HC Deb 06 August 1980 vol 990 cc632-47

Lords Amendment: No. 117, after clause 109, in page 78, line 23, at end insert— F.—(1) The provisions of section 24(1)(B) of the Housing Subsidies Act 1967 shall have effect where a person borrows, or two or more persons borrow jointly, from a qualifying lender on the security of a freehold or leasehold estate of the borrower, or of one or more of the borrowers (including an estate held jointly or in common by the borrower, or one or more of the borrowers and one or more other persons) in land in Great Britain, and the following conditions are satisfied:—

  1. (a) that the loan is or was made as part of a scheme under which not less than nine tenths of the proceeds of the loan are or were applied to the purchase by the person 633 or persons to whom it was made of an Annuity ending with his life or with the life of the survivor of two or more persons (in this section referred to as "the Annuitants") who include the person or persons to whom the loan is made;
  2. (b) that at the time the loan is made the person to whom it is made or each of the Annuitants had attained the age of 65 years; and
  3. (c) that the person or persons to whom the loan is made or each of the Annuitants uses the land on which it is secured as his only residence.
(2) The borrower or borrowers may by notice in writing to the lender in such form as the Ministry may direct (in this section referred to as an "Option Mortgage") elect that the loan shall be subsidised in accordance with the provisions of Part II of the Housing Subsidies Act 1967 and the Option Notice shall be treated for all purposes as if it were an Option Notice made under the provisions of section 24 of the said Act.

Mr. Stanley

I beg to move, That this House doth disagree with the Lords in the said amendment.

Mr. Speaker

With this it will be convenient to discuss the following:

The amendment to the Bill in lieu thereof tabled by the Secretary of State for the Environment:

'Subsidised loans—further application of Part II of 1967 Act

(1) In relation to a loan which satisfies the two conditions stated in subsections (2) and (3) below Part II of the Housing Subsidies Act 1967 shall have effect as if the loan were for or in connection with one or more of the purposes specified in section 24(1)(b) of that Act.

(2) The first condition is that the loan—

  1. (a) is made as part of a scheme under which not less than nine-tenths of the proceeds of the loan are applied to the purchase by the person or persons to whom it is made of an annuity—
    1. (i) ending, if the loan is made to one person, with his life or with the life of the survivor of two or more persons who include that person, and
    2. (ii) ending, if the loan is made to more than one person, with the life of the survivor of two or more persons who include the persons to whom the loan is made; or
  2. (b) was made under such a scheme before the commencement of this section.

(3) The second condition is that each of the persons mentioned in subsection (2) above has attained the age of sixty-five years at the time the loan is made (or) if the loan was made before the commencement of this section, had attained that age at the time the loan was made).'.

Government consequential amendment in page 94, line 25, after '109', insert 'to'.

Mr. Stanley

I announced on 29 July in a reply to a question from my hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury) that the Government accepted the principle of the new clause agreed to in another place. In the light of the argument advanced during the proceedings both on this Bill and on the Social Security Bill the Government have decided that the option mortgage scheme should be extended to provide additional income to elderly non-taxpaying owner-occupiers who buy an annuity on the security of their home. This will help them to remain longer in their homes, which is the wish of the great majority of them.

The amendment that was carried in another place is incompatible with the statutory framework of the option mortgage scheme. The Government amendment is essentially a technical measure that will further the intention of the Lords amendment.

The consequential amendment ensures that the provision applies to Scotland as well as to England and Wales. I believe that the alteration to the option mortgage scheme will be widely welcomed among the considerable number of low-income owner-occupiers who are seeking to supplement their income so that they may remain in the homes that they own.

Mr. Martin Stevens (Fulham)

Like so many in this place and in another place, I am deeply grateful to my hon. Friend and his colleagues for accepting this proposition. However, it has been said that the date on which it can come into force after the Bill has received Royal Assent may be in question. I shall be grateful if my hon. Friend will tell the House when we may expect this provision to be effective after the Bill has become law.

Mr. Stanley

I am not able to give my hon. Friend the Member for Fulham (Mr. Stevens) a precise answer now. There are a number of quite complicated technical arrangements that need to be made before this facet of the scheme can be extended. I assure him that we want to bring it into operation as rapidly as possible and that we shall work to that end.

Mr. Ted Graham (Edmonton)

We have reached a stage where we wonder into which precise category the Government's attitude may be placed. Is it to be placed in the "half a loaf" category or the "discretion is the better part of valour" category? There is no doubt that the Government's attitude in accepting gracefully that which was moved in another place is a substantial change in the attitude that was evinced by their spokesman in another place on more than one occasion. The Government having advanced their argument time after time and subsequently having made a substantial U-turn, we are entitled to a debate and an explanation.

First, we are entitled to say that the amendment that was moved in another place had the support of all the Benches in that place. There was support from the Liberal Benches. I pay tribute to the part played by Lord Banks to support that formidable trio of Ladies Vickers, Faithfull and Phillips. The support that came in another place had all-party support and that must be acknowledged.

It must also be acknowledged that the Government's acceptance of the principle that is enshrined in their amendment in lieu thereof is a major tribute to the tenacity of two responsible and respectable organisations—namely, Help the Aged and Age Concern. They were tenacious in their attempts to obtain equity in other legislation for the group of elderly citizens that we are discussing. They have been persistent. They will be delighted with the result of their efforts.

9.30 pm

We are entitled to remind the House and those affected by the Bill of the present position, and of the effect of the changes. An elderly person who owns his own home, and who has an inadequate income, can supplement his income by raising a mortgage in order to purchase an annuity. From that annuity, he pays interest on the mortgage. The balance of the annuity provides the extra income. It is right that those who pay tax should enjoy tax relief on mortgage interest, thus making the arrangements much more attractive to them than to non-taxpayers. When the Minister acknowledged the amendment from the other place he failed to mention not only that it had been carried but that it had been carried by a substantial majority, in House of Lords terms. There were 114 votes in favour of the amendment and 85 votes against. Those who read the proceedings of the other place will know that the figure of 85 represents the type of support that the Government had during most of the proceedings. The figure of 114 was made up of Lords from both sides and by those who sit on the Cross Benches.

The Lords amendment and the Government amendment seek to extend to non-taxpayers the option mortgage arrangements that are available to the non-taxpayer, who raises a mortgage to buy his house. The benefit of paying a lower, Government-subsidised rate of interest on a mortgage should be extended to those elderly people who do not pay tax. In the same way, elderly taxpayers get a tax benefit. I was delighted to note the success of Lord Banks. During the debate in the House of Lords, he successfully quoted the words of Lord Carr. All hon. Members are aware that he was an eminent and respected hon. Member. He was once Home Secretary, and a leading member of the Conservative Party. He expressed support for the principles contained in the amendment. The Minister's friends in the other place advanced arguments that have now been reversed. They repeatedly advanced the argument that no general principle stated that tax relief for taxpayers should be matched by subsidies for non-taxpayers. The Government have clearly made a concession to that argument.

The argument was also advanced that option mortgages are designed to encourage home ownership. The amendment would have been a new departure. The Minister appears to have accepted that new departures should be welcomed and that there is nothing wrong in redressing a clear injustice. It was also said that if the amendment were accepted, the effect would be more attractive to non-taxpayers. It was said that taxpayers' money would be used to subsidise a special group. The philosophy of the Conservative Party is to encourage and sustain home ownership. Secondly, the Conservative Party has a special place in its philosophy for looking after the elderly. Thirdly, the Conservative Party continually seeks to maintain its interest in equity. Those three principles were thrown overboard by the Conservative spokesman in the House of Lords during resistance to the amendment.

The other argument which has now been accepted by the Government is that of cost. A Government spokesman in the other place said that if the amendment that the Government are now moving were accepted, it could cost any-think up to £10 million. Of course, the mover of the successful amendment claimed that at most the amendment might cost £2½ million. It was estabblished quite clearly in the other place that there was likely to be a greater burden on the taxpayer by not assisting elderly non-taxpayers—that is if the concession were not made. We all know that in many instances if the elderly were denied the opportunity of continuing to own their own homes—

Mr. Robert Kilroy-Silk (Ormskirk)

I am a little worried about my hon. Friend's remarks. If he accepts the principle that the subsidy given to taxpayers should now be given to non-taxpayers, will he go further and say that the same subsidy should be given to those elderly constituents of mine who do not own their own homes and who do not have the ability to do so? Are we supporting the principle of the subsidy all the way along the line?

Mr. Graham

With respect, the argument here relates to those who own their own homes or who wish to own their own homes and who are elderly. At present those who are not elderly have the opportunity, whatever their circumstances, of taking advantage of the option mortgage. The principle now enshrined in the amendment, and previously resisted by the Government, is that the benefit of the option mortgage, open at present to those who are not elderly, should be extended to the elderly who are non-taxpayers and for whom the option mortgage is the best arrangement. I am grateful to the Minister for having indicated that the technical defects in the Lords amendment have now been put right in the amendment before us.

Mr. Durant

Is the hon. Member aware that during the period of the Labour Government this proposal was moved in various Finance Bills in the other place and that the hon. Member for Ormskirk (Mr. Kilroy-Silk) raised the very points that have been raised by his party in opposition to the principle behind this matter? I am delighted that the hon. Member has seen fit to welcome it, but his party was not too keen when it was in government.

Mr. Graham

The clearest indication of why the Government have finally accepted the amendment has been the campaign waged, not merely by hon. Members on both sides of this House but of those in another place as well. Also because of the effects of inflation, not least during the past 18 months, there has been a growing case to be made out for the benefits of the option mortgage for the non-taxpaying elderly who are buying their homes. Very late in the day, the Government, despite resisting the arguments in another place, have come before us tonight with an acceptable form of words. In view of the fact that the Government have accepted the principle and will put the matter right, I have pleasure in urging my right hon. and hon. Friends to accept the Government amendment.

Lords amendment disagreed to.

Amendment proposed to the Bill in lieu thereof:

'Subsidised loans—further application of Part II of 1967 Act

(1) In relation to a loan which satisfies the two conditions stated in subsections (2) and (3) below Part II of the Housing Subsidies Act 1967 shall have effect as if the loan were for or in connection with one or more of the purposes specified in section 24(1)(b) of that Act.

(2) The first condition is that the loan—

  1. (a) is made as part of a scheme under which not less than nine-tenths of the proceeds of the loan are applied to the purchase by the person or persons to whom it is made of an annuity—
    1. (i) ending, if the loan is made to one person, with his life or with the life of the survivor of two or more persons who include that person, and
    2. (ii) ending, if the loan is made to more than one person, with the life of the survivor of two or more persons who include the persons to whom the loan is made; or
  2. (b) was made under such a scheme before the commencement of this section.

(3) The second condition is that each of the persons mentioned in subsection (2) above has attained the age of sixty-five years at the time the loan is made (or, if the loan was made before the commencement of this section, had attained that age at the time the loan was made).'.—[Mr. Stanley.]

Several Hon Members


Mr. Speaker

We have already discussed this and I am putting the Question now. [Interruption.] I do not understand why hon. Members remain standing when I am on my feet. I am sorry if I have misunderstood the House. I am not trying to deny anyone his rights. If hon. Members wish to speak to this amendment in lieu I will allow them to do so.

Mr. Straw

I am grateful to you, Mr. Speaker. We have become so deferential to you during today that I was hesitant to stand when you were standing. Because of that, the desire of the hon. Member for Brentwood and Ongar (Mr. McCrindle) and I to speak was almost overlooked.

I wish to speak not only on the amendment in lieu but on the proposition that the House doth disagree with the Lords in their amendment. One of the myths is that the Conservative Party believes in home ownership and that the Labour Party seeks to deny home ownership to millions of people. The records of the parties since the war make it clear that the only party which has taken positive steps to extend the opportunity for people to purchase their own homes is the Labour Party.

Mr. David Alton (Liverpool, Edge Hill)

In view of the fulsome praise by the hon. Member for Edmonton (Mr. Graham) of my noble Friend Lord Banks, who ensured that the amendment came before the House tonight, I am surprised that the hon. Member for Blackburn (Mr. Straw) should say that the Labour Party is the only party which encourages home ownership. I hope that he will join in the fulsome praise of my noble Friend.

Mr. Straw

There was no inconsistency, simply the omission of an adjective. I meant to say that the Labour Party was the only major party which sought to extend home ownership. In its heyday the Liberal Party, some years before the hon. Gentleman was born, also assisted in that aim. I hear Government Members laughing at the proposition. The Labour Party has taken positive steps to extend home ownership.

Finance Acts provide that interest payable on the purchase of a home is eligible for relief against tax. That provision has been in operation since before the war. What other changes have been made to assist people to buy their own homes? The most important is the provision of the option mortgage scheme which appeared in the 1964 Labour Party manifesto and which was implemented in 1967. That provision is aimed at lower income families who do not have the full benefit of tax relief. That was the first important improvement which the Labour Party made towards assisting home ownership.

The second improvement was the provision to assist first-time buyers. Under the last Government loan and grant schemes were introduced to assist first-time buyers.

Mr. Donald Thompson (Sowerby)

Does the hon. Gentleman realise that neither measure that he has mentioned would have been necessary had his party not invented inflation?

Mr. Straw

The Labour Party did not invent inflation. Even the Prime Minister has not had the audacity to claim that. Had the hon. Gentleman any knowledge of history he would know that before the Conservative or Labour Party came into existence inflation at times ran riot. In the fourteenth century, as a result of the plague, there was great inflation. Before my party was established in its present form there was great inflation as a result of the First World War. Although the Conservative Party may not have invented inflation, it has ensured that it has proceeded apace. The Government have doubled VAT and the rate of inflation in only 15 months.

9.45 pm

It is time the Conservative Party woke up to Labour's contribution to home ownership and improving the nation's housing conditions.

Mrs. Peggy Fenner (Rochester and Chatham)

I am listening closely and with interest to the hon. Gentleman's argument. It is an effrontery to claim that his party has contributed to home ownership. The right hon. Member for Manchester, Ardwick (Mr. Kaufman) said that he would like to wipe out the opportunity for council tenants to purchase their houses. Does the hon. Gentleman accept that it is disgraceful for his party to try to make council tenants second-class citizens because they cannot buy their homes?

Mr. Straw

The hon. Lady has no conception of the important contribution that council housing has made to the housing situation.

Mr. Major

In the past.

Mr. Straw

It is continuing to do so. The development of council housing has transformed the housing condition of this nation and made us one of the best-housed nations in Europe.

I have experience of council housing. I lived in a council house until I was married. My family was able to move out of two privately rented rooms and at least live in accommodation that was dry and large enough for a family of five and my parents because of council housing. Conservative Members should give us no lectures about the importance of council housing. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) is right to pledge Labour to repeal this damaging and obnoxious legislation. It will undermine the opportunity of local authorities to house those in need of housing in the way that my parents were housed in 1952, albeit by a pretty reactionary Conservative council.

Local authority housing stock will be denuded by the so-called right to buy, and in years to come waiting lists will grow longer. We do not say that no tenant in no circumstance should have the right to buy, but we believe that the decision should be left to local authorities, which know the housing needs in their areas. We also firmly believe that discounts of this size should not be given.

I return to owner-occupation. Because Labour believes in meeting the housing needs of the whole nation, whether through rented accommodation or owner-occupation, we have sought to increase and improve the public rented sector, while encouraging those who can do so to buy homes in the private sector. That is why we introduced the option mortgage scheme and schemes to provide assistance to first-time purchasers. That is why we support the scheme that my noble Friend Lady Birk and other Labour peers helped to push through. It extends the assistance that we have always supported.

Mrs. Elaine Kellett-Bowman (Lancaster)

Will the hon. Gentleman acknowledge that, by the time people had saved enough to buy a house under the previous Labour Government, the price of the house had escalated so much that they could no longer afford to buy it?

Mr. Straw

The hon. Lady has a selective memory. One of the major reasons why the Conservative Party lost the election of February 1974 was the astonishing rise in house prices between 1970 and 1974. House prices were doubling within a year.

Mr. Kilroy-Silk

My hon. Friend is correct in saying that Labour Governments have done far more than any other party for the extension of home ownership. We are not opposed to owner-occupation. Indeed, many of the measures that Labour Governments have introduced, some of which my hon. Friend has alluded to, have been designed specifically to assist owner-occupation.

We are opposed to the compulsory and indiscriminate sale of council assets, which will lead to a reduction in the quality and quantity of housing stock, to the disadvantage of—

Mr. Speaker

Order. We are back on Second Reading points. The hon. Gentleman is wasting time. If he wishes to talk about the amendment, he had better do so.

Mr. Kilroy-Silk

The only point that I wanted to make to my hon. Friend—

Mr. Speaker

Order. The hon. Gentleman cannot pursue an intervention that was out of order. He was making a Second Reading point.

Mr. Straw

With your permission, Mr. Speaker, I should like to invite my hon. Friend to intervene again.

Mr. Kilroy-Silk

The point that my hon. Friend could have made to the hon. Member for Lancaster (Mrs. Kellett-Bowman) is that the greatest current inhibition to owner-occupation is the dramatic and unprecedented level to which interest rates have risen as a result of the Government's economic policies.

Mr. Straw

I am grateful to my hon. Friend for making that point, which I intended to refer to after dealing with the record of the Conservative Government between 1970 and 1973.

My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) asked my hon.

Friend the Member for Edmonton (Mr. Graham) whether it was right to agree to the extension of tax relief as set out in the amendment when elderly people in council accommodation would not have such tax relief.

I understand that point, but I believe that we should act fairly between all owner-occupiers. That was the reason why we introduced the option mortgage scheme. Wage earners on low incomes were not able to benefit from tax relief to the full extent and the option mortgage scheme provided compensation.

Similarly, those with sufficient income could obtain tax relief if they entered into the sort of annuity arrangement that has been described. The amendment provides that those with a lower income should have the same benefit, in relation to tax relief, as if they had a sufficient income to get that relief.

Mr. Kilroy-Silk

Does my hon. Friend agree that the elderly people who are to have the option mortgage scheme, and therefore tax relief, extended to them probably received tax relief when they were younger and buying their first home? His argument that they must get tax relief in the same way that a taxpayer would does not hold water.

Will my hon. Friend explain what other subsidy is given to any other category who are not taxpayers? When do we say that taxpayers receive a subsidy because they are taxpayers, but that because another category does not receive it because they are not taxpayers we must give them some other form of subsidy? Where is the equity in that?

Mr. Straw

The elderly living in rented accommodation receive rent rebates if they are in public sector accommodation and rent allowances if they are in private sector accommodation. Equity is involved there. Given the present structure of reliefs available for rent allowances and rent rebates for rented accommodation, and tax reliefs for the elderly with sufficient income in private accommodation, it would be inequitable to exclude the lower income category seeking an annuity arrangement.

My hon. Friend's first point was whether it was genuinely equitable for those who had enjoyed tax relief in the past to enjoy it again. That raises an interesting question whether tax relief on the purchase of homes should be restricted, for example, to a 20-year period in a person's life, and should not be repeated. There are strong social and economic grounds for that. In the long term the major benefit of existing tax reliefs is not to the individual because the tax reliefs are capitalised in the capital values of the properties.

Mr. Arthur Lewis (Newham, North-West)

Surely my hon. Friend cannot be right. Is it not the case that every man and woman pays taxes? They pay VAT and other taxes. They cannot get out of that. Young families with children receive child allowances, and the elderly pay taxes, although they do not have any children. Is my hon. Friend suggesting that the elderly should not contribute to the child allowance?

Mr. Straw

I am grateful to my hon. Friend for his intervention. I would not dream of answering for my hon. Friend the Member for Ormskirk concerning his suggestion. Despite the respect and esteem in which I hold him, he must speak for himself. My hon. Friend the Member for Newham, North-West (Mr. Lewis) is right to say that everybody pays taxes in one form or another. But we are concerned with the reliefs available through the payment of income tax. The value of such reliefs clearly depends on the size of an individual's income.

Like my hon. Friend the Member for Edmonton I am glad that the proposal was moved in substance in another place, and passed against the advice of the Government. I am glad also that on this relatively minor matter the Government have had the grace to return to the Commons, without having to be pushed by the Opposition, with an alternative which is almost acceptable. I commend it to the House.

Mr. R. A. McCrindle (Brentwood and Ongar)

I wish to make it clear that I have no intention of speaking about council housing. It may come as a surprise to the House to know that council housing has nothing to do with the amendment that we are discussing. Neither do I propose to engage for any length of time in a Dutch auction about which party has in the past been more beneficial to owner-occupation.

I propose to concentrate my attention wholly on the original amendment from another place, and on the words that now appear on the Order Paper. Although I take nothing away from those responsible for passing the amendment in another place, I wish to place on record the fact that in the 10 years that I have been in the House I have constantly pressed successive Governments to include the elderly in the option mortgage system. It is a great pleasure for me this evening to find some reward—although I should have preferred my hon. Friend the Minister to accept the proposal when I pressed him no later than June of this year, rather than wait for an amendment to be passed in another place.

10 pm

However, there seems to be a misconception running through the House. We are not talking about elderly people buying their properties. We are talking about elderly people who already own their properties and who wish to sell their properties, to take a loan upon them and, with the proceeds of the loan, to effect an annuity, and who are prevented from doing that at present because there is no taxable income to offset against the interest that has to be paid on the loan.

I welcome the fact that the hon. Member for Edmonton (Mr. Graham) made certain that there would be a debate on this subject. I could have wished, however, that during his contribution he had cast a little more clarification on the Opposition's thinking on the matter and, most particularly, that he had made clear what this scheme is not, as well as what it is. Unless this debate is publicised, there is a serious danger that it will be assumed that this is a new clause that is universally advantageous to all elderly people. I place clearly on record that that is not so. There are undoubtedly powerful reasons why we should introduce the new clause this evening. For example, it is one ideal way of sustaining the independence of elderly people. Secondly, it is a way of using their principal, sometimes their only, asset, whereas otherwise it may lie dormant. Thirdly, it is a method of improving their standard of living in the later days of their lives without having to resort to social security, which is anathema to many of the people about whom I am talking.

Those are the points in its favour, but it is not for everyone. For example, if there are relatives who are confidently expecting the property to be their sole inheritance and would be put out at any suggestion that that property were to be sold effectively over their heads, it cannot be advised as a suitable scheme for elderly people in these circumstances. Even there, however, I have found in the past that where that becomes evident, the sons and daughters are frequently moved to assist the elderly people to boost their income, so that the house that is to be inherited by sons or daughters remains intact.

In these circumstances considerable care has to be directed before it is decided that this is a desirable scheme.

Secondly, it is not as easy as saying "I shall sell my house to an insurance company or to a financial institution, and I shall take an annuity on it to boost my income". The market for this sort of home reversionary plan is very limited. One of the disadvantages is that in taking the loan from an insurance company or an institution the annuity tends to be tied to the same insurance company or institution, and that need not necessarily mean that the individual is getting the best deal.

I hope that as a result of this change in the law that we are here enacting, more institutions will come into the market and we shall have rather more schemes under which the financial institution giving the loan on the property leaves the person free to search for the best annuity available in the market.

I have heard reference to high interest rates and the disadvantage to owner-occupiers. Perhaps I should say that if there is one area in which high interest rates are of enormous advantage it is that of purchased annuities. So here we are doing something for elderly people that has not been possible to do previously, which is advantageous on two fronts.

The other point is that the elderly people to whom these schemes will apply should be rather wary. I speak as one who has been in the field and knows that many opportunities are available for attracting business from such elderly people. I also know that there are many people in the field—let us call them salesmen—who are not always on the level in introducing these schemes to the elderly people. Not only do I suggest a careful shopping around for the correct scheme for the elderly person but I also believe that the elderly person concerned would be well advised to seek professional advice.

Mr. Anthony Fell (Yarmouth)


Mr. McCrindle

My hon. Friend the Member for Yarmouth (Mr. Fell) says "Really". If he does not feel it wise to accept the best advice on where the best return on the money can be obtained, he astonishes me.

It is a good thing to have this breakthrough. I wish it had been done a long time ago, but I congratulate my hon. Friend the Minister for doing it. It is not a total panacea. There are considerable pitfalls for some people. I felt that I should point to some of them.

Question put and agreed to.

Consequential amendment: In page 94, line 25, after '109', insert 'to'.

Question put and agreed to.

Lords amendments Nos. 118 to 121 agreed to.

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