Management of the Economy and Ministerial Severance Payments

Justin Madders Excerpts

Tuesday 15th November 2022 Commons Chamber

[Justin Madders (Ellesmere Port and Neston) (Lab)]

A roof over your head, security at home and the peace of mind of knowing that at the end of the day you have somewhere to return to are the cornerstones of a happy and prosperous society. As we have heard, home ownership is the goal for so many of the constituents we represent and of those I speak with, and for years many have benefited from low and stable interest rates. Indeed, a whole generation of homeowners have taken their first steps on to the housing market knowing nothing other than that situation, which is one reason why I fear this current crisis is going to hit people harder and be more damaging than the previous interest rate rises we have seen.

The most immediate effect will be on those who do not actually own their home. There are many significant challenges people face when they are trying to get on the housing ladder, and the last few months have seen that ladder not just pulled up, but yanked away from hundreds of first-time buyers in my constituency. That has also placed many constituents who are already on the ladder in a position where their mortgages are no longer affordable.

Let us be clear: all of this was totally avoidable. It is the Conservative Government who have created this situation with their desire to turn the UK into a deranged economic experiment. This has spooked the markets, and while the main protagonists of this folly have gone, the Government remain, but it is the hard-working people who will pay the cost of this stupidity for many years to come.

I have spoken to one constituent whose repayment mortgage was unfortunately being negotiated right at the time the Government began their experiment. His family now face an increase in their mortgage repayments of £410 every single month. That is the sort of eye-watering, almost overnight increase in costs that all but the most well-off in society will have no chance of meeting. What of course makes this worse is that this comes on top of a year in which just about every expense a household will face has also gone up—council tax, energy bills and, of course, the weekly shop. Everyday costs have shot up well beyond any increases in wages, and those factors on their own are more than enough to put most households in trouble, but if we factor in mortgage increases of that degree on top, we reach a position that is clearly unsustainable.

We hear those seeking to absolve themselves of blame for this mess pointing to a pre-existing trend of increasing mortgage rates. While it is not disputed that there was indeed a slight upward trend before the kami-Kwasi Budget, there is no doubt that it is the Government’s reckless actions that have put rocket boosters under that trend, with the result that so much happened so quickly overnight. When the then Prime Minister and Chancellor decided to push ahead with their uncosted tax cuts, did they think for even a minute about what that might mean for people like my constituent who, over the next five years, will be paying an extra £25,000 on their mortgage? Of course they did not think about that; this Budget was not about my constituents’ interests or the interests of the vast majority of people in this country. And now my constituent asks:

“Can you please find out how the Conservative Government and their Prime Minister intend to fix an issue they created?”

Many of us would like to know the answer to that question, and if any who were in Cabinet at the time of that Budget but have since left would like to donate some of their severance payments to my constituent to help pay his increased mortgage costs, I am sure he would be grateful.

On severance payments, this Government have been doing their best to stop ordinary people from obtaining compensation when they lose their job, for example by reducing the number of people who can claim unfair dismissal. We should contrast that with the absolute bonanza of severance payments for departing Ministers. They do not have to work for two years somewhere before they can claim a redundancy payment or have the right to claim unfair dismissal; they get it from day one—no matter how badly they behave and what rules they break, they get those payments. Those are not the rules everyone else has to adhere to; that is indefensible.

Let us go through the catalogue of chaos that has become the hallmark of this Government. We have had four Chancellors in four months, and five Home Secretaries in three years—although two of those were, of course, the same person after they served a massive six days on the Back Benches in penance—and we have had five Education Secretaries in as many months. In total, we have had over 70 Ministers depart since July at a staggering cost to the taxpayer of over £700,000. That is not only a sign of a dysfunctional Government; we will be told on Thursday that we are all going to have to pay more tax and that public services funding must be cut, so it is an absolute disgrace that these payments have lined the pockets of people who had only been in the job two minutes—people who have had to resign because of things which, in many cases, if they did them in the real world, would mean they would not get a penny in compensation.

Another constituent, who was in the process of moving house at the time of the Budget, was advised that the products from their current lender had been removed entirely, preventing them from porting their mortgage; and, because the number of other products that were on offer was slashed to around 10% of what had been available the week before, they faced weeks of unnecessary anxiety. While they were eventually able to secure a mortgage, it has come at a cost of around £200 a month more than would have been the case had they completed on their mortgage only a week earlier. One might say that was unlucky timing; I would say it is unforgivable incompetence.

To provide some context, at the beginning of covid, when the world came to a halt, 462 financial products were removed from the market. When this mini-Budget came out some 935 mortgage products were withdrawn in just one day. On that measure at least, the Government have done more economic damage with their Budget than a global pandemic. Conservative Members should reflect on that, and have a sense of shame that it has come to this.

[Patricia Gibson]

Does the hon. Gentleman agree that the £65 billion used to shore up pension funds following the mini-Budget—£1,000 for every man, woman and child in the UK—is also a testament to the incompetence of this Government?

[Justin Madders]

Indeed; we are all the poorer for this folly and we will all be paying the price for many years to come. And where was the Prime Minister during all this? He did not say a word; I did not hear anything from him about why this was wrong. He kept silent and kept his cards close, playing the game, waiting for the opportunity to strike. But now it is his responsibility to clear this mess up and he had better do that.

While the markets have now begun to stabilise a little, the damage has already been done for many, with those coming off fixed-rate mortgages facing payment increases of five to seven times their current deal and some being shut out of the housing market entirely. Anyone on a fixed rate, and that is many of us, will be looking ahead in despair and fear over the next 12 to 18 months at what their mortgage payments will be. Martin Lewis has warned about a ticking timebomb; it is indeed a timebomb and, worse still, this did not need to happen at all.

The impact is not solely on those with mortgages. In my constituency, the pressure on the private rental sector is extremely high, which has already contributed to increasing rents. It is now impossible to secure a three-bed family property for less than £900 a month, which is about 50% of the average income in the constituency. I am already hearing from landlords who cannot afford to continue to rent out their properties without drastically hiking the rents, something many of them know is simply not realistic. They are therefore selling their properties, which will reduce the number of available properties in the private sector and push up rents again. Other landlords are now considering issuing section 21 notices to their tenants, because they know that if they relet the tenancies they can get 20% to 30% extra on the rents; that will push yet more people into homelessness.

Finally I want to say a few words about a group who, sadly, know only too well the impact of high mortgage rates: mortgage prisoners who have been trapped on standard variable rates for years. A constituent of mine is facing the 14th year on such a rate, and in October his mortgage increased once again by £100 a month. In 2021, he was on a fixed rate of 4.54%, double the average two-year fixed rate deal available at the time. Through no fault of his own, my constituent is limited in the mortgage products he can access and while the amendment to the Financial Services and Markets Bill would have capped mortgage prisoners’ SVRs and ensured access to fixed-rate deals under certain circumstances, the Government chose to vote that down. The measures introduced to provide switching options were found to have a limited effect by the Financial Conduct Authority, and with the contraction of mortgage products, hope for mortgage prisoners is now at an all-time low. They have experienced for years the issues that are now widespread in society, leading to frustration from many that their plight was met with little coverage or understanding when it could have been addressed and mortgage rates were historically low. I recognise those frustrations.

The Government also must ensure that any measures cover not just mortgage prisoners but other people who are trapped in their homes. Many leaseholders with unsafe cladding or other fire defects, and those with egregious ground rent clauses that make the properties unsellable, will see their costs increase due to interest rates going up, but they will not even have the choice of being able to sell their properties because a lack of Government regulation has let them down by leaving them in a home that they do not really own but they cannot leave. That is a wrong that it is taking far too long to put right.