§ 6. Mr. Stoddartasked the Chancellor of the Exchequer what was the composite rate of tax charged to building societies for the financial year 1977–78; and how this compares with the likely rate for 1978–79.
§ The Financial Secretary to the Treasury (Mr. Robert Sheldon)24¼ per cent. for 1977–78. No estimate of the rate for 1978–79 can be made until the Finance Act is passed fixing the tax rates and allowances for the year.
§ Mr. StoddartDoes my right hon. Friend agree that the composite rate of tax is bound to fall substantially this year as a result of the tax changes already made? Does he not also agree that that will bring a substantial financial windfall to the building societies, and, further, that the benefit should be passed on to 1555 those people buying houses? Will he make representations to the building societies to see that house purchasers benefit from this tax windfall?
§ Mr. SheldonAs my hon. Friend will know, the composite rate is fixed not only in accordance with the levels of taxation but on the basis of the assessment of those people who invest in the building societies. This falls to be determined, and the outcome should be known by about September of this year.
§ Mr. Frank AllaunIf the composite rate does fall, does my right hon. Friend agree that the margin between borrowing and lending rates will be too great, and ought to be reduced in the interests of house purchasers?
§ Mr. SheldonMy hon. Friend will know that this is always a very sensitive subject, in which the Government are always closely involved. It will be necessary to see the levels of liquidity of the building societies and to make one's assessment in due course, when more information is available.
§ Mr. RidleyWhat does the right hon. Gentleman intend to do about those who invest in building societies but who are not liable to pay income tax, and are charged to income tax by the composite rate and are unable to claim it back?
§ Mr. SheldonI understand that problem, and, in the main, those people who choose to invest in building societies also understand it. Many regard the advantages of the building society—the easy form of long-term investment and the way in which money can quickly be withdrawn when required—as offsetting that disadvantage.