Housing (Home Loans)

Part of Class Vi – in the House of Commons at 12:00 am on 29th April 1965.

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Photo of Mr Peter Bessell Mr Peter Bessell , Bodmin 12:00 am, 29th April 1965

The right hon. Member for Bexley (Mr. Heath) drew attention to part of the Labour Party's 1964 election manifesto. I make no apology for returning to the section which the right hon. Gentleman mentioned. It would not be possible to debate this subject seriously today without reminding the Government of the pledges which they made to the electorate and from which they obtained so many additional votes. In the manifesto, the Labour Party declared unequivocally as follows: Labour will:(i) Introduce a policy of lower interest rates for housing. … This policy of special favourable rates will apply both to intending owner occupiers and to local authorities building houses to let. There is no division between the three parties represented in the House or, I suspect, between Members as individuals, on the desirability of achieving such a worth-while objective. The country at large desires a system which will enable people to obtain new homes easily and at favourable rates. We know that slum clearance is proceeding too slowly. Far too many people are still living in conditions which would have been archaic even at the beginning of the century and which today are a disgrace in a modern civilisation.

Lack of good housing has created a situation in which many bad landlords have been able to flourish, and this has caused grave concern to everyone inside and outside the House. It should not be forgotten that bad housing not only creates bad landlords but creates bad tenants. It is not entirely their fault.

Bad housing and squalid conditions, through their psychological effect, are a ready source of crime and moral decline generally. How can any young couple setting out in life with the problems of bringing up a young family hope to succeed in their marriage if they are asked to live in conditions which are often quite intolerable.

It is not, therefore, untypical of a radical party seeking to form the Government that it should give such priority in its election campaign to the need for building new houses rapidly, enabling local authorities to provide additional homes at reasonable rents and giving the opportunity to young people and others to buy their homes at fair and low rates of mortgage interest.

This policy of Her Majesty's Government, as it was expressed in the election campaign, had for some of us the added merit that it was not doctrinaire Socialism. On the contrary, one of its aims was to encourage the spread of ownership and wealth among individuals. If some of us were a little surprised at this advance, we were none the less pleased to see it.

The election speeches of leaders of the Labour Party, the present Government, led the electorate to believe that, whatever else might take second place in a Labour Government's programme, there could be no danger of housing being put at the bottom of the list. For this reason, perhaps, more than any other, I was bitterly disappointed in the speech of the Minister this afternoon. He did not present us with a dynamic programme which had been carefully evolved, not necessarily in the 13 years while the Government were in Opposition, but in the last six months. There has been ample time to anticipate the present situation and ample time to produce a programme of correction.

I am not suggesting—it would be unreasonable to do so—that the Minister could possibly have solved the problems of financing local authorities or giving assistance to building societies in the short time in which the Government have been in office, but I do suggest that there has been an opportunity for taking precautionary measures to prevent the development of a situation the danger of which has been clear to many people for a long time. My noble Friend Lord Wade, in his maiden speech in another place, pointed out that, for more than nine months, the building societies had been warning both the past Administration and the present Government of the danger of the situation. Clearly, there has been an opportunity to do something, but the opportunity has been lost.

I recognise the sincere and genuine disappointment which must be felt by members of Her Majesty's Government that they have been unable to fulfil their election pledge in this matter and have been unable, so far at least, to indicate when they will be able to do so. I shall not rehash the arguments about responsibility, whether it is because they inherited a financial crisis that they did not expect, because they are no longer relevant. The, financial crisis was known to Her Majesty's Government at least six, if not seven, months ago. Therefore, they have had opportunity to plan within the framework of the conditions which they inherited.

It is disturbing that, far from having improved, the housing situation, in spite of the intentions of the Government as expressed at the time of the election, has deteriorated. This is something which must be answered, and it must be faced fairly and honestly by right hon. and hon. Members opposite. To take one of the existing problems, the building societies are having great difficulty at present in attracting investment. I shall not labour a point which has been made already more than adequately by previous speakers.

It may well be that this is only a temporary state of affairs. I have no lack of confidence in the ability of the building societies to overcome their problems. They form one of the most important financial institutions of this country, and I have complete confidence in them, as I am sure every hon. Member has. But the fact remains that they have a problem which prevents them from making advances at favourable rates to people who wish to become home owners.

It has been suggested, not in this debate but outside the House, that building societies retain far too much money as reserve. I do not accept this. On the contrary, I believe that one of the great pillars of strength of the building societies is that they know that they can always meet a call, however large or however sudden, and one of the reasons why they have been so successful in attracting investment, in spite of the comparatively low rate of interest which is frequently offered, is that people know that it is a good, sound and safe investment. If any inroads were to be made into their reserves, some of that confidence would be lost, and the consequences would be disastrous not only for the building societies themselves but for the economy of the country as a whole.

The Government could, and I believe should, give immediate assistance to the building societies. One or two suggestions have been put forward from this side of the Committee. One that the Minister should at least consider is whether it would not be possible for the Public Works Loans Board to allow access to funds by the building societies, even as a temporary measure to assist them over the present situation.

I think it is also very important that the Chancellor of the Exchequer should look again at the Corporation Tax and the Capital Gains Tax as they affect the building societies because, quite clearly, there is an important issue at stake and one which will affect the house building programme to which the Government are so clearly pledged and action upon which is expected throughout the country.

The Government could do worse than initiate discussions between the building societies and some of the major insurance houses to see whether sums could not be made available to them from that source. It might well be that, if a temporary tax incentive were granted to insurance houses, some of the very considerable capital reserves for which investment is sought by many of the insurance companies could be made available to building societies to assist them over the present situation.

Another matter to which the Minister should draw the Chancellor's attention is the question of what will be the effect of the new 5 per cent. Post Office savings account programme on investment in building societies. My right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) put that question specifically to the Chancellor but received no satisfactory answer.

I believe that a far more serious situation exists for the local authorities. Many have been compelled to cease making loans for house purchase because of the rate which they have had to pay to borrow the money. One model borough in my constituency, Saltash, has just resumed making loans for private house purchase and is charging at the rate of 7¼ per cent. for a 25–year loan and 7⅛ per cent. for a 30–year loan.

Saltash makes no secret of the fact that it is not anxious to encourage young people to tie this kind of millstone around their necks, but I believe that Saltash and other local authorities making these loans are abundantly right to take this line. Yet, what a disappointment it is, what a bitter blow it represents, to the young couples who after the last election genuinely believed that the Government would be in a position to offer them homes at lower rates of interest. Whatever the Minister may say, the fact is that today those young couples are compelled to pay a very much higher rate than previously.

I am not out of sympathy with the Government in this situation. I do not attempt to disguise that I recognise their problem, but they must have a programme to meet it, and it is that which we demand should be presented to the Committee. I believe that the problem facing the Government is threefold.

First, they must provide money for the continuation of the present rate of house building and purchase. Secondly, they must provide money for the necessary expansion. Finally, they have to provide the money to maintain their election pledge to reduce mortgage rates to local authority and private purchasers. It is not sufficient to blame the last Administration for shortsightedness or absence of planning. A properly phased programme without extravagant promises must be offered now. We have a national plan for education and a national plan for roads. Why cannot we have a national plan for house building, which is what we expected from a Government who have always maintained their faith in planning?

If money is the main factor the Government should face up to one question squarely. If the Government are to spend a sum which might be as large as £600 million in compensating the shareholders in the steel industry in order to nationalise that industry, that will bring small comfort to those who are living together in houses in overcrowded conditions. Moreover, if after taking office again after a break of 13 years they decide that instead of giving priority to their pledge to produce more homes at better rates of interest, they give priority to the nationalisation of steel, then I say that, like the Bourbon kings of France after their restoration, they will be found to have learnt nothing and to have forgotten nothing and they will go to the country unforgiven.