HC Deb 28 April 2004 vol 420 cc288-311WH

2 pm

Mr. Archie Norman (Tunbridge Wells) (Con)

I welcome this opportunity to discuss the Barker report, and I thank the Minister for giving up her time to be here. I am sure that her response will address our points about the serious issue that rightly received substantive examination in the Barker review.

The Barker report was commissioned by the Chancellor of the Exchequer to develop recommendations on housing supply in Britain. Its conclusions are far reaching and go far beyond current Government policy, and it will be interesting to hear from the Minister the extent to which the Government intend to adopt them as policy and how she envisages the Government taking the report forward. Will it form the basis of legislation, a White Paper or changes in policy? Its thrust echoes substantially the existing direction of Government policy as adopted by the Deputy Prime Minister, in particular the view that centrally driven housing targets must be imposed on the regions of Britain and that the apparatus for achieving them should be regional government.

The report was welcomed by the Chancellor and Deputy Prime Minister, although I noticed that the language in the welcome memo was somewhat uncommitted. However, the Deputy Prime Minister's press release said: The Government agrees that to deliver its commitment to stability and affordability needs a significant increase in housing development". That implicitly confirms and buys into Barker's central thrust, although there are many individual recommendations that go far beyond that point. The Government's reaction to date falls well short of endorsing the report, although the Chancellor promised that there would be ample opportunity to debate it. As we have not had a chance to do so to date, I hope that we can take the matter forward in this sitting.

My advice to the Minister is to adopt a discerning view of the Barker report. Although most hon. Members agree that there are serious problems in housing supply in Britain, it is not clear to me that they are addressed by the report, which draws on data and assumptions that bear a great deal of examination. The report is subjective in its assumptions, which are also highly political. It would be interesting to know whether the objectives that are implicit in those assumptions are shared by the Government. The report is flawed in its analysis and understanding of the household projection and housing demand figures and, as a consequence, highly mistaken in its conclusion. I shall endeavour to touch on each of those points.

I want to start with the background assumptions behind housing need. The Barker report takes as its starting point the assumption that it should be a Government objective to reduce house price inflation. It bases that case on the requirement for not just stability but a redistribution of wealth. In particular, the report refers to a more equitable distribution of housing wealth. It uses as raw material the conventional household projection data, most of which predate the outcome of the recent census.

Starting with the question of equity and redistribution of wealth, I hope that the Minister will be able to elucidate on whether the Government believe that it should be the role of the central state—and whether it is current Government policy—to redistribute housing wealth in this country. That is an overarching statement, and not something that has been evident in Government statements to date. We need to remember that we are talking about 70 per cent. of the population of Britain: roughly 70 per cent. of households are, in one form or another, home owners. For the Government to set as an objective a reduction in the wealth of 70 per cent. of the population is an interesting idea. That is not to say that there are not problems with people getting on the housing ladder. We all understand that, and I want to come on to that point later. However, it is not clear that building more houses is an effective way of redistributing wealth.

The report is also based on the contentious belief, which it does not properly examine, that it is possible to build our way out of house price inflation. The central assertion is that by nearly doubling the rate of house building, we can, over the years, reduce the average rate of house price inflation to the European average. I shall leave aside the question of whether that is desirable, or whether any sensible comparison can be made between our housing market and that in Europe. Nevertheless, it is disappointing, from an economist's point of view, that there is a comprehensive lack of analysis of the extent to which house prices are sensitive to the number of new houses being built, which, as the report acknowledges, amounts to about 1 per cent. of the housing stock per annum. All the evidence suggests that house prices in the UK are far more sensitive to the level of interest rates, and to the growth in real earnings and the expectation of future growth, than to the number of new houses being built.

Andrew George (St. Ives) (LD)

The hon. Gentleman makes a strong point. I agree that we cannot simply build our way out of the current housing crisis faced by the UK, particularly in the south. Does he agree that what we should do—the Barker review did not address this matter—is build up an intermediate market for those people occupying the big gulf between low earnings levels and high house prices in areas such as my constituency? Simply building more houses will never make any significant impact on that enormous gulf.

Mr. Norman

I thank the hon. Gentleman for his intervention, and I agree with the thrust of his remarks. There are real problems with housing supply in Britain, both in terms of the ladder of home ownership, and on the question of affordability, particularly in rural areas. I shall address those issues later in my remarks.

The Barker report, by adopting the overall thesis that we can build our way out of inflation, and believing that that is a good idea, loses sight of the underlying problems in housing and housing supply. If it were true that we could build our way out of house price inflation, one would expect the rate to be static in areas of the country where there is a surplus of houses. In fact, recent strong evidence shows that in areas with a housing surplus, house price inflation is just as high as in areas where there is a deficit. That is logical, because people are judging what they can borrow and what they can afford to spend on the basis of the prevailing interest rates and their rising average level of wages.

Mr. John Hayes (South Holland and The Deepings) (Con)

My hon. Friend makes the excellent point, which is not often made, that the unresponsiveness of the market is about not just the relationship between price and supply, but that between supply and price—it is a two-way insensitivity. Does he agree that the other profound problem with the use of supply-side mechanisms for dealing with price volatility and inflation is that they are a slow and clumsy method?

Mr. Norman

My hon. Friend makes a crucial point. Most of us accept that the objective should be not to reduce house price inflation—that may be desirable, although it is questionable whether it can be delivered—but to reduce house price volatility. That would be of benefit to the wider economy. However, to do that, we would have to create a much better link between housing supply and housing demand, which is difficult to do in a market with such a long lead time for supply. The Barker report makes recommendations on that, in the hope of lubricating and encouraging the flow of housing. However, any practical business man will know that there is a four, five, six or seven-year lead time for triggering new supply into the market. It is arguable that increasing the level of house building throughout the UK will have the effect of increasing volatility, because it will lead to more times of surplus, when people cannot afford to pay, or of deficit.

Mr. Edward Davey (Kingston and Surbiton) (LD)

I caution the hon. Gentleman against going too far down that road. It is clear that house price inflation is at least partly caused by demand outstripping supply. He argues that in some areas where there are surplus houses, house price inflation is still increasing, but those surplus houses are in relatively small areas where people do not want to live, so the houses that are not being used do not affect the real housing market.

Mr. Norman

I am grateful for that intervention. The hon. Gentleman is getting into an analysis of the issue that Barker never covered. The review is essentially a countrywide analysis. It does not seek to understand what we should do about areas of surplus housing and housing poverty. It is probably true that if we depress the rate of increase of house prices, we will reduce the chances of releasing land in inner cities or areas of comparative housing poverty, because the level of opportunity for developers will be reduced. That is a more complex issue, and a matter for discussion, but I welcome the hon. Gentleman's point.

Mr. David Drew (Stroud) (Lab/Co-op)

The hon. Gentleman is being generous in giving up so much of his time. Does he accept that part of the problem with Barker—he has already alluded to it—is that the attempt to take a global view gives us an over-simplistic impression of the housing market? There is no national housing market. There are differences between urban and rural Britain and between the north and the south, and there are different types of tenure. There is a real danger in trying to find a one-size-fits-all solution.

Mr. Norman

I agree. Again, we are getting into issues that are not sufficiently analysed by Barker. Almost all housing is local. House prices may be determined by macro-economic conditions, but affordability, scarcity and housing poverty are local issues and have to be addressed on that basis by agencies and instruments of Government as well as the marketplace. It is about adapting the prescriptions to local needs, and that is the complete opposite of the tenor or many of Barker's conclusions and recommendations.

I shall move on to another aspect of the Barker approach. In her keen endeavours to demonstrate the existence of housing scarcity, which she seems to have assumed before even starting the report, Kate Barker depends almost entirely on historical housing and household projections, most of which are based on, and drawn from, data prepared in 1996 or before and well before the results of the 2001 census. That is important because that census revealed about 900,000 more citizens or members of the population than were anticipated in the earlier projections. At a stroke, therefore, the census places a big question mark over our understanding of the total balance of housing supply and demand and makes a mockery of many of the statistics on which the report draws. However, in the determination to demonstrate a shortage of housing, those housing projections were adopted hook, line and sinker.

The report then draws on dated evidence about housing scarcity and, in particular, lists categories of scarcity and tries to quantify the level of new housing need. Those categories include, for instance, people in temporary accommodation and the 150,000 children who live in dwellings above the first floor. We can all see that there may be issues to address about children living in high-rise blocks, but equally accommodation of that type may be perfectly adequate.

There is undoubtedly a problem of people living in temporary accommodation, but the fact that there has been an increase in the number of people living in such accommodation—incidentally, that happened under this Government—is not necessarily evidence of a total housing shortage or a need to double the rate of house building. Such a situation can be evidence of problems of migration and immigration or of individual local authorities comprehensively failing to address the lack of affordable accommodation for people who need it. It can also be a function of the nature of the economy, the fact that some areas have comparatively high unemployment, and the movements of people between different parts of the country. Addressing each of those categories at a micro level is far more important and insightful than saying that the situation is evidence of a global scarcity and we can build our way out of it.

A useful study commissioned from Europe Economics by the Campaign to Protect Rural England demonstrated that, even if one takes the Barker approach to national statistics, it is hard to demonstrate that there is a national scarcity of housing. In fact, the CPRE study demonstrates—in data quoted in Barker's interim report, which mysteriously disappeared from the final version—that, in aggregate, there is a surplus of housing in Britain: there are more houses than there are households. That does not mean that every household can find the house in which it wants to live or should live. However, the surplus has increased, not diminished, in the last 10 years, despite Barker's assertion that there is a shortage of house building and a problem that will be solved by building more new houses by central Government diktat.

Andrew George

I am grateful for the hon. Gentleman's patience in giving way. In saying that there are more houses than there are households, does he accept that in constituencies such as mine, where 10 per cent. of the stock on the mainland and over a quarter on the Isles of Scilly is used as second homes, an extremely valuable local resource is being misused? For us, an effective planning policy would, perversely, be a restrictive one that would enable an intermediate market to develop to meet local need; we should not simply build houses that local people cannot afford.

Mr. Norman

I welcome the hon. Gentleman's point. I shall come on to how to establish what local need really is and how to address it.

We can argue about whether there is a housing surplus or a deficit—the Europe Economics study suggests that the surplus has increased from 2.4 per cent. to 3.7 per cent., but it is over 4 per cent. in the north-east and north-west and, unsurprisingly, just over 2 per cent. in the south-east. However, we know that such statistics are unhelpful when considering the national picture, because they conceal the fact that there are real scarcities locally, and all housing is local. The only conclusion we can come to is that the problem is not susceptible to sweeping global analyses. National household projections have proven to be totally flawed and of limited value, and the belief that doubling the rate of house building will address the problem of inflation is a complete delusion. Tragically, it would fail to address the problems that concern hon. Members.

Let us consider what the household projections reveal if they are analysed in a degree of detail that the report does not even endeavour to understand. Due to a demographic shift in Britain, there is an urgent need to adapt our housing supply. However, nowhere does the report ask what type of housing we will need in future and what the demographics tell us. The 1996 household model, which has become a sort of conventional wisdom in the industry, produces unrealistic outcomes.

Let me give two examples. First, the household projections suggest that there will be no increase in the number of lone parents over the next 10 years. I cannot say whether that is right, but it is a surprising conclusion and we should hesitate before accepting it. More importantly, they show, in the context of a comparatively static population with marginal net immigration, that the signal shift in housing demand is towards single-person households, which increased by 88 per cent. between 1991 and 2001. Such households, in the majority of cases, contain elderly people living alone. The vast majority of the requirement—66 per cent. for 2001 to 2011 and 78 per cent. for the subsequent decade—is for one-person households. That is unsurprising because, with the ageing population, more single, elderly people are seeking accommodation on their own. And guess what? We are building exactly the opposite. The vast majority of houses that we have built over the last 10 years are three or four-bedroom houses.

The housing policy pursued by the Government, particularly in the south-east of England, will, exactly as people say, result entirely in the development of executive homes in the suburbs and countryside and fail to meet the real challenge of Britain's changing population. It is a tragedy that Kate Barker's report completely sidesteps the issue of what the household projections—her own figures—really suggest.

In 2003, only 7 per cent. of new properties were one-bedroom houses and 63 per cent. were three or four-bedroom houses. If we can read anything into the available figures, it is that that system is not working very well, and there is a problem to be addressed. The situation is unsurprising: executive homes are driven by the marketplace and are the most profitable thing to develop. They entice people to move out of their existing accommodation to parts of the country where they may have a better quality of life, but the consequences for the housing stock, for the inner cities and for other areas of the country are profound. The Barker report fails to analyse any of that.

I want to move on to the question of the regional and local effects of the report's proposals. A number of hon. Members have raised that issue. My central belief is that the only useful way to consider the housing market is to understand where the problems lie. The problems are local and specific, but the report treats the market as a single entity, aggregates demand for the total, and uses that as a central case to justify new house building. It proposes comprehensive measures to increase supply which run right across the issues of the environment, house building, taxation and so on. If they are implemented, they will inevitably result in a large amount of extra house building primarily in the parts of the country that are most congested and, in many ways, least able to afford it. That particularly involves the south-east and the south-west.

When it comes to the south-east, it is important to remember that the report recommends measures to increase the release of brownfield land. I am sure that most hon. Members would support that. There has been some success, partly as a consequence of Government action over the past few years, in ensuring that more brownfield land is released. However, the reality is that, according to the existing projections, 50 per cent. of new houses in the south-east will be built on greenfield land simply because the capacity of brownfield land is not there. If we double the level of house building, that 50 per cent. will rapidly increase to 60 or 70 per cent. We are looking at a charter for building in the countryside of the south-east of England, the most congested part of Britain.

Bob Spink (Castle Point) (Con)

I want to take up one point raised by my hon. Friend. He asserted that most hon. Members would be happy for brownfield land to be given up to new house building in the south-east. That is a contentious issue. It is not quite so. We would of course prefer building on brownfield land to building on greenfield land, but even building on brownfield land in the south-east is not acceptable without the necessary infrastructure development, especially in the flood plain, which in much of the south-east is under increasing threat. Along with the plans we must have better road and rail systems. There is already too much pressure on the infrastructure and overcrowding on our public transport systems.

Mr. Norman

My hon. Friend makes a good point, which I want to come on to. As soon as we adopt the idea that many more houses are going to be built in the south-east, there are profound implications not only for the environment and public expenditure, but also for migration between different areas of the country. It is important to understand the effect of those implications, particularly on the areas with the highest levels of housing poverty, before we start to move forward. The reality is that the report will result in many more houses being built and in a continuation of the current imbalance, whereby the housing investment in Britain goes, generally speaking, to the more prosperous parts of the south-east and south-west, into building executive homes.

Mr. Andrew Love (Edmonton) (Lab/Co-op)

I apologise for missing the very beginning of the hon. Gentleman's speech. In the first half of his speech, he seemed to criticise the Barker review for taking only a national view, not a regional and local view. However, in the second half, he seems implicitly to be criticising the report because it recommends massive house building in the south-east and south-west. Was not the idea of the report to make a strong case for an increase in supply, but to leave the debate about how that should be achieved to the House and to Departments?

Mr. Norman

I am glad that the hon. Gentleman has raised that point, because it gives me the opportunity to clarify what I am saying. The Barker report does not make the case for more house building in the south-east, as such; rather, it argues for doubling the rate of house building in aggregate, based on aggregate national statistics. Perhaps I am doing the report an injustice, but I assert that the consequence of that proposal will be a substantial increase in house building in the south-east. At the very least. it is difficult to see how the report's recommendations can be implemented otherwise.

Any nationally driven state programme of house building will have consequences for migration, public infrastructure and the environment. It is important that we understand that the pattern of household movement in Britain over the last 30 years has typically been out of the cities, particularly in the midlands and the north, and into the suburbs. The pattern has also been to move away from the north and into the London conurbation, and out of the London conurbation and into the south-east and south-west. That is vividly reflected in the population statistics. To provide hon. Members with some examples, the population of Hull, where the Deputy Prime Minister has his constituency, has declined by 11 per cent. in the last 20 years alone. The population of other northern cities and areas has similarly declined. For instance, Newcastle's population has, I seem to recall, declined by about 21 per cent.; in Manchester the figure is 16 per cent.; on Merseyside, in aggregate, the population has declined by 10.5 per cent.; and in Middlesbrough the figure is 10.5 per cent., and so on.

The depopulation of urban areas is a serious problem in other ways, because it results in hollowed-out cities and housing poverty, with areas that are under-occupied. The phenomenon is also part of the syndrome of failing schools and higher crime rates in such cities. It is important to remember that for every new executive home that we build in the south-east, a household will leave another area to move into it. The chances are that that household will have moved out of metropolitan London or, perhaps, down from the north. Yes, there is a new household living in the suburbs of Tunbridge Wells; but somewhere there is an inner city where the school roll is declining, crime is rising, the better-off, more able people are leaving and there is high unemployment and social failure. It is not possible to disaggregate the problems of building in the south-east and regarding the region as the economic powerhouse of Britain from the impact of the north and regional policy as a whole.

Several hon. Members

rose—

Mr. Norman

I give way first to my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes).

Mr. Hayes

My hon. Friend is right: one of the big holes in the Barker report is the failure to link house building to regeneration in the way that he describes. Will he comment on the notion that the housing policy that one adopts to regenerate cities and the sociological effects that it has on population mix are key elements in reclaiming urban areas?

Mr. Norman

My hon. Friend makes the point much more eloquently than I could have done. If there is a serious housing problem in Britain, involving housing poverty and an inability to provide our children with a decent quality of life, it is in the inner cities, particularly in the north and the midlands. A report on housing supply that neglects to mention that issue misses the point to a degree that is reckless. I give way to my right hon. Friend the Member for Skipton and Ripon (Mr. Curry).

Mr. David Curry (Skipton and Ripon) (Con)

The problem now is that one has to be very well off or very badly off to live in the inner cities. For instance, Leeds has some high-quality housing in the centre, but it is expensive. It is the middling sort who find it difficult to live in cities.

I was a little hesitant when my hon. Friend said that part of the pressure in the south was the result of people migrating from the north. I am not sure whether that is true. I think that people are trickling out of the cities in the north into the suburbs. The pressures in the south-east are very much the result of household formation and immigration into London and the outer areas. I think that there is a net migration from the south to the north.

Mr. Norman

My right hon. Friend makes an interesting point. It shows that the movement of population is a complex matter. It is not as simple as saying that people are moving from the north to the south-east; they are not. Typically, when kids leave school or go to university they migrate to jobs in London; they get married in London and then move out to the south-east; and they may retire to the south-west. Net immigration tends to create particular pressure points in London.

Understanding the patterns of migration is important. It is a central fact that, although we have heard success stories in urban regeneration, even during the last few years—Leeds is one—the reality is that over the past 20 years, the major conurbations of the midlands and the north have declined in population. That is a serious problem, and until it is reversed—I am not saying that it will be easy—it is naïve to suppose that we can start to regenerate those cities. Regeneration requires holistic solutions.

Mr. Davey

The matter is complex but, whatever the reason. London and the south-east have seen more population growth than some cities in the north. I am not sure of the logic of the hon. Gentleman's argument. I do not wish to misrepresent what he is saying, but he seems to be suggesting that if one builds a house in the south-east or London, someone will move there. Surely, the underlying dynamic of the market is the direction of the economy and the fact that the jobs are to be found where there is economic development. If economic development could be better balanced throughout the country, it would help to achieve a more balanced housing market.

Mr. Norman

The hon. Gentleman is right: it is not possible to address the problem of housing supply outside the context of regional policy. The difficulty is that the Barker report is blind to that. It is not interested in what happens locally, but starts from the assertion that we can solve the problem by building our way out of house price inflation. That misses the important points that are being made.

Of course, there are other ways of addressing the efficiency of housing usage. It could be argued that regenerating the cities of the north, where there are areas of housing surplus, and creating good housing developments as has been done in the centre of Leeds, would be a more efficient way of using our national housing stock than insisting on more and more house building in the countryside of the south-east.

Mr. Love

I thank the hon. Gentleman for giving way yet again. This is indeed an extremely complex issue. I refer him to a report in The Economist last week, which said that recent trends suggest that people are moving from London to the cities of the north, and that has been driven by high house price inflation in London and the south-east. The question raised by the report is whether that process would be reversed if house price inflation fell. They are extremely complex issues, and the trends are difficult to predict.

Mr. Norman

They are complex issues, which is why we should be cautious about making sweeping judgments about house-building policy and its impact on the economy. As to whether people migrate from the south to the north, I suspect that the evidence is not yet sufficient; if that were found to be the case, it would be a reversal of the trend of the past 30 years. Some cities in the north have expanded, but the vast majority have not. Whereas Cambridgeshire has seen an increase in its population of 20 per cent., Nottingham's population has declined by 4 per cent. Those migrations have profound effects on the local housing market and the local economy.

It is one of the Chancellor's main thrusts that the south-east is one of Britain's business powerhouses, and the CBI and business organisations argue for more infrastructure investment and more housing in parts of the south-east where the housing market is very tight. However, those arguments are very much open to challenge. I was involved in managing businesses in Britain for 27 years, but if I were starting one tomorrow, it would not be in the south-east. If I were looking for a place to run a business, employ people and obtain investment for transport infrastructure, and, indeed, for a place that would provide quality of life, I would head north, and I am sure that the Minister will find an opportunity to agree with me on that point.

The flipside of that argument is that we must be cognisant of the fact that a high level of house building implies substantial investment in infrastructure not only in the areas where the new houses are built but to address problems in the areas that people are leaving. In addition, building more houses in places such as the south-east or London will result in substantial congestion costs, a problem that is addressed nowhere in the Barker report. The public infrastructure costs of house building are formidable. By way of illustration, I point out that the mathematical implication of existing Government projections for the south-east, which are, as I recall, that there will be 900,000 new homes in the next 10 years, is that 3,000 new hospital beds, 300,000 new school places and 900 km of new roads will be required. Very little of that infrastructure is planned for, and, of course, those school places in the south-east will probably replicate school places that already exist elsewhere.

My argument is not that a high level of house building is necessarily right or wrong but that we must understand its implications before making sweeping recommendations such as those in the Barker report. There is nothing in the report to address the problem of public infrastructure or congestion costs. In my judgment and that of most environmentalists, it does not even sufficiently address the question of costs to the countryside and rural England. Indeed, its main contribution in that respect is to recommend that green-belt restrictions be relaxed, presumably to encourage building on the countryside.

As several hon. Members have said, one housing problem that we know exists is the lack of affordable housing and a ladder to home ownership. The report endorses that view and, of course, uses it as a base for some of its recommendations for increased house building. We all know, however, that the problems with affordable housing are a matter not simply of house price inflation but of how we manage the mix of houses that is built. The report signally fails to address that problem. In the past seven years, there has been a dramatic decline in the number of affordable houses built and the number of houses built by social landlords. I would venture to suggest that that decline is a function not of any aggregate view of house building but of Government policy on, and funding for, social house building.

Jeremy Corbyn (Islington, North) (Lab)

The hon. Gentleman has been very generous in giving way to many hon. Members. If he studies the statistics for housing construction, he will see that the number of private sector houses developed over the past 10 years was roughly the same each year. The number of developments involving registered social landlords, including housing associations, fluctuates, but it is about 20,000 or 30,000 a year. However, the number of council developments has fallen from a high of about 38,000 in 1990 to virtually zero now. We are missing out on the option of local authorities developing housing to meet desperate social need, and the community pays for that in the housing benefit needed to meet the sky-high rents charged by the private landlords of the leased properties into which homeless people are put.

Mr. Norman

The hon. Gentleman and I can agree that there is a requirement to deal with the problem of affordable housing in most parts of the country, but we will not necessarily agree on the means to achieve that. I do not think that the idea of bringing back large-scale council house-building programmes is a runner, and it will certainly not be endorsed by the Deputy Prime Minister. However, it is clear that it is not only council house building that has fallen under the present Government; building by all social landlords has dropped dramatically.

The Barker report recommends that the rate of building of affordable housing by social landlords should be increased by 18,000 properties per annum. It estimates that the extra cost to the public purse of that would be up to £1.6 billion every year. I should be interested in the Minister's observations about whether the Government will make that sort of commitment to tackle the scarcity of affordable and sustainable housing, the very problem that the Barker report was, according to the Deputy Prime Minister, designed to take on—this is something that he endorses.

The Barker report also makes many practical recommendations. I do not want to give the impression that all of those are wrong or that the report does not contain worthwhile analysis or contribute to the debate. However, some of the recommendations stray well beyond housing into other public policy issues. The Minister may want to comment on that.

The tenor of the recommendations is strongly centralising and redistributive. They convey a centralised view of the world, in which it is thought that the state should intervene in fundamental ways in the house-building market, both to shape that market and to manage pricing.

Mr. Love

In the past couple of years the market has produced the highest house price inflation on record, with the lowest number of completions since 1924. Does the hon. Gentleman believe that there should be some intervention in the market to right that?

Mr. Norman

I am not sure whether the hon. Gentleman was present when I explained the premise on which I base my remarks. The contention of the Barker report is that we can build our way out of house price inflation. Kate Barker asserts that if we double the rate of house building, house price inflation may come down to the European average. That is not a conclusion accepted by most economists, and I would certainly not accept it.

The hon. Gentleman referred to the record increase I am not sure that it is a record—in house price inflation in the past two or three years. That has caused great concern, but he should know that it has been driven by what the Prime Minister likes to refer to as a record period of low interest rates, and by rising real earnings. An increase of 1 per cent. in interest rates would probably have a negative effect on house prices of 10 to 15 per cent. It would take out virtually all the house price inflation. If we are really concerned about house prices, we should deal with those factors. To imagine that we can build our way out of the problem, bearing it in mind that new houses account for only about 1 per cent. per annum of total housing stock, is to defy the laws of economics.

There is no substantive analysis of the issue of house price sensitivity in the report. For something from an economic source, that is disappointing.

Mr. Love

I partially accept the hon. Gentleman's argument. If the UK is compared to Holland, Australia or the United States, similar house price inflation is evident, and I suspect that the reasons for that are similar to those that he has outlined. However, I do not accept that supply does not affect that. It is critical that, in addition to dealing with the other issues that he mentioned, we tackle the supply issue In certain parts of Britain there is a gross deficit in the number of houses per head of population compared with other countries.

Mr. Norman

The hon. Gentleman may say that, but the thrust of my remarks is that the aggregate figures, taking the country as a whole, do not tell the local story. There are local scarcities, which need to be tackled by a Government who facilitate local solutions. That is not the thrust of the Barker report, which takes the view that there is an aggregate national problem, which can be solved with national solutions and a national policy, driven, and cascaded down, to the regions. Conceptually, that is the difference between what is felt by most hon. Members who have spoken in the debate and the focus of the report.

The report advocates other forms of market intervention; for example, taxing houses by value. It would be interesting to know whether the Minister feels that that should become Government policy. The report also recommends the implementation of a development land tax to ensure that the Exchequer reaps the benefit of what is referred to as "windfall profits". To say the least, the implementation of such a tax would be extremely complex, and the motivation behind it is not clear. Whether it is desirable to sequester windfall profits depends on one's political view, but it is highly unlikely to be a substantial source of revenue. It gives the lie to the motivation behind some of the recommendations and the report's underlying tone that developer profits are to be discouraged.

Another critical element in the recommendations is the report's enthusiastic endorsement of the role of regional government in implementing housing change. To ensure that that happened, new official bodies would be created: regional planning executives with expensive chief executives, for example. I doubt that people in Kent, Sussex or elsewhere would welcome that innovation, and the reaction of local government in most parts of Britain is very hostile to it.

We must consider exactly what the Government want local government to do nowadays. If they are to remove its last substantial remaining power, discretion in planning, they will also remove the ability of local people to influence their environment—for example, how many houses are built where, and the design requirements—and there will be profound implications for the future of local democracy.

Prior to this debate, I talked to some local government leaders, all of whom are extremely worried about the Barker report. I quote Sandy Bruce-Lockhart, leader of Kent county council, who said, rather poignantly: I stood in Newcastle watching an estate built just six years ago, with Government city challenge money, being bulldozed to the ground. The area was to be left derelict. It makes little sense simply to rebuild these houses in the south. Much of the prediction of growth in Kent is not for Kent people, it is for migration into Kent, particularly from the north and the cities. That is the point that I made earlier. That is what people on the ground are seeing and that is what they believe. The imposition on Kent of a regional government with new powers, based in Guildford, which could be the other end of the country as far as people in Kent are concerned, will be greeted with deep local hostility.

I have been critical of the report and I do not want to present an unbalanced picture. As I said, this is a substantial issue that deserves attention, and the report is a major contribution to the debate. I deliberately focused on the areas of disagreement, which are in my conceptual approach and practical recommendations. There are interesting recommendations in the report which we can probably welcome. For example, it contains some suggestions on how to manage larger developments and lubricate the planning process, and on the release of brownfield sites. However, overall the report adds disappointingly little to our understanding of the dynamics of the housing market. It is based on the acceptance, hook, line and sinker, of outdated projections, which have already been potentially discredited, and which fail to demonstrate what the report purports to demonstrate. It is also based on the assumption that state-driven house-building initiatives can redistribute wealth, and that that is a viable goal for Government, and on the belief that house price inflation can be dealt with, and suppressed by, encouraging more house building and imposing it on the regions of Britain.

The report fails to understand Britain's true housing needs, and it fails even to touch on the question of how we can transform and move our housing stock to meet the needs of the growing numbers of elderly people living alone and single people living in our cities. It does not attempt to address the issue of regional policy and alternative policy approaches, nor does it seek to understand the relationship between house building, the housing market, the plight of our inner cities and migration from north to south or vice versa. It has a centralising approach and a strong undertone of belief that the state and the tax system can be used to manipulate markets. if implemented, it would result in the wrong houses in the wrong places.

Several hon. Members

rose—

Mr. Joe Benton (in the Chair)

Order. Before the next speaker begins, I should inform the Chamber that I propose to start the winding-up speeches at 3 o'clock, which will allow 10 minutes each for the Opposition spokesmen and the Minister to reply.

2.51 pm
Mr. Kelvin Hopkins (Luton, North) (Lab)

Thank you, Mr. Benton. I shall try to be brief.

First, I welcome the Barker report as a good start. It identifies some of the key aspects of the housing problem, although it does not solve the whole problem. I have a lot more to add to what Kate Barker has said. I have asked the Leader of the House twice in business questions for a major housing debate on the Floor of the House, but we have not yet had one. I hope that the Minister will use her influence on him to bring forward a big debate, because housing is the major crisis facing the people of Britain—certainly in my constituency.

Our key problem is the desperate shortage of housing for ordinary people to rent. The market will not solve that problem. Two thirds of the population could probably get into owner-occupation, or are already in it, but a sizeable proportion of the population will have decent homes only if they are provided at rents they can afford. Such housing can be provided only if there is some degree of intervention by the state. That has been proved over and over again in the past 100 years. The only way to avoid slum dwellings and Rachman-like landlords is to provide social housing, which I believe should be local authority housing. Kate Barker has put her finger on that at least.

We have been in similar situations before, and each time we solved the problem by building houses. Some 50 years ago, when I was a small boy at school, some of my friends were rehoused in council houses which were magnificent because they had superb gardens, three bedrooms and were beautifully built. In the borough of Barnet, where I grew up, they now sell for £300,000 and have all been sold off. That problem was caused by house sales driven by massive discounts, which were paid for from housing accounts rather than the central Exchequer. The problem was then exacerbated by the collapse of house building.

I recently had lunch with representatives of the House Builders Federation, who told me that they want to build executive homes on greenfield sites for profit. They want the developed value. They are not interested in contracting to build housing for other organisations, in building on brownfield sites, or in building social housing because the profits would be insufficient. I briefly suggested in business questions that we should reconsider whether the state, or local authorities, should have a house building capacity—sustained by appropriate policies from the Government—in order to carry out such development.

There are thousands of people on the waiting list in my constituency of Luton, North; I do not know precisely how many, but there are 7,000 in the town as a whole. My constituency is interesting because it was at the epicentre of the collapse of owner-occupation for ordinary people in the early 1990s. People who were persuaded to buy starter homes and urged to take advantage of ever rising house prices bought into those small starter homes, which rocketed in price, but then there was a house price collapse and they were left in negative equity of were repossessed. There were more repossessions and more negative equity in my constituency than anywhere else in the country. Thousands of ordinary people at that margin and who had been encouraged to enter the owner-occupied sector could not sustain it and found themselves homeless and in massive debt. We do not want to repeat that. The only way to avoid it is to provide sufficient decent homes to rent, which people can live in out of choice, not simply because they are desperate.

The major problem in my constituency is the lack of affordable housing. I will not dwell on different sorts of affordable housing; I am talking about local authority affordable housing. The attempted marketisation and privatisation of housing over the past 30 years, starting with the Housing Finance Act 1972, has been disastrous. Profound mistakes have been made at every step of the way. Thirty years ago, we solved the problem in Luton. As vice-chair of the housing committee, I battered on then, as I do now, about the need to build council houses. We built hundreds of council houses and, as a result, we housed 700 families in one year. We also bought in the existing private sector. There was a collapse in the mortgage market and house prices were falling. There was a slump in the owner-occupied sector so we helped by buying several hundred houses and renting them out as council houses. That solved several problems. It got people into decent homes and off the housing waiting list, and I am glad to say that the council became popular for doing a good job. It also meant that the owner-occupier market remained relatively buoyant. The policy was regarded as dangerously socialist because it was municipalisation. Subsequently, everything was sold back as people became better off, and big subsidies were given for owner-occupation. We have now lost thousands of houses to owner-occupation, which could have been used to house the thousands of people still on the waiting list.

We could have encouraged people into owner-occupation from the council housing sector by simply giving them a subsidy from the national Exchequer to buy in the owner-occupied sector. That would have boosted owner-occupation and decanted people from council houses so that people on the waiting list could occupy that housing. I urge my hon. Friend the Minister to take seriously the problems of people in constituencies such as mine in south-east England. They do not want executive houses on greenfield sites; they want decent homes with affordable rent. It is down to the Government to provide that for them in the future.

Mr. Joe Benton (in the Chair)

I am prepared to call the hon. Member for Castle Point (Bob Spink), but I ask him to ensure that he concludes by 3 o'clock.

2.57 pm
Bob Spink (Castle Point) (Con)

I am grateful to you, Mr. Benton, and I shall try to be brief.

The Barker review of housing supplies was well summed up by Sebastian O'Kelly, the editor of Property on Sunday. Speaking about the Treasury report and the building of 2.5 million extra houses, he said: To build them, the Government needs to overturn the planning process that has existed for 50 years: a process that spared us again and again from the most appalling excesses of ill-thought-out, speculative development.

We need more social housing. As I know from my weekly surgeries, we need about 100 units of social housing in my constituency. We must do more to ensure that demand for social housing is met by the housing associations rather than from council new build.

The massive increase in house building is not necessary or appropriate, particularly in the south-east. Let me illustrate the change using, the example of my constituency. We have a target of 2,400 new houses, and although we are well over halfway through the planning period, we have only identified 700 new sites for those houses. We are way behind. That shows how extravagant the target of 2,400 was, yet the Government are trying to increase it to 4,000; that is completely unsustainable.

I shall briefly address the point about local democracy. Under the current system, there is considerable democratic input, with local councils making decisions within local plans that comply with the county councils' structure plans, which in turn reflect the Government's planning guidance. The Planning and Compulsory Purchase Bill changes that into a system whereby the Government impose regional spatial strategies, abolishing local control and structure plans completely.

The regional housing boards are sinister. They will ensure the delivery of the Government's massive increase in house building with cram-them-in density and the green belt being destroyed, whether local communities like it or not. I am old-fashioned enough still to believe that local communities know what is best for them and that they should be trusted with such decisions. They should be listened to and not overridden by the centralised, Big Brother controls that the Government are seeking to impose.

I see that we have reached the witching hour of 3 o'clock, so I shall abide by your instructions, Mr. Benton, and finish my contribution

3 pm

Mr. Edward Davey (Kingston and Surbiton) (LD)

I start by congratulating the hon. Member for Tunbridge Wells (Mr. Norman) on securing this debate. We have been waiting for it for some time, and I would encourage the hon. Member for Luton, North (Mr. Hopkins) to continue his efforts. The issue is of such importance that we need a debate on the Floor of the House, although in the meantime I welcome this chance.

I also welcome how the hon. Member for Tunbridge Wells did the job. He certainly taught me a few things that I had not known before the debate, and he helped redress the balance. In the Barker report and some of the commentary before and after it, we heard that the issue was all about housing numbers and how we should he looking for growth here, there and everywhere. The hon. Gentleman did an excellent job in suggesting that there is another way of looking at the subject.

Despite sharing some of the hon. Gentleman's reservations, I still welcome the Barker report for several reasons. First, a focus on the supply side is important. I am sure the hon. Gentleman would agree that we have seen a downturn in the number of new houses being built, particularly in the social and affordable sector—I make no distinction between the two. He was right to point out that we must be far more sophisticated in our analysis of the types of houses that are needed and ensure that the supply side, whether that is the private or subsidised sector, is providing such houses. The issue is not just about numbers, but about ensuring that we get the right type of housing.

I welcome the fact that there has been a report on the problems of the supply side. I have been concerned for some time that the Government's short-term initiatives seem always to be focused on the demand side. For example, some of the key worker housing subsidies for loans seem to exacerbate the situation rather than deal with the fundamental problem, which is providing more houses for certain groups in our population.

I welcome the Barker report because it is also a catalyst for debate and gives us a reference point to discuss the numbers. It is interesting to compare the briefings from the CPRE and from Shelter. Shelter believes that the professor has underestimated the need for house building, while the CPRE believes that she has overestimated it. She might believe that she has therefore got it right. However, whether or not the exact number is right, the key point made by the hon. Member for Tunbridge Wells, which I hope the Minister will take on board, is that it is not just the global figure that is important and that we cannot impose anything from the top down.

That brings me to my key concern about the Barker report, which is that it seems to be a centrist solution. The Government have been moving in that direction for some time, and although I am sure that Professor Barker is her own woman, the fact that some parts of her report have rubber-stamped the Government's policy should be acknowledged. I was particularly concerned by recommendation 6, which has two parts to it. I am sure that hon. Members remember it—

3.4 pm

Sitting suspended for a Division in the House.

3.19 pm

On resuming—

Mr. Davey

I was about to tell hon. Members about my objections to recommendation 6 of the Barker review. The two things that I find most objectionable concern centralisation. The review proposes that the regional planning bodies, which the Government have yet to set up under a Bill that is before Parliament, and the regional housing boards, which have only just been set up, should be merged. That would create a large, new, unaccountable regional quango with an even less accountable executive—a regional planning executive—with a series of powers and officials. The recommendation is exceedingly worrying. It might be just an outrider for the Deputy Prime Minister's thinking, but it suggests that housing and planning policy is to be carried out by bodies that have no democratic status. That is a key issue in the Planning and Compulsory Purchase Bill as it ping-pongs between this House and another place, because an amendment has been tabled by the Liberal Democrats—with the support of the Conservative party—to prevent powers from going up from county council level unless and until there is democracy at regional level.

Some of us do not think that the powers ought to be regionalised. In any event, it should be an underlying principle that wherever major powers are exercised, the people who exercise them should be accountable. It is worrying that the Barker review develops one of the Government's unsatisfactory policies. I hope that this House and the other place can kill it at birth. If we do, we will at least ensure that we do not have to witness the death of democracy in respect of planning and housing.

Although I share some of the criticisms outlined by the hon. Member for Tunbridge Wells and some others, let me make some positive points about the recommendations. The review proposes a new, tax-transparent vehicle for investment in the private rented sector. That has some attractions. There is probably cross-party consensus that that sector needs to develop. Increasingly interesting and attractive options are being proposed by bodies such as the Joseph Rowntree Foundation to meet the needs of people who could afford near-market rents but for whom suitable properties are not being built by the private sector. It is possible to imagine a tax-efficient vehicle being designed to plug that gap. My concern is that we might return to the bad old days of some versions of the business expansion scheme, under which there was abuse of tax loopholes. I am particularly concerned about abuses in relation to second homes. So, although I welcome the proposal, it is with that caveat, which I hope the Minister will share with Treasury colleagues.

The most disappointing thing about the report is what is missing. There are the underlying macro issues, on which we touched in early exchanges, in respect of regional economic development. I am concerned about the fact that the Government hardly seem to consider regional policy—they seem to have given up on it. One or two policy issues were mentioned in the report, but not really developed. The first—empty homes—was touched on by the hon. Member for Tunbridge Wells. Even in London and the south-east, there are many empty properties. It is incumbent on policy makers to find ways in which they can be brought back into socially useful occupation. We have worked hard on that with a few landlords in my constituency and shown that it is possible. However, we need policies to ensure that it happens. That can satisfy a slug of the housing need quickly, cheaply and in a sustainable way. It is a key issue that the Government have not tackled. I know that there are consultation papers on it and that I keep bleating on about it every time we have a housing debate, but until we see action we shall continue to push for it.

The second policy issue concerns the perverse tax incentives in the system. It is nonsense to levy no VAT on greenfield development but to charge it on repairs and regeneration. If we could address that, we could send a clear signal to the market and to private sector developers that they can invest in regeneration and in repair and renewal, thereby ensuring that that is where investment goes. I am concerned that, although the report mentions the matter, it is negative about it and its reasons are not persuasive.

Time has caught up with me. I say simply that I hope the Government will give more time to debate this issue and will not press ahead with any of the recommendations until the House has examined and scrutinised the report.

3.25 pm
Mr. John Hayes (South Holland and The Deepings) (Con)

This has been an important and strategic debate. I congratulate the Government on encouraging such a debate by commissioning the Barker report. I also congratulate my hon. Friend the Member for Tunbridge Wells (Mr. Norman) on giving us the opportunity to debate it in Westminster Hall; he made what I thought was one of the most cogent and accomplished speeches that I have heard in this place.

I say that I congratulate the Government, but I introduce a caveat. It seems odd that the Government should have commissioned an independent survey of housing strategy and simultaneously had two relevant Bills on the Floor of the House—the Housing Bill and the Planning and Compulsory Purchase Bill. Those Bills were debated before the report was published. If the Government want that sort of analysis, they should legislate on the back of it. They should consider the recommendations and legislate only if necessary. In that respect, the Government's chronology is subject to proper criticism.

To a degree, my observations about the Barker report have already been made, but I shall describe them briefly. First, the statistical assessment on which Barker is based is questionable. My hon. Friend the Member for Tunbridge Wells highlighted the problem of the 2001 census data, which seems to undermine the very foundation of Barker's measurement of the relationship between dwellings and households. It is also true, as my hon. Friend said, that Barker assumes that social trends will continue unabated, or in some cases counter-intuitively.

The Government's assessment, on which Barker relies so heavily, is that the number of single-person households will decline over time, whereas anecdotal suggestions are that it will grow. It assumes that the current level of immigration will be maintained, although some would say it is unsustainable. It assumes that current social trends—divorce rates, birth rates and so on—will be maintained. The assumptions that underpin Barker are at least questionable.

In straightforward terms, the unsuitable mix of housing—that is, too little social housing, as we heard from the hon. Member for Luton, North (Mr. Hopkins)—and the problem of affordability, which is related not to supply but to income and mortgage eligibility, may be at the heart of the housing crisis. It is not simply about numbers, as Barker encourages us to believe.

Secondly, Barker assumes that inadequate supply is the main driver in house price inflation and house price volatility. As my hon. Friend the Member for Tunbridge Wells suggests, it is a mix of several demand-side pressures that create high house prices and keep them high. It is the low interest rates, the relative unattractiveness of alternative investment vehicles, the level of borrowing secured by housing equity and the disproportionate allure of home ownership in the British culture that have driven up house prices and kept them up.

To apply supply-side solutions to the problem would be to use an extraordinarily blunt instrument. Given that only 1 per cent. of housing is new, and that only 10 per cent. of transactions relate to new properties, the idea that one can affect house prices by supply-side means seems at best hopeful and at worst an illusion.

Mr. Love

Will the hon. Gentleman, speaking on behalf of the official Opposition, say whether he accepts the thrust of the Barker report, which is that lack of supply is a major contributory factor to house price inflation?

Mr. Hayes

That is the very point I am making. In some parts of the country—and in some sectors; I mentioned social housing a moment ago—there is a mismatch between housing provision and housing need. There is no question about it, but the idea that one can affect house price inflation—the hon. Gentleman knows the numbers; he is an expert in such matters—is extremely ambitious. It would require a house building programme of almost impossible proportions. Such a programme would be impossible to carry out because of the restricted availability of land and capacity of the industry, and because of the time that it takes to deliver house building—a point that my hon. Friend the Member for Tunbridge Wells made in response to my earlier intervention.

The hon. Member for Edmonton (Mr. Love) may hope that increasing housing supply will have a dramatic effect—[Interruption.] I suggest to him that it will not have an effect in the short term, because one cannot magic houses out of the ether.

Barker's advocacy of large-scale building and relaxed greenfield planning constraints is likely to result in development that will be unsustainable in terms of infrastructure and unacceptable both in terms of housing quality and of local people's desire to see incremental development and the continuation of stable communities.

The Minister might choose to examine the development of a more fluid system whereby people could move more easily through social housing into market housing. She might also consider the adoption of a people-centred, rather than building-centred, approach to affordability, which would take into account how to make the houses available more affordable to the people who need them. She also needs to give proper consideration to the problem of empty homes, as the hon. Member for Luton, North said, and to examine the issues of design and quality, so that the worst-off people are not obliged to live in the worst quality houses.

3.31 pm
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Yvette Cooper)

I congratulate the hon. Member for Tunbridge Wells (Mr. Norman) on giving us the opportunity to debate this report, which raises important issues both for the economy as a whole and for individual quality of life.

May I seek your guidance, Mr. Benton, on whether the debate will finish at 3.45?

Mr. Joe Benton (in the Chair)

It will finish at 3.44.

Yvette Cooper

Thank you.

I shall begin my remarks by setting the Barker review in context. We should be clear that there is a series of things that are not covered in the review, and that we would not have expected it to consider them. Criticisms of it on that account would therefore be mistaken, although the points made may be important and valid, and we may take account of them in the Government's response. It is important to be clear about the purpose of the review.

The factors that led the Chancellor and the Deputy Prime Minister to ask for the Barker review were similar to those that had already been considered as part of the sustainable communities plan. However, many of those issues were so important, and the links between the housing market and the economy are so important, that it was considered necessary to analyse them further as part of the review.

In 2001, about 175,000 houses were built in the UK, which is the lowest annual figure since the second world war. The number of new houses built in the past 10 years is 12.5 per cent. lower than in the previous decade. The trend rate of house price growth in the UK has been 2.4 per cent. in real terms over the past 30 years, compared to an EU average of 1.1 per cent. In Germany there was no increase in real terms at all, and in France the increase was an average of 0.8 per cent. The latest evidence suggests that the trend rate of house price growth in the UK has increased to 2.9 per cent. over the past 20 years. There are also considerable regional variations in the UK, and there were extremes of volatility in the housing market under earlier Governments.

Although many of those factors had already been considered as part of the sustainable communities plan, the extent of their economic impact is significant. A volatile housing market contributes to macro-economic instability, hinders labour market flexibility and constrains economic growth. The Barker review was also prompted by the Treasury's assessment of the five economic tests and the position of the housing market in relation to Europe.

The review is a macro-economic assessment; it does not go into a series of detailed micro-economic considerations, nor does it examine the wider considerations of the planning system in the sustainable communities plan. Importantly, it does not consider the regional position, which we have to recognise must be an extremely important part of the final response to the Barker review.

Jeremy Corbyn

On the regional issue, does the Department expect a specific study to be made of the social and wider housing needs in London, and of increasing planning powers to ensure that we get at least a 50 per cent. proportion of social housing in new developments in the capital?

Yvette Cooper

We are getting under way a wide programme of work in response to the Barker review, including consideration of policy recommendations, consideration of, and consultation on, the underlying methodology used in the review and, in particular, the further regional analyses that are needed. Certainly one thing that we see arising from the Barker report is further work on affordable housing, and we are taking that forward in discussions as part of the spending review. However, the Barker review was aimed at providing important analysis to explain the level of under-supply at macro-economic level, and at identifying the barriers to the housing market as a whole functioning effectively and responding to house prices. We have a programme of follow-up work under way.

Having put the Barker review in context, I shall address some of the points raised by hon. Members. Clearly, the regional dimension to the housing market is extremely important, and we want to do further work on that in light of the report. However, it is completely wrong to suggest, as the hon. Member for Kingston and Surbiton (Mr. Davey) seemed to, that the Government's overall approach ignores regional policy. The sustainable communities plan constitutes a regional approach. It recognises the very strong regional variations in the housing market and the economy, and considers areas where there are much smaller variations in the market.

We have set out substantial housing growth strategies for the south-east, London and the eastern region, and for addressing low demand in parts of the north—I stress that it is parts of the north. The plan also includes a strong regional economic strategy. Indeed, the most recent follow-on publication from the plan was all about the potential for the northern way. The northern growth corridor is an excellent place to invest. I agree with the hon. Member for Tunbridge Wells that there are fantastic economic opportunities in that regard. From a constituency point of view, I can certainly provide very strong recommendations for investment in areas within a 20 or 30-minute radius of Leeds.

The hon. Gentleman seemed to argue that we should allow regional disparities to right themselves. He seemed to say that, left to themselves, the economy or the housing market would right regional inequalities— that the price mechanism would be enough to do that. The truth is that the evidence simply does not bear that out. It was, in many respects, the policy of the previous Government, and regional disparities grew, with all the problems to which such disparities lead.

Mr. Norman

My argument is not that regional disparities will right themselves. It is that if we adopt a national approach, advocate a doubling of the rate of house building and fail to address the regional issues, that will worsen the problem, not diminish it.

Yvette Cooper

We have at no time said that the response needs to be a national, top-down approach. We need an approach that recognises regional variations, which is exactly what the sustainable communities plan does and why one of the major pieces of work that we are doing to follow up the Barker review involves considering regional disparities. Nevertheless, it was important to start from an overall, macro-economic analysis of the impact of the housing market on the economy and the relationship between the two. Of course, there is a further regional dimension. That is important, but we must recognise that the sustainable communities plan is very much a regional plan. It is all about the different pressures that different regions face.

Mr. Hayes

But in that macro-economic analysis, which the Minister highlights, Kate Barker makes virtually no comment on the way we should deal with the insensitivity or unresponsiveness of price to supply and vice versa. Indeed, as my hon. Friend the Member for Tunbridge Wells says, she glosses over that subject. While the hon. Lady is dealing with that, perhaps she will also deal with the development land tax. Kate Barker recommends it, but do the Government agree with her?

Yvette Cooper

I shall come on to the relationship between supply and price. The Barker review set out a series of different policy recommendations; we are considering them and will say more about our response to individual recommendations in due course.

The right hon. Member for Skipton and Ripon (Mr. Curry) is right to say that there is little net migration from north to south, and it is not a factor in the pressures on the housing market and the variations across the regions. However, there is a regional issue that we very much need to address—it is economic and housing related—and that is exactly what the sustainable communities plan does. We need to develop that work further in light of the Barker report.

The hon. Members for South Holland and The Deepings (Mr. Hayes) and for Tunbridge Wells said that the Government should not be concerned about house price inflation, that it does not reflect under-supply in the housing market and, indeed, that there might not be under-supply. Those viewpoints are fundamentally wrong. House price inflation is clearly a serious problem, particularly in London and the south-east, and people are being priced out of the property market. Of the younger generation, only those who inherit property can easily find their way into the market; those who do not inherit need to earn significant sums to do so. The increasing pressure of house price inflation is therefore to the considerable and unfair disadvantage of some, so affordability does matter.

House price inflation also reflects under-supply. Hon. Members are right to note that housing is a financial asset as well as a consumption good, and the Barker review recognises that. That means that housing is affected by a whole series of other factors, including the performance of other financial assets and interest rates. However, none of that is to deny the fact that housing is also one of the most important consumption goods that we choose in our lifetimes. Those who suggest that we can simply dismiss the way in which it functions as a consumption good, and ignore the market relationships, are simply burying their heads in the sand,

Mr. Hayes

Will the hon. Lady give way?

Yvette Cooper

I am very concerned about running out of time, but I will briefly give way.

Mr. Hayes

I gave the hon. Lady two minutes of my time because this is a complex subject, as she will have noticed. She must, however, answer one point. The demand-side changes that I mentioned could be effected very quickly and have an immediate response, but the supply-side changes that she and Kate Barker seem to advocate would take a very long time to have any effect at all.

Yvette Cooper

Of course it can take some time to address housing supply—that is exactly why we should have been addressing the problem 10, 20 or 30 years ago and why we need to address it now. If we do not, we will have even greater problems in the future.

Housing supply has fallen. Demand has increased, and house prices have gone up, but housing supply has not increased in response. It was a fundamental part of Kate Barker's review to identify why housing supply has not responded effectively to house prices and what the barriers in the market might be.

The review also raises issues about affordable housing, and my hon. Friend the Member for Luton, North (Mr. Hopkins) is right to say that it is important. We have increased investment in affordable housing, but we need to increase the amount of such housing, particularly in London and the south-east.