The Economy and Living Standards

Mike Thornton Excerpts

Thursday 12th June 2014 Commons Chamber

[Mr Osborne]

What the remit that I sent to the Financial Policy Committee said is that we need to be vigilant about risks emerging in the housing market. Last week the IMF said very clearly that there is not a credit-fuelled boom today, but we need to be vigilant, and I completely agree with that. More than that, I have created—Parliament legislated for—the system of that vigilance. The Financial Policy Committee did not exist before this Government came to office; there was no such thing as the remit that the shadow Chancellor has just referred to. We have given the Financial Policy Committee tools to look at mortgage standards, alter capital ratios and make recommendations on loan-to-income ratios and loan-to-value ratios, and I am clear that it should not hesitate to use them if it judges that to be necessary. That message goes out loud and clear from this Dispatch Box and it will go out loud and clear at Mansion House tonight.

[Mike Thornton (Eastleigh) (LD)]

I wonder whether the Chancellor is aware that when I worked for Northern Rock, I used to visit Newcastle and we used to see members of the Financial Services Authority leaving the chief executive’s offices and thanking him for his advice on how to do their jobs.

[Mr Osborne]

My hon. Friend brings his experience to bear in the Chamber. Northern Rock was the epitome of what went wrong—the 125% mortgages. It is the important link between rising house prices and mortgages that families find unaffordable if prices fall or they lose work and the risks to the balance sheets of banks that came together in a toxic combination in 2007 and 2008. The Financial Policy Committee exists to make sure that we spot those risks in advance.

--- Later in debate ---

[Mike Thornton (Eastleigh) (LD)]

Looking at what has been happening over the past months and years, I am impressed by the desire of Members in all parts of the House to see a fairer society built on a stronger economy. The difference is in how we achieve that. We have seen that we need to concentrate on providing jobs, apprenticeships and training for young people.

In Eastleigh, youth unemployment is at its lowest for five years, not four. There are 125 young claimants, or 1.5%. That is still too high but it is a great improvement. The increase in training and apprenticeships is particularly important. We have hit about 3,000 new apprenticeships, and these are real apprenticeships, not some sort of fake training jobs. This is the way to go. If we want to create a fairer society, we need to train people, educate them and help them get the jobs they need.

Work must be worthwhile, and one of the ways to ensure that is through the Liberal Democrat policy—yes, it is a Liberal Democrat policy—of increasing the tax allowance to £10,500 a year. It is not enough, though. We need to increase that to make sure that no one on the minimum wage pays income tax. I did a rough calculation. The tax allowance would be £12,500 a year. I look forward to that happening soon.

In the time remaining, I want to look briefly at housing. One of the things for which we have been hugely criticised was the help to buy policy. I was talking to the Council of Mortgage Lenders just two days ago. Of the 19,393 equity loans taken so far, only 1,000 were in London. The vast majority were for first-time buyers, and the vast majority were for houses of less than £200,000, not £600,000. The scheme is doing exactly what it was meant to do—that is, allowing young people from an ordinary family with a small deposit to buy a house, improving on the situation that has existed for several years, where people had to be rich or have rich parents to be able to get together a deposit to buy a house. Of course the Governor of the Bank of England is right that we should keep a sharp eye on the scheme to make sure that it does what it was meant to do, and not what is claimed. It is vital that we continue to build more houses. I hope the housing associations can be targeted to allow them to provide the bulk of this housing.

On the subject of housing, a long-time bugbear of mine is stamp duty. Why on earth do we have a stamp duty with a cliff edge and a shelf? Up to £125,000 people do not pay a penny. If they buy a house at £125,000 + 1p, they suddenly pay £1,250. That is absurd. If the Treasury would like to find out from me how we can reform this in a totally revenue-neutral and fair way, please pick up the phone and call me. It is very simple and easy to do.