Finance Bill — Mortgage Interest Payments — 15 Jul 1997

Clause 1 ordered to stand part of the Bill.

I beg to move amendment No. 11, in page 10, line 15, at end insert--

'(4) This section shall not come into effect until the average mortgage rate is at or below the rate prevailing on 1st May 1997.'

The effect of the amendment is relatively simple. It would prevent the Chancellor's intended reduction in mortgage interest tax relief until the general tenor of interest rates returned to the level applicable on 1 May 1997--a date which, I imagine, is etched on the hearts of hon. Members on both sides of the Committee.

I shall return to the amendment, but first it may be helpful for the Committee if I give a little historical context to the issue of mortgage interest tax relief.

I suspect that, when discussing the subject, many of us are a little eclectic in our use of terms. I am trying to use the stricter term "mortgage interest tax relief", if only to remind the Committee that it is a tax relief given against taxable income on account of mortgage interest, although even that is not a perfect concept now. It is often described as MIRAS, no doubt because the acronym slips more easily off the tongue. That stands for mortgage interest relief at source, which was introduced some years ago. It is the same thing, but reflects the way in which the relief is now payable.

Subject to the indulgence that we may flit from one term to the other, even inadvertently, I shall say a word or two about the concept, how we got to where we are today and what we should do about that.

The original concept, like most things in the income tax system, almost all the way back to Pitt, was a logical one. Income was calculated taking into account all items that were taxable under various schedules, including at that time an implied rental equivalent for any house occupied by an owner-occupier under schedule A. Against that taxable income, the taxpayer was entitled to set off all relevant outgoings. From time immemorial, one of those outgoings was the deduction of interest on account of loans--not specifically tied to house purchase, at that stage.

That is a telling statement of the feelings of many Conservative Members; thus far, it has been the only statement by any Opposition Member on what they would have us do. Until such a claim has been rebutted or clarified, I, for one, will take that as a statement of what the Conservatives would have done if they had been in government.

Question put, That the amendment be made:--

The Committee divided: Ayes 147, Noes 381.

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