§ 2.40 p.m.
§ The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk)
My Lords, I beg to move that this Bill be now read a second time. This Bill is the sixth major housing measure of this Parliament. It underlines the determination of this Government to give help to those who need it, whatever type of housing tenure they prefer. It is right that housing policy is increasingly expressed in terms of choice and this is the central theme of the Green Paper on housing policy. People should have every possible opportunity to choose their own kind of home. For the Government, this means extending home ownership, strengthening of housing associations and wide-scale provision of public rented housing.
The Bill is about widening choice in both the private and the public sector. It has two major objectives. First, it helps first-time buyers. Secondly, it increases the financial limit on the Housing Corporation's power to guarantee loans. These objectives develop the Governments' policy of concern with the householder, irrespective of the form of tenure he prefers. We need to get away from the sense of conflict between the interests of the home owner and the tenant which has been divisive socially, and has had a malign influence on housing policy.
Most people are either owner-occupiers or tenants in the public sector. These are the dominant tenures and the pattern is unlikely to alter significantly in the future. We have a firm commitment to a continuing public sector programme and it is essential that that public sector should be attractive. It can be so only if it meets needs by providing the homes people want.
1628 As I am talking about the public sector, I shall reverse the order of the Bill and describe its second part first—namely, the Housing Corporation guarantee powers. I believe that that would be for the convenience of noble Lords. Clause 5 of the Bill extends the current upper limit on the power of the Housing Corporation to guarantee loans raised from private sources, mainly by housing associations.
Our 1974 Housing Act provided the impetus for the growth of the housing association in the last few years. The associations now have a programme of over 35,000 homes a year, more than double the level in the years up to 1974. Working with local authorities, associations provide a range of rented accommodation in the public sector, most of it in stress areas. These are housing action areas, general improvement areas, and the inner cities. Another of their streneths lies in meeting the needs of special groups such as the elderly, the disabled, the single young, and mobile workers. They also play a pioneering role in fostering alternative forms of tenure, such as equity-sharing and co-operatives which cater for those who would like a stake in their home but are either not looking for, or cannot afford, complete ownership.
This Bill will help housing associations to build up their activities by raising the £100 million ceiling on the Housing Corporation's power to guarantee the loans they raise from private sources. This ceiling is laid down in Section 10 of the 1974 Housing Act and has now almost been reached. It has been used partly for overdrafts and short-term loans from the clearing banks, and partly to offset the effects of the December 1976 public expenditure cuts. No additional cost will fall on the Housing Corporation, or on public funds, as a result of the increase. The Corporation meets the liability only in the unlikely circumstance of its guarantee being called upon. The decision to allow the power to be used will be one for the Government of the day. The Bill proposes that the limit should be raised to £300 million which, with the approval of Parliament, could be increased to £500 million, which should meet the needs of associations during the foreseeable future.
Therefore, the second part of the Bill will help housing associations to provide 1629 rented accommodation and to increase choice through new forms of tenure. But —and I return to the first objective of the Bill—we recognise that many people want to buy their own home. This is not a new departure. Labour Governments have a good record here, and it is nothing novel for us to recognise that people aspire, quite rightly, to own their own home. For example, in the last 10 years, Labour Governments have introduced the option mortgage scheme, ended the mortgage famine in 1974, developed the concept of mortgage stability, persuaded the building societies to set up support lending, and have taken action to counter excessive rises in house prices. With this Bill, we introduce a unique measure to help first-time home buyers.
The Bill aims to bring home ownership within the reach of more families, and has two main objectives: first, to ease the financial burden in the early years on those who can now only just afford to buy, and, secondly, to help into home ownership some who are now just on the margin, and who could with a little help buy at the right time.
About 40 per cent. of all first-time buyers move from privately rented housing. A further 40 per cent. are setting up a home for the first time, and many face a struggle to raise the deposit. The Bill will ease the financial strains on first-time buyers, especially young couples, and help them to buy earlier. Others will be able to leave unsatisfactory rented accommodation or crowded conditions when they are living with their parents. Too often the strains this puts on marriage lead to marital breakdowns and divorce. And whether family conditions are good or bad, young people should have domestic independence as soon as possible.
The schemes were devised with the building societies, the local authorities, banks and insurance companies. The Bill's proposals should not impose undue burdens on the institutions, especially the building societies, which will carry them out and bear the administrative costs. I should like to record our gratitude for their co-operation and help with the provisions of the Bill.
I must emphasise, however, that savings are fundamental since these are not 1630 "give-away" schemes. Buyers have to prove ability to save over two years or more. The savings requirements demonstrate, first, that people can save—which they must do if they are contemplating house purchase; secondly, we do not want to tempt into home ownership people who do not have the capacity to save and keep up their mortgage payments. Three broad elements determine whether help will be given. The purchase must be for the first time. It must be with a mortgage, and it must be at a price below a regional limit. A £600 loan will be available to those who, first, save for two years; secondly, who keep at least £300 in the account for the 12 months before they apply for a loan; and, thirdly, to those who accumulate £600 by the same date.
For five years the loan will be interest-free and without capital repayments. The benefits will be a major help in building up the necessary initial deposit. And for those who have already saved the deposit, savings are then freed for the expenses normally associated with purchase. The interest freedom means a saving of nearly £4 a month at today's interest rates. The loan, I stress, will be additional to money which the institution would have lent. The mortgage offer which buyers receive will show the amount the society is prepared to offer plus the extra loan. The cash bonus is a further encouragement to save. Again, savings are needed for two years, with at least £300 in the account for the year before they apply for benefit. This qualifies for the minimum bonus of £40. Every £100 over £300 kept for the final year earns an extra £10 up to a maximum of £110. It is cash tax-free and is not repaid. It is worth up to 13 per cent. on savings over the final year.
The lending institutions will pass on bonus and loan at completion of the purchase. After five years, institutions will repay each £600 loan, in full, to the Government from their own resources. At this point the purchaser begins to pay off the £600 to the society over the remaining life of the mortgage. His payments are thus increased at a time when he should normally be better able to afford them.
These are the main elements of the help—and it is worthwhile help. Most 1631 qualifying purchasers will have about £700 extra available at the time of purchase. Forty per cent. of first-time purchasers have a deposit of under £1,000, while nearly 70 per cent. have less than £2,000. So we shall be adding very significantly to their funds. By the mid-1980s, 200,000 buyers a year should benefit, and perhaps for 30,000 the help will make the difference between buying and not buying.
The Secretary of State will set area price limits from time to time, based on prices paid by first-time purchasers in the previous year, and adjusted for price increases. Limits will be set, so that about two-thirds of all first-time purchasers in each region are eligible. This effectively but simply directs help towards the lower end of the market. We estimate that this year two-thirds of first-time purchasers will buy houses of below £16,200 in London, £11,100 in the West Midlands and £10,400 in the North West.
About two thirds of those buying below the price limits should meet the other requirements. On this basis, about 40 per cent. of all first-time purchasers should get help. Benefits will begin to flow in the autumn of 1980. The costs in the first 12 months are estimated at £100 million, but after five years or so costs will decline as the institutions begin to repay the Government loans in full. The finance after that date will be recycled as continuing expenditure on the loans is largely met by repayments of earlier loans. There will be some net public expenditure—perhaps £10 million to £15 million—as the bonus will need to be financed, but the public expenditure for the first two years was allowed for in the last White Paper on public expenditure.
Now, as to the date of implementation, the benefits of the scheme must not be dissipated in higher prices. We shall therefore set an appointed day, as soon as possible after enactment. From then people can save under the scheme and will qualify two years later. This will allow the increased demand to be largely absorbed by increasing the supply of new houses and conversions, without forcing up prices. This is, I believe, very crucial. Proposals were discussed in another place to count savings held before the appointed day and bring payments forward. We have looked at this in great detail to see 1632 whether we could—and should—move in this rather attractive direction. There are merits, I agree, in early implementation, and obviously there are political advantages. But we decided that this would pose major difficulties of equity and administration. And, I repeat, the effect on house prices could throw away the benefits.
I believe that we have put together an effective package of help for first-time buyers in a way in which aspirations can be fulfilled. We are giving all first-time buyers who can meet the savings conditions an enhanced opportunity to get on the housing ladder at an earlier stage in their lives. This Bill may sound financially complex, but its implications are human, and even the rather dull sounding Housing Corporation guarantee power part is really all about homes for people. I hope that this House will expedite the Bill's passage, so that the savings period can begin as soon as possible and people can plan their future with greater confidence. I beg to move.
§ Moved, That the Bill be now read 2a.— (Baroness Birk.)
§ 2.53 p.m.
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, all of us, I think, will want to welcome anything, however paltry, which may help to solve the housing problem and also to assist home ownership. Having said that, I am bound to say that I doubt whether either of these two Bills—as I prefer to look upon it—will help very much as they stand. We welcome them all the same, and we welcome them particularly because we believe that some of these powers could be used to particularly good effect when the happy day comes when we have a Conservative Minister of Housing to deploy these powers.
I must try manfully to resist that temptation to embark upon a general debate upon housing at this stage on a Friday afternoon, which I am sure will be to the great relief of all your Lordships, and I will try to stick strictly to what we are talking about in a short a speech as possible. May I welcome what we would regard as the rather belated conversion, on the part of the Party of the noble Baroness, to a sincere belief in and a demonstrable 1633 wish to support individual home ownership. It seems to have taken the Government a very long time to have come to these conclusions, and I have to say that some people could be forgiven if they harboured the unworthy thought that possibly this was bread—or should I say "a crumb"? —being cast upon the waters in the run-up period to an Election. But, of course, no such unworthy thoughts would naturally be entertained by many of us here this afternoon.
The noble Baroness treated us to a good many figures in her commendably compressed speech—if I may say so—and if one looks at the debates in another place, a good deal of bandying about of figures went on. I do not intend to continue that activity here this afternoon. I think a number of points emerged from those discussions. First, the scheme put forward by the Conservatives in their October 1974 Manifesto is roughly twice as generous to the home buyer as this one. Secondly, the Conservatives have declared their intention to reduce stamp duty on houses at the lower end of the market; and that is absent from the Bill. Thirdly, we would not have wasted very many millions of pounds and a good deal of time in the Community Land Act. Also, at the end of the day, it has to be said—and the noble Baroness herself admitted—that this is a very complicated scheme. It seems to us that it is the very complexity which is leading to the delays in implementation and the costly administrative structure which will be needed to look after it.
§ Baroness BIRK
My Lords, perhaps the noble Lord would give way for one moment. There is a point at this stage on which he could perhaps help me. He referred to the Conservative scheme which would be far more generous. It would be helpful to me, even at this stage, to know how it is proposed to pay for it. Where would the money come from? Would it he public expenditure, and if so, what would be cut? As I understand the scheme, it would involve a very large amount of public expenditure. Incidentally, millions have not been spent on the Community Land Act, so it cannot come from that.
§ Lord STRATHCONA and MOUNT ROYAL
My Lords, that is the first source. One always runs into this difficulty 1634 in discussing any form of public expenditure. The fact is that it is possible to make savings in other directions. I mentioned one small activity on which we consider the Government have wasted money. There are many others. Clearly, no Opposition will say ahead of time exactly what their budgetary arrangements are going to be; you really cannot expect us to do so. But the fact is that the Conservative Party is quite clearly committed to making these contributions, and it is there in the Manifesto, and the noble Baroness knows it as well as I do. I am not going to speak for the Treasury, which I could not begin to do.
May I come back to this question, because the noble Baroness made a very interesting point, saying, that one of the reasons for delaying implementation of this was to avoid the increase in house prices. I think that this is an important and interesting point—one that I am bound to question. I am also bound to say that I would think that the activities of the Chancellor in the last day or two would add more to the cost of buying a house than would be likely to happen as the result of bringing in this scheme earlier rather than later. We regard that as a direct result of mismanagement of the economy.
There is one other point which is worth making. In the Report stage in another place the Under-Secretary of State for the Environment was resisting an Amendment, the purpose of which was to make these grants transferable when a house was subsequently sold. Reading that debate, one had the impression that he had fallen into the trap of failing to appreciate the impact of any one activity in the housing market on all the other things that happened. First-time buyers affect house sellers, and in turn the availability of accommodation has an effect on people's mobility, which indeed was one of the reasons that the Housing Corporation concept was originally set up.
Of course, if mobility is affected, it then becomes more difficult to tackle unemployment, and in turn the activity of the house market affects the building industry which is currently in the doldrums, and I cannot believe that the affairs of the building industry have been greatly helped by the threats of nationalisation which have been hanging over them. So far 1635 as the first half of the Bill is concerned, I can only say one cheer for the home purchase assistance scheme.
Now, my Lords, may I turn to the Housing Corporation guarantee proposals. I think here there is a serious danger of the possible over-expansion of the Housing Corporation's activities and a corresponding explosion in administrative cost. It was many years ago that I was involved in the voluntary housing movement and I remember then that the Housing Corporation was lending £50 million, I think it was, and many of us were worried that already they were taking too much unto themselves. We feared that there would he bureaucratic delay and frustration and added administrative expense, and that this would lead to prejudice of the services of volunteers. It is worth remembering that, when Sir Keith Joseph set up the Housing Corporation, the original intention was to tap the reservior of willing voluntary expertise, which was capable of identifying and satisfying local needs, and this was to be done by helping them with the provision of finance.
I shall resist asking detailed questions about some of the problems of the Housing Corporation; for example, how payments to departing co-owners are being financed —which I believe is still a problem—the problem of the title of the ownership of the property in co-ownerships, what exactly is meant by housing co-operatives, to which the Minister in another place has referred, and also whether the Housing Corporation has ever had any success in raising outside finance in the market, which I seem to remember has always been one of its intentions. I merely mention these in passing.
Certainly the Housing Corporation has grown very large. We are now talking about raising the borrowing limit to £300 million or even £500 million. This leads me to ask the Minister whether it is in fact the intention to try to concentrate housing in the Housing Corporation rather than with the local authorities. My impression is that the local housing activities are very largely being taken over by the Housing Corporation from the local authorities, who presumably have got existing trained staff and expertise and organisational structures available to do the job.
1636 Here again, what concerns me is that if the Housing Corporation expands too much, and if, as a result of expanding too much it has to set up a very large, and possibly over-rigid municipalised structure, this inevitably is going to have its effect in destroying the interest and the availability of those who work in what is after all called the voluntary housing sector, which is supposed to be the third arm of the housing business.
I call in aid no less a person than the ex-chairman of the Housing Corporation, and I commend to any of your Lordships who are familiar with his speeches in this House, if you want a good and amusing quick read, the preface by Lord Goodman to the last report from the Housing Corporation dated 1976–77, which is very good value indeed and written in his own inimitable personal style. He says:We are still an over-bureaucratic organisation, but with time this can be corrected and should be corrected".He then goes on to say that it is necessary to have greater faith, and he says this in connection with the need to decentralise and not he over-restrictive in some of the bureaucratic controls. I mention this because, if one looks at the accounts, they present a slightly alarming picture. One finds that staff salaries in the Housing Corporation have gone up from £1.4 million in 1976 to £1.9 million in 1977, and, if I read the accounts correctly, the overall administrative expense has gone up from £2¼ million in 1976 to £3½ million in 1977.
If that has happened in the face of the chairman saying that they were overbureacratic and needed to reduce their bureaucracy, what will happen when we lend the Housing Corporation a great deal more money? They have increased their overall administrative expense by 50 per cent. in one year. Is there not a danger that this is a trend which is liable to increase? Finally, may I ask the noble Baroness—and this is not intended to be a destructive question, but we are spending £3 million with the Housing Corporation where there is manifestly no end product as such—what in fact do we get in terms of value for that money?
§ 3.8 p.m.
§ Earl CATHCART
My Lords, we have already had a busy day's work for a Friday, and we still have a good deal of 1637 business to conduct, so I do not intend to keep your Lordships for more than a few moments. Nor do I intend to speak on the detail of the Bill, which seems to me intended to regulate in a reasonably satisfactory manner some necessary arrangements in the important field of providing homes. But I should like to try to persuade Her Majesty's Government to adopt a shorter Short Title to the Bill—the Home Purchase Assistance and Housing Corporation Guarantee Bill. This cumbersome mouthful almost qualifies to be the Long Title, and in future, once it has become law, it will be tedious to refer to and will almost occupy two lines when written. It is a portmanteau title, which seems to aim at meaning all things to all men.
The Bill itself is very concisely drafted, and I would ask the noble Baroness, Lady Birk, to consider giving the Bill an equally concise title and a much more dignified one. I am proposing that the Bill should be called the Homes and Housing Bill.
§ 3.11 p.m.
§ Baroness BIRK
My Lords, I am grateful for the general welcome given to the Bill this afternoon. We can tell that it is Friday because we are not on Wales or Scotland and there are very few of us here; but those who are here have been very helpful and appreciative. I naturally expected that in some areas noble Lords might feel that we were not going far enough and, indeed, the noble Lord, Lord Strathcona and Mount Royal, indicated that. He also commented that this had been a long time coming. I do not really think that this is so because the proposals were first made in a Green Paper last year and these were very much more detailed proposals than the ones I was trying to elicit from him during his speech. The introduction of the Bill following up that Paper has been extremely rapid. We considered it such an important part that it was brought forward before any of the other Green Paper proposals. It is a specific scheme and, as I pointed out in a whole series of figures, something that has been carefully and meticulously worked out. If I may say so, this sort of thing takes much longer than just saying that we shall introduce a very much more grandiose 1638 scheme and then being unable—and I am not blaming the noble Lord because it has not been put forward by his colleagues in either House—-to say how in fact it would be paid for.
The value of the help that people will be given, and the assistance which they will receive, will be extremely great and it will be done in a proper way so that one can then build on it, because the Secretary of State has the power by order to increase it as we go along when we can see what the demand is. Also, we must bear in mind the very important question of not rushing ahead so that there is a highly inflationary effect on house prices.
The noble Lord made some comments and asked a number of questions on housing corporations. I think that, if I may, I will take him up on his offer on the questions which he said he was "mentioning" but not "asking" and will write to him about them, for they deserve a much fuller answer that I could give this afternoon. He also talked generally about the Housing Corporation's philosophy and growth and whether it had become a large and over-rigid, formalised structure.
May I say first that, when one is concerned with working with volunteers, as in the housing associations, one of the important things that a corporation of this sort has to do is to provide a structure so that it can register housing associations. It does this if they satisfy management and other criteria, so that it can monitor their performance. The corporation has already identified and taken steps, as we know, against one or two associations before their misdemeanours, or in some cases I might use a stronger word than that became generally known. It has checked housing association projects to ensure the very thing which the noble Lord pointed out, that there is value being given for public money, which is absolutely essential. It advances loans, pays grants to housing associations on behalf of my Department, and generally acts as a clearing house.
This enterprise is on a national basis and I would not have said that a staff of 400–500 with a cost amounting to £1.9 million was frankly untoward if one takes into accoint the inflationary period through which we have been passing. Also, as I pointed out when I was opening, the 1639 housing programme is now running at 35,000 per annum, whereas, in the three years up to 1974 there were only 40,000 houses built. In fact, one is getting an increased value and an increased growth all the time.
The growth in cost has gone hand in hand with a growth in the work load which is placed on the corporation with this tremendously rapid increase. I do not accept that the Housing Corporation is taking over from the local authorities. They play a large part and will continue to do so in the housing association movement. Both are continuing on their way forward and are really complementary. As the noble Lord himself said, it is important to have a flexible framework in which one can have different types of housing. As I pointed out, the housing associations are very often meeting different needs and different demands from the local authorities. The split between them is about 70 per cent. by the Housing Corporation and 30 per cent. by the local authority.
I am not saying that everything is always perfect: it would be stupid to say so of any organisation. There are, possibly, unnecessary pockets of bureaucracy and maybe there are areas which are developing better and more fruitfully than others. But, overall, the Housing Corporation is doing an extremely good job. It clearly does need more room for expansion and it cannot expand without greater finance. Its activities, I assure the noble Lord, are very closely watched. It also has the opportunity to come forward with different ideas which it wants to try out, which I am sure is something that he would appreciate and support. This gives a better range and more ingenuity in our whole housing policy.
Local authorities are not in a position to carry out these extensive duties nor, because of their set-up and their own responsibilities, are they in a position to take a lead in the way that the corporation does. Therefore, I would say that on the whole the Corporation has nothing to apologise for, although I agree that it is something which one has to keep an eye on. I agree that any body has to make sure that it does not become rigid, and the stress on the need for flexibility and cutting out and unnecessary bureaucracy is absolutely fair. I assure 1640 the noble Lord that that is something which we are watching.
The noble Earl, Lord Cathcart, restricted his remarks to the Title of the Bill. I agree that it is a very short Bill and a very long Short Title. I do not think it is very stylish: it has no elegance about it. It does not trip very easily off the tongue but what it does—which is absolutely essential—is to explain exactly what the Bill is all about. It sums it up in one sentence, which is more than one can say about many other pieces of legislation. However, I note the noble Earl's point and next time we have a Bill coming along like this, we will certainly try to do better, not by increasing the size of the Bill—I am sure that he would not want that—but by reducing the size of the Title.
I hope that the two noble Lords who have spoken will be fairly satisfied with the answers they have been given and should like to thank them for their helpful contributions. I really believe, as I am sure they do, that the enactment of this legislation will be a further helpful step in achieving housing objectives which we all share and I hope that the piece about the Bill coming to this House which appears in today's Evening Standard and which says that the Home Purchase Assistance Bill is to be "defeated" in the House of Lords today is a Freudian or a literal error rather than a statement of fact. Therefore, I beg to move the Second Reading of the Bill and I hope for unanimous support.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.