Housing Market

Part of Opposition Day – in the House of Commons at 7:37 pm on 13th June 1995.

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Photo of Mr David Martin Mr David Martin , Portsmouth South 7:37 pm, 13th June 1995

It has been worth waiting to hear the high standard of contributions made to the debate. I am thinking especially of that of my hon. Friend the Member for Buckingham (Mr. Walden) with whose speech I wholly agreed. He made a thoughtful and worthy contribution to a debate on a serious subject which has interested me for many years, especially as it has in my lifetime—certainly my political lifetime—been grounded in mythology.

My right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) said that Labour's hostility to home ownership goes back some 15 years. I think that it goes back further and has also affected my party over the years. The bomb damage caused by the second world war meant massive devastation, mainly to rented accommodation, especially in London. The Rent Acts, which had been introduced after 1917 to deal with the problems of the first world war, were kept in place. Things were made worse after the second world war by all the controls that remained on house building and on the occupation of houses—imposed understandably in some cases, but ideologically by the Labour party in others. There was hostility to ownership and a belief that the Rent Acts should remain, controlling rented housing.

Under Harold Macmillan, as Housing Minister, 300,000 houses a year were promised and 300,000 were built in the course of the 1950s. There was no relief from the Rent Acts until 1957, when common sense returned and there was an attempt to revive the rented sector. But then, Rachman and others ruined the political field, and we unfortunately returned to the ideological battle lines drawn up between rented accommodation and the private sector.

The only options were to own a property or to be in public sector houses—in a council house. Housing associations were not much in evidence then; there were similar bodies, but the movement had not yet taken off.

In 1965 came another Rent Act, which made matters even worse for the rented sector and made it even more imperative that people buy their own homes rather than look to the private rented sector. Throughout the 13 years of Conservative rule—the Churchill, Eden, Macmillan and Douglas-Home Governments—the public sector had been expanded, and it reached its peak in the 1970s, with all that sky-rise housing. The idea was to get people as fast as possible into "units of accommodation"—to use the clinical expression of my hon. Friend the Member for Buckingham—even if surrounding neighbourhoods were ruined and demolished. They were badly built, often jerry built. Since then, many of them have had bombs put under them and we have started again.

Throughout, the choice lay between home ownership or public sector housing: the parties divided along those lines. The Labour party's hostility to home ownership was taken on by the Conservatives' property-owning democracy slogans that were so well dealt with by my hon. Friend the Member for Buckingham.

Little wonder then, as my hon. Friend said, that people became acclimatised to the idea that they must own a home. Failing that, they would hope for a council tenancy near their parents, or at least aspire to getting on the waiting list for one. There was never enough money; there were never enough houses. Instead, waiting lists got longer and longer. Sub-committees were formed in councils, with all the attendant temptations to corruption, in the form of special housing lists: "You come to me and I'll get you a house." That sort of culture entered local government, because the need for housing could never be met.

How to get some sort of sense into the market? In 1975, more legislation was passed which made rented accommodation in the private sector even more difficult. So we come to the mix of the late 1970s and early 1980s, when housing associations came in to try to hold the ring between the death of the private rented sector and the alternative of owning a home. This move was not so much ideologically based. Over the years I have visited many of the initiatives implemented by Portsmouth Housing Trust. Only last Friday I visited some. The trust has certainly plugged gaps in housing need over the years.

Apart from the Rent Acts, we cannot look at the problem without taking into account another extremely distorting factor in the market—mortgage interest relief. It is important to look at its origins. To do that, we need to go back even further than my hon. Friend the Member for Buckingham took us. Before 1974 people could get interest relief on any borrowing, not just borrowing for a mortgage. Today is not the first time house prices have spiralled upwards beyond people's ability to pay to stay in them—bankrupting some of them in the process. Others have had their houses repossessed.

In 1972–73 I wanted to enter the housing market. I had practised at the Bar for two or three years, I was living in London and I wanted to buy a house jointly with my brother, having begun save some money. I was living in a controlled tenancy, paying £12 a week with my brother for half a house in Kensington. What a rent to be paying for a property of that kind! No wonder the private rented sector died.

The house that we had been looking at was in Peel street, just north of Kensington High street. Just as we became interested in it, the price doubled, and the mortgage became too expensive for us. In the end, I did not own a house until 1980, when house prices, having fallen considerably in the late 1970s, returned to the sort of level that would enable me to enter the market.

Having seen the stoking up of the market that interest relief on borrowing had brought about, the Labour Government in 1974 introduced mortgage interest relief, allowable on no more than £25,000 paid for a property. That was intended to cap spiralling prices, which had been stoked up by borrowing in 1972–73.

In subsequent years the market levelled out. From the later 1970s until the early 1980s it was a good, buoyant market that people could afford to enter. Much of it was subsidised by mortgage interest relief, but that was not then as noticeable as it later became.

In the 1980s the cost of money—for buying houses, antiques or cars—was highly affordable: money was cheap. It became very cheap in the middle and late 1980s. That factor fed through into the housing market.

My right hon. Friend the Member for Sutton Coldfield and my hon. Friend the Member for Buckingham have taken us down memory lane, to the time when Baroness Thatcher headed the Government. She was good at spending money while saying that she was not doing so and that Ministers should not do so. My right hon. Friend, like my right hon. Friend the Member for Braintree (Mr. Newton), was a successful Secretary of State when health and social security were still combined in one Department, but I clearly remember that expenditure in the Department did not fall during the stewardship of my right hon. Friend the Member for Sutton Coldfield. The rhetoric in Cabinet may have suggested otherwise, but it certainly did not fall.

One of the features of Baroness Thatcher's Government was much rhetoric about cuts in expenditure, while in practice expenditure rose and rose, in every area. I nearly choked last night when I heard her saying on television that the Government's policy on mortgage interest relief represented the destruction of all that she believed in. Her Government cut it. I was therefore relieved to hear my hon. Friend the Member for High Peak (Mr. Hendry) remind the House that, in 1988, Baroness Thatcher's Chancellor removed double mortgage interest relief, which had meant that two people in a property could together get relief on the sum of £60,000. Baroness Thatcher therefore presided over a Government who cut mortgage interest relief.

The results were tremendous, showing just how important a part of purchasing houses mortgage interest relief can be. In the delay before the relief was disallowed, many of the people who are still suffering from negative equity today quickly entered the market.

My right hon. Friend the Member for Sutton Coldfield said that, in those days, there were no leaks, but that is not my memory of that Government. I think that there was a certain irony in his saying it, as there was a sort of leak that went around—namely, that Baroness Thatcher was rather keen, in those days, on mortgage interest relief and did not want her Chancellor to cut it. She wanted it to be increased. So it was increased from £25,000 to £30,000. It was a pathetic amount. When it was introduced in 1974, £25,000 bought a substantial part of a house, but £25,000 in the Thatcher years, and then £30,000, was a little blip as far as the market was concerned. It was not a significant increase. It withered on the vine, quite frankly. It was kept at £30,000 for year after year and became more and more insignificant, particularly as house prices went up, if I remember correctly.