HC Deb 03 July 1968 vol 767 cc1594-617


8.15 p.m.

Mr. Fletcher-Cooke

I beg to move Amendment No. 239, in page 10, line 26, at end insert: (6) Any individual, who by virtue of the said subsection (3) suffers a reduction in the said deductions from tax, being an individual who has given an option notice under the provisions of Part II of the Housing Subsidies Act, 1967 (Assistance for House Purchase and Improvement), may rescind that option notice by a notice of his desire so to do (hereafter in this subsection referred to as a 'withdrawal notice') given in writing to the lender at any time before 6th April, 1969 by him or his personal representative, and a withdrawal notice shall have the effect of rescinding the option notice as if that option notice had not been given; to the extent that such option notice may have take effect in connection with subsidy or taxation prior to its rescission, the appropriate financial adjustments shall be made. This Amendment deals with option mortgages—that famous implementation of the large pledge given by the right hon. Member for Belper (Mr. George Brown) and others in the election campaign. In this implementation a great number of people in very humble circumstances have been led into a trap, quite recently and quite directly, by the Government. In Committee the Financial Secretary, in his charming and engaging way—I do not say that he admitted this, but he expressed buckets of sympathy for them when he said: Nevertheless, I see that the hon. and learned Member has a point which one would like to meet if it were at all possible. I do not want to show absolute lack of sympathy with the people concerned … simply a question of possibilities of administering the scheme … not without sympathy for the purposes of the hon. and learned Gentleman … I am not committing myself to a belief that some Amendment of the law would be possible."—[OFFICIAL REPORT, Standing Committee A, 15th May, 1968; c. 837.] From a Treasury Minister, those are encouraging words. We had hoped that by this stage the Financial Secretary, with the great resources of Government Departments behind him, all racking their brains, might have done something to alleviate what is no less than a scandal. Nothing has happened, not a single chink of light from a Government Amendment. Since the Committee I and a number of hon. Members have received many letters from the deluded people who were taken in by the Government's promises, and who opted for the Government mortgage scheme.

In Committee, I held up the booklet issued by the Ministry of Housing and Local Government which was a guide to the scheme and which said: Read this booklet. You may gain by it. It stated—and at that time it was right— that, broadly speaking, if one did not pay the standard rate of Income Tax of 8s. 3d. in the £ on any of one's tax, one would be better off opting for the Government scheme. In other words, one should change one's ordinary commercial mortgage for the Government scheme and one would profit by it; if one were taking out a new mortgage, one should take out the option mortgage rather than an ordinary mortgage if one were not paying the standard rate on any slice of income.

Then there was a warning note in the booklet to the effect that a person should consider whether he would always be paying the same rate of taxation, because his circumstances might change. For example, if he ceased to be entitled to children's allowances, or something of that sort, he might find that his top slice went up into the standard rate, or, alternatively, if he was paying the standard rate and his income was reduced he might go below the standard rate, and he had to take into account the changes in his domestic circumstances and to make up his mind, because he had to opt finally by the end of December, 1967, in the case of an existing mortgage or, in the case of a new mortgage, when he took it out.

But there was no suggestion made to these relatively uninstructed people to whom the booklet was directed that they should also take into account possible changes in the structure of tax. That was never mentioned. They were not put on warning that the Government might, so soon after the introduction of the option mortgage scheme, change the rules, which is what they have done by Clause 14. They have brought many families into the standard rate of tax in respect of their higher income because they have —I will not use the word "fiddled" because that is an emotive word—rearranged the system of family allowances, for the best of motives, in such a way that many people, previously earning exactly the same amount of money, have, in the current financial year, been brought into the standard rate of Income Tax. As a result, those who opted for the scheme in good faith, bearing in mind the considerations which the Government told them to bear in mind but not those which the Government did not tell them to bear in mind, are now much worse off than if they had never opted for it.

I must refer to the letter which I read in Committee. It is one of many which I have received, but it is still the best. It concerns a man buying a house on a long-term mortgage and supporting a wife and four small children. His total income last year was £1,426 and the total tax which he paid was £12 5s. If things had remained as they were, he would have saved about 15s. a week by going over to the Government's option mortgage scheme; and, of course, he did so. But, having gone over to it, as a result of the rearrangement of children's allowances and the consequent upping of the top slice of his income, far from being 15s. a week better off, he is 10s. a week worse off than if he had paid no attention to the booklet and had not listened to the siren songs of the right hon. Member for Belper or of the Minister of Housing and Local Government, or anybody else. He would have been far better off if he had kept to his ordinary mortgage. Now he is 10s. a week worse off. This represents a swing of 25s. a week, which is very serious for a man in those circumstances.

The first argument put forward by the Financial Secretary is that people have to take tax changes on the chin, and that we cannot expect taxation rearrangements to be tempered to the shorn lamb, because otherwise there is no end to the matter. The second argument is that acceptance of our Amendment, which would mean reopening the option, is administratively impossible, not only for the Government, but for the building societies. I say nothing on the second point, except that if the Financial Secretary and the Treasury wanted to do something about these people they could always make a compensating tax reduction. It may be impossible to reopen the option, but it is not impossible for the Treasury to say that people who have suffered, whether it be to the extent of 5s., 10s. or 15s. a week, should have a compensating amount deducted from their tax. What is wrong with that in practice or in principle?

As for the quality of retrospection, I would merely say that there are endless philosophical, almost theological, arguments about the degree to which a Government may impose retrospective disadvantage—I put it no higher—upon the subject. But I have never heard of any principe which permits a Government who have tempted and trapped people into this situation so recently as six months beforehand and who have encouraged them to rely on the law as it then stood so to alter the arrangements that they are not merely no better off but positively worse off than if they had closed their ears to these temptations. That is disgraceful.

One can understand people taking, or seeking to take, advantage of the tax law as it stands subsequently finding that they do not obtain that advantage because the Treasury has been sharp and has taken it away. We do not like that, but we understand it. However, when people take advantage of the law as it stands and rearrange their affairs and then find that, as a result of subsequent legislation, they are not merely no better off but positively worse off than if they had relied on the law, that is retrospection with a vengeance and should never be done.

Here it has been done, not to tax evaders and avoiders, but to hundreds of people whose votes were sought and won. It is a scandal, and, by one means or another, if not by the means which we suggest, the Government owe it to their honour to put it right.

8.30 p.m.

Mr. Barnett

I am a little surprised to find that the Financial Secretary is to reply, because I thought that he did not reply to hopeless cases. This seems to me to be an indefensible position which the Government have to defend. I am unhappy about the working of the option mortgage scheme as it stands. The idea is basically a first-class one, the idea of helping those to buy a house who would not otherwise be able to buy a house and of helping existing mortgage payers at the lowest end of the scale. I hope that nobody here would object to that idea. I should have thought that, in principle, this is something all of us could support.

The Government, however, seem to be frightened of giving the scheme a real chance to work, and I suspect that the Building Societies Association has been persuading the Government almost to play it down, because the publicity of it, and the way it has been started and the way it has been working, are such as to give the impression that the Government have a sort of half-hearted approach to the whole idea of the option mortgage scheme.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government said on 7th May that about 4 per cent. of the existing borrowers who had to make a decision by 31st December, 1967, changed to option mortgages. So about 4 per cent. had opted for the lower interest rate, but I think that it would be agreed, as has been said by the Minister himself, that it is up to 20 per cent. of mortgage payers who could benefit by the scheme. Because of this rigid limitation they have not been able to benefit. Surely it is shameful that the Government should have adopted this sort of niggardly approach which cuts out so many people from the benefits of the scheme. I find it difficult to understand why the Government have adopted this sort of attitude, the major argument which we have had for it being the administrative difficulties of the building societies in dealing with it.

I would have hoped that the Government could have gone much further than this Amendment. I would have hoped that they would have made it possible for people who did not do so by 31st December, 1967, to opt in, as well as making it possible for people to opt out as the Amendment would allow, because there are changed circumstances. As has been explained by the hon. and learned Gentleman the Member for Darwen (Mr. Fletcher-Cooke), for the man who exercises his option it is now costing more.

I do not believe that one can argue that this is anything like the same situation as applies in the case of those who evolve complicated tax avoidance schemes, or even not so very complicated tax avoidance schemes, such as buying life assurance policies to save tax. I do not believe that it is anything remotely like it. It cannot be compared in any way with that sort of thing, because here the Government said that the mortgage payer could benefit under the scheme and then the Government changed the circumstances.

In the normal way of things, even with a quite legitimate tax avoidance scheme, the person taking part in it can expect that the circumstances may be changed. Indeed, he is invariably advised—he should be advised, and usually is—that things may change. Even the two-fifths life assurance premium allowance can be changed up or down. All these things can happen in a simpler scheme. Certainly they can happen, and have in the past happened in the more complicated ones.

This, however, is a totally different situation, and the Minister's reason for not allowing a change in opting in as well as opting out because of the administrative considerations seems to me to be wholly insupportable. I do not think that that answer is anything like good enough. As to the way the scheme works at present, it is not quite as the hon. and learned Gentleman said. He said that if a mortgage payer is a standard rate taxpayer he has nothing to gain. That is not strictly true, because if he is paying at 6s. and a little at the standard rate he could still benefit from the mortgage option scheme. The question whether he should opt in is often a very fine calculation. The sort of person we are talking about does not have advice; he does not get advice from an accountant; he has probably nobody to advise him. Even if he has someone to advise him, circumstances change so much as to make his decision one of very fine calculation. He may be near retiring age and, though he is now paying tax at the standard rate, in a few years' time he will not be paying at the standard rate; he may have a child aged 13 who, in a couple of years' time, will leave school, and though he is not now paying at the standard rate he will be then. There is an infinite variety of circumstances in which people decide whether or not to opt in.

Of course, the Government have made it that much more difficult by Clause 14(3), because of the reduction of the child allowance. It was difficult enough for a person to make the right choice before, but given this Clause the position has been made impossible. It seems to me that the Government are under an obligation, if they do not concede a change in the scheme, to concede (his point. There is a strong case for changing the scheme fundamentally to make it easier for building societies to allow all interest payments as a reduction and not allowable for tax in such a way that the standard rate taxpayer does not gain anything by it, but neither does he lose; that those at the lower rates of tax gain something; and those those paying no tax gain the whole of the reduction in the interest rate.

In other words, something like the family allowance scheme and reduction of tax, taking the two things together, so that the standard rate taxpayer does not gain, the lower paid taxpayer gains a little, and the non-taxpayer gains the whole family allowance. If something like that could be done with a mortgage option scheme, it would make it administratively much simpler and it would not cost a great deal. If it were limited to a mortgage up to a certain level, even for a standard rate taxpayer with a £2,000 mortgage, it would not cost the Government very much if they made the situation such that that standard rate taxpayer did not gain anything but neither did he lose. I should like to see the whole scheme changed more extensively to make it not only simpler for administration, but to help a much wider range of people.

It is a great shame that, of the 20 per cent. of people who could benefit, only 4 per cent. do. There must be something wrong with the scheme if it is so complicated that the person we want to see benefit cannot clearly see that he is able to benefit. A much simpler scheme along the lines that I have suggested might cost something more, but we could start off by limiting the level of mortgage to which it would be applicable. It would be simpler to administer and affect many more people at a more moderate cost.

Meanwhile, I feel that the Government are obliged to accept this Amendment because it would at least put right the position for those who accepted the option under the instructions of the Bill and of the booklet issued by the Government. People who made their decision based on that should now have their circumstances changed so that they do not suffer any further.

Mr. Walter Clegg (North Fylde)

For once I am pleased to be able to follow the hon. Member for Heywood and Royton (Mr. Barnett) in supporting this Opposition Amendment.

I congratulate my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) on the way in which he clearly put the dilemma which has resulted from this Government option mortgage scheme.

I will refer to the pamphlet, which has been quoted, to show how the choice of people was directed by the Government Department concerned. The pamphlet— and this part is in larger print than the rest—states, on page 4: But if you qualify for tax relief on your interest at only 6s. or 4s. in the £ or get no tax relief at all, you will normally be better off with in option mortgage and the Government subsidy. When the pamphlet goes on to discuss what happens if one's circumstances change, that is in small print. Therefore, the Government are faced with people who have acted not only on what they make of the scheme, but who have acted directly on the pamphlet which the Government have issued for their help in reaching a decision.

Possibly one criticism which can be made of the scheme from the beginning is that it: is very complex. As the hon. Member for Heywood and Royton very properly said, the people exercising this mortgage option scheme normally do not go to accountants or even solicitors for advice. I contend that if someone looked at the pamphlet as a whole, and in particular at the tables given in it, his eyes would be drawn—as the pamphlet intends—to the big print which says that if someone is paying tax at below the standard rate, on balance this would be the best thing to do.

I have sent the Financial Secretary a copy of a letter I received from one of my constituents, and perhaps I might quote from it: Thus, by accepting two socially-intended benefits, not only do I not gain at all, although I have seven children under age 14 and a mortgage of some £2,400—I actually incur a net loss of £3. That is, of course, a net loss of £3 per month. I can give the hon. Gentleman the figures in that case because they have been worked out by the tax collector.

I cannot imagine that the Government wanted that to happen, but if we put forward cases such as that to Treasury Ministers, or to Ministers in the Ministry of Housing and Local Government, we are inevitably told, not that there is no justice in what we are asking for, but that it is administratively impossible to do it. It is no use telling people that they must suffer injustice because it is administratively impossible to put it right. People do not appreciate that argument.

The writer of the letter went on to say: I am at present in the extraordinary situation where it would be to my financial advantage to pay £2 a month for the privilege of not receiving either benefit. I cannot conceive that even this Government want that state of affairs to exist, and I hope that the hon. Gentleman will take careful note of the arguments put forward today. I am sure that he will.

It is very difficult for the change to be made vis-à-vis the building societies, to reopen the option mortgage scheme, but the suggestion put forward by the writer of the letter is that if the family allowance itself were not reduced as it is in the Act by £36, at the standard rate, it should be deducted at the higher rate paid by the taxpayer before the new allowance came in. I do not know whether that would meet the situation, but perhaps the Minister will comment on it.

The Financial Secretary comes from a part of the world in which many people who are buying houses qualify under the scheme. I am thinking of mill workers, factory workers, and so on, who buy houses worth between £800 and £2,500. They accepted the Government's word as given in the pamphlet, and although they were warned that their circumstances might change, this was not the sort of change envisaged when they opted for the mortgage. I hope that the Minister will give us what we are asking for.

Mr. G. Campbell

I, too, support my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) who has so lucidly explained the injustice which could be done to certain people who have taken decisions under the Housing Subsidies Act, 1967. Under that Act a prospective house purchaser was given a choice. He could decide to take the option mortgage and pay a special rate subsidised by the Government, or he could continue to have a normal mortgage, and, if he paid a considerable amount of tax, get relief on that. His decision depended on the amount of tax for which he was likely to be liable in future years.

As the hon. Member for Heywood and Royton (Mr. Barnett) said, this was never an easy decision. I was a member of the Committee which considered the Housing Subsidies Bill, and I then used much the same words as those used by the hon. Member for Heywood and Royton today. If he looks up the OFFICIAL REPORT of the Committee he will see that on several occasions I referred to the difficult decisions which had to be taken under the Act. There were different circumstances for different members of the public. Prospective house purchasers had, somehow, not only to foresee their own likely rate of income in the future but also the liability to taxation of that income, and whether or not there would be any significant raising or lowering of taxes. This was very difficult for them.

8.45 p.m.

Now, within a year of that Measure becoming law—in May last year—the Government have put forward a proposal which completely changes the liability to Income Tax of many persons who had to decide whether or not to take part in the opition mortgage scheme. This change will have upset the simplest calculations of a person who gave an option notice before the end of last year, and it is reasonable that he should now be given an opportunity to rescind that decision.

I realise that the Government will say that they cannot go on for ever allowing those who have taken decisions under the option mortgage scheme to change their minds. I will understand it if the Minister puts forward that argument tonight. But this is a very special situation, because up to December, 1967, people who already had mortgages were given the opportunity to take such a decision. They were given a deadline. Many of those who opted for the scheme find themselves in completely changed circumstances, and some may be considerably worse off. In this situation the Government can take special action this year without committing themselves to having to make other changes later just because there is another change in taxation.

I can understand the Government's saying that this is not deliberate. I agree that it is not their intention to mislead prospective house purchasers, but many people have been misled and let down by the Government. They have taken a very important decision, and the circumstances have now been radically altered.

I was not in the Committee which dealt with the 1967 Act and I am therefore glad to be able to speak on Report on this Finance Bill. I am glad that the Guillotine has not yet come down. I understand that in Committee the Government said that it was administratively too difficult to make this change but, as my hon. and learned Friend the Member for Darwen said, some recompense can be made by the Government to the people who have been caught by their actions.

The Government know that in Committee and in the House last year we supported the concept of an option mortgage scheme. Like the hon. Member for Heywood and Royton, I was in favour of the idea. My hon. Friends and I assisted the Government by improving the Bill that they produced and attempting to improve it further still. We would have proposed somewhat different provisions in this respect.

We were not altogether happy with their proposed procedure. But we would not have let that Bill become an Act if we had thought that the Government would, in this Finance Bill, make changes in the personal reliefs and thereby alter individual allowances and upset entirely decisions taken in good faith before the Budget.

I therefore appeal to the Financial Secretary, who is a reasonable man, to see that justice is done in this matter.

Mr. Harold Lever

This has been an interesting and sincere and, even though critical, moderately expressed debate, and I wish that this Amendment had made it possible for me to remain in order and discuss what might have been, in other respects, the best drafting of an option mortgage scheme, and matters of that kind. Unhappily, I am concerned only with the narrower point of what we do about people who opted into the mortgage scheme and who, as a result, find that, instead of gaining as they intended and as, I think hon. Members will accept, we in good faith intended, they lost.

In Committee, I expressed my wish to try to help these people if it were possible to do so. I did not say and I do not concede now, for reasons which I will give, that they were the victims of an injustice. That does not mean that I do not feel real sympathy for them, and, if I readily could, I would have helped them. I spent a good deal of time between Committee and now trying to evolve some means of satisfactorily dealing with the problem, and I have not been able to find any.

It has been said that this is retrospective and unjust. First of all, there is nothing retrospective whatever in this legislation. I thought that a good deal of the discussion on this was away from reality. When people were invited to exercise this option, it was pointed out to them that whether they gained or lost would depend upon their circumstances and that this gain or loss might change as their circumstances changed. The kind of circumstances upon which the gain or loss depends include tax rates, interest rates—[An HON. MEMBER: "It was not said."] It might not have been said, but I am not free to go into that.

If the hon. Gentleman is complaining that the; Minister responsible for the scheme did not sufficiently adumbrate and detail the circumstances of change, that may be another matter which would be very well dealt with by the Minister responsible for issuing the pamphlet. I can say only that we are satisfied that everybody was warned that changed circumstances would affect his position and people were warned that circumstances could change which would affect their position to a point at which, instead of gaining, they would lose.

I do not think that it would be in order for me to read through every detail of the pamphlet and then invite the House to judge whether I have fairly stated this matter. This is a matter which hon. Members are free to press, perhaps in criticism of the type of scheme, the structure of the scheme, and the like, but I am obliged to tell the House that, although I think that this can be a hardship, the extent of which I will discuss in a moment, and a hardship with which I fully sympathise and which I should like to avoid, the fact remains that people who opted under the scheme opted in the knowledge that their circumstances could change in a way which would make their option unrewarding as opposed to rewarding and that they would suffer actual loss.

Secondly, they were warned that, when they opted, that option would be irrevocable—

Mr. Dempsey

Would my hon. Friend make it clear at what stage these people were warned that a change in circumstances could negative the option which they had expressed?

Mr. Lever

At the stage before they opted for the mortgage scheme. In other words, before they opted they were informed that an option could turn out unfavourably if their circumstances changed.

I am not prepared to turn this into a debate—nor is it possible to do so— in which we examine the whole of the pamphlet put out by the Ministry to see whether the warning was adequate. That is another matter. I gather that the right hon. and learned Member for Hexham (Mr. Rippon) thinks that it is not another matter. I, for my part, will assert that the warning given was a reasonable warning, both as to irrevocability and as to change of circumstances.

None the less, I will not pretend that I do not regret that it has affected, and so soon, people who have opted.

Dr. Bennett

They trusted the Government.

Mr. Lever

It is not a question of trusting the Government. The Government did not enact their tax legislation with a view to nullifying the effect, or. still worse, affecting the situation adversely for these optants.

May I point out to the hon. Member for Moray and Nairn (Mr. G. Campbell) that no one in the Committee claimed, as far as I know, that he foresaw the kind of difficulty which this would bring about, namely, that a change in tax rates could be complained of as a retrospective action under the option mortgage scheme. If one were to say that because a taxation change has this effect on the option mortgage scheme, it is retrospective, because the man is locked in, then one must also make that complaint of any change in allowances or in the standard rate of tax or matters of that kind.

Did the public, did hon. Members who voted for that Act, believe that we were indicating that at no point would we change our standard rate of tax or change our tax allowances for the next 20 or 30 years in such a way as—

Mr. G. Campbell

I made it clear in my statement that we realised that there would be changes in taxation, but that we did not visualise that those who had to take a decision by a deadline last December would find the ground completely cut from beneath their feet by something announced in March.

Mr. Lever

It does not matter whether it was announced in March, 1968, or in March, 1978. Hon. Members have accused the Government of retrospection because the tax rates have been changed to the detriment of someone locked in the option mortgage scheme. Those people knew that they were locking themselves in and they knew that a change in their circumstances might result in that being to their detriment.

If hon. Members say that the situation is unfortunate, I join them. It is unfortunate that somebody so soon should suffer in such a way. But without a misuse of language, hon. Members cannot talk of this as retrospection or as though the Government implied, when they brought in the Bill, that they would never change the tax rates or allowances in such a manner as might affect these people to their detriment. Clearly, that would have been an impossible commitment for any Government to undertake, and the present Government certainly did not undertake it.

I therefore say sharply—or, rather, I say that we must sharply make a division between sympathy for the people who are affected and that kind of accusation. I rarely speak sharply, and I meant to say that the distinction must be sharp. We must make a sharp division between a claim which merits sympathy for consideration and a claim which commands an imperative right to be corrected by the Government to the extent of legislation being enacted, the Government having retrospectively legislated to the detriment of people in an improper way. I agree with the first part of the claim, but I reject the second part completely.

I must make one or two comments on the problem of dealing with opting out. If options out are allowed on these grounds it is difficult to see how one could draft one's option opting outright so as to limit it to these cases and no others. There must be other cases of people whose circumstances have changed, by a change of interest rates, a change of earnings, a change in the number in the family and matters of that kind, whom we might wish to opt out. We would, therefore, have to allow the opting out this year to the whole class of people concerned, and we would, in addition, have a very dubious ground on which to stand if we did not give the same right to people similarly affected in the second or third year.

It is not possible to single out one person who has been adversely affected and not deal with people who have at least as good if not a stronger claim, and this would be necessary before I could recommend a Clause that did reasonable justice to all the people concerned.

9.0 p.m.

The further problem is that the administration of the scheme is sufficiently difficult as it is, not merely for the Inland Revenue. I could look into the matter to consider whether we could by some heroic exercise yet again try to meet the problem, but I am completely unable to help on the aspect that the scheme depends for its operation on the co-operation of the building societies. The building societies have said in the plainest terms that they cannot operate the scheme except on the basis of an irrevocable decision taken by the people concerned. I am not, therefore, in a position to give the relief in a form that would enable opting out to take place, since I cannot commit the building societies, and I have every reason to believe that it will be impossible to get them to change their view upon the matter. Therefore, I could not do what is asked in the Amendment or what was asked in Committee.

Hon. Members have quoted cases of the significant changes that have occurred. The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) mentioned a case in which he calculates that a man, instead of being 15s. a week better off, will be 10s. a week worse off. I have applied the skilled computers of the Inland Revenue to the facts so far as they have been revealed, and, on any reasonable assumption that we can make about the facts which were not revealed, we worked out that the man in question, however genuine in his conviction, has in fact moved from a position of 5s. to 6s. a week gain to a loss of about 1s. a week.

I want hon. Members to keep this in proportion. I do not say that 1s. a week must be ridiculed. For example, it may mean that the loss is coupled with the disappointment of losing the gain that had been expected. I do not think that it will be easy for the hon. and learned Gentleman to find cases where there are losses of either £3 a month or even of the 10s. a week that he has mentioned.

Mr. Fletcher-Cooke

I am surprised that at this late hour the details which I gave in Committee three or four weeks ago, and which I repeated tonight, have only now been challenged. I should have thought, either when we were upstairs, or a day or so later, the Financial Secretary might have written to me asking for further details of the case, and, if he challenged it, letting me know how he challenged it.

Mr. Lever

In Committee, we did not give this computation to the Committee. It has been alleged that there are cases of a loss of as much as £3 a month. I should be very interested to have details from the hon. and learned Gentleman, not at this moment but at some convenient time. I will certainly have it looked into. Hon. Members have now put forward the suggestion that we ought to look at the other possibilities of dealing with the matter.

Mr. Cranley Onslow (Woking)

The Financial Secretary may recall that I sent particulars to him of a loss which was about £2 a month, if not more. I am sorry to say that I have not yet had any full reply. The delays that have occurred in answering correspondence on this point have been disappointing.

Mr. Lever

I am sorry if the hon. Gentleman has not had a prompt reply. I deeply regret it. There is a pressure of work upon the Department at this season which is the only mitigating plea that I can make. I do not say that that excuses it. I very much apologise to the hon. Member for any delay, and I shall have the matter looked into immediately.

Mr. Barnett

On 7th May the Parliamentary Secretary to the Ministry of Housing and Local Government said that while he could not allow opting in or out after 31st December, 1967, he was looking at cases of special hardship. Is the Financial Secretary now saying that it is possible to look at cases of special hardship that might arise out of this or any other matter?

Mr. Lever

I was going on to say that the discussions which we have had today, coupled with the fact that I have never disguised my sympathy with those who are affected, make me feel that this matter ought to be looked at very carefully, not necessarily from the Revenue angle, which was the rather narrow approach we had here, but in more general terms, to see what is the extent of the difficulty and what are the possibilities other than a mere opting in and out for revenue purposes, which is impossible administratively both for the Revenue and for the building societies.

I think that hon. Members have made a very considerable case which should be looked at to see what considerations can be given to people affected in this way. I am particularly grateful to my hon. Friend the Member for Heywood and Royton (Mr. Barnett), who sits in the seat that I used to occupy with some satisfaction in previous years, and I am glad that he brings the same dispassionate objectivity to bear on these matters.

I am not retreating behind the narrow plea of the Revenue. There is a case to be looked at. But, within the framework of our discussions in Committee and again today, I cannot help. That does not mean that that sheds the whole Government obligation. My hon. Friend the Parliamentary Secretary to the Ministry of Housing and Local Government pledged himself to look into it, and that pledge ought to be followed up. I will add my words in support of the comments made today that the matter should be given the most urgent examination. All that I regret is that, within the framework of the Amendment and the administration of tax, I cannot put this difficulty to rights.

I hope that hon. Members will not think that I have failed in my duty which was, after the Committee stage, to see what could be done within this framework to solve the problem. On the other hand, I am unable to help, but that does not mean that the matter must not be looked at urgently elsewhere.

Mr. Rippon

None of the people who who have been so seriously misled by the Government will be impressed by the crocodile tears that the Financial Secretary has shed. I thought that it was a thoroughly hypocritical and unsatisfactory reply—

Mr. Harold Lever

The right hon. and learned Gentleman apparently likes to indulge in polysyllabic adjectives. Does he mean that I was insincere in my assertions of sympathy, or does he consider that some other meaning should be attached to it?

Mr. Rippon

I thought that my words were clear and censorious in their tone, and deliberately so. I cannot understand how the Financial Secretary can challenge the facts laid before his Department by many hon. Members on both sides of the House not only in correspondence but in Committee and in Parliamentary Questions put to the responsible Ministers in the Ministry of Housing and Local Government. It is not good enough to say, "We are very sympathetic. We think there is a case which ought to be looked into." It should have been looked into by now.

The Financial Secretary began by saying that he had real sympathy for people who have suffered hardship as a result of the decision that they have taken in the light of guidance which they received from the Government. He said that they had been unfortunate. But who other than the Government can put that right? He has conceded already that something has gone seriously wrong, but then he says, "There is nothing that we can do about it".

Mr. Harold Lever

I did not say that there is nothing that we can do about it. I said that there is nothing that we can do about it within the framework of the Amendment.

Mr. Rippon

The Government have all the resources to frame an Amendment in a form which remedies an injustice, even if it means making an ex gratia payment to those who have suffered as a result of their action. It is not good enough for the hon. Gentleman to say that the document which misled the public was the responsibility of the Minister of Housing and Local Government. It is the Government's collective responsibility, and the Treasury shares it as much as anybody else. The Government were aware of the document that was sent out and of the guidance given to people that those paying less than £80 per annum in tax were likely to benefit from an option mortgage. Many of them have been misled and as a result have suffered financially. Surely the Government can do something about such cases?

In our discussions on the Housing Subsidies Act we on this side of the House pressed unsuccessfully for a second option to be permitted to mortgagors. That is a matter which perhaps raises considerations for wider amendment of the Act in due course. We pointed out the inflexibility of the Government's provisions and warned of the dangers that might arise. We were then discussing the difficulty that faced a man entering into a mortgage in making the decision, perhaps very early in his life, as to whether or not he was likely to go on paying, say, 6s. in £, for a very long period or was likely to improve his prospects. It was understood that people would have to make the decision in the light of their assessment of their circumstances, such as whether they were in the sort of occupation that had reasonable prospects of promotion and advancement.

For the person buying a house under an existing mortgage, it was rather easier to make the decision whether he was likely to benefit by the new provisions. That is why a higher proportion of existing mortgagors have exercised the option as compared with new mortgagors.

In the light of what the Minister said today, the Government should warn people in pretty strong terms that they should take advice from sources other than the pamphlet before they exercise an option. Last month's building society magazine, Building Society Affairs, illustrated some of the difficulties now arising under the Act. As it says, The Scheme was devised at a time when most societies were charging 7⅛ per cent. to borrowers but now that the mortgage rate has risen to 7⅝ cent., tax reliefs have increased whereas the subsidy has remained static so that the advantage of opting has diminished…. It is now particularly difficult for a person in the 6s. tax band to make up his mind whether or not to opt because, for every £1,000 borrowed, he will, at the end of 25 years, be only £85 better off through opting. After 10 years (the average life of a mortgage) the advantage, taking into account the balance of debt outstanding, would be only £32 for every £1,000 borrowed. That is part of the general anxiety which arises at present to which the hon. Gentleman referred. It is a disappointing scheme, and it is not fulfilling in any way the expectations of those who promoted it or those on this side of the House who supported it, believing that it would bring some benefit to those in the lower income ranges.

We are not really seeking, however, to raise tonight the general issue as to

whether or not in ordinary circumstances a man should exercise the option. We accept that people must make a judgment as to whether their conditions will change or whether the standard rate may change, because one assumes that as the standard rate changed so the whole range of reliefs would be spread generally over the whole community. The effect on the option of the subsection about family allowances is in a sense a comparatively minor adjustment which nobody might have foreseen. It is because it is a limited point, and because the hardship can be so clearly identified, that we think that the Government should do their duty and compensate those who have been misled.

9.15 p.m.

At the very least we ought to have an undertaking in much firmer terms than we have had so far that this extremely misleading document sent out in the Government's name—"Your guide to the option mortgage scheme"—will be amended and reissued. Also, the Government, who spent a good deal of money on an advertising campaign telling people of the advantages of joining the option mortgage scheme, should now issue a further series of advertisements explaining how they have falsified the hopes on which so many people were induced to act, and in those advertisements they ought to state the steps which they are taking to enable those who have suffered hardship as a direct result of the Government's action to be compensated.

Question put, That the Amendment be made:—

The House divided: Ayes 139, Noes 194.

Division No. 265.] AYES [9.16 p.m.
Allson, Michael (Barkston Ash) Campbell, B. (Oldham, W.) Farr, John
Allason, James (Hemel Hempstead) Campbell, Gordon (Moray & Nairn) Fletcher-Cooke, Charles
Astor, John Carr, Rt. Hn. Robert Fortescue, Tim
Awdry, Daniel Chichester-Clark, R. Gibson-Watt, David
Baker, W. H. K. (Banff) Clegg, Walter Gilmour, Ian (Norfolk, C.)
Balniel, Lord Cooke, Robert Glover, Sir Douglas
Beamish, Col. Sir Tufton Craddock, Sir Beresford (Spelthorne) Godber, Rt. Hn. J. B.
Bennett, Dr. Reginald (Gos. & Fhm) Crowder, F. P. Goodhart, Philip
Biggs-Davison, John Cunningham, Sir Knox Goodhew, Victor
Black, Sir Cyril Dance, James Gower, Raymond
Blaker, Peter Davidson, James (Aberdeenshire,W.) Gurden, Harold
Bossom, Sir Clive d'Avigdor-Goldsmid, Sir Henry Hall, John (Wycombe)
Braine, Bernard Dean, Paul (Somerset, N.) Harrison, Col. Sir Harwood (Eye)
Brewis, John Dodds-Parker, Douglas Harvie Anderson, Miss
Brown, Sir Edward (Bath) Eden, Sir John Hawkins, Paul
Bruce-Gardyne, J. Elliott, R. W. (N'c'tle-upon-Tyne, N.) Heald, Rt. Hn. Sir Lionel
Bryan, Paul Emery, Peter Heath, Rt. Hn. Edward
Buchanan-Smith, Alick (Angus,N&M) Errington, Sir Eric Higgins, Terence L.
Buck, Antony (Colchester) Eyre, Reginald Hill, J. E. B.
Hooson, Emlyn Onslow, Cranley Taylor, Sir Charles (Eastbourne)
Hordern, Peter Osborn, John (Hallam) Taylor, Frank (Moss Side)
Hornby, Richard Osborne, Sir Cyril (Louth) Temple, John M.
Hunt, John Page, Graham (Crosby) Thatcher, Mrs. Margaret
Iremonger, T. L. Page, John (Harrow, W.) Turton, Rt. Hn. R. H.
Jenkin, Patrick (Woodford) Pardoe, John van Straubenzee, W R.
Kirk, Peter Pearson, Sir Frank (Clitheroe) Vaughan-Morgan, Rt. Hn. Sir John
Kitson, Timothy Peel, John Waddington, D.
Lane, David Percival, lan Wainwright, Richard (Colne Valley)
Langford-Holt, Sir John Pounder, Rafton Walker, Peter (Worcester)
Legge-Bourke, Sir Harry Powell, Rt. Hn. J. Enoch Walker-Smith, Rt. Hn. Sir Derek
Lewis, Kenneth (Rutland) Prior, J. M. L. Ward, Dame Irene
Lubbock, Eric Pym, Francis Weatherill, Bernard
MacArthur, lan Ramsden, Rt. Hn. James Wells, John (Maidstone)
Mackenzie, Alasdair (Ross & Crom'ty) Rees-Davies, W. R. Whitelaw, Rt. Hn. William
Macleod, Rt. Hn. lain Rhys Williams, Sir Brandon Williams, Donald (Dudley)
McMaster, Stanley Rossi, Hugh (Hornsey) Wills, Sir Gerald (Bridgwater)
Maddan, Martin Russell, Sir Ronald Wilson, Geoffrey (Truro)
Maginnis, John E. Scott, Nicholas Winstanley, Dr. M. P.
Maude, Angus Scott-Hopkins, James Wolrige-Gordon, Patrick
Mawby, Ray Sharples, Richard Wood, Rt. Hn. Richard
Maxwell-Hyslop, R. J. Shaw, Michael (Sc'b'gh & Whitby) Woodnutt, Mark
Mills, Peter (Torrington) Silvester, Frederick Wylie, N. R.
Miscampbell, Norman Sinclair, Sir George Younger, Hn. George
More, Jasper Smith, Dudley (W'wick & L'mington)
Mott-Radclyffe, Sir Charles Smith, John (London & W'minster) TELLERS FOR THE AYES:
Murton, Oscar Stainton, Keith Mr. Anthony Grant and
Nabarro, Sir Gerald Summers, Sir Spencer Mr. Hector Monro.
Nott, John Tapsell, Peter
Albu, Austen Fitch, Alan (Wigan) Lomas, Kenneth
Alldritt, Walter Fletcher, Raymond (llkeston) Loughlin, Charles
Allen, Scholefield Fletcher, Ted (Darlington) Lyons, Edward (Bradford, E.)
Archer, Peter Foley, Maurice Mabon, Dr. J. Dickson
Atkins, Ronald (Preston, N.) Foot, Michael (Ebbw Vale) McBride, Neil
Atkinson, Norman (Tottenham) Ford, Ben McCann, John
Baxter, William Forrester, John MacColl, James
Beaney, Alan Fowler, Gerry Macdonald, A. H.
Bence, Cyril Fraser, John (Norwood) McGuire, Michael
Benn, Rt. Hn. Anthony Wedgwood Freeson, Reginald Mackenzie, Gregor (Rutherglen)
Bennett, James (G'gow, Bridgeton) Galpern, Sir Myer Mackintosh, John P.
Bishop, E. S. Gardner, Tony Maclennan, Robert
Blackburn, F. Ginsburg, David McNamara, J. Kevin
Blenkinsop, Arthur Gourlay, Harry Mahon, Peter (Preston, S.)
Boardman, H. (Leigh) Gray, Dr. Hugh (Yarmouth) Mahon, Simon (Bootle)
Booth, Albert Greenwood, Rt. Hn. Anthony Mallalieu, E. L. (Brigg)
Bottomley, Rt. Hn. Arthur Gregory, Arnold Manuel, Archie
Braddock, Mrs. E. M. Griffiths, Eddie (Brightside) Marks, Kenneth
Bradley, Tom Griffiths, Will (Exchange) Marquand, David
Brooks, Edwin Hamilton, James (Bothwell) Mason, Rt. Hn. Roy
Brown, Hugh D. (G'gow, Provan) Hamilton, William (Fife, W.) Mellish, Rt. Hn. Robert
Bucnan, Norman Hamling, William Mendelson, J.J.
Buchanan, Richard (G'gow, Sp'burn) Hannan, William Millan, Bruce
Callaghan, Rt. Hn. James Harper, Joseph Miller, Dr. M. S.
Cant, R. B. Harrison, Walter (Wakefield) Milne, Edward (Blyth)
Carmichael, Neil Haseldine, Norman Moonman, Eric
Coe, Denis Heffer, Eric S. Morgan, Elystan (Cardiganshire)
Coleman, Donald Henig, Stanley Neal, Harold
Crawshaw, Richard Herbison, Rt. Hn. Margaret Newens, Stan
Cullen, Mrs. Alice Hooley, Frank Noel-Baker, Rt. Hn. Philip (Derby, S.)
Dalyell, Tam Horner, John Oakes, Gordon
Davidson, Arthur (Accrington) Houghton, Rt. Hn. Douglas Ogden, Eric
Davies, Ednyfed Hudson (Conway) Howarth, Harry (Wellingborough) O'Malley, Brian
Davies, Harold (Leek) Howie, W. Orme, Stanley
Davies, lfor (Gower) Hoy James Oswald, Thomas
Dell, Edmund Huckfield, Leslie Owen, Dr. David (Plymouth, S'tn)
Dempsey, James Hughes, Roy (Newport) Page, Derek (King's Lynn)
Dewar, Donald Hunter, Adam Palmer, Arthur
Diamond, Rt. Hn. John Irvine, Sir Arthur (Edge Hill) Pannell, Rt. Hn. Charles
Dickens, James Jackson, Colin (B'h'se & Spenb'gh) Parker, John (Dagenham)
Doig, Peter Jenkins, Rt. Hn. Roy (Stechford) Parkyn, Brian (Bedford)
Dunn, James A. Johnson, James (K'ston-on-Hull W.) Pavitt, Laurence
Dunwoody, Mrs. Gwyneth (Exeter) Jones, Dan (Burnley) Pearson, Arthur (Pontypridd)
Dunwoody, Dr. John (F'th & C'b'e) Jones, Rt. Hn. Sir Elwyn (W.Ham,S.) Peart, Rt. Hn. Fred
Edwards, Robert (Bilston) Jones, J. Idwal (Wrexham) Pentland, Norman
Edwards, William (Merioneth) Kelley, Richard Perry, George H. (Nottingham, S.)
Ellis, John Lawson, George Prentice, Rt. Hn. R. E.
English, Michael Ledger, Ron Price, Thomas (Westhoughton)
Ensor, David Lestor, Miss Joan Price, William (Rugby)
Evans, loan L. (Birm'h'm, Yardley) Lever, Harold (Cheetham) Probert, Arthur
Faulds, Andrew Lewis, Arthur (W. Ham, N.) Rankin, John
Fernyhough, E. Lewis, Ron Rees, Merlyn
Richard, Ivor Steele, Thomas (Dunbartonshire, W.) Wellbeloved, James
Robertson, John (Paisley) Swingler, Stephen Whitaker, Ben
Rodgers, William (Stockton) Symonds, J. B. Whitlock, William
Rose, Paul Taverne, Dick Wilkins, W. A.
Sheldon, Robert Thomson, Rt. Hn. George Williams, Alan Lee (Hornchurch)
Shore, Rt. Hn. Peter (Stepney) Thornton, Ernest Williams, Mrs. Shirley (Hitchin)
Short, Mrs. Renée (W'hampton, N.E.) Tinn, James Williams, W. T. (Warrington)
Silkin, Rt. Hn. John (Deptford) Tuck, Raphael Winnick, David
Silkin, Hn. S.C. (Dulwich) Urwin, T. W. Woof, Robert
Silverman, Julius Varley, Eric G. Yates, Victor
Slater, Joseph Walter, Harold (Doncaster)
Small, William Wallace, George TELLERS FOR THE NOES:
Snow, Julian Watkins, David (Consett) Mr. Ernest Armstrong and
Spriggs, Leslie Watkins, Tudor (Brecon & Radnor) Mr. Ernest G. Perry.
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