§ 3.25 p.m.
§ Lord Jay asked Her Majesty's Government:
§ What is the estimated total loss of budget revenue to the Exchequer in the current financial year due to income tax relief for mortgage interest payments.
The Minister of State, Department of Transport (The Earl of Caithness)My Lords, about £4.3 billion.
§ Lord JayMy Lords, since this rather arbitrary tax relief, which goes to some tax payers and not others, is no longer justifiable —certainly not in these enormous amounts—and since the Government are now so worried about the budget deficit, which is in large part due to the irresponsible tax cuts made in 1987 and 1988, would not, say, a 50 per cent. reduction in this tax relief be a very wise step towards bridging the budget gap?
The Earl of CaithnessMy Lords, I am sure that the noble Lord will recall that in 1991 mortgage interest relief was limited to the basic rate of tax and that from next year, 1994–95, the relief will be at 20 per cent. That will reduce the borrowing requirement and be a further step towards a basic rate of 20 per cent.
§ Lord BoardmanMy Lords, if mortgage interest relief were cancelled, what would be the impact upon house prices, especially in the lower range, and upon the mortgage security relating to them?
The Earl of CaithnessMy Lords, it would be difficult to predict what would happen to house prices. I am certainly in no position to give that answer to my noble friend this afternoon. Clearly, however, it would disappoint a lot of potential house buyers. The Government are very proud of the help that they have been able to give to house buyers, and are delighted that people have been able to take the opportunity to own their own homes.
§ Lord DesaiMy Lords, since the tax on domestic fuel will raise less money than the abolition of mortgage relief, have the Government carefully examined the effects of both proposals? Why did they choose the one that will benefit the better off and hurt the worse off?
The Earl of CaithnessMy Lords, I admire the noble Lord's skill at being able to translate one Question into a rather wider Question. If he would like to table that Question I am sure that a Minister would answer it on behalf of the Government.