HOUSING FINANCE (Hansard, 13 July 1971)

§ The Secretary of State for the Environment (Mr. Peter Walker)
Mr. Speaker, with permission, I wish to make a statement on the reform of housing finance in England and Wales.
In my statement of 3rd November, I informed the House of the broad principles of our reform of housing finance. We have discussed the details of our 215 plans with the local authority associations and the voluntary housing movement. The proposals which we have formulated in the light of these discussions are set out in a White Paper—Command No. 4728—which my right hon. and learned Friend the Secretary of State for Wales and I are presenting to the House. Copies are now available in the Vote Office.
For the first time in our history, there will be a national rent rebate scheme for all unfurnished tenants under which a rent rebate or allowance will be available to those tenants who need help to pay a fair rent for the house that they occupy. This will mean that 2½ million tenants in the private sector will for the first time have a rebate scheme available. It will mean also that council house tenants in authorities which do not at present have rent rebate schemes—that is, almost 40 per cent. of all authorities—will now be covered by a scheme.
Let me give an example. Take a council house tenant with a wife and two children who lives in a house with a fair rent of £4 a week. If his gross income is £25 a week, he will then get a rebate that will reduce his rent from £4 to about £2.70 a week. For those on very low incomes in relation to their family responsibilities, the scheme will provide a full rebate of rent so that they will pay no rent at all. When the scheme is introduced, many council and private tenants will meet less of the rent of their dwelling than before.
The White Paper proposes the replacement of the existing subsidy system by a new system to give a fresh stimulus to housing authorities and associations which need to go on building and to clear slums. If an authority incurs a deficit on its housing revenue account because it builds new houses for people now living in slums, Exchequer subsidies will meet about 75 per cent. of the deficit. In addition, if the authority makes a loss on the slum clearance operations itself, an entirely new slum clearance subsidy will meet 75 per cent. of that loss. In order to give an immediate momentum to slum clearance, we have decided that this new subsidy should be retrospective to the beginning of the present financial year.
I have already announced in my statement of 3rd November that the fair rent 216 principle will be applied to local authority dwellings and extended more rapidly to private controlled tenancies. The White Paper now makes it clear that the rent increase for council dwellings which are now below the fair rent will be phased in annual steps. The average annual increase will be 50 pence a week, subject to transitional arrangements for the period up to 31st March, 1973, which are explained in the White Paper. When a private tenancy passes out of rent control and the registered fair rent is substantially higher, the increases in the rent of the tenancy will be phased in three equal annual instalments.
The Government intend to introduce a Bill early in the next Session of Parliament to give effect to the proposals in the White Paper. These proposals will create a system of housing finance which is fair to all concerned and which concentrates help on people and areas in need.
My right hon. Friend the Secretary of State for Scotland will be presenting a White Paper tomorrow which will contain his proposals for the reform of housing finance in Scotland.

§ Mr. Crosland
We shall want to study the White Paper and we shall want a debate at the earliest possible moment, and in Government time. Many of the implications of this statement are profoundly reactionary and will affect the level of inflation, the rate of house building and the distribution of income. I have these specific questions to put to the right hon. Gentleman.
First, will the Secretary of State confirm that at the end of three years the average rise in rents will be £1.50? What does he think will be the social and economic consequences of such a huge rise in so short a period? Secondly, will he estimate what proportion of tenants, under fair rents, will be eligible for rent rebates? Is it, as many outside commentators have suggested, half or more than half—in other words, means testing on a mass scale for the first time? What effect does he think this will have on incentives about which his party is always talking? Thirdly, what does he estimate the effect of this will be on the rate of council house building at a moment when, despite all the constant, misleading and optimistic statements of the Government, council 217 house building faces a bleaker future than for a long time?
Lastly, while I am strongly in favour of owner-occupation—[HON. MEMBERS : "Oh."] It was the Labour Government who introduced the option mortgage scheme, and it was under a Labour Government that for the first time 50 per cent. of householders became owner-occupiers. Therefore, I repeat, while I am strongly in favour of owner-occupation, can the right hon. Gentleman in equity defend a system under which owner-occupiers alone receive open-ended and non-means-tested help at a time when millions of council tenants will be subject to a means test for the first time and at the same time face an increase in their rent of so large a character, if not at one stroke, at any rate three strokes?

§ Mr. Walker
As to the suggestion about our proposals being reactionary, there are 2½ million tenants in the private sector who will not consider that making a rebate scheme available to them for the first time is particularly reactionary. As to rent increases, I remind the right hon. Gentleman that during the period of the last Government rents in the public sector rose by 65 per cent. But I hope that the right hon. Gentleman will make clear to the country the proposals which his Government were preparing concerning the rent structure. They were not published before the election, but perhaps the right hon. Gentleman would tell us what they were.
As to the means testing of large numbers of council house tenants, I remind the right hon. Gentleman that under the previous Government 1,350,000 tenants were either obtaining subsidies through social security, means tested, or were in existing rent rebate schemes, means tested. So what the right hon. Gentleman has said is complete hypocrisy.
As for council house building, my announcement that the slum clearance subsidy will be retrospective to the beginning of this year will give a considerable momentum to tackling slum clearance, whereas the subsidy system operated by the Labour Government resulted in large numbers of towns and cities, particularly in some of the older industrial parts, almost stopping their slum clearance programmes. This will now change. [HON. 218 MEMBERS : "Answer."] Socialist councils—

Hon. Members
Answer.

§ Mr. Speaker
Order. Hon. Members have repeatedly shouted "Answer". The Minister should be allowed to answer.

§ Mr. Walker
Councils of all complexions will welcome the very substantial slum clearance subsidy in these proposals which will stimulate the right type of council building. We know the position of the Labour Party on home ownership. It is very much in line with that of a party which slashed council mortgages to the extent that it did.

§ Mr. Longden
Whilst congratulating my right hon. Friend upon introducing this revolutionary system whereby those who can pay for what they need and those who cannot are helped by their fellow citizens, may I ask whether the White Paper will include a provision whereby those small investors who have put their money into real property rather than stocks and shares will at long last be able to get a return which will enable them not only to keep their properties in repair but also to get a fair return for their money?

§ Mr. Walker
It certainly will mean, with the phasing over to fair rents, that many of these people will obtain a fair rent at long last, but not at the expense of poorer tenants, because a rent rebate scheme will be available.

§ Mr. Charles Morris
The White Paper has just been made available to hon. Members in the Vote Office, and paragraph 52 in regard to rent rebate says : The allowance will be based on only a proportion of the fair rent if the dwelling is much larger than the tenant requires or is situated in an area of high property values.… Does the Minister accept that this paragraph will bear heavily on elderly council house tenants?

§ Mr. Walker
No, the limitation is a total ceiling at the very top of the scale to stop absurd abuses of the rebate system. I can assure the hon. Gentleman that it has no such effect as he suggests.

§ Sir R. Turton
I congratulate my right hon. Friend on his far-sighted plan, but will he give an assurance that the working of housing associations will be encouraged, bearing in mind that the 219 houses which they are providing are chiefly for the elderly, who are in great need of houses?

§ Mr. Walker
My right hon. Friend will be pleased to know that there is a special section on housing associations. We intend to make the rent rebate scheme available to them, and, in order to encourage responsible and successful housing associations, under the proposals a new subsidy will meet for ten years up to 90 per cent. of the deposit for new building schemes when expenditure exceeds income from fair rents in the first four years. In total, we believe that this will give considerable encouragement to housing associations.

§ Mr. Pardoe
Although I welcome almost any statement which may sweep away the excuses which many local authorities have used for not building houses over the last few years, is the Minister aware that the net result of his earlier statement in November was a complete collapse of optimism throughout the construction industry? Is he further aware that, in view of recent estimates about public sector housing, many hon. Members on both sides of the House would think that his proposals today fall far short of the level necessary to restore optimism?

§ Mr. Walker
I hope the hon. Gentleman will have noticed that in the first few months of this year we have been clearing slums at the rate of 700 a month faster than last year. Only yesterday it was announced by the building industry that new starts in the owner-occupied sector for the first six months of this year were 30 per cent. up on last year.

§ Mr. Raison
I congratulate my right hon. Friend on his excellent statement, but will he give an assurance that he has closely consulted the Secretary of State for Social Services to make sure that the concentration of rebates and benefits on those with very low incomes is not such as to have a disincentive effect on them earning more?

§ Mr. Walker
Yes, Sir. These proposals are on the basis of a 17 per cent. tapering effect, which produces a minimum disincentive. I have been in close consultation with my right hon. Friend.

§ Mr. Hugh Jenkins
Will the right hon. Gentleman look again at mortgages? As one who is buying his house on mortgage, I am conscious that under his proposals there will be no means test for me or for any member of his party. One prominent member of his party has a mortgage of £26,000 on a very large house, which means that he is, and will continue to be, largely subsidised by the State. Will the right hon. Gentleman look into this gross unfairness and recognise that the scheme he has put before the House is divisive of the nation.

§ Mr. Walker
It is the intention on this side of the House to encourage home ownership, and I hope that all local authorities will give freedom to their tenants of council houses to take advantage of the incentives to owner-occupation.

§ Mr. Biggs-Davison
Will my right hon. Friend tell me by how much on an average council house rents were increased under the last Administration?

§ Mr. Walker
By 65 per cent.

§ Mr. Heffer
Will the right hon. Gentleman tell us exactly how the rent rebate will be calculated? Will it be based on the income of the tenant, or will the calculation include the earnings of everyone in the household, including teenagers?

§ Mr. Walker
There is a complicated formula for this. I refer the hon. Gentleman to the White Paper, where he will find that the rebate scheme is far more generous than the one recommended to local authorities by the previous Government.

§ Mr. Evelyn King
Will my right hon. Friend confirm, as I think must be the case, that at the end of three years the proportion of gross income paid in rent is likely to be far less than it was two or three years ago?

§ Mr. Walker
I have not done the calculations on this.

§ Mr. Frank Allaun
Does this mean that all rent control for private landlords' houses is now ended? Secondly, does not this mean more than doubling the rent for a vast number of houses? Is not this a deliberate increase in a major item in the cost of living? Lastly, is 221 this not just a redistribution of subsidy but a net reduction which amounts to a substantial rent increase?

§ Mr. Walker
On the first point, control will continue of rents controlled under the fair rent formula devised by the last Government, and also security of tenure remains complete in this section. On the second point as to the increase in rents, many tenants, particularly in places like Salford, will probably as a result of these proposals, with their rebates, be paying lower rents than before. It is therefore completely wrong to suggest that there will be an increase in rents. The redistribution means that instead of having £200 million of subsidies only £1 in £10 of which goes directly to help those in need, we are having £200 million of subsidies the whole of which will go to help people in need.

§ Mr. Kenneth Baker
I congratulate the Secretary of State on one particular aspect of the White Paper, and that is the substantial increase in slum clearance grants which will be of great benefit to inner London boroughs. I ask my right hon. Friend to redouble the efforts he is presently undertaking to speed up slum clearance within the Inner London boroughs and to bring to their attention the generous grants mentioned in the White Paper.

§ Mr. Walker
Yes, Sir. I hope that my announcement today that the slum clearance subsidy will be made retrospective will result in local authorities immediately going ahead with substantial programmes.

§ Mr. Carter
Is the Minister aware that, far from being welcomed in the country, his statement today will be received as a barbaric and savage attack on the principle of public sector housing? Is he not aware that in the country as a whole this new principle of a national rent rebate scheme will be interpreted as the poor keeping the poor?

§ Mr. Walker
It is, if I may say so, not something that will be greeted in that way by people in the private sector who have never previously been entitled to a rebate, or by people living in the areas of the 40 per cent. of local authorities who have no rebate scheme. The hon. Gentleman's remarks come ill from a party which, when in government, sent 222 round a circular urging local authorities to adopt a rent rebate scheme far less generous than the one I have announced today.

§ Mr. Chapman
As one who believes sincerely that had these policies been introduced 20 years ago there would not have been slums, obsolescence and overcrowding today, may I ask how many families my right hon. Friend estimates will receive rent rebates under his scheme, compared with those who would have received rent rebates under the scheme of the previous Government?

§ Mr. Walker
It is difficult to estimate this accurately, but quite certainly very substantially more, because 2½ million tenants in the private sector, which include many of the poorer households in the country, will receive benefit.

§ Mr. Marks
Who will provide the funds for rent rebates for private tenants? Will fair rents be assessed by rent officers or by reference to gross rateable value?

§ Mr. Walker
In regard to the second point, rent officers ; the answer to the first point is 100 per cent. by the Exchequer.

§ Mr. Costain
Could my right hon. Friend explain why it is that whenever any scheme is put forward to enable people to live in decent houses and to get a rent rebate the Opposition scream "means test", when in fact each time an income tax form is filled in it amounts to the same thing?

§ Mr. Walker
I think my hon. Friend will find that when right hon. Gentlemen opposite publish the proposals which they had in mind before the election it will be seen that their policies will not be all that much different.

§ Mr. Freeson
Could the right hon. Gentleman clarify one or two points which have become a little obscure in the course of some of his replies? In answer to a request for information about the cut in the total ceiling, he referred to a figure of £200 million. Is it still the Government's intention, as announced by the Chancellor of the Exchequer last year, to reduce by the middle-1970s the total projected expenditure on regional spending from £370 million to about £200 million and to hold it at that level rather than to expand it? On the question of 223 the total global figure, could the right hon. Gentleman say what estimates he or his Department have made of the total surplus or "profit" which will accrue to the housing revenue accounts throughout the country as a result of the new policies he has proposed in the White Paper?

§ Mr. Walker
On the first point, the figure will be kept at present levels and will not increase to the levels originally estimated under the old subsidy scheme ; but as the previous Government were carrying out a review of housing finance, presumably they had something like this in mind too.—[HON. MEMBERS : "No."] The right hon. Gentleman is free to publish his party's policy on rents, and the sooner he does so the better we shall be pleased. On the second point, I cannot give the estimated total so far as subsidies are concerned.

§ Mr. Julius Silverman
The Minister makes much of the question of rebates in the private sector. Has he examined the experience of the city of Birmingham which alone so far promoted a Private Bill to provide for rebates to private tenants, but which has discovered that the number of rebates which have been given, out of a total of about 60,000 estimated private tenants, amounts in all to a few hundred. Is he not grossly overestimating the benefits which this scheme will give to tenants in the private sector?

§ Mr. Walker
No, Sir. The rent scheme in Birmingham was an interesting and important experiment, but it was very different from the rent rebate scheme which we are introducing.

§ Mr. Blenkinsop
Why does not the Secretary of State answer the question put to him as to how many tenants will pay excessively high increases in rent following his proposals, and why does he intend to cause local authorities to undertake rent rebate schemes whether or not they wish to do so?

§ Mr. Walker
It is vital to provide a rent rebate scheme for everybody concerned in the country. If the hon. Gentleman is suggesting that the rents are outrageous. I will point out that they are the rents agreed by the previous Government as being proper.

§ Mr. Harold Wilson
The right hon. Gentleman has three times made accusa- 224 tions about the previous Government's policy, contrary to the usual convention of proprieties as to what papers were available to a previous Government. [HON. MEMBERS : "Oh."] Will he produce his evidence that any right hon. Member on this side of the House when a Minister had approved any such policies? Is he aware that I can categorically state that all my right hon. and hon. Friends in the right hon. Gentleman's former Department will confirm that no policy whatever was decided by those former Ministers on the lines of what has now been put forward? [Interruption.] Hon. Members opposite may laugh, but this is a serious matter of housing and of governmental proprieties. Would the right hon. Gentleman now produce the sources of his evidence? Will he take it from my right hon. and hon. Friends that there have been no such decisions, but that where proposals were put up—he cannot know this, but I will tell him—on the lines of his White Paper, they were rejected by the former Government?

§ Mr. Walker
The previous Government announced that they were carrying out a review of housing finance. They gave a reason for that review, namely, that they wanted to see that help went to those concerned. They spent many months on that review and, surprisingly, they did not come to any publishable conclusions before the date of the General Election. In spite of constant pressure from our side of the House at the time when we were in Opposition seeking an announcement about the conclusions resulting from those many months of work, the previous Government were unable to come to those conclusions. It is remarkable that the previous Government spent months in not coming to conclusions and that the present Government have taken two months to analyse the situation.

§ Mr. Harold Wilson
The right hon. Gentleman is now talking a very different language from when he began. Three times he said that we had come to conclusions and did not announce them. The right hon. Gentleman is now sliding back to the position that what we did was to spend some time examining the situation—and so we did. We rejected the facile and reactionary proposals he has accepted. Will he now withdraw?

§ Mr. Walker
I stated and I repeat—

§ Mr. Carter
Spiv.

§ Mr. Walker
I categorically state that I know of no conclusions reached by the previous Government. [Interruption.] I was stating my belief as to the conclusion they would come to. But now at last the right hon. Gentleman has the unique opportunity to tell the country and Parliament what his conclusions are.

§ Mr. Harold Wilson
I take the opportunity to tell Parliament that what the right hon. Gentleman said was a total misrepresentation of the position and he should withdraw it. The right hon. Gentleman should further recognise that matters of housing, which affect millions of people, are not matters for the slick approach he has shown today. I hope that when the right hon. Gentleman studies HANSARD tomorrow he will consider making a personal statement to the House. I will not press him this afternoon. But will he now answer the question put at the outset by my right hon. Friend? Could the House have a debate in Government time before the recess—this White Paper has been produced only two or three weeks before the recess—in which we do not merely have to accept the policy which he has outlined this afternoon but in which the whole House concerned with different points of view on housing may examine the Tightness or wrongness of the right hon. Gentleman's proposals? Could we have an answer to that question?

§ Mr. Walker
This is a question for my right hon. Friend the Leader of the House. But as far as I am concerned, I would welcome a debate, because I am dying to hear the right hon. Gentleman's views.