That the following provisions shall have effect for the period beginning 16th January 1992 and ending 31 days after the earliest of the dates mentioned in section 50(2) of the Finance Act 1973—
The measure is before the House for the simple reason that a general election is in the offing and the Government are rattled. The measure is to be followed next week by a Bill. If a general election were not to be held in the next four months, the Government would have shed crocodile tears and Ministers and the Prime Minister himself at Prime Minister's Question Time would have said that nothing could be done about house repossessions. They would have said that citizens whose houses had been repossessed—and that will continue throughout 1992—knew perfectly well that interest rates could go up or down, that they freely entered into a contract and that it was no part of the Government's function to bail them out.
Because of the impending election there are no crocodile tears and no statements that the Government cannot interfere. They are attempting to take action, and I should like to examine it to see whether it will be effective and whether the money resolution and the Bill—which it is rumoured will be before the House next week—are worth serious consideration.
In 1986, when the Prime Minister was a Social Security Minister, he cut mortgage support for those who had lost their jobs. The Tory election guide of 1987 boasted that the Prime Minister reduced the entitlement of those on income support to have their mortgage interest repayments cut from 100 to 50 per cent. for the first six months. Four years ago not only were they not prepared to help but cut state support for those who were losing their houses—and boasted and believed that that was a virtue.
The measure shows a reversal of Government policy but it is not the only reversal because only a few years ago the Government withdrew 40 per cent. mortgage interest relief and introduced legislation permitting relief to be claimed only at the basic rate. The Opposition agreed with that. In that matter as in this, the Government's philosophy was separation of Government from the operations of the market. That is no longer the case because by their proposal to waive stamp duty for eight months until August the Government are intervening in the market. That runs counter to their political philosophy.
We shall debate the matter again next week and perhaps either tonight or at that time the Minister will tell us what has changed. Has the Conservative party suddenly found a heart and a social conscience? Has it abandoned its political dogma or are the Government acting in this way because they know that there must be a general election within the next four months and are fishing for votes by using election gimmicks?
Many hon. Members would be tempted to do that and some see their first job in the House as fishing for votes. Indeed, I should not be surprised if the hon. Member for Sheffield, Hallam (Mr. Patnick) who is shaking his head, were one of those hon. Members.
That is not the only reversal of Government policy that we are witnessing. Income support paid by the DSS for mortgage interest will now go direct to the lender. There is a sort of tripartite deal, whereby the lenders—the building societies and banks—will try to restrict the number of repossessions that will take place in 1992, and in return they will be given a Government promise that income support paid for mortgage interest repayments will go directly to the lenders. In addition, stamp duty will be waived for eight months to try to kick-start the housing market. I shall say a few words about that later.
That is all a reversal of Government policy. It was not so long ago that the previous Prime Minister altered income support so that people could pay their own 20 per cent. of the poll tax. It was the citizen who would have to suffer, who would have to save money from his DSS money and pay the poll tax authorities. That is all gone. The Government cannot trust the citizen any more. They will have to send the money directly to the lender. The citizen cannot he trusted because he has been spending the money on other things.
I hope that the Financial Secretary will prepare an answer to the following questions—if not tonight, perhaps on Monday. Is what is happening now a reversal of Government policy? Is that reversal happening because their dogma is being changed, or have the Government suddenly found a social conscience? Do they now understand that it is more important that people have a roof over their heads if possible, or is this a matter of expedience, because there is an election coming and the Government are trying to fish for votes?
Hitherto, there was a brainless scheme whereby the Government were to carry on watching houses being repossessed and then fill those empty houses with the homeless people who had had their own houses repossessed some months before the repossession of the houses that they were to move into. That was a lot of nonsense. I do not believe that anyone in the country—[Interruption.] If the hon. Member for Walthamstow (Mr. Summerson) wants to intervene he can do so, but inaudible muttering from the Back Benches does not help.
We have a slightly better scheme now,. but I wonder how much better. Lenders will now help to keep people in their homes, the Government will give the money directly to lenders, and stamp duty will be waived. But will that work?
I should like to bring two newspaper articles to the attention of the House. The first, from The Independent of Saturday 11 January, is headed in big letters: "Stamp duty incentive fails". The first two paragraphs of that article say:
The recent increase in the stamp duty threshold from £30,000 to £250,000 was meant to kick-start the housing market into action.
However, the change is so far proving to be a non-event. High interest rates, the gloomy economic outlook, and the prospect of redundancy are more than enough to take the edge off most people's appetite for homebuying.
I think that I shall save much of that article for next week—although before Ministers cheer up too much at that news, I must tell them that they may hear those quotations at a later hour than this. This is an important matter. If the Government intend to give away £400 million this year——
My hon. Friend and I agree, at least on that point. If the Government are to give away £400 million this year, is there not a better way of giving it away to achieve what we all want, which is to get the economy moving again? I believe that there are much better ways of spending the money.
Let me move on to the other article, which appeared in The Guardian on 4 January under the headline,
Stamp duty move 'no help'".
I shall not read it to the House in full tonight—there will be time next week for that—but the first part of it states:
The Government's decision to suspend stamp duty payments on housing transactions will do nothing to revive house prices or housebuilding before 1993, a leading construction industry chief said yesterday. This would make the present downturn in the housing market one of the longest on record".
It would be nice if the Whip, who is now parroting what the Financial Secretary said, had some ideas of his own, instead of repeating the last thing that he happens to hear. Conservative Members are trying to provoke me, but I am resisting.
As I was saying, the article said:
This would make the present downturn in the housing market one of the longest on record, John Smith, chairman of the Building Employers' Confederation, said.
From reports in the press, at least, it looks as though the Government's scheme will not work and will not achieve the effect that the Government hoped it would. It will not kick-start the housing market. The Prime Minister was wrong when he said last June that the vague stirrings of recovery that he detected would begin in certain sectors, probably in the housing market. Conservative Members are silent on the matter; I hear not a murmur of dissent. I can take their silence only as agreement.
The stamp duty waiver certainly will not help those people whose houses have been, are being, or will be, repossessed. It will not help the Conservatives to get re-elected, either. It is not a case of, "If it's not hurting, it's not working." And it is not the opposite of that either, because that would be, "If it's hurting, it's working." The Government's policy is hurting and it is not working. It is the worst of both worlds. Yet again, in this economic objective as in many others, the Tory party has managed to find the very worst economic policy which will hurt and which will not work.
We look in vain to the Government to kick-start the economy, as opposed to the housing market. There is no point in kick-starting the housing market or kick-starting the economy by means of a consumer boom. That will not get the country out of the economic mess that it is in at the moment. We can save the country economically only if we look after industry and manufacturing. We look in vain for anything that the Government can do that will achieve that.
At the moment, nothing is being done. It is a pity. We have a Prime Minister who held interest rates at 15 per cent. for a year. Three quarters of a million people have lost their jobs since the right hon. Gentleman became Prime Minister. We have a Prime Minister who, as a Social Security Minister, boasted about cutting income support on mortgage interest payments and who now refuses to look at the real enduring remedies that depend on our industry and our trade. All we hear is gimmickry and fishing for votes. The people are not stupid, and they will see through that on 7 May, if not a little earlier.
My contribution will be more brief than that of the hon. Member for Wrexham (Dr. Marek), but not quite as brief as the Minister's remarkably short introduction. As this is a very important matter, however, I want to take a few moments to express some views on it.
The hon. Member for Wrexham suggested that these measures will not help. The people who are involved in housing transactions in the next eight months will not agree. They will find the measures to be of considerable help. The hon. Gentleman will be surprised when he sees how they stimulate the housing market. There is no doubt that they will have that effect. The hon. Gentleman accuses the Government of intervening in the market. In fact, the Government are ceasing to intervene in the market. They should not have intervened in the first place. There should never have been stamp duties to distort the market.
We have heard that the cost to the Treasury this year will be about £420 million. I should like to put that figure in context. I understand that the amount raised by way of stamp duties last year was about £1·7 billion. About £1 billion of it related to property transactions, £700 million to share transactions, and £17 million to miscellaneous matters. The stamp duty on share transactions was due to be abolished, but, for reasons beyond the control of the Government, that step has been deferred. Many of the smaller, miscellaneous duties too are to be abolished.
What we have here is temporary abolition of a proportion of stamp duty on properties. My main complaint is that the Government are not going far enough. In addition, there are certain impracticalities in the proposition, and in due course we shall be confronted with them. I hope that account will be taken of those impracticalities and that the Government will go even further in what is an overdue reform of the tax system.
The threshold is being raised to £250,000. Anyone buying a property for £260,000 will have to pay the 1 per cent. on the whole amount. I expect that there will be very few transactions involving sums just above £250,000. Why do not the Government go all the way and eliminate the tax altogether? There is no justification whatsoever for a property tax of this kind. I am totally against property taxes, but even if I were not I would be of the opinion that they should not be imposed on people incurring the expense of acquiring property. They have a distorting effect on the market.
It is proposed that the exemption in the case of transactions involving sums up to £250,000 should cease on 19 August. The hon. Member for Wrexham said that the measure would not kick-start the housing market. I expect that it will be of considerable help in that direction, and the housing market will certainly come to a stop on 20 August. How many property transactions will take place on that day or during the succeeding weeks? Are we really contemplating cessation of this exemption in mid-August? That is hardly a practical proposition, and I ask Ministers to think again about it.
There is plenty of time for reconsideration, for a decision to extend the exemption or make it permanent. It simply is not practical to remove this penal tax only until mid-August. It is a specific, heavy extra cost, against which building societies do not lend, and is therefore a great deterrent to house buyers. Ministers must recognise that it is impractical to suspend a tax for eight months while applying it to sums above an artificial threshold.
This is not a subject about which I have suddenly become passionate. If I may say so with a certain lack of humility—politicians are never accused of excessive modesty—I have been rereading a speech that I made 26 years ago—that is a sign of old age—to the 1965 Tory party conference, in which I said:
The revenue from stamp duties has dropped from £100 million in 1959 to £75 million. But you still meet stamp duties wherever you turn on cheques, receipts, mortgages, leases conveyances, share transfers, legal documents and life policies. To sweep these away altogether would symbolise a cutting-away of the accumulated red tape of centuries and would help the house purchaser, the small investor and many, many other sections of the population.
Alas, the £75 million soared thereafter. We did get rid of many stamp duties but, as with so many other examples of Conservative administration, when we reduced the taxes, we brought in more revenue. A classic lesson that the Opposition do not understand is that one can reduce taxes and increase revenue. Unfortunately, in this case, we have increaseed the revenue to the point where the Treasury does not want to lose it, but the message is none the less the same: stamp duties are not a logical or equitable tax; they are an unfair tax that should be abolished.
This measure takes us halfway along the road of getting rid of stamp duties altogether in the last significant remaining area of stamp duty revenue -raising—property. I urge my hon. Friends to go a bit further and to take advantage of this opportunity. They know in their hearts that they cannot bring back stamp duty, and they should not even contemplate doing so. They should go one step further and abolish stamp duties altogether and for ever.
The hon. Member for Faversham (Mr. Moate) has rightly pointed out the difficulties that the Government will face in August—whatever party forms the Government—when they are obliged under the temporary provisions to reintroduce stamp duty, and the reverse effect that that will have on the housing market—to the extent that the proposal has any effect at all.
It is ironic that the Government have brought a temporary tax advantage before the House because a number of the problems that we are now facing, especially in the housing market, started with a temporary tax advantage in 1988. The decision to announce to the world that people had a period of grace until August to take out multiple mortgages so that several people could receive tax relief on one property was part of the source of many of our present difficulties. It coincided with the vastly easier obtaining of mortgages, relatively favourable interest rates and the expectation of tax cuts in the autumn. The coincidence—in the strict sense of that word—of all those things produced a significant effect. The Government knew that all those things were happening and should have judged the position better.
The recognition in the light of that experience that temporary tax advantages may have an effect may be rather exaggerated in the case of this measure because we are talking about £600 per house. This measure is on a smaller scale. I do not really see how a £600 per house maximum benefit will make much of an impact on a housing market in which property values have dropped by £5,000, £10,000 or even by £20,000 in some cases. If a drop of £20,000 in the price does not make a flat in London saleable, £600 less stamp duty certainly will not. The measure seems unlikely to have anything like the effects that the Government have suggested. In Monday's debate, I hope that we can look a little more fully at whether the measure is justified and at what the alternatives might have been.
It seems to me that the Government cannot have all that much confidence in what they are doing because of the cost of the operation. I should like the Minister to tell me how the cost of this measure can be not much over £400 million. As I see it, that is roughly what we got from stamp duty in an equivalent period last year. Is the Minister arguing that house prices will continue to fall over this period and that therefore the yield will not increase? Is he arguing that there will not be an increase in the number of transactions and that therefore the revenue forgone will be roughly similar at the same house prices? Either way, his cost estimates seem to imply that the provisions will not have much effect on the housing market. Therefore, I ask him whether his cost estimate is realistic and, if it is, is he not really admitting that the measure's effect on the housing market will be very limited?
At the end of the day some Government will be faced with the embarrassment of having to restore the tax while very little purpose is served in the meantime. To some individuals at the margin of buying a house the extra few hundred pounds—for many it will be less than £600—will be welcome. It will be nice for them not to have to pay an irritating tax when they are scraping together the money for a mortgage. The possibility of it having a dramatic effect on the housing market is remote, and is largely discounted by the Government's estimate of what it will cost. In his reply to the debate, the Minister might say something about the cost.
It is interesting that this emergency provision, is proposed by the Government in a crisis as a prelude to legislation to be introduced next week, contains retrospective provisions. I am not one of those who believe that legislation should never have retrospective provisions. There are occasions when retrospection is useful. Up to now, the Government have taken the view that retrospection is not a principle which they should easily endorse.
I recall that, when a Labour Government wanted to restore civic rights to 11 Clay Cross councillors—rights which had already been restored to 400 Scottish and Welsh councillors in a similar position—Sir Michael Havers, who was to become Attorney-General, rushed to the Dispatch Box to say that retrospective legislation was a terrible thing. That is an illustration of the Government's double standards. When they want to worm their way out of a crisis which their policies have produced, that argument goes quickly by the board. It is an interesting comparison which does not do the Government much credit.
The ways and means resolution has been introduced because of the stagnant housing market, the unemployment increases in the construction industry and the fact that, in 1991, more than 100,000 houses were repossessed from people who had been persuaded by the Government that home ownership was the only possible way of existing. That is the background to the debate.
There is a useful note from the Library about recent developments in mortgage arrears. It links the Chancellor's statement about the resolution to the actual position. I do not think that the modest changes in stamp duty for eight months will galvanise the housing market into action or restore all the building industry jobs. Nor do I think that the Tory Government's failing fortunes will be restored in time for the election.
The research note points out that it is not just the fact that people are facing repossession that is causing the housing market to be in difficulty. A large number of houses are standing empty because they have been repossessed or cannot be sold. The research note says:
Janet Ford of Warwick University conducted a survey of 29 mortgage lenders in March 1991 which revealed new record levels of short term (two to five months) and serious (over six months) arrears. The survey, which was funded by the Bank of England, found that at the end of March approximately 784,000 loans were two or more months in arrears, representing just over 8 per cent. (one in twelve) of the total number of mortgages outstanding with the 29 lenders. Additionally, the survey revealed that the number of people with arrears of between three to five months, in March of 1991, outnumbered those people owing two months payments for the first time since 1985. These findings have been cited as an indication that for an increasing number of borrowers, the position is a more serious and persistent one than has been the case in the past.
That is one of the important reasons why the ways and means resolution will not provide an answer to the deep-seated defects in the housing construction industry, which arise from the Government's disastrous housing policies. Those policies resulted in many people becoming the owners of houses—unfortunately, only temporarily but—later facing repossession. Several hundred thousand people face the threat of repossession.
There was a news item in my local evening paper, the Telegraph and Argus, on Tuesday 14 January 1992. The Minister might care to comment on it when he replies. Headed "Bickering delays bid to end home loan misery", the report says:
Moves to ease the nightmare of homes repossession have yet to take effect, it emerged today.
Mortgage lenders and housing associations are still reported to be in disagreement over the mortgages-to-rent scheme which is central to the Government's mortgage rescue plans announced before Christmas.
The Chancellor of the Exchequer made a statement that the Government would allow lenders to lend money to the housing associations to buy properties and allow the people in arrears to stay in their home. That agreement has not been reached, because the housing associations cannot get the money at a sufficiently low level of interest. That is one of the underlying faults: the level of interest is far too high. It is inhibiting not only the housing market—that is the reason for the resolution—but industry. That is why we have an ever-soaring rate of unemployment and why, in the near future, the unemployment figures will demonstrate an increase in that terrible waste of ability and people's lives. Lives are wrecked by unemployment, which in turn means that they face the possibility of repossession due to mortgage arrears.
When the Chancellor of the Exchequer made his statement, he covered several points. The ways and means resolution—and the ensuing legislation that will come before the House next week—was one of them. I doubt whether all the people who, as a result of the Government's high interest rate policies, face unemployment and repossession because they cannot keep up their mortgage payments regard it as a price worth paying to support the Government policies of which they are victims. People are being forced out of their houses and homes repossessed at a rate never experienced since the war.
My second point on the ways and means resolution and the housing crisis that it represents is that many people have been forced into home ownership by the Government's policies. The Government have failed to provide local authorities with the means to build houses for rent to replace the houses which local authorities were forced to sell off, yet in turn, the revenue from the forced sales has been denied to the local authorities. Houses have been sold off so that they are no longer available to rent. Therefore, many people have been forced to look round for a house to buy. Some of them are in mortgage arrears unquestionably as a result of taking on a commitment which was too much for their income. That was directly encouraged by the Government.
It is worth pointing out that, in 1977, 112,000 local authority dwellings were constructed. The Government are fond of making comparisons between the period when the Labour Government were in office and their period of office. In 1986, there were 18,500—a drop of 100,000—and that figure has dropped even further. That is why we are debating this paltry ways and means resolution, which is part of a pattern.
People are finding it difficult to get hold of somewhere to live at a decent price. That is also reflected in the increase in the number of homeless people. In 1979, 55,000 people were homeless—the figures were provided by the Library—and that figure was too high. That was under a Labour Government, and it should have been less. In 1988, the figure had shot up to 120,000 and this year it is above that figure. It is all part of the pattern.
The ways and means resolution will reduce stamp duty for eight months to get builders back to work and get the housing market moving, when 120,000-plus people are homeless, and when even the Government admit that the measure will not galvanise the housing market into action, but will be peripheral. It is wrong for the Government to be so inert over this policy and to do so little so late, when all the signs were there. Indeed, my hon. Friends on the Opposition Front Bench have been pressing the Government to introduce a mortgage-into-rent scheme so that people do not face eviction in their hundreds of thousands as they have done because of Government policies.
In Bradford, including my constituency of Bradford, South, the local authority has been forced to sell off 14,500 out of 18,000 houses. Now they let virtually only flats and maisonettes, because the vast majority of houses have already been sold. Would it not be easier to do as Labour is promising to do, and sensibly to inject revenues from house sales into the house building industry so that local authorities can get to work building houses at a rent that people can afford?
It is no good the Government talking about home ownership as the only path to a roof over one's head. The reality is that a significant proportion of the population will only be able to afford houses to rent until they build up money for a deposit, are certain of their own finances, and can go down that path.
Immediately, there is a demand for houses to rent at a level that people can afford. That simply is not available in the private sector, or in the housing association sector. Housing associations are short of funds too and simply cannot meet the demand for houses.
Labour's policy is very good. The Conservatives are nearly always asking what Labour intends to do in one way or another. Labour's policy of releasing the funds which the Government have deliberately denied local authorities, at a sensible pace so that we do not outstrip the capacity of the building industry, and maintaining an increased pace of building by local authorities, will help to solve some of the problems. It will do so far more effectively than the ways and means resolution, which injects only about £400 million and will in no way help existing home owners who face repossession.
The only people it will help are those who are going to buy a house and who will be helped to make the decision by an extra relief of £200, £300 or £500. It will have a marginally beneficial effect, but that is all. It will not answer the important crisis which is facing us.
I hope that the Minister will announce something more widely effective than the ways and means resolution. Even though it would be stealing the Labour party's clothes, I would welcome an announcement that the Government would be prepared to use the £5·5 billion which is available for the sort of housing that people can afford—whether low-cost housing to buy or low-cost housing to rent.
To require local authorities to sell off houses without any replacement is one of the major reasons why we are in the housing crisis and one of the major reasons why we have cardboard cities not just in London, but in every major city and town throughout the country.
It may be anecdotal evidence, and the position may be the same in Paris and in other countries in Europe. I have no doubt that that is the case. We are concerned with policies that affect the building and provision of houses in our country. We have no control over the house-building programme in France, Brussels or elsewhere. We know that, in our country, where it is easier to get evidence, albeit anecdotal, the statistics provided by the Library show that homelessness has more than doubled under the Tories. We know that, in every major town and city, the numbers of homeless are growing. It is a scandal, and it is the responsibility of the Tory Government.
The resolution is very much a marginal factor. We shall have to see greater action to solve the housing problem. The reality is that it is too late for the Government to do anything. They are at the tab end of their period of office and they are thrashing around to try to pick up a policy that will act as a palliative to present themselves as a credible Government at the general election. They will fail.
The only way in which to have a Government with a policy that will produce an effective housing policy to get the cardboard cities removed, that will give people the opportunity of getting a house at a decent rent which they can afford and that will give local authorities an opportunity to replace some of the houses that they have been forced to sell off is to get a Labour Government elected at the next general election.
This has been an interesting short debate and a useful taster for the debates that we shall no doubt be able to enjoy when the Bill is debated in the House.
The resolutions and the Bill which will be introduced if the House sees fit to approve them should be seen in the context of the other arrangements announced by my right hon. Friends before Christmas—the agreement by the mortgage lenders to bring forward funds on concessionary terms for reducing repossessions in the course of the following year and the social security measures for direct payment of benefits to lenders. The resolutions are only one element among a number which we believe will have a beneficial effect on the property market.
It was a little difficult to be sure from the remarks of the hon. Member for Wrexham (Dr. Marek) whether he was in favour of the measures. There was a general tone of carping and sniping in his remarks. The measures have attracted widespread support and I am glad of that. It might have been a little more gracious of him to have given full-hearted support to what the Government have done and seek to do in bringing forward measures to assist.
My hon. Friend the Member for Faversham (Mr. Moate) urged us to go further and to abolish stamp duty on property altogether. As he says, he has made that case for many years and I hear what he says. He makes a case that we listen to with respect.
The hon. Member for Berwick-upon-Tweed (Mr. Beith) made a point about the amount that the proposal costs. I did not fully understand his point. He seemed to say that, because the cost that we have put in is the money that we believe would have been raised by stamp duty if the measure had not been taken, we expect the measure to have no effect. With respect, I must say that that does not follow. If there is, as we and most people believe, a significant effect on transactions, that is not tax that is forgone as a result of the measure, because some transactions would not have taken place without the measure. I shall have a look at what he says in the cold light of dawn, but I do not believe that his point is a real one; it is false.
The hon. Member for Bradford, South (Mr. Cryer) said that he thought this was retrospective legislation and, in his opinion, was none the worse for that. I suppose that it is technically retrospective legislation in that it has an effect going back to before the legislation will be enacted, but this is very common in taxation legislation, and it is usual for legislation of this kind—Finance Bills—to have effect from the time of the announcement. It is not retrospective in a substantive sense in that it does not have an effect on matters which took place before the announcement was made; so everyone who has made a transaction since we made the announcement has done so in the full knowledge of what we propose and what the consequences of his actions will be.
We can pursue these various matters when the Bill is debated in the House, and I look forward keenly to that occasion. I am only sorry that the warm support given to the measure by my hon. Friend the Member for Faversham was not echoed in the remarks of Opposition Members; they did not seem to oppose it but at the same time they could not bring themselves to the point of giving it the warm support that it has been given by almost every commentator outside. That reflects the difference between their negative, carping and destructive attitude and the Government's positive and constructive attitude. I commend the measure to the House.
That the following provisions shall have effect for the period beginning 16th January 1992 and ending 31 days after the earliest of the dates mentioned in section 50(2) of the Finance Act 1973–