HL Deb 04 May 1965 vol 265 cc909-20

7.0 p.m.

THE EARL OF KINNOULL rose to ask Her Majesty's Government whether they are aware of the acute shortage of funds available from building societies for prospective house-owners; and whether they consider this a serious threat to their national house-building programme. The noble Earl said: My Lords, when I put down this Question on house mortgages before Easter I did so without realising that the whole matter would be debated in another place last Thursday. I was on the point of withdrawing the Question when I noticed, so I thought, that there were some of your Lordships who wished to speak on the matter. I hope that this short debate will add some useful arguments to the matter and convince the Government that the present situation can be fairly described as a crisis and not just a temporary setback.

When I studied the Report of last Thursday's debate, with some care, I formed the impression that, although the Minister was commendably open and frank as to the concern he felt for his broken pledges and commitments on 100 per cent. mortgages and low interest rates, he was disappointingly vague as to the solution to the present situation. In fact, my Lords, he just simply refused to acknowledge the situation and calmly announced that we should have to wait until later this summer for his master plan. This disturbing attitude leads one to believe either that he wishes to be known as "unflappable" or that he is completely misjudging the seriousness of the situation. His description of the crisis as a temporary setback might have been perfectly fair if he had come forward with the solution. His claim that the housing programme was, as he graphically described it, "like an overheated engine" was hardly convincing when he took no steps to forestall the overheating. As to his comforting thought that this crisis would prove an advantage for his starting-off point in his national housing programme, this, I suppose, has the benefit only of original thinking.

I do not think it necessary to describe to your Lordships the very serious state of the house mortgage market to-day, except perhaps to say that it is now extremely difficult to obtain a mortgage, either through a building society or through a local authority. Perhaps when the noble Lord comes to reply he will tell your Lordships what percentage of applications for mortgages is at present being turned away through lack of funds. What I feel should be seriously considered to-night is what are the immediate and future effects of this crisis, and what solution can be devised immediately, without having to wait four or five months for the master plan.

The effects, as I see them, are quite simple. Lack of confidence leads to lack of supply. Evidence of this has already appeared with the announcement of contractors' cutting back their building programmes; and the Federation of Registered House Builders have stated that one in four people looking for a new house this year will be disappointed. It has been estimated that, due to the crisis, some 50,000 fewer houses will be built this year. If one takes on average three people per house, this will affect some 150,000 people.

Perhaps the noble Lord, Lord Mitchison, will be able to give the House an intimation of what estimate the Ministry have made of the number of houses and flats which will be completed this year. It may be of interest to note that building societies which last year loaned £1,087 million are estimating that this year the total loans will be some £300 million short of this figure. The Minister has so far turned his back on all the evidence of the slowing up of the building industry, and is coolly describing contractors as pessimistic or as having a sense of drama and political prejudice. Do responsible contractors honestly think like this? I very much doubt it. Have the Government forgotten the promise they made last November, through the Chancellor of the Exchequer, to take early action to assist the housing programme—a promise which has never been put into practice?

My Lords, I believe that there are many practical solutions which can assist the present crisis. Building societies, which finance some 75 per cent. of all private house building, should be, I believe, temporarily supported by the Government, either by a form of guarantee or by being directed to obtain loans from the various banks. The House Purchase and Housing Act, 1959, could be used to greater advantage to assist building societies in providing loans for older houses. Perhaps the noble Lord will tell the House what is the estimated capital which the building societies would require to tide them over this difficult period, if they were to meet all proper demands.

As for local authorities, which, I believe, are responsible for something like 15 per cent. of the total market for private house building, I am sure that their terms could be made far more favourable if the Public Works Loan Board were to grant them up to, say, 70 per cent. of the capital they require and not just up to the present maximum of 35 per cent. This would reduce their demands for raising capital on the open market and so make their terms far more attractive.

In conclusion, perhaps I may paraphrase an old saying to the noble Lord opposite: "Do not say in Opposition what you cannot do in power". I believe that the Minister has a genuine desire to meet his commitments and fulfil his pledges to the country, but unless he takes some immediate, imaginative and positive steps to solve the present crisis, I fear that his hopes will not be fulfilled for a very long time.

7.9 p.m.

LORD AUCKLAND

My Lords, my noble friend Lord Kinnoull was, I believe, absolutely right to raise this Question this evening. I have an interest to declare as a director of a very small building society in London, which was formed in 1935 and specialises in mortgage loans ranging between £2,000 and £4,000. It is particularly within these figures that the present difficulties lie, and I know from my own experience as an insurance broker with a firm which deals with this problem how very difficult it is at the present time—and "very difficult" is putting it mildly—to secure mortgage loans even up to £10,000 in many cases, let alone loans in the £2,000 to £4,000 range which many young people of moderate means who are hoping to set up a home of their own are seeking at the present time.

The picture as I see it at present is a dismal one. I have no wish to make any Party political capital out of this, because these young people and others who are seeking houses are not interested in the Party politics of this matter. I am bound to say, having read the Minister's speech of last Thursday, that like my noble friend I was profoundly disappointed at his apparent lack of understanding of this situation. This is no time to try to apportion blame, but I hope he will read very carefully the proceedings in this debate.

The London County Council, to be fair, have done their utmost to solve this problem, and the Greater London Council are now doing their utmost to solve it. I think it is only right to put this on record. However, delays of up to six weeks are being experienced by people who want their property to be surveyed, and this in itself creates considerable difficulties. There are estate agents in London and elsewhere who are being beseiged by people seeking house mortgages sometimes almost with a feeling of desperation, and they are being turned away by staffs who have nothing to do at the present time. I am informed that many of them are being passed on to finance houses, some of whom are making a very undesirable racket out of these unfortunate matters. I have no wish to criticise the bona fide finance houses, who do a very worthwhile job, but this present situation is bringing out the less scrupulous of these people, who are charging interest rates of 12 per cent., plus additional survey charges and other burdens.

As I have said, the building societies are not seeking to indulge in Party political pyrotechnics. The chairman of the Building Societies Association, in his paper of last February, spoke these words: Building societies have no desire to be dragged into the political arena. They are traditionally non-political and have always cooperated with the Government of the day to promote policies which are designed to encourage thrift and home ownership. I should like to ask the noble Lord who is to reply whether his right honourable friend's attention has been directed to these vital words. He has suggested, at least by implication, that the Opposition Benches are trying to make Party politics out of the state in which the building societies now find themselves. I believe this to be quite untrue. As my noble friend has said, all Parties are desirous of solving this problem.

I will quote one more figure. Last year, young people of the age bracket 25 to 34, newly married and seeking houses of their own, formed 42 per cent. of mortgage seekers. I should like to ask the noble Lord whether he is aware that many of these will be profoundly disappointed by the present situation. I hope that he will have some reply to the questions which have been directed to him this evening.

7.40 p.m.

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF LAND AND NATURAL RESOURCES (LORD MITCHISON)

My Lords, I have been waiting to hear what the present situation is supposed to be. So far I am a little disappointed. The noble Lord who spoke last said that it was very dismal. That is an expression of opinion. But it might be more useful to look at the facts. The noble Earl who initiated the debate started off by talking about broken pledges, but he did not tell us what pledges had been broken up to now.

THE EARL OF KINNOULL

My Lords, perhaps I should quote here the debate of last Thursday. I was referring to the pledge given by the Prime Minister and the whole of the Party in office at the moment, of 100 per cent. mortgages at low interest rates, at one stage the rate being quoted at 3 per cent.

LORD MITCHISON

My Lords, we have had this before, and by all means let us have it again; but if we are going to have it, let us have it right. What the Labour Party said was that they would reduce interest rates and, if necessary, have special rates in the case of both local authority houses and building society houses. I do not think that a specific figure was given. That particular pledge has been defended and repeated so often that it really seems a waste of time to do it again. In the debate to which the noble Earl referred it was again repeated, with a quotation from the Labour Party Manifesto.

It is perfectly clear that the pledge has not been broken. On the contrary, it is being carried out. But the difficulty is the financial mess in which we were left by the outgoing Administration; and upon that I shall have a word to say later—if the noble Earl wants me to answer his questions he had better perhaps let me answer them, and then interrupt me afterwards if he wants to. Let us proceed to see what this very dismal situation is—how the country is "going to the dogs", the building societies are "in the soup", the poor young couples are all weeping and nobody can do anything. All this is a misrepresentation and there is remarkably little behind it.

Let me give the noble Earl one or two facts. The actual rate of building at present is not worse than it was last year; in fact, it is rather better. If we take the starts in the first quarter of 1964 and the first quarter of this year, the starts of private dwellings, which are the ones with which we are concerned to-day, are a little higher in the first quarter of this year and the public starts are a little bit lower. When we come to the figures for this March it so happens that in the case of new houses in both sectors starts are up. Let us turn to completions. In the first quarter of 1965 more houses were completed both in the private and in the public sectors as compared with last year. These figures relate to England and Wales, but if one includes Scotland, exactly the same position applies. The net result, therefore, is that in this very dismal situation we are starting more houses and building more houses than we were at the same time last year.

Let us turn from that and see what is happening to these miserable building societies. The advances they made in the first quarter of this year were higher than those made in the first quarter not only of last year but of any previous year. There has been no general suspension of lending by building societies at all. It is continuing at a higher rate. I do not know about Lord Auckland's particular building society and what they are doing in any particular case; I am taking building societies as a whole. I hope the noble Earl can restrain himself—

THE EARL OF KINNOULL

My Lords, I can certainly restrain myself, but I thought that the noble Lord was moving on to a different point. The noble Lord has been quoting these figures of the past. I am talking about the present and the future, and when I do that I think of great firms like Wimpey, who are cutting back 30 per cent. of their housing programme. Does the noble Lord call this a healthy situation?

LORD MITCHISON

My Lords, I can deal with only one point at the time. I think that in a debate about building societies it is at least reasonable to point out that, so far from being in a very dismal situation, they are doing more work in the business of advancing money than they were at the same time last year. The noble Earl may be quite certain about the future, but I am not. I do however regard the present situation, which is what I am talking about, as not a very dismal one; and I think that to say that it is is quite unsupported by any evidence.

The Federation of House Builders, I think it was, quoted a figure of 50,000 fewer houses. All I can say on that is that I have never heard where this figure comes from. I cannot see what it can come from; and I cannot see how anybody can tell at this time how many houses will be completed by the end of this year. We can have targets and talk about them—and I should have thought that, of all "targeteers", the Party opposite were the leading exponents of rash targets. I should have thought, however, that this was a matter of mere common sense. It was one of the questions the noble Earl asked me. I see him shaking his head, but he must have a remarkable gift of prophecy if he can tell now how many houses will be completed by the end of the year. He may find the starting figures useful, and that is why I gave them. If the starting figures are completed, we shall do quite well.

May I give the noble Earl a rather rash estimate that was made? My right honourable friend the Minister saw the builders, and he told another place that the worst estimate he got from any builder was a figure that was only slightly lower than the total of last year. It was nothing like 50,000 from 400,000, but only slightly lower. I do not attach much importance to it, because I cannot see how a builder, a building society, a Minister or anybody else can tell, when he is speaking in May, how many houses are going to be completed at the end of the year. He may be in a better position to do this in October or November, but he cannot say this at present. That is the answer to that part of the noble Earl's Question.

Then there was a series of questions about how many people have been turned away by building societies. The short answer to that is that a great many people go to building societies and do not get the mortgages they want. Continuously, for years past, the building societies have been saying this. But one cannot say how many applications have been turned down, meaning how many applications would have been granted but for something or another, without making clear what the something or another is. That we have completely failed to learn from the noble Earl who asked the Question.

The other question was: how much money would be required to tide them over? To tide them over to do what? They are doing quite well. They are making their advances. The noble Earl shakes his head. He asked for the figures, and I have given them. If he refuses to accept them, then I cannot do any more about it. Where he gets his figures from, I do not know, because he has not produced any. If I may say so, this kind of attack should be founded on rather more facts and a rather more solid basis than it has been, not only to-day—I am not referring to this debate, or particularly to the noble Earl's speech—but by the Opposition, who made it in another place. The Press were really at the bottom of a lot of this, and they started this story on their own. Unless and until some further indication can be given of what really is the matter, I do not see how anybody can be expected to produce remedies for an entirely non-existent evil.

I should like to say one or two words about the position of young people. Young people want houses, and they want them very badly in London. And we all recognise that not only young people but a great many other people are in the kind of distress, in London and elsewhere, that was indicated, so far as London is concerned, by the Milner Holland Report, which we all have well in mind at the moment. But, as I think that Report made quite clear, the biggest gap in the machinery is not the house that the building societies will advance to supply, but the house which ought to be supplied in sufficient quantities by local authorities. It is to develop the activities of the local authorities further that my right honourable friend's attention is particularly directed.

But it is equally true that housing is not a matter just for the local authorities or for private housing. I heard the noble Earl (I think I heard him aright) suggest that 15 per cent. of the building was done by local authorities. That figure, I need hardly say, is quite incorrect. The proportion at present is roughly 40 per cent. by local authorities and 60 per cent. by private builders.

To look at the history of the matter, when the first Tory Government came in after we left office the amount of house building by public authorities that was taking place was far greater than the building being done by private builders. It was, however, the then Government's deliberate policy to encourage private house building at the expense of building by local authorities, and it is because of this that there are so many people now who ought not to have to ask for a mortgage. It is not what they want; but, finding themselves unable to get a local authority house, they have to see what they can achieve with building societies. That is the net result of Tory policy. That, as I said at some length the other day—and I hope I am not going to repeat it at great length this evening—is really the big gap, and that is what needs attention. But the two things must be kept in step, and it was to this that my right honourable friend referred when he spoke of having a meeting in the summer to get together the building programme, both as regards private houses and local authority building. That, I suggest, must be right.

There are two ways of looking at any building programme when you are finding out what you can manage. One way is to look at the financial side, and the other is to remember that there is a certain amount of building labour available in the country and that it cannot be increased immediately on any large scale. That being so, it is, as I see it, the business of the Government to keep in view the distribution of that building labour and the financial resources as between the various types of need: in the particular case we are discussing now, that of private houses for which building societies will make advances, and, on the other hand, that of local authority houses which are required to rent.

The difficulty about the building societies—and there is difficulty, though it was not mentioned by either of the two noble Lords who have spoken: but let me put it into their mouths; and I may be able to help them over this—is that the building societies, while they are getting a good deal of money, and much the same as they have always been getting, to use in advances, and while they are at the moment continuing to make advances, are having to suffer from fairly large withdrawals. That is the real difficulty from their point of view. It has nothing to do with actual building. It is the fact that because local authorities, for instance, are offering considerably higher rates to lenders than the building societies have been in the habit of offering, investors have drawn a good deal of money, particularly rather large investors, from the building society funds.

This, in turn, is, of course, the result of, if you like, a "dear" money policy at the moment: the result of protecting ourselves against the situation which we found in this country when we came into power. We found an enormous sum (I have the figures here, and they were quoted in this particular debate by the Chief Secretary to the Treasury) for which we were in debt to foreign countries, and for which we had to make provision by temporary borrowings. This was a matter which had to be attended to in October, when in fact it had been going on since July—and, for that matter, even earlier.

What we hold against the former Government on that matter is that they did nothing before the Election; that they should have taken action many months previously, but left us to carry this extremely unwelcome baby when we got back in October. Perhaps the noble Earl will allow me to finish my sentence. It is as a result of that emergency measure that the building societies and the local authorities have been in some difficulty and in some competition in borrowing funds. Does the noble Earl wish to interrupt?

THE EARL OF KINNOULL

My Lords, I am sorry to interrupt, but I wanted to know how long this political excuse was going to go on, blaming the past Administration.

LORD MITCHISON

It is no excuse to owe foreign countries £850 million or £950 million; it is hard cash; and the next time the noble Earl is a bit short of money, is he going to call it a fiscal excuse, or is he going to recognise the fact that he has not got the money and had better find it somewhere? That was the position that this country was in. Really it is a ludicrous use of political language to call something of that sort a fiscal excuse. It is rather a gruesome reality. Does anyone suppose that an incoming Chancellor of the Exchequer puts a 7 per cent. bank rate on for fun; that he applies a credit squeeze unless he has to? And does anybody sup- pose that the outgoing Government, when this is in fact the position we found on taking office, can evade all responsibility for their own omissions and own misdeeds by saying it is a fiscal excuse? It is really, saving the noble Earl's presence—and by all means let him interrupt; I like interruptions; I am accustomed to them, but let me finish my sentence—ridiculous to talk about this kind of thing in terms of that sort.

THE EARL OF KINNOULL

Could I ask the noble Lord one question? As I said, the Chancellor of the Exchequer pledged last November to improve the housing programme. He has not done so. Does he intend to do so?

LORD MITCHISON

The housing programme is getting along rather well, as I have just indicated, and of course he intends to do so. What does the noble Earl think about the measures we have already introduced about protection from eviction; what does the noble Earl think about the interviews proposed in the summer, and what does he think of the concessions that have already been made to local authorities by way of facilitating their borrowings? What does he think that is all for, if it is not for improving the housing programme?

I hope we have demolished some of this fiction today, because it is founded on fiction. It has no real basis at all, and so far as there is anything to be said on the matter that has any importance, it is this. The key to the whole matter is the financial situation with which we were saddled by the outgoing Party and in respect of which we have had to make provision in certain respects, particularly in this instance by continuing a seven per cent. bank rate far longer than anybody wants to continue it. We have no wish to have it. We did not ask for this baby. If we have given it the right medicine, it is a very nasty and painful one. But nobody wants it.