HL Deb 19 December 1991 vol 533 cc1531-40

3.35 p.m.

Lord Brabazon of Tara

My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement. Over the past few weeks my right honourable and honourable friends the Secretary of State for the Environment, the Secretary of State for Social Security, the Minister for Housing, the Minister of State for Social Security and I have had a series of meetings with representatives of the Council of Mortgage Lenders to discuss the problem of mortgage arrears and repossessions. I wish to pay tribute to the lenders and insurers for the helpful and constructive approach they have adopted throughout these discussions.

"We all recognise the hardship that repossessions can lead to for individuals and families. But mortgage lenders have assured us that some of the figures that have been suggested, particularly in recent days, for the level of mortgage repossessions this year and next are greatly exaggerated.

"The lending institutions have already agreed to participate in the scheme announced in November by the Minister for Housing to make empty properties, which have already been possessed, available to housing associations to house the homeless. But we wanted in addition to take action to keep borrowers who are facing difficulties in keeping up with their mortgage payments in their homes. I am therefore able to announce to the House a number of measures designed to reduce substantially the level of repossessions over the next year.

"The first duty of lenders is, of course, to their investors. But they are also concerned about the position of borrowers, especially those in difficulties. In our discussions this week lenders have confirmed to me that they do not seek to take possession where borrowers have suffered a significant reduction in income but are making a reasonable regular payment. Borrowers will, of course, remain responsible for their debts.

"A substantial proportion of repossessions do not result from legal action by the lender. Lenders have assured me that they wish to encourage borrowers to stay in their own homes, and that they will continue to increase the counselling and advice they offer to borrowers in difficulties.

"The Government already make generous provision—over £600 million this year—for mortgage interest payments for people on income support. The lenders have argued that in many cases this money is being diverted for other purposes, resulting in unnecessary repossessions. The Department of Social Security is already introducing new arrangements to identify arrears cases and to make payments direct to the lender. The Government have now agreed to bring forward legislation after the recess to make direct payment to lenders the norm. My right honourable friend the Secretary of State for Social Security will be making a further statement on this subject later today. In response lenders have confirmed that they will not take possession in cases where mortgage interest payments are covered by income support.

"There will, however, be cases where occupiers are not on income support but are nevertheless facing serious problems. Following our discussions this week the largest lenders have confirmed that they are prepared in case of need to provide funding on concessional terms to help such borrowers as far as possible to remain in their homes. In such cases the homes would either be sold to housing associations or taken into ownership by the lender. The borrower would remain in occupation as a tenant, or as part-owner, part-tenant. Individual lenders have undertaken to announce details of such schemes where they have not already done so, and insurers have expressed their support. Over three-quarters of a billion pounds has already been committed for this purpose over the next year by lenders responsible for 60 per cent. of total mortgage lending. The lenders' expectation is that the total figure could be around £1 billion if the need is there.

"The Government and the lenders will introduce these new measures as quickly as possible. In the meantime, lenders will continue to avoid repossessions wherever possible. The mortgage lenders believe that the new measures announced today, together with the actions they have already taken, will lead to a reducing trend in repossessions during 1992. All lenders are looking for an early and substantial reduction in repossessions. They have estimated that the measures I have described should prevent about 40,000 repossessions next year.

"But I recognise that there is a wider concern about the depressed state of the housing market, which has consequences for home owners in general and for the wider economy. I therefore have one further announcement to make.

"In his 1990 Budget my right honourable friend the Prime Minister announced that stamp duty on securities would be abolished late in 1991–92 to coincide with the introduction in the Stock Exchange of the system of paperless trading known as TAURUS. The Stock Exchange announced recently that TAURUS will not now be ready before April 1993. The abolition of stamp duty on securities will consequently also be delayed at least until then. This will result in a PSBR saving of £1 billion compared to the position shown in this year's MTFS.

"I have decided to use a portion of this additional revenue to help encourage and facilitate transactions in the housing market. I am therefore lifting the burden of stamp duty from the great bulk of house purchases for a period of eight months from midnight tonight.

"Stamp duty is currently charged at 1 per cent. on the full price of land and buildings costing more than £30,000. I intend to raise this threshold to £250,000 for documents executed from tomorrow until 19th August 1992, after which it will revert to £30,000. Stamp duty at the current rate of 1 per cent. will still be charged on purchases of more than £250,000.

"For the next eight months this will mean that no stamp duty will be payable on 90 per cent. of private home purchases. The consequent saving on an average-priced house will be a little over £600. The cost to the Exchequer will be about £110 million in this financial year, and about £310 million in 1992–93.

"A short Bill will be introduced early in the New Year to give effect to this measure. Until the passing of the necessary resolution, people who need to get their documents stamped will be charged duty on the basis of the present £30,000 threshold. But legislation will provide that the Inland Revenue will refund any duty paid in excess of what will be due under the proposed £250,000 threshold. Further details will be set out in an Inland Revenue press release to be issued today.

"Mr. Speaker, the measures I have announced today and the schemes which the lending institutions are putting together will contribute to a decisive fall in the level of mortgage repossessions. They will also help to stimulate activity in the housing market more generally, benefiting home buyers and home owners throughout the country. I hope that they will be warmly welcomed by the House."

My Lords, that concludes the Statement.

3.42 p.m.

Lord McIntosh of Haringey

My Lords, the House will be grateful to the Minister for repeating the Chancellor's Statement. It is a pity that because of the way in which we deal with these matters we cannot debate the social security Statement which is also being made. Presumably, that Statement has not yet been reached in the other place and we can hardly go in front of it.

One would not gain any impression from the Chancellor's Statement of the scale of the problem that is facing us as regards mortgage repossessions. One would not gain any idea that we are fast approaching what, in Conservative Party terms at least, could be the beginning of a significant social revolution. Nothing that the Chancellor said indicates that the number of repossessions in 1980 was 3,000 and that in 1986 it was 20,000. I shall return to 1986 in a moment because it is a very significant year. In 1991 the number of repossessions is likely to be between 60,000 and 80,000. For 1992 the best estimate produced by UBS Phillips & Drew, is 150,000 repossessions.

We are already in the position where one in 12 mortgagees is more than two months behind with mortgage payments. If that is not a matter for Government action then I do not know what is. The Government are themselves very largely responsible for what has happened not only because of the encouragement of house ownership, of which we do not disapprove, but because of the extreme means of discount on the sale of council houses throughout the 1980s. In addition, in 1986 the Prime Minister, in his then capacity as Secretary of State for Social Security, abolished the rule whereby those who are unemployed and on income supplement had their mortgage payments met by that supplement. Instead, he introduced a scheme where for the first 16 weeks of unemployment only 50 per cent. of the payments would be covered.

At that time the Building Societies Association pleaded with him not to make that change because they said it would increase the number of repossessions. Is it not the case that the dramatic increase in the number of repossessions follows directly from the action taken by the Secretary of State for Social Security in 1986? At that time, is it not also the case that Mr. Major said that he believed that claimants should generally be responsible for their dealings with their lenders and for their mortgage interest payments? If that was the case then we have an indication of what the present Secretary of State is going to say.

One must ask the Government what has changed since then. I shall tell the Government what has changed since then. Income supplement payments have become inadequate for the purpose. Many people have been enticed into home ownership who cannot manage it and in a time of dramatically increasing unemployment—brought about by this Government —the protection which mortgage holders once had against repossession and falling behind in their payments has been deliberately taken away by this Government.

Under those circumstances, will the Minister say what action is being taken by Government to deal with the problem? Nothing in the Statement showed any indication of Government action. In the Statement the Chancellor is saying that there could be three-quarters of a billion pounds of mortgage lenders' money made available—not Government money but mortgage lenders' money; but when it comes to action by Government, if we examine it closely, what the Chancellor is proposing is to recognise that he has a windfall of a £1 billion from the delay in the introduction of the TAURUS system, which the Government have committed to the abolition of stamp duty. He is going to give a proportion of that back—a proportion amounting to £420 million. As a result of this Statement the Government are going to make a profit of £580 million, in public expenditure terms.

It is difficult to see, in any case, what the stamp duty concession has to do with repossessions. It may do something for the housing market, but it certainly will not do anything for repossessions. There are many things that the Government could do if they are really serious about stopping repossessions. The £1 million which has been so freely bandied about in the press in the past few days could be made available from Government sources. The discussions that have taken place concerning the conversion of mortgages into rents—incidentally, that is a policy which has been Labour policy for more than two years now and is actually implemented by a number of Labour councils—could have been referred to here. No reference is to be found regarding mortgages into rents in the Chancellor's Statement.

There could have been a moratorium on repossessions, as recommended by the Labour Party and as advocated by mortgage lenders. Above all, there could have been a relaxation of the restrictions on expenditure on public housing, which is something that has been needed for many years now and is the only way to provide housing for those most in need.

Typically, the Government have chosen to make this Statement just before the House rises for the Christmas Recess. Even so, I cannot understand how on earth they hope to get away with such a shoddy excuse for a policy to deal with repossessions.

3.48 p.m.

Lord Thomson of Monifieth

My Lords, I join with the noble Lord, Lord McIntosh, in thanking the Minister for making this Statement. I also declare a personal interest as a director of a building society. 1 welcome the fact that the Government have now reacted—I think "reacted" is the word, rather than "acted"—to the lead taken by Mr. Paddy Ashdown in proposals to deal with this rising human problem of repossessions. Indeed, the proposals that the Minister has described in this Statement as coming from the building societies are very close indeed to the proposals that were put forward by Mr. Ashdown in his various interventions.

However, is not the noble Lord, Lord McIntosh, absolutely right in saying that, in essence, this is a mean-minded Government Statement in relation to the magnitude of the human problem that is involved in the present housing crisis and the repossessions aspect of it? Further, is it not absolutely right that what the Government are proposing here is not a positive financial contribution to the problem, but a proposal to leave it to the building societies to make the main contribution while reminding people in the Statement that the first duty of lenders is to their investors.

As regards the particular proposals for dealing with repossessions in terms of the housing associations and the building societies changing mortgages into rents, should not the Government have made their financial contribution to that particular plan?

While we welcome the Government's stamp duty proposals in order to try to get the housing market moving again, is it not absolutely right as the noble Lord, Lord McIntosh, said that all that they are doing is redeploying money that they would otherwise have had to expend, and upon which they have had a windfall saving?

Is it not a very disappointing Statement indeed from the Government? Should it not be widely recognised outside the House that the Government are not responding to the magnitude of the problem and that they are, as usual, passing the buck to other people to rescue citizens from a problem which is, to a large extent, their own responsibility?

Lord Brabazon of Tara

My Lords, I am grateful to both noble Lords for their reception of the Statement. I am sure that it will not surprise both noble Lords to know that I do not agree with much of what either of them said. I believe that the measures which were announced in the Statement will make a decisive contribution to reducing mortgage repossessions and will, in addition, help the housing market generally.

One needs to get the situation in perspective. I should remind the House that less than 2 per cent. of home owners are in serious arrears. Repossessions this year will be about one half of 1 per cent. of the number of all home owners. The lenders were expecting only about 80,000 repossessions next year before this package was announced. The lenders estimate that measures covered by the announcement should reduce the number of repossessions by 40,000 over the next 12 months. That is roughly one half of the expected figure. I believe that that puts the scale of the problem into perspective.

The noble Lord, Lord McIntosh, implied that it was all the Government's fault, although I believe that the noble Lord, Lord Thomson, said that a substantial part of the problem was the Government's fault. The current weakness in the housing market is due to a wide range of factors. It is fruitless to apportion blame. The key issue is what to do. That is why the Government have come forward with an effective and workable package. I think that the noble Lord, Lord McIntosh, said that he did not disapprove of home ownership. I am glad to hear that, as I am sure other people will be.

I believe that the cry from the noble Lord, Lord McIntosh, was, "Why no government money?" The package does not have to be subsidised by the taxpayer to be effective. The lenders have come forward with proposals for £1 billion of extra resources to introduce the schemes. That is a very substantial response. I see that the noble Lord wishes to speak, but he will have his chance to do so in a moment.

Lord McIntosh of Haringey

My Lords, there is a direct conflict between what the Minister is saying and what the Statement says. The Statement says three-quarters of a billion pounds and not £1 billion.

Lord Brabazon of Tara

My Lords, if the noble Lord will look at the Statement more closely he will see that it refers to an expected figure of around £1 billion. In any event, it is still a substantial amount of money.

The Government are playing their full part in the changes proposed in DSS legislation as regards the housing benefit consequential as people move from being owner occupiers to renters. Moreover, the stamp duty measure is, as the Statement says, worth some £400 million. The noble Lord, Lord McIntosh, appeared to regard that as a matter of absolutely no consequence.

The noble Lord also referred to the changes to the social security legislation in 1986. We think that it is right that there should be a fair and reasonable balance as between the borrower, the lender and the taxpayer in meeting the costs of home ownership in the first 16 weeks of a claim for income support from a person under the age of 60. When the rule was introduced in 1986 the Building Societies Association assured us that there was no reason to expect that people would lose their homes as a result. That remains the view of lenders and has been confirmed only recently by the Council of Mortgage Lenders.

The noble Lord, Lord McIntosh, referred to the Labour Party's proposals for a moratorium. He earlier referred to a statement made by a city analyst. I believe that it is the same city analyst who described the Labour Party's proposals as "an Enid Blyton story".

I hope that I have answered all the questions that noble Lords have asked.

3.55 p.m.

Lord Boardman

My Lords, can my noble friend confirm that, pending the passage of legislation relating to income supplement, there will be nothing to prevent the borrower from giving direct authority for payments to be made to the lender, thereby anticipating the legislation?

Lord Brabazon of Tara

My Lords, my noble friend is right. I believe that already many payments are made directly to the lender. There is nothing to stop that continuing pending legislation.

Lord Stoddart of Swindon

My Lords, is the Minister aware that when we are talking about mortgage lenders we are talking about ordinary little savers who contribute money to building societies and other organisations? Therefore, the people who are bailing out the Government are not the mortgage lenders or the building societies but ordinary little people in this country. I sincerely hope that their funds will not be put at risk and that they will not lose out on the return on their capital.

Secondly, the Germans have just raised their interest rates by 0.5 per cent. Will the Minister assure the House that the Chancellor of the Exchequer will not follow suit. If he does everything that has been announced will be nullified.

Lord Brabazon of Tara

My Lords, I take the point made by the noble Lord that it is the shareholders in the building societies and the banks who would ultimately pay the cost of any measures. As the Statement indicated, the lenders' first duty is to their investors. The measures announced today are fully consistent with that. It is in everyone's interests that those in borrowing difficulties should be helped to stay in their own homes. Of course, the stamp duty measures potentially benefit all home owners, including those mentioned by the noble Lord.

I take issue with the noble Lord in describing the measure as bailing out the Government. The idea is not to bail out the Government but to help those who are in difficulty with their mortgage payments.

I noticed that this afternoon the Germans raised their two main rates of interest by 0.5 per cent. I cannot—as I could not the other afternoon when the noble Lord asked the question—give an assurance that our interest rates will not change. As I have said on many previous occasions, our interest rates will remain at a level necessary to continue to bear down on inflation and to remain within our ERM commitments.

Lord Hylton

My Lords, is it not clear that we are in a considerable muddle, largely due to defective economic and housing policies during the past few years? Therefore, will the Government accept that two principles should guide us in our efforts to get out of the muddle? The first is that existing mortgage borrowers should be enabled to remain in their present dwellings either paying interest only on their mortgages or paying a rent for their house which could perhaps be on a portion of the equity. The second principle is that the building societies should be enabled to sell their present repossessed houses to local authorities and to housing associations. However, they will not be able to do so unless considerable new funds are made available. These should come either from the proceeds of previous sales of council houses or from new capital to be made available to housing associations.

Lord Brabazon of Tara

; My Lords, the noble Lord is right when he says that it is preferable that mortgage borrowers should remain in their houses. That is the main purpose of the measures that have been announced this afternoon. As the Statement said, The borrower would remain in occupation as a tenant, or as part-owner, part-tenant". Those possibilities are being offered, but it is mainly for the individual lenders, the building societies or banks, to decide in their own cases exactly what might happen. I believe that they will be making their own announcements in regard to their own borrowers.

Lord Skelmersdale

My Lords, this is obviously a good agreement for those unfortunate people who would otherwise lose their homes in the near future. However, a technical point arises on the Statement which I hope my noble friend will be able to answer. He will remember taking the Building Societies Act 1986 through this House. If my memory serves me right, building societies are only allowed to use 5 per cent. of their funds on owning their own properties. It seems to me that as a result of this agreement that amount will need to rise if the building societies are to part-own some properties instead of repossessing them and then selling them. Will the Government arrange to change this permitted percentage? If so, will that be by order or by primary legislation?

Lord Brabazon of Tara

My Lords, my noble friend makes an interesting point. I certainly recall the passage of the Building Societies Bill, on which I was ably assisted by my noble friend at that time. I recall the measure to which he refers. I do not have an immediate answer to the point so I shall have to write to him.

Lord Kennet

My Lords, the housing market is an extremely complicated phenomenon. It would be of assistance to the House, in trying to understand what is happening with mortgages, rents, house ownership and the rented sector, if the noble Lord could tell us what proportion of all the recent repossessions was former council houses which have been sold in the past few years to mortgage holders. I put this down as a Written Question but since the House adjourns today it might be convenient if we could have the Answer now.

Lord Brabazon of Tara

My Lords, it may be convenient but I am afraid the Answer is not available now.

Lord Dormand of Easington

My Lords, is the Minister aware that today's announcement on unemployment figures shows that the figure is now disgracefully over 2½ million? Does he also agree that the increase in unemployment will almost certainly continue throughout 1992? No doubt he will say that the increase each month will be smaller. However, all of us on these Benches are waiting for a decrease in unemployment.

In those circumstances, will the Minister say what provision is contained in the Statement on the machinery to be set up —and I detected none—to take care of the fact that the problem will be exacerbated by the increase in unemployment? That is the logical outcome and I hope that it is one of the factors taken into consideration in the Statement. It would be useful if the House received clarification in view of increasing unemployment in the country.

Lord Brabazon of Tara

My Lords, obviously one regrets any increase in unemployment. One can only be encouraged that the increase in the unemployed is rising more slowly each month. We do not give forecasts of future unemployment but I suppose one could say that a good many of the measures announced today will be of direct benefit to those who are unemployed and in receipt of housing benefit or income support. The measures are helpful for them.

Lord Dormand of Easington

My Lords, my point is that unemployment is increasing. The Minister has not dealt with that point.

Lord Brabazon of Tara

My Lords, I did not say that it was not increasing. I said it was encouraging that it was increasing at a slower rate month by month. The help that is being given to avert repossessions will be of benefit to those who are unfortunately unable to keep up their mortgage payments because they are unemployed.

Lord Bruce of Donington

My Lords, the Minister has said that the purpose of the measures he has proposed is not to bail out the Government in the present circumstances. Is the noble Lord aware that no magistrate at the present time would ever grant them bail anyway? The Government's housing policy lies in a complete shambles. The circumstances have arisen precisely because of the erroneous policies of the Government in the fiscal, economic and expenditure fields. The Government might at least have the generosity and the honesty to apologise for the grave errors they have committed.

Lord Brabazon of Tara

My Lords, the noble Lord will not be surprised to learn that I did not agree with a single word he said. I have already mentioned the current weakness of the housing market. That position is due to a wide range of factors, not just one particular factor. It is fruitless to apportion blame. The Government's housing policy is certainly not a shambles. I referred earlier to the scale of the problem. The figures speak for themselves.