§ Mr. Ralph Howell
asked the Chancellor of the Exchequer whether he will propose legislation to allow building societies to pay interest gross on time deposits, on the lines of the measure enacted earlier this year in respect of building society certificates of deposit.
§ Mr. Moore
The Government have been considering this question, in the light of representations received from the Building Societies' Association and other interested parties. We accept that all except the largest societies may find it more appropriate to raise funds from the wholesale money markets by way of taking non-marketable time deposits, rather than issuing marketable certificates of deposit. However, they are inhibited from doing so at present because the special building society arrangements —section 343 of the Taxes Act—generally require them to account for tax on interest paid to depositors.
In principle, we are anxious to keep to a minimum the number of exceptions to the special arrangements. These
Table 1—Net contributions (-) and receipts (+) by member state (Allocated budget, excluding United Kindom and German refunds) 1975 million ecu 1976 million ecu 1977 million ecu 1978 million ecu 1979 million ecu 1980 million ecu 1981 million ecu 1982* million ecu Belgium-Luxembourg +135 +346 +329 +337 +610 +439 +515 +510 Denmark +237 +294 +293 +381 +380 +327 +279 +294 Germany -1,007 -1,054 -1,467 -597 -1,430 -1,526 -1,684 -2,085 Greece — — — — — — +173 +698 France +35 +58 -310 -371 -78 +431 +576 +14 Ireland +175 +158 +212 +326 +545 +650 +582 +721 Italy +40 +248 †294 -334 +534 +737 +788 +1,586 Netherlands -27 +222 +88 +41 +288 +454 +239 +302 United Kingdom +104 -90 +126 -228 -849 -1,512 -1,419 -2,036 * provisional
The figures for 1975 to 1978 are not on the same basis as those after 1978, and do not sum to zero; but they give some guidance as to the orders of magnitude; the figures for 1982 are the mid-points of the ranges given by the Commission earlier this year, and they remain subject to revision.536W
arrangements represent a package agreed between the Government and the building society movement, with advantages and disadvantages for both sides. In this particular case, however, it may seem inconsistant to allow building societies to pay interest gross on certificates of deposit, but not on time deposits.
We have therefore decided to propose the further, very limited, change suggested by the Building Societies' Association. Legislation will be included in next year's Finance Bill to allow building societies to pay interest gross on time deposits of a minimum denomination of £50,000, provided that they have a life of less than one year. The change will apply from 1 October 1983, and draft legislation will be published as soon as possible.