§ The President of the Board of Trade (Mr. Douglas Jay)
With permission, I should like to make a statement on hire purchase and rental agreements.
I have made two Orders which come into operation tomorrow. One of these will increase the minimum deposit, and reduce the maximum period for repayment, required for most goods at present subject to control under the Hire Purchase and Credit Sale Agreements (Control) Order. Where the minimum deposit on an item is 15 per cent. it will become 25 per cent. In the case of furniture and mattresses, the minimum deposit is being raised from 32 10 per cent. to 15 per cent. I have decided to make no change in the minimum deposit required for cars, but the maximum period for repayment of the balance will be reduced from 30 months to 27 months.
For other items where the maximum period for repayment is at present 30 months, the period will be reduced to 24 months. For furniture and mattresses the maximum period will be reduced from 36 months to 30 months. I have decided to make no change in either the minimum deposit or the maximum repayment for cookers and water heaters.
The other Order will increase the minimum rental which has to be paid in advance under a hiring agreement, for all goods now subject to control, from 20 to 32 weeks.
The Government have made clear on many occasions that we are determined to eliminate the balance of payments deficit this year, following the substantial improvement that was made in 1965. To achieve this it is necessary to watch carefully the pressures on the economy. Industrial investment continues at a high level; and exports have been rising strongly. In these circumstances, we must continue to ensure that consumption does not make undue demands upon our resources.
§ Mr. Barber
The right hon. Gentleman will know that anything necessary to strengthen the economy or support sterling will have our support. I should like to ask him four questions, if I may.
First, is not the sole purpose of the Orders to cut consumption and is not the fact that they are necessary at all a recognition of the almost total failure of the Government's incomes policy?
Secondly, why have the right hon. Gentleman and his colleagues chosen this method of restricting consumption, bearing in mind that this new squeeze will be heavily concentrated on a limited number of industries and will bear heavily on a very small range of goods?
Thirdly, does the right hon. Gentleman agree with the view hitherto expressed by the Prime Minister that to increase hire-purchase deposits involves a social bias against those with modest incomes, or has the right hon. Gentleman now changed his mind?
33 Lastly, on the question of timing, will the right hon. Gentleman say whether these proposals were being considered in Government circles before the Hull, North by-election of only 10 days ago?
§ Mr. Jay
On the first question, about whether it is intended to cut consumption, no, the Orders are intended to restrain it from increasing further. The purpose is to complete this year the elimination of the balance of payments deficit bequeathed to us by right hon. Gentlemen opposite.
The right hon. Gentleman asked, secondly, why this particular measure and the answer is, because, in all the circumstances, we consider it the most appropriate. If he wishes to propose alternatives, we shall of course be glad to know what they are.
The right hon. Gentleman asked, thirdly, whether there was not a social bias in operating on the minimum deposit. There might have been if we had not carefully varied the figure between one type of product and another and eliminated some altogether for this very reason.
The right hon. Gentleman asked, finally, when we considered this problem. We have been considering it for a few weeks past.
§ Mr. William Clark
Would the right hon. Gentleman not agree that this is an extension of the credit squeeze, in whatever terms he puts it, and that this is the longest credit squeeze which we have had since the end of the war?
§ Mr. Frederic Harris
Does not the right hon. Gentleman recognise that this 34 is a confirmation that we are living in a time of roaring inflation?
§ Mr. Lubbock
Would it have been necessary to make this statement if the Government had been successful in controlling wages and salaries increases within the 3½per cent. norm? Is the right hon. Gentleman satisfied that investment in the industries concerned will not be affected? If consumption is restricted in the way he has mentioned, will not those industries be working at less than capacity and, therefore, export prices be affected adversely?
§ Dame Joan Vickers
Will the right hon. Gentleman reconsider the question of mattresses? Surely they cannot be considered a luxury? In any case, this proposition would hit the lower-income groups very hard indeed.
§ Mr. Geoffrey Lloyd
Is the business community to understand that there will normally be an extra pinch to the credit squeeze about 10 days after a by-election?
§ Mr. Bagier
Would my right hon. Friend not accept that if this is a credit squeeze it has been carried out without the abnormal increase in unemployment which was a feature of those carried out by the party opposite? Will my right hon. Friend accept that the whole country is aware of the necessity for bringing the economy into a proper balance? The result in the Hull by-election has shown that it appreciates the difficulty and will vote accordingly.
§ Mr. Barber
When the right hon. Gentleman talks about avoiding violent jerks, will he bear in mind that last year he increased the minimum deposit on many goods from 10 per cent. to 15 per cent. and that he is now increasing it from 15 per cent. to 25 per cent.?
§ Several Hon. Members rose—