Ministers said yesterday that Norman Lamont was studying the Budget options for replacing the Business Expansion Scheme (BES), which is due to be abolished at the end of next year.
The package is likely to fall far short of the demands for immediate action made by Tory backbenchers, if interest rates are increased. The Tory MPs are deeply worried about the rising numbers of home-owners whose homes are worth less than their mortgages.
Ministers are resisting the clamour for special measures for home-owners. They believe that using unsold homes for rent will help to take the housing market out of recession. The Treasury is in talks with the building societies, which are interested in expanding their role as private landlords.
The Chancellor said in his last Budget he was bowing to pressure to use the BES in helping to ease the problem of mortgage repossession. 'I propose to make it easier for the BES to be used for mortgage rescue schemes, where owner-occupiers in difficulties wish to stay in their homes as assured tenants.'
The BES advantages for assured tenancies and other investments will end on 31 December 1993. Mr Lamont said it was being abolished because it had become too complex, but there were widespread reports of abuses for tax- dodging. There was also criticism that property companies were being helped by the BES to profit from housing repossessions.
Mr Lamont has been persuaded that a replacement scheme is needed for the BES. The options for its successor are now being discussed, ministers confirmed yesterday. It will be directed at private sector landlords, to encourage them to take over more empty property for rent.
Ministers insist that expanding home ownership remains one of the Government's key policy objectives, but the Treasury believes that the best way to help most home-owners out of their mortgage difficulties is through stable prices leading to an upturn in the economy and lower interest rates.
Treasury ministers are sceptical about direct measures for home- buyers. Instead, they appear to be concentrating on reviving the rented sector as a means of relieving the depression in the market for home-buyers.
A Whitehall source said: 'We want to provide good quality accommodation, professionally managed, with responsible long- term institutions, and move away from the image of peeling houses with bad landlords.
'Discussions are under way with a number of interested parties to see what the right framework is for that revival. The building societies are major owners of property and they are parties to these discussions.'
The Treasury is wary about any extra public cost and it is likely that its ministers would want most of the new rented property to be let to private tenants.Reuse content