Queen's Speech — Debate (3rd Day)

Part of the debate – in the House of Lords at 8:41 pm on 8th December 2008.

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Photo of Lord Bates Lord Bates Deputy Chair, Conservative Party 8:41 pm, 8th December 2008

My Lords, in a debate on economics and business, there is necessarily a huge number of statistics bandied around. Probably the most staggering and disturbing, for all Members of the House, would be the statistic that last year there were 27,000 people whose homes were repossessed. This year that figure will probably rise to 45,000. Next year that is likely to rise to 75,000 repossessions. Another statistic is that more than 1 million homes are currently in negative equity. Another statistic is that when those people's homes are repossessed, they join a list of some 4 million who are currently on the social housing waiting list.

These are staggering and depressing statistics because, in the midst of the economics, a huge cost in human suffering comes as a result. We know that debt and issues such as home repossessions are prime causes of family breakdown in our society. At this time of year, I want to restrict my remarks to focusing in on the measures which have been proposed to tackle that because they leave me with a certain amount of confusion.

On the first point of confusion, I want to speak about the home owner mortgage rescue scheme and the support scheme, which it was not actually in the gracious Speech. I was present and I did not hear it. However, as it was mentioned in the other place by the Prime Minister, I take it that it is legitimate to raise this and that I am not out of order. It comes on the back of a number of mortgage rescue initiatives. The mortgage rescue initiative announced on 2 September, leaked to the press a few days earlier, proposed a whole series of initiatives.

Before I turn to those, I want to say a few words about Northern Rock. I say this as someone from the north-east. Northern Rock has been mentioned for the many good things that it has been doing in the region, but I am afraid that repossessions are certainly not one of them. Its performance has been appalling. Up until the end of September, 4,201 homes had been repossessed by Northern Rock, which was 0.56 per cent of the housing stock on its book. That represents four times the industry average of repossessions. Forgive me if this sticks in the craw a little bit. I get a little angry when I see an institution, whose doors would not actually be open were it not for the fact that the taxpayer bailed it out to the tune of £35 billion, behaving in such an uncharitable way towards people who have fallen on hard times and are in debt to much lower amounts. I would expect more.

I am sure we will hear that the problem is solved. After pressure from, I believe, the noble Lord, Lord Mandelson, Northern Rock has come up with a scheme. It says that it will not repossess any home with arrears of less than six months. We read the headlines, which get us very excited, and we think, "There we go: problem solved". However, when you look at the detail, only 1 per cent of cases where Northern Rock has repossessed so far this year have involved such arrears. Therefore, 99 per cent of the homes that have been repossessed—four times the national average—would continue to be repossessed under the proposed scheme. That is very disappointing and concerning. I certainly would expect better of Northern Rock as it moves forward.

We were told that the home owner mortgage scheme would bring under its ambit 90 per cent of the 11.7 million mortgage holders in the United Kingdom and that their homes would be protected from being repossessed. There was a wonderful, glorious headline in the Sun, with which I know that the noble Lord, Lord Mandelson, will be thrilled. It was about the thousands of home owners who were "Saved by the loan arranger". But after reading the headline, you look for the detail. On Radio 5 live, the housing Minister, Margaret Beckett, was asked how many people this scheme might help. The answer was that it could help up to 9,000 people over two years. We have been talking about 75,000 people next year having their homes repossessed and potentially the same number the year after that. The scheme would help less than one in 10 people: more likely, one in 15 people could potentially be helped.

But who is signed up to this scheme? Eight banks were declared as signed up to it. Some of them said that they received the phone call to tell them about the scheme only the night before the speech. The only indication that they are committed to doing anything is the extent to which they have said that, in principle, they would be willing to work with Her Majesty's Government on a scheme of this nature. We do not know who would be eligible for the scheme or what help would be available.

My key point is that, crucially, the scheme has a basic flaw; namely, it proposes to help people who are in debt by guaranteeing a system whereby they can accumulate more debt. How can a problem of debt be solved by more debt? I do not understand that. The fact that the Government are underwriting it does not make any difference. I would argue that two things are required. First, mortgage holders need to make basic interest repayments. It is essential that they make some repayment on their mortgage. They are party to it and they have to take on that responsibility. We are told that the age of irresponsibility is over. The age of responsibility is to begin. Some repayments have to be made.

Secondly, people should seek debt counselling. There are some excellent organisations. Shelter, citizens advice bureaux and Care for the Family do amazing work to help people through counselling. If these things are done, it should not be possible for a possession order to be granted. No possession order should be granted if someone is making their payments. That would be a very simple solution. The fact that the eight banks quoted do not include the sub-prime lenders, the secondary lenders, which have been at the heart of much of this problem, is another reason why we need a more simple, more honest and more direct approach to save this wave of unhappiness and tragedy which will spread across this country if it is unchecked.