Orders of the Day — Housing (England and Wales)

Part of the debate – in the House of Commons at 12:00 am on 20 June 1977.

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Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Environment 12:00, 20 June 1977

This afternoon we are to discuss the Government's housing policies and their wider housing implications. Every debate on domestic matters must reflect the international economic crisis of 1973, and housing can be no exception. But we on the Conservative Benches believe that there are three specific ways in which the Labour Party, first in Opposition and now in Government, have worsened the effects of the international economic crisis on this country.

First in Opposition and then in their early days in Government, between the two General Elections, Labour Members misrepresented to the people the gravity of that crisis, whereas the Conservative Government had begun to take the necessary steps and had put the issues to the country as fairly as we could. It was the Labour Party in Opposition that decried every effort we made to introduce a new awareness of the constraints that would be necessary following the quintupling of the price of oil.

Labour having misrepresented the crisis, its early economic policies when in Government undoubtedly stimulated the rate of inflation in this country, and the national economic dimension to the international crisis was a great deal worse than it otherwise might have been. It is impossible for the housing programme to remain immune from those broad economic trends. If that was not enough, this Government then proceeded to introduce a series of specific measures which singled out housing for particularly harsh treatment.

Let us look in greater detail at the three strands to which I have referred. In the days of late 1973 and early 1974. as we have pointed out on many occasions, there was an abundance of promises as to what the housing policies of the Labour Government were likely to be. They had all the ingredients of electioneering and few practical realities. We pointed out frequently the falsity of the claims that there would be cheap land available, that Labour would reverse the decline in the housing programmes and that we would see a stable building industry and a plentiful supply of local authority mortgages. That was the background of the Government's approach to housing in those days.

But when the Government moved on in their general economic policy, their macro-economics created a climate in which there was no conceivable alternative to a decline in the housing programmes of both the public and the private sectors. With the Government committed to high public expenditure, leading to high inflation and high interest rates, it was inevitable that, with building costs outstripping prices, and with high costs of borrowing and mortgages, coupled, for the free-enterprise building industry, with a diminution in the rate of growth either to nil or to a very low rate, there would be a gradual and increasing downturn in society's ability to pay for extra housing.

The figures are clear. In the 12 months to the end of December 1976, prices rose by 15·1 per cent. and average weekly earnings rose by 11·8 per cent. That is the background against which the community is not able to find the vital resources for private sector housing. One also saw the makings of the economic crisis which was to lead to the constraints on the public sector. Therefore, the nil or low-growth economy does not provide a background against which it is possible for any politician to claim that there will be a maintenance of hitherto higher housing programmes. Yet the Government gave the impression that that situation could somehow be avoided.

I am dealing with specific issues applied to housing, and I believe that they and the general economic background, which the Government have worsened, made it obvious where the programmes that the Government introduced must lead. I was re-reading today the remarkable statements which the then Under-Secretary of State for the Environment, the hon. Member for Manchester, Ardwick (Mr. Kaufman), made in going around the country in order, according to his own words, to get the Chancellor into trouble. He was encouraging local authorities dramatically to increase their housing programmes—intentionally, he said, so that the Chancellor of the Exchequer would be faced with a worsening economic problem.

It is not often that I congratulate the hon. Gentleman on success, but without doubt he achieved success in that direction beyond his wildest dreams. The Government pursued policies which, alone, with the exception of France, among equivalent economies, placed reliance on public sector provision of housing. If one looks at the chart showing the contributions of the public and private sectors, one sees that we are second in relying on the public sector for the provision of new houses. That is an unhealthy over-reliance on the public sector, and it provides the least effective deal from the community's point of view.

Secondly, partially for reasons to do with the building industry itself and partially for their own egalitarian concepts, the Government have introduced measures which have had a severe demoralising effect upon companies in the building industry. For example, the capital transfer tax, as in so many other industries, has had the effect of making a significant number of medium-size companies wonder what is the purpose of sweating it out and staying in business.

Then there is the Government's threat of legislation to favour direct labour organisations. Nothing is more revealing of the Government's cynical approach to politics than their method of solving the direct labour problem. We made it clear that, if the Government's words about direct labour measures meant anything, their legislation could find its way through the House, because we are as keen as the words used by the Labour Party in its policy document on finding a solution. If it were a question of improving efficiency and getting an element of accountability in direct labour organisations, as the Government said it was, there would be no difficulty in persuading the House to pass such a measure. We made it abundantly clear that such a Bill would have been acceptable with that express objective. But that was not the true objective.

The true objective was dramatically to extend the powers of direct labour departments of local authorities, and we made it clear that there was no way in which we were prepared to tolerate such a doctrinal extension of Socialist powers. The Government abandoned the opportunity that we would willingly have given in order to improve the efficiency of direct labour organisations, and now the Leader of the House has made it clear that the moment there is a majority—if ever there is—behind a Socialist Government we shall again be faced with the threat of legislation to extend the power of direct labour departments.

Thus, everyone involved in deciding whether to invest in a building company or to remain in the industry knows that it is the express purpose of the Labour Party to give a special and privileged position to direct labour organisations. Why should anyone continue to go through the agony and anguish of maintaining a posture in the building industry if it means that in the future there will be a growing threat from direct labour?

The other side of the coin is the use that it is now widely believed the administrative machinery is making of the 714 certificate. One can argue a narrow administrative point for the introduction of 714 certificates, but many people outside believe that the certificates are being used not to improve the efficiency or administration of the industry but to squeeze out a number of small businesses involved. The important thing is not what Ministers say or believe but what those people engaged in the industrial activity affected by 714 certificates believe—and they believe, widely and sincerely, that they are being discriminated against.

In the circumstances it is not surprising, as the Municipal Review has made clear, that we now have a higher proportion of unemployment in the construction industry even than in the high watermark of unemployment under the Labour Government in 1931. More than 220,000 people in the construction industry are unemployed. The previous record was 154,500, about 18 per cent., when unemployment reached the ultimate record in 1931.

The next area where the Government have specifically, for doctrinal reasons, been prepared to introduce discriminatory concepts in housing is in the withdrawal of tax reliefs. I have heard and can understand the words of the argument that one should not allow mortgage interest deductions on high levels of mortgage The theory, I suppose, is that that would mean that there would be more money to go round and that there would be a more egalitarian use of resources. In practice, however, what happens is that a significant number of people who would like to trade up from their existing level of house to a higher level are prevented by the tax system from doing so, which means that the level of demand for low-priced houses is kept higher than it otherwise would be. The effect is to keep the level at the lower end of the market higher than it would be otherwise, and the people who suffer are not only, to to some extent, those at the top end of the market but, even more dramatically, those at the lower end who cannot get houses from people who would like to sell them but cannot do so because of Government policy.

What is the Government's position on this matter? Labour Party policy is to remove interest relief on mortgages over £25,000. Anyone trying to plot the future clearly understands what the Labour Party would like to do. There is an electoral difficulty because, with the best will in the world and the most optimistic of scenarios, we shall be fighting a General Election in months rather than years. Therefore, the fear is that the issue will be fudged in the election but that after the election, if the Labour Party won, there would be a toughening of the mortgage interest relief provisions. That would be another disincentive to the expansion of the market.

The other matter which was once regarded as the jewel in the crown was the whole paraphernalia of promises which surrounded the Community Land Act and the development land tax. I shall deal with that matter later.

Against that background, it is not surprising that the latest figures for starts are as depressing as they are. According to the 2nd June Press release from the Department of the Environment, public sector starts are down 39 per cent. on a year ago and private sector starts are down 25 per cent. on a year ago. I accept that there has been a tiny flicker of improvement in the private sector in the last month, but the improvement is a percentage increase on such a low base as to mean that we are dealing with very small figures indeed. Overall, the level of decline in starts means that we face a very grim year for new housing in total. The local government figures particularly show dramatic reductions. We have now come virtually full circle from the heady days when the Under-Secretary of State for the Environment was first getting the Chancellor of the Exchequer into trouble.

It was impossible for the Government to sustain the momentum which they had put behind local government housing. It is now recognised everywhere, except in the published words of the Government, that local authority house building is the least effective form of provision of new houses. Every new council house built commits the community to a subsidy of more than £1,000 in the first year. The NEDC report on housing makes the point that it will be into the next century before we see the profit on the council houses being built now.

I understand—I hope that the Secretary of State will take the opportunity to confirm this—that the good news is that after three years of trials and tribulations the housing review is at last on us and that next week, despite all the delays, we shall be allowed to see the conclusions which the Government have reached. After three years of intensive wrangling and bickering, the conclusions had better be impressive.