To ask the Chancellor of the Exchequer what reaction he has obtained to his appeal to the banks for greater care in offering loans to their customers.
My remarks on the marketing of credit were addressed to all the lending institutions. There are encouraging signs that they are taking the matter very seriously.
While welcoming the recent attention paid to that important matter by my right hon. Friend, may I ask whether he is as concerned as I am by the recently issued figures showing that credit is still far from being under control? Does he accept that the financial institutions still engage in practices that pressurise people into effecting credit and that are far from the traditional practices in some corners of the City of London?Has my right hon. Friend given any consideration, even at this late stage, to the possibility that the banks and building societies should be required, on a temporary basis, to make special deposits with the Treasury, thereby limiting their opportunities to encourage people to engage in irresponsible credit-taking?
I congratulate my hon. Friend on his well-deserved honour in the recent birthday honours list which will give considerable pleasure to his many friends.On my hon. Friend's specific points, I confirm that I share his view that the volume of credit being advanced is still higher than I would wish. That means that we will retain a level of interest rates higher than it would be otherwise. On his advocacy of special deposits, I feel that, alas, their disadvantage is that their practical effect might be to raise rather than to reduce interest rates which would be difficult territory. The prime difficulty with the activities of lenders lies not with the banks or building societies, but elsewhere. Sir Gordon Borrie, the Director General of Fair Trading, has expressed his view on that matter.
Is not it clear that the policy of relying on a single instrument for the control of credit is not working? Should not the right hon. Gentleman pay more attention to the hon. Member for Brentwood and Ongar (Sir R. McCrindle) and think more seriously about proper credit controls, rather than rely on a weak form of exhortation?
My recent speeches were related not to credit controls, but to the marketing of credit. Credit controls are a separate matter. Although I understand the right hon. Gentleman's advocacy of them, I do not believe that a deregulated economy without exchange controls would be even remotely effective.
Does my right hon. Friend accept that when he appeared before the Treasury Select Committee, some hon. Members pointed out that organisations like the Halifax building society were making offers such as, "Take a second mortgage and have the trip of a lifetime round the world"? Many of us are pleased that, at long last, the Treasury is taking the view that long-term investment is good for the country, but that people mortgaging their homes for holidays is the way to financial and economic disaster.
I entirely share my hon. Friend's view. He will be aware that following the Jack report, a code of practice to cover the banks" and building societies" relationships with customers, including credit marketing and the use of confidential information, is being drawn up under the chairmanship of Sir George Blunden. I welcome that and look forward to the code in due course.
When perfectly sensible suggestions such as those made by hon. Member for Brentwood and Ongar (Sir R. McCrindle) were being put forward by the Opposition, they were derided by Treasury Ministers. Why does the Chancellor believe that the same ideas are now gaining currency among Conservative Members?
I have yet to hear any sensible ideas emanating from Opposition Front-Bench spokesmen.
Will my right hon. Friend resist any suggestion that we should return to the stupidity of special deposits? Does he agree that they will work only if we reintroduce exchange controls which is quite against our economic philosophy and that of the European Community?
My right hon. Friend touches on an important point, but I reiterate what I said a few moments ago. There is a very real danger that special deposits would have the practical market effect of driving short-term interest rates up, not down.