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On 2 June, in answer to the hon. Member for Faversham (Mr. Moate), the Minister seemed to imply that the measure was simply to save money. He said :"The yield costs are considerable, and we cannot afford to ignore the impact on the borrowing requirements of Government. We simply cannot ignore such money in the current equations on public expenditure."--[ Official Report,
2 June 1992 ; Vol. 208, c. 770.]
In my constituency, as in Leeds as a whole, unemployment is growing. People look to the Government to give assistance and help. Tonight people see the answer. The money which was provided and which the Chancellor said was aimed at helping the economy, relieving unemployment and helping the construction industry and house sales is being withdrawn simply to save money in the forthcoming public expenditure round. That would lead the people in my constituency to agree with those who said that the Government were acting cynically and arranging something for the election rather than seeking to help the millions of people who faced unemployment in the city.
Sir Anthony Grant (Cambridgeshire, South-West) : I have some sympathy with the new clause. I strongly supported the Chancellor when he introduced the moratorium. I do not believe for one moment that it was a gimmick. It may well have been a vote-catcher but what is wrong with that in a democracy? Listening to Opposition Members, one would think that they did not want any votes. Judging by the results of the election, they did not get many. There is nothing whatever wrong in vote-catching.
I supported the abolition of stamp duty first because I have always disliked it. It is a ridiculous tax. It is perhaps a little better than the window tax of many years ago, but it is not a sensible tax and it should always be substantially reduced. I have always welcomed reductions in it. Secondly, in the wretched recession that we are suffering, there is no doubt that the construction industry and the housing market are the most serious aspect. They were the first to suffer, and they are suffering considerably. The housing market is a major factor in the confidence on which so much depends.
Indeed, I would go further and say that a major factor in bringing back the confidence that we require to bring us out of the recession is a return to confidence in housing, house ownership and a property-owning democracy. In my time in Parliament I have been through all sorts of economic crises. There was stop-go and devaluation under the Labour party. All sorts of remedies have been suggested including monetarism and interventionism. None of them works. But the one thing that has been absolutely certain in the mind of the public throughout the ups and downs has been the thought that they owned a little bit of this country--their property. They believed in the old saying, "As safe as houses." That saying has existed for many years. To feel as safe as houses is a solid bedrock through the ups and downs of the economy and the proposed remedies.
Unfortunately, the unease which has crept in in recent years has destroyed that confidence. That is a major factor in the lack of confidence. Let me hasten to say that I do not blame my right hon. Friend the Prime Minister or my right hon. Friend the Chancellor of the Exchequer for that. The trouble arose during the previous regime, because of the ludicrous boom stimulated by the previous Chancellor, the noble Lord Lawson, and his absurd mortgage tax relief proposals, which encouraged young people, including my
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daughter, to rush into buying houses like mad. That was what stimulated a lot of this nonsense, and it was an artificial boom. If we manage to stimulate the housing market now, it is not likely that another boom will occur for many years. Banks and building societies are not so stuffed with money, nor are people sufficiently confident that they will take on loans with high interest rates, as another shift in value might mean that they would find themselves with a mortgage which was higher than the value of their property. There is no danger of another "Lawsonian" boom. Therefore, the Chancellor can feel confident about giving a boost to the economy. That is why he should apply his mind seriously to amendments such as new clause 3 and to the words of the early- day motion in the name of my hon. Friend the Member for Crosby (Sir M. Thornton), which also touched upon the matter.8 pm
I recognise the importance of curbing public expenditure ; I realise that it is fundamental to our economy. I am told that the stamp duty concession is worth about £600 million. Whatever it is, the sum involved is substantial. I therefore recognise that it plays a part in the public expenditure round.
Unlike the hon. Member for Leeds, East (Mr. Mudie), I do not want the Government to cancel the concession and to spend the money instead on some folderol, which would be entirely counter to their general economic thrust. I should be happy if they used the money on the general, essential needs of the economy.
Mr. Paul Boateng (Brent, South) : Since when has building homes for people been a folderol? We have heard what the hon. Gentleman has had to say about the former Chancellor of the Exchequer, the noble Lord for Blaby. Was there a single occasion when he voted against any measure introduced by the previous Chancellor?
Sir Anthony Grant : I never said that building houses was a folderol. As regards voting, if all of us had to bow down for errors in the way that we had voted, I am afraid that we would never stand up again. At least I accept my errors as much as anyone, and at least I was not Chancellor of the Exchequer at the time.
I am strongly in support of what I understand to be the policy of curbing public expenditure. I hope that that will be done with a view to lowering interest rates, which is more important than reducing or abolishing stamp duty. That is a fundamental factor in the confidence equation. If my hon. Friend the Economic Secretary tells me in his winding-up speech that the purpose of cancelling the moratorium is not merely to fritter the money away but is a fundamental means of reducing interest rates, I shall happily support whatever he advises on the new clause. Whatever he proposes-- [Interruption.] I have found that nearly everything that the Opposition propose is doomed to failure and disaster, so I shall also be guided by that factor. In all seriousness, the damage to confidence and to the concept of a property-owing democracy is extremely sad. I have believed in that theory throughout my political life. The Government and the Conservative party have always believed that encouraging people to buy is essential to our way of life. It is a bulwark against the ever-encroaching power of the state which the Opposition always encourage. I therefore hope that the concept of a property-owning
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democracy has not disappeared and that my hon. Friend the Economic Secretary will express some sympathy, on behalf of the Treasury and of the Government, for the plight of the construction industry and of people who believed in such a democracy and who are now in a state of great unease. I hope that he will say something to reassure them. We shall listen with keen interest to his reply. In the words of the sergeant major who saw his junior NCO allowing a body of troops to walk to the precipice, "For God's sake say something, even if it's only goodbye."Mr. Hoon : New clause 3 sets out a stark choice for the Government and their supporters : they either plead guilty to the charge that they used up to £400 million of public money for electioneering, on a failed policy of kick-starting the housing market, or they accept the new clause and allow the housing market time to make some sort of recovery. Either the Government believe in the policy that they so eloquently advocated in December and January or they admit to raiding the public purse to secure their re-election.
When moving the Second Reading of the Stamp Duty (Temporary Provisions) Bill in January this year, the then Financial Secretary said :
"The purpose of the measure is to encourage people considering buying houses to get on with buying their houses or flats and to prompt others to bring forward their purchases to take advantage of the moratorium."
That manifestly has not worked. The housing market remains flat, which is why I am prepared to give the Government the benefit of the doubt and to allow a little more time for the proposal to work. The then Financial Secretary admitted that that might be necessary because he added :
"It will, of course, be a little while before the effects of the measure show up in the levels of house sales."--[ Official Report, 20 January 1992 ; Vol. 202, c. 117.]
New clause 3 is a modest proposal to give a little more time--as advocated by the then Financial Secretary--for the housing market to recover.
If the Government were so enthusiastic about extending stamp duty relief in December and January, why are they choosing to abandon that policy now? One answer not available to them is to say that they can withdraw the extra relief because the policy has worked. Whatever else the Government may claim, they cannot say that the extra relief has helped the housing market in any way. If we compare the figures for January to May 1991 with those for January to May 1992, we find that there was a 24 per cent. reduction in property transactions. For the benefit of the hon. Member for Crosby (Sir M. Thornton), who challenged the statistics earlier, I should add that those figures were supplied by the Library and are based on the Government's figures for property transactions. Those figures illustrate a steady downward trend throughout 1992, when compared with the equivalent period in 1991. Notwithstanding the availability of extra relief, which came into force on 15 January, that trend continued.
There is no evidence from the statistics that the Government's scheme has had the effect that the then Financial Secretary said that it would have, unless it is the Government's case that the decline in property transactions would have been greater but for the availability of extra relief. If that is their case, it is time that they said so. Otherwise, we risk a sudden surge at the end
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of August, as people understandably try to complete transactions before relief ends, followed by a chronic reduction in demand.Mr. Tim Smith (Beaconsfield) : Could the hon. Gentleman explain why, if the measure has had no noticeable effect on the housing market, he thinks that we should continue with it?
Mr. Hoon : For precisely the reasons that the then Financial Secretary gave in January--he said that the measure would take a little time. If the hon. Member for Beaconsfield (Mr. Smith) looks at that speech, he will find that the then Financial Secretary referred to people's difficulties in finding homes, the time taken by the legal procedure and the time necessary to complete. There simply has not been enough time.
The purpose of new clause 3 is to allow a little more time, precisely as the then Financial Secretary set out. The question by the hon. Member for Beaconsfield (Mr. Smith) implied that the scheme was not justified in the first place and that the Government were simply gambling up to £400 million of taxpayers' money in trying to secure an upturn in the market. I presume that the hon. Gentleman is now saying that that policy was doomed to failure in any event. Is he really saying that the policy has failed?
Mr. Tim Smith : I am hoping to catch your eye later, Madam Deputy Speaker. I do not wish to prolong the hon. Gentleman's speech.
Mr. Hoon : The Government may be tempted to tell us the truth for a change and to say that their policy was the shortest of short-term policies. It was designed to get the Government through the election but no further and is now to be abandoned, despite the evidence of a severe housing crisis throughout the country.
The current state of the British housing market has caused a record number of repossessions. One in five of the houses currently on the market is available as a result of repossession or people voluntarily giving up their keys without waiting for appropriate legal proceedings. Those houses remain to be sold and the market will remain flat until they are sold and demand picks up.
The fall in the value of houses has had a further effect on the level of demand and has led to a debt trap in which 1.8 million people are borrowing more money than the current value of their house. Their mortgages and loans against their house are much larger than its actual value, and they are unlikely to risk selling those properties and trying to move on while they are saddled with a substantial debt.
Against that background, the Government have decided to restore stamp duty to its 1991 level and the fragile housing market will be given yet another serious blow inspired by the Government's misguided policies. That is not simply my view. We heard earlier the opinion of the chairman of the Council of Mortgage Lenders, who said that such a measure would be fatal to any recovery in the housing market. How do the Government propose to stimulate the housing market? Must we wait for another election before we can expect further action to help the housing market?
Mr. George Walden (Buckingham) : I speak as a supporter of the Government, but as a supporter they
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would probably prefer not to have. When the moratorium measure first came up, I supported it out of loyalty. I now support its abolition out of conviction.Both sides of the House have been playing at competitive populism. The British economy is deformed by the housing market. When hon. Members talk about the "barometer of the economy", the "engine of the economy" and "leading us out of recession", they use damaging phrases that have gained currency in this country. People observing the British economy have said for years that such talk cripples British economic prospects because it sustains the illusion that the economy can be run on a pile of sterile bricks and mortar.
I know exactly what the argument is about because I, too, have many small builders in my constituency. I do not need to discuss the matter because I understand it. I have been to many houses where a little van is parked outside at 3 o'clock in the afternoon, showing that the small business induced by the housing folly has collapsed and that the owner of that business has lost his job. Based on that business, he has bought an over- priced house for £90,000 that is now worth only £60,000.
The House should not sustain the bubble of that illusion, yet in some way hon. Members on both sides of the House have sustained it for years. I do not subscribe to phrases like "barometer of the economy". The housing market may be a barometer of the economy but it should not be, because this country will not come out of recession into permanent prosperity on the back of a pile of bricks and mortar, the price of which is artifically supported by Government subsidy. 8.15 pm
Dr. Marek : I listened to the hon. Gentleman with interest but I hope that he does not misrepresent the Opposition's view. It will help if we can get the housing market moving again but the Opposition have always held the belief that the prosperity of this country is based on high quality investment in manufacturing industry and the export of services as well as manufactures. That is the prime requisite of any successful industrial economy.
Mr. Walden : It is interesting that the hon. Gentleman felt moved to correct himself because I sense a note of defensiveness in his remarks. In my view, it is highly justified.
When we talk about the primacy of confidence in the housing market we mean higher prices, so why beat about the bush? If the measure were to succeed-- hon. Members on both sides of the House have suggested that it has not had much effect--in promoting "confidence", it would mean higher house prices and higher mortgages. All the crocodile tears about first time buyers are rubbish, because it would mean people gearing up from paying the preposterous current rate of 3.9 times of their incomes to paying even more. It is a deformity of the British economy and does not happen to the same extent in other countries. It deforms people's lives, which are geared to trying to meet that 3.9 times of their income for years, stretching to their middle age.
Mr. John Wilkinson (Ruislip-Northwood) rose --
Mr. Walden : May I finish my emotional outburst and then I shall give way.
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Those mortgage repayments will stretch across the horizon, while the people sit at home and eat baked beans and do not go out and enjoy themselves as I would prefer them to do.Mr. Wilkinson : Whether they eat baked beans is neither here nor there. What is at issue is whether it is sound policy for the value of houses to continue to decline and the market to be so depressed that many thousands of people are in the miserable position of realising that the equity value of their property is less than the value of their mortgage. They are therefore totally locked in and face penury. Anything that can be done to do away with that misery, whether by continuing the relief or, more sensibly, by cutting interest rates, should have the support of the House.
Mr. Walden : My hon. Friend has spoken to the feeling side of the nation. I want to do the impossible and appeal to its rational sense, which I have reason to believe exists. I have met people in my surgery who are trapped by a policy for which the Conservative party bears much responsibility--leading people to believe throughout the 1980s that the be- all and end-all of economic activity was to get on the housing ladder. It was wrong of us to do so. I do not agree with my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) that Conservative policy is to create a property-owning democracy. Property does not mean houses, and Conservatives, especially modern Conservatives, do not tell people what to do with their money. We give them the choice. As my hon. Friend the Minister of State for Housing and Planning said in a recent speech, the real choice that we should encourage is between whether people want to own or privately rent their house. It is wrong of us to continue to encourage, even at the present sotto voce level, this mumbo jumbo about home ownership.
People must decide whether they want to own their homes. We must try to level the market and allow them to decide. The priority should not be to encourage home ownership, even by this relatively piddling measure-- although £600 million is not piddling and could be better used than to prop up prices artificially. We do not want confidence if it means higher prices ; we want stability, rationality and common sense in the housing market, and that means the minimum possible subsidies.
Sir Anthony Grant : I do not dissent from my hon. Friend's view, but he appears to think that there is some marvellous
alternative--that people can either buy property or privately rent it. That is not the case. It was true before the war, but since then--because of the trembling structure of the rent Acts, because of the hostility of Labour Governments to landlords and their belief in having council house ghettos all over the place--there has not been that choice. We believe that people should have a choice and own their homes if that is what they want. The point is that there has been little choice ; I only wish that there were.
Mr. Walden : If my hon. Friend is handing me arrows to fire at the Opposition, I am happy to let loose with them. The debate is relatively small stuff compared with the £6 billion to £8 billion--a third of the education budget--that we spend, most of it wasted, on propping up the housing market through mortgage tax relief. We all know
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the story of that. We are discussing a minor amount of taxation on house buying, yet at the other end of the scale we are giving £6 billion to £8 billion of indiscriminate tax relief to rich and poor alike. My points are directly relevant to the overall view, on which I am sure the Treasury rightly keeps an eye, of the housing market. Let us try for once to be a little rational and cool and not mislead the public, or lead them again along a path that has brought many families to the brink of financial ruin.Mr. John Townend (Bridlington) : My hon. Friend's case is that the purpose of the moratorium on stamp duty was to increase house prices. Surely he does not expect us to believe that. Most of us do not want an increase in house prices. The purpose of the moratorium was to improve liquidity in the market.
Mr. Walden : As I explained earlier, I supported the original proposal for a moratorium, although I was in two minds about it. My hon. Friend has eloquently expressed one of those minds. I did not want then, and I do not want now, the housing market to go into a precipitous slump because so deformed is our economy by the housing market that we cannot risk that happening. If it did, a whole series of dreadful things would happen in the City and elsewhere. Indeed, some are already happening. One reason why I supported the Government was that I wanted the housing market to be held steady rather than watch it go into an abyss.
What is now happening in the housing market looks suspiciously like stability. That is not a bad thing. We should not lead people to believe that the price of their house can grow exponentially over the years with no effort from them, and that the Government have a duty to sustain inflated house prices for all time. Some people argue--in my view, out of the back of their heads--that mortgage tax relief should be increased to boost prices still further.
I could continue like this, but I have taken enough time. I am trying to break through the collusive populism in the House on this matter, which has been so damaging to the country--especially the poorer sector--by misleading people in the economic organisation of their lives. Only a few hundred million pounds is involved, but this time the Government are getting it right.
Mr. George Howarth (Knowsley, North) : It is a rare event, but I could go along with about two thirds of the speech of the hon. Member for Buckingham (Mr. Walden). Indeed, I am more likely to agree with him than are many of his hon. Friends. He said that our economy was deformed by the way in which the housing market works. He made an important point in his comments about mortgage tax relief. I am sure that he would agree, as most economists agree, that the boom in 1987-88 was very much led by the property market, just as the recession has also been very much led by it. As prices fell, so the economy moved deeper into depression.
It is not healthy for any economy to be in that position. It is also unusual. The United States and almost all European economies do not operate in the same way as Britain because they do not have the same over- dependence on what happens in the property market, whichever way it moves.
I agree with the hon. Gentleman that the Government's central mistake since 1979 has been their belief that there is an automatic virtue attached to home ownership. There
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is not, and nor is there anything virtuous about renting. It is just a simple transaction that people make and it should not be based on which is the most subsidised option ; it should be based on what circumstances suit an individual and his family at any given point in their lives.In the longer term, we must move away from that over-dependence on one tenure because it has such a dramatic impact on the economy. Not only is it not good social policy ; it is appalling economic policy. The hon. Gentleman described the effects of that. From his tone, I suspect that he would have gone further in his point about mortgage tax relief. It does not have any economic benefit and, strictly speaking, it does not help anyone to buy a home. Most objective commentators--not generally politicians--such as the two national inquiries into housing led by the Duke of Edinburgh have said that mortgage tax relief achieves nothing in housing policy.
The difficulty, and it is not unique to the Government, is that every political party that seriously wants power--with the exception of the Liberal Democrats, who usually do not expect to be taken seriously--has a difficult political problem because so many people receive mortgage tax relief. The economic and social aspects are different matters.
At various times some of my hon. Friends, most recently my hon. Friend the Member for Hammersmith (Mr. Soley), have tried across the Dispatch Box to interest Ministers in finding a politically acceptable solution that would break the logjam of that problem, but so far they have shown no interest in reaching any accommodation. In the long run, a Government--or, I hope, a combination of major political parties--must reach consensus because we cannot go on in this way. The problem will not wither on the vine for a long time unless action is taken. We cannot be certain that stamp duty relief has had any appreciable effect on the property market. The state of the construction industry is so appalling--with low unemployment, a small number of starts, and every other indicator depressed--that something must be done.
In the absence of a comprehensive package of measures of the kind that a Labour Government would have introduced, we must lend our support to stamp duty relief. It is not a wonderful innovation, and something more comprehensive is needed to deal with the real crisis in the construction industry. However, it is worth persevering, in the hope that that relief will eventually have some effect. I have no great enthusiasm for that policy, but in the pragmatic hope that it will have some useful effect, I will support my right hon. and hon. Friends in the Lobby.
8.30 pm
Mr. Wilkinson : Every now and then, we would do well to ask ourselves whether, especially on this side of the House, we have truly kept faith with our electors in housing matters. We have spent much of our political and parliamentary careers urging and encouraging people to realise their natural family aspiration to own their own home. By and large, we have been successful in that ; but if we had been more successful, this debate would be neither so prolonged nor so intense. Nor would we have opened the Evening Standard a few days ago to see my
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right hon. Friends the Prime Minister and the Chancellor of the Exchequer portrayed as innocent cherubs--somewhat podgy, but surprisingly underclothed.The Opposition's new clause is very much in the spirit of early-day motion 307, in the name of my hon. Friend the Member for Crosby (Sir M. Thornton). The Government would have done well to use the interval between the publication of that early-day motion and this predictable debate to announce new measures to stimulate the housing market and to make it easier for people, particularly first time buyers, to purchase their own homes. They noticeably did not do so.
In that interval, I received letters from Prowting Homes, whose headquarters is located in Ruislip. It is a big company which contributes to the local economy, and it urges that stamp duty relief be maintained for some time yet. The same is said by Taylor Woodrow, which is no inconsiderable company. For Taylor Woodrow to have written in similar vein suggests that it has negated the apophthegm that he who pays the Tory piper calls the Conservative Government's tune. A similar letter came from Ideal Homes, which is not located in Ruislip, but which no doubt builds desirable residences all around the country.
The facts are--and I wish that the Government and the House would pay more attention to the facts--that average house prices in London have fallen by no less than one quarter since the peak of the boom in 1989. That is a substantial decline, and the fastest that I have experienced during my 17 years in the House. It indicates that there is a prima facie case for stamp duty relief to be extended. If the market is so depressed, any ameliorating measure, such as perpetuating stamp duty relief, should be welcomed.
That relief pales into insignificance compared with the measure that is really required--the reduction of interest rates by about 2 per cent. Given that the Government are either unwilling or unable to do so, the next best thing must surely be to maintain stamp duty relief.
Lord Healey, when he was a Member of this House, used to remind us in his engaging way that one of the first things that one learns in politics is that if one is in a hole, it is better to stop digging. The big hole in which our economy finds itself is the result of maintaining astronomically high levels of real interest for far too long.
It was done not because inflation was out of control but because in our membership of the exchange rate mechanism a rate of 2.95 deutschmarks to the pound is some kind of totem or shibboleth. Would it adversely affect my constituents in Ruislip and Northwood--or the other people of London whose house values have declined so much and so fast--if the pound were worth instead only 2.83 deutschmarks or 2.75 deutschmarks? What matters to them is that they can service their mortgages, or can afford a mortgage to enter the property market in the first place.
Mr. Walden : I genuinely do not understand my hon. Friend's argument. He seems to be saying that the Government should provide a stimulus to the housing market--which in my terms means higher prices--so that first-time buyers can buy property.
Mr. Wilkinson : My hon. Friend may not understand, but many young people who want to buy a home understand very well. The marginal extra increment on the
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cost of house purchase represented by stamp duty can make all the difference between a successful and an unsuccessful transaction. The cynical may argue that stamp duty relief represents only 1 per cent. of the purchase price, and that house values need to fall only by this amount to have the same effect. However, property values have already fallen 6 per cent. on average over the past year. Do we want them to fall further to meet the objective achieved by stamp duty relief?Reintroducing stamp duty would be to impose a direct tax on mobility and flexibility in the employment market. At a time when substantial and dramatic changes in employment patterns--with companies in various sectors of industry feeling the pinch, and other large companies going out of business--are forcing people to sell up and to move elsewhere for jobs, the Government are making the process more difficult by their desire to reimpose the stamp duty the relief of which new clause 3 seeks to perpetuate a little longer. Would it not be wiser to consider over the winter period whether other measures could be introduced, such as the cut in interest rates that I suggested? Or stamp duty might be abolished altogether, as my hon. Friend the Member for Romford (Sir M. Neubert) has cogently urged over the years on the basis of his professional experience. After all, there are few areas left in which the House has genuine discretion in tax matters.
It is a matter of principle that we should at least consider using it in this instance. Without the approval of the House, we forwent the right to reduce VAT below 15 per cent. in the next four years. In days gone by, the reduction of indirect taxation was one of the primary methods that the Government used to restimulate the economy. Now we have deliberately eschewed it and I find this exceedingly strange.
My distinguished and learned hon. Friend the Member for Buckingham (Mr. Walden) said that it did not particularly matter whether the housing and construction industries were stimulated and that we should not look to bricks and mortar to regenerate our economy. What was he looking to? Was he looking to the export market? There is not much of a growing export market to the United States where the recession is so deep, or to Japan which is facing such parlous economic problems, or to Europe which faces recession as we do. Anyway, with an artificially over-valued currency, it is all the more difficult for our exporters to get into those markets.
What about aerospace? We all know about the difficulties of the airlines and the retrenchments in that business. What about motor cars? The motor industry is hardly the booming sector for which some people had hoped. What about defence and what about consumption? The savings ratio is so high that one cannot look to the high street to regenerate the economy. Therefore, the costs of extending the relief for a little longer are relatively small.
The Government have shown by their actions that they are not especially concerned about public expenditure : just before the election the public sector pay settlement was ahead of inflation, child benefit was uprated in line with inflation instead of introducing child tax allowances, £1 billion was allocated to the inner cities--
Madam Deputy Speaker (Dame Janet Fookes) : Order. I am sorry to interrupt the hon. Gentleman, but we are debating new clause 3, not the entire economy.
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Mr. Wilkinson : Against those examples of massive increases in public expenditure, to which I add the net contribution to the European Community, the extension of this relief is small beer. That is why I believe that the Opposition have done the House a favour in tabling the new clause and giving us an opportunity to air the arguments.
I accept that the Government said from the outset that the relief would be temporary. They are sticking to their intentions and carrying them out, and, I suppose, one should applaud that, however wrong-headed the end results. I shall not oppose the Government, but I shall not support them because I believe that the constructive criticisms which I have deployed were worth deploying, and I hope that my right hon. and hon. Friends will take note of them.
Mr. John Hutton (Barrow and Furness) : I shall be brief because this has been a long debate and many hon. Members still wish to contribute. I believe that the new clause should be supported because it offers a small but practical incentive to persuade house buyers to enter the property market to get things moving again.
It is extraordinary that the Government are proposing to end the moratorium on stamp duty at this time. I wonder whether they really believe that the worst is over for the housing market. Many hon. Members, particularly my hon. Friend the Member for Ashfield (Mr. Hoon), drew attention to some of the key housing market indicators. All hon. Members will have seen them, and there is no sign that the worst is over. The latest Halifax index shows that house prices fell again in May. In the first quarter of 1992, there were more than 16, 500 repossessions. In 1991, 75,500 houses were repossessed, and those figures represent a 72 per cent. increase over 1990.
All hon. Members know from their constituency surgeries and advice sessions for their constituents that the problems of mortgage arrears continue unabated. There is a massive problem in many constituencies, not least in mine, for people who are living in houses which are heavily mortgaged. Their mortgages now exceed the value of their houses. There are 1.5 million people living in such depressing circumstances.
The Government simply cannot believe that this is the right time to lift the moratorium on stamp duty because it is evident that the housing market is still acutely depressed. If the Government are wrong and believe that the housing market is set to boom, and if some of the green shoots to which hon. Members have referred are apparent in the economy--although I believe that the green shoots, if they ever existed, have shrivelled up and dropped off by now--will they assure the House that they will draw up a fresh set of proposals to deal with the serious problems with which many of our constituents have to live ?
I find it difficult to appreciate and understand the argument about cost. As I understand it, the Government want to lift by 1993 the stamp duty in respect of share transactions. If my figures are correct, that will cost the Government nearly twice as much as extending the moratorium on housing purchases.
The housing market is still in the doldrums as a result not only of the recession, which continues in my constituency and many others, but of many years of very
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high interest rates. Although the recent cuts in interest rates are welcome, they have not slowed the number of repossessions or reduced the extent of mortgage arrears.8.45 pm
We have heard some eloquent and rather philosophical contributions from Conservative Members, but what underscores the issue that we are debating is the fact that the Government do not have a credible housing policy. It is not enough to trot out the rather limp and tired slogans about the property-owning democracy. For many people who accepted the advice of the Government and were encouraged to buy their own homes, the reality of repossession and high personal debt has left a bad taste. A relevant housing policy should encompass the private as well as the public sector, tenants as well as home owners. Sadly, we are some way from such a credible housing policy. I shall say one or two brief words about the extent of the housing difficulties being experienced in my constituency. I took the trouble to consult all the estate agents in my constituency, and they have provided me with some interesting and relevant material for the debate. The local housing market is depressed for two reasons. First, as many hon. Members know, it is depressed because of the many job losses in the past two years at Vickers Shipbuilding and Engineering Ltd., which has led to a general lowering of confidence in the future. In fact, it has led to deep concern about what the future holds for people in Barrow and Furness. Secondly, and in particular, it is depressed because of the high level of redundancies among apprentices in my constituency, young men and women who have this year completed their four-year indentures. They have recently been declared redundant and, of course, they are the prospective first-time buyers in my local housing market. They now face the prospect of an uncertain period on the dole--it could be long or short, but we do not know --so there is no prospect of their considering the expensive option of purchasing their own property. Those combined effects have left the local property market in a sadly depressed condition, to which local estate agents see no signs of a substantive recovery.
In that context, all my local estate agents have said in recent days that they want the Government to extend the moratorium on stamp duty. They do not believe that we can press a button, as it were, to extend the moratorium and suddenly create a whole new climate of optimism in the housing market. It is a complex and sensitive market, but it lies at the root of confidence in the economy as a whole, and until confidence returns to the housing market we shall not see green shoots springing up anywhere in the economy.
I accept the view of my local estate agents that this is an important moment not to end the moratorium on stamp duty on house purchases. In my constituency, as elsewhere, ending the moratorium would have a negative effect on the housing market, and that would be bad news for the nation as a whole. So the Opposition proposal would be unlikely completely to transform the present state of the housing market. I wish it were possible for such a change to occur. But to end the moratorium now, when
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there is no sign of an end to the housing crisis--the market remains in a deep trough of recession--would be a foolish and retrograde step.It is a novel experience for me, a new hon. Member, to hear a debate of such high quality, with a clear measure of cross-party support for our proposal. I hope that when we vote on the new clause there will be voting with us Conservative Members who have the courage of their convictions.
Mr. John Townend : I agree with my hon. Friend the Member for Romford (Sir M. Neubert) that stamp duty is a bad tax which should be ended. We want to increase mobility of labour. A tax that bears heavily on people wishing to move house because they want to change jobs is damaging.
On the other hand, most people accept that it is impossible to abolish now a tax which raises a great deal of money, when we are faced with a huge public sector borrowing requirement which next year will be nearly £40 billion.
The housing market is flat, as hon. Members have made clear. It is experiencing little recovery, and that is holding back the recovery in consumer spending on which a general recovery of the economy could rest.
I welcomed the Government's decision to lift stamp duty for a limited period, up to 20 August, to give a short-term boost to the property market and increase liquidity. That move has not had the impact that some might have expected, but I remind the House that there are still six weeks to go, and with any time-limited relief one would expect a surge as the last days of the relief approach. A significant example of that occurred when Lord Lawson was Chancellor of the Exchequer. He abolished dual mortgage tax relief for couples and, instead of abolishing it overnight, he had a moratorium for several months. What occurred towards the end of that period resulted in an enormous surge in the housing market. Indeed, that was one of the principal causes of the overheating of the economy.
It is inept of the Opposition to propose a new clause that would extend the termination date of the moratorium before we have arrived at the first termination date of 20 August. That could abort the surge that we might expect in the coming six weeks. Had Opposition Members thought the issue through, they would have waited until 20 August and then, on our return after the summer recess, made the proposal, when it could have been discussed more sensibly. Another argument against the new clause is that it would cost £430 million more this year when, as I said, the Government's finances are under severe pressure. One way to make it possible to reduce interest rates--which, above all, would help the housing market and reduce the pain felt by those locked into high mortgages--would be to reduce the PSBR. I hope that there will be strong support from Opposition Members this year as each Government Department attempts to reduce its spending and bring Government finances more into balance. The more success we have in achieving that, the faster interest rates will come down. That is why I shall support the Government in opposing the new clause.
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