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Housing (Public Expenditure)

Volume 979: debated on Thursday 21 February 1980

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With permission, Mr. Speaker, I will make a statement on housing public expenditure.

The background to the decision that I am announcing today is well known to the House. This Government face the task of setting public expenditure at levels which the nation can afford. If we fail, the problems with which we are familiar will continue—a public sector consuming a disproportionate share of the nation's resources, high interest rates and declining investment in the private sector.

The harmful effects of the policies of recent years can be clearly seen in housing. By 1979, for the average new council house, taxpayers and ratepayers were contributing towards a subsidy of £30 per week. Council rents had fallen to an average of 6·4 per cent. of income, despite a commitment in the last Government's Green Paper to increase rents in line with earnings.

The net results of Labour's housing policy was to make new building for local authorities so expensive that in every year after 1976 local authorities of both political complexions responded by reducing their programmes. The rent policies of the last Government have been a major factor in the inability of local authorities adequately to meet housing costs, finance investment and maintain their existing stock.

Against this background, we have reassessed our housing policy. The Government's expenditure plans for 1980–81 and later years will be published in a White Paper next month but the local authorities, the Housing Corporation and the new towns will need to settle their programmes now. For these reasons, this year I am, exceptionally, making an oral statement.

Our reassessment of objectives must recognise the significant general improvement of housing conditions in the last 30 years. Home ownership has grown from 31 per cent. to 55 per cent. over that period, and we recognise the desire of most people to own their own home. In national terms, the supply of housing and demand are in better balance.

Needs and problems have become increasingly specific and local. The emphasis of public sector housing policy now must be to meet a particular needs, such as those of the elderly and the handicapped. We have to concentrate on modernising, improving and making better use of the existing stock, rather than on the general provision of new houses. We must encourage home ownership and the private rented sector.

We need, therefore, to adopt the new priorities that are reflected in the Housing Bill and that are critical given the economic background.

I come now to the programme for 1980–81. The housing investment pro- grammes for local authorities in 1980–81 will be allocated £2,199 million at expected outturn prices. The Housing Corporation will be allocated £420 million for the work of housing associations. The new towns building for rent programme will be £151 million. In new town development, the proportion of owner-occupation is below the national average, yet the demand is high. In future, growth must be based increasingly on the private sector and homes for sale.

Taken together, these three housing capital allocations for 1980–81 will, in real terms, at 1979 survey prices, be about £540 million or 21 per cent. lower than the forecast outturn for 1979–80. These figures are for England. My Scottish and Welsh colleagues are making separate announcements.

In the new circumstances, it is even more important that local authorities should use available resources in the most effective way to meet local needs. In order to encourage this, the housing allocation to each authority from April 1980 will be in a single block and they will have much greater ability to decide their own priorities. They will also have the new opportunities opened up by the Housing Bill.

There is a range of ways to promote low cost home ownership—by selling council houses, securing land release for builders and encouraging starter homes, through low-cost building for sale, especially for tenants and those on the waiting lists, schemes for improving and selling houses, such as acquisition, improvement and sale, and homesteading, and also by promoting shared ownership and helping priority home buyers with mortgages. In these ways, people can be helped to become owners.

Full details are in the allocation letter to authorities, copies of which are in the Vote Office.

The priorities now must be value for money and concentration, under the more flexible arrangements, on the problem areas.

In the private sector, the introduction of shortholds and the other provisions in the Housing Bill will improve the availability of rented accommodation without additional public expenditure. Exchequer subsidy to local authorities for housing last year amounted to £1,148 million in 1979 survey prices.

The rent levels of recent years have not only prejudiced the abilities of local authorities to maintain adequately their housing stock but have contributed to the enormous burden of public expenditure.

I have, therefore, concluded that it would be right to issue a supplementary rent increase guideline of 60p a week on average over the second half of 1980–81.

I have announced today a reappraisal which reflects our assessment of national economic and housing priorities. This is a necessary response to a situation in which the scale of housing subsidies increased under the previous Government to levels far beyond those the nation could afford.

From now on, we shall concentrate resources where they are needed. I have today set out realistically what the nation can afford.

The Secretary of State has made a long statement. Many of the figures in the statement are presented in such a way that it is difficult to determine the right hon. Gentleman's real intention. They are all embraced in a rather anodyne statement that he proposes to reassess the situation. I therefore confine myself to a number of questions relating to fact in the hope and belief that the Government will think it right that we should debate this important statement in their time in the immediate future.

Paragraph 8 in the Secretary of State's statement states that between 1976 and 1980 local authorities reduced their house building programme each year. May we be told in clear terms whether today's statement is intended to ensure that they reduce their house building programme even further, whether the Secretary of State expects that next year new starts will exceed the number of additional families that appear on the waiting list, or whether the statement amounts to a net reduction in the housing stock comparing demand and supply?

More specifically, may we be told whether the reduced number of starts that the statement envisages means that councils will be selling more houses than they are building, or building more houses than they are selling? Does the right hon. Gentleman promise us a net increase or a net decrease in the number of houses in the public sector available for tenants who wish to rent?

Secondly, I refer to paragraph 7, in which the right hon. Gentleman misquotes the Green Paper published by the previous Labour Government. The Green Paper stated that the then Government considered that over a run of years rents should be kept broadly in line with changes in money incomes. Will the right hon. Gentleman confirm or deny figures given to me earlier this afternoon by local authority associations that the housing rent increase that he has announced amounts to 28 per cent. over a year? If it does amount to that percentage, is he suggesting that earnings will increase by that amount over 12 months? If earnings are not expected to increase by that amount over 12 months, what effect on inflation and industrial relations does he expect to result from council house rents increasing by such an enormous amount?

Thirdly, will the right hon. Gentleman confirm that during the nine months in which he has been Secretary of State private tenants have suffered increased rents and reduced security of tenure and owner-occupiers have had to face uniquely high mortgage rates? Council tenants must now face uniquely high increases in their rents. There will be a remarkable inability for new and prospective tenants to obtain the council houses that they seek. What tenant or owner-occupier has benefited from the nine months of Conservative Government? Where were any of these proposals listed in the Conservative Party's election manifesto?

The right hon. Gentleman perhaps has not realised that in giving one block to local authorities it is a matter for local authorities to decide how they shall use the funds that are available to them. He will realise that all questions concerning what they do with their funds must depend on the individual judgment of the authorities. If he is asking for the trends of local authority new house building from which it would be reasonable to draw certain conclusions, he will want to know that during the last four years of the previous Labour Government, of whom he was a member, the number of new houses built by local authorities fell from 102,000 to 84,000 to 65,000 to 59,000.

Equally in Labour and Conservative local authorities the authorities left to themselves under the regime of the previous Government considerably reduced their level of new house building. I cannot predict any more than the right hon. Gentleman's predecessor could predict what they will decide to do with the priorities that they will now have under the one block system.

The right hon. Gentleman asks me about the level of rent increase that is likely to take place. I think that he is making the mistake of adding £1.50 and 60p in reaching his judgment—whereas the average is 60p, which means a £1.80 guideline. In reaching a judgment on what would be the right level of council house rent guideline to issue, I had to consider a number of options. I could have recommended that rents should increase in line with prices. I could have recommended that they increase in line with earnings, or any combination of the percentages relevant to those approaches. In practice it was the Government's view that we should adopt the approach of the previous Labour Government, namely, that rents should rise broadly in line with earnings. That is what the new guideline achieves.

As the right hon. Gentleman has chosen not to answer one of my questions, I shall press him on two of them. Surely the Government have some anticipation of how many houses will be built next year. Does the Secretary of State judge that the number of starts next year will be larger or smaller than the total in previous years? Secondly, will he confirm the local authority associations' figure, namely, that an increase of £1.80 will amount to an average increase in rents of 28 per cent.—which is wildly in excess of any forecast increase in earnings for the appropriate period?

It coincides with the change in earnings since the previous Government announced that that should be the rate of change in council rents. If the right hon. Gentleman is trying to push me on the level of new council house starts—I do not remember his pre- decessor ever making such forecasts—the one thing that is for sure is that there is no reason to suppose that the rate of starts is likely to decrease faster than it has been doing as a trend over recent years.

Does my right hon. Friend agree that the housing investment programme allocation will go further in view of the Government's declared intention to abolish Parker Morris standards and reduce the building cost yardstick in line with the private sector?

It is necessary for the Parker Morris standards and the cost yardstick techniques to be removed to give to local authorities the flexibility and freedom that they will now enjoy under the one block system.

Has my right hon. Friend taken action in respect of a report of the Public Accounts Committee in a previous Parliament? We pay tribute to the work of housing associations, but is he aware that the report was extremely critical of the financial accountability of certain of the associations and of the Housing Corporation? Will he give the House an assurance that if value for money is the criterion to which he adheres, as he has stated, not a penny of public money will go to the associations unless it is properly accounted for?

My right hon. Friend will be aware that we have embodied in the Housing Bill certain changes which were necessary as a result of the important report to which he refers. I hope that he will accept my assurance that we are now applying the closest scrutiny to the work of the Housing Corporation with the report in mind.

Is the right hon. Gentleman satisfied that HIP is being announced so late during the current financial year? How does he expect local authorities to be able to gear their spending programmes from 1 April on the basis of a 28 per cent. cut?

Secondly, how does the right hon. Gentleman expect greater owner-occupation to be achieved when local authorities will have less money to make available for mortgages during the course of the next financial year? Thirdly, how will he honour the obligation accepted by Conservatives on a previous occasion that they will peg mortgages when they are currently running at 15 per cent.? Finally, what will local authorities do to try to accelerate the improvements that he talks about in his statement when he is reducing the amount of money available for improvement grants?

The hon. Gentleman must be familiar with the broad economic imperative that if we do not reduce the levels of public expenditure we shall never reduce the level of interest charges and will never reduce the demand in the public sector for money that might otherwise be available for the building societies. He must recognise the totality of the programme to understand the answer to his questions. He asked about the HIP allocation. We have had to consider that in the light of the Government's public expenditure programmes. In an ideal world we should have announced the programme earlier. In the light of the public expenditure difficulties that we inherited, we have had to take the whole issue in one and consider it overall. It was necessary to take time to achieve that.

Does my right hon. Friend agree that in the White Paper and consultative document of the previous Government there were references to rents increasing in line with incomes? The Opposition have quoted those documents themselves. The truth is that they failed to carry out that policy when in in office.

My hon. Friend is totally right. They kept uttering brave words about their intentions on housing, but they failed to live up to any of them.

Is the Secretary of State aware that to talk about housing need being local is not enough? Does he not realise that housing needs are particularly localised in the inner city areas of which my constituency is one? Will the right hon. Gentleman assure us that if the 21 per cent. cut is made the inner city housing programmes will not be cut in the same proportion and that special allowance will be made for them? Otherwise the pretence that the Government are maintaining any sort of programme for the inner cities is totally destroyed.

The hon. Member will be aware that in the allocation of HIV resources the needs of the individual areas play a significant part in the judgments that we make. There is a range of options open to local authorities in order to make more resources available locally. I refer particularly to the sale of council houses, which will release resources that can then be used for the benefit of the people living in that area.

Can my right hon. Friend answer a specific point? Whether within the block allocation or outside it, will the housing authorities be able to underwrite fixed price contracts for sale? In the new town context, that would be extraordinarily valuable.

I shall look at the detail of my hon. Friend's question, but I very much doubt whether we shall be able to underwrite fixed price contracts in the present economic circumstances. However, I shall be in touch with my hon. Friend on the matter.

Is the Secretary of State aware that his announcement demonstrates how apt was the description of him by his hon. Friend the Member for Buckingham (Mr. Benyon) as the "gauleiter of housing" since by his policies he is further destroying any local authority discretion in house building programmes? Can the right hon. Gentleman say what effect his announcement will have on employment in the private sector of the building and construction industry, since he professes to be concerned about it?

The hon. Member will recall that he was an adviser to the Department of the Environment when the party that he supports was in Government. It is inappropriate for him now to use such harsh language about the changes that I am making since he supported a Government who halved the housing programme after 1974. I understand the anxiety of Labour Members to deny the realities but I remind the House that in 1974–75 the housing capital figure was £4·2 billion. By 1978–79 the figure was down to £2·1 billion. If that is not halving the programme, I do not know what is. Right hon. Members will remember that their capital reductions were at the rate of £500 million a year, every year, over their last four years of office. I am proposing a reduction of £550 million in another year. How, when I do it, it can be regarded as a scandal and when the Labour Government did the same thing for four years consistently it was regarded as a coherent policy I do not understand.

Does my right hon. Friend agree that the Opposition uproar on behalf of council house tenants would be slightly more acceptable if they did not seek to deny those same tenants the right to buy their own homes? Does he further agree that the alternatives to reductions in public expenditure in sectors such as housing are greater inflation, higher interest rates and less money available for those most in need? Will he invite the Opposition to say how they will fund their social objectives if they believe that we should spend money on each and every sector under the sun?

I would quarrel only slightly with my hon. Friend's suggestion that we should invite the Opposition to say how they will fund their objectives. There is no purpose in asking them because they will not get the chance to do it. The realities are that council tenants made their convictions absolutely clear about housing policy when they voted for the Conservative Party last year on a far greater scale than ever before.

The right hon. Gentleman mentioned housing associations in connection with his terrible action in relation to the Housing Corporation. Will he say what effect his announcement will have on the co-operative, mutually-owned housing sector? Is he aware that the GLC has established the Greater London Secondary Housing Association specifically to create mutually-owned co-operative housing societies as distinct from housing associations? Does his announcement mean the end of all those plans?

I made it clear in my Second Reading speech on the Housing Bill that I wish to give every support to the co-operative housing movement.

Is not my hon. Friend aware of the pressure from housing committees over the last few years to get exactly what he has stated today, namely, an allocation on which, at their discretion, they can base their own priorities? My only question on my right hon. Friend's statement concerns building for the disabled and the elderly. I should have thought that there was another category that—at a later time—he might reconsider, namely, single people. I believe that my right hon. Friend will find that on most housing lists single people are the third largest category.

This is a growing political and social problem, but the purpose of changing to a one-block system is to give local authorities the flexibility to deal with their own local needs as they determine them.

Is the Secretary of State able to tell the House why, and on what basis, he has revised the assessment contained in the housing policy review to the effect that new household formations will be at the rate of 120,000 a year in the public sector alone? Is it true that probable building this year will be 45,000 and that a 20 per cent. reduction on that figure will reduce it to about 36,000? Will the right hon. Gentleman confirm that that means that about 85,000 families a year will, as a result of the policies he has just announced, be left without the chance of a new home?

No one knows more about housing than the hon. Member. He is fully aware that there are 170,000 re-lets in the public sector alone.

I congratulate my right hon. Friend on his statement. There will be widespread support for the view that councils should concentrate provision on those in need, the elderly and the handicapped. For the general strategy to succeed, however, is it not vital that we encourage and speed up the sale of council houses, particularly those houses in need of improvement so that new owners can improve them? Can my right hon. Friend confirm that the new block allocation will give greater freedom to councils to increase the amount of mortgage moneys available for that purpose?

I am grateful to my hon. Friend for that helpful intervention. If local housing authorities feel that the use of funds for mortgage purposes is in the best interests of their communities, the flexibility of the one-block system will enable them to do precisely that. I can assure my hon. Friend that it is the intention of the Government to draw to the attention of the country—particularly public sector tenants—the opportunities afforded them following enactment of the Housing Bill now going through Standing Committee.

I invite the right hon. Gentleman to attend my next surgery so that he may see that about 70 per cent. of the cases brought to me are brought by people whose ambition is to obtain decent rented housing. In Leeds there are 20,000 people on the waiting list wanting to rent houses. How does the Secretary of State think that the policy that he announced today will solve the problem of those people?

I hope that the hon. Member will draw the attention of his constituents to the provisions for short-hold which are included in the Housing Bill now going through the House. However, before he explains in detail that the Government are reducing the capital allocations to £500 million in the coming year, he might also explain to them that four years ago the Government of which presumably he was a supporter reduced those allocations by £900 million in one year.

Will my right hon. Friend confirm that rent rebates will be available and that he will encourage the greater use of those rebates for those who cannot afford to pay, and also that those rebates should be paid for by those who can afford to pay? Does he recognise the success of the many councils, mostly Tory controlled, that are building houses for sale in the way that Preston has done? The queues there for those houses are so great that the authority has difficulty in dealing with applications. At the front of those queues are many Labour councillors.

I assure my hon. Friend that the rent rebates and allowances schemes will proceed under the normal rules. I welcome and support the efforts of the councils to which my hon. Friend referred to continue to enhance the build-for-sale proposals that many Conservative councils are operating with success.

Does the Secretary of State not realise that for many, many people in the industrial West Midlands his statement simply means less hope for the homeless and indeed ensures the creation of more homelessness?

The hon. Gentleman will be aware that in a range of ways—by the release of land, by the repeal of the Community Land Act and by the sale of council houses to tenants—we are providing a greater opportunity for home ownership than has ever been given in recent years. Before the hon. Gentleman takes off for the West Midlands he should remember that in the last four years he supported a Government who reduced the capital allocation for housing by an average £50 million each year.

Is my right hon. Friend aware that his statement will be much welcomed in central Lancashire? In order to hasten the development of private housing for owner-occupation in that area rather than rented housing in the new towns will he ensure that that infrastructure is provided?

I shall do everything that I can in the present economic climate to help with that difficulty. We are organising a greater degree of co-ordination between those who provide the infrastructure and those who build the houses. Much of the responsibility for that lies with other Government departments, and I shall ensure tht they are aware of my hon. Friend's views.

What can the Secretary of State offer to housing stress areas, such as that which I represent? Is he aware that that area has to cope with a Conservative-controlled council, a Conservative GLC and a Conservative Government? Is he aware that the number of names on the housing list in that area has doubled in the last 12 months and that there is no hope of an improvement in public or private house building on a significant scale?

Certainly, the capital allocation has been falling for years and the hon. Member's area will be familiar with the difficult problems brought about by the last Government's policies. Many opportunities will now be available, including the provision of shorthold and the AIMS and homesteading schemes. The Government are encouraging the release of land, a considerable part of which can be used for cheap houses for sale.

Does the Secretary of State agree that his words about the elderly and the infirm fall rather peculiarly from his lips? Is he aware that under a full rental system the houses about which he is concerned are paid for by the rents of the council houses that he proposes to sell? Does he realise that many homeless people cannot afford to buy the houses that he says the local authorities should build? Is he aware that the responsibility is falling on the shoulders of the local authorities to rehouse the homeless in homes that they do not have because the Secretary of State has put the final nail in the council house coffin?

The people to whom the hon. Gentleman refers are broadly protected by the rent allowance and rebate schemes. His fears are groundless. He takes no account of the considerable benefit to local authorities that sell council houses and use part of the receipts to enhance housing provision.

Is the Secretary of State aware that in many inner cities, such as that which I represent, there is a serious housing crisis that will not be helped by the complacency of his housing policly? Is he aware that waiting lists and homelessness are increasing? How can he have the effrontery to suggest that we should tell those people who are waiting for houses that the shorthold provisions will help them? If I were to tell my constituents who are waiting for houses that shorthold is the answer I should be lynched and there would be a by-election.

If there were a by-election I know who would win it. If the hon. Gentleman really believes what he says I wonder what he said to the same people when he supported a Government who reduced the housing programme at virtually the same rate as that which we are discussing.

Is the right hon. Gentleman aware that he is a national disaster and that his announcement is a recipe for housing shortage and soaring house prices? Will he confirm that rents in many areas will increase by considerably more than £1·80 a week, because of high interest charges? How will his statement help Swindon borough council to solve its expansion problems on an integrated basis?

I have just given that authority a degree of flexibility for solving its problems that it has not had before. Nothing has done more to contribute to the decline in the provision of capital for housing than the disastrous policies of the previous Government.

The Secretary of State said that he wished to concentrate resources where they were most needed. Does he accept that stress housing areas such as Leicester, with a growing population and over 30,000 on the housing waiting list, need extra resources, especially as the previous Conservative council did not take up the available resources? Does he agree that that is why the buildings did not go up? The Secretary of State says that he wishes to deal with local needs. Will he give special consideration to the needs of stress housing areas?

The hon. and learned Gentleman referred to local authorities not taking up the available money. In 1978–79 the last Government provided £2,380 million of which the local authorities used £1,718 million. That represents a 28 per cent. shortfall. The local authorities could not afford to use the money because the Government's economic policies made that money too expensive.

When my right hon. Friend considers housing problems in the inner urban areas and elsewhere, will he do everything possible to encourage local authorities to sell houses under the shared purchase scheme? Is he aware that that offers the greatest hope to many young couples who cannot possibly afford a home of their own? Is he further aware that in Hillingdon the fact that the scheme has been a great success means that many young couples on the housing list have no need to rent accommodation from the local authority?

I have no doubt that a major priority must be to enable those who can afford it to buy homes of their own. I have no doubt that the shared housing purchase schemes. which we are encouraging, will play a significant part in that. The more that we can encourage those who can afford it to provide housing from their own resources, the more money will be available for those in genuine need.

I apologise for intervening on this statement. However, it is disgraceful that when an important announcement is being made about housing, which will affect 65 per cent. of the Scottish people, neither the Secretary of State for Scotland nor any other Scottish Minister is present. The Scottish people will be angry. Why do we receive more and more Government announcements at press conferences instead of on the Floor of the House? Is it possible for you, Mr. Speaker—

Order. The hon. Gentleman knows that I am not responsible for that. I can deal only with statements that are made in the House. The hon. Gentleman must follow up his inquiry through the usual channels.

On a point of order, Mr. Speaker Is it possible for you to arrest the Secretary of State for Scotland?

Is the Secretary of State aware that at least he is brave enough to face the House, whereas the statement applying to Scotland has been made in a written answer? Is that not a contempt of the House? Will the Secretary of State bring his influence to bear on his colleague, the Secretary of State for Scotland, to face us? If not, some action should be taken to bring him here.

That is not a matter directly for me. I shall certainly ensure that my right hon. Friend the Secretary of State for Scotland is made aware of what has been said. However, he will not be frightened by the questions from the Opposition today.

Will the right hon. Gentleman give us one factual answer to one simple question? The original allocation for 1979–80 for local authorities was £2,862 million, in 1979–80 outturn prices. The allocation for local authorities for 1980–81, according to the announcement in the Minister's statement, is £2,199 million, at 1980–81 prices. Will he give us the percentage reduction, in real terms, of the £2,862 million in 197980 prices to £2,199 million in 1980–81 prices.

I should like to help the right hon. Gentleman. The difficulty is that many figures are involved in this exercise. I am not prepared to give them across the Dispatch Box, but if the right hon. Gentleman will give me the detail of his question I shall do my best to give him an answer today.

Is the right hon. Gentleman aware that when he issued a statement last August he was able, without any difficulty, to give these comparable figures? As he provided such an extraordinary collection of mingled, concealing figures in his statement, would it not have been perfectly open to him to provide these figures if they were not so disgraceful that he deliberately wished to conceal them?

I hesitate to comment on the fulsome language of the right hon. Gentleman in suggesting that I am deliberately trying to conceal figures from the House. That is far from the case. I hesitate to bandy statistics on such a complicated matter across the Dispatch Box. However, if the right hon Gentleman tables a question I shall be only too glad to do my best to answer it.