Calculation of Housing Revenue Account Subsidy

Part of Orders of the Day — Local Government and Housing Bill – in the House of Commons at 5:45 pm on 14th June 1989.

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Photo of Mr Clive Soley Mr Clive Soley , Hammersmith 5:45 pm, 14th June 1989

A consultation paper from the summer of 1988 includes the phrase would frequently be below market levels". Various other statements show that rents may at times rise to market levels.

I and my right hon. and hon. Friends have argued for a long time that Britain's housing crisis derives largely from the Government's having driven up rent levels at the same time as house prices inflation has pushed up house prices. As a result, market rents have crept in, thereby approximating to the revenue people could obtain if they sold the houses they owned, invested the money and took the return on it. That is what pushes rents to market rates.

The Government have never addressed this problem, whose complexity I concede, but it is important to realise that a free market in housing, in any serious sense of the term, is impossible. I do not want to debate whether there is such a thing as a free market in other senses—almost certainly there is not, except possibly in fruit and vegetables at the end of the road. But in housing, perhaps more than in anything else, the market is grossly distorted—by the time lag in supply and demand, by land prices and policies, by planning, and above all by the subsidy system, under which we provide a massive and ever-growing subsidy to the purchase sector and a declining subsidy to many people in the rented sector.

We give a dangerously low subsidy to people who rent. Consequently, British people are trapped more than many others and cannot move around the country to seek work or for other reasons, because there is no neutrality in the costs of buying or renting.

Similarly, it is difficult to move, for example, from the south Wales valleys where two-bedroomed houses are sold for about £10,000 to the south-east of England where a similar house costs about £80,000. It is also difficult to move to areas such as mine in the south-east because it is common to pay £60, £70 or £80 a week for a room, never mind a flat or a house. That is the sort of nonsense that the Government have created.

7 pm

I shall not pursue the matter further at this stage, because I know that the Secretary of State wishes to intervene and it may be helpful to hon. Members if that happens. We are trying to tie down the Secretary of State in the way that I have described to a method of assuming the same level of rent increase either in money or percentage terms for each local authority. It is an important amendment and raises the whole issue of rent levels.

As I have said many times during the passage of the Bill, it is grossly unreasonable to have to address such important matters in a debate that has almost become a Committee stage running late into the night on what is supposed to be Report. My hon. Friends, and I think Conservative Members, know that the Bill is virtually out of control in terms of the number of amendments and new clauses.