Restrictions on Payment or Charging of Interest by Banks, etc.

Part of New Clause 3 – in the House of Commons at 12:00 am on 27th February 1973.

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Photo of Mr John Biffen Mr John Biffen , Oswestry 12:00 am, 27th February 1973

The hon. Member for Loughborough (Mr. Cronin), who is, I suppose, a somewhat fastidious social democrat within the Labour Party, nevertheless committed the solecism of describing our present circumstances as this time of national crisis. It would be helpful if in all of these debates we tried somehow to disembarrass ourselves of this almost latter day sense of impending doom.

I was delighted to hear my right hon. Friend the Secretary of State for Trade and Industry on the radio this morning when he put his radio interviewer very firmly in his place when being asked about the nature of the present industrial unrest.

We are living through a period of economic difficulty, although I cannot remember when we were not doing that. Without doubt the present rates of inflation are intolerable and carry in their consequences the destructive elements which are immensely socially harmful as well as possibly economically harmful.

We are now discussing a good-nature tease. It is a good-natured demand by the Opposition—and they are entitled to a tease—to probe some of the frontiers of Government competence in controlling the price mechanism. It is true that we could use this as a debate to examine the balance between expenditure and taxation and the consequence which that balance has for interest rates. However, I shall not be beguiled into following that line of argument because a much more apt occasion will present itself immediately after 6th March.

This debate highlights the anomalous position of banks. It has been observed to be a lacuna in the legislation and the way in which the legislation will be operated by the Government, which perhaps is even more important than the legislation itself.

My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) made a splendid speech about the banks and spoke of their opportunity and potential. I felt that here was the Clive Jenkins of the banking world. He had gone through the document and had come to certain conclusions. If we look at paragraph 66 we see Subject to paragraph 10, all charges of banking enterprises other than interest rates are within the control and the system of allowable cost increases and the limitation on net profit margins apply to them. The qualifying phrase "other than interest rates" is exactly the sort of material that provides a livelihood for the Clive Jenkins of this world, whether in respect of Threadneedle Street and its immediate surroundings or of the white collar or blue collar unions.

My suspicion is that the blue collar unions will be the last people to recognise these circumstances, but eventually they, too, will appreciate the situation. It is this area of fudge and ambiguity that will give rise progressively through time, as we have these three years in prospect, to a sense of inequity and injustice as one section of the community rather than another can spot areas where they can operate pricing systems more effectively than otherwise would be the case.

The hon. Member for South Angus lighted on the centre point of this debate, which must be the process of learning from my hon. Friend the Chief Secretary to the Treasury where the Government now stand in respect of the Bank of England's competition and credit control. The Green Paper has cast a shadow of doubt on the determination of the Government to stand by that policy. My hon. Friend will be performing an immensely valuable service not merely to the Treasury Bench, of which he is a most distinguished member, but to the banking and financial community generally if he uses this occasion to say clearly that the Government still stand by the Bank of England's competition and credit control.

6.15 p.m.

Almost inevitably if the Government stand by the competition and credit control, it seems to me to be impossible to foresee circumstances in which the mortgage market does not become affected. I believe that there will be an upward thrust of mortgage rates unless action is taken to prevent that occurring. I am particularly anxious to know the Government's attitude. It puts the building societies in an impossible position if they are unable to compete along with other elements in the banking system for the resources available for lending. We may find ourselves in a situation where there is an artificial shortage of mortgages created because the mortgage market is leaned upon.

I do not suppose that notice will be served under Clause 5. I imagine that it will be part of the process of Government by invitation which was put so succinctly by my right hon. and learned Friend the Minister for Trade and Consumer Affairs earlier this afternoon. Government by invitation is one of the most offensive forms of government that can be undertaken. It is particularly offensive when we live in an age in which, quite properly, we are told that law and order are very important and essential elements in political discussion. I like to feel that the Government feel bound by authority as well as requiring others to abide by it.

Therefore, in the context of a continuation of the Government's adherence to competition and credit control, I hope that the Government will take the opportunity to clarify what they believe will be the degree of independence that will be permitted to building societies. It is clear that there are already gathering day by day further doubts and question marks about the execution of this aspect of Government policy. It is an area in which speedy elucidation is needed.