Housing Market

Part of Opposition Day – in the House of Commons at 7:09 pm on 13th June 1995.

Alert me about debates like this

Photo of Mr George Walden Mr George Walden , Buckingham 7:09 pm, 13th June 1995

Having listened to some of the contributions to the debate, I am reminded of how difficult it is becoming to discuss a whole series of absolutely fundamental subjects openly and frankly in this place. For example, hon. Members on both sides of the House know that the social security budget cannot continue at anything like its present level. Yet neither Front Bench can address openly the question of radical cuts—although I pay tribute to my right hon. Friend the Secretary of State for Social Security, who has made some suggestions in that regard.

Hon. Members on both sides of the House know that we cannot continue indefinitely spending more and more on the national health service, yet we must all pretend that we can. Hon. Members on both sides of the House have known for years that mortgage tax relief is indiscriminate, expensive, wasteful and inflationary, and that it militates against the private rented sector and distorts the entire economy. Yet no one can say that outright.

The speech by the hon. Member for Glasgow, Garscadden (Mr. Dewar) was notable for a certain shiftiness—uncharacteristic in a man who is so upright as to be elongated—on the question of mortgage tax relief. It is a sterile sort of debate when no one is able to tell the truth for fear that someone out there may be listening. The reason for that collective reticence is simple: we are all afraid of making the insecure middle classes feel even more insecure. I somehow doubt that it makes them feel better to know that their elected representatives are avoiding the issue.

The debate in the media and in the pubs is really about whether the Government should take action to inflate house prices artificially. If we cut through much of the debate on both sides of the House, we shall find that that is what we are discussing today. One does not have to be a genius to understand the politics of the matter: people quite like it when they are given money for nothing. The more owner-occupiers there are, the easier it is for us to ingratiate ourselves to 70 per cent. of the country at a stroke by giving them money for nothing. Who does not feel a secret gratification when told that his or her main capital asset is worth more than it really is?

The trouble is that we can fool the public only some of the time. We are having this debate today because the housing market became a farce in the late 1980s. The farce then became a circus and the circus became a pantomime, and many people who were assured at the time that they would enjoy the pantomime are now running to us in tears. For a few years the British public were led to believe that every Englishman's home was worth the price of a castle, or at least the price of a gatehouse from which one could hope one day to graduate to the castle. It was a cruel illusion.

It is convenient for us to pretend today that that situation resulted entirely from artificially low interest rates due to shadowing the deutschmark. It is very easy for us to shuffle all our problems, in one form or another, on to the exchange rate mechanism. The truth is far less comforting—particularly for my party, I am sorry to say. The truth is that the last Administration wilfully, wrongheadedly and irresponsibly encouraged people to believe the myth that home ownership of itself brings economic security and unearned financial gains.

Let us go to the root of the matter in so far as my party is concerned. The slogan "a home-owning democracy" is as appealing as motherhood, but unlike motherhood it is not a primary necessity for civilisation. The phrase is a logical nonsense; even worse, it is a dangerous nonsense in terms of modern Conservative philosophy. Of course, no one can oppose home ownership—it is a measure of where we have come to that it is necessary to spell that out. If we accept the idea that we can have a real democracy only when people own their own homes, we are back in the 19th century pre-reform days. If a real democracy can exist only when people own their own homes, the United States, with its high levels of rented accommodation, cannot be much of a democracy. So we are talking absurdities when we use the phrase "a home-owning democracy".

The modern Conservative party is supposed to be about choice and responsibility—that is how I understand it, but perhaps I am mistaken. People must decide themselves whether they want to own their own homes and how they should invest their savings or capital. It is for them to decide whether they should rent instead. A combination of Labour's bigotry against landlords and the tax privileges that we hand out to home owners has resulted in a scandalously overdeveloped private rented market. In that sense, we have deprived people of choice. Instead, we have fed them with illusion. That is a fundamental reason why they are so angry with the Government now.

At the heart of the whole dismal business lies a contradiction in our political thinking. It is summed up in two conflicting political slogans. The first is, "Get on your bike," which I think makes excellent sense in an international as well as a national context; and the second slogan is, "Get on the housing ladder," which is a cruel and a cynical nonsense. However one dresses it up, the Government of the day tipped the public the wink that buying a house was a sure-fire investment underwritten by Government subsidies and guarantees.

For that reason, it is absurd to say—I was sorry to hear my right hon. Friend the Secretary of State say it on the "Today" programme this morning—that 80 per cent. of people want to own their own homes. Of course they will say that if one asks them. If one asks them whether they want bigger houses than the ones they own at present, they will probably say yes to that as well. It has been dinned into them that home ownership is the only route to financial security. And behind it all is the secret hope that, who knows, one day we could all clamber back on the house-price carousel and set the whole unstable machine spinning again.

It is not merely a question of economic policy or the ups and downs of the housing market; it is a question of the relationship between Governments and the electorate. Do we want to treat the public as economic morons? Do we want to lead them into financial extravagance and irresponsibility by encouraging them to believe that their future can be based securely on inflated and publicly subsidised house prices?

So much for the inglorious past; we start from where we are, which is in a deep black hole. Climbing out of the hole is the easiest thing in the world: all one has to do is rig up some rescue package involving the rate or amount of mortgage tax relief or to devise some scheme designed to help first-time home buyers. I was sorry to hear my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) advance just such a proposal. Most of such schemes—I mean no offence to my right hon. Friend or to any other hon. Members on either side of the House who have advocated them—are of dubious economic honesty. I say that because, consciously or unconsciously, we all know perfectly well that the effect of those schemes will be to provide an artificial stimulus to the housing market, which will result in rising prices.

If we were to do what some hon. Members on both sides of the House have suggested, the result would be higher prices—perhaps just at the margin, we must not exaggerate; but higher prices nevertheless. My right hon. Friend thought that knock-on effects of that kind would prove positive. But what would really happen? Higher house prices would feed through into higher mortgages in a country where mortgage debt is wholly disproportionate to individual earnings and to our national wealth. That, in turn, would increase pressure for higher wages and that, in turn, would impact on inflation and competition. Macro-economically, the effect would be to divert funds from investment in the productive economy into sterile bricks and mortar.

The policy of the present Administration to date seems to me to have been highly responsible. They have trimmed back the inflation-producing machine of mortgage tax relief and stressed that they have no wish for a housing boom. They have begun shifting the burden for insuring mortgages to where it belongs. I am entirely behind my right hon. Friend the Secretary of State on that and he deserves personal credit, all the more so because it is naturally unpopular to have to tell people that they must take responsibility for their own actions. There has been, I am glad to say, some easing up on the use of the infantile slogan of "a home-owning democracy", although it still crops up from time to time.

We are now told that the country cannot take the medicine and that because some people arc caught in negative equity, the solution must be to give the whole damn shooting match a boost. I understand that the medicine is not pleasant. I face people on the doorstep and at surgeries, as do other hon. Members. It would help ease the pain if the Government were to explain frankly that the medicine is for the long-term health of the economy and that we should continue to take it.

The aim cannot, and must not, be higher house prices. We want stable and sensible house prices and the encouragement of a private rented sector. We should remember that the international financial community watches debates such as this. The question for it is whether the Government are serious in their anti-inflation policies or whether they are going to play games with their people and, therefore, with inflation. If we start fooling around with tax relief, in whatever way, on the pretext that it is temporary, who will believe it? Once mortgage tax relief is raised, who would dare bring it down again, given the trembling middle classes out there?

I cannot remember whether it was inside or outside the House, but I have said that the fundamental problem with Britain is that it is overhoused and undereducated. Let me explain what I mean by overhoused. I took the trouble to check the housing position in France and Germany. Obviously, my figures are general, but they are interesting.

Roughly speaking, we are by far the best-housed people in Europe in terms of rooms per household. Certainly we are better housed than people in France or Germany. We can see that from anecdotal evidence from going around the country. We may think that some of those rows of houses are rather tedious and some are getting on in age, but they are quite luxurious in their way. They are two-down, three-up and have a garden and so on. The figure for Britain is roughly five rooms per household. I am not talking about the condition of housing. There are problems with that, but let us not exaggerate. A lot of those houses are in perfectly good condition and are good living units, to give them a clinical name.

In Germany, a much richer country, there are four rooms on average per household. In France, again a richer country than us, there are three. We know, again anecdotally, that people in France or Germany are not tremendously generously housed. A lot of people live in flats or rented accommodation.

I make that point simply to stress that Britain does not consist solely of people living in cardboard boxes or people with housing problems. I acknowledge those problems, but this country consists mainly of people who are overhoused and overmortgaged. There are masses and masses of people who are overmortgaged in comparison with their earnings. Their lives, again considering international statistics, are distorted by the amount that they are forced or feel obliged—or sometimes are encouraged by Conservative Governments—to spend on their houses. They have high mortgages and they sit at home sweating and eating baked beans.

In other countries, the tendency is for people to spend less on housing and more on amusing themselves, on restaurants, entertainment and so on. Given the choice, I know which way I would like to swing our culture, not least, of course, for economic reasons. It is important for us to recognise in this debate that the entire British financial housing structure is askew, for some of the reasons that I mentioned earlier.

We are told constantly that there is a housing crisis, and the hon. Member for Garscadden gave us the usual list—the Halifax building society and so on. Lists of such bodies crop up in the press every day. Every single one of those bodies is profoundly self-interested in a rise in house prices, and the sooner the better, because they are all in business. They make money out of it. There is nothing that they would like better than to have the Government pour in more money so that their profits can rise. That is what we are talking about.

Believe it or not, I have a little residual realism about the matter. If some independent body could prove to me that such were the catastrophic effects of past policies that the British housing market stands on the edge of a precipice and that it was serious because of the overweening importance of that market and the way that it is linked to all sorts of other financial activities, such as insurance, I would have to take a serious view of a grave situation. I would have to take that view if the independent assessment were that bad, but I have yet to see such evidence. I discount most of the other evidence as self-interested.

I am more impressed by the position of my right hon. Friend the Secretary of State. Discounting his political necessities, the fundamentals of what he said are right. We have interest rates down and so on. All that is true. I do not want the housing market to take off or go up; I want it to stay where it is rather than go sharply down.

For all those reasons, although I am very much aware of the people who are suffering out there and of the short-term political advantages of throwing them a few more dud fivers to follow the others that we have thrown at them over the years, my inclination would be to do nothing, in an informed way. Naturally, being a realist, I would keep an eye out for any signs of the market really going over the cliff. In that case, we could not stand back and do nothing.

The debate is fundamentally about whether we should bolster popular illusions about the worth of people's assets or tell them the truth. In recent days, we have heard siren calls from someone not completely exempt from responsibility for the hole that we are in. The advice that we got from my right hon. and noble Friend Baroness Thatcher was that we should throw money into the hole. Of course, some hon. Members will remember that that was not the sort of advice that she gave in office. When she was confronted with problems, the last thing she said we should do was to throw money at them.

However, houses—bricks and mortar—it seems, are special. They are a form of spiritual entity for some people, and if they are in trouble, we have to shovel money in their direction. One might suspect, listening to some of these siren calls, that their motive was cheap populism—were it not for the fact that populism never comes cheap.

I am sorry to have taken so long, but, to sum up, it seems to me that the fortunes of the Conservative party have reached the stage where it has nothing to lose by acting responsibly. We might even get some credit for it.