Income Support: Mortgage Assistance (Hansard, 16 January 1995)

§ Lord Mackay of Ardbrecknish
My Lords, the consequence of our decision will be the development of comprehensive, high-quality, private mortgage protection insurance. That will provide better protection for all home owners, including those who fall into difficulties with their mortgage payments and cannot be helped by the present system because they have savings, a modest pension or working spouses.

§ Earl Russell
My Lords, is the Minister aware that the private sector mortgage debt rose from 35 per cent. of GNP in 1983 to 61.7 per cent. of GNP in 1993? If even I per cent. of that figure were bad debt it would be a debt of £3.5 billion. Even if private insurance were available for the people concerned, does the Minister believe that now is the right time to put that extra burden on British insurance?

§ Lord Mackay of Ardbrecknish
My Lords, I have absolutely no doubt, and we have every indication, that British insurance will be found to be more than adequate in bringing to the situation perfectly satisfactory policies designed for people who want mortgages in the future.
So far as concerns the figure referred to in the main part of the noble Earl's question, perhaps I may turn the question around and ask him and those who oppose the policy—

Noble Lords
No!

§ Lord Mackay of Ardbrecknish
My Lords, if noble Lords become so irritated by the rhetorical question, I shall rephrase it. I am quite amazed that we are asked whether we should put the pressure on the insurance industry, when the corollary is that we are happy to put the pressure on other taxpayers.

§ Lord Dean of Beswick
My Lords, is the Minister aware that in this country each week 1,000 families are still losing their homes because of lapses in paying their mortgage? The measures to which the Minister referred in answering the first Question are welcome. However, is he also aware that none of those people who lose their homes today will receive one iota of help from those measures? Bearing in mind that it was the equity imbalance which resulted from the Government's financial policy which put those people in that position, do they not deserve better treatment than the Government accord them at this point in time?

§ Lord Mackay of Ardbrecknish
My Lords, the noble Lord helps to make my point. Many people are not assisted by the current provisions but many, although not all, would be helped if insurance provision was widely based and widely accepted as it will be for all new mortgage takers.

§ Lord Stoddart of Swindon
My Lords, many of us believe that this is a strange measure. Is the noble Lord 404 aware that people living in modest houses pay mortgages in lieu of rent simply to obtain a roof over their heads? Why do the Government take benefit away from people paying mortgages but do not propose to take benefit away from people who pay rent? There seems a lack of equity in that position. I hope that the Government will reconsider their policy.

§ Lord Mackay of Ardbrecknish
My Lords, it is fairly self-evident that all of us take out a mortgage or pay a rent in order to obtain a roof over our heads. The position is quite simply this. To suggest to those people who take out a mortgage, and, more importantly, to those people who give a mortgage, that some form of insurance should be taken out against unemployment, we believe is a correct and responsible way for both the lender and the borrower to behave. Lest noble Lords go away with the thought that we are entirely withdrawing from that market, I underline the fact that we are asking the insurance companies and new borrowers to cover the first nine months. Anyone unemployed for longer than that period will be helped by the social security system.

§ The Countess of Mar
My Lords, is the noble Lord aware that a number of people who have been prudent enough to take out insurance against unemployment have found that the insurance companies have been let off the hook because of the small print? Before the Government bring any legislation before the House, will the Minister assure us that they will negotiate with the insurance companies to ensure that those companies do not get out of paying on the policies because, for instance, someone has not been employed for more than two years?

§ Lord Mackay of Ardbrecknish
My Lords, I can assure the noble Countess that we are looking at that problem—it has been brought to our attention—in our discussions with the insurance industry. The industry is bound by the ABI's code of practice. Once the policy has been taken out, the insurance ombudsman can arbitrate on disputes on behalf of policy holders. Despite the protections already in place, we are aware of the criticism referred to and are discussing the matter with the ABI and with the Council of Mortgage Lenders.

§ Earl Russell
My Lords, the Minister has invoked burdens on the taxpayer. Is he aware that at present 50 per cent. of those who receive income support help with mortgages are back at work within a year? Does he accept that if their homes are repossessed, that is unlikely to occur, and therefore the noble Lord risks putting on the taxpayer a much heavier burden than he carries already?

§ Lord Mackay of Ardbrecknish
My Lords, the noble Earl misses the point. If due to our policy, and with the quite lengthy time lag that we have allowed for, those insurance policies are available in the market, a borrower taking out an insurance policy who becomes unemployed will look to that insurance policy for nine months, and thereafter to the taxpayer. Therefore repossession does not come into the issue.

§ Baroness Hollis of Heigham
My Lords, what arrangements will the Government make, what help will 405 they give, to those who often cannot obtain insurance? I refer to those with a history of intermittent unemployment, the self-employed, those on short-term contracts and those in part-time work. Do they not stand the risk of losing not only their job but their homes too?

§ Lord Mackay of Ardbrecknish
My Lords, I think that the noble Baroness confuses existing borrowers—for whom the policy is two months and four months; it is not the nine months to which I referred—and new borrowers. Perhaps I may simply quote from the Abbey National Building Society: If we have agreed a mortgage there is no reason why the borrower should not then qualify for mortgage repayment protection".