§ Mr. Barter
I beg to move, in page 1, line 9, to leave out paragraphs (a), (b) and (c) and to insert:(a) an advance of any amount to any person or body corporate which exceeds one per cent., or such other larger percentage as may be prescribed under this section, of the total amount of advances which at that time have not been repaid to the building society, together with any arrears of interest in respect of those advances, or(b) an advance of any amount to any person or body corporate, being a person or body corporate who is, after the advance is made to him, indebted to the building society (taking into account the advance in question and all other debts of any description. whether immediately repayable or not) in an amount exceeding one per cent. or such other larger percentage as may be prescribed under this section, of the total amount of advances which at that time have not been repaid to the building society, together with any arrears of interest in respect of those advances.For the purposes of the application of this section a body corporate which is director controlled for the purposes of income tax and profit: tax regulations shall be deemed to be the same person as each one of its controlling directors and of any other body corporate of which any one of them is also a controlling director.
§ Mr. Speaker
I think it would be for the convenience of the House if we were to widen our discussion on this Amendment to include all the other Amendments which appear to go with it. They are the following Amendments:
§ Line 15, leave out "ten" and insert "one."
§ Line 19, leave out "ten" and insert "one."
§ Line 23, leave out "ten" and insert "one."
§ Line 24, leave out "twenty-five" and insert "two."
§ Line 28, leave out "two and one-half" and insert "one-half of one."
§ Line 32, leave out "twenty-five" and insert "two."
§ Line 44. leave out "a sum of five thousand pounds" and insert "one per cent."
§ Line 45, leave out "other," insert "greater."
§ Line 45, after "other," insert greater."
§ Line 45, leave out "sum" and insert "percentage."
§ Page 3, line 1, leave out "(whether greater or less)."
Line 3, at end insert
and power to make orders increasing the amount in respect of securities of freehold or leasehold estates in specific areas.
§ Clause 2, page 4, line 26, leave out "ten" and insert "one."
§ Line 27, leave out "twenty-five" and insert "two"
§ Page 5, line 3, leave out paragraph (a).947
§ Mr. Barter
I think I should draw to the attention of the House the fact that there are really two groups of Amendments in those to which you have referred, Mr. Speaker. The first group consists of the one which I have moved and the thirteen consequential Amendments which go with it, and the second group consists of the first two Amendments in page 2, line 45 and the Amendment in page 3, line 1. I will first concentrate on the first group, and subsequently deal with the second group, if that meets your wishes, Mr. Speaker.
The purpose of moving the larger group of Amendments is to draw the attention of the House at this stage to what I think is a major potential defect in the Bill. The defect is that, as far as I can see, in the Bill as at present before the House there is nothing which would prevent a building society from advancing the whole of the 10 per cent. special advance which it is permitted to one single individual or company. I think that this is a defect, although I appreciate that the alternative course which I have proposed in order to bring out discussion on this subject may itself be the subject of other defects. The point really is that this question arises and has any great significance only in the case of the larger building societies, and perhaps it does not have such great significance in the case of the smaller one.
The complaint that I made in the Standing Committee when we were discussing this Clause was that it seemed to me that the best method of regulating for the safety of the investor and the borrower any method by which loans and advances could be made by a building society was to bring into the regulations a restriction on putting too many eggs in one basket. The Bill as it now stands would enable 10 per cent. of the eggs to go into one basket. I felt that this was potentially a defect for the future.
The point was made during the Second Reading debate by the Economic Secretary that one of the reasons for the Bill was the possibility that a building society might have less than the most scrupulous control at any particular time and that the attractive words "building society" which encourage confidence and investments from the 948 community might mean that those funds, unless properly regulated by a Bill of this type, could be wrongly used.
I am, therefore, bringing this point forward because in response to this question in the Standing Committee the Economic Secretary said that he felt that any well run building society would not place all the 10 per cent. of its advances in one direction. The Bill is not really aimed at the well run building societies, which constitute the vast majority; it is aimed at the others. That is why I thought it was important to draw attention to this weakness and, in giving an assurance that I have no intention of pressing the Amendment, to express the hope that this matter may have attention in the future and that the situation may be watched to ascertain what developments arise in this direction.
The Amendments in the second group concern the setting of the limit of £5,000 on the definition of a special advance. There has been a great deal of concern among my hon. Friends on this question and I believe that hon. Gentlemen opposite have felt a similar concern. It seemed that a fair compromise might be reached if it were possible to agree that, while the Registrar will have power to vary the figure of £5,000, his power to vary shall be limited only to increasing the figure and not to reducing it. The purpose of the Amendments in the second group is to enable the Registrar merely to vary the figure of £5,000, which constitutes a special advance, upwards and not to bring it down below £5,000. He may bring it down to £5,000, but he may not bring it below that figure.
I think I have been unduly generous to the Parliamentary Secretary on this occasion because the first two Amendments in this group are in very similar terms and I have really given him an option as to which one he would like in the great hope that he may be disposed to look favourably at the suggestion which I am making.
§ 12.15 p.m.
§ Sir K. Joseph
Perhaps it would be convenient if I dealt first with the second group of Amendments in the name of my hon. Friend the Member for Ealing, North (Mr. Barter). We feel that these are perfectly acceptable and that they leave the discretion for lowering the 949 limit once again, should it be necessary, provided that the limit does not go below £5,000, and, therefore, we would advise the House to accept the second group of Amendments.
On the first group of Amendments, however, my hon. Friend himself acknowledges that his own proposals have certain defects. He rightly points out that it would be possible for a building society to put all the 10 per cent. of its special advance in the hands of one borrower. The Government have felt that they safeguard the investments of hose who lend to building societies sufficiently by ensuring that ordinary advances shall be in a ratio of at least 9:1 as against special advances, and, of course, as my hon. Friend points out, the Bill has really very little to teach the well-conducted building society. I therefore acknowledge that it would be possible for a building society to lend all its 10 per cent. to a single borrower, but I can give my hon. Friend and the House the assurance that the Chief Registrar would anyway have watched very carefully for just this sort of thing, and I am sure that my hon. Friend will agree that he has formidable powers in the Bill. Certainly, the Chief Registrar will watch this the more carefully since my hon. Friend has drawn such particular attention to the danger.
I do not want to take a lot of time in explaining the defects in my hon. Friend's proposals, but the defects are bases primarily on the difficulty of identifying the control of companies which might each, though nominally separate, be under the influence of a single borrower. My hon. Friend acknowledges this. I hope, therefore, that the House will feel that the Chief Registrar's supervision of these special advances, coupled with the 90 per cent.: 10 per cent. majority of ordinary advances, gives great security to the investors in building societies, and that my hon. Friend will, as he said, not press that group of Amendments.
§ Mr. MacColl
I recognise that the Government are in a jam at the moment. They have lost control of the House. They are unable to move the Closure and are faced with a revolt from their own side. I was hoping to rise and offer the Government all the support of my hon. Friends mashalled behind me in enabling them to resist this revolt.
§ Mr. Barter
The hon. Member for Widnes (Mr. MacColl) is, apparently, offering all twenty-one of his hon. Friends.
§ Mr. MacColl
In Standing Committee, the hon. Gentleman learnt a little simple arithmetic. We had a very interesting discussion about whether five into 100 equals twenty or about twenty. No, it was his hon. Friend the Member for Brierley Hill (Mr. Talbot) who was concerned in that. What I am suggesting is that, as an attentive pupil, the hon. Member for Ealing, North (Mr. Barter) must have benefited as a result. Simple addition would also teach him that 80 and 20 equal 100—a rather significant figure in this House.
§ Mr. Speaker
Perhaps we can now get to the Question, which is "That the words proposed to be left out stand part of the Bill."
§ Mr. MacColl
I was hoping to reopen the question by expressing great regret and sorrow that, instead of waiting to see whether we would support him, he has run away in this deplorable manner on the second group of Amendments.
I understand that these Amendments are designed to limit the Chief Registrar's discretion. We discussed this upstairs and on Second Reading. A number of my hon. Friends take the view that this limit ought to be imposed on the discretion. I and my hon. and learned Friend the Member for Kettering (Mr. Mitchison) take the view that the discretion should be both ways. We have always paid tribute to the Chief Registrar, to his wisdom, his detailed knowledge of what is going on, and to his sensitiveness to trends. But if all that be true, why is there this last minute decision that one cannot trust him to make a sensible decision on a question of this sort? It is unlikely that he would want to reduce the minimum below £5,000, but why should he not? As I understand these rather complicated Amendments, that is what the Government are now accepting. I was so staggered by the Government's complete volte-face that I could not believe it. I could not—
§ Sir K. Joseph
The hon. Gentleman is forgetting that my hon. Friend the Economic Secretary said in Committee that he could not conceive of a situation where the Chief Registrar would wish to 951 reduce the £5,000 minimum. The only reason that he wanted to retain this power was in case, after raising the limit to £15,000, the Chief Registrar might want to lower it again to, say, £10,000. The Amendments would allow the Chief Registrar this discretion to reduce the limit provided that it is not below, say, £5,000.
I must apologise to the House for a slip of the tongue. I am advising the House to accept the Amendment to page 2, line 45, leave out "other" and insert "greater", and at page 3, line 1, leave out "(whether greater or less)". I should not have included the Amendment to page 2, line 45, after "other", insert "greater", since two of the Amendments are mutually contradictory.
§ Mr. MacColl
I am at odds with the Parliamentary Secretary about what happened in Committee. The Economic Secretary said that it was most unlikely that the Chief Registrar would want to reduce it. That is a reasonable point of view. Our decision to leave this matter to the Chief Registrar was not in the original draft in the Bill but was an alteration introduced later and approved upstairs. We should keep to it.
I recognise the difficulty that the Parliamentary Secretary is in. He has been placed by his Whips in a most humiliating position. I am sorry for any Minister who finds himself suddenly recognising that he has to give way to back bench pressure because he does not control the House. I wanted to press my hon. Friends to give the Minister assistance, and I am sorry that he has run away. I shall not advise my hon. Friends to divide on this, but it is a deplorable surrender and I record my protest.
§ Mr. Glenvil Hall (Colne Valley)
I share the views of my hon. Friend the Member for Widnes (Mr. MacColl). We spent a lot of time on this part of the Bill in Committee and I thought, at the end of that discussion, that what was then in the Bill had been more or less agreed by all as the commonsense thing to be there, and I am startled that the Parliamentary Secretary should come to the House today and agree to make changes, particularly in view of the fact that the hon. Member for Ealing, North (Mr. Barter) said that he was not going to press it to a Division.
§ Mr. Glenvil Hall
He is going to press it to a Division. We will rally to the support of the Government on this occasion, much as we might dislike doing so. This suggestion is a retrograde step and we do not want to see it implemented.
The Parliamentary Secretary is an extremely lucid speaker and very often explains intricate points in a way which people like myself can understand them. But he did not give any real reason why the Government are giving way on this matter. Could he tell us what has happened between the Committee stage, when we dealt with this at great length, and now, when he is agreeable to making this change? What has happened in the interval? Has the Building Societies' Association asked for it? Has it re-read the Bill and talked to the Chief Registrar? Does he think that this is a desirable thing to do?
§ Mr. Barber
I realise that this is not the Committee stage and, therefore, that really only one Government spokesman is required, but I was referred to during this discussion. I have not the report here of the Committee proceedings, but my recollection is that I pointed out that I could not conceive of circumstances in which the limit would be reduced to below £5,000, and my hon. Friend the Parliamentary Secretary has explained the reasons why we wanted the power to reduce in the event of the limit having been raised.
Having said what I did in Committee, and then having thought about it, I came to the conclusion that there should not be power to reduce the limit below £5,000. I had in mind subsection (8) of Clause 1, whereby the Chief Registrar can make an order only with the consent of the Treasury. It seemed quite ridiculous not to concede the point of establishing in the Bill the provision that £5,000 was the lower limit if this was considered desirable by building societies so that they would know where they stood. It seemed a reasonable point. On a number of other matters we have thought it wise to defer the representations of Members opposite and we shall be coming to those in due course. On a small point of this kind, therefore, their attitude is a little trying to one's patience.
§ Mr. Barter
In view of the reply, Mr. Speaker, I do not intend to move the Amendment to page 2, line 45, after "other," insert "greater." Is it your wish that I should now move the other two that have been accepted?
§ Amendment, by leave, withdrawn.
§ Mr. Barber
I beg to move, in page 1, in line 20, at end to insert:For the purposes of paragraph (c) of this subsection, the amount in which a person is indebted to the building society shall be ascertained both immediately after the making of the advance and also at the end of a period of three months beginning with the date of the advance or (if sooner) at the end of the financial year in which the advance was made; and that paragraph shall not apply to an advance to any person so as to make it a special advance unless either the amount so ascertained on the first occasion exceeded ten thousand pounds (or, in a year for which references in this subsection to five thousand pounds are to be taken as references to a sum prescribed under this section, twice the amount of that sum) or the amount so ascertained on the second occasion exceeded five thousand pounds (or such other sum as may be prescribed under this section).
§ Mr. Speaker
Perhaps it would be for the convenience of the House to discuss with this Amendment the two Amendments in the name of the hon. Gentleman, in page 2, lines 34 and 38. We might thus extend the discussion a little.
§ Mr. Barber
That would be convenient, Mr. Speaker. This Amendment deals, with a point raised by my hon. Friend the Member for Ealing, North (Mr. Barter). When a person who has an advance from a building society moves, he generally repays the advance with the proceeds of the sale before being granted a further advance in respect of the second purchase. But if the borrower is unable to sell the house immediately, the society normally expects him to find a bank to provide the temporary finance, rather than itself have two advances outstanding for an indefinite period until a purchaser appears for the first house.
If a society were making a second loan in advance of repayment of the first, and if the sale of the first house were 954 definitely going through and the only reason for the overlap were accounted for by the differing speeds of the legal procedures in the two cases then it might well be the case that in such circumstances, because at the time of making the second advance the total outstanding was more than £5,000, the second advance would be a special advance even though, in itself, it were less than £5,000. This might conceivably cause a society to send its existing borrowers to another society for a second loan if it thought it were at any risk in respect of special advances. This was obviously not the intention of the Clause or the understanding of any hon. Member who served on the Committee. This Amendment, with two being discussed with it, is designed to remedy that position.
§ 12.30 p.m.
§ Mr. Barter
May I express my appreciation to the Economic Secretary for the consideration given to this matter and for having reached what is so satisfactory a conclusion?
§ Mr. Mitchison
This seems to us to be a reasonable provision for what may well happen in some cases. As far as we can see, it does not provide any useful loophole to the ill-intentioned or improvident.
§ Amendment agreed to.
Further Amendments made: In page 2, line 34, at end insert:
and may not make in that year any advances as respects which it cannot be ascertained at the time they are made whether they will he special advances or not".
In line 38, at end insert:
and shall not make in that year any advances as respects which it cannot be ascertained at the time they are made whether they will be special advances or not".—[Mr. Barber.]
§ In page 2, line 45, leave out "other" and insert "greater".
§ In page 3, line 1, leave out "(whether greater or less)".—[Mr. Barter.]