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Mortgage Interest Payments

Part of Orders of the Day — Finance Bill – in the House of Commons at 8:45 pm on 15th July 1997.

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Photo of Professor Ross Cranston Professor Ross Cranston Labour, Dudley North 8:45 pm, 15th July 1997

Conservative Members have presented themselves as the home owner's friends. In 1979 and subsequent years, home ownership is supposed magically to have increased. The fact is that, since the first world war, the trend of home ownership has been up, and the trend of rental accommodation down. Some of my constituents would be surprised by the Conservatives' claim, because they suffered severely in the late 1980s and early 1990s when their houses were repossessed. They certainly do not regard the Conservative party as the home owner's friend.

The hon. Member for Daventry (Mr. Boswell) spoke about a material breach of trust. It seems to me that there is a material smell of hypocrisy here. The rate of relief was reduced from the basic rate to 20 per cent. in 1994, and to 15 per cent. in 1995. He tried to explain that by saying that the context was the downward move in interest rates. My hon. Friend the Member for Workington (Mr. Campbell-Savours) challenged him, and the claim then became a downward trend of interest rates. The fact is that the figures from the Library support neither notion.

The hon. Member for Teignbridge (Mr. Nicholls) worked himself into a lather about how the MIRAS change would adversely affect the working poor. He did not seem to know much about poverty. Again we can identify hypocrisy, because Conservative Members oppose the minimum wage, which would greatly benefit the working poor. Some people in my constituency earn £3, or even £2, an hour, yet Conservative Members oppose a minimum wage.

There are two reasons for clause 15. First, the Government intend to introduce some stability into the housing market. Coupled with the stamp duty proposals, this measure will achieve some stability. The impact will vary around the country and, as with any fiscal measure, it is not possible to produce an absolutely certain result, but when enacted, clause 15 will have a beneficial effect through greater stability in the housing market.

The second reason for clause 15 relates to social justice, a notion mentioned by Conservative Members. In the past, mortgage interest tax relief cost huge amounts of money. As the hon. Member for Westmorland and Lonsdale (Mr. Collins) said, it was a subsidy—a huge subsidy—to home owners, but it worked in a most regressive fashion. It benefited the better-off. Conversely, under the Conservatives, there was a massive decline in expenditure on social housing. Expenditure on housing benefit went up, but only to subsidise people already in rented accommodation.

So little new social housing has been constructed recently that many people have no access to decent housing. That is the context. As Dr. Williams of the Council of Mortgage Lenders has pointed out, reductions in the rate have made the impact of MIRAS more progressive, but it remains an untargeted subsidy.