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Mr. Desmond Swayne (New Forest, West): This MIRAS--this market-distorting tax relief--was designed precisely to encourage greater home ownership because of the socially responsible attitudes that went with that. In that respect, MIRAS has been remarkably successful. Throughout the period in which the subsidy has been available, home ownership has grown remarkably. So what has changed? Are we no longer willing to support that subsidy? Do we no longer want to encourage people to own their homes?

In Committee, I found it extraordinary that Labour Members suddenly began to announce that they had always favoured the abolition of the relief in its entirety. When they were challenged on whether they had shared their enthusiasm with their electorate in their election addresses, the retort was that there was simply not enough space available in which to do so.

Moving on to all the talk about the housing market, there is no housing market--there are a number of discrete markets that operate quite differently. As we have heard, there is still a severe problem at the bottom end of the market and these measures will most severely affect those living in that end of the market and trying to sell

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their homes or pay their mortgages. The £10 or so a month that it will cost the average mortgage payer is significant for precisely those people who are struggling and have to meet the extra £20 or so consequent on the increases in interest rates that have already taken place. The Prime Minister, as Leader of the Opposition, was reassuring the people who have such difficulties when he said at the back end of last year:

    "We have no intention of raising taxes at all."

They were reassured and they are the people for whom Labour used to speak. It is precisely those people on whom these measures will have the greatest and most adverse effect.

Mr. Howard Flight (Arundel and South Downs): The crucial point is that, just three months ago, the Labour party presented the electorate with the proposal that the ordinary person would not suffer an increase in taxation. This measure is an increase in taxation of £100 a year and it will particularly affect the ordinary young family. It comes at the wrong time. Interest rates may be low in nominal terms, but they are high in real terms and about to go higher. That £100 a year will become £250 with the rise in interest rates.

The most important argument is this: when the previous Conservative Government reduced MIRAS, the reduction was mainly progressive. As tax allowability came down to 20 per cent., only the better off suffered. For people paying a 20 per cent. rate of tax, the reduction was entirely neutral. As has been pointed out, the reduction becomes acutely regressive as one goes below 20 per cent. I would have preferred us not to cut the relief from 20 to 15 per cent. when we were in government.

Now, the boot is being put in on two fronts--higher interest rates and MIRAS--for less well-off, ordinary young families. Many of those are the very people who suffered negative equity. As my hon. Friends have said, frequently it is at the bottom end of the market that house prices have not recovered. There are huge regional differences. We have heard all this talk of housing boom, but, in general, the housing market has not recovered from the crash of the past eight years.

The Labour Government propose to hit many young families because of the illusion that they are part of some economic machine of a housing boom that does not exist for them because they have only just recovered from negative equity.

My hon. Friend the Member for New Forest, West (Mr. Swayne) asked the equally important question: do we wish to discourage home ownership? Going back the days of more generous interest relief on mortgages, the whole point of doing that was to encourage home ownership and the sense of social responsibility that went with it. What is left of that tax encouragement is pretty small, but it is relevant, not to the better-off, but to the less well-off and their families.

The measure is just a cynical way of raising nearly £1 billion in tax and it comes at the wrong time. To impose it, not two or three years, but only three months, after the Government won an election in which ordinary people were made to believe that their taxes would not go up is wrong. The Labour party will pay at the next election for proceeding with this misguided increase in the taxation of ordinary people.

Mr. Woodward: I find myself at a loss to understand the point of clause 15. I am struck by the inconsistency

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in the Government's argument throughout much of the Bill; it is encapsulated in the hypocrisy and lack of consistency in clause 15. I and my constituents in Witney want to ask: why introduce this phasing out now and what its real significance? Is it a way of saying to people that the Government are going to phase out MIRAS altogether? If so, why have the Government not had the courage to say so or even to carry it through now?

I find myself wondering about the rationale behind the reduction and I should be grateful if the Financial Secretary explained that rationale to the House. What is the purpose of taking this action now? Is it part of a phasing out of mortgage interest relief at source for home owners throughout the country?

The onus is on the Government to own up, because the measure was not contained in their manifesto. In the manifesto, we read lots of wonderful glossy promises accompanied by lots of wonderful glossy pictures, but we see little mention of tax increases, yet the reduction in MIRAS is a tax increase. Labour promised to include in its manifesto all its intended tax increases: this measure was not in the manifesto, yet, within two months of Labour coming to power, in it comes. The reduction in MIRAS is a significant tax increase because it will hit something in the order of 10.5 million home owners. It will also hit many of those who are thinking of buying a home for the first time. About 400,000 people bought a home for the first time in 1995-96 and I remember that, when I bought my first home in 1983, MIRAS was a helpful tool for someone like me, who did not have any money or a financial background to rely on. It was a way of helping people like me to buy their own home.

I firmly agree with my hon. Friends, especially my hon. Friend the Member for New Forest, West, that MIRAS was introduced to encourage home ownership. We have endured a difficult period of negative equity, although I have to correct the hon. Member for Croydon, Central (Mr. Davies) by pointing out that the heights of negative equity were reached in 1992-93 and had dramatically changed by 1995-96.

Mr. Derek Twigg (Halton): If the hon. Gentleman believes that MIRAS was brought in to encourage home ownership, why did the Conservative Government--his Government--cut it twice?

7.15 pm

Mr. Woodward: My point concerns the inconsistency and hypocrisy of the current Government's case. On another occasion, I should be more than happy to explain at length my views on reducing mortgage interest relief at source within a clear policy. I do not understand the Labour Government's rationale and I am seeking an explanation. In case the hon. Gentleman has not realised, he is now in government--he has to provide the answers for the 10.5 million people up and down the United Kingdom who will be affected by the change. It is terribly important that the Government understand that there is a limited period during which they can simply apportion blame to the Conservatives. The hon. Member for Halton (Mr. Twigg) needs to become accustomed to the idea that Labour Members must now explain why their Government introduce hypocritical measures.

Mr. Clifton-Brown: The thrust of my hon. Friend's speech is that the reduction in the rate of MIRAS will

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affect those at the bottom end of the housing market, especially first-time buyers. Surely it was right to restrict the relief to basic rate taxpayers, as we did. We took it away from those paying the top rate of tax, but left it for basic rate taxpayers. Does my hon. Friend agree that the reduction of the relief will force younger people to save for a longer period before making their first home purchase?

Mr. Woodward: My hon. Friend makes a series of important points and the hon. Member for Halton would do well to pay attention. The Chancellor said that he intended to dampen the housing boom--he was obviously aware of the boom in the south-east. However, I am conscious of the fact that the housing boom and changes in housing policy are occurring all over the United Kingdom and it is my view--I should be interested in hearing whether Treasury Ministers share that view--that we should know exactly what the impact of the reduction in MIRAS will be on people living outside the south-east. What will the impact be on people living in the north of England or in Scotland? What will the impact be on those living in houses at the bottom end of the market--the poorest people to have made the decision, which I firmly support, to buy their own home?

I am at a loss to reconcile the Government's action with the Chancellor's statement that:

If the recovery is indeed at risk, that is not because of changes in the MIRAS rates, but because of what is happening to the value of the pound. The Chancellor will declare that it is not his decision to raise interest rates, but the House will not forget the day the Chancellor gifted operational control of interest rates to the Bank of England, without even so much as a reference to the House until after doing so.

In future years, it will be all very well for the Chancellor to say, "It was not my fault", but it will be his fault, because it was his decision to give away operational control of interest rates and it is the level of interest rates that hurts home owners. As we are about to witness the fourth rise in interest rates in barely more than eight weeks since the Labour Government came to power, home owners will be hurt twice by the measure before us. For those who live in the north of England, Scotland and elsewhere in the United Kingdom, the measure is a cruel one, which will greatly damage those who bought their own home.

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