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The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans): It is pretty rich of the hon. Member for Greenwich (Mr. Raynsford) to talk about positive packages for the housing market after that grossly exaggerated negative conclusion to his speech. How he believes that it will improve the housing market to talk of a lethal cocktail of poison, I leave to everyone's imaginings.
Column 531In his analysis, the hon. Member for Greenwich wholly failed to deal with the Government's two main arguments. The first relates to how to deal with the inexorable rise in the cost of income support mortgage payments. Does he believe that that rise should continue? Does he believe that the taxpayer should continue to support it at that level without any further restraint?
The second point with which the hon. Gentleman failed to deal relates to the 70 per cent. of those who are not on income support and who are not covered by the present arrangements. The Government are proposing to deal fairly with both those problems.
As my hon. Friend the Member for Colchester, North (Mr. Jenkin) powerfully expressed, when there is such state activity, it is hardly surprising that private enterprise tends to be displaced. The home protection insurance market has undoubtedly been affected by the existing scheme. What is sought to be insured must be borne in mind. What is proposed is short-term insurance to cover the nine months for new borrowers. That is a finite and insurable period. It is something which the market can reasonably be expected to make arrangements to cover.
Mr. Denham: The Minister has said that we can reasonably expect the market to insure the nine-month period. Will he confirm that one cannot buy a policy for the first three months of that nine-month period?
The Abbey National says that 40 per cent. of its new borrowers are now taking out mortgage protection policies. The Association of British Insurers makes it clear that about a third of its new borrowers are taking out such insurance. General Accident has insurance cover at £4 for every £100 of repayment.
It is reasonable to expect that, as the market develops and as competition comes into play, the price of policies will go down, and the terms of such policies will steadily improve. The fundamental fact with which the Opposition have not dealt is that it is in the interests of lenders--one would never have imagined it, judging from what was said earlier--that the type of policies that their borrowers take up, which, after all, are designed to pay those lenders, do not have the exclusions about which we have heard so much. In other words, the market will demand that improvement in insurance policies, and we can reasonably expect that to happen.
Mr. Dewar: The Minister will agree that the crux of the argument is what happens in the limited period at the start of the unemployment or ill health--the nine-month period. The Association of British Insurers says that almost all policies have between 60 and 90 days in which no payment will be made. Is it the Government's intention to negotiate an agreement with the industry so that that gap will not exist?
Mr. Evans: It is the Government's intention to stimulate the market. It is perfectly possible-- [Interruption.] The hon. Gentleman should listen for a moment, instead of assuming the ignorance of the market. The self-employed and contract workers can take out sickness insurance policies that come into play after three days, three months or six months, depending on the relevant terms. The market is well used to and quite capable of introducing products to deal with that matter.
Column 532The Opposition's attack on the insurance market is quite astonishing. No doubt it will be noted in the City. No doubt it will be noted, as the hon. Member for Sunderland, North (Mr. Etherington) put it, as working for our friends in the City. The hon. Member for Southampton, Itchen (Mr. Denham) deplored the costs of private insurance administration. He agrees with the proposition of the hon. Member for Sunderland, North. He apparently thinks that nationalising insurance or doing it collectively would be cheaper. He also attacked the terms of policies, but I stress that mortgagees have an incentive to improve the terms of those policies. The fact remains that the self-employed and, indeed, contract workers, can take out policies for all sorts of contingencies.
The hon. Member for Greenwich said that one cannot insure against divorce, and no one should be able to do so. A prudent couple will take out insurance to deal with contingencies, including the consequences of such a situation. [Interruption.] One can obtain insurance because one is unemployed or because the mortgage is not being paid. The hon. Member for Glasgow, Garscadden (Mr. Dewar) appears to be wholly ignorant of the basic terms of policies. Let us take the matter one stage further. The Government are committed to consulting on the details of the arrangements. Pensioners on income support mortgage interest payments are and will be fully protected. We shall consult in respect of other vulnerable groups.
I advise the hon. Member for Rochdale (Ms Lynne) that all new transactions after October 1995 will be classified as new from that date, not the date of the Budget statement, and we shall consult on protection for those on benefit who, for example, become disabled and require expenditure on improvements.
The Government welcome the opportunity to talk with the Council of Mortgage Lenders about the details of the scheme. We accept that, from October, the 1991 agreement will need to be negotiated, but there is a strong element of common interest among borrowers, lenders and the Government: repossessions are failures for mortgagors and mortgagees. A repossession inevitably leads to a vacant sale, which never recovers as much as a sale with the person in possession. An alarming number of repossessions--one building society put it as high as 30 per cent.--have come about as a result of borrowers simply walking away, leaving the place empty, and leaving mortgagees with no option but to repossess and to sell. That does not help the borrower, because he incurs alternative housing costs and his liability to the lender continues.
There is room for considerable improvement in the public's understanding of the rights and obligations of all parties to such arrangements. There is also scope for better practice in the management of mortgage arrears and repossessions. In November 1993, the Government tightened the county court rules. To answer the question of the hon. Member for Rochdale, we have no proposals to alter the Administration of Justice Act 1970, but mortgagees have realised that the courts possess wide powers to give some mercy to borrowers who are in difficulties. It is very unfortunate for the Council of Mortgage Lenders that the public appreciate the considerable forbearance that building societies and other lending institutions have already shown.
Column 533There are positive signs. Mr. Adrian Coles, the director of the CML, stressed that people may move from the standard 25 -year mortgage. There is no reason why different, more flexible mortgage terms should not be arranged, for example giving the option of making higher payments when in work to meet a holiday period if a contingency such as unemployment strikes. It may be much better to focus discounts not so much on first-time borrowers but on the contingencies of life such as childbirth, when a wife ceases to work for a period. There is absolutely no reason why there should not be variations of the repayment period.
Instead of that constructive approach, we have heard from the Opposition nothing but doom and gloom about the housing market. The hon. Member for Rochdale described the proposals as a further blow to the housing market. My hon. Friend the Member for Macclesfield (Mr. Winterton), who no doubt stirred Tory souls by saying that the ownership of property brought enhanced self-respect, nevertheless hardly assisted house building or the mortgage industry by referring to yet another nail in the coffin of the housing market. The reality was met by my hon. Friend the Member for Colchester, North, who pointed out that it is not desirable to have an overheated, excessive housing market that distorts the economy. My hon. Friend the Member for Macclesfield may find an interesting conflict in his priorities between manufacturing industry and housing.
The Opposition's prevailing theme has been consistently to talk down the state of the housing market. No Conservative Member can see how that could benefit any prospective home owner, anybody engaged in house building, or the economy generally. The facts are nothing like as black as the picture that the Opposition painted. Housing starts in the first nine months of 1994 were up 13 per cent. in the private sector. Indeed, they are the highest since 1989. Negative equity and repossession figures are tending in the right direction. The Government's support on MIRAS, which my hon. Friend the Member for Macclesfield said was being reduced, is still at £3 billion per annum. Under the proposals, the Government's commitments under the income support mortgage payment arrangements will still run at not much less than £1 billion a year.
On top of that, mortgage rates are at their lowest for many years and, perhaps above all else, the ratio between average earnings and average house prices is now classically at the most favourable point, because undoubtedly the cycle will turn as confidence returns. What the housing market needs and what home owners and borrowers with mortgages need is confidence, not the doom and gloom that we have heard from Opposition Members.
Question put, That the original words stand part of the Question: --
The House divided: Ayes 242, Noes 277.
Division No. 52] [7.00 pm
Column 533Abbott, Ms Diane
Adams, Mrs Irene
Ainsworth, Robert (Cov'try NE)
Column 533Anderson, Donald (Swansea E)
Anderson, Ms Janet (Ros'dale)
Column 534Battle, John
Beckett, Rt Hon Margaret
Bennett, Andrew F
Bray, Dr Jeremy
Brown, Gordon (Dunfermline E)
Bruce, Malcolm (Gordon)
Campbell, Mrs Anne (C'bridge)
Campbell, Menzies (Fife NE)
Campbell, Ronnie (Blyth V)
Carlile, Alexander (Montgomery)
Clarke, Eric (Midlothian)
Clwyd, Mrs Ann
Cook, Robin (Livingston)
Cunningham, Jim (Covy SE)
Cunningham, Rt Hon Dr John
Davies, Bryan (Oldham C'tral)
Davies, Rt Hon Denzil (Llanelli)
Davies, Ron (Caerphilly)
Donohoe, Brian H
Dunwoody, Mrs Gwyneth
Evans, John (St Helens N)
Ewing, Mrs Margaret
Field, Frank (Birkenhead)
Foster, Rt Hon Derek
Foster, Don (Bath)
Gilbert, Rt Hon Dr John
Godman, Dr Norman A