Building Societies (Special Advances)

Part of Bills Presented – in the House of Commons at 12:00 am on 17th December 1963.

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Photo of Mr Maurice Macmillan Mr Maurice Macmillan , Halifax 12:00 am, 17th December 1963

By leave of the House; I am prepared to see some sort of conflict and conspiracy, but I have to disappoint the hon. Member for Paddington, North (Mr. Parkin) of the comprehensive survey of the finances of building societies and a property-owning democracy which he hoped that I would give him. But I am happy to tell him that the conflict which he thought might exist between the Economic Secretary and the hon. Member for Halifax (Mr. M. Macmillan) is in his imagination, as was the greater part of his argument about conspiracy and crisis and difficulties arising from this comparatively simple little Order. I was not quite sure whether to be flattered by his imputations of subtlety, or merely to fear that he might think that I might have as tortuous a mind as his.

I do not want to labour the point, but building society mortgage rates are not controlled by the Government. They are not even fully controlled by the Building Societies Association, as the hon. Gentleman well knows. The greater part of his argument which was relevant to the Order was based on the fallacious assumption that it was mandatory and that it would put a burden on building societies which they would not be able to sustain. In fact, it liberates some of them to take action which they cannot now take. His argument made sense only on the assumption that the Order had a significant effect on the capacity of the smallest societies to act independently of the Association and the larger societies.

I should fall into the same difficulty of getting out of order if I followed the rest of his argument or attempted to deal with any of the imputations and innuendoes which he made in the course of it. If he examines it carefully in HANSARD tomorrow, he will find that even on his own reasoning the raising of the figure is likely to make the provisions more rather than less effective. I do not want to go into it. It is a complex argument based on the fact that raising the figure from £5,000 to £7,000, if it has any effect on the prices of houses, is apt to reduce that of those below the £5,000 level.

I admire the immense skill with which the hon. and learned Member for Kettering (Mr. Mitchison), aided and abetted by the hon. Member for Dunbartonshire, East (Mr.Bence), managed to extract the maximum amount of controversy and party political advantage from an innocuous Order. It is my task to commend the Order to the House rather than join in argument about the merits of the taxation of land value and the theories of Henry George, which I thought the hon. Member was raising at one time. However, I was glad that the hon. and learned Member went into detail about the 10 per cent. annual limit on special advances. It was a rather academic point, as his second point showed when he said that the amount of special advances made was only 2 per cent. over the whole building societies movement. Even that is, I think, slightly irrelevant, because the point that I was trying to make was that the vast majority of building societies concentrate on financing owner-occupation. There are a few who prefer to make advances on commercial property, and the 10 per cent. requirement was a necessary curb on their activities.

The hon. Member for Paddington, North was apparently calling into question the 10 per cent. requirement and not the effect of raising the limit of special advances from £5,000 to £7,000, which was really almost entirely irrelevant to his point. Whatever the hon. Gentleman feels about it, it is useful to have a special advance category, and if the hon. Gentleman has cases in mind I wish that he would let us know of them. It is useful to have a special advance category prescribed by law, because, in the eyes of the building society movement, this draws a line between what is and what is not their proper business. I do not think that there is a great deal of difference of opinion in the House about what is the proper business of the building societies, and all that the Order seeks to do is to extend the definition of a normal owner-occupier from one who borrows £5,000 for a house to one who borrows £7,000.

I was a little confused by the argument—though I was glad that it was not put forward seriously—that it is all right for building societies to deal with working class and lower middle class houses but it is not all right for them to deal with middle class houses. I thought that my hon. Friend the Member for Crosby (Mr. Graham Page) refuted that argument completely. It is the view of a large proportion of building societies that they should help the whole community with house purchase. They take the view that they should help all owner-occupiers and not just the poorer sections of the community, and it is up to the individual building society to decide on its own lending policy in this respect.

I do not think that the Government should attempt to steer them one way or the other, and here I should like to re-assure my hon. Friend the Member for Newbury (Sir A. Hurd) that there was full consultation with the building societies movement before this Order was brought before the House. As my hon. Friend the Member for Wimbledon (Sir C. Black) pointed out, there was no basic disagreement. I think that at different times various ideas were put forward as to the figure to be adopted, but broadly speaking the figure of £7,000 was regarded as high enough to be an effective definition of a genuine owner-occupier, and low enough not to divert funds. To put it higher would have weakened the definition to some extent, and to put it lower would have inhibited the free choice of building societies in different parts of the country.

The fifth and major argument put forward by the hon. and learned Member for Kettering, and later taken up by other hon. Members, was that this would cause some diversion of building society resources from their proper function, which again rather begged the question of what is their proper function. But even accepting that there would be a diversion of their resources into other less worthy channels, that is, making larger advances on more expensive houses, I find the argument difficult to follow, because, as far as I can see, the main piece of evidence brought forward was that building societies already could lend money on these more expensive houses but did not do so. I find it hard to deduce that when they can do so without making special advances they will suddenly devote the greater part of their resources to such property. It seems a complete non sequitur, I think that my hon. Friends dealt with that argument, and I think it improbable that the building societies will divert their money from smaller houses for the less well off sections of the community. My hon. Friend the Member for Wimbledon made this clear.

As to the effect of this increase on prices, I suppose it could be argued that to the extent that it pushes up a little the price of a fairly expensive house—for example, a house in the £7,000 plus bracket—it will have an equal and opposite effect on the price of a house in the slightly less expensive bracket—that is, £7,000 minus. I never much care for arguments which seem to me to owe slightly more to physics than to economics for their strength; but in so far as prices will be affected, that is the most likely result. I think that the effect will be marginal in the extreme.

This really alters the boundary which was used in the 1960 and 1962 Acts to define the genuineness of the owner-occupier definition. As this point was raised, I should point out that the 1960 figures had to be repeated in the 1962 Act without Amendment, because we had not the power to do otherwise. The 1962 Act was passed under the special consolidation procedure of the House and no innovations could be made. That is why this question was not even debated or considered before.

The hon. Member for Stockton-on-Tees (Mr. W. T. Rodgers) departed slightly from some of the arguments advanced by the hon. and learned Member for Kettering. Again, I must decline to answer him on the general question of building society policy. This is not my responsibility, nor that of the Treasury, nor that of the Government. I do not think some points the hon. Gentleman raised would be affected by the Order. It is not the function of the Government to select the priorities of building societies for them. As to the question of the regional priority, I do not think that it would be right to distort building society legislation to give some special treatment to different areas. Indeed, I do not think it is possible under the terms of the 1960 Act. As far as I recollect, there is no provision for raising the limit in a discriminatory fashion. It would be better for the problems of the North-East to be dealt with in a different way. I am not trying to minimise the problems there. I am merely saying that an Order of this nature, even if it were possible to make a distinction for certain parts of the country, is not the right way of doing it.

The building societies themselves have a regional flavour. We are not trying to impose on societies in one part of the country activities which are suitable for those in another part of the country. We are merely enabling the second class of society to undertake them if they wish to. My hon. Friend the Member for Wimbledon, with his expert knowledge, pointed this out.

It is a comparatively small point. My belief is that the Order will fulfil a useful function. The hon. and learned Member for Kettering and some of his Friends appeared to have a slightly selective view of when the Building Societies Association's activities are good or bad. Perhaps this is natural in the circumstances. However, the Order has the approval of the Association, and building societies in general agree with the Order.

If I may end with one party point, which I make in return for the many which have been made by hon. Mem- bers opposite, it is at least arguable that the fact that this change is needed does not reflect so much the specific housing problem and all the various troubles we have about prices as the rising standard of living, meaning that more people than before are beginning to buy their own homes and more people can buy the homes to which the Order refers. Therefore, I commend the Order to the House, for that among other reasons.