HL Deb 25 May 1966 vol 274 cc1448-61

6.42 p.m.

THE EARL OF KINNOULL rose to ask Her Majesty's Government whether they are aware of the growing concern felt at the sharp fall in the number of new houses being built under the present Housing Programme, whether they will now announce what measures will be taken to counteract the present trend, and whether they will consider exempting residential development land from the proposed Land Commission Levy to encourage house building. The noble Earl said: My Lords, a year ago I put down a Question on the state of the mortgage market and the effect it was having on the housing programme. At that time I received from the noble Lord, Lord Mitchison, who was answering on behalf of the Government, a most skilful answer which in parts was extremely scornful. He adamantly refused to accept that the then mortgage deficiency would affect the housing market, and, furthermore, went on to say that the case had been grossly exaggerated and many of the facts were distorted.

At that time, in my innocence, I naturally accepted the noble Lord's assessment of the position, for he obviously was in the best position to judge. But it is interesting to see now, on the figures recently published, that the noble Lord's assessment of the position was in fact woefully wrong. Even the right honourable gentleman the Minister of Housing and Local Government admitted last Thursday in another place that one of the factors in the disappointing completion figures for 1965 was, as he termed it, the "mortgage famine". I hope that this evening the reply of the noble Lord, Lord Kennet, will stand the test of time better than that of the noble Lord, Lord Mitchison.

The housing programme as I understand it—and perhaps the noble Lord will correct me if I am wrong—has to be judged, both in the public and in the private sectors, first, on the number of buildings started; secondly, on the number of buildings under erection or construction; and, lastly, on the number of completions. At any time one can compare these three sets of figures with corresponding figures for previous years and judge the pulse and the pace of the housing programme.

The present situation, as disclosed by the Minister last Thursday, is that the number of houses started in the first quarter of this year fell by over 13,000 as compared with the corresponding period of last year; the number under construction is also down; and the number of completions, in both the public and the private sectors, has dropped, I believe, by around 10 per cent. This fall-off shows more in the private sector than in the public sector, but in fact both are affected. These are the facts of the case. We now see that there is a serious decline in the housebuilding programme, and unless some steps are taken immediately, and unless the Government can create a more buoyant market, the completions for the whole year will fall far short of the 1965 figure of 382,000.

The primary reason for this decline, particularly in the private sector, is, without doubt, the terrible uncertainty that exists both in the minds of the developers and in the minds of the house purchasers. During the last month I have discussed with a number of small private developers the reasons for their anxiety. It is, after all, the small builders who constitute over 60 per cent. of the construction industry. The main anxiety that exists in their minds—and this was repeated to me on every occasion—is the unknown damage and effect the transitional period of the Land Commission levy will have on their business. No builder to-day can afford to purchase and hold residential development land unless he is confident that he can pass the ultimate levy, when it is charged, on to the house purchaser.

The threat of the levy tax, which has hung over the building programme for nine months, has without doubt caused a serious freeze-up of the immediate future plans of developers. The land banks of developers have been run down to the minimum, and until an announcement is made as to when the levy tax will become operative no future decisions can really be made with any confidence. On top of this the builders have been faced in the last year with a 10 per cent. increase in building costs, as well as the selective employment tax which will come into force in September and which, I understand, will put a further 2 per cent. on building costs.

Yet a further problem facing the builders is the shortage and high cost of bridging finance. If a builder surmounts all these problems, he finds when he comes to sell his house that at the present time the market is in one of the lowest troughs it has been in for many years, and the reason for this is, of course, that the house purchasers themselves face equal problems. Their problems are that mortgages are scarce and mortgage interest rates are, I believe, at the highest they have ever been in the history of this country. Possibly one of the most serious problems that house purchasers face to-day is when they seek bridging loans from banks when changing their houses.

I do not think it will break any confidence if I repeat a recent conversation I had with one of the branch managers of one of the Big Five banks. He told me that at the present time the banks can offer little service to their clients on bridging loans, as they are severely limited. Bridging loans will only be offered, first, when contracts have been exchanged on the house being sold, and, secondly, when the banks are satisfied that the purchaser's solicitors can give some undertaking that the purchaser of the house is in a position to complete the purchase. The effect of this is to weaken further the house market and to cause considerable worry to those exchanging houses. I should like to ask the Government to look into the present situation and to examine the possibility of local councils offering to help with bridging loans, when banks at present have no power to do so owing to the credit restrictions.

There are two further points which I should like to raise this evening. The first is the question of the availability of building land, and, in particular, the future of the Green Belt policy. The Minister mentioned this in last Thursday's debate in another place, and referred to the Green Belt policy, if taken on its own, as a "negative preservationists' policy". He seemed to imply that the pressures and demands for building land had become so great that this policy would have to be abandoned. To many people, this came, perhaps, as no surprise in view of some of the Minister's recent decisions, particularly the Hartley development in Kent. But I should like to ask the noble Lord whether he could say something of the future of the Green Belt policy as the Government see it.

The second point I should like to ask the noble Lord to comment on is the present interminable and wasteful delays that are caused by planning appeals and the decisions that come from those appeals. At the present time, it is not uncommon for decisions to take up to over half a year, and this, of course, snarls up the planning procedure, causes untold costs and delays the building.

In conclusion, I would say that it is clear to most people that the fall-off in the building programme is due to the uncertainties that exist in the market—uncertainty on the part of the developers as to the effects of rising costs and the new taxes, particularly the levy of the Land Commission, and uncertainty on the part of the house purchaser as to the cost of mortgages and bridging loans. It is, I believe, the duty of Government to create a buoyant and confident property market, and, unless steps are taken to correct the present uncertainties, the housebuilding programme is surely doomed to further disappointments for many years to come.

6.52 p.m.

LORD HAWKE

My Lords, I am glad my noble friend has not fallen into the trap into which so many politicians fall, which is to assume that the Government build houses. It is, of course, builders who build houses, but Governments can stop them from building them. I am afraid that this gigantic erection of bureaucracy which is gradually being put up by the present Government is definitely not going to help the production of more houses by builders. I am not going to deal so much with the question of the number of houses, although we are naturally all deeply interested, because housing is a great social question; and, if just at the moment the numbers are rather smaller than we should have expected, no doubt they may catch up one day. But there is one thing that cannot catch up, and that is the question of price. Many of us are deeply concerned over the very high cost of housing, and there seems very little likelihood that that situation is likely to change.

I have not studied, recently at any rate, the development in the cost of council houses, or even of the houses erected by private developers, in fairly large blocks—what might be called the bulk contracts, where mechanisation, standardisation, and so on, can have full play. But I am fairly closely concerned in a pretty big housing programme to rehouse the clergy of the Church of England, either by replacement or modernisation, and I can say that here there has been a rise of 20 to 25 per cent. in prices over the last four years, and of about 50 per cent. over the last ten years. I am now talking of small houses which are designed by architects and built of materials which are designed to last a century or so, so they are not strictly comparable to the council house programme, or even to a great deal of the housing that is going up under private development at the moment. But they do much more nearly reflect the current cost of materials and wages, because there is not the same opportunity for mechanisation, and so on.

It seems to me that the enormous cost of these houses to-day—and it is enormous as compared with pre-war—reflects the very high wages for craftsmen in the industry and rather doubtful productivity. We all know that the builders are paying far more than the official rates to maintain or attract craftsmen into their service. Clearly, this state of affairs is affecting all of us, because it is having such a marked effect in putting up the cost of repairs. That is one of the facets of our economy which our Government and their professors seem to overlook; that is, that a more prosperous society owns far more assets, and the maintenance of those assets takes a far larger proportion of the working population that is the case with a much poorer society.

Moreover, the service of the existing assets, so far from being helped in any way by the Government, is going to be penalised by the imposition of a selective employment tax. So the house-owner who wants his repairs done, the motor-car owner who wants his repairs done, the owner of the fridge that goes wrong will all have to pay for those articles to be serviced or repaired by somebody on whose wages a special tax has been laid, whereas the product as it comes from the factory will presumably be subsidised by the reverse procedure.

What can one do now about this grave shortage of tradesmen? With your Lordships' permission, I should like to quote a few lines from The Times of to-day. It is headed, "From Our Labour Staff" at Torquay on May 24, where the National Union of General and Municipal Workers is having some sort of a jamboree. The report says: To claim that training was synonymous with apprenticeship, Mr. Jack Cooper, General Secretary, said, was nonsense in this changing world. All young people with the aptitude for industrial skill should have every opportunity to acquire it". Then, further on, the mover of a motion on that particular subject said: … that many semi-skilled members had already acquired advanced skills which craft unions and employers would not let them exercise. The craft unions, instead of merely paying lip service to the Act, should permit adult apprenticeships. Workers who had been compelled to take any jobs they could get in the past should now have a chance to train for better class work". I could not agree with that more, and I am sure that all your Lordships will agree, too.

But what are the arrangements? We hear a great deal about adult employment schemes, redeployment and all that sort of thing. Are they really working? I cannot expect the unfortunate Minister who is to answer this debate to answer me that question, because I have not given him notice of it, and I do not think it is a question for his Department. But I would ask that somebody in the Government should look into these points, because it is very important indeed that this industry should be manned up. There are not enough people in it. We want to make certain that there are no restrictive practices—for instance, that nobody shall lay a brick unless he has been watching a bricklayer for five years, and so on and so forth. When I consider that, in a few months during the last war, the United States turned out some pretty adequate seamen in gigantic quantities from people who had never seen the sea, I always think that we could turn out plumbers and bricklayers rather faster than the existing apprenticeship system seems to do.

I do not know precisely how to achieve this. It would be ridiculous to ask for a Royal Commission on the subjects; but it seems to me that there ought to be some sort of departmental inquiry, in which one of the more practical economists might sit with one or two trade union leaders, to see whether there is some method by which we can get more people into this trade. It is not only a matter of the housing programme which every Government put forward to try to beat the target of the other side; it concerns also the maintenance of existing houses. If we are to have a much larger stock of houses in this country to cater for what will inevitably be a larger population, we shall need more people to maintain them; and at present we are not going the right way to get them. In fact, on the present basis it looks to me as if these costs of building and maintaining housing will continue to go up and up, because of the shortage of skilled labour.

7.1 p.m.

LORD KENNET

My Lords, I thank both noble Lords who have spoken for the constructive points they have raised. May I say to the noble Lord, Lord Hawke, that he is preaching to the converted about the mobility of labour within different trades in one industry. It is one of the principal objectives of the Government to increase this intra-industry mobility as much as to increase the inter-industry mobility. I agree with all he said. Are we not appealing with every breath to the trade unions to burn the rule books in this respect at least? The noble Lord will excuse me, as he has already done in advance, from answering in detail, not only because he gave me no warning but also because this matter affects all industries—building no more nor less than others.

I turn now to a point made by the noble Earl, Lord Kinnoull, in asking his Question—the question of planning appeal delays. I think that nothing he feels about this could be stronger than our feeling about it in the Ministry. It is an appalling situation which has been getting worse, and unless steps are taken it will continue to get worse. Steps are therefore going to be taken. Unfortunately, they may not be possible without legislation. What we are seeing now is the fruit of the existing system which simply is not geared to the volume of planning decisions which have to be taken in the late 1960s. I can assure him that the matter is under examination, and under swift and intense examination, in the Department, and there will be results.

With regard to Green Belts, the noble Earl would be wrong to take my right honourable friend's remarks in another place last Thursday as any sort of abandonment of the concept of the Green Belt as a protection of green country around the cities for amenity purposes. There is no question of abandonment. It is in fact the intention of my right honourable friend to extend the areas of Green Belt. But we do not want to be entirely rigid about not permitting one house ever to be built in a demarcated Green Belt. It seems to me that the people of the city ought to be able to get quickly into the country and that there should be country close to cities. But that does not mean that there must be absolute green country at exactly the same distance from the city centre all around the circumference; it might be found nearer in one place than another. A lot of planning thought is towards the idea of green fingers coming in towards the city centres and permitting city fingers to radiate out. As long as there is a solid area of green country which is available to everybody, that serves the purpose of a Green Belt. However, it is not the intention to chip away and erode the Green Belt and so get a massive spreading from the conurbations in all directions as there used to be some twenty or thirty years ago.

THE EARL OF K1NNOULL

My Lords, before the noble Lord leaves the question of the Green Belt I wonder whether he could perhaps clarify a riddle. I think many people feel that in the existing Green Belt much of the land is known as "proposed Green Belt". This applied for about four years and the Ministry's confirmation of Green Belt has been awaited. Could the noble Lord comment on that?

LORD KENNET

I could not without notice comment on it in respect to any particular Green Belt, but in all these questions of designation under planning legislation there is always a proposal, often an inquiry, and then a confirmation or not; and in this matter, I must regretfully admit, as in others, there are long delays.

The question of bridging finance is a difficult one. I think I should only like to say to the noble Lord that he will know that the banks are restricted in this respect and are asked to keep their lending to 5 per cent. more than they were lending in March last year. They have had guidance in general terms, but in each particular case it is left to the discretion of the bank manager, having taken everything into account, whether or not he should accord bridge finance. It is an interesting suggestion that local authorities should be empowered to assist with bridging finance as they are now with mortgage in general. I think that if this were to become the Conservative Party policy it would be more readily considered by the Government.

I am glad in this mini-debate that we are holding aloof from the wearisome task of slicing the housing figures, casting aspersions on the Government's performance, and casting aspersions on the morals and intentions of the Opposition. I believe that one can easily get too close to these figures. It seems to me that the most important one—the noble Lord will excuse me for quoting a figure, as he himself did so—is that in the last full year, 1965, 382,000 houses were completed; and this is the highest figure in the history of the country. That is the "macro-picture." Let us not be bogged down in the "micro-picture." It is true that early this year there was a dip in completions and it is also true that the results have now turned up again. They have not yet turned up far enough to make the part of this year that has already elapsed as good as the same period of last year. The cause for this has, we believe, partly been the weather. It is true that there was not as much frost this February as last, but there was more rain. But we must not get bogged down on this question of "bad weather." There is no definition of it. That is a matter that is being looked into by my Department and by the Ministry of Public Building and Works to see if it is possible to get a definition of bad weather so that we can start relating this to the housing figures.

LORD BURTON

My Lords, could the noble Lord tell me whether those figures were for England and Wales alone or included Scotland and Northern Ireland?

LORD KENNET

The figure of 382,000 is the United Kingdom figure. Completion times are increasing in the private sector from ten to twelve months, and we agree with the assessment made in many quarters that there is a "lack of confidence" especially among the smaller builders. It is very hard indeed to find precisely what this lack of confidence is and from what it comes.

The noble Earl said that 60 per cent. of houses are built by small builders. That implies a generous definition of a small builder. Sixty per cent. of houses are built by builders who build less than 50 houses a year. A builder who can build as many as 50 houses a year is not very small. I am thinking more of the 30 per cent. of houses built by builders who build less than 10 houses a year. These are the people we are talking about. There is a difficulty here because they are hard to reach. How do you find them? It is easy to set up working parties between Government and the industry and to get representatives of the big firms on to them. They are easy to find; and the Government do so. It is harder to tap the opinion and inform ourselves of the problems of the small builders. We are, however, tackling at the moment the problem of getting in touch with them and hearing precisely what it is that restrains them.

I think it was the noble Lord, Lord Hawke—he will correct me if I am wrong—who spoke of the "scarce" performance in the mortgage sector this year. As a matter of fact, savings, advances and commitments by building societies in the first quarter of this year were all running at record levels, and, moreover, they made advances on more new houses than in the same quarter last year. This hardly seems to me "scarce". I think one should avoid confusing the fact that the mortgage rate is now high—this has been referred to the Prices and Incomes Board—with the actual level at which mortgages are coming forward, which is also high.

LORD HAWKE

My Lords, one must not forget, and I think the Government should not forget, that as prices go on inflating, you need a larger and larger volume of mortgages to service the same amount of stuff.

LORD KENNET

My Lords, a larger volume of mortgages by value, but not by the number of mortgages issued. That depends on the number of houses, irrespective of the prices of the houses.

The completions in the public sector in the first four months of this year were the same as those for last year and there is no dip there. The completion time of houses was the same as in last year—no dip there. The completion time of flats was just perceptibly longer, but not, I think, in any meaningful way. It was just a faint oscillation, which may easily iron out the other way before we know where we are.

Turning to the prospects for the future for a moment, I would say that the pattern varies in different parts of the county. Local authorities in the West Midlands are letting new housing contracts at record rates, while the demand among authorities in the Southern counties and the South-Eastern counties remains very high indeed. Tender approvals, which is another way of measuring it (the noble Lord mentioned the multiplicity of ways of measuring which is such a confusion in this field), by Scotland, the London Boroughs, the G.L.C. and East Anglia, are below expectations, but the so-called "priority" authorities, the list of 130 with which the noble Lord will be familiar, mainly the conurbations in the North, now have their settled three-year programmes, and a great deal is expected of this innovation. It is too soon to predict the out-turn of these programmes but public authorities should start about 195,000 houses this year compared with 181,500 last year and complete 180,000 compared with 168,500 last year. As the House knows, the Government are committed to a steadily rising programme of building by public authorities. The results for this year should be better than those for last year, and next year they should be higher still. By 1970 public authorities are to be building about a quarter of a million houses a year.

If I may mention the selective employment tax for a moment, I would point out that it has been stated in another place that the effect of this will be to increase the price of small houses by about 2 per cent., which is not a very terrible matter. Against this we have to set three factors. First of all, the removal this autumn of the, formerly 15 per cent. now 10 per cent., import charge, which will again reduce the price of timber to house builders, and secondly, the rebate to be paid with the other hand on manufactured building materials, especially on industrialised building components. This is an extremely important matter when we bear in mind the increasing sector of all building which is to be done by industrialised methods. This is a net receipt from the centre. It is a receipt which will very largely offset, if not overtake, the effects of S.E.T. Thirdly, we have to consider the effects of the investment grant scheme for industrial investment, once again a large matter indeed for the building industry when you bear in mind that the total amount of investment in machinery under the National Plan is to double between 1964 and 1970.

Turning to the question of the betterment levy, I would say that we believe that the idea that residential development land should be exempt from the levy, as the noble Lord put it in his Question, must probably be based on a misconception about how it is going to work and who is going to pay it. The basis of the levy is that the person who realises the development value pays the levy, whoever it is. The Bill provides that the levy shall be charged on sales, in which case it is payable by the vendor, but the developer, if he pays any at all, pays only to the extent that he has not paid for the development value in the price he paid for the land. That is to say, the development value is going to be taxed in this levy, and it is adjusted according to the circumstances of the sale, whether it is paid by the vendor or the purchaser, who is probably the developer.

THE EARL OF KINNOULL

My Lords, may I interrupt the noble Lord? It is the transitional period about which developers are particularly worried, because here they will have paid for the development value but in fact the land will be treated at existing use value, so they will be taxed on it. This is the point of my Question.

LORD KENNET

I hope I am not becoming confused, but does it not de- pend on whether or not there is planning permission on the land? Because there is an exemption under Clause 62 which exempts from the levy residential development of land which was owned and had planning permission at the date of the publication of the White Paper. This we believe will cover the point the noble Earl was raising.

To be brief, so far as we can see, there is no reason why the proposed betterment levy should increase the price of land, and therefore the price of housing, at all. The purpose of the levy is that the increased value of the land arising out of the development possibilities should be taxed to the extent which is proposed in the White Paper. The fact that the levy is payable, the fact that the community is taking some of that value, should not, we believe, lead the overall price of land to increase at all. There is also the provision in the Bill itself, as the noble Lord will know, which says that any contracts of sale which stipulate that the amount of the levy, or any part of it, shall be passed on, shall automatically be of no effect.

THE EARL OF KINNOULL

I wonder whether I may interrupt the noble Lord on this important point. I appreciate that the matter depends as from the White Paper, but that was last September and, of course, builders work a long time ahead. They want to known now. Their real anxiety is whether, supposing they do not start the development by the time of the first appointed day, they will be taxed on it.

LORD KENNET

My Lords, the situation here is of intense complication, and there are large interests at stake, and I should be very sorry to mislead the House. I would therefore ask the noble Lord, if he thinks fit, to put down a detailed Question on this point. If he would do that, I could prepare a detailed Answer, which might be rather lengthy, in order to take account of all the considerations.

In conclusion, my Lords, let me say that it seems to us that, though the present phase of the house-building programme shows some disappointing features, the use of phrases like "sharp fall" in the noble Lord's original Question does show a selective approach to the whole picture. Housing achievements are not measured month by month in breathless pounces, although there are many political and journalistic pressures which tempt us to do precisely that. We believe that they should be measured year by year, or three-year period by three-year period.

We now have the three-year rolling programmes for 130 top-priority local authorities, to which we attach the very greatest importance. Although these authorities have the greatest need, it does not necessarily follow that they are in places where it is easiest to get the building done. An obsessive interest in monthly fluctuations might tempt us to say, "All right, we will build wherever it is easiest, just to get the figures up quickly." We believe that it would not be right to do that. We think, on the contrary, that it is best to stick firmly to our policy of channelling effort to places where the need is greatest, and that in the long run this policy will bear results of which this Government need not be ashamed.