HC Deb 15 July 1997 vol 298 cc250-96
Mr. Tim Boswell (Daventry)

I beg to move amendment No. 11, in page 10, line 15, at end insert— '(4) This section shall not come into effect until the average mortgage rate is at or below the rate prevailing on 1st May 1997.' The effect of the amendment is relatively simple. It would prevent the Chancellor's intended reduction in mortgage interest tax relief until the general tenor of interest rates returned to the level applicable on 1 May 1997—a date which, I imagine, is etched on the hearts of hon. Members on both sides of the Committee.

I shall return to the amendment, but first it may be helpful for the Committee if I give a little historical context to the issue of mortgage interest tax relief.

I suspect that, when discussing the subject, many of us are a little eclectic in our use of terms. I am trying to use the stricter term "mortgage interest tax relief', if only to remind the Committee that it is a tax relief given against taxable income on account of mortgage interest, although even that is not a perfect concept now. It is often described as MIRAS, no doubt because the acronym slips more easily off the tongue. That stands for mortgage interest relief at source, which was introduced some years ago. It is the same thing, but reflects the way in which the relief is now payable.

Subject to the indulgence that we may flit from one term to the other, even inadvertently, I shall say a word or two about the concept, how we got to where we are today and what we should do about that.

The original concept, like most things in the income tax system, almost all the way back to Pitt, was a logical one. Income was calculated taking into account all items that were taxable under various schedules, including at that time an implied rental equivalent for any house occupied by an owner-occupier under schedule A. Against that taxable income, the taxpayer was entitled to set off all relevant outgoings. From time immemorial, one of those outgoings was the deduction of interest on account of loans—not specifically tied to house purchase, at that stage.

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Those of us with fairly long memories—in my teenage years, I used to hear these concepts bandied about, even if I did not fully understand them—will remember the sustained pressure in the 1950s for the abolition of schedule A as it affected the owner-occupier. That provision was abolished by a Conservative Government, I think under Mr. Selwyn Lloyd, as a move explicitly favouring home owners. Ever since then, a person who has a discretionary option to invest, say, £200,000 of his money in a house to live in, as against renting a house, or to put the money into shares, bonds or other securities to generate an income with which to pay that rent, is usually favoured in tax terms by being an owner-occupier.

That change came about after a sustained campaign with a great deal of public feeling. It was, I believe, a reflection of the good intentions of the Conservative Government of the day to support owner-occupiers. It was the right thing to do, but it broke the tax symmetry, as it were.

Characteristically, on the other side of the argument for the taxpayer, the succeeding Labour Government in the late 1960s cut off interest on loans—not on house purchase, but on all loans other than for housing. We had moved from a perfect and tidy concept to one that favoured home owners and disfavoured other kinds of borrowing.

Thereafter, the regime was more stable, although along the way a restriction was imposed on the total amount of borrowing eligible for mortgage interest tax relief. Probably as a reflection of the relative stability of that period in the 1970s and 1980s, the importance of mortgage interest tax relief grew. The total cost to the taxpayer, or tax expenditure, rose. In 1991, it peaked at £8.9 billion per annum, which was a substantial cost.

That cost was achieved even though the eligible loans were restricted to £30,000 from 1984 onwards. That has not changed, and will be the subject of a clause to be debated in Standing Committee. I will not talk at length, except indirectly or incidentally, about the limit.

Since 1990–91—the peak of tax expenditure—interest rates in the United Kingdom have fallen sharply. At 1 May 1997, they were at their lowest historic level for more than 30 years. That was an appropriate time for a Conservative Chancellor—who, like all Chancellors, had to set tax priorities—to introduce a number of stepped changes which reduced the level of the relief, alongside the automatic reduction that was taking place on account of the reduction in interest rates. The changes involved the removal of higher rate relief from 1991–92 and the restriction of relief to 20 per cent., and subsequently to 15 per cent.

Anticipating the Financial Secretary's speech, I am sure that she and those on the Treasury Bench will try to justify the Government's changes by implying that they are a continuation and flow from other recent changes. However, in view of the somewhat overblown claims made about the Budget—

Mr. Campbell-Savours

When the Conservative Government took a similar decision some years ago, did they have interest rates in mind? Is not the policy they pursued then exactly the reverse of that which the Conservatives are pushing in the amendment?

Mr. Boswell

There is a huge distinction, to which I was about to refer. The difference is that interest rates were on their way down when the Conservative Government took that decision. Sadly, they are now on their way up. That is one reason why we are seeking to impose on the Government the restrictions that are set out in the amendment. If, as the Chancellor and the Financial Secretary have suggested, this is a people's Budget, we must ask why the people will pay for it.

I started my speech from an historical perspective, to which I shall now return. I cannot better the conclusion reached by the Council of Mortgage Lenders in its recent comprehensive briefing. It said that it is clear that mortgage interest tax relief has moved from being a highly regressive form of relief which benefited high income home owners most to being a relatively progressive form of relief giving most assistance to home owners with a relatively small mortgage and on lower incomes. I point out that a series of Conservative Chancellors introduced changes and continued to maintain the £30,000 restriction which, together with other measures such as the right to buy, brought about that social revolution. The Conservatives can reasonably claim to have pioneered the encouragement of home ownership from the 1960s.

The Council of Mortgage Lenders gives a further analysis of the pattern of mortgage lending now—and not as it would have been in the 197,0s under Governments of both colours. It examines the size of income of the mortgagor—the person who borrows; as I am not a lawyer, I tend to get it wrong if I do not think about it—and the average size of the mortgage based on the latest convenient revenue figures for 1994–95.

Mr. Campbell-Savours

I have checked the statistics. The hon. Gentleman said that, when the Conservative Government introduced the measure in 1995, interest rates were going down. According to Library research paper 9784, interest rates were increasing at that time. How does that information fit with the hon. Gentleman's amendment?

Mr. Boswell

If he were to take one month with another, the hon. Gentleman would find that interest rates tended to be down dramatically during that period. I am sure that he would agree that the solution figure achieved on 1 May 1997 was the lowest historic rate for more than 30 years.

Returning to mortgage distribution under the recent arrangements, it is interesting to note that, once people reach an income level of about £10,000 a year—

Mr. Campbell-Savours

I must press the hon. Gentleman on this important point. The Conservative Government announced the change in 1993, when, according to the Library, interest rates were 5.5 per cent. When the measure was introduced in 1995, interest rates were 6.75 per cent. In other words, the measure was introduced when interest rates were increasing, yet the hon. Gentleman pleads that we defer until interest rates go down.

Mr. Boswell

I draw the hon. Gentleman's attention to the fact—I invite him to check the figures for himself in the Library—that interest rates reached an historic peak on 15 September 1992. That date may be in the hon. Gentleman's mind. The tendency thereafter was for the rates to be reduced, which has produced conclusively the lowest historic rate for more than 30 years. Interest rates were down during that period. 1 strongly advise the hon. Gentleman—to whom I have given way three times on this point—to consider the distribution of incomes and mortgages.

The broad and level pattern of mortgages is established roughly at an income level of £10,000 per annum. It is well to remind the House that there are about 1.5 million beneficiaries of mortgage interest relief below that level, 1 million of whom are not taxpayers. Above the £10,000 figure, the curve rises relatively smoothly to a lower income limit of about £40,000 a year. The curve for the size of mortgage is broadly stable along that line. Therefore, given that there is a £30,000 limit, the amount of relief is very stable.

Another way of putting it is that, of 10.4 million home buyers, 45 per cent. had household income not exceeding £20,000 a year, yet they received 39 per cent. of the value of the mortgage interest tax relief; so the situation is pretty balanced. This analysis, suggesting an even distribution of the benefits of mortgage interest tax relief to home owners, is broadly confirmed by the Institute for Fiscal Studies.

It is worth adding that benefit relief is evenly spread regionally. In Wales, where house prices are lower, two thirds of the relief and 40 per cent. of the relief in Scotland go to those with mortgages under £30,000. The broad pattern of relief according to incomes and population is fairly stable across the country. Therefore, in its current form, the benefit is not a fat cats' or a home counties' benefit. Although the figures diverge in the south-east of England, that reflects the high cost of housing as a percentage of total disposable income. Any change in the level of tax relief makes the least proportionate difference to people in the south of England because they pay more anyway.

The scene, therefore, is of a widely spread benefit which is available to 10 million households all over the country and spread evenly among all income groups and regions. So what has happened since 1 May? This matter obviously concerns the hon. Member for Workington (Mr. Campbell-Savours). First and foremost, there have been three successive quarter point rises in interest rates—the last occurred only last week. Now that the Chancellor has remitted control of monetary policy to the Bank of England, there may be more increases to come.

Home owners need interest rate increases like a hole in the head. The cost of those interest rate rises alone—remembering that they are paid for by the great bulk of the 10 million householders—is £21.85 a month on average. We might object if the Chancellor tried to portray that increase as a law of nature. Nevertheless, it is created by the operation of interest rates.

What does the Chancellor do? He makes matters worse by imposing a staged cut in tax relief, which takes out another £8.95 a month for those mortgage holders who benefit from the full £30,000 relief. That makes a total loss to the individual householder of about £30 a month as a result of Labour's double whammy. There is the whammy of mortgage rate changes and that of the withdrawal, or partial withdrawal, of mortgage interest benefit.

The Labour Government claim that they are concerned to listen to others. That being so, surely they should have listened to those like the deputy director general of the Council of Mortgage Lenders, Peter Williams, who, commenting on the issue of retaining mortgage interest relief, said: The Government should understand that further cuts in mortgage interest tax relief do not represent a zero-cost option. I11-considered actions on MITR, based on the short-term expediency of releasing funds for other programme priorities, are likely to damage home owners and the housing market indiscriminately, and to call into question Labour's commitment to sustainable home ownership. Mr. Williams added: The CML is keen to work with the Government on a range of issues affecting the housing and mortgage markets, and is prepared to have discussions on the future of mortgage interest tax relief. It is clear, however, that the Chancellor's proposals are entirely within the framework of the policies that I have explained to the Committee, with the consequences that I have set out.

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I pause on three points of my own in the analysis. First—in this instance, the Chancellor and his Treasury team have been entirely consistent—a move has been slipped into the Budget that is completely in accord with the message of the Budget, which is, "Clap today and pay tomorrow." It is inevitable that the costs of the proposals have not yet fully sunk in, and that is because most people receive an annual statement of their mortgage liability in the spring. Their repayment period is adjusted accordingly. That does not apply to every mortgage, but there are many people who do not yet know what has hit them.

Secondly, Labour is claiming, and the Chancellor is calculating and betting on, a benefit of £950 million in a full year. The Chancellor should reflect on the implications of the three hikes in interest rates on the cost of MIRAS itself. By increasing the interest rate three times, there has been a rise in the cost of MIRAS. My personal calculation is that it has amounted to a loss of £225 million to the Exchequer. The Chancellor has already given away about a quarter of the benefit that he is claiming.

Thirdly, we have not taken into account all the changes that will bear on the ordinary person or ordinary householder, to use the Government's terms. In addition, there is the indirect impact of the changes in advance corporation tax on pensions and the need to contribute to pensions. There is also an indirect impact on local authorities and council tax. In some instances, there will be an impact on stamp duty. There are other changes that will take place indirectly in the second round.

Mr. Ivor Caplin (Hove)

I apologise for missing the start of your speech. You raised on three occasions, I think, since I have been in my place, the question of three interest rate rises since 1 May. Would you not accept—

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord)

Order. "You" and "your" are not words that the hon. Gentleman may use, because they refer to the Chair. The Chair is not involved in these matters.

Mr. Caplin

I am sorry, Mr. Lord.

The hon. Member for Daventry (Mr. Boswell) has said on a number of occasions that there have been three interest rate rises since 1 May. Perhaps he will reflect on why there was no interest rate rise in the first part of the year, which every economic forecaster said there should be so as to control the economy generally and specifically in terms of house purchase.

Mr. Boswell

It is interesting that, after the election result was known, it became clear from the price series for April that the outgoing Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), hit his inflation target precisely in April. We were accused during the general election campaign of not having hit that target. It seemed that inflation would be 2.6 per cent., but we reduced it to 2.5 per cent. It has now risen to 2.9 per cent. because of the direct impact of the Budget.

As for monetary policy at that time, I think that my right hon. and learned Friend the Member for Rushcliffe is to be commended on making his own judgment. I am surprised that the hon. Member for Hove (Mr. Caplin) appears to concur with the view of the Bank of England in the second half of last year, when it demanded an interest rate rise. My right hon. and learned Friend resisted that demand, and I believe that he was right to do so. These are now matters of history, and it is plain that some of the difficulties imposed by the Chancellor are that he has increased taxes and spending in the Budget as well as indicating a relaxation of the inflation target, which is an extremely bad signal to send.

We have a focused tax relief which is intended to give practical help to all sorts of home owners. It is neither regressive nor regionally skewed. It costs £2.3 billion annually, which in cash terms was very much what it was about 25 years ago. It is not very far out of the ball park of about 1 p on income tax. Our complaint is that the Government are aggravating the effects of their hits on higher interest rates on the householder with a tax hit that is entirely of their own making.

The Government's action is likely to have little effect in cooling any alleged boom in house prices, which is by no means universal. The conclusion of the Halifax building society in its latest house price index is that there is no need for any specific Budget measures aimed at curbing an allegedly "booming" housing market. I know, of course, that that must be a matter of judgment.

In fairness to the Government, I do not think that they have made their proposals on that basis. We on the Opposition Benches want to protect the home owner by providing, through the amendment, for no cut in mortgage interest tax relief to take effect unless and until interest rates are reduced to the historic low levels enjoyed by borrowers on 1 May.

I agree that present signs suggest that it might be rather a long wait before we reach that happy state again. It will be a long wait, because already the Chancellor has shown a readiness to relax his inflation target and a propensity in various ways to favour increased taxation. In my judgment, he is preparing the way for higher spending. Faced with that somewhat bleak picture, we owe it to home owners to offer them some protection, as afforded by the amendment.

To quote the Government, all that we are discussing amounts to a matter of trust. I have changed my spectacles recently, a move that has been of great benefit to my performance at the Opposition Dispatch Box, but I still see nothing in the Labour party's manifesto, with either old or new spectacles, that amounts to a pledge to increase taxes that are paid by home owners.

I have recently shared with the House of Commons a letter from one of my constituents, a Mr. Morrison, and I shall now share it with the Committee. He confirmed my apparent myopia when recently he wrote: I phoned Mr. Brown prior to the election concerning future fiscal policies. He informed me that no planned reduction in MIRAS would take place and I should look at the Labour Party manifesto, which did not include such measures. I am afraid that I have still not had any explanation from those on the Treasury Bench about those assertions. It could be that Mr. Morrison got through on a bad line and was misheard. It could even be that someone got into the headquarters or office of the Chancellor and decided to impersonate him. Or, of course, it might not have been a planned hit on mortgage rates at all: it could have been a panic cut imposed at a later date when interest rates were already humming on their upward path.

There has been, therefore—I regret to have to tell the Financial Secretary—a material breach of trust. I invite Ministers on the Treasury Bench to absolve themselves and their colleague by giving some belated explanation of what took place. Tonight, I also invite them to repair the damage that they have caused by at least committing themselves—I hope that the Financial Secretary is listening—to no further reduction in mortgage interest tax relief. Better and more immediately, I invite them to accept our amendment on behalf of the home owners whom, sadly, they have set out to damage.

Mr. Campbell-Savours

I shall be brief, as I had not intended to speak, but having been provoked by the Minister five minutes ago, when he failed to answer my perfectly reasonable question, I feel compelled to do so.

The whole debate begs a question that no Opposition spokesman has answered from the Dispatch Box. I pressed the shadow Chancellor several times to answer a very simple question. He refuses point blank to do so. What would the Conservatives have done if they were in government? Would they have raised interest rates? Would they have raised taxes? Would they have done a little of both? Or would they have done nothing at all?

I asked the other day whether the Conservatives accept that the economy is overheating. Everyone tells me, tells us, tells the Government, that the economy is overheating. The only people who have trouble mouthing those words are Opposition spokesmen. The reason, of course, is that if they were to do so, it would mean that they, were admitting that the economy was not in a particularly balanced state at the time of the general election.

The reality is that we faced up to our responsibilities the moment we knew what the problems were. I believe that there was almost a conspiracy of silence during the general election campaign, from all sides in the political debate, about what would happen post-Budget. Indeed, the Tory party was part of that conspiracy. I do not remember the Tories telling us at any stage during the election campaign what they intended to do about MIRAS after the election. We all knew that they would remove it.

I challenge any Opposition spokesman to come to the Dispatch Box today and tell us in all honesty that it was not the Conservative party's intention to interfere with MIRAS after the general election. Perhaps it would be better if a member of the then Cabinet were to do so, because I understand that the Cabinet of that time considered the issue of MIRAS. I give way to the hon. Gentleman—

Mr. Boswell


Mr. Campbell-Savours

Not him, he was not in the Cabinet—I am asking the right hon. Member for Hitchin and Harpenden (Mr. Lilley), who was a member of the Cabinet at that time, whether the issue was discussed in the Cabinet sub-committee.

Mr. Lilley

The hon. Gentleman purports to know what goes on in Cabinet sub-committees. I can assert, from my knowledge, that he is wrong on both counts.

Mr. Campbell-Savours

I am very surprised indeed, because we were being—

Mr. Boswell


Mr. Campbell-Savours

I now give way to the hon. Gentleman.

Mr. Boswell

I thank the hon. Gentleman for giving way. While he is speculating about what may or may not have taken place in the Cabinet, of which I would not, of course, have direct knowledge, does he nevertheless agree that the words that I quoted from my constituent suggest that it was reasonable for my constituent to decide, in placing his vote on 1 May—the date which is the subject of the amendment—that there was no proposal from the Labour party for a change in MIRAS? Does the hon. Gentleman accept that that was the import of that telephone conversation, or is there some other explanation?

Mr. Campbell-Savours

I think that to some extent there is an element of truth in what the hon. Gentleman is saying, but the reality is that everyone knew that surgery would be required after the general election. All the public opinion polling about what the public considered would be the position after the general election showed that they believed that, whatever Government were in power, there would be increases in taxation. That is a reality.

The polls before the general election showed that the British people expected taxes to rise, and they were correct. We believed that they would rise. Conservative Members knew that they would rise. The Liberal Democrats believed that they would rise, because they advocated openly in their campaign that they should. Economic commentators knew that they would rise. If I understand it correctly, the Governor of the Bank of England was advocating in private that taxes should rise to take pressure off interest rates and in the decisions in which he was involved at that time with the then Chancellor of the Exchequer.

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In many ways, I am arguing is that this is a totally false debate. The reality is that everyone knew that something was going to happen, and now the Opposition lecture us that somehow it is all our fault, when they know that we are dealing only with reality. We are dealing with the inevitable consequences of the underlying weak economy that we inherited.

I believe that the reason why we have to raise interest rates in this country, and why we have the problem with the exchange rate, is because this country is economically weak. Over the past 17 years, we have seen the economy's industrial base shattered. As a result, we cannot withstand the pressure of increased consumption without forcing up interest rates to block it off, for fear of provoking inflation.

If proof is needed, just look across the world. How can the Japanese have such low interest rates? How can Japan allow its consumption to rise without provoking heavy increases in interest rates? Why do we in the United Kingdom generally have a higher interest rate regime? It is because the British economy is fundamentally weak and was immeasurably damaged over those 17 years

I am prepared to concede that many parts of the British economy are now leaner, more efficient and more effective in the way in which they use resources, and that their management is better. Some policies introduced during the years of Thatcherism had that effect, but I am complaining that, in securing those objectives, a major part of the British economy was destroyed and, in the process, an interminable number of people were placed on the unemployment queue. That is the problem. How are we to strengthen the underlying economy of the United Kingdom, particularly the manufacturing sector, without provoking massive inflation in the United Kingdom? In many ways that will be the test for my right hon. Friend the Chancellor.

I shall move on to a comment that was made about the impact of the tax change on the property market. The impact on the top end of the market will be zero. There will be no impact at all. It will have no effect on properties costing hundreds of thousands of pounds, which in effect means most of the property in the London stock. Indeed, the inexorable trend towards higher and higher prices will continue in London, it being the part of the country that is leading the nation.

Because, historically, prices in the regions follow prices in London—whatever happens to the national economy—we await greater rises in the provinces than we are currently seeing, because of the delayed effect. That delayed effect will, to some extent, mitigate any damage that might arise from lower-priced properties. I believe that, at the last general election, in deciding what property to buy, people discounted the fact that they would have to pay more taxes. Therefore, on lower-priced properties, these measures will have little effect.

I come finally to some interesting statistics that I am having trouble understanding. Every week I follow a sample of building society lending rates, published by the Sunday Times—in particular the variable fixed and capped rate mortgages. They provide some interesting reading. I am unable to understand—hon. Members may be able to explain it to my simple soul and perhaps simpler mind—why it is that, in times of rising interest rates, capped rates are now lower than they have ever been, and fixed rates are now as low as they have ever been.

It is interesting to note that the Skipton building society's capped rate is now 7.49 per cent. Some six to nine months ago it was 0.5 per cent. higher. With regard to the five-year fixed rates—anything less than a five-year term is not a particularly meaningful statistic—a number of building societies offer between 7.5 per cent. and 7.95 per cent., which is less than the variable rate, certainly for the privatised mutuals, but the equivalent of many mutual variable rates.

There must be a message in all that. Perhaps it is that the markets believe that interest rates will fall and that at the moment we are simply experiencing an interest rate blip.

Mr. Patrick Nicholls (Teignbridge)

The hon. Member for Workington (Mr. Campbell-Savours) said that he had not intended to make a speech at all, but felt provoked to do so. I noticed, however, that he had sheafs of notes to call to his aid. I, too, am minded to say that I had not intended to speak but was suddenly provoked by the hon. Gentleman and I, too, have the benefit of being able to produce spontaneous notes.

I want to follow on from what the hon. Gentleman said in a completely spontaneous way, because it just happens to fit in with what I might have said had I intended to speak in the first place. However, I want to say a word first about the context in which the debate is taking place.

We are here today because of the way in which the Bill has been guillotined. I am old-fashioned enough to remember a time when Bills were guillotined because of filibustering or, at the very least, because debates had been going on for so long that it was only right that the Government should be entitled to draw things to an end. That clearly is not the position in this case

We have some three hours to talk about MIRAS and what has been done to it, but it might have been appropriate had we debated it in Committee Upstairs where the measure could have been examined at far greater length and where we could have tabled a series of amendments in order not only to find out exactly what the Government had in mind but to suggest ways in which the measure might have been adjusted, which might even have appealed to Labour Members.

Sadly, when the Committee stage is taken on the Floor of the House, the debate has to be far more general and it is not possible to have such a specific debate. One of the consequences is that it is not so easy for Labour Members to make the sort of contributions that I am sure they would have wanted to make had the matter been dealt with in Standing Committee. Such an opportunity would have given Labour Members the chance to show that they can think and speak, a talent which many will find particularly useful after the next election.

The Financial Secretary to the Treasury (Dawn Primarolo)

I wonder whether the hon. Gentleman's brief says that the reason we are discussing MIRAS on the Floor of the House is because his Front Bench chose to do so, and we were as surprised as he says he is that it is being debated here rather than in Standing Committee.

Mr. Nicholls

One does find with Finance Bills that the Opposition find certain parts that they do not like, so they table amendments in order to debate them. That is not particularly revolutionary. I am not in the slightest bit surprised that my right hon. and hon. Friends thought that it would be a good idea to debate MIRAS. Such a debate is a good idea.

Mr. Boswell

Is it not also in my hon. Friend's mind that this is the biggest single imposition of direct taxation on the ordinary citizen in the Budget? Some much bigger hits on the ordinary household budget come indirectly through the windfall tax and advance corporation tax, but this is the biggest single identifiable measure which strikes at the householder.

Mr. Nicholls

I am sure that that is right.

The hon. Member for Workington, in his spontaneous contribution, was generous enough, as he so often is in these debates, to say that there might be an element of truth in the fact that, if a constituent telephones the shadow Chancellor to ask whether he intends to do something and he says that he does not and then changes his mind and does it, the constituent might feel that he had been misled. A more straightforward way of summarising what the hon. Gentleman said would be to say, "Yes, the man was completely misled."

It was part of the hon. Gentleman's argument that in some way everyone knew that taxes would go up. It is strange for the hon. Gentleman to be cynical, but he was saying, in a rather cynical way, "Well, it doesn't matter if my Government put taxes up. Everybody knew they would. If someone was daft enough to believe my right hon. Friend the then shadow Chancellor when he said that he would not put taxes up, well, he has got it coming to him." I do not find that a particularly attractive argument, even if the hon. Gentleman does.

The fact is that even the hon. Gentleman does not believe it. He is simply making the best of a bad job. The hon. Gentleman is very much a party loyalist. He is one of those who is always prepared to sing in concert with his Front Bench. He is a man who manages to take a lead. He is a man for whom the cry "Give him a job" makes him light up because he knows that one day, because of his loyalty to the party line, it might come to him.

Mr. Campbell-Savours

Say that again.

Mr. Nicholls

I might do so one day.

When the hon. Gentleman tries to pretend that everyone accepted—

Mr. Campbell-Savours


Mr. Nicholls

The hon. Gentleman feels an intervention coming over him.

Mr. Campbell-Savours

I am the last person on earth who would either be offered or would accept a job.

Mr. Nicholls

It has been my experience that one can never make that assumption with complete confidence.

The hon. Gentleman might say that everyone knew that taxes would go up, but that view was not universally shared. It was not shared by the Prime Minister. In an article in the Financial Times on 21 September 1996 he said: I have to say"— that is how he puts it— that we have no plans to increase tax at all. He actually used the phrase "at all" to reassure people.

It was not just the Prime Minister who said that. As recently as 8 April 1997, at the beginning of the election campaign, the Chancellor said: There is no black hole for the Labour party because we have got no public spending commitments that require extra taxes. One man's black hole leads to someone else's black death, because it is pretty obvious now that there has been a huge amount of extra taxes. It is clear that some people knew that taxes would go up, and those people were the Opposition if they came into government.

It is worth placing MIRAS in the context of 17 tax rises from people who were saying days before the general election that there would be no increase in taxation. I will not go through all of them, but there are some that might be thought to be directly relevant.

MIRAS itself means that taxpayers will pay an extra £950 million. Stamp duty will cost them £540 million; the abolition of tax credits for pensions, £5.4 billion; the windfall tax, £5.2 billion; the limitation on the carrying back of trading losses, £250 million; the abolition of relief for medical insurance, £135 million; corporation tax, block leakage £190 million, finance leasing £300 million, more finance leasing for sale and lease-back £40 million, company purchase schemes £100 million; trade debt schemes £10 million; VAT cash accounting £15 million.

8 pm

By my rough and ready calculations, the Budget raised tax by £13 billion. Only a few short days before the election, the Government said that there would be no need to increase taxation. The hon. Member for Workington argued with a straight face—he cannot keep a straight face now—that everyone knew that taxes would increase and that it is only £13 billion, so who cares. That will not wash. If he wants to know a little more about it, he should ask the Prime Minister and the Chancellor why they said that there would be no need to increase taxation when, according to his analysis, they knew that that was not true.

In the event, the Labour party, which came to power saying that it would not increase taxation, has increased it by £13 billion. This is one of the biggest tax-raising Budgets in history. I shall give credit where it is due. It is remarkable that the party that managed to produce that huge tax-raising Budget has not yet been rumbled by the electorate.

There are two points to make about MIRAS. Labour Members have said that we started it. It is curious that they justify this change by saying that we did it, so it must be right, even though we are now opposing it. As my hon. Friend the Member for Daventry (Mr. Boswell) explained, when we adjusted MIRAS it was in the context of a downward trend in interest rates.

Mr. Campbell-Savours


Mr. Nicholls

The hon. Gentleman can pick out particular months, but if he sits down later in a reflective mood he will see that when we adjusted MIRAS there was a downward trend in interest rates.[Interruption.] The hon. Gentleman can wave his document in the air as much as he wants, but he should read it quietly, and hopefully he will be able to understand it.

When we adjusted MIRAS, we were heavily criticised by Labour Members. They had a principled objection to doing anything about MIRAS, but in today's Labour party the presence of principle is no obstacle to action and change.

To highlight their embarrassment, it is worth reminding Labour Members of what their leaders were saying about our attempts to adjust MIRAS. As recently as March 1996, in a speech to the Labour housing conference, the present Prime Minister "had to say"—because he talks like that—this: The first blow the government dealt to homeowners was to cut MIRAS in the 1993 Budget. First to 20 per cent., then a year later to 15 per cent. … the effect of all these measures was to add to insecurity, to destroy confidence in the housing market and to make people much more wary of buying and selling homes. The hon. Gentleman may raise his eyebrows, and I understand how he feels, but that is what the Prime Minister said.

The then shadow Chief Secretary to the Treasury, the right hon. Member for Oxford, East (Mr. Smith), attacked the changes to MIRAS. In a press release in March 1995, he said: Many people's living standards will suffer a severe knock when the latest two Tory tax increases take effect in a few weeks' time. These latest tax hikes hit as the Tories continue to argue amongst themselves over the absence of a supposed 'feel good' factor. We are criticised for suggesting that it is inappropriate for the Labour party to make these changes to MIRAS, but when we made adjustments to MIRAS, we were roundly attacked. Adjustments to MIRAS may or may not be appropriate, but it is clear that Labour Members cannot say that our attack on the Government is inconsistent or intellectually unsatisfying.

Changes to MIRAS do not hit the very rich. Those who recently made a windfall gain of £300,000 or £400,000 by selling their house in London will not be affected by this change. It does not affect people wealthy enough to travel all over the world with their own personal crimper. Alterations to MIRAS have no effect on them whatsoever: to them it is a matter of pence. But such changes affect the people who are just about able to claw their way into the housing market at the very lowest level.

I remember a speech made by the right hon. Member for Chesterfield (Mr. Benn) in which he spoke wistfully of the time when one could go into a council estate and feel at home. He said, "Now you walk down the streets of a council estate and all you see are fake Georgian front doors." That said it all. It showed contempt for the efforts of the very poor to raise themselves above the level of municipal serfdom and get into the property market.

What is so awful about the changes to MIRAS is not the £10 a month that it will cost people—because that is eminently affordable by Prime Ministers, Chancellors of the Exchequer and hon. Members such as the hon. Member for Workington and me—it is the effect that such a sum has on the working poor. [Interruption.] It is all very well for the hon. Gentleman to mock. It is a long time since Labour Members, most of whose salaries have doubled, were in the ranks of the working poor.

Such people will have to find another £10 a month because of the change to MIRAS, and a further £20 a month because of the interest rate rises that have already been announced, let alone those that are in the pipeline. For those people, whose plight makes Labour Members giggle, an extra £30 is real money. It is immensely sad that such changes are being proposed by a party that was once the genuine champion of the working poor, but it no longer has any acquaintance with those people: the principles, rhetoric and concerns that used to matter to the Labour party have been Follettised and Mandelsonised out of existence.

I can imagine what is said in Cabinet: "Let's do a bit of tinkering on MIRAS—it won't matter very much because it's only a tenner here and there." That is what happens when a party cannot even fall back on the paternalism that it has disliked over the years, and has deprived itself of its principles.

These alterations will make a small but significant difference to those least able to stand up to their effects. The view that has been put forward in some newspapers is that this measure was taken to dampen the property market. That is ridiculous. I mentioned that in a spirit of fairness, so that the Financial Secretary to the Treasury, the hon. Member for Bristol, South (Dawn Primarolo) could cross it out if it was in her brief. The hon. Member for Workington is right: this will not be a dampener on the property market—far from it.

One of the consequences of the raid on pension funds was to make them a far less attractive option than they were before. People with substantial sums of money to spare, such as Labour Prime Ministers and Labour Members of Parliament, will no longer think seriously about putting money into pension funds and providing for their future. The temptation will be to plough the money back into the property market. Far from the change being a dampener, it will boost the rise in property values. That is great news for those who can make a killing in the London property market by doing nothing more than sitting on their house in Islington, but it is a pretty sorry day for the working poor, whom it will hit most.

Mr. Geraint Davies

This is a sad day for the Opposition. They complained about the guillotine motion, but how many of them are present? Eight. It is a sad and pathetic day. They said, "This is terrible. We haven't got time to debate these crucial issues. We didn't want the Budget anyway." Look at them. What a sad lot.

Would anyone in their right mind agree to the Opposition's amendment, which underlines the fact that they are not serious about the long-term prospects of the British economy but still spend all their time thinking about the short-term political impact, as presented in the media, and the impact on their Back-Bench committees or whoever runs their party in this day and age. They are not interested in the long term. The Chancellor's Budget, however, is about the long term: it is about confronting, realistically, the legacy of 18 years of Tory rule.

We all know what that legacy is. It is a legacy of under-investment in physical and human capital, a massive public sector debt that was out of control and an economy that was overheating and, at the same time, disabled by under-capacity. Every time we have seen a bit of consumption in the economy, it has fed straight into interest rates. As my hon. Friend the Member for Workington (Mr. Campbell-Savours) pointed out, that contrasts with the situation in Japan, which has had a long-term industrial strategy.

The Chancellor, boldly and courageously, confronted the Tory legacy with, for instance, incentives for long-term investment—in the context of corporation tax and taxes on small businesses—and, before that, with his bold changes in arrangements involving the Bank of England. We all recall the master stroke with which my right hon. Friend delegated responsibility for the setting of interest rates to the Bank of England.

That is the answer to the question posed by the hon. Member for Teignbridge (Mr. Nicholls) about interest rates in the longer term. They are falling because the financial markets can see beyond the current blip—the current difficulties with sterling and the like, linked with sentiments about European monetary union and the fact that our current position in the economic cycle is out of synch with Germany's. In the long term, under the stewardship of our present Chancellor, we can expect interest rates to fall, providing the environment for health and wealth in Britain.

As for what has been said about massive taxes, a large proportion of the money that will be raised from the portfolio of activity that has been proposed will be used to reduce public sector debt—in other words, to cut future taxes. We inherited responsibility for paying back interest of some £25 billion a year, which, given the financial system, must have future tax implications. There are transfers; it is not a case of the old tax-and-spend idea that people seem to want to talk about.

Notwithstanding the denials that we have heard, we have a problem with housing. Consumption is increasing, and an extra £30 billion has been injected following the flotation of building societies and the like. This was the right time at which to help to stabilise the housing market by introducing a marginal reduction in MIRAS from 15 per cent. to 10 per cent.

As has been said, the reduction will not have a dramatic impact; it is just a touch on the brake. Given that we have given independence to the Bank of England, if we had not introduced the reduction, home owners would in any event have had to bear the cost in the form of a marginally larger increase in interest rates. The advantage of the MIRAS reduction is that we can reclaim some of the money and invest it either to avoid debt or to support worthwhile causes.

The changes that we have made are clearly good for Britain and good for the home owner. We do not want to return to the days of boom and bust, when home owners did not know where they were going. Under the Tories, at one moment it was a case of run out and buy a house; at the next, house prices were spiralling; a moment after that, prices were plummeting and people had negative equity. My right hon. Friends the Prime Minister and the Chancellor of the Exchequer are the friends of the home owner.

Mr. Boswell

The hon. Gentleman is presenting an interesting argument, and he has just made an interesting assertion. He suggested that the Prime Minister and the Government were the friends of the home owner. I recall the Financial Secretary to the Treasury saying the other day that she regarded the Government as the friend of pensioners. Is there some propensity among Labour Members to take the maximum amount of damage as an indication of how kind one is to people? If so, would it not have been better to increase taxes by twice as much? The Government could then have helped everyone even more.

Mr. Davies

That might sound logical in a cocktail bar—I am sure that the hon. Gentleman has many friends there—but, in fact, all the measures in the Bill involve long-term rather than short-term considerations.

As the hon. Gentleman has raised the issue of pensions, let me explain what the Bill means in that context. We are creating conditions in which British industry is strong and in which pensions are therefore secure. Moving some expenditure to cut future taxes must also be in the interest of the long term. Similarly, acting in the housing market to end an unstable cycle of change and uncertainty to which home owners cannot adjust must be in the interests of those home owners.

The hon. Gentleman will never learn from his party's recent history of instability, uncertainty, insecurity and fear. That was the legacy of old Britain and the old Tory party, but people are now waking up to the reality that things are improving. They have the greatest confidence in the new Government, and so they should.

8.15 pm

The shadow Chancellor has no idea of financial management, in that he has no idea whether interest rates should or should not have gone up in recent days. He will say nothing, one way or the other. Why? Is he worried about the view of the financial markets, or about the view of Back Benchers—or is he worried that he does not really know the answer? It is probably a combination of all three.

As we know, the amendment is about increases in interest rates after the election. We also know about the meetings between the Governor of the Bank of England and the last Chancellor of the Exchequer, who called the shots in terms of political interest, but held back interest rates against the long-term interests of the economy so that they would surge back after election day. The amendment suggests that the legacy of the last Government's political interference should interfere with the purity and elegance of the Government's proposals.

Incidentally, the amendment and the former Chancellor's behaviour in the past show that monetary and fiscal policy were governed by political considerations and were not designed to meet the country's long-term economic interests. That is why the Tories presided over the old boom-and-bust economy.

Many of us will remember the time when interest rates were at 15 per cent. We remember when we marched boldly into the exchange rate mechanism, and we remember arguments about the rate at which we entered. We did not know what we were doing. Then, suddenly, George Soros did a bit of manoeuvring, and everything collapsed. That was how we ended up, thanks to the politics and economics of the short term, and it is why we do not need any lessons from the wine bar about how to run an economy in the short term. I am beginning to dwell on specific statistics here, but it is preposterous that the hon. Member for Daventry (Mr. Boswell) can sit there and suggest that figures taken from the House of Commons Library today are wrong, although that is typical of the arrogance of the former Government.

I note that no one has bothered to look up the figures given some time ago by the hon. Gentleman. I may as well give them now. In November 1993, the interest rate was 5.5 per cent. It was in the Budget produced at that time that the Conservative Government decided to reduce MIRAS. By January 1996, the interest rate had risen to 6.25 per cent. By that time, we had seen two reductions, from 25 to 20 per cent. and from 20 to 15 per cent.

The behaviour and policy of the last Government were in direct contradiction to the amendment that we are discussing now. The Conservatives do not even remember what they did. Anything that is easy will be cobbled together in an attempt to mount some ludicrous opposition. There is a ragbag of hon. Members complaining about the guillotine. It is pitiful, is it not?

Mr. Brooke

The hon. Gentleman refers to a ragbag that has been cobbled together. What is his verdict on the Government's proposals on foreign income dividends?

Mr. Davies

I am not conversant with the precise nature of that. It will be articulated later, but that does not undermine my point that only a handful of Conservatives Members are in the Chamber barracking the Government.

Mr. John Bercow (Buckingham)

For the benefit of the House, will the hon. Gentleman please name an occasion in the previous Parliament when the current Chancellor of the Exchequer, then the shadow Chancellor, gave a verdict on the level of interest rates, saying that they should be higher, lower or at the level accepted by the then Chancellor?

Mr. Davies

That is precisely the point. The current Chancellor has rightly said that the onus for setting interest rates should be on the Bank of England. Conservatives Members are suggesting again that politicians should jump up and down and say that interest rates are too high and are hurting people here and there. The reality is that we need to set a context in which Britain will succeed. That is why my right hon. Friend the Chancellor did not jump about making the verdicts to which the hon. Gentleman refers.

Mr. Campbell-Savours

There was a momentous occasion when our people made their position on the matter absolutely clear: it was at the time of black Wednesday in October 1993. Conservative Members forget very quickly indeed.

Mr. Davies

The point is well made.

The Conservative party pretends that it is the friend of the home owner. Under the previous Government, home owners suffered the biggest negative equity in history and there were more repossessions than during the highland clearances. No wonder the Prime Minister said what he said, which Conservative Members have taken out of context. When the housing market was in chaos because of the short-termism of Conservative policy, naturally he said that that was not the time to reduce MIRAS, particularly given the wider economic problems that they had created, but the situation has changed.

Conservative Members talk about trust and say that, before the election, they did not know precisely every detail of what Labour was going to do. Of course they did not. There is no historical precedent for that. A newly elected Government will not have a plan for all the five years of the Parliament, detailing everything that they will do. We gave the thrust of what we were going to do, which was about putting people back to work, creating conditions for economic strength and creating a fairer and better Britain to face the new millennium.

Mr. Bercow

Will the hon. Gentleman give way?

Mr. Davies

Yes, I am happy to do so, because I am running out of things to say.

Mr. Bercow

I am grateful to the hon. Gentleman. I will wager that I have marginally more to contribute to the exchange between us than he has to offer in reply. The hon. Member for Workington (Mr. Campbell-Savours) referred to white Wednesday. I can state beyond peradventure that, in the context of the interests of home owners, I would not wish to see a return to the extended recession mechanism, but will the hon. Member for Croydon, Central (Mr. Davies) tell the House whether, in his judgment, re-entry to the extended recession mechanism would assist or hinder home owners?

The Second Deputy Chairman

Order. I remind the House that the amendment refers to mortgage interest payments, and I would be extremely grateful if hon. Members on both sides of the House confined their remarks to that matter.

Mr. Davies

The extended recession mechanism is a code name for the Conservative party, I presume. I will take your advice, Mr. Lord. We do not want to delay the Committee. All I say in passing is that one of the problems that we face is that exchange rates are too high because of the dilly-dallying and delaying of various decisions.

Mr. Damian Green (Ashford)

Are exchange rates too high now?

Mr. Davies

As perhaps the hon. Gentleman should know, Britain is quite high in its economic cycle relative to Germany. In addition, the financial markets are concerned about moving towards European monetary union on 1 January 1999, by which time the convergence criteria will not be met by all parties, particularly Italy and Spain, so Britain is being used as a safe haven for money. That is unfortunate for many British manufacturers, particularly those in the midlands, but the answer is not just the Chancellor and the Prime Minister being tough, insisting on the right convergence criteria and not supporting premature entry without it; it is also about providing pricing stability, which we have established through giving the Bank of England more independence, to ensure stability for manufacturers.

The shadow Financial Secretary and I were with the chairman of Ford today, and he was saying that he wants stability. He is getting that from the new Labour Government.

Mr. Boswell

Will the hon. Gentleman give way?

Mr. Davies

I was going to end there, but as the hon. Gentleman is here, I shall give way.

Mr. Boswell

Although I thought that we had an interesting time at Ford, I do not recall the conversation to which the hon. Gentleman refers, but it has just occurred to me that he must have uttered at least 400 words since my hon. Friend the Member for Ashford (Mr. Green) asked him whether exchange rates were too high. I should have thought that it required only one word—yes or no—but I have not heard it yet.

Mr. Davies

I do not know whether this says anything about the hon. Gentleman, but the chairman of Ford chose to sit at my table, not his. Because of that, the hon. Gentleman would not be aware of all the comments were made. Obviously Ford does not represent the British economy. It has a mixed view of different exchange rates because it spends on inputs and outputs and it acts on a European and global basis, but we had an enjoyable time.

I shall not dwell on the matter any further. The point is simple. The amendment does not stand up to any interrogation. It does not command much Opposition support, as we have seen from both the quantity and the quality of commentary. Moreover, the Budget, in terms of the financial markets, share values and the British public's level of confidence, has been given the thumbs up. I am happy to suggest that hon. Members do not support the amendment.

Mr. Tim Collins (Westmorland and Lonsdale)

I greatly enjoyed the speech of the hon. Member for Croydon, Central (Mr. Davies), for two reasons. He said that the Prime Minister is a friend of home owners. I suspect that the only home owner of whom the Prime Minister is a sincere friend is any home owner who can stump up 675,000 readies to buy his luxury home in Islington.

The other point that I greatly enjoyed was the hon. Gentleman's statement that the shadow Chancellor of the Exchequer should be criticised for not commenting on interest rate movements. When my hon. Friend the Member for Buckingham (Mr. Bercow) pointed out that the present Chancellor failed to comment on any interest rate movement throughout the past five years, the hon. Gentleman said that politicians should not jump up and down and comment about interest rate movements. A little consistency in his speech would have helped.

Like me, the hon. Member for Workington (Mr. Campbell-Savours) is a Cumbria Member. He said that the economy is palpably overheating and had been clearly overheating for some months, so everyone knew that tax increases would be necessary, whoever formed the Government after the general election. People who believe that the economy is overheating must have been confused by the Labour party's constant references throughout the past year or 18 months to the idea that we were still in a recession.

If it were palpably obvious that the UK economy was overheating, I wonder why it was that, whenever figures came out showing that interest rates were moving in the right direction and, in particular, that unemployment was coming down, the Labour party's reaction was not to say, "That is further proof that the economy is overheating", but, "Those figures are all fiddled. Unemployment is not falling at all." How is that consistent with this palpable vision of an overheating economy?

A point with which the hon. Member for Workington might agree is that, whatever the state of the economy in London and the south-east, it is very difficult to sustain the case that the economy is overheating in our part of the country. He knows that I am fortunate enough to represent one of the more prosperous parts of Cumbria, but we both know Barrow—it is not far from our constituencies—and he would agree that, if one told people there that the UK economy was overheating and needed to be damped down, one would be greeted with a hoarse laugh. There is still great unemployment in the area, and there is no real evidence of anything other than the first rosy fingers of dawn rising over the horizon for economic growth. It is difficult to sustain the case that the economy is overheating and that the first action of an incoming Government must be to wallop £13 billion of tax increases on to that economy.

8.30 pm
Mr. Campbell-Savours

Do I presume from that that the hon. Gentleman is prepared to accept that there is overheating, but only in one part of the country—the south-east? If it is the case that property prices are higher in that region, may I presume also that he supports our position on stamp duty?

Mr. Collins

The hon. Gentleman would not expect me to support the Government's position on stamp duty. He said that all voters across the UK knew for a fact that the economy was overheating and that taxes would have to rise, whoever won the election. That is not sustainable.

There is another important reason why people did not believe that interest rate rises and then tax rises would be necessary after the election. People will recall the great public relations stunt performed by the Prime Minister when he was Leader of the Opposition. A large poster was displayed which said that Labour pledged not to increase income tax rates for five years. The poster was signed "Tony Blair". The hon. Member for Workington may have had a similar experience to me in terms of people's responses on the doorstep during the election campaign. People took that poster and the series of pledges—including those referred to by my hon. Friend the Member for Teignbridge (Mr. Nicholls)—to mean that there would be no tax rises at all.

I tried to explain during the election campaign that the poster meant not that the Labour party was promising not to increase any taxes, but merely that it would not increase the basic rate and the higher rate, but could increase direct taxes in all sorts of ways. People replied, "Mr. Blair has said that he will not put up taxes at all." That is what the public believed, and that is the basis for any spurious mandate that Labour may believe that it has.

Mr. Bercow

In addition to being an assiduous representative of his constituents, my hon. Friend is an established and well-respected student of political theory. Does he agree that it is lamentable that Labour did not state in its election manifesto that it intended in this Parliament to reduce tax relief on mortgages when it has always prided itself on being the party that believes in the mandate theory of political representation—in other words, a party that receives a mandate is entitled to do whatever is in its manifesto? Does he agree that that reduction was not in Labour's manifesto and that it is particularly outrageous that, without notice or forewarning, the Government should now propose that highly damaging measure?

The Second Deputy Chairman

Order. Can we have brief interventions please, and not minor speeches?

Mr. Collins

I am grateful to my hon. Friend, and I am also grateful that the Financial Secretary to the Treasury is paying attention. Had she been in the Chamber for the previous debate, she would know that the entirety of the Paymaster General's argument for the windfall tax was that it was in the manifesto which was endorsed by the public, and therefore it must go through. That argument cannot apply to what we are considering now. The reduction in MIRAS was not in the manifesto, nor was it addressed in the election campaign. There is no mandate for it.

Mr. Jim Murphy (Eastwood)

I have listened with interest to the hon. Gentleman's version of political theory. Does he apply that analysis to the Conservative party's pledge on VAT on domestic fuel? Will he take the opportunity to apologise for the previous Government—his party—introducing VAT on domestic fuel, or is it only the current Government who have to keep their pledges?

Mr. Collins

I am grateful to the hon. Gentleman for allowing me to nail one of the most pernicious pieces of mythology passed around by the Labour party during the last Parliament. If he studies the 1992 Conservative manifesto, he will find that there is not one single reference in the document to any pledge concerning VAT. It is simply untrue that the previous Government breached any manifesto pledge on VAT. The Labour party manifesto made no mention of MIRAS, yet we are facing substantial changes in it.

Mr. Murphy

That is not an answer. [Interruption.] Well, it is an answer, but it is not an answer to my question. Does not the fact that the increase in VAT was not in the Conservative manifesto make it even worse? The manifesto did not contain that pledge, and no mention was made of it; yet the previous Prime Minister stood at the Dispatch Box and announced that VAT on fuel would be introduced. Had it not been for the then Opposition preventing him from doing so, the charge on pensioners and the poor would have been greater.

Mr. Collins

I gave a clear answer to the hon. Gentleman's charge, which was that we breached a manifesto pledge. We did nothing of the sort. If he is arguing that, before a party introduces a tax increase, it should announce it in its manifesto, he is making my point for me, which is that the Labour Government should have pledged to tinker with MIRAS.

In moving the amendment, my hon. Friend the Member for Daventry (Mr. Boswell) linked changes in MIRAS to changes in interest rates. Another important principle—which was, broadly speaking, adhered to by the previous Government, even in the adjustments that they made to MIRAS—is that the rate of MIRAS should be related to the basic rate of income tax. Two adjustments were made to MIRAS during the last Parliament. The first was to reduce it to 20 per cent. That was set out clearly as the long-term objective for the basic rate of income tax. By the time that the previous Government left office, they had made substantial progress towards reaching that rate. The basic rate had been reduced to 23p, and a large number of people were already paying at a rate of 20 per cent.

The second adjustment was to reduce MIRAS to 15 per cent. I believe that, over time, it was possible to believe that a Government who had reduced the basic rate from 33p, and then most of the way to 20p, could set a target of a basic rate of 15 per cent., at which point MIRAS and the basic rate would have been reunited.

I remember an excellent speech by my hon. Friend the Member for Buckingham at a Conservative party conference in the 1980s, when he received a standing ovation for proposing that the Conservative party should set a target of a 15p basic rate of income tax. He was greeted by the then party chairman—as I greet him now—as a future Chancellor of the Exchequer.

The difficulty now is that the level of MIRAS being set by the present Government—10 per cent.—is not intended to be related in any way to any target for the basic rate. The Labour party has said that it wishes ultimately to set a starting rate of 10 per cent., but it has no target for the basic rate. Notably, the Budget made no progress towards introducing a 10 per cent. starting rate even at the lowest and smallest level. So the Budget and the Finance Bill have removed any semblance of a relationship between the rate of MIRAS and the basic rate of income tax. That is a dangerous and pernicious development.

What is the purpose of MIRAS? It is, explicitly and rightly, a subsidy of home ownership. Many things are subsidised in the tax system. A generous level of MIRAS subsidises something that is important in our society. Wider home ownership is one of the great achievements of 18 years of Conservative government. Millions more people became home owners as a result of successive changes in financial and other legislation made by the last two Prime Ministers and successive Chancellors.

Dawn Primarolo

I have been listening carefully to the hon. Gentleman. Will he explain why the Chancellor of the Exchequer in 1993, Norman Lamont, gave two reasons for his reduction in MIRAS—first, that the Government needed the revenue and, secondly, that the reduction helped to spread the pain?

Mr. Collins

I am sure that the hon. Lady will recall, as I do, that Norman Lamont said clearly that one of the reasons for picking 20 per cent. for the first reduction—I made it clear that there were two reductions, first to 20 per cent. and subsequently to 15 per cent.—was that it was the long-term target for the basic rate of income tax. I am sure that other factors were involved.

If the hon. Lady says that the reduction was justified then and is presumably justified now for the purpose of raising revenue, one wonders why the present Prime Minister was so scathing about the Conservative Government's reduction, even three years later. He did not say, "We are in favour of higher public spending. We might not have increased taxes in quite this way, but it was necessary to do it." The Prime Minister said that the reduction in MIRAS was a pernicious Tory tax increase. What is sauce for the goose is sauce for the gander.

Dawn Primarolo

The hon. Gentleman has laid out the case that there was a logical and reasonable basis to the previous Government's decisions on MIRAS, and that they were guided by principles related to the housing market. Will he confirm that the then Chancellor of the Exchequer made it crystal clear in this Chamber that the reduction in MIRAS was a revenue-raising measure? He did not link it to the housing market, whatever might have been in his mind for the future.

Mr. Collins

Any tax increase is clearly made for a number of reasons. Raising revenue is likely to be one of them. One of the reasons why MIRAS was reduced by a Government who were, unlike the present Government, not ideologically in favour of increasing taxes for the sake of it was to plug the gap in the nation's finances caused by a global recession. I am sure that that was a factor. If the hon. Lady goes back and checks in full all the remarks made by the then Chancellor of the Exchequer, she will find what was his thinking. If all that he had been interested in doing was raising as much revenue as possible, he would not have picked a particular level but would have abolished MIRAS entirely.

The Financial Secretary will know that plenty of so-called experts believe that it would be a good idea to sweep MIRAS away. I believe that there is a philosophical and general case for a good level of MIRAS throughout the system. The hon. Lady will know that it is not enough to say, "We need to raise more revenue." If one does that, one whacks taxes up immediately. That is the answer to the hon. Lady's point. I now return to what I was saying before she interrupted me.

8.45 pm

There is a general case for mortgage interest tax relief. Wider home ownership was a huge achievement of the past 18 years. It helps to underpin social stability. On housing estates, there is now mixed ownership. Communities in places such as Westminster, in the environs of the House, which has a mixture of public sector and owned housing, are more stable. There is a wider spread of ownership, and more people feel that they have a stake in society. That has always been at the heart of Conservative philosophy. It is one of the differences between the two parties. It is why a Conservative Government, against ferocious Labour opposition, took through the right-to-buy legislation.

MIRAS is part of the same philosophy. It is based on the belief that, if people own their homes and are responsible for them, they will look after them better. They will have something to pass on to future generations. They will have a centre that they feel belongs to them rather than to others—as people always feel when they live in public housing. That is why widespread home ownership is a good thing, and why it is right to have a subsidy for home ownership in the tax system.

If the amendment is not carried, the Committee will endorse an agenda of the Government that will see not only successive reductions in MIRAS but its elimination, and the disappearance of the belief in a subsidy for home ownership in the tax system. That would be much to be regretted. It would be a retrograde step and we should oppose it.

Jacqui Smith (Redditch)

Is there not a certain illogicality in proposing that a tax subsidy in the housing market to promote home ownership is effective, while arguing that a subsidy in the labour market to promote employment is ineffective? Research would seem to suggest that there is a much larger deadweight effect in the housing market—in other words, people would still buy their houses if they did not receive tax relief—than in the employment market. The Government propose to provide a subsidy to create jobs for people, which must surely be important.

Mr. Collins

I agree with the hon. Lady that there is a strong case for a subsidy of both home ownership and employment. That is why the previous Government introduced family credit. The argument that she uses to undermine the argument for subsidising home ownership could be played back to undermine all the remarks made by Labour Members against family credit. Family credit was targeted at subsidising people to find work. So were the changes introduced by the previous Government in national insurance. Those changes were far more effective than others set out elsewhere in the Budget. However, I can see, Mr. Lord, that you are asking me to return to the amendment. I was tempted off it by the hon. Lady.

I conclude with the clinching argument for the amendment. It explicitly links the change in MIRAS to interest rates. In so doing, it rightly puts the spotlight back where it should be, on the first and probably the most important decision that the Government have taken—the transfer of control of interest rate movements away from democratically elected Ministers accountable to the House to an unelected body, the Bank of England.

Those hon. Members who can receive Channel 5 may have seen last night a film entitled "Runaway Train". It was about a couple of hardened convicts played by Jon Voight and Eric Roberts. The runaway train was piling through the Alaskan landscape out of control. I forget the names of the two hardened criminals in charge of the train, but one was older and more seasoned—let us call him Eddie—and the other was younger and more inexperienced—let us call him Gordon. They were out of control. Every time that the signals told them to go on a different track, they crashed through. Whenever there was an obstacle in the way, the train crashed through, splinters and branches everywhere. People in its way were mown down, limbs strewn left, right and centre.

The Government's management of interest rates has created a runaway train. The amendment, modest though it may be, would put something of a brake on it by providing that, until interest rates are brought back down, the Bank of England cannot have what it wants: a reduction in MIRAS. I hope that the Committee accepts the amendment before we all get run over by the runaway train.

Mr. Cranston

Conservative Members have presented themselves as the home owner's friends. In 1979 and subsequent years, home ownership is supposed magically to have increased. The fact is that, since the first world war, the trend of home ownership has been up, and the trend of rental accommodation down. Some of my constituents would be surprised by the Conservatives' claim, because they suffered severely in the late 1980s and early 1990s when their houses were repossessed. They certainly do not regard the Conservative party as the home owner's friend.

The hon. Member for Daventry (Mr. Boswell) spoke about a material breach of trust. It seems to me that there is a material smell of hypocrisy here. The rate of relief was reduced from the basic rate to 20 per cent. in 1994, and to 15 per cent. in 1995. He tried to explain that by saying that the context was the downward move in interest rates. My hon. Friend the Member for Workington (Mr. Campbell-Savours) challenged him, and the claim then became a downward trend of interest rates. The fact is that the figures from the Library support neither notion.

The hon. Member for Teignbridge (Mr. Nicholls) worked himself into a lather about how the MIRAS change would adversely affect the working poor. He did not seem to know much about poverty. Again we can identify hypocrisy, because Conservative Members oppose the minimum wage, which would greatly benefit the working poor. Some people in my constituency earn £3, or even £2, an hour, yet Conservative Members oppose a minimum wage.

There are two reasons for clause 15. First, the Government intend to introduce some stability into the housing market. Coupled with the stamp duty proposals, this measure will achieve some stability. The impact will vary around the country and, as with any fiscal measure, it is not possible to produce an absolutely certain result, but when enacted, clause 15 will have a beneficial effect through greater stability in the housing market.

The second reason for clause 15 relates to social justice, a notion mentioned by Conservative Members. In the past, mortgage interest tax relief cost huge amounts of money. As the hon. Member for Westmorland and Lonsdale (Mr. Collins) said, it was a subsidy—a huge subsidy—to home owners, but it worked in a most regressive fashion. It benefited the better-off. Conversely, under the Conservatives, there was a massive decline in expenditure on social housing. Expenditure on housing benefit went up, but only to subsidise people already in rented accommodation.

So little new social housing has been constructed recently that many people have no access to decent housing. That is the context. As Dr. Williams of the Council of Mortgage Lenders has pointed out, reductions in the rate have made the impact of MIRAS more progressive, but it remains an untargeted subsidy.

Mr. Green

The logic of the hon. Gentleman's argument is that mortgage interest tax relief should be abolished. Is he urging that on his Government?

Mr. Cranston

The hon. Gentleman anticipates me. I was going to remind the Committee that, on Second Reading, I said that I hoped that the Government would consider the case for a targeted subsidy for home owners that would assist people on low incomes to buy their own homes. I have been influenced by the detailed work of Shelter, which has campaigned so well over the years for people who do not have access to decent housing. There is a need for targeted assistance, and I hope that the Government will seriously consider it. The implication is that ultimately I want this untargeted subsidy to be abolished.

Mr. Bercow

In his general election literature, did the hon. Gentleman give any indication that he favoured the ultimate abolition of mortgage interest tax relief?

Mr. Cranston

One can say only a limited amount in one's election address, as hon. Members well know. I told the House that I wanted the Government to consider the matter in coming years.

Finally, I want to deal with the amendment. I have never seen such a pathetic attempt at an amendment. Its intention is clear—the change would not come into effect until interest rates had fallen below a certain level—but it is badly worded. It talks about the average mortgage rate coming down, whatever that means. My hon. Friend the Member for Workington referred earlier to the tables of mortgage rates that appear in The Sunday Times, and other organisations, such as the Halifax, also publish such tables. It behoves the Opposition to explain what is meant by the phrase "average mortgage rate".

One should bear in mind the uncertainty that would be created if the amendment were carried, not least because it would not be put into effect until some time in the future which we cannot identify, and which is not identifiable from the proposed legislation. One of the important principles of tax law is certainty, and the amendment would lead to a great deal of uncertainty. I shall certainly oppose it.

Mr. Green

I support the amendment in the interests of home owners in my constituency and around the country. Secondly, and possibly of equal importance, I support it on the basis of the arguments that we have heard on both sides of the Committee in what has been a fairly lengthy debate. The poverty of the argument in favour of the Government's case for reducing MIRAS is now clear to those of us who have followed the debate.

I should like to pick up on some of the points made by Labour Members. First, however, I should like to refer to the comments of my hon. Friend the Member for Teignbridge (Mr. Nicholls), who said that one of the most scathing attacks against the principle of cutting MIRAS came from the Prime Minister. The hon. Member for Croydon, Central (Mr. Davies) said that those comments were quoted out of context; I shall give him that context—it was a speech to a Labour housing conference. That attack was the central point of the right hon. Gentleman's speech. He argued that cutting MIRAS would add to insecurity, destroy confidence in the housing market and make people much more wary of buying and selling homes.

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Labour Members have argued that it was possible to make that argument in the early 1990s, when the housing market was in recession. I should point out to those hon. Members, to put the speech in its proper context for them, that not only did the Prime Minister make his speech to a housing conference, but he did so in March 1996, some years after the recession in the housing market of the early 1990s. It is quite clear that the right hon. Gentleman wanted to give home owners throughout the country the impression that he was against any further cuts in MIRAS in principle. It is a bit rich for a Government to introduce a measure in their first Budget, a few weeks after taking office, which so blatantly reneges on a commitment made by their own leader.

Mr. Brooke

Does my hon. Friend remember likewise that that speech was foreshadowed as a major statement of Labour housing policy?

Mr. Green

Indeed I do. That makes the behaviour of the Labour Government all the more disreputable, because almost their first act relating to the housing market reneges on that commitment.

The second argument that we have heard from Labour Members is that somehow the measure is designed to cool down an overheating housing market. We heard that argument most eloquently from the hon. Member for Workington (Mr. Campbell-Savours). There are several reasons why that argument does not hold water.

The first and most obvious is that the Government do not intend to introduce the measure now, but from the spring of next year. If they really believe that the housing market is overheating now, they should introduce a measure to control it now. They should not introduce measures that will be enacted in practically a year's time.

I thought that the country had learnt that classic lesson about fiscal policy in the 1960s and 1970s. Attempts to use it to fine-tune the economy when it is either overheating or cooling down always go wrong, because the timing is always wrong. That truism has been accepted by the authors of all economic textbooks, and it seems to have reached people in every part of the country except those on the Treasury Bench. What they propose is not an effective means of cooling down a housing market that may or may not be overheating.

Even if the Government thought that such a measure was effective, they should look at the facts produced by those who know about the housing market. The Halifax, which constructs possibly the largest house price index, made it clear in its June report that that month's figures support its view that the housing market is recovering slowly and not at the pace that some commentators would suggest. There has been no growth in transactions between April and May, so it said before the Budget: there is no need for any specific Budget measure aimed at curbing an allegedly 'booming' housing market … Prices paid by first-time buyers fell by 0.6 per cent. in June and is the first monthly fall since January. So not only will this measure fail to cool an overheating housing market, but according to our best evidence the housing market is not overheating anyway. So the idea is both ill conceived and unnecessary.

Thirdly, I want to pick up a point made by the hon. Member for Dudley, North (Mr. Cranston) about the impact on the property market, especially households with low incomes. As the hon. Gentleman said, the Council of Mortgage Lenders has pronounced on the matter, but it said the very opposite of the impression that the hon. Gentleman gave us: The restrictions imposed on mortgage tax relief in recent years mean that now it is a better source of targeted help to households on low incomes. Nearly 5 million home buyers, about half the total number of home owners who are in receipt of mortgage tax relief, have incomes of less than £20,000. They will be the very people hit hardest by the measure, which will mean more to those on relatively low incomes.

Mr. Cranston

Admittedly, the effect of the tax is now more progressive—but purely by accident. Hence my suggestion that ultimately a more targeted benefit ought to be considered by the Government.

Mr. Green

I shall deal later with targeted benefits. Whether by accident or design, I am glad that the hon. Gentleman admits that it is now a targeted benefit. It helps home ownership, which is a good thing; and at the moment it particularly helps home owners on relatively low incomes. That seems to me an ideal subsidy.

The CML goes on to make the point that previous cuts in mortgage tax relief took place against a background of rapidly falling interest rates, and that the move proposed by the Government will mean an increase of 1.25 per cent. in mortgage rates for lower-income households. The hon. Member for Dudley, North quoted the deputy director general of the CML, Peter Williams. What he said in full was: The Government should understand that further cuts in mortgage tax relief do not represent a zero-cost option. Ill considered action on mortgage tax relief based on short-term expediency of releasing funds for other programme priorities is likely to damage home owners and the housing market indiscriminately.

Mr. Stevenson

I want, first, to reassure the hon. Gentleman that, although his Front Benchers are not listening to him—they have been absent for 20 minutes—we are. Secondly, as regards the housing policy credibility of our respective parties, will he remind the Committee which Government presided over the worst ever crisis in housing and home ownership? It resulted in 1,000 repossessions a week, and has continued from the late 1980s to this day.

Mr. Green

When the housing recession occurred, the Conservative Government put in place a rescue package for those who were in trouble. This Government are hitting householders in two ways: cutting mortgage tax relief, and steering an economic course that has made interest rates go up. The Government are walking into another housing crisis. Because their spending priorities lie elsewhere, unlike the previous Government in the early 1990s, they will not want to organise a rescue package for those hit by negative equity. Labour is not interested in home owners, and we can be quite sure that the measures in the Budget that will damage the housing market will not be made up for by any rescue packages.

There are some who agree with the hon. Member for Dudley, North that there should be changes. Some groups are not instinctively in favour of home ownership and have argued for different types of housing subsidy. Even they, however, are not in favour of the measure. The Shelter briefing on the 1997 Budget says: The announced cut in MIRAS will hit the poorest owner-occupiers hardest". That is hardly a piece of central office propaganda. When a Labour Government introduce a measure that alienates millions of home owners and Shelter at the same time, they should realise that they are on the wrong tack.

Shelter states: For those on low incomes, a monthly increase in mortgage payments of around £10 per week will be critical to their budget … Reductions in the level of MIRAS ought to be redirected into a mortgage benefit or mortgage security scheme. The Government have given us the worst of all worlds. They are hitting the home owner, while not doing anything that might meet the demands of those who misguidedly think that a specific and more targeted form of tax relief for certain classes of home owner would be more effective.

We can see the outlines of the effect of the measure if the Government do not accept our amendment and proceed with their original policy. There will be continuing uncertainty in the housing market, which will inevitably spill over into the wider economy. Labour Members have repeatedly said that they want a climate of certainty. No home owner and no prospective home owner can be certain about the housing market because of the Government's actions.

Contrary to all their swords and propaganda before the election, the Government's first action is to cut mortgage tax relief. They will give no guarantee that they wish to preserve mortgage tax relief through this Parliament, and are being urged by their Back Benchers to get rid of it. That is a recipe for uncertainty, and will damage the housing market for years to come.

The Government are making mortgage tax relief less and less of a cushion for home owners when interest rates rise, as they are doing. As the financial markets have become increasingly uncertain about the Government's grip on the economy, they have put up interest rates—those interest rate rises are likely to go further. Home owners have every right to be uncertain and prospective home owners are even less likely to want to enter the market, which will create a spiral of decline.

The motivation behind the measure is clear: it is the Labour party's underlying hostility to home ownership and home owners. The measure is a traditional Labour measure. The Labour party does not like home ownership; its members regard it as a Conservative ideal, which it is. It gives people a direct, individual stake in society. It is one of the cornerstones of Conservative philosophy, and has always been opposed by the Labour party.

The Budget proves that, whatever weasel words were spoken before the general election, one of the Government's first acts on taking power has been to damage home owners and the housing market. Many millions of home owners will feel betrayed by the Government, the Budget and this particular measure.

Mr. Jim Murphy

I am grateful for this opportunity to speak in the debate. I shall attempt to be brief—a lesson that I am learning from listening to the less than factual contributions of many Conservative Members.

I welcome the broad thrust of the Finance Bill. Having listened to this debate for many hours this evening, I welcome the fact that the guillotine has been used. If Labour Members had to sit and listen to even more of the sort of contributions made by the last three or four Conservative Members to speak, they would jeopardise many of their sensibilities.

We are discussing a 23-word amendment. At different times during the debate, there have been anything between six and, at the current top rate—I have obviously brought the crowds in—nine Conservative Members in the Chamber. Although we are not having an education debate, I calculate that the figures show that we have had between two and a half and three and a half words per Conservative Member. I have been advised that, at some points, the Opposition Front Bench has been empty.

It took the hon. Member for Westmorland and Lonsdale (Mr. Collins) 23 minutes to offer his murmurings and protestations on the 23-word amendment to the Labour Budget. He offered no analysis of what Conservative Members would do to improve the economy and bring long-term stability. Until Opposition Members are able to do that, they will be found wanting, and I suspect that they may, as a consequence of that and other things, lose the vote tonight. [Interruption.] That is a dangerous prediction, but I suspect that it will be accurate, because only six or nine Conservative Members are present.

I spoke on Second Reading, which was very interesting—more so than tonight's debate. The hon. Member for Daventry (Mr. Boswell) paid me a welcome compliment on my remarks that evening.

9.15 pm

The hon. Member for Grantham and Stamford (Mr. Davies) also contributed to the Second Reading debate. Alone among Opposition Members, he has been honest enough to say what the Opposition would like to do about MIRAS. I shall quote two comments that he made in his speech that evening. When asked by the Economic Secretary to the Treasury what the Opposition would have us do, first he said that he would not reduce VAT on fuel, because that would be a perverse thing to do. It is making an unusual and warped value judgment to suggest that reducing charges for the most vulnerable members of our society would be perverse.

More important for tonight's debate, when the hon. Member for Grantham and Stamford was asked about MIRAS—the next Opposition Member to speak may choose to agree or rebut, criticise or congratulate—he said: I would have got rid of mortgage interest relief altogether."— [Official Report, 10 July 1997; Vol. 297, c. 1120.] That is a telling statement of the feelings of many Conservative Members; thus far, it has been the only statement by any Opposition Member on what they would have us do. Until such a claim has been rebutted or clarified, I, for one, will take that as a statement of what the Conservatives would have done if they had been in government.

The hon. Member for Ashford (Mr. Green) made what seemed, at least to me, an unusual comment—he mentioned Shelter's briefing on the Budget. It is unusual for a Conservative Member to compliment Shelter, as the previous Government did so much to bolster its business. That is one of the businesses and organisations to which the previous Government did bring increased funding and increased business—because of their housing policy, the number of repossessions, the amount of negative equity and the difficulty caused to what have been described tonight as "the working poor".

We all know the essential details of the measure reducing MIRAS to 10 per cent. It has been welcomed by the Confederation of British Industry and others because it helps to place our public finances on a sound footing. It helps to create a system of stable economics. It removes once and for all the concept of boom and bust—that has been a litmus test of economic policy—and I am reassured by the fact that it prevents overheating in the property market. If we are talking about the working poor, as the hon. Member for Teignbridge (Mr. Nicholls) did tonight, that fact in itself is of great benefit to those at that lower end of the property market.

Mr. Loughton

If the hon. Gentleman believes that the reduction in MIRAS will end the boom-bust syndrome in the property market, why have the Government not abolished it? Why have they introduced other measures in the Budget, especially that to remove ACT from equities—which has direct consequences for property investment by pension funds, among others—that will cause a marked return to a boom, which will inevitably be followed by bust in the not-too-distant future?

Mr. Murphy

I thank the hon. Gentleman for that interjection. The Labour party takes a balanced approach to those issues. We are talking about a 5 per cent. reduction, whereas the previous Government brought about a 10 per cent. reduction. We are moving away from boom and bust towards long-term economics. I believe that the hon. Gentleman will be one of the next speakers in the debate and I look forward to hearing what he would have done in terms of MIRAS and all the other policies in the Finance Bill, were the Conservatives in government.

The hon. Member for Daventry (Mr. Boswell) said earlier that the Labour party was involved in an enormous "material breach of trust". I do not know why he asserted that—nothing could be further from the truth.

Mr. Boswell

The hon. Gentleman will appreciate that, even if I complimented him on his last speech, I do not always have to do so. The point is that the then Opposition set itself up as somehow vested with moral superiority. They said that they would keep all their pledges, which the previous Government had not done, and that there would be no tax increases. There was also a specific exchange with a constituent of mine. I await with interest the Financial Secretary's explanation of what I rightly described as a "material breach of trust".

Mr. Murphy

I thank the hon. Gentleman for that interjection. He clearly did not read our manifesto in detail, or the 12 ft by 8 ft posters about our tax policy, which were put up throughout the country. I was grateful to the hon. Gentleman for his compliments on my speech; he will be aware that, thus far, I have not complimented him on his speech, because it was devoid of coherent argument. I hope that any other speeches he makes this evening will redeem the quality of his argument.

The electorate are in no doubt who breached their trust before the election and, to an extent, since the election. They showed clearly that the Conservatives were distrusted on the economy and had surrendered that ground to the new Labour party. They believed that the Conservatives were the party of boom and bust—the party of the few rather than the many—and that the Labour party was the exact opposite: we believed in long-term economic prosperity and understood how to deliver it, and we believed in governing for the many rather than just the few.

Conservative Members sometimes find it uncomfortable to talk about polling evidence. I contend that it is sometimes helpful for politicians to be in touch with public feeling and public opinion. That is one reason why we sit on the Government Benches putting forward our Finance Bill, while Conservative Members sit on the Opposition Benches with a 23-word amendment which will do nothing to improve the economy. Nevertheless, in opinion poll after opinion poll before and after the general election, the public realised that the previous Government's inactivity and economic impotence brought about repossessions and negative equity.

More important than any headline figure, the individuals who make up that polling evidence want long-term economic stability. They want to be able to plan their lives for the next five or 10 years, which is why people, especially my constituents in Eastwood, welcome the idea of long-term planning. Even after the reduction in MIRAS, families with a £50,000 mortgage are £250 better off than they were at the high point of interest rates under the previous Government.

We have heard much this evening about how Labour has allegedly lost touch with those who represent the "working poor". In addition to the contents of the Finance Bill, which will help those very people and bring about long-term prosperity, it is important to consider what we have done in respect of education for those people, and what we will do in respect of the health service for the majority of our population, and in respect of job opportunities to ensure that many more people are working and many fewer people are poor.

That is why I am eager to lend my support to the Finance Bill. With reference to the working poor, I want to ensure that many more people are working and far fewer are poor.

Mr. Robert Walter (North Dorset)

I hope that the Committee will forgive me if I rise to the challenge of the hon. Member for Eastwood (Mr. Murphy), who asked what we would have the Government do. We would not have introduced a Budget at this time, so we would not be debating the Finance Bill. We would not be introducing a windfall tax or a tax on pensions and pensioners, and we would certainly not be instituting an increased tax burden on home owners, which is the subject of the clause and the amendment.

I shall try to confine my remarks to the reduction in MIRAS and the implications for home ownership. From the contributions that we have heard this evening, it is clear that Conservative Members are concerned about that, whereas Labour Members seem less concerned.

I congratulate the hon. Member for Dudley, North (Mr. Cranston) on his honesty and frankness with the Committee when he said that he wanted the total abolition of mortgage interest tax relief. From the answer he gave, I suspect that he was not so frank with his constituents at the last election, which may be a pity. None the less, I am sure that they are all avid readers of Hansard and that they will be put right tomorrow morning.

The clause is a mean measure. It fails to meet the criteria or the rhetoric in the Chancellor's Budget statement. In his concluding remarks in that statement, the Chancellor said: The measures that I have announced today for stability, for investment … will make Britain better equipped and more ready to face the future with confidence. Previous Budgets pursued the short-term interests of the few. This Budget advances the long-term interests of the many. It is a Budget that equips Britain for the future—meeting the people's priorities. It is a people's Budget for Britain's future."—[Official Report, 2 July 1997; Vol. 297, c. 316.] For this measure, the people will pay. In the first year of its introduction, they will pay £900 million. I am sure that people will be delighted with that contribution to their long-term investment in their homes and in home ownership.

MIRAS is not as relevant to the well-heeled Member of Parliament or to the City whiz kid as it is to those on middle incomes and below. Currently, 68 per cent. of homes are owner-occupied—an increase from 56 per cent. in 1979. Four million new home owners have benefited from the Conservative approach to home ownership, of which MIRAS was but a small part.

The Conservative approach to housing is based on three core values: choice, opportunity and responsibility. Choice is central to our policy. We believe that individuals, not Government, know what is best for them and their families. In housing, the state's role is to ensure a diversity of provision to extend choice as widely as possible. Opportunity is closely related to individual choice, and we believe that we should create greater opportunities for investment and innovation in housing to assist not only the home owner but the private rented sector.

Mr. John McAllion (Dundee, East)

Who wrote this?

Mr. Walter

That is a very interesting point. It was not the hon. Member for Hartlepool (Mr. Mandelson).

The Second Deputy Chairman

Order. Hon. Members should not come into the Chamber and make comments from a sedentary position.

9.30 pm
Mr. Walter

Thank you, Mr. Lord.

A further principle is responsibility. The previous Government sought to extend responsibility through opportunity and choice. In the White Paper "Our Future Homes", which was published in June 1995, we said that continued growth of home ownership for those who wanted and could afford it was a central principle. Home ownership has increased over the years to 68 per cent. of households. The lower and middle-income groups have seen an extension of home ownership. People have been able to buy council houses and houses in the lower range of the market for the first time. MIRAS has been a very real benefit to them.

The Government secured a very large majority at the last election, so, to some extent, they can ignore the effects of this measure on lower-income families. However, those families will be affected most by this very mean measure. The reduction in MIRAS will have exactly the same effect on the City banker, with his £300,000 mortgage on his £500,000 house, as on the first-time buyer, with his £30,000 mortgage on his £40,000 or £50,000 house. There is no distinction: the measure will hit everybody equally. Therefore, the burden is proportionately much greater for those on lower and middle incomes. I have read the full text of the Budget, and I find it most intriguing that the measure is couched in such terms.

This is a very mean measure. It does nothing for housing, for the low-paid and for investment, and nothing for Conservative Members.

Mr. Steve Webb (Northavon)

We have heard some striking contradictions in the speeches of Opposition Members on the amendment. They were exemplified by the hon. Member for Ashford (Mr. Green), who regarded the cut in mortgage interest tax relief from 15 to 10 per cent. as an assault on home ownership. He apparently had no problems with the cut from 25 to 20 per cent. or from 20 to 15 per cent. that the Conservative party implemented a few years ago. Perhaps he would like to take this opportunity to dissociate himself from the actions of the previous Government.

Mr. Green

If the hon. Gentleman had been listening when my colleagues and I made our speeches, he would know that there is a difference between cutting mortgage interest tax relief at a time of rapidly falling interest rates and cutting that relief when interest rates are rising rapidly. That makes the real difference for home owners, and that is why the measure is so damaging to home owners and to home ownership.

Mr. Webb

Judging from that response, I suspect that the hon. Gentleman would be in good company with angels and pinheads.

The Opposition are not alone in having a contradictory position on this issue. I welcome the fact that the reduction in mortgage interest tax relief removes some cash from the personal rather than the corporate sector. The Budget did not do enough on that front, so, to that extent, I welcome the measure.

The Budget is supposed to be about welfare to work, but what are the prospects for people with mortgages who want to take a low-paid job? They will find that their mortgages are higher when they are in work. When in opposition, Labour Members opposed the cut in help with mortgage interest for those on income support. If we want people to move from welfare into work, we must give them security and ensure that, if they lose their jobs, they will receive help with their mortgages. At present, as soon as someone comes off income support, even if it is only for a few weeks, his mortgage will not be paid if he loses his job. For many people, the risk is not worth while. What will be done to help those people under the Government's proposals?

The question has been asked: what would Opposition Members do? We have heard that Conservative Members would do nothing, because they would not have had a Budget. My colleagues and I, however, would have gone one step further: we would have spent part of the money saved from the cut in mortgage interest tax relief on low-income benefit, to which the hon. Member for Dudley, North (Mr. Cranston) referred. That would at least cushion the blow and help people to move from welfare into work. If the Budget is to be seen as a welfare-to-work measure, why has the issue of the low-income home buyer not been addressed?

It is clear that mortgage tax relief is on its way out, either rapidly or slowly. However, unless the position of those who are trying to move from the bottom end of the labour market is not taken into account, we shall never make progress. What will be done to remove the insecurity that is felt by many at the bottom end of the labour market? They are told now to rely on private mortgage insurance, but what private mortgage insurer has any interest in someone on a short-term contract or in a low-paid job?

Will people who are currently in receipt of welfare be in a position to take work, and what will happen when they lose it? We know, of course, that people will be forced to take work. We know that there will be compulsion for young people, for example. What will they live on? What encouragement does the Budget give them to take chances? It seems that there is a paradox in the Government's approach. They talk about welfare to work, but they provide no support for those who are willing to take the chance. That is the fatal weakness of the clause.

Dawn Primarolo

Apart from a fleeting reference to the amendment in the opening remarks of the hon. Member for Daventry (Mr. Boswell), no further remarks have been directed to it. Our discussion started with a reference to the Conservative Government's six changes to MIRAS, including the announcement of a cut in November 1993. It was introduced in 1995 when interest rates were moving up. Opposition Members never suggested when they were in government that a delayed-mechanism amendment of the sort that they are now proposing was needed.

Various Conservative Members have told us how important MIRAS is and explained that Conservative Members, when in government, never touched it except on principle. As I said in an intervention, however, the then Chancellor of the Exchequer, Norman Lamont, made it absolutely clear why he was cutting MIRAS: he explained that the cut was to raise revenue and to spread the pain.

The hon. Members for Teignbridge (Mr. Nicholls), for Westmorland and Lonsdale (Mr. Collins) and for Ashford (Mr. Green) told us how they were really the friends of the poor. The hon. Member for Teignbridge was terribly concerned about the working poor. It is a shame that he was not so concerned during the property boom, when thousands of those people were losing their homes through repossession. It is a shame that the hon. Member for Westmorland and Lonsdale did not express his concern for social stability as people were deprived of their homes and savings.

Before the hon. Member for Ashford (Mr. Green) rises, perhaps he can explain exactly what the Conservative Government did to assist negative equity, because my recollection is that it was the building societies and not the Government who made arrangements to assist those people.

Mr. Green

Will the Financial Secretary tell the House whether she thinks that her measure in the Finance Bill will help poor home owners or make them worse off?

Dawn Primarolo

Turning to the question—[Interruption.] I know that some hon. Members have had a very good evening drinking and eating. I was about to deal with affordable housing and who benefits in the housing market.

I should remind hon. Members that most lenders have special schemes for first-time buyers and that interest rates are still extremely low compared to the record levels reached under the Conservative Government, when a typical mortgage of £50,000 would have cost £250 more than it does now. [Interruption.] I see that we are all returning from the restaurant.

Mr. Boswell

When one of my hon. Friends asked the Financial Secretary a question a moment ago, I had the impression that she was reluctant to answer it, so I put it to her again. Does she feel that home owners, particularly those in more modest circumstances, will welcome the changes in her right hon. Friend's Budget, or not?

Dawn Primarolo

I realise that it is a good sport to trade across the Dispatch Box, particularly at this time of the evening, but as the hon. Gentleman knows, what is most important for those who own their own homes is stability and security in the housing market, and a prospect that they will manage to keep their houses.

Referring specifically to—[Interruption.] Sir Alan, this is very difficult. The Opposition table an amendment, repeatedly complain that it is not dealt with at the Dispatch Box, and then come into the Chamber simply to cause disruption.

Mr. Green


Dawn Primarolo

An amendment is before the Committee, to which I have to respond. I intend to respond to it, and when I have, if there is time, the hon. Gentleman can certainly intervene again.

The reduction in the rate of mortgage interest relief is an important measure to give economic stability. The point of the amendment is that it delays the implementation of that reduction—a delay that was not sought by the Conservatives when in government. The delay would not assist mortgage lenders. The very notice that we are giving them in the Budget would be denied them in terms of being able to deal with their mortgagees.

The amendment simply will not work, because there is no recognised average mortgage rate or prevailing rate, and it does not tell us who will decide what that rate should be. The amendment will cause instability rather than provide stability in the market. Opposition Members have referred continually to election manifesto promises, but the Conservative party's 1992 election manifesto promised to maintain mortgage tax relief, only for it to be cut when they came into office.

9.45 pm

The Council of Mortgage Lenders has said that the Budget package contains a prudent set of measures. The Halifax has said that it will allow the steady recovery in house prices to continue. The Budget has been welcomed by the Institute of Directors and a number of other building societies which are clear that there is need for action now in the housing market. Opposition Members have also referred repeatedly to comments made by my right hon. Friend the Prime Minister. It is necessary to apply a gentle brake to the housing market because of the increase in prices and in order to secure the stability that all house owners want. In the three months to June, prices were up 2.1 per cent. on the previous month and 6.8 per cent. on the year as a whole. That shows why it was necessary to dampen down the housing market.

Mr. Boswell

Will the hon. Lady comment on the second quarter's report of the Halifax, which said: there is no need for any specific Budget measures aimed at curbing an allegedly 'booming' housing market"? Does she agree with that comment, or does she simply beg to disagree?

Dawn Primarolo

We need to ensure stability in the housing market so that those who own their houses and those who seek to own their houses are not at the mercy of the market from which they suffered under the Conservative Government. What we do not want to see is rising house prices or people trapped in negative equity and unable to provide for themselves.

The Government's proposals are sensible and modest. The amendment would not work and is not viable. It would not give stability and it would deny mortgage lenders time to plan for and adjust to the changes. The Government's proposals seek to prevent a return to the boom and bust policies of the previous Government. On that basis, I ask the Committee to reject the Opposition amendment and to support the Government's measures to provide stability and to assist home owners.

Mr. Boswell

This has been an interesting debate, and merely reinforces the official Opposition's determination to press the amendment to a vote.

I will deal first with the contributions of Labour Members, which have contained two themes. Two new Members, the hon. Members for Croydon, Central (Mr. Davies) and for Eastwood (Mr. Murphy), emphasised the importance of stability, as did the Financial Secretary—they were obviously all on message. That concept is rather like motherhood and apple pie, and one from which I cannot dissent, although three successive interest rate rises and a series of unpromised and uncovenanted tax increases on a large scale in the space of eight weeks does not seem to suggest a Government bent on stability.

Labour Members also showed some MIRAS scepticism. The hon. Member for Workington (Mr. Campbell-Savours), who has been in the House a long time, said that everyone knew that Labour would breach its election pledge. He characteristically suggested that there might have been a conspiracy between Members of the two Front Benches to produce a collective guilty secret. Neither my constituents nor I saw any sign of that being offered to us during the election campaign.

The hon. Member for Dudley, North (Mr. Cranston), who outed himself as an opponent of MIRAS, said that he was not able to include this measure in his election address due to inadequate space—the only Labour election address in history that could have been a little longer so as to be a little more informative. His theme was that we all knew that MIRAS was coming to an end, and so it should. He implied that we should not take too seriously the matters of trust invoked by his leader.

The hon. Member for Northavon (Mr. Webb) made an interesting contribution. He and my hon. Friend the Member for Ashford (Mr. Green) touched on the possibility of restructuring, which was open to the Government and could be in subsequent Budgets. The Government could have introduced proposals, but merely to make a cut is a major breach of faith.

I greatly enjoyed the contributions of my hon. Friends, which contained two underlying themes. They were concerned about the home owner, and not merely about Islington man or those at the top who have cleared more than £0.5 million in a particular sort of windfall which is not being taxed under the windfall levy. According to the Financial Secretary, such windfalls will not be available to any persons bent on making money out of their houses in the future. She said that the housing market was overheating and that action had to be taken, so people will not make a profit on their houses in the future. My hon. Friends emphasised their passionate commitment to home ownership at all levels of income and for people from all walks of life.

I hope that the Government will take note of my hon. Friends' concern about the breach of trust, which goes all the way up to the Prime Minister. It is not possible to construe the words delivered by the Prime Minister to Labour's housing conference in any other way than that MIRAS was safe in his hands. Now we know better.

In the Financial Secretary's brief remarks—she read out her brief, which Ministers have done since time immemorial—she pointed to alleged deficiencies in the drafting of the amendment. As a matter of fact, we did speak to our amendment. Nevertheless, she was unable to answer the serious questions put to her. For example, my hon. Friend the Member for Ashford asked the Financial Secretary to answer a specific question: which home owners would benefit? As she did not appear to understand that perfectly simple question, I asked it again, but I am still waiting for an answer.

What has become increasingly clear during the debate, however, is the Government's approach to taxation. The theme was initiated by the Financial Secretary the other day, when she said that pensioners would welcome the Budget, and that pension funds would benefit from it. That theme was taken up today by the hon. Member for Croydon, Central (Mr. Davies), who said that the measures were for the good of home owners. This is not the first occasion on which Labour Governments have said that taxes—

Mr. Geraint Davies

Will the hon. Gentleman give way?

Mr. Boswell


Mr. Davies

Do you agree that your comments about the Prime Minister—[Interruption.] I am sorry. Does the hon. Gentleman agree that his comments about the Prime Minister were out of context, and that what Tony Blair was referring to—[Interruption.] Does the hon. Gentleman agree that what the Prime Minister was referring to was a housing market that had been crucified by your Government—[Interruption.] The Prime Minister was referring to a housing market that had been crucified by the hon. Gentleman's Government, in terms of negative equity and repossessions. In the present circumstances, is it a good idea to start another cycle of boom and bust? If the hon. Gentleman were in the Government, would he encourage an over-fuelling of the housing market, which would cause a repeat of the chaos and catastrophe that were produced by the hopeless leadership of his party?

Mr. Boswell

I advise the hon. Gentleman to make his interventions shorter, and to stop digging when he is in a hole.

The law that has been made clear by Labour Members—it might be termed the Bristol, South law—is that if it is bad for you, it is really good for you. It was put very well by Shakespeare, who spoke of taking correction mildly and of kissing the rod. That could apply to taxpayers. It was put even more succinctly by the Roman historian Tacitus, who said, describing methods of classification: They create a wilderness and call it peace. When the Government create a wilderness for taxpayers, they call it "really in their own best interests."

We have heard no explanation from the Financial Secretary of a specific point that I raised both on Second Reading and tonight. I asked why mortgage interest tax relief should be further reduced, given that that breached a pledge made to my constituent. I also asked the Financial Secretary for a commitment that the present Government would at least not make further reductions in MIRAS, but I heard no such commitment from her lips.

Meanwhile, Conservative Members realise that home owners will suffer under the Budget. They will be losing an average of £21 a month in higher interest rates, following three hikes of £7 a month. They will be losing £9 a month following the Chancellor's discretionary decision to withdraw a further tranche of mortgage interest relief. That means that home owners—the ordinary people—will already be losing £30 a month under the present Government. I think that, so far, they are losing about 50p a day each.

I am sorry to say that there is no sign of interest rates coming down. I remind the Committee that our amendment prescribes that the wilful increase in tax caused by the withdrawal of further mortgage interest relief should not take effect until interest rates return to the level that we bequeathed to the Labour Government. There is no sign of interest rates coming down. There is no need for this hit on the house owner. It should not take effect at least until the Government have, in their own terms, stabilised the economy and reduced interest rates to where they were.

Our proposal is to protect home owners. That is our commitment on the Conservative Benches, and that is why we shall press this amendment to a Division with considerable relish.

Question put, That the amendment be made:—

The Committee divided: Ayes 147, Noes 381.

Division No. 57] [9.59 pm
Ainsworth, Peter (E Surrey) Greenway, John
Amess, David Grieve, Dominic
Ancram, Rt Hon Michael Gummer, Rt Hon John
Arbuthnot, James Hague, Rt Hon William
Atkinson, Peter (Hexham) Hamilton, Rt Hon Sir Archie
Baldry, Tony Hammond, Philip
Beggs, Roy (E Antrim) Hawkins, Nick
Bercow, John Heald, Oliver
Beresford, Sir Paul Heathcoat-Amory, Rt Hon David
Blunt, Crispin Hogg, Rt Hon Douglas
Body, Sir Richard Horam, John
Boswell, Tim Howarth, Gerald (Aldershot)
Bottomley, Peter (Worthing W) Hunter, Andrew
Bottomley, Rt Hon Mrs Virginia Jack, Rt Hon Michael
Brady, Graham Jackson, Robert (Wantage)
Brazier, Julian Jenkin, Bernard (N Essex)
Brooke, Rt Hon Peter Johnson Smith, Rt Hon Sir Geoffrey
Browning, Mrs Angela
Bruce, Ian (S Dorset) Key, Robert
Burns, Simon King, Rt Hon Tom (Bridgwater)
Butterfill, John Kirkbride, Miss Julie
Chapman, Sir Sydney (Chipping Barnet) Laing, Mrs Eleanor
Leigh, Edward
Chope, Christopher Letwin, Oliver
Clappison, James Lewis, Dr Julian (New Forest E)
Clark, Rt Hon Alan (Kensington) Lidington, David
Clark, Dr Michael (Rayleigh) Lilley, Rt Hon Peter
Clarke, Rt Hon Kenneth (Rushcliffe) Lloyd, Rt Hon Sir Peter (Fareham)
Loughton, Tim
Clifton-Brown, Geoffrey Luff, Peter
Collins, Tim Lyell, Rt Hon Sir Nicholas
Colvin, Michael MacGregor, Rt Hon John
Cormack, Sir Patrick MacKay, Andrew
Curry, Rt Hon David Maclean, Rt Hon David
Davis Rt Hon David (Haltemprice) McLoughlin, Patrick
Davies, Quentin (Grantham) Madel, Sir David
Day, Stephen Malins, Humfrey
Dorrell, Rt Hon Stephen Maples, John
Duncan, Alan Mawhinney, Rt Hon Dr Brian
Duncan Smith, Iain May, Mrs Theresa
Emery, Rt Hon Sir Peter Merchant, Piers
Evans, Nigel Moss, Malcolm
Faber, David Nicholls, Patrick
Fabricant, Michael Norman, Archie
Fallon, Michael Page, Richard
Flight, Howard Paice, James
Forth, Rt Hon Eric Paterson, Owen
Fowler, Rt Hon Sir Norman Prior, David
Fox, Dr Liam Redwood, Rt Hon John
Fraser, Christopher Robathan, Andrew
Gale, Roger Robertson, Laurence (Tewk'b'ry)
Garnier, Edward Roe, Mrs Marion (Broxbourne)
Gibb, Nick Ross, William (E Lond'y)
Gill, Christopher Rowe, Andrew (Faversham)
Gillan, Mrs Cheryl Ruffley, David
Gorman, Mrs Teresa St Aubyn, Nick
Gray, James Sayeed, Jonathan
Green, Damian Shephard, Rt Hon Mrs Gillian
Shepherd, Richard (Aldridge) Trend, Michael
Simpson, Keith (Mid-Norfolk) Tyrie, Andrew
Soames, Nicholas Viggers, Peter
Spelman, Mrs Caroline Walter, Robert
Spicer, Sir Michael Wardle, Charles
Spring, Richard Wells, Bowen
Stanley, Rt Hon Sir John Whitney, Sir Raymond
Steen, Anthony Whittingdale, John
Streeter, Gary Widdecombe, Rt Hon Miss Ann
Swayne, Desmond Willetts, David
Syms, Robert Wilshire, David
Tapsell, Sir Peter Winterton, Nicholas (Macclesfield)
Taylor, Ian (Esher & Walton) Woodward, Shaun
Taylor, John M (Solihull) Yeo, Tim
Taylor, Sir Teddy Young, Rt Hon Sir George
Temple-Morris, Peter
Thompson, William Tellers for the Ayes:
Townend, John Mr. James Cran and
Tredinnick, David Mr. Nigel Waterson.
Abbott, Ms Diane Cann, Jamie
Adams, Mrs Irene (Paisley N) Caplin, Ivor
Ainger, Nick Casale, Roger
Allan, Richard (Shef'ld Hallam) Caton, Martin
Allen, Graham (Nottingham N) Cawsey, Ian
Anderson, Donald (Swansea E) Chapman, Ben (Wirral S)
Anderson, Janet (Rossendale) Chaytor, David
Armstrong, Ms Hilary Chidgey, David
Ashdown, Rt Hon Paddy Chisholm, Malcolm
Ashton, Joe Clapham, Michael
Atkins, Charlotte Clark, Dr Lynda (Edinburgh Pentlands)
Austin, John
Ballard, Mrs Jackie Clark, Paul (Gillingham)
Banks, Tony Clarke, Charles (Norwich S)
Barnes, Harry Clarke, Eric (Midlothian)
Barron, Kevin Clarke, Rt Hon Tom (Coatbridge)
Battle, John Clarke, Tony (Northampton S)
Bayley, Hugh Clwyd, Ann
Beard, Nigel Coaker, Vernon
Beckett, Rt Hon Mrs Margaret Coffey, Ms Ann
Bell, Stuart (Middlesbrough) Cohen, Harry
Benn, Rt Hon Tony Coleman, Iain (Hammersmith)
Bennett, Andrew F Colman, Tony (Putney)
Benton, Joe Cook, Frank (Stockton N)
Best, Harold Cooper, Yvette
Betts, Clive Corbett, Robin
Blackman, Liz Corbyn, Jeremy
Blears, Ms Hazel Corston, Ms Jean
Boateng, Paul Cotter, Brian
Borrow, David Cousins, Jim
Bradley, Keith (Withington) Cox, Tom
Bradshaw, Ben Cranston, Ross
Brand, Dr Peter Crausby, David
Breed, Colin Cryer, Mrs Ann (Keighley)
Brinton, Mrs Helen Cryer, John (Hornchurch)
Brown, Rt Hon Gordon (Dunfermline E) Cunningham, Jim (Cov'try S)
Cunningham, Ms Roseanna (Perth)
Brown, Rt Hon Nick (Newcastle E)
Brown, Russell (Dumfries) Dafis, Cynog
Browne, Desmond (Kilmarnock) Dalyell, Tam
Bruce, Malcolm (Gordon) Darling, Rt Hon Alistair
Buck, Ms Karen Darvill, Keith
Burden, Richard Davey, Edward (Kingston)
Burgon, Colin Davey, Valerie (Bristol W)
Burnett, John Davidson, Ian
Burstow, Paul Davies, Rt Hon Denzil (Llanelli)
Butler, Christine Davies, Geraint (Croydon C)
Byers, Stephen Davis, Terry (B'ham Hodge H)
Cabom, Richard Dawson, Hilton
Campbell, Alan (Tynemouth) Dean, Mrs Janet
Campbell, Mrs Anne (C'bridge) Denham, John
Campbell, Menzies (NE Fife) Dewar, Rt Hon Donald
Campbell, Ronnie (Blyth V) Dismore, Andrew
Campbell-Savours, Dale Dobson, Rt Hon Frank
Canavan, Dennis Donohoe, Brian H
Doran, Frank Ingram, Adam
Dowd, Jim Jackson, Ms Glenda (Hampstead)
Drew, David Jackson, Helen (Hillsborough)
Drown, Ms Julia Jamieson, David
Dunwoody, Mrs Gwyneth Jenkins, Brian (Tamworth)
Eagle, Angela (Wallasey) Jones, Barry (Alyn & Deeside)
Efford, Clive Jones, Ms Fiona (Newark)
Ellman, Ms Louise Jones, Helen (Warrington N)
Ennis, Jeff Jones, leuan Wyn (Ynys Môn)
Etherington, Bill Jones, Ms Jenny (Wolverh'ton SW)
Ewing, Mrs Margaret
Fearn, Ronnie Jones, Dr Lynne (Selly Oak)
Field, Rt Hon Frank Jones, Nigel (Cheltenham)
Fitzpatrick, Jim Kaufman, Rt Hon Gerald
Fitzsimons, Lorna Keeble, Ms Sally
Flynn, Paul Keen, Alan (Feltham & Heston)
Follett, Barbara Keen, Mrs Ann (Brentford)
Foster, Rt Hon Derek Keetch, Paul
Foster, Don (Bath) Kennedy, Jane (Wavertree)
Foster, Michael Jabez (Hastings) Khabra, Piara S
Foster, Michael John (Worcester) Kidney, David
Foulkes, George Kilfoyle, Peter
Fyfe, Maria King, Andy (Rugby & Kenilworth)
Galbraith, Sam King, Ms Oona (Bethnal Green)
Galloway, George Ladyman, Dr Stephen
Gapes, Mike Lawrence, Ms Jackie
Gardiner, Barry Laxton, Bob
George, Andrew (St Ives) Lepper, David
George, Bruce (Walsall S) Leslie, Christopher
Gerrard, Neil Lewis, Ivan (Bury S)
Gibson, Dr Ian Liddell, Mrs Helen
Gilroy, Mrs Linda Linton, Martin
Godman, Dr Norman A Livingstone, Ken
Godsiff, Roger Livsey, Richard
Goggins, Paul Lloyd, Tony (Manchester C)
Golding, Mrs Llin Lock, David
Gordon, Mrs Eileen McAllion, John
Gorrie, Donald McAvoy, Thomas
Graham, Thomas McCafferty, Ms Chris
Griffiths, Jane (Reading E) McCartney, Ian (Makerfield)
Griffiths, Nigel (Edinburgh S) McDonagh, Siobhain
Griffiths, Win (Bridgend) Macdonald, Calum
Grocott, Bruce McDonnell, John
Grogan, John McIsaac, Shona
Gunnell, John Mackinlay, Andrew
Hain, Peter McNamara, Kevin
Hall, Mike (Weaver Vale) McNulty, Tony
Hall, Patrick (Bedford) MacShane, Denis
Hamilton, Fabian (Leeds NE) Mactaggart, Fiona
Hancock, Mike McWalter, Tony
Hanson, David Mahon, Mrs Alice
Harman, Rt Hon Ms Harriet Mallaber, Judy
Harris, Dr Evan Mandelson, Peter
Heal, Mrs Sylvia Marek, Dr John
Heath, David (Somerton & Frome) Marsden, Gordon (Blackpool S)
Henderson, Ivan (Harwich) Marshall, David (Shettleston)
Heppell, John Marshall, Jim (Leicester S)
Hesford, Stephen Marshall-Andrews, Robert
Hewitt, Ms Patricia Maxton, John
Hill, Keith Meacher, Rt Hon Michael
Hinchiffe, David Meale, Alan
Hoey, Kate Michael, Alun
Hood, Jimmy Michie, Bill (Shef'ld Heeley)
Hoon, Geoffrey Michie, Mrs Ray (Argyll & Bute)
Hope, Phil Milburn, Alan
Hopkins, Kelvin Miller, Andrew
Howarth, Alan (Newport E) Mitchell, Austin
Howarth, George (Knowsley N) Moffatt, Laura
Howells, Dr Kim Moonie, Dr Lewis
Hoyle, Lindsay Moore, Michael
Hughes, Kevin (Doncaster N) Morgan, Alasdair (Galloway)
Hughes, Simon (Southwark N) Morgan, Ms Julie (Cardiff N)
Hurst, Alan Morgan, Rhodri (Cardiff W)
Hutton, John Morley, Elliot
Iddon, Dr Brian Morris, Ms Estelle (B'ham Yardley)
Illsley, Eric Morris, Rt Hon John (Aberavon) (Morecambe & Lunesdale)
Mountford, Kali
Mudie, George Smith, Jacqui (Redditch)
Mullin, Chris Smith, John (Glamorgan)
Murphy, Jim (Eastwood) Smith, Llew (Blaenau Gwent)
Naysmith, Dr Doug Smith, Sir Robert (W Ab'd'ns)
Norris, Dan Snape, Peter
O'Brien, Bill (Normanton) Soley, Clive
O'Brien, Mike (N Warks) Starkey, Dr Phyllis
O'Hara, Edward Steinberg, Gerry
Olner, Bill Stevenson, George
Öpik, Lembit Stewart, David (Inverness E)
Organ, Mrs Diana Stewart, Ian (Eccles)
Osborne, Mrs Sandra Stoate, Dr Howard
Pearson, Ian Stott, Roger
Perham, Ms Linda Strang, Rt Hon Dr Gavin
Pickthall, Colin Stringer, Graham
Pike, Peter L Stuart, Ms Gisela (Edgbaston)
Plaskitt, James Stunell, Andrew
Pollard, Kerry Sutcliffe, Gerry
Pond, Chris Swinney, John
Pope, Greg Taylor, Rt Hon Mrs Ann (Dewsbury)
Pound, Stephen
Powell, Sir Raymond Taylor, Ms Dari (Stockton S)
Prentice, Ms Bridget (Lewisham E) Taylor, Matthew (Truro)
Prentice, Gordon (Pendle) Thomas, Gareth (Clwyd W)
Prescott, Rt Hon John Thomas, Gareth R (Harrow W)
Primarolo, Dawn Timms, Stephen
Purchase, Ken Tipping, Paddy
Quin, Ms Joyce Todd, Mark
Quinn, Lawrie (Scarborough) Touhig, Don
Radice, Giles Trickett, Jon
Rapson, Syd Truswell, Paul
Raynsford, Nick Turner, Dennis (Wolverh'ton SE)
Reed, Andrew (Loughborough) Turner, Desmond (Kemptown)
Rendel, David Twigg, Derek (Halton)
Robertson, Rt Hon George (Hamilton S) Twigg, Stephen (Enfield)
Tyler, Paul
Robinson, Geoffrey (Cov'try NW) Vaz, Keith
Roche, Mrs Barbara Vis, Dr Rudi
Rogers, Allan Wallace, James
Rooker, Jeff Walley, Ms Joan
Rooney, Terry Ward, Ms Claire
Ross, Ernie (Dundee W) Watts, David
Rowlands, Ted Webb, Professor Steve
Roy, Frank Welsh, Andrew
Ruddock, Ms Joan White, Brian
Russell, Bob (Colchester) Whitehead, Dr Alan
Russell, Ms Christine (Chester) Wicks, Malcolm
Ryan, Ms Joan Williams, Rt Hon Alan (Swansea W)
Salmond, Alex Williams, Alan W (E Carmarthen)
Sanders, Adrian Williams, Mrs Betty (Conwy)
Savidge, Malcolm Wills, Phil
Sawford, Phil Wills, Michael
Sedgemore, Brian Wilson, Brian
Shaw, Jonathan Winnick, David
Sheerman, Barry Winterton, Ms Rosie (Doncaster C)
Sheldon, Rt Hon Robert Wise, Audrey
Shipley, Ms Debra Wray, James
Short, Rt Hon Clare Wright, Dr Tony (Cannock)
Simpson, Alan (Nottingham S) Wright, Tony D (Gt Yarmouth)
Singh, Marsha Wyatt, Derek
Skinner, Dennis
Smith, Rt Hon Andrew (Oxford E) Tellers for the Noes:
Smith, Angela (Basildon) Mr. Robert Ainsworth and
Smith, Miss Geraldine Mr. David Clelland.

Question accordingly negatived.

It being after Ten o'clock, THE CHAIRMAN put the remaining Question required by the Order [14 July] to be put at that hour.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 370, Noes 141.

Division No. 58] [10.15 pm
Abbott, Ms Diane Colman, Tony (Putney)
Adams, Mrs Irene (Paisley N) Cooper, Yvette
Ainger, Nick Corbett, Robin
Ainsworth, Robert (Cov'try NE) Corbyn, Jeremy
Allan, Richard (Shef'ld Hallam) Corston, Ms Jean
Allen, Graham (Nottingham N) Cotter, Brian
Anderson, Donald (Swansea E) Cousins, Jim
Anderson, Janet (Rossendale) Cox, Tom
Armstrong, Ms Hilary Cranston, Ross
Ashdown, Rt Hon Paddy Crausby, David
Ashton, Joe Cryer, Mrs Ann (Keighley)
Atkins, Charlotte Cryer, John (Hornchurch)
Austin, John Cunningham, Jim (Cov'try S)
Ballard, Mrs Jackie Cunningham, Ms Roseanna (Perth)
Banks, Tony
Barnes, Harry Dafis, Cynog
Battle, John Dalyell, Tam
Bayley, Hugh Darling, Rt Hon Alistair
Beard, Nigel Darvill, Keith
Beckett, Rt Hon Mrs Margaret Davey, Edward (Kingston)
Benn, Rt Hon Tony Davey, Valerie (Bristol W)
Bennett, Andrew F Davidson, Ian
Benton, Joe Davies, Rt Hon Denzil (Llanelli)
Best, Harold Davies, Geraint (Croydon C)
Betts, Clive Davis, Terry (B'ham Hodge H)
Blackman, Liz Dawson, Hilton
Blears, Ms Hazel Dean, Mrs Janet
Boateng, Paul Denham, John
Borrow, David Dewar, Rt Hon Donald
Bradley, Keith (Withington) Dismore, Andrew
Bradshaw, Ben Dobson, Rt Hon Frank
Brand, Dr Peter Donohoe, Brian H
Breed, Colin Doran, Frank
Brinton, Mrs Helen Drew, David
Brown, Rt Hon Gordon (Dunfermline E) Drown, Ms Julia
Dunwoody, Mrs Gwyneth
Brown, Rt Hon Nick (Newcastle E) Eagle, Angela (Wallasey)
Brown, Russell (Dumfries) Efford, Clive
Browne, Desmond (Kilmarnock) Ellman, Ms Louise
Bruce, Malcolm (Gordon) Ennis, Jeff
Buck, Ms Karen Etherington, Bill
Burden, Richard Ewing, Mrs Margaret
Burgon, Colin Fearn, Ronnie
Burnett, John Field, Rt Hon Frank
Burstow, Paul Fitzpatrick, Jim
Butler, Christine Fitzsimons, Lorna
Byers, Stephen Flynn, Paul
Caborn, Richard Follett, Barbara
Campbell, Alan (Tynemouth) Foster, Rt Hon Derek
Campbell, Mrs Anne (C'bridge) Foster, Don (Bath)
Campbell, Menzies (NE Fife) Foster, Michael Jabez (Hastings)
Campbell, Ronnie (Blyth V) Foster, Michael John (Worcester)
Campbell-Savours, Dale Foulkes, George
Cann, Jamie Galbraith, Sam
Caplin, Ivor Galloway, George
Casale, Roger Gapes, Mike
Caton, Martin Gardiner, Barry
Cawsey, Ian George, Andrew (St Ives)
Chapman, Ben (Wirral S) George, Bruce (Walsall S)
Chidgey, David Gerrard, Neil
Chisholm, Malcolm Gibson, Dr Ian
Clapham, Michael Gilroy, Mrs Linda
Clark, Dr Lynda (Edinburgh Pentlands) Godman, Dr Norman A
Godsiff, Roger
Clark, Paul (Gillingham) Goggins, Paul
Clarke, Charles (Norwich S) Golding, Mrs Llin
Clarke, Eric (Midlothian) Gordon, Mrs Eileen
Clarke, Tony (Northampton S) Gorrie, Donald
Clwyd, Ann Graham, Thomas
Coaker, Vernon Griffiths, Jane (Reading E)
Coffey, Ms Ann Griffiths, Nigel (Edinburgh S)
Cohen, Harry Griffiths, Win (Bridgend)
Coleman, Iain (Hammersmith) Grocott, Bruce
Grogan, John Mackinlay, Andrew
Gunnell, John McNamara, Kevin
Hain, Peter McNulty, Tony
Hall, Mike (Weaver Vale) MacShane, Denis
Hall, Patrick (Bedford) Mactaggart, Fiona
Hamilton, Fabian (Leeds NE) McWalter, Tony
Hancock, Mike Mahon, Mrs Alice
Hanson, David Mallaber, Judy
Harman, Rt Hon Ms Harriet Mandelson, Peter
Heal, Mrs Sylvia Marek, Dr John
Heath, David (Somerton & Frome) Marsden, Gordon (Blackpool S)
Henderson, Ivan (Harwich) Marshall, David (Shettleston)
Heppell, John Marshall, Jim (Leicester S)
Hesford, Stephen Marshall-Andrews, Robert
Hewitt, Ms Patricia Maxton, John
Hill, Keith Meacher, Rt Hon Michael
Hinchliffe, David Meale, Alan
Hoey, Kate Michael, Alun
Hood, Jimmy Michie, Bill (Shef'ld Heeley)
Hoon, Geoffrey Michie, Mrs Ray (Argyll & Bute)
Hope, Phil Milburn, Alan
Hopkins, Kelvin Miller, Andrew
Howarth, Alan (Newport E) Mitchell, Austin
Howarth, George (Knowsley N) Moffatt, Laura
Howells, Dr Kim Moonie, Dr Lewis
Hoyle, Lindsay Moore, Michael
Hughes, Kevin (Doncaster N) Morgan, Alasdair (Galloway)
Hughes, Simon (Southwark N) Morgan, Ms Julie (Cardiff N)
Hurst, Alan Morgan, Rhodri (Cardiff W)
Hutton, John Morley, Elliot
Iddon, Dr Brian Morris, Ms Estelle (B'ham Yardley)
Illsley, Eric Mountford, Kali
Ingram, Adam Mudie, George
Jackson, Ms Glenda (Hampstead) Mullin, Chris
Jackson, Helen (Hillsborough) Murphy, Jim (Eastwood)
Jenkins, Brian (Tamworth) Naysmith, Dr Doug
Jones, Barry (Alyn & Deeside) Norris, Dan
Jones, Ms Fiona (Newark) O'Brien, Bill (Normanton)
Jones, Helen (Warrington N) O'Brien, Mike (N Warks)
Jones, leuan Wyn (Ynys Môn) O'Hara, Edward
Jones, Ms Jenny (Wolverh'ton SW) Olner, Bill
Öpik, Lembit
Jones, Jon Owen (Cardiff C) Organ, Mrs Diana
Jones, Dr Lynne (Selly Oak) Osborne, Mrs Sandra
Jones, Nigel (Cheltenham) Pearson, Ian
Kaufman, Rt Hon Gerald Pendry, Tom
Keeble, Ms Sally Perham, Ms Linda
Keen, Alan (Feltham & Heston) Pickthall, Colin
Keen, Mrs Ann (Brentford) Pike, Peter L
Keetch, Paul Plaskitt, James
Kennedy, Jane (Wavertree) Pollard, Kerry
Khabra, Piara S Pond, Chris
Kidney, David Pope, Greg
Kilfoyle, Peter Pound, Stephen
King, Andy (Rugby & Kenilworth) Powell, Sir Raymond
King, Ms Oona (Bethnal Green) Prentice, Ms Bridget (Lewisham E)
Ladyman, Dr Stephen Prentice, Gordon (Pendle)
Lawrence, Ms Jackie Prescott, Rt Hon John
Laxton, Bob Primarolo, Dawn
Lepper, David Purchase, Ken
Leslie, Christopher Quin, Ms Joyce
Lewis, Ivan (Bury S) Quinn, Lawrie (Scarborough)
Liddell, Mrs Helen Radice, Giles
Linton, Martin Rapson, Syd
Livingstone, Ken Raynsford, Nick
Livsey, Richard Reed, Andrew (Loughborough)
Lloyd, Tony (Manchester C) Rendel, David
Lock, David Robertson, Rt Hon George (Hamilton S)
McAllion, John
McAvoy, Thomas Robinson, Geoffrey (Cov'try NW)
McCafferty, Ms Chris Roche, Mrs Barbara
McCartney, Ian (Makerfield) Rooker, Jeff
McDonagh, Siobhain Rooney, Terry
Macdonald, Calum Ross, Ernie (Dundee W)
McDonnell, John Rowlands, Ted
McIsaac, Shona Roy, Frank
Ruddock, Ms Joan Taylor, Matthew (Truro)
Russell, Bob (Colchester) Thomas, Gareth (Clwyd W)
Russell, Ms Christine (Chester) Thomas, Gareth R (Harrow W)
Ryan, Ms Joan Timms, Stephen
Salmond, Alex Tipping, Paddy
Sanders, Adrian Todd, Mark
Savidge, Malcolm Touhig, Don
Sawford, Phil Trickett, Jon
Shaw, Jonathan Truswell, Paul
Sheerman, Barry Turner, Dennis (Wolverh'ton SE)
Sheldon, Rt Hon Robert Turner, Desmond (Kemptown)
Shipley, Ms Debra Twigg, Derek (Halton)
Short, Rt Hon Clare Twigg, Stephen (Enfield)
Simpson, Alan (Nottingham S) Tyler, Paul
Singh, Marsha Vaz, Keith
Skinner, Dennis Vis, Dr Rudi
Smith, Rt Hon Andrew (Oxford E) Wallace, James
Smith, Angela (Basildon) Walley, Ms Joan
Smith, Miss Geraldine (Morecambe & Lunesdale) Ward, Ms Claire
Watts, David
Smith, Jacqui (Redditch) Welsh, Andrew
Smith, John (Glamorgan) White, Brian
Smith, Llew (Blaenau Gwent) Whitehead, Dr Alan
Smith, Sir Robert (W Ab'd'ns) Wicks, Malcolm
Snape, Peter Williams, Rt Hon Alan (Swansea W)
Soley, Clive
Starkey, Dr Phyllis Williams, Alan W (E Carmarthen)
Steinberg, Gerry Williams, Mrs Betty (Conwy)
Stevenson, George Willis, Phil
Stewart, David (Inverness E) Wills, Michael
Stewart, Ian (Eccles) Wilson, Brian
Stoate, Dr Howard Winnick, David
Stott, Roger Winterton, Ms Rosie (Doncaster C)
Strang, Rt Hon Dr Gavin Wise, Audrey
Stringer, Graham Wray, James
Stuart, Ms Gisela (Edgbaston) Wright, Dr Tony (Cannock)
Stunell, Andrew Wright, Tony D (Gt Yarmouth)
Sutcliffe, Gerry Wyatt, Derek
Swinney, John
Taylor, Rt Hon Mrs Ann (Dewsbury) Tellers for the Ayes:
Mr. David Clelland and
Taylor, Ms Dari (Stockton S) Mr. Jim Dowd.
Ainsworth, Peter (E Surrey) Day, Stephen
Amess, David Dorrell, Rt Hon Stephen
Ancram, Rt Hon Michael Duncan, Alan
Arbuthnot, James Duncan Smith, Iain
Atkinson, Peter (Hexham) Emery, Rt Hon Sir Peter
Baldry, Tony Evans, Nigel
Beggs, Roy (E Antrim) Faber, David
Bercow, John Fabricant, Michael
Beresford, Sir Paul Fallon, Michael
Blunt, Crispin Flight, Howard
Body, Sir Richard Forth, Rt Hon Eric
Boswell, Tim Fowler, Rt Hon Sir Norman
Bottomley, Rt Hon Mrs Virginia Fox, Dr Liam
Brady, Graham Fraser, Christopher
Brazier, Julian Gale, Roger
Brooke, Rt Hon Peter Garnier, Edward
Browning, Mrs Angela Gibb, Nick
Bruce, Ian (S Dorset) Gill, Christopher
Burns, Simon Gillan, Mrs Cheryl
Butterfill, John Gorman, Mrs Teresa
Chapman, Sir Sydney (Chipping Barnet) Gray, James
Green, Damian
Chope, Christopher Greenway, John
Clappison, James Grieve, Dominic
Clark, Dr Michael (Rayleigh) Gummer, Rt Hon John
Clifton-Brown, Geoffrey Hague, Rt Hon William
Collins, Tim Hamilton, Rt Hon Sir Archie
Colvin, Michael Hammond, Philip
Cormack, Sir Patrick Hawkins, Nick
Curry, Rt Hon David Heald, Oliver
Davis, Rt Hon David (Haltemprice) Heathcoat-Amory, Rt Hon David
Davies, Quentin (Grantham) Hogg, Rt Hon Douglas
Horam, John Ross, William (E Lond'y)
Howarth, Gerald (Aldershot) Ruffley, David
Hunter, Andrew St Aubyn, Nick
Jack, Rt Hon Michael Sayeed, Jonathan
Jackson, Robert (Wantage) Shephard, Rt Hon Mrs Gillian
Jenkin, Bernard (N Essex) Shepherd, Richard (Aldridge)
Johnson Smith, Rt Hon Sir Geoffrey Simpson, Keith (Mid-Norfolk)
Soames, Nicholas
Key, Robert Spicer, Sir Michael
King, Rt Hon Tom (Bridgwater) Spring, Richard
Laing, Mrs Eleanor Stanley, Rt Hon Sir John
Leigh, Edward Steen, Anthony
Letwin, Oliver Streeter, Gary
Lewis, Dr Julian (New Forest E) Swayne, Desmond
Lidington, David Syms, Robert
Lilley, Rt Hon Peter Tapsell, Sir Peter
Lloyd, Rt Hon Sir Peter (Fareham) Taylor Ian (Esher & Walton)
Loughton,Tim Taylor, John M (Solihull)
Luff, Peter Taylor, Sir Teddy
Lyell, Rt Hon Sir Nicholas Temple-Morris, Peter
MacGregor, Rt Hon John Thompson, William
MacKay, Andrew Townend, John
Maclean, Rt Hon David Tredinick, David
McLoughlin, Patrick Trend, Michael
Madel, Sir David Tyrie, Andrew
Malins, Humfrey Viggers, Peter
Maples, John Walter, Robert
Mawhinney, Rt Hon Dr Brian Wardle, Charles
May, Mrs Theresa Waterson, Nigel
Merchant, Piers Wells, Bowen
Moss, Malcolm Whitney, Sir Raymond
Widdecombe, Rt Hon Miss Ann
Nicholls, Patrick Willetts, David
Norman, Archie Wilshire, David
Page, Richard Winterton, Nicholas (Macclesfield)
Paice, James Woodward, Shaun
Paterson, Owen Yeo, Tim
Prior, David Young, Rt Hon Sir George
Redwood, Rt Hon John
Robathan, Andrew Tellers for the Noes:
Robertson, Laurence (Tewk'b'ry) Mr. James Cran and
Roe, Mrs Marion (Broxbourne) Mr. John Whittingdale.

Question accordingly agreed to.

Clause 15 ordered to stand part of the Bill.

To report progress and ask leave to sit again.—[Mr. Robert Ainsworth.]

Committee report progress; to sit again tomorrow.

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