HOUSING (EXPENDITURE) (Hansard, 27 October 1980)

§ The Secretary of State for the Environment (Mr. Michael Heseltine)
The housing investment programme for local authority housing this year is £2,200 million. The latest returns of local authority expenditure between April and June, the more recent HIP submissions for 1981–82, and discussions about them with individual authorities suggest that there could be an overspend of up to £180 million in 1980–81 above that figure. The Government attach fundamental importance to ensuring that cash limits are observed.
As soon as I knew of the risk, therefore, I considered it essential to find out the precise position and to ask local authorities not to enter into further commitments until we knew the position. I have therefore sent them a circular asking them to let me have returns of their expected expenditure in 1980–81 on the basis of existing commitments, together with their estimated expenditure on statutory grants in the year. When I have these figures I shall be able to see what action is needed in the longer term, and I shall make a further announcement.
Meanwhile, however, I have asked authorities not to enter into any further new housing commitments except those which follow from a statutory obligation. and I have withdrawn related borrowing approval except that which is needed to cover payments resulting from existing commitments.

§ Mr. Winnick
That is a disgraceful decision. Is the Secretary of State aware that his decision will be a bitter blow to the housing hopes of so many people desperately waiting in the housing queue, and that their misery will continue as a result of his statement? Is he aware of the disastrous effect of the decision on the building industry and employment?

§ Mr. Heseltine
The hon. Member will be fully aware that my action is to prevent an overspend on an announced budget. It is not a reduction in the existing 29 programme that was announced to the House. It therefore has to be taken in the overall context. It is unthinkable that the Government could countenance a general attitude that allowed cash limits to be exceeded by about £180 million with no attempt to do anything about it. The hon. Gentleman has no concept of the effect of attitudes of this sort on the private sector, and he should find out what is happening as a result of the attitude that lay behind so many of the previous Government's policies in this sphere.

§ Mr. Adley
Is my right hon. Friend aware that the increasing burden of the rates is becoming well-nigh intolerable in many places, and that for industry particularly the rates burden is every bit as great a problem as the high rate of sterling or any other factor in the economy? Is he aware that in spite of the difficulties he will have widespread support if he is somehow able to control local authority expenditure from going over and above the limits announced by the Government at the beginning of the year?

§ Mr. Heseltine
I am most grateful to my hon. Friend for supporting that view. No organisation can countenance expenditure excesses of £180 million and do nothing about them.

§ Mr. Frank Allaun
Why has the Secretary of State gone back on his public and categorical rejection of such a moratorium only last month? How long will it last? If it is intended to last only a week or two it is unnecessary. Or is a much longer stay intended? That was not done even in the hungry 'thirties.

§ Mr. Heseltine
When I announced the Government's views of the overspending of current expenditure by local authorities I believed that we could avoid the moratorium on capital expenditure that we are now considering. Subsequent to that decision, new information has become available indicating that there is a potential excess expenditure on capital account on one of the housing cash limits. That was why I was forced reluctantly to introduce the circular that the House is now considering.
The question that the hon. Gentleman asks about timing is of crucial concern. I have asked the local authorities to let 30 me have their revised estimates by the end of this week.

§ Mr. Allaun
They might keep the right hon. Gentleman waiting.

§ Mr. Heseltine
I cannot wait. If I had announced to authorities my intention to withhold, in a week or so time large numbers of contracts might have been entered into which would have aggravated the situation even further. The consequence of waiting would have been to enable those authorities most likely to overspend to consolidate the overspending at the expense of the underspending authorities.

§ Mr. Alton
What economic sense does it make to throw more people into the dole queue with all the economic and social implications of such an action? Is the right hon. Gentleman aware of the unemployment in the building industry? Is he aware of the indignity suffered by over 1 million people in the United Kingdom who have homes without inside toilets or bathrooms? What does he intend to do about that?

§ Mr. Heseltine
What economic sense does it make to pile up capital debt, the interest on which will be paid for generations to come, in order to sustain public expenditure which the nation cannot afford?

Several Hon. Members
rose—

§ Mr. Speaker
Order. This is an extension of Question Time, but I will call two more hon. Members from either side before I call the right hon. Gentleman on the Opposition Front Bench.

§ Mr. Alan Clark
Does my right hon. Friend accept that there is a certain latent injustice in applying this moratorium simultaneously to underspenders and overspenders? Is he aware that the city of Plymouth, which has consistently underspent, has had to halt a number of schemes, including one involving £200,000 of underspending which had been put to one side for housing improvements and has had to cancel the granting of mortgages to young people in the city? Is he aware that the sooner the moratorium can be lifted or, at any rate, made more selective, the better pleased we shall be in Plymouth?

§ Mr. Heseltine
I am most grateful to my hon. Friend for his comments. He is right, but the longer I allowed the situation to continue the worse might have become the gap between the overspenders and the underspenders. The legislation now being considered in another place will enable me to distinguish much more between those who overspend and those who underspend, both on capital and current accounts.

§ Mr. Dubs
Is the Secretary of State aware that his moratorium has also caused great difficulties for individuals who are seeking mortgages from local authorities for private house purchase? Can he reconcile that with his intention to make house buying easier?

§ Mr. Heseltine
The building societies now have substantial sums available for house purchase. The local government Bill that we hope shortly to be considering will enable local authorities to guarantee private sector finance in this form, so there will be considerable relief in that way.

§ Mr. Kaufman
Why does the right hon. Gentleman mislead the House when he refers to not having brought about a reduction in the existing programme? Is it not a fact that his statement on 21 February reduced the HIP allocation to local authorities by one-third over the previous year, bringing it down to the lowest level ever, and that he has now cut off even that miserable trickle of funds?
32 Secondly, the right hon. Gentleman rebuked my hon. Friend the Member for Battersea, South (Mr. Dubs) by asking him to consider the position of the private sector. Is he aware that last Friday the Daily Telegraph accused him, in his circular, of hitting the wrong target with a vengeance, because the private enterprise construction industry will feel the chill?
Is the right hon. Gentleman further aware that the director-general of the National Federation of Building Trades Employers said that this was a further body blow to the building industry, which is accelerating into decline and has in prospect the worst recession since the war? The right hon. Gentleman is a disaster to housing and is bringing about a disaster to the housing industry and he should resign.

§ Mr. Heseltine
I am sure that in all the vagaries of the policies on the Opposition Benches the right hon. Gentleman's support for the Daily Telegraph will not go unnoticed. As the right hon. Gentleman knows, I have announced, and the public expenditure tables show clearly, the level of provision for housing this year. Therefore, the action that I took last week was designed not to reduce that programme but to ensure that it was not exceeded. That is what I did, and I believe that it was necessary. Indeed, the right hon. Member for Leeds, East (Mr. Healey), the former Chancellor of the Exchequer, found it necessary in 1976 to take similar action, and he was supported by the right hon. Member for Manchester, Ardwick (Mr. Kaufman).