§ The Chancellor of the Exchequer (Mr. Norman Lamont)
With permission, Mr. Speaker, I should like to make a statement.
Over the past few weeks my right hon. Friends the Secretary of State for the Environment, the Secretary of State for Social Security, the Minister for Housing and Planning, the Minister of State for Social Security and I have had a series of meetings with representatives of the Council of Mortgage Lenders to discuss the problem of mortgage arrears and repossessions. I wish to pay tribute to the lenders and insurers for the helpful and constructive approach that they have adopted throughout these discussions. We all recognise the hardship that repossessions can lead to for individuals and families, but mortgage lenders have assured us that some of the figures that have been suggested, particularly in recent days, for the level of mortgage repossessions this year and next are greatly exaggerated.
The lending institutions have already agreed to participate in the scheme announced in November by the Minister for Housing and Planning to make empty properties which have already been possessed available to housing associations to house the homeless. We wanted in addition to take action to keep in their homes borrowers who are facing difficulties in keeping up their mortgage payments. Therefore, I am able to announce to the House a number of measures designed to reduce substantially the level of repossessions over the next year.
The first duty of lenders is, of course, to their investors, but they are also concerned about the position of borrowers, especially those in difficulties. In our discussions this week, lenders have confirmed to me that they do not seek to take possession where borrowers have suffered a significant reduction in income but are making a reasonable regular payment. Borrowers will, of course, remain responsible for their debts.
A substantial proportion of repossessions do not result from legal action by the lender. Lenders have assured me that they wish to encourage borrowers to stay in their own homes and that they will continue to increase the counselling and advice that they offer to borrowers in difficulties.
The Government already make generous provision—over £600 million this year—for mortgage interest payments for people on income support. The lenders have argued that in many cases this money is being diverted for other purposes, resulting in unnecessary repossessions. The Department of Social Security is already introducing new arrangements to identify arrears cases and to make payments direct to the lender. The Government have now agreed to introduce legislation after the recess to make direct payment to lenders the norm. My right hon. Friend the Secretary of State for Social Security will be making a further statement on that subject later today. In response, lenders have confirmed that they will not take possession in cases where mortgage interest payments are covered by income support.
There will, however, be cases where occupiers are not on income support but nevertheless face serious problems. Following our discussions this week, the largest lenders 454 have confirmed that they are prepared in case of need to provide funding on concessional terms to help such borrowers as far as possible to remain in their homes.
In such cases, the homes would either be sold to housing associations or taken into ownership by the lender. The borrower would remain in occupation as a tenant, or as part-owner, part-tenant. Individual lenders have undertaken to announce details of such schemes where they have not already done so and insurers have expressed their support. More than £¾ billion has already been committed for that purpose during the next year by lenders responsible for 60 per cent. of total mortgage lending. The lenders' expectation is that the total figure could be around £1 billion, if the need is there.
The Government and the lenders will introduce those new measures as quickly as possible. In the meantime, lenders will continue to avoid repossessions wherever possible.
The mortgage lenders believe that the new measures announced today, together with the actions that they have already taken, will lead to a reducing trend in repossessions during 1992. All lenders are looking for an early and substantial reduction in repossessions. They have estimated that the measures that I have described should prevent about 40,000 repossessions next year.
But I recognise that there is a wider concern about the depressed state of the housing market, which has consequences for home owners in general and for the wider economy. I therefore have one further announcement to make.
In his 1990 Budget, my right hon. Friend the Prime Minister announced that stamp duty on securities would be abolished late in 1991–92 to coincide with the introduction in the stock exchange of the system of paperless trading known as TAURUS—the transfer and automated registration of uncertified stock.
The stock exchange announced recently that TAURUS will not now be ready before April 1993. The abolition of stamp duty on securities will consequently also be delayed at least until then. That will result in a public sector borrowing requirement saving of £1 billion compared with the position shown in this year's medium-term financial strategy.
I have decided to use a portion of that additional revenue to help encourage and facilitate transactions in the housing market. I am therefore lifting the burden of stamp duty from the great bulk of house purchases for a period of eight months from midnight tonight.
Stamp duty is currently charged at 1 per cent. on the full price of land and buildings costing more than £30,000. I intend to raise that threshold to £250,000 for documents executed from tomorrow, until 19 August 1992—after which it will revert to £30,000. Stamp duty at the current rate of 1 per cent. will still be charged on purchases of more than £250,000.
For the next eight months, that will mean that no stamp duty will be payable on 90 per cent. of private home purchases. The consequent saving on an average-priced house will be a little over £600. The cost to the Exchequer will be about £110 million in this financial year and about £310 million in 1992–93.
A short Bill will be introduced early in the new year to give effect to that measure. Until the passing of the necessary resolution, people who need to get their documents stamped will be charged duty on the basis of the present £30,000 threshold. But legislation will provide 455 that the Inland Revenue will refund any duty paid in excess of what will be due under the proposed £250,000 threshold. Further details will be set out in an Inland Revenue press release to he issued today.
The measures that I have announced today and the schemes that the lending institutions are putting together will contribute to a decisive fall in the level of mortgage repossessions. They will also help to stimulate activity in the housing market more generally, benefiting home buyers and home owners throughout the country. I hope that they will be warmly welcome by the House.
§ Mrs. Margaret Beckett (Derby, South)
Is the Chancellor of the Exchequer aware that the Government's handling of the matter has been typically irresponsible, shifty and dishonest? Does he recall that when, as long ago as 1986, the present Prime Minister showed his true colours by cutting mortgage interest support paid to those who lose their jobs, bodies such as the National Consumer Council, the Government's own Social Security Advisory Committee, and many right hon. and hon. Members warned of the dire consequences for those on the lowest incomes, who would be forced deeper and deeper into debt? Consequently, the Prime Minister, in his caring way, described those forebodings as "overcooked".
When, two days ago, the Chancellor heard the Prime Minister tell my right hon. Friend the Leader of the Opposition that the Building Societies Association had been consulted about the changes, did he remember that, when consulted, the BSA said that it totally opposed them?
Does the Chancellor recall that, as the present recession deepened, the Prime Minister—then Chancellor of the Exchequer—was pressed during Treasury questions to take action to stem the flood of repossessions, which by then was affecting a far wider swathe of the community, with hundreds of thousands in arrears? The right hon. Gentleman dismissed such action by saying thatonly a relatively small number of borrowers are in difficulty."—[Official Report, 15 March 1990; Vol. 169, c.655.]The Chancellor of the Exchequer continued to pay so little heed that as late as June this year he told David Frost that the "vague stirrings" of recovery that he detected would "begin in certain sectors—probably in the housing market." Even when the president of the House Builders Federation wrote to the Chancellor of the Exchequer saying that there was no foundation for that assertion, the right hon. Gentleman continued to repeat it.
Will the Chancellor say whether the Government, whose policies on benefits and interest rates—which were defended so felicitously by the Prime Minister with the words,If it isn't hurting, it isn't workingled to the present crisis, take any of the blame?
From the Chancellor's statement, it seems almost that the Government's only contribution is to find a scapegoat for the problem and to seek credit for the solution. Does the Chancellor acknowledge that our spokespeople have been holding discussions with building societies and the Council of Mortgage Lenders—not just in recent weeks, but for months—and submitted a package that contained some elements of the proposals that the Chancellor outlined today? If the Government had paid heed, it would have saved the homes of thousands and thousands of families for whom it is now too late.
Is it not the case that, although the stamp duty measures will, as the Chancellor said, ease the housing 456 market, they will do absolutely nothing to assist those people already in danger of losing their homes? Can the right hon. Gentleman confirm that the Government have made no net contribution to that scheme—bearing in mind the savings that the Government will make on mortgage interest; bed-and-breakfast costs for the homeless, which I understand are currently running at £1 billion; and, as the Chancellor said, because the postponement of TAURUS will only in a certain proportion be committed to the scheme? How many more families could have been helped if the Government had been prepared to commit even all the savings from TAURUS?
If we contrast the Government's coyness in slipping out a press statement three days ago which revealed cuts in real terms in the provision of public sector house-building next year with the Chancellor's willingness to come to the House to make a statement on a scheme to which the Government are contributing so little the day before the House adjourns for Christmas, the concern that the Chancellor claims to feel can be described in one word—humbug.
§ Mr. Lamont
I am sorry that the hon. Member for Derby, South (Mrs. Beckett) did not feel able to welcome the substantial measures that I announced. Her only question is, "What are you contributing?" She is not interested in whether the measures work. I should have thought that a contribution of more than £400 million would be regarded as substantial by anyone with a responsible attitude to finance—if not by the Labour party.
The measures that I announced stand to reduce the number of repossessions by 40,000. They are currently running at an annual rate of 80,000. That is a substantial reduction and the hon. Lady should have had the grace and the good manners to welcome it. [Interruption.] I hear the hon. Member for Dagenham (Mr. Gould) mentioning the figure of 200,000. Let me tell him that the Council of Mortgage Lenders has told me specifically how disturbed it is by the alarmist talk that the Opposition are putting about in regard to the number of mortgage repossessions. The council specifically distanced itself from the figures quoted by the hon. Member for Dagenham.
I might add that the council also told me that it did not believe that the income support measures taken in 1986 had caused the repossessions. The council said that, provided that people were having half their interest paid by income support, they would not have their houses repossessed on that account. The hon. Lady's allegation is entirely unfounded.
The hon. Lady seems to think that the Government should simply contribute more money. What about Beckett's law? I thought that Labour had only two public spending commitments. That is what the hon. Lady is always telling us, yet, over the past week, we have been told repeatedly in radio broadcasts that Labour want to put in more money. The truth is that it would have done so ineffectively and would not have produced the results that our package will produce.
§ Mr. Speaker
Order. I must bear in mind the fact that we have another statement after this one and then a business statement; moreover, more than 60 right hon. and hon. Members wish to participate in the important debate 457 that follows. I shall allow questions to the Chancellor to continue until 4 o'clock, but then we shall proceed to the next statement.
§ Sir Anthony Grant (Cambridgeshire, South-West)
My right hon. Friend's announcement constitutes one of the most cheering pieces of news that home owners have heard for a long time. Has he ever seen such a miserable, sour lot of sick parrots as those on the Opposition Front Bench?
§ Mr. Lamont
As always, my hon. Friend is quite right. The Opposition thrive on bad news: they wish for nothing but bad news. As ever, they will be disappointed.
§ Mr. A. J. Beith (Berwick-upon-Tweed)
We welcome the package, which contains many suggestions made by my right hon. and hon. Friends. It will cost lenders relatively little net and will cost the taxpayer hardly anything net.
Will the Chancellor examine the stamp duty proposal? For an amount that will not have a very decisive impact on the housing market—which may still be in a rather sluggish condition when stamp duty is reimposed next August—he could have extended housing benefit to mortgage payers on very low incomes and given additional help to people who are now in a very difficult position.
§ Mr. Lamont
I am grateful to the hon. Gentleman for giving the measures a broad welcome, but I am somewhat puzzled about the fact that he feels aggrieved on the ground that—as he put it—the measures cost both lenders and the Government very little. The fact that we were able to reach such an arrangement, which will substantially reduce the number of repossessions, strikes me as a tribute to the package.
Of course, I understand what the hon. Gentleman said about housing benefit, but the measure that he suggests would involve substantial public expenditure and I do not feel that we could accommodate it in the present fiscal circumstances. Moreover, such a measure would have to be permanent: the money could not be clawed back following the recovery of the housing market.
§ Mr. Tim Smith (Beaconsfield)
Is my right hon. Friend aware that today's carefully targeted statement will have a double benefit? First, it will achieve the common-sense solution of keeping borrowers in their own homes; secondly, because of the close relationship between the state of the housing market and consumer confidence, it will have a beneficial effect on the economy.
§ Mr. Lamont
I am grateful to my hon. Friend. He is right to say that this is a sensible, well-targeted measure. As I stressed, it has been made possible by the deferral of TAURUS. It is being achieved without prejudicing the fiscal position and should help to increase turnover and get the housing market moving again. Many people in the industry have asked for a reduction in stamp duty. They believe that it will have an effect.
§ Mr. David Trimble (Upper Bann)
The very awkward position that arises as a result of repossessions has been caused primarily by the recession, which has increased unemployment, reduced incomes in some cases, and reduced the value of the property. The Government have energetically tried to help one element of the population hit by the recession. Why have they selected this element 458 for assistance? Many other people have been hit by the recession. What do the Government intend to do for people the value of whose investments has gone down? House owners should know, as other investors know, that investments can go down in value as well as up. Is it not strange that the Government should give special assistance to house owners? Has not that been primarily because the people worst affected live in the south-east of England?
§ Mr. Lamont
I believe that the measures that have been announced—to try to bring forward transactions in the housing market and to stimulate the housing market—are in everybody's interest. They are in the interests of those who are in danger of their homes being repossessed. They are also in the interests of the housing market and the wider economy. I think that they will be welcomed by borrowers, lenders and everybody in the country.
§ Rev. Ian Paisley (Antrim, North)
Can the Chancellor assure me that the people of Northern Ireland will benefit from these measures at the very same time as people in the rest of the United Kingdom?
§ Mr. Robert Sheldon (Ashton-under-Lyne)
Is the Chancellor aware that the stamp duty measure is a surprising Finance Bill measure which will do perhaps a little to sell a few houses, but will not do much for those whose homes are being repossessed? That is the problem that the Chancellor has to face over this Finance Bill measure. Is he also aware that a number of building societies have insurance policies that come into force only when a property is sold? If they come into force only when properties are sold, they have an incentive to sell the property to recover the value. What does he have to say about that?
§ Mr. Lamont
This is a two-part package. It contains, first, the measures that we have been able to agree with the lending institutions, which both they and I believe will have a dramatic impact. Secondly, there is the income support element which in itself, by means of the legislation that we are implementing, the lending institutions believe will lead to a substantial reduction in repossessions. I have already explained that, because of what has happened, the stamp duty measure has been made possible without endangering the fiscal position and makes it possible to postpone the abolition of stamp duty on securities. None the less, the measure will help to stimulate the housing market and to bring forward transactions. For that reason, it should be welcomed by the right hon. Gentleman.
§ Sir William Clark (Croydon, South)
Does my right hon. Friend agree that it is absolutely disgraceful for Opposition Front-Bench spokesmen to talk about 200,000 repossessions next year? Does he also agree that it is churlish of the Opposition not to recognise that the measures that he has introduced will halve repossessions next year from 80,000 to 40,000? Is not that something that the Opposition should welcome, instead of being party-minded about it?
§ Mr. Lamont
My hon. Friend is right, but he should not underestimate the irresponsibility of the Labour party. Apart from having talked about 200,000 repossessions, on other occasions the Labour party has talked about 300,000 repossessions. Both figures bear no relationship to reality. 459 The Labour party has also put forward an absolutely cloud-cuckoo-land solution to the problem. It says that there should be a six-month moratorium on repossessions—something which is totally impossible to negotiate and totally irresponsible and which has rightly been described by one authority as a pure Enid Blyton story.
§ Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)
Is the Chancellor of the Exchequer aware that, compared with last year's figure, there has been a 25 per cent. increase in repossession warrants during the first nine months of this year in Merthyr Tydfil and Rhymney? Is he also aware that, according to discussions that I have held locally, it does not appear that building societies often force the pace when it comes to repossessions; it is forced by many of those who have offered second mortgages on properties. Will the Chancellor's statement and the deal that he arranged do anything to prevent those who are forcing the pace on second mortgages from causing many of the repossessions?
§ Mr. Lamont
I note what the hon. Gentleman said. Since he has such a great problem in his constituency, I am sure that what I have announced will be welcomed there, even if its Member of Parliament does not have the grace to do so. The hon. Gentleman asked whether it will help in cases of second mortgages. The answer is yes. Some of the schemes of individual societies will help in cases of a second mortgage that may have affected a business or a family. I must stress that the building societies and other lending institutions have put forward not just one scheme but many schemes, tailored to the problems facing their borrowers. Some of the schemes will enable people to become tenants and later to revert to being owner-occupiers again. That is a welcome characteristic of some of the schemes.
§ Mrs. Teresa Gorman (Billericay)
Will my right hon. Friend accept the grateful thanks of those of us who have in our constituencies one or two of the 2 per cent. of people who find themselves in difficulties? Of course, 98 per cent. of those buying their homes do not have a problem. Will my right hon. Friend take an interest in the activities of fringe banks, many of which have lent unreasonable sums? In my constituency, someone with a bungalow worth £150,000 was lent almost half a million pounds by a fringe bank. That is thoroughly irresponsible and the cost should not be picked up by the taxpayer. Will my right hon. Friend discuss with the building societies the possibility of spreading mortgages over longer periods? I understand that in Japan it is commonplace for mortgages to be spread over 60 years or more. Could that not be adopted here?
§ Mr. Lamont
I note what my hon. Friend said. She is right to put the problem in perspective, as the building society chiefs have been anxious to do when they talk to us. As my hon. Friend said, only 0.5 per cent. of all properties are repossessed and only 2 per cent. of mortgages are in serious arrears. The problem must be kept firmly in perspective.
My hon. Friend talked of the problem in her constituency where she said that there has been lending by institutions which she regards as irresponsible and excessive. The prudential requirements on building societies for riskier loans have been tightened up and they 460 are obliged to make greater provision for such loans in future. Therefore, some measures have been taken to deal with the problem worrying my hon. Friend.
§ Mr. Jim Sillars (Glasgow, Govan)
Is not this an unfortunate day for the Government, since the Scottish Office has issued its tenants charter, which says:Owning your home means that you have full control over your own housing."?That is manifestly untrue when the Government make such a mess of the economy and render people unemployed. Nevertheless, we welcome any package that produces a solution to the problem facing 40,000 families. However, the other 40,000 families are not covered. What will the Chancellor do about them—see them thrown in the street?
§ Mr. Lamont
I am moderately grateful to the hon. Gentleman for his half-welcome. It is the Government's policy to encourage ownership and I stressed in answer to another hon. Member that many of the schemes that will take homes into tenancy for the time being will allow people to revert to being owner-occupiers. Many of those whose homes are repossessed face losing all ownership of the property, but such schemes will enable some people to continue to own part of the same property or another property. So there is some flexibility built into the schemes. We would expect that following these measures the level of repossessions will decline. I hope that the remaining 40,000 will be affected as the economy recovers next year.
§ Mr. Andy Stewart (Sherwood)
I welcome my right hon. Friend's statement, but does he agree that one reason for the depressed state of the property market is the way in which we buy and sell properties in England and Wales? "Subject to contract" is meaningless. It allows gazumping and "gazundering". The system is discredited. Is not it time that we adopted the Scottish system of property transactions and allowed our people to honour the obligations that they enter into?
§ Mr. Lamont
Personally, I have always admired the Scottish system—but then I tend to admire everything Scottish. I fear that this is a matter for my right hon. and learned Friend the Lord Chancellor rather than me, but I am sure that he will note my hon. Friend's remarks.
§ Ms. Dawn Primarolo (Bristol, South)
The right hon. Gentleman said in his opening remarks that borrowers would be able to become either part-tenants or full tenants of their houses. Will they be entitled to claim housing benefit during the period when they are part or full tenants? If the answer is yes, will the right hon. Gentleman announce how much that will cost and whether that money will be refunded to local authorities so that they are not expected to meet the cost out of current funds?
§ Mr. Lamont
Those who become tenants will qualify for housing benefit although, as the hon. lady knows, housing benefit is an income-related benefit. We expect the cost of the increase to be about £50 million a year.
§ Mr. Speaker
Order. The hon. Member has been here a long time. He knows that points of order are not taken until after statements.