Following discussion with the Building Societies Association, abolition of the limit on building society investments under the composite rate arrangements was announced on Budget day and took effect from 6 April 1985.
I welcome the abolition of the ceiling on the amount that depositors can invest in building societies. What effect has this had on the level of deposits? Will it lead in due course to a reduction in interest rates for mortgagees? Does my hon. Friend have any other plans for different roles for building societies?
It is too early to say whether the abolition of the ceiling on deposits will have a material effect on the inflow of funds into building societies. Those funds determine the building societies' ability to lend at a particular rate. I draw my hon. Friend's attention to the speech that I made on 6 June in Eastbourne confirming many of the proposals in the Green Paper, which will enable the building societies to compete more effectively in the market place, especially on an equivalent basis to the banks.
Does my hon. Friend accept that the proposals that he put forward to the building society movement at that conference were widely accepted and that they will benefit the depositor and the home-owner alike? Will he ensure that the legislation which he will, perhaps, introduce next Session preserves the integrity of the building society movement, which is widely respected? Will he ensure also that building societies do not fall prey to overseas financial institutions?
I am glad to know of the welcome that my hon. Friend gives the proposals for reform of the building societies. Although I believe that it is a good thing for the building societies to have wider powers, in relation to both their balance sheets and their other functions, I am conscious that it is important to maintain the principal characteristics of building societies, which have ensured their reputation for such a long period as a safe home for savings and as a means of providing home ownership.