Your Money: Relief for townies may mean misery in the green fields

The battle between town and country continues - this time over mortgages
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Indy Lifestyle Online
EVER THOUGHT of living in the country? Too bad, because someone in the Government doesn't want you to live there. And if you must, be prepared to pay even more for the privilege of doing so than a typical townie in his or her chosen property.

The Government's Urban Taskforce, which is charged with promoting urban renewal, proposed this week to scrap Miras, mortgage interest tax relief, for people living on greenfield sites. The proposal would add about pounds 18 a month to the cost of a mortgage over pounds 30,000.

The idea is that taking away country-dwellers' right to Miras, but retaining the relief for borrowers in towns, would discourage undesirable greenfield development. The money saved could be used to fund work in run-down inner cities.

Changes to Miras are among the suggestions being considered in the taskforce's report, which was passed to the Department of the Environment earlier this week. The report makes no mention of whether homeowners already living in the countryside would suffer, but a Department of the Environment spokesman refused to rule this out.

However, the Countryside Alliance, a powerful lobbying group, has hit out at the proposals. Nigel Burke, the Alliance's head of policy, says his organisation's main concern is that the removal of Miras might hit not just new homebuyers in the country, but anyone who already owns a house there, too.The idea of giving people retrospective financial penalties is not on."

Mortgage experts are no keener on the idea of differential Miras treatment. Ian Darby, of independent mortgage advisers John Charcol, says: "If you got withdrawal in some areas and not others, it would cause uproar. I have a house in the country, and that would wind me up enormously."

Miras gives borrowers tax relief at 10 per cent on the interest relating to the first pounds 30,000 of their loan. Based on the Halifax's current standard variable rate of 7.45 per cent, this produces a saving of pounds 18.65 a month, or about pounds 224 a year.

Philip Cartwright, of London & Country, another firm of mortgage advisers, says: "For everybody living in a four-bedroom house in the country, there are others struggling to make ends meet. Why should someone who lives in a pounds 30,000 home in the country suffer?"

Mr Burke agrees, fearing that the proposals as they stand could hit social- needs housing in rural areas.

Civic Trust, an environmental charity working in town centres, wants to see Miras wiped out for all homeowners, not just those in the countryside. It told the taskforce: "Phasing out mortgage tax relief should be considered, provided that the funds are redirected into housing-led urban renewal." It sees no sense in withdrawing the relief for country-dwellers alone.

Steve Evans, head of policy at the Civic Trust, says: "It strikes us as mad, because it would be impossible to police, and it would be grossly unfair."

But Mr Evans sees no reason why Miras should not be withdrawn from existing homeowners as well as new borrowers. He says: "We need to raise money to regenerate cities, and one option is to phase out mortgage interest relief for everyone."

Whether Miras is hit or not, the taskforce may well back some kind of tax changes in this summer's final recommendations. This week's taskforce report concludes: "The UK Government is still operating its fiscal regime in a relatively unimaginative way. The taxation system can be used proactively to incentivise investment in particular urban areas, while deterring excessive development in other locations".

Other suggestions floated in the report include adjustments to Council Tax in certain areas, and tax concessions for investors prepared to back city developments.

Despite repeatedly cutting its value, governments have so far shied away from abolishing Miras altogether. Mr Cartwright says: "If Miras were suddenly taken away, and people were pounds 18 a month worse off, you would be remembered as the party that took it away."

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