§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Chichester-Clark.]
§ 9.59 p.m.
§ Lord Balniel (Hertford)
I feel that I ought to begin by thanking my hon. Friend the Parliamentary Secretary to the Ministry of Housing and Local Government for his courtesy in attending at this late hour in order to answer the points I wish to raise which are solely concerned with my constituency——
It being Ten o'clock, the Motion for the Adjournment of the House lapsed, without Question put.
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Chichester-Clark.]
§ Lord Balniel
The points I wish to raise are solely concerned with a few persons who live in my constituency, but I make no apology for raising this matter which to them is important and which in my opinion raises certain questions of policy which I regard as important.
Perhaps it would be for the convenience of the House if I began by explaining the background to the story I wish to unfold. I should begin by explaining that in Welwyn Garden City a housing estate known as the Temple-wood Estate, consisting of about 127 houses, is in process of being built by Welwyn Garden City New Town Development Corporation. During the early part of July this year those houses were allocated to applicants. Many of these people who wished to purchase houses had been on the waiting list for anything up to two years. In allocating the houses, provisional prices were quoted to the applicants, prices which, incidentally, showed a fairly considerable increase over prices for similar houses in 1958.
On 11th August this year the prospective purchasers received a letter from the Development Corporation emphasising that the prices were provisional only and that they might have to be increased. However, the letter went on with this limited, but none the less definite, assurance: 688The only assurance that can be given at this time is that if no unforeseen extras occur and if the general level of property values remains substantially unaltered there will be little to fear.Then there was a rather touching, and in retrospect a perhaps slightly equivocal, phrase to the effect that it is essential that applicants should be aware of the Corporation's own doubts and difficulties in this matter. Five weeks later the prices of those houses leapt upwards by between £175 and £300 for each house according to the type of house.
In a moment I shall ask my hon. Friend what were these "unforeseen extras" which occurred in those five weeks and which necessitated this very considerable increase in price. I should like also to discuss something of the merits of the action of the Corporation, but, before doing so, I wish to turn to another matter which is of considerable importance. This matter was first brought to my attention when the appointed representatives of some seventy applicants asked to see me.
As no reason except the very vaguest and rather unconvincing reason had been given for this substantial increase in prices, these people naturally and rightly sought a meeting with the Corporation to find the reasons for the increase. Twice they asked for a meeting, and twice they were refused by the Corporation. Then they approached me and asked me if I personally would try to find the reasons for the Corporation's actions. Of course, I very readily agreed to do this.
I wrote to the Corporation simply asking that I and the small deputation of my constituents should have the opportunity to meet the Corporation and discuss the reasons for the increase. Perhaps I should quote the words from my letter to the Corporation on 3rd October:I understand that at the beginning of July, 1960, the applicants for houses on Temple-wood Estate were invited to make a selection and were quoted provisional prices. Since then they have been informed that the prices have been increased and there is in their minds the fear that they might be still further increased. They feel that they are entitled at least to know the reasons which have led the Corporation, so soon after quoting provisional prices, to increase them. I would be grateful to have the opportunity of meeting you with a small deputation of the applicants, to have a general discussion with you about the price of these houses, and the reasons for the increase.689 My purpose in writing to the Corporation was solely to ascertain the facts and in no way to urge that the prices were excessive and should be reduced. The Corporation refused to see me. It is true that it agreed to see me alone without my constituents, but, as I am sure my hon. Friend will appreciate, for me to be seen alone by the Corporation, to be given information which is private and confidential and which I could not pass on to my constituents would, of course, be totally useless.
I must tell my hon. Friend, because the Development Corporation is his agent, that this is the first occasion that I, as the elected Parliamentary representative for this division, have ever been refused a meeting with my constituents and a public authority. I venture to express the hope that not only is it the first but that it will also be the last occasion.
My opinion as to the wisdom of the Corporation in this matter is, I suppose, of very little moment, but I will frankly say to the House that, in my opinion, this decision of the Corporation was lacking in frankness towards my constituents. I also think that it was a mistaken interpretation of its duty to the public, whose servant, after all, it is. Surely, the absolute minimum which we have the right to expect of the Corporation is that if it takes decisions which directly affect the interest of any individuals it should be obliged to give reasons for those decisions.
In this instance, the Corporation refused to allow us to know at all how it arrived at the selling price of its houses. I ask my hon. Friend, what conceivable reason, in a democracy such as ours, is there for secrecy in this kind of matter? Even if—and I am beginning to suspect that it is the case—the profits which are being made by the Corporation are colossal, why should not the public know and why should not the Corporation be willing and anxious to justify itself before the public? After all, this is public money which is being spent. It is a matter of public, albeit of local, interest, but the Corporation is a public body and I cannot understand the reasons which have inspired its actions in this matter.
This is particularly true because this Corporation, unlike many other public 690 authorities which have to deal with the public, has not established any consumers' consultative committee whereby matters of this kind could be properly ventilated, and if it refuses to see me with my constituents I am left with absolutely no recourse in defence of what I regard as the reasonable interest of my constituents save to raise it in the House of Commons.
I should like to turn to the merits of the matter. I ask my hon. Friend what it was that occurred in this short period of five weeks which caused the Corporation to decide to abandon the original offer and boost the price of these houses by between £175 and £300?
I think that my hon. Friend will probably agree that for a public authority to offer a house at a provisional price to an individual, who has probably been waiting for two years for a house, and, having obtained his acceptance, immediately to raise the price, at least requires some explanation as to how the authority arrived at the selling price. This the authority feels that it cannot give.
It is true that neither I nor my constituents can force the authority to break its silence. All I can do is to express the opinion in the House that it has committed an error of judgment. I think, however, that it is probably reasonable to draw the conclusion that the selling price now bears very little relation to the cost of building these houses.
The Development Corporation wrote to the applicants for these houses, on 11th August, giving some possible reasons why an increase in price might be necessary, as follows:First, I must make it clear that specifications are unlikely to be altered for reasons of expense, but are quite definitely at the mercy of materials shortages.Is this increase in price the result of shortages of material? I venture to believe that this could not account for more than a tiny fraction of the increase which is now being demanded. The Corporation's letter continues:Secondly, shortages of materials are quite likely to delay building work and any forecasts of the date by which your house will be completed must be recognised for what they are—guesses …Is the reason for this substantial increase in the price of houses the fact 691 that the building has been delayed? Again, I venture to guess that the delays do not account for more than a tiny fraction of this increase in price. The letter continues:Thirdly, in view of the possible use of more expensive material, possible delays in completion, and the uncertain state of the property market there is no way of being certain that currently quoted estimated prices will hold throughout the period of building.Here, I think, the Corporation has touched very delicately upon the reason for these price increases, for I suspect that during this period of five weeks the Corporation decided to cash in on the speculation in land values resulting from the serious shortage of building land in the green belt area. If I am right in suspecting this, I should like to comment that I do not feel that it is the Corporation's job to compete for profits with the speculators. More especially is this not a job for the Corporation because the land on which these buildings are being built was obtained at low prices very many years ago. Although I have not checked this fact, I think that we can reasonably assume that it was land compulsorily acquired from private individuals.
I should like to ask some questions of my hon. Friend on a rather wider issue. What are the principles on which the Corporation is operating? The price for these houses has risen since 1958 by 20 per cent., although the building costs in this area have risen by about 5 per cent. We know from the accounts of the Development Corporation that even with the former profit margin if was making quite a handsome profit. Now I read—and it has not been contradicted by the Development Corporation—that the additional profit, over and above what has proved to be a satisfactory profit in the past, on the sale of 127 houses is about £31,000.
I should like to clear up a misconception which is certainly felt by many of my constituents. Not one penny of this profit will be used for the benefit of Welwyn Garden City. The profit will be sent post haste to the Treasury. I am not in any way against the idea of the Development Corporation making a reasonable profit. "Reasonable" is the adjective I use.
692 I hope that I have the agreement of my hon. Friend in this matter because in a recent letter to a local council my right hon. Friend the Minister of Housing and Local Government used these words:The aim of a local authority should be to keep the margin of profit at the lowest possible level.My right hon. Friend thought it correct to write to a local authority for which he has only indirect responsibility, calling on it to keep to the lowest possible margin its profit in a matter concerning the rentals of produce stalls. My right hon. Friend is directly responsible for the Corporation. Surely he will consider calling on it to operate at a low margin of profit in a matter which concerns not produce stalls, but human beings.
I have no doubt that the Corporation will be able to sell its houses, because there is a very long waiting list of applicants. But in doing so it is exercising the monopoly powers it possesses in a way which I do not think is of benefit to the community. It has a monopoly. The prices which it is now asking do not in any way reflect the rising cost of production. They reflect solely the demand.
This is what we are constantly urging manufacturers not to do. We constantly ask them to hold prices stable, to absorb rising prices and not pass them on to the consumer. It is true that we often ask in vain. If we ask that of manufacturers, surely we have the right to ask it also of the Corporation?
I feel that the Development Corporation, being a public corporation, financed by Treasury advances, is under a real moral obligation to act with restraint in profit making. It is the Treasury Ministers who constantly urge us to curb profits and control the cost of living. Why should Treasury advances be used in this way to extract the maximum profit from the desperate need for houses in this area?
In a recent Question in the House I asked my hon. Friend whether this was part of our policy of curbing profit margins, whether it was part of our policy of stabilising the cost of living, or part of our policy of encouraging home ownership. My answer to that would be that it is directly contrary to our policy of curbing profit margins; 693 it is directly contrary to stabilising the cost of living, and directly contrary to our policy of encouraging home owner ship.
As this is a matter of policy and not a matter of day-to-day operation within the Development Corporation, I ask my hon. Friend to look at the matter once again, because it is a cause of considerable concern in Welwyn Garden City.
§ 10.18 p.m.
§ The Parliamentary Secretary to the Ministry of Housing and Local Government (Sir Keith Joseph)
I agree entirely with my noble Friend the Member for Hertford (Lord Balniel) that this is a cause of very strong feeling in his constituency. I note the presence of my hon. Friends the Members for Hemel Hempstead (Mr. Allason) and Hitchin (Mr. Maddan), who also presumably are interested because of the new towns in their constituencies.
I realise that when we are dealing with constituents waiting for houses strong feelings are bound to be involved, but I am sure that the constituents of my noble Friend will feel that at least their case has been most vigorously, cogently, extensively, and comprehensively put forward this evening. I only hope that my answer can attain the same level.
I feel, however, that my noble Friend and his constituents will not find my answer all that satisfactory in detail, because I must start as I finish, and finish as I start, by insisting that the price at which a new town corporation decides to sell a house is entirely a matter of day-to-day management, provided that it conforms with the general policy direction laid down by my right hon. Friend. That being so, my right hon. Friend would be unwilling to intrude in that day-to-day management.
My noble Friend has asked, as he is quite entitled to ask, on what principle my right hon. Friend judges whether the corporation is within the policy laid down. The general policy in these matters has been clearly laid down by my right hon. Friend. It is that, wherever possible, new town corporations should sell houses only at market price, or as near to market price as possible. It is, therefore, my right hon. Friend's responsibility to assure himelf that this is the level or approximately the level at 694 which houses are sold. If he is so satisfied, he must, to maintain his own policy, leave the decisions and the conduct of such decisions to the new town corporations.
My noble Friend has made great play with the responsibility of the corporations not to make, as he put it, excessive profits out of the use of public or Treasury money. That is one aspect, but I would put to him very strongly the contrary aspect—that it would be a sad dereliction of duty if Treasury or public money were used in such a way as not to yield the fullest possible value for that expenditure.
Many of my hon. Friends constantly criticise local authorities for indiscriminate subsidies in the way of rents. I suggest to my noble Friend that if the corporation were to give a subsidy by selling to an arbitrary number of its applicants houses at below market value, it would offend the proper use of public money in just the same way as some of us feel that local authorities offend the use of public money by indiscriminately subsidising their tenants.
I suggest to him that what has really excited his constituents to feel so strongly in this case is not so much the final price as the fact that the price has changed during the proceedings. Here, I have the greatest sympathy with the applicants. They may well compare the situation that might have been had they been buying houses from a private developer, but I would remind them, through my noble Friend, that if the private developers, as they generally do, fix the price well in advance and do not change it, it is because, in most cases they have a far larger margin of profit with which to play than a new town corporation would permit itself.
I would also remind them, through my noble Friend, that every communication that I have heard of that they have had from the corporation emphasised the provisional nature of the estimated price. That may be small comfort to them, but there can be no question here of sharp practice or deceit. They were warned in each communication. Because my right hon. Friend does not intrude in day-to-day management, he would not wish me here to go into details of make-up of costs. That is not his business, once he 695 is satisfied that the price approximates to the market value.
I would also remind my noble Friend that housing costs cannot easily be compared on the basis he sought to compare them between 1958 and 1960 purely by comparing the index of building costs. One has to take into account site costs and site development costs. One has to take into account, not only the average movement in the building industry between the two dates but also the effect of price changes on local materials; and, even more important, the effect of delays due to weather or other causes on this particular site.
I would also remind him that, as is made clear in the letters from the corporation to the applicants, it is not only costs that govern the price but market value. Therefore, it does not seem to me that a mere comparison of building costs between 1958 and 1960 concludes the story.
There are other considerations that could be urged against any subsidised sale. For instance, a new town corporation is most anxious to avoid increasing the temptation to individuals to sell their houses to people who may, perhaps, not work in the new towns. A subsidised sale which would offer a substantial profit on resale would perhaps offer an unnecessary temptation to the individual purchaser to transfer his house at a fairy early stage, perhaps to someone who does not work in the town. I am not suggesting that any of the applicants now are seeking to buy a house for that purpose. Indeed, I am sure they are not. Nevertheless, if people were inclined to say that that sort of danger can be covered by restrictive covenants, I would answer them by saying that I am advised that restrictive covenants cannot, unless statutorily sanctioned, easily be used for that sort of purpose.
My noble Friend said that he was sure his opinion was not of great moment in this matter. I would like to reassure him. His opinion, and indeed the opinion of his constituents, is of the greatest moment, and if I have any comment on the Corporation it is to say that my right hon Friend hopes that it will recapture as quickly as possible the sort 696 of public relations and relationship with the constituents of my noble Friend that he would desire.
My noble Friend regretted that he was not immediately seen with his constituents. He was good enough to make it plain that the Chairman of the New Town Corporation had immediately agreed to see him personally. But in a dispute like this one must sympathise a little with the Chairman of the New Town Corporation who was, so far as he was able, conforming to my right hon. Friend's policy. He was under no obligation to go into great details of how the price was made up, and I sympathise with him in feeling that it was not necessarily his duty to see not only my noble Friend but my noble Friend with his constituents.
I repeat that public relations are vital in new towns, as anywhere else, and I am sure that the Chairman and his colleagues will seek to rehabilitate any relationship that has gone slightly awry as soon as they possibly can. I would repeat that they were under no obligation to explain the cost make-up of the houses.
If my noble Friend or any hon. Member can show that a new town is not following my right hon. Friend's policy as laid down, or if any hon. Member of the House questions the policy laid down by my right hon. Friend for the new towns, then they can have recourse to this House. But if my right hon. Friend has laid down a policy which meets with general approval—and I suggest that a policy of market value is one which should meet with general approval—and if he is satisfied that the new town corporations are operating within that policy, I suggest there is nothing for which my right hon. Friend can legitimately be asked to answer in this House.
I must finish as I began by saying to my noble Friend that much as my right hon. Friend regrets the disturbance and strong feeling that this matter has aroused, and much as he hopes that the good spirit of the new town will be recaptured in this area as in all others, he cannot think of interfering with the day-to-day management of affairs, provided that it conforms, as it does in this case, with the general policy as laid down.
§ 10.28 p.m.
§ Mr. Martin Maddan (Hitchin)
Surely my hon. Friend the Parliamentary Secretary will agree from the account which has been given that it cannot be disputed that the affair was bungled in very serious respects. Although it was stressed that the prices were provisional, nothing unforeseeable has happened. No account has been given of a change within five weeks. In addition, I am not satisfied about the reason why the Chairman of the Corporation would not 698 see my noble Friend and his constituents. When something goes very awry like that, it is not good enough to say that it was within the day-to-day management of affairs. I hope it is clear that my right hon. Friend has told the Corporation in much stronger terms than the Parliamentary Secretary has used what he thinks of them, and what we think of them.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-nine minutes post Ten o'clock.