Labour sets mortgage relief target

MORTGAGE interest tax relief should be phased out over five years as part of a large-scale reform of housing finance, Labour's Commission on Social Justice said yesterday, writes Nicholas Timmins.

In its latest discussion paper, the commission argues the moves the Conservatives have already taken to cut back the scheme should be extended until it is abolished. The savings should be used to create a mortgage benefit for lower-income owner occupiers which would allow unemployed owner-occupiers to get back to work. At present people who lose their jobs can be trapped into unemployment because social security pays their mortgage interest and they cannot get a sufficiently well-paid replacement job to come off benefit and start paying their mortgage again.

The Government is already winding down mortgage interest tax relief, restricting it to the lower rate of tax (20 per cent) from April this year and to 15 per cent next year. Taking it down by another 3 per cent a year would phase it out in five years, the paper says.

Meanwhile, more public rented housing should be created by allowing local authorities to set up arms- length housing companies, using private as well as public funds.

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