The Chancellor of the Exchequer (Mr. Norman Lamont) : With permission, Mr. Speaker, I should like to make a statement. Over the past few weeks my right hon. Friends the Secretary of State for the Environment, the Secretary of State for Social Security, the Minister for Housing and Planning, the Minister of State for Social Security and I have had a series of meetings with representatives of the Council of Mortgage Lenders to discuss the problem of mortgage arrears and repossessions. I wish to pay tribute to the lenders and insurers for the helpful and constructive approach that they have adopted throughout these discussions. We all recognise the hardship that repossessions can lead to for individuals and families, but mortgage lenders have assured us that some of the figures that have been suggested, particularly in recent days, for the level of mortgage repossessions this year and next are greatly exaggerated.
The lending institutions have already agreed to participate in the scheme announced in November by the Minister for Housing and Planning to make empty properties which have already been possessed available to housing associations to house the homeless. We wanted in addition to take action to keep in their homes borrowers who are facing difficulties in keeping up their mortgage payments. Therefore, I am able to announce to the House a number of measures designed to reduce substantially the level of repossessions over the next year. The first duty of lenders is, of course, to their investors, but they are also concerned about the position of borrowers, especially those in difficulties. In our discussions this week, lenders have confirmed to me that they do not seek to take possession where borrowers have suffered a significant reduction in income but are making a reasonable regular payment. Borrowers will, of course, remain responsible for their debts.
A substantial proportion of repossessions do not result from legal action by the lender. Lenders have assured me that they wish to encourage borrowers to stay in their own homes and that they will continue to increase the counselling and advice that they offer to borrowers in difficulties.
The Government already make generous provision--over £600 million this year--for mortgage interest payments for people on income support. The lenders have argued that in many cases this money is being diverted for other purposes, resulting in unnecessary repossessions. The Department of Social Security is already introducing new arrangements to identify arrears cases and to make payments direct to the lender. The Government have now agreed to introduce legislation after the recess to make direct payment to lenders the norm. My right hon. Friend the Secretary of State for Social Security will be making a further statement on that subject later today. In response, lenders have confirmed that they will not take possession in cases where mortgage interest payments are covered by income support.
There will, however, be cases where occupiers are not on income support but nevertheless face serious problems. Following our discussions this week, the largest lenders
Column 454have confirmed that they are prepared in case of need to provide funding on concessional terms to help such borrowers as far as possible to remain in their homes.
In such cases, the homes would either be sold to housing associations or taken into ownership by the lender. The borrower would remain in occupation as a tenant, or as part-owner, part-tenant. Individual lenders have undertaken to announce details of such schemes where they have not already done so and insurers have expressed their support. More than £ billion has already been committed for that purpose during the next year by lenders responsible for 60 per cent. of total mortgage lending. The lenders' expectation is that the total figure could be around £1 billion, if the need is there.
The Government and the lenders will introduce those new measures as quickly as possible. In the meantime, lenders will continue to avoid repossessions wherever possible.
The mortgage lenders believe that the new measures announced today, together with the actions that they have already taken, will lead to a reducing trend in repossessions during 1992. All lenders are looking for an early and substantial reduction in repossessions. They have estimated that the measures that I have described should prevent about 40,000 repossessions next year.
But I recognise that there is a wider concern about the depressed state of the housing market, which has consequences for home owners in general and for the wider economy. I therefore have one further announcement to make.
In his 1990 Budget, my right hon. Friend the Prime Minister announced that stamp duty on securities would be abolished late in 1991-92 to coincide with the introduction in the stock exchange of the system of paperless trading known as TAURUS--the transfer and automated registration of uncertified stock.
The stock exchange announced recently that TAURUS will not now be ready before April 1993. The abolition of stamp duty on securities will consequently also be delayed at least until then. That will result in a public sector borrowing requirement saving of £1 billion compared with the position shown in this year's medium-term financial strategy.
I have decided to use a portion of that additional revenue to help encourage and facilitate transactions in the housing market. I am therefore lifting the burden of stamp duty from the great bulk of house purchases for a period of eight months from midnight tonight. Stamp duty is currently charged at 1 per cent. on the full price of land and buildings costing more than £30,000. I intend to raise that threshold to £250,000 for documents executed from tomorrow, until 19 August 1992--after which it will revert to £30,000. Stamp duty at the current rate of 1 per cent. will still be charged on purchases of more than £250,000.
For the next eight months, that will mean that no stamp duty will be payable on 90 per cent. of private home purchases. The consequent saving on an average-priced house will be a little over £600. The cost to the Exchequer will be about £110 million in this financial year and about £310 million in 1992-93.
A short Bill will be introduced early in the new year to give effect to that measure. Until the passing of the necessary resolution, people who need to get their documents stamped will be charged duty on the basis of the present £30,000 threshold. But legislation will provide
Column 455that the Inland Revenue will refund any duty paid in excess of what will be due under the proposed £250,000 threshold. Further details will be set out in an Inland Revenue press release to be issued today.
The measures that I have announced today and the schemes that the lending institutions are putting together will contribute to a decisive fall in the level of mortgage repossessions. They will also help to stimulate activity in the housing market more generally, benefiting home buyers and home owners throughout the country. I hope that they will be warmly welcome by the House.
Mrs. Margaret Beckett (Derby, South) : Is the Chancellor of the Exchequer aware that the Government's handling of the matter has been typically irresponsible, shifty and dishonest? Does he recall that when, as long ago as 1986, the present Prime Minister showed his true colours by cutting mortgage interest support paid to those who lose their jobs, bodies such as the National Consumer Council, the Government's own Social Security Advisory Committee, and many right hon. and hon. Members warned of the dire consequences for those on the lowest incomes, who would be forced deeper and deeper into debt? Consequently, the Prime Minister, in his caring way, described those forebodings as "overcooked".
When, two days ago, the Chancellor heard the Prime Minister tell my right hon. Friend the Leader of the Opposition that the Building Societies Association had been consulted about the changes, did he remember that, when consulted, the BSA said that it totally opposed them?
Does the Chancellor recall that, as the present recession deepened, the Prime Minister--then Chancellor of the Exchequer--was pressed during Treasury questions to take action to stem the flood of repossessions, which by then was affecting a far wider swathe of the community, with hundreds of thousands in arrears? The right hon. Gentleman dismissed such action by saying that
"only a relatively small number of borrowers are in difficulty."-- [Official Report, 15 March 1990 ; Vol. 169, c.655.]
The Chancellor of the Exchequer continued to pay so little heed that as late as June this year he told David Frost that the "vague stirrings" of recovery that he detected would
"begin in certain sectors--probably in the housing market." Even when the president of the House Builders Federation wrote to the Chancellor of the Exchequer saying that there was no foundation for that assertion, the right hon. Gentleman continued to repeat it. Will the Chancellor say whether the Government, whose policies on benefits and interest rates--which were defended so felicitously by the Prime Minister with the words,
"If it isn't hurting, it isn't working"--
led to the present crisis, take any of the blame?
From the Chancellor's statement, it seems almost that the Government's only contribution is to find a scapegoat for the problem and to seek credit for the solution. Does the Chancellor acknowledge that our spokespeople have been holding discussions with building societies and the Council of Mortgage Lenders--not just in recent weeks, but for months--and submitted a package that contained some elements of the proposals that the Chancellor outlined today? If the Government had paid heed, it would have saved the homes of thousands and thousands of families for whom it is now too late.
Is it not the case that, although the stamp duty measures will, as the Chancellor said, ease the housing
Column 456market, they will do absolutely nothing to assist those people already in danger of losing their homes? Can the right hon. Gentleman confirm that the Government have made no net contribution to that scheme--bearing in mind the savings that the Government will make on mortgage interest ; bed-and-breakfast costs for the homeless, which I understand are currently running at £1 billion ; and, as the Chancellor said, because the postponement of TAURUS will only in a certain proportion be committed to the scheme? How many more families could have been helped if the Government had been prepared to commit even all the savings from TAURUS?
If we contrast the Government's coyness in slipping out a press statement three days ago which revealed cuts in real terms in the provision of public sector house-building next year with the Chancellor's willingness to come to the House to make a statement on a scheme to which the Government are contributing so little the day before the House adjourns for Christmas, the concern that the Chancellor claims to feel can be described in one word-- humbug.
Mr. Lamont : I am sorry that the hon. Member for Derby, South (Mrs. Beckett) did not feel able to welcome the substantial measures that I announced. Her only question is, "What are you contributing ?" She is not interested in whether the measures work. I should have thought that a contribution of more than £400 million would be regarded as substantial by anyone with a responsible attitude to finance--if not by the Labour party.
The measures that I announced stand to reduce the number of repossessions by 40,000. They are currently running at an annual rate of 80,000. That is a substantial reduction and the hon. Lady should have had the grace and the good manners to welcome it.
[Interruption.] I hear the hon. Member for Dagenham (Mr. Gould) mentioning the figure of 200,000. Let me tell him that the Council of Mortgage Lenders has told me specifically how disturbed it is by the alarmist talk that the Opposition are putting about in regard to the number of mortgage repossessions. The council specifically distanced itself from the figures quoted by the hon. Member for Dagenham. I might add that the council also told me that it did not believe that the income support measures taken in 1986 had caused the repossessions. The council said that, provided that people were having half their interest paid by income support, they would not have their houses repossessed on that account. The hon. Lady's allegation is entirely unfounded.
The hon. Lady seems to think that the Government should simply contribute more money. What about Beckett's law ? I thought that Labour had only two public spending commitments. That is what the hon. Lady is always telling us, yet, over the past week, we have been told repeatedly in radio broadcasts that Labour want to put in more money. The truth is that it would have done so ineffectively and would not have produced the results that our package will produce. Several Hon. Members rose --
Mr. Speaker : Order. I must bear in mind the fact that we have another statement after this one and then a business statement ; moreover, more than 60 right hon. and hon. Members wish to participate in the important debate
Column 457that follows. I shall allow questions to the Chancellor to continue until 4 o'clock, but then we shall proceed to the next statement.
Sir Anthony Grant (Cambridgeshire, South-West) : My right hon. Friend's announcement constitutes one of the most cheering pieces of news that home owners have heard for a long time. Has he ever seen such a miserable, sour lot of sick parrots as those on the Opposition Front Bench ?
Mr. A. J. Beith (Berwick-upon-Tweed) : We welcome the package, which contains many suggestions made by my right hon. and hon. Friends. It will cost lenders relatively little net and will cost the taxpayer hardly anything net.
Will the Chancellor examine the stamp duty proposal? For an amount that will not have a very decisive impact on the housing market--which may still be in a rather sluggish condition when stamp duty is reimposed next August- -he could have extended housing benefit to mortgage payers on very low incomes and given additional help to people who are now in a very difficult position.
Mr. Lamont : I am grateful to the hon. Gentleman for giving the measures a broad welcome, but I am somewhat puzzled about the fact that he feels aggrieved on the ground that--as he put it--the measures cost both lenders and the Government very little. The fact that we were able to reach such an arrangement, which will substantially reduce the number of repossessions, strikes me as a tribute to the package.
Of course, I understand what the hon. Gentleman said about housing benefit, but the measure that he suggests would involve substantial public expenditure and I do not feel that we could accommodate it in the present fiscal circumstances. Moreover, such a measure would have to be permanent : the money could not be clawed back following the recovery of the housing market.
Mr. Tim Smith (Beaconsfield) : Is my right hon. Friend aware that today's carefully targeted statement will have a double benefit? First, it will achieve the common-sense solution of keeping borrowers in their own homes ; secondly, because of the close relationship between the state of the housing market and consumer confidence, it will have a beneficial effect on the economy.
Mr. Lamont : I am grateful to my hon. Friend. He is right to say that this is a sensible, well-targeted measure. As I stressed, it has been made possible by the deferral of TAURUS. It is being achieved without prejudicing the fiscal position and should help to increase turnover and get the housing market moving again. Many people in the industry have asked for a reduction in stamp duty. They believe that it will have an effect.
Mr. David Trimble (Upper Bann) : The very awkward position that arises as a result of repossessions has been caused primarily by the recession, which has increased unemployment, reduced incomes in some cases, and reduced the value of the property. The Government have energetically tried to help one element of the population hit by the recession. Why have they selected this element
Column 458for assistance? Many other people have been hit by the recession. What do the Government intend to do for people the value of whose investments has gone down? House owners should know, as other investors know, that investments can go down in value as well as up. Is it not strange that the Government should give special assistance to house owners? Has not that been primarily because the people worst affected live in the south-east of England?
Mr. Lamont : I believe that the measures that have been announced-- to try to bring forward transactions in the housing market and to stimulate the housing market--are in everybody's interest. They are in the interests of those who are in danger of their homes being repossessed. They are also in the interests of the housing market and the wider economy. I think that they will be welcomed by borrowers, lenders and everybody in the country.
Mr. Robert Sheldon (Ashton-under-Lyne) : Is the Chancellor aware that the stamp duty measure is a surprising Finance Bill measure which will do perhaps a little to sell a few houses, but will not do much for those whose homes are being repossessed? That is the problem that the Chancellor has to face over this Finance Bill measure. Is he also aware that a number of building societies have insurance policies that come into force only when a property is sold? If they come into force only when properties are sold, they have an incentive to sell the property to recover the value. What does he have to say about that?
Mr. Lamont : This is a two-part package. It contains, first, the measures that we have been able to agree with the lending institutions, which both they and I believe will have a dramatic impact. Secondly, there is the income support element which in itself, by means of the legislation that we are implementing, the lending institutions believe will lead to a substantial reduction in repossessions. I have already explained that, because of what has happened, the stamp duty measure has been made possible without endangering the fiscal position and makes it possible to postpone the abolition of stamp duty on securities. None the less, the measure will help to stimulate the housing market and to bring forward transactions. For that reason, it should be welcomed by the right hon. Gentleman.
Sir William Clark (Croydon, South) : Does my right hon. Friend agree that it is absolutely disgraceful for Opposition Front-Bench spokesmen to talk about 200,000 repossessions next year? Does he also agree that it is churlish of the Opposition not to recognise that the measures that he has introduced will halve repossessions next year from 80,000 to 40,000? Is not that something that the Opposition should welcome, instead of being party- minded about it?
Mr. Lamont : My hon. Friend is right, but he should not underestimate the irresponsibility of the Labour party. Apart from having talked about 200,000 repossessions, on other occasions the Labour party has talked about 300,000 repossessions. Both figures bear no relationship to reality.
Column 459The Labour party has also put forward an absolutely
cloud-cuckoo-land solution to the problem. It says that there should be a six-month moratorium on repossessions--something which is totally impossible to negotiate and totally irresponsible and which has rightly been described by one authority as a pure Enid Blyton story.
Mr. Ted Rowlands (Merthyr Tydfil and Rhymney) : Is the Chancellor of the Exchequer aware that, compared with last year's figure, there has been a 25 per cent. increase in repossession warrants during the first nine months of this year in Merthyr Tydfil and Rhymney? Is he also aware that, according to discussions that I have held locally, it does not appear that building societies often force the pace when it comes to repossessions ; it is forced by many of those who have offered second mortgages on properties. Will the Chancellor's statement and the deal that he arranged do anything to prevent those who are forcing the pace on second mortgages from causing many of the repossessions?
Mr. Lamont : I note what the hon. Gentleman said. Since he has such a great problem in his constituency, I am sure that what I have announced will be welcomed there, even if its Member of Parliament does not have the grace to do so. The hon. Gentleman asked whether it will help in cases of second mortgages. The answer is yes. Some of the schemes of individual societies will help in cases of a second mortgage that may have affected a business or a family. I must stress that the building societies and other lending institutions have put forward not just one scheme but many schemes, tailored to the problems facing their borrowers. Some of the schemes will enable people to become tenants and later to revert to being owner- occupiers again. That is a welcome characteristic of some of the schemes.
Mrs. Teresa Gorman (Billericay) : Will my right hon. Friend accept the grateful thanks of those of us who have in our constituencies one or two of the 2 per cent. of people who find themselves in difficulties? Of course, 98 per cent. of those buying their homes do not have a problem. Will my right hon. Friend take an interest in the activities of fringe banks, many of which have lent unreasonable sums? In my constituency, someone with a bungalow worth £150,000 was lent almost half a million pounds by a fringe bank. That is thoroughly irresponsible and the cost should not be picked up by the taxpayer. Will my right hon. Friend discuss with the building societies the possibility of spreading mortgages over longer periods? I understand that in Japan it is commonplace for mortgages to be spread over 60 years or more. Could that not be adopted here?
Mr. Lamont : I note what my hon. Friend said. She is right to put the problem in perspective, as the building society chiefs have been anxious to do when they talk to us. As my hon. Friend said, only 0.5 per cent. of all properties are repossessed and only 2 per cent. of mortgages are in serious arrears. The problem must be kept firmly in perspective.
My hon. Friend talked of the problem in her constituency where she said that there has been lending by institutions which she regards as irresponsible and excessive. The prudential requirements on building societies for riskier loans have been tightened up and they
Column 460are obliged to make greater provision for such loans in future. Therefore, some measures have been taken to deal with the problem worrying my hon. Friend.
"Owning your home means that you have full control over your own housing."?
That is manifestly untrue when the Government make such a mess of the economy and render people unemployed. Nevertheless, we welcome any package that produces a solution to the problem facing 40,000 families. However, the other 40,000 families are not covered. What will the Chancellor do about them--see them thrown in the street?
Mr. Lamont : I am moderately grateful to the hon. Gentleman for his half-welcome. It is the Government's policy to encourage ownership and I stressed in answer to another hon. Member that many of the schemes that will take homes into tenancy for the time being will allow people to revert to being owner-occupiers. Many of those whose homes are repossessed face losing all ownership of the property, but such schemes will enable some people to continue to own part of the same property or another property. So there is some flexibility built into the schemes. We would expect that following these measures the level of repossessions will decline. I hope that the remaining 40,000 will be affected as the economy recovers next year.
Mr. Andy Stewart (Sherwood) : I welcome my right hon. Friend's statement, but does he agree that one reason for the depressed state of the property market is the way in which we buy and sell properties in England and Wales? "Subject to contract" is meaningless. It allows gazumping and "gazundering". The system is discredited. Is not it time that we adopted the Scottish system of property transactions and allowed our people to honour the obligations that they enter into?
Mr. Lamont : Personally, I have always admired the Scottish system-- but then I tend to admire everything Scottish. I fear that this is a matter for my right hon. and learned Friend the Lord Chancellor rather than me, but I am sure that he will note my hon. Friend's remarks.
Ms. Dawn Primarolo (Bristol, South) : The right hon. Gentleman said in his opening remarks that borrowers would be able to become either part- tenants or full tenants of their houses. Will they be entitled to claim housing benefit during the period when they are part or full tenants? If the answer is yes, will the right hon. Gentleman announce how much that will cost and whether that money will be refunded to local authorities so that they are not expected to meet the cost out of current funds?
Mr. Lamont : Those who become tenants will qualify for housing benefit although, as the hon. lady knows, housing benefit is an income- related benefit. We expect the cost of the increase to be about £50 million a year.
Column 461Mr. Ashton : This is a genuine point of order about the Chancellor.
The Secretary of State for Social Security (Mr. Tony Newton) : With permission, I wish to make a statement about the proposed revision in the arrangements for paying income support in respect of mortgage interest. This will take place in two stages.
First, as my right hon. Friend the Minister for Social Security and Disabled People announced on 5 November, we have already initiated action to make more effective the existing provisions which enable direct payments to the lender to be made in cases where an adjudication officer judges it to be in the borrowers' best interests, which is generally interpreted as covering cases where there are arrears of at least a month. The carrying through of that action, which begins next month, will now be accelerated with the aim of identifying by April all existing arrears cases on income support, with a view to adjudication officers taking appropriate decisions on implementing direct payment in those cases.
Secondly, as my right hon. Friend the Chancellor of the Exchequer said in his statment just now, we intend to bring before Parliament when it reassembles after the forthcoming recess a Bill to provide for direct payment to become the norm for income support mortgage interest payments to qualifying lenders should the lenders wish. That will apply whether or not there are arrears, from the time at which income support payments meet the full eligible interest--after the claim has continued for 16 weeks. "Qualifying lenders" will be defined for this purpose to cover building societies, banks, or local authorities, but not private individuals who may have lent money for home purchase. It is hoped, subject to the passage of the Bill, to implement this new system from April 1992.
The administrative cost of introducing these arrangements, including the accelerated identification of arrears cases over the next three months, is estimated to be some £20 million over the next year, of which the Council of Mortgage Lenders expects to meet about £10 million. The Bill will include appropriate provision for that. Those proposals form an important ingredient in the range of measures described in my right hon. Friend's wider statement earlier and, I believe, will correspondingly be welcomed by borrowers and lenders alike.
Mr. Michael Meacher (Oldham, West) : The Secretary of State has announced that Department of Social Security mortgage interest payments will be paid direct to building societies. We support that--we have always done so--and we will not oppose the Bill. Is the Secretary of State aware that the person who originally blocked payments, and who is thus responsible for thousands of repossessions which would otherwise have been averted, is the Prime Minister ? Is the right hon. Gentleman aware that, when the Prime Minister was the Minister for Social Security and the Disabled, he said in the House on 16 December 1986 :
"claimants could face the prospect of having their payments made direct That would be a tighter regime than we want since we believe that claimants should generally be responsible themselves for their dealings with their lenders and for their mortgage interest repayments."--[ Official Report, 16 December 1986 ; Vol. 107, c. 1131.]
Column 463That is what the Prime Minister said, so when will he have the grace to apologise to the 100,000 families who have been repossessed this year and to say that he was wrong to introduce the 16 -week disqualification rule in the first place, that he was wrong to rule out direct payments since 1986 and that he was wrong to dismiss Opposition predictions at the time that it would lead to widespread evictions and homelessness ?
Does the right hon. Gentleman recognise that the only reason why so many families have failed to pass on their mortgage interest payments to the mortgage lenders is that they cannot get by on income support, which, for a single person over 25, is only £39.65 a week ? Does the right hon. Gentleman think that, if he were unemployed and had no other resources, he could live on that for months and years on end ? If he doubts it, why is he today forcing hundreds of thousands of others to do so ?
If the right hon. Gentleman is now going to require direct payments, will he also increase the pitifully low levels of income support to realistic levels on which people can manage, especially as the Government will be saving tens of millions of pounds from this deal ? Why, if the right hon. Gentleman is serious about stopping further repossessions, has he still not announced that he is abolishing the 16-week disqualification rule which still penalises more than a third of all those receiving mortgage interest payments ?
Is the right hon. Gentleman aware that, contrary to what the Prime Minister said at the Dispatch Box two days ago, and contrary to what the Chancellor of the Exchequer said a few minutes ago, the building societies opposed the 16-week disqualification rule from the outset? Is he aware that the Building Societies Association issued a statement in 1986 which said :
"Building societies regret that the government has decided to limit assistance which unemployed owner-occupiers receive through supplementary benefit."
If the building societies opposed it then and oppose it now, why will he not repeal it?
Finally, what is the total saving to the Government from today's deal? Is it not shameless of the Government that their contribution to a repossession crisis that they and especially the Prime Minister have created is to offer no new money and, indeed, to make substantial savings out of other people's misery? Why is the right hon. Gentleman offering no new aid from those savings to the 100,000 families who have already been evicted this year?
Does the right hon. Gentleman recognise that today's deal is far too little, far too late? It is far too late because the Government were fully warned five years ago, and it is far too little because, whether it assists 7,000 families or, as the Government more dubiously claim, 40,000 families, it is still far less than the likely 150,000 to 200,000 repossession victims of this Government next year.
Mr. Newton : I am grateful for what the hon. Member for Oldham, West (Mr. Meacher) said at the outset of his questions about his willingness to support the proposed legislation. Beyond that, there is not very much agreement between us.
There is no question of direct payments having been blocked. The arrangements for direct payments in arrears cases have existed for many years. They are being strengthened at the moment. What we have thought it right to do in the context of the willingness of the building societies and banks to negotiate the very favourable package of measures announced today is to move towards
Column 464automatic direct payments as part of an overall deal which is in the interests of borrowers, lenders and taxpayers as a whole. As for income support rates, it is barely two months since I announced a huge uprating of benefits which will increase them all by 7 per cent. next April, and after a number of years in which they have been persistently increased for many groups of claimants, including not least the families with children to whom the hon. Gentleman referred.
On the 16-week rule, the hon. Gentleman quoted very selectively from the Building Societies Association's 1986 statement. Of course it did not welcome the proposal
"Societies will do all they can to help people where benefit is restricted and there is no reason to expect that people will lose their homes as a result."
That was the case then and has been so ever since. As my right hon. Friend the Chancellor of the Exchequer assured the House a few moments ago, we have been told by the Council of Mortgage Lenders that it remains the case now.
Several Hon. Members rose --