Orders of the Day — Building Societies (Interest Rates)

Part of the debate – in the House of Commons at 12:00 am on 9 April 1973.

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Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil 12:00, 9 April 1973

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.