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Mr. Brooke: Does my hon. Friend remember likewise that that speech was foreshadowed as a major statement of Labour housing policy?
Mr. Green: Indeed I do. That makes the behaviour of the Labour Government all the more disreputable, because almost their first act relating to the housing market reneges on that commitment.
The second argument that we have heard from Labour Members is that somehow the measure is designed to cool down an overheating housing market. We heard that argument most eloquently from the hon. Member for Workington (Mr. Campbell-Savours). There are several reasons why that argument does not hold water.
The first and most obvious is that the Government do not intend to introduce the measure now, but from the spring of next year. If they really believe that the housing market is overheating now, they should introduce a measure to control it now. They should not introduce measures that will be enacted in practically a year's time.
I thought that the country had learnt that classic lesson about fiscal policy in the 1960s and 1970s. Attempts to use it to fine-tune the economy when it is either overheating or cooling down always go wrong, because the timing is always wrong. That truism has been accepted by the authors of all economic textbooks, and it seems to have reached people in every part of the country except those on the Treasury Bench. What they propose is not an effective means of cooling down a housing market that may or may not be overheating.
Even if the Government thought that such a measure was effective, they should look at the facts produced by those who know about the housing market. The Halifax, which constructs possibly the largest house price index, made it clear in its June report that that month's figures support its view that the housing market is recovering slowly and not at the pace that some commentators would suggest. There has been no growth in transactions between April and May, so it said before the Budget:
Thirdly, I want to pick up a point made by the hon. Member for Dudley, North (Mr. Cranston) about the impact on the property market, especially households with low incomes. As the hon. Gentleman said, the Council of Mortgage Lenders has pronounced on the matter, but it said the very opposite of the impression that the hon. Gentleman gave us:
Mr. Cranston:
Admittedly, the effect of the tax is now more progressive--but purely by accident. Hence my suggestion that ultimately a more targeted benefit ought to be considered by the Government.
Mr. Green:
I shall deal later with targeted benefits. Whether by accident or design, I am glad that the hon. Gentleman admits that it is now a targeted benefit. It helps home ownership, which is a good thing; and at the moment it particularly helps home owners on relatively low incomes. That seems to me an ideal subsidy.
The CML goes on to make the point that previous cuts in mortgage tax relief took place against a background of rapidly falling interest rates, and that the move proposed by the Government will mean an increase of 1.25 per cent. in mortgage rates for lower-income households. The hon. Member for Dudley, North quoted the deputy director general of the CML, Peter Williams. What he said in full was:
Mr. Green:
When the housing recession occurred, the Conservative Government put in place a rescue package for those who were in trouble. This Government are hitting householders in two ways: cutting mortgage tax relief, and steering an economic course that has made interest rates go up. The Government are walking into another housing crisis. Because their spending priorities lie elsewhere, unlike the previous Government in the early
There are some who agree with the hon. Member for Dudley, North that there should be changes. Some groups are not instinctively in favour of home ownership and have argued for different types of housing subsidy. Even they, however, are not in favour of the measure. The Shelter briefing on the 1997 Budget says:
Shelter states:
We can see the outlines of the effect of the measure if the Government do not accept our amendment and proceed with their original policy. There will be continuing uncertainty in the housing market, which will inevitably spill over into the wider economy. Labour Members have repeatedly said that they want a climate of certainty. No home owner and no prospective home owner can be certain about the housing market because of the Government's actions.
Contrary to all their words and propaganda before the election, the Government's first action is to cut mortgage tax relief. They will give no guarantee that they wish to preserve mortgage tax relief through this Parliament, and are being urged by their Back Benchers to get rid of it. That is a recipe for uncertainty, and will damage the housing market for years to come.
The Government are making mortgage tax relief less and less of a cushion for home owners when interest rates rise, as they are doing. As the financial markets have become increasingly uncertain about the Government's grip on the economy, they have put up interest rates--those interest rate rises are likely to go further. Home owners have every right to be uncertain and prospective home owners are even less likely to want to enter the market, which will create a spiral of decline.
The motivation behind the measure is clear: it is the Labour party's underlying hostility to home ownership and home owners. The measure is a traditional Labour measure. The Labour party does not like home ownership; its members regard it as a Conservative ideal, which it is. It gives people a direct, individual stake in society. It is one of the cornerstones of Conservative philosophy, and has always been opposed by the Labour party.
The Budget proves that, whatever weasel words were spoken before the general election, one of the Government's first acts on taking power has been to
damage home owners and the housing market. Many millions of home owners will feel betrayed by the Government, the Budget and this particular measure.
Mr. Jim Murphy:
I am grateful for this opportunity to speak in the debate. I shall attempt to be brief--a lesson that I am learning from listening to the less than factual contributions of many Conservative Members.
I welcome the broad thrust of the Finance Bill. Having listened to this debate for many hours this evening, I welcome the fact that the guillotine has been used. If Labour Members had to sit and listen to even more of the sort of contributions made by the last three or four Conservative Members to speak, they would jeopardise many of their sensibilities.
We are discussing a 23-word amendment. At different times during the debate, there have been anything between six and, at the current top rate--I have obviously brought the crowds in--nine Conservative Members in the Chamber. Although we are not having an education debate, I calculate that the figures show that we have had between two and a half and three and a half words per Conservative Member. I have been advised that, at some points, the Opposition Front Bench has been empty.
"there is no need for any specific Budget measure aimed at curbing an allegedly 'booming' housing market . . . Prices paid by first-time buyers fell by 0.6 per cent. in June and is the first monthly fall since January."
So not only will this measure fail to cool an overheating housing market, but according to our best evidence the housing market is not overheating anyway. So the idea is both ill conceived and unnecessary.
"The restrictions imposed on mortgage tax relief in recent years mean that now it is a better source of targeted help to households on low incomes. Nearly 5 million home buyers, about half the total number of home owners who are in receipt of mortgage tax relief, have incomes of less than £20,000."
They will be the very people hit hardest by the measure, which will mean more to those on relatively low incomes.
"The Government should understand that further cuts in mortgage tax relief do not represent a zero-cost option. Ill considered action on mortgage tax relief based on short-term expediency of releasing funds for other programme priorities is likely to damage home owners and the housing market indiscriminately."
Mr. Stevenson:
I want, first, to reassure the hon. Gentleman that, although his Front Benchers are not listening to him--they have been absent for 20 minutes--we are. Secondly, as regards the housing policy credibility of our respective parties, will he remind the Committee which Government presided over the worst ever crisis in housing and home ownership? It resulted in 1,000 repossessions a week, and has continued from the late 1980s to this day.
"The announced cut in MIRAS will hit the poorest owner-occupiers hardest".
That is hardly a piece of central office propaganda. When a Labour Government introduce a measure that alienates millions of home owners and Shelter at the same time, they should realise that they are on the wrong tack.
"For those on low incomes, a monthly increase in mortgage payments of around £10 per week will be critical to their budget . . . Reductions in the level of MIRAS ought to be redirected into a mortgage benefit or mortgage security scheme."
The Government have given us the worst of all worlds. They are hitting the home owner, while not doing anything that might meet the demands of those who misguidedly think that a specific and more targeted form of tax relief for certain classes of home owner would be more effective.
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