§ 4 pm
§ The Secretary of State for Social Security (Mr. Tony Newton)
With permission, I wish to make a statement about the proposed revision in the arrangements for paying income support in respect of mortgage interest. This will take place in two stages.
First, as my right hon. Friend the Minister for Social Security and Disabled People announced on 5 November, we have already initiated action to make more effective the existing provisions which enable direct payments to the lender to be made in cases where an adjudication officer judges it to be in the borrowers' best interests, which is generally interpreted as covering cases where there are arrears of at least a month. The carrying through of that action, which begins next month, will now be accelerated with the aim of identifying by April all existing arrears cases on income support, with a view to adjudication officers taking appropriate decisions on implementing direct payment in those cases.
Secondly, as my right hon. Friend the Chancellor of the Exchequer said in his statment just now, we intend to bring before Parliament when it reassembles after the forthcoming recess a Bill to provide for direct payment to become the norm for income support mortgage interest payments to qualifying lenders should the lenders wish. That will apply whether or not there are arrears, from the time at which income support payments meet the full eligible interest—after the claim has continued for 16 weeks. "Qualifying lenders" will be defined for this purpose to cover building societies, banks, or local authorities, but not private individuals who may have lent money for home purchase. It is hoped, subject to the passage of the Bill, to implement this new system from April 1992.
The administrative cost of introducing these arrangements, including the accelerated identification of arrears cases over the next three months, is estimated to be some £20 million over the next year, of which the Council of Mortgage Lenders expects to meet about £10 million. The Bill will include appropriate provision for that.
Those proposals form an important ingredient in the range of measures described in my right hon. Friend's wider statement earlier and, I believe, will correspondingly be welcomed by borrowers and lenders alike.
§ Mr. Michael Meacher (Oldham, West)
The Secretary of State has announced that Department of Social Security mortgage interest payments will be paid direct to building societies. We support that—we have always done so—and we will not oppose the Bill.
Is the Secretary of State aware that the person who originally blocked payments, and who is thus responsible for thousands of repossessions which would otherwise have been averted, is the Prime Minister? Is the right hon. Gentleman aware that, when the Prime Minister was the Minister for Social Security and the Disabled, he said in the House on 16 December 1986:claimants could face the prospect of having their payments made direct … That would be a tighter regime than we want since we believe that claimants should generally be responsible themselves for their dealings with their lenders and for their mortgage interest repayments."—[Official Report, 16 December 1986; Vol. 107, c. 1131.]463 That is what the Prime Minister said, so when will he have the grace to apologise to the 100,000 families who have been repossessed this year and to say that he was wrong to introduce the 16-week disqualification rule in the first place, that he was wrong to rule out direct payments since 1986 and that he was wrong to dismiss Opposition predictions at the time that it would lead to widespread evictions and homelessness?
Does the right hon. Gentleman recognise that the only reason why so many families have failed to pass on their mortgage interest payments to the mortgage lenders is that they cannot get by on income support, which, for a single person over 25, is only £39.65 a week? Does the right hon. Gentleman think that, if he were unemployed and had no other resources, he could live on that for months and years on end? If he doubts it, why is he today forcing hundreds of thousands of others to do so'?
If the right hon. Gentleman is now going to require direct payments, will he also increase the pitifully low levels of income support to realistic levels on which people can manage, especially as the Government will be saving tens of millions of pounds from this deal? Why, if the right hon. Gentleman is serious about stopping further repossessions, has he still not announced that he is abolishing the 16-week disqualification rule which still penalises more than a third of all those receiving mortgage interest payments?
Is the right hon. Gentleman aware that, contrary to what the Prime Minister said at the Dispatch Box two days ago, and contrary to what the Chancellor of the Exchequer said a few minutes ago, the building societies opposed the 16-week disqualification rule from the outset? Is he aware that the Building Societies Association issued a statement in 1986 which said:Building societies regret that the government has decided to limit assistance which unemployed owner-occupiers receive through supplementary benefit.If the building societies opposed it then and oppose it now, why will he not repeal it?
Finally, what is the total saving to the Government from today's deal? Is it not shameless of the Government that their contribution to a repossession crisis that they and especially the Prime Minister have created is to offer no new money and, indeed, to make substantial savings out of other people's misery? Why is the right hon. Gentleman offering no new aid from those savings to the 100,000 families who have already been evicted this year?
Does the right hon. Gentleman recognise that today's deal is far too little, far too late? It is far too late because the Government were fully warned five years ago, and it is far too little because, whether it assists 7,000 families or, as the Government more dubiously claim, 40,000 families, it is still far less than the likely 150,000 to 200,000 repossession victims of this Government next year.
§ Mr. Newton
I am grateful for what the hon. Member for Oldham, West (Mr. Meacher) said at the outset of his questions about his willingness to support the proposed legislation. Beyond that, there is not very much agreement between us.
There is no question of direct payments having been blocked. The arrangements for direct payments in arrears cases have existed for many years. They are being strengthened at the moment. What we have thought it right to do in the context of the willingness of the building societies and banks to negotiate the very favourable package of measures announced today is to move towards 464 automatic direct payments as part of an overall deal which is in the interests of borrowers, lenders and taxpayers as a whole.
As for income support rates, it is barely two months since I announced a huge uprating of benefits which will increase them all by 7 per cent. next April, and after a number of years in which they have been persistently increased for many groups of claimants, including not least the families with children to whom the hon. Gentleman referred.
On the 16-week rule, the hon. Gentleman quoted very selectively from the Building Societies Association's 1986 statement. Of course it did not welcome the proposal—
§ Mr. Newton
There has never been any dispute about that.
Its statement went on to say:Societies will do all they can to help people where benefit is restricted and there is no reason to expect that people will lose their homes as a result.That was the case then and has been so ever since. As my right hon. Friend the Chancellor of the Exchequer assured the House a few moments ago, we have been told by the Council of Mortgage Lenders that it remains the case now.
§ Mr. Speaker
Again, I will allow 15 minutes of questions from Back-Bench Members on the statement. At 4.25 pm, we shall move on to the business statement.
§ Mrs. Edwina Currie (Derbyshire, South)
Does my right hon. Friend agree that not only first mortgages but second, third and fourth mortgages, hire purchase catalogue debts and other loans and debts, too, cause the problem? Many of those do not qualify for assistance through social security, and some are granted after the claimant goes on to social security. Is it not time that we insisted that all secondary lenders take into account the overall commitments of the borrower, and that they should say no rather more frequently?
§ Mr. Newton
Many lenders may well have drawn that conclusion from the experience that we have all shared in recent months. I have no doubt that they will take note of my hon. Friend's words.
§ Mr. James Lamond (Oldham, Central and Royton)
Is not this proposal rather inadequate and late? Should not the Government shoulder the financial responsibility for rescuing people who are being dispossessed, and spread that burden of costs throughout society, by means of the tax system? Surely it cannot be right to ask investors in building societies—who received a passing mention from the Chancellor—to carry the burden of the cost of this rescue attempt. Many of them are pensioners with small savings. Are not those the very people whom we are constantly being asked to remember in the battle against inflation? We are told that their savings have been eroded. Why should we erode their savings further by making such people shoulder a burden which is really the responsibility of the whole community and of the Government?
§ Mr. Newton
The hon. Gentleman makes two points. The whole package—the understanding outlined by my right hon. Friend the Chancellor and myself—exemplifies a good co-operative arrangement between the Government and the private sector institutions involved to 465 tackle the problem. One of the reasons for it is that investors in buidling societies stand to gain considerably from the arrangements. The building societies and other lenders recognise that the measures will have beneficial effects on the housing market—for example, on the volume of property that might otherwise have been repossessed.
§ Mr. Steve Norris (Epping Forest)
Does my right hon. Friend not agree that it is a dreadful slap in the face for most people on income support to suggest that the gap between the amount of mortgage relief allowed and the amount received by lenders is a reflection of a dreadful inability to pay—especially as the vast majority of people on income support do manage on their benefit? Does my hon. Friend agree that the measures announced in his statement will prevent up to 40,000 repossessions next year by making sure that funds go directly to the lenders, and will ensure that income support funds are properly spent on those who are truly in need?
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)
Does the Secretary of State accept that, as has been said, we give the package an unreserved welcome? None the less, will he give us an undertaking to consider the impact of the change on the level of income support, as there are now several direct debit benefits—six or seven, I believe? The long-term effects should be considered. It is not clear exactly who is eligible for the package. Does anyone having trouble with mortgage costs have the right to opt into the package?
§ Mr. Newton
Not quite in the way that the hon. Gentleman puts it. Under the proposed Bill, qualifying lenders will be able to opt for direct payment where income support is in place. The arrangements that we shall implement over the next few months involve a requirement for people on income support paying mortgage interest to give the Department—the Benefits Agency—verification of the interest being paid. Their consent will be sought to inform the building society so that direct payment arrangements can be put into effect. I hope that that answers the hon. Gentleman's point.
On the first point, about direct debit, most building society arrangements operate by standing order rather than by direct debit, which is not quite the hon. Gentleman's point.
§ Mr. Andrew Rowe (Mid-Kent)
Although it is clear that unemployment has its part to play in the number of repossessions, is it not true that a substantial proportion of repossessions stem from the break-up of marriages and from other domestic problems? Will my right hon. Friend assure me that his package today will be of considerable assistance to families in which the principal wage earner has walked out?
§ Mr. Newton
Yes, I think I can. The range of circumstances that lead to people being in difficulty is wide. One of the encouraging features of our talks with the building societies over the past few weeks is that, apart from their specific undertakings in relation to cases in which income support is being paid, it is clear that they 466 really mean their words about improving counselling services and generally trying to find new ways in which to help those in difficulty, whether they are on income support or not.
§ Mr. Dave Nellist (Coventry, South-East)
How many items can now be taken out of somebody's benefit before he gets some money to live on? Given that 255,000 families—the equivalent of a city the size of Coventry—are more than six months in arrears with their mortgage interest payments, should we not have heard from the Secretary of State today an announcement of the restoration of full mortgage payments immediately, and not after four months, to somebody who is on benefit, and an amnesty, or halt, on repossessions, instead of Elastoplast politics which are timed so nakedly for the election schedule?
§ Mr. Newton
The last part of the hon. Gentleman's question, as I have said several times, bears no relation to reality. Building societies simply do not take action to repossess people who have been paying half the mortgage interest for four months unless there are other relevant circumstances, such as the fact that they were already in large arrears before they went on to income support.
On the other point, I had the uneasy feeling that I had missed something that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) had asked me about direct debits—direct deductions. It was his use of the phrase "direct debits" that put me off course. Those are in a different category from the deductions to which the hon. Member for Coventry, South-East (Mr. Nellist) referred, which are for fuel debts, rent debts and the like, and which arise as deductions from regular weekly payments of benefit. My statement concerns a specific additional payment directed to a specific purpose—the payment of mortgage interest. Different considerations therefore apply.
§ Mr. David Madel (Bedfordshire. South-West)
My right hon. Friend will know that the problem is far more serious in certain parts of the country. Will he ask the Benefits Agency to show greater flexibility on the opening hours of offices, and to consider the temporary redeployment of staff'? Many people will need face-to-face interviews rather than telephone calls on the new arrangements.
§ Mr. Newton
Yes. I will certainly draw the attention of the chief executive of the Benefits Agency to my hon. Friend's remarks. The chief executive's remit very much includes developing Benefits Agency services to be more flexible in responding to the needs of local communities.
§ Mr. Joseph Ashton (Bassetlaw)
Is it not a fact that, in the housing boom of the mid-1980s, many young couples were encouraged to take out endowment mortgages from insurance companies, which the Chancellor of the Exchequer did not mention this afternoon? What happens if the lender does not volunteer to come into the scheme? How many couples are likely to be affected by that?
§ Mr. Newton
The Council of Mortgage Lenders speaks for the vast majority of the lenders whom the hon. Gentleman has in mind. I have the list, but I will not attempt to read it out. Nobody can speak for everyone who may under any circumstances lend money that may he associated with house purchase. The spirit of our discussions and the approach that has been adopted by the very large lenders, who account for a huge majority of 467 those in the housing market, suggests that our proposals will have a considerable effect on people with mortgages of any kind.
§ Mr. Patrick Nicholls (Teignhridge)
Does my right hon. Friend agree that, although the proposals are welcome, they can never remove the borrower's responsibility to realise, when taking out a mortgage, that his circumstances may change and that interest rates may go up as well as down? Bearing in mind the fact that, to my certain knowledge, there have been many cases of building societies positively encouraging people to take on commitments when any expert would know that they could not possibly maintain them, is it not highly appropriate that building societies should play their part in helping to clear up some of the mess that such irresponsibility causes?
§ Mr. Newton
My hon. Friend has made a not dissimilar point from that made by my hon. Friend the Member for Derbyshire. South (Mrs. Currie). I have no doubt that the results of what has been happening in recent months will be borne in mind by all lenders when considering applications for both first and second mortgages.
§ Mr. Clifford Forsythe (Antrim, South)
I welcome the Secretary of State's proposals that will enable those people who wish to remain in their own homes to do so. I support the view that income support that is intended for mortgage payments should be made directly to the mortgage lender, but will the right hon. Gentleman remember that other people, who are not on income support, may also be in difficulties and may be unable to keep up their payments because, for example, of the cost of repairs? Such people may put their home on the market but then face difficulties in getting housed because, for example, of the cuts in the housing budget in Northern Ireland.
Will the Secretary of State confirm that the scheme extends to Northern Ireland, given the statement by a building society spokesman to the effect that most of the money would go to the south-east of England and is not required for Northern Ireland?
§ Mr. Newton
On the latter point, it is obviously for the building societies and banks to determine the precise coverage of their arrangements, because those arrangements will differ from one institution to another depending on their circumstances and on the situation in different parts of the country. However, I shall ensure that the building societies' attention is drawn to the hon. Gentleman's point.
In answer to the hon. Gentleman's first point, of course it is true that, despite the best efforts of some Opposition Members to suggest otherwise, the effects of the difficulties that have occurred are not by any means confined to those in receipt of income support. That is precisely why, from 468 the building societies' point of view, much the biggest element of the package is the measures that my right hon. Friend the Chancellor of the Exchequer outlined, which will be worth perhaps up to £1 billion, most of which will be directed to those who are not on income support.
§ Mr. Hugo Summerson (Walthamstow)
Will my right hon. Friend confirm that measures have been taken to counter possible abuse by unscrupulous lenders who may take the opportunity to try to raise repayments by those who they know are having their mortgages paid directly?
§ Mr. Newton
We are always looking for ways of preventing abuse in the social security system, but my primary purpose this afternoon is to put in place arrangements that will effectively help with the problem of repossessions.
§ Mr. Harry Ewing (Falkirk, East)
Given that the Secretary of State obviously accepts that the vast bulk of the problem is caused by unemployment and by people losing their jobs, may I, against that background and in all seriousness, make a helpful suggestion to the right hon. Gentleman? He must be aware that, at the time of the next election, when every current occupant of the Treasury Bench will lose his or her ministerial job, their ministerial salaries will nevertheless continue to be paid for a further three months to allow them to adjust to a lower level of income. Might it not be a good idea to extend that principle to every other person in the country who loses his or her job?
§ Mr. Newton
My right hon. Friend the Leader of the House, who is concerned with those arrangements, will no doubt have noted the hon. Gentleman's suggestion. For the moment, I must sensibly concentrate on ensuring that our arrangements for income support are directed towards those whom we are trying to help.
§ Mr. John Watts (Slough)
I welcome unreservedly my right hon. Friend's proposals for direct payments in respect of mortgage interest. Will he consider extending that principle to rent in respect of income support claimants? Landlords in my constituency are increasingly unwilling to let their properties to potential tenants who draw income support because of had experiences of income support not being paid to them and large debts being accrued.
§ Mr. Newton
I have not adverted to housing benefit in that sense because local authorities already have wider powers to make direct payments of rent if they wish. The sensible course may be for my hon. Friend to take up the matter with his local authority. If he thinks that I could help, for example by contacting the local authority, he should give me details and I shall see what I can do.