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Mr. Geraint Davies: Does the hon. Gentleman recall that, in 1995, the then Government cut MIRAS twice, during a period in which interest rates were going up and there was a good deal of negative equity, along with a good many repossessions? That continued, albeit to a lesser extent, into 1996, when the present Prime Minister made his comments. In that context, the decision was wrong; but, at a time when the economy is overheating, and when greater consumer buoyancy and confidence are reflected in the markets, is not the change in MIRAS right and consistent?
Mr. Quentin Davies: The hon. Gentleman clearly did not listen to the intervention of my hon. Friend the Member for Witney, who knows a good deal about the subject. He has pointed out that at the relevant time, in 1995--and the same has been the case for some years--negative equity was falling. It has fallen to a remarkable extent, year on year. The hon. Gentleman's argument collapses when confronted with reality, as so many Labour arguments have appeared to do during today's debate.
Let me return to the central principles that underlie so much of this ill-thought-through Budget. As I have said, this issue raises major questions about the Government's
competence and the appropriateness of the Budget as a whole. It also poses an enormous question mark--one which should greatly embarrass the Government--over their straightforwardness with the electorate. Is it possible to listen to Labour Ministers' public statements, to take them seriously and to think that they will be reflected in the Labour Government's actions in a few months or, indeed, a few weeks?
The answer, clearly--and sadly for the reputation for integrity of politics in this country--is no. My hon. Friend the Member for Witney has a whole list of quotations from the last few months, which make it plain that the electorate were misled by the Labour party, when it was in opposition, about what the party proposed to do in a number of respects, but specifically about MIRAS. We must all feel sad about that. I hope that members of the Labour party, and specifically its representatives in the House--Front Benchers and Back Benchers alike--feel a degree of embarrassment and sadness, because that is the appropriate response to a measure of this kind.
Before I became a Member of Parliament, I used to earn my living in the City. Serious penalties were imposed on anyone who, for example, engaged in a capital-raising exercise--floating a company, or raising a rights or debt issue--and made misleading statements about his or her long-term intentions with regard to the management of the business, the use of the money to be raised or the factors that were likely to have an impact on the company's profitability or its ability to service the loan. Those were serious matters. Had any statements been made in previous months or years that needed to be corrected, they would have had to be corrected explicitly in the prospectus, so that potential investors reading it were not deceived about the true intentions or views of those who were asking for their money. That principle is taken very seriously in the financial markets, and thank goodness it is.
Mr. Geraint Davies:
Will the hon. Gentleman give way?
Mr. Quentin Davies:
I hope that the hon. Gentleman will forgive me if I do not. I want to end my speech. I am sure that the hon. Gentleman will have every opportunity to catch your eye, Mr. Deputy Speaker, although the Labour Government have unfortunately left us with far too little time to consider clause 15 or any other clause. I do not think that I can be blamed for that, however much else I may be blamed for.
The discipline to which I have referred--ensuring that responsible people do not deceive those whom they ask for support--does not seem to be observed in the Labour party. The Labour party came to the electorate during the campaign, made a good many criticisms of the Conservative Government--from which certain Labour policy priorities could be inferred--and made a number of commitments. It is clear that its commitments not to raise taxes were not observed, and that the inferences that might reasonably be drawn from its criticisms of the Conservative Government were wrongly drawn by the electorate. All the speeches and comments quoted by my hon. Friend the Member for Witney, which imply that Labour was opposed to Conservative progressive reductions in MIRAS, were fundamentally deceptive. Labour was not opposed to those reductions at all; indeed, it clearly intended to reduce MIRAS as soon as it came to power.
I leave the final question to the Financial Secretary, who I assume will sum up the debate shortly. Do the Labour Government intend to abolish MIRAS altogether? There may be sound reasons for doing so, as long as such action is based on clear principles. If the Financial Secretary has that intention, will she now--belatedly, perhaps--be straightforward enough to tell the House and the country so? Will she say whether this is just the first tranche, and whether the intention is to get rid of MIRAS altogether in a year or two? Then we shall all know where we are, and it will be not only a victory for honesty in the Government but a great advantage for householders. Those who borrow by means of a mortgage, or intend to do so, will know where they stand. They will be able to make their family commitments without the fear that their assumptions will be undercut by yet another unannounced and unexplained U-turn by the Labour Government.
Dr. Vincent Cable (Twickenham):
The Liberal Democrats have supported Conservative amendments to Finance Bills on their technical merits on a good many occasions. There have been many such amendments, but this is not one.
I listened with interest to the hon. Member for Grantham and Stamford (Mr. Davies) who, in his introductory remarks and his conclusion, made a cogent case for the phasing out of mortgage interest tax relief. There has been a broad consensus across all the parties that that should be done on its economic merits. The previous Government introduced the gradual erosion of the benefits of that tax relief, partly by cutting the rate from 25 to 15 per cent. and, more gradually, but equally effectively, by freezing the nominal rate at which interest was allowable. In real terms, with inflation, the benefits were gradually reduced. There were good reasons why that should have happened and why there should have been a consensus in the House that the phasing-out process should continue. The hon. Member for Grantham and Stamford made those points.
MIRAS is a distortion in the market in favour of purchase and against both private and social renting. Moreover, it encourages house purchasers to treat their homes not simply as homes but as speculative assets. We recognise the political difficulties of dealing with the problem suddenly, dramatically and painfully, which is why we have all accepted a gradual phase-out. The Government are continuing that process and they should be encouraged to do so.
The only contrary argument that could hold water is that this is a particularly bad time to phase out the relief. Actually, it is a good time because although interest rates
are rising, they are relatively low, certainly in terms of what they were at the peak of the cycle. If there is a good time to do it, this is it.
Moreover, as has been argued, the housing market is becoming overheated. As several hon. Members have said, that is an uneven process. The market is not a general, undifferentiated whole--bits of it are still depressed. As a general trend, however, that has to be dealt with and it is appropriate that it should be dealt with by, for example, the stamp duty measure.
In addition, we are dealing with a broader economic context in that, as we have urged Labour Members to accept, there is a general overheating of the economy. The measure will take some consumer spending out of the economy. In our view, it will not be enough, which is why crucial public services are having to bear so much of the burden. If the measure were not enacted and consumer spending were not reduced in this way, the Bank of England committee that now looks at monetary policy would be forced to raise interest rates by even more than it will probably raise them within the next month or so, inflicting even greater hardship on manufacturing industry. We believe that that should be accommodated within the household sector, not by industry.
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