LOAN INTEREST PAID UNDER DEDUCTION OF TAX (Hansard, 11 May 1983)

§ The Financial Secretary to the Treasury (Mr. Nicholas Ridley)
Clause 19 deals with some minor technical deficiencies in the Act of last year that brought in mortgage interest relief at source. I would be happy to reply to any questions about it that hon. Members may wish to raise, but this is also a good opportunity for me to clarify the change affecting mortgage relief at source. I am indebted to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) for having asked a helpful parliamentary question on 4 May, in answer to which I was able to set out in full what has happened.
In order to make the picture clear it is necessary to go back to August 1982, when there was a fall in mortgage interest rates, followed by another fall in November. Those two falls resulted in less tax relief being available to taxpayers. As a result, the Revenue granted excess relief, which will have to be taken back over 1983–84 in codings and assessments. That series of events added up to a small interest-free loan from the Revenue to the taxpayer. Admittedly, it is always unpleasant to have to pay anything back. The change to mortgage relief at source itself makes no difference whatsoever to the taxpayer, whose mortgage remains on the same basis. In addition, there are now the increases in national insurance surcharge and the much larger reductions in income tax contained in the Budget.
A married man on average earnings with a £16,000 mortgage, which was the average last year, had a net take-home pay after tax and mortgage interest of £82.29 in August last year. In May this year—even assuming that he had had no increase in earnings at all—his net take-home pay would be £88.70. Everyone with a mortgage will be better off in May this year than he was in August last year. I strongly urge anyone who believes that he is not better off, or that something has gone wrong with his coding or with the arrangements for the deduction of his 826 tax, to get in touch with the tax inspector, who will put the matter right. Nobody has been denied relief, and there is no reduction in the relief available.

§ Mr. Robert Sheldon
As the right hon. Gentleman will know, I am awaiting replies to two further questions to which holding replies have been given. Will he say whether a person with an average mortgage and average earnings was better off in Budget week than he will be next week?

§ Mr. Ridley
I am not aware of the right hon. Gentleman's other two questions, but I will make sure that he receives answers to them before he leaves us on Friday.
It is impossible to answer his question in relation to any individual taxpayer or week. However, what commentators have done, and what the hon. Member for Bedwellty (Mr. Kinnock) has done — although, as shadow Secretary of State for Education and Science, he, at least, should be educated in the matter—is to take account of the reduced tax relief caused by the fall in mortgage interest but fail to take account of the value of the fall in mortgage interest. By manipulating the figures with great care and, I am afraid, with deliberate intent to deceive, they have managed to find circumstances—from month to month or week to week — in which people can be made to appear worse off. Any impartial observer studying the figures I gave in Hansard on 4 May must agree that nobody could he worse off and that everyone must be better off.
There are further advantages. The Inland Revenue has saved over 1,000 members of staff by the introduction of the new method, and, in addition, the problem of the reduction or increase in tax relief due to falls or rises in mortgage interest will never occur again, because it will be taken into account at source and will not have to be effected in taxpayers' assessments or codings.