§ 8.25 p.m.
§ Mr. Frederick Willey (Sunderland, North)
We are making the start of play rather later than I expected and I shall acknowledge my luck in the ballot by being as brief as I can. I advise my hon. Friends who are anxious to keep the House sitting to give an example themselves and I shall expect a sit-in to be staged here during August and September, but they will have my good wishes and not my attendance.
The subject I am anxious to discuss concerns considerable, substantial but avoidable personal hardship to some of my constituents. But I want first to put it in its general context. The hardship is caused as the result of a particularly reactionary piece of Whitehall interference. Housing authorities can build for private sale for owner-occupation. My own authority and that of my hon. Friend the Member for Sunderland, South (Mr. Bagier) is an authority that does so. In April we received a Whitehall directive which said:Building for sale schemes should be carried out for the local authority by private builders. The Secretaries of State will not be prepared to approve such schemes if they are to be carried out by Direct Labour Organisations.Could we have a better example of "Whitehall knows best"? The directive said not that the Secretary of State would consider with the authority whether it was desirable or not, but "No". Is this what the Under-Secretary meant when he said that local government should be local, not giving local authorities any discretion or opportunity to put their case to the Secretary of State but merely giving a blunt ruling that in no circumstances could a local authority do this?
It is believed—it is the only reason one can think of—that this was done because the Secretary of State and his Department 811 gave way to pressure exercised by private builders. This is particularly disturbing because when we think of prices we feel that far too often the Government give way to this sort of pressure. But when we discussed the matter at Question Time I said that, apart from the general considerations, it appeared particularly stupid to us in Sunderland.
In Sunderland we have the fourth largest and one of the most efficient direct labour departments in the country. At the moment it is booming and making a substantial profit, which the ratepayers enjoy. But the Minister says that public works departments ought to concentrate on maintaining and improving council houses. The Sunderland public works department has a programme running up to a £3½ million on improvements. The Minister says that we should concentrate on council housing. We are at the top of the league for council housing and we have been since the war.
So we satisfy the Minister's criteria, and in doing so we have built up in the public works department undoubtedly and unchallengeably the most efficient building force in the town. I pay particular tribute to the public works department. In Sunderland we have had over the past few years a very depressing time, with high unemployment. The public works department gave a lead because it recognised that within the tragedy of unemployment was the tragedy of the young unemployed. Indeed, it doubled the normal rate of taking apprentices. This was an excellent example to the town. If other builders had followed this example we should not be suffering from the shortage of skilled trades to the same degree that we are today.
The public works department tendered for and is now building 20 three-bedroom houses which will be sold for £6,500 each. As the Minister will recognise and accept, that is well below the market price in the neighbourhood. But, even more important, the cost of construction is less. This point is conceded by the builders' federation. The only comparative figures that it can produce are four years old, and they are exclusive of land, roads and sewers, all of which are included in the figure I have mentioned. Therefore, we may take it that the costs of construction of these houses are lower 812 than any figures that private industry can produce. This is confirmed by the fact that the public works department is building similar houses as council houses in three particular schemes. The tender for each of those schemes from the department far lower than any that came from private builders.
It is not surprising that the public works department, which was meeting all the requirements for improvements and building all the council houses that it could be expected to build, also built and regarded as proper to build a number of houses for private sale.
Let us consider why it should do that. There was a need to be fulfilled. This has been proved without question, because there were over 200 applications for the 20 houses to which I referred earlier. The public works department decided to build those houses because it recognised the need and also the fact that, if it did not do so, the need would not be met. In this instance there was no tender apart from that submitted by the public works department. Therefore, the houses otherwise would not have been built.
The building of such houses is unattractive to the private builder. There is such pressure on the building industry at the moment that it is unattractive not only to build such houses but, with raging inflation in the cost of houses, to build speedily. A builder will not complete a house this month if he is not under pressure to do so if he knows that the price will be higher the following month, and he certainly will not build houses like these.
Because the public works department was successful in meeting an obvious demand in Sunderland by building houses in an area of the town which was unattractive to the private builder, but an area with a tradition of owner-occupation, it decided to tender for the building of 26 houses on a site less than 50 yards away. Naturally enough it showed an interest to do the work. Any builder would do so. It had its equipment on the job nearby. It had a labour force which was completing the building of 20 houses nearby. It was then that the Department intervened. It said "You cannot build these houses." It did not say "We will discuss this with you. Is this fair competition?" It said "No, 813 under no circumstances can you build these houses."
The position is that the public works department put in a tender for £156,759. Only one tender was submitted from a private builder. That was a tender of £193,584. The Secretary of State is saying to Sunderland that he will compel young couples, low-income people, who are bidding for the houses to pay £1,500 more to obtain them. The Secretary of State is saying "We will give you no option."
When I raised the matter at Question Time the Minister said "But there can be considerable competition for contracts for direct sale." Of course there can, but there is not in Sunderland. In the first case there was no tender. The houses would not have been built if the Secretary of State had behaved as he is now behaving. In the case I am now describing, there was one other tender. That tender was far higher than the tender submitted by the public works department. There is no question but that that it would also mean slower completion. People who want to buy houses for their own occupation in Millfield will have to pay £1,500 more. That is heartbreaking not only to the people of Mill-field but to constituents of my hon. Friend the Member for Sunderland, South. That is because there are two more schemes for which the public works department would like to tender.
Does the Minister think that that makes sense? I thought that he believed in competition. Let us have competition. I put the matter back in its general context. The Government are in serious difficulty about prices. Their constant alibi is "We are subject to world prices and world conditions." That is not the real issue. They know that the real issue is whether the Government are doing enough, whether they are fighting hard enough to keep down world prices.
People cannot be convinced when they know of the scandal of land prices and when we note the astronomical escalation of house prices which we have endured during the past year or two. Our constituents cannot believe that the Government are doing enough. Not only has the TUC said that, but so also has the CBI. How can the Government convince my constituents that they are doing all they can to reduce prices when they 814 are deliberately enforcing a price increase on these houses of £1,500?
The people believe that the Government are too soft in dealing with land speculators and with the building industry. Of course the building industry will go slow when there is an escalation in house prices. The Government must react against that. When a public works department is willing to get more houses built more cheaply and more speedily, the Government should be behind it. Instead we find Whitehall adopting an approach of dictatorial interference with Sunderland local government.
The Minister has spoken of heartbreak. This decision is bringing heartbreak to many families in Sunderland. They know that but for the public works department some of those who will be lucky in getting a house would have had no chance of getting a new home for themselves. They know that at best, if the Government persist in what they are doing, those who are lucky enough to get new homes will have to wait longer, will have to pay more and will have to pay more than they can afford. It seems stupid that we do not make immediate and effective use of this labour force in Sunderland, especially as it has the experience and the ability to build these houses.
It seems stupid that we cannot take the opportunity of using the public works department to encourage competition in the town and to encourage the building of more houses for sale. Will the Minister say whether the Secretary of State is willing to meet a deputation from Sunderland? A local authority as important as Sunderland has the right to expect that he will and that, in the light of the circumstances, he will reconsider his decision and we shall be allowed to build the houses our people need.
§ 8.42 p.m.
§ Mr. Gordon A. T. Bagier (Sunderland, South)
I welcome the opportunity of speaking in the debate initiated by my right hon. Friend the Member for Sunderland, North (Mr. Willey) and I congratulate him on his success in having the first debate on the Bill. I hope that I can impress upon the Minister the importance of the matter we are raising and I remind him that an Early Day Motion deploring the decision embodied 815 in the circular about direct works departments was tabled and signed by many of my right hon. and hon. Friends.
Will the Minister withdraw this extraordinary circular? A Government who profess to be worried about rising prices and escalating costs should not deliberately obstruct a body which can provide houses more cheaply than the private sector merely because it is a public body. What other reasons and what pressures have been brought to bear on the Department for it to issue this remarkable circular? The public works department in Sunderland is one of the most efficient in the country and the fourth largest. If the Minister requires evidence, the latest figures covering the period between 4th March 1971 and 9th May 1973 clearly show that the public works department is doing an excellent job and in a competitive atmosphere is putting in tenders well below its competitors.
The department's record is good. In building the saving on the contract price submitted by the department was £604,103.28. The difference between the contract price and the next lowest tender was £153,73343. The total saving to the corporation was therefore about £750,000. In civil engineering the saving on the contract price in the same period was £148,000 and the difference between the department's price and the next lowest tender was £217,000. The total saving to the corporation in civil engineering was £365,000. That represents a total saving to the corporation of about £1* million. It is a success story of the direct works department.
As my right hon. Friend the Member for Sunderland, North said, it provides first-class employment in the town and has faced up to the responsibility of employing apprentices. It has discarded lump labour, one of the biggest cancers in the building industry outside. The direct works department functions in a proper up-to-date manner, as evidenced by the success stories it has to tell.
In house improvements, in which most of our building competitors are active, the success story is probably even greater. When a modernisation contract was put out for private tender for 996 dwellings for the Ford estate in my constituency, the estimated cost by contractors averaged £2,600 per dwelling. The contract was 816 eventually let to the public works department at £1,972,569, an average cost of £1,980 per dwelling, representing a saving of £620 per dwelling. The contract was properly carried out and well supervised. It was won in complete competition with the outside sector.
With that kind of success story I find it difficult to understand why, in a period when the building industry is extremely busy, when the private sector is working to full capacity and when it has difficulty getting certain skilled labour, out of the blue comes the circular from the Minister's Department which states specifically—with no question of consultation—that an elected local authority cannot build houses for sale.
The paragraph in that circular quoted by my right hon. Friend read:Building for sale schemes should be carried out for the local authority by private builders. The Secretaries of State will not be prepared to approve such schemes if they are to be carried out by Direct Labour Organisations They consider that in the housing field the purpose of such organisations, is to assist the local authority, where appropriate, in the discharge of its basic function of providing, maintaining and improving dwellings to rent".I assume that the Minister agrees with that section of the circular. What he is saying is that the direct labour department can compete to provide private houses for rent. It can maintain them after they have been built and it can improve them, all for rent. If the direct works department decided to build houses for rent, I assume that the Department would approve. 1 assume that if the local authority, in competitive tender, said that it was building houses for rent, it could go ahead. Would it then be wrong for the local authority to apply the principle which the Government are pushing that council houses should be sold to sitting tenants?
How ridiculous a situation can we get? On the one hand one section of the Department is saying that a direct works department cannot build houses for sale to outside bodies, but on the other hand it is saying that it can build council houses for rent. Yet another section of the Department says, "You should be able to sell your council houses to the sitting tenants who want to buy". What a ridiculous intrusion into local government. I shall be interested to hear how the Under-Secretary of State gets out of it.
817 My local authority took the matter up with the Department. As my right hon. Friend said, the circular arrived at a particularly inopportune time—half way through a house-building scheme in a particularly difficult part of his constituency—and stopped the second part of the contract. When the clerk of the authority asked why this had to happen and why we could not continue and finish the scheme, he got this remarkable reply, dated 8th May:I appreciate the problems experienced by your Council in trying to obtain competitive private tenders for the earlier competition but the fact that the Direct Labour Organisation is unable to compete in the next stage should go a long way to persuading private firms to submit competitive tenders for the next phase of the Council's programme for building for sale.What on earth does that mean? Does it mean, as I understand it, that, the main source of competition having been removed, the private sector can submit whatever prices it wants to submit? It appears like that to me.
On the figures I have given of the results of the direct works department, the Government are deliberately cutting out a cheap building sector in Sunderland and bringing in the alleged competitiveness of builders who are, in fact, putting in higher prices. I do not want to be unfair to the private sector, because it has its problems. It is fully extended on schemes which are assisted by the Government to improve houses, and so on. Its work force is fully stretched and often the reason why it is tendering is merely to keep the names of the firms before local authorities' attention rather than a definite wish to get a contract, particularly of the size my right hon. Friend has referred to.
I hope that the hon. Gentleman will react to our plea to meet a deputation from Sunderland, together with my right hon. Friend and myself, so that we can discuss this matter. I hope that he will not say that the circular, which stated in such unequivocal terms that direct works departments cannot build for sale, is not capable of having exceptions made to it. If he does meet us, and if there is any non-partisanship at all in this Government, I hope that he will accept the strength of our argument.
§ 8.54 p.m.
§ The Under-Secretary of State for the Environment (Mr. Reginald Eyre)
I am 818 glad that the right hon. Member for Sunderland, North (Mr. Willey) has enabled me to say something about our policy on building for sale by local authorities. I think it would have been rather fairer of him if he had sought to commend us for out initiative in developing a policy which encourages building for sale by local authorities. He was a member of the Labour Government who on occasions professed their belief in owner-occupation and the importance of the role of local authorities in housing. But today he appeared to have forgotten that under that administration local authorities were allowed to build for sale only in the most exceptional circumstances. Under a Labour Government it is unlikely that this kind of beneficial development would have taken place at all under the former rules which were laid down.
I appreciate the right hon. Gentleman's feelings about the keenness and aspirations of those in Sunderland, but I maintain that the policies of a Conservative administration—which are different from those adopted by our Labour predecessors—give extra opportunities for hope and for a successful solution of the kind of problem which he has been describing. These are the facts of the matter.
It is sad that the right hon. Gentleman and his hon. Friend the Member for Sunderland, South (Mr. Bagier) confined themselves to criticism of a beneficial policy which did not exist during their period of office.
§ Mr. Willey
Surely we should discuss this matter on the common ground that we are both in favour of owner-occupation. I have been in favour of owner-occupation as long as I can remember.
§ Mr. Eyre
I have served on many Standing Committees in which the right hon. Member for Sunderland, North has established that. I agree with him on a personal basis and I shall be happy to continue our discussion on that basis. What we are doing is to encourage local authorities to come forward with building for sale schemes where this will meet a local need for lower-priced houses which is not fully satisfied by developers. We announced this policy in the White Paper entitled "Widening the Choice: The Next Steps in Housing", and we 819 gave advice to local authorities about our readiness to approve building for sale schemes in Circular 16/73 issued on 17th April, 1973.
This initiative should be seen as furthering our objective of widening opportunities for home ownership. It gives local authorities a further opportunity to take the wide view of housing responsibilities which should extend to considering the overall housing needs of their area. This should seek to ensure that those who wish to own their own homes should be given every opportunity to do so. It should also be seen as complementary to the encouragement which we have given to local authorities to be prepared to sell their existing houses to their tenants. In other connections the hon. Member for Sunderland, South referred to this matter.
These are two ways in which local authorities are uniquely well placed to help those who otherwise might be unable to realise their aspirations to own their own home. I am thinking of tenants who want to buy but who are interested only in buying their existing houses. We must also have in mind young married couples and others on housing waiting lists who would prefer to buy rather than to rent and for whom building for sale can be particularly helpful. In this respect we share the common ground to which the right hon. Member for Sunderland, North referred.
Local authorities are free to sell their houses, whether existing or built for sale, in accordance with the terms of the general consent in Section 104 of the Housing Act 1957 and in Circular 54/70. This means that they can sell either at unrestricted market value or, provided that the costs are covered, at up to 20 per cent. below unrestricted market value where certain restrictive conditions are imposed. The right hon. Gentleman would agree that this can be very helpful to young couples and other groups in certain circumstances.
In selling their existing houses and in building for sale local authorities can thus give to those who cannot afford the unrestricted market price of new houses available in the area an opportunity which they would not otherwise have of becoming owner-occupiers. The high figures of sales of council houses—over 45,000 820 house sales were recorded in 1972 by 621 local authorities—are relevant to the question of building for sale. It is the same kind of people for whom local authorities should be catering in sponsoring schemes of lower-priced housing for sale, people in housing need who might otherwise have to be provided for in rented accommodation which they would prefer not to have. The two policies are complementary and certainly not mutually exclusive. I hope that local authorities will take advantage of the Government's initiative in both these matters.
I acknowledge that Sunderland County Borough Council is an authority which is doing both. I am glad that this authority is not among those which have so far set themselves against selling houses to tenants. I was glad to be able last year to agree, exceptionally, that Sunderland Council should be allowed to build houses for sale at Washington Street, even before the Government's new policy of building for sale had been announced. I am pleased that the council want to go ahead with a further scheme for building for sale at Potts Street, but I cannot agree with the council, and the right hon. Gentleman, in the wish to have the scheme carried out by the council's public works department Our policy on this is clear.
The hon. Member for Sunderland, South referred to Circular 60/73, paragraph 4 of which clearly sets out the policy. We do not believe that building for sale is an appropriate job for a direct labour organisation. It is a job for the private builder who has both the experience, and the expertise, and we believe that it is right that where local authorities provide houses for sale they should employ private builders to do the work
§ Mr. Willey
I wonder why there has been a change of mind in this matter. The hon. Gentleman thought that it was in order in the first application and so he allowed the public works department of the council to build the 20 houses. But when it came to a further 26 houses he said: "No, it is a question of policy." Why was it right for the public works department to build 20 houses but wrong for that department to build a second batch of 26?
§ Mr. Eyre
As I have explained to the right hon. Gentleman, that decision on 821 the first application was made before the policy had been formalised and it took account of the exceptional circumstances which the right hon. Gentleman and his hon. Friend the Member for Sunderland, South described so effectively during the meeting at which that decision was made.
§ Mr. Bagier
My hon. Friend has just asked why there was a different decision on the two applications and the only answer which the hon. Gentleman has given is that there has been a change of policy and that this has been set out in a circular. We are simply asking what is the basis behind that change of policy. Would the hon. Gentleman say from where he gets the extraordinary statement that the lack of experience seems to be the objection to the direct works department building houses for sale? This department built a polytechnic in Sunderland.
§ Mr. Eyre
With regard to the point made by the hon. Gentleman about the meeting I must, in fairness, remind him that there were exceptional circumstances which we discussed at the time. These were in respect of the timing of the rehousing of other people who were being moved from slum clearance schemes. The right hon. Gentleman and the hon. Gentleman know that ahead of the formulation of policy I tried exceptionally to take account of those circumstances at that time. This is the answer to the second point raised by the hon. Member for Sunderland, South. No local authority can have set up a direct labour organisation to build houses for sale.
As I said, until recently building for sale by local authorities was actively discouraged by successive administrations. The basic purpose of the direct labour organisations in terms of housing is to help in the provision, maintenance and improvement of the authorities' stock of dwellings to rent, and it is far better that they should concentrate on those tasks where their own experience lies. I was very glad to hear the tribute which the hon. Member for Sunderland, South paid to their efficiency in this respect. They can also be used to good advantage in carrying out conversions and improvements to existing private houses. In older houses it is often difficult to foresee what defects will need to be remedied, and problems of this kind which arise as work 822 proceeds can be more easily dealt with by men who are thoroughly experienced in this type of work.
I understand, for example, that in the case of house improvement the Sunderland County Borough Council's total programme for the period 1966 to 1974 was for 7,134 dwellings to be improved. So far, 6,159 have been improved, almost all by the direct labour organisation, and it is undertaking the remainder of this very substantial contract. I understand, too, that there is much similar work to be done in adjoining areas. Hebburn Urban District Council and Houghton-leSpring Urban District Council have been mentioned to me, and I remind hon. Members that they will be amalgamated with Sunderland on 1st April 1974.
I have taken note of what the right hon. Member for Sunderland, North said about the tender received as compared with the figure at which he says the direct labour organisation would do the work. Without seeking to doubt his figures, I make the general comment that it may not be wholly realistic to make a straight comparison between a firm tender and an estimate. There is a significant difference between the two. One leaves the risk with the contractor who enters into a contract on the basis of a tender, and the other leaves it with the client. I understand that the Sunderland direct labour organisation has done good work in the past in terms of its normal activities and that it justifies the tribute to which I have referred. I am sure that there remain similar tasks on a similar scale for it to perform in the future.
I was asked whether I was prepared to meet a deputation. In this request the right hon. Member for Sunderland, North was supported by his hon. Friend the Member for Sunderland, South. I should like to consider that request carefully and to reply to it before the House rises for the Summer Recess.
The hon. Member for Sunderland, South referred to the house-building performance of Sunderland and claimed that it was the champion in the house production league. I mention in passing that that would probably be questioned in Birmingham.
I ask the right hon. Member for Sunderland, North to acknowledge that 02 823 this new initiative that we have taken in changing the previously restrictive attitude to building for sale is a virtuous one. It will lead to widening opportunities for people who wish to enter into home ownership. I hope that the right hon. Gentleman will not confine himself merely to one aspect of criticism.