HC Deb 02 July 1980 vol 987 cc1726-36

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

1.7 am

Mr. Christopher Murphy (Welwyn and Hatfield)

I wish to raise the subject of the current problems associated with home ownership, especially for first-time buyers. There is without doubt a clear desire in our society for home ownership. The Conservative Government, recognising the value of a property-owning democracy, are right to seek to promote it. Home ownership gives the individual and his family a personal stake in the country's capital wealth and enhances his freedom and independence. Home ownership engenders a spirit of personal pride and care, adding to the concept of greater responsibility.

In addition, there are economic arguments in terms of reducing council house subsidies and advancing the mobility of labour. Surveys show that 80 per cent. of young people wish to have the opportunity to buy their own homes and that over 70 per cent. of all families want to be home owners. Yet the Socialists deliberately fly in the face of the democratic wish of the people.

In my constituency, the Labour Party, at the time of the election, took control of the district council on a minority vote. In spite of the consent of the Secretary of State to sell council homes with up to 50 per cent. discounts, it has refused to accept the majority view of the local electorate and increase the level of discount from 30 per cent. The previous Conservative administration in the district, to its great credit, instigated a policy of sales giving the maximum discounts then available. That was popular. Since being in opposition, the Conservative group on the council has continually pressed for a greater discount to be made available.

My constituents, who are tenants of some years standing, have, therefore, been denied the right which they were seeking of obtaining higher discounts. In consequence, with house prices rising in Hertfordshire, many have been forced to forgo an opportunity to which they understandably feel they were entitled. This callous disregard of the hopes and aspirations of council tenants in Welwyn and Hatfield by the local Labour-controlled council has resulted in a stream of letters, telephone calls and "surgery" visits from frustrated families desperately keen to purchase their home. But in an already expensive housing area this chance is, cynically, denied them.

Politics should surely involve administration in the best interests of the people —not against them. Opposition Members—certainly not in attendance here—would do well to remember that as they declare their continued opposition to giving such fundamental rights to their fellow citizens who have been thwarted for far to long.

However, despite the negative approach of Socialism, this raw deal for council tenants will be overcome by the Housing Bill now completing its passage through Parliament, giving, as it does, the right to buy and a guarantee of full discounts. When this measure is enacted, it will prove to be, without doubt, one of the most significant pieces of social legislation this century ensuring enormous benefit to the future secure development of our society. I congratulate the Government and the Ministers involved, including my hon. Friend the Under-Secretary who is to reply to this debate, and I give them my full support in their determination to ensure natural justice.

The problems associated with home ownership are not, however, confined to the injustices suffered by tenants with Socialist councils. A particularly acute difficulty encountered by young couples seeking to purchase their first home is in obtaining sufficient cash to put down a deposit on that otherwise elusive property.

In the Conservative election manifesto which received the endorsement of the electorate a commitment was given to improve on existing legislation with a realistic grants scheme to assist first time buyers of cheaper homes. This follows on from the ideas canvassed during our days in opposition of providing a £1 grant for every £2 saved, up to a given maximum of perhaps £1,000.

May I say immediately that I fully recognise that such a scheme must inevitably await improvement in the overall economic climate. The citizens of this country would do well to remember that the ramifications of economic mismanagement by the previous unlamented Socialist Government go far beyond the apparent record levels of inflation and debt that such maladministration created.

However, I believe it to be essential that such a scheme should be introduced at the earliest possible opportunity, for this will do much to further encourage home ownership. Indeed, when one gives full consideration to the cost involved, the taxpayer will pay less overall than he now contributes to the continuing subsidies for more council housing.

Estimates in recent years point to the average cost of providing a council house as being about £1,600 per annum over a 20-year period when one takes into account building, maintenance, loan charges and all other relevant costs. If one subtracts from that the average rent paid, the relevant figure remaining is in the region of £1,200 per annum. Compare this with the maximum suggested under the first-time homes grant scheme of £1,000 and already, in the first year, there could be a saving. But the real advantage is that, instead of further costs being borne by the taxpayer for the next 19 years of council housing subsidy, no such further expenditure has to be contemplated with regard to a house purchase.

If I may again quote my own constituency of Welwyn and Hatfield, the cost of purchasing a first-time home may now well be about £20,000. Therefore, on a 90 per cent. mortgage, the couple would need to put down £2,000. If they can, therefore, save £1,333.66 the Government will provide £666.33 under the scheme. The net result would be less public spending than in the case of a council home and the satisfaction of home ownership.

A further problem associated with home ownership again involves the difficulty of raising sufficient finance, in this case meeting that continuing archaic form of raising revenue—stamp duty—which dates from 1694 in the reign of William and Mary, and was introduced as a temporary measure to last for four years. Earlier this Session I introduced a Private Member's Bill to abolish stamp duty on home purchase, and many of my hon. Friends who supported me have been encouraged, as I was, by the fact that my right hon. and learned Friend the Chancellor of the Exchequer has been able to go some way in our direction by raising the threshold from £15,000 to £20.000.

As I have already mentioned, in my constituency there are very few homes or flats on the market for less than £20,000, so it still means that virtually everyone is caught in the stamp duty trap from which there is no escape. Undoubtedly this is a simple way of raising revenue, and when the Government have inherited such a parlous economic state where we have continually spent what has not been earned I can fully appreciate the difficulties in removing this source of taxation until public sector borrowing has been firmly curtailed and public expenditure realistically reduced.

However, getting together the deposit and the solicitor's costs is hard enough for a family, and particularly one which is a first-time buyer, but the extra levy of up to 2 per cent. on the sale price can be the hidden extra cost which wrecks all the financial considerations. It is certainly to be hoped that this additional barrier to home ownership can be removed in the very near future, especially when one realises that less than 10 years ago 96 per cent. of all purchases were exempt, whereas now the figure is less than half that.

In this short debate, I have endeavoured to draw attention to some of the current problems associated with home ownership, especially for the first-time buyer. This is not to be blinkered about further difficulties that may be encountered—for example, with respect to obtaining a mortgage, and the level of interest rates—but what is of fundamental importance is to enable families to have the opportunity of satisfying their desire for home ownership.

The Government will clearly achieve a great deal in this direction because they understand the fundamental wishes of the people of this country. They also have the determination to put firmly into practice the means by which people can obtain the end which they clearly seek. I can do no better in conclusion than quote one of the main aims of Conservative political strategy as set out in "The Right Approach": To extend ownership so that many more of our citizens have a stake in the community". That, I am confident, the Government will achieve.

1.19 am
Mr. Den Dover (Chorley)

I want briefly to touch on three problems relating to home ownership. The first concerns first-time buyers. Several years ago it was very difficult, if not impossible, for first-time buyers in the South-East to buy a home of their own. Now, even in the North-West, in my constituency in Lancashire, it is difficult for young people, even with allowance for the wife's earnings, to buy their own homes.

I praise the activities of the building societies which have done a marvellous job to help home ownership grow over the past few decades. But I ask my hon. Friend the Under-Secretary to raise with my right hon. and learned Friend the Chancellor of the Exchequer the possibility of involving the major banks in providing a prop for mortgage facilities. It is difficult for couples to obtain the initial mortgage for purchase and also to make the regular monthly payments. I should like banks to offer loans to help with the initial payments for the house and with topping up, the initial monthly repayments to the bank being much lower than in later years. That would greatly help first-time buyers.

My second point also concerns the Treasury. The £25,000 mortgage ceiling for tax relief should be raised. It is extremely important to have mobility not only of key skilled workers but of management and executives. They are very important to the economy. Raising the limit would enable them more easily to move around the country. It would also have a beneficial effect on the construction industry.

My final point concerns owner-occupiers in run-down towns, such as Chorley and Leyland in my constituency. Instead of being thrown out of their houses by compulsory purchase, many people would like to see their homes improved by a grant from the local athority. Instead of the local authority having to provide a council house if such people are made homeless, it is better economics to offer grants to improve such homes. The couple will then not be made homeless, and the necessary work can be done while the family is living in the house.

I submit those three points for the Minister's consideration.

1.21 am
Mr. John Wheeler (Paddington)

I am glad of the opportunity to contribute briefly to the debate. I congratulate my hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) on the excellent presentation of his case. I should like to add the inner London dimension, particularly the growing problem in dealing with the increasing number of empty properties. In one district alone in my constituency, the Marylands and Lawhill district, there are no fewer than 44 houses empty, with only a handful having work in progress on them.

The difficulty in inner London, and particularly in the city of Westminster, is that those properties are expensive to restore and difficult to acquire via the local authority. How can we provide homes that people can afford in central London? Employers are seeking people to fill the many job vacancies in central London, but there are no homes for those people to live in, even when there are many empty properties.

Is the report of the vacant property survey yet to hand? Will my hon. Friend be able to issue better guidance to local authorities, particularly those in inner cities, on how to deal with the problem of empty properties? It is a serious matter. I believe that we should encourage local authorities to acquire those properties and pass them on immediately, either to individuals, who will thereby become home owners, housing associations or co-operatives, and that requires the favourable interest and co-operation of the Department of the Environment. I know that my hon. Friend's endeavours are always in the public's interest.

1.23 am
The Under-Secretary of State for the Environment (Mr. Geoffrey Finsberg)

My hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy), in a most helpful and caring speech, raised a subject of particular interest and concern to the Government. My hon. Friends the Members for Chorley (Mr. Dover) and Paddington (Mr. Wheeler) raised additional points which I shall try to cover in the time available.

As my hon. Friends know, it is our firm policy to encourage the spread of home ownership. We are well aware of the difficulties that home owners and would-be home owners face at present. We are most conscious of the financial difficulties that people face when first buying their houses, and we want to make that crucial move possible for more families. That is why we are encouraging local authorities to consider promoting low-cost home ownership in their areas under a seven-point programme.

The first item in that programme is the sale of council houses or flats to sitting tenants. My hon. Friend has emphasised the great boon that this will produce for millions of council tenants who will no longer be serfs of some Left-wing despotic council. At present, it is for individual authorities to decide whether to sell to their tenants and, subject to the limits that we have set out in our general consent, how much discount they should offer. But those councils which deny their tenants the oportunity to buy their houses on the maximum discount allowable for their length of tenancy in order to satisfy their own narrow prejudices will no longer be able to do so when the right to buy becomes law. It is our hope that this will happen before the House rises for its well-earned Summer Recess.

On Third Reading of the New Towns Bill on 6 June, I accused Stevenage borough council of having double standards, since it wants to buy its own offices but refuses to let tenants buy their homes. Stevenage borough council has complained to me, saying that it lets people buy. The fact is that, while it allows people to buy, it is among those authorities, as my hon. Friend has mentioned, which are not prepared to allow the full discount that the Government have permitted in the general consent, and are thus setting up what I can only call wholly arbitrary and unnecessary barriers to people buying their own homes. The only people the council is harming is its own tenants.

What I wanted to convey was that they were not being good landlords, that they were not being public spirited, and that they were simply ensuring that their tenants will have to pay more than we believe is right. Under the Housing Bill, as my hon. Friend has said, we shall not only be obliging councils to offer the maximum discount possible; we shall also be removing any obstacles to building society lending on such sales, because the building societies have a problem over discounts and the market valuation, and we are making clear, by virtue of the Housing Bill, that there will not be any technical or valuation obstacles to their lending.

In order to assist local authorities, in view of their obligation under the Bill to sell to sitting tenants, the decision has been taken that from 1 April next they will be able to increase their single block allocation for capital spending for all services by an amount equivalent to 50 per cent. of the housing capital receipts received in the course of the year. It will be very interesting to see whether authorities such as Manchester and Birmingham, which deny their tenants the right to buy, will continue to do this and thus make it possible to build less accommodation than they would if they sold and used part of the proceeds. While it is fair to say that this is a choice that will be up to them, I should have thought that very few would not want to take the opportunity that we are giving to them.

The second point in our home ownership programme is building for sale, and here we are asking local authorities to make land in their ownership available for building for sale schemes with private developers. These will be new homes and the sale price can be below market value, so they should be readily mortgagable by building societies.

The third point in the programme is improvement for sale, and this touches partially on what my hon. Friend the Member for Paddington said. We are asking local authorities and housing associations to undertake the improvement of houses for sale. We are thinking mainly of older houses, generally vacant and in need of improvement. The authority will buy the house, undertake the improvements, and then sell it. There will be no question of the authority adding it to its housing stock. The selling price should cover the costs of acquisition and improvement, although there is provision for an Exchequer contribution in the event of a deficit.

Our fourth aim is the sale of unimproved homes. We are encouraging authorities to sell vacant and unimproved dwellings for improvement by the purchaser—as, for instance, the GLC has done with its excellent pioneering homesteading scheme.

Next, in the Housing Bill we are giving local authorities power to guarantee building society mortgages. This should enable building societies to lend on more down-market property than they would normally. It should help first-time purchasers, to obtain a loan to buy a property at a price they can afford.

The sixth item in our programme is also aimed at making homes available at a price which the first-time purchaser can afford. That is encouraging further cooperation between housing associations and local authorities, in offering starter homes to young people who may have the deposit to pay on a house, but whose incomes are insufficient at present to raise an adequate building society loan.

The seventh, and major element, in our low-cost home ownership programme is share-ownership—part owning and part renting initially, with the option to purchase the whole equity later. Some 1,500 houses have already been bought through various local authority shared ownership schemes, but there is scope for shared ownership to be offered as an alternative to outright ownership much more widely than at present. We are ensuring that there are no legal obstacles to prevent local authorities, new towns and housing associations from offering shared ownership as well as outright ownership on both new and existing dwellings. My Department is developing a model shared ownership scheme which brings together examples of best practice. We are also ensuring that shared owners who are former council tenants will qualify for discounts in the same way as outright purchasers.

I said that I had already covered partially the point raised by my hon. Friend the Member for Paddington. It is right to say that we are ensuring that the schemes that allow homesteading and the reaching of an agreement with the owner to buy property and resell it for improvement are being covered by an amendment being moved in another place this week. We do not want there to be any loopholes in that idea.

We recognise, as did my hon. Friend, that, because of inflation and increasing house prices, the costs involved in house purchase transactions have become quite considerable. One of the major costs was the Government tax, stamp duty. My hon. Friend may have not understood it correctly—perhaps the temporary tax was intended for four centuries rather than for four years. In the last Budget my right hon. and learned Friend the Chancellor of the Exchequer raised the threshold to £20,000. That means that the average first-time purchaser, in all areas except Greater London and the South-East, no longer has to pay stamp duty. The cost to the Exchequer of raising the threshold, and subsequent bands of payment, is estimated to be £85 million in a full year. At a time when the Government are pursuing a rigorous policy of restraint in public expenditure, that represents a most generous move in favour of first-time house purchasers. Any further changes in taxation are, of course, decisions for my right hon. and learned Friend the Chancellor. My right hon. Friend the Chief Secretary to the Treasury said, in reply to a question in the House on 22 May, that the duty will not be phased out, given the Government's need for substantial revenues.

My hon. Friend the Member for Chorley raised the question of the ceiling on mortgage tax relief and the banks' topping-up loans. It is true that many people are now seeking topping-up loans from other sources such as banks. While they are likely to be at higher interest rates than those of building societies, they are still eligible for tax relief within the £25,000 limit.

On the subject of raising the limit of £25,000 for mortgage tax relief, I refer my hon. Friend to the statement made by my right hon. Friend the Chief Secretary in the Standing Committee on the Finance Bill on 10 June. He pointed out that any change in the mortgage tax relief ceiling would have to be considered in the context of the totality of the Government's housing programme and the tax status of housing relative to that of other forms of investment.

Because we are committed to encouraging the spread of home ownership, and because we recognise that first-time purchasers need some assistance as costs have increased, we have continued the home loan scheme introduced by the previous Administration. That will enable the prospective purchaser who has saved for at least two years under the scheme, and who buys a house within the price limits we shall set, to obtain a loan of up to £600, which is interest-free and repayment-free for up to five years, and a tax-free cash bonus of up to £110. In our manifesto we said that we should like, in time, to improve on existing legislation with a realistic grants scheme to assist first-time buyers of cheaper homes. That is still our intention. But such improvements will, of necessity, as my hon. Friends recognised, have to wait until our economic policies have borne fruit.

We are hoping, with the help of these various measures, to encourage the spread of home ownership. I emphasise that among the 6 million council tenants are hundreds of thousands who will be able to buy their flats, not just their houses. But as a home owner I am conscious that the major problem facing most home owners today is the size of their mortgage repayments. High interest rates are a price that we have to pay at the moment for getting the economy right, and I make no apology for them. When our policies succeed, home owners will be among those who benefit. The essential ingredient of a successful extension of home ownership is co-operation between bodies outside Government—suppliers of land, house builders, and the suppliers of house purchase finance. Subsidies from central Government are not a universal answer. Our main role is to ensure that the climate is right, and the rest will follow.

I think that my hon. Friends have done a great service in raising this issue tonight, and I am most grateful to them.

Question put and agreed to.

Adjourned accordingly at twenty-five minutes to Two o'clock.

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