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Mr. Lilley: The hon. Gentleman is free to intervene if he wants to discredit that, too.
Mr. Dewar: I am not in the business of discrediting in that sense. I have fairly reflected what has been said by the industry itself in my contribution. I have had the good sense to consult the industry again over the past 24 hours, and we have had rather a different picture. The best thing that I can say to the Secretary of State is that we shall all have to wait and see what emerges. I have taken good advice and see no reason to retract what I have suggested.
Mr. Lilley: I think that I have given the hon. Gentleman a very good reason to retract--an objective, anonymous survey, covering 75 per cent. of lenders-- [Interruption.] The hon. Member for Bootle (Mr. Benton) intervenes from a sedentary position, as is his wont, because he is very reluctant ever to expose himself to criticism. The second issue was the quality of insurance policies. Opposition attacks have rested heavily on criticisms of existing mortgage protection policies, voiced by Loughborough university, the National Association of Citizens Advice Bureaux and the Council of Mortgage Lenders. The Loughborough study was not primarily designed to examine mortgage protection policies, and its observations on that subject, particularly on the success of claims, were based on interviews with just 12 people. NACAB has wider experience of the difficulties that have arisen with policies, precisely because people with difficulties go to their local citizens advice bureau. I am happy to say, however, that NACAB now serves on the monitoring committee for the code of practice governing the sale of creditor insurance. The Government recently approved a strengthened version of that code requiring lenders to spell out limitations of policies and ensure that they are appropriate to borrowers' needs. The National Association of Citizens Advice Bureaux recently said that the new industry guidelines being drafted to cover the types of policy for sale did address their main concern.
Finally, there is the Council of Mortgage Lenders. Banks and building societies are the principal beneficiaries of the present income support for mortgage interest scheme; indeed, we pay roughly £1 billion of taxpayers' money a year directly into their coffers. It is natural that they should want to retain the system in full and, if possible, expand it into a mortgage benefit scheme. The director general of the Council of Mortgage Lenders recently said:
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"we would especially like to work with Labour on working up a mortgage benefit scheme."The council seems to believe that that is the Labour party's policy. The remark was made in the same issue of Shelter's magazine. The director general seems to take Labour's housing spokesman rather more seriously than does the hon. Member for Garscadden. Unfortunately, the director general's understandable enthusiasm for state-subsidised mortgage insurance tempted him to rubbish private mortgage protection policies as
"not really worth a great deal".
He seemed to forget for a moment that most of those policies are sold for a hefty commission by his own members.
Unlike Mr. Adrian Coles, I do not believe that banks and building societies have been cynically selling worthless policies to their borrowers. After all, it is in the lender's interest to ensure that insurance policies pay out when the borrower loses his job. The Mortgage Finance Gazette survey that I mentioned earlier found that the overwhelming majority of lenders were happy with the way in which claims were dealt with by the insurers. In fact, one of the largest insurers revealed that it paid out on 80 per cent. of claims, and that the level of complaints that it received was almost negligible. When lenders negotiate block insurance for their borrowers, they will have an even stronger incentive and leverage to ensure that the policies are of high quality, do not contain hidden escape clauses and pay out readily on genuine claims: otherwise the lender's loans will not be serviced when the borrower is in difficulties. It is, of course, probable that private insurance rather than income support will discourage some kinds of irresponsible lending. In particular, it will discourage lending for equity
withdrawal--second, third and even fourth mortgages. One fact to emerge from the Loughborough university study is that 50 per cent. of borrowers in arrears had extended or increased their mortgages, or taken on extra mortgages. The new arrangements for income support will discourage a resurgence of such lending in future.
Ms Diane Abbott (Hackney, North and Stoke Newington): Earlier, the Secretary of State kept talking about mortgage providers providing free insurance. An impeccably right-wing Conservative such as the right hon. Gentleman must know that it cannot really be free; someone must be paying for it, directly or indirectly. This so-called free mortgage insurance reminds me of the promises of Ministers when we debated eye testing some years ago that of course opticians would conduct the tests for free because of the pressures of the market. That free eye testing never transpired, and this free mortgage insurance will not transpire either.
Mr. Lilley: Surely it is clear that the process of competition drives down costs and forces people to take the cost of providing cover out of their otherwise higher-than-normal margins. It is to their competitive advantage to do so.
The third area of concern during our last debate, and since, was the coverage of insurance for different categories of people. In January, the hon. Member for Garscadden said that because of our policy
"there will be great difficulties for the self-employed".
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In fact--as I mentioned to my hon. Friend the Member for Taunton (Mr. Nicholson)--an increasing number of insurance companies, including those providing direct mortgage and block insurance, cover self-employment.The hon. Member for Greenwich (Mr. Raynsford) said that many contract workers
"will find that they are uninsurable".--[ Official Report , 26 January 1995; Vol. 523, c. 496-529.]
Again, policies of the type negotiated by the Skipton building society do cover contract workers.
The Association of British Insurers has reiterated that
"virtually anyone who is able to obtain a mortgage should be able to purchase insurance to go with it--even special categories of mortgage holders such as the self-employed, single parent and part-time workers."
In short, I am confident that we are well set to see the rapid expansion of low-cost, high-quality comprehensive insurance. Members of the Labour party --like their unfortunate, flummoxed leader--are left equally bewildered. Their problem is that they still do not understand the creative, innovative, cost-cutting power of free enterprise when it is released from the distortions of state subsidy and intervention. There could be no clearer evidence that the party is still the old Labour party: hostile to private enterprise, ignorant of how it works and instinctively preferring to rely on subsidised state provision.
Mr. Alan Howarth (Stratford-on-Avon): I was encouraged by my right hon. Friend's response to the hon. Member for Rochdale (Ms Lynne). Does he intend under the legislation to outlaw discrimination against disabled people, to make it illegal for mortgage lenders to refuse to provide mortgage insurance for disabled people under block schemes? Would they, at the very least, be required to look at each individual case and not discriminate against categories of people? Will my right hon. Friend undertake, on behalf of the Government, to monitor the position? In the event that the private system fails to provide adequate mortgage cover for disabled people, will he ensure that his Department affords other protection?
Mr. Lilley: I can certainly give my hon. Friend an assurance that, when considering the advice of the Social Security Advisory Committee and the representations made to it, we shall look closely at the interaction of the proposals and our measures to improve the position of disabled people, to ensure that we do not take away with one hand what we give with the other. I do not wish to spell out the details, but that will be the underlying approach, which I think will be shared by my hon. Friend and, indeed, the whole House.
Less than a month ago, having given his interview to Shelter, the hon. Member for Greenwich--Labour's housing spokesman--went to a conference organised by Shelter. There he promised that a Labour Government would repeal our reforms to income support for mortgage interest. In due course, that would cost hundreds of millions of pounds and leave 70 per cent. of mortgage payers unprotected. Will the hon. Member for Garscadden reaffirm his colleague's pledge? Is Labour's policy to withdraw the changes that we have made in income support if it ever becomes the Government?
Mr. Nick Raynsford (Greenwich): Will the Secretary of State accept that I did not do what he claims I did? At that conference--the hon. Member for Skipton and Ripon
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(Mr. Curry) was present--I gave a clear undertaking that we would fight the introduction of the proposals tooth and nail. We believe that they will be very damaging to the market, and will cause hardship to individuals. We said that we would do everything to stop them coming into effect.Mr. Lilley: According to the report that I received--not from my hon. Friend the Member for Skipton and Ripon or any other political source, but from a non-political source--the hon. Member for Greenwich clearly did what I said that he had done, but if he says that he did not I entirely accept his word. I believe that in the House we should accept an hon. Member's word. [Interruption.] My hon. Friend the Member for Skipton and Ripon was not the source.
The upshot is that we do not know whether the Opposition would repeal the measures. The Opposition have made no policy statement about whether they would repeal them. That is another item that is not on their non-agenda.
The hon. Member for Garscadden had the cheek to raise the question of taxation. As I said then, our policy is to reduce taxes when it is prudent to do so, but the only way to afford tax reductions is to curb public spending growth. That must inevitably involve curbing the growth of social security spending because it accounts for more than 40 per cent. of what central Government spend.
In the past two years, I have set out, introduced legislation on and begun to implement a programme of reform to ensure that the social security budget does not outstrip the nation's ability to pay, yet the Labour party has opposed nearly every reform--not just this measure, but the measures on pensions, unemployment benefits and incapacity benefit. In effect, it has rejected the bulk of the £4 billion of savings a year by the end of the century which I have put in train. Even if it is not persuaded by the housing spokesman to commit itself to £600 million of extra spending on a new mortgage benefit, Labour must tell the country how it would finance up to £4 billion of savings that it wishes to forgo.
The Opposition paint an unremittingly gloomy picture of the housing outlook. They then fail to agree on any remedies or policies. The hon. Member for Garscadden offers nothing to help people who have no mortgage protection. Labour's record confirms that it is the enemy of a free housing market. It destroyed private renting, it opposed council house sales and it wants to abolish mortgage interest tax relief entirely.
The hon. Gentleman offers nothing to help first-time buyers and he does his best to undermine their confidence by blatant
scaremongering. As I have demonstrated, however, the outlook for housing is a lot brighter than he suggests and our reforms of income support for mortgage interest will help make prospects brighter still. Our policies should lead to the development of high-quality insurance, giving wide coverage at modest cost. That will ensure that most prospective first-time buyers will be offered low-cost mortgage insurance against jobs lost. That will boost their confidence and so strengthen the housing market.
5.51 pm
Mr. Barry Jones (Alyn and Deeside): The debate has been begun by two of our most coherent debaters. I like the style of my hon. Friend the Member for Glasgow,
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Garscadden (Mr. Dewar), which is frank and at times quite tart. He is an honest debater. The Secretary of State for Social Security can be a persuasive debater, if at times over-sanguine. In today's debate, he ducked and weaved with some mischief and managed to sit down without acknowledging too many of the great errors that his Government have committed. What should be emphasised throughout the debate is that, for 16 years, Her Majesty's Government have had control over and given the lead in housing. It is not good enough for Ministers to refer over and again to what they perceive to be defects in the policies of Her Majesty's Opposition when it is the Government who carry responsibility and must face up to some worrying situations.The context of our debate, as it affects people, is wretched. One miserable statistic is that, in the past five years, 295,000 of our fellow citizens have suffered repossession. Another worrying statistic is that more than 1.2 million of them suffer negative equity. I define the first as a misery, and the second as a continuing and deep worry for those who are affected.
I make a plea to the Government: do not end the income support safety net for home buyers who have suffered a loss of employment. That is a real plea and I hope that it does not fall on deaf ears in the months ahead. The second plea is more positive. I hope that the Government will sanction greater release of council house receipts so that, over a period, we can get some of that money into the housing market.
I should like to raise matters that concern north Wales. In 1992, Alyn and Deeside council was able to complete only 22 houses. In the same year, only 42 houses could be completed by Clwyd county council. The local authorities in Clwyd--Delyn, Glyndwr, Wrexham and Colwyn--were not able to complete one home in 1992. In that year, throughout Wales, there were only 133 completions by local authorities--a wretched figure. The great city of Cardiff was able to complete only six houses. That offers a pretty miserable scene when one considers the fact that Cardiff city council represents the capital of Wales and that city has a pressing housing problem.
Mr. Hendry: Will the hon. Gentleman give way?
Mr. Jones: I will not give way at this point. I want to make a brief speech and many hon. Members will seek to catch Madam Deputy Speaker's eye.
There are two fundamental requirements for fellow citizens: they should have a home and, secondly, they should have a job. I take the view that some form of housing is the priority, even before a job. One cannot have a civilised existence without a home. Anyone without it is in serious trouble. To say that a house should come before a job is a bold statement to make in any debate, but that is the view that I have formed after only 25 years in the House and after holding at least 50 surgeries or advice bureaux every year.
My proposal to the Secretary of State is that he should lead the Government in a greater and more urgent attack on the tens of thousands of aging houses for which councils have taken responsibility. There should be a much bigger programme of council house building. More tenancies should be made available for people who live on their own.
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Senior citizens will always tell us that the sheltered housing in which they live is excellent. My own council makes a wonderful effort in that direction, but I find that there are not enough sheltered housing schemes for senior citizens. That means that throughout the country we cannot evacuate single elderly people from three-bedroom council houses. If we could do that, we would be able to give younger people with a family and children a better start in life. If we wanted to contribute, as a House of Commons and as a Government, to the sum of human happiness, building more homes would be a great priority. If we could do that, we could employ jobless construction workers in Wales, who number tens of thousands. If we could put the unemployed construction worker back to work to make those houses, we could give a better start in life to younger people who have no home of their own.I am sure that I am not the only Member of Parliament who finds that most of his time in his surgeries is taken up by people with housing problems. The particular problem that I should like to highlight involves young couples who come to see a Member of Parliament, who are living apart but who are married or have a stable partnership, who have young children and who find that they must make appointments to see each other because they have no settled home of their own. I find it difficult to interview couples such as those. That problem should add urgency to the Government's approach to their housing policy.
It is also clear to me that we have many houses that were built soon after the end of world war two; we have dilapidation. I cannot be the only Member of Parliament who receives petitions from worried local authority tenants in certain estates and streets, who say that it is time that their homes were modernised. All that those citizens are asking for is new windows and doors and central heating. If we were able to meet that urgent necessity for tens of thousands of our fellow citizens, we could do better for them and enable them to have better lives and to realise their full potential. The Government have neglected the opportunity to take the lead and to give the industry a boost. Since 1979, the Government have had access to about £125 billion of North sea oil revenues. Too little of it has gone into the housing industry.
Although the Government can point to advances and improvements and to a housing programme, it is not a programme that will tackle our deep-seated problems. If the Government want to be seen to be in favour of the enhancement of the lives of those who are suffering from very real difficulties, they should give top priority to housing.
I must inform the Secretary of State that we have a serious housing problem in Wales and his right hon. Friend the Secretary of State for Wales would be able to tackle it to more effect, I presume, if he had more assistance from the Treasury. The Secretary of State for Social Security should tell his right hon. Friend that, if the Government are serious about tackling unemployment as well as housing, they must release more receipts from the sale of council houses. That is a top priority in Wales, as it is throughout the country, and I very much hope that the Secretary of State will bear in mind the matters that I have raised.
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6.2 pmSir Norman Fowler (Sutton Coldfield): I agree with what the hon. Member for Alyn and Deeside (Mr. Jones) said about the importance of housing, although not with all his remarks.
First, I must declare an interest, as I am the chairman of the National House Building Council. We do not build houses but give structural warranties on new houses and so are, in effect, a consumer protection body.
Furthermore--and nearer to the subject of this debate--I was Secretary of State for Social Services in another Government between 1981 and 1987 and, with that experience, I find it extremely difficult to take entirely seriously the Opposition's claim to be the natural protector of the home owner, even less the champion of the new, would-be home buyer. As my right hon. Friend the Secretary of State said, we all remember well Labour's opposition to council house sales. If Labour policy had prevailed, local authorities would still be the landlords for hundreds of thousands of tenants and 1.5 million council tenants would have been deprived of the opportunity of ownership.
Labour's policy announcement of 10 years ago is perhaps less well remembered, but has some similarities to my right hon. Friend's arguments. In 1985, I was about to publish the Government's proposals on social security reform, but was pre-empted by the Opposition, who had a radical new plan for housing. That plan amounted to the abolition of mortgage tax relief and the creation of a new housing allowance. Between 2 million and 3 million people would have lost out directly as a result.
The tradition that the Opposition spokesman for housing outlined--he is spokesman for housing now, but having listened to this debate I would not bet on his remaining spokesman long--
Sir Norman Fowler: No, the hon. Member for Greenwich (Mr. Raynsford). He is following in the tradition of what the Opposition have been saying for the past 10 years. I still require a great deal of persuasion that their line has changed.
Mr. Raynsford: Perhaps the right hon. Gentleman will check the records and accept that what he is alleging is incorrect. That set of policy proposals came from the Association of Metropolitan Authorities and was never endorsed as Labour party policy. In fact, the proposals were rejected by the Labour party. The right hon. Gentleman's attempt to present them as Labour party policy is incorrect and misleading and I hope that he will withdraw that assertion.
Sir Norman Fowler: I am interested in that statement. If the hon. Gentleman is referring to the 1985 proposals, as I was, I will not withdraw it. The hon. Gentleman had better check his facts, as I have done. I looked it up in Hansard . We debated those proposals on the Floor of the House at the time. They were not the AMA's proposals but those of the hon. Member for Oldham, West (Mr. Meacher), if the hon. Gentleman wants to know. I have the Hansard here and I can show it to him if he wants to check.
The shadow Secretary of State, the hon. Member for Glasgow, Garscadden (Mr. Dewar), said that the reduction in mortgage tax relief is
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"not on the Labour party's agenda"in present circumstances, and he also mentioned the small print of the insurance companies. I would want to examine the small print of his assurance very carefully.
At the very least, the Labour party's credentials on mortgage tax relief are suspect. As my right hon. Friend the Secretary of State said, it is clear that there are those in the Labour party, including some Labour Front -Bench figures, who would do away with mortgage tax relief altogether. That is another reason why I am not inclined to take lectures on housing from the Labour party.
As for the Opposition's attack on social security changes, the principle of those changes is difficult to dispute. I understand the concern that the Opposition Front-Bench spokesman quite fairly expressed and the quotations from the housing industry. Anyone with any experience in that area would know that there is concern. The principles of the changes that the Government propose are difficult to dispute, however. Social security remains a vast budget. It is accepted now much more so than in the mid- 1980s that we should target help to the people who need it. That principle is accepted now, but it was not then; it is certainly accepted by the Labour party's social commission. In addition, we must also be selective about what the social security system can do. In other words, if provision can be made in the private sector, through normal insurance, it is sensible for the Government to follow that avenue, which is precisely what they are doing in this case.
I understand the complaint about timing, but provided that provision can be made, and the evidence of the insurers is that it can--I hate to mention Skipton building society again--there is nothing to detain us in that regard. Indeed, judging by everything that has come from the Labour Front Bench today, if there ever were a Labour Government, as far as I understand the Opposition's policy--I am willing to give way again--such a measure would not be repealed. My concern about the housing market does not relate to social security, but to mortgage tax relief--a subject that is not mentioned in the Opposition motion. My concern is about the Conservative manifesto pledge to
"bring home ownership within the reach of more families", which is of fundamental importance. I am conscious that my old boss, my noble Friend Baroness Thatcher, has been setting out her views on that very subject and on several others at the same time. On the radio this morning I heard my right hon. Friend the Secretary of State for Social Security nobly coming up with the charitable interpretation that Lady Thatcher had been laying about the Labour party. We must all hope that, if that indeed was her purpose, it never enters her mind to lay about the Government.
I see that Lady Thatcher's comments in her interview with David Frost about those hon. Members who had the Whip withdrawn are in The Times under the headline "Thatcher says Major treated rebels like a bossy headmaster". She is quoted as saying:
"Really, I don't like it when [the Government] act like an overpowering headmaster. It's no good. It won't do . . . each of these [rebels] has been elected by their constituents".
I look back with fondness on those much gentler times when my right hon. and noble Friend Lady Thatcher was in power. The Cabinet was rather like a gathering of old pals--all at one in policy. There were no disagreements and no leaks. As Secretary of State, one had only to ask for something and one would be given it. "Of course,
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Norman," Lady Thatcher would always say, "if you want more money for the health service, you must have it." No pressure was ever brought on the parliamentary party in any respect whatever. The rumour that the Single European Act was pushed through on a guillotine is, of course, a total misreading of history. Those who differed from Lady Thatcher on policy were allowed--no, they were not allowed, they were encouraged--to set out their reservations. It was, of course, the role of the Chief Whip to facilitate such constructive discussion.The House may take it from what I have said that I am not an uncritical adherent of all of Lady Thatcher's historical account, interesting as it is, but on housing, she has got it absolutely right. It is a great pity that the then Chancellor, the right hon. Member for Kingston upon Thames (Mr. Lamont), started the process of reducing mortgage tax relief in the 1991 and 1993 Budgets and that that process was continued in November 1993.
We all know that the Treasury wanted to reduce and, preferably, end mortgage tax relief. That is no secret. It would like to reduce and end other things too. But mortgage tax relief has led to much of the increase in home ownership over past years. More than 4 million more householders own their homes today than in 1979. That is a record of which this Government should be very proud and which should be extended. I repeat that that is what our manifesto promised. Yet today--we have to take note of the position because we cannot run away from it--sales of second-hand houses are down, starts of new houses are down, and a respected body such as the House-Builders Federation predicts that prices could fall as the year progresses. We should not deplore the past; we should ask what--practically --can be done. I do not believe that we should have a negative equity relief scheme such as I have heard advocated. I do not think that the Government can take on the obligation to guarantee a particular price for individual houses. The Government can, however, encourage the market generally, especially first-time buyers.
There are two reasons why help for the first-time buyer would be going with the grain. First, there is no question that to be a home owner remains the public's aspiration. All surveys show that. That is not a reason to neglect other areas of housing policy such as housing associations and the rented sector. The main hope of recovery comes from giving help to those who want to buy. Secondly, given inflation, the price of houses and interest rates, it is an exceptionally good time to buy a house, but some confidence and encouragement are needed. The Government can give that encouragement.
There should be a mortgage tax scheme--I am not trying to turn the clock back to where we were at the beginning of the 1990s--aimed specifically at helping first-time buyers. That scheme would have a number of elements. There would be an increase in the rate of mortgage relief to, say, 25 per cent. There would be an increase in the MIRAS threshold to, say, £40,000 or £50,000. That special relief would taper over a 10- year period to a point where normal tax relief would take its place. Clearly, I accept that there are other ways of achieving the goal, but targeting first-time, new home buyers would not only help thousands of couples to realise their ambition to be home owners--I repeat that that
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ambition still exists--but have a knock-on effect in the housing market and get sales moving again. There would be a dual effect. The Labour motion fails partly because it makes no mention of any kind of scheme for first-time buyers. Indeed, I do not think that Labour Members can really say that, in Government, they would preserve tax relief. My right hon. Friend the Secretary of State showed that quite clearly. They are not prepared to say that that would be their position were they in Government. The motion also fails on the ground of Labour party history. I do not think that any objective analysis of the Labour party's position over the past 10 or 15 years shows that its heart is in extending home ownership. Indeed, it has fought against many of the most important developments. Nevertheless, having said that about the Labour motion, I hope that Ministers will take from this debate a message that action in housing is needed urgently.Mr. Nicholas Winterton: I am very grateful to my right hon. Friend. I very warmly support his proposition that we need to give an incentive to first-time buyers, not least because I made precisely that proposal in the House three weeks ago in an Adjournment debate on a Wednesday morning which I initiated. My right hon. Friend carries considerable weight with the Government because of his experience in many high offices of state. Will he assure me that, with me, he will weigh very heavily on the Government to bring about the proposal whereby MIRAS is increased to a standard rate of 25 per cent. up to a threshold of £50,000 for first-time buyers? If he agrees to do that, the campaign will be very successful. May I have his support?
Sir Norman Fowler: With respect to my hon. Friend, I thought that that is exactly what I was doing. I have been weighing in over the weekend. I have even appeared on the "Today" programme to put forward my proposition. No man can make a greater sacrifice and get up that early. In all seriousness, I agree very much with my hon. Friend. I say in the most friendly way conceivable that I would not wish Ministers to go away from this debate rejecting the Labour motion--which I reject--with its policies and its history, and with the feeling that nothing is required to be done.
Mr. Betts: Will the right hon. Gentleman give way?
Sir Norman Fowler: I shall not give way again as I am nearing the end of my speech. We should aim to extend home ownership. That was what we said in our 1992 manifesto. We should help the first-time buyer. We set out our aims in our manifesto and we should be guided by them.
6.18 pm
Mrs. Diana Maddock (Christchurch): It is difficult to over-estimate the importance of housing, not only to the national economy but to individuals and families. A house is the single biggest item which the majority of families will buy in their lives. People in the United Kingdom spend between them more than £30 billion a year on housing. Some 30 per cent. of our total net wealth is in housing.
Although this debate is specifically on the housing market, we must be careful not to lose sight of the most important principle of housing policy: to ensure that
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everyone has some sort of roof over his or her head, regardless of who owns it, and that the accommodation is warm, healthy and not overcrowded. Hundreds of thousands of families in Britain today long for a home that fits those criteria. Security and stability are important, too. People want not just a good quality home; they want to know with a degree of certainty that they will still have it next week and next year. With the shortage of council house developments and the decline of the private rented sector in recent years, people have looked to owner- occupation as a way to get a secure home, despite the fact that many people --particularly the elderly, the young and the mobile--find it more convenient to rent.In the 1980s, a mood of euphoria surrounded the housing market. It has now gone, perhaps never to return. The idea, fostered by the Government, that housing was a dead cert bet, not just for profitable investment but for a secure future, has now been blown out of the water. As another hon. Member said, we must ask why we are in this position and why we are having this debate. Who have been in power for the past 16 years? Who refused to allow local authorities to invest money from council house sales in building new homes to replace them, despite the fact that one million households are on waiting lists? Who stoked up the economy in 1987-88 with what many people believe were cynical tax cuts for short-term political gain? The result was an excessive boom and the housing market has paid the price in excessive interest rates. The economy then had to be damped down.
Mr. Peter Brooke (City of London and Westminster, South): The hon. Lady has just observed that the tax cuts of 1987 and 1988 were intended for short-term political gain. As she would be the first to challenge the Government if they introduced a tax cut in the immediate run-up to an election, when does she think would be an appropriate time to have one?
Mrs. Maddock: As the right hon. Gentleman will know, my view is that people are not asking for tax cuts at the moment. Last Sunday's papers show that people are only too happy to pay for what they believe the nation needs, such as a better health service. When the economy is booming and doing well, and when people have good jobs and homes, perhaps one could think about tax cuts, but we are certainly not in that position now.
Whose reliance on mortgage interest tax relief conspicuously failed to provide proper support for those on low incomes? The Minister's speech today was evidence of that. Now mortgage interest relief at source is being phased out with no thought about how that fits in with an overall housing strategy. The Government's economic short-termism has created mayhem with interest rates--some describe it as a rollercoaster--which has thrown the housing market into turmoil. Since the Government have been in office, inflation has been as high as 22 per cent. and almost as low almost 1 per cent. Interest rates have gone from 10 per cent. to 20 per cent. to 7 per cent. to 15 per cent. to 5.25 per cent., and they are probably on their way up again.
Who now propose cuts in housing benefit which will deter private landlords from letting houses? Who propose cuts to income support for mortgage holders, which everyone in housing, whatever the sector, agrees will lead to more repossessions and homelessness? And who now propose less help for those with mortgages when they lose their jobs? It is the current Government--the same people
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who are nervously milling around the button marked "emergency reverse". We heard proposals in that respect this afternoon. We are in the present position because of the way in which the Government have played around with the economy and the housing market for what we and many other people believe was short-term electoral gain. Where the Government should have ensured stability, they have played fast and loose with interest rates and tax cuts. Where they should have encouraged sensible, sustainable home ownership, they have led families into mortgage misery with arrears piling up, unable to move because they owe more than their homes are worth. Where the Government should have brought security, they have brought a flood of repossessions--more than 300,000 in the past five years--and with them, family breakdowns, stress and other serious problems.For millions more people, the Government's policies have brought an ever- present fear of homelessness, which haunts them day and night. If the Englishman's home is his castle, the Government have let down the drawbridge, drained the moat and sent the guards away, leaving the occupants vulnerable to attacks from the dark knights of sickness, unemployment and recession. For many, the fear is that they will lose not just their homes but their livelihoods. A considerable proportion of small businesses are set up with bank loans using family homes as collateral. According to a survey carried out last year, more than 60 per cent. of overdrafts to small businesses in 1994 depended at least partly on personal collateral, which is nearly always the family home. In that way, home and job are tied up together so that if the one is lost, so is the other. Such a double blow--a double whammy--can be shattering.
The Government are guilty of an astonishing misdirection of priorities. They have concentrated all their fire on grants, loans and other incentives to tempt people into home ownership but then largely abdicated their responsibility for helping people when they are threatened with losing their homes. The Government have regularly espoused the virtues of the free market but they have tilted that market to encourage entry into home ownership at unsustainable levels. They allowed mortgage interest tax relief to fuel spiralling house prices in boom times, but when people need it most they decide to take it away without a word of warning.
Unlike the Government, the Liberal Democrats have been consistent in their policy. We have always believed that MIRAS and income support for mortgage holders should be replaced by a much more coherent, effective and means- tested benefit that will help home owners on low incomes, and we have been roundly condemned by Conservative Members for daring to suggest that we would do that. Yet that it is precisely what the Government have been doing in recent years. But the Government have not just phased out MIRAS for new mortgage holders: they have taken it away from the very people whom they tempted into owner-occupation in the first place.
I do not remember the Government saying, "Buy a house but be careful how much you spend because we are thinking of cutting mortgage interest tax relief." Their message has always been, "Buy a house. Get a mortgage. We are on your side and we shall support you. You can
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rely on us." It is another broken promise and people are so angry about it that today we have heard Conservative Members proposing to reverse it.The Government could have not have picked a worse time to begin to reduce MIRAS. They are kicking the market when it is down. The time to cut MIRAS gradually is when the market is healthy, and we should not hit those people with existing mortgages who have made their financial plans on that basis. We as Liberal Democrats have always said that we would phase MIRAS out slowly over two Parliaments. We would not hit the market with 10 per cent. cuts in 12 months, as the Government have done, and we certainly would not do anything with the market as it is at the moment.
The Labour party's record is not much better. For years it has prevaricated about what to do about mortgage interest tax relief. Despite the fact that the Rowntree foundation, Shelter, the Institute for Fiscal Studies, the National Housing Forum and even its own Commission on Social Justice have recommended replacing MIRAS with a mortgage benefit, the Labour party has prevaricated. Once again, on a major policy issue we are less than sure where Labour stands. I think that the message I got from Labour today was that, like ourselves, it does not want to do anything at the moment. But where the Labour party stands on mortgage interest tax relief in the long run remains unclear.
The Government have pursued a chain of policies across the housing spectrum which have encompassed a blind faith in owner-occupation and a determination to run down the public sector, regardless of the consequences. The Government's negative attitude to social housing has led to cut after cut in new building, until we have reached the stage where fewer affordable homes to rent will be built in this financial year than in any year since the war. Yet there are now 2 million households in unsuitable accommodation. Some are in hostels or board and lodgings, while others are squatting, sleeping on friends' floors and are often forced to share with a host household. In the Budget, total housing spending for the next three years was cut by more than £1.5 billion. While housing need has never been higher, investment has not been lower for a long time. Perhaps the most frustrating thing for many of us is that we can see where the money is going: it is paying the unemployment benefit, income support, housing benefit and family credit of the construction workers who have lost their jobs.
The case of a gentleman in my constituency illustrates clearly where 16 years of Tory housing policies have led us. He worked in the construction industry earning a good salary in the boom 1980s and took out a mortgage on a house at a high price at that time. As things got worse, however, he lost his job. Although the Government help him with his interest payments, he is trapped in that house. When he goes to the employment office, he is told that he must take a job at wages which he knows full well will not cover the payments on his house. Being a responsible man, he goes to the people who lent him the money for his mortgage, who say that they will repossess his home as soon as he defaults when he gets a job. His next stop is the housing association, where he is told that if that occurs he will knowingly be homeless and therefore the housing
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association will not have any responsibility towards him. That encapsulates clearly what has happened as a result of the Government's policies in the past 16 years.The Government should be investing in building affordable new housing to rent in the public sector, and they could start with a phased release of the capital receipts which are held in local authority bank accounts. We know that the Government will say "What about the public sector borrowing requirement?" But respectable people in finance know that if there is the will to change the way we work, we could do it. We could get more money invested in housing, and that would mean more jobs.
We need a comprehensive mortgage benefit. The Government should be using the money saved by the cuts that they have made in MIRAS to create a coherent and reinforced safety net for mortgage holders. That is what my party has proposed for a number of years. Another subject which needs tackling is housing benefit, which traps people in poverty because they cannot afford to work.
We certainly need to see an end to boom and bust economics. We need an accountable central bank which looks after interest rates--which the bank itself would set, subject to targets set by Parliament--to take politics out of interest rates and avoid interest rate variability. We have consistently put forward those proposals in recent years, and we have warned the Government about the consequences of their short-term economics for housing and the economy. They have not listened, and we are paying the price. That is one of the reasons for the debate today.
It is vital to our economic future that we have a flexible and stable housing market. People who are tied up by negative equity or who are held by housing shortages are not just being trapped in cramped or sub-standard accommodation. They are often being locked out of work and into poverty. They are being held back from reaching their full potential, and our economy is suffering as a result. The national debate on housing has reached a crucial point, and the choice is fairly stark. Either housing will continue to descend to the level of a party political football--with the Government using blind and illogical measures to push home ownership to unsustainable levels while increasingly abandoning mortgage holders to the effects of the economy--or we can take the alternative route that my party has proposed. We need a strong safety net for home owners and tenants alike so that families can feel secure in their homes even when they are under threat in their jobs. We do not need the Government's proposals to hit income support for mortgage holders. It would be wrong to do that at any time, but people in all sectors of housing believe that now is definitely not the time for the Government's proposals. It is time that the Government started to listen to people. More importantly, it is time that they took responsibility for their actions over the past 16 years.
6.36 pm
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