The amended Budget proposal would result in a working couple who are paying mortgage interest of £7,000 or more each year paying up to £400 less in income tax in 2026 than under Policy & Resources’ original recommendation.
The Assembly backed the change yesterday in an amendment proposed by Aidan Matthews, and it will face a final vote at the end of general debate on the Budget today.
Scrapping P&R’s plan to lower mortgage interest relief would reduce States income by about £600,000 next year, but deputies believed it was a price worth paying to support and encourage home ownership, which has been in decline in recent years.
‘I believe almost everyone would agree that this decline in home ownership is not a good thing,’ said Deputy Matthews.
‘Being able to own your own home is intrinsically a good thing. Owning your own home is the most desirable way to establish yourself and put down roots, especially as a family.’
He argued that lenders may take mortgage interest tax relief into account when calculating whether an applicant could afford repayments and therefore cutting it could only make home ownership ‘an even more distant dream for many young people and families’. P&R president Lindsay de Sausmarez believed that lenders had already disregarded tax relief from their calculations owing to the States’ long-term policy of phasing it out completely and could not see how maintaining it would help tenants move into the owner-occupier sector.
Deputy de Sausmarez said she ‘broadly agreed’ with the wish to encourage home ownership. But having declared that she was a beneficiary of mortgage interest relief herself, she said she could not see why she should benefit from a tax break denied to people renting rather than owning their property.
‘This is the fundamental question. Do we think it is right and equitable that everyone who pays taxes should be supporting the portion of the community who pay mortgage interest?’ she asked.
Deputy Matthews said it was difficult to find ways of financially supporting tenants in the private rental sector even if the Assembly would like to in principle.
‘My greatest hope for this Assembly is that we will really focus on supporting children, young people and families to remain in the island and build our economy,’ he said.
‘If we are to revive and thrive, we need to make the island a place where young people want to stay and which families see as a safe and welcoming environment. Sending out a message that the States supports home ownership is a valuable sign to middle Guernsey.’
The amendment was approved by 23 votes to 15.
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