HC Deb 19 June 1995 vol 262 cc3-5
2. Mrs. Liddell

To ask the Secretary of State for Social Security what estimate he has made of the effect of his proposals to alter the present system of help with mortgage interest payments under income support on the number of repossessions. [27600]

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

Current income support provision is costly yet fails to cover the majority of people who fall into difficulty with their mortgage payments. The new proposals encourage the provision of comprehensive, high-quality mortgage protection for all new home owners should they suffer a loss of income. This should help to reduce the number of repossessions.

Mrs. Liddell

The Secretary of State is being most unreasonable in this matter. Does he agree with the Council of Mortgage Lenders and the Association of British Insurers, which have already pointed to the likely dramatic increase in repossessions? If he is not prepared to listen to the common sense of Opposition Members who are concerned about repossessions, will he at least respond to the fear on his Back Benches about the consequences of these moves for those who are already suffering the effects of negative equity?

Mr. Lilley

The hon. Lady is entirely mistaken. The Association of British Insurers has said the complete opposite of what she has said. It has said that virtually everybody who can obtain a mortgage should be able to obtain insurance. As a result, there should in due course be a reduction in repossessions and in the number of people who fall into arrears.

Mrs. Roe

Is my right hon. Friend aware that, according to a recent survey in the Mortgage Finance Gazette, two thirds of the building societies polled said that they are planning to provide block insurance for their members and that 60 per cent. of those will provide it free? Does that not show that it is not only the Skipton building society but also many others that are likely to provide free unemployment insurance cover for their borrowers?

Mr. Lilley

My hon. Friend is absolutely right. It was very interesting to see the reaction of the Labour Benches when the survey and the news which it brought forward were brought to their attention. They were shocked at the good news, because what is good news for home owners is bad news for Labour.

Ms Lynne

Does the Secretary of State not understand that there is genuine concern that those who have been encouraged to buy their homes could, because of the cut in income support for mortgage benefit, face homelessness? Can the Secretary of State tell the House whether he has fully thought through all the implications of the policy? Whatever he says at the Dispatch Box, I do not think that he has.

Mr. Lilley

I can, of course, give the hon. Lady that assurance. We are consulting about it with the help of the Social Security Advisory Committee. We have had a very good response from the insurers, and the evidence is that the building societies will follow the excellent example set by the Skipton building society. However, I find it a bit rich for the sole representative of the Liberal party here present to pose as being interested in home owners when her party is actively contemplating abolishing mortgage interest tax relief.

Mr. Congdon

May I congratulate my right hon. Friend on his determination to reduce the £90 billion a year spent on social security? Is it not right that those who are acquiring an asset that they will use and benefit from for their lifetimes should contribute towards insuring it rather than expect other taxpayers to bail them out?

Mr. Lilley

It is certainly absolutely right that we should try to move from a system which, at present, leaves 70 per cent. of people with mortgages, who may find themselves unemployed or without an income, uncovered by the existing state system to one where all new home owners have protection and cover against the risk of losing their jobs. The extraordinary complacency of the Labour party, which had a debate on the subject and revealed that it had no policy to help those 70 per cent. will, I think, be recognised as a letdown to home owners.

Mr. Dewar

Does the Secretary of State hold to the estimate—rather optimistic, I fear—referred to by the hon. Member for Broxbourne (Mrs. Roe) that a minimum of 40 per cent. of home owners will have to meet a significant additional cost to have insurance cover in the private market? Does he endorse that estimate? Has he noted the rather endearing, touchingly loyal, advice from the Secretary of State for Employment that the problem for the Tory party will be solved if it pulls up its socks? Would not dropping a plan for mortgage interest payments, which would add greatly to the uncertainty in the housing market, be an absolutely excellent contribution to that rather odd exercise?

Mr. Lilley

The hon. Gentleman, who had the opportunity to tell us what Labour party policy is, tacitly criticises us because there may be some small cost to 40 per cent. of home owners in getting the protection that everybody believes they should have when taking out a new mortgage, and ignores the fact that his party proposes to leave 70 per cent. of them without any cover at all. The other day, he disowned his party's housing spokesman, who had at least offered to do something for that 70 per cent., but at the expense of abolishing mortgage interest tax relief.

Mr. Peter Bottomley

Does my right hon. Friend agree that it is good to see a split among the members of the Council of Mortgage Lenders, and that those building societies that remain neutral look as though they have an interest in trying to help people not only to buy homes but to keep them after they have contracted to buy them, and that that example should be followed, not criticised, by the banks?

Mr. Lilley

I am not one to rejoice in splits in any direction. I thought the correspondence from the chairman of Skipton building society was very interesting. In one respect, he is in agreement with the chairman of the Cheltenham and Gloucester, who himself a little while ago said there was no need for building societies to raise interest rates—which they did—because there was an ample profit level. That means that they will have the means to provide cover without undue cost to home owners.