Mortgage Guarantees (Hansard, 16 December 1991)

§ 1. Mr. Madden
To ask the Secretary of State for Social Security what he is doing to make mortgage guarantees by his Department acceptable to building societies and financial institutions.

§ The Secretary of State for Social Security (Mr. Tony Newton)
The income support arrangements in respect of mortgage interest depend on individual circumstances and do not therefore constitute a generalised guarantee. From next month, changes are being made in the operation of the arrangements with the aim of making them more effective in preventing the build-up of arrears where income support is in payment.

§ Mr. Madden
Will the Secretary of State instruct his officials to see whether they can help constituents living in Hanover square in Bradford, who sold their homes for £1 to the British Heritage Housing Trust and are now angry that they cannot afford to buy their homes back at prices up to £51,000? The building societies are unwilling to accept guarantees given by the Department a nd by Bradford council because the former owners are pensioners, unemployed people and people en low 2 incomes. Will he ensure that urgent action is taken to enable my constituents to buy back their homes and does he understand that any scheme that he introduces which relies on cosmetics and sticking plaster will not be adequate compensation for those many people who are fearful of losing their homes for ever?

§ Mr. Newton
I understand that there has been correspondence between the hon. Gentleman and Bradford West office about a particular case which must be one of those to which he adverted in his supplementary question. It has been fully explained to the hon. Gentleman that it is not possible to give advance assurances about particular payments when the payment of income support depends on an adjudication officer's decision at the time the claim is made. I think that that is fairly well understood. Normally the arrangements work well in terms of the general letter which is given to building societies.

§ Mr. Ward
Does my right hon. Friend agree that if there is to be any change to help with the repossession problem, it would be humane if it were made before Christmas? Does he further agree that it would help if housing benefit were paid directly to the lender and that that would make matters much easier for his Department in dealing with other benefits?

§ Mr. Newton
My hon. Friend may be aware that, in addition to the measure on which I commented in my original answer, there have been discussions with representatives of the Council of Mortgage Lenders and some of my right hon. Friends to see whether further action can sensibly be taken to help with the repossession problem. Those discussions have been constructive and are continuing.

§ Mr. Frank Field
Will the Secretary of State recall for the House for how many years Opposition Members have been asking him to make mortgage payments direct to building societies? How many hundreds of thousands of people might now not be homeless if he had followed that advice? Why is it that sense enters the Government's head only when an election approaches?

§ Mr. Newton
That is an uncharacteristically overheated question from an hon. Member who, rightly, has a reputation for the balanced way in which he puts things. He well knows that arrangements have been in place for a long time enabling direct payments to be put into force when arrears occur. Those arrangements have undoubtedly prevented many repossessions. At the moment we are seeking to improve the working of those arrangements and that has been widely acknowledged and welcomed by the building societies.

§ Mr. Andrew MacKay
When my right hon. Friend next meets the banks and building societies and rightly discusses with them the possibility of increasing direct payments of income support in respect of interest payments, will he emphasise that the most serious threat to the housing market and to the liquidity of the banks and building societies would be too many forced sales at prices that are too low? That in turn would lead to even more repossessions and he should tell the banks and building societies to be far more responsible about foreclosing on people's property.

§ Mr. Newton
The Council of Mortgage Lenders as a body, and its members, would recognise the points that my hon. Friend makes. It is on that basis that the constructive discussions to which I referred are taking place between many of the lenders and Government representatives.

§ Mr. Kirkwood
Will the Secretary of State acknowledge that there has been widespread concern for some time about the scale of repossessions? Did he say in answer to a supplementary question that only an improvement to the existing mechanism is being considered? Would I be right in thinking that that would exclude new and more fundamental ways of trying to deal with a problem that is spiralling wildly out of control?

§ Mr. Newton
The hon. Gentleman has drawn the wrong conclusion about an earlier answer, which I think was clear. We announced some time ago improved arrangements, as I believe them to be—we are already putting them in place and they will take effect from the end of the month—to make direct payments of income support where arrears occur. Another matter that is under discussion with the Council of Mortgage Lenders is whether a further extension of automatic direct payments could contribute to dealing with the problem.

§ Mr. Higgins
In any future discussions, will my right hon. Friend include building societies, banks and insurance companies, as in many instances a mortgage may be backed by an insurance policy instead of the mortgage being arranged on a repayment basis?

§ Mr. Newton
Yes, the talks embrace representatives of those concerned with that part of the business.

§ Mr. Meacher
Will the Secretary of State note that the Prime Minister, when a Minister in the Department of Health and Social Security, set in train the tidal wave of repossessions when he pushed a regulation through the House, five years ago to this very day, which disqualified a newly unemployed person from receiving half his DSS mortgage interest repayments for the first 16 weeks? Does the right hon. Gentleman acknowledge that on that occasion the Prime Minister said: There is no reason"— that is, for eviction— 4 and it will not happen."—[Official Report, 16 December 1986; Vol. 107, c. 1129.] Will the right hon. Gentleman at least apologise to the 100,000 families who have been evicted this year, especially as the Prime Minister's folly was in direct defiance of the building societies' advice at the time? Will he admit that the Prime Minister's action has caused untold misery? Will he repeal immediately the iniquitous Major disqualification rule?

§ Mr. Newton
Not for the first time, the hon. Gentleman totally misrepresents the position. The arrangements to which he referred were put in place after discussions with the Building Societies Association, during which it made it clear that a mortgagor would not repossess on the basis that the hon. Gentleman has suggested, as well as on the basis that where interest was rolled up in cases in which more than 16 weeks were involved, the Department would meet the additional interest charged on the extra payments arising. Those were balanced arrangements and in my view they have worked well. In reasonably expressing concern about repossessions, the hon. Gentleman should at least do so on a fair and straightforward basis.