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Opposition Day

Volume 100: debated on Wednesday 25 June 1986

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17Th Allotted Day

Unemployed People (Mortgage Interest)

3.50 pm

I beg to move, That this House condemns the Government's proposal to halve mortgage interest cover for the unemployed and others for the first six months of supplementary benefit, which will sharply increase mortgage arrears leading to evictions and undermine home ownership by discouraging building societies from lending to low earners; and calls on the Government to withdraw this proposal in the interests of a policy for the family which guarantees security of tenure of the family home.

Recently, the Prime Minister trumpeted, again, her belief in a policy for the family. It is difficult to think of any policy more damaging to the family than that which threatens it with the loss of its home, yet that is exactly the effect of the Government's intention to halve mortgage interest payments for the unemployed for the first six months of supplementary benefit. It will sentence thousands to rising mortgage arrears and evictions as a penalty for being unemployed.

Instead of concentrating help on those in greatest need, as the Government claim is the object of their social security policies, the measure will concentrate maximum harm precisely at the point when people need help most— when people, through no fault of their own, lose their job. Contrary to everything that the Government claim they stand for, it will undermine home ownership by discouraging building societies from lending to those on lower incomes, and it will be the final nail in the coffin that ditches thousands who exercise their right to buy.

The Government seek to justify all that on two grounds. First, they say that the cost of mortgage interest payments to supplementary benefit claimants has risen rapidly to too high a level. That is due partly to the spread of home ownership which the Government have encouraged and is partly due to higher house prices, for which claimants can hardly be held responsible.

The truth is that more is being spent because there are more claimants, especially more unemployed claimants, and their needs are greater because house prices have risen much faster than inflation. That is not a reason for denying people such help.

The Government's second pretext for the measure is that the help given is so generous that people are better off out of work. That result is arrived at, I submit, by the use of figures so studiously contrived that the Government are implicitly admitting the implausibility of their case.

The Government, according to their note supplied to the Social Security Advisory Committee, took the example of a £16,000 mortgage, which they say is the average mortgage for a two-child family, and related it to a family on low earnings—£80 to £120 a week. Virtually nobody on earnings as low as that would have a mortgage of £16,000. It is only that thoroughly implausible combination which yields the conclusion which the Government are so determined to fabricate—that a man buying a house is better off out of work than in work. It is clear, to anyone who thinks about it for more than a moment, that the Government's figures and their conclusion are completely unreal.

Even if the work incentive argument had some force for unemployed claimants, it would be wholly irrelevant in almost half the cases. That is because a large number of owner-occupiers on supplementary benefit are not unemployed — they are pensioners or lone parents. In 1982, only 60 per cent. of owner occupiers claiming supplementary benefit were available for work. For the other 40 per cent., the discouragement to work argument, which is so precious to the Prime Minister, is irrelevant. I am well aware, of course, that the Government have tried to meet that objection by exempting pensioners from their proposals. But what about single parents and sick and disabled people? Are they to be sacrificed in the interests of the Prime Minister's obsession with the "why work" syndrome?

I put it to the House that the Government's case does not stand up to examination. The central principle called in aid by the Prime Minister in defence of this proposal in her letter to my right hon. Friend the Leader of the Opposition — it is repeated in the Government's amendment to our motion — points in precisely the opposite direction. In her letter, the right hon. Lady said:
"The aim of the main proposal … is to strike a fair and reasonable balance between the borrower, the lender and the taxpayer."
Is it striking a fair balance for the Government to save £30 million by cutting mortgage interest payments to the poorest people on supplementary benefit, while at the same time paying out £370 million in mortgage tax relief to the top earners on more than £30,000 a year? Is it striking a fair balance to select for cuts in mortgage interest payments the 90,000 households — the Government's figure—in poverty who are struggling to buy a house while, at the same time, those households getting mortgage interest tax relief at the top rate of 60 per cent., who also happen to number 90,000 households, are left to enjoy their privileges untouched? Far from striking a fair balance, I submit that these proposals will produce grotesque unfairness between those in desperate need facing eviction and those on the highest incomes who cream off ever bigger tax perks every year.

Like several other measures in the Social Security Bill, this proposal is almost universally condemned. A Child Poverty Action Group survey of the responses of 60 key organisations to the Green Paper found no support for the proposal, even from the Institute of Directors, which is well known for its support for the Government on almost everything else. The National Consumer Council in its booklet entitled "Behind with the Mortgage", which was published last year, states:
"The safety net provided by mortgage interest payments to those owners faced with unemployment or relationship breakdown is crucial in avoiding repossession and homelessness during the early stages of default when financial problems may escalate to such a level that it becomes impossible to recover from them."
The Building Societies Association, which is the body most concerned about this —it is very concerned—declared in last year's report entitled "Mortgage Repayment Difficulties" that cuts in supplementary benefit would lead
"to a much greater increase in arrears and repossessions."
The Institute of Housing, in its response to the Green Paper, asks that
"assistance with interest payments be continued at the same level for the meantime."
Referring to one of the other points which Ministers have used to mitigate the damage done by the proposal, the institute went on to say that it:
"considers it unlikely that mortgage insurance arrangements, in their present form and premium level, could fill the gap provided by supplementary benefit for either the long-term unemployed or low-income owner-occupiers."
The matter has been referred to the Social Security Advisory Committee, the Government's advisory body, but I think that we already well know its views. It stated:
"We do not think a scheme of this kind could be justified at all, unless the building societies and other mortgage lending bodies were prepared to give comprehensive assurances about the availability of rescheduling."
Of course, no such assurances have been given, and it is unlikely that they will be.

By far the most telling of all, in my view, is the report of the Department's own policy inspectorate which does not support the Government's case. Out of a sample of 330 claimants it shows that the average mortgage payment was £72 a month and supplementary benefit cover will now be withdrawn for nearly half that sum. The report is in the Library and many hon. Members may have seen it. However, one in four are paying between £100 and £250 a month. For them, with an average mortgage of about £15,000—if anything, that is a conservative figure—the interest payment is about £34 a week. Therefore, the Government are proposing to cut their weekly income by no less than £17. In the year-long bitter miners' strike the Government docked £17 a week off the miners. The Government are now transferring their vindictiveness to home owners and kicking the most vulnerable of them when they are down.

Further, there is no doubt that this measure will cause intense hardship. Already the trend for repossession is rising sharply, even before the measure is introduced. In 1979, building societies repossessed 2,500 homes and by last year, the number was seven times that at 16,500. Since, the Government's own admission—

Is my hon. Friend aware — I hope that he will go to Liverpool to see — that there are streets upon streets of houses in Liverpool where two or three years ago there were no "For sale" signs. Increasingly, people are now being faced with having to sell and if they cannot sell they are being faced with eviction. That is a growing trend, especially in an area such as Liverpool with its terribly high level of unemployment. This measure will increase that trend and make it absolutely appalling for the people in those areas.

My hon. Friend is correct. It is undoubtedly inner-city areas—Liverpool is as hard hit as any—that will bear the brunt of this measure if the Government are unwise and callous enough to put it through.

By the Government's own admision, 90,000 households will be affected by the latest proposal. Therefore, it must be certain that the rate of repossession and eviction— this is the point of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer)—will double or perhaps increase by even more, to at least 30,000 to 50,000 a year. It is easy in the House to give simple figures of that kind, but those figures conceal an enormous amount of personal misery. I hope that all hon. Members will agree that there is little worse in human experience than being driven from one's own home.

The fact that that will undoubtedly happen is revealed by the DHSS policy inspectorate's own report. It found that more than a quarter of the claimants in the sample had already been forced to approach the lender for a reduction in their mortgage payments. However, only two thirds had been able to negotiate a reduction, usually for only three months at a time. All those people were asking was to be allowed to pay the whole of their mortgage interest. Imagine what would have happened if they had approached the lenders and said that they wanted to pay only half the interest. Even under the present rules one claimant had been forced to put his home up for sale, and two others were under pressure to do so. Surely, under these proposals, that number is bound to rise dramatically.

There are other less obvious but no less damaging consequences. If mortgage interest is not met in full for the first six months on benefit but instead the loan is rescheduled at a higher amount once the six months is over, which is what the Government are proposing and hoping, a claimant could well have less incentive to return to work. The rescheduled payment could have risen to a level difficult to manage on low wages, and I believe that there would then be a strong temptation to remain on supplementary benefit until a better paid job came along. I put that to the Government because it is very important to their case.

There is another irony in the Government's proposal, the whole aim of which is to save £30 million. It may turn out, even in financial terms, to be counter-productive. Mortgage arrears are increasingly a significant cause of homelessness. In 1985, one in every 10 families was homeless owing to mortgage arrears. That is double the figure of four years ago. Since many of those made homeless as a result of mortgage arrears end up in bed and breakfast accommodation—I submit that many of them will— the financial cost to the DHSS could easily turn out to be greater than the £30 million which it is hoped to save.

From that standpoint, the proposal to restrict mortgage interest payments through supplementary benefit presents a totally false economy, quite apart from the morality of it. I am simply talking here about the financial aspect. If the Government are determined to make savings in this area, a much fairer and more rewarding route would be to restrict mortgage interest tax relief to the standard rate. That would save £250 million, eight times as much as this proposal, without any of its immensely damaging side effects.

By contrast, this proposal will indirectly press building societies into restricting their lending to those in secure employment. It will discourage lending down market in all cases that are marginal or where people are at risk of unemployment. By the same token, it will also probably threaten the Government's inner-city initiative because building societies will be unwilling to invest in low-cost properties mortgaged with those risks. Furthermore, this proposal will ensure that home owners are treated significantly less generously in future than tenants. It is remarkable that we should have such a proposal from the Government and it is a discrimination which sits extremely oddly with the Government's constantly expressed policy of encouraging owner occupation as the preferred form of tenure.

If the Government genuinely believe that there is a problem of escalating benefit expenditure on mortgage interest, they should tackle its causes, which are high unemployment and high interest rates, rather than its symptoms. What is not acceptable, especially from a Government who like to talk of concentrating help on those in need and from a Prime Minister who likes to talk about a policy for the family, is a proposal which deliberately hits families precisely when they are most vulnerable. That is why we now unreservedly call on the Government to withdraw this proposal in the interests of a genuine policy for the family which guarantees that most priceless asset for all families, security of tenure in the family home.

4.7 pm

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:

'congratulates the Government on the success of its policies to encourage home ownership; recognises the need to achieve a proper balance between the responsibilities of the borrower, the lender and the tax payer, and greater fairness as between those on Supplementary Benefit for short periods and those in low paid employment; and notes the proposals to this end that the Government has put forward for consultation to the Social Security Advisory Committee.'.
I feel bound to comment at the outset that there is something faintly ironic in the sight and sound of the hon. Member for Oldham, West, (Mr. Meacher) appearing today as the homeowners' friend. It is barely a year, if that, since the newspapers were full of stories, to the horror of his right hon. and hone Friends, of his desire completely to abolish mortgage interest tax relief. His dedication to that cause is a byword throughout the country.

I do not want to intervene but I must if the Minister is going to start his remarks with a deliberate fabrication of that kind. I ask him to withdraw. I never made any such allegation, I do not believe it, and I never said it. I remind him that we are not talking today about whether people are wealthy enough to receive tax relief at a certain level, but about people in desperate poverty and whether aid should be taken away from them, leading to eviction.

All I can say is that the hon. Gentleman succeeded in misleading a large part of the British press and most of his colleagues on his Front Bench by the proposals that he put forward a year or so ago. What is more, it is a matter of clear public knowledge that throughout the past six years the Labour party at national and, more important in this context, local level, has dragged its feet on the sale of council houses and on the increased right to buy that the present Government have ensured. Whatever else may be said about today's debate, the spectacle of the Labour Front Bench seeking to parade as the party of home ownership lacks a good deal of credibility.

My hon. Friend does not need to go as far back as the speech made by the hon. Member for Oldham, West (Mr. Meacher). Had he been present in yesterday's debate, he would have heard the hon. Member for Bootle (Mr. Roberts), speaking from the Opposition Front Bench, say that tax relief on mortgages of £12,000 or so was acceptable, but tax relief on mortgages verging on £30,000 was unacceptable, implying what the Labour party would do.

I did not have the privilege of hearing the hon. Member for Bootle (Mr. Roberts), but that would fit with the position that the Labour party adopted at the general election, which was one of hostility to the modest increase that the Conservative Government had made in the size of mortgages that could rank for tax relief. The fact is that the Labour party has consistently opposed almost every practical step that has been taken to encourage home ownership.

The truth is that we are having this debate today only because the hon. Member for Oldham, West has been frustrated in some of his ambitions in the past. If he had had his way, the people for whom he now claims to speak would not be receiving supplementary benefit for mortgage interest because he would have seen to it that they would never have become home owners in the first place. That is the reality of the position that the hon. Gentleman has sought to create. His appearance today is about as credible as Dracula turning up as a blood donor.

As I said when we previously debated this proposal, there has been no mystery about the Government's view that this area of the benefits system needed consideration and review, or, indeed, about the Government's thinking on what the conclusion might be. As I reminded the House on the previous occasion when we debated the issue briefly during the passage of the Social Security Bill, the Green Paper published almost exactly a year ago specifically said:
"The Government intend to discuss with building societies and other interested bodies arrangements whereby less of the burden—particularly for people on benefit for a short time — falls immediately and directly on the social security system."
That proposition was echoed in the White Paper at the end of last year, in which we said:
"The Government will continue to discuss with building societies and other major lenders what changes might be appropriate, including the possibility of a limit on the proportion of mortgage interest which would be met during an initial period in receipt of benefit."
My right hon. Friend the Secretary of State referred to the same matter when he gave evidence to the Select Committee on Social Services in January. It was raised in Committee on the Social Security Bill, a fact that the hon. Member for Oldham, West appeared to have forgotten on the last occasion when he spoke about the matter. The hon. Member for Derby, South (Mrs. Beckett) asked me about it, and again I specifically set out the nature and direction of our thinking.

What is more, far from seeking to disguise the fact that we felt that that area needed examination and what sort of examination we were undertaking, we took specific steps to amend the leaflets which, under the right-to-buy legislation, go to those inquiring about their right to buy. We amended the leaflet to draw specific attention to the fact that the Government had made the proposal. It was amended last year, to draw attention to what had been in the Green Paper. Indeed, an addendum note was added to it after the White Paper, to make it absolutely clear what the Government's thinking was.

Therefore, I refute any suggestion of the sort that has been made, to the effect that the Government have proceeded in a stealthy or underhand way. We have made our intentions clear to the House. We have made our intentions clear to those considering buying their property under the right-to-buy legislation. We are now proceeding in an absolutely normal, above board and straightforward way to put forward proposals for public consultation to the Social Security Advisory Committee. Of course, we shall consider its view.

My view on this potential Bill is well known—I think that it is somewhat less than satisfactory. As I understood it, many of us complained at the time that the social security payments going to people were not being used for the purposes for which the money was being given. They were being used for something else. If the money goes directly to a building society or the person who holds the mortgage, that is common sense because it stops people being dispossessed of their homes. Will my hon. Friend explain to some of us who are somewhat unhappy how he thinks it helps to add to people's worries at their most vulnerable time—their first six months of unemployment, which must be appalling? How can one explain to them that there is not a lack of generosity of spirit in the proposal, which is not what I would call good Conservatism?

I shall come directly to my hon. Friend's point, which is about the fairness of the system, and the balance between the claims of different claimants in the system — in this case, according to the time that they have been on benefit. However, I should like to make it clear that that issue is separate from that of whether this or any other part of the benefit system is abused. Abuse might occur within the present or future rules. That might happen because it is just as possible that half the interest will not get passed on as that the whole of the interest was not passed on. That problem needs to be addressed. However, that is separate from the broader issues that my hon. Friend has raised, to which I shall come in a moment.

My hon. Friend referred to the amended leaflet. Is it or is it not the Government's intention to renege on the undertaking given in the unamended leaflet to people who bought their homes, that if they received unemployment or supplementary benefit, the interest would be paid? Is it or is it not the Government's intention to renege on that undertaking, given in writing in the leaflet, on the basis of which people entered into commitments which otherwise they might not have entered into?

I appreciate the implication of my hon. Friend's question, but it seems to me that, as with any leaflet describing the benefits system, such a leaflet can be taken only as a description of the position at the time when it is published. I think that that is commonly understood.

I note my hon. Friend's point, and I was aware of his concern. I ask him to consider that the implication of his question, if carried to its logical conclusion, would go far wider than the specific issue of whether this part of the benfit system should be changed. In the situation that my hon. Friend adumbrated, a person's entitlement to supplementary benefit could be affected by a variety of changes. For example, the substantial increase in invalidity benefit that the Government made at the social security uprating before last, in November 1984, took many long-term sick and disabled people out of supplementary benefit because it increased their invalidity benefit. On the logic that my hon. Friend has been putting forward, that, too, could be construed as a change affecting their entitlement to the full payment of mortgage interest.

No one would claim to have been misled if a change is made from which he gains.

The basic fact is that, to be entitled to benefit for mortgage interest, one has to be on supplementary benefit. Therefore, the logic of my hon. Friend's implied position is that anything that changes the potential entitlement to supplementary benefit of someone buying his own house is to be treated in the way he has suggested. At the very least, I ask my hon. Friend to take account of that position, but above all I ask him to take account of the fact that leaflets, whether about the right to buy or describing the social security benefits system, can be taken only as a description of the position at the time when they are published.

Let me now refer to the proposals. I should like to clear one thing out of the way before I come to the proposal that is the main focus of the debate. I should make it clear that there are several other proposals in the draft regulations that have been put to the Social Security Advisory Committee, of which the House should be reminded. Two of these proposals are designed to be beneficial to claimants and I hope that they will be welcomed by the House in that respect.

The first is designed to ensure that a loan taken out to repay an earlier advance used to acquire an interest in a home or to carry out essential repairs or improvements to it will be eligible for benefit on the same basis as an original loan. That is entirely beneficial and I assume that Opposition Members and others will welcome that.

The second proposal is for a special disregard of income from mortgage protection policies to meet the balance of mortgage payments. That is a sensible and beneficial provision which must be considered in the context of the main proposal and which I am sure that the House will welcome.

There are also two other smaller proposals designed to allow greater scope to tighten up on the extent to which the benefits system helps to meet payments on loans taken out for business purposes or payments on very expensive or large homes with a high mortgage. It was implicit in the remarks made by the hon. Member for Oldham, West that it is reasonable—whatever else we may disagree about—to impose limits on a system which is primarily intended to help protect an individual's interest in the home in which he or she lives.

The Minister has referred to the Social Security Bill and the Government's thinking on certain aspects of the Bill. Bearing in mind the defeat that the Government suffered on the Bill in another place, and accepting the great anxiety of many people who would be adversely affected by the Bill if it is enacted, will the Minister take this opportunity to explain the Government's intentions about the proposals?

I am glad to see that you are smiling, Mr. Deputy Speaker. You will no doubt respond generously to my immediate evasion of the hon. Gentleman's request as that would take us well beyond the rules of order in the context of this debate.

I am happy to tell the House that the Government were not defeated in another place on the proposal that we are discussing today. This proposal was brought in in another place by a side wind. The proposal was not contained in the Social Security Bill as originaly drafted. It was introduced by a side wind.

That is an amendment that dragged the proposal into the context of discussion on the Bill. Their Lordships kindly did not press the matter to a vote and we were not defeated on the issue. I will not comment further on the other points raised by the hon. Member for Bradford, West (Mr. Madden).

I will not comment on them because to do so would be out of order.

I would now like to consider the principal proposal and the points of concern expressed by Opposition Members and by one or two of my hon. Friends. The main proposal, as the House is aware, is to limit the amount of supplementary benefit payable for mortgage interest to 50 per cent. of the total for the first six months on benefit for everyone under 60 years of age. The hon. Member for Oldham, West rightly acknowledged that that does not apply to people over pensionable age or to those slightly under pensionable age in respect of men.

Some people might have been led to believe, by the controversy that attended the matter when the proposal was announced, that we proposed to abolish supplementary payments for mortgage interest. Quite apart from the issue affecting those aged over 60, it is important to understand the limited nature of the proposals. They fully protect those whose claims continue beyond six months and they do not affect those over 60. Our estimate, as the hon. Member for Oldham, West has acknowledged, is that the proposals affect about one fifth of the expenditure in that area — £30 million out of a total of £150 million. They will affect some 90,000 claimants at any one time. The figure of £30 million compares with £9,000 million which is paid to building societies in mortgage interest. The 90,000 figure must be considered against the 6 million borrowers.

We have made it clear that when a claim lasts more than six months, mortgage interest would be met in full. Moreover, where the limitation has caused arrears and these are capitalised into a higher outstanding loan, the extra interest on the higher loan would also be met. That is specifically designed to protect the position of those whose claim does not turn out to be short term.

I must stress to my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) that, despite the numbers of people who, unhappily, are unemployed for longer periods, most spells of unemployment, even now, are relatively short. Approximately one quarter of the people who become unemployed leave the register within four weeks. Half leave it within three months and two thirds within six months.

My hon. Friend continues to raise more worries as to why the hell we are messing with this matter. If, on my hon. Friend's figures, most people are unemployed for only a short time, two thirds for this much time and one third for that much time, we seem to be causing a lot of misery, woe and concern for peanuts. Why are we doing that? I suggest that my hon. Friend should say little and try to get the proposals through.

I hope that my hon. Friend will not dismiss the point that I was trying to make, especially as the hon. Member for Oldham, West specifically said that in some cases these payments can amount to significant sums of money and run into hundreds of pounds a month. In fact, people would probably lose tax relief as a result of the hon. Gentleman's proposal. It is legitimate to ask whether mortgage payments for people with large mortgages and in normally well-paid jobs, who may simply be between jobs or unemployed for a short period, should be completely picked up on supplementary benefit from day one—

and paid for through the tax system by many people whose income over the year will be significantly less than those to whom the supplementary benefit payments are being made. An issue of equity is involved, especially when we consider people with large mortgages who are out of work for short periods. I hope that my hon. Friend the Member for Selly Oak will not dismiss that point.

I am grateful to the Minister for giving way after he has drawn our attention to the reasons why the House should not support those people who are unemployed and who probably vote Tory rather than for any other party. Is not the Minister misleading the House when he suggests that these unemployed people immediately become eligible for supplementary benefit? Many people do not become eligible for supplementary benefit for a long time. It is not a case of people with large mortgage payments opting out of jobs and opting on to benefit. These people will have suffered a considerable drop of income over a long period of time before they receive benefit.

That may be true in some cases but not in as many as I suspect the hon. Gentleman may think. It will, of course, depend on the amount of capital the person possesses and that may rule him out of supplementary benefit.

I am sure that the hon. Member for Birkenhead (Mr. Field), with his expertise, would agree that if someone—albeit with a large income but who may conceivably have mortgaged himself to a high level and does not have much capital—unhappily falls into this position, the existence of the large mortgage is likely to bring him immediately on to supplementary benefit. If he has a mortgage payment of £200 or £250 a month, his supplementary benefit entitlement would be some £250 and £300 a month or possibly more if he has two or three children. In those circumstances it is unlikely that any other entitlement to income would rule him out of supplementary benefit. He may well get immediate payment of supplementary benefit for mortgage interest from the outset because of the sheer size of the mortgage.

What the Minister says is true, but he still needs to explain to the House why the Government are bringing in a measure that will hit their supporters more than any others.

The Government have made it clear that one of their concerns is to ensure fairness between groups within the benefits system and especially for those who are in low-paid employment, but not in the benefits system. In addition, we are anxious to focus the available resources as effectively as possible on those who most clearly need help. That is the context in which our proposal is put forward.

My hon. Friend must accept that the Government's proposal will increase anxiety among the unemployed. It must do so. Even if, as my hon. Friend rightly said, most people are unemployed for a relatively short period, they do not know that they will be unemployed for only a short time. In two towns in my constituency where 41 per cent. of the men are unemployed, the Government's proposal is increasing anxiety enormously. Even if people want to sell their homes, they cannot do so because there is no market for them. There are at least half a dozen families in my constituency where the fathers commute 300 or 400 miles during the week to get jobs, while supporting their homes in my constituency. There is no way that my hon. Friend can get away from the fact that the Government's proposal will increase anxiety.

I recognise the force with which my hon. Friend speaks and we shall take account of his anxieties alongside the considerations that I am putting forward. I must ask him to bear in mind that mortgage payments can also be a source of anxiety to those in relatively low-paid employment, who will often be paying the taxes to meet the needs on which my hon. Friend focused.

It is right for the Government to consider the balance between the various considerations, and that is precisely what we are seeking to do. We think that it is appropriate to strike a balance—

Yes, but I had better not give way too often, because I am sure that a number of hon. Friends wish to take part in this debate.

I am grateful to the hon. Gentleman. He must know that low-paid workers are most vulnerable to unemployment and intermittent spells of unemployment. The Government's proposal will hit those people. Will the Minister please not talk about people with massive mortgages? Such people are usually wealthy and will often have savings. They will not be hit. The low-paid struggling to keep out of unemployment — possibly going in and out of unemployment—will be worried, frightened and hurt by the Government's proposal.

That group can find that they are worse off being in low-paid employment than being on benefit. The linking rule proposals accept that there is a problem about people who are in work for short periods. We have sought to ensure in the draft regulations that they will not be disadvantaged.

We are seeking to strike a balance between a variety of considerations, including the amount of help that borrowers can legitimately expect to receive from the benefits system in securing a capital asset that will normally grow in value, the guarantee that a lender should expect from the benefits system in protecting the loan that he advances and what it is reasonable to expect the taxpayer to bear.

We have sought a balance that takes account of what is reasonable and sustainable for the borrower. The latest estimate of the average payment of supplementary benefit for the first six months on benefit is £16 per week. On that basis, the average amount to be paid on an outstanding mortgage if a claim lasted for the full six months—as I said, many will not — would be about £200, which hardly merits the sort of language used by the hon. Member for Oldham, West.

I am sorry that my hon. Friend the Member for Selly Oak has temporarily left his place, because I wanted to tell him that another consideration is equity between home owners who are out of work and can receive full payment of mortgage interest from the first day on benefit and home owners in work, but on low incomes that may not be much above the benefits that they would receive if they were out of work.

The hon. Member for Oldham, West raised a number of issues in connection with the figures that we put to the Social Security Advisory Committee. I do not think that the hon. Gentleman questioned the validity of the figures, which clearly show that working families with a £16,000 mortgage, which is the average loan outstanding for such families, have an income while out of work that is appreciably higher than their income while in work if they are in the earnings range of £80 to £120 a week. As to whether those families are representative—a point raised by the hon. Member for Oldham, West—the available data show that there were 130,000 working families — with children—who have mortgages of over £10,000 and earnings below £150 a week. Of those families, 30,000 had mortgages of over £20,000. The problem of equity cannot be dismissed as a trivial one.

We also provided data for families with a £10,000 mortgage and they showed that for the earnings range £80 to £120 a week, income from supplementary benefit was very close to income from work. Whatever else Opposition Members say, I hope that they will recognise that a problem exists.

Alongside our proposals and some of the considerations that led the Government to put those proposals before the SSAC, I have tried to put to the House the view that anyone concerned with the equity of the benefits system and the balance of demands made on the taxpayer and on those receiving benefits must address a range of questions.

There are questions to be asked about whether it is reasonable that the taxpayer should pick up the whole of the bill for purchasing an appreciating capital asset from the first day on benefit, even for what may be very short periods and when many of those paying the bills may be little or no better off than those whose bills are being paid.

No. I have given way enough.

There are questions about whether it is right that lenders should expect or be given the guarantee that this part of the benefits system implies and about whether we should maintain a system that can undoubtedly contribute significantly to the unemployment trap, which all of us agree should be tackled. We must also ask how far such expenditure can be seen as a proper priority at a time when there are so many other pressing demands.

I say no more to the House than that those are problems which can and should be addressed within our overall plans for social security, which seek to make the system fairer between those who are in work and those who are out of work, to tackle the unemployment trap and, above all, to ensure that the huge resources devoted to social security are channelled as effectively as possible to those who most clearly need the help that the taxpayer can and should provide.

Our proposals seek to address those problems. They have been put forward for consultation in the normal way and we shall, of course, consider the outcome of that consultation carefully and fully before coming to any final conclusions. We shall also consider what is said in the debate. In that spirit, I invite the House to reject the motion and endorse the Government's amendment.

4.38 pm

I am one of the two Opposition Members who are vice-presidents of the Building Societies Association. It is not a financial interest, but merely an honorary job, and I would have mentioned it only in passing if the Minister had not tried to cover up one of the weakest cases that I have ever heard presented to the House by making an aggressive attack on my hon. Friend the Member for Oldham, West (Mr. Meacher) and the Labour party.

The building societies movement, started largely in the north of England, came from the pennies of the poor. It was a working-class movement of people who tried to buy their own houses to save themselves from being ground down by landlords. The Tory party tried to hijack the owner-occupier from the building societies. The Government's proposals show the House, the owner-occupier and the public just how thin is their real love of the owner-occupier.

This takes me back to my childhood. My father bought his house, but my father-in-law, who worked in the same factory, steadfastly refused to buy his house. He could have afforded it, because he had more money than my father. He was a plumber, whereas my father was a labourer and a chargehand. My father-in-law would not buy his house because of the fear that if he lost his job he would be unable to keep up the mortgage repayments. Because of his fear, he lived instead in a council house. The Government are bringing back that fear.

I am appalled by how little the Minister understands the psychology of somebody who suddenly finds that he is out of work. These proposals will attack, not the long-term unemployed, but those who are out of work for the first six months. The hon. Member for Delyn (Mr. Raffan) clearly understands this point. He told his right hon. Friend the Secretary of State for Social Services that when a man becomes unemployed he does not know whether he will ever find work again. If he is lucky, he will be in work again within three or six months. However, he does not know that. He may be out of work for ever. In a constituency such as mine, or the consituency of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), the likelihood is that if a person loses his job he will be out of work for ever.

Does the right hon. Gentleman agree that this measure discriminates most against those parts of the country that are hardest hit by unemployment? In my constituency a quarter of the labour force have lost their jobs in the last 15 years. These are the people who will be hit the hardest. They know that they will be out of work for at least six months. This measure will break their backs. They are desperately looking for jobs, but there are no jobs for them.

I am grateful to the hon. Gentleman for what he has said. He is another Member with sense on that side of the House. I hope that he and the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) will prevail upon the Government to drop these stupid proposals.

The reasons for the proposals have varied. The Green Paper "Reform of Social Security", volume 2, Cmnd. 9518, argued in paragraph 2.92:
"The government wish to introduce changes in the system to reduce the discouragement for owner-occupiers to return to work that can apply under the present interest payment commitment."
The Minister did not say that today. The spokesman for the Department of Health and Social Security did not say that either. The reasons that the Department gave were to
"reduce the inequity in treatment between home owners on benefit and those in work: share responsibility for helping those on benefit with mortgage liabilities between the state and the borrowers, and lending organisations; reduce the burden on the taxpayer; not affect long-term pensioners".
The Minister does not dare to say that the proposals will discourage owner-occupiers from returning to work, but that is precisely what they will do. If a home owner becomes unemployed because of the Government's policies, after six months the Government's darling is no longer loved. The home owner becomes a feckless individual who will not go back to work because he wants the state to pay his mortgage. That is precisely what the Government are saying in these proposals.

The Minister referred to the inequity between a person in work who is paying a mortgage and a person who, through no fault of his own, loses his job and is on the dole. I repeat that the most vulnerable time when he is on the dole is the first few weeks. His whole world collapses and he finds that he may also lose his home. The Building Societies Association and individual building societies say —the hon. Member for Delyn will appreciate this point — that when people become unemployed the vast majority of them will starve rather than reduce their mortgage commitments. They pay their mortgages up to the hilt and hope that their building societies never find out that they have lost their jobs. They are ashamed to be out of work. Above all else, they will try to keep a roof over their heads. The same is true of council tenants. Above all other expenses, they will pay their rent. That is an ordinary, working-class concept which the Minister probably does not appreciate.

I have already mentioned that the Minister referred to inequity. Let me therefore consider two semi-detached houses on a council estate. In one of the semi-detached houses there is an owner-occupier. He has been led—or misled—by the Government into buying his house. Next door, there is a local authority tenant. If the Minister is looking for inequity, he can find it there. The owner-occupier finds that, for the first six months, half his mortgage interest cover disappears at a stroke. However, the council house tenant next door does not find that half of the rent is taken away from his supplementary benefit.

I hesitate to push the anomaly too far. Knowing this Government, their next step will be to cut by half their payment of rent to council tenants who are on supplementary benefit. That is a glaring inequity. The owner-occupier will say to the Government — a Government who are proud of the fact that they introduced the right of ownership — "The chap next door was right. He is better off than I am. I was a fool to buy this house and to listen to you. Where do I stand now?"

The inequity goes much further than the full payment of rent. I understand that the amount that the DHSS allows a person who is on supplementary benefit for the maintenance of the insurance premiums on his home is £1·85 a week. The average cost, taking into account both maintenance and insurance, is at least £6 a week. Therefore, he is worse off even without this measure, which will reduce the amount of money that he receives.

I speak, not on the behalf of the association, but as a vice-president of the Building Societies Association. I deplore the cynical way in which the Government intend to halve mortgage interest cover for the first six months. They know perfectly well that building societies are mutual institutions and that they are also caring institutions, They care about their borrowers. If payments are missed for a few months because somebody is ill or out of work, all he needs to do is to tell his building society, and in 99 per cent. of cases the building society will look after him and say that it is a temporary lapse.

If the borrowers cannot meet their interest payments during the first six months, the Government hope that the building societies will carry them. They hope that the building societies will pick up the tab for the Department of Health and Social Security. I think that the building societies will do just that. However, it is both unjust and inequitable. It is inequitable because building societies are not companies. They are mutual institutions. Having picked up the tab, the building societies will pass it on to other borrowers and to investors. However, it gets the DHSS off the hook.

I thought that the Minister was going to say that people should insure against redundancy. I am glad that he did not do so. It is possible to insure against redundancy, but the problem is that those who insure against redundancy feel almost certain that they will never become redundant. The vast majority of borrowers do not take out that kind of cover. If a section of the community were to insure against redundancy, and they were almost certain to benefit from it, the premiums would be impossibly high and the ordinary borrower would be unable to afford to take out insurance against redundancy.

Is the right hon. Gentleman aware that at least one of the policies of that kind that I have seen offers insurance against redundancy for up for two years? It costs only £39, irrespective of the size of the mortgage, and covers the whole of that two-year period.

As the hon. Lady says, that is for a two-year period. A person who is taking on a mortgage and who takes out insurance usually takes out health and redundancy insurance. The insurance companies encourage people to take out health insurance as well. The hon. Lady said it costs £39 for two-year cover, but the vast majority of people do not take out such insurance and are unlikely to do it unless they feel that they are likely to become victims of unemployment.

The country at large believes that the Government have introduced this measure largely out of spite because of the way in which building societies behaved during the miners' strike. Miners are good customers of building societies. They are respected by the societies, and when the building societies knew that the miners were in a temporary difficulty they looked after them during the difficult period of the strike. I think that because of that the societies incurred the wrath of the Government. Many miners are owner-occupiers, especially in the north of England.

If the Government really believe that their darling owner-occupiers on whom they have prided themselves in the past are the feckless people that this measure suggests, and that they will not work because the Government are paying their mortgages, a simple remedy is available — treat mortgage interest payments for a person on supplementary benefit in the same way as rent payments are treated. That means direct payment of the interest to the building society by the agreement of the borrower and his building society.

I almost sought to intervene a moment ago, but restrained myself. The right hon. Gentleman missed the point in what he said about the expectations of the building societies in relation to those on benefits. Large numbers of people who may have similar difficulties with their mortgages may not be on supplementary benefit, and the building societies and mutual associations will readily and rightly help such people for the sort of time that we are talking about.

The right hon. Gentleman went further and praised the building societies for the help that they gave to the miners who were on strike for a long time. Is he saying that it is right for the building societies to be expected to assist people on strike, thereby depriving themselves of income, but entirely wrong to expect them to adopt a similar approach to those who are in difficulty for any other reason?

The Minister has misunderstood what I said, perhaps maliciously. Building societies are mutual institutions that are owned by their members, and the borrower is just as much a member as the investor. A different relationship exists between a building society borrower and any other sort of debtor. That is because he joined the building society when he became a borrower and is a member of that society.

If the Minister thinks that people who are unemployed are feckless and likely not to return to work, he could introduce a system of direct payment of interest to building societies in the same way as there is direct payment of rent to local authorities. Many building society borrowers would welcome that. They worry about their mortgages being paid and would voluntarily enter into such an agreement with the DHSS. Many of my constituents ask me whether they should write to the DHSS office about the direct payment of rent. They want to do that so that they can be sure that they will not fall into temptation and get into difficulties with their rent.

This is a miserable measure, which attacks people when they are most vulnerable. The Government hope that because they are caring associations the building societies will carry the cost. I hope that the Minister will not go ahead with his proposals and that he will listen not only to the Opposition but to the wise words uttered in interventions by his own hon. Friends.

4.55 pm

I welcome the new proposals that my hon. Friend the Minister has described — the proposals that cover further advances and mortgage protection policies. If it is necessary, I declare my interest as a director of an insurance broking company. The disregard for mortgage protection policies will be most useful. I have been kind so far, but I am afraid that I may not be so kind hereafter.

I should like to make three points about the Government's proposals. First, if the motive behind these proposals is simply the achievement of an economy I am totally opposed to them, because that reason alone would not be justification for the proposals. The figure that has been suggested is £30 million, but that theoretical projection is unlikely to be achieved, for reasons I shall give in a moment. I am just as anxious about what I would describe as the psychological effect of these proposals as about their practical effects—in exactly the way that my hon. Friend the Member for Delyn (Mr. Raffan) described the matter in his first intervention, when he spoke about the anxiety of unemployment.

My hon. Friend the Minister is right to be apprehensive about any disincentive to return to work in the existing arrangements. He pointed to the relatively favourable position of people on benefit when they were compared especially to low-income families that were in work. My own apprehensions are about exactly that effect being achieved by the proposals. It is possible for the scope of these proposed changes easily to be exaggerated —usually for political reasons, as happened during the speech by the hon. Member for Oldham, West (Mr. Meacher).

The proposals provide for a 50 per cent. reduction in the first six months; thereafter, interest payments will be met in full. I see that change during and after six months providing a positive incentive for exactly what my hon. Friend the Minister must not want to see. I anticipate that some of those who find themselves in this position will recognise the loss that they are incurring in the first six months on supplementary benefit and will be encouraged to prolong unemployment beyond the six months in an attempt to recoup what they initially lost. I am sure that the Minister does not want to see that, any more than any hon. Member would want to see it.

Worse still, that disincentive to return to employment might become a permanent feeling. I am sure that all hon. Members agree that we ought to offer every encouragement to the spirit of enterprise in people who, through no fault of their own, find themselves out of work.

I do not want to make any exemptions here, but of all the cases that would be covered, the ones that come most easily to mind are the cases of executive and middle management people and those making their way in careers that have been interrupted too early. In a positive manner we ought to offer them every encouragement for a return to work. We should not do that in a negative fashion but should seek to end the position of such people being a cost to the taxpayer. That is a desirable objective, but equally important is their own contribution to wealth production and the continued regeneration of the economy.

I accept my hon. Friend's perfectly reasonable concern for those who are unemployed and for the difficulties that they face. I am sure he would also wish to be fair to taxpayers. It would be wrong for the taxpayer to allow an unemployed person to benefit from a capital gain at the taxpayers' expense. Does my hon. Friend feel that a fairer way to deal with the matter would be for the person who needs to go to the DHSS for help with payments to agree to an entry being made against his land registry title to the effect that any capital gain acquired should be recouped by the taxpayer when the property is sold?

I am grateful for that intervention. I am aware of the need to be fair to the taxpayer. Nor should we ignore the comparison with people in low-paid work. We should do everything possible to encourage people back into work and to stop them being a cost to the taxpayer, but my hon. Friend's proposition of a notation in the land registry about any capital gain made for the relevant period would be difficult to achieve in theory, let alone in practice. People might try to sell their house in an area in which unemployment is felt heavily, but there may be no sale and no capital gain because others in the area are in the same boat.

The theoretical savings of £30 million will not necessarily be achieved. The right hon. Member for Halton (Mr. Oakes) spoke about transferring the burden from taxpayers to building societies. The saving will not necessarily be made, because most building societies will try to be as reasonable and helpful as possible to borrowers. It is likely that building societies will accept 50 per cent. of interest payments for the first six months as a matter of course, rolling up the rest of the payment until after that time, when the 50 per cent. saved would have to be picked up by supplementary benefit. The burden on building societies would be thus relieved, with no saving for the taxpayer.

There might be room for abuse in the present arrangements for supplementary benefit mortgage interest payments. That is less likely to happen when a person is unemployed and has no immediate prospect of employment than when a person is unemployed but has a reasonable certainty of employment before too long. Such a person might take advantage of the supplementary benefit payments to bear mortgage interest payments. Such cases are not likely to be many and the proposal of a six-month period to cover them is excessive. We are taking a sledgehammer to crack a nut.

I listened to what my hon. Friend the Minister said and I shall listen to the rest of the debate. I cannot promise that I shall be able to support him when the House divides, but we are talking only about proposals in draft. They have not yet received the formal consideration of the Social Security Advisory Committee. If they return to the House in anything like their present form, I would not be able to support them. It would be far better if they did not come back, and never saw the light of day.

5.4 pm

I agree with much of what the hon. Member for Cardiff, North (Mr. Jones) said. He advanced a potent argument about the psychological, as opposed to the practical, effect of these proposals. He also mentioned the disincentives that they might lead to. He rightly observed that building societies might mitigate the cost of mortgage interest by accepting only 50 per cent. of it for the first six months. His arguments led me to my original conclusion, that, as he said, we are taking a heavy sledgehammer to crack a nut.

The Minister started by belabouring the official Opposition Front Bench about their attitude to the sale of council houses. He rightly observed that the Government are intent on increasing home ownership. That being so, an increase under this Budget heading must have been inevitable. Between 1975 and 1983 expenditure on mortgage interest relief has increased more than seven times and expenditure on supplementary benefit has increased more than four times. What level of expenditure would the Minister countenance as reasonable? There must be an acceptable increase. The Government have to make a judgment about that.

The hon. Gentleman will have noticed that I did not refer to the level of expenditure at all in my speech. I put the weight of the argument on fairness, equity and incentives, which are the real points at issue.

If the Minister tells me that, I accept it, but I suspect that the Treasury saw the increase and obliged DHSS Ministers to make a change.

The Minister also said that there has been no mystery about how the proposals have been introduced. That is true for the proposal concerning mortgage interest repayments. I might have missed something, but I did not think that, when the proposals were first mooted in the Green Paper and then followed through to the White Paper, they would affect the disabled and single parents. The Minister referred, almost in passing, to the other two changes concerning home loans for business purposes and restrictions on unnecessarily high costs in relation to other housing in the area. I may have missed something, but I believe that neither of those changes saw the light of day until a few days ago. There is therefore an element of mystery.

The Minister's case was minimalist. The more I listened to it, the more I agreed with the hon. Member for Birmingham, Selly Oak (M r. Beaumont-Dark), who said that the game was not worth the candle in terms of the anxiety caused. In an intervention a moment ago, the Minister said that he is interested in equity. What representations has he had from low-paid workers that this is a monstrous inequity which they want put right? He said that this issue must be addressed. It sounds as though he as been forced, lobbied and pressed heavily by a group of people who consider themselves to be at a disadvantage. Has the Minister had any representations to that effect? I doubt whether he has. If he is interested in the equity argument, the answer is clear and is lying in his hand for him to use if he wishes. As was suggested to the housing benefit review team, he should apply standard housing benefit and extend it to mortgage interest payments to redress positively, not negatively, the question of equity.

The Minister said that the issue must be addressed. However, as I understand it, the concept of the welfare state is to make provision for unaccountable misfortune and circumstances that cannot be foreseen. A classic example would be people who suddenly and unaccountably lose their jobs. In such circumstances, for the welfare state to withdraw an element of support, as the Government seek to do, would run counter to the provision, thrust and principles of the welfare state.

This is a sneaky move in so far as the Minister is taking £30 million out of the budget of people who do not know that this may happen to them. It is a soft target, because who knows when he may lose his job or be caught by this provision? It is an easy cut to make because no organised lobby will protest against it, apart from Government Back-Bench Members, such as the hon. Members for Delyn (Mr. Raffan), for Selly Oak and for Cardiff, North, who are acutely on the ball in this regard.

This is a false economy. Have the Government taken into account the increase in housing benefit that will accrue as a result of the changes if arrangements are not entered into with building societies simply to roll over the payments, so that the supplementary benefit system will pick them up after six months? Surely people will be made homeless as a result. If they are made homeless, they will be priority cases for local authority housing, and that would lead straight to housing benefit applications and claims. Does the £30 million that the Government hope to save take into account the increased cost of housing benefit? If not, the Government have got their sums wrong.

The Minister and the Government generally have made great play of their consultations with the building societies and local authority associations. That was as far as we got in Standing Committee in terms of a positive response from the Government at any stage when the issue was raised. I have yet to see — again, I may have missed them — any results from the consultations that the Government had with the local authority associations or the building societies. I should be interested to read any exchanges, correspondence or minutes of meetings that suggest that any of the organisations were enthusiastic about or warmly endorsed this proposal.

The Government are making some play of the fact that mortgage protection policies are available to mitigate some of the worst effects of the change. As a practising solicitor before I became a Member of Parliament. I was involved with mortgage protection policies, so I know that they have extremely restricted provisions. Only the larger building societies offer them, and then only in restricted circumstances. The Government should not adduce them as a measure of protection available to people who would otherwise be hit by the proposals.

I have in the past seen the Minister persuade his Back-Bench Members with an almost impossible brief, but having listened carefully to him today, I think that he has signally, for the first time, failed to a greater extent than at any time during the two years in which I have been watching him.

5.14 pm

I have listened with interest to the comments made by the Opposition. I wonder whether hon. Members realise that it has never been automatic to pay 100 per cent. of mortgage interest. I have examined several Supplementary Benefits Commission reports, and I was interested to find that one of its annual reports drew our attention to the increasing cost of mortgage interest repayments. It stated:

"Our policy is to regard these outgoings … as reasonable for supplementary benefit purposes if they were reasonable at the time they were entered into. If they were not, the claimant is given at least six months to move."
That was from the 1979 report, Cmnd. 8033.

Even the Labour Government were being rotten to mortgage interest claimants on supplementary benefit. Any suggestion that is started to happen, or was proposed, under this Government is nonsense. Those rules have been in operation for a long time.

Does the hon. Lady accept that there is a difference between that provision, which remains part of the supplementary benefit scheme ensuring that excessive payments are not made to people who have overextended themselves, and which is a necessary safeguard, and a completely arbitrary cut, irrespective of whether outgoings are reasonable, which is what the Government propose?

Provided that the hon. Gentleman will accept—I am sure that he made a lot of fuss about it in those days—that the Labour Government did it, too.

That was the Supplementary Benefits Commission—

I am sure that the hon. Lady will get an opportunity to make her own speech later.

It is well to remind ourselves, if we may, of the genesis of these proposals. During the year-long miners' strike, striking miners did not qualify for full benefits. They managed very well on the supplementary benefit paid over for their mortgages. The building societies actively cooperated and colluded with them during that time. As a result, the DHSS, not the National Union of Mineworkers, was the main source of finance and support for the families of striking miners, and as a result extensively prolonged the strike.

My local pitmen were different from those who received such assistance in two ways: first, they had a ballot; and secondly, they voted to work and did just that. As a result, they had no extra help with their mortgages during those 12 months. They felt exceedingly badly about that. The strike should have come to a conclusion far sooner than it did, and had the building societies not acted as they did, I am sure that Mr. Scargill would have got his comeuppance much sooner.

It is also worth pointing out that this is the main form of assistance for housing that is still paid to the householder. Under housing benefit, council rents and rates are paid direct, and only private rental property allowance, which represents a tiny percentage of the total paid in housing benefit, is paid to the householder.

No. The hon. Gentleman, who is extremely talented and knowledgeable, will no doubt make his contribution in a few moments.

As the right hon. Member for Halton (Mr. Oakes) rightly said, we could tackle the problem differently. It might be better to change the rules and make them closer to those for other housing benefit claimants, so that supplementary benefit would be paid straight to the building society and could be used only against mortgage interest payments. That would achieve the objective of protecting a man's home without giving assistance and encouragement to industrial disputes. I commend that suggestion to the Minister. I understand from a written reply that it is already done for mortgage defaulters or others if it is
"in the overriding interests of the claimant or his family to do so."—[Official Report, 12 February 1985; Vol. 73, c. 158.]
We have that right and that power and, if we were being really hard-nosed, tough and aggressive during an industrial dispute, we might use that power once again.

We are a long way from the miners' strike, and it is unlikely that, at least as long as we have a Conservative Government led by my right hon. Friend the Prime Minister, there will be another miners' strike or another similar industrial dispute. I noticed that the teachers made sure that their pockets were not hit in any way during their strike and that they did not make any claims on the social security system.

The Government have three objectives, and they are all laudable: first, to reduce spending, which is something that we were twice elected to do. We have not been terribly good at it, but we intended to do it. The second objective is to encourage people to take responsibility for themselves and for their welfare. That is a necessary objective in a free society. The third objective is to avoid the disincentive of returning to work if the payment for that work is not sufficient to pay the mortgage. Some of those objectives have been welcomed by responsible bodies. In paragraph 337 of its fourth report of 1985, in which it responded to the Green Paper, the Social Security Advisory Committee said:
"We accept that for some claimants the present arrangements may operate as a disincentive"—
it gives an illustration of this—
"and that it is also questionable whether public funds should be used to help individuals acquire an appreciating capital asset whilst they are dependent on means-tested benefit."
A Building Societies Association report, published in January 1985, also recognised the supplementary benefit scheme as
"almost certainly the most generous in the world."
Therefore, we should recognise that some of the Government's proposals have had their supporters.

I am a little sceptical about the claim to save money. My hon. Friend the Minister will know that I always want to know what social security proposals will cost, whether we shall save anything, or whether they will — as is usually the case—end up costing much more. The first thing that I found was that the DHSS does not know how much it spends on this sort of benefit. In a written answer on 23 May 1986, which was addressed to the hon. Member for Shelter, the hon. Member for Fulham (Mr. Raynsford), it was announced that the DHSS knew the cost in 1983—£150 million—and thought that it knew how many people had claimed in 1984–277,000—but that it did not know the cost for 1984 or for 1985. I could lay odds that it does not know the cost now, yet mortgage interest information has been collected as a separate item since 1983. Somebody must know.

It is a little alarming that we should be asked to swallow whole the claim that a lot of money will be saved when the Government do not know the cost in the first place. I am also slightly sceptical about the suggestion that we will save £35 million. I hope that my hon. Friend the Minister can answer this point. He spoke about 90,000 people and a cost of £200 each. That works out at not £35 million but £18 million. In that case, it looks as though we are taking a substantial sledgehammer to crack a nut.

If it is only 90,000 people at any one time, it would be interesting to know how the DHSS reached a figure of £35 million, whether it has any idea of how many people will be affected, and if so, who. It works out that the figure is about £8 a week, but I am slightly sceptical, because the social security policy inspectorate, which did some research on this issue, found that the average payment for the entire mortgage was £16·64 a week in 1984. Of that, th amount for interest was only £12·11 a week. That suggests that we would be saving about £6 a week, not £8. However, I look forward to the comments of my hon. Friend the Minister.

My hon. Friend the Minister knows that I support almost anything that saves money on the social security bill. I just want to be sure that we do save money, and that the savings are not a chimera that will vanish if the essential administrative costs, such as finding out how much the darned thing costs in the first place, are added up.

The Government's proposals may well achieve other objectives that are less desirable, particularly to Conservatives. They may well discourage home ownership in some parts of the United Kingdom. I do not think that they would do so in my part of the United Kingdom, where unemployment is low, but they may well have an effect on some families who, until this Government came to power, had no choice but to be council tenants. I refer, for example, to single-parent families.

The social security inspectorate inquiry found that on the whole claimants had managed to negotiate and were able to maintain their payments. Thus, the proposals may not affect existing borrowers, but they may well affect potential owner-occupiers. We do not want to put people off from owning their own homes. In particular, we do not want to treat those living on council estates differently. But it just does not wash to argue that the proposals will make people homeless. We are talking about £6 a week, when somebody may be obtaining benefit of £100 or more. Thus, the proposals may well be neither here nor there in that respect, but the myth will have its effect, and that may well discourage the few people whom we most want to care for.

I support another suggestion that has been made. My hon. Friend the Minister will remember that I wrote to him at the time of the Green Paper to ask whether he was serious about the proposals. He told me that he was pursuing discussions with the insurance companies. I believe that we should chase up the possibility of getting proper insurance cover. This would probably save nearly all the £150 million which, back in 1983 at least, we thought the scheme cost. It would encourage more home ownership, because people would have some security. It would help to make people more responsible and would prevent funds being used during industrial disputes. The insurance companies would be exceedingly loth to pay out to a claimant who had himself been responsible for his circumstances.

I believe that we should make private redundancy and sickness insurance compulsory for all mortgage holders. There are already redundancy policies. The best ones seem to come from Yorkshire, where there seems to be some true grit. The Skipton building society is offering loans with a rate guaranteed to stay at 9·9 per cent. as long as people take redundancy insurance through General Accident and Life Assurance Corporation plc. The Scarborough building society is offering a mortgage care insurance scheme, providing cover against redundancy, sickness, or any other event that may prevent a borrower from working. That costs only £5 a month for every £100 of mortgage payment and works out at roughly £5 for every £10,000 borrowed, which is peanuts.

I have listened to the hon. Lady carefully, and she is making an important point. Does she accept that people do not make much use of such policies at present? If so, and the hon. Lady's suggestion is taken up, more people will have such policies and the premiums will go sky high.

On the contrary. I am not an expert on insurance, but, as the right hon. Member for Halton said, most of those who take out policies are those who face the risk of redundancy. If such policies are compulsory, the risks will be spread much more widely, so there will be no reason for premiums to rise.

The National Association of Estate Agents has a scheme entitled the redundancy mortgage protection scheme, which helps the borrower to pay his mortgage instalments for a period of up to two years. It covers endowment mortgages as well. It costs just £39 for the initial two-year period. Again, that is peanuts. If the cost of such schemes to the insurance companies is so low now, I cannot imagine that it would rise if all of us, even including hon. Members were protected similarly. I believe that the cost would fall and that it would be very good business. It is worth pointing out that all those schemes are much more generous than any scheme that the Government could afford.

I tried to find out how much business the insurance companies were doing, but that turned out to be difficult. because they cross-subsidise. However, according to figures published by the Association of British Insurers, premiums for permanent health and other long-term insurances in the United Kingdom, which would include this type of insurance, increased from £129 million in 1984 to £142 million in 1985. I bet that those firms would not accept that sort of business unless they found it extremely worth while.

I promise to be brief, and I am grateful to the hon. Lady. Are there any geographical differences in the insurance premiums that she has advocated at such length? If there are, I rather think that my constituents would have to pay higher premiums, because the current male unemployment rate in my constituency — unlike that in hers—is fully 26 per cent.

I take the hon. Gentleman's point. I cited the National Association of Estate Agents and its scheme. However, in many parts of the country, including the hon. Gentleman's constituency, housing is much cheaper, and mortgages are consequently much smaller. There may well, therefore, be some balancing out.

If we take the view that we do not allow someone on the road without compulsory insurance, perhaps we should not allow anyone to take out a mortgage without some compulsory insurance that has an element of protection against falling earnings. The Government could then leave the supplementary benefit rules intact, and could protect their caring image, which we are all keen they should do. The state would not be needed. We could save, not £18 million or £35 million, but perhaps more than £100 million of good public money. We could then put it to better use by making, for example, tax cuts, and by returning that money to the taxpayers' pockets.

Whenever an attempt is made to cut the take from the taxpayer by altering social security provison, Opposition Members react like a flock of radioactive sheep. They bleat loudly and disagreeably and glow gently from their exertions. They recognise neither the problem nor the worthwhile objectives of the Government. They do not propose any solutions, and intend only to keep on spending. That is why I am happy to support the Government in the Lobby, but I hope that they will rethink parts of the proposal and in so doing look after the interests of the home owner and the taxpayer alike.

5.29 pm

This has been an extraordinary debate, because, with the exception of the hon. Member for Derbyshire, South (Mrs. Currie), the Minister has clearly had the greatest difficulty in ensuring any support from his Back Benchers, and has had considerable difficulty in sustaining his argument. It is clear that the measure that we are debating is not just wrong in principle but damaging to a large number of people. It is untimely. It flies in the face of public opinion and the informed opinion of those who have commented on the Government's social security Green Paper, and in the face of the opinion on the Government's Back Benches.

What is all this for? We are talking about a possible saving of £30 million—hardly a significant sum. There are even doubts as to whether the full amount of that will be saved. We are not talking about large numbers of people but about approximately 90,000 out of the 277,000 who, at the last count, were recorded as receiving assistance towards their mortgage interest payments from the DHSS. I hasten to add, as a correction to what the hon. Member for Derbyshire, South said, that this is not the largest group of people receiving direct assistance towards household costs. I tried to intervene earlier to put her right. Approximately 1 million households in the private sector are receiving rent allowance. I am sure that she would not have wanted to mislead the House on that.

The background of the measure is the extension of owner-occupation, a continuous trend for many years and one that has been supported by the Government, but which has inevitably involved an increase in the number of home owners on low incomes. Therefore, there are more home owners at risk of getting into difficulty over repayments. The increase in mortgage arrears was referred to by my hon. Friend the Member for Oldham, West (Mr. Meacher), and I reiterate the scale of the figures. At the time of the 1979 general election, when the Government came to office, there were 8,420 households with building society mortgages more than six months in arrears. By 1983, the figure had risen to 32,000 and by 1985 to 60,390. A further 14,000 were similarly in arrears over local authority mortgages.

That considerable increase has been accelerating, and is paralleled by a serious increase in the number of repossessions by building societies, from just 2,500 houses in 1979 to 7,000 in 1983 and to no fewer than 16,590 last year. That is a huge surge in the number of people who lose their homes because the building society repossesses, generally because of mortgage default. A further 1,000 homes were repossessed by local authorities in 1985. That gives a measure of the scale and increase of the problem. It is hardly surprising, given the increasing trend—

My hon. Friend has referred to the scale of the problem, which is truly staggering. I ask him a question similar to that which I asked the hon. Member for Derbyshire, South (Mrs. Currie) earlier. Has he any information concerning the geographical distribution of these scandalously high statistics of repossessions?

Unfortunately, I do not have any information immediately available, but information on which I can touch later will concern the incidence of homelessness relating to mortgage difficulties, and shows that the problem is particularly acute in the north, but not much of a worry in London and the south-east. There is a regional bias to the north in terms of homelessness and that may be reflected in the mortgage difficulties, although I do not have the precise figures.

It is not surprising, given the background of those figures and the increasing number of people in difficulty, that DHSS expenditure on mortgage support has gone up. It would be amazing if it had not. One of the few points on which I agree with the hon. Member for Derbyshire, South is that it is somewhat unfortunate that the DHSS is not able to give figures of the cost for later than 1983. That seems a rather poor basis for policy making. In 1983, it cost £150 million.

Such a figure is small in proportion to total social security expenditure and to the other form of assistance for mortgages — the mortgage interest tax relief arrangements. To cut this assistance now, against the background of an escalating problem, and growing need, and a larger number of people at risk of having their homes repossessed, is remarkably irresponsible, even by the Government's standards.

Let us look at the argument advanced in favour of this change. The Minister has already conceded that the cost argument is not fundamental, but he nevertheless advanced it. The cost is hardly enormous when compared to mortgage interest tax relief, which has gone up from £1 billion in 1979 to £4·75 billion—an enormous escalation. Of that, some £250 million or more is paid out in higher rate tax relief. In other words, it is going solely to people with substantial incomes. If it were necessary for the Government to seek savings from home owners, and if they wished to do so without hurting them, they would target it on those best able to take the cut. Those paying at the higher rate would be the obvious target. The Government would be taking away benefit from people who would not be hurt and a much better saving would be yielded — £250 million as against £30 million—were they to make savings at the expense of home owners who could well afford to pay a little more towards housing costs. It is interesting that this group has not been targeted, and that says a great deal about the Government's social priorities and values.

Those figures also show much about the Government's second argument, that of equity. The Minister argued that the present arrangements were unfair on low-income home owners and I agree that that is a case. The present arrangements do not ensure adequate assistance for low-income home owners at work, who may be having difficulties meeting their repayment costs with the relatively small amount of assistance that they get from the mortgage interest tax relief. They may have even greater difficulty in meeting unexpected additional costs—for example, repairs.

The inadequacy of the mortgage interest tax relief for low-income home owners is clear. The average value of mortgage interest tax relief for those on low incomes— of, say, between £4,000 and £5,000—worked out at the last count at some £250 a year. For those with an income of over £30,000 a years, whom it might be assumed could afford to do with a little less assistance, the average value of mortgage interest tax relief is some £1,400 a year—almost six times as much. This is a measure of how inequitable the current system is. It gives the greatest assistance to those who could perfectly well cope with less but it does not give adequate assistance to those on low incomes who need more towards their mortgage repayment costs.

Low-income home owners get assistance towards their rates, under the housing benefit scheme. Here we come to the nub of the matter. Is there not an acute anomaly if low-income home owners can get assistance towards their rates under the housing benefit scheme but not towards their mortgage repayments? That anomaly was identified by the housing benefit review team appointed by the Government to look into the issue. It reported with a recommendation that the anomaly could be covered by making mortgage interest payments eligible for assistance under the housing benefit scheme. That is an equitable proposal.

The Government did not accept that proposal. I suspect that they did not, simply because the estimated cost was £100 million, but this returns us to the argument about how such costs could be met. If the Government were serious in their view, which was much talked about in the social security review, of the need to target assistance more effectively on those most in need, withdrawing assistance from those who could probably do without it would ensure that there was real value for money. If those paying tax at the higher rate and getting £250 million of mortgage interest tax relief, lost that help, the Government could afford to fund the housing benefit scheme covering mortgage interest payments and make a saving. That is the answer if the Government are serious about equity. Unfortunately, I do not believe that they are serious.

The Government's proposals are not as damaging or severe as originally foreshadowed in the White Paper. Those proposals were universally condemned. In response to that condemnation the Government, rather than doing the sensible and obvious, and accepting that they had blundered, decided to be weak. They watered down the proposals to make them less severe and hoped that they would get away with it. How often have we observed that response to criticism from the present Government, particularly from the Social Security Advisory Committee and others?

The Government have gone a bit too far. They have trimmed the proposals in the hope that they would get away with it, so now we have a watered-down fag-end of a proposal which is less extreme than the original because it does not affect all those who are assisted with mortgage repayments and does not cover all the payments during the first six months. The proposal is no less damaging for that. It will have dire effects on some groups.

The hon. Member for Birmingham, Selly Oak, (Mr. Beaumont-Dark) made a telling point when he asked why the Government should penalise people when they were at their most vulnerable, in the first six months of unemployment and find it most difficult to cope with repayments.

What about the disincentive effect, on which the Government have not provided an answer? If assistance is to be available only for 50 per cent. of the mortgage interest in the first six months, anyone who has gone through those first six months will then qualify for the full amount. They will find it difficult to consider taking an insecure job because if they lose the job they will, once again, have to cope with 50 per cent. of the mortgage interest repayments for six months. The disincentive is clear for those who have been unemployed for six months and resume work because subsequently they might risk having to pay the 50 per cent. mortgage interest repayments.

What happens if a building society decides not to reschedule the debt? That might happen if little equity is outstanding on the property. That would create homelessness. The figures are telling. In 1979, a total of 4 per cent. of those accepted as being homeless by local authorities were homeless as a result of mortgage arrears. Last year that figure had risen to 10 per cent. — the highest on record. Does it make sense to risk increasing the numbers at risk of homelessness by withdrawing assistance?

What about others at risk, such as single parents? According to the latest figures, about 35,000 people are in that position. In my experience, that group most often face the most acute problems early in their claim for supplementary benefit, usually after the breakdown of the marriage or the relationship and when there is a sudden loss of family income. This means risking losing the family home and, becoming homeless.

Many advice agencies concentrating their help on such people know how important it is to get in at the earliest possible moment and to discuss with the building society the possibility of a remortgage if it is necessary to buy up the other party's equity to keep the wife and children in the matrimonial home. The loss of 50 per cent. of the mortgage interest in the first six months could be a critical factor which prejudices the prospects of a successful negotiation. Finances in such cases are often finely balanced. People in that position are most likely to be penalised by the proposal. Homelessness might be intensified specifically by the Government's proposal.

The Minister's response is threadbare. I hope that it was not intentional, but the Minister misled the House in saying that the taxpayer was meeting the full cost of people acquiring an appreciating asset. The truth is that supplementary benefit meets only interest payments. A safeguard is not very expensive, but it meets an important social need.

If the Government are looking for equity, they have a clear alternative which will ensure that proper help goes to home owners. Will the Minister accept that his case is threadbare? Instead of trying to push this fag-end of a proposal, which has been watered down in the face of enormous criticism, will he recognise that there is no support for it? The proposal is widely condemned and ill-considered and will cause hardship. Will the Minister accept that and withdraw gracefully, instead of stubbornly trying to push through a proposal which is so widely condemned?

5.46 pm

I do not share the expertise on these matters of the hon. Member for Fulham (Mr. Raynsford), but I know how the measure will affect large numbers of people in my constituency. As I said in an intervention, unemployment in Delyn is high.

I have considerable respect for the Minister. I say that although I will he critical of the measure and of his speech.

Hon. Members on all sides share that respect. Few Ministers have to write more letters or have to answer for more. The same can be said of his colleague on the Front Bench, my hon. Friend the Under-Secretary of State for Health and Social Security.

I did not find my hon. Friend's speech convincing. It was a south of England speech. I do not mean to be rude by that. The Minister put emphasis on the short-term unemployed and said that most of the unemployed would find jobs within six months. How do we know that a person will find a job within a certain period? The Minister's constituency is in Essex, and the Under-Secretary's constituency is also in south-east England. The unemployed there have a much better chance of finding a job within six months than my constituents who live in the north, in the industrial and economic front line. I am not digressing. That is crucial to my criticism of the measure.

My constituency has suffered massive structural unemployment for the last 15 years because of its over-dependence on two industries — steel and textiles. Courtaulds employed 7,500 men and women in my constituency 15 years ago. Now it employs only 150 and their jobs are hanging by a thread. The Courtaulds plants were concentrated round Flint and Holywell so male unemployment there is 41 per cent. My constituency therefore has a higher proportion of long-term unemployed.

My constituents cannot sell their houses because so many are trying to sell their houses. The housing market is non-existent. My constituents who are out of work are desperately trying to find jobs. At my surgery in the last month I heard from a man who managed to find a job in Weston-super-Mare. He travels from there to his home in my constituency every weekend. He has to leave his wife and family in Holywell because he cannot sell his house. Another man has to travel equally far to Dumfries and he is in exactly the same position.

Last year Courtaulds' biggest remaining factory, at Greenfield, closed with the loss of 600 jobs, 200 jobs having been lost at the same factory six months earlier. The borough council, which is by no means Labour-dominated, stated to the Select Committee on Welsh Affairs, which held an inquiry into the closure at Flint —and it was no exaggeration—that any man who was out of work and over 35 years of age at the time in my constituency was unlikely ever to work again.

We are working hard in my constituency to prove that statement pessimistic. The Welsh Office, the Welsh Development Agency and Delyn borough council—we are all working together to create jobs. The Government could not have done more than they have by giving us the highest level of development area status, by designating Delyn an enterprise zone, and backing it with £8 million. That has created what the chief executive of the council has called
"the most attractive industrial location in Wales."
We are creating jobs, but in our area, as in many other areas, they are mostly female jobs. In the presence of the hon. Member for Derby, South (Mrs. Beckett) and my hon. Friend the Member for Derbyshire, South (Mrs. Currie), I hasten to say that I am not against creating female jobs. However, the most economically active women tend to be the wives of employed men, so we are not spreading incomes into unemployed households but doubling incomes in households where one person already has work.

No Government could have done more for north-east Wales than this Government. They have done far more than the last Labour Government, whose response was a worthless wringing of hands while factories closed. Unemployment in my constituency did not start on that day in 1979 that my right hon. Friend the Prime Minister crossed the threshold of No. 10 Downing street. Indeed, the massive Courtaulds redundancies and the first of the Shotton redundancies occurred under the last Labour Government, who did nothing. Yet all the good this Government have done is, at least in part, being undone by this measure.

Mr. hon. Friend the Minister said that part of the reasoning behind the measure was to reduce the inequity in the treatment between home owners on supplementary benefit and those in work but on low incomes. The low earners in my constituency have no ill feeling towards the unemployed who are receiving help; indeed, there is a great deal of sympathy. All those people that I have mentioned in my constituency, especially in Flint and Hollywell, are on low incomes, and most of them say of the unemployed, "There but for the grace of God go I."

I do not understand how we can talk of equity and inequity when we are not comparing like with like. Those who are out of work through no fault of their own cannot be compared with those who are fortunate enough to have jobs. I as a taxpayer, and the vast majority of taxpayers in my constituency who see at first hand the ravages of unemployment—not only financial, but psychological— would gladly contribute to help those who have the misfortune to be out of work. We do not want to deal them another blow at the very time when they are trying to find new work.

It has been said that, as the measure applies only to the first six months, the unemployed can use their redundancy payments to see them through that difficult period. Redundancy payments for low earners are minimal, especially for those who worked for Courtaulds. Even those who had been employed for 30 or 35 years received negligible payments—between £5,000 and £6,000. I have been very critical of that. We should not eat into those redundancy payments for living costs when they could be used to help somebody set himself up in his own business.

Anyone with a redundancy payment of £5,000 or £6,000 would be ruled out of supplementary benefit by the capital rule, so would receive no help.

I know that is so, but how long does such a small redundancy payment last? It can only be a short time for many of my constituents, because they have overdrafts and considerable costs. I can assure my hon. Friend that the vast majority of my constituents will not be outside supplementary benefit, but very much dependent on it.

This measure discriminates against the hardest hit areas of the country where many of those out of work are long-term unemployed. It is not simply a financial blow; it is a psychological blow just at the crucial time when somebody is first experiencing the hitter shock of being out of work. It can only increase their anxiety and make it more difficult for them to adapt to the reality of being out of work. People in that position come to my surgery week after week. We simply cannot do this to them. Just when they are at their most vulnerable, they are to be dealt another blow that can only increase their anxiety.

The measure perpetuates an impression — a wholly wrong and unfair impression—that the Government are creating two nations, the north and the south. We want to destroy that impression; indeed, we must destroy it in the coming months, not only because it is morally right to do so but because I and many of my hon. Friends will not be here after the next election if it is not destroyed. My hon. Friend the Minister will not be a Minister, but will find himself sitting on the Opposition Benches.

We are beginning to get across to the country a great deal of the good that we are doing. I know how much good the Government are doing in my constituency. My constituents have seen three of our four community hospitals visibly transformed during the past seven years, so they know that a great deal of money has been spent on them. The Government care, and my constituents realise that we have put that caring into practice through resources, albeit carefully allocated and spent.

We must destroy the unfair impression that the Government are creating two nations. No Government have done more in Delyn to create jobs since it first began to suffer massive structural unemployment 15 years ago. However, much of that good will be undone by this measure. In Lord Woolton's famous words, we must show that we not only cope, we care. Of course we must be careful, efficient, cost-effective administrators of not the Government, but the taxpayers', money. But we must also be compassionate, caring spenders of that money.

I implore my hon. Friend the Minister to think well and wisely about this measure. The money it would save would be a minute fraction of what we would lose in credibility as a Government and as a party. We are a Government who genuinely care, and I beg my hon. Friend not to throw away all the good that he and his colleagues have done. I hope that he will pick up this banana skin before we slip on it. He would he one of the first Ministers to do that, and it would be to his great credit. I hope that he will withdraw this measure as soon as possible.

5.57 pm

I shall speak briefly, even though I represent a constituency with scandalously high unemployment. Currently, male unemployment in the Greenock travel-to-work area is 26 per cent. That is an official figure, not one that I have fiddled or concocted. It was given to me yesterday by the assistant manager of the jobcentre in Greenock.

Like the hon. Member for Delyn (Mr. Raffan), I am deeply concerned about the way in which this paltry measure will affect my constituents. My hon. Friend the Member for Fulham (Mr. Raynsford) said that it was less than extreme, but I think it will exacerbate the problems faced by people at the dreadful moment when they are put out of work. It will especially affect those who do not receive large redundancy or severance payments.

Like the hon. Member for Delyn, I, too, can give a litany of companies that are in decline in my constituency. People are being dismissed each month. During the time that I have represented Greenock and Port Glasgow, the work force of Scott Lithgow has shrunk from 5,000-plus to about 1,400. That company is building one rig for Britoil, which is to he launched in about one month. When the fitting out is completed at the tail end of the year, the 1,400 work force faces dismissal. That is the sort of problem that one has to face in representing constituents in these worrying circumstances.

Many of the 1,400 are managers, designers and naval architects. I am talking not only about the low-paid shipyard worker. If such a man is 40 years or older, he Will have experienced varying periods of unemployment, especially on the lower Clyde. Regrettably, that is a way of life for him. I am talking also about people who have purchased homes outwith my community, in places such as Kilmacolm, Wemyss Bay and Inverkip, and who are facing the threat of unemployment within the next few months. My plea to the Minister is to withdraw his horrible proposal.

Other industrial organisations in my constituency are facing bleak times. The last remaining marine engineering plant on the Clyde is situated in my constituency. If orders are not obtained within the next few months, employees of Clark Kincaid will be put out of work. Managers, design engineers and the men who build such first-class products will lose their jobs.

The cane sugar refining industry is in remorseless decline. There were 13 refineries, and now there is only one. The remaining refinery, owned by Tate and Lyle, is within my constituency.

Other industries are also experiencing remorseless decline. The result is that, in the space of a few years, there is male unemployment of 26 per cent. In my constituency, over 8,000 are unemployed. When Ministers recite the national unemployment statistics, they frequently fail to reinforce them by referring to their geographical distribution. I suspect that few Conservative Members—regrettably, only a few hon. Members are in the Chamber to discuss this important issue — have in their constituencies the level of unemployment that is to be found in mine.

Many of my constituents have been unemployed for over a year. Even when they obtain fresh employment, they face a short-term engagement. That is a growing phenomenon in Britain and the rest of the European Community. In the yard in my constituency which has only one rig to complete, hundreds of workers are on 13-week contracts. The contracts are extended only at the diktat of the employer — Trafalgar House. The employees do not have the power to extend their period of employment. Many men who have been taken on for 13 weeks — I accept that some have worked for much longer than that—are told that once that period has come to an end they can be dismissed following a week's notice with the usual severance pay agreements.

Those are some of the problems faced by those who live in the west of Scotland with its scandalously high unemployment. Scottish unemployment figures are higher than those for the rest of Great Britain. I think I am right in saying that the current unemployment rate for Great Britain as a whole is about 13·3 per cent., but it is 15·6 per cent. for Scotland and 18·5 per cent. in the Strathclyde regional area. As I have said, it is 26 per cent. or more in my constituency. These are the official figures.

The west of Scotland is experiencing a remorselessly continuing decline in its manufacturing base. The decline did not begin in 1979 and it would be stupid of me to suggest that it did. It could be argued that Scotland's manufacturing decline began in the 1920s. It was halted, perhaps, by the second world war, when manufacturing activity remained on a plateau, and the break continued for a few years after the war. Despite the introduction into Scotland of new industries—what some call sunrise industries — the decline of the manufacturing base continues. It is not only my constituency with its traditional industries that is suffering a decline. I suspect that we shall never see the complete revival of the shipbuilding industry on the Clyde, or the marine engineering sector, no matter what Government come into office in two years' time. Naturally, I hope that the next Government will be a Labour Government, and that soon after that we shall have a Scottish Parliament. I would happily quit this place for such an assembly.

Whatever Administrations we have over the next decade, we shall not see a dramatic and radical revival of the shipbuilding and marine engineering industries. The epicentre for employment in those activities is in south-east Asia, and it will remain there for many decades to come, with perhaps some input by Brazil, China and elsewhere.

My hon. Friend the Member for Monklands, West (Mr. Clarke) can corroborate everything that I have said. His constituency has experienced the loss of Gartcosh with the decline of the steelmaking industry. The decline continues and people are worried about their prospects and those of their children.

The one Scottish solution that seems to have worked in the past — it has been used cynically by different Administrations — is emigration. That is one way in which Scotland has dealt with its unemployment. The little measure that we are discussing—as my hon. Friend the Member for Fulham has said, it is less than extreme—will worsen the problems facing my constituents and people in the west of Scotland and elsewhere.

Clydeside is not the only area that is suffering, and the traditional industries are not suffering alone. Even the new industries in Scotland have experienced unemployment. Last year, National Semiconductor in my constituency dismissed 400 employees. Not all of them received more than £3,000 in redundancy payments. Many of them are owner-occupiers. Some live in my constituency and others live in the constituency of the hon. Member for Renfrew, West and Inverclyde (Mrs. McCurley). The electronics industry is not the only sector to have suffered during the hiatus. However, I am pleased to say that National Semiconductor is experiencing some form of recovery, and the management is honouring its promise to me that it would re-hire those who had been dismissed. Some were out of work for six or nine months and others are still out of work. As I have said, the problem exists in other industries.

The hon. Member for Delyn made a dramatic speech. Britoil recently announced that 400 employees would have to go. Again, they are not low-paid employees—manual workers living in council houses. Some are designers and senior managers. Forty of those employees, who worked at the head office in St. Vincent street, Glasgow, were given one hour's notice to clear their desks. That was no doubt because of the confidential nature of documents in their desks and, presumably, on their computers. Some people say that they received a reasonable pay-off by that massive oil company. However, they were given one hour's notice that they would be out of work. Some of those employees had moved to Scotland to work for Britoil.

The Grampion region benefits enormously from jobs created by the offshore oil industry. However, people in that area face the threat of unemployment. One employers' association which represents British interests in the offshore oil industry, BRIT — I hate acronyms and initials because I can never remember what they mean—said a few days ago that about 15,000 jobs within its member firms disappeared from the Scottish oil industry between February and June this year. That figure represents people with all kinds of occupational skills and knowledge, and with all kinds of mortgage obligations.

The hon. Member for Delyn warned the Government against creating two nations. I suggest that those two nations exist. Looking beyond national statistics, we see a pronounced geographical shape to unemployment in Britain. Despite the easy opportunity that is offered to every Back Bencher to produce solutions to the problems which appear to bedevil Ministers, I do not have the answers to these massive problems. I leave that to hon. Members representing the Scottish National party— on the occasions when they choose to visit the Chamber. Similarly, the Social Democrats are often noticeable by their absence when the House debates such issues.

On behalf of the people I represent, in these bleak economic times and the problems that they face, I ask the Minister to think again about this paltry measure. Its one effect will be to create added burdens and greater distress to people who are put out of work because of circumstances utterly outwith their control.

6.13 pm

I listened with care to the hon. Member for Greenock and Port Glasgow (Dr. Godman), as I always do. I know the area of his constituency very well. I do not demur at all from his general comments about the difficulties in that area. I listened with care also to the remarks of my hon. Friend the Member for Delyn (Mr. Raffan). Both my hon. Friend and the hon. Gentleman sketched the problems of those who are unemployed for long periods and the problems of those who live in areas where there is high unemployment. If there is such difficulty in those areas, it is important that Government aid is focused most accurately on where it is most needed.

As the hon. Member for Oldham, West (Mr. Meacher), in his rather extreme and emotional speech, opened the debate, it is clear that the Opposition thought they were hitting at a soft target. There is no doubt that the measures have had a bad press, based on a rather simplistic and inadequate reading, in some cases, of the Government's proposals. If I were uncertain about the Government's proposals at the beginning of the debate, I am not uncertain about them now.

It is clear that there are differing views about the way in which the building societies in particular will cope with the proposals. Some hon. Members think that the building societies will allow the interest to be rolled up and accumulated as part of the capital sum of the outstanding debt. I suspect that that will be the case. If that is so, there is a strong argument in favour of the measures, because they would provide equity between the various parties involved in the mortgage and the outstanding loan. I shall return to this point later.

My first point is that there is no doubt that some families are better off out of work than in work. I have never criticised the shirkers and scroungers—those who take advantage of unemployment benefit. I believe that the number of genuine scroungers and shirkers is small. They become known quite quickly to their neighbours. I believe that the overwhelming majority of people who are out of work desperately want to find a job. I reserve my anger for Members of Parliament who allow a system to continue which allows people to he better off out of work than in work.

I invite my colleagues to consider the position of the head of a family who must face the problem and decide whether to take a job and a cut in income, which will damage his family, or to stay out of work. This is a dilemma in which the House of Commons should not have put anyone. It is wrong that hon. Members should have legislated so that some people are better off out of work than they are in work. It is interesting to note that the Opposition have not commented on the specific points made by my hon. Friend the Minister. I think that they owe us their comments and views on a system which allows some people to be better off out of work than they are in work.

Secondly, my hon. Friend the Minister gave an example of a household with an average mortgage of £16,000, whose income out of work was appreciably higher than that of a family in work with an income of £80 to £120 a week. Examples have been given of the more deprived areas of the United Kingdom. I shall give an example of the position at the other end of the scale. A married man with three children, and the maximum mortgage allowable for tax relief of £30,000, is better off unemployed unless he earns about £180 a week. When the inevitable costs of travelling to work, clothing, lunches, and so on, are taken into account, he is better off unemployed unless he earns about £200 a week —£10,000 a year. That is a scandal with which any Government should cope.

My third point—I echo those made by the Minister — is that there should be a fair balance between the employed and the unemployed, home owners and tenants, and Government and lending organisations. In maintaining a fair balance, there is a limit to which adjustment can be made by improving benefits. Sometimes there is a point at which existing benefits, when they have grown out of balance, need to be reviewed and perhaps reduced. If help is to be focused on those most in need, we should review financial aid where it is not best spent.

My fourth point is that house ownership has been and continues to be an excellent investment. This year house prices are expected to increase in value by about 10 per cent., compared with inflation of about 3 per cent.

Investment in housing may be a good investment in my hon. Friend's constituency, but I assure him that it is not in mine. In my constituency, the house market is at best static and at worst declining. As I said earlier—this is true of all areas where there is a high level of long-term unemployment — everyone wants to sell his house so that he can try to find a job in another part of the country. Therefore, housing is not a good investment in places such as my constituency which are the hardest hit.

My hon. Friend has made a fair point, but it is fair to say also that in most parts of the United Kingdom housing has been a good investment. Of course there are exceptions, but the general rule, which applies more in the south-east than in most parts of the United Kingdom, is that housing is a good investment. People receiving assistance with their interest payments should bear in mind that, normally, investment in housing is a good investment.

Fifthly, the Government propose that half the mortgage interest payments will be met for the first six months for claimants under 60. It is important to stress that there will be full protection after the six months for the long-term unemployed, that there will be full protection for those over 60 and that there will be considerable protection for the 90,000 people who will be affected by the proposals. The case has been made for consultation by the Social Security Advisory Committee on the Government's points. I therefore support the Government's view.

6.21 pm

Make no mistake, this measure is bitterly resented throughout Britain. I want to refer to information from my constituency. I remind the Minister of his comments in a press release issued by his Department:

"Our aim is to strike a fair and reasonable balance between the borrower, the lender and the taxpayer. We do not think this is achieved by the present arrangements which will enable all mortgage interest payments to be met immediately, however short the period of benefit."
In certain circumstances, that is not accurate. This is a confidence trick played on the person who is not sharp enough to reschedule his debt with the building society. The press release states:
"In future, one half rather than the whole of mortgage interest should be met for claimants under 60 who are in receipt of benefit for only a short time or during the first six months of a longer period on benefit. After this period the interest would, as now, be met in full."
If a man who is suddenly out of work immediately sees the building society and has his interest payments rescheduled until a later period so that the Government pick up the arrears, he will not be out of pocket. If the debt is rescheduled, it is a disincentive for him to go back to work because, if he does, his arrears will not be refunded. The Government have spent a long time talking about disincentives. With the stroke of a pen, this scheme has created another disincentive, through mortgage interest payments.

There are other strange aspects to the measure. The Minister said that he was thinking of people on low incomes and aiming for a fairer distribution of the burden. The hon. Gentleman should not have distinguished betwen one low income and another. If he was looking for money, he should have considered mortgage interest tax relief, which is paid willy-nilly to those paying higher taxes. Mortgage interest tax relief is structured so that the more expensive the house one buys and the higher one's income, the higher the mortgage interest tax relief. In 1986, that is nearly £5 billion. If the Minister were looking for a section of the community to bear the brunt of this measure, he should have looked to those who were a little more fortunate than people who have been flung into unemployment.

This measure is bitterly resented, and I am surprised that it is associated with the Minister for Social Security. Many Labour Members regard him as one of the most knowledgeable and compassionate of Members on the Government Benches. But the fact is that this is the Treasury talking, not the Department of Health and Social Security.

The Government have incurred political unpopularity over this measure. I am in the political business to argue against them, but I never wanted to do it in this way. Unemployment is a financial and psychological blow. It is a great shame that when a man becomes unemployed, he learns that he will lace penalties with his mortgage interest repayments. That is difficult to bear.

The Building Societies Association, among others, has pointed to the increasing length of the list of people in mortgage arrears. This is becoming a serious problem. The Government are seeking also to extend owner-occupation. I am in full agreement with that. At present, 65 per cent. of people own their own houses. If the Government wish to pursue that policy, why on earth do they penalise the least fortunate owner-occupiers who happen to fall out of work? This is an inequitable policy, especially as the money could have been taken from elsewhere.

We all know that the Minister has to be hard-headed with a limited amount of money. He has a scale of priorities; he has to judge between this and that. But this decision is wrong. It is resented and, politically, it will cost the Government. It penalises the person who becomes unemployed and does not know enough to go to the building society to get his debt rescheduled so that, if he remains unemployed, the bill can he picked up later by the Treasury. The measure penalises not only the unemployed but the least knowledgeable. It is a bitter blow for some people. It means kicking someone in the teeth when he is already on the floor. The Minister's explanations on the radio and elsewhere are not credible—not because the hon. Gentleman cannot argue the case well enough but because he has a deplorable case to argue. He should take it away and think again.

6.29 pm

We listened with great interest for the Minister's defence of these proposals. I say "for" rather than "to" because, as my hon. Friend the Member for Ipswich (Mr. Weetch) has just said, the defence was somewhat lacking. The hon. Gentleman complained that the Government have been attacked for secrecy. I know that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) expressed concern at some of the details of the proposals. However, on the whole, the Opposition are not complaining about secrecy, although we know that the Prime Minister made a spirited attempt to run away from the timing of the proposals, if not from the proposals themselves. We object to the proposals as such because they are unjust, immoral, short-sighted and utterly nasty.

The proposals are being introduced against a background in which homelessness is already increasing sharply because of unemployment, especially in the past year. Hon. Members have given various statistics in the debate, and I want to remind the House of only two.

Homelessness through mortgage default is now five times greater than it was when the Government came to power in 1979; and in the last year alone mortgage defaults rose by 50 per cent. and repossessions, according to figures from the National Consumer Council, went up from 3,000 a year to 11,000. That is nearly a 300 per cent. increase in repossession. Therefore, it is extraordinary that, against that background of already increasing homelessness, the Government have decided that they are giving too much help with mortgage interest payments to the most vulnerable in our society.

Many hon. Members have already expressed their awareness—I was pleased to see it happening on both sides — that there is already desperate anxiety among many unemployed. There is substantial evidence from the United States of America and here of the destructive effects to health of stress due to unemployment and of the increase in suicides that follows when unemployment levels rise substantially. If that is true and can be demonstrated now while greater help is available, the problems are bound to be exacerbated by these proposals. Indeed, it is hard to imagine proposals more destructive of people's security or more inclined to make them suffer substantial increases in stress than the justified fear of losing their homes.

Even now, when the Government's payments meet interest, although not the capital repayments, as a number of hon. Members have already pointed out, losing their home is the greatest anxiety for many home owners. The Government's policy inspectorate, which, as the Minister will know, has done a survey of a number of owner-occupiers, found that although many of the people it interviewed were good money managers—we are not talking about the feckless or incompetent — they all expressed the fear now of being unable to keep up their mortgage repayments and often went without other essentials, including replacement clothing, to do so. That point was made by my right hon. Friend the Member for Halton (Mr. Oakes) in his admirable speech, and it has come through strongly from the study. I repeat that that is the position now, before the Government make this further attack on the unemployed.

The Building Societies Association, in its 1985 report, referring to the existing payment, said:
"If this benefit had not existed the rise in unemployment would have led to a much greater increase in arrears and possessions."
That is against a background in which, as we have already heard, the increase has already been substantial.

The Government, in their amendment, claim that this proposal has been introduced not just to make savings —which, as the hon. Member for Cardiff, North (Mr. Jones) rightly said, would be wholly inadequate justification for such a proposal—but because there is a need for balance and fairness between the treatment of one group and another in society, especially between the treatment of the low paid and the unemployed. The Government imply in what they have said that these proposals are part of the way to encourage people out of unemployment, as well as indicating, as I have said, that there is unfair treatment of home owners in low paid work compared with those on supplementary benefit.

As several hon. Members have pointed out, the Government are creating a new disincentive for people to go back to work. The Minister said that at present most unemployment is short term. It will not be in future—at least certainly not when people catch on to the implications in these proposals. Whether people are looking at short-term, part-time or low-paid jobs, it will not be in their interests to go back to work before they have been unemployed for six months. It certainly will not be in their interest to take short-term or insecure jobs because, if they become unemployed again, they will have to start building up that period of qualification all over again if the work they took was for anything longer than eight weeks. It will not be in their interest to take part-time work because they may deprive themselves of entitlement to benefit and of building up their six months.

It certainly will not be in their interest to take low-paid work at or near the end of their six months because, as my hon. Friend the Member for Ipswich pointed out with admirable clarity, it is only if they stay unemployed for longer than six months that the interest that they might have succeeded in getting deferred will be paid. Therefore, as I have said, it creates a disincentive for people to take any kind of part-time employment which might put them beyond the income level of their entitlement to supplementary benefit. In a sense, it creates a disincentive for home ownership as such because there are bound to be people who, simply through the loss of this mortgage interest entitlement, will be put outside the income range in which they might be entitled to supplementary benefit.

It is an extraordinary position, and it is even more extraordinary that the Minister should choose this debate to boast about what the Government have done to promote the sale of council houses. It is extraordinary that the Government, who have promoted such sales, should now he putting people who may have bought their council houses and may even now be struggling to meet the mortgage repayments — a widespread phenomenon, as Opposition Members are well aware—and who become unemployed, in a position where, under these proposals, they could become homeless because they listened to a Government who told them that the best way to secure the future for their family was to buy their own home. A threat will now be hanging over them that they would not have faced if they had failed to listen to the Government and had remained tenants.

Only the other day the Minister for Housing, Urban Affairs and Construction said that the Government were not anxious — perhaps I should say "any more", although I do not think that he did—to encourage the low-paid to buy their own homes. It is a pity that they did not mention it earlier. It is certainly not the impression that many people in the country have had.

Those who, for whatever reason — perhaps because one of the family has a part-time job or because they lose their entitlement to the mortgage interest payment —lose all entitlement to supplementary benefit as such are bound to find that they will never, even after six months, qualify for this payment. They are almost bound to end up either giving up any part-time job, if they have one, or be in greater danger of becoming homeless.

The Minister did not mention the possibility of people insuring against the loss of employment. I was a little surprised because that has featured quite strongly in the other defences that the Government have made of this proposal. I listened with great care to what the lion. Member for Derbyshire, South (Mrs. Currie) said about the availability of such schemes, the cost, and so on. I would not question the information that she has gathered. However, I also have information from people who, rather than going to the societies to ask what is offered, have tried as a family unit to obtain such insurance in the recent past.

I must tell the hon. Lady that all those who have spoken to me and some who have written have said that in practice it is not only much more difficult than she suggested but more costly. A simple hut, I would have thought, obvious point is that those for whom the threat is greatest and those who need the insurance most are those who are least likely to be able to get it, or afford it, because they are bad risks. Insurance companies do not like taking on people who are a had risk.

My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) asked a pertinent question. I do not blame the hon. Lady for not having the answer to it. It may be that the insurance companies could not answer it. He asked whether there were differential payments in different parts of the country. I am sure that all hon. Members will recognise that where unemployment is high such insurance is likely to be unobtainable or, in effect, unobtainable because it is so expensive.

I recognise that the hon. Member for Derbyshire, South had a different proposal. She proposed that everyone should have compulsory insurance for health, redundancy, and so on, as a package. I was under the impression that we already had such a system. We call it national insurance. I can see no reason to compel people to take out further private insurance for something that they are already paying the Government to provide.

The Minister said that the Government would consider the outcome of the consultations being undertaken with the Social Security Advisory Committee. Of course, he did not remind the House that we have had two sets of consultations already. The Government consulted the building societies and a whole range of other institutions on the proposals as drafted in the Green Paper and on the proposals as drafted in the White Paper. To the best of my recollection, they got no support from any quarter, not even from the Institute of Directors, which has been known to support one or two of the Government's wilder proposals.

Apart from consultations on those specific measures, which do not seem to us to have brought the Government any comfort, earlier they consulted several eminent persons, all of the Government's own choice and of their own political persuasion, about the pattern of housing support, as my hon. Friend the Member for Fulham (Mr. Raynsford) and other hon. Members mentioned. In the housing benefit review, the Government's hand-picked advisers addressed their minds to precisely the matter that so troubles the Government, to which they refer in the amendment the balance between support for those who are in low-paid work and those who are unemployed. The housing benefit review team proposed that the right way to deal with the problem was to make home owners eligible for standard housing benefit. Therefore, we have had two processes of consultation in the past year, both of which, so far, the Government have chosen to ignore.

As has been amply demonstrated by hon. Members on both sides of the House, the proposals are made against a background in which homelessness, due to inability to pay mortgages, is already rising sharply. They are also made against the more general background, which is perhaps less easily understood by the public, of an attack on the income and an increase in the problems of the unemployed. This matter may soon be debated in the House. A reduction is being made in the single payments available to the unemployed. Ultimately they will be replaced by the social fund. That will mean a reduction in income available to the unemployed. The costs that they are to meet from their reduced income are to rise, particularly because of the Government's proposal in the Social Security Bill to make everyone on supplementary benefit meet 20 per cent. of their rates and water rates. That proposal was rejected only this week by another place, but we hear that the Prime Minister is determined to reinstate it.

The penalties of unemployment are also due to be increased. In the final days of consideration of the Social Security Bill in Committee, the Government introduced a proposal that if someone might have made himself voluntarily unemployed, or might not be seeking work with sufficient enthusiasm, his benefit could be reduced — not for six weeks, as now, but for a full 13 weeks. The Government clearly said that they proposed measures with increased questioning so that they could find out what action people were taking to find work, even in areas where unemployment is sky-high.

Before the proposals came forward in this form, we were already concerned that the package, particularly the last elements to which I referred, might mean that people were pursued and attempts made to force them to take jobs, even low-paid jobs, and even there the money coming in would not be adequate to support their families. If the family is carrying a further burden of debt, incurred because the benefit paid under the proposals is reduced, there is a great danger that those people may be leant on and pushed by Government officials to take action which might increase the danger of them losing their home because of the growing burden of debt compared with a potentially inadequate income.

Despite growing evidence that the Government are dominated by those whose views would not have been out of place in the Tory Governments of the 1930s, I have noticed that Ministers become upset when we in the Labour party draw on the experience and history of our families and, in particular, of the Labour movement. But it is still important and relevant to say to the Government at the conclusion of this debate that part of what made the proposal that is usually described as the means test so hated was that it took away from people the few assets that they had managed to accrue, often after struggling throughout their working life, and that they knew perfectly well they could never replace. It made families feel that all their work, all their endeavour, had gone for nothing, because the few achievements that had been gained were gone for ever.

The way in which the memory of the means test has lingered on is testimony to the bitterness of that experience. I know that hon. Members, particularly Opposition Members, can testify to that strongly from the experience of their families. It is extraordinary that this Government want to revive that memory and bitterness. A famous quotation tells us that those whom the gods would destroy they first send mad. Clearly the gods, like the country, have turned against the Government.

6.44 pm

The Parliamentary Under-Secretary of State for Health and Social Security
(Mr. John Major)

I shall endeavour to bring some sanity to the debate. We have had an excellent debate of some heat and passion. I have no objections to that. The hon. Member for Derby, South (Mrs. Beckett), in summing up the Opposition's case, did so crisply and aptly, as she so frequently does. One or two of the speeches have been outstanding. I shall endeavour to respond to as many of the points made as possible.

I know that the hon. Member for Oldham, West (Mr. Meacher) must leave, for understandable reasons, which he has explained to me, so let me say a word or so about his opening speech. I listened to it with an unanticipated admiration. My fascination was not so much with the content of the hon. Gentleman's argument or, indeed, with the motion, to which I shall refer; nor was it with his delivery, lucid and impassioned as it was, and as it so frequently is. My fascination was born out of sheer admiration for the absolute brass-necked effrontery of the motion on this subject from that source. It is effrontery because, as my hon. Friend the Minister of State set out at the commencement of the debate, our proposals are still at the consultation stage. The Social Security Advisory Committee is still considering them. No report has yet been received. No consultation has yet been considered. No final decisions have yet been taken—[Interruption.] The hon. Member for Walsall, North (Mr. Winnick) occasionally engages his mouth before his thought processes. He would be wise to wait a second or two.

On a former occasion, when the hon. Member for Oldham, West issued his Green Paper on mortgage interest, he was concerned that he was criticised for what were consultation proposals, and said so loudly and frequently to the press. I say that the hon. Gentleman's effrontery is brass-necked because—I put it kindly—the hon. Gentleman has a chequered history on the subject of mortgage interest, and the concept of him, with his record, as the saviour of home owners, is as absurd a proposition as the House can swallow, even towards the end of a long Session. However, I shall not be cruel to the hon. Gentleman and dwell on that, not least because I wish to refer specifically to some of the important points that were made in the debate by him and others.

The right hon. Member for Halton (Mr. Oakes) spoke early in the debate with all the experience of a vice-president of the Building Societies Association. I was particularly grateful to him for the acknowledgment that the building societies deal sensitively with borrowers facing short-term difficulties. I am happy to acknowledge that that is traditionally the case, and I hope and expect that the building societies will continue to do so in future the underlying concern of the right hon. Gentleman—I hope that I do not misstate it — and of other hon. Members, including the hon. Member for Oldham, West, my hon. Friend the Member for Cardiff, North (Mr. Jones) and the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), was the danger of foreclosure as a result of arrears. I entirely accept—it is impossible to deny it—that foreclosure inevitably causes great distress where it occurs.

The right hon. Gentleman, better perhaps than anyone else in the House, will know that foreclosure is the last option that the lenders wish to pursue. It is not an early instinct, but the last option. There are many criteria to be considered before that sad decision is reached — how much, if any, equity the individual possesses in the property, whether the difficulty is likely to be long-term, and whether there are other debt problems. All those are relevant points that would need to be seriously considered by the lender before there was any suggestion of foreclosure. I suggest that the same principle would apply where the lender is not a building society, but perhaps some of the later arrivals on the lending scene — the local authorities, which would lend to people who had purchased local authority property, and banks.

I do not accept, in the fashion that it has been advanced from time to time this afternoon, the suggestion that the proposed change sent to the Social Security Advisory Committee, would, of its own volition given its nature and scale, materially accelerate foreclosure. Although we may quibble about the figures on the fringes, there is little doubt that, broadly, the average interest lost for a supplementary claimant unemployed for the full six months would be about £200. That addition to the capital debt, when it is known that after a six-month period the interest would again be met in full, seems unlikely to trigger foreclosure of its own volition. The observation made by the right hon. Member for Halton about the building societies lends some force to that argument.

I hope that the hon. Gentleman will forgive me if I do not give way. He contributed to the debate and there are many points that I should like to cover. Some of the comments that I should like to cover are his.

That argument is also strengthened in the light of the specific comments by the Building Societies Association to the effect that it would handle any change in arrangements sympathetically and would continue with the basic aim of keeping as many people in home ownership as possible.

The right hon. Member for Halton also mentioned another important matter. He referred to the £1·85 weekly addition to supplementary benefit for repairs and insurance. I can reassure the right hon. Gentleman by saying that that sum may be increased where the cost of repairs and insurance exceeds that figure, provided that it is reasonable in all the circumstances to do that. We would expect that frequently to he the case.

My hon. Friend the Member for Cardiff, North expressed his concerns trenchantly. I shall study with care the reservations that he expressed. They were echoed by other hon. Members. In the meantime, as his speech was unique in this respect, perhaps I may welcome his acknowledgement of the minor improvements proposed, and specifically his acknowledgement of the proposed special disregard of income from mortgage protection policies to meet the balance of mortgage payments. It was refreshing to hear that minor change acknowledged, for it was in danger of being swamped in the criticism that emerged elsewhere in the debate.

My hon. Friend the Member for Delyn (Mr. Raffan), in an excellent speech, spoke with passion and clarity about his concerns. He referred to some of the observations made by my hon. Friend the Minister for Social Security, who was trying to make the point that the measure was directed at the first six months on benefit. Everyone whose unemployment turns out to be long term, will, of course, have all the interest met after the six months, including the extra interest in arrears arising from the 50 per cent. limitation, which will have capitalised and added Lo the outstanding loan. Those whose unemployment is longer term will come, and will know that they will come, into full benefit and qualify for extra help with additional interest on the higher loan.

Therefore, I hope that people out of work will appreciate that and understand that 100 per cent. will become available if, sadly, they remain out of work after the full six months and that that will include the extra help with the interest, which may have been capitalised and which was not met during the first six months. I should also like to assure my hon. Friend the Member for Delyn that, when the measure comes into operation it will affect new cases only, and not existing cases.

The hon. Member for Fulham (Mr. Faynsford), in a wide-ranging speech, referred to repossessions and arrears. I shall not bandy statistics with him, for we have done that before and I am wary of creating a tradition. However, we are in no sense complacent about arrears. I accept that for those in difficulties the problems can, self-evidently, be severe. The proportion of those in difficulties is very small and ought not to be over-exaggerated.

Well over 99 per cent. of mortgages are not in arrears. It does not help the hon. Gentleman's argument or rational debate to paint an exaggerated picture of many people in severe difficulties. On the information available to me, that is not statistically the case.

I should like to correct the Minister. At the beginning of my speech I made the point that we were not talking about large numbers of people. The point that I tried to make—the statistics that I quoted illustrate this—is that there has been a serious increase in the proportion of arrears during the lifetime of the Government. In fact, there has been a sixfold increase. Although the numbers are not large in absolute terms, the trend is very worrying. The likely implication of the proposals is to make that trend worse. That is the main principle of the Opposition's criticism.

I understand the hon. Gentleman's point. In no sense was I trying to misrepresent him. I was trying to place his point in the context of the facts as I understand them.

The hon. Gentleman also referred rather tantalisingly to the proposition of extending mortgage interest cover to housing benefit. He will know that that occurs in France, Germany, New Zealand and Switzerland. He will also know that none of those countries offer 100 per cent. cover, nor, I think — I shall have to check to he completely sure — do they provide the degree of protection that would be provided under the supplementary benefit proposals even were we to implement the proposals referred to the SSA C in their present form.

My hon. Friend the Member for Derbyshire, South (Mrs. Currie), with an arithmetical precision that is admirable, asked how the Government's figures added up. They did not seem to add up to my hon. Friend. I understand her confusion, but I can assure her that the calculations are correct. However, in the interests of brevity perhaps she will permit me to write to her with the detailed calculations, rather than deal with them at great length now.

Another matter which is relevant and which has run as a strand throughout the debate is the anxiety that lenders will be discouraged from pursuing low-cost home ownership initiatives. We hope that that will not be the case. The Government have welcomed the building societies' efforts in that area, and we recognise that they are helping people into home ownership who might otherwise have been unable to afford such ownership.

There is always an element of risk in operating at the lower end of the market. Any addition to that risk from our proposals will, in our judgment, be short-tern and apply to only a minority of cases. I must emphasise again that when a borrower becomes unemployed and is in receipt of unemployment benefit, mortgage interest and interest on arrears will be fully covered after the six-month period. When unemployment is for less than six months, we believe that it will normally be possible to make arrangements for the recovery of arrears in the normal way. In the meantime, help will continue to be given with half the interest payments.

In order to put the matter into the proper context at the end of an emotional debate, I stress that we are considering an amount equal to three months' interest at most. There is, of course, also the problem of the mortgage interest trap, about which the Shelter Housing Aid Centre has made comments recently. I can assure the House that we will carefully examine this problem, which, to some extent, may appear to be inherent in any scheme to introduce a six-month qualifying period.

It is our preliminary judgment that the number of people who might be caught in the mortgage interest trap is minute. Throughout the country we believe that no more than 1,000 people will be affected. We will therefore need to balance carefully our desire to help with the legal and operational problems involved in dealing with changes of circumstances in the six-month period.

The thrust of the Opposition's charge has been that the Government are unfairly beastly to people whom we sought to encourage into home ownerhip. I do not accept that charge. It is inaccurate, and that has not been our intention. I must also say, even in the absence of the principal protagonist, the hon. Member for Oldham. West, that it is a colossal cheek for the Opposition to make that charge. They opposed the right to buy, and many of the people about whom they now claim to be concerned would never have become home owners without the right to buy.

The hon. Member for Oldham, West appeared to he keen to abolish either all or — as I do not wish to misrepresent him—part of mortgage interest tax relief, without which far fewer people would have become home owners. As recently as last evening, speaking from the Opposition Front Bench, the hon. Member for Bootle (Mr. Roberts) repeated yet again that it was wrong for taxpayers to receive income tax relief on mortgages up to £30,000. That is in flat contradiction to what has been said elsewhere as the official Opposition policy. The sooner the Opposition make their position utterly clear on that, the better.

The hon. Member for Fulham says that the Opposition will limit it to the standard rate. The hon. Member for Oldham, West had a different proposition, and the hon. Member for Bootle had yet a further proposition to make yesterday. There are more propositions from the Opposition on mortgage interest than there are defence policies from the alliance. The sooner we have an accurate assessment of the Opposition's stance, the better. We need no lectures from the Labour party on that.

The propositions that we referred to the advisory committee were not novel. They were well understood, they were trailed in the Green Paper and in the White Paper and they were spoken about often. Nor are they final, for we await with interest the advisory committee's report on the draft regulations.

Moreover, I re-emphasise that our proposals apply only to the short term, with full benefit entitlement being restored after six months. They are modest proposals; they are certainly worth considering; they will bring equity of treatment between home owner and taxpayer and between those on low incomes, whether in or out of work.

Even under our proposals, we would have a better and more generous system than the Labour Government in New Zealand—

rose in his place, and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 198, Noes 259.

Division No. 233]

[7 pm

AYES

Abse, LeoDeakins, Eric
Adams, Allen (Paisley N)Dewar, Donald
Alton, DavidDixon, Donald
Archer, Rt Hon PeterDormand, Jack
Ashdown, PaddyDouglas, Dick
Ashley, Rt Hon JackDover, Den
Ashton, JoeDubs, Alfred
Atkinson, N. (Tottenham)Duffy, A. E. P.
Bagier, Gordon A. T.Eadie, Alex
Banks, Tony (Newham NW)Eastham, Ken
Barnett, GuyEdwards, Bob (W'h'mpt'n SE)
Barron, KevinEllis, Raymond
Beckett, Mrs MargaretEvans, John (St. Helens N)
Beith, A. J.Fatchett, Derek
Bell, StuartFaulds, Andrew
Benn, Rt Hon TonyField, Frank (Birkenhead)
Bennett, A. (Dent'n & Red'sh)Fields, T. (L'pool Broad Gn)
Bermingham, GeraldFisher, Mark
Bidwell, SydneyFlannery, Martin
Blair, AnthonyFoot, Rt Hon Michael
Boothroyd, Miss BettyForrester, John
Boyes, RolandFoster, Derek
Bray, Dr JeremyFoulkes, George
Brown, Gordon (D'f'mline E)Fraser, J. (Norwood)
Brown, Hugh D. (Provan)Freeson, Rt Hon Reginald
Brown, N. (N'c'tle-u-Tyne E)Freud, Clement
Brown, Ron (E'burgh, Leith)George, Bruce
Bruce, MalcolmGilbert, Rt Hon Dr John
Buchan, NormanGodman, Dr Norman
Caborn, RichardGould, Bryan
Callaghan, Rt Hon J.Gourlay, Harry
Callaghan, Jim (Heyw'd & M)Hamilton, James (M'well N)
Campbell, IanHamilton, W. W. (Fife Central)
Campbell-Savours, DaleHancock, Michael
Carlile, Alexander (Montg'y)Hardy, Peter
Carter-Jones, LewisHarman, Ms Harriet
Cartwright, JohnHarrison, Rt Hon Walter
Clark, Dr David (S Shields)Hart, Rt Hon Dame Judith
Clarke, ThomasHattersley, Rt Hon Roy
Clay, RobertHeffer, Eric S.
Clelland, David GordonHogg, N. (C'nauld & Kilsyth)
Clwyd, Mrs AnnHome Robertson, John
Cohen, HarryHoyle, Douglas
Conlan, BernardHughes, Robert (Aberdeen N)
Cook, Frank (Stockton North)Hughes, Roy (Newport East)
Cook, Robin F. (Livingston)Hughes, Simon (Southwark)
Corbett, RobinHume, John
Corbyn, JeremyJanner, Hon Greville
Cox, Thomas (Tooting)Jenkins, Rt Hon Roy (Hillh'd)
Craigen, J. M.John, Brynmor
Crowther, StanJohnston, Sir Russell
Davies, Rt Hon Denzil (L'lli)Jones, Barry (Alyn & Deeside)
Davis, Terry (B'ham, H'ge H'I)Kaufman, Rt Hon Gerald

Kinnock, Rt Hon NeilRedmond, Martin
Kirkwood, ArchyRees, Rt Hon M. (Leeds S)
Leadbitter, TedRichardson, Ms Jo
Leighton, RonaldRoberts, Ernest (Hackney N)
Lewis, Ron (Carlisle)Robertson, George
Lewis, Terence (Worsley)Robinson, G. (Coventry NW)
Litherland, RobertRogers, Allan
Livsey, RichardRoss, Ernest (Dundee W)
Lloyd, Tony (Stretford)Ross, Stephen (Isle of Wight)
Lofthouse, GeoffreyRowlands, Ted
Loyden, EdwardRyman, John
McCartney, HughSedgemore, Brian
McDonald, Dr OonaghSheerman, Barry
McKelvey, WilliamSheldon, Rt Hon R.
MacKenzie, Rt Hon GregorShields, Mrs Elizabeth
McNamara, KevinShore, Rt Hon Peter
McTaggart, RobertShort, Ms Clare (Ladywood)
McWilliam, JohnShort, Mrs R.(W'hampt'n NE)
Madden, MaxSilkin, Rt Hon J.
Marek, Dr JohnSkinner, Dennis
Marshall, David (Shettleston)Smith, C.(lsl'ton S & F'bury)
Martin, MichaelSmith, Rt Hon J. (M'ds E)
Mason, Rt Hon RoySnape, Peter
Maxton, JohnSoley, Clive
Maynard, Miss JoanSpearing, Nigel
Meadowcroft, MichaelSteel, Rt Hon David
Michie, WilliamStewart, Rt Hon D. (W Isles)
Mikardo, IanStott, Roger
Miller, Dr M. S. (E Kilbride)Strang, Gavin
Morris, Rt Hon A. (Wshawe)Thompson, J. (Wansbeck)
Morris, Rt Hon J. (Aberavon)Thome, Stan (Preston)
Nellist, DavidTorney, Tom
Oakes, Rt Hon GordonWallace, James
O'Brien, WilliamWareing, Robert
O'Neill, MartinWeetch, Ken
Orme, Rt Hon StanleyWelsh, Michael
Owen, Rt Hon Dr DavidWhite, James
Park, GeorgeWigley, Dafydd
Parry, RobertWilliams, Rt Hon A.
Patchett, TerryWilson. Gordon
Pavitt, LaurieWinnick, David
Penhaligon, DavidWoodall, Alec
Pike, PeterWrigglesworth, Ian
Powell, Raymond (Ogmore)Young, David (Bolton SE)
Prescott, John
Radice, GilesTellers for the Ayes:
Randall, StuartMr. Ron Davies and
Raynsford, NickMr. Lawrence Cunliffe.

NOES

Adley, RobertBright, Graham
Aitken, JonathanBrinton, Tim
Alexander, RichardBrown, M. (Brigg & Cl'thpes)
Alison, Rt Hon MichaelBrowne, John
Amery, Rt Hon JulianBryan, Sir Paul
Amess, DavidBudgen, Nick
Arnold, TomBulmer, Esmond
Ashby, DavidBurt, Alistair
Aspinwall, JackButler, Rt Hon Sir Adam
Atkins, Rt Hon Sir H.Carlisle, John (Luton N)
Atkins, Robert (South Ribble)Carlisle, Kenneth (Lincoln)
Atkinson, David (B'm'th E)Carlisle, Rt Hon M. (Wton S)
Baker, Rt Hon K. (Mole Vall'y)Carttiss, Michael
Baker, Nicholas (Dorset N)Cash, William
Baldry, TonyChalker, Mrs Lynda
Banks, Robert (Harrogate)Chapman, Sydney
Batiste, SpencerChope, Christopher
Bellingham, HenryChurchill, W. S.
Bendall, VivianClark, Hon A. (Plym'th S'n)
Benyon, WilliamClark, Dr Michael (Rochford)
Biffen, Rt Hon JohnClark, Sir W. (Croydon S)
Biggs-Davison, Sir JohnClegg, Sir Walter
Blackburn, JohnCockeram, Eric
Blaker, Rt Hon Sir PeterColvin, Michael
Bonsor, Sir NicholasConway, Derek
Boscawen, Hon RobertCoombs, Simon
Bottomley, PeterCope, John
Bottomley, Mrs VirginiaCormack, Patrick
Bowden, A. (Brighton K'to'n)Corrie, John
Boyson, Dr RhodesCouchman, James

Cranborne, ViscountKing, Roger (B'ham N'field)
Critchley, JulianKnight, Dame Jill (Edgbaston)
Currie, Mrs EdwinaKnowles, Michael
Dickens, GeoffreyKnox, David
Dorrell, StephenLawler, Geoffrey
Douglas-Hamilton, Lord J.Lee, John (Pendle)
Dykes, HughLeigh, Edward (Gainsbor'gh)
Edwards, Rt Hon N. (P'broke)Lennox-Boyd, Hon Mark
Eggar, TimLewis, Sir Kenneth (Stamf'd)
Emery, Sir PeterLightbown, David
Evennett, DavidLilley, Peter
Eyre, Sir ReginaldLloyd, Sir Ian (Havant)
Fairbairn, NicholasLloyd, Peter (Fareham)
Fallon, MichaelLord, Michael
Farr, Sir JohnLyell, Nicholas
Favell, AnthonyMcCurley, Mrs Anna
Fenner, Mrs PeggyMacfarlane, Neil
Fletcher, AlexanderMacKay, Andrew (Berkshire)
Fookes, Miss JanetMacKay, John (Argyll & Bute)
Forman, NigelMcLoughlin, Patrick
Forsyth, Michael (Stirling)McNair-Wilson, M. (N'bury)
Forth, EricMadel, David
Fox, Sir MarcusMajor, John
Franks, CecilMalins, Humfrey
Fraser, Peter (Angus East)Maples, John
Freeman, RogerMarlow, Antony
Galley, RoyMarshall, Michael (Arundel)
Gardner, Sir Edward (Fylde)Mates, Michael
Garel-Jones, TristanMaude, Hon Francis
Glyn, Dr AlanMayhew, Sir Patrick
Goodhart, Sir PhilipMellor, David
Goodlad, AlastairMerchant. Piers
Gorst, JohnMeyer, Sir Anthony
Gow, IanMiller, Hal (B'grove)
Gower, Sir RaymondMills, Iain (Meriden)
Grant, Sir AnthonyMills, Sir Peter (West Devon)
Greenway, HarryMiscampbell, Norman
Griffiths, Sir EldonMitchell, David (Hants NW)
Griffiths, Peter (Portsm'th N)Moate, Roger
Ground, PatrickMontgomery, Sir Fergus
Grylls, MichaelMoore, Rt Hon John
Hamilton, Neil (Tatton)Morris, M. (N'hampton S)
Hanley, JeremyMorrison, Hon P. (Chester)
Hannam, JohnMoynihan. Hon C.
Hargreaves, KennethMurphy, Christopher
Harvey, RobertNeale, Gerrard
Havers, Rt Hon Sir MichaelNelson, Anthony
Hawkins, C. (High Peak)Newton, Tony
Hawksley, WarrenNicholls, Patrick
Hayes, J.Morris, Steven
Hayhoe, Rt Hon BarneyOnslow, Cranley
Hayward, RobertOppenheim, Phillip
Heathcoat-Amory, DavidOppenheim, Rt Hon Mrs S.
Heddle, JohnOsborn, Sir John
Henderson, BarryOttaway, Richard
Hickmet, RichardPage, Richard (Herts SW)
Hicks, RobertParkinson, Rt Hon Cecil
Higgins, Rt Hon Terence L.Patten, J. (Oxf W & Abgdn)
Hind, KennethPattie, Geoffrey
Hirst, MichaelPawsey, James
Hogg, Hon Douglas (Gr'th'm)Peacock, Mrs Elizabeth
Holland, Sir Philip (Gedling)Percival, Rt Hon Sir Ian
Hordern, Sir PeterPortillo, Michael
Howarth, Alan (Stratf'd-on-A)Powell, William (Corby)
Howarth, Gerald (Cannock)Powley, John
Howell, Rt Hon D. (G'ldford)Prentice, Rt Hon Reg
Hunt, David (Wirral W)Price, Sir David
Hunt, John (Ravensbourne)Proctor, K. Harvey
Hunter, AndrewRaison, Rt Hon Timothy
Hurd, Rt Hon DouglasRees, Rt Hon Peter (Dover)
Jackson, RobertRhodes James, Robert
Jenkin, Rt Hon PatrickRhys Williams, Sir Brandon
Jessel, TobyRidley, Rt Hon Nicholas
Johnson Smith, Sir GeoffreyRidsdale, Sir Julian
Jones, Gwilym (Cardiff N)Rifkind, Rt Hon Malcolm
Jones, Robert (Herts W)Rippon, Rt Hon Geoffrey
Joseph, Rt Hon Sir KeithRoberts, Wyn (Conwy)
Kellett-Bowman, Mrs ElaineRoe, Mrs Marion
Kershaw, Sir AnthonyRossi, Sir Hugh
Key, RobertRost, Peter

Sackville, Hon ThomasTownsend, Cyril D. (B heath)
Sainsbury, Hon TimothyTracey, Richard
Shaw, Giles (Pudsey)Twinn, Dr Ian
Shaw, Sir Michael (Scarb')Vaughan, Sir Gerard
Shelton, William (Streatham)Viggers, Peter
Shepherd, Richard (Aldridge)Wakeham, Rt Hon John
Silvester, FredWalden, George
Skeet, Sir TrevorWalker, Bill (T'side N)
Smith, Tim (Beaconsfield)Waller, Gary
Speed, KeithWarren, Kenneth
Spencer, DerekWells, Bowen (Hertford)
Spicer, Michael (S Worcs)Wells, Sir John (Maidstone)
Stevens, Lewis (Nuneaton)Wheeler, John
Stewart, Allan (Eastwood)Wiggin, Jerry
Stewart, Andrew (Sherwood)Winterton, Nicholas
Stokes, JohnWolfson, Mark
Tapsell, Sir PeterWood, Timothy
Taylor, John (Solihull)
Tebbit, Rt Hon NormanTellers for the Noes
Thompson, Donald (Calder V)Mr. Tony Durant and
Thompson, Patrick (N'ich N)Mr. Michael Neubert.
Thurnham, Peter

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 33 (Questions on amendments), and agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House congratulates the Government on the success of its policies to encourage home ownership; recognises the need to achieve a proper balance between the responsibilities of the borrower, the lender and the tax payer, and greater fairness as between those on Supplementary Benefit for short periods and those in low paid employment; and notes the proposals to this end that the Government has put forward for consultation to the Social Security Advisory Committee.