§ (1) The Treasury shall have power to restrict the payment or charging of interest by banks and other financial institutions.
§ (2) The power conferred by subsection (1) above shall be exercisable by order, or by notice given to the institution, or each of the institutions, affected by the notice.
§ (3) An order under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.—[Dr. Gilbert.]
§ Brought up, and read the First time.1326
§ Mr. Deputy Speaker (Miss Harvie Anderson)
With new Clause 3 it will be convenient to take Amendment No. 24, in Title, line 4, after 'dividends', insert 'interest'.
§ Dr. Gilbert
The new clause is intended to give the Treasury power for the first time, in the context of the Government's counter-inflation programme,to restrict the payment or charging of interest by banks or other financial institutions.The new clause is set down at a time when interest rates in this country have been soaring faster and higher than ever before. The commercial banks have recently raised their base lending rates to a record height of 9½ per cent. The Bank of England's rate, which used to be called Bank Rate, is up at a record figure. Personal overdrafts, which were at 6½ per cent. or 7 per cent. a year ago, are now costing 12½ per cent. to 14 per cent. In short, Britain is now the most expensive country in the industrialised world in which to borrow.
What is more, the end is far from being in sight. As the banks are bidding frantically in the open market for funds, so we can expect the process to continue in a higher and higher, giddier and giddier spiral until the Government take drastic action.
When we look to see who is hurt by spiralling interest rates, the answer is almost everyone—everyone who has an overdraft, everyone who has or wants a hire-purchase agreement in the near future, and everyone who wants credit. Recently I drew attention to the fact that the Government permitted the introduction of the new Access credit card with rates of interest of between 19 per cent. and 21 per cent. on extended terms. That was a clear conniving at the substitution, under the overall credit limits, of higher cost sources of credit for relatively low cost sources from overdrafts and that type of borrowing. The cost is enormous. Mr. Graham Searjent in the Sunday Times of 25th February calculated that, already, the increase in interest rates was costing the average family about 25p to 30p a week.
1327 5.30 p.m.
Briefly, his calculations were to the effect that the higher cost of mortgages on individuals, plus the higher cost of hire-purchase loans, plus the higher cost of bank loans, will amount to well over £200 million—the difference between the gross costs of outstanding borrowings at today's interest rates and the cost of the same borrowings at rates prevailing only a year ago. One fears that it will not be long before there is a general move upwards in mortgage rates
The Building Societies Association is already talking ominously about rates of 10 per cent., as against current rates of 8½ per cent. With the return on bank deposit accounts now nearly up to that which the building societies themselves can offer, it will not be long before the building societies have to offer more in order to keep their share of the funds coming into the market.
Everyone who wants to borrow suffers, but who is suffering least? As usual under this Government, those who suffer least are those who are most well off. Under the Finance Act, 1972 deductibility of interest was restored for speculative purposes and the more money one has, of course, the more advantage one derives from that enormous tax concession. It applies to everyone who wants to borrow, except, of course, under this Government, when one is borrowing only about £400 or £500. If one's interest charges are only £35 a year, one gets no relief. If one is paying £3,500 as a big speculator on the Stock Exchange, one gets virtually total relief of one's interest. It is all subsidised by the general run of taxpayers.
But who benefits? Somebody benefits under this scheme of things, and the people who benefit in times of high interest rates are those with money to lend. Those who can deposit funds with the commercial banks get a slightly higher return, but the people who make the most money are the moneylenders, the hire-purchase firms and above all the banks—as one might expect, the banks.
There has never been such an explosion of bank profits in British history. The figures are absolutely startling. Over the last couple of weeks or so, the four big commercial clearing banks have reported 1328 huge increases in profits. The profits of the National Westminster Bank have risen by £42 million, those of Barclay by £35 million, those of the Midland by £20 million and those of Lloyds by £16 million—a total increase of about £113 million in bank profits. The increase in the second half of 1972 is of the order of 60 per cent. pre-tax.
We have every reason to expect that this increase in profits will continue and to believe that those figures understate the true position, because to some extent they are weighted down by the profits of the banks' overseas operations, which are on nothing like such a munificent scale as the profits from their operations in this country.
To quote Mr. Michael Blanden of the Financial Times about a week ago:Stockbrokers are united in expecting further substantial profits growth from the big banks.How right he is, and how right they are.
There is nothing at all in the code, as I read it, that constitutes a direct attack on interest rates as such. How do the Government propose to control them? So far as I can see, they propose to rely, possibly, to some extent, on paragraph 38 of the code, on the question of the degree of profit in the best two of the last five years. But those five years are up to 1st April 1973, and as I have already shown, that would include one of the biggest bumper years in banking history.
It should be noted that the code contains provisions allowing companies price increases if their last five years' profits are unrepresentatively low. Of course—but there is nothing in the code to deal with those cases in which any two of the last five years contained profits which are unrepresentatively high. The Government's attitude is virtually total helplessness.
§ Mr. Bruce-Gardyne
Before the hon. Gentleman concludes, could he help the House by giving an indication of the impact he thinks that acceptance of his amendment would have on monetary policy, and whether that impact would be desirable or undesirable, in his view?
§ Dr. Gilbert
I will come on briefly to the general question of monetary policy. The amendment is not quantified. It does 1329 not instruct the Government what should be an ideal level of interest rates but merely gives them power to control them. Obviously, one cannot deal in quantitative terms without considering the total volume of money and of lending, the level of Government expenditure and taxation and so on.
The Government's general attitude is virtually total helplessness. It is true that they try, under paragraph 21(ii) of the code on page 5, to exclude certain types of interest charges from costs which will be allowable under phase 2.
§ The Chief Secretary to the Treasury (Mr. Patrick Jenkin)
The hon. Member's reference to that paragraph allows me to put on record our apologies for a misprint. The word "not" should appear before "normally" in paragraph 21(ii). We are dealing here with interest which is not usually chargeable profit and loss account. Some of the Press have gathered that but some have not. Of course, in the subsequent issues of the Green Paper, we shall see that a correction slip is included. Those distributed yesterday did not have that correction and I therefor draw attention to the misprint.
§ Dr. Gilbert
I am grateful to the Chief Secretary. I had concluded that there had to be a misprint of precisely that nature. The effect, of course, if one reads paragraph 21(ii) with the "not" included, is that increases of interests rates attaching to debenture charges and that sort of thing will not be allowable costs but that interest on bank and hire purchase charges—
§ Mr. Jenkin
We are not in Committee, but I think that the hon. Gentleman has misunderstood the principles. The interest which would not be allowed as an allowable cost is interest which would normally be chargeable to capital account. Debenture interest would normally be charged to the profit and loss account, and any increase in the interest would be the allowable cost to the extent provided in the consultative document.
§ Dr. Gilbert
Very good. To the extent, then, that paragraph 21 disallows certain rates of interest for purposes of calculating profits under phase 2, it helps in the attack on the increase in the cost of living. For that, we must be grateful.
1330 There is no direct attack on interest rates and there is therefore no direct relief for individual borrowers. For all practical purposes the Government are washing their hands of the situation and are saying that there is nothing whatever they can do about it.
This is particularly surprising in the light of the American experience in these matters. The Government have been at pains to copy as many salient points from the American phase 1 and phase 2 programmes as they possibly could, and have, like the Americans, set up a Price Commission and a Pay Board, using precisely the same terms and giving them similar powers. But there is one American institution they have completely neglected to imitate. As a third body reporting under the Cost of Living Council the United States Administration set up a Committee on Interest and Dividends and the attention of the Government has been drawn to their omission. They have done nothing about remedying it.
The Committee for Interest and Dividends in the United States has precisely the same sorts of powers as the Pay Board and the Price Commission. It has not been without effect. It was reported from New York as long ago as last November that as a result of administration attempts to "talk down" interest rates—as the phrase is over there—the First National City Bank agreed to alter the formula it used for computing its prime lending rates in order to lower these by about one-eighth per cent. as a result of the Government's suggestion. The Bankers Trust Company also agreed to abandon its floating prime rate for the time being as a result of a request from the United States Administration. More recently, at the beginning of this month when some of the large banks raised their prime rates from 6 per cent. to 6¼ per cent. the United States Administration, in the person of Mr. Arthur Burns, chairman of the Federal Reserve System, sent telegrams to all the banks asking for details of why they were changing their rates and what changes in costs and earnings lay behind it. He is reported to have insisted thathigher marginal cost of funds from sensitive money market sources should not be permitted to unduly influence institutional lending rates.It is quite clear that if the will is there, at least something can be done by an 1331 administration which is determined to act. Why are we suffering now? The answer, of course, is perfectly clear. We are paying the price of the enormous borrowing rates of the Government, the enormous deficit on public account, the enormous excess of public spending over public taxation. I do not share the general philosophy of Conservative Members that the only way to deal with this is by cutting public expenditure. What we are now getting and what we are now paying is the price of the Government's tax cuts that they gave over the last couple of years to their most enthusiastic and well-heeled supporters. Let no one be under any illusion about this. These tax cuts were presented as a cost-free bonanza to the British public. They were nothing of the sort. The public have been paying for them in higher prices and we are paying for them in higher interest rates.
Government spokesmen get up time after time at the Dispatch Box and at public meetings and boast about the enormous tax concessions they have handed out. They boast about how they have cut taxes by £1,000 million, £2,000 million and £3,000 million. They never say what is the inevitable reverse of the coin—that because of the tax cuts, by keeping public expenditure at the same level, there is an enormous deficit which is growing higher inevitably, as the report of the Expenditure Committee revealed only the other day. The CBI has just given as its estimate that if there is neither an increase in taxes nor a cut in public expenditure there will be a deficit of about £4,000 million in the coming year, even higher than this year. It must have its effect either on higher interest rates or on higher prices.
The Government face a very serious problem of debt funding just over the horizon. Their options are quite clear. They will have to make drastic cuts in public expenditure, or they will have to raise taxation, or there will be continued inflation, or there will be higher interest rates. The probability is that there will be a compromise with a combination of all four.
The Chancellor's chickens are coming home to roost at a rate and with a ferocity—if one may use that word about chickens—that I think he never would have anticipated. We on the Labour side 1332 consider that the present level of interest rates, the pattern of interest rates, the way in which they are accelerating and the way in which they are being accompanied by indecent bank profits is a gross affront to this country. We say to the Government that they cannot hope to get the ordinary people to co-operate in the objectives of the Bill while the Government are prepared to sit back and see the moneylenders profit to such an outrageous extent at the expense of ordinary men and women who find it necessary to go into debt.
§ 5.45 p.m.
§ Mr. Bruce-Gardyne
Fortunately the hon. Member for Dudley (Dr. Gilbert) more or less destroyed the case for his clause in his concluding remarks. I took it from the concluding passage of his argument that the Opposition would not seek to press the clause to a Division and I look forward to my hon. Friend's confirmation that if the Opposition had had any intention of doing so Government Members would have been invited to resist it.
The amendment is totally and utterly incompatible with the direction of monetary policy on which my hon. and right hon. Friends have now said—in my view a little belatedly—that we are embarked. The hon. Member for Dudley drew attention to the recent increase in bank profits and the only part of his argument with which I found myself in broad agreement was when he said that the increase in bank profits was likely to continue. He was absolutely right. I imagine that bank profits next year will be substantially higher than those just declared and I hope that will be the case because I belong to a minority cult in this House which continues to believe in profit. I have some reservation about regarding a certain level of profitability as excessive.
I certainly accept the hon. Member's proposition that we shall see a further increase in bank profits because, as far as I can tell, we shall see a further substantial increase in interest rates if the Government are genuine in their determination to bring the growth of money stock gradually under control. Although the hon. Member was careful in response to my intervention not to quantify the clause, and not to set levels at which the limitation on interest rates would begin 1333 to apply, nevertheless he could hardly dispute that any artificial limitation on interest rates would be incompatible with a coherent monetary policy. The need to impose a control on interest rates would presumably arise only if interest rates were rising, and interest rates would be rising because unless they rose the money stock would grow more rapidly than the Government were prepared to tolerate. That is a logical sequence of events which could not very well be disputed.
The latest indications that we have had on the growth of the money supply are perhaps not entirely reliable. It is true that we should not judge too much by one month's figures. However, I doubt whether my hon. Friend the Chief Secretary would go very far in disputing the proposition that the rate of growth in the money supply to the latest period for which we have information is wholly excessive. We shall have a need in the months ahead for a more restricted monetary policy. At the same time, I am inclined to agree that the outlook for the net borrowing requirement in the next 12 months is, to say the least, ominous.
I do not regard the CBI as necessarily the ultimate font of all wisdom under its present direction. I am inclined to the view that its estimate of the likely net borrowing requirement in the year ahead may turn out to be an underestimate. It seems possible that the figure will be nearer £5,000 million than £4,000 million, not least because I suspect that this year's net borrowing requirement will turn out to be rather less than that predicted in my right hon. Friend's Budget last year. Inevitably public expenditure spending programmes have slipped behind schedule and, therefore, they will come on with greater force and volume in the year ahead.
The hon. Member for Dudley tried to some extent to cover his flanks by suggesting that rather than allow interest rates to rise to meet the predicament, the Government should go for higher rates of taxation. I do not believe that it is as simple as that. Alas, it is difficult to devise a type of additional taxation which will conflict neither with the objectives of this legislation nor with the objective of achieving a 5 per cent. rate of growth and an improvement in industrial investment.
§ Mr. John Cronin (Loughborough)
Would the hon. Gentleman be sympathetic towards a tax on profits made on land values? That surely would not upset any of the criteria which he has mentioned?
§ Mr. Bruce-Gardyne
I should like to see us trying to tackle the causes of inflation for a change rather than dealing with the symptoms. I confess that that is not conventional wisdom at present. The course of honour and glory at present, in the eyes of many observers of the nation's affairs, lays the emphasis on dealing with the symptoms of inflation, rather than the causes. If we are to do that, something along the lines of what the hon. Member for Loughborough (Mr. Cronin) is talking about would fit in with that pattern. I should rather see us tackling the causes than the symptoms.
§ Dr. Gilbert
The hon. Gentleman challenges me to offer any tax changes that would fit into this programme. Would he care to discuss the point which I raised—namely, as a result of last year's Budget, interest charges are not deductible and that that is a direct incentive for people to borrow and force up the value of land and homes? That is an incentive to speculate.
§ Mr. Bruce-Gardyne
I do not want to be dragged too far wide of the amendment. Of all the various suggestions put forward from the Opposition benches, the one which the hon. Gentleman has just mentioned is one with which I find myself least unsympathetic. I do not go beyond that. In general, I put the proposition that it would not be easy to enable us so to restrict the net borrowing requirement in the year ahead by increases of taxation that there was not a pressure to continue with a further and continual rise in interest rates, without coming into conflict with either the overall objectives of the Bill or the objective of encouraging industrial investment, if two objectives are compatible, which I doubt—but that is a matter with which we shall have to deal at another stage.
The amendment is totally incompatible with the requirements of the monetary policy as far as we can see them for the year ahead. That in itself is a more than 1335 adequate reason for rejecting the amendment. It would also be totally incompatible with competition and credit control. I know that there has been a growing volume of opinion among commentators, most of whom are finding that they are having to pay a real rate of interest on their overdrafts for the first time for many years, to the effect that competition and credit control should be thrown into the ash can.
I was relieved to hear a reply from my hon. Friend the Minister of State, Treasury, last week to my hon. Friend the Member for Kingston-upon-Thames (Mr. Norman Lamont), who asked my right hon. Friend the Chancellor of the Exchequer whether he was satisfied with the working of the policy of competition in credit. My hon. Friend the Minister of State said:Yes, Sir. The changes have resulted in a welcome increase in competition and innovation in the banking sector.'Further, in answer to my hon. Friend, he said:… A return to ceilings on bank lending in the private sector would stifle competition and in any event would have severe limitations as a monetary tool."—[OFFICIAL REPORT, 22nd February 1973; Vol. 851, c. 657.]I was inclined to say "Bravo". I hope we shall hear nothing tonight which will in any way show an indication of wavering from that robust assurance. The amendment is totally incompatible with competition and credit control.
§ Dr. Gilbert indicated assent.
§ Mr. Bruce-Gardyne
I am glad to see that the hon. Gentleman agrees with that. That in itself would be another reason for opposing it. I agree entirely with the sentiments expressed by my hon. Friend the Minister of State.
We are impaled on the horns of a slightly embarrassing dilemma when we are discussing the amendment. The dilemma arises from paragraphs 38 and 40 of the Green Paper, to which the hon. Member for Dudley referred. He rightly pointed out that paragraph 38 saysPrices should be determined so as to secure that net profit margins do not exceed the average level of the best two of the last five years.He further pointed out that paragraph 40 says 1336Where the reference level has been exceeded, or where in the light of interim accounts or other evidence it is likely to be exceeded, price reductions … should be made according to the actual or expected excess.Here we seem to be in a slight difficulty. I agree with the hon. Member for Dudley that the profits of the clearing banks in the year ahead will exceed the reference point. That is very likely. Of course, if the banks are required to abolish their charges, we might even be paid for keeping an account with the banks. However, I have a nasty suspicion that unless we are paid large sums for keeping our accounts with the banks we shall find that the impact of higher interest charges in the year ahead will mean that the banks are over the top of their reference point. What do we do then? It seems that this is a slight embarrassment. The amendment must be rejected.
I am not so clear about what we can do, other than accepting the effect of the amendment, to ensure that the banks conform to paragraph 40. I hope that my hon. Friend will make it clear that paragraph 40 will not under these circumstances apply to the banks. That will be the sensible line for us to take. That will make the policy completely consistent. We shall then have an assurance that the Government will pursue a coherent and responsible monetary policy in the year ahead. But if my hon. Friend the Chief Secretary is not prepared to give that assurance, we shall be left with considerable doubts and anxieties on what the likely course of monetary policy is to be in the years ahead. My hon. Friend must seriously address himself to this dilemma.
§ 6.0 p.m.
§ Mr. Cronin
I support the new clause so ably moved by my hon. Friend the Member for Dudley (Dr. Gilbert).
The important aspect of the new clause is that it reflects a serious disquiet which is shared by both sides of the House about the high rates of interest prevailing at present. The clause asks the Government to take powers to reduce interest rates. As far as I know, since the First World War we have never had such high rates of interest. This is a symptom of the thoroughly rotten state of the economy under the administration of the present Government.
§ Mr. Cronin
Yes. I am grateful to my hon. Friend, but I should like to come to that point later.
We have never previously had a situation in which the equivalent of the minimum lending rate of the bank was 8¾ per cent. Only about a month ago it was 9 per cent. This means in effect that a first-class borrower has to pay 11 per cent. for his borrowings. How can the Government expect any substantial expansion of the economy in those circumstances?
It has been pointed out by my hon. Friend the Member for Dudley that the only gainers from this are the banks. My hon. Friend gave some very useful figures about enormous increases in bank profits. He may not have mentioned the percentage increases. However, last year the National Westminster Bank for instance, increased its profits by 50 per cent. That is an organisation which is supposed to have some degree of public service attached to it, and not to be a pure blight on the economy.
It is disappointing that there is no reference in the Green Paper to bank interest rates except for the rather scanty references at paragraphs 21 and 66.
If I may digress, we have been told that at the top of page 5 there is a misprint, and that the word "not" should be inserted. Will the Chief Secretary give an assurance that there are no similar misprints in the document, no other "nots"? It would be nice to know that a fundamental document of Government policy has been accurately printed and is not full of careless mistakes of this nature. It is extremely difficult to debate a subject such as this when one is suddenly told at the last moment that the word "not" should be inserted and that the opposite is meant.
§ Mr. Bruce-Gardyne
If the hon. Member consults paragraph 91 on page 16 he will find a not entirely dissimilar instance there.
§ Mr. Cronin
That is very helpful to know. But no doubt the Chief Secretary will deal with that point.
It is an obvious truism that the high interest rates which we are asking the Government to control will have a deplor- 1338 able effect on capital investment and on the building up of stocks and, therefore, will increase unemployment. We need not develop that point because both sides of the House are enormously and painfully aware of it. An important thing to remember is that these high rates are not having any effect on the property speculator, the pampered child of the Government. As things are going at present, it does not worry a property speculator if he pays even 15 per cent. interest. He knows that in a few months' time he will make 100 per cent. profits. Property speculators will not be affected.
This will affect everyone else, however, who makes a worthwhile contribution to the economy. Most important, of all, it will affect principally the small man. The large borrower, the man in big business, will be able to offset these high interest rates against his taxation. The man who pays a high rate of surtax, or large amounts of tax under the new tax code, will be very much less affected, whereas the smaller man, like the small businesses all of us know in our constituencies, will be much more severely affected by these interest rates which are now so high. Yet the Government have declined so far to take any action to control and to reduce these rates.
Perhaps the Chief Secretary will correct me if I am wrong, but I presume that the Government's reluctance to control interest rates is due to an intention to let them rise as high as possible to cut down the money supply. I do not know whether that is the intention, but I suggest that these high rates would not occur if the Government took some very sensible steps to reduce the inflation on borrowing. If the Chief Secretary could persuade his right hon. Friend the Chancellor of the Exchequer, in this time of national crisis, to take the very sensible step that was taken by my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) when Chancellor, and to ensure that in future the interest paid on borrowings could not be set against taxation as an expense, except in cases where that was particularly helpful in the national interest, that would bring down interest rates enormously. It would not then be necessary for us to demand that the right hon. Gentleman should have some effective form of control.
1339 The other important thing is that there should be some quantitative control of interest rates. One of the maddest things that the Government did at the end of 1971 was to abolish all quantitative controls of interest rates and controls on hire purchase and to cease giving the banks any directions about who should receive loans and who should not. If we had quantitative controls, this would be much more help for the economy and these high interest rates would be unnecessary.
In conclusion, it is essential that the Government should have power to control these high interest rates. At the same time, however, such rates would not be necessary if the Government abandoned their crazy policy of subsidising a demand for credit and at the same time raising its price.
§ Mr. Biffen
The hon. Member for Loughborough (Mr. Cronin), who is, I suppose, a somewhat fastidious social democrat within the Labour Party, nevertheless committed the solecism of describing our present circumstances asthis time of national crisis.It would be helpful if in all of these debates we tried somehow to disembarrass ourselves of this almost latter day sense of impending doom.
I was delighted to hear my right hon. Friend the Secretary of State for Trade and Industry on the radio this morning when he put his radio interviewer very firmly in his place when being asked about the nature of the present industrial unrest.
We are living through a period of economic difficulty, although I cannot remember when we were not doing that. Without doubt the present rates of inflation are intolerable and carry in their consequences the destructive elements which are immensely socially harmful as well as possibly economically harmful.
We are now discussing a good-nature tease. It is a good-natured demand by the Opposition—and they are entitled to a tease—to probe some of the frontiers of Government competence in controlling the price mechanism. It is true that we could use this as a debate to examine the balance between expenditure and taxation and the consequence which that balance has for interest rates. However, 1340 I shall not be beguiled into following that line of argument because a much more apt occasion will present itself immediately after 6th March.
This debate highlights the anomalous position of banks. It has been observed to be a lacuna in the legislation and the way in which the legislation will be operated by the Government, which perhaps is even more important than the legislation itself.
My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) made a splendid speech about the banks and spoke of their opportunity and potential. I felt that here was the Clive Jenkins of the banking world. He had gone through the document and had come to certain conclusions. If we look at paragraph 66 we seeSubject to paragraph 10, all charges of banking enterprises other than interest rates are within the control and the system of allowable cost increases and the limitation on net profit margins apply to them.The qualifying phrase "other than interest rates" is exactly the sort of material that provides a livelihood for the Clive Jenkins of this world, whether in respect of Threadneedle Street and its immediate surroundings or of the white collar or blue collar unions.
My suspicion is that the blue collar unions will be the last people to recognise these circumstances, but eventually they, too, will appreciate the situation. It is this area of fudge and ambiguity that will give rise progressively through time, as we have these three years in prospect, to a sense of inequity and injustice as one section of the community rather than another can spot areas where they can operate pricing systems more effectively than otherwise would be the case.
The hon. Member for South Angus lighted on the centre point of this debate, which must be the process of learning from my hon. Friend the Chief Secretary to the Treasury where the Government now stand in respect of the Bank of England's competition and credit control. The Green Paper has cast a shadow of doubt on the determination of the Government to stand by that policy. My hon. Friend will be performing an immensely valuable service not merely to the Treasury Bench, of which he is a most distinguished member, but to the banking and financial community generally if he 1341 uses this occasion to say clearly that the Government still stand by the Bank of England's competition and credit control.
Almost inevitably if the Government stand by the competition and credit control, it seems to me to be impossible to foresee circumstances in which the mortgage market does not become affected. I believe that there will be an upward thrust of mortgage rates unless action is taken to prevent that occurring. I am particularly anxious to know the Government's attitude. It puts the building societies in an impossible position if they are unable to compete along with other elements in the banking system for the resources available for lending. We may find ourselves in a situation where there is an artificial shortage of mortgages created because the mortgage market is leaned upon.
I do not suppose that notice will be served under Clause 5. I imagine that it will be part of the process of Government by invitation which was put so succinctly by my right hon. and learned Friend the Minister for Trade and Consumer Affairs earlier this afternoon. Government by invitation is one of the most offensive forms of government that can be undertaken. It is particularly offensive when we live in an age in which, quite properly, we are told that law and order are very important and essential elements in political discussion. I like to feel that the Government feel bound by authority as well as requiring others to abide by it.
Therefore, in the context of a continuation of the Government's adherence to competition and credit control, I hope that the Government will take the opportunity to clarify what they believe will be the degree of independence that will be permitted to building societies. It is clear that there are already gathering day by day further doubts and question marks about the execution of this aspect of Government policy. It is an area in which speedy elucidation is needed.
§ Mr. John Mackie (Enfield, East)
I am tempted to my feet by the remark of the hon. Member for Oswestry (Mr. Biffen) that this is a teasing clause. That was a light-hearted remark if ever there were one.
1342 The clause seeks to bring some measure of control over interests rates, and I should like to relate my own experience as a medium borrower in an industry that is seeking to increase production. When my sons and I were considering a project to increase beef production, we discovered that present interest rates precluded us from going ahead with that project. Anybody who has studied the matter will know that there has been a severe fluctuation in the price of beef which has fallen from £22 per cwt. to £18 or £19 per cwt. Admittedly that is still high, but farmers have to make their plans on the basis of present-day prices.
The Chief Secretary to the Treasury said in Committee that his right hon. Friend the Minister of Agriculture would try, through the price review, to bring in some control of farming profits. If that is to be the case, and if at the same time there is to be no control over interest rates, then increases in production will be inhibited. I emphasis once again that this clause is by no means a teasing provision, but is a serious contribution.
§ Mr. Patrick Jenkin
This debate in a short time has ranged very widely. I shall not take up the remarks of the hon. Member for Enfield, East (Mr. Mackie) on the subject of the problems of farm price reviews and beef prices. The hon. Member for Dudley (Dr. Gilbert) and one or two of my hon. Friends, including my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), sought to raise budgetary matters—for example, the borrowing requirement and the possibility of tax changes. These are matters about which I must maintain the silence of a Trappist monk. There was also discussion of future movements of interest rates, which is a matter on which Treasury Ministers speculate at their peril. So, for reasons which I am sure the House will understand, I shall have nothing to say on these matters but will confine myself to the narrow but, I concede, important points which the hon. Gentleman raised in moving this new clause.
Two central issues have been mentioned in the debate, arising out of the problem of the high rates of interest which we are at present experiencing; first, the burden of these high rates on the individual borrower and, secondly, the benefit which they mean for the banks 1343 and other financial institutions and the relevance of that benefit to the counter-inflation policy. As the hon. Gentleman recognised, these are two sides of the same coin, and it is the intention of this new clause, by conferring on the Government power to restrict the rates of interest, that both these problems should be dealt with. I must make it clear to the House that I am afraid the new clause is unacceptable and I hope that the House will resist it.
The freedom for interest rates to fluctuate is an essential instrument for the overall management of the economy. If interest rates were controlled in the manner which the hon. Gentleman envisaged in bringing in his new clause the authorities' ability to influence monetary conditions in the country would be severely hampered. It is indeed widely recognised —and has been for some time now, as my hon. Friend the Member for South Angus pointed out—that control of the money stock is essential in the battle against inflation. The new clause, by depriving the authorities of the instrument of control in this regard, would help to defeat the whole purpose of the Bill. In other words, as my hon. Friend the Member for South Angus said, the power which it is sought to give to the Treasury under this new clause is incompatible with the rest of the Government's counter-inflation policy.
I recognise that this is not easy for the man-in-the-street to comprehend. To him, the interest he pays—whether on a mortgage or an overdraft, or through hire purchase—is a price, or a charge. When his income is restricted and he sees other prices and charges being restricted as severely as the newspapers this morning recognise it is the Government's intention to restrict them, he cannot see why this charge should not also be restricted. And especially must this be true at a time when, as has happened in the past few months, the action by the authorities to keep the expansion of the money supply in check has put an upward pressure on all interest rates.
§ Dr. Gilbert
I understand the Chief Secretary to say that if we tried to set interest rates in any rigid pattern it would be totally impossible to work any monetary policy. This clause is merely an enabling one; it does not set any limits, 1344 or specify types of interest rates. If this is so, can the hon. Gentleman explain why countries such as the United States and Canada, for many years, quite outside the conditions of the economic emergency, have had permanent controls over various types of interest rates? If they can do that, why cannot we?
§ Mr. Jenkin
I am sure the hon. Gentleman recognises—and I was going to deal with the point—that conditions in other countries, with their various institutional arrangements, are bound to differ. He is quite right: in the American counter-inflation policy they had their committee on interest and dividends, but the experience and the problems of the United States differ in many respects from what we face here. It simply does not follow that because it was right to set up in America a committee of the sort President Nixon set up in connection with his pay and prices policy it would be appropriate to do the same thing here.
What is more significant is that the United States did not, in fact, impose statutory controls on interest rates, and, for reasons which I am coming to and have indeed already adverted to, it would be inappropriate to do so here.
There are other differences. We have taken the view—and I do not think it has been seriously challenged on either side of the House—that in the interests of fairness and in order to be seen to be dealing fairly with all categories of our population, we should introduce a control on dividends, and the House may think it is a pretty stringent control. They have not had a control on dividends in America.
§ Mr. Jenkin
The hon. Gentleman may say that is irrelevant, but I think we would have heard in very strong language from him if we had decided not to do it. The fact is that if there is to be control of the incomes of employees and the self-employed, and profit margins, and distribution, we feel it right that at the same time restrictions should be placed on investment income paid in the form of dividends. That is another difference between ourselves and America, because they do not do that.
The ordinary man may well ask how the Government can claim to be fighting 1345 inflation by letting interest rates rise as they have. The short answer is that there is no effective method of controlling monetary aggregates other than the use of interest rates. The hon. Member for Loughborough (Mr. Cronin) invited me to return, as he put it, to some form of quantitative control on lending. I just do not believe that that is right. The quantitative controls on bank lending which were employed for many years, particularly by the party opposite, simply do not represent a viable alternative for the control of monetary aggregates to the movement of interest rates. I entirely agree that they did succeed in holding back certain sorts of lending. They held down bank lending to the private sector by the operation of lending ceilings, but only at the cost of great distortions in the allocation of credit and considerable inefficiencies in our financial system. These grew more and more severe and the anomalies became greater and greater as time went on. Constrained by ceilings, the banks and finance houses had no incentive to go out and compete for business, while borrowers, particularly those in non-priority areas, were forced to seek funds, often at very high cost, from fringe institutions outside the credit control net.
§ Mr. Cronin
I am sure the hon. Gentleman will at least concede that in the days of the Labour Government there was not this absolutely crazy escalation of land and property prices, brought about by the subsidies given by the Government to the speculators.
§ Mr. Jenkin
I will answer the hon. Gentleman now; I was coming to it later. In the matter of the tax allowance for interest on borrowing to invest in land, the purchase of land, and the improvement of land and buildings, the rules today are exactly the same, word for word, pound for pound, as they were under the hon. Gentleman's Government. We have not changed by one iota the tax allowance for interest on money borrowed to invest in land purchase or land improvement. All the talk we have had about the allowance helping the land speculators, and so on, comes ill from hon. Gentlemen opposite. The reforms of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) left the tax relief for interest on borrowing unchanged, and it stands today as he left it.
§ Mr. Benn
But the hon. Gentleman will agree that as a result of leaving it as it was, land and property speculation has occurred and, since the Government have changed their own policy several times in the past two-and-a-half years, if they recognise that there has been a link between the existing system—left by the last Government—and what has happened, there is no reason at all why they should not respond by changing the policy.
§ 6.30 p.m.
§ Mr. Jenkin
If the right hon. Gentleman is suggesting that there should now be a disallowance for tax relief for interest charged on money borrowed by, say, businessmen investing in the buying and selling of land, he should say so. That was never the policy of his party, and it would be a very difficult policy. But we are moving a little wide of the clause—
§ Mr. Benn
As the hon. Gentleman has challenged me on this, I remind him that one of the matters raised by the TUC in its discussions with the Government was that action should now be taken to deal with the scandal of the rise in land and property values, which is affecting rents and payments for houses by members of the unions. This is not a new or surprising matter, but one that might have some bearing on the prospects of reaching a voluntary agreement.
§ Mr. Jenkin
I am sure that the right hon. Gentleman realises that this is not the time to refer at greater length to paragraph 23 of the counter-inflation White Paper of January, in which we said that the Governmentintend, before the next stage of the policy comes into operation, to bring forward proposals which will increase the availability of building land and reduce the extent to which it is possible for people to make disproporionately high profits from transactions in land.I must ask the right hon. Gentleman to await the appropriate announcement from my right hon. Friend.
I return to the question of the money supply and the path that the hon. Member for Loughborough was asking me to re-tread. There is no evidence that in the longer term the imposition of lending ceilings had much impact on the growth of the money supply. Their main effect 1347 was to alter the channels by which the market supplied money, and the money often flowed in a much less efficient way. If the demand for money exists the supply will usually be forthcoming by one means or another. If the banks are forbidden to satisfy the demand the public will try to find other ways, perhaps by selling gilt-edged stock or going to fringe institutions.
We saw under the previous Government the kind of thing that happens. If the authorities go into the market to purchase debt in an effort to prevent interest rates from rising, their actions simply provide the money that ceilings prevented the banks from making available. There cannot be much sense in that.
I think that it is widely agreed, not only on the Government side, that the fundamental changes in the techniques of monetary supply that we made in 1971 have led to a much sharper and more competitive approach in the financial system, which has been of general benefit to the whole economy. Important and far-reaching structural changes have occurred in the past year or so as the banks have come to play a much greater rôle in channelling funds through the economy. Part of the big increase in bank lending to the private sector has been an inevitable catching-up process after years of rigid controls which had greatly distorted the allocation of credit.
I can respond to the requests of my hon. Friends the Members for Oswestry (Mr. Biffen) and South Angus by assuring the House that it is not our intention, by resorting to quantitative restrictions, to throw away the striking gains in the efficiency of the financial sector that have been achieved under the new arrangements. That would be a retrograde step, and one that would not avoid the need for high interest rates if an excessively rapid growth in the money supply is to be reduced.
But that is not to say that there should be a free-for-all in the allocation of credit under the new system. We reserved the right to give qualitative guidance to the banks from time to time as we felt necessary. Last August, as the demand for funds from industry started to pick up, we reminded the banks of the importance of satisfying the needs of industrial borrowers and asked that they 1348 should, as necessary, curb their lending to property companies and for financial transactions.
The banks are very conscious of their responsibilities in this regard, and as financial conditions have tightened in the past few months there are indications that they have been cutting back on other types of lending, particularly for the purposes mentioned in the guidance. With the system of overdraft facilities in this country, the effects of that process take time to show up in the figures, but they will become more evident as existing facilities fall due for renewal.
No one—least of all the Government —wants to see interest rates at a high level. The key to lower interest rates lies in the success of our efforts to curb inflation. That in turn requires that the growth of the money supply be kept in check. If we are to achieve that, interest rates must remain free to fluctuate.
§ Mr. Bruce-Gardyne
How does my hon. Friend reconcile paragraphs 38 and 40 of the White Paper with the consequences for bank profits of the exemption of interest from control?
§ Mr. Jenkin
Every hon. Member who has spoken has raised the question of the banks' profits—the other side of the coin. What effect will the high interest rates have on the banks' profits, and what are the implications for stage 2 of the counter-inflation policies? A number of hon. Members have referred to paragraph 66 of the Green Paper, where we make it clear that charges of all sorts—fees, commissions, bank charges and so on—are within the ambit of control by the Price Commission. They are subject to the regime of allowable cost increases and to the profit margin control. If those margins are exceeded, not only will no increases in the charges be allowed, but there will be power under the Bill for the Price Commission to order reductions.
However, as will be apparent to anyone who read Michael Blanden's perceptive article in the Financial Times this morning, the operation of the controls in relation to banks is not straightforward. There are problems of definition and control. Mr. Blanden mentioned in particular the problem of how to define the turnover of a bank. Here it is 1349 essential that the Government should take the opportunity of the publication of the Green Paper, which is a consultative document, to consult the banks and the finance houses on the precise application of the controls in their sector.
But I must make it clear that it is our intention, so far as it lies within our power, to ensure that the banks and other financial institutions are not excluded from the limits that apply to the rest of the economy, and that the Price Commission should be able to exercise its powers under the Bill to implement the code in relation to the banks and financial institutions.
§ Mr. Peter Hordern (Horsham)
Can my hon. Friend confirm that no measures will be taken with regard to the banks other than those mentioned in the Green Paper?
§ Mr. Jenkin
I cannot be as specific as my hon. Friend would have me be, because we are to consult the banks, the finance houses and other bodies, and I do not want to tie the hands of the Government and those who will carry out the consultations in deciding the best way to achieve the purpose I have just outlined.
However, it would not be compatible with the rest of our counter-inflation policy to seek to control interest rates, for they must be free to fluctuate as required for the overall management of demand, which is an essential element in the control of inflation.
The new clause is not only inconsistent with the rest of the counter-inflation policy; it is unnecessary to achieve one of the objects of that policy—to subject bank profit margins to the same sort of strict regime as that applicable to other enterprises.
Therefore, I ask the House to reject the clause.
§ Dr. Gilbert
With the leave of the House, I should like to reply briefly.
Paragraph 66 of the Green Paper says:Subject to paragraph 10, all charges by banking enterprises other than interest rates are within the control …".One of the first things the Chief Secretary could do with regard to that paragraph is to make sure that the banks publish their charges. We should all be better off.
1350 The hon. Gentleman might also force all the banks to publish true financial statements. The last answer I received to a Question on the subject showed that about 90 still refused to disclose their true profits. That is another step forward that the hon. Gentleman might take in his discussions with the banks.
I welcome what the Chief Secretary said about consultations with the banks but I cannot accept his airy dismissal of the way in which things are done in other countries as being totally unsuitable for trying to control inflation here. I refer him to page 46 of the report of the Cost of Living Council of the United States for the period 1st January-31st March 1972, where it is said that the council had determined that:the issuance of mandatory regulations and orders providing for the stabilization of interest rates and finance charges is not necessary at this time"—that is not surprising, because American interest rates are much lower than ours—to maintain such rates and charges at levels consonant with economic growth.In the United States they have powers to set mandatory limits to interest rates. There is no reason why this Government should be so reluctant to take such powers. The man in the street finds it difficult to understand their continued tenderness to the banks.
Later on the same page of that report it is said thatSeveral large banks, in announcing increases in the prime rate, stated explicitly that they were not increasing consumer loan or mortgage loan rates.It would be nice to have some assurance that that would be the result of the consultations which the hon. Gentleman intends to have with the banks. The report also says thatthe Committee on Interest and Dividends has met with representatives of the commercial banking industry …. with a view toward discovering obstacles to lower rates and to the avoidance of future rate increases.The only things not controlled in the Bill or the code are bank interest rates and bank profits. Difficulties of definition apart, we absolutely reject that philosophy. We say that just because there is difficulty of definition, and so on, it is that more important to act on interest rates.
1351 I have no hesitation in asking my hon. and right hon. Friends to divide the House in support of this new clause.
§ Question put, That the clause be read a Second time:—
§ The House divided: Ayes 218, Noes 282.1355
|Division No. 68.]||AYES||[6.42 p.m.|
|Abse, Leo||Griffiths, Will (Exchange)||Oram, Bert|
|Allaun, Frank (Salford, E.)||Hamilton, James (Bothwell)||Orbach, Maurice|
|Archer, Peter (Rowley Regis)||Hamilton, William (Fife, W.)||Orme, Stanley|
|Ashley, Jack||Hannan, William (G'gow, Maryhill)||Owen, Dr. David (Plymouth, Sutton)|
|Atkinson, Norman||Hardy, Peter||Padley, Walter|
|Barnett, Guy (Greenwich)||Harrison, Walter (Wakefield)||Palmer, Arthur|
|Barnett, Joel (Heywood and Royton)||Hart, Rt. Hn. Judith||Pardoe, John|
|Beaney, Alan||Hattersley, Roy||Parker, John (Dagenham)|
|Benn, Rt. Hn. Anthony Wedgwood||Heffer, Eric S.||Parry, Robert (Liverpool, Exchange)|
|Bidwell, Sydney||Howell, Denis (Small Heath)||Pavitt, Laurie|
|Blenkinsop, Arthur||Huckfield, Leslie||Peart, Rt. Hn. Fred|
|Boardman, H. (Leigh)||Hughes, Rt. Hn. Cledwyn (Anglesey)||Perry, Ernest G.|
|Booth, Albert||Hughes, Robert (Aberdeen, N.)||Prentice, Rt. Hn. Reg.|
|Bottomley, Rt. Hn. Arthur||Hughes, Roy (Newport)||Prescott, John|
|Boyden, James (Bishop Auckland)||Hunter, Adam||Price, William (Rugby)|
|Bradley, Tom||Irvine, Rt. Hn. Sir Arthur (Edge Hill)||Probert, Arthur|
|Broughton, Sir Alfred||Janner, Greville||Rees, Merlyn (Leeds, S.)|
|Brown, Hugh D. (G'gow, Provan)||Jay, Rt. Hn. Douglas||Rhodes, Geoffrey|
|Buchan, Norman||Jeger, Mrs. Lena||Richard, Ivor|
|Butler, Mrs. Joyce (Wood Green)||Jenkins, Hugh (Putney)||Roberts, Albert (Normanton)|
|Callaghan, Rt. Hn. James||Jenkins, Rt. Hn. Roy (Stechford)||Roberts, Rt. Hn. Goronwy (Caernarvon)|
|Cant, R. B.||John, Brynmor||Roderick, Caerwyn E.(Brc'n&R'dnor)|
|Carmichael, Neil||Johnson, James (K'ston-on-Hull, W.)||Rodgers, William (Stockton-on-Tees)|
|Carter, Ray (Birmingh'm, Northfield)||Johnson, Walter (Derby, S.)||Rose, Paul B.|
|Carter-Jones, Lewis (Eccles)||Jones, Barry (Flint, E.)||Ross, Rt. Hn. William (Kilmarnock)|
|Castle, Rt. Hn. Barbara||Jones, Dan (Burnley)||Rowlands, Ted|
|Clark, David (Colne Valley)||Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)||Sandelson, Neville|
|Cocks, Michael (Bristol, S.)||Jones, Gwynoro (Carmarthen)||Sheldon, Robert (Ashton-under-Lyne)|
|Cohen, Stanley||Jones, T. Alec (Rhondda, W.)||Shore, Rt. Hn. Peter (Stepney)|
|Concannon, J. D.||Judd, Frank||Short, Mrs. Renée (W'hampton, N.E.)|
|Corbet, Mrs. Freda||Kaufman, Gerald||Silkin, Rt. Hn. John (Deptford)|
|Cox, Thomas (Wandsworth, C.)||Kelley, Richard||Silkin, Hn. S. C. (Dulwich)|
|Crawshaw, Richard||Kinnock, Neil||Sillars, James|
|Cronin, John||Lambie, David||Silverman, Julius|
|Crosland, Rt. Hn. Anthony||Lamborn, Harry||Skinner, Dennis|
|Crossman, Rt. Hn. Richard||Lawson, George||Small, William|
|Cunningham, G. (Islington, S.W.)||Lee, Rt. Hn. Frederick||Smith, John (Lanarkshire, N.)|
|Darling, Rt. Hn. George||Lestor, Miss Joan||Spearing, Nigel|
|Davidson, Arthur||Lewis, Arthur (W. Ham, N.)||Spriggs, Leslie|
|Davies, Denzil (Llanelly)||Lewis, Ron (Carlisle)||Stailard, A. W.|
|Davies, Ifor (Gower)||Lipton, Marcus||Steel, David|
|Davis, Clinton (Hackney, C.)||Lomas, Kenneth||Stewart, Rt. Hn. Michael (Fulham)|
|Davis, Terry (Bromsgrove)||Lyon, Alexander W. (York)||Stoddart, David (Swindon)|
|Deakins, Eric||Lyons, Edward (Bradford, E.)||Stonehouse, Rt. Hn. John|
|de Freitas, Rt. Hn. Sir Geoffrey||Mabon, Dr. J. Dickson||Strang, Gavin|
|Delargy, Hugh||McBride, Neil||Strauss, Rt. Hn. G. R.|
|Dell, Rt. Hn. Edmund||McCartney, Hugh||Summerskill, Hn. Dr. Shirley|
|Dempsey, James||McGuire, Michael||Swain, Thomas|
|Douglas, Dick (Stirlingshire, E.)||Mackenzie, Gregor||Thomas, Rt. Hn. George (Cardiff, W.)|
|Douglas-Mann, Bruce||Mackie, John||Thomas, Jeffrey (Abertillery)|
|McNamara, J. Kevin||Thorpe, Rt. Hn. Jeremy|
|Driberg, Tom||Mahon, Simon (Bootle)||Tomney, Frank|
|Duffy, A. E. P.||Mallalieu, J. P. W. (Huddersfield, E.)||Torney, Tom|
|Dunn, James A.||Marks, Kenneth||Tuck, Raphael|
|Eadie, Alex||Marquand, David||Varley, Eric G.|
|Edelman, Maurice||Marshall, Dr. Edmund||Wainwright, Edwin|
|Edwards, Robert (Bilston)||Mason, Rt. Hn. Roy||Walden, Brian (B'm'ham, All Saints)|
|Edwards, William (Merioneth)||Mayhew, Christopher||Walker, Harold (Doncaster)|
|Ellis, Tom||Meacher, Michael||Wallace, George|
|English, Michael||Mendelson, John||Weitzman, David|
|Evans, Fred||Mikardo, Ian||Wellbeloved, James|
|Faulds, Andrew||Millan, Bruce||Whitehead, Phillip|
|Fisher, Mrs. Doris (B'ham, Ladywood)||Miller, Dr. M. S.||Whitlock, William|
|Fitch, Alan (Wigan)||Milne, Edward||Willey, Rt. Hn. Frederick|
|Fletcher, Raymond (Ilkeston)||Mitchell, R. C. (S'hampton, Itchen)||Williams, Alan (Swansea, W.)|
|Ford, Ben||Molloy, William||Williams, Mrs. Shirley (Hitchin)|
|Forrester, John||Morgan, Elystan (Cardiganshire)||Williams, W. T. (Warrington)|
|Fraser, John (Norwood)||Morris, Alfred (Wythenshawe)||Wilson, Alexander (Hamilton)|
|Freeson, Reginald||Morris, Charles R. (Openshaw)||Wilson, Rt. Hn. Harold (Huyton)|
|Galpern, Sir Myer||Morris, Rt. Hn. John (Aberavon)||Wilson, William (Coventry, S.)|
|Gilbert, Dr. John||Mulley, Rt. Hn. Frederick|
|Ginsburg, David (Dewsbury)||Murray, Ronald King||TELLERS FOR THE AYES:|
|Golding, John||Oakes, Gordon|
|Grant, John D. (Islington, E.)||O'Halloran, Michael||Mr. Donald Coleman and|
|Griffiths, Eddie (Brightside)||O'Malley, Brian||Mr. Tom Pendry.|
|Adley, Robert||Fox, Marcus||McNair-Wilson, Patrick (New Forest)|
|Alison, Michael (Barkston Ash)||Fraser, Rt. Hn. Hugh (St'fford & Stone)||Maddan, Martin|
|Allason, James (Hemel Hempstead)||Fry, Peter||Madel, David|
|Amery, Rt. Hn. Julian||Galbraith, Hn. T. G. D||Maginnis, John E.|
|Archer, Jeffrey (Louth)||Gardner, Edward||Marples, Rt. Hn. Ernest|
|Astor, John||Gibson-Watt, David||Marten, Neil|
|Atkins, Humphrey||Gilmour, Ian (Norfolk, C.)||Mather, Carol|
|Awdry, Daniel||Gilmour, Sir John (Fife, E.)||Maude, Angus|
|Baker, Kenneth (St. Marylebone)||Glyn, Dr. Alan||Mawby, Ray|
|Baker, W. H. K. (Banff)||Godber, Rt. Hn. J. B||Maxwell-Hyslop, R. J.|
|Balniel, Rt. Hn. Lord||Goodhart, Philip||Miscampbell, Norman|
|Batsford, Brian||Goodhew, Victor||Mitchell, Lt.-Col.C. (Aberdeenshire, W)|
|Beamish, Col. Sir Tufton||Gorst, John||Mitchell, David (Basingstoke)|
|Bell, Ronald||Gower, Raymond||Moate, Roger|
|Bennett, Sir Frederic (Torquay)||Grant, Anthony (Harrow, C.)||Molyneaux, James|
|Bennett, Dr. Reginald (Gosport)||Gray, Hamish||Money, Ernie|
|Benyon, W.||Green, Alan||Monks, Mrs. Connie|
|Berry, Hn. Anthony||Grieve, Percy||Montgomery, Fergus|
|Biffen, John||Griffiths, Eldon (Bury St. Edmunds)||More, Jasper|
|Biggs-Davison, John||Grylls, Michael||Morgan-Giles, Rear-Adm.|
|Blaker, Peter||Gummer, J. Selwyn||Morrison, Charles|
|Boardman, Tom (Leicester, S.W.)||Gurden, Harold||Mudd, David|
|Body, Richard||Hall, Miss Joan (Keighley)||Murton, Oscar|
|Boscawen, Hn. Robert||Hall, John (Wycombe)||Nabarro, Sir Gerald|
|Bossom, Sir Clive||Hail-Davis, A. G. F.||Neave, Airey|
|Bowden, Andrew||Hamilton, Michael (Salisbury)||Nicholls, Sir Harmar|
|Braine, Sir Bernard||Hannam, John (Exeter)||Noble, Rt. Hn. Michael|
|Bray, Ronald||Harrison, Brian (Maldon)||Normanton, Tom|
|Harrison, Col. Sir Harwood (Eye)||Nott, John|
|Brinton, Sir Tatton||Onslow, Cranley|
|Brocklebank-Fowler, Christopher||Haselhurst, Alan||Oppenheim, Mrs. Sally|
|Brown, Sir Edward (Bath)||Hastings, Stephen||Orr, Capt. L. P. S.|
|Bruce-Gardyne, J.||Havers, Sir Michael||Osborn, John|
|Bryan, Sir Paul||Hayhoe, Barney||Owen, Idris (Stockport, N.)|
|Buchanan-Smith, Alick (Angus, N&M)||Heseltine, Michael||Page, Rt. Hn. Graham (Crosby)|
|Buck, Antony||Hicks, Robert||Page, John (Harrow, W.)|
|Bullus, Sir Eric||Higgins, Terence L.||Parkinson, Cecil|
|Burden, F. A.||Hiley, Joseph||Peel, Sir John|
|Campbell, Rt. Hn. G. (Moray & Nairn)||Hill, John E. B. (Norfolk, S.)||Percival, Ian|
|Carlisle, Mark||Hill, S. James A. (Soulhamplon, Test)||Peyton, Rt. Hn. John|
|Carr, Rt. Hn. Robert||Holland, Philip||Pink, R. Bonner|
|Channon, Paul||Holt, Miss Mary||Pounder, Rafton|
|Chapman, Sydney||Hordern, Peter||Price, David (Eastleigh)|
|Chichester-Clark, R.||Hornby, Richard||Prior, Rt. Hn. J. M. L.|
|Churchill, W. S.||Hornsby-Smith, Rt. Hn. Dame Patricia||Proudfoot, Wilfred|
|Clark, William (Surrey, E.)||Hunt, John||Pym, Rt. Hn. Francis|
|Clegg, Walter||Hutchisen, Michael Clark||Raison, Timothy|
|Cockeram, Eric||Iremonger, T. L.||Ramsden, Rt. Hn. James|
|Cooke, Robert||Irvine, Bryant Godman (Rye)||Rawlinson, Rt. Hn. Sir Peter|
|Coombs, Derek||James, David||Redmond, Robert|
|Cooper, A. E.||Jenkin, Patrick (Woodford)||Reed, Laurance (Bolton, E.)|
|Corfield, Rt. Hn. Sir Frederick||Jennings, J. C. (Burton)||Rees, Peter (Dover)|
|Cormack, Patrick||Jessel, Toby||Rees-Davies, W. R.|
|Costain, A. P.||Johnson Smith, G. (E. Grinstead)||Rhys Williams, Sir Brandon|
|Critchley, Julian||Jones, Arthur (Northants, S.)||Ridley, Hn. Nicholas|
|Crouch, David||Jopling, Michael||Ridsdale, Julian|
|Crowder, F. P.||Joseph, Rt. Hn. Sir Keith||Rippon, Rt. Hn. Geoffrey|
|d'Avigdor-Goldsmid, Sir Henry||Kellett-Bowman, Mrs. Elaine||Roberts, Michael (Cardiff, N.)|
|d'Avigdor-Goldsmid, Maj.-Gen. Jack||Kilfedder, James||Roberts, Wyn (Conway)|
|Dean, Paul||King, Tom (Bridgwater)||Rodgers, Sir John (Sevenoaks)|
|Deedes, Rt. Hn. W. F.||Kinsey, J. R.||Rossi, Hugh (Hornsey)|
|Digby, Simon Wingfield||Kirk, Peter||Rost, Pater|
|Dixon, Piers||Kitson, Timothy||Russell, Sir Ronald|
|Dodds-Parker, Sir Douglas||Knight, Mrs. Jill||St. John-Stevas, Norman|
|Drayson, G. B.||Knox, David||Scott, Nicholas|
|du Cann, Rt. Hn. Edward||Lambton, Lord||Scott-Hopkins, James|
|Dykes, Hugh||Lamont, Norman||Shaw, Michael (Sc'b'gh & Whitby)|
|Eden, Rt. Hn. Sir John||Lane, David||Shelton, William (Clapham)|
|Edwards, Nicholas (Pembroke)||Langford-Holt, Sir John||Simeons, Charles|
|Elliot, Capt. Walter (Carshalton)||Le Marchant, Spencer||Sinclair, Sir George|
|Elliott, R. W. (N'c'tle-upon-Tyne, N.)||Lewis, Kenneth (Rutland)||Skeet, T. H. H.|
|Emery, Peter||Lloyd, Ian (P'tsm'th, Langstone)||Soref, Harold|
|Eyre, Reginald||Longden, Sir Gilbert||Speed, Keith|
|Farr, John||Loveridge, John||Spence, John|
|Fenner, Mrs. Peggy||Luce, R. N.||Sproat, Iain|
|Fidler, Michael||McAdden, Sir Stephen||Stainton, Keith|
|Finsberg, Geoffrey (Hampstead)||MacArthur, Ian||Stanbrook, Ivor|
|Fisher, Nigel (Surbiton)||McCrindle, R. A.||Stewart-Smith, Geoffrey (Belper)|
|Fletcher-Cooke, Charles||McLaren, Martin||Stodart, Anthony (Edinburgh, W.)|
|Fookes, Miss Janet||Maclean, Sir Fitzroy||Stoddart-Scott, Col. Sir M.|
|Fortescue, Tim||McMaster, Stanley||Stokes, John|
|Foster, Sir John||Macmillan, Rt. Hn. Maurice (Farnham)||Stuttaford, Dr. Tom|
|Fowler, Norman||McNair-Wilson, Michael||Sutcliffe, John|
|Tapsell, Peter||Turton, Rt. Kn. Sir Robin||White, Roger (Gravesend)|
|Taylor, Sir Charles (Eastbourne)||van Straubenzee, W. R.||Wiggin, Jerry|
|Taylor, Frank (Moss Side)||Vaughan, Dr. Gerard||Wilkinson, John|
|Taylor, Robert (Croydon, N.W.)||Vickers, Dame Joan||Winterton, Nicholas|
|Tebbit, Norman||Waddington, David||Wolrige-Gordon, Patrick|
|Temple, John M.||Walder, David (Clitheroe)||Woodnutt, Mark|
|Thatcher, Rt. Hn. Mrs. Margaret||Walker-Smith, Rt. Hn. Sir Derek||Worsley, Marcus|
|Thomas, Rt. Hn. Peter (Hendon, s.)||Wall, Patrick||Wylie, Rt. Hn. N. R.|
|Thompson, Sir Richard (Croydon, s.)||Walters, Dennis||Younger, Hn. George|
|Tilney, John||Ward, Dame Irene|
|Trafford, Dr. Anthony||Warren, Kenneth||TELLERS FOR THE NOES:|
|Trew, Peter||Weatherill, Bernard||Mr. Kenneth Clarke and|
|Tugendhat, Christopher||Wells, John (Maidstone)||Mr. Paul Hawkins.|
§ Question accordingly negatived.