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Mortgage Interest Payments

Part of Orders of the Day — Finance Bill – in the House of Commons at 7:45 pm on 15th July 1997.

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Photo of Mr Patrick Nicholls Mr Patrick Nicholls Conservative, Teignbridge 7:45 pm, 15th July 1997

The hon. Gentleman can pick out particular months, but if he sits down later in a reflective mood he will see that when we adjusted MIRAS there was a downward trend in interest rates.[Interruption.] The hon. Gentleman can wave his document in the air as much as he wants, but he should read it quietly, and hopefully he will be able to understand it.

When we adjusted MIRAS, we were heavily criticised by Labour Members. They had a principled objection to doing anything about MIRAS, but in today's Labour party the presence of principle is no obstacle to action and change.

To highlight their embarrassment, it is worth reminding Labour Members of what their leaders were saying about our attempts to adjust MIRAS. As recently as March 1996, in a speech to the Labour housing conference, the present Prime Minister "had to say"—because he talks like that—this: The first blow the government dealt to homeowners was to cut MIRAS in the 1993 Budget. First to 20 per cent., then a year later to 15 per cent. … the effect of all these measures was to add to insecurity, to destroy confidence in the housing market and to make people much more wary of buying and selling homes. The hon. Gentleman may raise his eyebrows, and I understand how he feels, but that is what the Prime Minister said.

The then shadow Chief Secretary to the Treasury, the right hon. Member for Oxford, East (Mr. Smith), attacked the changes to MIRAS. In a press release in March 1995, he said: Many people's living standards will suffer a severe knock when the latest two Tory tax increases take effect in a few weeks' time. These latest tax hikes hit as the Tories continue to argue amongst themselves over the absence of a supposed 'feel good' factor. We are criticised for suggesting that it is inappropriate for the Labour party to make these changes to MIRAS, but when we made adjustments to MIRAS, we were roundly attacked. Adjustments to MIRAS may or may not be appropriate, but it is clear that Labour Members cannot say that our attack on the Government is inconsistent or intellectually unsatisfying.

Changes to MIRAS do not hit the very rich. Those who recently made a windfall gain of £300,000 or £400,000 by selling their house in London will not be affected by this change. It does not affect people wealthy enough to travel all over the world with their own personal crimper. Alterations to MIRAS have no effect on them whatsoever: to them it is a matter of pence. But such changes affect the people who are just about able to claw their way into the housing market at the very lowest level.

I remember a speech made by the right hon. Member for Chesterfield (Mr. Benn) in which he spoke wistfully of the time when one could go into a council estate and feel at home. He said, "Now you walk down the streets of a council estate and all you see are fake Georgian front doors." That said it all. It showed contempt for the efforts of the very poor to raise themselves above the level of municipal serfdom and get into the property market.

What is so awful about the changes to MIRAS is not the £10 a month that it will cost people—because that is eminently affordable by Prime Ministers, Chancellors of the Exchequer and hon. Members such as the hon. Member for Workington and me—it is the effect that such a sum has on the working poor. [Interruption.] It is all very well for the hon. Gentleman to mock. It is a long time since Labour Members, most of whose salaries have doubled, were in the ranks of the working poor.

Such people will have to find another £10 a month because of the change to MIRAS, and a further £20 a month because of the interest rate rises that have already been announced, let alone those that are in the pipeline. For those people, whose plight makes Labour Members giggle, an extra £30 is real money. It is immensely sad that such changes are being proposed by a party that was once the genuine champion of the working poor, but it no longer has any acquaintance with those people: the principles, rhetoric and concerns that used to matter to the Labour party have been Follettised and Mandelsonised out of existence.

I can imagine what is said in Cabinet: "Let's do a bit of tinkering on MIRAS—it won't matter very much because it's only a tenner here and there." That is what happens when a party cannot even fall back on the paternalism that it has disliked over the years, and has deprived itself of its principles.

These alterations will make a small but significant difference to those least able to stand up to their effects. The view that has been put forward in some newspapers is that this measure was taken to dampen the property market. That is ridiculous. I mentioned that in a spirit of fairness, so that the Financial Secretary to the Treasury, the hon. Member for Bristol, South (Dawn Primarolo) could cross it out if it was in her brief. The hon. Member for Workington is right: this will not be a dampener on the property market—far from it.

One of the consequences of the raid on pension funds was to make them a far less attractive option than they were before. People with substantial sums of money to spare, such as Labour Prime Ministers and Labour Members of Parliament, will no longer think seriously about putting money into pension funds and providing for their future. The temptation will be to plough the money back into the property market. Far from the change being a dampener, it will boost the rise in property values. That is great news for those who can make a killing in the London property market by doing nothing more than sitting on their house in Islington, but it is a pretty sorry day for the working poor, whom it will hit most.