HC Deb 09 August 1966 vol 733 cc1395-400

The following Question stood upon the Order Paper:


To ask the Minister of Housing and Local Government whether in present circumstances he intends to interfere with the action of the building societies in fixing rates of mortage interest.

The Minister of Housing and Local Government (Mr. Richard Crossman)

With permission, I will now answer Question No. 19, which has been put down for Written Answer.

No, Sir. There is no basis for compulsion here. As my right hon. Friend the First Secretary made clear, Part IV of the Prices and Incomes Bill does not apply to interest rates, which are dealt with under Clause 2.

The absence of compulsion only emphasises the need for voluntary action in this sphere. I have now had a discussion with the Chairman of the Building Societies Association. I told him of the importance that the Government attach to achieving the prices and incomes standstill, and emphasised that in this the building societies have an important part to play.

In the Government's view, the national interest will best be served if increases in interest rates notified to existing borrowers, but not yet effective, are not implemented until the National Board for Prices and Incomes has reported on this subject. This report should be available towards the middle of October.

I have asked the Chairman of the Building Societies Association to inform the members of his executive of the Government's wishes in this matter, and, if it agrees, to advise all member societies as soon as possible to comply with the policy.

Mr. Boyd-Carpenter

Is the right hon. Gentleman aware that so far as the powers sought to be taken are concerned his statement does little to diminish the chaos which was created by the First Secretary of State?

On the substance of the matter, will the right hon. Gentleman tell the House how he suggests that the building societies should maintain their flow of funds for loans in a situation in which general interest rates are being raised by Government action, so as to prevent a further falling-off in their lending and, therefore, in the house-building programme in the private sector?

Mr. Crossman

There was no chaos. There was a misunderstanding which was caused by a Press flash. As far as I have read HANSARD, there is no misunderstanding as a result of anything said by the First Secretary during the whole of the debate in Committee. He made clear throughout what I have said here, that this all falls under Clause 2 and that action can only be voluntary and not compulsory.

I have made it clear to the building societies that what we ask them to do is to postpone action until the middle of October. We considered the matter very carefully together and I do not think that the right hon. Gentleman is justified in thinking that this degree of postponement would have the dangerous results which he anticipates.

Sir K. Joseph

As the right hon. Gentleman has just confirmed that the freeze, such as it is, is only voluntary, how does he justify the allegations of his right hon. Friend the First Secretary of State, which he is now apparently supporting, that the Press was distorting the truth when it said that the legal prices freeze does not apply to mortgage interest rates?

Mr. Crossman

That is not quite what the Press said. I would suggest to the right hon. Gentleman that he could discuss this at some length later this afternoon, but if the right hon. Gentleman wishes to have it from me he can. The Press did not say this. The Press tried to make it clear, or implied, that there was to be a complete absence of any control or compulsion. What I have said is that there is an absence of compulsion, but as a result I am asking the building societies to do what I asked the local authorities to do about rents, which is to join in on a voluntary basis and to keep the freeze on a voluntary basis. There was nothing in what my right hon. Friend said which contradicted that.

Sir K. Joseph

Then surely the Press was quite right that there is no legal freeze and that the freeze is purely voluntary.

Mr. Crossman

In that case, I am delighted to hear that the Press and my right hon. Friend agree with themselves, and I do not know why the Committee wasted such a lot of time.

Mr. Freeson

Would my right hon. Friend not agree that much of the problem could be obviated if the building societies were to undertake a fundamental review of their policy about reserves?

Mr. Crossman

This is one of the subjects which is being studied by the Prices and Incomes Board. One of the points we referred to was whether, under modern conditions, the amount of reserve now normally retained by building societies is either adequate, too much or too little. I would be inclined to agree with my hon. Friend that there is a great deal in his contention.

Mr. Lubbock

Does not the Minister agree that if the mortgage rate is held at its present level, voluntarily or compulsorily, that also means that the investment rate if frozen as well, and that under these circumstances the inflow of funds to the building societies would dry up? Will the Minister, therefore, take powers to grant loans to the building societies at the present investment rate, so as to allow them to continue to support the private house-building programme at its current level?

Mr. Crossman

It was precisely because I realise that there are the dangers to which the hon. Gentleman has drawn attention that I did not ask the building societies, for instance, to hold things level for a year or even six months. I asked them to hold things level until October because I thought that it was ridiculous that, when the matter had been referred to the Prices and Incomes Board to discover the answers to the questions raised by the hon. Gentleman, the rate should go up before the Board's decision had been taken.

Mr. Winnick

During the general freeze on incomes would the Minister recommend owner-occupier to refuse to pay an increase in mortgage interest rates quite regardless of what the building societies recommend?

Mr. Crossman

I certainly would not.

Mr. Rippon

Does not the Minister understand the damage that has been done to the housing programme by the continued uncertainty about the position? Does he not understand that the person who wants to buy a house wants to know what he will have to pay? What day this week will the Minister make his promised statement about the mortgage option scheme? Does he not have a qualm of conscience that what we are arguing about is whether it should be 6¾ per cent. or 7⅛ per cent.? Will the right hon. Gentleman tell us when it will be 3½ per cent. and consult his right hon. Friend the First Secretary about that?

Mr. Crossman

The House would think that I was overlong to answer all six of the right hon. and learned Gentleman's questions. He asked me about the option mortgage scheme. My reply is that I made a fairly full statement on this when talking to a builders' conference the other day and that there is no reason for any doubt whatever on the part of anybody who is buying a house as the position is explained to such people absolutely explicitly.

The scheme will be included in our subsidies Bill. I described in detail what the scheme was and I reminded people, once again, that they could switch to it and, therefore, that they could buy straight away. Hon. Members opposite who go on saying that there is doubt are only increasing the difficulties and are not helping to get the houses sold.

Mr. Robert Howarth

Does my right hon. Friend appreciate that millions of owner-occupiers expect that if their incomes are frozen during the next six months mortgage interest rates should also be frozen?

Mr. Crossman

I appreciate this. That is the view not only of mortgage holders. We are aiming at an overall freeze of prices as well as incomes. Therefore, rents and mortgages form a very important part. [HON. MEMBERS: "Rates?"] Rents, I said. I dealt with rents and mortgages and I said that we are dealing with these first. I take my own order of answering the questions.

Rents and mortgages form an important part of this subject and, therefore, although both are voluntary—that is, council rents and mortgages—I have called upon councils and building societies, and I have had a very much better response from them than I have had from hon. Members opposite—to come and help in doing this job.

Mr. Kitson

What discussions does the Minister intend to have with the Minister of Agriculture, as the Agricultural Mortgage Corporation has raised its rates by ¾ per cent. and the Government are responsible for nominating two directors to that Corporation?

Mr. Crossman

That is another question, which the hon. Member might address to another Minister.

Mr. St. John-Stevas

Surely the Minister has misled the House yet again by saying that a mortgage is not covered by Clause 26 of the Prices and Incomes Bill. Surely, a mortgage is a loan of money, that is, a service, for which interest is paid—that is, a charge—and this comes directly within Clause 26. What is important is what the Bill says and not what the Minister says.

Mr. Crossman

I listen always with great attention to the hon. Member. All I can tell him is that my legal advisers advise me differently.

Several hon. Members rose——

Mr. Speaker

Order. Mr. Jay. Statement.