Orders of the Day — Housing

Part of the debate – in the House of Commons at 12:00 am on 8 November 1971.

Alert me about debates like this

Photo of Mr James Allason Mr James Allason , Hemel Hempstead 12:00, 8 November 1971

The speech of the hon. Member for Gloucestershire, West (Mr. Loughlin), who spoke at some length—I made it 35 minutes—showed the passion felt by hon. Members opposite about this vote of censure on the Government, further evidence of which is the teeming benches over there. I shall seek to speak more briefly.

The hon. Member said that most council tenants will be paying more with rent allowances. I accept that; but would he consider the corollary—that the other proportion, something less than 50 per cent., will be paying less? Does he object to that? These are the people about whom we are really concerned. I could take the hon. Gentleman to people in my constituency—widows with children, for example—who are finding great difficulty in meeting public authority rents. They will be paying less under this system. I should have thought that the whole House would approve of such a system.

Both sides of the House must agree that we need a great expansion of the housing programme. If we have learned anything from the hon. Member for Gloucestershire, West, it is that housing is now very costly.—But hon. Members

opposite talk as though it were possible to isolate public authority housing from this and let the taxpayer take care of the whole difference. I believe that housing is costly and that if we want the end—a vast increase in the housing programme—we must also will the means.

My right hon. Friend the Secretary of State was a little unfair to blame the right hon. Member for Grimsby (Mr. Crosland) for the reduction in the housing programme. That reduction came rather earlier and was clearly on the shoulders of the Leader of the Opposition. When devaluation regrettably became necessary, the Leader of the Opposition said that housing would not be affected. But within a couple of months we found that it was affected. There were severe cuts in Government expenditure all round, including a severe reduction in housing. The housing programme collapsed from that point, and there has been a steady reduction, which is still being felt in the 1971 completions. It is only now that starts are beginning to improve that we shall see an improvement in future in the housing programme.

The reasons for high prices, as the hon. Gentleman said, are high land prices, high building costs and high interest rates —none of which is a phenomenon of this Government. This movement has been taking place since 1964. These factors have combined to make an average house appallingly expensive. The cost of providing a £5,000 house is about £9 a week. Let us just consider how different occupiers have to meet this.

First, an owner-occupier gets tax relief on his mortgage interest, which reduces the cost to about £7·50 a week.

As for a local authority, under the 1967 Act, the Government provide a subsidy which reduces the cost from £9 to £5 a week. But, even so, £5 a week is more than the local authority would wish to charge. So by means of the pooling of rent on the historic costs and by means of the rate subsidy, rents are reduced to something far below what the owner- occupier has to meet.

For the private landlord, although the cost is £9 a week, this is not the cost to him, because he must pay tax on a notional income which he gets even though there is no profit. So the breakeven point for the private landlord is about £10 a week. That is where he gets no profit at all but only succeeds in paying his tax on the notional profit which he has not made. So he must charge more than £10 a week if he wants to see any return on his money. There are similar discrepancies for cost-rent housing associations and for co-ownership housing societies.

At present there is no private building in the regulated sector. The only solution to this is to give capital allowances for new buildings built to let. An income tax capital allowance would bring the £10 cost substantially down so that it might be possible for a private developer to provide houses in regulated sectors. All hon. Members should welcome such a suggestion, except the right hon. Member for Grimsby, who does not approve of private landlordism and wants to see it municipalised.

The other effect of this distortion of the cost is on local authority building. The high cost of the subsidy is a drain on the Exchequer. After devaluation there was a reduction in council house building and in the whole housing programme, because the country could not afford the £200 a year subsidy per house.

It will be a brave local authority that undertakes a substantial scheme and then says to all its tenants, "We are sorry, but the cost of these new houses is £5 a week. Consequently, we must increase your rents considerably to spread the load.". One town in my constituency has refused to do this because it is too great a burden on existing tenants. Instead, the council concerned is charging very high rents for the new houses. I believe this system to be unfair and not a way to get housing built.

The alternative is the new policy of rent increases. Clearly, it is not popular. No one wants to be told that his rent must rise next year and the year after. It is easy for the Opposition to try to gain popularity by fighting this. I ask them to consider whether they have a constructive alternative or whether it is not their duty to say that housing is now very expensive and everybody must take his share in meeting its high cost.

The rent increases will be accompanied by generous housing allowances. It was suggested to my right hon. Friend that some people would not be able to afford their rents if they were increased. Those whose rents will rise significantly are the people who can best afford to pay rent increases. Some people living in council houses pay only a very small proportion of their income in rent. The rents of such persons will rise significantly over the years. The rents of other people who can least afford to pay their present rents will be reduced, and I welcome that.

At present rent rebates amount to only 6 per cent. of the total Government subsidy. The right hon. Member for Grimsby said that rent allowances will be paid for by council tenants out of the increases in rent. When I pointed out to the right hon. Gentleman that that is not so and that the rent allowances will be paid for in total out of housing subsidies, the right hon. Gentleman said that he did not believe that housing subsidies should be used for housing allowances; they should be used to subsidise everybody's rent.

Obviously, everyone dislikes the idea of having to impose a means test on the majority of tenants, both private and public. The alternative is to continue with the present system of subsidising everyone, thereby ensuring that the subsidy goes in the main to those who do not need it and least of all to those who need it.