I beg to move,
That this House condemns Her Majesty's Government for the bungled, inflationary and inequitable manner in which it has dealt with a mortgage rate crisis which is entirely due to the catastrophic failure of the Government's own housing and monetary policies.
I have never known, in the fairly long period that I have been in politics, a Government announcement, especially one giving away money, that has been greeted with such universal derision and contempt as the statement on mortgage rates last week.
The Secretary of State for the Environment when he made the statement was virtually friendless in the House, and the Government have been friendless in the Press, and in a Press which is normally sympathetic to them. The reasons for this were obvious. First, the rise in mortgage rates to 9½ per cent. shattered such few of the 1970 election pledges as have not already been broken. Second, the crisis would not have arisen but for the Government's insufferable complacency in the face of repeated warnings of what would be likely to happen. Third, the Government's reaction to the crisis—the grant of £15 million—was solely and cynically dictated by the prospect of the county elections this coming Thursday.
I want to deal briefly with each of these three points in turn. First, I wish to deal with the Tory promises made in that most disgraceful of election campaigns. Let me remind the House of the words of the Tory Election Manifesto "A Better Tomorrow":
The increase in the cost of new homes, and the highest mortgage interest-rates in our history, have prevented thousands of young people from becoming owners of their own homes …. Today, mortgage repayments on the average-priced new house are £3 a week more than when Labour came to power.
The Secretary of State for Trade and Industry, who was then in charge of hous-
ing matters, added during the course of that election campaign:
Labour's wanton betrayal of promises has cost the homes of thousands. The people Labour forgot will not forget Labour's failure.
What are the facts? When Labour left office, the cost of an 80 per cent 25-year mortgage on the average-price new home was £7·37 a week. Today, it is £14·23 a week—nearly double. Under the Tories, the cost of a mortgage has risen not by £3 a week but by £6 a week, and not in six years but in less than three.
The Secretary of State for Trade and Industry, who made many speeches at that time, had another favourite theme, that the cost of a mortgage was going up more than earnings. He said—this time in the House in one of our many housing debates—
Whereas during the period of the Labour Government the mortgage cost of an average-price new house went up 77 per cent., earnings went up by 54 per cent., with the consequence that fewer and fewer people on average earnings could afford to buy an average-price new house. Under this Conservative Government, on the other hand, because of the decrease in the mortgage interest rate
—those were the days—
and the increase which has taken place in earnings, the reverse has been true."— [OFFICIAL REPORT, 8th November 1971; Vol. 825, c. 678.]
How do things look now after 2¾ years? The rise in earnings under this Government has so far been 34 per cent., but the mortgage cost of an average-price new house has risen by 93 per cent. That is the Government's record.
My second point is that the present situation need never have arisen. It has arisen because of the improvident behaviour of the building societies when funds were plentiful, and because of the irresponsibility and inconsistency of the Government's own monetary policies.
The behaviour of the building societies in the last two years has been incredible. In 1971 and 1972, they enjoyed a huge inflow of funds because their rates at that time were highly competitive. They did not query for a moment the wisdom of lending out all those funds in mortgages. They did not ask what would be the effect on house prices if they did. They did not wonder whether they should put some of those funds into a reserve fund against a rainy day. They blindly, thoughtlessly and automatically pumped them all out.
In 1971, the amount of mortgage lending rose from £2,000 million to £2,700 million, an increase of one-third. In 1972, the amount increased by one-third again, from £2,700 million to £3,600 million. But this did not—I shall not weary the House by repeating myself; I have said it again and again—enable people to buy one-third more houses in each of those years, because only 2½ per cent. more houses were built in each of those two years. What it did was simply to drive up the price of houses to their present crazy level, and it left the building societies empty-handed and defenceless against any change for the worse in monetary conditions.
This year, the change for the worse has occurred, and occurred with a vengeance. The societies now find themselves not flush with funds but acutely short of funds due entirely to the Government's actions. The Government's borrowing requirement of £4,400 million has pushed up interests rates of all kinds right through the ceiling. The Chancellor, by beefing up the attractions of national savings in the Budget—these are the building societies' most direct competitor —has worsened the position still further. It is extraordinary that the Chancellor's right hand seems to have no idea what his left hand is doing. In the Budget, he improves the attractiveness of national sayings. When this has the predictable and, presumably, desired effect that other savings become less attractive, he reverses himself and pumps money into other forms of savings. An extraordinary attitude. In fact, there is no co-ordination between the Government's monetary policies and their housing policy, any more than there is between their housing policy and their prices and incomes policy.
In addition, the new system of monetary control set out in "Competition and Credit Control" has been a further background influence in pushing interest rates all round.
The building societies were caught with their pants down. Less money was coming in. More money with withdrawn. The Government showed no sign of recalling the promise, made in small print in "Competition and Creditor Control", that they would safeguard the building societies from any adverse effects of the new monetary system. First, then, the building societies put up their borrow- ing rate to 6·3 per cent. That did not do the job, and they made clear that they would have to put it up further to 6·75 per cent., which would involve a 10 per cent. mortgage lending rate.
All this was due to their refusal in the two previous lush years to give a moment's thought to the future, and due to the Government's monetary decisions taken in total disregard of their likely effect on the home buyer.
At this point, politics take over totally from finance, and logic and reason become entirely subordinated to Government anxieties about the GLC and county elections. First, the Government twist the building societies' arm and persuade them to postpone a decision on higher rates until 13th April, one day after the elections. The building societies reluctantly agree, though with a good deal of angry muttering. Ministers heave a sigh of relief, even though they know that on 13th April rates will have to go up to 10 per cent. They are quite happy that that should be so, provided that the elections are over by then, because their concern for the owner-occupier is always rather precisely correlated with the dates of general or local elections.
Then came the bombshell. The building societies announced that they were not prepared to wait till 13th April. They were to have a meeting last week, and at that meeting the rate would certainly go up to 10 per cent. So last week's distasteful farce began to unfold. It was action stations and panic in Whitehall. This time, no doubt, it was Sir Desmond Plummer on the telephone to the Prime Minister rather than the other way round, and, in some slight revenge for the famous telephone call to Japan, Sir Desmond Plummer was blowing his own top in the reverse direction.
Sir Stanley Morton and his colleagues were constantly peregrinating in and out of Minister's offices. There were Cabinet meetings, and Cabinet splits—"Will they, won't they?"—with daily and contradictory briefings to the Press. A classic example of how not to govern a country. Finally, there was the ridiculous mouse of the £15 million, with the Secretary of State for the Environment as fall-guy last week. The whole thing was a thoroughly discreditable story.
There is an interesting sidelight on last week's low comedy events which vividly illustrates the Government's sense of values. Sir Stanley Morton and his colleagues not only had instant access to senior Ministers when they wanted it; they were peremptorily summoned to Whitehall at all hours of the day and night. But during last week there was another distinguished public figure trying anxiously to fix an appointment with one of the senior housing Ministers. I refer to Sir Robert Thomas, chairman of the Association of Municipal Corporations. He wanted to bring a deputation to discuss the next increase in council house rents due on 28th April. He offered five separate dates for this important deputation, but, unlike Sir Stanley Morton, he was told that Ministers were far too busy. When told that the Secretary of State for the Environment was not able to see him until after the local elections, he said "Very well. I shall be glad to see the Minister for Housing and Construction ", but he was told that he, too, was too busily committed to see the deputation until after the local elections.
That deputation was supported, was it not, not only by the AMC but by the TUC? Here we have a Government freezing wages and at the same time refusing to meet representatives of the AMC and the TUC about rent increases—never mind about the extra being given to people who, perhaps, have £20,000 mortgages.
My hon. Friend is absolutely right, and he underlines the point. Clearly, one carries no weight with this Government if one merely represents council tenants. After all, they do not merit a bribe. Sir Desmond Plummer is not blowing his top about them, because they will vote Labour anyway. And, good heavens, so they will!
I come now to the criticisms of the Government's way out of this crisis of their own making.
I would prefer not to give way. We started the debate late and I expect that a large number of people want to speak and if my hon. Friend will forgive me I shall carry on.
Many criticisms have been couched in terms of the inconsistency and illogicality of the Government's monetary policy. These criticisms are in my view sustained and I have no doubt we shall hear them forcefully put in the debate. I want to criticise, however, in terms of housing policy and of the inequity of the proposed subsidy taken in isolation. It is a subsidy, however much Sir Stanley Morton may protest to the contrary. It is a direct subsidy to the mortgage lending rate.
What should our attitude be? We would all agree that generally the owner-occupier is treated generously by our society. He receives mortgage interest tax relief, he pays no Schedule A now on imputed rent income, he pays no capital gains tax, he receives the advantage of improvement grant and he enjoys the best of all possible hedges against inflation. On the other hand, although a house is the best of all long-term investments, the burden of mortgage interest and mortgage repayments in the early years has risen under this Government to an intolerable level. It is now a very heavy burden on the new and recent borrower. There is, therefore, a strong case for avoiding an additional burden of mortgage costs for the young, the new and the recent borrower.
Is the Government's chosen method the best way to do this? My answer is firmly "No". The best way would have been never to have got into this situation in the first place. The Government should have adopted my proposal last year—and no doubt I should have put it forward earlier than I did, although I put it forward a great deal earlier than the Secretary of State—for a building society stabilisation fund. That would have enabled lending now to go on at an adequate level without the need for a 10 per cent. mortgage rate.
I still think that the right thing would be to create such a fund now. But if help is to be given now—special help apart from the stabilisation fund—to meet this crisis of the Government's own making, it must satisfy one of two essential conditions. One condition is that there should be no increase in the total help going to the owner-occupier. In other words, the £15 million should be found by legislating—not by twisting the building societies' arms but by legislating —to withdraw mortgage interest tax relief on second homes and on mortgages above a certain level.
Everyone in the House wants to help the young home-buyer. But it is a scandal, the extent to which we help the man who buys property as a speculation, the man who buys a weekend cottage or holiday house which is empty for nine-tenths of the year, and from which he probably derives a healthy income for much of the year, and the man who wants to buy a £30,000 or £40,000 house in London. Therefore the help in total to the owner-occupier should not increase and the £15 million should be paid for by lopping off concessions at the top end.
The other essential condition, if the first is not met, is that, if help to the owner-occupier is to be increased, there should be an equivalent increase in the help for council and private tenants whose incomes on average are lower and whose need on average is greater. The Secretary of State tried to claim last week when he made his statement that this was what was happening, that the extra £15 million was balanced by the recent increase in the needs allowance, but that analogy is totally false. Help now being given to the owner-occupier is far greater than that being given to tenants by way of the needs allowance. It is not just £15 million in grant. There is also additional tax relief on the 1 per cent. rise in mortgage rates which will cost the Exchequer £36 million over the next year, making the total of help to the owner-occupier £51 million. The estimated cost of the higher needs allowance is only £25 million to £30 million and so the owner-occupier is getting twice as much help as the tenant.
Of course there is also this crucial difference that this additional help goes on top of a rising total whereas the help to tenants goes on top of a declining total. Whereas the cost of tax relief has risen by £40 million to a total of £340 million in 1971–72, and is certain to rise still further, the Public Expenditure White Paper shows that subsidies for tenants would fall by about £70 million from 1972–73 to 1973–74. The fall will be only £40 million to £45 million with the higher needs allowance, but a fall is a fall is a fall. In summary the owner-occupier will receive 13 per cent. more from the Government in 1973–74 while the tenant will receive 8 per cent. less. That is the basic inequity of the system.
This ignores also the fact referred to by one of my hon. Friends last week that the tenants' help is means-tested whereas the owner-occupiers' help is not. So much for the pledge in the Tory election manifesto to concentrate Government subsidies where they are most needed.
The Government's other two arguments for this particular method of help are equally unconvincing. One is that it is necessary as part of the counter-inflation policy and the other is that it is necessary to keep up sufficient demand for new housing—and goodness knows that is a problem enough. I referred at Question Time to today's NEDO forecasts about what is likely to happen to housing starts in the next two years, and the figures are alarming. Both these arguments, however, assume that the help is permanent and will continue, if necessary, after three months. But the Chancellor made it clear that the help will stop after three months, even if, as is likely, building societies raise their rates to 10 per cent.
What should the Government have done? Here I wish to say a word about the rôle of the building societies. I have great respect for the building society leaders. They are honourable and public-spirited men who carry out their duty as they see it. One of the disgraceful things of the last few days has been the way in which they have been made both a scapegoat and a political football by the Government. I have a great deal of sympathy with some of the pained complaints to which some of them have given vent. Nevertheless, the events of the last five years have shown that we must fundamentally reconsider their rôle and their mode of operation. We shall have to discuss that in much greater detail on another occasion.
I make only these points: building societies are the self-appointed financiers of owner-occupation. They provide about 80 per cent. of total mortgage finance. But in the last five years they have conspicuously failed in what should be their central aim—to ensure a steady increase in finance and therefore to keep house prices reasonably stable and to offer a stable demand for the building industry. Instead of that we have had gluts and famines, wild inflation of house prices and a devastating cyclical effect on the building industry.
I do not believe that the answer consists of playing about with reserve ratios. In the long run that is mere tinkering. I am certain that it does not consist in altering the composite rate of tax. That would constitute a subsidy to the better-off depositors and would be altogether the wrong approach. The immediate need is for a stabilisation fund—after all, Joseph persuaded Pharoah to set up a corn supply stabilisation fund which on the whole seemed to work quite well. If we had had one in the last two years, with all the money that was pouring into the societies, we would have avoided the present situation.
It is a tragedy that the Government refused even to consider, let alone to adopt, this proposal many months ago. It must be done even now unless we are to face a worse possible crisis in the year ahead. The Government are right when they say that now is not the ideal moment to do it. Of course it is not—a few months ago would have been the ideal moment. But this is entirely the fault of the Government and it is extraordinary that they have only now just begun consultations with the building societies. All they ever do in every direction is to give the stable door a gentle push long after the horse has bolted.
In the long run we shall have to consider more fundamental proposals, such as the possibility that insurance companies and pension funds should devote a proportion of their funds to mortgage lending. We shall have to consider the very disturbing rise in the ratio of expenses that the building society movement has displayed in the past few years. We shall certainly have to consider the injection of an element of competitive public enterprise, and many other things. But those are long-term matters.
In the short run we condemn the Government unequivocally, not for their desire to help the young home-buyer—a laudable desire that we strongly share— but for acting too late, because they ignored our proposals for a stabilisation fund; for acting inequitably, because they have given additional help to the owner-occupier but not to the private tenant and the council tenant; and for acting with bare-faced cynicism, as what they have done has been related solely to the forthcoming county elections.
I do not need to repeat that the Government's housing policy is in ruins. That is obvious to everyone. But the most unpleasant aspect of last week's events was the open and shameless attempt to bribe a section of the electorate. Fortunately, it will not have the slightest effect on Thursday's results.
The right hon. Member for Grimsby (Mr. Crosland) has made his own vigorous election speech, but he was rather more confused than usual. That is not surprising, because he is speaking to a hysterical motion that totally mixes up the short-and long-term problems. That was evident from his reaction that I read in the Financial Times last week to the proposal for the £15 million bridging grant. He called it a bridging loan. I think that it was an instant reaction, because the money is in fact a bridging grant, as needs to be made quite clear.
The right hon. Gentleman talked then about the £15 million being a token approach to a stabilisation fund. It is not a short-term aproach to a stabilisation fund. It is designed to meet an immediate problem in the context of phase 2 of the counter-inflation policy.
The right hon. and learned Gentleman is right to say that I made that statement and used the phrase "bridging loan". I had then assumed wrongly—I had not read the full text— that it was a loan, and was therefore an approach to a stabilisation fund. I agree that, in that the £15 million is a grant, that comment is not applicable.
I am grateful to the right hon. Gentleman. It is important to get the distinction clear. It was in no way our purpose to do this as a first step towards a stabilisation fund.
It is perhaps significant that the motion does not attack the bridging grant as such. Indeed, the Leader of the Opposition has himself called for building society mortgage loan rates to be limited by subsidy if necessary. He said on 31st October
1972, speaking in the context of an incomes and prices agreement:
there must be a limit on building society mortgage rates, and this, if necessary, may mean subsidies. The Government should not reject this on the ground of the sanctity of the freedom of the City".—[OFFICIAL REPORT, 31st October 1972; Vol. 845, c. 30.]
Therefore, the Opposition have no objection in principle.
It is not inequitable that we should, in the context of counter-inflation measures, give the same short-term help to the house-owner as we have already given to council and private tenants through not only the £160 million for rebate schemes but the up to £30 million for the increased needs allowance. That will be continuing help.
It can be said with some justification that the £15 million is aid that goes to all mortgagors and is not subject to the means test. But we faced the same problem with our special arrangements for the payment of £10 to old-age pensioners before Christmas. In taking effective action it is not always possible to distinguish between those who are rich and those who are not so rich. As I pointed out when I dealt with the matter in the House on Thursday, a high proportion of the people with whom we are dealing are paying off mortgages and earning below-average industrial wages.
I should like to deal with the short-term action and the reason for it. It had nothing whatever to do with the local elections. The timing was determined by the Building Societies Association, which called its special meeting. As the right hon. Gentleman said, we have been having discussions with the Association over a period. We asked it to have regard to two facts. The first was the counter-inflation policy and the difficulty being encountered in a period of wage restraint. Secondly, we asked it to have regard to the fact that we should be producing a housing White Paper, which would put that short-term problem in the broader context of discussions on stabilisation.
This is a short debate, so I shall not give way.
In our debate on 14th March I spoke at some length about the rising demand for home ownership and the Government's determination to try to meet it by a high and sustained housebuilding programme. We have done better than the achievements of a Labour Government. The measure of our success is that in 1972, as compared with 1970, mortgages for first-time purchasers rose from 301,000 to 371,000; for borrowers under 25 from 117,000 to 144,000; and for borrowers with up-to-average industrial earnings from 158,000 to 192,000. Over the past two years the total number of new house owners has risen by 500,000.
That has undoubtedly put considerable pressure on the building societies. I said on 14th March:
The basic position of the building society movement remains sound. Its assets exceed £15,000 million. Repayment of principal last year reached the record figure of £1,400 million, a sum which by itself can support a large number of new advances. Nevertheless we have to accept that the building societies have to retain and attract funds from investment. Inevitably that raises the question to which the right hon. Gentleman referred—whether mortgage lending rates should be increased… Difficult and conflicting considerations are involved."—[OFFICIAL REPORT, 14th March 1973; Vol. 852, c. 1323.]
What are those considerations? First, we must do all we can to avoid a shortage of mortgage funds. The low level of private housing activity in 1965–66 and in 1969 and 1970 was surely due in large part to the shortage of mortgage funds in those years, when the right hon. Gentleman was saying nothing about a stabilisation fund.
Of course, we could take different views on such matters as the appropriate level of building society liquidity and reserve ratios in relation to the statutory minimum requirements. But I agree with the right hon. Gentleman that they do not go to the heart of the problem we are discussing.
There is no escaping one basic fact. In the longer run building societies cannot be totally insulated from the market for savings. They must offer investors a rate of interest sufficiently competitive to retain and attract enough funds to support existing mortgages and to finance new mortgages. That is why many building societies, rightly or wrongly, have judged that in the current conditions they must raise their investment rate to 6·75 per cent. net to bring in an adequate flow of funds.
The second consideration is that we must accept that the building societies are strong and do not need special financial help in the present situation. That is why the right hon. Gentleman is wrong to insist on calling the payment a subsidy to the building societies, when it is help to the individual owner-occupier at a time of temporary wage restraint.
I cannot accept the suggestion that some right hon. and hon. Labour Members have made on television and radio that the building societies could offer a low and uncompetitive investment rate to avoid raising the mortgage lending rate, and that the Government should plug the gap with repayable Exchequer loans for use for mortgage lending. If the building societies kept down the investment rate to 5·6 per cent., which corresponds to a mortgage rate of 8·5 per cent., at the prevailing rates of interest Exchequer loans would amount to many hundreds of millions of pounds over the next few months, and not merely the £15 million bridging grant. That would have represented a totally unacceptable increase in the public borrowing requirement. What we are doing now does not involve an increase in that requirement.
Thirdly—and this is where the difficulty and the conflict arises between the short-term and the long-term considerations—we believe that during phase 2 of the Government's counter-inflation policy some temporary help to mortgagors in an abnormal situation is justifiable. The longer-term need is for measures to ensure a more stable flow of funds.
Quite apart from the justification for temporary action to help owner-occupiers at a time of wage restraint—such action is justified for the same reasons which justified helping other sections of the community—the evidence which we have suggests that recent withdrawals from building societies have been used not to invest in other markets. There is no evidence of a shift from one form of investment to another—for example, from the building societies to National Savings. It seems that withdrawals have been made to finance a surge of consumer spending in advance of the introduction of value added tax. If that is so, the funds should begin to flow back to the societies in the weeks ahead.
In the special circumstances, we thought it wrong that the mortgage lend- ing rate should be put up to 10 per cent. which the arithmetic of a 6·75 per cent. investment rate would justify. The action which we have taken is temporary. My right hon. Friend the Chancellor of the Exchequer has made that clear. There will be no question of permanently holding down the interest rate below its true level. It should be possible in a few months' time to judge more accurately the appropriate rate for mortgages.
The motion talks about the Government's action being inflationary. No one wants higher interest rates for their own sake—certainly not the Government. It must be remembered that high interest rates are not a cause of inflation so much as a consequence of it. As my right hon. Friend the Chancellor of the Exchequer in his Budget statement said:
Because expectations about the future rate of inflation are a major factor in determining the level of interest rates, the success of the counter-inflation policies is crucial to improvement in this sphere as in others."—[OFFICIAL REPORT, 6th March 1973; Vol. 852, c. 252.]
A 10 per cent. mortgage lending rate would have meant an increase of about 13 per cent. in the gross repayment on a new annuity mortgage. The effect of the bridging grant should be in the short term to moderate increases in new gross mortgage costs from 13 per cent. to 8 per cent. That is right and equitable in the context of the counter-inflation measure.
The right hon. and learned Gentleman has referred three times to counter-inflationary measures. Does he admit that on 28th April millions of families, both council tenants and private tenants, will have large rent increases and that only a minority of them will have a rebate? Does not he think that it is doubly unfair to do that, which is unnecessary, at a time when he is talking about curbing prices and giving extra help to some wealthy people in the owner-occupier sector?
I know that the hon. Gentleman does not want to listen to my answer. We raised the needs allowance by £3·50 to deal with that situation. As a result of that action the average family, with two children, with an income of £35 a week—even though the rent of a council house may rise—may well, because of the effect of the needs allowance, pay less in future than it pays now. We have helped the position not only of council tenants but of private tenants.
A reduction in rent cannot be called a drop in the bucket. The hon. Gentleman has not bothered to look at the effect of an increase of £3·50 in the needs allowance. It would help his constituents more if he explained to them how they will be able to obtain their rent reductions which the Government are providing, instead of misleading them into thinking that they have to pay an increase.
It is hard to see how inequitable, as the right hon. Gentleman suggests, this modest aid to the mortgagor is—this ridiculous mouse, as the right hon. Gentleman called it—when we have done so much for other sections of the community. The right hon. Gentleman did not give sufficient weight to the fact that the effect of the bridging grant will be to maintain a reasonable flow of mortgage funds and to keep up a high level of new building at a crucial time.
Meanwhile, the building societies have agreed that they will try to help existing mortgagors accommodate an increase in the lending rate to 9·5 per cent. by offering an extension in the mortgage loan period where possible. I agree with much of what the right hon. Gentleman said about the situation facing first-time purchasers. That applies particularly in an area of high prices. I think that they will be helped by the fact that the Building Societies Association will recommend its members to limit special advances over £13,000 as far as possible. We shall be discussing with the building society representatives whether means can be found of making it easier for young couples in particular to get their foot on the first rung of the home ownership ladder.
In the longer term, I believe that all house purchasers will benefit if we can find satisfactory means of stabilising the flow of mortgage funds.
I shall now deal with the real substance of the right hon. Gentleman's case. I indicated my general agreement with him on stabilisation on 6th March. However, stabilisation cannot be introduced easily or overnight. It is a difficult problem. I have no doubt that the right hon. Gentleman found that it was a difficult problem and, of course, he decided not to stabilise when he was responsible for these matters.
My right hon. Friend the Member for Gloucestershire, South (Sir F. Corfield) and I dealt with this matter between elections in a pamphlet called "Target for Homes". We had to find some way to deal with the situation where the building societies are borrowing on short term and lending on long term. It is not an easy matter. About 85 per cent. of all residential mortgage funds are provided by building societies. They are non-profit making organisations, but they have to live in the commercial world and they have to come to terms with it. Changes in credit conditions—and perhaps the administrative requirements and policies of building societies themselves—have contributed to the alternation of mortgage glut and mortgage famine over the last 10 years. That has contributed to the steep fluctuations in the output of new houses; and to increases in house prices when demand outstrips supply at the end of each period of shortage.
I doubt whether any system of stabilisation could in itself make mortgages significantly cheaper in the longer run than otherwise would be the case. Building societies must depend on investment from the public raised at market rates of interest. But what we can reasonably hope for from an effective stabilisation system are the stabler prices that should flow from a stable level of housing building, and the social benefits of avoiding the disappointment and frustration among couples setting up homes who find that they cannot get loans at a time of mortgage famine. That is the mischief that a long-term policy could help to meet. That is why we began urgent consultations with the building societies.
It is important to distinguish between short-term action and the longer term questions which the right hon. Gentleman has raised, which require a good deal of research and study.
With regard to long-term proposals that the Minister might have, has he taken account of the fact that the Prime Minister, just prior to the General Election in June 1970. promised, when he was asked about the 8½ per cent. mortgages that then prevailed and what his answer would be, to reduce mortgages, and added that the Conservative Party was studying the Merritt-Sykes system and the Australian proposals? Have the Government gone into the matter since 1970?
The matter has been considered. There is a great deal of merit in the Australian system. It is worthy of study. The hon. Gentleman's intervention demonstrates that this is not a matter which could have been dealt with, as the right hon. Gentleman suggested, overnight as an alternative to temporary measures. Indeed, he had the same difficulties himself. We would hesitate before we changed completely the system on which we base our building societies at present.
The Opposition have rightly concentrated, because of the topicality of the matter, on the financial aspect. But the motion condemns the whole of the Government's housing policy. The right hon. Gentleman did that also in a rather conventional electioneering peroration. It is impossible to separate the question of housing finance from the supply of land and other considerations of housing policy. That is what we are dealing with in the White Paper published today. With the release of land, we have had considerable success already. The new planning guidelines I propose will help further. They will contain a general presumption in favour of housing development. There will no longer be an automatic presumption against using white land for housing. In growth areas, there will have to be exceptionally compelling planning objections before the strong general presumption in favour of housing can be over-ridden.
The land hoarding charge will not only penalise speculative hoarding of land without planning permission but will provide a powerful inducement to owners of land which now has planning permission for housing to develop that land. I am also proposing legislation to facilitate partnership schemes between local authorities and private enterprise and to require developers to contribute towards the cost of services. All these measures will help to bring more land forward for development and to remove what has been a major obstacle to getting more houses built for sale.
Although most people want to own their own homes, there are and will always be many people who prefer to rent or cannot afford to buy. It is part of our housing policy that we should seek to meet these varying needs by slum clearance, by improvement and by new building to rent. But we should not aim, as has been suggested, at a municipal monopoly of rented accommodation. Local authorities should not be the only agency which builds for rent.
That is why we are taking measures to strengthen the Housing Corporation and the National Building Agency in the way I foreshadowed in our debates earlier this year. They can more easily meet urgent requirements—for example, of those who move into an area. The new remit of the Housing Corporation will be to promote the development and effectiveness of the whole voluntary housing movement and, above all, to give particular help to those housing associations which are active in areas of bad housing, whether by the purchase, conversion and improvement of existing older dwellings or by the provision of new dwellings. That provision will go a very long way to meeting the needs expressed today.
I entirely refute the way in which the motion seeks to reject the housing policy of the Government as a whole. I believe that the action we have taken and the new measures announced in the White Paper, which represent a major shift of resources to housing, demonstrate that our policy is coherent, vigorous and calculated to achieve better conditions over the whole spectrum of housing and to give the wider housing choice that we all want to see.
When all is said and done, what has happened is that, in the week before the local elections, the Government have decided to hand out £15 million in order to keep mortgage rates down from 10 per cent. to 9½ per cent. for a period of three months. That is what the Government have done, and anybody who is remotely affected is going to say, "Thank you for nothing". For the persons concerned, the relief offered is tiny and for a very trivial period. The Building Societies Association itself has said that it neither wants nor needs this help.
I am bound to say that the number of wealthy organisations which say they neither want nor need £15 million must be very limited. If the Government really have £15 million to spare, they might switch their attention from this debate to the one we are to hold after it. A number of organisations concerned with the needs of disabled people would receive £15 million with much better grace than the Building Societies Association has apparently received it.
Has there ever been anything like this before, when a Government, in such an obvious electoral bribe, have waved this large sum of money about in a way that has no real relevance to the nature of the problem and have had it contemptuously rejected by the immediate recipient? I do not think that there is a previous such example. How on earth has it happened?
The Secretary of State had to defend it in the House a few days ago. When he was endeavouring to do so, I was reminded of a passage written by Adam Smith in "The Wealth of Nations" two centuries ago. Smith said:
It must be offensive to an intelligent man to realise that what he is saying is nonsense or very little better than nonsense.
How does it come about that the Government have got themselves into this position because, as was apparent last week and indeed, today, there is hardly any enthusiasm even among hon. Members opposite for the Government's position in the matter?
I think it comes about because, for years now, on the whole housing problem the Government have got their priorities completely wrong. Their willingness to produce a subsidy of this kind at this moment suggests that at least they have now grasped the fact that housing as a whole ought to be subsidised just as education ought to be subsidised, because if any of our fellow citizens are desperately deficient either in education or in housing this is an injury not only to them but to society as a whole. This is the case for subsidising all housing, whether it be for council tenants, private tenants or owner-occupiers.
But the Government have their proportions desperately wrong. Having at last got to the idea that all housing ought to be subsidised, they should look at what range of help they are giving to the various categories of people. But what has happened? It is still true, despite the growth of owner-occupation, that, if we want to deliver most of our fellow citizens from the misery which inadequate housing means, the first priority ought to be the increase of council house building of the kind of properties which people can rent at rents they can afford. But between 1970 and 1972, the number of council houses completed dropped by about one-third and the number of council dwellings started dropped by about one fifth. As long as that kind of policy goes on, a great many of our fellow citizens will never be delivered from the evil of inadequate housing. If the Government had £15 million to spare, they would have been better advised to use it to build accommodation to rent at rents which the great majority of our fellow citizens can afford.
The second error which the Government have made—and Conservative Governments have made it ever since the Rent Act 1957—is to pursue policies which have made it possible for people already reasonably well housed to be a bit better housed and for people who are inadequately housed to be pushed a further rung down the ladder. That is the effect of a policy which offers a subsidy of this kind to owner-occupiers, which will be handed out to them without question of need. I do not suggest that the effect of the subsidy will be very great one way or the other, but, in so far as it is taken and is without means test, it will help some who are already tolerably well housed to improve their position—and all this side by side with the Housing Finance Act, which will make it more difficult for people who are already in difficulties to get themselves tolerably well housed. If we add to that the steady discouragement of the building of council houses, illustrated by the figures I have quoted and by the Government's publications, it will be seen that it is even harder for those in a difficult position to improve that position.
I mentioned two charges against the Government—their lack of proportion, their driving of a wedge so that those already not too badly-off have an improved position and those in difficulties are pushed further down. My third charge concerns why the Government were driven to this ridiculous expedient which, when it was announced in the House last week led to only one hon. Member opposite managing to get to his feet and express a word of approval for the Government against the chorus of disapproval from all sides.
The Government have been driven to this ridiculous expedient because they are not prepared to take effective measures against the causes pushing up the price of houses and, beyond that, the price of land. Such action would require severe measures. Drastic powers would have to be given to local authorities to take possession of houses left unoccupied because the owner believed that it would pay him more to wait another six months and sell at an inflated price rather than let someone use the building at once.
I have referred to this before in the House. The Government take not the smallest notice. I would not seriously expect them to do so because, basically, they are more interested in people who own land and houses than in people who want to live on the land, in houses. That is what the Conservative Party is for. We want effective measures with drastic powers of requisitioning by local authorities and an effective public authority with drastic powers to bring land into public ownership. We cannot expect that from a Conservative Government. That is why we are landed with this admittedly ridiculous, inadequate and electioneering proposal.
I am never sure whether it is a virtue in politics to be consistent. If it is I would lay claim to having been one of the very few hon. Members on the Government side of the House who, since the Budget proposals, has drawn attention to the fact that there was bound to be a considerable effect on owner-occupiers. Having been one such hon. Member who drew the Government's attention to that situation, I must welcome the assistance that is forthcoming from the Government as a result of their announcement last week. I am bound to tell my hon. and right hon. Friends that I do so with substantial reservations.
Having pressed the Government in this way it is incumbent upon me to say why I feel that some aid should have been forthcoming to owner-occupiers at all. I begin from the premise that nothing is more important than that phase 2 of the Government's counter-inflation policy should succeed. Secondly, there can be no denying that the increase in the building society rates which we have experienced in the last few weeks spring directly from the Chancellor's action in the Budget to stimulate National Savings.
I have no doubt that it was right, in the interests of a counter-inflation policy, so to stimulate national savings. If that is the case I must point out that it is also right for the Government to take all reasonable steps to contain essential family costs thereby making the phase 2 wage increases more acceptable than would otherwise be the case. If it is right to give this assistance I can think of several ways in which I would have preferred it to have been given.
When I raised this matter in the House on 8th and 22nd March I asked whether the Government would consider reducing the rate of tax paid by building societies. Here I must make a sharp criticism of the Treasury. I was surprised to find that the answer given by the Chief Secretary was to the effect that mortgage rates were of no particular concern to the Treasury Department. Events in the last few days have seemed to take rather a different line.
I suggested that the rate of tax paid by the building societies should be reduced during 1973–74. I did so because I feel, rightly or wrongly, that there will be a tendency for interest rates to begin to fall in the next year or so. If that is so it would be much better to give this assistance on what might be called a year-to-year basis. This would also have the advantage that it would not be a grant or subsidy. It would be a method of leaving in the building societies' funds additional resources which they could then take care of in a suitable way. That may mean that they would not extend equal assistance to everyone. They might chose to give particular assistance to those borrowers in greatest need.
As a second alternative I suggested— and I devoutly hope that this is something to which my hon. and right hon. Friends will give consideration-—that the first £40 of interest on a building society investment account should be income tax free in the same way as the first £40 of interest on a Trustees Savings Bank account is income tax free. If that were done the vast new inflow of funds, perhaps from a section of society that at the moment does not even think of investing in a building society, could be so considerable that a large measure of the difficulties could be ironed out. I hope that this is still something to which my hon. and right hon. Friends will turn their attention in terms of preventing similar crises in future.
Thirdly, if we are looking for rather better ways of assisting owner-occupiers by a distribution of £15 million, much more help and of a much more less temporary nature might well have been extended to the option mortgage borrowers. The option mortgage system, having brought owner-occupation within the reach of a great many people who would otherwise have found house purchase too expensive, is something that should now be examined in the light of some years of operation.
I hope that the Government will take the opportunity, in consultation with the building societies over the next three months, of seeing how we can so improve the scheme that in future it not only helps young purchasers through a reduced rate of interest but also provides assistance with the deposit. Hon. Members on both sides seem to overlook the fact that while interest rates are important, if we were to ask a young couple about to purchase their first home which was more important, assistance with repayments or assistance with the deposit, I have no doubt at all that they would reply that assistance with the deposit was the more important.
I can see a great deal of sense in what the hon. Gentleman says about the system. Does he not agree that when we last debated this matter the proposition was made, from the Government side of the House, that young people ought to be encouraged to buy their houses and then sell them four or five years later to make a profit? How can he reconcile what he is saying with that submission?
I cannot recall that submission. The hon. Member will be interested to know that I will develop this argument a little later. I hope that for the time being he will contain himself.
Discussion of the cost of repayment and the cost of a deposit brings me to the question of the building societies. I have had some experience of building societies and I have found them, particularly in the last few years, singularly lacking in enterprise and having an insufficient capacity for forward planning. I listened to what the right hon. Member for Grimsby (Mr. Crosland) said about the creation of a stabilisation fund. I believe that there is a great deal of merit in the creation of such a fund, but it should not and need not come from Government resources. It should and must come from a redeployment of the building societies' resources so that, with luck, by holding back to a minimum extent in good years societies prevent the recurrent mortgage famine of the last 10 to 20 years.
Building societies' lending terms are considerably in need of revision. If I were a young man looking for a first mortgage and if I were to walk along my local high street on a Saturday afternoon, assuming that there were six building societies with offices there—not an improbable situation—I would take an even bet that only one of them would be prepared to lend to me over a term in excess of 25 years. I fail to see why. If I were prepared to pay for my pension over my working lifetime, and if I were in rented accommodation during the whole of my working lifetime, I see no reason why the building societies should not progressively become more prepared to extend the mortgage repayment terms.
I envisage the building society approach changing whereby a prospective owner must have 10 or even 20 per cent. of his own money involved. The number of building societies which would give me a 100 per cent. mortgage is very small. I suggest to the building societies movement that the time is coming when that matter, too, will become part and parcel of the operation. I see no reason why a borrower who wants to know exactly what his costs will be over the period of the mortgage should not be able to obtain the mortgage on a fixed-interest basis, paying perhaps half per cent. more than other borrowers. Yet that is almost impossible in the building society movement.
The building societies must develop new ways of attracting money. The business of having a vast inflow one year and a famine the next is not good enough. I should like attention to be devoted to a dimension in building society investment which, as far as I know, is not practised in this country. If inflation has taught us anything, it is that if we are to invest our savings there should be some prospect of capital growth. But there is no capital growth in a building society investment. Certainly investors have security and a good rate of interest, but they do not have capital growth. Yet underlying building society transactions is the purchase of a property and in no other respect has the capital gain been greater in the last 10 years.
The borrower, who borrows at as cheap a rate of interest as possible, has a sizeable capital gain. I put it to the building societies: is it impossible to share this capital gain with the investor? If we were to introduce a new type of building society investment within which there would be a potential sharing of the capital gain of the ownership of the home resulting in investors placing their money with societies at a much lower rate of interest than they have to pay now, would it not be in the best long-term interests of the movement and of the prospective owner-occupier?
I should like to expand in a future debate some of the thoughts which I have mentioned today. I return to the proposition which the Government have put before us. I shall have no difficulty in supporting the Government in the Lobby because, as I said at the beginning of my remarks, it will be consistent with my demand for help for owner-occupiers. To those of my right hon. and hon. Friends who may feel that they must oppose the Government's move for what are called interventionist reasons, I say that many millions of my constituents and theirs who do not understand what inter-ventionism means have noted that some Government assistance is forthcoming and are grateful for it.
A major theme of the period when the present Government were in opposition was the breaking of the then Labour Government's promises. On nothing was greater vehemence expressed than on the Labour Government's broken promises in housing. The last paragraph of the Conservative Party manifesto in 1970 read:
Under a Conservative Government, the gap between the politician's promise and government performance will be closed.
The record relating to the Labour Government's housing policies which in opposition they sought to put before the public was discreditable, starting with the promise made by the then Mr. George Brown in Derby in September 1964 when he said:
For the new mortgages we have something in mind of the order of 3 per cent.
We progressed through various other promises of the Labour Party in opposition. In an election broadcast in October 1964 the then Leader of the Opposition said:
We believe the Government should act positively to help owner-occupiers by lowering interest rates …
No one can deny that what the Labour Party said at the time was discreditable and perhaps it was best summed up in an article in the New Statesman in September 1970 written by the present Opposition Chief Whip, who said:
As one of the politicians involved, I admit to being thoroughly ashamed that my term of office did not produce anything like the approach that is needed to solve the problem of housing.
The Conservative Party, I suppose rightly, belaboured the Labour Party's record. As the right hon. Member for Grimsby (Mr. Crosland) said, the Conservative Party said on page 18 of its manifesto:
The increase in the cost of new houses and the highest mortgage interest rates in our history have prevented thousands of young people from becoming owners of their own homes.
Even today, three years later, one can almost visualise the tears dripping down the face of the Prime Minister when he penned those words.
The Conservative Party belaboured the Labour Party for having increased mortgage repayments by £3 a week. The situation now depends on whether one takes repayments on an 80 per cent. mortgage or a 100 per cent. mortgage, but, taking the 100 per cent. mortgage, I calculate that the mortgage repayment on the average-priced new house since the Tories came to power has risen by £8 a week. As a proportion of the average industrial earnings, the repayment has risen from 30 per cent. to 50 per cent. in less than three years.
It was that figure which the Secretary of State for Trade and Industry deemed to be the most important. He said:
The true problem arises when the relationship between the cost of a mortgage and the average industrial wage gets so much out of line that the person with an average industrial wage cannot buy a home of his own."—[OFFICIAL REPORT, 15th May 1969; Vol. 783, c. 1663.]
That is no bad starting point from which to judge the Government's record, which has been blown sky high in the last week.
It is not only a question of the Conservative Party manifesto—one might decently bury a document which is nearly three years old—because the Conservatives arc still at it. They published leaflets recently. One of them, produced by the Conservative Central Office, was headed,
It's all happening … as promised.
It referred to the lifting of hire-purchase controls and the modernisation of banking systems. It referred to a
Housing policy that concentrates help on the needy … as promised".
Such leaflets have been distributed in my constituency in the last two weeks. They talk about streamlined methods of decision making as promised. Certainly there has been no more streamlined decision taking than this. In particular they say:
Council tenants have been encouraged to buy their homes—as promised.
Let us take that last point. I have done something to persuade one or two councils in my constituency in principle to sell houses to tenants where they are not needed for other and higher social purposes, and in Camelford Rural District Council area, which is part of my constituency, in the last week tenants have received a letter from the council which offers them a chance to buy their houses at £6,000 and the repayment quoted—we have to take the gross weekly
cost for the moment—for 25 years is £12·83 a week, and the figure for the mortgage option scheme is £10·1. That is for a council house the rent and rates of which at present are £3·85—a figure of £10·1 a week when average industrial earnings are £36 and the average earnings in Cornwall are nearer to £20 than £25 a week. It transpires that the promise which the Government made to make it easier for council tenants to buy their houses is in total collapse. That promise will never be kept.
Why have interest rates gone up? As everyone knows, they have gone up primarily because of inflation. I have always been amazed that people have been prepared to lend their money for nothing or even less—because that is what a good many people have been doing, investing in national savings, trustee savings banks and building societies. Why should I lend when I shall actually lose by doing so? If I lend to a building society at 6·75 per cent. tax free I am the fool in the phrase, "a fool and his money are easily parted." For the fool who invests £100 for a year with a building society at those rates net of tax may expect at the end of the year to have £10675. If inflation is at 8 per cent. he will have no such thing. He will have only about £93·40.
Why, the Government may well ask, could anyone, fool or wise man, expect a rate of inflation of 8 per cent.? The Government, who promised to check price rises at a stroke, did not, and refused statutory intervention on prices and incomes until the eleventh hour. Even now they insist on beating their breast and telling us they do not really believe in it but want to get back the old free for all as soon as possible, and their pay norm is £1 plus 4 per cent., of average industrial earnings. Their policy is inflationary; their attitude to the prices of food seems to be to let them rip. The possible alternative to the Government—the official Opposition—are totally opposed to any kind of wages policy and their domestic policies add up to a rag-bag of the most inflationary devices ever put forward by any political party on earth and possibly elsewhere.
In my view, inflation will continue, and probably at the present level, and, may even continue at higher levels. The Chancellor of the Exchequer tells us this is a bridging loan to carry over the position for three months and by the end of three months something miraculous will have happened to interest rates and they will have come down to a lower level. I do not know whether they will go up or down. Nor does the Chancellor. The Times reckons interest rates will go up to 17 per cent. and the Economist reckons they will fall. It is anyone's guess.
Certainly inflation is here now and I must admit that not even my party's policy will stop it, although I believe that our policy of a selective tax on those who cause inflation would do more than anything else to help get it down. If we want to check the money supply, as indeed we do, we must accept higher interest rates, for the only alternative, I suppose, is rationing, and that seems to be the sum total of the choice. Did not the Chancellor know when he made his announcement in the Budget about national savings and interest rates that it would have the very effect on mortgage interest rates it has had? There was an instantaneous reaction, at a stroke, and interest rates at a stroke went up in every field as soon as he ended his speech. He should have gone to the capital market for his borrowing requirements and he should have had a growth-linked bond encouraging people to invest in the growth rate in the economy.
I admit, that the Government are in a dilemma, but it is a dilemma entirely of their own making. When all is said and done, we have a Government who subsidise housing costs of that section of the electorate from which they expect greater political support, while at the same time they remove subsidies from the housing costs of that section of the electorate from which they expect less political support. Such a Government cannot possibly claim that they are following a one-nation approach. An hon. Member here is again accusing my party of having supported the Housing Finance Bill. We did not.
We voted against it, and we made it quite clear what we were doing. We proposed numerous Amendments to it.
The Government cannot escape that that Act will remove £300 million from the pockets of council house tenants by 1975–76 while at the same time allowing the benefit of income tax relief on mortgages whether for a swimming pool, a garage or whatever, to rise. The Government, like the last are a two-nation Government.
That is their own affair, but when they use taxpayers' money to buy votes from a more favoured section of the community that becomes the public's affair with a vengeance and I must say that it seems to me to be a piece of political sculduggery of the very worst sort.
I come to a question about the operation of the pay code formula and the announcement made today. Can the Minister tell us whether the pay code formula of £1 plus 4 per cent. means that the extra benefit gained by those who pay fixed-interest rates on mortgages, from, for instance, their employers, will have to count the notional benefits of what they would have had to pay, against the formula of £1 plus 4 per cent.? Can he tell us whether the building societies, which have not exactly welcomed this subsidy, categorically told the Government before they offered them this money, that they would otherwise raise their rates to 10 per cent.? How did the Government know that would be the rate? Is the taxpayer being asked to pay to stop something which would not have happened in any case?
What are the solutions? Something far more radical than the suggestions we have had from the Government and Opposition this afternoon. The right hon. Member for Grimsby put forward a scheme to stabilise mortgage interest. This is a buffer stock. I am inherently suspicious of buffer stocks whether they be on corn or copper or mortgages. Indeed, we already have one because there is a difference between the statutory level of the building societies' reserve and the national level of the reserve. I agree there is need for this present reserve. Would not the building societies and the Government have been fired at had they kept back money in years of plenty? They would have been fired at from all sides for doing just that.
The question is how to get people to lend to the building societies. I agree entirely with the hon. Member for Bil-lericay (Mr. McCrindle) that theoretically it should be very easy because investment in property is the best hedge against inflation, and I agree with him because I have a mortgage of exactly that kind where I share the equity with the person who lends the money. It is, unfortunately, not entirely certain that the present law allows this, because there are various decisions of the courts against a clog on equity. It would be helpful if the Government could clear this up and ensure that the law allows it.
The real answer to the problem of housing finance lies in the tax credits scheme, in a replacement of the mortgage allowance and rent subsidies and rebates by housing credits or allowances. The mortgage interest relief must be abolished and replaced by a housing allowance payable as of right to any person with a mortgage. This would automatically limit the value of the house on which the Government are prepared to give help. It would, moreover, allow only one housing allowance and would therefore not allow second home mortgages. I agree with the right hon. Member for Grimsby that these should be abolished immediately.
In our view, the introduction into the tax credits scheme of housing allowances and credits would bring a new fairness and a new equality between those who rent and those who buy their properties, which is the real answer to the problem.
I listened with interest to the remarks of the hon. Member for Cornwall, North (Mr. Pardoe) about a housing allowance. No doubt the Select Committee on tax credits of which we are both members will be considering that. I hope that he will forgive me if I do not follow him on that point.
I must begin by declaring an interest in housing development.
The £15 million bridging grant flows, almost as a logical necessity, from the Government's pursuing in parallel the twin policies of stimulating economic growth through a high borrowing requirement and action on countering inflation. I have yet to hear any hon. Member opposite say that they do not want economic growth or that they do not want inflation to be controlled. The country is now getting economic growth at a rate that we have not had for many years, and all the indications are that phase 2 of the counter-inflation policy is being successful.
Therefore, while I do not particularly welcome the £15 million bridging grant, I do not particularly condemn it. I believe that, in the circumstances, the Government had little option. In any event, there are more important problems associated with housing finance which have to be considered.
I welcome the Government's intention to look into the regulation of the flow of mortgage funds. The building societies have been greatly criticised because, during 1972, a year of mortgage surplus, they did not cut back on their lending. This criticism implies that it is the job of building societies to regulate the flow of funds. If it is a matter of public policy to regulate the flow of home purchase finance, that is a job for the Government and not for the building societies, although in practice the societies do achieve a measure of regulation by varying their liquidity ratios.
It is also suggested that the building societies should favour young couples buying their first home. They do this to a certain extent already but if it is a matter of public policy to favour one type of purchaser and one type of house over another, that is a matter not for the building societies but for the Government and Parliament.
The Government have at their disposal a simple tool both for regulating the flow of mortgage funds and for discriminating between one type of house purchaser and another. It is a device that we have used for many years on hire-purchase transactions, namely, legislating for a minimum deposit. This would effectively control the flow of funds and could be used to discriminate as between one type of house purchase and another. For example, there could be a relatively low minimum deposit required for the first purchaser of a new home and a relatively high deposit for the purchaser of a holiday home.
Whether it would be necessary to run such a policy in conjunction with a mortgage stabilisation fund, I do not know. Certainly the idea of such a fund is superficially attractive. It is not a particularly original idea. It has been kicking around for a long time, but it has two potential snags. The first is its possible effect on the money market. This can best be illustrated by looking at 1972, a year of mortgage surplus.
During 1972, the total mortgage advances were £3,600 million, a massive increase of £800 million over the previous year. With the wisdom of hindsight, it might be argued that the building societies should have advanced say £400 million less, but what would they have done with the money? If they had put it into local authority funds or into gilt-edged stock, which are the only places they can put it, the injection of that very large sum into the money market would almost certainly have forced down interest rates to a level too low to service the building societies' own borrowings from their investors.
In the case of gilt-edged, a further problem might have arisen on realisation. Had they invested in gilt-edged in 1972, they would have been selling that stock during 1973, to make good their present shortages. But of course, the market for gilts is now depressed because the Government themselves are trying to sell large quantities, and the building societies would have suffered a loss.
Losses of one kind or another may well be inherent in the very idea of a mortgage stabilisation fund, which requires the finding of investment outlets in times of plenty, and therefore of low interest rates, and the realising of assets in times of dearth, and therefore of high interest rates.
If the Labour Party opposite do not like the £15 million grant which the Government are making to the building societies, they must face up to the fact that a stabilisation fund could well involve a much bigger contribution by the taxpayer to the building societies and of course it would again be an indiscriminate contribution because it would make no distinction between poor borrowers and rich borrowers.
There is a further snag inherent in the idea of a stabilisation fund. It is based on the theory that years of surplus are more or less equally balanced by years of famine. But in practice that is not so. There are four times as many years of famine as there are years of surplus. In order, therefore, to keep the stabilisation fund topped up, building societies would have to keep their interest rates artificially high.
The solution could be to look for new sources of home purchase finance. Insurance companies and local authorities already do something; perhaps they could do more. Perhaps pension funds, private investment portfolios, even trade union funds, could enter the mortgage market.
I welcome the Government's intention to look into the problem of regulating the supply of mortgage finance, but it is worth making the point that there must be not only a supply of mortgages but also a supply of building finance, particularly for the smaller builders who are very dependent on bank borrowing. It is no good, on the one hand, providing the wherewithal to build houses if, on the other, the small builders who make a great contribution to the building of houses for sale are no longer able to build for lack of finance.
The building societies have suffered much criticism, but it needs to be said that they have served Britain well. The home purchaser in Britain can get a better deal in terms of length of loan, size of loan and rate of interest, even at the present high levels, than in practically any other country. The building societies have made a massive contribution to the extension of home ownership in Britain and it is now up to the Government to provide them with the framework which will enable them to do even better.
Despite protests to the contrary, the Government have to accept that they are largely responsible for pushing up interest rates. They are hoist by their own petard. The final straw was the Budget's national savings proposals and the £4,000 million borrowing requirement, which has had the effect of leaving the building societies stranded in this muddy junction. It was obvious for months that money was flowing out of the societies at a much faster rate than it was coming in or, at least, that they were getting less money to retain in their reserves. The warning signs should have been clear to the Government a long time ago and the Government should have been prepared to take action at the time of the Budget, or even before then.
It is much too easy to suggest, as the Minister tried to argue this afternoon, that this is all due to Christmas and VAT consumer spending sprees. No doubt that spending has had some effect on funds going out, but my information is that a lot of money has gone from the building societies into fixed-income bonds and local authority loans, and by the very nature of these commitments it will be a considerable time before that money comes back into the building societies. So the Government have themselves created this vicious inflationary merry-go-round from which neither ratepayer, householder nor tenant can alight; and they have managed to make city treasurers frantic and building society chiefs demented all at the same time.
The glut of money which was available to building societies over the past two years has helped to push up house prices —I confess that the Housing Finance Act was a very efficient assistant, too—but the present shortage of money is having the effect of making many people revise the prices they ask for their houses, so it may be that it is an ill wind that blows no one any good, and this effect may be just one crumb of comfort in this terrible situation. Building societies have a responsibility to challenge the house prices that are being asked. They are in a unique position to bring their influence to bear on the market forces, although I do not think that we should overestimate their obligations or suggest that the Government have no part to play.
We are always being told that a house, even at a 10 per cent. rate of interest, is a good buy, that it is the only good hedge against inflation. It certainly is a good hedge against inflation. "Think of the capital gain you are making," we are always being told, but I find that more and more people are beginning to realise that one cannot eat a capital gain from the house in which one lives. It is true that a man's descendants may spend it for him after he has gone, but it is not much good to him while he is living. It is little comfort for someone to be told that his house is worth £X thousands now as he goes to pay his last mortgage instalment from his first retirement pension payment.
A stabilising fund is extremely important and I am glad that the Government are now proposing to do something about it. I do not minimise the difficulties— it is a very difficult problem to solve, and probably only the Government of the day can solve it. We have been told in the last few days that the liquidity rate of the building societies has been reduced from about 17 per cent. to 13 per cent. and this in itself is a kind of stabilising fund. It is, however, still a long way off the statutory requirement of 7½ per cent. and I wonder whether the building societies themselves could not reduce then-reserves to 10 per cent. and thus release a considerable sum of money at this time of famine.
It is possible that if the societies took this action the Government would need to give them some guarantee in the unlikely event of their being embarrassed in the future by taking such a step. It is also clear that not all building societies have reduced their reserves to 13 per cent. Some have considerably more money than that in hand and might well be asked what contribution they could make by reducing their reserves and so pump some money into the housing market.
The House will be aware that many local authorites are now virtually minor building societies. In Stoke-on-Trent we have 2,000 mortgages outstanding to a tune of some £2 million. The House will quite clearly appreciate that these figures emphasise the fact that local authorities are lending money on older-type property to people with very low incomes—the sort of people about whom the building societies do not want to know.
This is an invaluable service for the less affluent members of society, but the local authorities have to borrow their money on the open market. I am told that the present long-term rate is between 9½ per cent. and 10 per cent. while the temporary money rate is from 10 per cent to 12 per cent. If a ¼ per cent. is allowed for administration, as is the case in Stoke-on-Trent, it is quite clear that local authorities could be losing money by providing this service to the very people who can get it from nowhere else.
I therefore hope that the Minister will tell us whether it is the intention of the Government to channel some of the subsidy to the local authorities to compensate them for any loss they may incur. Unless such help is given the burden will fall on the ratepayers who, I suggest, have not yet recovered from the bitter taste of the rather poor £10 million rate relief that has been given to them. Yet without this local authority service many more people will be driven on to the council housing waiting lists or into the private sector, and possibly further inflate the inflationary spiral there.
Much sympathy has been expressed, as it always is, for the lower-paid people who need mortgages. The option mortgage scheme certainly helps, but it is the surtax payer who has the most to gain from having a mortgage. The tax relief is so heavily weighted in his favour that he is encouraged to buy big and pay long and so sterilise funds which could be more usefully used elsewhere for those with greater needs. They will be encouraged by the increased subsidy which they will get under the Government's propsals. It is socially and morally indefensible to give them extra money now.
I should like to see building societies charging a differential interest rate for, say, mortgages of £10,000 rising by ½ per cent. or so up the scale. That would release money to enable building societies to keep their interest rates lower for those who pay less and can only afford to pay less. If that is not acceptable to the building societies, the Government might remove the surtax concessions which these high income bracket people get and return that surtax money to the building societies to help them keep their interest rates down.
It is a stark truth that many young people are now being driven into the rented sector or into buying inferior property which at some time in the future they may very well regret having hung round their necks. The rate of house price inflation means that their savings do not match the increase in prices and their dreams of a home drift further and further away.
Since last autumn—because it must be remembered that interest rates went up last autumn also—the cost of a £5,000 mortgage has gone up by more than £60 a year. According to my arithmetic, that means that a man has to earn about £44 a week before a building society will agree to lend even this modest sum, yet most of my constituents do not earn anything like £44 a week and will find it extremely difficult to find that sort of money in order to set up a home. The 1½ per cent, increased rate of interest will mean that many who already have mortgages will find themselves going over the top of the income-repayment ratio which the building societies recommend. I know that they will be told that they can extend the period of their mortgage perhaps from 25 years to 39 years, but what a millstone is being put round their necks.
What an irony it would be if the Government's policy resulted in our having to build more houses to rent because fewer and fewer people could afford to buy.
I was interested in the passing reference made by the hon. Member for Stoke-on-Trent, North (Mr. Forrester) to building society valuations. I wish to turn to what I see to be the essential role of the building societies and to the work of the Building Societies Association. I do so as one who has considerable professional links with the building societies and who recognises the unique position that they hold. I think it is right to say that they are unique in the world and that there are no institutions elsewhere in the world such as the building societies which we know in this country. They play a very important role by offering a very attractive method of saving to a large number of depositors. They also play an essential role in the extension of owner-occupation.
Tribute has been paid both by my right hon. Friend the Secretary of State and by the right hon. Member for Grimsby (Mr. Crosland) to the important part which the building societies have to play in our housing programme. They engage in that disastrous financial occupation: they borrow short and lend long. That is one of the difficulties facing us in the present circumstances, But, as my right hon. Friend said, they have assets in excess of £15,000 million, and the value of their work is recognised by the fact that they enjoy a composite rate of tax which enables them to have a very simple method of granting tax-free interest on money deposited with them.
In this context I wish to look briefly at what happened last year in the housing market. Clearly it was a sellers' market. As this became recognised those wishing to sell houses began to put up the asking prices. The building societies had an immense flow of funds into their reserves, and they began to look for ways and means of putting out this money. As a result they began to up-value properties nearer to the asking prices.
It is true that most building societies employ their own valuers. As a result I think that we saw a situation in which there was a substantial increase in asking prices and the building societies began to up-value properties and thus enabled would-be buyers to get the benefit of large mortgages. This in turn enabled buyers to pay higher prices, and this fundamentally was the cause of the escalation in house prices that we have seen over the past 12 months.
There was an unprecedented flow of money into the building societies. They were committed to putting this out in a way which in their judgment best suited them. At the same time they also lowered the relation between the income of an applicant and the proportion that his income should bear of mortgage repayments. We had these two constituent factors—increased valuations and making it easier for people to take on larger mortgages. I think that this led substantially to the situation to which I have referred.
It was not just buyers who saw the opportunity. It was those who recognised that one of the cheapest ways of borrowing money was to borrow from a building society because they had tax concessions. Many people who had low mortgages on their houses realised that if their houses were valued at current levels they were able to increase their mortgages. Many building societies granted increased mortgages on this basis and people used the money for all sorts of purposes. They bought cars. They went abroad on holiday. They refurnished their houses.
In addition there were those who wanted to improve their properties. Here again they made application to building societies, and their applications were con- sidered favourably by most of them. If we care to look into a large number of cases, I think that it will be found that people had the benefit of revaluations of their properties far in excess of the cost to themselves. Here again the building societies made substantial additional resources available and thus increased the money supply in the country from the substantial increase in the deposits made with them.
Furthermore the banks added to this inflationary situation by granting generous bridging and short-term facilities. This is fundamental to the escalation of prices that we have seen, and land prices nave followed automatically. We have had a tremendous uplift over a 12-month period. Some estimates that I have seen put it as high as 100 per cent. Understandably builders and developers selling at the increased values secured unlooked-for profit levels in their developments. But this is an essential ingredient in the situation that I have outlined.
What the building societies should have done in these circumstances, recognising their obligation to their depositors in terms both of interest rates and of their security, was to limit valuation increases. They should have retained their usual practice with regard to earning-repay-ment ratios and they themselves should have considered carefully what has been advocated today on both sides of the House, which is the creation of a stabilisation fund. I know that this would have meant that their retention would have increased and their ability to pay a high rate of interest would thereby have been prejudiced. But they must have known that this rate of escalation could not go on indefinitely. These measures would have done a great deal to preserve market stability in house prices. After all, the policies of building societies must be directed to this end.
Here a heavy responsibility rests on the Building Societies Association whose responsibility it must be to look at the implications of the aggregate policies of their membership and to see the extent to which the public interest is being served.
Now that we have got on to this high plateau of house and land values, we shall not see any significant recession. If past experience is any guide, we are unlikely to see prices drop by anything in excess of 5 per cent. In other words the damage done last year is irreversible.
The building societies should now consider the social objectives of the vast influence that they have with the sums at their disposal which we are told are in excess of £15,000 million. We should expect them to ensure the most favourable possible terms for first-time buyers. They should establish a method of priority for advances in this and other ways. They should have a degree of social objectivity in their policies in addition to their essential duty to protect their investors. I welcome what my right hon. Friend the Secretary of State said about the negotiations into which he is entering. I have no doubt that he will be engaged in those personally.
I hope that the Government will not think just in terms of a stabilisation fund. I hope that the wider questitons, to some of which I have referred, will be considered carefully. The history of the building society movement confirms that we are likely to get a ready response and that there will be recognition of the important part that they have to play. There is a public duty which rests upon them. Understandably in this respect it may restrict their individual objectives and ambitions. But I am sure that if this is clearly required in the public interest the Building Societies Association will find it readily agreeable to its members.
The hon. Member for Northants, South (Mr. Arthur Jones) has, in his usual temperate language, pronounced one of the most savage indictments of building societies and their operations over the last 12 months that has been heard in the House. Many of us share his analysis of the situation.
The hon. Gentleman said that the building societies had made an unfortunate and a very large contribution to the problem of house price inflation. However, the hon. Gentleman did not touch on the consequences of that inflation not only in terms of the housing market in general, but, more particularly, for a very large number of individual house owners who have been in the market in the last 12 months.
I have a nightmarish feeling that thousands of householders are now landed with debts which a short while ago they could not have envisaged themselves being saddled with—in other words, they have millstones round their necks.
If the bottom were to fall out of the housing market and the householder's capital assets, his home, to plummet, building societies for the first time could have a significant number of defaulters on their mortgages. One of the great features of the building society movement is that the number of defaulters on mortgage payments is negligible. However, the level of monthly repayments, especially with the further increased interest charges, is horrific and people have put themselves into hock for huge sums.
One aspect which the hon. Gentleman omitted from his review of the situation was the operation of housing supply last year. The Government repeated the fallacy of assuming that, if local authority housing were cut back, private sector housing would increase and more than adequately make up the difference. However, in practice this has never happened. All figures since the war show that, when local authority housing is cut back, although there may be some increase in private sector supply, the total number of houses built falls.
For example, the total number of new houses built in Wales in 1972 was the lowest since 1946, because in areas like mine—the valley areas—there was a tremendous cut back in local authority housing. The Government's discouragement of this sector, together with the operation of the Housing Finance Act, prevented local authorities from building. The number of new local authority houses built has dramatically fallen. The few gains in the private sector have not met the loss in the local authority sector.
This has an effect on the private house market, because more and more people are driven to try to buy in the private sector. I will tell the House what the real tragedy—or one housing trap—is as created by this Government's policies, particularly in constituencies like mine. The Government have successfully managed to prevent working-class couples from buying themselves into the private house market for the first time.
In my constituency the extent of owner-occupation is 60 per cent. to 70 per cent. Now that the first rung of the housing ladder has been raised it is too high for working-class people. Eighteen months ago a young couple could buy a house in Merthyr Tydvil for £1,000 or £1,500 and, with the grant, have a marvellous house for the expenditure of £2,500. Today house prices in Merthyr Tydvil start at £2,500 or £3,000 for unimproved property.
The result of this is that a very large number of young people who might have been able to buy in at the bottom end of the private sector cannot now get on to the first rung. So they turn to local authorities for housing. Local authorities have not been able to build enough houses in the last 18 months. Therefore, these young people have been caught in the housing trap.
This debate should be not just about a stabilisation fund and the financial juggling of Governments and building societies, but about the growing problem of homelessness. In constituencies in South Wales, an increasing number of young working-class couples, instead of talking and thinking about a property-owning democracy, in the language of "A Better Tomorrow", will have to live in the front room of their parents' home. Tensions will thus be created.
I have been staggered over the last few months at the number of people who have come to my surgery on Saturday morning and who have been separated as a result of the tensions which have been brought on by their living in the front room of their parents' home. The young children, perhaps, have got on the nerves of middle-aged or elderly grandparents. The young wife stays with the parents and the young husband returns to live with his people.
This afternoon the Secretary of State talked social and housing gibberish. His approach is that a means-tested policy is all right for rents, but for mortgages there must be an indiscriminate open-ended subsidy. Where is the logic in that? How can anyone, even hon. Members opposite, square that? Why did not the Government decide to apply this £15 million to help out those most in need? Why was it not applied to finance working-class home ownership, or to help people make initial deposits on houses costing £3,000, £4,000, or £5,000 —the House will understand that I am talking in terms of my constituency— instead of forcing them into homelessness or driving them to live in grossly overcrowded conditions with their parents?
That is our major indictment of the Government. It is not that they were caught by surprise. We warned them time and time again.
The debate has taken an ironic twist. It has been said latterly that the handing out of this £15 million subsidy is very much part of phase 2 of the counter-inflation policy. That argument does not stand up. This subsidy will not run till the end of phase 2. What happens if interest rates rise to 10 per cent. after three months? Phase 2 will not then be over. Will the Government return then with phase 3 building society subsidy? If there is to be further intervention on wages and prices in phase 3, will there be further intervention in the form of a building society subsidy to offset increased mortgage rates?
These questions have not been answered by Ministers. It is not that we do not believe in subsidies for housing. We do. We believe in subsidising home ownership and housing built to rent. I believe in subsidised housing, because housing is a vital part of our social services. I have no qualms about subsidies.
But we indict this Government for their insensitive planning in housing over the last two years, their planning of resources and their unfair and unequal distribution of subsidies.
I am sorry that it should have fallen to my right hon. and learned Friend the Secretary of State for the Environment to defend the aberrations that apparently go on in the Chancellor of the Exchequer's bathroom. My friends in the water industry tell me that we are heading for a drought. If that cuts down my right hon. Friend's baths and, therefore, the bright ideas which occur while he is in his bath, that must be proof positive that providence is on the side of the Conservative Government.
I take the view that if, in order to achieve growth, one goes in for printing money at the rate at which we have printed it, one is bound to have a very rapid increase in the price of houses, the number of which can only be increased very slowly. I have no doubt, as my hon. Friend the Member for Northants, South (Mr. Arthur Jones) has indicated, that that has been aggravated by some very old-fashioned practices on the part of the building societies. Moreover, I cannot see that paragraph 10 of the White Paper, which tells us that this £15 million is linked with the
operation of special factors which have temporarily affected the pattern of savings
gives us any confidence that this is a special pattern or that it is of a temporary nature. This makes it the less convincing.
One cannot help but wonder whether there are too many building societies in this country. After all, they fulfil a function which is analogous to the banks, and I have no doubt that we were very much better off a few years ago with the five main banks, and a few others, than we were at the beginning of the century.
One wonders, too, in view of the extent to which building societies and their functions are known, whether it is really necessary for them to have these prestige offices in every town. In consequence, one is bound to wonder whether the margin between the lending and borrowing rates is as low as it might be. One of the results is undoubtedly that many people now have commitments which they can meet only if inflation continues. So we have built into our society a number of people with a vested interest in that happening.
I think the right hon. and learned Gentleman misheard me. I agree with him that there are far too many building societies, but if we concentrate them into five very large societies it reduces the element of competition, and I should have thought that that was against Tory philosophy.
Does not the right hon. and learned Gentleman agree that the time has come for the Government to create a building society and for the money to be raised by taxation, allowing particularly the poor to get 100 per cent. mortgages at very low interest rates?
I do not think that that follows at all. I was comparing the building societies with the banks, but I did not want to be taken literally to committing myself to five. There are now well over 100 building societies, and it seems to me that a reasonable reduction would very much strengthen the reserves of those which were left. It is, after all, a question of reserves on which we depend if we are to think of stabilisation of any sort as a practical operation.
Having commiserated with my right hon. and learned Friend for having to defend that policy, I welcome the White Paper which looks ahead and which I am glad to say incorporates something of the philosophy which he and I tried to expound in the pamphlet to which he has referred. It is to that White Paper that I wish to address most of my remarks.
I am convinced that one of the major causes of high cost modem housing is lack of continuity in the building operations themselves. On a national scale this sort of stop-go operation, using the construction industry as a sort of economic regulator—of which the party opposite are as guilty as anybody, and perhaps more—is the sort of thing which produces bottlenecks in materials, which greatly increases the price of housing and lowers the efficiency of the industry. Since the war we have had this cycle, for example, in bricks. At one moment they are stockpiled, and small brick firms go out of business. The next, we are screaming for bricks because those firms have gone out of business. It is this failure to produce a continuous policy which is at the root of our problems. It is impossible for the local builder to plan ahead. It is impossible to keep an even employment level.
This also affects the assessments which are made, so wrongly, about the required training programme for craftsmen. Only 18 months to two years ago I was engaged in a somewhat acrimonious correspondence with an hon. Friend of mine in the Department of Education and Science which was determined to close down a very wide-ranging building training course in a technical college in my constituency. I was assured that all the forecasts of trades required were more than adequately coped with and that there was no foreseeable shortage. Now we are screaming for more craftsmen— particularly plasterers and bricklayers. The assessment by the trade of its requirements has been abysmally inaccurate.
I have some fears—although I have no doubt that he will be able to allay them—that my right hon. and learned Friend's hoarding charge may have the effect of inhibiting this essential continuity. To many builders the land for which they have planning permission today represents not only what they are working on but their reserve for a number of years ahead. If they are forced to accelerate their operations to the three years which I think is allowable, they may well have no further reserve and this will have an inhibiting effect on the continuity that is necessary.
Therefore, I hope that my right hon. and learned Friend will be able to assure us that this is a matter which he has in mind and that an acceleration will be allowable only where it can clearly be shown that a properly balanced programme can be carried out on the basis of what the builder puts forward.
I think we overstress the effect of the price of land on houses. There is no doubt that the price of land is determined by the market for houses, rather than the other way round. We all know, for example, that if a builder were to acquire a large acreage of land absolutely free, gratis and for nothing, even though he was able to pass that saving on to the first purchaser, the first person who sold from the housing estate would cash in on the market price for houses. We would merely be transferring the profit from one to the other. I therefore regard with a little suspicion what is said in paragraph 20 of the White Paper which deals with the sale of land by local authorities. The White Paper says:
The Government is asking authorities to come forward with schemes designed for this purpose"—
that is, building houses for sale on land which they own—
and to make use of the permitted discounts from unrestricted market value ".
If they do that, they will pass on the profits to the first vendor amongst the first purchasers. I would hope that we would not be too enthusiastic for that method of helping the householder.
That is essential. I thank my hon. Friend for pointing it out. I was, indeed, coming to that point. But it is unfortunately a myth to believe that ultimately we pull down the price of houses. Finally, my right hon. and learned Friend must bear a share of the blame for the lack of land coming forward, because the time being taken to decide appeals is really scandalous. My right hon. and learned Friend states in the White Paper that a large proportion of local authorities have responded to the Government's request to review their planning programme and to review the amount of land they can make available. The implication is that some local authorities have not responded, and that that will inevitably mean that any landowner who believes that his land is suitable must appeal, and unless these appeals can be dealt with much more speedily than at the moment it will contribute to the bottleneck in land. That goes not only for appeals. In my constituency not long ago there was the case of a piece of land, just as my right hon. and learned Friend has described—not actually green belt but white land earmarked to be treated as green belt for the foreseeable future. The local planning authority changed its mind and agreed that it was suitable for development, but it took something between six and eight months to get a letter out of the Department saying that approval had been given. That sort of delay is every bit as damaging as the hoarding by the owner of the land, whatever be the motive.
I welcome the White Paper, however, and I have dealt with the few points which, from an inevitably cursory examination, have struck me as worthy of critical mention. I welcome the White Paper as a whole, and will support my right hon. and learned Friend, although I continue to sympathise with him in defending what I believe is a rather useless operation and a gimmick.
With time so short I intend to stick to one aspect of this important subject. Unlike my right hon. Friend the Member for Grimsby (Mr. Crosland), I do not absolve the building societies from some blame for the present situation. Over the last year, I have put down a series of Questions to Ministers asking for the whole matter to be referred to the Monopolies Commission. Now that the Government have made a gift of £15 million to the building societies, there is an even stronger case that the subject should be looked at by an independent inquiry to initiate a full and searching probe into all the activities of the building societies.
I have put a series of question to building societies in the area which I represent. Those questions have never been answered or refuted. For example, I have asked them how much money has been lent to property developers by the building societies—money which is exploited by property developers in the sale of houses, the prices of which have risen atronomically. I have attempted to discover how many people have more than one mortgage—two, or in some cases, three—enabling them to have additional tax relief on the interest which they pay. This also has been a drain on the building societies' funds.
Why have the building societies never stated how many people have more than one mortgage? This is a question that the Government should be taking up with the building societies. Why has it been necessary in the last five years for plush, swanky offices in every town and village throughout the country to be put up by building societies, some next door to each other?
Why could not building societies have a ceiling on loans during the last 18 months? If they had had a ceiling on loans to borrowers, it would have had a good effect on house prices. There is no doubt that the building societies were lending money indiscriminately, particularly during 1972. It had the effect of raising prices, and I believe that they bear a heavy responsibility for the astronomical increase of house prices which has taken place in this period. They made money far too easily available. Some of these questions should be answered by the building societies. That is why the Government should refer the matter to the Monopolies Commission or to some form of inquiry where these questions could be delved into to see whether building societies are efficient organisations. I do not think that they are.
We have seen the effect of the 8½ per cent. mortgage rate going to 9½ per cent. For example, on a £5,000 house, a man will now have to pay £340 extra a month over 25 years. On a £10,000 house—and this is about the average price in the London area and many other parts of the country—a man will have to pay £6·80 more per month over 25 years.
I know that building societies invite people to extend the period of repayments, but I draw attention to the article in The Guardian on Saturday which showed what happens when a man extends his repayment period. The article cites the case of a man who bought a house in June last year. He would have got a 25-year mortgage at 8 per cent. In October the rate went up to 8½ per cent. and he chose to extend his mortgage period to 29 years.
Now the rate has gone up to 9½ per cent. An extension on a 29 year mortgage is, in the blunt words of one building society, a reach into 'infinity'. It means that if the man were allowed to extend his mortgage period, his weekly repayment would not even cover the weekly interest charges, and he would never start paying back the capital.
In all these circumstances surely there is a case for a full and independent inquiry, and I ask the Government to consider this seriously, particularly in the light of their spending of public money to assist the building societies.
I hope that the hon. Member for Derby, South (Mr. Walter Johnson) will forgive me if I do not follow his line of reasoning in detail. I am not sufficiently expert in the characteristics of the building society movement to be able to comment in detail, though I must say that in my experience of building societies my impression has been the reverse of that stated by the hon. Gentleman. They have always acted extremely conscientiously in the exercise of what is, in effect, a quasi-statutory function, and I believe that we should pay a tribute to the way in which they have assisted owner- occupation.
Hon. Members on both sides of the House are concerned more for that marginal category of persons—marginal in numbers though not in social need—who are at the lowest end of the income scale, particularly young married couples, who need extra special assistance in house purchase.
What we have seen in recent days, with the £15 million assistance announced by the Government, will in a few months be a mere flash on the wave or a vague and distant memory. It is not of central importance to the main problem of overcoming the grave social disability in our society, whereby schemes of assistance for young married couples are not provided. I return, therefore, to the theme expressed by my hon. Friend the Member for Dartford (Mr. Trew) and, even more pointedly, my hon. Friend the Member for Billericay (Mr. McCrindle).
My right hon. Friend tells us that he has been discussing this question as a matter of urgency with the building societies. In my view, we have talked about it for too long, and action is overdue. We ought to bring in special schemes exclusively reserved for young married couples. I have no time to explain what I mean, but ideas of that kind will be familiar to many hon. Members.
I can make no more than one or two quick comments on possible special schemes for young married couples. Because the making of mortgages more readily available to everyone would have an inflationary effect, we must delimit schemes for young married couples by reference to age. I suggest that below the age of 27 would be a sensible line of approach, without producing an adverse inflationary impact.
In my view, the joint stock banks should do far more at the higher end of the income scale, through formal house-lending schemes, thus enabling building societies to make their funds available at the lower end.
Over the years, in my judgment, the building societies have pursued an absurdly conservative policy in regard to idle balances and liquid resources, and they should now be far less conservative in this respect. I make these suggestions—there are other ideas, also—within the context of special schemes for young married couples. I do not suggest that they should apply to all young married couples, but I want something done for them at the lowest end of the income scale, and especially in London where help is needed most.
With those quick comments, I re-echo my hon. Friend's words on this most important aspect of the problem.
Whenever we have these crisis debates— the longer we have the present Government, the more crisis debates we shall have—back benchers drive more and more nails into the philosophy of supply and demand and into the appalling idea of people having to stand on their own two feet. Paradoxically, the condemnation of those appalling notions comes principally from the party which is supposed to support them.
No one can say that we heard anything particularly inspiring from the Opposition Front Bench today, either. It is the system which has gone wrong. The system will not work. If people are expecting a Socialist answer from my party they are entitled to have one. We ought to say bluntly that the proof is plain, beyond reasonable doubt, that our present system of borrowing and lending for home ownership just does not work. Right hon. and hon. Members opposite should realise that we are in danger of elevating the status of moneylender above all decent principles.
The time has come to consider the establishment of a form of public works loan board which could devote itself to lending money to people who wish to engage in the laudable exercise of buying their own homes. Hon. Members on both sides of the House say that it is right and proper that people should be encouraged to buy their own homes. The present system has not provided the wherewithal, so let us examine my proposal and see whether we can not just make promises but provide the tools so that people may buy their own homes, under a system controlled by a democratically elected Parliament.
My view, contrary to that of the Secretary of State, is that the points made on both sides during the debate have been well worth hearing, whether we agree with all the detail or not. Hon. Members on both sides have made excellent contributions.
I say at the outset, lest I should omit to do so later in my argument, that this Front Bench would support the proposal advanced by my hon. Friend the Member for Derby, South (Mr. Walter Johnson) that there should be a high-powered committee of inquiry established to review rapidly the whole subject of the provision of finance for house ownership, and for house building for other forms of tenure as well.
Over the past year or more there has been sufficient debate and argument in both political circles and professional circles to expose the main areas for study. It would be useful now if all the threads of thought which have developed in various quarters, including certain parts of the building society movement itself, were brought together and examined by such a high-powered committee of inquiry, and I urge the Government to take immediate steps in that direction.
In replying to the debate, I shall pass over much of the ground covered by hon. Members who have made detailed criticism of the Government's handling of the present situation during the past week or so. Those matters have been well covered in the debate as well as in all the public discussion by the mass media and elsewhere. Whatever view one takes of what has happened, I think it unquestionable that no sector of opinion on housing matters has commended what the Government have been doing in the last few days with regard to mortgage interest rates. I leave that aside, therefore, and turn to some of the basic matters underlying those events.
What makes a 9½ per cent. or 10 per cent. interest rate so critical at this time is not the interest rate itself, serious though that may be, but the fact that it comes on top of the sharpest rate of increase in land and house prices that we have ever experienced. Not only is the level the highest; the rate of increase has been the sharpest we have seen. Such a state of affairs has never been known before. Building society policy has certainly contributed, hence the interest in the idea of a stabilisation fund, but there is far more to the problem than that.
Property inflation and high interest rates are the products of Government policy generally and of certain deep-seated contradictions in our housing finance system. I turn, first, to Government policy as a background to the events of recent days. Both the Government's taxation policy and their increase of the money supply have, apart from their other actions in the past 18 months or two years, released into the economy vast sums, the object being to create expansion. The Government believed that a free flow of money into the economy would produce results and lead to investment in productive industry.
In fact, that did not happen. Most of the money went into land and property speculation and similar forms of investment. It went into land and property on an unprecedented scale. By their general policy over the past two years, and by their actions as recently as a month ago in the Budget, the Government have shown that their policy was directed to creating a situation in which that would be the inevitable consequence.
Some of the basic anomalies in our system for financing home ownership have been discussed in the debate, and it is these anomalies which reveal where the most serious problem lies. The right hon. and learned Member for Gloucestershire, South (Sir F. Corfield) spoke of the "stop-go" situation in the building industry under successive Governments, as a result of using the industry as an economic barometer and as a means of financial management in the economy. I acknowledge that. From that kind of general policy stem most of the basic problems of the incapacity of the building industry and its inadequate recruitment, with economic inefficiency and the socially damaging results of recession in house building leading on to boom.
We must all learn from what has happened. At least towards the end of their term of office, the Labour Government had learned from it. A month or two before the election was called in 1970, as a junior Minister I prepared a memorandum for my senior Minister on this very question, and I know that I was not alone in directing attention to it. We had started to examine ways by which the supply of money to house buyers could be linked more closely to the supply of houses—and that is the key. It is in this area of housing finance that serious flaws in the system are most to be found. From mid-1971 to the end of 1972 building societies were booming with the inflow of cash and they lent it freely without regard to the supply of houses. I believe that the ratio of lending was that for every mortgage advanced on a new house about three mortgages were advanced on existing houses, and at times the ratio was even higher than that.
This, in itself, added to inflation, in view of the rate of house building going on at the time and still continuing. Instead of taking the opportunity in such a boom period to examine some of the fundamentals of the situation, Ministers sat back complacently taking credit for something that had nothing to do with any of their actions. The area of housing policy directly within their responsibility —local authority building—experienced a continued rundown but the Ministers basked in the knowledge that the building society lending boom had stimulated confidence in the building industry and private sector starts were up.
They should have been spending that time in pursuing fundamental reforms that we will all have to face up to eventually. However, nothing was done by them. When the inevitable trough following the boom in cash flow came it created a famine. Builders are now losing confidence, as I can confirm from my contacts in the industry. In spite of the £15 million subsidy they are losing confidence. Inevitably, they will start to cut back, and that cut back will hit hardest those on lower incomes.
This is confirmed by the NEDO forecast to which my right hon. Friend the Member for Grimsby (Mr. Crosland) referred earlier. NEDO has indicated that it expects a fall back in the public sector starts between 1972 and 1975 from 123,000 to 110,000. In the private sector it expects it to drop to 210,000 from last year's rate of 227,000. The total of starts in the country, already at its lowest level for 10 years, is expected to drop from 350,000 in 1972–73 to 330,000 in 1975. That figure will be lower than the level achieved in 1963. It will not be a happy position to be in but it is the situation which is emerging now as a result of the Government sitting back for 2½ years just being satisfied that there was a massive cash flow going into the building societies, money which could be lent and which created confidence. The cash flow will revive again but the houses will not be there in sufficient numbers for people to buy, and that will create a further spate of inflation. The situation will be worse if no action is taken now to end speculation and profiteering in the other areas of the property market.
The first lesson to be learned from the situation is that owner-occupation, housing to rent and land and property are indivisible as policy-making areas of the country's affairs. Policy must interrelate to each of them. That means we must cease the obsession with owner-occupation. We should talk of balanced housing policies and balanced housing programmes and stop assuming in everything we say and do that virtually all that must be done is to increase the rate of owner-occupation to solve almost all the housing problems. That is not true, and we should stop saying it, even if it is unpopular to do so. Credit control should be created—a policy which the Government virtually stopped about 18 months ago. The control should guide lending in certain key areas of the economy, and that should include housing and urban renewal. There should be drastic business rent control as part of the effort to control property and land speculation in our city areas.
My next suggestion may well draw laughs from Government benches, but I will mention it just the same. Land should be brought into public ownership in order to achieve sensible and balanced urban renewal and development at reasonable cost. That means that there must be price control relating to existing use value. There must be an end to speculation in residential property by extending the area of social ownership, especially municipal ownership, cooperatives or other forms of housing association—a positive expansion of this to put an end to private landlordism.
There must be an integrated policy on the balanced provision of houses of all kinds instead of an obsession with owner-occupation. If we continue to lose rented properties in our cities there will be a marked impact on the prices of owner-occupied houses for sale. Pressures will build up on that market which it cannot meet and prices will continue to rise. There should be some use of building society funds to meet the gravest need of all in housing, the need for more non-profit dwellings to rent. There should be, financed with the help of building society funds as well as from other sources, an aggressive campaign for tenants to form co-operatives to buy their own properties where the owners of those properties are constantly buying and selling over the tenants' heads.
Linked with the proposed stabilisation fund, building societies should use their resources to invest directly in building, not simply to confine themselves, as has been the practice virtually since the 1874 Act, to lending money to people to buy houses. One of the merits in this, which was a point I was examining when I was still in the Ministry, is that at times of slump or trough in building when there is a lack of confidence in the industry, as happens from time to time, some of these resources could be used to stimulate building in order to maintain confidence and in order to create the kind of consistency referred to by two or three hon. Members.
I have certain ideas as to the kind of institution that should be created in order to achieve this. However, that must await another occasion, because time forbids an examination of it today. These are the kind of points we should be examining in a fundamental review of housing finance. They are the kind of points which I urge the Government to set up a committee of inquiry to consider. That is the view of the Opposition Front Bench. It is about time we had some consistency, some coherence and integrity integrated in national housing policy.
I agree with the hon. Member for Willesden, East (Mr. Freeson) in one respect: we have had an excellent debate with interesting suggestions from both sides.
The Opposition motion has mixed both monetary and housing policy, but the House has shown today that the issues which have concerned it are essentially housing issues. The mortgage lending rate is of course one matter to be considered in this conext. However, as the hon. Member for Willesden, East and a number of other hon. Members have pointed out, it is only one question. Both sides of the House are at least united in one aim. We are all concerned with providing decent homes for families, with enough houses for sale for those who want to own their home and enough houses to rent for those who prefer to rent or who cannot afford to buy.
I think it is common ground between us that most people want to own their home if they can. The only way in which we can make sure that their wishes will be fulfilled is to go on increasing the supply of houses for sale. Therefore, maintaining a high and stable output of houses to buy is an extremely high priority in housing policy. The whole Government are concerned about this and I am concerned about it as Minister for Housing and Construction. Two things are needed to achieve this objective. The first is an adequate supply of mortgage funds and the second is an adequate supply of land. The measures which my right hon. and learned Friend announced today will make a contribution on both of these vital matters.
The question of mortgage funds is the main part of the debate. Building societies have now raised their investment rates to a level which they believe will bring in the necessary money for the time being. In the longer term we look to some stabilisation arrangements which will ensure that enough mortgage funds are always available. This is a difficult and complicated matter which should not be over-simplified. We are determined to secure greater stability in the flow of mortgage funds, and discussions have begun on this with the Building Societies Association.
There is no point in dealing with the problem of money in isolation. We have also to deal with land. If there is no land, insufficient houses will be built and the prices of houses and land will go up. I was glad to have the support of my right hon. and learned Friend the Member for Gloucestershire, South (Sir F. Corfield) for the measures announced in the White Paper on land for housing. The land hoarding charge will help to flush out land with planning permission which is being hoarded for speculative purposes. The new planning guidelines represent a major shift of emphasis in the treatment of planning applications and appeals, because there will now be a general presumption in favour of housing development.
We shall also tackle the problem of land being held back for development because of a lack of services, by introducing legislation at an early opportunity requiring developers to contribute to the cost of services provided by public authorities in connection with the development of land which has planning permission. I return to the question of money. The whole House, with the possible exception of the hon. Member for Ealing, North (Mr. Molloy). can agree that it is essential that there should be a sufficient flow of money into building societies to enable them to lend to those people who can reasonably expect to buy their own homes. Building societies' funds are the life blood of the private housing market, and a mortgage famine would be the worst possible result for everyone, whether or not he has a house of his own now. Builders will not build unless they think that people will buy the houses which they are engaged in building. There should be enough money flowing into building societies to keep up the housing programme which we all know is needed.
Building societies have to be able to attract funds in a competitive market for savings. In 1973 they will need at least the amount of money they lent in 1972 to support the level of house building of which the industry is capable.
Nearly half the money comes from repayments of earlier advances. But the societies still need not far short of £2,000 million this year as well, and at current interest rates they could not hope to get more than a fraction of this amount if they offered interest of only 5·6 per cent., the rate which corresponds to a mortgage rate of 8½ per cent. Therefore, the stabilisation fund that the right hon. Gentleman has set up retrospectively for us would have had to cream off enormous sums last year from the building society inflow. This raises serious and difficult problems that no one could be expected to solve in a short time.
In the controversy over mortgage rates, the major point must not be forgotten— to keep up the output of houses. Nothing must spoil that. My right hon. and learned Friend pointed out that last year there were 227,000 private housing starts against 165,000 in 1970. The rate is at least being maintained so far this year. [Interruption.] The trend is at present upwards.
In discussing stabilisation with the building societies, we will have particularly in mind the position of the younger and less well-off first-time purchasers.
I want to return to the more limited question that is concerning the House, whether the Government were right in the very special circumstances existing now to provide the £15 million bridging grant that we have been discussing. The building societies were convinced, rightly or wrongly, that it was essential for them to go to 6·75 per cent. as their investment rate. There may be grounds for dispute about that, but it was their view that they had to do so. The 6·75 per cent. investment rate is worth, to the investor paying the standard rate of tax, 9·64 per cent. That inevitably means a mortgage rate of 10 per cent. unless action is taken.
The Government came to the conclusion that in the context of the counter-inflation policy it would have been wrong to allow mortgage interest rates to rise to 10 per cent. That would have meant that the cost to a new home buyer of his mortgage would have been increased by a further 13 per cent. gross. It seemed right to the Government that steps should be taken to try to modify that increase, and accordingly they took action. My right hon. and learned Friend the Secretary of State has made it clear that there will be a corresponding cut in expenditure to compensate for that amount. Therefore, there will be no net addition to public expenditure, nor will there be any net addition to the borrowing requirement. I hope that my hon. Friends will accept that that is so.
One or two hon. Members suggested that it is unfair that home owners should have been assisted in this way by the Government. I understand that to be the view of some Opposition Members. Certainly it was clear from their speeches. But surely that cannot be right. As part of our counter-inflation policies, householders of every type have received some help. [Interruption.] I am coming to council tenants. The national increase in the needs allowance cost £30 million. That will benefit council tenants and private tenants, including tenants of furnished accommodation to whom the national scheme is being extended this month.
We have also shown our concern about the position of all householders— owner-occupiers and tenants alike—as ratepayers. We are making available the highest ever Exchequer grants to local authorities. We have now introduced a further £10 million of additional domestic relief to assist those ratepayers who are worst affected by revaluation.
Thus it is entirely right that we should also be giving some modest help to owner-occupiers with a mortgage, including young couples buying their home for the first time, to avoid their having to meet an exceptionally high rate of interest at an exceptional period.
In 1972 there were 371,000 building society mortgages to first-time purchasers, an increase of 70,000 on 1970. There were 144,000 mortgages to borrowers under 25, an increase of 27,000. Perhaps most important of all in the context of this debate, there were 192,000 mortgages to borrowers with incomes up to the average industrial manual worker's earnings, compared with 158,000 in 1970. In the face of those facts—
In the brief time that I have, I shall try to come to my hon. Friend's point.
In the face of the facts I have given about average industrial earnings, is it so wrong that additional assistance should be given in the context of the fight against inflation to help these people? The building societies have assured the Government that they intend to cut back mortgages over £13,000 for housing and to intensify their help for first-time purchasers.
The effect of the bridging grant should be in the short term to moderate increases in new gross mortgage costs from about 13 per cent. to 8 per cent. A typical mortgage, would increase by about £4 gross or £3 net at present. If the rate had been allowed to rise to 10 per cent. the increased cost would have been £6 gross or £4 net, so there is a gross saving of £2 per month on a fairly typical mortgage.
In the context of counter-inflation, that is right. [Interruption.] Some Labour hon. Members are saying that it is wrong in principle that the subsidy should be granted, while some say that it is inadequate. They must decide which is their case. The Leader of the Opposition has himself suggested such subsidies. Surely Labour hon. Members cannot disagree with that wise advice? [Interruption.] I am glad to learn that they agree that we should have a policy of subsidising mortgages under present conditions. That is what the Leader of the Opposition has said. Even the hon. Member for Heywood and Royton (Mr. Joel Barnett), although he disagrees with the TUC occasionally, can scarcely disagree with the Leader of the Opposition. I understand that to be the Opposition's position. The right hon. Member for Grimsby perhaps did not answer that question, and we must look at exactly what the Opposition are saying.
The Opposition cannot ride both horses at the same time. They can either say that it is inequitable to have the subsidy or that the subsidy is insufficient. [Interruption.] If they say that it is inequitable, the right hon. Member for Jarrow (Mr. Fernyhough) had better deal with his right hon. Friend the Leader of the Opposition on that matter. The Leader of the Opposition is trying to ride both horses. He is trying to say that the help is insufficient.
I should be more concerned about the motion if it were not that history shows just how hollow are the Opposition's words. [Laughter.] Before Opposition Members laugh too hard, let them remember their own record. When in office they allowed two mortgage famines in 1965 and 1969. There is no mortgage famine now, and my right hon. Friends have taken steps to avert one.
The Labour Party when in power sought to deal with the land problem by the Land Commission and betterment levy. My right hon. Friends are doing it the sensible way, through getting more land released through the planning system. [Laughter.] That seems to be a matter of amusement to the Opposition. Instead of having a tax on land transactions, which added to the price but not to the supply, we shall tax land hoarding and make developers pay for the cost of services. The Opposition argue for a municipal monopoly. My right hon. Friends want choice and more voluntary effort in housing.
Labour Members studied the problem of housing finance for 4½ years without coming to conclusions, except for the interminable memoranda that the hon. Member for Willesden, East wrote to successive Ministers of Housing. My right hon. Friends solved the problem by applying to council tenants the fair rents system invented by the Labour Party but
|Division No. 99.]||AYES||[7.0 p.m.|
|Abse, Leo||Davis, Terry (Bromagrove)||Houghton, Rt. Hn. Douglas|
|Allaun, Frank (Salford, E.)||Deakins, Eric||Howell, Denis (Small Heath)|
|Archer, Peter (Rowley Regis)||de Freitas, Rt. Hn. Sir Geoffrey||Huckfield, Leslie|
|Armstrong, Ernest||Delargy, Hugh||Hughes, Mark (Durham)|
|Ashley, Jack||Dell, Rt. Hn. Edmund||Hughes, Robert (Aberdeen, N.)|
|Ashton, Joe||Dempsey, James||Hughes, Roy (Newport)|
|Atkinson, Norman||Doig, Peter||Hunter, Adam|
|Bagier, Gordon A. T.||Dormand, J. D.||Irvine, Rt. Hn. Sir Arthur (Edge Hill)|
|Barnes, Michael||Douglas, Dick (Stirlingshire, E.)||Janner, Greville|
|Barnett, Guy (Greenwich)||Douglas-Mann, Bruce||Jay, Rt. Hn. Douglas|
|Barnett, Joel (Heywood and Royton)||Driberg, Tom||Jenkins, Hugh (Putney)|
|Beaney, Alan||Duffy, A. E. P.||Jenkins, Rt. Hn. Roy (Stechford)|
|Benn, Rt. Hn. Anthony Wedgwood||Dunn, James A.||John, Brynmor|
|Bennett, James (Glasgow, Bridgeton)||Dunnett, Jack||Johnson, Carol (Lewisham, S.)|
|Bidwell Sydney||EadieAlex||Johnson, James (K'ston-on-Hull, W.)|
|Johnson, Walter (Derby, s)|
|Bishop, E.S.||Edelman, Maurice||Johnston, Russell (Inverness)|
|Blenkinsop, Arthur||Edwards, Robert (Bilston)|
|Boardman, H. (Leigh)||Edwards, William (Merioneth)||Jones, Barry (Flint, E.)|
|Booth, Albert||Ellis, Tom||Jones, Dan (Burnely)|
|Bottomley, Rt. Hn. Arthur||English Michael||Jones T. Alec (Rhondda, W.)|
|Boyden, James (Bishop Auckland)||Evans, Fred||Judd Frank|
|Bradley, Tom||Ewing, Harry||Kaufman, Gerald|
|Broughton, Sir Alfred||Faulds, Andrew||Kelley, Richard|
|Brown, Robert C. (N'c'tle-u-Tyne, W.)||Fernyhough, Rt. Hn. E.||Kerr, Russell|
|Brown, Hugh D. (G'gow, Provan)||Fitch, Alan (Wigan)||Kinnock, Neil|
|Brown, Ronald (Shoreditch & F'bury)||Fletcher, Ted (Darlington)||Lambie, David|
|Buchan, Norman||Ford, Ben||Lamborn, Harry|
|Buchanan, Richard (G'gow, Sp'burn)||Forrester, John||Lamond, James|
|Butler, Mrs. Joyce (Wood Green)||Fraser, John (Norwood)||Latham, Arthur|
|Callaghan, Rt. Hn. James||Freeson, Reginald||Lawson, George|
|Galpern, Sir Myer||Leadbitter, Ted|
|Cant, R. B.||Garrett, W.E.|
|Carmichael, Neil||Gilbert, Dr. John||Lee, Rt. Hn. Frederick|
|Carter, Ray (Birmingh'm, Northfield)||Ginsburg, David (Dewsbury)||Leonard, Dick|
|Castle, Rt. Hn. Barbara||Golding, John||Lestor, Miss Joan|
|Clark, David (Colne Valley)||Golding, John||Lewis, Arthur (W. Ham, N.)|
|Cocks, Michael (Bristol, S.)||Grant, George (Morpeth)||Lewis, Ron (Carlisle)|
|Cohen, Stanley||Grant, John D. (Islington, E.)||Lipton, Marcus|
|Griffiths, Eddie (Brightside)||Lomas, Kenneth|
|Concannon, J. D.|
|Conlan, Bernard||Griffithas, will (Exchange)||Lyon, Afexander W. (York)|
|Corbet, Mrs. Freda||Grimond Rt. Hn. J||Lyons, Edward (Bradford, E.)|
|Cox, Thomas (Wandsworth, C.)||Hamilton, James (Bothwell)||Mabon, Dr. J. Dicckson|
|Crawshaw Richard||Hamilton William (Fife, W.)||McBride, Neil|
|Cronin John||Hamling, William||McCartney, Hugh|
|Crosland, Rt. Hn. Anthony||Hannan, William (G'gow, Maryhill)||McElhone, Frank|
|Crossman, Rt. Hn. Richard||Hardy, Peter||McGuire, Michael|
|Cunningham, G. (Islington, S.W.)||Harrison, Walter (Wakefield)||Machin, George|
|Cunningham, Dr. J. A. (Whitehaven)||Hart, Rt. Hn. Judith||Mackenzie, Gregor|
|Dalyell, Tam||Hattersley, Roy||Mackie, John|
|Davidson, Arthur||Healey, Rt. Hn. Denis||Mackintosh, John P.|
|Davies, Denzil (Llanelly)||Heffer, Eric S.||McMillan, Tom (Glasgow, C.)|
|Davies, G. Elfed (Rhondda, E.)||Hilton, W. S.||McNamara, J. Kevin|
|Davies, Ifor (Gower)||Hooson, Emlyn||Mallalieu, J. p. W. (Huddersfield, E.)|
|Davis, Clinton (Hackney, C.)||Horam, John||Marks, Kenneth|
|Marsden, F.||Peart, Rt. Hn. Fred||Strauss, Rt. Hn. G. R.|
|Mason, Rt. Hn. Roy||Pendry, Tom||Summerskill, Hn. Dr. Shirley|
|Mayhew, Christopher||Perry, Ernest G.||Taverne, Dick|
|Meacher, Michael||Prescott, John||Thomas,Rt.Hn.George (Cardiff,W.)|
|Mellish, Rt. Hn. Robert||Price, William (Rugby)||Thomas, Jeffrey (Abertillery)|
|Mendelson, John||Probert, Arthur||Thorpe, Rt. Hn. Jeremy|
|Mikardo, Ian||Radice, Giles||Tinn, James|
|Millan, Bruce||Reed, D. (Sedgefield)||Tope, Graham|
|Miller, Dr. M. S.||Rees, Merlyn (Leeds, S.)||Torney, Tom|
|Milne, Edward||Rhodes, Geoffrey||Tuck, Raphael|
|Mitchell, R. C. (S'hampton, Itchen)||Richard, Ivor||Urwin, T. W.|
|Molloy, William||Roberts, Albert (Normanton)||Varley, Eric G|
|Morris, Alfred (Wythenshawe)||Roberts, Rt.Hn.Goronwy(Caernarvon)||Wainwright, Edwin|
|Morris, Charles R. (Openshaw)||Robertson, John (Paisley)||Walden, Brian (B' m' ham, All Saints)|
|Morris, Rt. Hn. John (Aberavon)||Roderick, Caerwyn E.(Brc'n&R'dnor)||Walker, Harold (Doncaster)|
|Moyle, Roland||Rodgers, William (Stockton-on-Tees)||Wallace, George|
|Mulley, Rt. Hn. Frederick||Rowlands, Ted||Watkins, David|
|Murray, Ronald King||Sandelson, Neville||Weitzman, David|
|Oakes, Gordon||Sheldon, Robert (Ashton-under-Lyne)||Wellbeloved, James|
|Ogden, Eric||Shore, Rt. Hn. Peter (Stepney)||Wells, William (Walsall, N.)|
|O'Halloran, Michael||Short,Rt.Hn.Edward (N'c'tle-u-Tyne)||White, James (Glasgow, Pollok)|
|O'Malley, Brian||Short, Mrs. Renée (W'hampton.N.E.)||Whitehead, Phillip|
|Oram, Ber||Silkin, Rt. Hn. John (Deptford)||Whitlock, William|
|Orbach, Maurice||Silkin, Hn. S. C. (Dulwich)||Willey, Rt. Hn. Frederick|
|Orme, Stanley||Sillars, James||Williams, Alan (Swansea, W.)|
|Oswald, Thomas||Silverman, Julius||Williams, W. T. (Warrington)|
|Owen, Dr. David (Plymouth, Sutton)||Skinner, Dennis||Wilson, Alexander (Hamilton)|
|Padley, Walter||Smith, John (Lanarkshire, N.)||Wilson, Rt. Hn. Harold (Huyton)|
|Paget, R. T.||Spearing, Nigel||Wilson, William (Coventry, S.)|
|Palmer, Arthur.||Spriggs, Leslie||Woof, Robert|
|Pannell, Rt. Hn. Charles||Stallard, A. W.|
|Pardoe, John||Stewart, Rt. Hn. Michael (Fulham)||TELLERS FOR THE AYES:|
|Parker, John (Dagenham)||Stoddart, David (Swindon)||Mr. Donald Coleman and|
|Parry, Robert (Liverpool, Exchange)||Stonehouse, Rt. Hn. John||Mr. Joseph Harper.|
|Pavitt, Laurie||Strang, Gavin|
|Adley, Robert||Clarke, Kenneth (Rushcliffe)||Grant, Anthony (Harrow, C.)|
|Alison, Michael (Barkston Ash)||Cockeram, Eric||Gray, Hamish|
|Allason, James (Hemel Hempstead)||Cooke, Robert||Green, Alan|
|Archer, Jeffrey (Louth)||Coombs, Derek||Grieve, Percy|
|Astor, John||Cooper, A. E.||Griffiths, Eldon (Bury St. Edmunds)|
|Atkins, Humphrey||Cordle, John||Grylls, Michael|
|Awdry, Daniel||Corfield, Rt. Hn. Sir Frederick||Gummer, J. Selwyn|
|Baker, Kenneth (St. Marylebone)||Cormack, Patrick||Gurden, Harold|
|Baker W. H. K. (Banff)||Costain, A. P.||Hall, Miss Joan (Keighley)|
|Balniel, Rt. Hn. Lord||Crowder, F. P.||Hall, John (Wycombe)|
|Barber, Rt. Hn. Anthony||d'Avigdor-Goldsmid, Sir Henry||Hall-Davis, A. G. F.|
|Batsford Brian||d'Avigdor-Goldsmid, Maj.-Gen.Jack||Hamilton, Michael (Salisbury)|
|Beamish, Col. Sir Tufton||Dean, Paul||Hannam, John (Exeter)|
|Bell, Ronald||Deedes, Rt. Hn. W.F.||Harrison, Brian (Maldon)|
|Bennett, Dr. Reginald (Gosport)||Digby, Simon Wingfield||Harrison, Col. Sor Harwood (Eye)|
|Benyon, W.||Dixon, Piers||Haselhurst, Alan|
|Berry, Hn. Anthony||Douglas-Home, Rt. Hn. Sir Alec||Hastings, Stephen|
|Biffen, John||Drayson, G. B.||Hawkins, Paul|
|Blaker, Peter||du Cann, Rt Hn. Edward||Hayhoe, Barney|
|Boardman, Tom (Leicester, S.W.)||Dykes Hugh||Heath, Rt. Hn. Edward|
|Body, Richard||Eden, Rt. Hn. Sir John||Heseltine, Michael|
|Boscawen, Hn. Robert||Elliot, Capt.Walter (Carshalton)||Hicks,, Robert|
|Bossom, Sir Clive||Elliott, R. w. (N'ctle-upon-Tyne,N.)||Higgins, Terence L.|
|Bowden, Andrew||Emery, Peter||Hiley, Joseph|
|Bray Ronald||Eyre, Reginald||Hill, John E. B. (Norfolk, S.)|
|Brewis John||Farr, John||Holland, Philip|
|Brinton, Sir Tatton||Fell, Anthony||Horden, Peter|
|Brocklebank-Fowler Christopher||Fenner, Mrs. Peggy||Hornby, Richard|
|Fidler, Micheal||Howe, Hn. Sir Geofferey(Reigate)|
|Brown, Sir Edward (Bath)||Fisher, Nigel (Surbiton)||Howell, Ralph (Norfolk, N.)|
|Bruce-Gardyne, J.||Fletcher-Cooke, Charles||Hunt, John|
|Bryan, sir Paul||Fookes, Miss Janet||Iremonger, T. L.|
|Buchanan-Smith,Allck(Angus,N & M)||Fortescue, Tim||Irvine, Bryant Godman (Rye)|
|Buck, Antony||Foster, Sir John||James, David|
|Bullus, Sir Eric||Fowler, Norman||Jessel, Toby|
|Burden, F. A.||Fox, Marcus||Johnson Smith, G. (E. Grinstead)|
|Butler, Adam (Bosworth)||Fraser,Rt.Hn.Hugh(St'fford & Stone)||Jones, Arthur (Northants, S.)|
|Campbell, Rt. Hn. G. (Moray & Nairn)||Fry, Peter||Jopling, Michael|
|Carlisle, Mark||Gardner, Edward||Joseph, Rt. Hn. Sir Keith|
|Carr, Rt. Hn. Robert||Gibson-Watt, David||Kaberry, Sir Donald|
|Cary, Sir Robert||Gilmour, Ian (Norfolk, C.)||Kellett-Bowman, Mrs. Elaine|
|Channon, Paul||Glyn, Dr. Alan||Kershaw, Anthony|
|Chapman, Sydney||Goodhart, Philip||Kimball, Marcus|
|Chichester-Clark, R.||Goodhew, Victor||King, Evelyn (Dorset, S.)|
|Churchill, W. S.||Gorst, John||King, Tom (Bridgwater)|
|Clark, William (Surrey, E.)||Gower, Raymond||Kinsey. J. R.|
|Kirk, Peter||Noble, Rt. Hn. Michael||Sproat, lain|
|Kitson, Timothy||Normanton, Tom||Stainton, Keith|
|Knight, Mrs. Jill||Nott, John||Stanbrook, Ivor|
|Knox, David||Onslow, Cranley||Stewart-Smith, Geoffrey (Belper)|
|Lambton, Lord||Oppenheim, Mrs. Sally||Stodart, Anthony (Edinburgh, W.)|
|Lamont, Norman||Owen, ldris (Stockport, N.)||Stoddart-Scott, Col. Sir M.|
|Lane, David||Page, Rt. Hn. Graham (Crosby)||Stokes, John|
|Langford-Holt, Sir John||Page, John (Harrow, W.)||Stuttaford, Dr. Tom|
|Le Merchant, Spencer||Parkinson, Cecil||Sutcliffe, John|
|Lewis, Kenneth (Rutland)||Peel, John||Tapsell, Peter|
|Lloyd, lan (P'tsm'th, Langstone)||Percival, lan||Taylor, Sir Charles (Eastbourne)|
|Loveridge, John||Peyton, Rt. Hn. John||Taylor, Edward M.(G'gow,Cathcart)|
|Luce, R. N.||Pike, Miss Mervyn||Taylor, Frank (Moss side)|
|McAdden, Sir Stephen||Pink, R. Bonner||Taylor, Robert (Croydon, N.W.)|
|MacArthur, lan||Pounder, Rafton||Tebbit, Norman|
|McCrindle, R. A.||Powell, Rt. Hn. J. Enoch||Temple, John M.|
|McLaren, Martin||Price, David (Eastleigh)||Thatcher, Rt. Hn. Mrs. Margaret|
|Maclean, Sir Fitzroy||Prior, Rt. Hn. J. M. L.||Thomas, John Stradling (Monmouth)|
|McMaster, Stanley||Pym, Rt. Hn. Francis||Thomas, Rt. Hn. Peter (Hendon, S.)|
|Macmillan, Rt.Hn.Maurice(Farnham)||Quennell, Miss J. M.||Thompson, Sir Richard (Croydon, S.)|
|McNair-Wilson, Michael||Raison, Timothy||Tilney, John|
|McNair-Wilson, Patrick (New Forest)||Ramsden, Rt. Hn. James||Trafford, Dr. Anthony|
|Maddan, Martin||Rawlinson, Rt. Hn. Sir Peter||Trew, Peter|
|Madel, David||Redmond, Robert||Turton, Rt. Hn. Sir Robin|
|Marples, Rt. Hn. Ernest||Reed, Laurance (Bolton, E.)||van Straubenzee, W. R.|
|Marten, Neil||Rees, Peter (Dover)||Vaughan, Dr. Gerard|
|Mather, Carol||Rees-Davies, W. R.||Vickers, Dame Joan|
|Maude, Angus||Renton, Rt. Hn. Sir David||Waddington, David|
|Maudling, Rt. Hn. Reginald||Rhys Williams, Sir Brandon||Walder, David (Clitheroe)|
|Mawby, Ray||Ridley, Hn. Nicholas||Walker, Rt. Hn. Peter (Worcester)|
|Maxwell-Hyslop, R. J.||Ridsdale, Julian||Walker-Smith, Rt. Hn. Sir Derek|
|Meyer, Sir Anthony||Rippon, Rt. Hn. Geoffrey||Walters, Dennis|
|Mills, Peter (Torrington)||Roberts, Michael (Cardiff, N.)||Ward, Dame lrene|
|Miscampbell, Norman||Roberts, Wyn (Conway)||Wells, John (Maidstone)|
|Mitchell, Lt.-Col.C.(Aberdeenshire,W)||Rossi, Hugh (Hornsey)||White, Roger (Gravesend)|
|Mitchell, David (Basingstoke)||Rost, Peter||Wiggin, Jerry|
|Moate, Roger||Royle, Anthony||Wilkinson, John|
|Money, Ernie||Russell, Sir Ronald||Winterton, Nicholas|
|Monks, Mrs. Connie||St. John-Stevas, Norman||Wolrige-Gordon, Patrick|
|Monro, Hector||Scott, Nicholas||Wood, Rt. Hn. Richard|
|Montgomery, Fergus||Shaw, Michael (Sc'b'gh & Whitby)||Woodhouse, Hn. Christopher|
|More, Jasper||Shelton, William (Clapham)||Woodnutt, Mark|
|Morgan, Geraint (Denbigh)||Shersby, Michael||Worsley, Marcus|
|Morgan-Giles, Rear-Adm.||Simeons, Charles||Wylie, Rt. Hn. N. R.|
|Morrison, Charles||Sinclair, Sir George||Younger, Hn. George|
|Mudd, David||Skeet, T. H. H.|
|Murton, Oscar||Smith, Dudley (W'wick & L'mington)||TELLERS FOR THE NOES:|
|Nabarro, Sir Gerald||Soref, Harold||Mr. Walter Clegg and|
|Neave, Airey||Speed, Keith||Mr. Bernard Weatherill.|
|Nicholls, Sir Harmar||Spence, John|