HC Deb 16 November 1962 vol 667 cc783-92

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Campbell.]

4.1 p.m.

Mr. Frank Allaun (Salford, East)

I wish briefly to make seven points and I hope that the Parliamentary Secretary will consider them as "Seven Pillars of Housing Wisdom".

First, most wage and salary earners cannot afford to buy their own homes and are dependent on council housing, since councils are the only bodies building houses to let. Second, in the last eight years the Government have almost exactly halved the number of council houses built from 235,000 in 1954 to 116,000 last year. Third, this was caused mainly by the doubling of the interest rate which was never more than 3 per cent. under the Labour Government up to 1951. Fourth, this in turn has doubled council rents. Fifth, it has also greatly increased the mortgage interest instalments paid by those buying their own houses. Sixth, local authorities are being forced to raise their rents and rates almost annually to cover the growing deficiency on their housing revenue accounts; or, despite the growing need for houses, actually to stop building, which is even worse. Seven, local authorities are becoming increasingly unpopular because of this and are being made the scapegoats for the guilty men in the Government.

The catastrophic effects of the interest rates are not generally realised. To put it simply, two-thirds of the economic rent, ignoring rates on the one hand and subsidies on the other, goes to pay the interest on the housing loan. I am indebted to the chairman of the Salford Housing Committee, Councillor Norman Wright, for the following figures, which I think are typical of what faces councils throughout the country.

Like many councils, the Salford Council is forced to build multi-storey flats, not because it wants the flats but because there is no alternative. A multistorey, three-bedroomed flat has an economic rent of £4 10s. 11d. a week. The actual rent, rates, management expenses and repairs would amount to £2 7s. 11d. But interest adds no less than £2 3s. a week.

Another council in the North borrowed £100,000 this year for housing purposes. But the time that money is paid back over sixty years at the prevailing rate of interest, the council will have paid £371,000.

I suggest that we look at the matter from the receiving end, from the point of view of the tenant. That great novel, Love on the Dole, like many other great novels and plays, was written by a Salford man, Walter Greenwood. In his book he describes conditions of life in "Hanky Park" which is the nickname for the Hankinson Street area of Salford. Recently this area—unfortunately it is only one of many slums in the city—has been completely cleared.

The tenants have been rehoused in twelve-storey flats, built economically and well by direct labour on a magnificent site overlooking Manchester Racecourse. They were paying in their slum homes 9s. a week, which was more than the houses were worth. They went to these new flats and found that the rent was 31s. a week. That was two years ago and I regret to say that since then the council has been forced to make several rent increases so that now the rent is about 40s. a week. There are rumours of further increases.

These tenants lived in houses which were so small and terrible that they could not have proper furniture in them. Now they are paying fairly heavy hire-purchase instalments on furniture. They also have to have smokeless fuel, a couple of bags a week at 12s. 6d. a bag. These may not seem to the Parliamentary Secretary and his colleagues to be big figures, but I point out that nearly all these people are low-paid workers. Many of them are working as labourers in the engineering industry. The basic rate for an engineering labourer today is the magnificent sum of £8 9s. 10d. a week. True, some can earn overtime and bonuses, but many cannot. This applies also to dockers in the city. There may be short-time working, as unfortunately is very often the case at the docks. By the time they have paid National Insurance and their fares, they take home less than £8 a week in this so-called affluent society.

Speaking on 26th September, the Minister of Housing and Local Government said: Rents generally are far too patchy. In some areas they may have reached the economic level, but in others they are unreasonably low. I challenge the Minister, or the Parliamentary Secretary, to come to Salford and tell these tenants that rents are unreasonably low and should be raised still further.

What alternative is there for such councils? One proposal is that they should stop building, but they are faced with the problem of young couples with no home to go to, with overcrowding so serious that at night one or more of the children in the family have to be boarded out with neighbours—there is no room for them to sleep in the home—with decaying slums and a waiting list which includes people who have been waiting for seventeen years—since 1945.

Mr. Eric Lubbock (Orpington)


Mr. Allaun

It is shocking, but it is true. It would be criminal to stop building in such circumstances. This places councils in a dilemma. If they go on building additional houses or flats they create a deficiency on the housing revenue fund, especially as the proportion of post-war houses to pre-war houses grows.

I want to thank another north-west housing chairman for some more figures. He tells me that every additional house or flat his council builds causes a deficiency of £50 or £60 a year in the housing revenue fund. If we work this out for sixty years, we see that, by the time the interest has been paid, the council will have been involved in a loss of between £3,000 and £3,600 for every extra dwelling it builds. That forces many of them to raise the rates solely in order to offset the loss.

All this is extremely unpopular. It is a highly political matter, because the real trouble lies here in Westminster with the Conservative Government, which is using local authorities—and they are mainly Labour local authorities in industrial areas Where the housing situation, a relic of the last century, is worst—to carry out their policy. I have been doing a little research, and I have compiled a list of some of the larger towns and cities in England where since 1st January this year the council has been forced to raise rents or is in difficulties with its housing revenue account mainly because the interest rates are too high. I am afraid that this list is by no means complete. It includes Birmingham, where the increase has been confined to more modern council houses, and it also includes Bradford, Chelmsford, Enfield, Fleetwood, Grantham, Ilford, Ipswich, Kensington, Liverpool, Macclesfield, Manchester, Newcastle-on-Tyne, Norwich, Newark, Nottingham, Oxford, Salford, Sheffield, Sunderland, Swansea, Thurrock, Wisbech and Watford. If present high interest rates continue, I fear it is inevitable that there will be further increases in rents and that these will affect other towns not mentioned in the list.

Where will this end? According to the L.C.C. housing chairman, economic rents of the new schemes being considered by the L.C.C. were between £6 and £8 a week and beyond the capacity of families of moderate means.

I can anticipate two arguments in reply. We shall be told that this is overlooking Government subsidies. I would answer this by saying, first, that Government subsidies do not cover the high interest rates; secondly, that it is not the tenants who are being subsidised but the financiers; thirdly, that the high interest rates are a result of the Government's financial policy.

A further argument may be that differential rents mean higher rents for some and thus avoid raising them for others, but if interest rates were reasonable there would be no need to raise rents for anyone. Moreover, differential rents are most unpopular. They involve a means test, and since means are constantly altering, it is a constant means test. If we reduce rents for some, we make them too high for others. In the cases quoted at £6 and £8 a week, if these were reduced for some it would make them unbearably high for others, even for reasonably well-to-do people.

I claim to be a Labour man, not a "Yes-man", and I do not say that everything which the Labour Government did was right, but on one thing they have a great record; they kept interest rates on housing loans down to as low as 2 per cent. or 2½ per cent., or at the highest 3 per cent. I am very glad to say that the Opposition are committed to cheap housing loans.

I recently asked the Chancellor of the Exchequer how much it would cost to reduce the interest rates on the current year's council housing programme to 3 per cent., and he said that it would cost £8 million a year. That is a fleabite compared with the £83 million a year given to the Surtax payers. The Chancellor also said that we cannot insulate housing from the general conditions of the money market. Oh yes, we can, Fords, Colvilles and the Steel Company of Wales, private profit-making companies, have been given Government loans at cheap interest rates. Then why not the public authorities for the necessities of housing?

What is required immediately? The Government should fix a reasonable rate for funding short-term council loans and, secondly, we need in future the provision of special loans at cheap rates. The Opposition are committed to this, and I sincerely hope that we can force the Government to adopt the same measures.

4.15 p.m.

Mr. Michael Stewart (Fulham)

My hon. Friend the Member for Salford, East (Mr. Frank Allaun) has raised a most important point, to which I am sure that the Government this time will be willing to lend an ear, because the Minister has expressed his determination to step up the rate of slum clearance. This must mean stepping up the rate of council house building. At present, the high interest rates are a permanent drag on council house building.

I ask the Parliamentary Secretary to address himself particularly to the question of what can be done by administrative action to enable local authorities to get loans at lower rates. It may be said that this is a form of subsidy, but the Government cannot object to that, because the Minister said in the House only a fortnight ago that he was willing to review the subsidy arrangements. To do that in the literal sense would require legislation, which we cannot discuss now, and which would take time. If the Minister can do something about interest rates, he could produce a similar effect with less delay. This is also a way of relieving local authorities of some of the very heavy financial burden that is falling upon them and upon ratepayers.

Similarly, the Government have been urged by their own back benchers to do something about the burden of local expenditure. To do something really fundamental again would require legislation and would take time. If we can apply ourselves to this immediate problem of interest rates, it may again be possible to produce a somewhat similar effect, some relief for local authorities, rather more speedily than we could do it by a thorough-going reorganisation of local government finance. For the sake of both housing and local authorities, I hope that the Parliamentary Secretary will be able to give us a forthcoming reply.

4.16 p.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. F. V. Corfield)

The hon. Member for Salford, East (Mr. Frank Allaun) started his speech with a series of points which he said he hoped would be regarded as the "Seven Pillars of Housing Wisdom". I do not know about that. They seemed to me to be a good many points of unwisdom from the point of view of the general economy.

I should like to put into perspective the council house building programme, because the hon. Gentleman drew particular attention to that. In 1951, which was the last year of the Labour Government, the total number of houses built was 194,831, of which 172,280 were local authority and 22,551 private enterprise. In 1960, the figures for England and Wales were 297,818 in total, of which 129,189 were local authority and 168,629 were private enterprise houses. This year the pattern is approximately the same. The idea that there has been a grave slash in local authority building does not stand up to scrutiny.

The hon. Gentleman also made much of the fact that rents were rising but there is very little that is not rising in price. I challenge the hon. Member to state two items the price of which has not increased. The only item I can think of the price of which has not risen and which is not continually rising is sparking plugs. If the cost of labour and materials, and so on, rises, whatever the commodity—whether it be a house or anything else—the price is bound to rise and the cost of maintenance is bound to rise.

I have examined a table of average rents. I have those for Salford before me. The average rent per week at present being charged is 1.9 times the 1939 rent. In Salford—this is relatively high for the authorities in the North particulars of which I have here—it is less than double the 1939 rents. There is precious little else the price of which has risen so modestly as that. The figure for Liverpool is 1.4, for Manchester 1.2, for Birmingham 1.7, for Eccles 1.9, and for Widnes 2.1. That is the range.

The arguments that the hon. Gentleman put forward, and which have been supported by his hon. Friend the Member for Fulham (Mr. M. Stewart), are neither new nor, as he said, are they confined to the members of one particular party, but to me they always seem to be based on a fundamental misconception of the nature and function of interest rates. It seems to be imagined that these rates are arbitrarily fixed either in Whitehall or Threadneedle Street, but they depend, of course, on the state of the market, and reflect the supply of capital in relation to demand.

As the hon. Member for Fulham admitted, the only method by which a fixed interest rate below the market rate could be assured for local authority housing would be for the Government to borrow at market rates, lend at whatever fixed interest was chosen, and make up the difference. This is a subsidy, and it has an absolutely direct relationship to a capital subsidy, and I find great difficulty in differentiating between the two, with regard to the point made by the hon. Gentleman that the latter would be very much more favourable.

The other day at Question Time, the hon. Gentleman asked my right hon. Friend what would be the total cost of a council flat with an initial construction cost of £2,600, at the current rate of interest of61/8; per cent.—that is, the Public Works Loan Board rate—spread over sixty years. The answer he got was £9,815. If, on the hon. Gentleman's idea of a fixed rate lower than the market rate, we were to select a rate of 4 per cent., the total cost over the same period for the same house would be £6,877. Therefore, the effect would be precisely the same as a capital contribution equal to the difference between those figures, which is approximately £3,000.

Assuming that we are here concerned with the average local authority which qualifies for the current £24 basic subsidy over sixty years, there is a capital subsidy of £1,440 and, as the hon. Gentleman no doubt knows, in certain circumstances—and I would be the first to admit that they are fairly rare—that £24 can rise as high as £40 per annum. In practice, however, local authorities borrowing on the open market do so for periods much shorter than sixty years when interest rates are high, and try to fund the loans in more favourable circumstances. In addition, a number—certainly all the bigger ones, and probably all those that I have mentioned today—pool their loans so that the interest is spread over a long period.

I admit that there is endless scope for argument between individuals and between political parties, as to the size of the subsidy at any particular moment. But that is bound to a very large extent to be arbitrary, because there is no exact measure of what is right at any particular time, but, in the last resort, the figures selected have to depend on a judgment formed after considering the other demands on the economy, and the degree of priority—which, again, is a matter of judgment—to be given to housing. It would, therefore, be surprising if there were not constant argument, but that would be equally true in selecting any particular standard interest rate such as the hon. Member has in mind.

The second leg of this argument, which seems to be rather frequently and, if I may say so, conveniently, forgotten, is that it can be applied with equal force to a number of other vital services, whether they be social or economic. It would be very difficult, I suggest, to differentiate for this purpose between houses, on the one hand, and, perhaps, schools and hospitals, drainage schemes and water supply, on the other. The last two of those services are prerequisities to building houses in most areas and the former two are, generally, necessary adjuncts.

I do not believe that if we accepted the principle of differential rates it could rationally be confined to housing or even to the purely social sphere of our activities. After all, there are a large number of activities which we normally describe as economic but which, nevertheless, often have a definite, obvious, important and, frequently, urgent social content. I am thinking particularly of the building of factories in areas of high unemployment and the construction of roads which are necessary to attract and service the industries which move there.

I am bound to say that the more one looks at this argument the more one is drawn into an ever widening sphere of social-cum-economic activity. When all is said and done, the continual development of the whole range of our social services, including housing, depends on the industrial productivity of the country and the rise of the gross national product. I must admit that when I contemplate the administrative task of sorting all the various services which are so often mentioned in this connection into a list of priorities, divorced from the pull of the market and from all ordinary and commercial economic tests, I find it a rather frightening prospect.

I do not really believe that this treatment, even if it were confined to housing, would be conducive to maximum economy or efficiency. I have a good deal of admiration for hon. Gentlemen opposite when I think of the equanimity with which they apparently contemplate this mammoth, Herculean task. However, my admiration is tempered with a bit of suspicion as to the success they would be likely to meet. If I am right in thinking that I hear hon. Gentlemen opposite saying that they have already done that, I would remind them that we had a devaluation largely as a result.

This leads me to the third general observation I wish to make on this matter. However much we argue across the Floor of the House about economic policies, or the lack of them, the fact is that we live in a tightly packed island whose economy has always been bound up in a sensitive balance because we live entirely by exporting our skills and industry. That means that inevitably, from time to time, measures must be taken either to check or stimulate. I cannot believe that hon. Gentlemen opposite or their party really wish to deprive themselves, if they expect to get power—and I can realise their doubts about achieving that—of the effect of the monetary weapon. If this principle is accepted I have little doubt that it will spread and that a large part of the economy will be insulated from the effect of this weapon.

It seems that the basic argument of hon. Gentlemen opposite is directed at the actual size of the subsidies. At present, these are derived from the 1961 Act and are tied, to some extent, to the Housing Revenue Account, in so far as it shows a revenue equivalent to twice the gross value averaged over the whole of the council properties.

There are large numbers of local authorities, particularly in the industrial areas, where housing needs are the greatest and which are still running a rent policy which averages well below double the 1939 values. I cannot believe that this is in the interests either of their constituents, of the housing policy of the country as a whole or, indeed, of the private people who are anxious to buy their own houses.

In the private sector, my right hon. Friend has no powers to control, or responsibility with regard to, the building societies. They can lend only at a rate related to that at which they borrow. If the rates are to be artificially lowered someone must make up the difference and, clearly, the only body or organisation which can do that is the Exchequer.

The Question having been proposed, after Four o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-nine minutes to Five o'clock.