§ 11.26 p.m.
§ Mr. Ted Leadbitter (The Hartlepools)
I raise tonight a matter which I find to be of national concern despite the fact that I have raised it on the Adjournment for the specific reason of drawing attention to the problem of local authority building in Hartlepool. I note, as a preliminary, that on 12th September 1972 The Times reported:The Association of Municipal Corporations, which represents the interests of local authorities, is to ask the Minister of Housing for an early readjustment of the cost yardstock … The AMC also wants a review of the entire yardstick system.I decided to look at the problem in other areas to find out whether my constituency was in an isolated position.
I found that in a recent survey in England, 47 housing schemes were investigated. Of those, 45 were above the Government's cost yardstick limitation. The highest was 78 per cent. above and the average 17.6 per cent. above.
1078 I find that the Federation of Master Builders has expressed its dissatisfaction in terms relating to local authorities in this way:There is virtual unanimity of opinion on the need for radical change in the cost yardstick policy.Referring to the Municipal Review of January 1973 I find that the Housing Committee of the AMC reported in its minutes:At a meeting with the Department of Employment on 3rd October 1972 we were represented by the City Architects of Bristol and Sheffield and the Chief Quantity Surveyor of Birmingham. Based on evidence from the six largest cities outside London the representatives pressed for an immediate increase in the yardstick of not less than 25 per cent. to bring the level up to the lowest current tender prices.In a few sentences I have established that there is a major London problem, that there is a major problem for the six largest cities outside London and I now intend to show how this is a problem for the Hartlepool County Borough and surrounding local authorities in the North-East.
The basic yardstick was fixed in November 1971. A regional variation, known as a special market allowance, was fixed on 1st May 1972. My local authority first approached the regional office of the Department on a scheme involving 45 dwellings on a site known as the Oxford Street site. It was established from that first approach that it would be given a market allowance, in addition to the cost yardstick, of 12½ per cent. There was a subsequent meeting on 26th February, which I attended, when the offer of 12½ per cent. was raised to 15.18 per cent. I understand that during the past twelve months building trade wages have risen by about 32 per cent. in the region, and I have other pertinent figures.
The effect of the offer was to transfer a considerable financial burden on to the ratepayers, and it was not accepted by The Hartlepools authority because we are conscious that there is already an additional burden on them because of the Housing Finance Act and the fact that a proportion of social security benefits which were formerly tax-borne is now provided for by the local ratepayers.
It occurred to us that the small increase in the yardstick was intended to 1079 help the council, but nevertheless we refused because these pertinent figures, which I shall give the House, could not escape our attention. The tender accepted for the 45 houses—the tendering was competitive—was £252,527. Allowing for the 15.18 per cent. market allowance, the known recognisable expenditure which the Government want to force the council to place on the rates is therefore about £28,914—that is, £643 per house—or, for a full year's programme of 200 houses, the demand on the ratepayers would be at the exceptionally high level of £128,600.
In an attempt to reduce its costs, the authority decided to see whether it could help by confining the central heating to ground floor level only. This was, of course, leaving only the minimal Parker Morris standards. The examination produced a tender price of £241,902, and taking the yardstick of 15.18 per cent. market allowance into account, the rate payers in this case would be expected to pay £18,299, or, on a total programme of 200 houses a year, £81,400.
These figures are particularly pressing on an authority such as The Hartlepools which, like many other authorities, has heavy pressures on it for rent and rates. If we are to have a continuing programme of housing with this kind of marketing allowance, we will see what effect there is on an authority like The Hartlepools.
In the first year, taking the full standards under the original estimate, the cost to the ratepayers would be £9,200; in the second year, £18,400; in the third year, £27,600; in the fourth year, £36,800, and in the fifth year, £46,000. The cost to the ratepayers, taking the reduced standard of central heating into account, would be £5,800 for the first year; for the second year £11,600; the third year £17,400; the fourth year £23,200; and the fifth year £29,000. These figures are simply not acceptable. I urge upon the Minister that they are worthy of the closest scrutiny, because Hartlepool would not present a case to the Department without the most careful examination of all its costings.
I decided to see whether the Hartlepool case stood alone. During the past two or three days I have sent a questionnaire to a number of local authorities in the North East and I have received replies as recently as this morning from 22 of them. 1080 They are all quite emphatic and certain that the housing cost yardstick is out of date, that it does not reflect the reality of the situation and that it is in urgent need of review.
All the authorities are satisfied that building costs have risen by more than 20 per cent. during the past 12 months and 12 of the 22 authorities which have replied to me estimate that there have been increases of 25 per cent. in building costs. Four authorities have experience of increases of more than 30 per cent. Nine authorities are considering lowering the standards of their house building and some have already done so. One local authority in writing to me complains bitterly that it has been offered a market allowance on condition that it promises to reduce floor space to the minimum of the recommendations made by Government circular. In nine reported cases among these authorities the market allowances vary from as low as 8 per cent. to as high as 16.3 per cent., and even this highest figure does not bring much satisfaction to the authorities concerned.
A number of authorities have referred to the amount of money that they have already placed upon their ratepayers as a cost burden for their council house building. One authority reports to me that the ratepayers are expected to meet costs of up to £250 per house, a total cost per annum of £130,579. Another authority reports costs of £182 per house borne by the ratepayers at a total annual cost of £31,668. Another reports a cost met by the ratepayers of £1,000 per dwelling unit. Another authority reports that the ratepayers must meet a bill of £45,000 and yet another, a smaller authority, reports a sum of £9,141 as its cost in the first year of the effects of the cost yardstick. It is clear, therefore, that in the North Eastern Region 22 authorities have reported a situation which is highly critical for them. I suggest that they have not exaggerated the situation.
The total effect of this seems to be weighing heavily on overall building in the region. In 1970 the number of local authority building completions for the country as a whole was 180,129. In 1972 the total had fallen to 122,827. In the Northern Region the number of completions in 1970 was 11,410 and in 1972 it was 9,080. That represents a 1081 serious reduction in house building at a time when we should be building more houses.
For Great Britain as a whole, the number of starts for those two years was 41,539 in 1970 and 29,318 in 1972. For the Northern Region, there were 3,539 in 1970 and 1,771 in 1972—a serious drop in starts. These figures are for the third quarter of each of the years.
I suggest to the Minister that it is time that the Government told the country, while exhorting local authorities to build houses, why they are saying to local authorities, without much publicity, "We are putting strictures on you. You must therefore build fewer houses". The chief official in the Northern Region surprisingly told me, "If the Hartlepools local authority cannot build its houses and cannot meet the contract, so be it". That is a condemnation of Government policy.
§ 11.41 p.m.
§ The Under Secretary of State for the Environment (Mr. Reginald Eyre)
I am sure that the House is grateful to the hon. Member for The Hartlepools (Mr. Leadbitter) for raising tonight the question of the housing cost yardstick in relation to housing in his constituency. I know that the concern he has expressed reflects the anxiety of the local housing authority, the Hartlepool County Borough Council, to do all it can to see that the housing needs of its area are dealt with. The council has asked me to receive a deputation to discuss the question of the Oxford Street scheme and a meting will be arranged in the near future.
First, I should like to emphasise that the Government are anxious to give all the help they can to all local housing authorities in their efforts to bring better housing conditions to their areas. I have in mind here the whole housing spectrum, private as well as council house building, house and area improvement, slum clearance and more generally other measures to improve the environment and social conditions.
It is right, too, that I should pay tribute to the achievements of successive Hartlepool County Borough Councils. I have been looking at what has been done recently. The achievement in the improvement field is particularly impres- 1082 sive. The council aims to improve its 1,900 pre-war council houses to Parker Morris standards by June 1974.
The number of grant applications in Hartlepool approved by the Department in 1972 was double the number of the previous year. There is also much to be done in the private sector of improvement and, with the council's encouragement, the number of grants approved in 1971 was increased fourfold in 1972 when 774 grants were approved. The council organised a House Improvement Month campaign in the autumn of 1971 in which my noble Friend Lord Mowbray and Stourton was glad to take part. Moreover, the council has declared three general improvement areas, all of private housing.
On slum clearance, over 1,300 unfit houses have been cleared over the last five years and the council aims to clear its remaining unfit houses within the next decade.
This represents most commendable progress in an area which, I recognise, has been beset even more than has the Northern Region as a whole by employment problems. It says much for the council that it has been able to do all this. I hope, too, that it would acknowledge the practical encouragement it has had from the Government, through the high rates of improvement grant provided by the Housing Act 1971, and extended by the Housing (Amendment) Act 1973 through the new slum clearance subsidy, through the Government contributions to the derelict land and special environmental assistance schemes, through special development area assistance and through the Task Force which my right hon. Friend the Secretary of State for Trade and Industry has set up to tackle the problems in the steel works.
I am glad, too, that the council is encouraging the aspirations of people in the area to owner-occupation. It is selling council houses to tenants and offering the 20 per cent. discount allowed on full market value. Building for sale by private developers is also going ahead.
I appreciate, of course, that the hon. Member is presently concerned with the council's current plans for new council house building. It is, however, necessary to look at the total situation, not only in Hartlepool itself, but in the Northern Region as a whole, in order 1083 to appreciate the position on tenders for local authority housing schemes.
What is being done in Hartlepool in the improvement field, in private house building and in local authority building for housing and other purposes reflects the general situation in the region. I have myself paid several visits to the region recently and have been greatly impressed by what is being done.
Improvement grants in the region have virtually doubled in each of the last two years to a total of no fewer than 52,000 last year, in 1972. New house building has meanwhile stayed at a high level, with 19,500 completions in 1972 and 22,000 houses under construction at the end of the year, the highest total for the last three years.
It is hardly surprising that, as a result of all this, encouraged by Government measures to stimulate employment, the resources of the building industry have been stretched. I am sure that hon. Members who represent constituencies in the Northern Region would not want us to reduce the massive help we are giving, but it does create problems which cannot be cured overnight.
The construction industry's labour force needs to be expanded. Employment in the industry had fallen during the period of several years when the industry lacked confidence in the future markedly as in 1969 and we have the strange paradox that, despite the difficulties of unemployment in this area, it is not at all easy to recruit skilled labour for building work. Now a new confidence has been created and I am glad to say that measures are now in hand to increase its capacity.
The number of craft apprentices entering the industry increased by 40 per cent. last year. The Department of Employment is rapidly increasing its provision for adult trainees. There are now 328 training places for building trainees at Government training centres in the region with an output of some 600 trainees a year, an increase of over one-third in training capacity over the past 12 months. Further expansion is planned to take place during the current year.
That is the general background against which the problem of the housing cost yardstick and the tender for the Oxford 1084 Street scheme had to be looked at in my Department. Indeed, that is the situation in which the present method of applying the cost yardstick has to be seen. I must refute categorically the suggestion by the hon. Gentleman that we are using the yardstick to inhibit council house building. The reverse is the case. The basic yardstick has been increased by amounts varying from 34 per cent. to 62 per cent. depending on the nature and location of the scheme since it was brought into operation in 1967. We have increased the basic yardstick by amounts varying from 23 per cent. to 43 per cent. since April 1971. The last general increase was in May 1972. That is the date of the present basic yardstick.
Since then it is undoubtedly true that average tender prices have risen. But the movement has not been a steady one. During the latter half of 1972 tender prices for new local authority housing schemes began to move in a very erratic fashion. A study by the Department of tender prices showed that there was no consistent pattern even within the same region, and that while some local authorities were receiving tenders within the basic yardstick, others were receiving tenders well in excess of acceptable cost limits.
In this kind of situation a general increase in the yardstick would not have been a great deal of help. What was needed was a means of giving more flexibility to the system. That flexibility has already worked well in the London situation, to which the hon. Gentleman referred, as well as in other parts of the country.
It was in these circumstances that my right hon. Friend the then Secretary of State for the Environment announced during the debate on the Address on 2nd November last that he was prepared to give a special yardstick allowance for individual schemes where local market conditions made this necessary. These more flexible arrangements have been operating now for four months and, by and large, I think it fair to say that they have coped reasonably well with a complex situation. They have certainly enabled the great majority of local authorities to continue with the housing programmes which they consider to be necessary to meet their needs. I understand that the Hartlepools Council was 1085 able to accept tenders for 147 houses during 1972.
Nevertheless, some tenders are higher than can be justified by market conditions alone. In such cases a realistic market allowance may not entirely close the gap between the basic yardstick and the lowest tender. That, in fact, is the position on the Oxford Street scheme.
I do not for one moment minimise the difficult problem to which the local authority must address itself. Should it go ahead making use of the unsubsidised tolerance or should it wait and go out to tender again later?
Whilst fully recognising the difficulty of such a choice for the local authority, I do not believe it would be right for the Department to try to avoid it by giving a market allowance which it believes to be excessive. We have a duty to taxpayers, and we cannot therefore subsidise house building regardless of price.
The Department has offered a market allowance of 15 per cent for the Oxford Street scheme of 45 houses. This took account of recorded increases in house building tender costs in 1972. I am satisfield that the Department has acted reasonably and fairly in this matter. To give more in order to make sure that the scheme might go ahead at once would not mean that more housing work was done in the area. Indeed, it might only result in higher prices for the same volume of work.
As to the future, the Government have formulated strict policies to counter inflation. So far as house building is concerned, the cost of many of the inputs, notably labour and materials, are subject to control. As our measures bite, builders will be in a position to look forward 1086 with greater certainty as regards their costs, and it is reasonable to expect that the general effect will be an earlier return to more stable tendering conditions.
As to the future of the yardstick system itself, I know that there has been a good deal of criticism over the years for various reasons. We keep the arrangements under continuous review and we have invited the local authority associations to let us have their views on how they see the future of cost control in the context of the Housing Act 1972. We shall be studying what they have to say carefully as well as conducting our own review.
I am grateful to the hon. Member for raising this matter. I have taken careful note of what he said. I shall look forward to meeting the deputation from the council and to considering its representations.
§ Mr. Leadbitter
Will the Minister now take account of the views of these 22 authorities which differ from his opinion?
§ Question put and agreed to.
§ Adjourned accordingly at nine minutes to Twelve o'clock.