I shall come to that matter shortly.
The insidious effect upon people once they have bought a house is that they then find the burden of mortgage repayments almost intolerable and the only way that it will become tolerable is by a continuation of wage and salary inflation. In other words, we are giving an entire class of people a vested interest in continued inflation as the only way of reducing a mortgage to reasonable proportions.
That was the year that was—1972. What about 1973? It looks as though in 1973 we shall find the opposite situation—not a 32 per cent. increase in mortgage lending but a mortgage famine and mortgage rationing. Again, this will not be because of any change in the housing situation. The number of completions will probably be about the same this year as it was last year, and there is nothing much in that. It will be because of a change in the monetary situation.
The basic cause of the change this year will be that the Government have a public sector borrowing requirement of enormous dimension—£4,400 million. I am not as critical as some of my hon. Friends of the fact of that borrowing requirement, but at any rate it exists. Therefore, there is a general rise in interest rates, bank deposit rates are at a record level and the yield on gilt-edged has risen dramatically. Then in the Budget—what the building societies called "the last straw"—the Chancellor introduced his more generous terms on national savings, the building societies' nearest competitor. This will mean a consequential rise in building society withdrawals and less money coming in. Therefore, as a result, they have to raise their interest rates from 8½ per cent. to 9 per cent. or 9½ per cent.
The Secretary of State has clearly been trying hard indeed to twist the building societies' arms. We have heard that he has had two meetings with them. We hear of deteriorating relations, the worst ever, between the Government and the building societies. But the right hon. and learned Gentleman has clearly failed to twist their arms. Had he succeeded he would have told us this afternoon with a great flourish from the Dispatch Box. Therefore, we can take it as certain as night follows day that within the course of a few days building society rates will be up certainly to 9 per cent. and probably to 9½ per cent.—another notable Government contribution to the counter-inflation policy.
This volatility in mortgage lending, for reasons which have nothing to do with the housing situation, is ridiculous. One year a surfeit of funds pushes house prices through the roof. The next year a shortage of funds pushes up building society lending rates. It is also thoroughly bad for the building industry and the supply of houses. What builders want is not a surfeit of buyers one year and unsold houses the next, but a steady increase in demand in line with the extra houses they can produce.
I therefore return—here I answer the question posed by the hon. Member for Northants, South (Mr. Arthur Jones)—to my proposal for a building society stabilisation fund. It would work in this way. Over the past two years mortgage lending would have been allowed to grow at a steady rate of, let us say, 10 per cent. or 15 per cent. each year. The surplus funds which the societies were attracting would have been put into a stabilisation fund where they would earn a reasonable rate of interest. Now this year, when the net inflow of money is drying up, the societies could draw on the stabilisation fund to maintain the flow of lending without excessive increases in interest rates. In this way the fund would protect the house buyer from the full short-term vagaries of the money market.
The establishment of such a fund would make a good next step for the Government away from lame duckery and laissez-faire. Alas, this afternoon there was no sign of anything so positive from the Secretary of State.
A good deal has been said today about the land-hoarding charge. I do not propose to go into this in any detail. In his opening speech my right hon. Friend covered the point adequately. It is clearly a purely political gesture which all commentators agree will have virtually no effect on the supply of land or the number of houses.
I turn from that to say a few words about rates. After all the huffing and puffing and the Prime Minister's Guildhall speech and the desperate pleas of the six big cities, all we get at the end of the day is the munificent sum of £10 million, and the bountiful sum of £1 million for Scotland, to meet some of the anomalies created by revaluation.
However, revaluation is not the crucial problem. This does not begin to touch the real core of the big city problem—this was referred to by my hon. Friends the Members for Newcastle-upon-Tyne, West (Mr. Robert C. Brown) and Liverpool, Scotland (Mr. Marsden)—which is one of falling population and falling revenue but rising expenditure.
I will quote one or two reactions from the local Government world to this trivial concession of £10 million. According to the City Treasurer of Leeds,
the aid promised did not in any way deal with the case presented by the big cities. It was nothing to do with revaluation but concerned rising expenditure and falling population.
The Assistant City Treasurer of Liverpool said that
his authority also was primarily concerned with expenditure increases and falling population. Although revaluation had caused concern to some of the cities, it was of no special significance at Liverpool".
The Assistant Secretary of the Association of Municipal Corporations said
the Government was giving very little help, and the association was not surprised that the cost would be as low as £10 million. At Liverpool, only 12½ per cent. of domestic ratepayers would get any help. At Leeds individuals would need increases of 38·6 per cent. in their rate bills before qualifying.
The real problem is not one created by revaluation. It is the problem of the cities, of cities squeezed between ever-increasing needs and inadequate resources; the need to spend more to cope with the inner urban problems, and, partly, as my hon. Friend the Member for Newcastle-upon-Tyne, West, said, the problems created by their being regional centres; problems created by the fact that the inner cities contain a high percentage of social welfare cases, the fact that they have educational deficiencies of long standing costing a great deal to put right. They have suffered typically from the worst environment. They have suffered increasingly from a transport crisis, especially a crisis in public transport. All these things inexorably push up their expenditure at the same time as the outflow of population means that they have a less buoyant rate base.
The only way to bridge the gap is greater Government help. The Government's formula designed to deal with the extreme effects of revaluation is totally irrelevant from this point of view.
When will the Government deal with this major underlying problem of local government finance? In the spring of 1970, before the General Election, a great deal of intensive work had already started on the subject. The Green Paper on the reform of local government finance was published as long as ago as July 1971. Yet, incredibly, last Tuesday the Secretary of State said in a written answer:
The Government will be entering urgently into further discussions with the local authority associations on this subject".—[OFFICIAL REPORT, 6th March 1973; Vol. 852, c. 95.]
My God, what a sense of urgency! It is two and a half years since they came
into office, more than a year and a half since the Green Paper on local government finance. If that is the Secretary of State acting urgently I should like to see what he looks like when he is acting un-urgently. He is making his predecessor "What-can-I-do" Walker look like a fiend for rapid progress—a positive tiger in his restless activity. But it is becoming extremely urgent that the House should have some information as to exactly what the Government are proposing because the problem, big as it is, seems to be getting even worse as the days pass.
In private rents, in council rents, in house prices, in land prices and in rates, Government policies, or the lack of them, have created the greatest inflation the country has ever known. In the last two-and-a-half years we have had the astonishing combination of record inflation in the cost of housing and the worst house-building figures for a decade. It has been an utterly deplorable performance and what is most tragic is the Secretary of State's ineffable complacency in the face of it, which is beginning to match that of his complacent predecessor.
The fact is that the country will not forget or forgive the Government's abject failure in housing, and we censure them for it tonight.