British Sikh Federation welcomes Budget changes

- Mortgage Interest Relief stoppage will lead to better mortgages

- Shares for employees will increase productivity and responsibility

The British Sikh Federation (BSF) welcomes the Budget changes on 9^th March 1999, and had previously written on 1^st February 1999 to Chancellor Gordon Brown MP to stop mortgage interest relief by phasing it out over the next year, setting out details in summary form to explain the benefits to the consumer and Government, so that the lending Banks and Building Societies can no longer hide behind the pretence of front-end loading interest payments and back-end loading capital payments (in order to make it more tax efficient). This will help to bring about new mortgage repayment schemes, so that the capital was paid off at least directly proportionately each year. The BSF had also brought this matter to the attention of Don Cruickshank, who is heading an Investigation into the practices of banks and building societies. The plans for the Financial Services Authority (FSA) to publish a League Table for mortgages is also welcomed.

Stephen Byers MP, Secretary of State for Trade and Industry, has also announced that mortgage Lenders will be required to specify the annual percentage rate of interest, and the total charges to be paid throughout the entire life of a loan.

Following an earlier Express & Star newspaper article on 16 February 1999, setting out the BSF approach for a revised mortgage scheme, the BSF was contacted by a Financial institution to work out the details of such a reformed mortgage scheme; the details are currently being reviewed by the BSF. There was a meeting between the Financial institution representative and the BSF at Guru Nanak Gurdwara, Sedgley St, Wolverhampton, on Sunday 28^th February 1999; on that day, BBC TV also carried out filming and interviews in readiness for Baisakhi coverage on BBC Midlands Today regional news, due to be broadcast on 12/13 April 1999 evening at approx. 6.30pm.

According to the Inland Revenue tax authorities, there are 11 million mortgage loans and 19 million borrowers, and the BSF estimates that stopping the mortgage interest relief alone will save £1,400 million / year for the Government; other savings in bureaucracy and mortgage payments when people are unemployed will probably increase this to at least £2,000 million / year. It will mean that the Government can use the money saved for better purposes elsewhere, e.g. education, health service, police combating crime, etc.

It is to the benefit of the borrower, government, and tax payers that the debt should be paid off as quickly as possible. The capital should be paid off at least linearly over the term of the loan, so that after 7 years of a 20 year term loan, at least 7/20 of the capital has been paid off. The interest should be charged on a daily basis on the capital debt outstanding at any given time.

Such an approach, based on repayment of the capital throughout the term of the loan, with interest only paid on the outstanding capital, means that the capital loan is paid off in a shorter period by keeping the annual total payments constant (as the interest portion decreases, the capital payment is increased), e.g. 13 years compared to the present 20 years for the same capital loan and interest rate of 6%, see attached example; the mortgage interest relief was now only worth £180 per year, and was of a very low significance amongst such figures. Such an approach shows a saving of approx. £32,000 in the total money paid back in comparison to the 20 year figures for a present mortgage scheme. There will also be savings in mortgage protection insurance schemes, since the term would only be 13 years instead of 20 years. If this approach was applied to all 9 million mortgages, it would mean a saving of £288,000 million to consumers, which could be used to purchase other goods thereby helping the manufacturing industry.

It is of benefit to the Government, since the state would only have to pay reduced assistance to cover mortgage loan interest payments when a person became unemployed

Company Shares

The BSF welcomes the changes made by the Chancellor in his Budget, to increase shareholding by employees. On 28 December 1998, the BSF had written to Gordon Brown to bring out new schemes so as to increase the shares held by all employees in their company.

Most British Asian businesses are successful because of the personal involvement element. With large employers, employees feel they have no influence or control, and a split in responsibilities / attitudes occurs with the usual attitude of "them and us" amongst management / workers. If all employees working for a large employer (for example anyone with over 50 employees) had shares in the company, they would have a personal involvement in the well being of the Company, with less scope for strikes, and management would be encouraged to manage in a better way since employees were shareholders as well and could raise questions at the Company Annual General Meeting.

All employees should be required to own shares in the company by legislation, and be encouraged to hold onto the shares for a number of years through taxation incentives or free matching shares; the number of shares given to workers, under special schemes, should be of a substantial quantity / value, with annual allocations related to Company profits as well.

A substantial amount of work is also carried out these days by agency / part-time / short-term contract / renewable contract staff; these workers should also be able to play their full part in the well being of the Company through share ownership schemes.