House of Commons Hansard Debates for 13 Jun 1995

Mr. Charles Hendry (High Peak): First, I declare an interest in that I am the chairman of a group of companies involved in the private rented sector. On a non-pecuniary basis, I am chairman of the all-party homelessness group, a trustee of the Big Issue charitable trust and a friend of the National Association of Citizens Advice Bureaux, whose report in many ways stimulated this debate.

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It has to be one of life's more unpleasant experiences to wake up to the dulcet tones of the hon. Member for Holborn and St. Pancras (Mr. Dobson) on "Today" saying that we are to have a debate on housing this week. That is what we heard last week.

Mr. Dobson: I was telling the truth.

Mr. Hendry: We always expect the hon. Gentleman to tell the truth, but that does not make it any more pleasant.

We discovered today that soundbites and media presentation are rather more important than the Opposition's policies. I have listened intently to the speeches made so far in the debate, and we are no nearer knowing where Labour currently stands on this issue. One might have thought that a policy would come out of an Opposition Supply day.

We do not know yet what Labour's policy is towards a mortgage benefit. My hon. Friend the Member for City of Chester (Mr. Brandreth) intervened on the hon. Member for Glasgow, Garscadden (Mr. Dewar) to ask about that, and was told that the hon. Gentleman would come back to the subject. He did not do so, and has now left the Chamber. He may have left it to the hon. Member for Greenwich (Mr. Raynsford) to deal with in his winding-up speech. I hope that he will do so.

We do not know whether the Labour party wants to extend the current scheme. We know that 70 per cent. of people are not covered by it at present. We know that it is not adequate, but we do not know whether the Labour party would extend it to cover more people. Labour Members are simply saying what they believe to be politically popular to catch another few minutes' slot on the news tonight or tomorrow morning.

It is cynical in the extreme for the Labour party to choose this subject for a Supply day debate. In many ways, the empty Opposition Benches bear that view out. Labour Members know that they cannot speak with a straight face on the housing market and home ownership, and they have decided to remain absent from the debate.

Mr. Raynsford: Where are all the Tory Members?

Mr. Hendry: It is not our Supply day. The Opposition have chosen the subject. We know that, within a few hours, the Labour Whips will be scurrying around the House asking whether their Back Benchers can speak in the debate as they are a bit short of hon. Members who want to speak.

Mr. David Martin (Portsmouth, South): The Whips are already doing that.

Mr. Hendry: That shows the depth of the Labour party's thinking and its commitment.

We can tell from the Labour party's record how committed it is. When we introduced the right to buy--the most important measure for extending home ownership ever--the Labour party opposed it. Even when the national party had decided grudgingly to accept it, Labour-controlled local authorities throughout the country were doing their best to thwart it.

We know that home owners would be hit by a Labour Government because of Labour's spending policies. The Labour party may not commit to them now, but if it were in office it could not bear to keep the lid on them. That

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would inevitably lead to higher taxes and to high interest rates--one of the most damaging factors for home owners.

Day by day, home owners see the cost of Labour. If people aspire to improve their house and push it up a council tax band, or aspire to buy a better house, everywhere we look, band by band, Labour councils cost them more-- from £99 in band A to nearly £300 for more expensive properties. That shows Labour's commitment to home ownership. If the Labour party wants to try to be the friend of home owners, perhaps it should start by recognising some of the facts. Since 1971, the number of houses has increased by 3.25 million, and 2 million of them have been built since the Government came to power 16 years ago.

The hon. Member for Alyn and Deeside (Mr. Jones) said that the number of houses being built by the council in his constituency had dropped, but he did not tell us how many more homes were being built by housing associations. How sad it is that he chose to show us only a small and distorted element of the picture.

Mr. Betts: Is not the hon. Gentleman in danger of misleading the House, albeit inadvertently? The truth is that, last year, only 500 council houses were built and the number of housing association properties built fell. Fewer properties for rent were built last year than in any year since the war. Housing association new build has not replaced council new build. The total for both combined has fallen to the lowest level ever.

Mr. Hendry: Certainly the total number of houses built has fallen, but a key factor is the number of new lettings taking place. The figure for last year shows a key movement in the rented sector. The number of new lettings has been rising consistently in recent years, and last year it was at its highest level--

Mr. Dobson: Since when?

Mr. Hendry: For the hon. Gentleman's information, it was the highest level ever. Perhaps he would like to use that soundbite when he is next on the "Today" programme.

The number of mortgages has increased dramatically. In 1980, only 6.2 million people had mortgages; now, 10.4 million have them, and that figure has not dropped during the recent difficult years in the housing market. Year on year, the number of people taking out mortgages has grown.

On the other side of the spectrum, in 11 successive quarters, the number of families accepted as homeless has dropped. It is a shame that political parties and the pressure groups outside, which are so ready to see two months of bad figures as a trend, will sometimes not see 11 quarters of good figures as something to be welcomed. The home ownership ratio--the ratio between peoples' incomes and the cost of buying a house--is at its most favourable for 10 years. There is a tremendous improvement in many of the housing indicators, and the House should welcome them.

We should also welcome the fact that housing standards have never been higher. The housing improvement survey, taking into account the way in which standards were measured and changes were brought in, shows that housing standards are better than they have ever been.

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That has happened in the context of a Government spending commitment of more than £20 billion on housing this year, last year and the year before.

The debate shows us the Labour party scurrying about the political spectrum, not because of an issue of principle but because it has spotted some potential votes of which it may be able to catch hold. That will not wash in the longer run.

We hope that the hon. Member for Greenwich will tell us where he now stands on MIRAS, because we know that he has called for it to be phased out over a period of five to 10 years. He is minuted as having said that, so I hope that if that is not his view now he will distance himself clearly from it. We know one answer that we shall not hear--that Labour will commit itself absolutely to holding down public spending to avoid rising interest rates, which are the biggest curse that affect people who own their own homes.

Fundamentally, the debate is about repossessions. Their number has fallen. The level now is 35 per cent.--one third--below its peak. There are also encouraging figures on the level of arrears. The number of people who are more than 12 months in arrears has fallen by a quarter. There has also been a fall in the total amount of arrears. Much has been made of levels of negative equity. I understand the concern, but let us recognise the facts there, too. There are now 1.2 million homes with a total negative equity of £7.2 billion. That compares with 1.8 million homes two years ago, when the total negative equity was just below £12 billion. The total level of negative equity per property has dropped from £6,500 to £5,800. All those indicators show a move in the right direction, and many families who were experiencing negative equity a year ago have now moved out of it altogether.

We cannot rewrite history, but we can be absolutely certain about one thing --that almost all the repossessions could have been avoided if there had been comprehensive mortgage protection. We shall not find anybody who has lost his home in recent years who does not now wish that he had taken out a mortgage insurance policy.

What the Government are proposing is right, not only for the taxpayer but for home owners, because it would give them the security that the hon. Member for Christchurch (Mrs. Maddock) said was so important. We insure our furniture, our treasured possessions and our lives; we even insure our holidays in case they are cancelled or we cannot take them. Surely it makes sense to insure the most important purchase that we shall ever make in our lives--our home, which is the roof above our family's heads.

Seventy per cent. of people would not be covered by income support if they lost their job. The cruelty of the Opposition's approach is that it gives a false sense of security and makes more people believe that they would be covered by income support than has ever been the case. Indeed, in the past, too many people have erroneously believed that they were covered and, tragically, have found out to their cost that they were not.

The building societies are responding constructively. We have heard what the Skipton building society is doing. If it is the fact that my hon. Friend the Minister for Local Government, Housing and Urban Regeneration represents

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the constituency of Skipton and Ripon that has encouraged the Skipton to be so constructive, I wish that all building societies would set up their headquarters there. There may be discussions about how far such a scheme would go, but after the discussion this morning with the chief executive of one of the largest building societies in the country, I know that other societies are considering following the Skipton's lead.

The response of the Association of British Insurers to the Government's proposals has already been mentioned, but it may be worth picking up a couple of points from it. For example, it says: "Unlike income support, there is no savings test, and the circumstances of other members of the family are not taken into account.

It is reasonable to expect that as a result of the

recently-announced changes in income support, more people will take out mortgage protection insurance. This factor, combined with falling unemployment, should reduce the cost of such insurance . . . There are likely to be very few people who will meet a mortgage lender's eligibility criteria but who will not be eligible for Mortgage Payment Protection insurance."

That is the voice of the organisation that represents the firms that would be responsible for providing the insurance. It believes that the firms can do it, and do it in a comprehensive way-- [Interruption.] The hon. Member for Greenwich may laugh, but there will be a moral, if not legal, obligation on those organisations. Even before they have started to develop policies in intricate detail, they believe that they can meet the objective. I find it slightly sad that Labour's housing spokesman finds that something to giggle at.

We must recognise the limited extent of the Government's proposal. They do not propose the removal of income support for all time, but for a limited period--the first nine months of new mortgages. On an average mortgage of about £33,000 at an interest rate of 8 per cent. the total cost would be £2,000 over nine months. We should see the proposal in context. We have had discussions about how much the premiums should be and whether they should be £150 or £250, which would mean an extra £3 or £5 a week.

We should ask people whether they would rather spend £3 or £5 on a house that is £1,000 or £2,000 more expensive or have an absolutely cast-iron assurance that, if they lost their job or fell into difficult circumstances, they would not lose the roof over their head. The policy offers greater security than has ever been available before.

The hon. Member for Christchurch spoke about the double whammy of people losing their jobs and then losing their houses. If everyone took out mortgage insurance, we could remove that threat, and if a person lost their job, they could be assured that they would not also lose the roof over their head. There are also other exemptions, such as involve people who are over 60. The Government are consulting further as to whether those exemptions should be extended. We must look at the subject in context. We must also ask the building societies to examine the way in which they operate. In the past, they have been too quick to lend people money without taking them aside and saying, "Interest rates may be low at the moment, but if they went up to 12 or 15 per cent. could you afford it?" There should be almost an obligation on building societies to encourage people to think, "Maybe I can afford that mortgage now,

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but if my circumstances changed, if one partner stopped working or lost their job, could we continue to afford the mortgage at a higher rate of interest?".

Not surprisingly, there have been some comments on MIRAS, following the comment of Baroness Thatcher last night. It should perhaps be remembered that the biggest change in mortgage interest tax relief happened in the 1988 Budget, when double mortgage relief was removed. It was not removed overnight; it was phased out. We should recall that that created a tremendous growth in the property market before it dropped overnight. Perhaps the right hon. and noble Lady might care to remember who was in charge of the Administration at that time. She spoke about the level at which interest relief was payable being increased to £30,000, but had it been increased in line with the rate of inflation under her Administration, it would have been £60,000 rather than £30,000.

If home ownership is the way in which people prefer to live, and independent surveys by Shelter and other organisations suggest that 80 per cent. of people want to own their own homes, it seems strange that Government subsidies support the non-preferred systems of housing, such as renting, but are being removed from the preferred system of housing.

There is a good, but not absolutely comprehensive, case for assisting first -time buyers as this is an uniquely favourable time for many of them to enter the market, but we should view any move to extend MIRAS for first- time buyers against the background of falling interest rates. People who buy a house now on an average mortgage will pay £130 a month less than they would have paid in October 1990.

We have heard repeated calls for more money to be ploughed into building 100,000 new houses, or whatever, a year. I am certain that if 100,000 new houses were being built, the Opposition would say that the figure should be 200,000. Whatever the figure, we can be certain that the Opposition will double it.

Mr. Iain Duncan Smith (Chingford): Does my hon. Friend agree that that observation leads on to another problem for us to ponder? We have not managed to free up the rental market enough and, even after the reforms, we have still to do a great deal more to reduce the pressure on the housing market.

Mr. Hendry: I am grateful to my hon. Friend for raising that point. I hope that the Government will move in that direction because the private rented sector has a key part to play in the balance and it needs further development.

The solution should not always be to build moresocial housing. There are about 100,000 empty flatsabove shops. Not only are they a wasted resource,but bringing people back into city and town centresis a socially desirable objective. There are some 780,000 empty properties in Britain. Many of them are owned by local

authorities--predominantly Labour-controlled authorities--but the overwhelming majority are in the private sector. As my hon. Friend the Member for Chingford (Mr. Duncan Smith) suggested, we should encourage those properties back into use.

Mr. Dobson: What about Suffolk Coastal?

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Mr. Hendry: The hon. Member for Holborn and St. Pancras, again from a sedentary position and with his usual charm that so endears him to the people of the country says, "What about Suffolk Coastal?".

The case for Suffolk Coastal is quite remarkable. That local authority has sold off the overwhelming majority of its social housing stock in a large- scale voluntary transfer. It has shown tremendous responsibility by keeping a small number of houses to meet the needs of homelessness in the borough. That is a way forward that many others should follow. A small percentage of residual stock is kept empty to enable the local authority to house homeless people with great speed. I should have thought that the hon. Gentleman would welcome that.

We should also encourage housing associations to feel the exciting and exhilarating wind of competition. I hope that the Government will soon announce that the housing association grants will also be made available to private developers and that money will be recycled to housing associations by extending the right to buy to those who live in housing association properties.

We must also take steps to make the housing waiting lists in local authorities operate better and more efficiently. The Government have already put forward proposals and I hope that it will not be long before they make a firm commitment to them.

As joint chairman of the all-party group on homelessness, there is nothing I want to see more than the scourge of homelessness removed. The Government's proposal, whereby everybody would have mortgage protection insurance, is a key element in that process. It would mean that we could begin to remove once and for all the fear of people who lose their jobs that they may also lose their homes.

It is sad that, once again, in today's debate Labour has shown that where there is a choice between easy popularity and responsible government, easy popularity always wins and responsible government is relegated.

6.57 pm

Mr. Geoffrey Robinson (Coventry, North-West): I must comment straight away on the speech by the hon. Member for High Peak (Mr. Hendry) who, despite his clear knowledge of the subject that we are debating today and the range of interests that he rightly disclosed, would appear to be living in a different country. He talks about letting being at an all-time high, but overlooks the fact that a significant proportion of new rentals are simply transfers within the local government market, and if one removes them from the statistics, the figures are far from the level that he would lead us to believe. The hon. Gentleman talks about the number of repossessions falling, but overlooks the fact that they are still running at more than 50, 000 a year. There are 1,000 a week and the number is rising. If I were on the Conservative Benches, the last thing in the world that I would want to refer to is repossessions. If one walks down the streets in the well-to-do suburbs that many Conservative Members represent, one can see that the "For Sale" signs are going back up. Repossessions are again increasing in number.

The hon. Gentleman talks about negative equity as if the Government had achieved some marvellous success in reducing it. He tells us that there are only 1.25 million home owners whose houses are worth less than the

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mortgage taken out on them. What sort of achievement is that? He did not tell us that it is an enormous number, nor did he mention that it is increasing yet again.

Mr. Hendry indicated dissent .

Mr. Robinson: It is increasing again; repossessions are increasing and negative equity is increasing, and we are confronted with a genuine crisis in the market. The hon. Member for High Peak, as chairman of the all -party homelessness and housing need group, which must be one of the most socially oriented and worthwhile organisations in the House, should be deeply worried about those issues instead of trying to place the best gloss on what is a terrible position for the Government.

However, there is one matter on which I would tend to agree with the hon. Member for High Peak, yet again I must fundamentally disagree with him. I am pleased to see the Secretary of State returning to the Chamber, because I wanted to intervene in his speech about that issue--insurance--earlier. I am grateful that he has returned.

I happen to agree with the Secretary of State and the hon. Member for High Peak that, if we could achieve a comprehensive insurance policy to cover mortgages for those who have taken them out, that would be very worth while. Throughout the House we would agree--it has been said already and it bears repeating--that there are two essential things in the lives of our citizens. One is a job--or jobs, in two-parent families, if they can get them--and the other is a house. If one places the other at risk, it is a dramatic situation. I said earlier, and I say again now that the Secretary of State is back, that the fact that we have approximately 1.25 million people with negative equity, that there are 50,000 repossessions a year and the figure is increasing, and that we have so much homelessness, to which the hon. Member for High Peak--chairman of the all-party homelessness group --referred, shows that there is a major problem. The uncertainty will persist because, whatever the Secretary of State says about Labour Front- Bench Members and our proposals, there are a few precious months before we shall have to declare them as the next Government. It will happen. We shall have to. There is no doubt about that.

However, we are now worried about what the Government will do about that position. The Secretary of State got off lightly earlier because he was able to focus on the narrow issue in the Opposition motion of insurance for mortgages. If he is really telling us that he is confident that, on the back of that remarkable initiative from the Skipton, we shall now have a nationwide--"cast-iron", I think, was the phrase used by the hon. Member for High Peak--insurance policy covering all mortgage holders, I would rejoice with him. It would be a tremendous achievement.

However, the Secretary of State knows as well as I do that subscribing for insurance for mortgage risks is an extremely difficult, if not impossible, proposition, with the best will in the world. I defy any of the big insurance companies to come up with a policy that will work. We know that two thirds of people who have taken out insurance have found, when they came to cash it in, that

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it did not work. Those are the figures that we have. If the Secretary of State wants to correct me, I would be delighted to hear him do so.

Mr. Lilley: It is Department of Employment research.

Mr. Robinson: I know.

Mr. Lilley: Twelve claimants were interviewed.

Mr. Robinson: I have no doubt that, as the Secretary of State is so committed to that issue--it is important and I am with him on it--he will do better research to find out what the true figure is. I shall come to another matter in a moment, because "sophistry" is an in word at the moment and the Secretary of State was indulging in a great deal of it in his speech. However, I challenge the right hon. Gentleman, in his heart of hearts, to give us the terms of the policies that will be underwritten, which will give a cast-iron guarantee to people who have mortgages that, in the event that they lose their job, they will be able to cash in the policies and prevent a repossession. I do not believe that it is possible, and it is a cruel hoax on the people to put it as a realistic proposition. Then the Secretary of State said that the policy would pay for itself--that that would come from the margins because the Skipton building society was offering free insurance to gain a competitive advantage. Correct. He then said, "But of course all the others will follow suit". I say that there is no competitive advantage once the whole market is covered and all mortgage lenders are doing the same thing.

If the Secretary of State, who is the arch apostle of market forces--the one who believes in supply and demand, the profit motive and so on-- believes that, once a pattern of behaviour is established for all providers in a given service, they will continue to do that out of their own margins, he lives in cloud cuckoo land. Obviously, mortgage lenders will pass on the costs. It would be worth doing if it could be done properly, but all it will do, in the meantime, is depress the market further by making the cost of borrowing more expensive.

That brings us to the nub of the Opposition's case--the timing of these perverse proposals. When the market is flat on its back, one does not go on kicking it. When one is in a hole, one does not go on digging. When a company or an industrial sector is in difficulties, one does not clobber it further. That is the golden rule for anyone who wants to handle pragmatically and constructively problems that inevitably arise in various sectors and at various times in the economy.

Instead of doing that, the Government, for a reason that I cannot understand, have chosen to tackle insurance, social service provision for mortgage interest and tax relief on mortgage interest. At the very time when we need measures to revive and sustain the market, the Government have chosen to indulge in those perverse measures to depress it further.

It is equally inane to pretend that no crisis exists. Some figures were mentioned earlier, but we know that sales of existing housing are down. We know that starts on new houses--I heard the figure today--are at an all- time low, lower than since the second world war.

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We know that prices are down. The Halifax building society's figures say that they are 1 per cent. down on a year ago, and 10 to 15 per cent. down on a few years ago. There are 1 million people in negative equity and the number is increasing.

The construction industry is the next example that I give the House. I read today, sadly, in the "Companies & Markets" section of the Financial Times , that a major provincial house builder had issued a profit warning. The chief executive said that the company was being clobbered because it was the first house builder to announce a profits warning, and that the company felt it right that it should let its shareholders know the way things stood. However, he says--it is clearly quoted in the Financial Times --that the company is only the first in a series of similar companies in the house building industry that will announce severe profit warnings. If that does not amount to a crisis, I do not know what does. Moreover, we all know it. I do not want to indulge in describing the problems that we have in Coventry, but it is simply incorrect that in Coventry, the private sector is replacing the houses that the public sector no longer builds--to take another argument from the speech of the hon. Member for High Peak. The private sector is not nearly replacing what we have lost from the public sector's building programme.

We are in crisis, and we need remedial action from the Government. It is no good trying, as the Secretary of State, perhaps smugly, has done today, to sneak out of the debate on the narrow issue of insurance and to say, "We shall now have a nationwide programme put in place to deal with that"-- first, because he knows that, in all probability, it will not work and, secondly, because he knows that, in itself, it will not be remotely enough to solve the major problem in the housing market.

It is not for me necessarily to say what I think should be done, but the Government could do two things. Obviously, I do not speak for Labour Front- Bench Members, but I wish not to speak to them or for them. I want to speak to the Government and persuade the Government to do something; they are the people who can do it. They are the people who suffer most from the instability in the market. They are the people who suffer most from the pervading sense of insecurity that the job position is creating, which now also permeates the housing market.

The Government could do two things, one of which is Labour policy. They could allow a phased release of the housing capital receipts in the possession of local authorities, to be spent on affordable rented accommodation. If the Government were not ideologically blinkered against that, they would realise that it is the obvious thing to do. The resources are there. That is within the borrowing requirement already as they are capital receipts. I know that it can be argued within the Treasury and within Departments whether we need to increase the public sector borrowing requirement. In my opinion, it need not be treated in that way.

The second thing that the Government could do--which would, in all probability, involve a further increase in borrowing and in the PSBR--would be to help first-time buyers. That proposal has been made from the Government Back Benches and it merits Government consideration. The alternative is to sit the whole thing out and say, "It will get better; we do not have to worry. If we simply sit back, the thing will recover in the normal

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course of events." No doubt it will. Perhaps it will. But how many more people will have their homes unnecessarily repossessed as a result of that laid-back attitude?

I am sure that every Conservative Member would have a different attitude if it were their house, their mother's house or a family house that was going to be repossessed. Let us think about it for a second in that context. If it was so, Conservative Members would have a totally different attitude.

One might sit back and say, "Let's leave it to the market," but how many more people do we needlessly have to put through that hoop, and how much longer do many people who need housing have to wait, simply because the Government believe that the market will right itself in the fulness of time? I will be second to no one in subscribing to the usefulness of market forces. But the point of government is to reinforce market forces and to make them work effectively through Government action when it is required. I put it to the Secretary of State that it is one of those occasions in the market at this time. If he could get beyond his narrow ideological focus and come closer to the real human suffering involved, I believe that he would take action to deal with the problem.

7.9 pm

Mr. George Walden (Buckingham): Having listened to some of the contributions to the debate, I am reminded of how difficult it is becoming to discuss a whole series of absolutely fundamental subjects openly and frankly in this place. For example, hon. Members on both sides of the House know that the social security budget cannot continue at anything like its present level. Yet neither Front Bench can address openly the question of radical cuts--although I pay tribute to my right hon. Friend the Secretary of State for Social Security, who has made some suggestions in that regard.

Hon. Members on both sides of the House know that we cannot continue indefinitely spending more and more on the national health service, yet we must all pretend that we can. Hon. Members on both sides of the House have known for years that mortgage tax relief is indiscriminate, expensive, wasteful and inflationary, and that it militates against the private rented sector and distorts the entire economy. Yet no one can say that outright.

The speech by the hon. Member for Glasgow, Garscadden (Mr. Dewar) was notable for a certain shiftiness--uncharacteristic in a man who is so upright as to be elongated--on the question of mortgage tax relief. It is a sterile sort of debate when no one is able to tell the truth for fear that someone out there may be listening. The reason for that collective reticence is simple: we are all afraid of making the insecure middle classes feel even more insecure. I somehow doubt that it makes them feel better to know that their elected representatives are avoiding the issue.

The debate in the media and in the pubs is really about whether the Government should take action to inflate house prices artificially. If we cut through much of the debate on both sides of the House, we shall find that that is what we are discussing today. One does not have to be a genius to understand the politics of the matter: people quite like it when they are given money for nothing. The more owner-occupiers there are, the easier it is for us to

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ingratiate ourselves to 70 per cent. of the country at a stroke by giving them money for nothing. Who does not feel a secret gratification when told that his or her main capital asset is worth more than it really is?

The trouble is that we can fool the public only some of the time. We are having this debate today because the housing market became a farce in the late 1980s. The farce then became a circus and the circus became a pantomime, and many people who were assured at the time that they would enjoy the pantomime are now running to us in tears. For a few years the British public were led to believe that every Englishman's home was worth the price of a castle, or at least the price of a gatehouse from which one could hope one day to graduate to the castle. It was a cruel illusion.

It is convenient for us to pretend today that that situation resulted entirely from artificially low interest rates due to shadowing the deutschmark. It is very easy for us to shuffle all our problems, in one form or another, on to the exchange rate mechanism. The truth is far less comforting--particularly for my party, I am sorry to say. The truth is that the last Administration wilfully, wrongheadedly and irresponsibly encouraged people to believe the myth that home ownership of itself brings economic security and unearned financial gains.

Let us go to the root of the matter in so far as my party is concerned. The slogan "a home-owning democracy" is as appealing as motherhood, but unlike motherhood it is not a primary necessity for civilisation. The phrase is a logical nonsense; even worse, it is a dangerous nonsense in terms of modern Conservative philosophy. Of course, no one can oppose home ownership--it is a measure of where we have come to that it is necessary to spell that out. If we accept the idea that we can have a real democracy only when people own their own homes, we are back in the 19th century pre-reform days. If a real democracy can exist only when people own their own homes, the United States, with its high levels of rented accommodation, cannot be much of a democracy. So we are talking absurdities when we use the phrase "a home- owning democracy".

The modern Conservative party is supposed to be about choice and responsibility--that is how I understand it, but perhaps I am mistaken. People must decide themselves whether they want to own their own homes and how they should invest their savings or capital. It is for them to decide whether they should rent instead. A combination of Labour's bigotry against landlords and the tax privileges that we hand out to home owners has resulted in a scandalously overdeveloped private rented market. In that sense, we have deprived people of choice. Instead, we have fed them with illusion. That is a fundamental reason why they are so angry with the Government now.

At the heart of the whole dismal business lies a contradiction in our political thinking. It is summed up in two conflicting political slogans. The first is, "Get on your bike," which I think makes excellent sense in an international as well as a national context; and the second slogan is, "Get on the housing ladder," which is a cruel and a cynical nonsense. However one dresses it up, the Government of the day tipped the public the wink that buying a house was a sure-fire investment underwritten by Government subsidies and guarantees.

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For that reason, it is absurd to say--I was sorry to hear my right hon. Friend the Secretary of State say it on the "Today" programme this morning--that 80 per cent. of people want to own their own homes. Of course they will say that if one asks them. If one asks them whether they want bigger houses than the ones they own at present, they will probably say yes to that as well. It has been dinned into them that home ownership is the only route to financial security. And behind it all is the secret hope that, who knows, one day we could all clamber back on the house-price carousel and set the whole unstable machine spinning again.

It is not merely a question of economic policy or the ups and downs of the housing market; it is a question of the relationship between Governments and the electorate. Do we want to treat the public as economic morons? Do we want to lead them into financial extravagance and irresponsibility by encouraging them to believe that their future can be based securely on inflated and publicly subsidised house prices?

So much for the inglorious past; we start from where we are, which is in a deep black hole. Climbing out of the hole is the easiest thing in the world: all one has to do is rig up some rescue package involving the rate or amount of mortgage tax relief or to devise some scheme designed to help first-time home buyers. I was sorry to hear my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) advance just such a proposal. Most of such schemes--I mean no offence to my right hon. Friend or to any other hon. Members on either side of the House who have advocated them--are of dubious economic honesty. I say that because, consciously or unconsciously, we all know perfectly well that the effect of those schemes will be to provide an artificial stimulus to the housing market, which will result in rising prices.

If we were to do what some hon. Members on both sides of the House have suggested, the result would be higher prices--perhaps just at the margin, we must not exaggerate; but higher prices nevertheless. My right hon. Friend thought that knock-on effects of that kind would prove positive. But what would really happen? Higher house prices would feed through into higher mortgages in a country where mortgage debt is wholly disproportionate to individual earnings and to our national wealth. That, in turn, would increase pressure for higher wages and that, in turn, would impact on inflation and competition. Macro-economically, the effect would be to divert funds from investment in the productive economy into sterile bricks and mortar. The policy of the present Administration to date seems to me to have been highly responsible. They have trimmed back the inflation -producing machine of mortgage tax relief and stressed that they have no wish for a housing boom. They have begun shifting the burden for insuring mortgages to where it belongs. I am entirely behind my right hon. Friend the Secretary of State on that and he deserves personal credit, all the more so because it is naturally unpopular to have to tell people that they must take responsibility for their own actions. There has been, I am glad to say, some easing up on the use of the infantile slogan of "a home-owning democracy", although it still crops up from time to time.

We are now told that the country cannot take the medicine and that because some people are caught in negative equity, the solution must be to give the whole damn shooting match a boost. I understand that the

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