HC Deb 23 May 1974 vol 874 cc752-3

10.32 p.m.

The Under-Secretary of State for the Environment (Mr. Gerald Kaufman)

I beg to move: That the Assistance for House Purchase and Improvement (Increase of Subsidy) Order 1974, a draft of which was laid before this House on 17th May, be approved. The hon. Member for Worthing (Mr. Higgins) said earlier that he was part of the late show, but it seems that the motto of the hon. Member for Hornsey (Mr. Rossi) and myself is that we never close. We start early, we work the night shift and we earn our money.

This draft order has the effect of increasing the scales of option mortgage subsidy at present set out in Statutory Instrument 1973 No. 1928. It is simply consequential to the changes in the basic personal rate of tax, announced in the Budget, from 30 per cent. to 33 per cent. The new subsidy scale will restore broad equality of treatment as between the option mortgagor and the mortgagor eligible for full tax relief at the basic rate on mortgage interest. The subsidy payable on an annuity mortgage—that is, the normal form of mortgage—at 11 per cent. will be increased from 3.25 per cent. to 3.6 per cent. This means, for example, that the monthly payment by an option mortgagor in the first year of a 25-year annuity option mortgage for £6,000 will be reduced by about £1.40.

The order is straightforward in its effect, but I particularly wish to draw attention to three points. First, when we last debated this subject a few months ago it was pointed out that there is a minor discrepancy between the amount of assistance available under tax relief at the basic rate, and subsidy, at the top and bottom of the steps in the subsidy scales. Such small discrepancies are inevitable but these have been reduced.

Where previously the subsidy was related to steps of 0.875 per cent. in the mortgage rate, under the proposed scale the subsidy will be related to narrower steps of 0.6 per cent. in the mortgage rate. This gives a closer correspondence with tax relief. It would be possible to reduce the steps even further but we decided not to do this because it would have produced an administratively long and cumbersome scale.

Secondly the House will note that, as previously, the draft order provides for two scales of subsidy, one for annuity mortgages and one for endowment mortgages. The latter is slightly lower. This is to ensure that, given that the endowment mortgage involves payment of interest only on a loan, both types of mortgage attract about the same proportion of interest-related subsidy. The increased rates of subsidy will come into effect on 1st August 1974. This will give lenders—who have been consulted—time to make the necessary administrative arrangements. I commend the order to the House.

10.36 p.m.

Mr. Hugh Rossi) (Hornsey)

The Opposition welcome the order and the relief that it will give to those who are in the option mortgage scheme. As the Minister has frankly stated, this is the direct result and the logical consequence of the increase in the basic rate of income tax in the Budget and it merely brings the option mortgage people up to parity with those mortgage payers who are able to offset their interest against the new rates of income tax.

Question put and agreed to.

Resolved, That the Assistance for House Purchase and Improvement (Increase of Subsidy) Order 1974, a draft of which was laid before this House on 17th May, be approved.