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First, the falls in US housing prices are being driven by a very large overhang of unsold houses. Here in the UK, by contrast, housing supply is not currently meeting demand. That is why we have a target of more than 240,000 net additional homes a year by 2016. We intend to deliver 2 million new homes by 2016, and 3 million by 2020. Secondly, mortgage lending regulation is stricter in the UK than it is in the US. Many of the regulatory changes suggested in response to the problems in the US market have already been made in Britain. Thirdly, although it is generally accepted that the UK also has a sub-prime mortgage sector, it is much smaller than that in America, where it was seen as the trigger of the current difficulties.
The Government have taken a number of steps to help ensure that lenders lend responsibly and borrowers can make informed choices, including the statutory regulation introduced in 2004. The FSA’s regime places specific requirements on firms to take account of the affordability of loans, and to treat customers fairly. Like the hon. Member for Twickenham, we welcome the recent statement from the Council of Mortgage Lenders setting out the steps that the industry is taking to support borrowers who are experiencing difficulties. They include working with debt advisers, proactive identification of at-risk borrowers, and considering repossession only as a last resort.
More generally, the Government have been focusing increasingly on improving people’s financial capability so that they can make better decisions about how to handle their money. For the long term, we have put aside £11.5 million for personal finance education in schools over the next three years. That will include developing ways of helping primary school pupils to start thinking about money, using their child trust funds to make it relevant to them. From September this year, financial education will also be part of the secondary school curriculum.
We must think about today’s adults as well. Otto Thoresen has been considering the best way in which to ensure that everyone in the country can obtain free, impartial, high-quality advice on money when they need such information. His final report, published earlier this month, recommended a pathfinder project to test the best ways of offering that, and, with the FSA, we have agreed to provide up to £12 million to run it over the next year.
Jane Kennedy: I meant to give way to the hon. Gentleman earlier, but his hon. Friend the. Member for Eastleigh (Chris Huhne) jumped in. I will ensure that I give way to him on this occasion.
Simon Hughes:
I am grateful to the Minister. As she will have heard, I intervened on my hon. Friend the Member for Twickenham on exactly that point: the need to ensure that “one-stop shops” are available throughout the country, so that people can go to a single location to obtain advice on a range of debt issues. Can she assure me that the response to the report to which she has referred will not be so extended and protracted that it will be of no benefit other than as a pilot scheme? Will she and her colleagues give serious consideration to an early advertising campaign
with maximum reach, providing the addresses of the places to which people will be able to go? Millions of people are in need of free, independent, impartial, sound advice.
Jane Kennedy: The hon. Gentleman has made a sensible suggestion, and we will consider it. The pilot that we propose is a significant piece of work that will make a real difference to people.
Jim Cousins: I am grateful to my right hon. Friend for allowing me to intervene before those set in authority over us send me off to discuss the draft Land Registration (Network Access) Rules 2008.
The hon. Member for Twickenham (Dr. Cable) has been consistently and relentlessly snobbish about what he calls Together mortgages. As a result of both his remarks and what is happening in the markets, such mortgages are now being withdrawn. That is leaving a large number— [Interruption.] It is a great pity that the Liberal Democrats are so snobbish about low-income owner occupation. Low-income home ownership ought to be precious to us, but now that Together mortgages are being withdrawn, a large number of low-income home owners are in real difficulties. What has my right hon. Friend to say to that?
Jane Kennedy: My hon. Friend has made a valid point. I acknowledge the strength of what he has said and the passion with which he has said it. I know that he may have to leave soon, so let me simply say that we are doing a great deal to help people in those circumstances.
As I have said, free debt advice is hugely important to those who do experience difficulties. For the next three years the financial inclusion fund will be increased to £130 million, and £76 million will be spent on providing free, face-to-face money advice. There is also targeted support for vulnerable people through support for mortgage interest, which provides a backstop for some people who have fallen out of work. It helps about 200,000 people each year to cope until they can return to employment.
I want to make three main points. First and most important, Britain’s economy is in a strong position. It is stable, it is continuing to grow, a record number of people are in work—for which I give thanks—and we have seen over the last decade that it is more resilient than it has been in the past. The present position is very different from the position in the early 1990s.
Secondly—because of that different economic position—I do not agree with the hon. Member for Twickenham’s predictions of a house price crash and a huge increase in the number of repossessions. House price inflation is declining, but it is doing so relatively gradually, and house prices remain higher than they were a year ago. Although the number of repossessions is expected to rise a little in the year ahead, they remain far below their levels at the start of the last decade.
Finally, the Government are continuing to take action to ensure that people are able to make better financial decisions, and to ensure that support and advice are available to those who do get into difficulty.
I urge Members to oppose the Liberal Democrat motion, and I commend the Government’s amendment to the House.
2.29 pm
Mr. Mark Hoban (Fareham) (Con): The hon. Member for Twickenham (Dr. Cable) managed to paint a very bleak and gloomy picture of the economy and the housing market, and he was helped to paint that picture of doom and gloom by his hon. Friends. The hon. Member for North Southwark and Bermondsey (Simon Hughes) spoke of a “huge and terrifying” financial hole facing millions of families, while the hon. Member for Montgomeryshire (Lembit Öpik) said that people were on the brink of “a repossession catastrophe”. Language like that does little to help home owners. We do not want to be seen to be talking down the housing market. People’s hopes and aspirations rest on it, and it is irresponsible and opportunistic to whip up an air of crisis and panic.
Mark Hunter (Cheadle) (LD): The hon. Gentleman makes great play of Liberal Democrat Members’ concern about the increasing number of repossessions. Is he aware that in my area—to give just one example—the repossession rate is currently running at 10 per cent., which is twice the national average? Does he not think that a repossession rate of 10 per cent. is something to be concerned about?
Mr. Hoban: I think that every Member of this House is concerned about repossessions and the fact that people across the country are at risk of losing their homes. However, we should address this issue reasonably and rationally, instead of seeking to talk down the housing market and create an air of panic.
Mr. Hoban: I shall give way to the hon. Member for Eastleigh (Chris Huhne).
Chris Huhne: I am grateful to the hon. Gentleman for giving way, not least because he is my neighbouring MP and as a result we share the same county courts in respect of repossessions. Is he aware that repossessions in southern Hampshire and the county courts of Southampton and Winchester are up by more than 20 per cent. over the past year? Does he not regard that as a matter of considerable concern, as I do? I hope he will not be complacent about the considerable personal suffering involved in those horrifying figures.
Mr. Hoban: No, I will not be complacent about that, but I think we need to look at this matter objectively and carefully, instead of being irresponsible and seeking to create an atmosphere of panic and chaos, which is what the Liberal Democrats have done. The Financial Secretary has gone in the other direction: she sought to paint a much more rosy picture of the economy than the reality warrants and overstated the case, but she has minimised some of the legitimate concerns people have about the current state of the economy.
Too often over recent months, all that we have heard from the Government is that all our problems have been caused by the global credit crunch. It is typical of this Government that they take the credit when times
are good, but shift the blame when times are harder or more uncertain. The challenge in any crisis is how to handle it. It is a hallmark of good government to be prepared for a crisis and take control, rather than be buffeted by events.
We saw yesterday at the Prime Minister’s weekly press conference that he has no room for manoeuvre. He was looking to others to bail him out of a situation he has created for himself. He was encouraging the Bank of England to cut rates to boost growth—the Bank of England that he made independent. He has set an inflation target for the Bank, but he was looking for it to put that target to one side. He also called for the European Investment Bank to offer loans to businesses.
The reality is that the Prime Minister, having mishandled public finances for the past 10 years, has no room for manoeuvre. Unlike Governments elsewhere in the developed world, he cannot offer tax cuts to help hard-pressed families or to lift the burden on businesses, because this month we are seeing increased taxes on families, small companies and wealth creators. So at a time when families are facing economic uncertainty, they cannot expect the Government to help them. There is no denying the fact that families are facing economic uncertainty; I accept that. People need to use more measured language, however. Interestingly, the hon. Member for Eastleigh used far more measured language than his colleagues on this issue. Perhaps he is auditioning for another part in the future.
Mr. Hoban: I shall give way to the hon. Gentleman, as I named him earlier as someone who was creating and then stoking up that atmosphere in the housing market.
Lembit Öpik: I am grateful to the hon. Gentleman for flattering me by saying I have such awesome power over the British economy. Perhaps my party does not need to be in government, and instead we can just run the country from the Opposition Benches.
Given that the hon. Gentleman seems to be striking a middle way between our position and the Government’s, I am at a loss to know whether he will vote for the Government amendment or have the courage—of our convictions, certainly—to stick up for the people who are suffering in the housing market and vote for the Liberal Democrat motion.
Mr. Hoban: I am not sure I would ever look to the hon. Gentleman for guidance, and certainly not on how to vote, as I think that so far he has not backed a single successful candidate for leader of the Liberal party. [Interruption.] He refers from a sedentary position to the right hon. Member for Sheffield, Hallam (Mr. Clegg). I read part of the GQ interview this week. I do not know whether the hon. Member for Montgomeryshire wants to share his experiences of running for office. I shall move on, however, Mr. Deputy Speaker, as I suspect you would like me to do so.
Despite cuts in the Bank of England’s base rate, many families’ mortgage repayments will increase when more than 1 million fixed rate or discounted deals come
to an end this year. The widening gap between the base rate and the LIBOR is a sign of continued uncertainty about and a current lack of trust in the financial markets. That means that home owners will not necessarily receive the full benefit of recent base rate reductions.
In addition, the restriction on the availability of credit means that lenders are tightening their conditions. For example, the Co-op has cut its maximum loan-to-value ratio from 95 to 90 per cent.; and the Nationwide’s subsidiary The Mortgage Works has withdrawn its offer of 100 per cent. mortgages, as has Scottish Widows which yesterday withdrew its 100 per cent. mortgage aimed at young professionals, who will now have to find a deposit. First Direct closed its mortgage business to new customers because it could not process the volume of applications it received. The problems in the global credit market therefore mean not only that customers will face higher rates when existing deals come to an end, but that credit itself is being rationed through tougher rules and conditions. Those with equity in their homes or with substantial deposits may well be able to meet tighter conditions imposed by lenders. For those without either, existing mortgage customers will be forced to stay on relatively high standard variable rates, and those aspiring to get on the property ladder will have to save for longer.
In times of economic uncertainty, people naturally turn to the Government for help and they hope that the Government will do something to lift the tax burden from them or will understand that costs are rising. However, because this Government failed to prepare for difficult times, no relief is on offer. Last month’s Budget saw taxes increase on alcohol and new cars—tax increases that are in place to plug the hole opening up in the Chancellor’s numbers, and that will raise the cost of living as well as take money out of families’ pockets. Also, this month we will see tax increases such as the scrapping of the 10p band.
The hon. Member for Llanelli (Nia Griffith) certainly understands what is happening, judging by an article in The Guardian today. She said:
“We have always wanted to support those on lower incomes, we have done an enormous amount with things like the minimum wage to raise people out of poverty”
“I think therefore anything that hits people on lower incomes is perhaps something we are particularly sensitive to in the Labour party.”
I think the hon. Lady had a point.
Apparently, the Prime Minister claimed that no one would be worse off as a consequence of scrapping the 10p rate, but that is certainly not the evidence that was given to the Treasury Committee in its inquiry into the 2007 Budget. The Exchequer Secretary to the Treasury was a member of that Committee, and I think signed off the report that was published. Robert Chote of the Institute for Fiscal Studies said in an evidence session that 5.3 million families would lose out as a consequence of the scrapping of the 10p rate, and Mark Neale, managing director of the budget, tax and welfare directorate at the Treasury, said that
“the figures that Robert Chote gave you are in the right ball-park”.
Therefore, many people will be worse off as a consequence of the scrapping of the 10p rate—older pensioners, and many couples and single earners without children. No Labour Member should be fooled by the Prime Minister’s reassurances of earlier this week. The change will hit their constituents, and mine, hard.
Mr. George Mudie (Leeds, East) (Lab): I do not know whether the hon. Gentleman has spoken to Robert Chote since, but at a presentation in Parliament on this year’s pre-Budget report he put the figure much lower. He has seriously reduced the number of those who would lose because of the scrapping of the 10p rate. Will the hon. Gentleman make arrangements to meet Robert Chote?
Mr. Hoban: I am always happy to meet Robert Chote, who came up with some important figures. Interestingly, when the then Chancellor was quizzed last year, he was unable to refute them. Last year, when the Treasury put the policy forward and it was announced in the Budget, it also regarded those figures as being in the right ball park. The figures may have changed, but last year’s decision was made on the basis of 5.3 million families losing out as a consequence of scrapping the 10p rate.
Julia Goldsworthy: Does the hon. Gentleman agree that although there may be some variation in the number of people thought to be affected, the income profile is most likely to be those who work part time, those on low incomes, and single people under 25 without children who are not eligible to benefit from the changes to the tax credits?
Mr. Hoban: The hon. Lady has produced a reasonable and helpful analysis of the people who will lose. Female pensioners in their early 60s are the group in my constituency who are particularly concerned and vocal about this matter. A number of groups will be affected, so for the Prime Minister to brush aside the impact, as he appeared to do at Monday night’s parliamentary Labour party meeting, is to seek to minimise an important and growing concern for our constituents.
Not only is the 10p rate being scrapped, but taxes are increasing on wealth generators, small companies’ tax rates will be increased again and entrepreneurs will be hit by an 80 per cent. increase in the capital gains tax they pay on selling their businesses. That is hardly a move designed to encourage new business investment and formation at a time of economic uncertainty.
While our competitors used 15 years’ global economic growth to prepare for difficult times, the Prime Minister, who was the then Chancellor, taxed, spent and borrowed his way to a position in which our deficit exceeds that of our EU counterparts. Even Italy has a lower budget deficit than UK. It seems that prudence, which was a feature of his first Budgets, has left the UK and is happily living in Tuscany—a place that seems to be one of relative fiscal rectitude compared with the UK. While our competitors can use their reserves to pay for tax cuts, Britain has no such luck.
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