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It is interesting that, after the election result was known, it became clear from the price series for April that the outgoing Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), hit his inflation target precisely in April. We were accused during the general election campaign of not having hit that target. It seemed that inflation would be 2.6 per cent., but we reduced it to 2.5 per cent. It has now risen to 2.9 per cent. because of the direct impact of the Budget.
As for monetary policy at that time, I think that my right hon. and learned Friend the Member for Rushcliffe is to be commended on making his own judgment. I am surprised that the hon. Member for Hove (Mr. Caplin) appears to concur with the view of the Bank of England in the second half of last year, when it demanded an interest rate rise. My right hon. and learned Friend resisted that demand, and I believe that he was right to do so. These are now matters of history, and it is plain that some of the difficulties imposed by the Chancellor are that he has increased taxes and spending in the Budget as well as indicating a relaxation of the inflation target, which is an extremely bad signal to send.
We have a focused tax relief which is intended to give practical help to all sorts of home owners. It is neither regressive nor regionally skewed. It costs £2.3 billion annually, which in cash terms was very much what it was about 25 years ago. It is not very far out of the ball park of about 1 p on income tax. Our complaint is that the Government are aggravating the effects of their hits on higher interest rates on the householder with a tax hit that is entirely of their own making.
The Government's action is likely to have little effect in cooling any alleged boom in house prices, which is by no means universal. The conclusion of the Halifax building society in its latest house price index is that there is no need for any specific Budget measures aimed at curbing an allegedly "booming" housing market. I know, of course, that that must be a matter of judgment.
In fairness to the Government, I do not think that they have made their proposals on that basis. We on the Opposition Benches want to protect the home owner by providing, through the amendment, for no cut in mortgage interest tax relief to take effect unless and until interest rates are reduced to the historic low levels enjoyed by borrowers on 1 May.
I agree that present signs suggest that it might be rather a long wait before we reach that happy state again. It will be a long wait, because already the Chancellor has shown a readiness to relax his inflation target and a propensity in various ways to favour increased taxation. In my judgment, he is preparing the way for higher spending. Faced with that somewhat bleak picture, we owe it to home owners to offer them some protection, as afforded by the amendment.
To quote the Government, all that we are discussing amounts to a matter of trust. I have changed my spectacles recently, a move that has been of great benefit to my performance at the Opposition Dispatch Box, but I still see nothing in the Labour party's manifesto, with either old or new spectacles, that amounts to a pledge to increase taxes that are paid by home owners.
I have recently shared with the House of Commons a letter from one of my constituents, a Mr. Morrison, and I shall now share it with the Committee. He confirmed my apparent myopia when recently he wrote:
I phoned Mr. Brown prior to the election concerning future fiscal policies. He informed me that no planned reduction in MIRAS would take place and I should look at the Labour Party manifesto, which did not include such measures.
I am afraid that I have still not had any explanation from those on the Treasury Bench about those assertions. It could be that Mr. Morrison got through on a bad line and was misheard. It could even be that someone got into the headquarters or office of the Chancellor and decided to impersonate him. Or, of course, it might not have been a planned hit on mortgage rates at all: it could have been a panic cut imposed at a later date when interest rates were already humming on their upward path.
There has been, therefore—I regret to have to tell the Financial Secretary—a material breach of trust. I invite Ministers on the Treasury Bench to absolve themselves and their colleague by giving some belated explanation of what took place. Tonight, I also invite them to repair the damage that they have caused by at least committing themselves—I hope that the Financial Secretary is listening—to no further reduction in mortgage interest tax relief. Better and more immediately, I invite them to accept our amendment on behalf of the home owners whom, sadly, they have set out to damage.