HC Deb 19 March 1975 vol 888 cc1638-41
20. Mr. Frank Allaun

asked the Secretary of State for the Environment if he has now completed his consideration of the proposal to provide Government loans at lower interest rates to local authorities for the purpose of granting mortgages to would-be house buyers ; and if he will make a statement.

23. Mr. R. C. Mitchell

asked the Secretary of State for the Environment if he will list those local authorities which have since 23rd January 1975 announced their intention of charging mortgage lending rates above 11 per cent.

Mr. Freeson

On the general issue, I would refer my hon. Friends to the answer I gave to my hon. Friend the Member for Nelson and Colne (Mr. Hoyle) on 10th March.—[Vol. 888, c. 31–2.]

I will, with permission, circulate in the Official Report a list of 18 local authorities in England which have to my knowledge announced decisions to raise their variable mortgage rate above 11 per cent. in the last eight weeks.

Mr. Allaun

Is it not a fact that many local authorities which help people who cannot obtain mortgages elsewhere are having to pay more than 15 per cent. on their current borrowings, whereas building societies can get money in at less than 11 per cent.? Could not the Government—at little cost to themselves, as they can obtain money cheaply—provide loans equally cheaply to the local authorities for this most valuable purpose?

Mr. Freeson

Applying to local authorities what one might loosely call the building society scheme that we adopted a year or so ago would not be of much help, even if it were acceptable to operate it, because £500 million loaned to building societies must be seen in relation to the £2,500 million loaned by them. The application of that kind of proportion of lending to local authorities would not produce the desired results. The figures have been worked out. In any case, in terms of public expenditure our housing priorities lie elsewhere.

Having made those two points, I want to make it clear that we are still carefully examining ways in which we might be able to deal with this serious problem, serious particularly for a minority of borrowers from the local authorities concerned.

Sir D. Walker-Smith

While I appreciate that there are differences between the position of building societies and the position of local authorities in some respects in regard to mortgage interest rates, may I ask whether constructive action will be taken to help authorities which are encountering special difficulties? Has the Minister yet concluded consideration of, and given sympathetic attention to, the representations made to him by the Broxbourne District Council over its special difficulties?

Mr. Freeson

We have had a number of representations, not from all the local authorities affected but from quite a few. Except in certain marginal respects, we have not been able to be of immediate assistance to the local authorities concerned, but we are still looking into ways in which we may be able to help in the matter.

Mr. R. C. Mitchell

is my hon. Friend aware that with every month that goes by more local authorities will have to change more than the 11 per cent. building society rate for their mortgages? This is inevitable because of the nature of local authority financing. May I stress that many of the people who take up local authority mortgages are in the lower income groups and could not obtain mortgages from the building societies? Is it not essential that they should be treated fairly, as were the building society borrowers?

Mr. Freeson

I take the point my hon. Friend is making about the policy practices of local authorities in the issuing of mortgages, although, as a result of recent analytical examination, I would not go too far down that road in a general way. There is evidence of a considerable overlap in the kinds of customers covered by local authority provisions and those covered by building societies—far more than I had thought until quite recently. Nevertheless, we still take the problem seriously. I cannot promise that there will be an immediate answer. We shall try to find an answer, but it must be one which does not involve public expenditure being redirected from higher housing priorities.

Mr. Rossi

In view of the many thousands of empty houses in local authority ownership, does the Minister accept that the proposal contained in Question No. 20 is a far more sensible way of deploying public resources than a programme of municipalisation? Will he have regard to those authorities which are finding it difficult to recruit teachers or to provide homes for public service employees, because those employees do not wish to be council tenants but cannot afford to buy their own homes at the high level of mortgage interest proposed by local authorities?

Mr. Freeson

The hon. Gentleman has raised some cases demanding sympathy in the coverage that has been given to the matter. The housing difficuilties which teachers and other public service workers in London and some other places have experienced did not start with the increase in mortgage rates in recent months. They started a considerable time ago during the great boom in house prices under the previous Government.

The hon. Gentleman's introduction of the issue of municipalisation is a red herring. There are considerable pressures form public service worker's organisations for local authorities to buy even more properties in oreder that they may make vacant property available for such workers.

Following is the list:

Bolton DC. Luton DC.
Bournemouth DC. Melton DC.
Bracknell DC. Middlesbrough DC.
Brent LB. Milton Keynes DC.
Cambridge DC. North Herts DC.
Chichester DC. Reading DC.
Eastbourne DC. Suffolk Coastal DC.
East Staffordshire DC. Tendring DC.
Langbaurgh DC. Uttlesford DC.