§ 7.20 p.m.
§ Moved, That the Bill be now read 3a—(Baroness Birk.)
§ On Question, Bill read 3a.
§ Clause 1 [Advances to lending institutions]:
Lord DAVIES of LEEK moved the following Amendments:
Page 2, line 15, after ("savings") insert ("or such lesser amount as the Secretary of State may by order specify;")
Page 6, line 17, leave out paragraph 17 and insert ("7. Such banking companies and discount companies as the Secretary of State may with the consent of the Treasury specify by order.").
§ The noble Lord said: My Lords, because of the late hour, I should like to move both Amendments at the same time it will expedite business and I do not think that it will blur my intentions. I beg, therefore, to move the two Amendments standing in my name.
§ The first Amendment aims to reduce the £600 saving requirement for the purchase of cheap houses and to bring it down to something like £300. In another place, the Government have bowed to pressure and have been good enough so to amend the Bill that the savings requirement may be reduced at a future date. I should like that amendment to be made quite clear, for I believe that there is still discrimination against those who want to buy cheap houses. May I give some figures to the House.
§ It is worth remembering that in 1976' over 6 per cent. of all second-hand 464 dwellings were sold for less than £4,000. I believe that the present requirement to save £600 will discriminate against the purchaser of the cheaper house. The person buying a house for £3,000 will have to save 20 per cent. of the purchase price, while a person buying a £12,000 house will have to save only 5 per cent. of the purchase price. Consequently, the aim of this Amendment is to end discrimination against the purchasers of cheaper houses by making sure that they are not required to save more than they receive by way of Government loan.
§ I am prepared to accept that there should be the caveat that people should not be driven into incurring expenses, similar to those with which they are sometimes faced as a result of high pressure advertising, which they cannot afford to meet. Some protection against that kind of activity is, I accept, provided in the Schedule to this Bill.
§ The second Amendment relates to the Schedule on page 6. The intention of this paragraph is to exclude certain foreign banks, particularly Asian banks, that would be used by the coloured immigrants who live in this country. We have to expect the growth of a cosmopolitan population throughout the world, and we have to learn to live with it and understand it. That is the function of an intelligent society. Many people therefore oppose the exclusion of recognised lending institutions, among which would be a number of reputable Asian banks. In the inner city areas, more and more black people are trying to buy their homes. As Dickens pointed out over a century ago, there is nothing that solidifies society better, than the ownership of a dwelling and the joy of making what originally may have been a humble home into something which is clean and neat. Consequently, I welcome the general purposes of the Bill.
§ There is the danger, however, that we are not protected from usury. Many of the homeless sections of the population in Southampton, Cardiff, Grimsby and Birmingham pay very high interest to institutions which are lending at rates which I call usurous. I do not want to name any names; it would be invidious.
§ May I add that not so long ago there was a Paper on homelessness from the Department of the Environment, the 465 Department of Health and Social Security and the Welsh Office. I do not intend to go through them, because the House is well informed, but it is quite true that since 1945 all Governments, both Labour and Conservative, have passed many housing Acts. If local authorities were to implement these Acts, it would be possible to do almost everything that is contained in this home purchase Bill to encourage young people, old people, the lonely and others in the inner city areas to try to buy their property. For instance, power is given to local authorities by the Local Government Act 1972 to do anything which is calculated to facilitate the discharge of any functions. They have power to incur expenditure for certain purposes up to the product of a 2p rate in any financial year. The powers of principal councils in relation to emergencies and disasters are well known, but too often they are not prepared to implement powers to improve inner city areas and slum property. Recently, many authorities have made what was originally slum property into decent property. Those dwellings are now within the reach of people who do not have much capital and who are prepared to struggle to buy their homes.
I am told that there are safeguards. Those safeguards are, allegedly, in the Protection of Depositors Act 1963. It was my duty to read through this Act. Hannibal could drive a train of elephants through that Act, or any part of it. The Protection of Depositors Act has more to do with moneylending than with lending money for house purchase or with building societies. Who or what is designated as a banking company or a discount company for the purposes of the Protection of Depositors Act 1963'? This is an Act which is designed
to penalise fraudulent inducements to invest on deposit; to restrict and regulate the issue of advertisements for deposits; to make special provision with respect to the accounts to be delivered by and the supervision of companies which issue such advertisements; …".
§ The Protection of Depositors Act 1963 is mentioned in the Schedule to this Bill. I shall paraphrase it from memory. Legally speaking, my paraphrase may be off-beat, but the gist of it is as follows. Clause 1 states that to conceal material facts is an offence. There is a girl who appears on television every weekend who gives examples of this. She shows an old 466 lady in Lambeth dancing up and down and then she picks out people who cheat the public by not letting them know the true rate of interest. It would be interesting to know how many rogues, rascals and userers have been trapped by the Protection of Depositors Act 1963.
§ With regard to the concealment of material facts, what is the most material fact for a poor purchaser of a house? The true interest rate could be 25 per cent. When I was a child in the Welsh valleys, there used to be a few wise old women who would lend a shilling to the collier's wife instead of her going to the pawn shop—at an interest of a penny a week—so that she paid back one shilling and one penny. It sounded marvellous, but it is a rate of interest of between 300 and 400 per cent. I believe that the true interest rates should be spiked down; they should be clearly declared by discount houses, banking houses, building societies and the rest when they lend, particularly to people who are not at all familiar with the Act.
I have nearly finished, so if my noble friend who is well and beautifully dressed on the Front Bench wants to get away, she need not worry. Clause 8(1)(d) says—and here is the escape hatch that Hannibal could take his elephants through—
… any other exceptional circumstances affecting the production or audit of the company's accounts".
So that under Clause 8—these are the words in the Act—if the presentation of accounts is onerous or impracticable then the Act would not be enforced upon the discount company. That is what it really means. So that private advertising companies have not got the safeguard that we hoped. They are supposed to present their accounts regularly.
§ One day I will table a question to find out how often this Act has been applied since 1963 to people who cheat the country or who cheat house purchasers. I hope that I shall get an answer. I do not intend to press the House to a Division: Your Lordships have had enough, but I hope I shall receive an answer which will give people outside some satisfaction. In any case I want to congratulate the Government on bringing the Bill forward, but it needs spokeshaving; it needs polishing and also some tightening up if we are going to apply the 1963 Protection of 467 Depositors Act. I shall leave it at that and wait for the reply from my noble friend. I beg to move.
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, I should like to express regret that the noble Lord, Lord Davies of Leek, moved these two Amendments together, because they really address themselves to quite different issues. But since we have embarked on the debate in this form I will follow him. With regard to the first Amendment, I suggest that to claim that this discriminates against the buyer of the cheaper house is a slightly mischievous manipulation of figures, if I may say so not in any derogatory manner at all. Once could equally well say (could one not?) that it discriminates against the purchaser of a more expensive house because he is only able to get a grant of six per cent. on a £12,000 house, whereas he can get a grant of 20 per cent. for a £3,000 house. So I really do not believe that that particular point is a telling one.
Of course, one could pluck any figure out of the air. It seems to me that on the whole £600 is not an unreasonable figure. As I said on Second Reading, we believe that under a Government of a different complexion it would be possible to double the size of the grant because we believe that the cost of building and maintaining council houses is of the order of £1,200 a year. I do not think there is much point in our getting into a long argument over that at this stage, but I am bound to say to the noble Baroness, Lady Birk, that I am not tremendously in favour of the noble Lord's first Amendment.
When we come to the second Amendment, about which I have been lobbyed in much the same way, I think we have a rather interesting situation. As I understand it, this Amendment addresses itself to two issues. On the one hand, it is suggested that in the list of approved or recognised lending institutions there are certain perfectly reputable and respectable banks which are not included and the Secretary of State should have power to add people to the list. On the other hand, it is suggested that there are certain organisations which carry the stamp of approval but which act in a usurious manner, to use the nice old word which the noble Lord used, and the Secretary of State 468 should have the power to remove such institutions.
When I discussed this with the noble Baroness, who was good enough to spare some time to go over it, it was pointed out that if one looks at Clause 2 one finds that the Secretary of State has precisely the powers which he needs to do these two things and these were inserted in another place during the debate which took place there. In any case, I do not believe that it would be right to give the Government the power to say to an institution, "It has been represented to us that you are no longer behaving in a respectable manner; we do not like you; we are therefore going to take you off the list". I think that would be a highly objectionable power. I cannot really believe that any Government or civil servant would want to be put in a position where he had this type of omnibus sledgehammer power to do something which would require a certain appeals procedure, or perhaps an institution or organisation with whom the matter could be discussed. So from this side of the House it would seem that the two points are already covered in the Bill, and that so far as the second Amendment is concerned I am not at all sure that the last state of that man would not be worse than the first.
§ Baroness BIRK
My Lords, I should like to follow my noble friend and reply to the two Amendments together. The first Amendment on the scale of loans deals with people on a lower income having the opportunity of owning their own home. I agree with the noble Lord, Lord Strathcona and Mount Royal, that we should not embark on another Second Reading debate, but I cannot resist wondering how he is going to double the size of the grant without having an enormous extension of public expenditure. However, I will restrain myself from going any further down that political road.
I have tremendous sympathy for the motivations behind this Amendment, but we have grave doubts about a scheme which involves a sliding scale of loans. This scheme has been carefully worked out to encourage people to achieve a reasonable level of savings before purchase. It was intended to provide significant help in return for significant savings, because, in addition to all this, money is needed generally for the deposit, for 469 surveys for legal fees and for removal expenses and so on, and offering a Government loan of, say, £300 for £300 of savings could turn out to be rather irresponsible and damaging to the very people we want to help.
It could mislead buyers into believing that £300 is a reasonable target for savings if they want to buy a house. Not only might they find it difficult to obtain a mortgage rapidly and find themselves in financial difficulty but financial institutions would generally be extremely uneasy about lending to people with such small savings. There would then be a number of sadly disillusioned prospective purchasers. I can assure my noble friend that we did not choose the figure of £300 out of the blue; it was thought out very carefully as being just about the right level to set a reasonable but not impossible target.
One of the great virtues of the scheme in the Bill is its simplicity. We have these two elements, a £600 single value loan, and a bonus, on a very simple sliding tariff. To underline the simplicity, the final requirement for the loan is a single figure, too, and that is £600. We believe that the extra effort needed on the part of the institutions to administer various sizes of loan, including loans as small as £300, would be out of proportion to the benefits involved, and again there would be more costs coming up on the other side. We see the force in the counter arguments. Clause 1(6)(c) enables the Secretary of State to introduce a sliding scale of loan by order once we have more experience of operating the scheme and can see whether a need exists. I can assure my noble friend that if we found that among those buying cheaper houses a significant proportion were unable to save up to £600—and we shall be monitoring this very carefully—an order could be made by Negative Resolution to introduce a sliding scale.
In rounding off this Amendment, I would say finally that the purpose of the whole Bill is to help into home ownership those who are just on the margin, who up to now would not have had the opportunity. It would not be any kindness to those who cannot manage the payments, even with the help provided by the Bill, almost to seduce them into home ownership which they could not 470 afford. So far as the building societies are concerned, there has been a growing percentage of loans to people in the lower income bracket, and in fact this Bill will result in building societies coming forward with larger loans. My noble friend was kind enough to say that this was not an Amendment he would wish to press but that he wanted an answer to it, and I hope that answer will have satisfied him.
If I may turn to his second Amendment, that, in a way, is really very much more straightforward. I would point out right away that the way paragraph 7 in the Schedule is worded means that it only contains those banks which have been exempted by the Secretary of State for Trade from the provisions of the Protection of Depositors Act. These are banks or deposit houses that are exempted because they meet the stringent criteria and are reputable banks. In fact the paragraph is very strictly drawn. The noble Lord, Lord Strathcona, did raise this point with me, and I welcome the chance to explain to noble Lords the Government's attitude towards inclusion and exclusion of finance institutions in regard to participating in the scheme.
Of course, the vast majority of loans to first-time buyers come from the building societies, and they are already included. I understand the worries about the other sources of finance, but the Government will be able to react quickly and effectively either to remove or to add institutions. This was carefully put in in another place to meet the particular points which were raised this evening by my noble friend and also in private discussions by the noble Lord opposite. The Schedule to the Bill therefore includes in the saving and lending institutions all banks recognised under the Act of 1963 which we have discussed. This is simply a convenient way of starting the scheme, with a list of institutions which have satisfied the Secretary of State for Trade, who consults the Treasury and the Bank of England about their financial repute. But the Schedule can be altered by the removal or addition of any type of institution, such as a bank or building society, and this is now included in Clause 2(1)(b). The Secretary of State will not be able to make such an order—which could, naturally, have very serious commercial implications for the institution concerned—without first giving an opportunity for representations to be 471 made by that institution or on its behalf, either by solicitors or trade associations; in addition, the consent of the Treasury is needed. So this clause provides a firm safeguard against high-handed or arbitrary administrative action.
With regard to the addition of institutions to the Schedule, fear has been expressed that some perfectly reputable banks, sometimes described as "ethnic" banks, are not on this list. Some of these banks may provide mortages, especially in inner areas. The list already includes many of the "minority" or "ethnic" banks, such as the Allied Irish Banks Limited, the Bank of Cyprus, the State Bank of India, and there are others. The main point is that any bank not on the list will be able to apply to the Secretary of State to be recognised for the purpose of the scheme. If the Secretary of State and the Treasury are satisfied, that bank can be added to the Schedule by order. I am quite certain my noble friend would feel that these banks, whether they are the ordinary conventional banks or what we call "ethnic" banks, should have to conform to the same strict criteria as all the other banks on the list.
I hope that these two explanations have reassured my noble friend that there is sufficient flexibility in the Bill to cover both his first Amendment, which deals with his concern about the loan scheme, and also his second Amendment, which deals with banks and other institutions.
§ 7.46 p.m.
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, may I ask the noble Baroness one question arising out of what she has said. The fact that an organisation like Shelter, who wrote to me about this point, could be under certain misapprehensions about the Bill suggests, does it not, that there is a wide lack of information about what the Bill will do? When the noble Baroness refers to the list, I suppose she is talking about Part I of the Schedule. I have the impression—certainly I did when I looked at it—that any ordinary person, indeed any person doing other things, as most of us are in this House, cannot really be expected to go back to the Insurance Companies Act 1974, the Friendly Societies Act 1974, the Protection of Depositors Act 1963, and 472 so on. Would the noble Baroness envisage that a list of intelligible and identifiable institutions might be produced at some stage so that one can find out what is necessary?
Perhaps this is also the moment to say that I agree with the noble Lord, Lord Davies of Leek, when he expresses worry about the quotation from the Protection of Depositors Act. What we are concerned about is not so much the protection of depositors as the protection of the consumers or the borrowers in some of these cases. Perhaps the noble Baroness could give us a little assurance on that point. I am sorry to waste further time on the matter, but I think it is quite an important one.
§ Baroness BIRK
Certainly, my Lords. I was in fact going to make some of these points on the Question, That the Bill do now pass, but I will make them now. The important thing is that people should understand what the Scheme is about. They should know where to go and should have a choice of institution, and be able to decide for themselves whether they are getting a good, bad or indifferent deal. I can say that we recognise—and I certainly do—the importance of wide publicity. Every one who might benefit from the Bill should know what the benefits are and where they can get them; the available institutions, and how to set about it themselves. I agree with the noble Lord that the information should not be something that is extremely difficult to dig out.
There will be a Press campaign, directly the Bill gets through and the appointed day is set, which will encourage prospective buyers to obtain the leaflet which describes the scheme in full. I can assure noble Lords that it will be in easily comprehensible layman's language, not in legal or (dare I say?) Civil Service jargon. Leaflets will be freely available from institutions which operate the scheme, banks, local authorities, building societies, and also from general places like post offices so that people can get one quite easily without having to find the specialised places. The leaflet will also be printed in Welsh and in a number of other languages such as Hindu and Gujarati. I think that that covers the point.
It is most important that people have the opportunity to have this information 473 communicated to them and understand what it is about. However, most important of all, they must know whether they are eligible, and how their savings are dealt with so that they go about it in exactly the right way. All those matters are simple to the expert but they are extremely complicated to ordinary people who will want to have them explained in a simple way.
§ Lord DAVIES of LEEK
My Lords, I thank my noble friend for that helpful answer. I should like to say to the noble Lord, Lord Strathcona and Mount Royal, how grateful I am to him—this was really a non-political matter—for the constructive points which he raised at the end of his remarks. We now know that there will be some publicity. It is bound to be empirical, but from both sides of the House there has been a tribute tonight to the work of Shelter which this House and Parliament have recognised. In view of that, I beg leave to withdraw the Amendments.
§ Amendments, by leave, withdrawn.
§ Baroness BIRK
My Lords, I beg to move that the Bill do now pass. I wish to thank noble Lords, and in particular the noble Lord, Lord Strathcona and Mount Royal, for the helpful and expeditious way in which he has enabled us to deal with this matter. I should also like to thank my noble friend Lord Davies of Leek for enabling me to explain and to put on record the matters which I think have caused concern. I hope that now I have been able to explain how they are clearly dealt with in the Bill. All I can say is that the sooner the Bill becomes law, the sooner we shall have the appointed day and the sooner the first benefits will be paid to first time buyers, and people who have never had a chance to own their own home before will now be able to start to do so.
§ Moved, That the Bill do now pass.—(Baroness Birk.)
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, in talking of the expeditious and helpful way in which the Bill has been handled I am bound to say that the noble Baroness has taken the words out of my mouth and it is now high time that she put something else in. hers!
§ On Question, Bill passed.