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Mortgage Interest Payments

Part of Orders of the Day — Finance Bill – in the House of Commons at 8:30 pm on 15th July 1997.

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Photo of Mr Tim Collins Mr Tim Collins Conservative, Westmorland and Lonsdale 8:30 pm, 15th July 1997

I gave a clear answer to the hon. Gentleman's charge, which was that we breached a manifesto pledge. We did nothing of the sort. If he is arguing that, before a party introduces a tax increase, it should announce it in its manifesto, he is making my point for me, which is that the Labour Government should have pledged to tinker with MIRAS.

In moving the amendment, my hon. Friend the Member for Daventry (Mr. Boswell) linked changes in MIRAS to changes in interest rates. Another important principle—which was, broadly speaking, adhered to by the previous Government, even in the adjustments that they made to MIRAS—is that the rate of MIRAS should be related to the basic rate of income tax. Two adjustments were made to MIRAS during the last Parliament. The first was to reduce it to 20 per cent. That was set out clearly as the long-term objective for the basic rate of income tax. By the time that the previous Government left office, they had made substantial progress towards reaching that rate. The basic rate had been reduced to 23p, and a large number of people were already paying at a rate of 20 per cent.

The second adjustment was to reduce MIRAS to 15 per cent. I believe that, over time, it was possible to believe that a Government who had reduced the basic rate from 33p, and then most of the way to 20p, could set a target of a basic rate of 15 per cent., at which point MIRAS and the basic rate would have been reunited.

I remember an excellent speech by my hon. Friend the Member for Buckingham at a Conservative party conference in the 1980s, when he received a standing ovation for proposing that the Conservative party should set a target of a 15p basic rate of income tax. He was greeted by the then party chairman—as I greet him now—as a future Chancellor of the Exchequer.

The difficulty now is that the level of MIRAS being set by the present Government—10 per cent.—is not intended to be related in any way to any target for the basic rate. The Labour party has said that it wishes ultimately to set a starting rate of 10 per cent., but it has no target for the basic rate. Notably, the Budget made no progress towards introducing a 10 per cent. starting rate even at the lowest and smallest level. So the Budget and the Finance Bill have removed any semblance of a relationship between the rate of MIRAS and the basic rate of income tax. That is a dangerous and pernicious development.

What is the purpose of MIRAS? It is, explicitly and rightly, a subsidy of home ownership. Many things are subsidised in the tax system. A generous level of MIRAS subsidises something that is important in our society. Wider home ownership is one of the great achievements of 18 years of Conservative government. Millions more people became home owners as a result of successive changes in financial and other legislation made by the last two Prime Ministers and successive Chancellors.