HC Deb 05 December 1973 vol 865 cc1247-9
15. Mr. Frank Allaun

asked the Secretary of State for the Environment what is the total cost of a council house costing £8,000, including land, after interest has been paid on the loan for the usual borrowing period of 60 years at the current Public Works Loan Board rate for long-term loans of 11⅝ per cent.; what is its economic rent, excluding repairs and rates; and if he will estimate the effect of the 13 per cent. bank rate on such a cost and rent.

The Under-Secretary of State for the Environment (Mr. Reginald Eyre)

The total payments would be about £56,000; but local authorities pool their loans, which make it unrealistic to estimate the effect of current interest rates. At a typical pool rate of 9 per cent. the total payments would be about £43,500.

Fair rents are charged, not economic rents, but the cost to the council of £8,000 at 9 per cent. is about £14 a week.

Mr. Allaun

While pooling may reduce the rent of the house in the example quoted, will it not increase the rents of all the other houses? Secondly, is the hon. Gentleman aware that the economic rent of that house will be £17.95 a week plus rates and repairs, or approximately £20 a week? Will the Government either reduce the interest burden, which will go up with the higher bank rate, or finance housing out of revenue? If they can build a battleship or a motorway without paying a single penny of interest, why cannot they do the same with council houses?

Mr. Eyre

The hon. Gentleman overlooks the fact that authorities will have the benefit of pooled loans raised in earlier periods when rates were lower. The hon. Gentleman misunderstands the benefit of the operation of the Housing Finance Act, which means that the tenant will pay only a fair rent.

Mr. Hardy

Will the Minister tell us whether any council houses are being built at a cost in excess of £8,000? Are not some now being built costing £10,000, and is not this one of the reasons for the decline in the public sector, which I am sure he deplores?

Mr. Eyre

I shall have to write to the hon. Member about any specific figures of the cost of new housing. However, I emphasise that new subsidies under the Housing Finance Act will meet at least 75 per cent., and this year 85 per cent., of the loan charges on admissible expenditure on new housing schemes for all authorities with a deficit in their housing revenue account.

Mr. Freeson

Is not the Minister somewhat complacent? Does not the kind of information elucidated by the Question show the need for a radical reappraisal of the way in which money is being used and housing financed? Will he take on board the point which arises from his last reply that large areas of expenditure by local authorities are not covered by the reckonable expenditure element due for subsidy? I am getting a stream of complaints from local authorities about this, and I am sure he must be, too.

Mr. Eyre

May I reply to the principle raised by the hon. Member? The building of municipal housing out of revenue, which is the implication of the question, would be prohibitively expensive for ratepayers and taxpayers alike, and successive Governments have thought it right for the cost of revenue-earning assets to be spread broadly over their expected life.