HL Deb 30 January 1973 vol 338 cc490-2

2.38 p.m.

LORD BESWICK

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what research has been conducted into the use made of personal bank loans the interest on which is allowable for tax relief under the Finance Act 1972.

THE MINISTER OF STATE, DEPARTMENT OF HEALTH AND SOCIAL SECURITY (LORD ABERDARE)

My Lords, in the published quarterly analysis of bank advances, lending by banks in Great Britain to persons is subdivided into lending for house purchase and other personal lending. No further information about the use made of personal bank loans is available.

LORD BESWICK

My Lords, while thanking the noble Lord for that Answer may I ask him whether he would not agree that if more thorough research had been carried out it would show that this tax concession had been a significant element in both the rise and the collapse of the equity share market?

LORD ABERDARE

My Lords, the increases in personal loan advances date back a very long way and I should not have thought that they could necessarily be held responsible for recent events.

LORD BESWICK

My Lords, while it is true that the increase in loan advances dates back a long way, and while it is true that the noble Lord himself criticised this increase in the years gone by, would he not agree that because of the tax concession these advances have been used by those who can exploit an inflationary situation? Would he also not agree that so long as this concession remains it is difficult to take seriously the Government's claim for fairness in phase II of the counter-inflationary plans?

LORD ABERDARE

My Lords, the Government's economic policy is intended to ensure that a faster rate of growth of output can be achieved in conjunction with steadier prices, and monetary policy will be consistent with these objectives. As the noble Lord will know, the general ceiling of lending has been affected recently by two calls for special deposits and in August last by qualitative advice that was given by the Governor of the Bank of England to the banks.

LORD SHINWELL

My Lords, may I ask the noble Lord this question? If personal loans are conceded to enable any person to purchase property and he then sells that property and makes a profit, surely that is bound to cause a measure of inflation? How can one possibly avoid it?

LORD ABERDARE

My Lords, if I may say so, I do not think that is really relevant to the point. The fact was that when the Labour Government withdrew the tax concessions on personal loans they did not withdraw them on property.

LORD SHINWELL

My Lords, whatever answer the noble Lord may give as an excuse, I hope he will not put any blame on the Labour Government, because surely the present Government cannot escape simply on account of the failures of the previous Government?

LORD HARVEY OF PRESTBURY

My Lords, if the Government are going to be fair in this matter ought they not to go even further and allow the first £30 to the man who wants to borrow a small sum, for whatever purposes?

LORD ABERDARE

My Lords, I am aware that there is a £35 limit, to which my noble friend is referring. This is purely for administrative reasons. It would be exceedingly difficult for the Inland Revenue to cope with a number of small claims.

LORD BESWICK

My Lords, is the noble Lord not aware that the point made by my noble friend Lord Shinwell is relevant; and is the noble Lord really saying that the sort of economic growth we want is to be measured in terms of speculation in equity shares and property?

LORD ABERDARE

Not at all, my Lords. As I said, the Governor of the Bank of England has issued advice to the banks on their lending policy: that they should, as necessary, make credit less readily available to property com panies and for actual transactions not associated with the maintenance and expansion of industry; and the two calls to which I referred have reinforced that advice.