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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 Damian Green Damian Green Conservative, Ashford 8:45 pm, 15th July 1997

Indeed I do. That makes the behaviour of the Labour Government all the more disreputable, because almost their first act relating to the housing market reneges on that commitment.

The second argument that we have heard from Labour Members is that somehow the measure is designed to cool down an overheating housing market. We heard that argument most eloquently from the hon. Member for Workington (Mr. Campbell-Savours). There are several reasons why that argument does not hold water.

The first and most obvious is that the Government do not intend to introduce the measure now, but from the spring of next year. If they really believe that the housing market is overheating now, they should introduce a measure to control it now. They should not introduce measures that will be enacted in practically a year's time.

I thought that the country had learnt that classic lesson about fiscal policy in the 1960s and 1970s. Attempts to use it to fine-tune the economy when it is either overheating or cooling down always go wrong, because the timing is always wrong. That truism has been accepted by the authors of all economic textbooks, and it seems to have reached people in every part of the country except those on the Treasury Bench. What they propose is not an effective means of cooling down a housing market that may or may not be overheating.

Even if the Government thought that such a measure was effective, they should look at the facts produced by those who know about the housing market. The Halifax, which constructs possibly the largest house price index, made it clear in its June report that that month's figures support its view that the housing market is recovering slowly and not at the pace that some commentators would suggest. There has been no growth in transactions between April and May, so it said before the Budget: there is no need for any specific Budget measure aimed at curbing an allegedly 'booming' housing market … Prices paid by first-time buyers fell by 0.6 per cent. in June and is the first monthly fall since January. So not only will this measure fail to cool an overheating housing market, but according to our best evidence the housing market is not overheating anyway. So the idea is both ill conceived and unnecessary.

Thirdly, I want to pick up a point made by the hon. Member for Dudley, North (Mr. Cranston) about the impact on the property market, especially households with low incomes. As the hon. Gentleman said, the Council of Mortgage Lenders has pronounced on the matter, but it said the very opposite of the impression that the hon. Gentleman gave us: The restrictions imposed on mortgage tax relief in recent years mean that now it is a better source of targeted help to households on low incomes. Nearly 5 million home buyers, about half the total number of home owners who are in receipt of mortgage tax relief, have incomes of less than £20,000. They will be the very people hit hardest by the measure, which will mean more to those on relatively low incomes.