HC Deb 08 February 1978 vol 943 cc1430-2
2. Mr. Newton

asked the Secretary of State for the Environment when he expects to introduce legislation on local authority mortgage interest rates.

The Minister for Housing and Construction (Mr. Reginald Freeson)

We must first consider the local authority responses to the Green Paper proposal for legislation to enable them to charge the BSA recommended mortgage rate by use of the rate fund.

Mr. Newton

Does the Minister recognise that the Green Paper contained a definite commitment to legislate on this subject which was welcomed by those of us whose councils are now forced to charge substantially more than the building society rate—in the case of Braintree 2 per cent. more? Why has he not taken the opportunity of yesterday's Bill to do this? Will he put that right in Committee?

Mr. Freeson

There is a host of proposals on policy changes in the Green Paper on the housing policy review, some of which require legislation and others not. It would be theoretically possible to jump ahead and put all of them into a Bill concerned with one or two particular issues. At present we are in consultation with local authority associations and others on this proposal. When we have received their responses we shall be in a better position to judge what form, if any, the legislation should take.

Mr. MacFarquhar

Clearly consultation with local authorities is important. However, does my right hon. Friend recognise that the people who are suffering are those who are paying mortgage interest far higher than the going market rate? Will he undertake to take action as soon as possible?

Mr. Freeson

I understand the problem only too well. It has arisen before in recent years. I cannot take action without legislation. That is why we made the proposal that we did in the Green Paper and on which we are seeking responses. We are not receiving responses that are universally in agreement with the proposal—I would not expect that—but we have to await the responses and evaluate them, and then we shall come forward with proposals.

Mr. Peter Bottomley

Is the Minister aware that most legislation in this country does not have universal agreement? But there is overwhelming agreement—except on the Government Front Bench—that this anomaly must be put right. If it is just a question of legislation, will he commit the Government to introduce legislation very soon?

Mr. Freeson

When we have completed consultations we shall be in a better position to bring forward proposals for legislation. It was us on this Front Bench who put forward proposals in the first instance, not those on the Opposition Benches.

Mr. Frank Allaun

Will the Minister again consider the real solution, which is that building societies should be required to provide 10 per cent. of their £7 billion a year loans at their current interest rate to the local authorities, which in turn could on-loan it particularly to people buying cheaper, older houses who cannot, as things are, obtain mortgages from the building societies?

Mr. Freeson

As has been said frequently by myself and by my right hon. Friend, this is at one level an attractive proposition. The only difficulty is that if it were to be undertaken as policy it would add to the total amount of public expenditure under the rules of public expenditure provision.

Even if such a scheme were in operation, it would not necessarily alter the position with regard to the interest rates for local authorities because they base their rates on the consolidated loan fund interest rates. Whatever borrowing was undertaken, whether from building societies or any other source, it would come within the consolidated loan fund which is operated by local authorities individually. They charge rates according to that broad system.