§ 3.32 p.m.
§ Mr. Frank Allaun (Salford. East)I beg to move,
That leave be given to bring in a Bill to require building societies to lend a proportion of their total annual advances to local authorities at the societies' current interest rate, to enable the authorities to provide more mortgages to local house-buyers unable to obtain them from building societies.
§ Mr. Russell Kerr (Feltham and Heston)On a point of Order, Mr. Speaker. Some of us regard this Bill as very important. Could my hon. Friend be heard in relative quiet?
§ Mr. SpeakerI am particularly grateful to the hon. Gentleman who will, I know, always observe that rule himself.
§ Mr. AllaunAlthough building societies have helped millions of families to secure a home, I think it must be said that they are far too restrictive about giving mortgages on cheaper and older houses. They also usually insist on high deposits and high incomes.
I have evidence from all parts of the country showing that the societies are refusing mortgages on structurally sound houses. For example, they often insist on the house having a front and back garden, a rare distinction in many industrial towns, or they may require that the house already possesses a bathroom and inside lavatory. Yet if the buyer could obtain a mortgage he would subsequently install them with the aid of an improvement grant. Even more serious is that many societies red-line whole districts and refuse to grant any mortgage applications in those areas.
223 Only 6 per cent. of building society loans go on houses costing less than £6,000, but many young couples could get their first modest home if they could obtain a mortgage. Sometimes, because of mortgage refusal, buyers are forced into the hands of money lenders or fringe banks, which charge them up to 25 per cent. interest.
There are vast numbers of the older, cheaper type of house for sale at present. If they cannot be sold because would-be buyers cannot get a mortgage, they may be left empty, in which case within weeks or even days they are vandalised. They frequently become a complete write-off and have to be boarded up by local authorities and then demolished. One demolished house in a terrace can start the rot in a whole row. This is the main cause of the decline in the inner city areas.
Local authorities are far less reluctant to lend on older properties. They also grant up to 100 per cent. mortgages. Unfortunately, the total amount they are permitted to lend has been reduced by the Government under the public expenditure cuts. As a result in many cases town halls have to close their lists to applicants within a week of opening them because they have reached the year's permitted totals.
The building societies, however, are bulging with funds. Therefore, it is only fair that they should be asked to help down-market. That is why the Secretary of State for the Environment introduced his support scheme whereby the societies were to advance mortgages to applicants sponsored by the councils. Regrettably, the scheme has had mixed results. Societies have turned down three out of four applicants in some areas, for the very reasons I have stated.
Out of a total of £157 million to be lent in this way, only £100 million will have been advanced by the end of the financial year this month. There is to be a £300 million scheme in the coming year, but there is no reason to believe that it will be any more successful. Therefore, the Bill would require the societies to provide a proportion—10 per cent.— of their total annual advances to the councils in block loans for onward lending in this way.
Another advantage of this scheme would be that mortgagors would pay the 224 current building society rate of interest, rather than the higher rates which councils are forced to charge if they themselves have borrowed at a higher rate.
Eighteen months ago I introduced a similar Bill which received its First Reading without opposition. It did not proceed further because parliamentary time was not forthcoming. I am more hopeful on this occasion because the need is now more apparent.
Without Government backing, Private Members' Bills have a fairly poor prospect. Therefore, I shall be only too pleased if the Government take this measure over. If there is not enough time before a General Election, I suggest that this Bill should be included in Labour's election programme.
Earlier this month Labour's national executive home policy committee unanimously supported the Bill. Furthermore, it is backed by local authorities, including, I stress, Conservative-controlled councils.
Among the building societies some like the scheme and some do not. Many of them see no objection. Indeed, they would have far greater security than at present because the loans would be advanced not to individual borrowers but to councils and with full financial security. The societies would also be freed from the work of investigating each individual application. Block loans are already provided by English building societies to the Housing Executive of Northern Ireland for onward lending in this way.
It may be argued that the Government are restricting temporarily the supply of mortgages. That may be the case, but this scheme would mean that more mortgages would be provided at the lower end where there is at present a shortage of loans.
I conclude by pointing out that 10 per cent. of building society advances last year would be £600 million. That would be a tremendous boon to those needing homes, whether in the cities or elsewhere. It is surely not asking too much to require building societies to provide one-tenth of their loans to help the lower-paid half of the population.
§ 3.40 p.m.
§ Mr. William Clark (Croydon, South) rose—
225§ Mr. SpeakerOrder. Is the hon. Gentleman seeking to oppose the Bill?
§ Mr. ClarkYes, Mr. Speaker. I have no direct financial interest in building societies, either as a borrower or as a lender. I am vice-president of the Building Societies Association, but that is an honorary position. The only vested interest that I have—and that everyone else has—is to ensure that building societies remain in being. As the hon. Member for Salford, East (Mr. Allaun) said, they have been a boon to owner-occupation.
I am diametrically opposed to the Bill because it is a direction of investment Bill and such a measure must be wrong, particularly for building societies. We are talking about an industry which has £34,000 million worth of assets, 5 million advances on its books and 15 million savers throughout the country.
I think that all hon. Members will agree that, since the end of the war, the industry has been the one financial institutional success in this country. It has weathered the various economic storms in that period. The hon. Member for Salford, East, for all his soft talk in introducing the Bill, looks with envy on any institution that is successful, and he and his colleagues try to devise ways in which the State can get hold of some of that success.
The hon. Gentleman did not remind us that building societies from time to time have surplus funds and lend them, on a temporary basis, to local authorities. At the end of last year, £2,900 million was deposited with local authorities and if they want to use those funds to develop inner cities, they may do so.
It will be within the recollection of every hon. Member that, since the end of the war, and certainly recently, building societies have helped local authorities, particularly since the cut-back on public expenditure, by making building society money available for home ownership within the local authority sector. The hon. Gentleman was rather quiet about whether, if local authorities get money from the building societies, any of it could be used to assist council tenants to buy their homes from local authorities.
The hon. Gentleman's criticisms of building societies do not bear investigation. He said that they are failing to lend money on older houses, but in the 226 last quarter of 1977, a total of 44 per cent. of all building society advances were made on pre-1939 houses, and in the same period, 24 per cent. of all advances were on houses built before 1919. It is not correct to say that building societies have not helped in the purchase of lower-priced or older houses.
In the whole of last year, local authorities—despite what the hon. Gentleman said about their helping in inner cities— made 17,000 advances on pre-1919 houses. In the same period, building societies made 160,000 such advances. The hon. Gentleman's criticisms are not valid. In addition, 65 per cent. of all building society advances last year were to buyers under the age of 35. Here again, the hon. Gentleman's criticisms of building societies are not valid.
The House must recognise that building societies can lend only money which they obtain from the public. For every person who borrows from a society, there are three investors who supply the money.
The hon. Member for Salford, East should be criticising his own Government because since they have been in office, they have killed off the private rented sector and have not encouraged home ownership. The loose talk going on at present —and I understand that the hon. Member participates in it—of cutting the level of mortgage interest allowed for tax purposes cannot possibly encourage home ownership. The hon. Gentleman's main criticism of the Government should be that they have not kept to the manifesto on which he, no doubt, fought his campaign in October 1974, and in which it was categorically stated that local authority lending would be expanded. What criticism does the hon. Gentleman level at the Chancellor of the Exchequer who, on 22nd July 1976, slashed the home-lending programme for local authorities by £146 million? That was diametrically opposed to what they promised the electorate.
The hon. Gentleman's tactic in saying that his Bill has been approved by the Labour Party's NEC is kite-flying, similar to the kite-flying tried by his hon. Friend the Member for Blyth (Mr. Ryman), who introduced a Bill to nationalise building societies. I am pleased that the Government would not have that and did not let that Bill go through.
227 This Bill is analogous to the previous measure, but rather more subversive. The hon. Member for Salford, East says that we should direct the investment of building societies to the tune of 10 per cent. of their advances, but who is to say that next year that figure will not be 20 per cent. 40 per cent., or 60 per cent.? Eventually, the industry will be nationalised by backdoor methods.
The Government did not like the Bill of the hon. Member for Blyth because the Prime Minister and everyone else in the House realised that, like this Bill, it was an albatross that even the Labour Party could not afford to carry into the next General Election.
The direction of investment would be a dangerous precedent for the House to pass. If we start with building societies, who is to say that we shall not have
§ direction of investment of insurance companies, banks, pension funds and the rest? I am sure that the Left wing of the Labour Party would like that to happen, but everyone else in the country appreciates that our future depends on investment and that investment depends on savers.
§ It would be a catastrophe if the palsied hand of the State were put on building society funds. It would cause savers to lose confidence and would be the death knell of owner-occupation.
§ Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and Nomination of Select Committees at Commencement of Public Business):—
§ The House divided: Ayes 190, Noes 165.
229| Division No. 146] | AYES | [3.49 p.m. |
| Allaun, Frank | Ellis, John (Brigg & Scun) | McDonald, Dr Oonagh |
| Archer, Rt Hon Peter | English, Michael | McElhone, Frank |
| Ashley, Jack | Ennals, Rt Hon David | MacFarquhar, Roderick |
| Ashton, Joe | Evans, Fred (Caerphilly) | MacKenzie, Rt Hon Gregor |
| Atkins, Ronald (Preston N) | Evans, Gwynfor (Carmarthen) | Maclennan, Robert |
| Atkinson, Norman | Evans, Ioan (Aberdare) | Madden, Max |
| Bagier, Gordon A. T. | Evans, John (Newton) | Mallalieu, J. P. W. |
| Bain, Mrs Margaret | Ewing, Harry (Stirling) | Marshall, Dr Edmund (Goole) |
| Bates, Alf | Faulds, Andrew | Maynard, Miss Joan |
| Bean, R. E. | Fernyhough, Rt Hon E. | Mendelson, John |
| Beith, A. J. | Flannery, Martin | Mikardo, Ian |
| Benn, Rt Hon Anthony Wedgwood | Fletcher, Ted (Darlington) | Miller, Dr M. S. (E Kilbrlde) |
| Bennett, Andrew (Stockport N) | Foot, Rt Hon Michael | Mitchell, Austin |
| Bidwell, Sydney | Fowler, Gerald (The Wrekin) | Molloy, William |
| Bishop, Rt Hon Edward | Freud, Clement | Morris, Alfred (Wythenshawe) |
| Blenkinsop, Arthur | Garrett, John (Norwich S) | Morris, Rt Hon Charles R. |
| Booth, Rt Hon Albert | Garrett, W. E. (Wallsend) | Morris, Rt Hon J. (Aberavon) |
| Boothroyd, Miss Betty | George, Bruce | Moyle, Roland |
| Bottomley, Rt Hon Arthur | Gilbert, Rt Hon Dr John | Mulley, Rt Hon Frederick |
| Bray, Dr Jeremy | Golding, John | Newens, Stanley |
| Brown, Hugh D. (Provan) | Graham, Ted | Noble, Mike |
| Brown, Ronald (Hackney S) | Grant, George (Morpeth) | O'Halloran, Michael |
| Buchan, Norman | Grant, John (Islington C) | Orme, Rt Hon Stanley |
| Buchanan, Richard | Grocott, Bruce | Palmer, Arthur |
| Butler, Mrs Joyce (Wood Green) | Harrison, Rt Hon Walter | Pardoe, John |
| Canavan, Dennis | Hattersley, Rt Hon Roy | Park, George |
| Cant, R. B. | Heffer, Eric S. | Pavitt, Laurie |
| Carmichael, Neil | Hooson, Emlyn | Panhaligon, David |
| Carter-Jones, Lewis | Hoyle, Doug (Nelson) | Perry, Ernest |
| Castle, Rt Hon Barbara | Hughes, Rt Hon C. (Anglesey) | Price, William (Rugby) |
| Clemitson, Ivor | Hughes, Robert (Aberdeen N) | Radice, Giles |
| Cocks, Rt Hon Michael (Bristol S) | Hughes Roy (Newport) | Rees, Rt Hon Merlyn (Leeds S) |
| Cohen, Stanley | Irving, Rt Hon S. (Dartford) | Reid, George |
| Coleman, Donald | Jay, Rt Hon Douglas | Richardson, Miss Jo |
| Conlan, Bernard | Jenkins, Hugh (Putney) | Roberts, Albert (Normanton) |
| Cook, Robin F. (Edin C) | John, Brynmor | Rodgers, George (Chorley) |
| Corbett, Robin | Johnson, James (Hull Watt) | Rooker, J. W. |
| Cowans, Harry | Jones, Alec (Rhondda) | Ross, Stephen (Isle of Wight) |
| Craigen, Jim (Maryhill) | Jones, Dan (Burnley) | Rowlands, Ted |
| Crawford, Douglas | Kaufman, Gerald | Ryman, John |
| Crawshaw, Richard | Kelley, Richard | Sandelson, Neville |
| Cryer, Bob | Kerr, Russell | Sedgemore, Brian |
| Cunningham, Dr J. (Whiteh) | Kilroy-Silk, Robert | Selby, Harry |
| Davidson, Arthur | Lambie, David | Sever, John |
| Davis, Clinton (Hackney C) | Lamond, James | Shaw, Arnold (Ilford South) |
| Deakins, Eric | Latham, Arthur (Paddington) | Sheldon, Rt Hon Robert |
| Dempsey, James | Lewis, Ron (Carlisle) | Silkin, Rt Hon S. C. (Dulwich) |
| Dormand, J. D. | Litterick, Tom | Sillars, James |
| Douglas-Mann, Bruce | Lomas, Kenneth | Silverman [...] |
| Duffy, A. E. P. | Loyden, Eddie | Skinner, Dennis |
| Eadie, Alex | Lyon, Alexander (York) | Smith, John (N Lanarkshire) |
| Edge, Geoff | Lyons, Edward (Bradford W) | Snape, Peter |
| Spearing, Nigel | Thorne, Stan (Preston South) | Whitlock, William |
| Spriggs, Leslie | Tinn, James | Willey, Rt Hon Frederick |
| Stallard, A. W. | Tuck, Raphael | Williams, Rt Hon Shirley (Hertford) |
| Steel, Rt Hon David | Varley, Rt Hon Eric G. | Wilson, Alexander (Hamilton) |
| Stewart, Rt Hon Donald | Wainwright, Edwin (Dearne V) | Wise, Mrs Audrey |
| Stewart, Rt Hon M. (Fulham) | Wainwright [...] (Colne V) | Woof, Robert |
| Stoddart, David | Walker, Harold (Doncaster) | Wrigglesworth, Ian |
| Stott, Roger | Walker, Terry (Klngswood) | Young, David (Bolton E) |
| Strang, Gavin | Ward, Michael | |
| Summerskill, Hon Dr Shirley | Watkins, David | TELLERS FOR THE AYES: |
| Taylor, Mrs Ann (Bolton W) | Watt, Hamish | Mr. Jim Callagban and |
| Thomas, Jeffrey (Abertlllery) | Weitzman, David | Mr. Joseph Dean. |
| Thomas, Ron (Bristol NW) | White, Frank R. (Bury) | |
| NOES | ||
| Aitken, Jonathan | Grist, Ian | Onslow, Cranley |
| Arnold, Tom | Hamilton, Michael (Salisbury) | Page, Rt Hon R. Graham (Crosby) |
| Atkins, Rt Hon H. (Spelthorne) | Hampson, Dr Keith | Page, Richard (Workington) |
| Banks, Robert | Hannam, John | Paisley, Rev Ian |
| Bendall, Vivian (Ilford North) | Harrison, Col Sir Harwood (Eye) | Pattie, Geoffrey |
| Bennett, Dr Reginald (Fareham) | Haselhurst, Alan | Peyton, Rt Hon John |
| Berry, Hon Anthony | Hawkins, Paul | Powell, Rt Hon J. Enoch |
| Biffen, John | Hayhoe, Barney | Prentice, Rt Hon Reg |
| Body, Richard | Hicks, Robert | Price, David (Eastleigh) |
| Boscawen, Hon Robert | Holland, Philip | Prior, Rt Hon James |
| Bottomley, Peter | Hordern, Peter | Pym, Rt Hon Francis |
| Bowden, A. (Brighton, Kemptown) | Howe, Rt Hon Sir Geoffrey | Raison, Timothy |
| Boyson, Dr Rhodes (Brent) | Hunt, John (Ravensbourne) | Rathbone, Tim |
| Braine, Sir Bernard | Hurd, Douglas | Renton, Rt Hon Sir D. (Hunts) |
| Brooke, Peter | James, David | Renton, Tim (Mid-Sussex) |
| Brotherton, Michael | Jenkin, Rt Hon P. (Wanst'd&W'df'd) | Rhodes James, R. |
| Brown, Sir Edward (Bath) | Jessel, Toby | Ridley, Hon Nicholas |
| Buck, Antony | Johnson Smith, G. (E Grinstead) | Ridsdale, Julian |
| Budgen, Nick | Jones, Arthur (Daventry) | Roberts, Wyn (Conway) |
| Burden, F. A. | Joseph, Rt Hon Sir Keith | Ross, William (Londonderry) |
| Butler, Adam (Bosworth) | Kershaw, Anthony | Rossi, Hugh (Hornsey) |
| Carlisle, Mark | Kilfedder, James | Rost, Peter (SE Derbyshire) |
| Chalker, Mrs Lynda | King, Evelyn (South Dorset) | Sainsbury, Tim |
| Churchill, W. S. | King, Tom (Bridgwater) | Shaw, Giles (Pudsey) |
| Clark, Alan (Plymouth, Sutton) | Knight, Mrs Jill | Shepherd, Colin |
| Clark, William (Croydon S) | Lamont, Norman | Shersby, Michael |
| Cockcroft, John | Langford-Holt, Sir John | Sims, Roger |
| Cooke, Robert (Bristol W) | Latham, Michael (Melton) | Sinclair, Sir George |
| Cope, John | Lawrence, Ivan | Skeet, T. H. H. |
| Costain, A. P. | Lawson, Nigel | Smith Dudley (Warwick) |
| Critchley, Julian | Le Marchant, Spencer | Smith, Timothy John (Ashfleld) |
| Crouch, David | Lester, Jim (Beeston) | Speed, Keith |
| Dodsworth, Geoffrey | Lewis, Kenneth (Rutland) | Stainton, Keith |
| Drayson, Burnaby | McAdden, Sir Stephen | Stradling Thomas, J. |
| Dykes, Hugh | McCrindle, Robert | Taylor, Teddy (Cathcart) |
| Edwards, Nicholas (Pembroke) | McCusker, H. | Tebbit, Norman |
| Fairbairn, Nicholas | Macfarlane, Neil | Temple-Morris, Peter |
| Fairgrieve, Russell | MacKay, Andrew (Stechford) | Thatcher, Rt Hon Margaret |
| Finsberg, Geoffrey | Macmillan, Rt Hon M. (Farnham) | Townsend, Cyril D. |
| Fletcher, Alex (Edinburgh N) | McNalr-Wilson, M. (Newbury) | Trotter, Neville |
| Fookes, Miss Janet | Marten, Neil | Vaughan, Dr Gerard |
| Forman, Nigel | Mates, Michael | Viggers, Peter |
| Fowler, Norman (Sutton C'f'd) | Mather, Carol | Wakeham, John |
| Fraser, Rt Hon H. (Stafford & St) | Mawby, Ray | Walder, David (Clitheroe) |
| Fry, Peter | Meyer, Sir Anthony | Walker, Rt Hon P (Worcester) |
| Gardiner, George (Reigate) | Miller, Hal (Bromsgrove) | Wall, Patrick |
| Gardner, Edward (S Fylde) | Mitchell, David (Baslngstoke) | Warren, Kenneth |
| Gilmour, Rt Hon Ian (Chesham) | Moate, Roger | Weatherlll, Bernard |
| Gilmour, Sir John (East Fife) | Monro, Hector | Whitelaw, Rt Hon William |
| Glyn, Dr Alan | More, Jasper (Ludlow) | Wiggin, Jerry |
| Goodhart, Philip | Morris, Michael (Northampton S) | Young, Sir G. (Ealing, Acton) |
| Goodhew, Victor | Morrison, Hon Peter (Chester) | Younger, Hon George |
| Goodlad, Alastair | Mudd, David | |
| Gow, Ian (Eastbourne) | Neave, Airey | TELLERS FOR THE NOES: |
| Gower, Sir Raymond (Barry) | Nelson, Anthony | Mr. Patrick Connack and |
| Gray, Hamish | Neubert, Michael | Mr. Robert Adley. |
| Griffiths, Eldon |
§ Question accordingly agreed to.
§ Bill ordered to be brought in by Mr. Frank Allaum. Mr. Andrew F. Bennett, Mr. Bruce Douglas-Mann, Mr. Jim Callaghan, Mr. Robin F. Cook, Mr. 230 Joseph Dean, Mr. Arthur Latham, Miss Joan Maynard, Mr. Max Madden, Mr. Norman Atkinson, Mr. Julius Silverman and Mr. Brian Sedgemore.