accept the recommendation of the estate agent and pay the charge. In the majority of cases they do not think of going to another society. We have seen in the past how little use has been made of the facilities of local authorities charging interest rates of 3 per cent. when building societies were charging 4½ per cent. I suppose the reason was that most people only buy a house once in their lives. The estate agent recommends them to the building society and they do not know any other way of going about the business. I cannot accept the argument that there is a free market and terrific competition. The majority of house purchasers accept the advice of the estate agent.
If the Minister can think of a better way of doing it than by regulations under Clause 1, I should be only too happy to accept his assurance. To say that it can, more or less, be left to the Registrar if he sees that a society is charging these premiums and that he will not have to accept them for trustee status although they qualify under other headings, does not go far enough. I first thought it would be all right, but when the Minister went further and spoke of the trouble that the Registrar had in dealing with the premium business I thought there should be something laid down with which the societies must comply.
§ 7.45 p.m.
§ Mr. Lindgren
The Economic Secretary is always so courteous in dealing with the Committee that perhaps we should be courteous to him and give him the opportunity of saying the last word rather than take advantage of a further statement he is to make. Our point is that made by my hon. Friend the Member for Islington, North (Mr. Reynolds). It is our function, while the Bill is going through the House, to try to give added status to some building societies and to protect the borrower against any possibility of being put at a disadvantage.
As the Economic Secretary said, in the vast majority of cases many of the things which have been suggested do not happen. That is true so far as the large, medium or small society are concerned. It is true in all phases of life. By legislation we have to take action to protect the community against the worst, not to assume that the best will always obtain. 474 For instance, factory legislation is not passed to deal with the best employers, but with the worst. In 999 cases out of 1,000 the best employer is twenty years ahead of factory legislation. It is exactly the same with house purchase.
I emphasise to the Economic Secretary the human points made by my hon. Friend the Member for Islington, North. We are dealing now with a range of property and with people who are not buying houses every now and again. Some people change their houses almost as often as they change their shirts, but the majority of those covered by the Bill buy one house. If they pass it on to anyone, they pass it on to a son or daughter.
A practice which has not been referred to leads to some misunderstanding on the part of borrowers. As my hon. Friend said, often it is the only time a person has bought a house and they know nothing about this sort of thing. It is strange that they do not get more information, but they think that everyone in the business is as honest as they are. When they go to an estate agent and he asks whether they have a solicitor they say, "No, thank goodness. I have had nothing to do with the police or solicitors". The estate agent then says, "You do not want to have two solicitors. Why not have the solicitor associated with the building society? He will act for you both ways and it will not cost more". The purchaser accepts that, but if a person goes to an independent solicitor, in nine cases out of ten that solicitor will advise, "Have an independent survey of the property". The survey made by the building society is for its own purpose.
If the purchaser wants to be satisfied about what he is buying, and to be sure that dry rot will not appear in a short time so that he is saddled with heavy repairs before the mortgage is finished, he should have an independent survey. He should go to a qualified surveyor and have the property surveyed so that he may have a guarantee that what he is purchasing is good value for what he is paying. The building society's survey is not for the purpose of the purchaser, but is its security on the basis of the loan. The average person is required to pay a survey fee and if the survey is carried out for him it can be a guarantee that he is getting what he pays for.
475 The Economic Secretary ought to accept the Amendment, not because building societies are rooking people, but because a small proportion of them carry on practices which are not ideal. We are making it possible for many of them to get public money. They are to get additional money for other purposes and even those building societies which do not come in within the scheme may get added business.
Regulations of this kind would mean that if a building society were still carrying on practices which are not desirable it might start evading those regulations. When people start evading regulations and seeing how they can get round them that is proof to me, as a layman, that there is something fishy about the persons concerned. If they are all above board the regulations will not make any difference. They will try to comply with the regulations and that will be for the benefit of public protection.
I hope that the Economic Secretary will extend the courtesy he always shows to us by saying that he will include some of these words in the regulations and thereby protect people who are likely to buy houses.
§ Mr. Erroll
The debate which has arisen on this Amendment would have been almost more appropriate to a Bill revising building society law generally. I must remind the Committee that this Clause deals with the approving of certain building societies which presumably wish to be approved. Under Clause 1 (1), the Chief Registrar has to be satisfied that a building societyfulfils such requirements as to its assets and liabilities, liquid funds, reserves, and other matters …The "other matters" enable the Registrar to exercise quite a wide discretion in his study of such societies as apply.
We are here concerned only with 200 or so societies which may regard themselves as eligible. Even if we were to insert the words proposed in the Amendment, that would not take in the small societies, the societies which do not wish to participate in the scheme and the societies which would be ineligible on account of size or for any other reason. If we accepted the Amendment it would 476 be a very imperfect way of trying to deal with the abuses alleged by earlier speakers, because it would not really deal with them at all, although it might spuriously give the impression that Parliament had taken the necessary steps to deal with them, and that would be a mistake.
The difficulty remains, I frankly accept, that there may be the odd society among the top 243 which might resort to the practices which have been mentioned. In that case the Registrar has very complete discretion and, of course, marching with the completeness of his discretion is the power to withhold approval, which constitutes a very powerful sanction.
I have mentioned a particular example which was taken up by the mover of the Amendment about one building society changing its practices under pressure. I mentioned that example to show that it becomes very difficult to deal with sharp practices by means of written regulations. I was not intending to develop the point of the Registrar and his activities but to show how difficult it is to deal with sharp practice by regulations. I think that in the case of societies which seek approval under this Bill we would do far better to rely on wide powers of discretion given to the Registrar than try to write everything into the Bill, as the hon. Gentleman the Member for Wellingborough (Mr. Lindgren) himself admitted when he started to refer to a practice which was not covered by the Amendment but which might have been. Our way of doing it means that all possible sharp practice can be swept into the purview which the Registrar will conduct before approving a society for the purposes of the Measure. I hope that is satisfactory, and I should like to remind the hon. Gentleman that I was told that I would not be further tackled on my statement.
§ Mr. Mitchison
I would ask the Economic Secretary one question. Would it not be advisable to put into the regulations some statement about these matters in order to indicate to building societies which might seek to qualify what they ought to do and to those who do not seek to qualify what good practice is?
Question put, That those words be there inserted:—
§ The Committee divided: Ayes 170, Noes 200.479
|Division No. 31.]||AYES||[7.55 p.m.|
|Ainsley, J. w.||Hannan, W.||Palmer, A. M. F|
|Allaun, Frank (Salford, E.)||Hastings, S.||Parker, J.|
|Allen, Arthur (Bosworth)||Hayman, F. H.||Parkin, B. T.|
|Allen, Scholefield (Crewe)||Healey, Denis||Pearson, A.|
|Awbery, S. S.||Herbison, Miss M.||Peart, T. F.|
|Bacon, Miss Alice||Hobson, C. R. (Ktighley)||Pentland, N.|
|Balfour, A.||Holman, P.||Plummer, Sir Leslie|
|Bence, C. R, (Dunbartonshire, E.)||Houghton, Douglas||Popplewell, E.|
|Benson, Sir George||Hughes, Cledwyn (Anglesey)||Prentice, R. E.|
|Beswick, Frank||Hughes, Emrys (S. Ayrshire)||Price, J. T. (Westhoughton)|
|Blackburn, F.||Hughes, Hector (Aberdeen, N.)||Probert, A. R.|
|Blyton, W. R.||Hunter, A. E.||Pursey, Cmdr. H.|
|Boardman, H.||Hynd, J. B. (Atteroliffe)||Randall, H. E.|
|Bottomley, Rt. Hon. A. G.||Irving, Sydney (Dartford)||Rankin, John|
|Bowden, H. W. (Leicester, S.W.)||Isaacs, Rt. Hon. G. A.||Reynolds, G. W.|
|Bowles, F. G.||Janner, B.||Rhodes, H.|
|Boyd, T. C.||Jay, Rt. Hon. D. P. T.||Roberts, Goronwy (Caernarvon)|
|Braddock, Mrs. Elizabeth||Jeger, George (Goole)||Rogers, George (Kensington, N.)|
|Brockway, A. F.||Johnson, James (Rugby)||Royle, C.|
|Broughton, Dr. A. D. D.||Jones, Jack (Rotherham)||Silverman, Julius (Aston)|
|Brown, Thomas (Ince)||Jones, J. Idwal (Wrexham)||Silverman, Sydney (Nelson)|
|Burke, W. A.||Key, Rt. Hon. C. W.||Skeffington, A. M.|
|Burton, Miss F. E.||King, Dr. H. M.||Slater, Mrs. H. (Stoke, N.)|
|Butler, Herbert (Hackney, C.)||Lawson, G. M.||Slater, J. (Sedgefield)|
|Castle, Mrs. B. A.||Lee, Frederick (Newton)||Smith, Ellis (Stoke, S.)|
|Champion, A. J,||Lee, Miss Jennie (Cannock)||Sorensen, R. W.|
|Chetwynd, G. R.||Lindgren, G. S.||Soskice, Rt, Hon. Sir Frank|
|Cliffe, Michael||Logan, D. G.||Sparks, J. A.|
|Clunie, J.||Mabon Dr. J. Dickson||Spriggs, Leslie|
|Collick, P. H. (Birkenhead)||MacColl, J. E.||Steele, T.|
|Corbet, Mrs. Freda||McCann, J.||Stewart, Michael (Fulham)|
|Craddock, George (Bradford, S.)||MacDermott, Niall||Stones, W. (Consett)|
|Grossman, R. H. S.||McGhee, H. G.||Sylvester, G.O.|
|Davies, Harold (Leek)||Mclnnes, J.||Taylor, Bernard (Mansfield)|
|Davies, Stephen (Merthyr)||McKay, John (Wallsend)||Taylor, John (West Lothian)|
|Deer, G.||McLeavy, Frank||Thomas, George (Cardiff)|
|Delargy, H. J.||MacMillan, M. K. (Western Isles)||Thomson, George (Dundee, E.)|
|Donnelly, D. L.||MacPherson, Malcolm (Stirling)||Thornton, E.|
|Dugdale, Rt. Hn. John (W. Brmwch)||Mahon, Simon||Timmons, J.|
|Ede, Rt. Hon. J. C.||Mainwaring, W. H.||Usborne, H. C.|
|Edwards, Rt. Hon. John (Brighouse)||Mann, Mrs. Jean||Viant, S. P.|
|Evans, Albert (lslington, S.W.)||Marquand, Rt. Hon. H. A.||Warbey, W. N.|
|Evans, Edward (Lowestoft)||Mason, Roy||Watkins, T. E.|
|Fernyhough, E.||Messer, Sir F.||Weitzman, D.|
|Finch, H. J.||Mitchison, G. R.||Wells, Percy (Faversham)|
|Fitch, Alan||Moody, A. S.||Wells, William (Walsall, N.)|
|Fletoher, Eric||Morris, Percy (Swansea, W.)||Wilcock, Group Capt. C. A. B.|
|Foot, D. M.||Morrison, Rt. Hn. Herbert(Lewis'm,S.)||Wilkins, W. A.|
|Fraser, Thomas (Hamilton)||Mort, D. L.||Willey, Frederick|
|George, Lady Megan Lloyd(Car'then)||Moyle, A.||Williams, David (Neath)|
|Gibson, C. W.||Mulley, F. W.||Williams, Rt. Hon. T. (Don Valley)|
|Grenfell, Rt. Hon. D. R.||Oliver, G. H.||Williams, Richard (Openshaw)|
|Grey, C. F.||Oram, A. E.||Winterbottom, Richard|
|Griffiths, Rt. Hon. James (Llanelly)||Oswald, T.||Woodburn, Rt. Hon. A.|
|Griffiths, William (Exchange)||Padley, W. E.||Woof, R. E.|
|Hale, Leslie||Paget, R. T.||Yates, V. (Ladywood)|
|Hamilton, W. W.||Paling, Rt. Hon. W. (Dearne Valley)||TELLERS FOR THE AYES:|
|Mr. Holmes and Mr. Simmons.|
|Agnew, Sir Peter||Bingham, R. M.||Cooper, A. E.|
|Aitken, W. T.||Birch, Rt. Hon. Nigel||Cordeaux. Lt.-Col. J. K.|
|Allan, R. A. (Paddington, s.)||Bishop, F. P.||Corfield, F. V.|
|Anstruther-Gray, Major Sir William||Black, Sir Cyril||Craddock, Beresford (Speithorne)|
|Arbuthnot, John||Bonham Carter, Mark||Crosthwaite-Eyre, Col. O. E.|
|Armstrong, c. W.||Bowen, E. R. (Cardigan)||Crowder, Sir John (Finchley)|
|Ashton, H.||Boyle, Sir Edward||Crowder, Petre (Ruislip—Northwood)|
|Atkins, H. E.||Braine, B. R.||Cunningham, Knox|
|Baldock, Lt.-Cmdr. J. M.||Bromley-Davenport, Lt.-Col. W. H.||Dance, J. C. G.|
|Baldwin, Sir Archer||Brooke, Rt. Hon. Henry||Davidson, Viscountess|
|Balniel, Lord||Brooman-White, R. C.||Deedes, W. F.|
|Barber, Anthony||Browne, J. Nixon (Craigton)||Donaldson, Cmdr. C. E. McA.|
|Barlow, Sir John||Bryan, P.||Doughty, C. J. A.|
|Barter, John||Bullus, Wing Commander E. E.||du Cann, E. D. L.|
|Batsford, Brian||Burden, F. F. A.||Duncan, Sir James|
|Baxter, Sir Beverley||Butcher, Sir Herbert||Elliott,R.W.(Ne'castle upon Tyne,N.)|
|Bell, Philip (Bolton, E.)||Carr, Robert||Emmet, Hon. Mrs. Evelyn|
|Bevins, J. R. (Toxteth)||Channon, P.||Errington, Sir Eric|
|Bidgood, J. C.||Clarke, Brig. Terence (Portsmth, W.)||Erroll, F. J.|
|Biggs-Davison, J. A.||Cole, Norman||Fell, A.|
|Finlay, Graeme||Lambton, Viscount||Redmayne, M.|
|Fisher, Nigel||Lancaster, Col. C. G.||Rees-Davies, W. R.|
|Fraser, Hon. Hugh (Stone)||Leavey, J. A.||Ridsdale, J. E.|
|Freeth, Denzil||Legge-Bourke, Maj. E. A. H.||Rippon, A. G. F.|
|Gammans, Lady||Legh, Hon. Peter (Petersfield)||Robinson, Sir Roland (Blackpool, S.)|
|Garner-Evans, E. H.||Lindsay, Hon. James (Devon, N.)||Robson Brown, Sir William|
|Glover, D.||Lindsay, Martin (Solihull)||Roper, Sir Harold|
|Glyn, Col. Richard H.||Linstead, Sir H. N.||Ropner, Col. Sir Leonard|
|Godber, J. B.||Lloyd, Maj. Sir Guy (Renfrew, E.)||Russell, R. S.|
|Goodhart, Philip||Loveys, Walter H.||Scott-Miller, Cmdr. R.|
|Gower, H. R.||Lucas, Sir Jocelyn (Portsmouth, S.)||Sharpies, R. C.|
|Graham, Sir Fergus||Lucas-Tooth, Sir Hugh||Shepherd, William|
|Green, A.||Mackeson, Brig. Sir Harry||Smyth, Brig. Sir John (Norwood)|
|Cresham Cooke, R.||Maclean, Sir Fitzroy (Lancaster)||Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)|
|Grimston, Hon. John (St. Albans)||McLean, Neil (Inverness)||Steward, Sir William (Woolwich, W.)|
|Grosvenor, Lt.-Col. R. G.||Macmillan, Maurice (Halifax)||Storey, S.|
|Gurden, Harold||Maopherson, Niall (Dumfries)||Stuart, Rt. Hon. James (Moray)|
|Hall, John (Wycombe)||Maddan, Martin||Studholme, Sir Henry|
|Harris, Reader (Heston)||Maitland, Cdr. J. F. W. (Homcastle)||Summers, Sir Spencer|
|Harrison, Col. J. H. (Eye)||Maitland, Hon. Patrick (Lanark)||Sumner, W. D. M. (Orplngton)|
|Harvey, Sir Arthur Vere (Macclesf'd)||Manningham-Buller, Rt. Hn. Sir R.||Taylor, William (Bradford, N.)|
|Heald, Rt. Hon. Sir Lionel||Markham, Major Sir Frank||Teeling, W.|
|Hicks-Beach, Maj. W. W.||Marlowe, A. A. H.||Temple, John M.|
|Hill, Rt. Hon. Charles (Luton)||Marshall, Douglas||Thomas, Leslie (Canterbury)|
|Hill, Mrs. E. (Wythenshawe)||Mathew, R.||Thomas, P. J. M. (Conway)|
|Hill, John (S. Norfolk)||Mawby, R. L.||Thompson, R. (Croydon, S.)|
|Hobson, John(Warwick & Leam'gt'n)||Maydon, Lt.-Comdr. S. L. C.||Thornton-Kemsley, Sir Colin|
|Holland-Martin, C. J.||Milligan, Rt. Hon. W. R.||Turton, Rt. Hon. R. H.|
|Horobin, Sir Ian||Mott-Radolyffe, Sir Charles||Tweedsmuir, Lady|
|Horsbrugh, Rt. Hon. Dame Florence||Nairn, D. L. S.||Vane, W. M. F.|
|Howard, Gerald (Cambridgeshire)||Neave, Airey||Vickers, Miss Joan|
|Howard, Hon. Greville (St. Ives)||Noble, Michael (Argyll)||Wakefield, Edward (Derbyshire, W.)|
|Howard, John (Test)||Oakshott, H. D.||Wakefield, Sir Wavell (St. M'lebone)|
|Hughes Hallett, Vice-Admiral J.||O'Neill, Hn. Phelim(Co. Antrim, N.)||Ward, Rt. Hon. G. R. (Worcester)|
|Hughes-Young, M. H. C.||Orr-Ewing, C. Ian (Hendon, N.)||Ward, Dame Irene (Tynemouth)|
|Hulbert, Sir Norman||Page, R. G.||Webbe, Sir H.|
|Hurd, Sir Anthony||Pannell, N. A. (Kirkdale)||Webster, David|
|Hutchison, Michael Clark(E'b'gh,S.)||Partridge, E.||Whitelaw, W. S. I.|
|Hutchison, Sir Ian Clark(E'b'gh,W.)||Peel, W. J.||Williams, Paul (Sunderland, S.)|
|Hylton-Foster, Rt. Hon. Sir Harry||Peyton, J. W. W.||Wills, Sir Gerald (Bridgwater)|
|Jennings, J. C. (Burton)||Pickthorn, Sir Kenneth||Wilson, Geoffrey (Truro)|
|Jennings, Sir Roland (Hallam)||Pilkington, Capt. R. A.||Wolrige-Cordon, Patrick|
|Johnson, Dr. Donald (Carlisle)||Pitt, Miss E. M.||Wood, Hon. R.|
|Johnson, Eric (Blackley)||Powell, J. Enoch||Woollam, John Victor|
|Kaberry, D.||Price, David (Eastleigh)|
|Keegan, D.||Price, Henry (Lewisham, W.)||TELLERS FOR THE NOES:|
|Kershaw, J. A||Ramsden, J. E.||Mr. Gibson-Watt and|
|Kirk, P. M.||Rawlinson, Peter||Mr. Chichester-Clark.|
§ The Temporary Chairman (Mr. H. Hynd)
It would be convenient for the Committee if the hon. Member dealt at the same time with his two Amendments in line 3, the first to leave out "approved" and to insert "designated" and the second to leave out "approval" and to insert "designation".
§ Mr. Mitchison
On a point of order. Are there not also two Amendments in lines 14 and 15 in the name of the hon. Member for Holland with Boston (Sir H. Butcher) which bear on this matter?
§ The Temporary Chairman
We can deal only with the Amendment which the hon. Member has moved and the two Amendments in line 3, because the hon. 480 Member's Amendments in lines 14 and 15 are not selected.
§ Sir H. Butcher
Thank you, Mr. Hynd, for being so helpful.
As the proceedings of the Committee have shown so far, certain of the smaller societies, through no fault of their own except size, will not qualify for this trustee status of deposits in their funds. The converse of the word "approved" is the word "non-approved", which probably has a derogatory implication. On the other hand, the opposite of the word "designated" is the word "non-designated", both terms being completely neutral. I believe that this change will commend itself to the Committee and to the Minister.
§ Mr. Mitchison
If a building society prefers to be mistaken for a new town rather than for an approved school, we on this side of the Committee have no objection.
§ Mr. Erroll
I am glad to have an assurance from the Opposition that they have no objection to the Amendment, which we are glad to support. We hope that the Committee will accept it.
§ Amendment agreed to.
§ Further Amendments made: In page 2, line 3, leave out "approved" and insert "designated".
§ In page 2, line 3, leave out "approval" and insert "designation".—[Sir H. Butcher.]
§ Mr. Mitchison
The reason for this Amendment is that the Bill refers to withdrawing "approval", but we could not very well withdraw "designation". The word "revoked" is more suitable.
§ Mr. Erroll
I am grateful to the hon. and learned Member. I had it in mind that this Amendment was consequential and I was, therefore, taken by surprise when asked to move it.
§ Amendment agreed to.
§ Mr. Erroll
I beg to move, in page 2, line 12, at the end to insert:(2) Where the officer appointed to perform in Northern Ireland the functions of registrar of friendly societies (in this section referred to as the Registrar for Northern Ireland) is satisfied that a society incorporated under the Building Societies Acts (Northern Ireland), 1874 to 1940, which is a permanent society within the meaning of those Acts fulfils the requirements prescribed under subsection (1) of this section, he may designate the society for the purposes of paragraph (a) of that subsection; and where a society has been so designated and the designation has not been revoked, that paragraph shall apply in relation to it as it applies in relation to a permanent building society within the meaning of this Act.
§ The Temporary Chairman
The Committee could discuss at the same time the Amendment in page 2, line 18, after "Registrar", to insert:or the Registrar for Northern Ireland.
§ Mr. Erroll
The Registrar for Northern Ireland would be given power by this 482 Amendment to approve permanent building societies incorporated in Northern Ireland in the same way as the Chief Registrar is already empowered under Clause 1 (1) of the Bill to approve societies incorporated in Great Britain. The effect of the Amendment is that deposits with approved societies incorporated in Northern Ireland will he made lawful for trustees in Great Britain subject to the same conditions as those which apply to deposits in approved societies incorporated in Great Britain. The Amendment has been agreed with the Government of Northern Ireland.
Building societies incorporated in Great Britain have power to raise funds in Northern Ireland, just as societies incorporated in Northern Ireland may raise funds in Great Britain. It would be inequitable, therefore, not to give to Northern Ireland societies the opportunity to secure trustee status for their deposits on the same terms as will apply to societies incorporated in Great Britain. The regulations made by the Treasury under Clause I (I) will, accordingly, be applied in Northern Ireland by the Registrar. This is a small change. I hope that the Committee will agree that it improves the Bill and its operation and will accept the Amendment.
§ Mr. Mitchison
May I ask the hon Gentleman two questions? First of all, is there a building society in Northern Ireland with assets of over £500,000? If so—and I assume there is—how many such societies are there? Secondly, do they conform with the recommendations of the Building Societies Association in regard to rates of interest charged? That is all I wish to ask, but the hon. Gentleman will see that these questions have a certain value and interest, and I hope that he will be able to give me an answer.
§ Mr. Erroll
The position at the moment is that no society incorporated in Northern Ireland is likely to qualify, but there is some prospect of a merger which should make one society eligible for consideration. Consequently, the Northern Ireland Government would like to have the same arrangements apply, and to see the application of the Treasury regulations by the Registrar for Northern Ireland who is to be employed to help in this matter.
§ Mr. Mitchison
In those circumstances, I can only hope that some contribution will be made by this Bill to the provision of a standard amount and other improvements in house purchase in Northern Ireland. The hon. Gentleman did not answer the second part of my question. I would not wish to press him for it now, but I think that he will see that in the terms of the Bill it is advisable that there should be some correspondence between rates of interest in the two countries.
§ Mr. Erroll
I can explain that point. It is, of course, for the Government of Northern Ireland to decide whether to make a grant, and, if so, to legislate in the Northern Ireland Parliament. It is, therefore, a matter for the Northern Ireland Parliament to decide for itself.
§ Mr. Mitchison
Are we then to understand that the passage of this Bill is not enough and that the Northern Ireland Parliament will have to pass another Bill there?
§ Amendment agreed to.
§ Mr. Erroll
I beg to move, in page 2, line 13, to leave out from "Registrar" to "this" in line 15 and to insert:or, as the case may be, the Registrar for Northern Ireland, shall publish in the London, Edinburgh and Belfast Gazettes, a notice of every designation made by him under".This is a consequential Amendment, which provides that the giving of approval to, or the withdrawal of approval from, a building society shall be published in all three countries.
§ Amendment agreed to.
Further Amendments made: In page 2, line 15, leave out
withdrawal of such an approval
revocation of such a designation.
In line 18, after "Registrar", insert:
or the Registrar for Northern Ireland."—[Mr. Erroll.]
§ Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
§ 8.15 p.m.
§ Mr. Thomas Steele (Dunbartonshire, West)
We have so far had some very nice, comfortable discussions, and very 484 little has been said to upset the general atmosphere of good will. What I am about to say may strike a somewhat different note.
Clause 1, as it now stands, will enable certain building societies to furnish funds—particularly with Government money—to people who wish to buy houses built prior to 1919. That is its main function. I am sure, however, that it is appreciated that building societies are not, as it were, just an abstract body of people. They consist, first of all, of directors, but even the directors do not always do the actual work. There are the various regional organisations, and eventually it comes down to the individual representative of a building society in a particular town.
I am reinforced in what I want to say by something that the Minister of Housing and Local Government said about an Amendment tabled by my hon. Friend the Member for Coventry, South (Miss Burton) dealing with the interpretation that local agents and officers of local branches of building societies may put on directions given to them by their boards of directors. I took note of his words. He said that some local representatives applied rules of their own. Therefore, it seems very important, when we are giving this approval to the buildings societies, to look at some of the things that some agents have been doing.
In the very first sentence of the right hon. Gentleman's Second Reading speech on the Bill on 15th December, 1958, he said:Provided people can afford to buy a house and look after it, home ownership is a splendid thing in every way."—[OFFICIAL REPORT, 15th December, 1958; Vol. 597, c. 787.]I agree with that, provided that people can afford to buy a house. But when we look at Appendix 1 of the White Paper we see that a society can…grant to any borrower who in the opinion of the Society is creditworthy …The word "creditworthy" has been used throughout the discussions.
During the Second Reading debate I said that I was not at all happy about what was at present happening over house purchase in my constituency and other parts of Scotland, and that I wanted to ensure that, whatever was done about this we would not give approval to building societies to carry on the kind of racket to which I then referred. Since I made that 485 speech, I have had a great deal of correspondence which has proved that what I said then was correct. I want now to quote from one or two letters to give the Committee an idea of what it is all about.
I drew attention to the activities of a man in my constituency, Mr. Lascelles McClughan, who is a house agent and the local agent for the Halifax Building Society. I have a letter here which reads:I have read with interest in the newspaper the account of your speech against Lascelles McClughan, as I happen to occupy one of his houses. At the time I entered the above address it was as a sub-let. After I had been here for over two months, the occupant left to go to England. Then I received notice from McClughan to leave or buy the house. I had to pay £25 deposit and the price of the house is £500 for a room and kitchen. At that time I was after coming to the city from the North and was pretty green as far as this was concerned. Since then I see I have been grossly overcharged for a property not worth half the price. Also I pay repair bills every year for which I cannot what for".The Committee will, I know, excuse the grammar. I could go on and read more of this letter, but what I have read is an indication of the kind of things which happen in connection with some of the houses affected by the Measure we are now discussing.
I have another letter which says:I read your allegations about Mr. Lascelles McClughan with great interest as it recalled to me that I was one of his victims about eleven years ago. At that time I purchased a house in the south side of Glasgow for £800. I paid £100 deposit and signed a legal document. But when I went to see the house it was occupied by a tenant who had no intention of leaving.It was only after some considerable trouble that this man was able to get his deposit back.
I have another letter which ties up with what the Secretary of State for Scotland said, that what is here proposed did not relate only to houses worth £1,800 but to houses of lesser value. This letter reads:I am writing this no0te to you and would he obliged if you would send it to Mr. Steele"—it was sent to me from a local newspaper—It is about Lascelles McClughan and after reading today's Record I think Mr. Steele is quite right as I was one of the victims. I have seven of a family. My husband bought a house of him for £350, £30 down and so much per month. We put in a fireplace and did up the walls, put in electricity, also a new sink unit, and unfortunately were 486 £7 back in our payments after paying up nearly £200. They were never away from the door looking for money and threatening to put us out. He would send you a summons for a small court debt every other week and he would collect the court expenses and we were never at court.That is another indication of how this man operates.
Here is another letter which, I think, shows something even worse:Regarding Mr. McClughan I never met anyone like him in my life. His performance is dreadful and believe you me since we have been here I have seen a great deal of him. We have had to pay a lawyer since 1955 as he sent me an account for what he calls common charges. This was a half yearly account and amounted to £9 18s. I paid it in three parts sending a money order for £3 each week until the third week. When I asked for a receipt he wrote back to me telling me that he had not received any of the money and I had to vacate the house immediately. I went into his office and met a Mr. Diamond who was just as rude as him and they swore they had never received any of the money. I then went to a solicitor and I am paying all my instalments through him ever since. I went to the G.P.O. and they were able to give me full proof that I had paid the £9 18s. and the bank Mr. McClughan had paid the orders into. He immediately said that it was a clerical error. Then he started saying that I owed him an enormous sum for back payments of common charges. As he never gave me any receipts I again appealed to the G.P.O. but they could not help me this time and I unfortunately had to pay this money over again. Even although I have a lawyer it is hard going as although they know I have engaged them to watch him they don't seem to be up to all his tricks. We had Irish people in the flat upstairs and he literally threw them out and then sold their stuff.This, I think, is even worse. The lady goes on to say that:He has several young men he sends out daily to snoop, cajole and very often threaten his victims, and believe you me having had a few visits from these characters I can readily understand it.I have a letter here also from a group of people who say how glad they are that this racket has been exposed. I said that this man was interested not in selling houses to creditworthy people at all but was interested in selling houses to people who could not afford to buy them. The letter from these people goes on to say:There have been four houses sold over and over again thus gaining deposits every time.There is another aspect to this also. I have a letter here from a very respectable firm in Glasgow which says:We are delighted you have attacked the racket in house sales. We ourselves are a hire-purchase company and this is what we 487 find. Houses are sold for a deposit. The tenant obtains our hire purchase facilities re installation of a fireplace. Very soon after the tenant goes in, he cannot keep up with the house instalments. He is thrown out and before we know where we are the factor has sold the house for a much bigger figure—thanks to our fireplace—but refuses to reimburse us in any way for the fireplace we have installed. We have one particular case where a party took a six room and kitchen house, put in two new fireplaces, but as far as we know never occupied the house and the factor refused to allow us one penny for the fireplaces but proceeded to capitalise by selling the same property for a larger price.We can without fear of contradiction confirm that it is to the poorest of the poor these houses are sold. We would like to point out that there are at least ten to twelve factors in this racket, perhaps more.I should like an assurance that some guarantee will be given that there will not be a further extension of this kind of racket.
As I said on Second Reading, it was reported in the Press that the Halifax Building Society would be making a private investigation into this matter. I do not say that this man is operating on behalf of the Halifax Building Society. I do not know. I would hazard a guess that he is not, but the point is that this man is an agent of the Halifax Building Society and the kind of men he employs are those who go out to cajole and threaten people regarding payments. This is the kind of person who will be operating this scheme in my constituency.
I hope that when the Minister replies he will be able to give me some indication whether a guarantee will be given. Will there be an investigation? Once approval has been given to a society, what kind of report will be made? Will a copy of the application which is made by the building society be submitted to the Treasury so that it will have some idea of the kind of people and the resources of the applicant?
All the argument so far on the Clause has concerned creditworthy people. The first Amendment to the Clause dealt with the idea that sex discrimination was being used in people not getting credit from building societies. I am concerned with an entirely different matter, because clearly the kind of racket which is going on is for the purpose of making money out of the poorest of the poor. Those of us who know housing conditions in 488 Glasgow and the west of Scotland know that this kind of racket must be stopped. I hope and trust that the Minister will be able to assure us that as Government money is concerned no building society or building society agent will be able to extend the kind of racket which I have mentioned.
§ The Joint Under-Secretary of State for Scotland (Mr. J. Nixon Browne)
My right hon. Friend is not aware of any evidence to indicate that either Mr. McClughan or the other gentleman to whom the hon. Member for Dunbartonshire, West (Mr. Steele) referred is operating outwith the law. So, to that extent, it is difficult to see what action is open to my right hon. Friend. If anyone has evidence to show that McClughan or anyone else is breaking the law, he should, of course, report the facts to the Procurator Fiscal.
I sympathise most deeply with the people who wrote to the hon. Gentleman and with the people who have had similar experiences but have not written about them. This just goes to show that people would be so well advised before signing an agreement—it is too late afterwards— to consult a solicitor or to go to a citizen's advice bureau about the form of agreement they are signing, and they should make inquiries of local authority offices about the conditions of the house.
To some extent, the Bill, which makes 95 per cent. loans available over a very wide range of cheaper properties, should enable many wage earners to purchase sound property on reasonable terms and conditions, and this should help to lessen the attraction of the type of offer which is made by Mr. McClughan and others. The conduct of an agent of a building society is a matter for the building society itself. After all, this is a very competitive industry. It is in the direct interest of the society not to be discredited by an agent. There seems to me to be very little that my right hon. Friend can do to put a stop to such abuses, which must be minimal over the wide range of building society operations. I can only hope that the hon. Member's second speech on this subject will have drawn attention once more to the building society, whatever it may now be, for whom the gentlemen concerned purport to act as agents.
§ Mr. MacColl
As the Joint Under-Secretary of State has said, this is a very competitive industry. I would not draw from that exactly the same conclusions as the hon. Gentleman has done. He said that in many cases it means that building societies want to be particularly jealous of their reputation, because if they get a reputation among people of discrimination, that they are careless or unscrupulous in their pursuit of business, it will react badly on them. On the other hand, it is equally true that, if pressure of competition is very great, particularly, as it were, on the periphery, in cases where, as my hon. Friend the Member for Dunbartonshire, West (Mr. Steele) has said, agents are competing for business, the danger is surely that building societies will tend to make grants for the purchase of property which is not a good investment.
I have with me the bulletin of the Building Societies Association for November last year, which discusses the Bill and the Clause and states:A building society would very rarely take the risk of granting a 95 per cent, mortgage on property built prior to 1919, so some method is needed to cover the additional risk involved.The Government and local authorities are stepping in to help to underwrite that risk. It remains true that, looking at this as a business proposition, in many cases the granting of these high mortgages on old property is a risk which a prudent society would not take. That increases the danger that in a market where there is great competition, the societies will not be discriminating in the allocation of their money, but that they, and particularly their agents, will feel impelled to enter into arrangements when really the facts of the situation—the kind of facts, for example, which my hon. Friend has mentioned and the kind of warning that the Joint Under-Secretary has given—indicate that people should not enter into the ownership of property.
The House has had to consider this question already in another context, because the provisions of the Second Schedule to the Housing Act, 1957, would not have been needed in their original form under the Slum Clearance Compensation Act, 1956, had it not been that when local authorities began extensive slum clearance operations, it was dis- 490 covered that large numbers of owner-occupiers had bought property which was slum property and which had to be condemned as unfit to live in. Because of the size and extent of that problem, the Government felt it necessary to introduce special legislation to provide for higher compensation for this property than a strict interpretation of the law would have allowed. If that was necessary, surely it indicates the need to watch the operation of the Clause with considerable care. There is a danger that people will enter into the hazard of owner-occupation in cases where it is not desirable to do so.
I listened with great interest to the speech of my hon. Friend the Member for Dunbartonshire, West. One sometimes talks about these things in rather theoretical terms, and I was interested that when my hon. Friend had mentioned this kind of problem in his constituency he immediately attracted letters from widely scattered types of cases. That seems to me to indicate that there is a very serious problem which needs very careful watching. After all, included in paragraph 5 of the Second Schedule to the Housing Act, 1957, were special provisions whereby an owner-occupier whose property had been taken for any part of a clearance project, could get out of his personal covenant in the mortgage into which he had entered.
If loans for house purchase had been negotiated with experienced and highly reputable people, with due regard to the security of their money, that situation would never have arisen. We should never have people in that position, and there is no hon. Member of this Committee who has not had this problem arising in his own constituency, where somebody has said "My house is to be demolished; I do not mind that, because it is an unfit place, and I would much rather have a council house, but now I find that I have heavy payments to make to a building society, or whoever was the mortgagee, on account of the house from which I can no longer have any benefit." It was because of the widespread appreciation of that problem that this particular paragraph was inserted into the Schedule, providing for application to be made to the county court for relief from this obligation.
Therefore, we have evidence in this Committee that this is a serious problem, and I think it would be unwise for the 491 Committee to pass this Clause, giving the impression that all will be very easy, that no problem will be involved and that it will all work smoothly. The difficulties involved in this undertaking are very great indeed, and I am very grateful to my hon. Friend for having given us, in so dramatic a way and with so much factual evidence, proof that this is a very real problem, which needs to be watched very carefully indeed.
§ Mr. J. A. Sparks (Acton)
There are one or two things which ought to be said before the Minister is allowed to have Clause 1, which is the most important of the Clauses in the Bill. It would seem to me that the Government are to some extent giving a false impression of the effect of Clause 1 and the main purpose of the Bill.
As I understand the Clause and what is involved with it, it provides approval for certain building societies for the purpose of receiving public moneys to advance on the acquisition by applicants of dwellings that were completed before 1919. The minimum age of the dwelling or house is 40 years, but it may be 50, 80, or even 100 years, because there is no limit in that respect. As my hon. Friend the Member for Widnes (Mr. MacColl) has pointed out, there are many houses and dwellings which are near to slum clearance areas which are not at the moment technically slums but which are not very far from being included in that category. It is proposed to permit the approved building societies to advance loans to applicants to acquire such properties, and I understand that a maximum figure that will be advanced is £2,500, though I believe that the right hon. Gentleman is proposing later on in the Bill to raise that in certain areas to £3,000.
First, I do not believe that there are many people living in pre-1919 completed houses who can afford to apply for mortgages of that extent. I do not believe that they would have an income sufficient to be able to acquire such property; indeed, many of them would not desire to do so. However, there is this important factor. If such a person does apply and receives a loan, as I understand it, the loan is repayable over 20 years. Also, if that house has need of improvement, 492 further loans can be made by the building society towards the cost of such improvement. There is, however, an important condition, and I want to know from the Minister whether it applies not only to improvement grants but to the advancing of the loan itself. The condition for an improvement grant is that there must be a minimum of 15 years' life in the house, but if the applicant is going to secure a loan repayable over 20 years for a house which will last only 15 he is going to be left at the end of the period with an asset which is worth very little. Therefore, I do not believe that building societies, especially those which are jealous of their financial standing, will want to burden themselves very much with this kind of property which is a diminishing quantity measured as security value. I do not believe this will lead to the success the hon. Gentleman seems to envisage. It is quite true that local authorities also cover this process. Why the right hon. Gentleman should seek to duplicate that I do not know. I do not think there is a case for duplication.
There is also another important factor. We have heard quite a lot said about the trustee status which is to be given to certain approved building societies. I do not think that is worth very much, but it is laid down that the public money which will be invested in a building society shall be a first charge, or nearly a first charge, on the assets of the building society. Should a building society overload itself with assets which are declining very sharply, should any of them find themselves in difficulties, it will be the ordinary shareholders who will suffer and not the depositors and not the Exchequer, because, as I understand it, the depositor and the State will have the first claim in the event of a society having for any reason to be wound up or finding itself it difficulties through overloading itself too much with this type of property which is a shrinking asset.
Therefore, I should like the right hon. Gentleman to give some assurance in a case of that kind that it is not the ordinary shareholders in the building society who will have to suffer the risks which may—and we all hope that they will not—descend upon building societies in years to come. The Government are taking a clear course to look after their own interests and are not prepared to take the 493 same risks as the ordinary shareholder in a building society is having to take. The Clause, therefore, is not quite the glaring success that the right hon. Gentleman is seeking to claim for it. I believe that this is a little bit of pre-election window dressing, and it is as well that we should realise the main purpose of the Bill.
I do not think that it will contribute more than a very little to the solution of the problem of the old houses. In so far as it may make a small contribution here and there it is to be welcomed. But by and large, it will never achieve all that is being claimed for it by the right hon. Gentleman, and I do not think that the House should put a great or excessive value on the merits of this Clause.
§ Mr. Maurice Macmillan
I hope that the Committee will forgive me if I refer briefly to a matter which was raised by the hon. Member for Dunbartonshire, West (Mr. Steele), since the society involved has its headquarters in my constituency. I have been in touch with the society. The inquiries which it is making are still proceeding and therefore there is not a great deal that I can say, except to give one or two facts.
The Halifax Building Society has about twenty-four properties in the area to which reference has been made, and the last arrangement which it entered into there was about two years ago. Any property of which the mortgage is held by the Halifax Building Society in that area cannot be dealt with in the way that was described, since the agent has no control over the resumption or resale of property once the mortgage has been passed by the Halifax.
Therefore, as far as the Halifax Building Society is concerned, the kind of thing to which reference has been made could not happen in connection with money loaned to it by the Government even if the Halifax did in fact qualify for a loan under this Bill. In any case, operations which have been taking place in the last two years have taken place in a period in which the Society had no transactions in that area. Investigation has not been completed, but as far as I know the properties concerned have been dealt with by the man who has been mentioned as an ordinary owner on his private account, possibly in partnership with somebody 494 else, but not, of course, with the Halifax Building Society.
§ Mr. Reynolds
I should like to make one or two points before we conclude discussion on the Clause, particularly with reference to the so-called arrangements to assist people to obtain 95 per cent. mortgages. The cat was let out of the bag several times today, more particularly from the other side of the Committee, to the effect that the main purpose of the Clause is to secure trustee status to certain societies. Indeed, the main purpose of the Bill is to do that.
We on this side of the Committee must draw attention to the fact that only a limited amount of money is available in this field of trustee investments and now it appears that over two-thirds of the societies are to be eligible for trustee status. I happen to be chairman of the finance committee of a local authority represented so ably here by my hon. Friend the Member for Acton (Mr. Sparks), and having heard only today that we are likely to have the biggest rate increase for some years as a result of the passing last year of the Local Government Act, I now look askance at the fact that once this Clause is approved, and once this Bill becomes law, it will be much more difficult for the finance committee of my local authority to borrow on the market from the sources from which it has been obtaining money for the last three or four years. We shall be competing not only with the people who have been there for some years now but also with the building societies, with the trustee savings banks, with pension funds and other similar organisations.
I would not like to let this Clause go by without protesting at the fact that this will make it more difficult for local authorities to borrow money for capital works than it has been even in the last few years.
§ Mr. Mitchison
We all want to get on with the Bill and so I will say briefly what I have to say. The point just raised by my hon. Friend the Member for Islington, North (Mr. Reynolds) is a real one and it goes even beyond the borrowings of local authorities. Looking at the discussion we have had on this Clause, and the terms of the Clause itself, it seems to me that the main difference between 495 the two sides of the Committee is as follows. The Government and their supporters are content to allow the building societies to attain trustee status purely on financial considerations and they do not take into account for the purposes of this Clause the other side of the picture, that the price to be paid or the function to be discharged in return for trustee status is to act in effect as the agents of the Government in respect of certain advances.
We take the view that this latter function is the main purpose of the Bill and that it cannot be disregarded when the question arises of approval under this Clause. We believe, in short, that it is not enough for the Government to say, "You are financially solvent"—whatever the terms may be— "and therefore you can have trustee status for your deposits". If the Government are to use building societies as agents they must ensure that the business is conducted in such a way and for such purposes as this Committee and the Government themselves will approve.
I was disappointed that on clear evidence of at least a doubt about sex discrimination the Government refused to put anything into the Bill, although the right hon. Gentleman must have felt some uneasiness in the matter since he was willing, and indeed anxious, to investigate this point again. Similarly, when we came to the question of survey fees, and the like, there was again on the Government side a reluctance to go beyond the bare minimum of financial status and to investigate in any way dealings between building societies and the public who borrow money from them.
In the instance just given we have been told that an agent of the Halifax Building Society, which may or may not come into this scheme—that is one of the great uncertainties at present—has been behaving on his own account in a way which certainly invites some comment and inquiry. Yet all that happens is that the building society in question says that he must have done it on his own account. It seems to me that those who act as agents in dealing with the advancement of money to people who want homes, particularly when those advances are made to comparatively poor people, must take a responsibility for their own conduct, and 496 their principals too must take responsibility for the choice and the conduct of those agents.
Applying those principles to the Clause, the Government seem to be unwilling to take sufficient responsibility for the performance by the building societies in the proper way of the functions which the Bill intends them to have, just as the building societies on their own account in that instance—perhaps not in others—seem to be ready to dissociate themselves from those who are entitled to be described as their agents.
In both cases it is very largely a question of reputation. There is no doubt that a dealer in property in a small town who is able to put on the building the plate of an old and reputable society thereby gets a certain prestige. There is no doubt that a society which by the provisions of this Clause gets trustee status on its deposits will, in what has been called by the Government a highly competitive business, gain a considerable advantage, an advantage which will be gained either at the cost of other building societies or at the cost of other people who have to perform the function of lending money in this way, including local authorities.
Therefore, I have an uneasy feeling at the end of the discussion on the Clause that we are asked to consent to a financial transaction carrying with it implications of status and advertisement of some importance, and that we are being asked to consent to that while the Government at this early stage are apparently dissociating themselves from any social responsibility which the Clause will involve in the long run.
I regret that. We do not oppose the Bill. We do not think that it will make much difference. We do not think that the consequences of the Clause will be large. So far as they are important, it will be their social rather than their financial side which will matter. The right course in those circumstances is to let the Clause pass. We regret that a number of Amendments have been refused which would have made it a more humane and social Clause, and we shall now have to see how it works. I do not regard power to annul the regulations to be made as of very much practical importance, since 497 on such occasions amendment is impossible, time is limited, and the Government Whips are on.
§ Question put and agreed to.
§ Clause, as amended, ordered to stand part of the Bill.