Intergenerational Fairness

Debate between James Cartlidge and Julian Knight

1st reading: House of Commons
Tuesday 28th February 2017 Commons Chamber

[James Cartlidge (South Suffolk) (Con)]

It is a real pleasure to follow the hon. Member for Birmingham, Selly Oak (Steve McCabe), who is a very good member of the Select Committee on which we both serve. I will echo one of his key arguments, which is that we need to reform the triple lock and other pensioner benefits and to use the savings for adult social care and the NHS, given how much of those savings would go to those who are pensioners.

The key word used by the hon. Gentleman was “honesty”. We must level with the British people about the financial situation we are in. The way to look at it is to ask: if we had a blank canvas today, what would we keep of what we have now? No one starting a pensions system today would come up with the triple lock. No one would suggest a winter fuel allowance, costing £2.1 billion, which is paid to everyone regardless of their income or their national insurance record. In my view, no one would suggest a free bus pass, which costs £1.2 billion. No one would even suggest the £10 Christmas bonus, which Ted Heath introduced in 1972, costing £124 million at Christmas, at a time when the NHS is in crisis and needs more funding.

The essence of my argument is that 2020 is way too late. To have such a date is to use an arbitrary political timetable to enforce policy, at a time when the national interest requires us to look at the state of adult social care and the NHS and to find the money needed for them in a fair way. To me, the proposition that we are about to put more money into adult social care and the NHS but that none of it will come from existing pensioners is extraordinary. We have to look at pensioner benefits and the triple lock.

When it comes to the triple lock, we must remember that by 2050 the number of pensioners—the number of people over 65—will not be 10 million as it is today, but 19 million, which is almost twice as many. Look at the pressure our services are under today, let alone when there are almost twice as many pensioners. If we keep the triple lock, it will cost an extra £15 billion by 2050. My view is that we should recognise that the most vulnerable pensioners—those who need help from the state the most—are in the care system or in the NHS and in need of care.

I think we should look very hard at the winter fuel allowance. I would capitalise it for a year to invest in remediation measures, provide help with heating and so on, and move people on to more competitive energy tariffs, and then I would wind it down and spend the money on the care system, because that is what pensioners need, particularly in the winter.

We should look at the free bus pass. We could put a nominal charge on the pass and allow pensioners to travel at peak time. According to my county council, that would be a huge saving. It is actually what many pensioners want, bearing in mind how many do not take advantage of the free pass, which costs the Exchequer £1.2 billion a year.

I have to add that we should look at free prescriptions. In England, we say that we pay for our prescriptions, but 90% of prescriptions in England are not paid for, because so many of them go to the over-60s. The cost of free prescriptions in England for the over-60s is £4.8 billion. I recently went to a pharmacy in the beautiful village of Clare in my constituency. Most of the over-60s there are relatively well-off and probably own their properties outright—of course, there are pensioners there who are not well-off—but the fact is that they receive free prescriptions while many far less well-off people of working age do not. That is the sort of moral issue we must talk about.

What would I use the savings on? People should be as open and honest about this as I and our Committee have been prepared to be.

[Julian Knight]

My hon. Friend is slaughtering sacred cows in such a steady fashion that I am wondering whether he is also considering looking at free BBC TV licences. Is that an expense we cannot afford?

[James Cartlidge]

My understanding is that the BBC will be asked to pick up the tab for that shortly, which I think is fair enough.

As I say, none of us would introduce such things today. They were political measures that bear no relation to contributions to the national insurance system or to the incomes of the recipients. That is the sort of politics we simply cannot afford today. Instead, we should be prepared to look at these measures, and use the savings to support a fair deal for those who have assets and need the care system, as well as to support those in the care system who cannot support themselves. Raising money to support the care system offers the possibility of another aspect of intergenerational fairness. The care sector is desperately short of staff and too many are badly paid. If we raise the money to support the social care sector, which will not be hit by the robot employment era, we have a way to give better paid work to young people and to provide a better career structure to those who might otherwise be on relatively low pay.

I want to finish on the key point made, in an excellent speech, by my hon. Friend the Member for Weston-super-Mare (John Penrose). I strongly agree with him on the issue first raised by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) in relation to the basic pension plus in April 1997 that we should move to a funded system. All our constituents who are pensioners will make the point, “Why should you take this stuff away from me when I have paid into this all my life?” And quite right. Pensioners come to my surgeries worried about having low interest rates on their savings when council tax is going up. They are affected by that. I accept that many of them are not wealthy. In fact, many are struggling. I accept that, but the root of the problem is that we have a pay-as-you-go system. We have vast freebies, such as prescriptions, and nobody feels any link to them. My hon. Friend is right that this is about the contrast between a Government who would be doing the right thing, even though it is not popular, of building towards a funded system, and those in the past who have given out vast freebies at the expense of future generations. The former is the model we should move towards. It may not be popular, but I think the public know that tough decisions have to be made. We should not shy away from them. If we want inter- generational fairness, we will have to have a little bit of intergenerational honesty.

Housing: Long-term Plan

Debate between James Cartlidge and Julian Knight

Tuesday 9th February 2016 Commons Chamber

[Julian Knight]

I completely agree. It is ridiculous politics for people on the housing ladder to seek to pull it up and not allow others on. That is terribly two-faced, and entirely wrong.

Help to Buy is a fantastic innovation and is a good measure for an emergency. Our housing industry was dying, which is why we introduced it. The Government should be commended for continuing with that policy. Social mobility is aided by the measure, but this is not a demand issue. It is a problem of supply.

[James Cartlidge]

My hon. Friend is making an excellent speech. He is the first person to make the wider point that I think we should focus on, which relates to issues such as the pensions system and the price of money. We often talk about supply, but the price of money is an issue too. After the crunch there was a complete collapse in economic activity, and Help to Buy was given a huge boost, with maximum prices of £600,000 and so on, which was necessary to rescue the economy from what would have become a depression.

[Julian Knight]

My hon. Friend is absolutely correct. Help to Buy is very similar to the car scrappage scheme, which helped to rescue a major industry in 2008-09. The measure was introduced to allow house builders to get rid of dormant stock. As an economy, we are held captive by the lack of supply. Responsible Governments look at the supply side—that is what we did in the 1980s—for solutions, and that is what we are trying to do. We are trying to get more homes built: the Government aspire to 200,000 a year, or 1 million in total. It is good to have stretching goals, but if we could just produce enough for the new families being formed, that would be satisfactory. In my constituency, we are stepping up to the plate. We have a local plan in place, unlike many areas represented by Opposition parties. We have met the challenge and are looking to build more homes, be it through direct build, right to buy or getting housing associations to build more homes—they have not been building enough. I believe that devolution, through the combined authorities, can also help.

Finally, I turn to our opponents. The hon. Member for Erith and Thamesmead (Teresa Pearce) said she did not want to trade statistics, so I will not delve into them, but I will say one thing: the real shame of the 1997-2010 Labour Government was that their flagship policy was home information packs. That was basically it on housing. All those people waiting on the housing list, looking for a home to follow their dreams, had to wait, because the homes were not being built for the households being formed.

Labour has commissioned a report into housing, as it did in 2004, and I presume that this time the findings will again be ignored. I will be interested to read the report—I do welcome it—but instead of commissioning a report, the Government are getting on with building houses. They can truly say, “We are the builders”.

Housing

Debate between James Cartlidge and Julian Knight

Wednesday 10th June 2015 Commons Chamber

[James Cartlidge (South Suffolk) (Con)]

I congratulate the hon. Member for Norwich South (Clive Lewis) on his maiden speech. As a Suffolk MP, it is good to see that there are some good things coming out of Norfolk.

I want to draw the House’s attention to my interests. I am a controlling shareholder in a mortgage broker and property portal that is focused on the shared ownership sector. It includes First Steps, which will be of interest to London MPs.

According to the Intermediary Mortgage Lenders Association, if current trends in tenure continue, two decades from now, for the first time since the early 1970s, the majority of Britons will rent their home. I have spent my commercial life focused on first-time buyers, and I do not want to live in a country where home ownership is restricted to the few. That is why I strongly support the measures proposed by my right hon. Friend the Secretary of State to support home ownership, particularly the extension of the right to buy. It is important to remember that this is not just about getting on the property ladder; it is about people keeping a roof over their head. Housing repossessions are at the lowest level for nine years; indeed, repossessions and arrears are falling. I welcome that. We must never forget that a key element of any housing policy is a strong economy in which people can afford to pay their mortgages, gain employment to obtain mortgages, keep paying their rent, and so on. I am proud to be a Conservative in a Government who are delivering a strong economy where people can get on the ladder and get on in life.

I set up my company in 2004. I was originally a mortgage broker, although we have since diversified, and I want particularly to focus on mortgages. I have to say to the shadow housing spokesman, the hon. Member for Wolverhampton North East (Emma Reynolds), that when we started in 2004 I was absolutely shocked and appalled by some of the practices in the mortgage lending industry. I was stunned that people who already had an adverse credit history and huge unsecured debts would call us up seeking a mortgage. Indeed, they were often able to obtain one, on a self-certified basis, through so-called adverse, heavy-adverse and super-adverse products. One very famous American bank even had a “credit builder” product, which basically meant “unlimited-adverse”. People could have missed as many payments as they wanted and still obtain a mortgage.

Those were bad days for the mortgage industry. They were overseen by the Financial Services Authority, which was set up by Gordon Brown in 1997. When he did so, he said that it would give stability to the financial sector. For me, the biggest failure of the Labour Government was their failure to regulate the mortgage sector. I was a business owner in the mortgage sector, and we constantly received correspondence from the Financial Services Authority—huge reams of regulation and gobbledegook. Every six months we had to submit a capital adequacy return. Northern Rock would have been doing the same thing, so why could not the FSA have spotted what was happening? It was an incredible failure to regulate banking. Let us not forget that 1998 to 2007 was the most unprecedented period of growth in house prices in this country, so when Labour Members table a motion about first-time buyers and affordability, they must recognise their own culpability in this matter.

One specific issue that I feel very strongly about is the growth of buy-to-let. I would never criticise anybody who has invested in property, especially given that we have had such problems in our pensions sector, not least because of the tax brought in—again—by Gordon Brown. I do not blame anyone for doing that, and I do not think we should do anything to clamp down on existing buy-to-let, because that would force rents up. However, when we look at new entrants to the market in the years ahead, we have to start to take account of the fact that the assets in buy-to-let will shortly hit £1 trillion. The key point about buy-to-let is that it is not a level playing field. Those properties are properties that first-time buyers wish to buy as well.

Three key aspects illustrate why buy-to-let is not a level playing field. The first is stamp duty. If I buy my first property, I pay the same rate of stamp duty as someone buying their 15th buy-to-let portfolio property. I do not think that is acceptable. Then there is tax relief, which has been raised by hon. Members in all parts of the House. If we were to give first-time buyers the ability to offset their mortgage repayments against tax, we would be told that that was stimulating house prices, yet we feel quite happy that a buy-to-let landlord should be able to do the same. Again, I have a real problem with that.

The most important point is about mortgages. If someone telephones our biggest mortgage bank, which was bailed out at great cost by the public, they will find that a residential customer—a first-time buyer or home mover—has to have a capital repayment mortgage, which is absolutely right, but that a buy-to-let landlord can get a mortgage for the same property from the same bank on an interest-only basis. The Intermediary Mortgage Lenders Association has stated:

“The ‘triple lock’ of the new regulatory landscape—the mortgage market review (MMR), Basel 3 capital adequacy rules and macro-prudential regime, disadvantages first-time buyers relative to buy-to-let borrowers and may help to entrench the decline of owner-occupation going forward.”

That is what the mortgage lending industry says. It went on:

“For example under the MMR at an interest rate of 4%, first time buyers required to take out a capital repayment mortgage will face monthly mortgage payments 58% higher than a landlord”,

who is probably borrowing to lend the property out to frustrated first-time buyers.

[Julian Knight (Solihull) (Con)]

I am very interested in my hon. Friend’s analysis of the buy-to-let mortgage market. I would point out, however, that the oversight of that market has been far better under this Government with their regulation of financial services than during the Labour party’s time in government.

[James Cartlidge]

It has to be said that the oversight of mortgages could not have been worse: it was a very grave failure under the FSA.

The thing about the level playing field is that I want to see a country where first-time buyers on average earnings have a realistic prospect of buying a home, which is not that ambitious. I am a one nation Conservative, and I do not want to be in a two nation country with those who own property and those who have absolutely no chance of doing so. That is the key point. There are those who will feel that owning their own home is a long way away, but they want to feel that they have a chance. That is one reason why I support measures such as the extension of the right to buy and the Help to Buy individual savings account deposits. We want to give people opportunity.

As we move forward, Mr Speaker—[Interruption.] Sorry, Madam Deputy Speaker. It is the force of very short habit, as I have only just got into the House.

I want us to consider such points, because we need a level playing field. House prices are affected not just by building and the supply of building; demand factors are critical as well. House prices collapsed in 2008 not because we suddenly built more homes, but because of the economy and what happened to mortgage finance. I hope that my right hon. and hon. Friends will take cognisance of these points.