§ 12. Mr Frank Allaun
asked the Chancellor of the Exchequer what is the annual and total tax relief, respectively, on a 100 per cent. mortgage on the average priced house of £9,090 bought over 25 years at present interest rates, compared with those reliefs on such a mortgage on a house costing £25,000, and the approximate annual saving if such tax relief were limited to the standard rate and mortgage ceilings were reduced to £9,090.
§ Mr. Robert Sheldon
With permission, as the answer is somewhat lengthy, I shall arrange for it to be circulated in the Official Report.
§ Mr. Allaun
Would not these two proposals save the Government about £160 million a year without hurting the average-income purchaser of an ordinary house, although the ceiling in London would have to be higher? Secondly, would not this be much fairer than to slash council house subsidies, which would be bound to mean a further increase in rents and a reduction in house building?
§ Mr. Sheldon
I understand the point made by my hon. Friend, but they are largely matters for my right hon. Friend the Secretary of State for the Environment. My hon. Friend will know that the housing finance review will be ready in the autumn. The financial implications of the matters to which he refers will need to be considered carefully in the light of that review. We know his interest in these matters, and we shall continue to watch over them as best we can.
§ Mr. Michael Latham
Will the hon. Gentleman confirm that, however one does the sums, it still costs three times as much to house a person in a new council house as to help him buy his own home?
§ Mr. Sheldon
The hon. Gentleman uses his figures glibly. I am unable to confirm or deny the figures at the moment. But the way in which housing finance has developed over the years and the amount of money provided by the Chancellor in the way of subsidies of one kind or another have led to the urgent need for a review, and we await the report with great interest.
Following is the answer:The tax relief depends on the rate of interest, the levels of tax rates and allowances, and the amount and composition of the mortgagors income.The relief in the first year, at the present basic rate of tax and a mortgage interest rate of 10½ per cent., would be approximately £37 per £1,000 of mortgage in each case. Assuming that the interest rate continued at 10½ per cent. and that the payments attracted relief at the 1976–77 basic rate of tax throughout the period of the mortgage, total tax relief would be approximately £650 per £1,000 of mortgage in each case. If relief was limited to a mortgage ceiling of £9,090, the reduction in tax relief at the basic rate of tax would be £589 in the first year and, on the assumptions given above, £10,342 over the whole period. The effect of limiting relief to the basic rate of tax will depend on the taxpayer's original rate of tax.