Building Societies (Hansard, 22 May 1980)

§ 1. Mr. Budgen
asked the Chancellor of the Exchequer whether he has any plans to change the law concerning the building societies.

§ The Financial Secretary to the Treasury (Mr. Nigel Lawson)
I refer my hon. Friend to the answer that I gave to the hon. Member for Thurrock (Dr. McDonald) on 15 November.

§ Mr. Budgen
Does not my hon. Friend agree that building societies operate a cartel on interest rates and that that cartel has two main effects? First, does he not agree that it denies a proper market return on investment? Secondly, does he not accept that it encourages the growth of very large building societies? Will he give an undertaking that the Government will not introduce any legislation that is designed to continue that cartel?

§ Mr. Lawson
I am not sure that my hon. Friend was right when he said that the existence of a cartel would encourage the growth of large building societies. The cartel maintains mortgage interest rates at lower rates than might otherwise be expected. I shall bear in mind my hon. Friend's remarks concerning legislation.

§ Mr. Grimond
As buildings societies collect money in areas that include my constituency, is it not reasonable that they should undertake to lend money also? At present, a lot of money is taken out of Shetland and Orkney by building societies that will not lend money for building in those areas.

§ Mr. Lawson
One must commend the thrift of the people of Orkney and Shetland. It is for building societies and their customers to decide where they lend and borrow. It is not an issue for the Government to decide.

§ Mr. Hal Miller
Should not greater protection be given to those who invest in building societies and to those who receive loans? Does not my hon. Friend accept that the present craze for building 691 society mergers seems designed to further the interests of the managers of those societies, not those of the depositors or those taking out mortgages? Will he reconsider his reply to the right hon. Member for Orkney and Shetland (Mr. Grimond) concerning the relationship between the deposits that are made and the advances that are given?

§ Mr. Lawson
My hon. Friend is a robust interventionist in many ways. Protection is important. The issue concerns the Registry of Friendly Societies and the registrar. Legislation may be needed. We shall have to apply the EEC directive on credit institutions to building societies, just as that directive was applied last year to those operating under the Banking Act. Other changes may be necessary if we are to follow up the report of the inspectors on the collapse of Grays Building Society and to tidy up existing legislation. Consultations on all those issues are taking place.

§ Mr. Weetch
Does the Financial Secretary realise that we need legislation to control some of the wasteful practices of building societies? Does he not accept that the streets of Ipswich—like many other towns—are wastefully littered with expensive and prestigious offices? Does he not further accept that many of those offices do nothing for many weeks of the year? Should not some of those wasteful activities be curtailed?

§ Mr. Lawson
I am not sufficiently familiar with the town of Ipswich to be able to comment on the hon. Gentleman's specific remarks, but there is a great deal of waste in many areas of the country. However, I am not sure that that necessarily calls for legislation.