LEADING ARTICLE:Tory fears of repossession

The chorus now calling on the Government to bail out home-owners is predictable, indeed understandable. Job insecurity and fears of eviction now blight the lives of even the most privileged: 300 or so Tory MPs are afraid that they will be unseated unless something is done quickly.

Their self-interested motives for wanting to subsidise those in mortgage misery will not, of course, torment those who might benefit from government munificence: the 1 million people living in homes worth less than their mortgages and the 250,000 households in serious arrears on their repayments. Many of these home-owners were sold a dream by the Tories - including John Major, however much he might like to forget his part in the affair. But they have been living out a long and apparently unending nightmare. This group would regard any state hand-out as long overdue.

But the many more millions of people who have avoided getting themselves, either by luck or design, into a financial mire will be more sceptical about doling out state cash essentially to keep Tory MPs housed and watered at Westminster. Taxpayers would, after all, have to foot the bill.

So any policy initiative should be examined with a brutal realism that is not obscured by a sympathetic reception from predominantly middle- class opinion formers whose own interests bias them in favour of mortgage subsidies.

The available options do not stand up to close scrutiny. They include tax breaks for people in negative equity, abolishing stamp duty and increased mortgage tax relief, confined to first-time buyers. Even if these policies were combined in such a way as to add no extra cost to the taxpayer, they would conflict with the Government's aim of reducing mortgage subsidies. Such supports have long been inequitable, outstripping the money spent on council housing.

The suggested policy changes could also prove to be very expensive and unpredictable. Introducing tax breaks for those with negative equity could, in effect, involve writing a blank government cheque. Any further fall in house prices would cost the Treasury dearly. These initiatives would also be inflationary just when housing prices seem to be stabilising after more than a decade of turbulence. The national obsession with housing as a source of capital appreciation diverted cash from productive investment. Now, after decades of getting it wrong, it looks as if housing is being accorded its rightful place in the economy. People are getting used to seeing housing as providing homes rather than as a profit-generating investment.

All this might seem hard-hearted to those stuck with mortgage debt and struggling to make repayments. But there are other ways in which many people can improve their positions. Negative equity need not now prove an obstacle to moving: many home-owners can rent out their own properties and then become tenants themselves. Alternatively, building societies are increasingly willing to provide more flexible mortgages.

The biggest problem is not negative equity but repossession. It is possible to live for years in a home worth less than the mortgage, but not in one that divorce, unemployment or ill-health has rendered too expensive. To this impoverished group (which typically also suffers negative equity), the Government and lenders should show compassion so that people are not needlessly turned out of their homes. Ministers must ensure that, when mortgage interest support for the unemployed is reduced in October, property owners have other ways to insure against losing their homes. But fiscal prudence, if not electoral wisdom, dictates that is all the help property- owners can rightfully expect from the taxpayer.