§ 4.13 p.m.
§ LORD SHEPHERDMy Lords, in seeking permission of your Lordships' House to repeat a statement, may I join with the noble Baroness in expressing my personal congratulations to the noble Earl, Lord Snowdon, on having made his maiden speech. It was a speech of distinguished quality.
My Lords, the Statement is being made in another place by my right honourable friend the Secretary of State for the Environment on the subject of mortgages, and I will use his words:
"The Government's immediate objective is to increase the flow of funds available for mortgage lending, while holding the mortgage rate at its present level. The building societies, on the other hand, have argued in recent days that a sufficient net inflow of new savings cannot be assured except by an increase in their investment rate, which in turn would require an increase in the mortgage rate to above, and probably significantly above, the present 11 per cent.
In order to avoid this further damaging increase in housing costs, while yet making more money available for house purchase, the Government have offered to arrange immediate short-term loan facilities for building societies up to £100 million at a rate of 10½ per cent. The Bank of England would make advances at the minimum lending rate, which is currently 12¼ per cent. The cost of meeting the difference—about £150,000 per month at present rates—would be met by my Department's Vote, subject to Parliament's approval. We also undertook to arrange for a further £400 million to be available from the end of April, if circumstances then still required this, at an average rate of £100 million a month.
"This initiative would, in the Government's view, meet the immediate major problem. It would help the societies to lend more money quickly for house purchase without imposing further financial burdens on home owners and home buyers. The Government also believe that the present 1252 difficulties of the societies in attracting an adequate supply of funds will diminish as we succeed in our intention of reducing the level of interest rates generally.
"The Council of the Building Societies Association considered these proposals at a meeting yesterday afternoon. They were not able to agree to accept them without a further discussion with the Government. I have therefore agreed to meet the Association's representatives once again at 5 o'clock this afternoon. Our proposals will, I believe, make a significant contribution towards stabilising both the cost and the flow of mortgage funds. I hope and expect, therefore, that following our further discussion with the Association's representatives, the Council will decide at their next meeting on April 19 to accept the Government's proposals and to recommend no increase in the mortgage rate."
My Lords, that concludes the Statement.
§ LORD SANDFORDMy Lords, I would start by thanking the noble Lord the Leader of the House for repeating the Statement in this House this afternoon, and on behalf of my noble friends behind me to say that we welcome the offer contained in it. I hope that, as a result of the further information and assurances that the noble Lord's right honourable friend the Secretary of State can give to the societies when they meet him a little later this afternoon, it will be possible for the initiative to lead to a satisfactory conclusion. Meanwhile, I am sure that I speak on behalf of all home owners in saying that there is an intense sense of relief that the rates of interest are not to rise for the time being.
My Lords, it was a year ago almost to the day when my right honourable friend, Mr. Rippon, had to make similar temporary short-term arrangements with the building societies. There has been widespread expectation and hope since then that the building societies will be able to come forward with further long-term solutions to these problems so that we do not again have to proceed from hand to mouth in this way. I am sure the House would be grateful if the noble Lord could say anything about the development of those long-term solutions. 1253 The House will be glad to note from the Statement that Her Majesty's Government give such high priority to home buyers. One hundred million pounds a month is a lot of money, and this is a welcome expression of the Government's understanding of the importance of the subject. To cast our minds back to the Budget and the policy contained therein, most of it, in so far as it bore on this problem, made the solution more difficult. If the noble Lord could point to any particular aspect of the Budget Statement and indicate how it has actually helped in furthering the Government's policy in this particular respect, I am sure that the House will be grateful to hear it.
§ 4.18 p.m.
§ LORD WADEMy Lords, on behalf of my Liberal colleagues, I should like to join in thanking the noble Lord the Leader of the House for repeating this Statement. I think we must all agree that it is very important that there should be an inflow into the building societies to enable them to carry on their proper functions, and that if possible the rate of interest to home buyers should not be increased above the present 11 per cent. With regard to the proposed loan of £100 million at 10½ per cent., and a further possible £400 million, would the noble Lord agree that there are a number of detailed points that require very carefully looking into, as suggested by the Financial Times this morning? To give only one example, the object would be defeated if, as a result of the conditions imposed, there was a net outflow instead of an inflow of savings from other sources.
I have noticed that it is stated in the Press that the Government are angry with the building societies, and some rather uncomplimentary remarks have been made about them. I should have thought that that was not very diplomatic when these discussions were taking place. I do not know whether the noble Lord, Lord Shepherd, can throw any light on that subject. But as a meeting is to take place at 5 o'clock, it would not serve any useful purpose for me to raise other detailed points. I hope the meeting is successful and that a solution will be found.
§ LORD SHEPHERDMy Lords, I am grateful to the noble Lord, Lord Sand 1254 ford, and the noble Lord, Lord Wade, for the welcome they have given to this Statement. I agree with the noble Lord, Lord Sandford, that this major problem of the finance of house ownership throughout the country needs a radical look, and certainly it is somehing to which all the major political Parties ought to be paying particular attention. I hope that Lord Sandford will forgive me if I do not follow him in his questioning in regard to the Budget. It is an involved argument balancing one factor against another. All I would say is that, on balance, I believe that the Budget was favourable to the building societies; but I will not pursue the matter any further because of the debate we have before us. In regard to the point that Lord Wade raised about anger with the building societies, all Governments have a sense of frustration and disappointment when their first overtures are repulsed. Sometimes in the media it may appear to be anger, but I hope, as does the noble Lord, Lord Wade, that we shall have a satisfactory outcome on April 19.
§ THE EARL OF ONSLOWMy Lords, will the noble Lord please justify his confidence that interest rates will come down? There has been a recent hardening of interest rates in the United States. Secondly, if the interest rates to investors are held down at an artificially low level will this not mean, as The Times said this morning, that investors will be subsidising house owners twice over: once as taxpayers and once by not getting the market rate of return on their interest-bearing money?
§ LORD SHEPHERDMy Lords, in regard to the noble Earl's second supplementary question, I think he will find that, as a consequence of the Budget, the net return after tax is now more favourable to the lender to a building society than it was before. If, however, one takes an investment in the building societies—and here one should stress that they are secure; in fact, they are an unrivalled source of investment and income—one finds that the rate of return to a building society investor compares favourably with most secure sources of investment. I would be quite happy to debate other matters with the noble Earl, but I have a feeling that we have already intruded in a most sensitive debate, and 1255 perhaps we should leave the more monetary and statistical matters to another day and return now to the debate on the handicapped.