Housing Subsidies (Hansard, 15 March 1976)

§ Mr. Freeson

The texts of the letter of 25th February and that of 15th March are given below.

Department of the Environment

2 Marsham Street

London SW1P 3EB

01-212 7601

Minister for Housing and Construction

25 February 1976

Dear Hugh,

I am sorry not to have written to you earlier about your Parliamentary Questions asking:

i. what was the average tax relief (including option mortgage subsidy) in England and Wales and in Great Britain per mortgagor and per owner-occupier for 1973-74 and 1974–75 and what is the estimated subsidy in both cases for 1975–76;
ii. taking present day figures in both cases, what is the average subsidy on a newly-built council house in the first year, including subsidies from all sources; and what is the tax relief on an average new mortgage for England and Wales and for Great Britain in both cases;
iii. what was the average housing subsidy in England and Wales and in Great Britain, per housing association tenant, council tenant and private tenant for 1973–74 and 1974–75; and what is the estimated subsidy in each case for 1975–76.

The Department have been in touch with the Inland Revenue about estimates of tax relief. The estimates are in the process of being revised at the moment, so I thought I should write now to answer your second and third Questions. I will write as soon as I can in reply to your first Question (I hope in not more than a week's time).

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Your second Question asked about the average subsidy on a newly built council house in the first year and tax relief on an average new mortgage. On the best information at present now available the average cost of a new local authority dwelling (including land) may be put at about £12,000. In England and Wales the new capital costs element of housing subsidy, payable under the Housing Rents and Subsidies Act 1975, meets 66 per cent. of annual loan charges on admissible capital costs of local authority dwellings. Assuming a typical loans fund rate of interest of 11 per cent. (this will, however, vary from one authority to another), subsidy in the first year after completion of a dwelling costing £12,000 would be of the order of £875. Scotland has an entirely different subsidy system so I cannot give an appropriate Great Britain figure.

There are also a number of other housing subsidies—basic element, supplementary financing element, special element (1975–77), and high costs element (1976–77). None of these is specifically related to new building, but the amount of special element and high costs element (where payable) can be affected by the amount of new building. There are also of course in some cases contributions from the rate funds to the housing revenue accounts, again not specifically related to new building.

The tax relief in the first year of the average new annuity mortgage, assuming an 11 per cent. rate and full tax relief at the basic rate, is about £290 both in England and Wales and in Great Britain. This is based on the average Building Society mortgage advance made during the third quarter of 1975, which was about £7,550 both in England and Wales

£ per dwelling 1975–76 outturn prices
		1973–74	1974–75	1975–76
		England and Wales	Great Britain	England and Wales	Great Britain	England and Wales	Great Britain
Central Government Subsidy	…	78	83	123	125	132	134
Rate Fund Contributions	…	29	31	34	35	27	30
Rent Rebates	…	46	45	48	46	45	42
Total	…	153	159	205	206	204	206

Tenants of housing associations and private tenants who meet the conditions of the scheme may receive rent allowances. It is not possible

£ per dwelling 1975–76 outturn prices
				1973–74	1974–75	1975–76
				England and Wales	Great Britain	England and Wales	Great Britain	England and Wales	Great Britain
Rent Allowances	…	…	…	7.2	7.0	16.5	15.6	18.7	17.7

These figures and those in paragraph 7 are at 1975–76 outturn prices which is the price base for subsidy figures published in this month's White Paper on Public Expenditure.

The main channel of support now to "fair rent" housing associations is the capital grant towards the cost of new schemes paid under the Housing Act 1974. In 1975–76 such grants will, we estimate, average about £8,000 per dwelling: but this is of course a once-for-all payment. Support for housing associations under earlier legislation has been of a varied nature depending on the type of association.

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and in Great Britain. However, whereas in the public sector, there is, over a period of years, an increasing rent income in relation to loan charges and thus a steadily falling deficit which turns to surplus on a council house, the prospect for the average private house is that after about eight years it will be sold at a substantially higher capital value and a fresh mortgage will be taken out; and as a result more tax relief will be payable in most cases.

There are, as I am sure you appreciate, very difficult technical problems in making valid comparisons between support for owner-occupied housing and public rented housing. But for the reasons I have given, it is clear that it is only in the early years in the life of a house that the subsidy for a new council house exceeds the tax relief available to the average first time purchaser of a private house. If one looks forward about 10 years taking account of inflation, the respective levels of support might then be broadly the same; after that the tax relief on the owner-occupied house would often greatly exceed the subsidy payable on the corresponding council house, as the owner-occupied house might have been sold, probably with a larger mortgage being taken out due to the rise in house prices in the meantime.

Turning to your third Question, housing subsidies as defined in the Public Expenditure White Papers include Central Government subsidies, Rate Fund Contributions and Rent Rebates and Allowances (which are financed partly from the Rate Fund and partly through Exchequer Subsidy). Housing subsidies per dwelling to local authority tenants are estimated as follows:

to break down the payment of allowances to tenants in these two categories, but the total paid can be expressed as an average, as follows:

Such subsidies amounted to £6.1 million in 1973–74 when there were about 250,000 housing association tenants (excluding the Scottish Special Housing Association).

I hope this letter gives you the information you were seeking. You will, I am sure, understand the need for the qualifications.

Yours sincerely,

REG FREESON

Hugh Rossi, Esq, MP,

House of Commons,

London SW1A 0AA.

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"DEPARTMENT OF THE ENVIRONMENT

2 Marsham Street,

London, SW1P 3EB.

01–212 1601

15 March 1976.

Minister for Housing and Construction,

When I wrote to you on 25 February I promised I would write to you again about

AVERAGE TAX RELIEF AND OPTION MORTGAGE SUBSIDY (£)
				Per mortgagor	Per owner occupied dwelling
				Great Britain	England and Wales	Great Britain	England and Wales
1973–74	…	…	…	100	102	52	54
1974–75	…	…	…	134	136	70	72
1975–76	…	…	…	170	173	89	91

These are the best estimates currently available. However, being estimates, they are, as you will appreciate, subject to further revision from time to time if better information becomes available.

In regard to your letter of 3 March, the average housing subsidy to which I referred in my letter of 25 February in answer to your first Question was Central Government subsidy to wards the cost of building a new council house. Amounts of rate fund contributions are at the discretion of the local authority and will vary from one authority to another depending upon the extent to which they meet their housing revenue costs from rents and Central Government subsidies. If they make a contribution from the rates this will reduce the amount to be found from rents. Rate fund contributions are not, however, made specifically towards the cost of new housebuilding as such; they are set against housing revenue expenditure as a whole.

REG FREESON.

Hugh Rossi, Esq., M.P.,

House of Commons,

London, SW1A 0AA."