§ 3.48 p.m.
§ Order of the Day for the Second Reading read.
§ LORD SORENSEN
My Lords, we have not had a comprehensive debate on housing since July 27 last year, when the noble Lord, Lord Hawke, introduced a Motion; and I was very glad indeed to see that he is to participate in our debate to-day. To-day we concentrate on this very important subject by considering the Housing Subsidies Bill, which is a substantial measure that I am sure will prove of great benefit to many thousands of people in this country who still urgently need decent accommodation. Housing is now of course recognised to be a national 551 responsibility, whether it be by the Government financially assisting local authorities to provide buildings or, more directly, by their financially assisting persons to purchase their own dwellings.
As we know, this has not always been so. At one time it was assumed that the building and supply of houses should be left entirely to private enterprise and the free play of the market. This is apart from the laudable provision of almshouses by philanthropic persons or, equally so, the erection by those persons of urban blocks of flats for working-class occupation. In those times, of course, it was not assumed that we should go anywhere near the point we have reached to-day, where the Government, in one way or the other, either through private enterprise or public enterprise (both of them essential, of course, to meet the problem), take such responsibility as they now do. Hence it is that all parties now vie with each other to devise policies which they believe will ensure—if not immediate, then ultimate; and, perhaps, in the foreseeable future—the provision of sufficient good-standard dwellings to satisfy what is now admitted to be a great social need. Although much remains to be done, I think we can without complacency feel gratified at the progress that has been made.
Before I plunge into the Bill, I would remind your Lordships that according to housing statistics issued recently these are the figures of progress that has been made. From 1945 (which includes the period after the war when few houses were constructed apart from purely temporary dwellings) up to December, 1966, 4,867,996 dwellings, either flats or houses, had been built, which probably means that about 15 million or more families are now living in post-war dwellings. The total number built in 1966 was 385,509, of which 180,137 were in what we now know as the public sector, and 205,372 in the private sector. This represented a fall in private sector building compared with 1965; although there are now signs of improvement in that sector. But on the other hand there was an increase in the public sector. I must emphasise that both the public and private sectors are of immense importance in the solution of this problem. We know that many previous assumptions and anticipations have 552 been falsified by a number of unpredictable factors: people are now living longer; young people are marrying earlier; there is far less sub-letting than formerly, probably mainly because the income of even the working-class people is higher, both proportionately and absolutely, than it was. These unpredictable factors have given some concern to those who try to make an estimate about the future, but I think we are getting now a little nearer concrete facts.
My Lords, the Housing Subsidies Bill, which has now been introduced in this House, is a further valuable contribution to the solution of that problem, and notwithstanding minor criticisms that have been made the Bill has been welcomed by all Parties in another place and outside—for which, I am sure, all noble Lords here are most grateful. It is probably wider in scope than any comparable Bill since the Chamberlain Act of 1923. Part I of the present Bill introduces an entirely new system of housing subsidies to encourage the building of houses to let at moderate rents by local authorities, by housing associations and by new town development corporations.
Part II of the Bill introduces the option mortgage scheme which is designed to broaden the basis of owner-occupation by bringing it within the reach of more families of moderate means. It does this by giving those families the same kind of assistance with their mortgage repayments as the standard taxpayer enjoys through income tax relief.
Part I of the Bill also contains two other kinds of grant to assist special types of housing work: Clause 15 increases the grant for hostels from £5 to £15 a year for each bedroom provided. The types of hostel to which this grant applies are, for example, those provided by local authorities for elderly people, and those provided by voluntary bodies for young people in employment, single women and others whose need of a permanent home can best be met in this kind of communal accommodation. Clause 12 is of particular interest, because it was introduced into the Bill during its Report stage in another place. My noble friend Lord Kennet will explain more fully some of the provisions of that clause. It provides a new, or refurbished, grant for housing associations acting under authorised 553 arrangements with local authorities in providing accommodation by the improvement and conversion of older houses. Much of this is already being done. Certainly in those localities that some of us know quite a number of houses have been converted, improved and made available for people who by moving into them have, in turn, eased somewhat the general housing situation. The new provisions are designed especially to assist those housing associations who are concentrating their efforts on helping families who are homeless, or in danger of becoming homeless. There was recently a television presentation on this subject which certainly moved a large number of people in this country. I here would pay tribute to the many housing associations already in existence who have done excellent work in this direction.
The case for giving housing special priority was stated in a White Paper, The Housing Programme, 1965 to 1970. It was presented in November, 1965. It would be appropriate, I think, if I extracted from it some few facts relevant to the Bill. In Great Britain then, according to that White Paper, there were still about 1 million slum houses—although I agree that the term is a little ambiguous. But it is a fact that substandard housing numbered approximately about 1 million, in spite of what had been done. Also there were up to 2 million houses which were sub-standard, but not as severely so as the slum houses which would have to be replaced. About three-quarters of a million houses were needed to overcome the shortage and provide a reserve for mobility. Further, it was estimated that each year 30,000 houses were needed to replace those lost by redevelopment, such as road widening, and 150,000 more to keep up with the formation of new households in a rising population. Altogether, it was envisaged that close on 4 million houses should be completed in the next few years—fewer, of course, than the number of post-war houses that have been built. This is an indication of the seriousness of the problem that still remains.
The White Paper proposed to raise house-building from the 1964 level of 374,000 (of which about 60 per cent. were for the private sector and 40 per cent. for the public authorities) to the 1970 level of 500,000 houses, divided 554 about equally between the private and the public sector. That remains the target, however much we fall short of it. It is an objective, and the objective which we are striving to reach as quickly as we can. Much will depend on performance in the private sector, which is less predictable and less controllable than the public sector. The case for a bigger increase on the public sector arises from the desperate shortage of houses to let at rents which the average family can afford.
Now, my Lords, I turn to the Bill itself, which is one, and only one, vital component of the Government's general housing policy. Part I of the Bill applies only to England and Wales: the separate Scottish Bill will be considered later to-day. It introduces a new type of basic housing subsidy. Instead of the traditional unit subsidy or basic subsidy for each house, regardless of costs, location or interest rate charge, we introduce a cost-related subsidy related to building costs, site costs and the costs of borrowing. The present basic subsidy was fixed in 1961 at £8 or £24 a house. Clause 2 of this Bill introduces the aggregate cost subsidy which works like this. A local authority applies to the Minister for subsidy approval on the houses or flats it proposes to build. Approval is related to the actual cost or value of the land and the estimated cost of site works and construction at tender stage. The approved cost of all dwellings built by that authority in the financial year is then totalled, and the subsidy covers the difference between the loan charges incurred in that year and what the loan charges would have been if the money had been borrowed at 4 per cent.
To simplify the new system the local authority associations have agreed that the Minister should specify representative rates each year, instead of calculating the borrowing costs separately for each of the 1,400 or so local housing authorities in England and Wales. Clause 2 therefore gives the Minister power to specify the rate, or rates, of borrowing—after consulting the authorities—by means of an Order subject to the Negative Resolution procedure. There has to be power to specify more than one rate because the borrowing arrangements for new towns, for instance, are different from those of local authorities. This means that the Bill makes two proposals not attempted 555 before. First, it provides for higher subsidy where building or land costs are higher, so that all authorities get proportionately the same benefit, whereas at present the £24 subsidy is payable whether the costs are high or low. Secondly, it ensures that if interest rates increase the subsidy does not remain static, as the 1961 subsidies did. Thus local authorities, development corporations or housing associations will know for certain that if interest rates rise they will be protected, since the subsidy will also rise. They can therefore plan ahead on the basis of a stable interest rate of 4 per cent. As a corollary to this, of course, as interest rates fall, the subsidy is adjusted accordingly.
Let me provide two illustrations. On a house costing £3,000, including the cost of the land, the loan charges at 6½ per cent. would be £199 per year; and at 4 per cent. the figure would be £132 per year, a difference of £67. On a flat in a high block, costing £5,000, the loan charges at 6½ per cent. would be £332; and at 4 per cent. £420, a difference of £112. Noble Lords should compare these amounts of subsidy, £67 and £112 respectively, with the provisions of the 1961 Act where the basic subsidies were respectively £8 or £24.
As I have explained, the new basic subsidy is a cost-related subsidy. This, we can appreciate, is something about which a Chancellor of the Exchequer or, for that matter, a Minister of Health would have seriously to be concerned. We are therefore introducing, as an essential part of the new subsidy system, a new system of control for which powers are provided in Clause 3. Briefly, the Minister intends to lay down new housing standards based on recommendations by the Parker Morris Committee Report, Homes for Today and Tomorrow.
The new department is also preparing a series of cost yardsticks which define the cost limits for housing designed to these standards. The yardsticks allow for regional variations and differences in costs for different types of houses at different densities. Local authorities will be free to build at these standards up to the limit of the cost yardstick and will receive subsidy up to this limit. They may exceed the yardstick by up to 10 per cent., but while they will get loan 556 sanction for this excess they will not receive subsidy. If the cost exceeds 10 per cent. loan sanction will not be given, and the scheme will have to be revised to bring it within the cost limit. This aims at deepening cost-consciousness in local authority house-building and encouraging still greater efficiency and economy. It is a valuable feature of the new subsidy system. This does not cast any reflection on the desire and intention of local authorities to reduce costs as much as possible, but it will be an added stimulus.
In general, my Lords, the new subsidies apply to all houses and flats in tenders approved on and after November 25, 1965; that is, after the publication of the White Paper. But Clause 1(3) provides that the Minister may pay the new subsidies on houses or flats completed on or after November 25, 1965, in areas where, in the opinion of the Minister, there is an exceptional need for more houses as a result of exceptional slum problems or housing shortage, and where the provision of that housing would result in unreasonably high rents or rates. The Minister has announced the list of authorities who will benefit by this retrospective subsidy. They are the 54 local authorities in England with more than 12½ per cent. unfit dwellings, according to returns submitted to the Ministry in 1965; or with 10 per cent. or more excess of households over dwellings according to the 1961 Census, and who had 100 or more houses or flats approved but not started or under construction at the end of November, 1965.
The rules adopted for this retrospective payment of subsidy admittedly involve an element of rough justice. That was almost inevitable. A few authorities have complained that tests have worked unfairly in their case, but as it was essential to work on the most comprehensive and objective data available—data which related to all authorities—we could not do better than take the 1961 Census and the 1961–1965 slum clearance return. Generally speaking, the vast majority of local authorities, including those who might have expected to qualify but were disappointed, have accepted that the rules adopted and the list of qualifying authorities are fair and reasonable. It is, of course, a once-and-for-all operation, and not a continuing feature 557 of the new subsidy system. It must be realised that while retrospective subsidy has had to be limited to very few local authorities with quite exceptional housing problems, the new subsidies will bring greatly increased financial assistance to all housing authorities.
The Bill also provides, in Clauses 4 to 11, additional subsidies to meet special needs; for instance, for flats in high blocks; housing for industry and town development; extra costs incurred through mining subsidence, or building in local materials, such as Cotswold stone; and special provision for expensive sites. In each case the special subsidy is paid in addition to the basic aggregate cost subsidy.
Clause 13 of the Bill enables the Minister, by order, to abolish or reduce subsidies payable under Part I of the Bill. This is a similar power to that contained in Section 2 of the Housing Act 1961 which was criticised by the then Opposition. In view of the apparent inconsistency, a word of explanation as to why it appears in this Bill is necessary. Such adjustments are fairly well known in political evaluation. Essentially, the justification for the inclusion of these powers in this Bill is that the Bill provides a totally new form of basic subsidy which is related to the difference between the cost of a 60-year loan at a rate of interest representative of rates paid by recipient authorities in the immediately preceding financial year, and the cost of a 60-year loan at 4 per cent. But local authority borrowing is not based only on 60-year loans; it includes long-term, short-term and temporary borrowing. Part of the borrowing is therefore always being renewed at prevailing rates of interest. This means that if the new subsidies were based on a representative interest rate of about 6½ per cent., and subsequently interest rates fell to, say, 5 per cent., local authorities would continue to draw subsidies on houses completed in the earlier period related to a rate of interest about 1½ per cent. higher than they were now paying on their current debt. In such circumstances a reduction of subsidy might be justifiable.
But, just as it is possible for interest rates to fall, after a period of high interest rates, so it is possible for interest rates to rise again. In such circumstances it would be only reasonable for the 558 Minister to have the power to make an order restoring, in part or in whole, subsidies which had been abolished or reduced by a previous order. Unlike the 1961 Act, therefore, this Bill enables the Minister to vary or revoke a previous order as respects any subsidy period remaining after the new order comes into force—that is to say, a first order might be made abolishing certain 60-year subsidies after they had run for 20 years. Ten years later this order could be revoked or varied so as to restore the whole or part of these subsidies for the remaining period of 30 years. I am sure that this flexibility will commend itself to your Lordships.
I should like now to turn to Part II of the Bill, which deals with what has come to be known as the option mortgage scheme. This part of the Bill applies to the whole of Great Britain and not only to England and Wales. The details of the scheme are a little complicated, but the broad principles are straightforward and have already been explained in the Government's White Paper, Help Towards Home Ownership, which was published last December. The object of the option mortgage scheme is to rectify one of the anomalies of our present tax arrangements as they apply to the purchase of houses for owner-occupation. A man who buys a house is entitled to relief from income tax on the interest which he pays on the loan. If he pays income tax at the standard rate, the effective rate of interest which he pays on the loan is reduced by about a third. But if he pays income tax at less than the standard rate, the tax reliefs to which he is entitled are obviously that much less. And if his income is so low that he does not pay any income tax, then he can get no income tax reliefs at all upon his mortgage interest. So we have the rather odd situation that, when it comes to buying a house on mortgage, the higher your income, the more help you can get.
The option mortgage scheme seeks to redress the balance by providing a Government subsidy which any borrower may choose as an alternative to income tax reliefs. Taken over the period of a normal mortgage, the amount of the subsidy works out at marginally less than income tax reliefs at current rates. Generally speaking, therefore, it will not be to the advantage of the man who is 559 paying the standard rate of income tax to choose the subsidy when he takes out a mortgage. But the man who is paying less than the standard rate can, by opting for the Government subsidy, secure for himself assistance with his mortgage repayments broadly comparable with that which he would get by way of tax reliefs if he were a standard rate taxpayer. For annuity type mortgages of the sort normally given by building societies and local authorities, the subsidy has been fixed at 2 per cent. of the capital outstanding from time to time. This means, in effect, that the interest payable by the borrower will be effectively reduced by 2 per cent. There is, however, an interest floor of 4 per cent., so that if interest rates fall below 6 per cent., the subsidy will be reduced, and if they fall as low as 4 per cent., it will disappear altogether.
Some mortgages, particularly those issued by insurance companies, are of the endowment type. In these cases the capital borrowed is secured by an endowment insurance policy and is paid off by a single payment with the proceeds of the insurance at the end of the period for which the loan is made. Under these arrangements, of course, no capital is repaid until the mortgage is finally redeemed, so that interest is payable for the full amount of the loan throughout the whole of the period. A 2 per cent. subsidy in these circumstances would provide a very much greater degree of benefit than that which will be given on the annuity type mortgage. To keep the subsidy on the two types of mortgage broadly in line, therefore, only 1¾ per cent. will be paid on endowment mortgages.
Option mortgages will be available through building societies, local authorities, insurance companies and friendly societies. It would not be practical or desirable to apply the scheme to anyone who is prepared to lend for this purpose. A great deal of thought has been given to the administrative problems of paying subsidy and having it credited to the borrower's account, with the object of keeping the operating costs to the minimum. Under the scheme which has been devised, the subsidy will be paid in bulk to the lending agencies. They will claim from the Exchequer at appropriate in 560 tervals 2 per cent. or 1¾ per cent., in the case of endowment mortgages, of all the capital outstanding from time to time in those cases where the borrower has opted for the subsidy. The borrower will simply be given a mortgage with repayments calculated as if it had been at 2 per cent. less than the current rate of interest. This is the situation so far as new borrowers in the future are concerned.
But the scheme will apply equally to existing borrowers who already have mortgages. It is common practice for both building societies and local authorities, as interest rates fluctuate, to leave the borrowers' regular repayments at their existing figure but to adjust the period of the loan. This frequently means that the current repayments on a loan bear no direct relationship to the current rate of interest. To avoid the vast number of individual calculations that would be involved, the subsidy will be reduced by a uniform one-sixth, or broadly, the effect of the subsidy. This will not give exactly the right result, and any margin will be corrected by a small adjustment of the period of the loan. This scheme is, of course, for assisting owner-occupiers, but it is also being applied to the co-ownership housing association. In co-ownership housing, a comparatively new development in this country, the members of the association own cooperatively the houses which they occupy. This type of association has been treated in the past as equivalent to owner-occupation for tax purposes—it is indeed a special form of owner-occupation—and the Bill extends the right to receive Government subsidy to them by regulation.
The essence of the option mortgage scheme is that it will effectively reduce the interest which has to be paid on a mortgage when it has been obtained. But the obstacle for many people in buying their own home lies in finding the necessary deposit. Linked with the option mortgage scheme in Part II of the Bill, therefore, is a new scheme designed to enable option loans to be made in excess of the amount which would normally be advanced, and up to 100 per cent. of valuation in suitable cases. This will be done under an arrangement by which the excess advance will be the subject of a guarantee to be given jointly by the Government and an 561 insurance company. The arrangements have indeed been worked out with the Building Societies Association and the British Insurance Association.
This scheme is being grafted on to existing well-tried arrangements by which mortgages above the normal level are advanced on the collateral security of an insurance indemnity, and the guarantee will be provided by an insurance policy in the ordinary way. But since the Government will be joining with the insurance companies in sharing the risk, the premium—which is normally a single payment—will be reduced accordingly. The borrower will be able to add this to the mortgage debt and repay it over the period of the loan.
The option mortgage scheme will come into operation with effect from April 1, 1968: that is to say, subsidy will be payable on mortgages which are then already in existence as from April 1, and thereafter on new mortgages from the date when they start. Those whose mortgages are already in existence will in general have to decide whether or not they are going to opt for the Government subsidy by the end of this year. After September 1 next, new borrowers applying for mortgages will be asked to say whether they propose to opt for the Government subsidy or to keep their right to income tax reliefs at the time when they apply formally for a loan.
The guarantee scheme will be brought into effect after the option mortgage scheme on a date to be fixed by the Minister by statutory instrument. This will be fixed after consultation with the building societies and insurance companies, the object being, of course, to ensure that adequate funds are available to meet the anticipated increased demand for loans.
Before concluding, I must express appreciation on the part of the Government for the great deal of help and cooperation which the Minister has received from the building societies, the local authorities, the friendly societies and the insurance companies in working out the details of the option mortgage scheme and the guarantee scheme, particularly as we know that the option mortgage scheme will inevitably add to the complexities of their day to day business. Nevertheless, they have agreed to co-operate in 562 the arrangements, and the Government are most grateful to them for all their helpful service.
My Lords, my noble friend Lord Kennet will have more to say on this subject in replying to the debate, and he will, I am sure, supplement my own observations most adequately. This is a Bill to help the housing programme, with which we are all concerned, and it involves both what we have called the public and the private sectors. It is comprehensive in scope and generous in its provisions. I am glad indeed that it has received such general support from all quarters. It is a major piece of social legislation which over the years will have a great impact on the housing needs of this country, and will I am sure bring increased hope to those who, unfortunately, still suffer the stress, burden and frustration of inadequate or congested homes. I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Sorensen.)
§ 4.25 p.m.
§ LORD BROOKE OF CUMNOR
My Lords, we are all grateful to the noble Lord, Lord Sorensen, for his speech introducing this Bill and explaining its provisions. Though I cannot go so far with him in the flattering remarks he made at the end of his speech about its importance and effectiveness, I can give him the assurance which probably at this moment he most wants, that the Opposition will certainly be ready to co-operate in speeding this Bill on to the Statute Book.
It was my concern about housing conditions with which I was familiar when I was an undergraduate that first aroused my interest in politics; and whatever I have done in the political scene since, the fact that large numbers of our fellow citizens are living, and continue to live, in disgraceful conditions has never been far from my thoughts or my political purpose. I hope the noble Lord will not mind my saying that I cannot help feeling grieved at the loss of impetus in the housing programme which has been suffered in these last two and a half years. We had hoped—the Conservative Government had planned, and the Labour Opposition had led us to expect—that whichever Government won the Election there would be a continuance of the rise in the number of new houses completed. I am glad that 563 the noble Lord confirmed the target of 500,000 houses by 1970; but the Government having missed their target in 1965 and 1966, and being certain to miss their target again in 1967, of 400,000 houses—not 500,000—one cannot help feeling sceptical about their ability to reach 500,000 three years hence.
§ LORD SORENSEN
I am sure the noble Lord will agree that there has been a steady increase, and the 486,000 houses built last year in the public and private sectors represents a distinct advance on which we can build for the future.
§ LORD BROOKE OF CUMNOR
The noble Lord said 486,000; the correct figure is 386,000. In fact, when the Conservative Government went out of office there were some 430,000 houses and flats under construction, and only 380,000 of those were completed during the subsequent year, 1965. There is no doubt that if the Labour Government had not forfeited the confidence of the building industry in that year, a figure of 400,000 would have been reached. If the Conservative Government had remained in power the figure would have been 420,000 last year and 440,000 this year. On present housing figures it looks as though by the end of 1967, next Christmas, there will be something like 100,000 families who will be without the homes that they badly need, and who would have had homes if the Conservative Government had remained in power after 1964.
§ LORD KENNET
I am grateful to the noble Lord for yielding. Would he not agree that the number of houses under construction at any moment is a less valid measure of housing progress than the number of houses completed in any given year; and that the number of completions has risen year by year, not only since the present Government took office, but during the latter years of the Conservative Government's tenure of office?
§ LORD BROOKE OF CUMNOR
My Lords, I agree that the number of houses completed is the most important figure of all, and that is why I was surprised by the noble Lord's colleague, the Joint Parliamentary Secretary, taking so much credit recently for the number of houses in Greater London planned but not completed. It is quite true that it is the 564 number of houses completed that matters. But whereas when the Conservative Government went out of office there was a steadily rising trend, that has slowed off, and so far the Government have been able to get little beyond 380,000 completions a year.
§ LORD MITCHISON
Perhaps the noble Lord will allow me to interrupt. Did I not hear him claiming credit for houses which had been planned or promised, and not completed? Surely the right test is completed houses. If the noble Lord wants another test, it should be the same for both Parties.
§ LORD BROOKE OF CUMNOR
My Lords, it would have been the same if people had been wise enough to put a Conservative Government into office. But in fact there has been this loss of impetus, just as in 1951, when a Conservative Government came in, there was a great new surge of impetus which carried the figures forward.
This Bill is, for the Government, a kind of rescue operation, but my sincere hope is that both Parts of it will succeed, and succeed rapidly, in getting more houses built, both in the private sector and in the public sector. Part I embodies an interesting experimental subsidy. We have been trying various kinds of subsidy ever since the Addison subsidy of 1919, and broadly speaking each subsidy Bill has probably been an improvement on the last. I was responsible for one in 1959. But certainly no Government to date could have put its hand on its metaphorical heart and claimed that the subsidy system was perfect. In the old days, before the Labour Party gained power in 1964, their plan (as I understood it) was for artificially low rates of interest to be made available to local authorities for housing purposes, which would have constituted a hidden subsidy. I think this plan in the Bill is both more ingenious and more sound, because this is an open subsidy, and it always seemed to me it would be a weakness if one had some kind of concealed subsidy for housing alongside an open one.
This subsidy is new, experimental and generous, at a time like this when the Government have forced interest rates up so high. Certain questions arise. The former subsidy, which it replaces, was selective in the sense that it gave a 565 higher subsidy to those local authorities with heavier financial burdens on their housing revenue accounts. This new subsidy, as I understand it, has done away with that differential and will be, at any rate for all new houses henceforward, at the same rate regardless of the financial problems of the particular local authority on the housing side. I say "for new houses" because I appreciate that there are special arrangements in the retrospective clauses, and I am not making any criticism of them. I think it was wise to have a retrospective provision in respect of certain local authorities. Retrospectively there is an element of selectivity in it, but not as regards new houses to be built in the future.
The second question which must be asked is this. If this policy of controlled interest rates—assuming I may use that term—is right for housing, why do the Government withhold a similar concession from local authorities which are building schools or colleges or children's homes, or all the other kinds of local authority building for social purposes? What is the logical difference? It appears to be because the Government do not mind being brutal to the ratepayers generally, so long as they are considerate towards one section of the ratepayers; namely, the council tenants. Many council tenants have small incomes—some, very small incomes—and thoroughly deserve assistance, while many of them have quite large household incomes and do not need subsidy at all. We cannot escape the fact that under these generous subsidies, as under previous subsidy schemes, a great deal of money will go to tenants with no need.
I am aware of all the difficulties about differential rent schemes and rent rebate schemes and so on, but so far as I know all Parties in Parliament are now agreed that, ideally, subsidies which we vote here in Parliament should be wisely allocated among tenants so that tenants who receive subsidy do so according to their needs and do not receive subsidy beyond their needs. There are some local authorities which have achieved that. There are some extremely good differential schemes operating now, but I think the noble Lord, Lord Kennet, will confirm that the majority of local authorities do not yet have schemes which achieve that ideal object, and that it would be much 566 better if they did. I understand that a Working Party has been studying this as between the Ministry and the local authority associations. If the noble Lord, Lord Kennet, in winding up, could give us any information about progress there, I think it would be helpful, because all of us who are interested in housing, and certainly all of us in your Lordships' House who are concerned, even formally, with the voting of money for Exchequer subsidies must naturally ask what further action the Government contemplate to secure that all housing authorities adopt sensible rent schemes.
I should like to illustrate this, if I may, by one quotation from a member of the Government speaking in another place. The Joint Parliamentary Secretary, Mr. Mellish, winding up the Third Reading debate on this Bill on March 8, said:This is the best Bill dealing with subsidies ever to be introduced by any Government. Simple figures illustrate that. Today, subsidies are running at £86 million a year. Under the Bill, they go up this year to £100 million, and by 1970 they will rise to £140 million."—[OFFICIAL REPORT, Commons, col. 1711.]I know what was in the Joint Parliamentary-Secretary's mind. He was thinking of the people who were in need, and he felt that more and more Exchequer money was being made available for those who were in need. But of course the fact is that one cannot evaluate the use made of housing subsidies simply by adding up their total amount. We all of us know that it is easy to make money available; it is a far harder task so to allocate that money so that it does the maximum good.
§ LORD MITCHISON
My Lords, would not the noble Lord like to add the last sentence, which he has omitted from the quotation, or shall I add it for him?
§ LORD BROOKE OF CUMNOR
My Lords, I will gladly add it. I will go right to the end. Mr. Mellish added two further sentences:We are determined to give aid to those in genuine need. This is a Bill which even their Lordships will describe as a first-class Bill produced by a first-class Government.If the honourable Member really thought that I should declare this to be a Bill produced by a first-class Government I think his imagination was running riot, but I am grateful to the noble Lord for 567 having invited me to quote the other sentence, when Mr. Mellish said:We are determined to give aid to those in genuine need ".That is just my point. One cannot be certain that one is giving aid to those in genuine need, simply and solely by paying out more money from the Exchequer. Indeed in a sane world where economics were less topsy-turvy it should not be necessary to subsidise the rents of nearly so many people. We do not have to subsidise food and all kinds of other necessities of life, but in this country and, let me say at once, in most other industrialised countries, we have brought ourselves into a situation where it is necessary to pay a subsidy from some source or other in order to make the rents of newly-built, good standard houses or flats within the reach of people who are not well off.
§ LORD BROOKE OF CUMNOR
I forget the exact words I used, but I was seeking to say that we single houses out for very large subsidies from the public purse. I know that we subsidise school meals, and items like that.
§ LORD POPPLEWELL
My Lords, seeing the noble Lord is widening the scope of this debate, would he not put housing subsidies in relation to subsidies to the Cunard Line for building Q4, to various aircraft projects, to agriculture, vast sums of subsidies? Seeing that he is dealing with subsidies, should he not mention also the vast amounts of subsidies given to private enterprise, probably very rightly—I am not complaining—in order to encourage their business?
§ LORD BROOKE OF CUMNOR
My Lords, the noble Lord is possibly imagining that I am seeking to make some nasty Party point here. I am not. I know perfectly well that subsidies are voted by Parliaments, sometimes wisely and sometimes unwisely, for a variety of purposes—in the case of the Cunarder, it was done for national prestige; but we do not, so far as I am aware, subsidise the whole of the shipbuilding industry, and we do not subsidise on this scale anything that I can think of, except agriculture; and in that case it is a subsidy to the farmer rather than to the consumer.
568 I come back to what I was saying, that if we did not live in an economically topsy-turvy world we should be able so to arrange matters that people could, out of their earnings, pay for the roof over their heads in the same way as they can pay for food and all kinds of other necessities and semi-luxuries of life. But, so far as I am aware, no industrial country has managed to solve this problem. Every country has large numbers of people living in what are rightly regarded as sub-standard conditions, and some of them, at any rate, will need new good standard housing. I say "some of them" will need it because others of them will manage to find older housing that will suit them.
But surely noble Lords opposite cannot argue that simply to increase the bill for housing subsidies should be regarded as a good thing in itself, any more than that an increase of the agricultural subsidy bill can be regarded as a good thing in itself. What is a good thing is to relieve need, and therefore the use made of these subsidies must be carefully regarded, and we have all the time to make sure that we are achieving value for money. This is something we know we are not doing over quite a large field in the use of these housing subsidies, as a result of the failure of many local authorities to adopt schemes which ensure that the money goes only to tenants in need, and only so far as they do need it.
Perhaps I may return now, after those interruptions, to the Bill. This seems to me to be essentially a House of Commons Bill. It deals with money matters. It is not the kind of Bill which your Lordships can extensively amend. I am therefore not proposing to go into the financial details; but I have one or two questions of which perhaps the noble Lord, Lord Kennet, would take note. In various places in this Bill we find the use of those somewhat objectionable words "reasonable" and "unreasonable". I well remember the noble Lord, Lord Mitchison, when he was in Opposition and I was the responsible Minister, criticising me whenever I sought to include either of these words in a Bill. We have a provision in Clause 1—it is on line 35 of page 2—relating to the Minister being of opinion thatan unreasonable rate burden will have to be imposed or unreasonably high rents will have to be charged by the authority".569 Can the noble Lord, Lord Kennet, when he replies, tell us what the Minister is likely to regard as reasonable or unreasonable in these matters? So far as I know, we have had no guidance on that, and I do not think any answer was given to that question in another place. But it is very pertinent here, unless we are giving the Minister an arbitrary discretion.
Likewise we have in Clause 3, in relation to the cost yardsticks:what in the opinion of the Minister, having regard to all the circumstances of the case, should be the reasonable and appropriate cost".Can the noble Lord give us any indication (this relates to the future, whereas the other one related to the past) what the Minister is going to regard as the "reasonable and appropriate" cost? I entirely see the necessity for introducing into this new subsidy scheme the concept of the cost yardstick. I hope that it will do something to check those local authorities which, through employing direct labour, have in fact had to spend far more on some of their building schemes than was at first estimated, though I am not sure this plan is entirely watertight even now against them. I should be particularly grateful to the noble Lord if he could tell us whether the Minister has in mind different yardsticks for traditional building and for industrialised building. So far as I know, it is the policy of the present Government, as of their predecessor, to stimulate building by industrialised methods. Indeed, most of us take the view that the target of 500,000 could not possibly be reached otherwise. But industrialised building, at any rate at present, tends to be more expensive, and I think the Government themselves would regret it if the cost yardstick plan were in fact to operate as a disincentive to local authorities to make use of industrialised methods.
I warmly welcome Clause 15, to which the noble Lord, Lord Sorensen, referred, increasing to £15 the subsidy for hostels. I welcome also Clause 12, which grants subsidies for conversions or improvements by housing associations, a clause which, if I remember rightly, was introduced by the Government on the Report stage in another place after pressure from some of my political friends at the Committee stage.
570 My Lords, I turn now to Part II of the Bill, and I welcome the scheme of option mortgages. I also welcome the wisdom of the Government in yielding to persuasion from the building societies that their original scheme for accomplishing their object was unworkable. This is a better plan. I think we all regret, and particularly those who are thinking of getting married within the next 12 months, the delay until April, 1968, on which the Government are insisting before this new scheme of option mortagages comes into operation. I regret, too, what appears to be the indefinite postponement of the guarantee scheme under Clause 30. The Government are taking the requisite powers in this Bill, but clearly none of us can count on that scheme being in operation by any given time. I am very glad that the option mortgage plan is to extend to co-ownership schemes, although I would suspect that these new concessions are likely to kill the cost-rent schemes. They do not appear to me to gain anything from any part of this Bill and cost-rent will seem henceforward to be, by comparison, expensive.
There is, of course, nothing here about the 3 per cent. mortgages which we heard all about from the Foreign Secretary in Election days. It seems a long time since the present Prime Minister, speaking at Sittingbourne in 1963, said:By intelligent monetary policies, Labour will bring mortgages within the reach of young couples on average incomes.Their intelligent monetary polices have landed us with a 7 per cent. bank rate for a longer time in the first 2½ years of Labour Government than during the whole 13 years of Conservative Government. This Bill is brought in against a background of a 7⅛ per cent. mortgage rate, compared with a 6 per cent. rate when the Conservative Government were in power. Since then, of course, building costs also have gone up. They have been further increased by the selective employment tax. I simply cannot conceive why the former Minister of Housing, Mr. Crossman, agreed to the Chancellor of the Exchequer introducing that into his Budget and applying it to building work. I can only imagine he received no warning from the Chancellor at all as to what he was proposing to do. It has been calculated that the selective employment tax alone adds £150 to the 571 price of a £3,000-house, and all that has to be set off against any reduction in interest rates which this Bill will secure.
I said at the beginning that it is the number of new houses built that matters more than anything else. The noble Lord, Lord Sorensen, confirmed not only the Government's target of 500,000 houses by 1970, but also the Government's hope that they would be divided, roughly equally, between private sector and public authority building. He said that private enterprise building was unpredictable. Private enterprise building in fact is very predictable, provided the Government continue to deserve the confidence of the private builders. I can tell him that this Government will only achieve their target on the private enterprise side, and I think on the other side too, if they gain and keep the confidence of the building industry. I am not saying that everything was perfect while the Conservative Housing Ministers were in power. But the Conservative Government did achieve that; they did throughout the years secure and retain the confidence of the building industry, and I do urge upon present Ministers that they should not regard that as something they can play about with.
In our time, in those 13 years, house ownership went up from roughly 31 per cent. to 47 per cent. of all the families in the country. The number of houses built by private builders in 1966 was 13,000 lower than in 1964. We shall watch with keen interest to see whether that shortfall is now quickly made good, and more than made good, because if option mortgages are not to drive up prices by upsetting the equation of supply and demand many more houses must be built for sale. Otherwise, nothing is gained for the people who are wanting mortgages by lowering the cost of the mortgage to them; if that simply increases the demand, and if the supply of houses is not correspondingly raised, house prices will go up.
May I ask what is the Government's attitude to the scheme which I initiated, and which was a great success, while it lasted, of making Exchequer advances to building societies to assist them to grant 95 per cent. mortgages for older houses? That went extremely well; nearly the whole of the £100 million was taken up. 572 It has never been revived. I appreciate that there is a danger in this scheme, because if it was brought in at the wrong time it could force up house prices. At the same time, building societies are generally less anxious to lend on these old, smaller properties than on new houses. I should like to be assured by the Government that they have the purchase of old houses in mind no less than the purchase of new houses, and that if conditions seem appropriate they will reactivate that scheme.
We are dealing with a Housing Subsidies Bill, and it is not the occasion for an extensive debate over the whole field of housing, but perhaps the noble Lord, Lord Kennet, will allow me to ask one or two questions on matters essential to an integrated housing policy. I have said the building of new houses is the most important test of all, but the modernisation of older houses is, in our present circumstances in this country, nearly as important. Of course, when older houses pass into owner-occupation, modernisation normally gets done, and that was one of the virtues of the £100 million scheme for assisting the purchase of older houses. May I ask the noble Lord if the Government are satisfied with the progress of modernisation? Let me say at once, I was never satisfied with it all the time I was Minister. I took various steps to speed it up. They all had some effect, but even yet it seems to me we have not got powerful enough instruments to bring about the rapid conversion and modernisation of all the older houses in this country—houses such as none of us would wish our daughters or daughters-in-law to move into when they get married because of the lack of modern amenities.
Secondly, are the Government satisfied that the powers under the 1961 and 1964 Acts to deal with bad management of houses in multi-occupation are effective? I hope they are. I was responsible for the original powers in 1961. That was an experiment, like Part I of this Bill, and I am well aware you do not always get an experiment right first time; it was necessary to tighten them up in certain respects in the 1964 Act. I am asking these questions simply because this might be the only time for some months when we shall have the opportunity to debate housing here. It would be a pity if 573 we were to speak as if those topics specifically included in this Bill were the only ones which should be of interest to the Minister and your Lordships in developing our housing policy. My Lords, I conclude as I began. This is a useful Bill. By common consent it was considerably improved in the course of its passage through another place, and we on this side of the House will do all in our power to speed it on to the Statute Book.
§ 4.58 p.m.
§ LORD SILKIN
My Lords, may I begin by saying that I infinitely preferred the ending of Lord Brooke of Cumnor's speech to the beginning. He began by the usual wrangle about the defects of the present Government, and how much they were below their forecasts. He made a speech which was almost identical in terms to the speech which his opposite number made in another place—he might almost have read out what his opposite number said on that occasion. It was rather surprising that he should have done so, because in his later remarks he indicated the source of his interest in housing. He mentioned that even as a young man he had become very much concerned about housing conditions of the people, and had retained that interest ever since. Just to match that, may I say that my own interest in housing began when I was first born, because for a great many years of my early life I lived in the sort of house that we are trying now to improve or to get rid of. I am quite familiar with the slum dwelling, and therefore both the noble Lord and I have a common interest in the housing problem.
I pay full tribute to the noble Lord's sincerity in trying to deal with the housing question, and it is a great pity that one should start off by treating this as a purely political matter, with this rancour about "You said 400,000: you have built only 383,000." If the noble Lord were quite sincere he would pay tribute to the fact that this is the highest number of dwellings that has ever been erected in one year in the history of this country. Surely that is something about which we can feel proud.
But is this not all shadow boxing? The number of houses that are built in any one year by a Government is a complete misnomer. The Government do not build houses at all; it is the local 574 authority. The Government can only inspire or encourage local authorities to build more, and the method of doing it is by providing a greater financial inducement. This Government are hoping, just as previous Governments have hoped, that by greater financial inducements, they can get an increase in the number of houses built. The noble Lord said that the numbers of houses are all important. Of course they are important, but they are not all important. I think far more important is the kind of houses that are built, where they are built, and whether they satisfy the needs of the people whom we want to help.
The noble Lord said that the amount of subsidy was irrelevant as compared with those who received the benefit of it. He was anxious that those who most needed the subsidy should get the benefit of it. I completely agree with him: I agreed with the whole of that part of his speech. But he must also recognise that mere numbers of houses are not by themselves significant. If you were to build all your houses in Eastbourne and Bournemouth and the southern seaside resorts, and ignore the East End of London, you would not be going far towards meeting the problem. To a great extent, when you count numbers, that is what has been done in the past.
One of the things that worries me—I am going rather wider than the Bill itself—is that our machinery for building houses by public enterprise is really not the most efficient or satisfactory. Nobody would dream of devising a scheme for building houses that are most needed in this country by appointing 1,400 agencies, local authorities of varying sizes, large and small, efficient and inefficient, those amply supplied with finance and those not, each of them with the responsibility for providing houses. I am very glad that a Royal Commission are sitting, which I hope will drastically reduce the number of local authorities with housing powers. I am sure that if they do so, it will make for greater efficiency.
I wish also that it were possible to have some kind of subsidy which would distinguish between houses which are being built in areas where housing is most needed as against those in areas where it is less urgently needed. I recognise that the Government have made 575 a beginning by some kind of discrimination, by selecting a number of authorities where the subsidy will begin earlier than it would otherwise. That, at any rate, is an acceptance of the idea, but I hope it may be possible to go further.
May I say a word about targets? The noble Lord, Lord Sorensen, referred to a target one day of half a million houses. May I say that throughout our housing history we have underestimated our housing demands. I do not want to analyse deeply the figures which the noble Lord himself gave, but I could quite easily demonstrate to him that he has underestimated our housing requirements, and if we are successful even in building 500,000 houses a year, all we shall be doing is to stand still: we shall not be improving our housing conditions. Even if we go on for the next ten years building 500,000 houses a year (I shall not be here to see the conclusion of it, so it is easy for me to prophesy), I am quite certain that, on the facts as we know them at the present time, on the forecasts that have been given officially, 500,000 houses a year will not be adequate to meet all our requirements and to improve conditions. But at least let us get on with the 500,000.
§ LORD COOPER OF STOCKTON HEATH
My Lords, would the noble Lord give way while I make a point? While I agree with him that targets are not wise, would he not agree that the capacity to build houses depends ultimately upon the whole of our investment programme, and housing itself must share part of the overall investment? This is the speed at which, in practice, we can work.
§ LORD SILKIN
My Lords, certainly I would agree with that. But I do not think we ought to be too complacent about these targets, because never in the past have our targets been high enough, and I see no reason why they should be more successful in the future.
There is one other factor that I wish to deal with, though I do not think the noble Lord himself touched on it. I agree to a great extent with what he said on the question of subsidy. We are dividing into two sections those of the population who are obliged to live in rented houses. If you are lucky enough 576 to get a council dwelling or a dwelling with a housing association, you get an enormous subsidy from the Government. It is perhaps £2, or it might even be £3, a week in subsidy. If you are living in an expensive flat and are not fortunate enough to get a dwelling from a local authority, even though you are compelled to live in rented accommodation, you get nothing. Yet in many cases the people who are living in rented accommodation are no better off than those who have council accommodation.
Is there not some way in which the Government can help those who are compelled to live in privately-owned rented accommodation? Have the Government even considered that problem? Because at the moment there are far more people living in privately-owned rented accommodation of a completely unsatisfactory nature and who are paying enormous sums by way of rent than there are in council rented accommodation. I know that the Rent Act is intended to bite to a certain extent. There are limits to the rent a person can be forced to pay if he has the knowledge and the courage to take advantage of his rights, but nevertheless there is this vast difference between the privately rented house and the council rented house, and very often it is a matter of chance as to whether you get local authority accommodation.
I should like now to say a few words about mortgages. The option mortgage is no doubt a satisfactory method, I suppose the best the Government could devise, of putting the person who gets no relief from income tax because his income is too low in the same position as the person who gets the full advantage. But the position of a person who has to exercise the option is a very difficult one. These are people with low incomes who have no advice accessible to them and who have to decide, at the time of taking a mortgage, whether they will take advantage of the scheme. Look at the imponderables they have to consider, if they are in a position to consider them. First of all, they have to consider what is the likely rate of interest. At the moment, with interest rates as high as they are, it may pay them to take advantage of the scheme. If interest rates go down, it is another matter; they get no benefit beyond any interest above 4 per cent., 2 per cent. being the maximum. In normal times the rate of 577 interest of 5 per cent. may be appropriate. In that case all they would get is 1 per cent.
They have to weigh this up once and for all. At the moment they are not paying income tax because their income is low, and they have to weigh up their prospects of having to pay income tax in the future. They even have to try to fathom what is in the mind of the Chancellor of the Exchequer as to what will be the rate of income tax in the future, and whether it will increase or decrease. A man is being asked to decide all these matters at the time of taking a mortgage. He is being asked to decide once and for all, and he must make his choice. This choice may last, if he is in occupation for that time, for 25 years with no chance of changing it. I wonder why the Government are so insistent that, having made the choice, it is to be a choice once and for all, and that the man is not able to change his mind when his own circumstances or general circumstances have changed. I can see no great harm that would come to the scheme or to anything else if he were permitted to change his mind.
I was under the impression that a scheme was to be introduced which would shield people who could least afford it from the high rate of interest charges. At the moment, as the noble Lord, Lord Brooke of Cumnor, said, people are paying 7⅛ per cent. and they are committed to that rate for the duration of their mortgage. Those people who get income tax relief in respect of their payments of interest are getting no other relief in respect of the high interest rates. I hope interest rates generally will come down, but there is no guarantee of that if they have borrowed their money from a building society. All they can do, if they are fortunate enough to be able to manage it, is to pay off the building society and reborrow elsewhere. But that is a rather costly procedure and is not very satisfactory. You have to pay a redemption fee; then you have to find another mortgage and pay their fees again; then there is a fresh survey, fresh legal costs, and so on. It is not an entirely inexpensive matter to change your mortgage, but it is all that is available to a person who may be committed for 25 years to a mortgage at a rate of 7⅛ per cent.
578 I was hoping that the Government would have found some way of giving relief to those people who are forced to pay these high rates of interest. It is true that they are receiving some benefit from income tax relief on their payments, but it is nothing compared with the subsidy that would have been payable if they were living in a rented house. The nation is being paid the cost of this subsidy in the case of people who are buying their own houses. It is impossible to do so under this Bill, but I hope that the Government will give further consideration to the possibility of giving help to such people who in many cases are just as worthy as are the potential tenants of local authority houses. As the noble Lord, Lord Brooke of Cumnor said, it is difficult to talk about the financial aspects of this Bill in any detail because this House is not primarily concerned with these financial matters. I hope that we can suggest a number of ways in which the Bill might be improved in Committee.
I join with the noble Lord in welcoming this Bill. In fact the noble Lord welcomed the Bill rather more warmly than did some of his colleagues in another place. Their welcome was rather cool and unenthusiastic. I think the noble Lord was rather more enthusiastic. I think he is quite right, for this is a good Bill. I agree with the words of Mr. Mellish in another place (I am not sure if I may use his name) that this is one of the most far-reaching housing measures we have had in our day. I hope it will meet with great success, but that does not mean that we shall not be able to improve it as we go along.
§ 5.17 p.m.
My Lords, I have never been one to indulge in the older Parliamentary game of, "We built X; we will build Y" and vice versa, because it is the builders who build houses and not local authorities, as the noble Lord, Lord Silkin, said. Builders operate according to the economic climate of the day. The economic climate has not been very good of late. I personally welcome the squeeze. I think it is the one good service this Government have performed in the whole time they have been in office. It is regrettable, however, that the effect of the squeeze should have borne so hard on housing. It could have been avoided by proper arrangements 579 with the banks for bridging loans, and to a large extent housing should have been allowed to opt out of the squeeze. In the debate in which I took part last year, I asked the Government what were the views of the Chancellor of the Exchequer on these matters, and I got no reply.
By increasing subsidies this Bill, to my mind, illustrates the general malaise of the whole building situation. To have subsidies at all is bad enough, but to have to increase them is worse. Building costs are an integral part of the overhead charges on our nation, and too high costs are visited on our economy unto the third and fourth generations. I am more familiar with the field of housing which deals with the provision of single, custom-built houses for the Church of England, and I know that the price of those has gone up by at least 50 per cent. in the last five or six years. Here there is no question of land prices at all; the land belongs to us. I am referring to the plain, simple building costs.
Knowing very little about local authority tenders, I looked them up this morning and, expecting to find that the prices for local authority tenders had risen much less, I was very disagreeably surprised to find that between 1960 and the second quarter of 1966—and that is not by any means the latest price—prices had gone up by approximately 60 per cent.; that is, from £1,615 to £2,672. Then one must add site costs and the like, so that the cheapest three-bedroomed house is to-day costing something like £3,500 if one includes the extra cost imposed by the S.E.T.et cetera.
I understand that the United Nations suggest that 20 per cent. of income should be available for housing. That is a very low figure and, in some cases, the building societies go up to a third. But if one takes 25 per cent. of income as available to finance house purchase, one gets to the situation where a man with the average industrial earnings of £1,000 a year can just afford a house costing £3,500 or thereabouts, although it is by no means sure that, at any rate in the Home Counties, he can obtain a dwelling at that price. When we turn to renting the position is still worse. I imagine that a renter would consider that anything under a 10 per cent. return on the cost of his money and repairs would be 580 grossly uneconomic. But 10 per cent. on £3,500 comes to approximately £7 a week, and that is on a cheap, three-bedroomed house to be built to-day.
This appalling cost of building has been recognised as an increasing burden for some time. It was hoped that calling on industry to make the mass-produced house would be a remedy, but apparently these houses cost more than the others. Why is that, and why is building so expensive in general? No one seems to know. There are so many possible explanations. Management may be incompetent, but our biggest firms obtain huge contracts overseas against international competition. The components may be too dear, and possibly there is not enough standardisation. One does not know. Labour may be incompetent, so are our training facilities adequate and is the number of new entrants to the journeyman trades sufficient? Men may be badly deployed or idle. We know that money is dear, but how can we expect otherwise when consumption based on hire-purchase is so high and savings are so low? It is a question of supply and demand.
If all these factors are ruled out as possible causes of the malaise, then we have to resign ourselves to other alternatives, other theses, the curing of which may be much more intractable. We might have to say that our ideas about the proportion of income which is regarded as rightly available to provide shelter are too low. We might have to say that industrial wages are still too low. But how are we to export if they go much higher? We might have to say that the standard of houses is too high, but everybody in the country would recoil from such a suggestion. I should prefer the first lot of possible explanations to be investigated, including the way in which the building industry is used.
The other day my noble friend Lord Eccles made what I think was the best speech on education which I have ever heard in this House. He emphasised that the art of Government was the art of priorities, and he said that in the educational field it was quite impossible to do all the things which in the eyes of most educationists were vitally necessary. He said that such a situation had always existed and, indeed, always would exist. I believe that far too much building 581 work has been attempted, and there has not been a sufficient emphasis on priorities. Housing should have a much higher positive priority than it has had over the last few years. For instance, the Offices, Shops and Railway Premises Act, however necessary it might be to get rid of slum offices, et cetera, could well have been postponed. A great deal of local authority building is very desirable, but it could well have been postponed. I doubt whether, in comparison with housing, the provision of many new universities could really be justified on a priority basis.
The fact is that the whole building industry has been overloaded, but, as the Economist has stated in another context, it is just playing into the hands of the monopoly bargaining power of the trade unions if one overloads the economy. Then, I think it is time there was another inquiry into the whole economics and deployment of the building industry, from the component factories to the finished house. At the moment, huge volumes of Government and local authority work are making it easy for people to pay more and more money. Wage rates go up every year, and we do not know very much about how the earnings go up. If some of the rumours one hears are correct, then some of the contractors are paying very much higher than the normal wages in order to entice men into their employ and away from their competitors.
To subsidise housing at large is obviously quite uneconomic. In many cases, one is merely subsidising the motor industry; the lower the rent the larger the car can be. But so long as politics are politics the battle cry, "If the Tories get in your rents will go up" is an absolute sure winner, and the Labour Party has recognised that for many years. Proper rent rebate schemes have the effect of diverting subsidies to those who need them most. But of course this could be achieved in other ways; that is not the only method. But how many proper rent rebate schemes are being operated in this country at the moment?
To turn for one second to the Bill itself, Clause 12, which covers subsidies to the housing associations, seems to be one of the best provisions in the Bill. Even with the subsidy, I think that most of these tenants will be paying a very sub 582 stantial rent; probably far higher than local authority rentings, or more than purchase through a building society would cost. This seems to me the only hope, outside local authority housing, of providing rented accommodation; and there are many people in this country for whom it is highly inconvenient to have to buy a house—people whose jobs tend to shift from place to place.
It ought to be possible for houses to be provided by mass-production techniques at prices which can be afforded even by those who are slightly below the industrial average wage, and to do this without a subsidy. But it might entail a considerable shake-up in the tradition and practice of the deployment of the building industry. Something ought to be done. The Government's steps seem to be higher subsidies, higher taxes, selective employment tax and Land Commission tax on land. All these things seem to be steps towards higher housing costs. The Government claim all sorts of credits and responsibilities towards building. It is time they got down to reducing the costs.
§ 5.30 p.m.
§ LORD MITCHISON
My Lords, it is expedient to be short. I found the noble Lord, Lord Brooke of Cumnor, in his most enchanting form. He always reminds me of Dr. Jekyll and Mr. Hyde. This time, if he does not mind my saying so, he was more Dr. Jekyll and Mr. Hyde than ever. We began with pure Dr. Jekyll; that is, with a little bit about his enthusiasm for and interest in housing, which I entirely accept. I may have heard it before, but I do not mind how often he says it, because I think it is really good Dr. Jekyll. Then we had a terrible bit of Mr. Hyde about the housing record of the two Governments. Really, with great respect this is sheer nonsense. One has only to look at the table on page 6 of the White Paper, The Housing Programme, 1965 to 1970, which is conveniently printed in connection with this Bill.
It is quite a simple story. What happened was this. There was indeed a surge in 1951—the noble Lord, Lord Brooke of Cumnor, is quite entitled to claim that—but it stopped in 1954. I am looking at the "All Dwellings" figures. They then fell, they continued to fall for a number of years and then ran roughly 583 level until just before the 1964 Election, when they mounted up again. That was when we were promised or offered all kinds of things that might happen in the future. I prefer the test of the noble Lord, Lord Brooke of Cumnor—that of the number of completed dwellings. When one looks at the rest of this table, one sees something even more significant. While this was going on, the "Private Sector" housing roughly—quite roughly—followed the curve of the "All Dwellings"; but what fell, and fell sharply, under Tory Governments was the proportion of buildings put up at the instance of public authorities. That proportion had been a great deal higher, but in 1958 it fell below, and has since remained below, at any rate until quite lately, the figure of private buildings.
The reason why it ought not to have fallen is not due to any metaphysical question as between public and private building. Both are done by the hands, and on the immediate orders of builders by trade. It is not due to that at all. It is due to the fact that the real shortage during those years was the shortage of dwellings to let; and of course one of the things the Tory Governments did when they came in after 1951 was to start using fiscal methods in a way in which they had not been used by the Labour Government. How well I remember the constant entreaties to them not to go on pushing interest rates up high because it was so hard on local authorities! This was said time and time again; and local authorities who, under the post-war Labour Governments, had been able to borrow at round about 3 per cent. were cramped, and cramped almost to a stop, by the interest rates that the Tory Governments introduced as what they thought was the right weapon in the national economy.
My Lords, I am not going into the question, but that is what happened at the time; and the result was that their building was cramped, and they were unable to provide houses to let to ordinary working folk at rents they could afford to pay. Private enterprise did not do it; it was perhaps unable to do it, but it certainly did not do it. What private enterprise did was to build houses for sale. This is all comparatively ancient history. It is notorious by now; there can be no doubt about it. It makes me 584 laugh to hear Tory Members getting up now and saying that the drive has gone out of the housing programme, when a record number of houses was built last year; and saying, "You have done terribly badly, because, instead of building 400,000, you found that the debt that we, the Tories, had bequeathed to you overseas was so large that you could manage only 385,000".
§ LORD BROOKE OF CUMNOR
My Lords, perhaps the noble Lord will explain how he squares his argument about the impetus going out of the programme with the fact that in 1964 total completions rose by 75,000, whereas in the two years following that they rose by only 12,000.
§ LORD MITCHISON
I have given the noble Lord an answer, but I think he got up too quickly to hear it. The trouble was that when we came in we had to meet an overseas debt bequeathed by the extravagance of the previous Government. That was the difficulty; and surely he has not forgotten the figure. Some people say £700 million, others say £900 million. I am not arguing as between one and the other—it depends exactly how you put it—but the answer is clear enough. The squeeze, which is the only thing in the whole programme of the Labour Government which appeals to his poor noble friend behind him, is the result of just that; and surely the noble Lord knows it. Has he been living in this country since then without realising (a) that there was a squeeze; (b) that it was unlikely to result from the malevolence of any particular Government and therefore had some other cause; and (c) that the cause was clearly obvious—the overseas debt left at the end by the Tory Government? Does the noble Lord wish to interrupt again?
§ LORD BROOKE OF CUMNOR
My Lords, it is good of the noble Lord to sit down. If he wants to pursue this argument, he must explain why, when the Labour Government fell in 1951, having created a far greater financial crisis, the Conservative Government had within two years put up the rate of house building by 100,000 houses a year.
§ LORD MITCHISON
It is 16 years ago, but the reason was that they thought their only chance politically was to increase the housing programme, which I 585 entirely agree badly needed increasing. I share the noble Lord's own view, and the views of my noble friend Lord Silkin, that the housing programme has been consistently too small all the time; but it is a question of what can be afforded and what can be allocated to that purpose as against other equally urgent purposes.
My Lords, I welcome this Bill, and I do it without any reservation at all—and that is not just because I have been a member of the Labour Party for a long time. In my view, the Government have hit the right device for dealing with the subsidy to local authorities. What in fact is being done is to carry out in a rather different form the promise that local authorities should have money for housing at a cheaper rate than the normal rate, if the normal rate was too high, and for this purpose the rate of 4 per cent. has been taken as the reasonable rate to pay. I think it is about right. It is of course a question of judgment; and it will result, as is shown by the figures quoted by the noble Lord, Lord Brooke of Cumnor, in a very large increase in the assistance given to local authorities over housing. That, too, I think is right. The trouble has been that the expenses of local authorities, including the cost of house-building, and including the price of land, have gone up very considerably in recent years. There clearly was a moment—and I think this was it—when something had to he done to help them meet their housing obligations. I welcome that action wholeheartedly.
Secondly, in relation to local authorities there is one other point I should like to mention. I do not agree with noble Lords opposite who say that housing subsidies should be directed only to cases of need, for the simple reason that you just cannot do it. If you are going to do it, you are going to have to direct, through legislation from Whitehall, what are the cases of need. This is exactly the sort of question that ought to be left, and is left, to local authorities. But I welcome the arrangements that are being made at present about rent rebates. Many years ago when the noble Lord, Lord Brooke of Cumnor, was chairman of the Central Advisory Committee (I think it was called) of the Ministry of Housing, before he took office, indeed I think before he came into Parliament, he chaired a Committee which recommended, and rightly, 586 that rent rebates really are a matter for the local authorities themselves. Neither he nor I would deny that there is also a case for the Government giving a lead about it.
There is one other point which I hope—which I am sure—will be borne in mind. It is that this matter of rent rebates is very different from a differential rent scheme. Differential rent schemes will not work. The reason is that people change not only their houses but their occupations and incomes. You cannot in practice keep up with what is going on. It is the biggest provider of neighbourly tittle-tattle that any kind of scheme has been, and has been proved so by experience. Rent rebates, where the tenant is obliged to show that he cannot afford to pay a normal council rent, are, I think, right in present circumstances.
My Lords, I turn now to say a word or two about the option scheme—I forget the precise title. Let us call it the option scheme and the guarantees. I too, share the regret—I think one cannot help doing it—that these things are being delayed: the option arrangements for a year or thereabouts, and the guarantees to a date to be announced later. But this is a question of what one can afford. It was put as that quite clearly in another place, and I should have thought it was quite obviously so. If one has to choose which comes into operation first, then I think it is right to bring the local authorities in for the moment. If noble Lords will look at the Financial Memorandum, the position is that the costs to the Government of both Part I and Part II are roughly the same to begin with, although they alter a little later. But, broadly speaking, the Part has been chosen which has to be chosen at present as the most urgent. I think it would have been impossible to have brought the other in and to have postponed the local authority arrangements.
The option scheme does not seem to me to be quite as difficult to understand as my noble friend Lord Silkin thought everybody would find it. The man who is going to take out a mortgage must choose between the two things. It is open to him to follow Punch's advice to those about to marry and not to take a mortgage. But, if he is to take it, there is a pretty clear table at the end 587 of the White Paper which shows the comparative effect of the two things over 25 years. I should have thought the broad advice is that people who pay the standard rate might well be content with their income tax benefits, while those who pay less than the standard rate of tax ought to think seriously about taking the bird in hand in the shape of the option scheme. This would not lead many people wrong. I do not suppose that everybody in this country always gets the full advantage that he could have got out of any benefit from public funds if only he had had a bit of hindsight. It seems to me that these two schemes are about as clear as you can make a complicated matter of this sort. One must remember that they are schemes to be worked in conjunction with the building societies. I would not accept that either the Government or the building societies dictated to one another over it. It is a clear case for taking a scheme which can be worked. I do not regard it as unnecessarily complicated.
My Lords, to sum up—and I hope I have not been too long—I think the Government have hit on the right method of subsidy. It is more elastic than the old one; and Lord Brooke of Cumnor's subsidies of £8 and £24 drew a sharp line at one particular point. I do not think they worked very well. I think also that the rise in the cost of land and building since then has made those sums of money inadequate. I hope that Dr. Jekyll will agree with me that on the whole this is a pretty good solution of a rather difficult problem. It is one of several solutions. One of them was the Rent Act, which I think was remarkably good; the other is this Bill about housing subsidies—not bad; pretty good, in fact.
My Lords, so much for that side of the Bill. As for the private side, it is obviously hard to tell how this is going to work out; and a certain amount of water will have to flow under the bridge between now and the time when it comes into operation. There is a budget coming on in a few weeks' time and there will be another before the first of these two schemes comes into operation. So one can say no more than that the solution is right; it looks workable. It looks the kind of thing which might encourage not so much the builders as the developers 588 to get on with more private building than they have chosen to get on with in the past.
I do not believe in the theory that builders or developers sit back and say to one another, "This is a horrid Government; we are not going to build." What they do is to look to see what they can make out of it. I think that this will help them in that respect. I recognise that they have had their difficulties. I recognise with the noble Lord, Lord Hawke, that the building industry badly needs looking at; that it is not as good as it might be. I think this Bill is a step in the right direction. Therefore, without any reservations at all so far as I am concerned, I welcome this Bill as a pretty good one, the best, I think in the field of housing finance that we have had for many years.
§ 5.48 p.m.
§ LORD ST. HELENS
My Lords, I should like to say at the outset that I too welcome this Bill, so far as it goes, and that, like your Lordships, I have read the Hansard of the debates in the House of Commons where the Bill was dealt with in great detail. I should like also to thank the noble Lord, Lord Sorensen, for his extremely painstaking and lucid description of the Bill in your Lordships' House this afternoon. I must say that I was amused when listening to the dialogue between my noble friend Lord Brooke of Cumnor and the noble Lord, Lord Mitchison. It took me back many years to when this used to go in the House of Commons. I thought my noble friend was absolutely right, if I may say so, in calling attention to the failures that form the background to this Bill.
It is true that the Government, in two successive years, have failed each time to reach their much-proclaimed housing target by about 20,000 houses; and this fact deserves to have attention called to it. It is not just a question of bricks and mortar; it is also a question of extreme disappointment and misery among people who had expected to get the houses that the Government had promised they would have. It is also a question of rising cost and increased rates of interest. I think it is right that attention should be drawn to these factors as it was in the House of Commons. I said that I welcome this Bill, so far as it goes, but, of course, it 589 does not by a long chalk go the whole way. It does not help the homeless, or the very poor, or those people who are living in the squalor of the slums.
My Lords, I have one or two general criticisms of the Bill—general because, as my noble friend Lord Brooke of Cumnor, said, this is really a House of Commons Bill and we do not need to go into all the financial implications. I feel that the Government are going through something of a crisis of leadership specifically in relation to the squeeze, mention of which by my noble friend Lord Hawke I very much welcomed. When I was a young man I was told that if you wanted to be a leader it was no good pointing the way, telling people what to do and then doing something completely different yourself. I was brought up to believe that if you wanted to be a leader, you explained to people what you wanted them to do and then you said to them, "Follow me", and showed by your own example how it should be done. This is specifically what the Government have not done.
The Government have instituted a crippling squeeze on the private sector of the industry and the country, but at the same time the Government are setting an appalling example by increasing their own public expenditure to the tune of £660 million. I will not continue on this aspect, because I gather from the newspapers that we are likely to debate the matter some time very shortly after the Budget Statement; but I feel that a Government who make others economise and then spend more themselves will very shortly lose the respect of the community; and this is precisely what the Government are doing in respect of this Bill.
I do not criticise the Bill, but I most emphatically criticise the timing, because under this Bill the Government are proposing to spend a great deal more money—we had the figures given earlier—at a time when they are squeezing the private economy; and, frankly, such action finds no support from me. There has been a talk about overall subsidies. I feel strongly about this matter, though possibly not many people will agree with me. I believe that if you subsidise things you will always waste your money. The only way to use subsidies economically is to concentrate them where the need is 590 greatest; and you can do that, not by subsidising things but by subsidising people. This view is, I know, anathema to a Socialist Government, so I will not even bother to expound the argument.
§ LORD MITCHISON
My Lords, may I point out to the noble Lord that this Government, to do them justice have, like his own, done a great deal in the way of national insurance. Is not that subsidising people?
§ LORD ST. HELENS
Fair enough, my Lords. I am not saying that everything is black or that everything is white. On the other hand, in relation to housing the Labour Party have given massive subsidies which I believe, under a different system, might much better have gone to the occupants of the houses.
My Lords, mention was made earlier—I cannot remember by whom—of what happens to private landlords. We all know, unfortunately, that a former Minister of Housing has expressed a natural prejudice against the private landlord—indeed, much of the legislation which has been passed by this Government lately seems to me either designed to discourage or entirely to ignore the private landlord. I think the Government would do well to remember the examples provided by Europe, America and other countries, where the private landlord is looked on with extreme favour and is asked to co-operate as much as he can in housing schemes. I would remind the Government of the debate we had on the Milner Holland Report. Milner Holland said that one-third of the dwellings in London contain two-fifths of the population. It may be a political dogma not to like the private landlord, but I should have said it was wholly impractical riot to seek the closest possible co-operation with the private landlord. Unless that is done, there will be a large fall in the number of houses for renting. It seems to me that the Government are trying to place nearly the whole of the burden of providing rented housing on State building and not on private landlords.
Turning briefly to Part II of the Bill, I strongly support the mortgage option scheme but I cannot understand why, if subsidies to the local authorities are being ante-dated to November, 1965, the mortgage option should be post-dated to April, 1968. It seems to me that this is a rather 591 illogical action by a Government who proclaim themselves so much in favour of home ownership. I think it must be extremely frustrating, as was said by my noble friend Lord Brooke of Cumnor, to young people, who are getting married, and hoping to bring up a family, to have to wait until April, 1968, before they can obtain their mortgage, or before they can secure the loan included in the mortgage to help them pay their deposit. For young people who are setting up, or hoping to set up, a home, the great stumbling block is nearly always finding the deposit. Anyone who has been a member of Parliament for a poor constituency will remember how onerous was the task of interviewing young people who wanted help in getting a home, and, after asking them how much they had for a deposit, having to tell them, "I am sorry, but there is no hope unless you can raise a deposit".
Those Members of your Lordships' House who spoke at Election meetings during the 1966 Election will recall the enormous vote-catcher which the document circulated by the Ministry of Housing proved to be when it hinted at 100 per cent. mortgage rates immediately after the Election. It was a very strong vote-catcher, and I deeply and bitterly regret that this help with deposits will not be forthcoming until April, 1968, which is too far ahead.
My Lords, I said that I welcome the Bill, so far as it goes. I should have liked it to go further. I wish to conclude with a plea for good public relations in this matter, so that people may know what is available for them in the provisions of this Bill. So often I used to find that people were ignorant of the resources and facilities available to them. The fact that this might have been technically their own fault gave them no satisfaction or consolation whatsoever. I feel that in this Bill the Government have taken steps, if not to the extent that I should have liked, to improve the conditions of people. I hope that they will follow it up by making quite certain that the people are informed by every possible means of the resources that are available to them.
§ 5.59 p.m.
§ LORD POPPLEWELL
My Lords, I am very interested in the trend which this debate has taken. There have been three 592 speakers from the Benches opposite and all of them professed to give a welcome to the Bill. But the observations in at any rate two of these speeches seemed to be a condemnation of the principle of subsidies within the Bill. The noble Lord, Lord Hawke, differed somewhat from his colleagues in this respect. I could not help reflecting that the Opposition are facing a large number of difficulties. Noble Lords opposite realise that this is the natural sequence of events in dealing with housing over a period of years, and they are annoyed that they themselves did not take a similar line on both private and council house development. They dare not oppose the principle of the Bill, but they have done their level best to condemn the Government for their record and their line of approach. In my opinion, the present line of development is a modern approach to supplying the social needs arising from the past.
It was the late Lord Addison, father of my noble friend Lord Addison, who brought about the first big change in the housing situation of this country. His 1919 Act, which dealt with the housing shortage created by the First World War, adopted the principle of giving subsidies for rented houses, assistance being given by both the central Government and local authorities. From that time onwards this principle, with some modification, has remained the basis of our housing legislation. Lord Addison's aim was to provide houses at a reasonable rent for the working-class population. The Wheatley Act of 1924 gave more generous subsidies on a rather different basis, but also laid down a higher standard of housing than the 1919 Act. Many houses were built by local authorities under the Wheatley Act. I remember taking a major part in my own local authority in seeing that houses were built under that Act. They were chiefly to meet the needs of the normal growth of population and to provide better accommodation.
The Statute Book is littered with Acts of Parliament dealing with housing since 1919, and I have no intention of mentioning them all. The Chamberlain Act, because of the complexion of the Government, had a different line of approach. It gave a subsidy of £100 to the private builder for every house he built—one of the terms now pressed by the noble Lord, 593 Lord St. Helens, to encourage the private house-builder. That Act was not very successful. In 1931 we saw another great change in the approach to housing, with the new slum clearance provisions. I remember sponsoring one of the first schemes under the 1931 Act, under which, instead of a subsidy being given per house built, it was given according to the number of persons rehoused. That Act is known as the Greenwood Act, after the father of the present Minister of Housing and Local Government.
The next developments in housing took place after the war, under Nye Bevan. He adopted the principle of a subsidy from both sources, but based on the local authorities' financing their share from the general rate fund. He insisted on an improved standard of housing. I think that the nation owes a debt of gratitude to Nye Bevan for his far-sighted approach to housing. To him it was not just the building of brick boxes as breeding places: he attempted to provide a standard of housing, with higher rooms, cupboard accommodation and kitchen accessories, of which the nation might be proud.
We hear a good deal to-day about the Tory Government building their 300,000 houses in one year under the Macmillan-Marples housing drive. It is interesting to analyse this to see just what was achieved. The standard of housing built under the Macmillan-Marples régime was considerably inferior to that established under the Bevan régime. There was less cupboard space, lower ceilings, less shelving and less decent kitchen equipment. In addition, there were more two-bedroom and one-bedroom units, to use that awful word. It is as well to have this in mind when we are taunted about the present Government's not having achieved the target of 400,000 houses last year. As my noble friend Lord Silkin pointed out, little is said by the Opposition about the fact that last year's achievement of 382,000 houses was the highest on record. These target figures, important as they are, must be taken in relation to the types and standard of houses that are built. We find, if we do that, that the houses constructed since 1964 are of a higher standard than those built previously. It is as well to get these things on record.
594 Between 1951 and 1960 the Tory Government stopped housing subsidies to local authorities completely, except for certain types on more expensive sites. They also insisted upon a change in the basis of local authority financing, and instead of giving assistance from the general rate compelled the housing revenue account of local authorities to bear the full costing on all houses. One has seen, consequent upon this type of development, how the rents of houses built after the First World War, in the 'twenties, under the Wheatley Act, have been rising to a startling degree in order to assist local authorities to balance their housing revenue account, thus making more expensive the rents of modern houses. All these things must be kept in mind when we are talking about a Bill of this description.
This Bill once more accepts a social obligation to provide better homes. The noble Lord, Lord St. Helens, said we should encourage the private builder to build houses to let. But were the Tory Government between 1961 and 1964 more successful in that direction? We all know that in the post-war years comparatively few houses were built to rent. Most were built for owner-occupiers; and I do not complain about that, because it is as well to encourage owner-occupation. We also know that the record since the end of the First World War shows that few houses have been built by private enterprise to rent. There may be a variety of reasons why this has been so; but it is an established fact.
All houses approved to be built after November 25, or actually completed, will rank for this new method of financial assistance based upon the interest charges. The local authorities will now be able to plan ahead. They will be able to formulate their schemes knowing full well that their housing costs will be based upon a 4 per cent. interest, the remainder coming from the central Government. The Opposition have talked in the days gone by about a "property-owning democracy"—at one time we heard that phrase ad nauseam—but under this Bill a real effort is being made to encourage people to build their own homes, and they will receive financial assistance under this new arrangement that has been entered into with the building societies. This is a real effort to assist in the establishment of a 595 property-owning democracy, as distinct from mere words.
Previously, those who used this slogan during election campaigns have done their utmost to make it more difficult for local authorities to build houses, and in this way compelled many people who could ill afford it to pledge themselves ahead to buy a house. Many of us have seen cases where people buying a house have been unable to keep up their mortgage payments. If you go in some of these private housing estates you find any number of notices saying, "House for sale". People have hit a bad spell, and they are in difficulty because of the heavy costs involved. Under this Bill, assistance is being given in this direction.
The noble Lord, Lord Hawke, and my noble friend Lord Silkin, mentioned the question of costs. I think this is most important, because under Clause 3 of the Bill, with its yardstick of costs, one can see that careful thought will have to be given with a view to keeping costs at a reasonable level. With regard to the steep increase in housing costs on the sale of new houses that have gone up in this last two years, I am not satisfied that the selling price is fully justified. I think that a nice rake-off which is quite unjustified is being taken somewhere. Therefore, I think the Government will have to be careful in this connection.
I am delighted that the building societies have fallen into line and are taking part in the scheme of the National House Builders Registration Council. This is an effort by some of the best type of builders to ensure good standards of workmanship. That the building societies are now coming in and taking an active part in this, as it were, tidying up and trying to stop the jerry-builder is an interesting step forward. We all know that only a few years ago the spate of jerry-building that occurred between the wars had re-commenced, and the unfortunate purchasers of houses from some of these developers were faced with untold difficulties, because there was not this good standard of building. I look forward to this National House Builders Registration Council being more effective; and I sincerely hope that more authorities, in letting tenders, will let them only to builders who accept the stiff regulations laid down by that Council.
596 Under this Bill the Government pledge themselves to do what Labour Governments have done previously; namely, to establish a good standard. They are pledging themselves to work in accordance with the Parker Morris standard that has been laid down. I cannot see the time when the Tories will come back into power, but if they ever do, I sincerely hope that they will not take the step, as they have previously, of reducing the standards that have been established for houses. Houses, as I have said, are something more than brick boxes. A housewife wants good appliances in her house, so that her work is made easier, with good storage accommodation, in order that the family may be a little tidier in their habits.
I am delighted with this Bill, too, because it brings in assistance to housing associations. I remember after the war, when it was difficult to get permits for building houses, a small association being formed in my constituency, and the arguments that I had to influence the Minister at the time to grant a licence for this to go ahead. Eventually this was achieved. I welcome the bringing in of housing associations in so far as financial inducement is concerned. For the first time we have heard a lot about helping the private owner. In the past, the poor fellow who had never been on the level at which he paid income tax had to meet that full cost if he wanted to own his home. On the other hand, of course, the person who paid income tax received a rebate. Under this new method he may opt for whatever scheme he desires, but it will mean that the man who is "near the bone" in trying to buy his own home will be assisted by virtue of the fact that he will pay only a rate of about 4 per cent., instead of the present market rate of interest charges.
§ LORD BROOKE OF CUMNOR
My Lords, may I interrupt the noble Lord? It is important to realise that the mortgage rate at the moment is 7⅛ per cent., and therefore the best a man can hope for, so long as it remains at that figure, is to borrow at a rate of 5⅛ per cent.
§ LORD POPPLEWELL
My Lords, I thank the noble Lord for proving my case. I mentioned 4 per cent. The rate at the moment is 7⅛ per cent., but the man will be getting a 2 per cent. rebate, 597 according to the noble Lord's reckoning, whereas previously a man in that position would have received no rebate at all. Therefore for the first time he is getting some assistance. The figures will naturally change according to the investment rate, and we can see the present trends, including the downward direction of the bank rate. We know that at present the building society rate is 7⅛ per cent., and although they say that they do not tie their rate to the bank rate one would hope that, with the passage of time, the 7⅛ per cent. which is only just coming into operation will follow the general downward trend of money.
I should like to mention one point in connection with the question of costs it is a vexed question. The industrialised building of houses has not quite come up to our expectations. We had hoped that by more mass production of house-building there might have been a reduction in cost. I am still hopeful that this will come about, but it involves heavy capital costs. Of course among the larger builders there is a desire to eliminate waste, and the smaller builders cannot afford the high capital costs necessary to provide the more modern machinery. However, I think they could go a good deal further than they have done at the moment, and therefore I hope that the Government will insist on a most searching investigation. Finally, may I say most sincerely that I commend this Bill, and I trust that the Committee and other stages of the Bill in this House will be expedited in order that it may become an Act as quickly as possible.
§ 6.25 p.m.
§ LORD KENNET
My Lords, I do not think there is much more to say in regard to the body of the Bill after the full account of it given by my noble friend Lord Sorensen at the beginning of the debate. I should correct one thing he said, and I do this without too much compunction since I misinformed him on it. It is that the representative rate Order, which he said was subject to Negative Resolution procedure, was in fact amended on the way through another place and it will now be subject to the Affirmative procedure. I beg the pardon of the House for this slip.
598 The noble Lord, Lord Brooke of Cumnor, asked me about the words "reasonable" and "unreasonable" in Ministerial parlance. Would he leave that over so that we may have a discussion on it on the question, "That the clause stand part"? The noble Lord also complained that the new subsidy is not selective enough, and that it takes no account of the differing financial positions of the local authorities. As a matter of fact, Clause 5 makes some such provision for a supplementary subsidy where the authority's housing costs are high in relation to its resources. The White Paper on Housing mentioned that this would be of particular assistance to local authorities in Wales.
§ LORD BROOKE OF CUMNOR
My Lords, I appreciate that it was relevant, but there again one gets into the difficulty of "reasonable" and "unreasonable". However, I agree that it should be left until the Committee stage.
§ LORD KENNET
My Lords, whether one local authority's resources are reasonably lower than another's, or unreasonably higher, is something that we can discuss at Committee stage. The noble Lord, Lord Brooke of Cumnor, also asked whether there would be a special yardstick for industrialised building. There will not, but the unified yardstick will permit industrialised projects which cost about as much as traditional ones, and there will be no financial discrimination in favour of any particular form of construction.
The last point brought up by the noble Lord, Lord Brooke of Cumnor, was with regard to S.E.T. I think I should correct him—or, if he demurs at that word, I should fill in the details of what he correctly said, which gives a slightly different impression. He complained that this tax would add £150 to the cost of a house. If it were all passed on to the consumer (which it is not always) it would add 2 or 3 per cent., which would be £70 or £80 added to the cost. What is true is that an addition of £70 or £80 would increase the mortgage repayments by about £130 over 20 years, provided that the mortgagor was getting no tax relief or additional mortgage subsidy, which of course he will be.
The noble Lord, Lord Hawke, complained that there was not enough sense 599 of priorities. I feel that this is unjustified. The Building Control Act and the office development control by the Board of Trade are both designed to allocate priorities. Within the field of housing itself we have for the first time introduced a completely firm priority arrangement by picking out 130 local authorities and in effect saying to them, "You build as much as you can". This was also referred to by my noble friend Lord Silkin. We want to make sure that we get houses in the right places—not in Eastbourne, Bournemouth or London, but precisely where the need is greatest. I think this Government can claim that they administer very firm priorities indeed in regard to building.
In replying to the debate I should open by saying a little about the housing associations. Clause 12 provides subsidy for housing associations which are converting and improving existing property. It was added to the Bill in its passage through another place. It has not generally been the practice to pay housing subsidy, whether to housing associations or to local authorities, to help with the purchase of an existing property, although improvement grants are available. In most of our towns and cities there are areas of Victorian property which, properly handled, would be capable of giving many years of useful life. This is the sort of property which is often the basis of the traditional bed-sitter areas, and much of it is being converted and will provide reasonably satisfactory homes.
However, again, often it has been allowed to deteriorate over the years. Sometimes it has been misused in that it has been let off without proper conversion to far too many families without adequate facilities. This sort of treatment by landlords intent only on "sweating" the property only serves to hasten its final deterioration. Some excellent work is being done in some parts of London, and in one or two places in the provinces, by housing associations and trusts who are buying up property of this type, repairing it, converting it into two or three separate dwellings with the necessary facilities and letting it at rents which reflect no more than the cost of the operation. This is a field in which a determined and competent housing trust 600 can make an extremely useful contribution towards the solution of some of our housing problems.
The difficulty is that, after adding the costs of conversion and improvement, even allowing for the Government improvement grant—that is, the old improvement grant—and for some charitable help which often exists, the rents which have to be charged to meet the loan charges, management and maintenance, are often beyond the means of those families whom the associations are created to help. Unlike local authorities, few of the associations concerned have any pool of existing property acquired in the past at lower prices to offset the higher costs of acquiring at present-day values and their rents usually come out a good deal higher than a local authority would expect to charge for comparable accommodation.
Clause 12 seeks to meet this difficulty by providing that the Government improvement grant payable to housing associations, which is at present three-eighths of the loan charges arising from the cost of improvement and conversion (subject to a maximum of £800 per dwelling), shall be increased to cover the cost of the acquisition of the property as well. The maximum is increased to £2,000 per dwelling. The subsidy will be paid through local authorities to housing associations, which are working under the approved arrangements which all of us who work in this field know so well.
The subsidies to local authorities for which Part I of the Bill provides will be equally available to those housing associations undertaking new building under authorised arrangements with local authorities. It is not perhaps generally realised that something like 70 per cent. or 80 per cent. of all housing association building in the past comes into this category. In the future, they will get the increased subsidies for which Part I provides.
I should like to say a word about council housing and home ownership—the distinction between those two—because the noble Lord, Lord Brooke of Cumnor, and many other speakers have said this Government are kind only to council tenants. It is not a fair charge. Let me give some comparative figures of the cost to the Exchequer of local authority rented housing, on the one hand, and private home ownership, on the other. 601 It is often alleged that every council tenant is subsidised at the expense of the taxpayer, whereas the home buyer is not. In fact, it is estimated that in 1966–67 the average Exchequer subsidy payable on each council house in the country was about £20 a year, whereas the average tax relief on mortgage payments by home buyers was about £36 a year. The total cost of local authority housing subsidies in that year (this time including Scotland) is estimated to be £100 million, whereas the total cost of mortgage interest relief is estimated to be £155 million.
Certainly some local authorities contribute to the cost of council housing from the rates, and this adds on average in Great Britain just under £10 a year per house to the subsidy on council houses. But the combined Exchequer and rate subsidy on a council house is still noticeably less than the tax relief afforded on mortgage payments.
§ LORD BROOKE OF CUMNOR
My Lords, I am very grateful to the noble Lord for the detail in which he is replying. But in fact I was not using the argument he was attacking. I was not questioning that there was assistance to the owner-occupier. I well realise that successive Chancellors of the Exchequer have thought it well worth while because it is such a good incentive to saving. What I was asking was why, if the Government are arranging for what is equivalent to an artificially reduced rate of interest on local authority housing, it is not logical to extend that to other local authority buildings such as schools and children's homes—a different point.
§ LORD KENNET
My Lords, I thought the noble Lord made both points and I thought I was answering one of them. Since the other one goes so far outside the scope of this Bill, perhaps he will agree to discuss that on another occasion, perhaps on the Third Reading of the Bill. I was not of course seeking to make any invidious comparisons of the private and public sectors. Both are fulfilling a vital social need. But it is wrong to suggest that one case is a drain on public funds while the other is not.
Let me come to another argument which has occupied us very much, and that is that subsidies ought to be paid only to those who need them and should 602 not go to make life easier for council tenants who do not need them. It seemed that many of us were forgetting that the Government are not paying the subsidy direct to the tenant; they are paying the subsidy to the local authority. As to what the local authority ought to do, the White Paper had some forthright things to say. It said:Subsidies should not be used solely or even mainly to keep general rent levels low. Help for those who most need it can be given only if the subsidies are used in large part to provide rebates for tenants whose means are small. A number of authorities have had the courage to adopt thorough-going rent rebate schemes and have found that it does not entail raising general rent levels beyond the means of the majority of tenants. The more generous subsidies now to be provided create an opportunity for all authorities to renew their rent policies along these lines.I thought that at one point the noble Lord, Lord Brooke of Cumnor, was agreeing to this sort of approach, and if I am right in that I hope he will help us to get local authorities to adopt this sort of policy by adding the weight of his wisdom to ours, especially in speaking to Conservative-controlled authorities.
I make no apology for repeating what was said in the White Paper, and I quote again from it:Rent policies are also for local decision. But if the extra subsidies now to be provided are to be used, as they should be, to relieve those with the greatest social need, these policies should reflect the fact that the financial circumstances of council tenants vary widely …".As a matter of fact, the Labour Party has always taken this view and it is out of place to level the charge at us that we are encouraging local authorities to dish out subsidy money to tenants irrespective of their means. It is interesting perhaps to note that the father of the present Minister of Housing, when he was Minister of Health, not long before he was succeeded by my own father as Minister of Health and of Housing, wrote a circular in connection with the Housing Act 1930, in which he said:Rent relief should be given only to those who need it, only for so long as they need it.That was the Labour Minister in 1930 and we have never changed this policy. The case to-day is as strong as it was them. The case can best be demonstrated by the fact that, according to the Ministry of Labour, about 30 per cent. of council tenants with household incomes of 603 £500 a year or less were paying more than one-fifth of their income in rent, whereas almost 98 per cent. of those with household incomes of £1,050 a year were paying less than one-tenth of their income in rent. It is a very real problem.
There has been criticism—and how well we in the Government understand and sympathise with it—of the delay in the introduction of the option mortgage scheme. It is true that it has been delayed, and it is also true that no date at all has been fixed for the introduction of the guarantee scheme. There are two reasons for this delay. The more important, as we all know, is the economic situation. The housing White Paper for 1965–70, which was published in November, 1965, and first mentioned the Government's plans for bringing home ownership within the reach of more families, said:As soon as the country's economic situation allows".It is a matter of judgment, and unfortunately it is the judgment of the Government, I expect shared by the Opposition, that "As soon as" is not yet quite reached.
Even apart from the economic consideration, a very long time is necessary to get the machinery set up because of its intense complications. I would say to my noble friend Lord Silkin that the reason why mortgagors cannot jump from option to regular type tax relief, and so on, and back again is that the building societies simply would not have it. They refused to consider the idea. They said it was imposing an impossible amount of work on them, and this was something which the Government regretfully had to accept. It was broadly true to say that if anybody was paying below the standard rate of income tax he would be better off with an option mortgage, and that would continue to be so whatever the price of money was. Beyond that there is a provision for a late change from one to the other in the Bill which is complicated, but we can talk about that in greater detail on Committee stage if it interests noble Lords.
My noble friend Lord Popplewell touched on the question of costs and standards. One thing I should like to add to that is to report progress on the achievement of Parker Morris standards. 604 This is very good. In tenders approved in the fourth quarter of 1966, the last quarter for which we have figures, 53 per cent. of all dwellings were fully up to the Parker Morris standards, and on the two most important, space and heating, the figures were 75 per cent. and 87 per cent. This is splendid progress. I want to congratulate the local authorities and say that, as always, progress in this field must not mean any tolerance of runaway costs, a matter which we can consider at greater length later and for which the yardstick exists.
My Lords, I have not much more to say. I should like to touch for a moment on the question of the sale of council houses. I was expecting to hear a lot more about this in the debate. I do not know whether the Opposition dropped it, or thought it was a loser. I do not think this question of the sale of council houses to sitting tenants by local authorities is an issue of principle, unless indeed it is the principle of political morality in promoting the issue itself. "This wonderful scheme", in the words of the Leader of the Opposition, as the answer to the housing needs of the homeless, which it is not, is simply a question of common sense and housing management. The reality is much more prosaic.
A general ministerial consent to the sale of council houses has been in existence since 1952. It was revised and reissued in 1960. Between 1960 and 1965 sales averaged 2,300 houses a year out of a total local authority stock of about 4 million houses. Last year the total increased by about 50 per cent. This increase was entirely attributable to the sale of 1,138 houses in Birmingham in the last seven months of the year. But only 184 out of the 1,400 local authorities in England and Wales sold any council houses at all last year. For the past 15 years, therefore, local authorities have had discretion to sell individual houses in the normal course of housing management, and this has given rise to no difficulty, no complaint and very few sales. Then, suddenly, Birmingham, with 38,000 families on the waiting list, decide that they will sell at least 10 per cent. of their housing stock and engage in an extraordinary political campaign to persuade other local authorities to follow suit.
605 The reasoning behind the Opposition's policy is misconceived and its motives remain obscure to me. They have chosen to treat it as a political issue rather than one of practical housing management. It is said, first, that the sale to the sitting tenant offers a benefit to the ratepayer, who no longer pays subsidy on the house sold—but there is no obligation on a local authority to subsidise a tenant who is capable of buying the house he now rents. Next, it is said that there is a further benefit to the taxpayer, who no longer pays the national subsidy. But Exchequer housing subsidies do not have to be applied solely to the benefit of the tenant who occupies the house on which the subsidy is paid. We have been talking about this in connection with rent rebate schemes. Council houses built years ago—and two-thirds of those sold in Birmingham are pre-war-can normally be let at a profit on their original cost, and the subsidies form part of a subsidy pool which is used, for example, to help meet the cost of rent rebates for needier tenants, or to reduce the rents of similar houses built more recently at higher costs. If you chop off the cheaper end of your housing stock, you get no help with lowering rents at the more expensive end.
Next, it is claimed that the housing account receives an advantage both in capital gain and a contribution to the revenue side. This should be the case, certainly, since the houses should not be sold at a loss. But the gain may not be as large as is often thought since, when the house is sold, the council lose the rental income, which in the case of older houses will normally show a surplus, and the Exchequer subsidy. These items have to be offset against the mortgage repayments, and the savings in management and repairs on the houses sold. Moreover, since very few of the houses will be sold for cash (for instance, the Birmingham scheme is said to offer deposits down to £5), the housing account has to continue to meet the loan charges on the houses sold. Council houses are normally financed by loans over a 60-year period, and when a house is sold, only a small part of its capital cost will have been paid off. So much, incidentally, for the Leader of the Opposition's assertion at Wolverhampton that,The scheme swells the local authority's housing fund by something like £2 million 606 for every 1,000 houses sold and this releases money so badly needed to give the homeless new homes and new hope.I do not like playing around with those words "homeless" and "new hope".
That £2 million—apart from any cash deposits—will only come in over the years as mortgages are repaid, and part of it will be needed to pay off the council's outstanding debts on the houses themselves. Nor, a fortiori, can any sale be enough to offset the cost of building new houses to replace those which have been sold. The fact remains that a council house which could be let at a moderate rent has been sold and the stock of rented housing has been depleted. Much has been made of the argument that there is no real loss since the tenant has a tenancy, in effect, for life. But in practice all councils meet some of their housing need from relets, and it is surely very likely that some of the tenants who are able and willing to buy from the council would otherwise have decided to move out and buy privately, especially if the council had helped them achieve this as enthusiastically as they have set about selling off the stock of rented housing. The tenants who are now buying were no doubt glad to be able to rent a council house at a time when they could not afford to buy. There are 38,000 families on the Birmingham waiting list, for most of whom the only hope of a decent home is to rent a council house.
My right honourable friend the Minister has made the Government's position perfectly clear on this issue. Until the demand in any area for houses to let at moderate rents begins to level off—and apart from the incidental sale of individual houses on grounds of estate management—houses that have been provided with the help of public funds to meet the need for houses to let at moderate rents should be kept available to meet that need. I repeat what the Minister has said on more than one occasion in the past month:In general local authorities ought not to sell their houses where there is still an unsatisfied demand for houses to let at moderate rents and where they intend to continue a substantial programme of building houses to let.Arguments based on the profitability of the transaction are beside the point. It is not frightfully clever to make a profit 607 on a house built before the war for £400. The real argument is about making the best social use of the housing stock, not about how to get the best possible commercial advantages from exploiting it—either by renting or by sale.
My Lords, this afternoon the local authorities are receiving from the Minister comprehensive advice in the form of a circular on this subject, and I should like to add my voice to his in recommending any local authorities who are thinking of following Birmingham's deplorable scheme to consider it most carefully, in the light of advice they are getting to-day, before deciding, to dispose of the assets created for general social use by themselves and their own predecessors.
§ LORD BROOKE OF CUMNOR
My Lords, the noble Lord has interpolated this political sermon on the selling of council houses into a debate in which the subject has not been mentioned, on a Bill in which it has not been mentioned also; and he has done so at a moment in the debate when he knows that I have no right of reply. All I will say is that the Birmingham scheme has brought a great deal of genuine social satisfaction to council tenants who have now become owners of their houses, and would, in fact, have lived in those houses indefinitely, occupying them, but as tenants and not as owners.
§ LORD KENNET
Well, my Lords, I wonder how much social satisfaction is brought to the 38,000 people on the waiting list. That is what is of great importance.
This Bill meets the housing situation as it is to-day. I will not go through its provisions again. It is the successor to a long series of Housing Acts over the years. Its scope is wider than any other Housing Subsidies Act passed since the war; but even so, it will not last for ever, and it may well be superseded by further legislation before many years have passed. Since the war the average life of Housing Subsidies Acts—the period of each Act before it was superseded by the next—has been about four years. There have been 16 Housing Acts of one kind or another since the war, not counting Rent Acts and Housing Acts related to Scotland, which has had her fair share. There is never going to be finality in 608 housing finance. We shall never get the perfect system. It is for this reason that we are pressing forward with studies that will bear our next instalment in housing legislation.
I should like to mention one or two of these studies, particularly a study into the provisions of the 1961 and 1964 Acts about the control of multi-occupation, about which Lord Brooke of Cumnor asked. This study group has reported; the Minister has its Report, and he is considering it. In the field of older houses and the improvement grant structure there is a rather large series of studies going forward into deficiences in the present law, which we have already identified though we are not quite sure how to rectify them; into the economics of home improvement when compared with the economics of redevelopment in the twilight area, and into physical techniques for doing it cheaper by mass production.
There is also a national survey of the condition of the housing stock which, for technical reasons which I will not go into, will be a great deal more effective in its results than any other survey which has ever been undertaken. The results of that will be out in this month; we shall have them processed by the summer, and we shall fit these results into the economic, legal and physical studies that we are doing in order to get a completely new improvement and conversion policy not too long ahead. This is only one part of what is going ahead. I thought I ought to mention it, simply so that we shall be able to look beyond this Bill. I look forward to an interesting Committee stage on this Bill, and I want to thank the noble Lord, Lord Brooke of Cumnor, for his assurance that it will be an easy and expeditious one.
§ On Question, Bill read 2a, and committeed to a Committee of the Whole House.