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Mr. Derek Twigg: On the issue of hurting home owners, would the hon. Gentleman care to comment on the hundreds of thousands of people who suffered negative equity and the hundreds of thousands of people who lost their homes under the previous Government? Whose fault does he think that was?

Mr. Deputy Speaker: Order. We are starting to stray from the amendment, which is about the MIRAS scheme and not about repossession.

Mr. Woodward: I am grateful, Mr. Deputy Speaker.

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It is important for members of the Treasury team to sit down and consider whether abrogating responsibility for operational control of interest rates is a good or bad idea at a moment like this. I have already explained the relevance of the clause to the interest rate rises. The truth is that interest rates will continue to rise in the next few months. Of course, this weekend some excellent advice was given by the general secretary of the GMB, whose knowledge of economic practices is exceptional. He advised on GMTV that the pound should be linked to the Italian lira because the markets might then think that the pound is not so strong. That is quite right, but unfortunately it has always been the practice of those on the Conservative Benches to be cautious of taking advice from that gentleman.

The truth is that interest rates are the means by which people in this country can be hurt because, for most, the biggest expenditure of their lives is the purchase of their home. The proposal to cut MIRAS will hurt those people at a time when some are still recovering from a prolonged and difficult recession. The hon. Member for Halton may not have noticed that that recession occurred the world over and hit people in every western economy.

Mr. Derek Twigg: What about black Wednesday?

Mr. Woodward: I will not comment on that, because I suspect that you, Mr. Deputy Speaker, would immediately rule that it was out of order and not relevant to the amendment.

The hon. Gentleman must recognise that people do not understand the rationale behind the Government's decision. They need an explanation of whether the reduction in MIRAS is part of a policy to axe it. Home owners want the answer to that question.

The Financial Secretary has made much in her speeches about the need for certainty and people's need to be able to plan. If one is making the biggest purchase of one's life, which represents the most important commitment that any family will make, one has a right to plan and a right to certainty. I do not understand whether the proposed reduction is part of a plan to abolish MIRAS. We have been offered no clear rationale for the Government's decision.

Today, it has been said that the Government will look at the business of buying and selling houses. A cross-departmental review of house-selling practices will lead to legislation to regulate what has been described by hon. Members as the buoyant housing market. The Government will compile case studies of individual buyers and sellers. I dare say that the Savorets of Islington will provide a useful case study for the Government to examine. When they finish looking at that case, they will appreciate that those people were lucky enough to benefit from being able to buy a house worth £625,000 in Islington. The blunt truth is that the phased reduction of mortgage interest relief will not greatly affect those who are able to afford to spend hundreds of thousands of pounds on a house.

For those trying to buy their first home, costing between £30,000 and £50,000, MIRAS makes the crucial difference--the difference between being able to buy a house or staying in rented accommodation. I am aware that, until quite recently, it was Labour policy to prevent people from buying their own homes.

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Apparently, that conviction was easily shed so that the Labour party could get into power. Now we search for the Government's new rationale towards home ownership. Is it something that they will encourage or punish people for?

In the interests of clarity and honesty, I would greatly welcome hearing from the Financial Secretary whether the MIRAS reduction is a one-off or part of a policy to phase it out at source. When can the 10.5 million home owners expect that policy to be effected and completed?

Dawn Primarolo: The Conservative Government cut mortgage interest relief six times--on a number of occasions when interest rates were rising. I do not recall hearing Conservative Members voice their concern for those who then found themselves in negative equity or who lost their homes because of the housing boom. I remind those hon. Members that, even with the recent increases in interest rates and allowing for the reduction in mortgage interest relief, payments on a typical mortgage of £50,000 are still £250 a month less than they were when the Conservative Government presided over the boom and peak in interest rates.

Every hon. Member knows that those who own their own homes, or aspire to do so, are haunted by the prospect of a housing boom and the negative equity and the repossessions that go with that. The Government's measures on mortgage interest relief have been welcomed by the Council of Mortgage Lenders, which described the Budget package as prudent, and by the Halifax building society, which said that the measures would allow steady growth in the housing market. The difference is that, according to the Halifax index, house prices in the three months to June were up 2.1 per cent. on the previous three months and up 6.8 per cent. on a year earlier. Most commentators expect that there will be similar rises in the next year. Although those rises will be uneven, they will be spread across all the regions.

The measures proposed by the Government on mortgage interest relief and stamp duty will apply a gentle brake on the housing market. They are also designed to provide it with some stability to avoid the boom over which the Conservative Government presided, with all the misery that went with it.

Mr. Clifton-Brown: The hon. Lady says that her Government have the monopoly on the care of those in negative equity. Surely every interest rate rise makes it all the more difficult for those in negative equity to earn their way out of it. The combined effect of the four interest rate rises since the election and the proposed reduction in MIRAS will make it even more difficult for those in negative equity to get out of it.

Dawn Primarolo: I would not suggest for a moment that Labour Members are the only ones with a monopoly on care for those on low incomes. I was pointing out that, in government, Conservative Members were less vocal and their actions did not follow the prescriptions that they are now recommending to the Government. I am sure that the hon. Gentleman would agree that it is necessary to act on the housing market before matters get out of hand instead of waiting until they are completely out of control and then standing by, wringing our hands and saying how sorry we are.

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I accept that the impact of the MIRAS reduction will hit low-income families, but their mortgages tend to be low, so the impact will not be as great for them. It is essential for those families to have the security of the knowledge that there will not be a runaway housing market because the Government are taking prudent measures to ensure that that does not happen.

Mr. Woodward: The hon. Lady has yet again made much of security and certainty. Would she care to explain to hon. Members how tax changes, in particular the four increases in interest rates in three months, will add to people's sense of security and certainty?

Dawn Primarolo: The increases in interest rates are a result of the mess that the previous Government left us to clear up. The previous Government did not take the advice that they were given before the general election, so it is necessary to act now. The electorate can rest assured in the knowledge that the Labour Government will take the difficult decisions to ensure economic stability.

Amendment No. 27, which would delay implementation of the MIRAS cut, is ridiculous. As we have said, it is necessary to try to dampen down the housing market to protect those in the market and to ensure that those who aspire to home ownership can do so on terms that they can afford, in the knowledge that the market is slowing down.

7.30 pm

Conservative Members make their proposals from the security of the Opposition Benches, not the reality of dealing with the economic circumstances. The Government will not shrink from taking the difficult decisions to protect stability, especially in housing. I recommend that the House votes against the amendments and supports the Government in their strategy.

Mr. Heathcoat-Amory: These debates are settling into a familiar pattern: we ask the questions and the Financial Secretary cannot or will not answer them. However, it is not an entirely fruitless exercise because, from her silence and her failure to answer our points, we have established beyond dispute some important facts.

First, clause 15 is a major breach of the tax pledges that Labour made at the time of the general election. Secondly, we have established that the measure is regressive. It hits the poorest 10 per cent. of people in the country more than the richest 10 per cent. Thirdly, the measure fails to deal with the supposed housing boom--if that was the intention--because it does not come into effect until 6 April 1998. Fourthly, it is simply a crude, tax-raising measure. It will net the Treasury nearly £1 billion a year extra and it will do so at a time when interest rates are and will be rising strongly.

So borrowers, all 10 million of them, will be hit twice--by the increase in their mortgage contributions and by the withdrawal of, or further limitation of, tax relief. Above all--

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