§ Mr. Chris Smithasked the Chancellor of the Exchequer if, pursuant to the answer of 19 December 1986, Official Report, column 740, to the hon. Member for Islington, South and Finsbury, in relation to the table of tax units receiving mortgage interest relief in 1986–87, he will account for (a) the increase from 1985–86 in those with total income of under £4,000 p.a. receiving mortgage relief from 500,000 to 690,000, and the increase in the average value of this relief from £110 to £350, (b) the increase from 1985–86 in those with total income over £20,000 p.a. receiving mortgage relief from 900,000 to 1,100,000, whilst the total cost of such relief has fallen from £1 billion to £970 million and (c) the factors involved in the fall in the total cost of relief from £4.75 billion to £4.5 billion; and if he will make a statement.
§ Mr. Norman LamontI assume that the hon. Member is comparing the information supplied in my answer to him of 19 December 1986, at column740, with that given to the hon. Members for Thurrock (Dr. McDonald), for Oldham, West (Mr. Meacher) and Birkenhead (Mr. Field) on 9 April 1986, at columns 125–26.
The information provided for 1985–86 in April 1986 was based on projections of the 1983 family expenditure survey and the 1983–84 survey of personal incomes. The estimates were therefore subject to a considerable amount of error. Also, I regret that the analysis incorrectly allocated the small proportion of mortgage interest relief received by non-taxpayers; this mainly affected the estimates for the lowest ranges of income.
Revised estimates for 1985–86, based on the 1985 family expenditure survey and projections from the 1984–85 survey of personal incomes are given in the table. These estimates are consistent with those for 1986–87, supplied on 19 December 1986. But they, like those for 1986–87, remain provisional.
Compared with the information supplied in the answer of 19 December 1986:
- a. the average relief per mortgagor for those tax units with total incomes under £4,000 per year remained almost unchanged between 1985–86 and 1986–87, being estimated at £360 in 1985–86 and £350 in 1986–87.
- b. the numbers with total incomes over £20,000 per year, receiving mortgage interest relief, increased from 940,000 in 1985–86 to 1,100,000 in 1986–87, while the total cost of relief to these tax units increased from £910 million to £970 million. In this range, therefore, the average relief per mortgagor fell from £970 in 1985–86 to £880 in 1986–87. This fall reflects the reduction in average interest rates (from 13.25 per cent. in 1985–86 to 11.5 per cent. assumed for 1986–87), which was partly offset by growth in the amount of interest eligible for relief below the ceiling of £30,000.
414 - c. the estimate of the total cost of relief is now £4.5 billion in both 1985–86 and 1986–87. The esimate for 1985–86 has been revised from £4.75 billion, following improvements to methods of projecting amounts of mortgages outstanding.
Tax units1 receiving mortgage interest relief by range of total income—1985–86 Range of total income Numbers receiving mortgage relief2 ('000) Average value of relief per mortgagor (£) Total cost of relief (£ million) Percentage of total cost (per cent.) Under 4 690 360 250 6 4 to 5 110 370 40 1 5 to 6 210 400 90 2 6 to 7 320 410 140 3 7 to 8 440 440 200 4 8 to 9 580 460 270 6 9 to 10 630 470 300 7 10 to 12 1,250 540 680 15 12 to 15 1,490 560 840 19 15 to 20 1,340 580 780 17 20 to 25 430 720 310 7 25 to 30 230 970 230 5 over 30 280 1,300 370 8 8,000 560 4,500 100 1 single persons and married couples. 2 including about 500,000 non-taxpayers.
§ Dr. McDonaldasked the Chancellor of the Exchequer if he will publish a table showing the estimated cost of providing mortgage interest tax relief in 1985–86, 1986–87 and 1987–88, at 1985–86 prices, showing separately the estimated cost of mortgages previously under the option mortgage scheme.
§ Mr. Norman Lamont[pursuant to his reply, 29 January 1987]: Information for 1985–86 and 1986–87 is in the table. It would be premature to provide an estimate for 1987–88, since the cost will depend on the amounts of mortgate lending and interest rates as well as on the 1987–88 income tax rates and bands. It is not possible to distinguish the cost of relief for those mortgages which were previously under the option mortgage scheme:
Estimated cost of mortgage interest relief (£ million) Year At current prices At 1985–86 prices 1985–86 4,500 4,500 1986–87 4,500 4,370