HL Deb 04 February 1965 vol 262 cc1325-46

7.15 p.m.

LORD WAKEFIELD OF KENDAL rose to ask Her Majesty's Government what is the policy for lowering interest rates for housing and when it will be introduced. The: noble Lord said: My Lords, I am grateful for the opportunity to state my reasons for asking this Question of Her Majesty's Government, and to express the hope that we may have a full statement on this important subject. Also, I hope that the Government will no longer delay positive action in implementing the written and verbal promises made before and during the General Election. Indeed, interest rates for housing was a major issue at the last Election. Many people voted Socialist because they thought that, if returned to power, the Socialists would carry out the undertakings which they gave to reduce interest rates for housing immediately as a matter of priority. I would go so far as to say that that power was obtained on the strength of such pledges by the Socialist Party. Now that power has been obtained, failure to implement quickly the undertakings given would be a very grave breach of faith because the promises made were unconditional. In such circumstances no excuse of any kind is admissible.

It was therefore with surprise and regret that I read recently that the Chancellor of the Exchequer blamed the building society movement for raising their interest rates to borrowers. I am a director of a building society, and I cannot do better than read to your Lordships a letter received by my society last week from a shareholder who had asked for his money back. This is what the letter said: Thank you for your prompt handling of this and all the other dealings I have had with you. I hope that ore day I shall be able to join you again. My sympathy to you in the face of this idiotic attack by the Chancellor.

That letter is to the point and, I suggest, admirably summarises what more than 2½ million borrowers and nearly 6 million shareholders and depositors in the building society movement are thinking.

They are quite right in thinking that this attack was idiotic, for these simple reasons. As your Lordships well know, building societies borrow short and lend long—which seems to me to be quite the wrong way round, but somehow or other it works. Another strange thing is that shareholders and depositors seem to be quite willing to see their money become worth less and less, since there is no equity in a building society, as your Lordships well know, while the people who use this loan money to buy their homes find their bricks and mortar, in money terms, becoming worth more and more.

There is, however, a limit beyond which those who lend their money to building societies will not go. That limit was being rapidly reached towards the end of last year; and indeed was reached with some societies in January, when withdrawals exceeded deposits. In spite of the security and other advantages of having their savings with a building society, if other forms of saving become more advantageous because of better interest rates, then, quite naturally, people not only do not lend their money to building societies but also withdraw it and place it elsewhere. The result is that not only do building societies not have the money available to lend out on mortgage to would-be borrowers but, unless they take remedial action, since borrowing is short and lending long, in a few weeks they can quite easily become very short indeed of cash; and their liquidity ratios could disappear, just as quickly as foreign money disappeared from this country when the Socialists started on their vigorous campaign of magnifying an unsatisfactory balance of payments into an unrecognisable crisis.

The Chancellor took steps, some of which were of a most peculiar and doubtful kind, to try to correct the balance-of-payments position and also to attempt to stop the outflow of cash from this country caused by lack of confidence by the world in Socialist policies. He was quite right to take action. But if it was right for him to take urgent action, why should it be wrong for the building societies to take similar action for a similar purpose?

The societies deeply regretted the necessity to raise interest rates to borrowers. It was forced on them by the Government as a direct result of the Socialist policy of increasing costs and raising interest rates. The increasing tax burden to bear is aggravated by the decision to increase the standard rate of income tax next April. This will automatically increase the composite rate of tax, which is a heavy burden for building societies. The societies should have taken action and put up their rates at the end of November or early December. In this latter month the net receipts were the worst for three years. The building societies should not have waited until the New Year before putting up their rates. They waited until the middle of January, to try to help the Government to stabilise prices. All they got was an ungracious kick in the pants for their public-spirited action. My Lords, they deserved sympathetic thanks, not unjustified criticism.

I was quite horrified at the suggestion of the Chancellor that the societies should apparently sit still and do nothing while their reserves disappeared and their trustee status became endangered through lack of an adequate reserve ratio. That would be an idiotic suggestion from any normal person, but surely an unforgivable one from a Chancellor of the Exchequer. The Chancellor has criticised the societies for putting up their rate of interest, on the grounds that they have done so only because the bank rate has gone up. Furthermore, he has said, as has the Minister of Housing and Local Government in another place, that he expects interest rates to come down immediately the bank rate comes down. Of course the bank rate does affect building society rates in the long term, but not necessarily immediately. In this connection, it is interesting to note that in the last eight years, while the bank rate has changed twenty times, building society interest rate has changed only five times, including the recent change.

The building societies, I can quite confidently say, will reduce their rates just as soon as they can; and this will not necessarily be when the bank rate is reduced. Any reduction in rates will be considered when the inflow of deposit money exceeds the outflow of mortgage money. At that stage, by lowering mort- gage rates the demand for mortgage money will presumably increase, and as interest rates to depositors might be lowered at the same time, the inflow of money might also be likely to lessen. Equilibrium should then be more or less restored. I should be grateful to noble Lords opposite, if they would kindly explain all this to the Chancellor and to the Minister of Housing and Local Government, as they really do not seem to understand how building societies operate. Perhaps the Chancellor might understand the position better if he were told that the building societies faced an urgent balance-of-payments problem, not unlike another balance-of-payments problem of which he has some experience.

There is, of course, no reason at ail why the promises made by the Socialist Party before and during the Election to reduce interest rates should not be implemented at once. This could be done by relief of income tax and profits tax on a building society's surplus. If this were done, then mortgage rates could be reduced by a quarter per cent. However, judging by what was said at the General Election, something far more substantial than this was envisaged. Again, my Lords, there need be no difficulty. If there were remission of the composite rate of income tax as well, then approximately a further 1¾ per cent. reduction in the mortgage rate could be made: that is to say, instead of the present 6¾ per cent. it would be 4¾ per cent., and on favourable occasions might be as low as 4 per cent. or less. We could then get fairly close to Mr. Brown's 3 per cent.

The Chancellor of the Exchequer has said that in the next Finance Bill there is going to be a corporation tax as well as a wide capital gains tax. There is no reason at all why the Government should not now, this evening, announce that in the next Finance Bill they are going to implement their General Election promises by abolishing taxation for building societies, thus bringing down housing interest rates for borrowers by 2 per cent. I say this because the Prime Minister and his colleagues pledged themselves quickly to reduce, not to raise, interest rates for housing. At Wembley on September 12 last year the Prime Minister said: I would mobilise the country's resources to provide homes without regard to private interest or private profit. The housing problem must be tackled like a war-time operation. I end the quotation., but observe that that is to say with speed, not procrastination. Again, in his Election address the Prime Minister said: 100 per cent. mortgages, lower interest rates and cheaper legal charges will help those who wish to buy. By those words he made it abundantly clear that to reduce interest rates for housing would be the first priority for the Government in the first 100 days.

His deputy, Mr. George Brown, said in his Election address that there would be special low interest rates for house purchases by intending owner-occupiers, or local authorities will halt the soaring costs of homes". In the light of this pledge, why is it, then, that a number of local authorities are abandoning their mortgage schemes and raising their rates of interest? For example, the Socialist-controlled council in Birmingham have raised the rates for new mortgages to 6¾ per cent. and existing mortgages will go up to 6¾ per cent. in April. The 100 per cent. mortgage scheme has been abandoned. The London County Council have raised the rate for new mortgages to 7¼ per cent. Compare these Socialist-controlled local authorities' actions with what the Prime Minister promised before the Election in a television broadcast. This is what the Prime Minister said: We shall also encourage popular schemes such as that in Birmingham, where the Labour council are building houses for sale and are giving 100 per cent. mortgages with low interest rates. That, of course, was the position in the good old days, when there was a Conservative Government in office.

We see, then, that the 100 dynamic days that this country has suffered under Socialism have resulted in exactly the opposite of what the Prime Minister promised. It is not only what the Prime Minister promised; it is what 16 other members of his Cabinet promised as well. They said that a Labour Government would introduce preferential rates for home buyers. I should like to ask the noble Lord opposite who is to reply to this debate: when is this urgent war-time operation going to lake place? When is the Chancellor of the Exchequer going to implement his Election address, in which he stated that would-be home owners would be aided by favourable interest rates"?

The Socialist Chief Whip in another place was quite specific in his Election address when he said that a Labour Government would make it easier to buy a home of your own by making the full purchase price available at a lower rate of interest". He went on to say: We shall also keep down rents of council houses by making money available to the council at a lower rate of interest". Why was this not done with Birmingham and the London County Council? There is no foreign balance-of-payments problem involved here.

In view of the way in which the Government are now trying to get out of their promises and pledges, I think that I cannot do better than conclude with further quotations from the Prime Minister in speeches he made last year, before the Election, in Stevenage and Swansea. At the former place, he said: We shall cheapen the cost of housing by our interest rate policy". At the latter place, he said: If we had to use short-term interest rates to staunch any flow of short-term capital so as to safeguard our sterling area reserve, we should take special care by the use of the two-tier interest rate structure we have proposed to ensure that local authorities get capital for housing, at rates which represent the power of the Government to borrow". Why, then, has no action been taken along these lines? To indicate the kind of rates envisaged by the Government, Mr. George Brown said at Derby on September 26: What we have in mind "— that is, as regards interest rates for home buyers— is something around 3 per cent.".

Finally, in the 1964 Election Manifesto, The New Britain, the Socialist Party said this: Labour is ready. Poised to swing its plans into instant operation. Impatient to apply the New Thinking that will end the chaos and sterility". The Government have not taken the promised urgent action to lower interest rates for housing, my Lords, but they have certainly created chaos in financial circles and foreign trade. Already the Socialist Party are guilty of reaching power by issuing a false prospectus. If company directors issue a false prospectus, the Director of Public Prosecutions is quickly after them, and rightly so. In the case of the Socialist Party, it will not be the Director of Public Prosecutions who will be after them for fraud and a particularly cruel kind of deceit; it will be public opinion, and with every justification. Already at Leyton and Nuneaton the writing is on the wall. The red lights are focusing their beams on the broken pledges and shattered promises of these first inglorious one hundred days of the guilty men. I again ask my Question: What is the policy for lowering interest rates for housing, and when will that policy be introduced?

7.34 p.m.


My Lords, I would ask for the customary and traditional indulgence of this House, more especially as it is a rather late hour. A fortnight ago the noble Lord, Lord Bowles, in a maiden speech in this Chamber, mentioned that when he made his maiden speech in another place the Members of that other place were in fact sitting in this Chamber. Your Lordships had graciously allowed this Chamber to be used by the Members of the other place until their Chamber was rebuilt. I find myself in a similar position.

I made my maiden speech in another place fifteen years ago, during a debate on the coal industry. The Labour Government were in power at that time, with a very slender overall majority. I remember the occasion well, not only because I made my maiden speech but also because it fell to my lot, speaking on behalf of myself and my colleagues, to warn the Government that they would be faced with a very close and critical Division at the end of the day. Evidently my warning was not heeded, because when the debate concluded and the Division took place the Government Whips were taken by surprise, and the Government were defeated. Perhaps it was not surprising that my words passed unheeded, for who would expect a mere newcomer, making his maiden speech, to say anything that would affect the life of the Government? Some political commentators say that the Government never fully recovered from the shock. So much for my first maiden speech. But, in recollecting the incidents that followed it, I am not suggesting that the modest comments which I wish to contribute to this short debate to-night are likely to have any such far-reaching consequences.

This subject is nevertheless important, and I am very glad that the noble Lord, Lord Wakefield of Kendal, has provided an opportunity for it to be discussed. A high bank rate has many repercussions throughout the economy, and it is bound to affect housing finance and mortgage rates. It affects them in many different ways. It affects firms supplying the building industry; it affects adversely the cost of providing working capital for those engaged in the building industry; and, of course, it affects the cost of new loans raised by local authorities.

At the present time some smaller local authorities are in serious difficulties. The L.C.C. have raised a very large loan at 6¾ -per cent., and they are charging 7¼ per cent. to home buyers. Now some smaller local authorities who have loans falling in cannot offer less than that, but have to offer 7 per cent.; and I understand that some of them have already ceased to grant any loans to would-be home buyers. It is true that they have some concessions from the Public Works Loan Board, up to 20 per cent. of their needs, but this is very much less than what is required—and this is one of the indirect consequences of a high bank rate. The promise to do something about this next Session is not very much comfort for them.

I would agree that there is no easy solution to this problem. It has been suggested that there should be a two-tier system, to which I think the noble Lord, Lord Wakefield of Kendal, referred—that is to say, some borrowers would be granted more favourable rates of interest whilst others would have to pay the full rate. Some categories of borrowers would have a beneficial rate of interest; others would not. Frankly, I have very great doubt as to whether this would work fairly, and I think it would probably lead to more anomalies than would be removed. It would be extremely difficult to draw the line. For example, I am sure there are many who wish to help young married couples who are buying their homes, and it has been suggested that something should be done to make the rate of interest on mortgages less for these young married couples who are buying their homes. Where does one draw the line? How does one define a young married couple, and when does a couple become a not-quite-so-young married couple? Again, what would one do about a second marriage? It is really impossible to find a satisfactory definition.

Then, to turn to a wider sphere, it is sometimes suggested that sums raised by local authorities for housing to let should be treated favourably so far as interest is concerned, but not funds required for loans to those who are buying their homes. I find it difficult to justify this in principle, and I think equally difficult is it to justify the distinction between loans made by local authorities to people buying their homes and loans made by building societies.

The noble Lord, Lord Wakefield of Kendal, has already referred to the problems of the building societies, and I should like to express a few words on that subject since the building societies have been brought into the political arena. I have No 1nterest to declare, although I am an honorary Vice-President of the Building Societies' Association, and I am, of course, interested in those 2½ million borrowers who depend on the building societies. I do not think there should be any discrimination against them.

I would say that the criticism made by the Chancellor of the Exchequer against the building societies was somewhat unfair. It is often said that the best defence is to attack; but I should have thought that in this case the attack was misdirected; it would have been more to the point to have criticised the last Administration for failing to remove some of the taxation anomalies which adversely affect the building societies, particularly in keeping up their reserves. To return to the criticisms of the building societies. It is not always appreciated by the public that the amount charged by the building society must depend on the amount it has to pay to those who invest in it; and the amount available to home buyers is dependent upon the amount the building societies can attract from investors. If the prevailing rate is high, then inevitably the building society rates charged to the borrowers must go up.

Furthermore, they must be continually raising new money. I will quote from a statement which was made by the Building Societies' Association on the 27th January of this year: During 1964 … there was a steady fall in the amount of new money coming to building societies. Part of the mortgage demand was met by running down liquid assets, but this could not continue indefinitely. I will also quote, if I may, from the Economist of January 23: After the increase in bank rate, even the biggest societies experienced a sharp fall in their inflow of savings. I have other quotations which will show that the fall in the margin was becoming a serious one. This is not just an academic point, because it will lead to rationing of mortgages. To use words from the same article in the Economist of January 23, it is likely to lead to: an arbitrary, unfair and restrictionist rationing of mortgages for new would-be house buyers". I know something of the problems of young people in search of mortgages. Consider the case of the young people living with their in-laws. They seek a house; they find a house and they are fortunately in the position to put down a small deposit; they apply for a mortgage and it is turned down—not because they were unsuitable people to buy their own home, but because mortgages are rationed. The rationing of mortgages can be as great a hardship as high interest rates. It is no answer to say that there is a demand for mortgages; the need is for availability of funds as well. It has been contended that the building societies could have waited before putting up their rates the last time. I do not think so. It has been argued that when the corporation tax comes into effect they will be treated more leniently; but that tax will not come into effect until 1966-67. What is needed is action now.

My Lords, I should like to be constructive. As far as local government finance for housing is concerned, it is an extremely complex subject, and I should be trespassing on the time of your Lordships' House if I were to go into details. I think that more help should be given to the smaller authority, either through the Public Works Loan Board or by the local authorities banding together to raise funds on a regional basis, I think that would be a good idea. In that way, they would be in a better position to compete with the larger concerns like the L.C.C.

So far as the building societies are concerned there is a comparatively simple change that could be made. As the noble Lord, Lord Wakefield of Kendal, pointed out, the building societies suffer tax in a number of different ways. They pay the composite rate in respect of the savings of those who invest in the societies; in addition, they pay both income tax and profits tax on their surpluses. This is not strictly profit: there are no ordinary shareholders to whom such profits could be paid if there were any. The surplus is used for building up reserves and for advancing further mortgages and, perhaps, reducing interest rates.

Therefore, I would abolish income tax and profits tax on the surplus, and in due course when the corporation tax comes into effect I would not apply it to the building societies. The result would be some reduction in rates, and it would lessen the danger of the rationing of mortgages. I believe that if the last Administration had done this, it is probable that the present increase in mortgage rates which has aroused so much controversy would not have been necessary. Surely, if we wish to expand our house building programme, then the least we should do is to avoid rationing of mortgages, and we should make available as much money as possible.

Those are just a few practical suggestions; but I think there remain two basic truths. The first is that the introduction of a high bank rate has far-reaching consequences throughout the economy. This argument about the building societies only confuses the issue. Secondly, if special relief is to be granted—certainly anything that would bring interest rates down to the region of 3 per cent. when the ruling rate is 6 per cent. or 7 per cent.—it would involve a very large subsidy; and here I think I must disagree with the noble Lord, Lord Wakefield of Kendal. I calculate that to bring down by subsidy the rate of interest from 6 per cent. to 3 per cent. for all home buyers, both from building societies and local authorities, would cost something in the region of at least £150 million a year, which would have to be paid by the general body of taxpayers. I think it would cost something between £150 million and £175 million a year.

In view of this, it is important to introduce an element of realism, and the public should know what is involved. The late Lord Samuel, who preceded my noble friend Lord Rea as Leader of the Liberal Party in your Lordships' House, once said that in politics the best way to play your hand is to lay your cards face upwards on the table. Well, in politics it is often very tempting not to follow that sound advice. But in dealing with the complex subject of interest rates, which is not fully understood by the general public, it behoves one to be as frank and open as possible and to strive to tell the public the truth.

7.46 p.m.


My Lords, I understand that this is the first occasion on which the noble Lord, Lord Wade, has addressed this House. I know it is my wish and, I think, the wish of us all to congratulate him on an excellent speech. I hope that on many occasions we shall hear his most relevant and material remarks. Speaking for myself, I shall deal with this question of rates of interest entirely on a mathematical basis. I am not suggesting for a moment that the human element should be eliminated: but unfortunately the human element is also concerned with mathematics.

Let me get straight to the point and deal with the building societies. I hope your Lordships will pardon me if I say something abundantly obvious. It is that the building societies cannot lend money until they have first obtained it from the general public. The public want the best return for their money and, therefore, the rate of interest offered by the building societies must compare favourably with that from other sources of investment. In this connection, the prevailing bank rate is, in my opinion, of immediate importance. If the bank rate is 7 per cent., then the building societies find themselves compelled to pay investors something in the region of 4 per cent., free of tax, in order to induce them to invest money in the building societies. My Lords, is that the truth, or not?—no one answers!

The building society, having raised the necessary money, is then in a position to lend it to persons who wish to acquire houses. Allowing for the most economic administration, the building society will find it necessary to charge its borrowers a rate of interest in the region of 7 per cent. Is that correct or not correct?—no one answers! The building society is not allowed to make what is commonly known as a profit, but is allowed to have a surplus of revenue above expenditure and may allocate such surplus to reserve. I consider it is absolutely essential that the building society should build up strong reserves. In my view, the collapse of a building society, even a small building society, is a national disaster, like the collapse of some big banking institution. Therefore, the building up of strong reserves by the building societies is a national requirement.

I should like the noble Lord who is going to reply on behalf of the Government, and who, I understand, is a Senior Wrangler, to tell me precisely at what rate of interest the Government and local authorities propose to raise money from the public and, having raised the money, at what rate per cent. they propose it should be lent to persons who wish to acquire a house. Let us have the figures, not adumbrations from the platform to a large crowd of people. I never speak to a large crowd; they never wait for me. If there is going to be a loss on every transaction, let us know precisely what that loss is, always making a fair allowance for administrative expenses. Then I hope that the noble Lord will go on to tell me who will discharge the loss. People often say, "The Government will pay." But "The Government", whichever political Party happen to be in power, never has a farthing: it is the taxpayers who produce the money. Sometimes people say that the local authorities will pay. But the local authorities have not a farthing. All they have is the money they obtain from the rates. So I want to know, if there is going to be a loss on the Government scheme, how much it is likely to be, who is going to pay and how the money is going to be found. Let us have the figures, exactly and precisely, and no ancillary adumbrations.

7.53 p.m.


My Lords, I think we should be grateful to the noble Lord, Lord Wakefield of Kendal, for introducing this important subject and giving us an opportunity of discussing it, albeit briefly. I am not so sure about the pleasure of noble Lords opposite, because they may find themselves in an awkward position, but certainly it is a great pleasure to Members on these Benches and, if I may say so, on the Liberal Benches to have had this opportunity. It has also given us an opportunity of hearing the noble Lord, Lord Wade, make a most interesting maiden speech. I am sure we can congratulate the Liberal Party on their acquisition and ourselves on finding somebody who can talk with the knowledge the noble Lord has displayed, and we shall look forward to hearing him, perhaps on other subjects, on which I feel sure he will be equally well informed.

If I may say so without appearing to be presumptuous, I liked the way in which the noble Lord addressed himself in a straightforward and simple manner to the Government Benches. I feel sure that the noble Lord who is to reply and, even more, his right honourable friend the Minister of Housing and Local Government, will have to pay careful attention to what the noble Lord, Lord Wade said, when it comes to considering the lower interest rate and the complications in the economy in general. I am rather sorry for the noble Lord who is to reply, because whatever he is going to tell us is bound to contradict either the Prime Minister or a good number of Cabinet Ministers. I shall show that that is so.

Let me remind your Lordships of the background of this matter. In the months preceding the General Election, it was generally understood, from the speeches of important members of the Labour Party, that there would be a reduced rate for mortgage interest and even for local housing authority borrowing. When pressed on this matter in the summer, Mr. Wilson said, in a letter to the Building Societies Association, who wanted to know where they stood, that Labour was not proposing to introduce through the public sector some special or discriminatory form of subsidised loans for house purchase. Furthermore, in a speech at roughly the same time at Leeds, Mr. Wilson said that the Labour Government would revert to Public Works Loan Board financing for essential local authority needs and that the financing would be at a reasonable rate of interest which reflected the power of the Government to borrow. That is a far different matter from 3 per cent. interest rates for potential home owners and local housing authorities.

In spite of what Mr. Wilson said at that stage, the Labour Manifesto stated clearly that: Labour will introduce a policy of lower interest rates for housing. This policy of specially favourable rates will apply to both intending owner-occupiers and local authorities building homes to rent. The Manifesto added: Labour will further help the owner-occupier by providing 100 per cent. mortgages through local councils. The First Secretary, as he now is, Mr. George Brown, made great play with this during the Election, as my noble friend said. It hit the headlines, and I have no doubt that many votes went to the Labour Party by this promise of 3 per cent. interest. Yet immediately the Election was finished and the Labour Party scraped home by a nose, we did not hear another word about it. In the Queen's Speech it was not mentioned at all. Perhaps by that time the Prime Minister's more reasonable and sounder economic views had predominated, and therefore this did not find a place in the Queen's Speech.

Why has it to be resurrected in this way now? Because of the results at Leyton and Nuneaton. Immediately after the by-elections, the Minister of Housing stated at a Press conference that he thought the voters in these constituencies had felt let down by the failure of the Labour Government to follow their policy on this point and that he was preparing legislation for the next Session to fulfil their promise.

Which is it to be? Is this promise to be fulfilled for electioneering purposes—not the past but the future—or are the Party opposite going to stick by the words of the Prime Minister? Is the Minister of Housing going to pay attention to what has been said by the noble Lord, Lord Wade, and by my noble friend Lord Wakefield of Kendal, about the effect of the bank rate and the essential requirements of the building societies? We must know. And if we are going to have this lower rate of interest, since this is a matter that is very difficult for the public to understand, it must be explained thoroughly.

If we are to have a low rate of interest for potential home owners the Government will have to explain why such people will benefit and why home owners who are already paying higher rates of interest will not be able to benefit from it. The Government will have to explain how it is that the houses for which they propose to charge a lower interest rate will cost more than they do now. Because there is a limit to the number of houses which can be built—we are all agreed on that—and if the Labour Party fulfil their promise to build a greater number of local authority houses for renting, then the present rate of house building for home ownership will be reduced. We are going to get, at one and the same time, lower interest rates increasing the demand and a lesser number of new houses diminishing the supply; so obviously the price of houses on which people will be paying a lower rate of interest will go up. Is it an advantage to pay a lower interest on an article which costs much more? That will have to be explained.

If this interest rate is going to be below the Public Works Loan Board rate for local authority housing, that will form a subsidy. Is it going to be an indiscriminate housing subsidy to all local authorities or only to those who need it? That is an important point. It is of no use for the Government just to say: "In order to fulfil our Election promise, on which we have had second thoughts"—and perhaps rightly so—"we are now going to implement it in the next Session." They must explain why they did not implement it first of all. And, now that they have changed their mind again, they must explain what effect that is going to have on everybody. These matters must be explained thoroughly. As I have said, the noble Lord opposite has a difficult Question to answer, and we look forward to seeing how he will be able to answer on behalf of his right honourable friend, not to mention, indirectly, on behalf of his other right honourable friend the Chancellor of the Exchequer, the foolishness of whose remarks have been demonstrated very clearly by other noble Lords who have spoken this evening.

8.1 p.m.


My Lords, I think one might bear in mind two things: first, the hour, and, secondly, that one should not have too much of anything. If I were to try to answer every single rhetorical question that has been asked of me this evening, your Lordships would indeed be kept late. No answer was expected.

May I, however, first of all fulfil one personally very agreeable duty? I have known the noble Lord, Lord Wade, for many years. I have listened to him make speeches in another place about many matters, including, I may say, building societies, and I have always felt that those speeches reflected several things which I valued. I felt it again to-day. The first is that he does know what he is talking about, or finds out beforehand what it is he has to know. Secondly, the noble Lord makes up his own mind within the proper limits of Liberalism—such as they may be. Thirdly, I have never heard him make a speech that was intended to be anything but constructive, by way of suggestions, such as the one we heard to-night. I assure the noble Lord—we have known one another for a long time—that it is an agreeable personal pleasure to be able to say to him a few of the kind things I have always felt about him, and to express the conventional and in this case very real hope that he will come and do the same thing here as I have heard him do elsewhere. I am sure that in saying this I speak for the whole House.

I will not attempt to answer in detail a good many points raised because, if I may say so, this is a rather ridiculous sort of Question. This is a Question on behalf of—I was not sure whether it was the Tory Party or the building societies: To ask Her Majesty's Government what is the policy for lowering interest rates for housing, and when it will be introduced. Every speaker who has spoken proceeded to explain what he thought the policy was, and either he was talking about something he did not know or he had no need for further information. I am going to answer the substance of what has been put.

There is a question here, and a really serious one, of what the country can afford at any given moment. I begin, therefore, by taking the last two sentences of the speech made by the Leader of the Liberal Party on Tuesday last in another place. He said this: Britain cannot afford to return to the 1964 type of Conservative Government. The Conservatives know this, and they know full well that if they went to the country now under the leadership of last autumn they would be beaten, and, this time, beaten squarely."—[Official Report, Commons, Vol. 705 (No. 48), col. 948, February 2, 1965.] I agree.

I come from that to consider for a moment what has been happening about interest rates for housing. The history of it—and I have to go back a little way—is that while the Labour Government were in office after the war there were low rates, around 3 per cent. When the Tories got back, in 1951, they proceeded gradually, and I think deliberately, to raise interest rates and, therefore, to put up, necessarily in their view, the rates of interest charged to local authorities for housing advances and, accordingly, the rents which local authorities themselves had to charge. Anyone who looks through the history of the New Towns during this period will find how large an element that deliberate increase by the Tory Party of interest rates has been in hindering the proper and full development of the New Towns. I do not say it has been a fatal hindrance; but a hindrance it certainly has been.

This is the Party which comes to us to-day to complain about interest rates at the moment. Let us see what "at the moment" means. Various quotations were made—and I must say that none of them seemed to me to be inconsistent with another if one took them in their context and noted what they were really about—from what was said by my right honourable friends at various times. One speaker very kindly quoted what seems to me to be the relevant document in this, and that is the Labour Party's policy statement in the matter. I will quote it, too. Labour will introduce a policy of lower interest rates for housing. It is impossible to say now what changes will be required in the general interest rate structure of the market. But because of its great importance to the family housing should be treated as a separate case deserving specially favourable borrowing rates. This policy of specially favourable rates will apply both to intending owner-occupiers and to local authorities building houses to let. The statement then deals with the much more difficult case of people who already have mortgages at a very high rate—I do not think that, for the moment, I am concerned with that. But not one jot or tittle of that policy that I have just read out has been abandoned.

How does one satisfy the Tory Party? They raised a Motion in another place on Tuesday last complaining of the hasty action of the Government, and to-day we had Lord and almost vituperative complaints about the Government's failure to move fast enough on this point. I think the suggestion that we were too hasty was fully and adequately answered by my right honourable friend the Prime Minister, who invited the Tory Party in another place to say what it was they found hasty. So far as I can see from the course of the debate, he never received an answer to the question. Was it this? Was it that? Or what was it? Now, to-day, I am supposed to explain—and I shall find little difficulty in doing so—why the full purport of the policy which was promised, and is still promised, has been delayed.

I cannot think that any noble Lord opposite is really ignorant of the reason. Are they not aware that there really has been a financial crisis? Do they think, as did the noble Lord, Lord Wakefield of Kendal, that it was an invented one, trumped up from some minor difficulty about the balance of payments? Just look at the figures that were given the other day. Just look at the figures of the balance of trade, slipping steadily from bad to worse over quarters. Just look at the figures of the total amount of foreign indebtedness. Just look at the figures that demonstrate quite clearly that something which had to be done at the very last moment in October should certainly have been done in July and, in my view, a great deal earlier than that. The fact of the matter, my Lords, is that, having themselves bared the cupboard and postponed the Election for Party political reasons, they brought on a financial crisis in this country and now refuse to recognise its existence and its effect on this very matter of interest rates for housing.

This kind of nonsense is dangerous nonsense. Some people will believe it, as they believed the Leader of the Opposition when he went round the country explaining that its economic position had never been better. The then Prime Minister spoke with the authority of his position and his knowledge, and that sort of remark ought never, in my view—and I do not hesitate to say it—to be made by the Leader of a responsible political Party in the circumstances in which it was made.

We have had to-day from the opposite Benches what I call a nice, vigorous, tackle. I am still running, and I still have the ball, though I must say that the noble Lord did his best, and if words could have done it he would have brought me down easily. But there is rather more than that in this subject, and I must say that I am rather shocked to hear anybody, whether it is in the interests of the building societies or the Tory Party, talking in this way about the interest rates on housing, about breaches of Election speeches and the rest of it, when the fault lies, as I see it, entirely with the outgoing Government. It is they who caused the trouble which involved the postponement of these pledges.

There is another point I want to make. These pledges by their nature—and I read them out on purpose—are not things which can be done rapidly, and no promise has ever been made that they would be done rapidly. Indeed, the contrary has been said time and time again, and the extraordinary suggestion that this should have priority in the first one hundred days was one of the more extravagant efforts (I hope the noble Lord will not mind the word) that we had in the opening speech. Well, there was one obvious priority for the first hundred days. We had through this House the other day two emergency measures: one of them was to protect tenants in certain circumstances, and the other was to bring what is now admitted to have been, as I understand it, an overdue increase to pensioners. That we could not fulfil that at once was bad enough, and that was because of the position in which we found ourselves, a position for which, I repeat, those who earlier postponed the Election and had neglected the matter year after year are, as I see it, entirely responsible. It is fantastic, is it not, to suggest that housing interest rates, however important they are, should have priority over those two measures.

I do not want to go into a whole list of matters, but I think on the true view of the body politic my right honourable friend the First Secretary of State was perfectly right in giving an urgent priority for steps to arrive at the incomes policy which the previous Government had blessed in theory and damned in practice. One can argue about this—it is getting a very long way from the Question. I should, however, before I sit down, like to point out one or two small things. One is this. Building societies are, of course, extremely useful in our society. They perform a valuable function and no one—no sensible person, at any rate—would for a moment seek to underrate their importance. But the passion not to be taxed seems to arise in the most improbable places before every Budget. I think it should occasionally be controlled, and though I know building societies have a serious case in this matter, I am sure they will not expect me—and those who spoke on their behalf to-day will not expect me—when replying for my right honourable friend, the Minister of Housing and Local Government, to anticipate the Chancellor of the Exchequer's Budget. That would really be a political cartwheel of an order that is rarely, if ever, attempted, and I am not going to try. That is one point.

The second is about the local authorities. Something has been done. It was mentioned by the noble Lord, Lord Wade, in his maiden speech. What has been done in effect is to allow the smaller authorities—and he properly had particular regard for them—to get rather more at favourable rates from the Public Works Loan Board. It is perfectly true that all rates are high because the bank rate is high. These things hang together, and I should very much like the noble Lord who asked the question to-day to take the Radcliffe Report on the Monetary System and read solidly through it. He would find it fascinating. It contains a good deal about the subjects which he was considering to-day. Building societies, the local authorities in their housing operations, and the other organs of our monetary system, do in fact go together. They are part of one whole; perhaps not completely thought out, nor clearly thought out, but they interact one on another.

It is impossible to put the Government of the day in a position where they have to raise the bank rate and, at the same time, expect them to deal with the very difficult question of the rates of interest for housing loans. We are going to carry out those promises, and we are going to carry out one more. It has been so often repeated that I have no hesitation whatever in repeating it again. We are going to look thoroughly and carefully at the relation between central and local finance. I am sure it needs a review, and the noble Lord, Lord Meston (who explained to me his reasons for leaving), put to me some problems which would have required not merely mathematics but a bit of prophecy, too. Therefore, I am afraid I cannot answer his particular conundrums, ambiguously or otherwise. I would say this about it. It seems to me that that relation between central and local finance is one of immense importance, and not merely from the financial point of view. For on it depends the proper balance between the requirements of the central Government in matters which affect local authorities and the independence of the local authorities, which I hope we all value highly, and which certainly over the years they have well deserved. That balance I hope we shall strike.

My Lords, I hope I have not taken up too long, and I hope I have not been too violent. But I must say that I really get a bit sick when the Tory Party get up here and say that the Government in the first hundred days have not lowered the interest rates on housing, and that therefore they have done something wrong. I should just like to remind them of one little thing before I sit down. What was the thing they did in their first hundred days in 1951? They brought in an earth-shaking measure. The Labour Government had provided for publicly owned pubs in New Towns. They cancelled that, and handed them back to the brewers.

House adjourned at twenty minutes past eight o'clock.