Mortgage Interest Relief

HC Deb 26 January 1995 vol 253 cc493-537

Madam Speaker

I have selected the amendment in the name of the Prime Minister.

4.22 pm

Mr. Donald Dewar (Glasgow, Garscadden)

I beg to move, That this House notes with concern the proposed withdrawal of help with mortgage interest payments during the first nine months on income support for any applicant obtaining a mortgage after 1st October 1995 and the reduction in such assistance for existing borrowers who in future are forced to apply for state help; and, recognising that these changes will result in a very significant additional cost for home owners, lead to repossessions which are already running at an unacceptably high level and further depress the housing market, calls on Her Majesty's Government to withdraw these proposals, which will cause real difficulties for both lenders and borrowers. As its title makes clear, the motion deals with the support given to people drawing income support and with help with mortgage interest payments. It might seem a rather technical and obscure matter to do with the fine print. Indeed, it is ultimately likely to result in regulations that will be passed in a quiet corner of the Committee Corridor at the fag end of a parliamentary day. That should not happen, and we are determined that it will not, because the proposals raise significant issues.

Mortgage interest support is no small issue in itself. Of course, it has increased greatly in recent years, and that was one of the foundations on which the Secretary of State for Social Security made his case for change.

Dame Elaine Kellett-Bowman (Lancaster)

The hon. Gentleman says that it has increased substantially. Would he care to inform the House that it has increased from £31 million to £1.1 billion?

Mr. Dewar

I regret having given way because I was about to deal with that very point. This time, the hon. Lady is correct. Mortgage interest support has risen from, as the hon. Lady says, £31 million in 1979 to just over £1 billion in current terms. It involves about 550,000 claimants. I will not give way to the hon. Lady again in case she stands up to say that it involves 548,000 people. I offer her that gratuitous fact, which she can dream about tonight.

The anger and the drive in the Department appears to be based on that rise in support. The increase has largely been in the latter part of the period and it is of course, as everyone in the House recognises, almost entirely the result of two factors. One reason is the recession—the Government are not in a very good position to complain about the management of the recession—and the second reason is the very large increase in owner-occupation.

The Secretary of State managed to sound as though he was complaining about the latter factor. In the Department of Social Security press release, which announced the change, he said: In recent years the pattern of owner occupation has changed out of all recognition", as though that were something to deplore. In fact, the Government, quite rightly, have been encouraging people to buy their own homes when it makes sense for them and they are in a position to do so. I certainly make no complaint about the fact that there are more owner-occupiers. I take from it the logic that that increase will put greater pressure on the scheme that we are discussing.

My worry is that the changes being brought forward are likely to introduce an element of instability which will be quite serious to many people in the country. I do not want to insult the House by running over the proposals in any detail, but in the briefest possible way, I remind hon. Members that if a person takes out a new mortgage after 1 October 1995 and—unfortunately—has to apply for help, he will find that he is in a help-free zone for nine months.

Existing borrowers who have to apply in future for help with mortgage interest will get no help for two months and 50 per cent. for four months, compared with the present limitation of, simply, 16 weeks at 50 per cent. There is the comparatively minor matter, with which I have no objection, that the cap on mortgages is being reduced for this purpose from £125,000 to £100,000.

The impact of the changes will be considerable. Existing borrowers will find that if they were to move on to income support and apply for help, they would be losing through this disqualification the equivalent of two months' support, or for someone on an average mortgage, about £350. For new mortgages, the nine-month freeze would be worth about £1,250. Those amounts are not academic but substantial sums that will be sadly missed, especially by people who are in a marginal situation and who are struggling to maintain their position as home owners.

Problems will be created. To be fair—I make no bones about it—the Government have offered a solution. That solution is that the private insurance market will be able to cover the gap and offer the service. The thrust of that and the most significant difficulty with it is that if the scheme is as comprehensive as, I understand, the right hon. Gentleman wishes it to be, it will place a significant burden on almost every home owner in the country.

Insurance is a commercial business and, as the Government have conceded, it costs about £7 to cover every £100 of mortgage payments currently. Realistically, it looks like adding another £200 or £300 a year to the cost of maintaining one's house.

Dame Elaine Kellett-Bowman

indicated dissent.

Mr. Dewar

Those figures will be little consolation to the hon. Lady who is shaking her head so decisively.

Dame Elaine Kellett-Bowman

Will the hon. Gentleman give way?

Mr. Dewar

No, I am sorry.

Dame Elaine Kellett-Bowman

rose—

Mr. Dewar

May I—

Dame Elaine Kellett-Bowman

It is no good referring to me and not giving way.

Mr. Dewar

I am not giving way to the hon. Lady.

Dame Elaine Kellett-Bowman

Oh come on.

Mr. Dewar

The hon. Lady is turning a delightful colour of brick red, but even that will not tempt me to give way.

The changes will be—

Dame Elaine Kellett-Bowman

The hon. Gentleman must give way.

Madam Speaker

Order.

Mr. Dewar

Thank you, Madam Speaker.

Dame Elaine Kellett-Bowman

rose—

Madam Speaker

Order. Is the hon. Gentleman giving way?

Mr. Dewar

indicated dissent.

Madam Speaker

Then I and the hon. Gentleman must remain firm.

Dame Elaine Kellett-Bowman

On a point of order. The hon. Gentleman should give way. He has referred to me.

Madam Speaker

Perhaps the hon. Gentleman will give way a little later.

Mr. Dewar

The hon. Lady complains that I am drawing attention to her, but she is doing a very good job at drawing attention to herself. I suspect that it is doing her no good at all.

Anyway, at £7 per £100, I do not think that there is—

Dame Elaine Kellett-Bowman

Will the hon. Gentleman give way?

Madam Speaker

Order. The hon. Lady must not pursue the point. She knows our procedures very well. Perhaps if she leaves her point until a little later, the hon. Gentleman may give way then.

Mr. Dewar

I am very grateful to you, Madam Speaker.

Realistically, it looks like an extra £200 or £300 a year on the cost of home ownership. It will be little consolation to know that there is a small addition to that, which I mention only in passing, of the new 2.5 per cent. insurance tax which will apply to such premiums.

We must consider whether that burden will be shouldered cheerfully. The issue must be seen in context. Not only do home owners face the prospect of the additional insurance costs if they take the Secretary of State's advice, but, from April, their MIRAS—mortgage income relief at source—will be reduced to 15p. The Council of Mortgage Lenders, whose arithmetic is probably better than mine, reckons that someone with an average mortgage will see the cost of home ownership rise by just over 10 per cent.

The Secretary of State for Social Security (Mr. Peter Lilley)

If the hon. Gentleman is criticising the reduction in mortgage interest relief at source introduced by my right hon. and learned Friend the Chancellor of the Exchequer, will he also criticise the Opposition housing spokesman, who proposes the abolition of mortgage interest relief, as I will happily demonstrate in my speech?

Mr. Dewar

In that case, it might have been useful if the Secretary of State had waited to make his point in his speech. If we are talking about MIRAS—as apparently we are—when the Secretary of State replies, will he explain what he thought of the manifesto promise that MIRAS would be maintained at present levels when it has now been reduced twice by the Government, and is now at 15 per cent? That does not seem to be a ground on which the Secretary of State should choose to do battle.

No doubt the defence will be that individuals can make their own choice and some will opt out from the additional burden. We must ask whether the proposal can be comprehensive. I will deal with that point reasonably briefly. Many groups of people are unlikely to be covered by the private insurance market. For the evidence for that, I rely on the briefing that was sent to hon. Members by the Association of British Insurers which, naturally, wants to sell insurance. That is the point of its activities. It will be extremely difficult to offer cover to many important groups.

For example, pensioners are not in the frame. Some categories, notably the retired, who are claiming income support because of a permanent shortfall—

Mr. Lilley

Lest the hon. Gentleman inadvertently misleads the House, may I state that the proposals do not apply to pensioners?

Mr. Dewar

I was about to come to that point. I read the documents that the Government issue and I want to obtain more information. The people to whom I have referred cannot be covered by insurance. Therefore, they must be covered by some form of exemption. The phrase used is that they will be "protected". However, it is clear from the Government amendment that pensioners on income support will continue to have their mortgage interest paid". The Secretary of State has given this matter much thought—as was clear from the speed with which he approached the Dispatch Box—so perhaps he will explain on what basis that will be paid. Will it be paid at the standard rate? Will there be a restriction in the first 16 weeks, as previously, or will all the mortgage interest be paid? It would be extremely helpful if the Secretary of State could clarify those points.

Dame Elaine Kellett-Bowman

Three and a half minutes ago, the hon. Gentleman assumed that insurance premiums would remain the same even though many more people would take them out. According to the normal principle of insurance, the wider the coverage, the more likely it is that premiums will fall.

Mr. Dewar

I agree with the hon. Lady and that no doubt is the hope. However, the hon. Lady will recall that things can go up as well as down. Between 1991 and 1993, premiums in the sector about which we are concerned increased by 43 per cent. and a large number of insurance companies made very substantial losses and withdrew from such business. If the proposal is to be the substantial foundation on which the Government are relying, it seems to be a very high risk strategy.

As I do not have time to deal with those groups in detail, I shall simply say that there will be great difficulties for the self-employed. I am told that most private insurance companies will cover the self-employed. However, they will pay only if they are satisfied that the self-employed have ceased to trade. The terms are usually that a business must be wound up or, in some cases, that the self-employed are in voluntary liquidation or are bankrupt. That does not seem to be a happy situation.

The disabled can be covered too, but not, of course, for any claim that arises out of their disability or an existing illness. Even for those who will be covered, there will be bad news and good news. The good news, according to the Association of British Insurers, is that one's premium is likely to be calculated to reflect the increased risk. In other words, they will be paying above the average. The bad news is that that degree of sophistication is probably still a year or two away, so that in the interim there will probably be no cover for them at all.

There are also single parents, who comprise about 20 per cent. of the claimants' group. They, I am told, will be all right. The Association of British Insurers says to me that we do not need to worry; most of them will not qualify for a mortgage, so they will not need mortgage interest support. Even those who have mortgages and whose marriages break up will get the support that they require from their former partners—ha, ha—or from the work of the Child Support Agency, we are told. [Laughter.] Definitely, there is cause for some laughter at that point.

For new single parents, the results of an immediate and unexpected divorce, there is unlikely to be any cover at all. They do not fall within the remit of the industry. If they did obtain cover or if they had cover, they would almost certainly not receive payment for 12 months, according to the Association of British Insurers, because it would not pay out because of the danger of fraud until decree nisi had passed. By that time they would have had the equivalent, anyway, of the nine-month period without any help and would be in grave danger.

It will not be easy to obtain comprehensive cover of the kind that the Secretary of State has suggested. I certainly recognise, as he does—it is a point that I have made about single parents—that most private contracts allow for 60 or 90 days without any payment or support in any event, so we are left with private insurance cover not covering the gap that the Secretary of State is creating, although insurance cover was supposed to be the answer to that gap. That must be very unsatisfactory.

A large number of people will not take out cover and may find themselves unexpectedly at risk. Fewer than 5 per cent. of existing mortgage holders have such insurance cover. It has gone up substantially recently, but again, to quote the Association of British Insurers, even if the advantages of this kind of insurance are pointed out—we know what that means—by the lender, then the "penetration rate"—a somewhat sinister phrase— can be as high as 35 per cent. That does not sound like comprehensive cover by any reasonable definition.

Repossessions are dropping. That gives me great pleasure, and I hope that they continue to drop, but the Council of Mortgage Lenders, the Building Societies Association and the people who are in the business of lending will say that they are convinced that one result of the changes, if they are brought into force, is that there will be more repossessions than there should have been and that even if, as I hope, there is a continuing drop, it will be very much smaller than it otherwise could have been. The Secretary of State should take that point into account.

I ask the Secretary of State to deal with the 1991 agreement between the Department of Social Security and the Council of Mortgage Lenders. In it, direct payment was agreed and, in return for direct payment, it was said there would be no repossessions. It is very important that that holds good and continues.

I draw the right hon. Gentleman's attention to the CML news update, issue No. 4, which has just come out and with which I am sure he will be familiar. Its second and most important conclusion is: it is difficult to see how the December 1991 agreement between lenders and the Government can now survive. If that is true and if that fear turns out to be justified, that would be an extremely serious matter. One of the difficulties that worries the trade and me, although there have been some reassuring words, is how the new standard rate will affect people who have been prudent and have taken out a fixed-interest mortgage and who may find that there is a continuing gap on a permanent basis, when they are in receipt of support, between what has been paid on their behalf and their obligation and indebtedness to the lender.

I shall be very quick because I recognise the strictures of time in this short debate, but let me turn to the justifications, as I understand them, for the changes. One is that it is appropriate, proper and meet that those who own their own homes should stand on their own two feet. That is an attractive idea, and I understand that it may appeal to some members of the Conservative party, but I cannot understand the logic behind it.

If we assume—I believe that we are right to do so—that people on income support in rented property deserve to have their rent paid because of their financial difficulties and the situation in which they find themselves, why should people in exactly the same financial situation, who qualify for and receive income support, get no help whatever simply because they have bought their own homes?

There seems to be something of a turnabout in historic terms, because I am now defending home owners. I do not see why they should be discriminated against, and that is exactly what is happening. There will be help with rent for people on income support but no help with mortgage interest payments. Of course there should be no repayment of capital, because that would be preserving and enhancing a capital asset, but what is the logic behind the discrimination against home owners?

Mr. Julian Brazier (Canterbury)

Surely there is a considerable difference in circumstances between the two cases. People who buy their own houses not only take on a considerable responsibility, and should understand that that is what they are doing, but in the vast majority of cases, despite the fact that there is some negative equity now, will enjoy a capital gain in the long term.

Mr. Dewar

In view of the history of recent years that sounds like an argument about fool's gold.

There was once a time when a home owner would live in the stockbroker belt in a Tudor villa, but now many of my home owners live in former council houses; many have had to struggle, and are marginal home owners in every sense. I have not time to embroider the argument, but I feel strongly that the proposal is discriminatory and cannot be justified.

Mr. Frank Field (Birkenhead)

Will my hon. Friend give way?

Mr. Dewar

I shall give way for the last time.

Mr. Field

Is not the proposal so surprising that one must ask oneself what the next move may be? As the people on the Treasury Bench are supposed to be so fully committed to owner-occupation, this should be the last thing that they would suggest. They could justify it to their supporters only if they answered my hon. Friend's question by describing it as a first move towards further reform. The next move could be to expect people to cover their rent through some form of insurance in case they become unemployed.

Mr. Dewar

My hon. Friend has been here too long and has been watching the Government for too long, as we all have. I understand his point, but I hope that it is neither valid nor justified.

Mr. Bernard Jenkin (Colchester, North)

Will the hon. Gentleman give way?

Mr. Dewar

I must press on.

Mr. Jenkin

rose—

Mr. Dewar

I am giving way for literally the last time.

Mr. Jenkin

In view of the hon. Gentleman's unhappiness about the apparent inconsistency between the treatment of rents and that of mortgage interest, is he undertaking that it would be a Labour Government's policy to harmonise those arrangements? Does he undertake not only to reverse the present situation but to go further? How much would that cost?

Mr. Dewar

At the moment I am arguing that discriminatory treatment should not be introduced and that we should oppose it. I genuinely hope—I am not being sarcastic—that as the hon. Gentleman has some experience in the subject, he will join me.

As I understand it, the second reason for introducing the measure is the idea that the insurance market can offer more comprehensive cover. For example, if people have savings of more than £8,000 they do not get income support, and if someone loses his job and the family income is cut by two thirds but his wife still works, the family may not qualify for income support. The idea is that for the £200 or £300 a year spent on the premium people will have a security and stability that would not otherwise be available.

I have been trying to tell the Secretary of State that I do not believe that such comprehensive cover will be achieved. Many of the vulnerable people will not buy cover and will end up in the vale of tears; there may be a considerable on-cost to public funds in the end. It may be right to be prudent, but prudence is not compulsory; it is an addition and an alternative to the safety net of the mortgage interest protection organised by the DSS.

There is another argument of great importance, on which I make no apology for quoting the Council of Mortgage Lenders again. The council first says that there has been a drive to encourage home ownership for people on more modest incomes—I approve of that. It adds: First, the Government remains committed to assisting people to enter owner-occupation—the Housing Corporation is being instructed to give an increasing proportion of its budget to low-cost home-ownership initiatives which supposedly enable marginal groups to enter owner-occupation. The council then argues trenchantly and forcefully that the Government's proposals run counter to that aim, because they will have two effects. First, they will put at risk many people in that economic situation—the low-bottom tranche of home ownership, which many people have been artificially stimulated into entering. Secondly, according to the council, the proposals may frighten out many people in the commercial world who might otherwise have invested in such enterprises.

The council argues that the proposals are therefore incompatible with the general thrust of Government policy—a thrust with which, unusually, I sympathise. I do not believe that home ownership should be the privilege of the well-off. The policy causes an unpleasant clash of principles within the Government's scheme of priorities, and I ask the Minister to think again.

I shall finish—or almost finish—by giving the final reason for the proposals: the Government hope to save money. I shall ask the Minister to say a word or two about that. The DSS press release mentions £200 million in the long term—an interesting figure. We know that the minor adjustment in the cap on mortgages—the limitation to £1,000—will save only £1 million between October, when it is introduced, and the following April. From that April to the following October the savings will again be only £1 million. That may surprise hon. Members, because that measure sounds quite important. As the hon. Member for Lancaster (Dame E. Kellett-Bowman) said—I do not want to draw attention to her in case she rises in her wrath—we are spending £1 billion. Yet the saving is only £1 million.

Let us take a more important figure—the estimated saving from new mortgage holders after 1 October. Those are the people who will find that they lose nine months' support. What will that save? I received a parliamentary answer to that question, and I can hardly believe it. Assuming that one includes all the people involved, the annual saving will be £18 million. What is £18 million compared with the cost of the scheme?

The adjustment will mean bureaucracy, discrimination, differentials and many other problems. It will put some people at risk, because some will lose their homes and possibly their jobs; there will certainly be casualties. Yet the figure for savings resulting from the main change is something like £18 million for a whole year. That is dogma run mad, and it will cause an enormous number of difficulties. I hope that the Minister will say clearly what savings he expects will result from his proposal.

Now I really shall finish, by saying that the Secretary of State is in a double bind. If the system is as comprehensive as he says, if he gets everyone on board and persuades them all to find the extra £200 or £300 a year, he will create a considerable additional burden for home owners right across the range. Many may escape the burden and will not have to pay, but then the trouble will be that the system will not be comprehensive, thus losing the only virtue that the right hon. Gentleman parades.

Better-off people in steady employment, who may well pay the insurance, may ultimately begin to think that they are paying for something that they do not need, and that they have been done. The vulnerable, the people who really need the coverage, will no doubt recognise that they cannot afford to take it out, and they will join the casualties.

In the consultation, I hope that the Minister will consider what is being said by the Consumers Association, the National Association of Citizens Advice Bureaux, the Association of British Insurers, the Building Societies Association and the Council of Mortgage Lenders, all of which have trenchant criticisms of the right hon. Gentleman's proposal. Some of those organisations are openly, root-and-branch hostile to the idea.

Some Conservative Members have already raised a cry of pain. I am confident that Tory Back Benchers who go to their constituencies will not be met with a quiet word of congratulation in the corner and a mutter of welcome for the new proposals. They will find—rightly and understandably—that the proposals are very unpopular.

I do not mind about that—it is not my problem. I do mind about a number of people whom I know personally, and many more whom I know exist in my constituency, who are existing on a budget that is stretched to breaking point by a mortgage. Those people have no room for error or for manoeuvre, and they may well be put to the wall because of the increases in costs. They may decide to run the risk, and end up as really difficult casualties, and find that they have no support at all for a vital nine-month period. I do not think that those people should be put at hazard by the measure. I do not think that people such as them—who exist in every constituency—should be forgotten in the House, and that is I why commend the motion.

4.50 pm

The Secretary of State for Social Security (Mr. Peter Lilley)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: condemns the Opposition's wish to continue the inadequate existing system of Income Support Mortgage Interest, which does not protect those with modest savings, those with small pensions or redundancy payments, or those with a working spouse, which has undermined the spread of private mortgage insurance and has contributed to 50,000 homes a year being repossessed; believes that the Government's proposals will lead to the development of more comprehensive, less costly insurance cover; welcomes the fact that pensioners on income support will continue to have their mortgage interest paid; and reaffirms its commitment to home ownership". Much as I like the hon. Member for Glasgow, Garscadden (Mr. Dewar)—he knows that—we will take no lectures from him or from any of his colleagues, who voted at every opportunity to stop council tenants having the right to buy their own homes. They cannot pose as the friends of home ownership.

We will take no lectures from a party that has always used every lever available to it in Parliament, local councils and housing authorities to prevent people from owning their own homes. The Labour party has only one objective locally and nationally: to become the nation's landlord. We are the party of home ownership, and we will remain so.

The Labour party is trying to pretend to be on the side of home owners, but its position wholly ignores the problems of those who suffer the risk of repossession. Labour offers nothing, and in his speech the hon. Member for Garscadden offered nothing to help them.

Labour seems to oppose the spread of private insurance, which would protect such people because, on doctrinaire grounds, it is against private insurance. We believe that the present income support arrangements for mortgage interest, which are extremely costly to the taxpayer, are manifestly unsatisfactory and need reform. They fail to provide comprehensive cover.

The Labour party mentions the present system of ISMI as though it provides cover for everyone who finds themselves unemployed or without earnings: it does not. Two thirds of home owners would not qualify for help if they lost their jobs today, either because they have a working spouse or because they have a little saved. Many of the remaining one third would be disqualified simply because they were receiving redundancy pay or an early retirement package. Labour offers nothing to protect them from the risk of repossession.

As a result, some 150,000 people a year who lose their jobs receive no help from income support with their mortgage interest. Labour offers nothing to help them to avoid the risk of repossession. Some 50,000 people have their homes repossessed every year, many of whom are not in receipt of income support. Labour offers nothing to help them.

We are determined to improve the situation, and that means encouraging the growth of private insurance. Private insurance has been growing, but the very existence of income support for mortgage interest has undermined its growth over a period when it could have provided valuable cover.

People who believed that they were covered did not take out insurance, only to find that they could not receive help from the state. Our measures will help to reduce repossessions in a number of ways.

Ms Ann Coffey (Stockport)

Will the Secretary of State comment on a problem that one of my constituents experienced? He took out mortgage protection insurance cover but, because he attended a Government training course the Employment Agency did not deem him to be unemployed, for reasons of which I am sure the Secretary of State is well aware. As the agency would not confirm that he was not in employment, his insurance company refused to pay out.

Is the Secretary of State aware that there will be thousands of such cases? People will have to read the fine print of their insurance policies carefully. Is he further aware that there will be endless wrangles between constituents, Members of Parliament, insurance companies and the Employment Agency over exactly what unemployment means?

Mr. Lilley

The hon. Lady makes an important point. One of the consequences of our reforms will be that lenders and borrowers will have an interest in ensuring that insurance policies are good, high-quality policies that cover what they purport to cover and offer protection against the circumstances in which people may find themselves. Those include the circumstances described by the hon. Lady. I shall return to that issue; it is an important aspect of what we are seeking to achieve.

Mr. Jenkin

Should not home owners be advised to read carefully the small print of the next Labour manifesto? Is not it unclear what policies are being promised to make home owners more secure under a Labour Government?

Mr. Lilley

That is certainly true. Home owners should look not only for the small print but for the price tag; very often they will find neither.

Our measures will help reduce repossessions in a number of ways. First—I do not recall the hon. Member for Garscadden mentioning this—for existing borrowers, we shall start paying ISMI direct to the lender from the outset. At present, during the initial 16-week period, when it is payable at a rate of 50 per cent., it is paid to the borrower, but it is often not passed on to the lender. Arrears can then accumulate, and that can cause problems. That will not happen in future.

Secondly, we will ensure that all those taking out new mortgages are encouraged to take out insurance or other forms of cover for the first nine months of any loss of earnings. It will be in the interests of the lender and the borrower to see that proper cover is in place. ISMI will be available after nine months—much as at present—to cover those who face loss of earnings.

Mr. Richard Burden (Birmingham, Northfield)

Will the Secretary of State explain how the measure will help many borrowers who will lose income support for the first nine months? Those borrowers will be urged to take out private insurance, but most private insurance companies will not pay anything for the first 90 days, or at least the first 60 days. Where will the borrower obtain the money that the Government have removed?

Mr. Lilley

Responsibility for providing protection in the event of loss of earnings must be covered by the borrower, the lender and the Government. We all have a responsibility, but it is perfectly reasonable that during the first couple of months the lender and the borrower should meet the cost of any inability to pay interest.

We should remember that the vast majority of people who lose their jobs get back into work shortly—two thirds do so within six months and a large number within the first couple of months. That makes it unnecessary to make arrangements for paying interest to lenders, who are large institutions with extremely large resources. Lenders can deal with that in the first instance, as of course they do for the majority of people who are not covered by income support for mortgage interest.

Mr. Frank Field

The Secretary of State assures the House that all will be well when the measure is passed, but the Opposition naturally question whether that optimism is securely based. We are worried on a number of counts. Following his experience with the Child Support Agency, the Secretary of State has been converted to pilot studies. Has he thought about introducing them for this measure, so that before we make the scheme universal we can find out which side of the House is right—the Conservative side, which is confident that all will be well, or our side, which is worried that many people will suffer as a result?

Mr. Lilley

I do not think that this measure will suffer from the organisational problems that beset large-scale organisational reform. In a sense, we already have experience of private insurance and we want to build on it and to make it better. We know from our experience of the state system that it is inadequate and that it leaves many people uncovered—an issue that the Opposition have failed to mention. We are making the change only for the first nine months and for those taking out new mortgages, so it will be introduced gradually, as new people enter the market.

Pensioners on income support will continue to receive payments for their interest—

Mr. Dewar

At the standard rate?

Mr. Lilley

Yes, at the standard rate. At present, they are not subject to the 50 per cent. rule for the first 16 weeks and will not be subject to it.

We have begun consultations with those involved, will consult carefully about how the change may affect other groups and are determined to get the details right. I will deal with extensive coverage in a moment, but first I must deal with some of the criticisms that have been made here and in other Labour party statements in recent weeks.

The alleged increase in the cost of buying houses, as a result of the combined effect of the recent small interest rate rise, changes in mortgage interest relief and the introduction of private insurance, is one of the main complaints, which were widely faxed to the newspapers by the hon. Member for Dunfermline, East (Mr. Brown), to which the hon. Member for Garscadden alluded. They claim that that increase will price first-time buyers out of the market, which is sheer nonsense.

The two main determinants of the cost of buying a house are the price of houses, which by historical standards is low relative to earnings, and the interest rate, which is almost at a 20-year low point because of our success in getting inflation down, which will be put at risk by Labour's policies. Their combined effect means that, even after allowing for the tax change and the potential cost of mortgage insurance, the cost of house purchase is little more than half the proportion of net income that it was at its peak about five years ago. As my right hon. Friend the Prime Minister pointed out at Question Time, the typical mortgage today costs £140 a month less than in October 1990.

Claims that the cost of mortgage protection is high and is likely to rise are nonsense. One can already insure one's mortgage for 4p in the pound on one's monthly advance, if one insures direct, which is only £12 per month on the average mortgage. How many hon. Members spend as little as that to insure the contents of their house, and how many think it strange that they, rather than the taxpayer, have to pay the buildings insurance on their home, which is usually a condition of a mortgage?

Mr. Dewar

The cost of alternative protection is obviously important. Perhaps I have placed too much reliance on the Building Societies Association and the Council of Mortgage Lenders. Is the right hon. Gentleman saying that he believes that someone on an average mortgage could arrange adequate cover for under £150 a year?

Mr. Lilley

Yes, if they took advantage, for example, of the new General Accident Direct insurance, rather than going through a building society and paying it the additional commission. Commissions may well decrease as a result of our changes and I very much hope so.

Mr. John Denham (Southampton, Itchen)

rose

Mr. Lilley

May I make a little progress before I give way again? The hon. Gentleman may find that my comments will relieve him of the need to intervene.

We consider it normal to insure, and to be required to insure, the fabric of the building against fire and damage when we take out a mortgage. We do not think it unusual to take out life insurance policies to pay off the mortgage if the breadwinner dies. Moreover, competition is reducing the cost of home building insurance. The Halifax has announced cuts of up to 60 per cent. in its insurance premiums, with average cuts of about 20 per cent. The Association of British Insurers is convinced that the cost of mortgage insurance will come down as it becomes more universal.

At present, the worst risks—people who suspect that they may be made redundant—are those who are most likely to take out insurance, which means that costs are higher than they would be otherwise. The spread of insurance over a wider spectrum of people will give a better spread of risks, and so reduce costs and premium.

Some hon. Members have claimed that the changes will adversely affect the housing market. I certainly recognise the importance of rebuilding confidence in the market, but I do not believe that our announced changes will undermine it. On the contrary, it is clear that it is not the cost of purchasing houses that is holding back the housing market, as it is historically quite low relative to incomes and will not be appreciably affected by the modest cost of mortgage insurance.

The main problem is personal confidence and fear of unemployment at a turbulent time in the labour market, not merely here but worldwide, which is causing new buyers to hold back. When insurance cover is the norm, as part of a new mortgage, potential new buyers are likely to feel more confident, not less. Moreover, fewer people who become unemployed will be unable to cope and thus face repossession, so the market will be less depressed by forced sales.

Almost by definition, a market in which new buyers are properly covered against risk will be healthier, more active and more resilient.

Mrs. Maria Fyfe (Glasgow, Maryhill)

In my constituency nine people are chasing every job. Does the right hon. Gentleman believe that premiums will be higher in such an area, and what is his estimate of what they might be?

Mr. Lilley

Usually, insurers do not have regional premiums—

Mrs. Fyfe

What about car insurance?

Mr. Lilley

Of course they do for motor insurance.

The main threat to the housing market is people such as the hon. Member for Garscadden and others talking it down, scaremongering and spreading wholly unfounded fears, and they should be ashamed of themselves. The Council of Mortgage Lenders told me emphatically that people should not talk down the market, as the Opposition have.

Some Labour Members have asserted that cover will not be available for certain groups. The insurance industry has roundly rebutted that assertion. In its paper, the Association of British Insurers states: Very few people, having first been accepted by a mortgage lender as a satisfactory credit risk for granting a mortgage will not be eligible for insurance. Even in these few cases, the competitive nature of the mortgage protection insurance market is such that new products are likely to be developed quite quickly, or existing products refined to provide cover". Likewise, the Abbey National said: If we have agreed a mortgage there is no reason why the borrower should not then qualify for mortgage repayment protection. Of course, we shall take care when framing the regulations to ensure that we encourage comprehensive cover for all those who should be able to get a mortgage. I am pleased that the Council of Mortgage Lenders and the Association of British Insurers have agreed to work closely with my officials to ensure that we do all that we can to achieve that objective.

Mr. Denham

The Minister referred to the Council of Mortgage Lenders and said that it did not want people to talk down the housing market. Is that the same Council of Mortgage Lenders that has written to hon. Members, saying that it is concerned about the potential impact on mortgage borrowers and on the housing market of the changes which have been announced"?

Mr. Lilley

Yes, it is, and a certain ability to argue its case when it has a vested interest in receiving more than £1 billion of public money with no questions asked is not surprising. Whoever suggested that the hon. Gentleman should be cautious about repeating everything that the Council of Mortgage Lenders says was right. It would be a first, in my experience, if an interest group in receipt of public money did not argue to continue receiving at least as much of it in future.

Mr. Brazier

I am most grateful for the fact that my right hon. Friend continues to set an excellent example by giving way to hon. Members on both sides. On the moral point about vested interests, does he agree that it is wrong that people who take out mortgages on large properties should be underwritten by the state—and the taxpayer—in some unlimited fashion? After all, the taxes are paid by people who are often on much lower incomes.

Mr. Lilley

That is certainly correct. I am sure that hon. Members on both sides will have been shocked by a number of recent, highly publicised cases of significant sums being lent to certain people. For instance, a part-time speech therapist was able to secure a loan of hundreds of thousands of pounds on the prospect that she would cease to be part time and be able to work full time—only to discover that she could not do so. The lender who made that decision felt it right and proper that the taxpayer should underwrite the risk. That is surely not an optimum use of taxpayers' money.

Insurers and lenders make it clear that policies are available for many of the groups for whom it is alleged they are not. As the hon. Member for Garscadden admitted, they are available for self-employed people. Policies have long been available to cover sickness and disability. Contract workers and people working in non-traditional ways are a growing phenomenon, and lenders are recognising that they will have to adapt to it if they want to be able to supply home finance for such people; otherwise they will lose out in an important market. They are therefore developing schemes involving repayment holidays between contracts built into the mortgage provision for people who are contract workers. We welcome that. In our discussions we shall attempt to find out what can be done to facilitate the growth of such policies.

The hon. Member for Garscadden mentioned the consequences of marital breakdown. Of course, insurance policies do not cover that, but we should at least question whether those who split up can use that as an excuse immediately to pass on the cost of their mortgage to the taxpayer. Why should married taxpayers have to subsidise divorce? Is that Labour's policy? If a husband scarpers and leaves a wife to bring up the children with no income, in the first instance it is for the building society to pursue the errant husband, to make sure that he meets that liability. Moreover, in such circumstances, the building society has a duty to be helpful to the mother with children; should the situation persist beyond nine months, income support for mortgage interest will be available to help.

I accept that, as the hon. Member for Stockport (Ms Coffey) said earlier, policies have not always been satisfactory. That is partly because income support for mortgage interest reduced pressure from lenders and, to some extent, reduced the number of borrowers pressing for improvements in policies.

We recently agreed to a revised code of practice from the Association of British Insurers. About 95 per cent. of mortgage protection insurance is handled by members of the ABI, and by the insurance ombudsman service or the personal insurance arbitration service. A condition of membership of the ABI is adherence to the code of practice, which was revised in the light of recommendations of the independent code-monitoring committee, which includes the National Association of Citizens Advice Bureaux.

The code is now tougher, and it will ensure that the advice given by those who sell insurance policies, or when lenders provide such policies alongside a mortgage, spells out the fine print and details the obligations to borrowers. I hope that that and any further changes that emerge in the course of our consultations will enhance the quality of mortgage protection policies as well as extending their coverage.

Mr. Dewar

I hope that I shall not have to interrupt the right hon. Gentleman again, but before he finishes will he deal with the potential savings? A question in Hansard on 15 December 1994 asked the Secretary of State to estimate the annual savings in a full year to social security expenditure from withdrawing income support assistance with mortgage interest payments from new mortgages after October 1995 for nine months assuming that (a) all income support claimants with new mortgages are affected".—[Official Report, 15 December 1994; Vol. 251, c. 794.] The savings amounted to £18 million. Perhaps I have misunderstood, but if that is right it would seem an extraordinarily small figure.

Mr. Lilley

That is simply because we are applying it to new mortgages. As the new mortgage builds up, savings will grow. We expect, within a relatively short time, the savings from the measures that I have mentioned today to amount to £200 million a year—

Mr. Keith Bradley (Manchester, Withington)

By when?

Mr. Lilley

By the end of, I think, the third year of the expenditure round. Overall, however, savings.will grow by more than that, as total coverage of mortgages comes in—

Mr. Dewar

Allowing for those who fall out of the figures?

Mr. Lilley

Correct, but most people are back in work within nine months. New mortgages are covered: existing mortgages are not, but over a 25-year period every mortgage will be covered. It will take time to build up—

Mr. Dewar

rose—

Mr. Lilley

I have already given way to the hon. Gentleman many times. If he has difficulty with the idea, there is not much that I can do.

Mr. Dewar

Give way for the last time.

Mr. Lilley

No, I am sorry. I want to get on to the interesting aspect of the debate, which was the failure of the Labour party to mention its policies to help those at risk of repossession. I know that my hon. Friends, whatever their views, are all determined to help such people. There seemed to be no determination by the Labour party to improve cover for those who are at risk.

Opposition Members have offered nothing. To extend income support for mortgage interest to everyone, including the two thirds of home owners who are not eligible at present, would cost an enormous amount. The costs have already risen from £31 million in 1979 to £1.1 billion now. The Labour party has not recommended—rightly so—extending such cover at the taxpayers' expense; but it is not the cost that puts off Opposition Members. It is the fact that they have another policy that does not bear on the issue but which would in itself be hugely expensive.

The hon. Member for Greenwich (Mr. Raynsford), Labour's housing spokesman, advocates a mortgage benefit for those in work. By definition, it could not help the jobless. According to the National Association of Citizens Advice Bureaux, this idea would cost the taxpayer £600 million a year. The hon. Gentleman was at least unusually forthcoming about how he would pay for it. In an interesting interview in the magazine Roof, produced by Shelter, he said: I do think a mortgage benefit scheme has substantial advantages. If part of its costs were met by further phasing out of MIRAS, so be it. I will talk to my Treasury colleagues about this.

Mr. Nick Raynsford (Greenwich)

Will the right hon. Gentleman give way?

Mr. Lilley

I cannot resist the opportunity.

Mr. Raynsford

Perhaps the right hon. Gentleman will read the earlier part of that interview, in which I talked about how the Government were already phasing out MIRAS, with no benefit to home owners. In that part of the interview I deal with ideas for providing more effective help for home owners who are not helped by MIRAS.

Throughout his speech the right hon. Gentleman has criticised the present arrangements because of the lack of such help, but he has the gall to criticise the Labour party for having no positive proposals.

Mr. Lilley

So Labour's housing spokesman admits that these are the Labour party's proposals. They cost £600 million, and they would be paid for by a further phasing out of mortgage interest relief. It is a major step forward to have got that out of the hon. Gentleman.

Mr. Jenkin

How many extra people would that put on means-tested benefits?

Mr. Lilley

I will have to look that up. I have no doubt that it would be a large number. It would be a means-tested benefit. It flies in the face of the criticisms that the rest of the shadow social security team has of means-tested benefits; that is an interesting but not unusual contradiction. I will look up the numbers and reply to my hon. Friend.

The hon. Member for Garscadden is not alone—he is not a maverick on this. The Commission for Social Justice made a similar proposal to extend income support to people in work on low incomes. Its proposals were helpfully costed by The Independent, with help from the Institute for Fiscal Studies, a member of which sat on the commission. They show that the mortgage benefit to low-earning home buyers will cost between £600 million and £700 million. It is part of total identifiable proposals in the commission's report that add up to £7 billion a year.

It is financed by what are euphemistically called "savings". The specific one that seems to be related to mortgage benefit is the abolition of mortgage tax reliefagain—raising between £2.5 billion and £3 billion a year. In addition, the abolition of the married couple's allowance and tax on child benefit would in total raise more than £6 billion in extra income tax, paid by the income tax payer to finance the identifiable policies of the commission.

Mr. Dewar

Will the Secretary of State give way?

Mr. Lilley

The hon. Gentleman had an opportunity to inform the House about his policies, but he did not do so. He cannot object if I fill in for him. The hon. Member for Manchester, Withington (Mr. Bradley) can tell us more later.

Mr. Dewar

I always knew that the Secretary of State was a "proper gent", as they say.

As the right hon. Gentleman is so concerned about the importance of MIRAS, and he will remember the 1992 Tory election manifesto, which I know he takes seriously, because it has stopped him doing all sorts of things, for example, to child benefit, I ask him whether he still stands by the promise in it—that Conservatives will maintain mortgage tax relief? Does that mean that he can guarantee that there will be no further adjustment downwards, and that it will be restored to its 1992 rate, at the first possible opportunity?

Mr. Lilley

It is clearly compatible with what the Government have done and is incompatible with what the hon. Gentleman proposes. It is a bit rich of the Labour party to criticise a reduction in the value of something that it proposed to abolish.

The position taken by the Labour party on the issue is irresponsible in the literal sense of the word. Labour is irresponsible in its criticisms, its scaremongering and talking down of the housing market. It is irresponsible in ignoring the real problem, which we seek to address: to provide greater and more comprehensive cover for those who are unprotected by income support for mortgage interest. It is irresponsible in that it will not even tell us whether it will reverse our plans should it ever get elected. It recklessly proposes extra costs and refuses to tell the House in detail about them. It is irresponsible in that it does not recognise that individuals should play a part and accept some personal responsibility for housing finance, who in general do not object to doing so.

The cost of mortgage protection must be borne by someone. There is no logic that says that that someone should always be the taxpayer. Our proposals will mean that everyone—it is fewer than one third at present—who takes out a new mortgage should be properly covered against unemployment. They will mean fewer defaults and repossessions and a healthier market. Far from taking protection away, we are making it more likely that future borrowers are adequately protected. I recommend these measures to the House.

5.23 pm

Mr. John Denham (Southampton, Itchen)

The Government amendment moved in the name of the Prime Minister says that the House believes that the Government's proposals will lead to the development of more comprehensive, less costly insurance cover". That doctrinaire statement and the speech by the Secretary of State might be excusable from someone who had just landed in this country from another planet or who had just come out of business school full of free-market theories, but it could not be said by somebody with experience of the workings of the Financial Services Act 1986, or with responsibility for the workings of the Act, who had to oversee the disaster in the sales of personal pensions from which so many people are suffering, into which so much money will have to be poured and which has not yet begun to run its course.

The faith that the Government have placed in the way in which the insurance market will respond to their proposals is completely misplaced in a number of specific areas: first, the likely cost to be borne by home owners who must insure their mortgages; secondly, the consequences of the Government's determination not to regulate the market in the insurance policies that will be sold to cover the loss of income support for mortgage payments; and, thirdly, the area, scope and availability of cover for people wishing to buy their own homes.

On cost, it is interesting that, in 1993, home owners paid premiums totalling £220 million on mortgage protection policies, yet only £150 million was paid out on those policies. That suggests that some 30 per cent. of the premiums is absorbed in the cost of selling, marketing and administering the policies, and the profits of the insurance companies. One year's snapshot figures do not necessarily tell the whole tale, but I suggest that that sort of excess shows that it is an inefficient way in which to insure against anything.

Mr. Jenkin

The hon. Gentleman is right to say that one year's snapshot figures do not necessarily tell the whole tale. They cannot possibly, because the insurance industry is necessarily cyclical and there will be years when it pays out more than it collects in premiums, and those are offset by the years when the industry collects more in premiums than it pays out. A single year's figures are completely misleading.

Mr. Denham

The hon. Gentleman will agree that, throughout the insurance industry, the cost of administration and marketing of private insurance policies is vastly greater than the cost of administering those that are run through the state social security system, and the cost of selling the policies means that home owners will be paying not only the cost of their own insurance but the great costs of administering and running the system. I believe that that makes it an inefficient deal for home owners at the best of times.

The second point on cost has been raised, but as far as I am aware it has not been answered: people will now be left with a period of three months in which no cover will be available to them from the state or from the typical mortgage protection policy. I have not yet heard an explicit statement from the Government as to whether that three months is to be paid by the individual, from separate savings which they must make, or whether the Government blithely assume that mortgage lenders will absorb that three-month shortfall without moaning about it. I suspect that it might be the latter, in which case it is not surprising that building societies are talking about ending their agreements on repossessions.

It is estimated—I believe that it is widely accepted—that the increased cost of these policies over the lifetime of a typical mortgage will be between £7,000 and £8,000 per home buyer. That all points to the design of an inadequate system of cover, which would be more expensive to home owners, who are now the majority in our society, than other ways of insuring cover collectively through the social security system.

The National Association of Citizens Advice Bureaux, among others, has called for a reform of the Financial Services Act, because it believes that the regulation of the sale of mortgage protection policies has proved inadequate. The Secretary of State asked us to rely yet again on codes of conduct and self-regulation that have so demonstrably failed in the sale of personal pensions and other products. Proper regulation of the sale of mortgage protection policies is essential under any circumstances, but to move into an enforced extension of the market to all home owners over time without regulating it properly is grossly irresponsible.

Such products suffer from arbitrary exclusion clauses. During the last recession, many of those who had mortgage protection policies found that the policies were withdrawn once the insurance company realised that somebody might face redundancy. In coal mining areas and other areas where redundancies were widely mooted, insurance companies tore up the policies just at the moment when people were likely to want to claim on them. The codes of practice that we have been offered so far will not ensure that those policies remain in force when they are needed.

Inappropriate policies may be sold. After all, on paper, people would require a policy that replaced the interest payments that the Government are taking away. Yet it is likely that, just to show that I do not take everything that the building societies say at face value, faced with a captive client, the building societies will be tempted to say that insurance is necessary and to sell a policy vastly more expensive than the client needs in order to cover the interest payments that the Government are taking away.

The Secretary of State asserted that there would be a fall in the costs of commissions and fees charged by the sellers of insurance policies. But it is interesting that, in parliamentary answers, Ministers have said that they have no intention of regulating to require the disclosure of commissions and fees at the point of sale of the policies.

For the past three weeks, anyone selling a personal pension policy has had to disclose fees and commissions. Yet when it comes to the sale of mortgage protection insurance, no such disclosure will be required, nor will there be any requirement to show that alternative and perhaps cheaper sources of insurance might be available.

It is easy to see how the new home buyer, possibly a first-time buyer who is quite unsophisticated in the financial services market, will be at the mercy of the building society agent who is not only providing the mortgage but under instructions to sell the insurance policy as well.

There will be no regulation to cover the widespread problem that most of these policies are invalidated by a short period of return to work. A person who is covered may claim on his policy. After nine months he may receive the job seeker's allowance. Within 14 weeks he may be forced back to work through threat of loss of benefit, but into a short-term or temporary job—the sort of job that the Secretary of State has made it clear people will be forced to take or they will lose their benefit.

Immediately, under most of the policies, people will make themselves uninsurable for future purposes. When the temporary or short-term job that they have been required to take comes to an end after a few weeks or months, they will be without cover. There has been no explanation from the Government about how they will cope with such a situation. It is impossible to cope with that without effective direct regulation of the industry.

The third area to which I wish to refer concerns the scope of the policies that are on sale. That seems to be the point at which the whole exercise becomes an article of faith rather than a rational analysis of what the market is likely to be. Currently, 19 per cent. of home owners are on short-term contracts, are self-employed or are part-time workers. But 36 per cent. of the work force are in those relatively insecure categories and most people believe that the number of people in self-employment, in part-time work and on contract work is likely to grow.

The reality is that some of those people, probably a substantial number, will no longer be able to enter into home ownership because of the difficulties or the risks of obtaining mortgage protection cover.

As a statement of faith, it is right to say that insurance cover will be available. Insurance cover is always available for anything at a price. But the one thing that the Government have ruled out is any regulation to ensure that insurance cover is available at a reasonable price for everybody. In replies to me, Ministers have ruled out the regulation of premiums.

We know, because it is there in all other forms of insurance, that the insurance industry is disaggregating its client group more and more every year. It simply is not realistic to believe that insurance companies will be happy to spread the risk of insuring against unemployment equally across those in secure employment and those who are in the most marginal part-time and short-term work.

Compared with today's costs, some cheaper policies will be available for those in the most secure employment. It is intrinsically unlikely that anything else would happen. But that would be balanced by a sharp and prohibitive rise for those who are clearly in insecure employment. That would be sufficient to bar altogether a substantial and growing number of people from entering the housing market. That is an extraordinary policy aim for a Government who have always said that they back home ownership.

On grounds of cost and the efficiency with which insurance is provided in our society, this is a mistaken move. The Government's refusal on dogmatic grounds to regulate the very industry that they seek to promote is inexcusable and irresponsible. The damage to the aspiration of becoming a home owner of people who would rather have full-time permanent employment but cannot find it will be devastating.

5.35 pm

Mr. Nicholas Winterton (Macclesfield)

It is always a pleasure to follow the hon. Member for Southampton, Itchen (Mr. Denham). He has raised a number of important issues, but I hope that he will forgive me if I do not follow his line of debate.

Members on both sides of the House, either in their speeches or interventions, are seeking to concentrate on the inequities for certain specific groups inherent in the proposals that we are debating today. But as chainnan of the Manufacturing and Construction Industries Alliance, I am personally deeply concerned about the impact of the proposals on the housing market.

I am grateful to my right hon. Friend the Secretary of State for spending a considerable amount of time with me earlier this week when we had a full and frank discussion on the matter. We covered many if not all of the issues that have been covered so far in the debate.

My right hon. Friend is aware that I have met representatives of the Council of Mortgage Lenders, the Building Societies Association and the Association of British Insurers and the chief executive of the building society whose head office is located in my constituency, the Cheshire building society, an extremely efficient, progressive and fast-growing building society.

I remind my right hon. Friend that the Conservative Government were returned to power at the last general election in 1992 on a manifesto which pledged: The opportunity to own a home and pass it on is one of the most important rights an individual has in a free society. Conservatives have extended that right. It lies at the heart of our philosophy. That commitment, the promotion of home ownership, advocated by the Conservative party ever since it took office in 1979 and even before that, has transformed, particularly since 1979, the political complexion and the very structures of our society, and has proved to be, as I said to my right hon. Friend earlier this week, a winning formula.

People from lower income groups who had in the past felt alienated, marginalised or ignored by the main political parties could, albeit often after struggling to make ends meet, finally buy a stake in the property-owning democracy, a stake which often brought them into the Conservative fold for the very first time in the history of our party and gave my party the electoral boost that it needed. Ownership of property brought people enhanced self-respect and a stake in society, creating both a sense of responsibility and greater social stability—something in which I fervently believe; I hope that my party believes in it too.

Today, sadly, as we examine the Government's record in recent years, that commitment to a property-owning democracy and to home ownership that pledge—seems a little ragged. Mortgage interest relief at sourceMIRAS—is being phased out in what I consider to be a Treasury-driven exercise: it was reduced from 25 per cent. to 20 per cent. last April, and will fall to 15 per cent. in April this year. There has been no increase in the £30,000 ceiling since 1985, nearly a decade ago.

Notwithstanding the comprehensive speech made by my right hon. Friend the Secretary of State, the Government's latest proposal to reduce mortgage interest support for home owners who lose their jobs carries a number of serious risks for those people, and also represents yet another nail in the coffin of the housing market and the property-owning democracy for which I stand.

Mr. Barry Porter (Wirral, South)

Come on!

Mr. Winterton

Let me tell my hon. Friend that the housing market is showing signs of weakness which reflect a lack of confidence, job insecurity and the prospect of further MIRAS reductions in April. That was confirmed only last night at a dinner that I had the pleasure of attending, when the Governor of the Bank of England told me openly and honestly, "The housing market is flat; the housing market is weak; there is indeed a problem." The timing of my right hon. Friend's proposals is particularly unfortunate, and is likely to cause still more house purchases to be deferred. Indeed, figures relating to sales negotiated and new inquiries for the first weeks of this year already reveal that we are set for one of the worst years for house sales for some time. That is very bad news for the economy, because the housing market can influence a wide range of economic activity. Moreover, the implementation of such confidence-dampening measures causes a hiatus after their introduction. I need only cite the ending of double interest relief in August 1988 and the ending of the stamp duty moratorium on 19 August 1992.

In short, the housing market—which has not yet participated in the more general economic upturn—seems set to head further downhill into the doldrums. That is not due to high prices, lack of desire to own a home or a shortage of quality homes in all income ranges; it is due almost entirely to what I would describe as a series of Treasury-inspired blows which have left house builders punch drunk from the impact of what genuinely appears to be an attack on home ownership.

Mr. Porter

Author!

Mr. Winterton

Let me tell my hon. Friend—who is intervening very effectively from a sedentary position, as he generally does—that these are not just my own views.

Mr. Jenkin

Who wrote it, Nick?

Mr. Winterton

My hon. Friend should note that the House would do well to consider the recent third report of the Treasury Select Committee on the 1994 unified Budget, which stated: We suspect that a long list of factors such as rising interest rates, poor job security and the announced changes to income support for mortgage payments, would incline individuals to stay out of the housing market, and explain a static market. None of our official witnesses gave us cause to change our mind. Let me inform my hon. Friend the Member for Colchester, North (Mr. Jenkin) that the Treasury Select Committee—chaired as it is by my long-standing and respected hon. Friend the Member for Hazel Grove (Sir T. Arnold), a former vice-chairman of the Conservative party—is not a maverick voice, but a credible commentator that has wisely sounded a serious warning to the Government at this time of consultation.

The fear of a reversal in the Government's attitude to home ownership is not only in the minds of observers. It was the Minister for Local Government, Housing and Urban Regeneration himself who sounded the warning in a recent interview with the magazine Roof, which has already been mentioned. He said: I don't think there is some undiscovered new wave of owner-occupation which is about to burst upon us, quite frankly. Most people still do have that as a natural aspiration"— this is the section that I consider importantߞ but I don't personally attribute any moral superiority to owning a house". Wise words, perhaps, in some people's view; but they relay a grim message about the Minister's own approach to home ownership.

Mr. Jenkin

Does the Treasury Select Committee report, which my hon. Friend quoted, actually say that a steady and stable housing market is a bad thing?

Mr. Winterton

No, indeed it does not—although I do not have a copy of the entire report with me; I shall certainly look at it after the debate to see whether that is specifically spelled out. Of course we want a stable housing market and low interest rates, because they are desirable for a sound economy.

Let me refer my hon. Friend to statistics produced by the House-Builders Federation, which show that the number of weekly site visitors so far this year is dramatically down on the figures for last year and the year before—and both those years were bad. Moreover, weekly net reservations also show a dramatic reduction on the past two years. I am glad to say that the federation produces its figures very quickly. Those, I think, are serious warnings.

Let me also tell my hon. Friend the Member for High Peak (Mr. Hendry), who is sitting behind the MinisterߞI assume that he is the Minister's parliamentary private secretary—that January and February are usually good months for the housing industry. The figures are therefore quite serious, and I hope that they will be noted by my right hon. Friend the Secretary of State.

The Council of Mortgage Lenders now predicts that, as a consequence of the change in income support for mortgage interest, mortgage arrears will rise and repossessions are likely to increase in 1996". Let me point out to my right hon. Friend that that may bring us dangerously close to a general election. Furthermore, the council predicts that, given the current economic climate and political approach, there is never likely to be an upturn in the housing market. The social implications of such a position are grave.

The new proposals will again place a smothering pillow over the slumbering face of confidence in the new housing market. They will discriminate against households and individuals wishing or needing to move house. As The Times put it on 1 December—it is important to note the views of these commentatorsߞ crucially for the Government's fortunes, it will further heighten middle-class insecurity. Home ownership, house prices, economic security and middle-class support for the Tories are inextricably linked". I share that view. I invite my right hon. Friend the Secretary of State not only to reaffirm his commitment, and that of the Government, positively to promote home ownership, but to tell us clearly how that is to be done.

I do not intend to go into the details of the proposals, because that has already been done by the hon. Member for Glasgow, Garscadden (Mr. Dewar) and will no doubt be done again by other speakers. The essence of the social injustice, however, lies in the fact that—as the Prime Minister proudly boasted in a written answer to me just a few days agoߞ Owner-occupation in the United Kingdom has risen from just over 54 per cent. in 1979 to over 66 per cent."—[Official Report, 23 January 1995; Vol. 253, c. 25.] That is important.

In keeping with their political vision of society the Government have enticed and encouraged into the property market many council and housing association tenants and many people who are on low incomes. Now they appear to be withdrawing from those groups the safety net of support, however inadequate it is. The policy has gone seriously awry for the most vulnerable, although I appreciate and support the steps that are to be taken to limit interest relief, where it is available, to a maximum value of £100,000.

There is now a clear and deliberate policy emerging from those who advise my right hon. and learned Friend the Chancellor to stifle the housing market. Such Treasury mandarins—and I include the Governor of the Bank of England—continue to display an irrational fear of the childhood bogeyman of inflation which was rooted in social and economic conditions that no longer apply because our economic recovery is export driven. They see the housing market as a smouldering fire of intolerable price rises.

I do not want to see a return to the ludicrous, spiralling house prices of the late 1980s, but more movement and more confidence are prerequisites for growth in the economy as a whole and of the electoral prospects of my party. If we are committed to stimulating such growth, let the next Budget give a real, but responsible boost to the market by increasing MIRAS again from 15 to 25 per cent. for first-time buyers. It should be up to a maximum of £50,000 for a period of, say, five to 10 years. I hope that my right hon. Friend the Minister will convey that message to the Chancellor. He should abolish the tax on prudence and responsibility which he imposed in his Budget when he introduced what I would describe as new and completely unjustified taxes on insurance premiums.

The proposals are well intentioned, but at this time they amount in practice to a betrayal of those on low incomes, the self-employed, people on short-term contracts and others who are struggling to have their stake in the property-owning democracy. I believe, and I hope that I am right, that it was Sir Winston Churchill who spoke about the need for a safety net for those who fall off the ladder of life. I respected him and I believe that when he said that he meant it. Society has a responsibility for those who through no fault of their own fall off the ladder of life. In this period of consultation I say to my hon. Friendf that the proposals are poor economics, they are weak housing policy and they are bad politics. I shall not be able to support them in the Lobby.

5.52 pm

Ms Liz Lynne (Rochdale)

I am pleased to take part in the debate, although I realise that my speech and those of other hon. Members will probably have no effect whatever on the Government. Their policy is ill considered and will depress the property market, as the hon. Member for Macclesfield (Mr. Winterton) has said. In the long term it will cost jobs. At the same time as the Government are introducing the measure they are penalising the rented sector by cutting housing benefit. The policy will be an absolute disaster and the Government must do a U-turn before it is too late.

In his letter to all hon. Members, the Secretary of State for Social Security stated that mortgage interest benefit had risen from £31 million in 1979 to £1.1 billion today and that reform was clearly essential. It is indeed essential, but he should have gone on to say that the reason for the need for reform is the mess that Tory policies have created over the past 15 years. The letter said that from October existing borrowers who were not on income support would get no benefit for two months, 50 per cent. for four months and 100 per cent. thereafter.

Many, although not all, of those people will get into debt. The letter states that for new loans after October people will get nothing for nine months, but I should like the Secretary of State to clarify that. I have been led to believe that those who take out mortgages after the Budget statement will not get benefit for nine months.

These are not reformsߞthey are cuts. If the Minister were serious about reform, he would look at the underlying reasons for the problems and listen to people who have pointed to Government policies over the past 15 years. I was not against some of those policies, such as the right to buy, which was introduced by Mrs. Thatcher. But the Government have been responsible for economic mismanagement, the boom and bust of the 1980s, record unemployment and a record recession. Their employment policies are designed to encourage people to accept low pay and part-time work and contract work, which many people are now accepting. That is leading to insecurity in employment and in the housing market.

Those factors are linked and lead to higher mortgage interest benefits, but instead of looking at them the Minister is considering cuts. In the past four years, 250,000 homes have been repossessed. The figure is coming down and that is welcome news. I hope that it will continue to come down, but I am afraid that this policy will lead to even more repossessions.

Some 1,250,000 mortgages are greater in value than the value of the homes that they represent. The available statistics show that the growth in the number of people buying homes between 1984 and 1991 was in the so-called blue collar sector—the people who have faced more unemployment. The Government tried to persuade them into home ownership through the right-to-buy scheme.

The Government must realise that unemployment is not usually the fault of the unemployed. Yet the proposals make it look as though that is what the Government think. Unemployment is due to the economic climate. The policy will deal a further blow to the housing market and mortgage lenders are crying out about it. I gather that there was a fairly acrimonious meeting recently between the Secretary of State and the mortgage lenders, who stated that they thought that there would be thousands more repossessions and that that would cause a slump. I know that the lenders have a vested interest, but we must heed that warning.

The Secretary of State says that that cannot happen, that he will modify the Administration of Justice Act 1970 so that people will have longer to pay—perhaps even within the lifetime of the mortgage. That is fine so far as it goes, but mortgage lenders do not have to lend money and will pick and choose. The Government have always said that a thriving housing market is an indicator of economic recovery and they still keep saying so, but perhaps the Secretary of State does not agree. He will say that people should take out insurance, but that is not always available as illness or marriage break-up and unemployment is not always covered. We must face the fact that only 40 per cent. of those claiming benefit are unemployed.

Let us examine some existing insurance policies. Citizens advice bureaux have reported that people have been duped into buying policies with loopholes and that claims are not being met. One bureau reported the case of a man who had been made redundant. He did not want to sit around, so he got employment which lasted for some time but in different jobs. Eventually he became unemployed again, but he was not covered by his insurance because he was not in continuous employment for six months. That has not been addressed. Such happenings are not uncommon. How will such people survive? They will not if they do not have benefit and many will face repossession and homelessness. As I have said, that will be a further blow to the housing market.

One in three people buy insurance protection, but the policies are riddled with exclusions, as I have illustrated by my reference to the man who was made redundant. People are also ruled out by pre-existing medical conditions, illness in the previous 12 months or lack of continuous employment. It would bar people on fixed-term contracts, unless they run for a number of years. It would bar a number of building workers on contracts. It would bar a number of actors and people working in the media. Above all, the self-employed would suffer.

Those with mortgages will have to find an estimated £7,000 in insurance payments over 25 years. From October, the cost of a mortgage in real terms will be 10.5 per cent. higher than it is now, taking into account mortgage tax relief and other factors. That does not include the mortgage interest rate rise of 0.3 per cent. announced last Friday. At the same time, the Government are cutting housing benefit. Where will people go? Housing association grants are due to fall in 1996–97 to 1989–90 levels. Housing investment will fall because of the end of the capital receipts holiday. The Government's subsidy to council housing will continue to dwindle. Council and housing association rents continue to rise. If the rug is pulled from underneath home owners, they will find that there is no low-cost rented accommodation available for them. All of that will contribute to the lack of the feel-good factor about which the Government seem to be so worried.

If the Government are thinking about reforms, they should introduce real reforms and put people with mortgages on the same basis as tenants. They should introduce a benefit for mortgage holders—[Interruption.] I accept that it would have to be paid with the phasing out of MIRAS—[Interruption.] That is in our policy document and it has been for some time. We are suggesting that in the long term there should be a new benefit for householders and tenants alike, which would mean that everybody would be better off in work.

I agree with the view that currently people on income support who have help with their mortgages are not motivated to take low-paid work. With a merger of the two benefits in the long term, they would always be better off in work. There would be a taper in the same way as there is a taper on housing benefit. The cost of income support would be reduced because there would be an incentive for people to get back into employment.

All that the Government's policies will do is to impose a cost on people in the long term. There will be more repossessions and more homelessness. There will be a further destabilisation of the housing market. The Secretary of State's policy will cause misery and will not contribute to the feel-good factor about which the Government are always talking.

6.2 pm

Mr. Hartley Booth (Finchley)

I have listened to the debate with interest and care. I was interested to note the inconsistency with which Labour Members attacked the Government and what they are trying to do. I have been in the Chamber for debates on subjects such as housing and inner-city matters when, time and again, Labour Members have criticised the Government for increasing the dependency culture. The number of people dependent on mortgage interest relief in 1979 totalled 100,000; in 1988 the figure was almost 400,000; and last year it was just short of half a million. It is obvious that there is an increasing dependency sector and the Government, as part of their proposals, are suggesting how that could be reduced. I should have thought that the Opposition, who have so strongly criticised the extension of the dependency culture, would applaud that—but they have said not a word.

With the new spending rectitude of the Labour party, broadcast daily throughout the media, one would have thought that there would be considerable concern about how expenditure has risen from £31 million in 1979 to more than £1 billion last year on this item alone. One would hope that the Opposition would be consistent in their arguments and say, "Hold on, the Government are sensibly trying to be responsible with public expenditure, so let us welcome the tough decision that the Government have taken." But no, throughout the debate Labour Members have insisted that this is just one more attack on a particular group of vulnerable people.

The Conservative party stands for home ownership. It stands for the ability of people to buy, own and live in homes happily and comfortably. Indeed, the record referred to by my hon. Friend the Member for Macclesfield (Mr. Winterton) stands for itself. Home ownership has risen from almost 55 per cent. to almost 67 per cent. I have argued many times that the experts might be wrong, but they say—and they are all agreed on this—that there is a ceiling on any predictable level of home ownership of about 70 per cent. On that basis, we are only some 3 per cent. short of what the experts say we could conceivably achieve in home ownership, so we have done well in that area.

We must ensure that home owners are assisted, encouraged and live in the real world; that is what the proposal is about. I looked, I listened and I was prepared to criticise the Government if they had not included a transitional period, but they have. It is only with insurance taken out after 1 October this year that the rule will apply. It is vital that a fair, good and thoughtful Government provide a transitional period. We could not do that with milk quotas because the European Union would not allow it. As a result, many farmers were tied to their equivalent of mortgage or business loans.

That will not happen with the Government's proposal; there is to be a proper, phased introduction. The results are sensible, as I understand them, and it is why I support the Government. If any of our conclusions do not hold, we will have to think again, but in the round the results are such that I would argue strongly that we should back the Government's proposal.

Of course there will be savings—small to begin with, but larger by stages. There was an extraordinary paradox in the remarks of the hon. Member for Glasgow, Garscadden (Mr. Dewar). I do not know whether my hon. Friends noticed it, but he began by saying that this was an horrific and damaging proposal for many people—yet only a paragraph later he said, "Well, the Government are going to save only a small amount of money." If that is true, why the horror? The point is that the proposal exercises something that we were elected to do—to spend responsibly.

We are becoming more sophisticated on the subject of debt. It is a most important subject that we need to deal with in this country. Young people in Germany do not borrow money to buy houses at the age of 25 or 30. The average age for doing so—and they do not buy that often—is nearer 35 or 40. It is certainly right to encourage the purchase of homes, but it is also about time we thought about responsibility in the acquisition of debt. Over the years, the Government have been consistent in their dislike of debt. That was why, in the face of opposition from Labour Members, we reduced the national debt at several stages during the 1980s. We do not like debt and we do not like young people getting into debt irresponsibly. The proposals will assist the culture of thinking about debt and of getting into it only when one is ready for it.

I am descended from a group of people with a Puritan past, which many hon. Members have. Those people did not like to borrow at all. People will have to consider the acquisition of a mortgage with the extra hurdle. They will have to think about the acceptance of the nine-month period that is included in Government's proposal. That is a sensible addition to the growing culture.

With regard to the opposition of my hon. Friend the Member for Macclesfield and of Labour Members, there may be a temporary effect on the macro-housing market. The proposal may lead to a points depression in that market, but as we are close to the 70 per cent. maximum purchase level, that effect would probably have occurred anyway. In the end, however, more people will take up mortgages, with more thought to the debt that they take on, and with more planning. I conclude, therefore, that fewer people will claim, even though they could claim. As I said earlier, the proposal will strike a blow against the dependency culture.

The Conservative party is the party of home ownership and of spending responsibility. It is a party of debt responsibility. For all those reasons, I support the Government's proposals and oppose what has been said by the Labour party.

6.11 pm

Mr. Bill Etherington (Sunderland, North)

I must take exception to some of the remarks made by the Secretary of State for Social Security. It is almost beyond belief that he has the effrontery to stand up in the House and to say that he is seeking to improve the position for people unfortunate enough to become unemployed who have to pay a mortgage. It borders on the mendacious.

The Secretary of State talks about the two thirds of people who cannot benefit because they are not in receipt of income support. Obviously, those people do not need the relief. If they have redundancy payments and more than £3,000 in the bank, they may be able to manage for a few weeks. In case the Secretary of State is not aware, the income support level is below what is regarded by the European Union as a decent level. When those people go on income support, they will have difficulties, which shows how barren the thinking is behind the legislation.

Since 1979, a string of Bills have been introduced to worsen the plight of people who are unfortunate enough to be unemployed. First, it must be said that unemployment is brought about by the Government's policies and not by people who happen to be unfortunate enough to become unemployed. That is an important factor, which the Secretary of State seems to overlook.

Two unedifying strands in the Government's philosophy seem to have come together in the Bill. The first is their lack of respect, concern or compassion for the unemployed, which borders on disdain. The second is their love of providing work for their friends in the City. That was shown when the Government sought to abrogate their responsibility in relation to the payment of state earnings-related pensions. Because it was costing the taxpayer too much money, the Government decided that private insurance should take over. What a disaster that has been, and what a cost to the taxpayer it has proved to be. Not many strands in the Government's thinking are philosophically satisfactory, but those two strands are the worst.

The Government are forever stating that they believe in a property-owning democracy. Some Labour Members also believe in that. Since 1967, I have been in the privileged position of having my own house. When I started to buy, however, the circumstances were much more propitious than they would be for anyone buying now. I issue a challenge to those on the Treasury Bench: I am willing to give way if the Minister will stand up and guarantee that every person who seeks and obtains a £45,000 mortgage will be able to obtain for £12 per month satisfactory insurance which covers them against sickness and unemployment?

The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans)

rose—

Mr. Etherington

I am delighted.

Mr. Evans

There is a fatal fallacy in the hon. Gentleman's premise. If the hypothetical person in the example that he mentioned is granted a mortgage because his credit is sound and because he is in a reasonable position to expect reasonably to repay that mortgage, there is no reason to suppose, if a sensible lending judgment is made, that he cannot be insured as well.

Mr. Etherington

Those were weasel words. I asked for a guarantee, not a platitude, but that was what the Minister offered. No guarantee was given. The Government are in favour of people owning or paying for their own houses, and getting into debt. They support that so that those people can be controlled by their employers, so that the threat of the dole queue becomes ever worse, so that they can be forced into taking poor employment, and so that they are not in a position to fight back when an employer tries to worsen their conditions.

That is what this is all about. It is not about financial constraints. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) has already pointed out that a small amount of money will be saved by the Treasury by the measure. It is not, however, a small amount of money to the victims who find, after a few weeks of unemployment, that they are likely to become homeless. That is how much the Government care about people's security. The Government do not give a damn for the citizens of this country unless they are making money for someone else—preferably the Government's friends in the City.

My hon. Friend the Member for Southampton, Itchen (Mr. Denham) mentioned that insurance companies can sometimes be a little fickle in the way in which they deal with policy holders. He understated the position. He said that if a miner became unemployed, the insurance company would try to find ways of abrogating its responsibilities. It is not quite so bad as that because the insurance company would not have condescended to give a policy to a miner in the first place. I do not speaking from anecdotal evidence, but from personal experience as in 1967 I sought to obtain just such a policy.

I have no doubt that some Conservative Members, who have made many interventions, who are hired hands of various insurance companies, and who are on their payrolls but do not bother to declare it on occasions in the House—

Mr. Deputy Speaker (Mr. Michael Morris)

Order. The hon. Gentleman has just made a very serious allegation. I hope that he will either withdraw it or substantiate it.

Mr. Etherington

I shall substantiate it. A Conservative Member stood up on, I think, five occasions this afternoon during a debate on an important matter in which the insurance industry is involved, and from which it benefits, but he has not declared an interest. I invite him to comment.

Mr. Deputy Speaker

Order. The hon. Gentleman knows the rules of the House. Any hon. Member who makes a speech in the House is required to declare an interest. Hon. Members are not required to make such a declaration in an intervention. The hon. Gentleman should know the rules of the House and he should challenge only hon. Members who disobey those rules.

Mr. Etherington

I accept your reprimand, Mr. Deputy Speaker. If I am required to withdraw my remark, I shall do so. I hope that if the hon. Member concerned makes a speech he will clarify the matter for the benefit of the House.

On the notional figure of £45,000 of borrowing for a mortgage, it has been stated that the payment required will be about £12 a month, but people in the financial services business say that it will be £21 a month.

I pay tribute to the hon. Member for Macclesfield (Mr. Winterton) who alone of all Conservative Members spoke with compassion and some understanding for those who find themselves in the vulnerable position of having a large mortgage, on the payment of which the retention of their home depends. It is to the hon. Gentleman's credit that he recognises their plight, but I am sorry that his understanding was not reflected in the speeches of other Conservative Members, least of all that of the Secretary of State.

The Government's proposals should be taken in conjunction with various pieces of legislation that have been introduced since 1979 and which discriminate against the unemployed. Together, they create a society to which fear is the key. If people do not have very good jobs but are paying a mortgage and have the threat of things being made so much worse if they become employed, the more fearful they will be of challenging their employers. That is what the proposals are all about.

I trust that people outside will see the proposals for what they are: they have nothing to do with improving the lot of those who are unfortunate enough to be unemployed and have a large mortgage to service, but they have everything to do with further intimidation of those who are fortunate enough to be employed.

6.20 pm

Mr. Bernard Jenkin (Colchester, North)

I am happy to declare an interest as an adviser to Legal and General Group plc, which is an insurer and an arranger of mortgages. I am a little distressed that the hon. Member for Sunderland, North (Mr. Etherington), with whom I have had many debates in European Standing Committee B where I have often declared my interest, should not expect me to make that declaration. This time, I shall put his attitude down to the heat of the debate and leave it at that. I shall respond later to several comments that he made, especially that about the unattractive motive that he feels lies behind the Government's policy.

I deal first with a recurrent theme that was mentioned by opponents of the measure and others, such as my hon. Friend the Member for Finchley (Mr. Booth), who represents the constituency which, perhaps more than any other, resonates with the principle of home ownership. The hon. Member for Rochdale (Ms Lynne) and my hon. Friend the Member for Macclesfield (Mr. Winterton) also mentioned the effect that the measure is likely to have on the housing market.

I do not participate lightly in the debate. My constituency has probably suffered some of the biggest falls in property prices. Negative equity on a large scale is one of the major problems facing my constituents. My constituency was an area of considerable new build in the 1980s when houses were purchased at what we now regard as inflated prices, with the result that negative equity is a serious problem in huge parts of my constituency. Therefore, I would not dream of supporting a measure that would have a seriously deleterious effect on the housing market. It would not be in my interest to do so and as, I think, the hon. Member for Rochdale—but certainly the hon. Member for Glasgow, Garscadden (Mr. Dewar)—suggested, it would be extraordinary for a Conservative Government to propose such a measure.

The measure will have an extraordinarily slight effect in its first year. Indeed, the hon. Member for Garscadden derided the Government for the fact that the measure will remove a mere £18 million from the housing market in that time and will build only over a period of time—perhaps 10 years—to savings of perhaps £200 million. I should explain how that will happen.

In the first year, a small proportion of householders will be eligible under the scheme and only a small proportion of them might trigger the effects of the scheme. In the second year, perhaps twice as many households will fall on hard times and be eligible for the scheme. That is how the scheme will build and how savings will accumulate year by year. In that sense, the scheme will have a minimal impact in its first year of operation. It cannot be described as a knockout blow to the housing market when it is being introduced so gradually.

The hon. Member for Birkenhead (Mr. Field) complained that we have are not piloting the scheme, but, in effect, the first year of operation will be the pilot because such a tiny proportion of the housing market will be affected. It is important to keep this important, revenue-saving measure, which has other benefits that I shall discuss later, in perspective.

Before I give way to my hon. Friend the Member for Macclesfield, I must say that his somewhat hysterical comments about the state of the housing market, made in this place in what may be a delicate period of transition from decline to recovery, probably do more damage to confidence in the housing market than the scheme ever would.

Mr. Nicholas Winterton

I am not considering the measure on its own; I am considering it with the reduction in MIRAS, which is extremely unpopular and is having an impact, and with increases in mortgage interest rates, although they are as yet only nudging higher. Job security must also be taken into account. Although we do not often do so under a Conservative Government, dare I say that there has been an increase in taxation, which means that people have less to spend and are therefore less likely to buy a new house?

Mr. Jenkin

Interest rates have fallen substantially over the past three, four or five years. We may have to expect small increases in future to continue our successful anti-inflation policy, but we do not want to return to the 1980s when so much economic activity was diverted into speculative property investment. My hon. Friend praised the Government for the export-led recovery, and we must ensure that investment in assets for export remains more attractive than investment in property for speculative gain. We should encourage people to invest in property in which they want to live rather than to invest in property for speculative purposes. We are succeeding in that, and this slight measure is probably not even relevant to the argument about incentives to invest in property.

Two main issues have arisen in our debate. The first involves equity of treatment for those in the rented sector and those with mortgages in owner-occupied properties. The hon. Member for Garscadden in particular implied that the benefit and tax system should treat similarly owner-occupiers and those in the rented sector. In fact, there is a certain balance. We give home owners generous support—some billions of pounds—through MIRAS, and it is entirely logical that those who benefit in one respect should accept a little more responsibility in another.

Secondly, what has been lacking in the debate is an appreciation of how the insurance and lending markets operate. [Interruption.] The hon. Member for Holborn and St. Pancras (Mr. Dobson) chuckles, but, if we had accepted Opposition Front Benchers' advice over the past 15 years whenever we placed our faith in the way in which the markets operate and can take over functions previously carried out by the state, we should not have privatised anything, contracted out anything or achieved anything. Economically, we would be in a substantially worse position today. Well may the hon. Member for Holborn and St. Pancras laugh—at his own folly for all the mistakes made and bad advice given by his party to the country over the past 15 years.

The important thing is that the system will make more demands on lenders and borrowers. Just as during the recession lenders were required to make finer judgments about who they lent to and about who was a safe risk, the insurance markets will be required to do the same. It is hardly surprising that there is not a flourishing insurance market for mortgage insurance at the moment, when so much of the market has been displaced by state activity. That is what one would expect. When the state has been undertaking an activity, one would not expect the private sector to come in and take part.

The theme—I return to the comments by the hon. Member for Sunderland, North—behind the proposals is to try to make borrowers and lenders make more responsible decisions on loans taken out and houses bought. We do not want a market—indeed, we cannot afford a market—which is insulated from all the consequences of its decisions by the state underwriting every risk taken by the consumer. That creates the problems which overheated the property market in the 1980s.

Finally, I shall deal briefly with the issue of mortgage benefit, which arose earlier. That is perhaps the maddest idea that the House has heard for some time. I have great sympathy for what the Labour party says about the number of people who find themselves on income-related, means-tested benefits. I agree that there are too many people on means-tested benefits. If we moved more towards a system of tax allowances and away from means-tested benefits, we would avoid the .indignity of means-testing for quite a number of people.

The proposal of mortgage benefit would increase the number of people—most of them probably already paying tax—on means-tested benefits and paying tax, thereby increasing the poverty trap and increasing all the problems which currently beset our benefits system. It would be a major step backwards. I urge the House to reject that idea and to support instead sensible measures such as the Government's proposals instead.

6.32 pm

Mr. Nick Raynsford (Greenwich)

I begin by declaring an interest as a consultant to HACAS housing consultancy company, although, to the best of my knowledge, it does no work relevant to the debate. I have certainly undertaken no related work.

This has been an important and revealing, albeit short, debate. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) spelt out with his characteristic incisiveness the main problems associated with the Government's proposals for home owners and the impact on the housing market. His concerns have been echoed by my hon. Friends the Members for Southampton, Itchen (Mr. Denham) and for Sunderland, North (Mr. Etherington) and by the hon. Members for Macclesfield (Mr. Winterton) and for Rochdale (Ms Lynne), all of whom raised valid and extremely powerful points about the adverse impact of the Government's proposals. By contrast, the Secretary of State secured support only from the hon. Members for Finchley (Mr. Booth) and for Colchester, North (Mr. Jenkin).

The Secretary of State's speech was extraordinary in three ways. First, he had to reveal that even now, two months after the proposed changes were first announced in the Budget, he is far from clear about the precise details of how the scheme will work in practice and what will be its various impacts. Secondly, even more extraordinary, coming as it does from an apologist—

Mr. Lilley

Is the hon. Gentleman complaining that we are consulting about the details? That is extraordinary given that Labour Members often make the allegationߞfalse, of course—that we come out with things, which were thought out in great detail, without consultation.

Mr. Raynsford

The Secretary of State made great play in his speech of the adverse effect on the market of scares. He has introduced proposals which have scared the market substantially. He only has to talk to the House-Builders Federation, the Council of Mortgage Lenders and all the experts, to reinforce that point. It would have been wise on his part to have thought a little more carefully about the precise details of what he proposed before coming forward with them. That is the point that I am making. He does not appear to have worked out precisely what he is proposing to do.

Secondly, and even more extraordinary, coming as it does from an apologist for the market, the Secretary of State showed little understanding of the consequences of his proposals on the housing market. Thirdly, and perhaps most extraordinary of all, he chose to present himself rather like a latter-day Mr. Bumble; as a benefactor of the poor. In that famous section in "Oliver Twist", one recalls Mr. Bumble expressing the great principle of outdoor relief, as it was then, and social security as we would call it now, which is to give the paupers exactly what they don't want; and then they get tired of coming. The Secretary of State appears to believe, and certainly tried to make the House believe, that his cuts in income support discussed today were really an act of kindness to struggling home owners in difficulty. That is nothing to do with reality. The proposals are not necessary. They are ill thought out, they are confused, they are unlikely to achieve the savings that they are supposed to generate, they will be difficult to implement and they are likely to cause severe administrative problems, widespread anomalies and immeasurable anguish to thousands of families.

The proposals are not necessary because the rising trend in income support expenditure is already beginning to reverse. From a peak of £1.22 billion in 1993, expenditure has fallen to £1.08 billion in 1994—by far more than the savings that the Secretary of State expects to achieve this year. If measures were now being taken to help recovery in the housing market, as well as to tackle the continuing scourge of unemployment, we could expect further substantial reductions over the next few years, achieving savings far in excess of the £200 million that the Secretary of State is claiming that he will save. That figure has already turned out to be a rather elusive target.

The proposals are ill thought out and confused. Under the Secretary of State's proposal, most existing home owners will receive no benefit for the first two months and then only 50 per cent. for the next four months. Thereafter, even though they will qualify in full for income support, it will be calculated on a standard rate which could be significantly below their outgoings, especially if people have opted for fixed-rate mortgages.

Pensioner claimants, we now understand, will not lose entitlement in the first two months, but they will, apparently, have their benefit assessed on the standard rate. That makes a mockery of the claim in the Government's amendment that pensioners on income support will not be adversely affected because those who have mortgages at higher rates than the standard rate will be adversely affected.

New borrowers after October will have no entitlement at all for the first nine months. We have not yet heard whether that restriction will apply to new borrowers who subsequently reach retirement age. Perhaps the Secretary of State would like to tell us whether future pensioners will be subject to that restriction. We do not know.

Hon. Members

Answer!

Mr. Lilley

Yes, they will.

Mr. Raynsford

I am delighted to hear it. We have achieved, at least, a certain further clarification.

Mr. Lilley

Not at all. I said it during my speech and the hon. Member was not listening.

Mr. Raynsford

We are delighted to tease out some of the more obscure features of the Secretary of State's proposals.

We must ask why the Secretary of State is introducing this complex series of arrangements, riddled with anomalies, ostensibly to save £200 million. Once again, confusion reigns. The Secretary of State cannot tell us precisely how that saving will be achieved. He expresses hope that, in the long term—over three years, he says—the figure will be reached. But he has some difficulty with the arithmetic, because in the written answer of 15 December in column 794, he indicated a saving of £18 million in the first year for new borrowers, which must be the main category of saving.

We accept that the figure may be larger in the second year, but if, as the hon. Member for Colchester, North suggested, the figure doubled, it would reach only £36 million. Even if it were to double again in the third year, we would still be a very long way short of £200 million. So the Secretary of State has a certain amount of explaining to do about where the mythical £200 million will come from.

Not only can the Secretary of State not provide good answers on those figures, he cannot provide convincing answers either to questions on the likely additional costs which will flow from what he is proposing. There will be costs, and the Department will have to bear some of them. It is clear that the measures will lead to an increase in repossessions.

Mr. Lilley

indicated dissent.

Mr. Raynsford

The Secretary of State may shake his head, but the Council of Mortgage Lenders, which is in a far better position than he is to make an estimate, states that the increase could be between 12,000 and 24,000. I would rather believe the Council of Mortgage Lenders than the Secretary of State on that particular issue.

If the council's upper figure is correct, that would push repossessions back to the level reached in 1991 when they were at their peak. That in itself is bad enough, but when we think about the consequences, the full stupidity of the proposal becomes clear. Many of the home owners who will forfeit their homes as a result of the Secretary of State's plans could find themselves in a bed-and-breakfast hotel or other temporary accommodation. While the average weekly cost of income support for home owners towards mortgage interest is £37.98, the average weekly cost of keeping a family in a bed-and-breakfast hotel is £231. In other words, it is £193 more or, in annual terms, an extra £10,036.

If just 1,800 home owners end up in bed-and-breakfast accommodation as a result of the Secretary of State's action, he will have wiped out entirely the supposed £18 million from withdrawing help for the first nine months for new home owners. That is an indication of the stupidity of the proposals because we need only think of the personal cost to the families concerned if they are condemned to bed-and-breakfast hotels and cannot stay in the family home.

The Secretary of State would have us believe that that will not happen because a new and thriving insurance industry will come to the rescue. Once again, the problem is that the Secretary of State has not done his sums and has apparently only the flimsiest grasp of the realities in the market place. The National Association of Citizens Advice Bureaux, which was quoted by the hon. Member for Rochdale (Ms Lynne), has made it clear that, for many individuals, mortgage protection policies are unavailable or inadequate. According to NACAB, Many citizens advice bureaux report clients who have taken out mortgage protection policies in good faith only to find that when they come to make a claim, the policy fails to pay out. Many others do not even get that far. I received a letter last week, which I suspect is typical, from a home owner in Cumbria, who said: When I bought my home last year my mortgage company"— which happens to be a very large and reputable building societyߞ required that I should take out redundancy insurance. I agreed. No policy however could be found which would provide me with cover. My job? I am a primary teacher with years of experience who had a short break to have children. On my return to work I was given a temporary fixed term contract. The Secretary of State does not seem to realise that a large number of teachers and other workers will not qualify for redundancy insurance simply because the natural termination of a fixed term contract is not considered to be redundancy. He offers no solution to those of us in a very unpleasant situation. How many other employees in an increasingly deregulated market, where fixed-term contracts are ever more common, will find that they are uninsurable or can obtain insurance only at a prohibitive premium? As the Secretary of State has been reminded frequently in the past two months, unemployment is only one of the factors leading to claims for income support from home owners.

Of the 548,000 claimants receiving such help last year, less than half were unemployed. Eighteen per cent. were over retirement age, 22 per cent. were lone parents and 19 per cent. were claiming for other reasons, mainly disability. The Secretary of State has yet to give us hard evidence in relation to where people will obtain insurance cover against the risk of a relationship breakdown or disability. All that he can offer is his optimistic hope—no hard evidence, just his hope—that new insurance products will emerge to cover many of those risks. However, I doubt whether many potential buyers would put their shirts, let alone their houses, on his hopes.

I challenge the Secretary of State to put this challenge to some of his colleagues. If he suggests to his colleagues, and particularly those in seats with majorities of less than 15,000, that they seek insurance cover at the moment, he might he interested to learn the terms that would be offered—if any of them qualified for cover at all.

What about the impact: on the housing market? In its brief, the House-Builders Federation makes the point that it is evident to anyone with an understanding of what is happening at the present time in the market that it is, in the federation's words, Showing increasing weakness, reflecting lack of confidence, job insecurity and the possibility of a further reduction in MIRAS in April. The timing of these proposals"—

Mr. Jenkin

It would say that.

Mr. Raynsford

They are not my words, they are the words of the House-Builders Federation. The federation has a direct interest in a flourishing house building industry. It states: The timing of these proposals is particularly unfortunate and they are likely to cause more house purchases to be deferred. The federation continues: the measures will go on to discriminate against those households wishing or needing to move and will slow down housing transactions even further. Against that background, what is needed is a positive package of policies to restore confidence in the housing market. The Secretary of State is offering the opposite. In addition to the threatened increase in interest rates, and the further cut in MIRAS in April, the income support changes constitute a lethal cocktail which will poison any prospect of recovery in the market this year.

Mr. Lilley

That is scaremongering.

Mr. Raynsford

According to the Secretary of State I am scaremongering by quoting the words of the House-Builders Federation. That is an indication of how extraordinarily badly informed the Secretary of State is about the market. The story in today's Daily Star about his reluctance to meet representatives of the House-Builders Federation is perhaps another indication of the problem. [Interruption.] The Secretary of State intervenes from a sedentary position, but I understand from the director of the House-Builders Federation that a meeting was arranged hastily this morning after the article appeared in the Daily Star.

Mr. Lilley

I had received no request from the federation to see me. On reading the article, I telephoned the federation to say that my door is always open to any organisation, such as the federation, which wanted to see me. I said that if the federation wished to come and see me, it was welcome to do so. I am pleased if the hon. Gentleman has discovered that the federation is willing to come, but those are the facts and I hope that he will now withdraw his remarks.

Mr. Raynsford

The Secretary of State said that he received no request for a meeting. Any sensible Secretary of State doing what he is doing would have asked for the federation's opinion before he acted.

The measures which the Secretary of State is proposing, and which we are debating tonight, are ill-conceived and incoherent and will, if carried through, have a devastating impact on thousands of families whose dream of home ownership will turn into the nightmare of repossession. That comes from a Government who have presided over the worst-ever crisis of mortgage debt and repossessions in the country's history. It comes from a Government whose Prime Minister claimed in January 1992 on "Desert Island Discs" of all extraordinary places: We've stopped, if you recall, the repossessions just before Christmas. Since then, 176,000 former home owners, many now languishing in miserable and expensive temporary accommodation, can bear witness to the falsehood of that pre-election claim. It comes from a Government with no constructive thoughts on how to stimulate recovery in the housing market—recovery that is vital to liberate the millions of home owners who are trapped in negative equity.

The only good thing to be said for the package is that it will, if carried through, put paid to any prospect of a feel-good factor returning to the housing market and, by so doing, it will hasten the end of this discredited Tory Government.

6.47 pm

The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans)

It is pretty rich of the hon. Member for Greenwich (Mr. Raynsford) to talk about positive packages for the housing market after that grossly exaggerated negative conclusion to his speech. How he believes that it will improve the housing market to talk of a lethal cocktail of poison, I leave to everyone's imaginings.

In his analysis, the hon. Member for Greenwich wholly failed to deal with the Government's two main arguments. The first relates to how to deal with the inexorable rise in the cost of income support mortgage payments. Does he believe that that rise should continue? Does he believe that the taxpayer should continue to support it at that level without any further restraint?

The second point with which the hon. Gentleman failed to deal relates to the 70 per cent. of those who are not on income support and who are not covered by the present arrangements. The Government are proposing to deal fairly with both those problems.

As my hon. Friend the Member for Colchester, North (Mr. Jenkin) powerfully expressed, when there is such state activity, it is hardly surprising that private enterprise tends to be displaced. The home protection insurance market has undoubtedly been affected by the existing scheme. What is sought to be insured must be borne in mind. What is proposed is short-term insurance to cover the nine months for new borrowers. That is a finite and insurable period. It is something which the market can reasonably be expected to make arrangements to cover.

Mr. Denham

The Minister has said that we can reasonably expect the market to insure the nine-month period. Will he confirm that one cannot buy a policy for the first three months of that nine-month period?

Mr. Evans

Policies vary enormously. Not all of them are couched in the terms to which the hon. Gentleman refers.

The Abbey National says that 40 per cent. of its new borrowers are now taking out mortgage protection policies. The Association of British Insurers makes it clear that about a third of its new borrowers are taking out such insurance. General Accident has insurance cover at £4 for every £100 of repayment.

It is reasonable to expect that, as the market develops and as competition comes into play, the price of policies will go down, and the terms of such policies will steadily improve. The fundamental fact with which the Opposition have not dealt is that it is in the interests of lenders—one would never have imagined it, judging from what was said earlier—that the type of policies that their borrowers take up, which, after all, are designed to pay those lenders, do not have the exclusions about which we have heard so much. In other words, the market will demand that improvement in insurance policies, and we can reasonably expect that to happen.

Mr. Dewar

The Minister will agree that the crux of the argument is what happens in the limited period at the start of the unemployment or ill health—the nine-month period. The Association of British Insurers says that almost all policies have between 60 and 90 days in which no payment will be made. Is it the Government's intention to negotiate an agreement with the industry so that that gap will not exist?

Mr. Evans

It is the Government's intention to stimulate the market. It is perfectly possible—[Interruption.] The hon. Gentleman should listen for a moment, instead of assuming the ignorance of the market. The self-employed and contract workers can take out sickness insurance policies that come into play after three days, three months or six months, depending on the relevant terms. The market is well used to and quite capable of introducing products to deal with that matter.

The Opposition's attack on the insurance market is quite astonishing. No doubt it will be noted in the City. No doubt it will be noted, as the hon. Member for Sunderland, North (Mr. Etherington) put it, as working for our friends in the City. The hon. Member for Southampton, Itchen (Mr. Denham) deplored the costs of private insurance administration. He agrees with the proposition of the hon. Member for Sunderland, North. He apparently thinks that nationalising insurance or doing it collectively would be cheaper. He also attacked the terms of policies, but I stress that mortgagees have an incentive to improve the terms of those policies. The fact remains that the self-employed and, indeed, contract workers, can take out policies for all sorts of contingencies.

The hon. Member for Greenwich said that one cannot insure against divorce, and no one should be able to do so. A prudent couple will take out insurance to deal with contingencies, including the consequences of such a situation. [Interruption.] One can obtain insurance because one is unemployed or because the mortgage is not being paid. The hon. Member for Glasgow, Garscadden (Mr. Dewar) appears to be wholly ignorant of the basic terms of policies.

Let us take the matter one stage further. The Government are committed to consulting on the details of the arrangements. Pensioners on income support mortgage interest payments are and will be fully protected. We shall consult in respect of other vulnerable groups.

I advise the hon. Member for Rochdale (Ms Lynne) that all new transactions after October 1995 will be classified as new from that date, not the date of the Budget statement, and we shall consult on protection for those on benefit who, for example, become disabled and require expenditure on improvements.

The Government welcome the opportunity to talk with the Council of Mortgage Lenders about the details of the scheme. We accept that, from October, the 1991 agreement will need to be negotiated, but there is a strong element of common interest among borrowers, lenders and the Government: repossessions are failures for mortgagors and mortgagees. A repossession inevitably leads to a vacant sale, which never recovers as much as a sale with the person in possession. An alarming number of repossessions—one building society put it as high as 30 per cent.—have come about as a result of borrowers simply walking away, leaving the place empty, and leaving mortgagees with no option but to repossess and to sell. That does not help the borrower, because he incurs alternative housing costs and his liability to the lender continues.

There is room for considerable improvement in the public's understanding of the rights and obligations of all parties to such arrangements. There is also scope for better practice in the management of mortgage arrears and repossessions. In November 1993, the Government tightened the county court rules. To answer the question of the hon. Member for Rochdale, we have no proposals to alter the Administration of Justice Act 1970, but mortgagees have realised that the courts possess wide powers to give some mercy to borrowers who are in difficulties. It is very unfortunate for the Council of Mortgage Lenders that the public appreciate the considerable forbearance that building societies and other lending institutions have already shown.

There are positive signs. Mr. Adrian Coles, the director of the CML, stressed that people may move from the standard 25-year mortgage. There is no reason why different, more flexible mortgage terms should not be arranged, for example giving the option of making higher payments when in work to meet a holiday period if a contingency such as unemployment strikes. It may be much better to focus discounts not so much on first-time borrowers but on the contingencies of life such as childbirth, when a wife ceases to work for a period. 'There is absolutely no reason why there should not be variations of the repayment period.

Instead of that constructive approach, we have heard from the Opposition nothing but doom and gloom about the housing market. The hon. Member for Rochdale described the proposals as a further blow to the housing market. My hon. Friend the Member for Macclesfield (Mr. Winterton), who no doubt stirred Tory souls by saying that the ownership of property brought enhanced self-respect, nevertheless hardly assisted house building or the mortgage industry by referring to yet another nail in the coffin of the housing market. The reality was met by my hon. Friend the Member for Colchester, North, who pointed out that it is not desirable to have an overheated, excessive housing market that distorts the economy. My hon. Friend the Member for Macclesfield may find an interesting conflict in his priorities between manufacturing industry and housing.

The Opposition's prevailing theme has been consistently to talk down the state of the housing market. No Conservative Member can see how that could benefit any prospective home owner, anybody engaged in house building, or the economy generally. The facts are nothing like as black as the picture that the Opposition painted. Housing starts in the first nine months of 1994 were up 13 per cent. in the private sector. Indeed, they are the highest since 1989. Negative equity and repossession figures are tending in the right direction. The Government's support on MIRAS, which my hon. Friend the Member for Macclesfield said was being reduced, is still at £3 billion per annum. Under the proposals, the Government's commitments under the income support mortgage payment arrangements will still run at not much less than £1 billion a year.

On top of that, mortgage rates are at their lowest for many years and, perhaps above all else, the ratio between average earnings and average house prices is now classically at the most favourable point, because undoubtedly the cycle will turn as confidence returns. What the housing market needs and what home owners and borrowers with mortgages need is confidence, not the doom and gloom that we have heard from Opposition Members.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 242, Noes 277.

Division No. 52]	[7.00 pm
AYES
Abbott, Ms Diane	Anderson, Donald (Swansea E)
Adams, Mrs Irene	Anderson, Ms Janet (Ros'dale)
Ainger, Nick	Ashton, Joe
Ainsworth, Robert (Cov'try NE)	Barnes, Harry
Allen, Graham	Barron, Kevin

Battle, John	Golding, Mrs Llin
Bayley, Hugh	Gordon, Mildred
Beckett, Rt Hon Margaret	Graham, Thomas
Bell, Stuart	Grant, Bernie (Tottenham)
Bennett, Andrew F	Griffiths, Nigel (Edinburgh S)
Berry, Roger	Griffiths, Win (Bridgend)
Blunkett, David	Grocott, Bruce
Boateng, Paul	Gunnell, John
Boyes, Roland	Hall, Mike
Bradley, Keith	Hanson, David
Bray, Dr Jeremy	Hardy, Peter
Brown, Gordon (Dunfermline E)	Harman, Ms Harriet
Bruce, Malcolm (Gordon)	Harvey, Nick
Burden, Richard	Hattersley, Rt Hon Roy
Byers, Stephen	Henderson, Doug
Caborn, Richard	Heppell, John
Callaghan, Jim	Hill, Keith (Streatham)
Campbell, Mrs Anne (C'bridge)	Hinchliffe, David
Campbell, Menzies (Fife NE)	Hodge, Margaret
Campbell, Ronnie (Blyth V)	Hogg, Norman (Cumbernauld)
Canavan, Dennis	Home Robertson, John
Cann, Jamie	Hood, Jimmy
Carlile, Alexander (Montgomery)	Hoon, Geoffrey
Chidgey, David	Howarth, George (Knowsley North)
Chisholm, Malcolm	Hoyle, Doug
Church, Judith	Hughes, Kevin (Doncaster N)
Clapham, Michael	Hughes, Robert (Aberdeen N)
Clarke, Eric (Midlothian)	Hughes, Simon (Southwark)
Clwyd, Mrs Ann	Hutton, John
Coffey, Ann	Illsley, Eric
Cohen, Harry	Ingram, Adam
Connarty, Michael	Jackson, Glenda (H'stead)
Cook, Robin (Livingston)	Jackson, Helen (Shef'ld, H)
Corbett, Robin	Jamieson, David
Corston, Jean	Janner, Greville
Cousins, Jim	Jones, Barry (Alyn and D'side)
Cox, Tom	Jones, Ieuan Wyn (Ynys Mon)
Cummings, John	Jones, Lynne (B'ham S O)
Cunliffe, Lawrence	Jones, Martyn (Clwyd, SW)
Cunningham, Jim (Covy SE)	Jowell, Tessa
Cunningham, Rt Hon Dr John	Kaufman, Rt Hon Gerald
Dalyell, Tam	Keen, Alan
Darling, Alistair	Kennedy, Charles (Ross,C&S)
Davidson, Ian	Kennedy, Jane (Lpool Brdgn)
Davies, Bryan (Oldham C'tral)	Khabra, Piara S
Davies, Rt Hon Denzil (Llanelli)	Kilfoyle, Peter
Davies, Ron (Caerphilly)	Kirkwood, Archy
Denham, John	Lewis, Terry
Dewar, Donald	Liddell, Mrs Helen
Dixon, Don	Litherland, Robert
Dobson, Frank	Livingstone, Ken
Donohoe, Brian H	Lloyd, Tony (Stretford)
Dowd, Jim	Loyden, Eddie
Dunnachie, Jimmy	Lynne, Ms Liz
Dunwoody, Mrs Gwyneth	McAllion, John
Eastham, Ken	McAvoy, Thomas
Enright, Derek	McCartney, Ian
Etherington, Bill	Macdonald, Calum
Evans, John (St Helens N)	McFall, John
Ewing, Mrs Margaret	McKelvey, William
Fatchett, Derek	Mackinlay, Andrew
Field, Frank (Birkenhead)	McMaster, Gordon
Fisher, Mark	McNamara, Kevin
Flynn, Paul	MacShane, Denis
Foster, Rt Hon Derek	McWilliam, John
Foster, Don (Bath)	Madden, Max
Foulkes, George	Maddock, Diana
Fraser, John	Mahon, Alice
Fyfe, Maria	Mandelson, Peter
Galloway, George	Marek, Dr John
Gapes, Mike	Marshall, David (Shettleston)
George, Bruce	Marshall, Jim (Leicester, S)
Gerrard, Neil	Martin, Michael J (Springburn)
Gilbert, Rt Hon Dr John	Martlew, Eric
Godman, Dr Norman A	Maxton, John
Godsiff, Roger	Meacher, Michael

Meale, Alan	Sheldon, Rt Hon Robert
Michie, Bill (Sheffield Heeley)	Shore, Rt Hon Peter
Michie, Mrs Ray (Argyll & Bute)	Short, Clare
Milburn, Alan	Skinner, Dennis
Miller, Andrew	Smith, Andrew (Oxford E)
Moonie, Dr Lewis	Smith, Llew (Blaenau Gwent)
Morgan, Rhodri	Snape, Peter
Morley, Elliot	Soley,
Morris, Rt Hon Alfred (Wy'nshawe)	Spearing, Nigel
Morris, Estelle (B'ham Yardley)	Spellar, John
Morris, Rt Hon John (Aberavon)	Squire, Rachel (Dunfermline W)
Mullin, Chris	Steel, Rt Hon Sir David
O'Brien, Mike (N W'kshire)	Steinberg, Gerry
O'Brien, William (Normanton)	Stevenson, George
O'Hara, Edward	Stott, Roger
Olner, Bill	Straw, Jack
O'Neill, Martin	Sutcliffe, Gerry
Orme, Rt Hon Stanley	Taylor, Mrs Ann (Dewsbury)
Pearson, Ian	Taylor, Matthew (Truro)
Pickthall, Colin	Timms, Stephen
Pike, Peter L	Tipping, Paddy
Pope, Greg	Turner, Dennis
Powell, Ray (Ogmore)	Vaz, keith
Prentice, Bridget (Lew'm E)	Walker, Rt Hon Sir Harold
Prentice, Gordon (Pendle)	Walley, Joan
Prescott, Rt Hon John	Wardell, Gareth (Gower)
Purchase, Ken	Wareing, Robert N
Radice, Giles	Watson, Mike
Randall, Stuart	Wigley, Dafydd
Raynsford, Nick	Williams, Rt Hon Alan (Sw'n W)
Reid, Dr John	Williams, Alan W (Carmarthen)
Rendel, David	Wilson, Brian
Robertson, George (Hamilton)	Winnick, David
Robinson, Geoffrey (Co'try NW)	Wise, Audrey
Roche, Mrs Barbara	Worthington, Tony
Rogers, Allan	Wray, Jimmy
Rooker, Jeff	Wright, Dr Tony
Ross, Ernie (Dundee W)	Young, David (Bolton SE)
Rowlands, Ted
Salmond, Alex	Tellers for the Ayes:
Sedgemore, Brian	Mr. George Mudie and
Sheerman, Barry	Mr. Joe Benton.
NOES
Ainsworth, Peter (East Surrey)	Browning, Mrs Angela
Aitken, Rt Hon Jonathan	Bruce, Ian (Dorset)
Alexander, Richard	Burns, Simon
Alison, Rt Hon Michael (Selby)	Butcher, John
Allason, Rupert (Torbay)	Butler, Peter
Amess, David	Butterfill, John
Arbuthnot, James	Carlisle, Sir Kenneth (Lincoln)
Arnold, Jacques (Gravesham)	Carrington, Matthew
Arnold, Sir Thomas (Hazel Grv)	Carttiss, Michael
Ashby, David	Cash, William
Atkins, Robert	Channon, Rt Hon Paul
Baker, Rt Hon Kenneth (Mole V)	Churchill, Mr
Baker, Nicholas (North Dorset)	Clappison, James
Baldry, Tony	Clark, Dr Michael (Rochford)
Banks, Matthew (Southport)	Clifton-Brown, Geoffrey
Banks, Robert (Harrogate)	Coe, Sebastian
Bates, Michael	Colvin, Michael
Bellingham, Henry	Congdon, David
Bendall, Vivian	Conway, Derek
Beresford, Sir Paul	Cope, Rt Hon Sir John
Biffen, Rt Hon John	Cormack, Sir Patrick
Booth, Hartley	Couchman, James
Boswell, Tim	Cran, James
Bottomley, Peter (Eltham)	Currie, Mrs Edwina (S D'by'ire)
Bottomley, Rt Hon Virginia	Curry, David (Skipton & Ripon)
Bowis, John	Davies, Quentin (Stamford)
Boyson, Rt Hon Sir Rhodes	Day, Stephen
Brandreth, Gyles	Deva, Nirj Joseph
Brazier, Julian	Delvin, Tim
Bright, Sir Graham	Dorrell, Rt Hon Stephen
Brooke, Rt Hon Peter	Douglas-Hamilton, Lord James
Brown, M (Brigg & Cl'thorpes)	Dover, Den

Duncan, Alan	Knight Mrs Angela (Erewash)
Duncan Smith, Iain	Knight, Greg (Derby N)
Durant, Sir Anthony	Knight, Dame Jill (Bir'm E'st'n)
Dykes, Hugh	Knox, Sir David
Eggar, Rt Hon Tim	Kynoch, George (Kincardine)
Elletson, Harold	Lait,Mrs Jacqui
Emery, Rt Hon Sir Peter	Lang, Rt Hon Ian
Evans, David (Welwyn Hatfield)	Lawrence, Sir Ivan
Evans, Jonathan (Brecon)	Legg, Barry
Evans, Nigel (Ribble Valley)	Leigh, Edward
Evans, Roger (Monmouth)	Lennox-Boyd, Sir Mark
Evennett, David	Lester, Jim (Broxtowe)
Faber, David	Lidington, David
Fabricant, Michael	Lilley, Rt Hon Peter
Fenner, Dame Peggy	Lloyd, Rt Hon Sir Peter (Fareham)
Field, Barry (Isle of Wight)	Lord, Michael
Fishburn, Dudley	Luff, Peter
Forman, Nigel	MacGregor, Rt Hon John
Forth, Eric	MacKay, Andrew
Fowler, Rt Hon Sir Norman	Maclean, David
Fox, Dr Liam (Woodspring)	McLoughlin, Patrick
Fox, Sir Marcus (Shipley)	McNair-Wilson, Sir Patrick
Freeman, Rt Hon Roger	Madel, Sir David
French, Douglas	Maitland, Lady Olga
Fry, Sir Peter	Mans, Keith
Gale, Roger	Marlow, Tony
Gallie, Phil	Marshall, John (Hendon S)
Gardiner, Sir George	Marshall, Sir Michael (Arundel)
Garnier, Edward	Martin, David (Portsmouth S)
Gill, Christopher	Mates, Michael
Gillan, Cheryl	Mawhinney, Rt Hon Dr Brian
Goodlad, Rt Hon Alastair	Merchant, Piers
Gorman, Mrs Teresa	Mills, Iain
Gorst, Sir John	Mitchell, Andrew (Gedling)
Grant, Sir A (SW Cambs)	Mitchell, Sir David (NW Hants)
Greenway, Harry (Ealing N)	Moate, Sir Roger
Greenway, John (Ryedale)	Monro, Sir Hector
Griffiths, Peter (Portsmouth, N)	Montgomery, Sir Fergus
Grylls, Sir Michael	Nelson, Anthony
Hague, William	Neubert, Sir Michael
Hamilton, Neil (Tatton)	Newton, Rt Hon Tony
Hampson, Dr Keith	Nicholls, Patrick
Hanley, Rt Hon Jeremy	Nicholson, David (Taunton)
Hannam, Sir John	Nicholson, Emma (Devon West)
Hargreaves, Andrew	Norris, Steve
Harris, David	Onslow, Rt Hon Sir Cranley
Hawkins, Nick	Oppenheim, Phillip
Hawksley, Warren	Ottaway, Richard
Hayes, Jerry	Page, Richard
Heald, Oliver	Paice, James
Heathcoat-Amory, David	Patnick, Sir Irvine
Hendry, Charles	Patten, Rt Hon John
Heseltine, Rt Hon Michael	Pattie, Rt Hon Sir Geoffrey
Hicks, Robert	Pawsey, James
Higgins, Rt Hon Sir Terence	Peacock, Mrs Elizabeth
Horam, John	Pickles, Eric
Hordern, Rt Hon Sir Peter	Porter, Barry (Wirral S)
Howard, Rt Hon Michael	Porter, David (Waveney)
Howarth, Alan (Strat'rd-on-A)	Portillo, Rt Hon Michael
Hughes, Robert G (Harrow W)	Powell, William (Corby)
Hunt, Rt Hon David (Wirral W)	Rathbone, Tim
Hunt, Sir John (Ravensbourne)	Redwood, Rt Hon John
Hunter, Andrew	Renton, Rt Hon Tim
Hurd, Rt Hon Douglas	Richards, Rod
Jack, Michael	Riddick, Graham
Jackson, Robert (Wantage)	Rifkind, Rt Hon Malcolm
Jenkin, Bernard	Robathan, Andrew
Jessel, Toby	Roberts, Rt Hon Sir Wyn
Johnson Smith, Sir Geoffrey	Robertson, Raymond (Ab'd'n S)
Jones, Robert B (W Hertfdshr)	Robinson, Mark (Somerton)
Jopling, Rt Hon Michael	Roe, Mrs Marion (Broxbourne)
Kellett-Bowman, Dame Elaine	Rumbold, Rt Hon Dame Angela
Key, Robert	Ryder, Rt Hon Richard
Kilfedder, Sir James	Sackville, Tom
Kirkhope, Timothy	Sainsbury, Rt Hon Sir Timothy
Knapman, Roger	Scott, Rt Hon Sir Nicholas

Shaw, David (Dover)	Thurnham, Peter
Shaw, Sir Giles (Pudsey)	Townsend, Cyril D (Bexl'yh'th)
Shephard, Rt Hon Gillian	Tracey, Richard
Shepherd, Colin (Hereford)	Tredinnick, David
Shepherd, Richard (Aldridge)	Trend, Michael
Shersby, Michael	Twinn, Dr Ian
Sims, Roger	Vaughan, Sir Gerard
Skeet, Sir Trevor	Viggers, Peter
Smith, Sir Dudley (Warwick)	Walden, George
Smith, Tim (Beaconsfield)	Walker, Bill (N Tayside)
Soames, Nicholas	Waller, Gary
Spencer, Sir Derek	Ward, John
Spicer, Sir James (W Dorset)	Wardle, Charles (Bexhill)
Spicer, Michael (S Worcs)	Waterson, Nigel
Spink, Dr Robert	Watts, John
Squire, Robin (Hornchurch)	Wells, Bowen
Stanley, Rt Hon Sir John	Wheeler, Rt Hon Sir John
Stephen, Michael	Whitney, Ray
Stern, Michael	Whittingdale, John
Stewart, Allan	Widdecombe, Ann
Streeter, Gary	Wiggin, Sir Jerry
Sumberg, David	Wilkinson, John
Sweeney, Walter	Willetts, David
Sykes, John	Wilshire, David
Tapsell, Sir Peter	Winterton, Mrs Ann (Congleton)
Taylor, Ian (Esher)	Wolfson, Mark
Taylor, John M (Solihull)	Wood, Timothy
Taylor, Sir Teddy (Southend, E)	Young, Rt Hon Sir George
Temple-Morris, Peter
Thomason, Roy	Tellers for the Noes:
Thompson, Sir Donald (C'er V)	Mr. Sydney Chapman and
Thompson, Patrick (Norwich N)	Mr. David Lightbown.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments) and agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House condemns the Opposition's wish to continue the inadequate existing system of Income Support Mortgage Interest, which does not protect those with modest savings, those with small pensions or redundancy payments, or those with a working spouse, which has undermined the spread of private mortgage insurance and has contributed to 50,000 homes a year being repossessed; believes that the Government's proposals will lead to the development of more comprehensive, less costly insurance cover; welcomes the fact that pensioners on income support will continue to have their mortgage interest paid; and reaffirms its commitment to home ownership.