§ 3. Mr. Rost
asked the Chancellor of the Exchequer what is his estimate of the reduction in building society interest 1104 rates to borrowers that would result from the exemption of building societies from corporation tax, by such exemption being passed on fully in lower interest rates to borrowers.
§ Mr. Rost
I appreciate that building societies cannot easily reduce their rates to borrowers at present, despite the lower Bank Rate, because they have to compete for their money in the market in order to continue to attract sufficient funds to provide mortgages, but does not my hon. Friend agree that interest rates on mortgages could be reduced at a stroke if building societies were now exempted from taxation? Would this not implement yet another election pledge, by reducing mortgage interest rates from the all-time disgracefully high level to which they were allowed to rise by the previous Government? May we have some action?
§ Mr. Macmillan
I do not accept most of the implications of what my hon. Friend says. Nor is he correct in his assumptions about the effect of corporation tax on building society interest rates. If there had been no corporation tax of any kind on building societies and the whole of the corporation tax had been devoted to lowering interest rates, they could have gone down in 1968 by 0.2 per cent., in 1967 by 0.17 per cent., and in 1970 by 0.22 per cent.
§ Mr. Barnett
The House will be surprised that the Chief Secretary could not accept the serious implications of his hon. Friend's supplementary question. As there has now been a cut in taxation on building societies—that is, through the cut in S.E.T.—what estimate has he made of what the effect will be towards a cut in their interest charges?