HC Deb 12 June 1974 vol 874 cc1607-10
17. Mr. Michael Latham

asked the Secretary of State for the Environment what progress is being made by his joint advisory committee with the Building Societies Association; and whether he will make a statement.

33. Mr. Frank Allaun

asked the Secretary of State for the Environment what progress is being made by his joint advisory committee with the Building Societies Association.

44. Mr. Ioan Evans

asked the Secretary of State for the Environment what further discussions he has had with the Building Societies Association; and if he will make a statement.

Mr. Freeson

At the meeting of the joint advisory committee on 6th June the Building Societies Association was offered the third tranche of short-term loans of £100 million at 10½ per cent. out of the total of £500 million to be made available if necessary. The Council of the Building Societies Association will consider this offer at its meeting on 14th June.

Mr. Latham

Has this expert body yet estimated the likely amount of mortgage finance which will be available during 1974 and, if so, on what level of private house building is any such estimate based?

Mr. Freeson

I am not aware of any such estimate having been made by the Building Societies Association or the joint advisory committee which would involve consultation with officials of the Department.

Mr. Allaun

Will the Minister lend more money to local authorities at the favourable rate recently granted to the building societies, so that they can provide more mortgages—100 per cent. mortgages if necessary? Will this not be possible when the building societies repay the £500 million or, as is possible, do not take up the third part of that sum? Will my hon. Friend not do more for the local authorities?

Mr. Freeson

If there were any difficulty about the flow of funds into local authorities for mortgages we might have to consider how to stimulate that flow. This was the position with the building societies. For the first time in living memory there was a net outflow of funds. This is not the position with local authorities. There is no limit on lending by them and, so far as I am aware, there are no difficulties for them in raising money for granting mortgages. Should there be difficulties we shall be glad to consider ways of dealing with them.

Mr. McCrindle

Will the hon. Gentleman say whether any discussions are taking place dealing with a voluntary stabilisation fund within the societies? Now that funds are flowing in, would it not be a good thing if the Government were to exercise their influence on building societies with a view to eliminating or at least mitigating a future mortgage famine?

Mr. Freeson

This issue has been the subject of discussions which have covered other aspects of the problems facing us. We shall be pursuing this aspect of policy.

Mr. Evans

Does my hon. Friend realise that he and his colleagues are to be congratulated on the action they have taken? Is he aware that if there had not been a change of Government those buying houses today would be paying a 13 per cent. interest rate? Will he continue with this policy of giving hope to those struggling to buy their homes? Is it not a fact that while the Conservative Party talked about creating a property- owning democracy, what it did was to create a money-lenders' paradise.

Mr. Freeson

I thank my hon. Friend for those observations. What we have been doing on a number of fronts is to take an immediate initiative to get out of the current situation, which we inherited. As to the future, there will be some careful medium- to long-term studies of a variety of policies. This is one such area. We shall be coming forward with substantive administrative policy proposals and legislation in due course to deal with the problems inherent in the situation.

Mr. Walter Johnson

Is my hon. Friend aware that the vast sums being loaned to the building societies at favourable rates of interest for the purpose of keeping down interest rates are being reinvested in the City at considerably increased rates of interest? Is this not a disgraceful misuse of public funds?

Mr. Freeson

No. The object of the exercise is to maintain the level of funds which building societies have available for lending and to maintain their liquidity levels so that they can grant mortgages at a reasonable level and at an increased rate. The money was flowing out of building societies. That was why we carried out this exercise. The result has been that, far from there being a net outflow of funds, which would have threatened the supply of mortgages, there is now a net inflow and we can rely on mortgages being issued in future.

Mrs. Thatcher

Are not the people who are taking money away from the building societies the local authorities and the Government, both of whom are offering a higher rate of interest to the saver?

Mr. Freeson

The right hon. Lady has raised an important point about the structure of the borrowing and investing market. We have a situation which was created by her Government—I make no party point about that—which threatened building societies as far back as October last year, and it grew worse as the months went by. We have taken immediate steps to tackle the situation. With regard to longer-term reform, we shall come to that in due course.