§ 2.56 p.m.
§ LORD WADE rose to call attention to the need for imaginative and realistic policies with regard to housing, rating and land acquisition; and to move for papers. The noble Lord said: My Lords, this is the first occasion on which I have had the privilege of opening a debate in your Lordships' House. In moving the Motion I shall endeavour to put forward some constructive ideas. I do not pretend that this is a subject which offers any easy and simple solution, and I shall listen with very great interest to the speeches of the noble Lords who are to follow me. I am aware that I am attempting to cover a very wide field—housing, land acquisition, rates—and it has been suggested to me that I might have added "and Uncle Tom Cobbleigh and all". But I cannot very well discuss house building without some reference to the land on which houses are built; and I cannot very well consider the overall cost of housing without making some reference to the heavy burden of rates.
§ I start with the assumption that in the 1960s and the 1970s the building of houses and flats should be one of the main growth industries. We cannot afford to cut down on the building of homes. There is ample evidence to show the need; there is ample evidence of overcrowding. We are all aware of the growth of population. Reference was made to this in the debate in your Lordships' House on May 19, when we were considering urban planning and development. Fortunately, house building is not one of those activities which seriously affect the balance of payments. If I am wrong in this respect, if in view of the economic situation it is necessary to curtail our house building programme, then let the people be told, and told frankly, so that they know that the frustrations which some of them have to face, the difficulties which some young married couples are having to put up with, are necessary. But, personally, I do not think it naturally follows from the balance-of-payments situation, and I believe that every possible encouragement should be given to the building of more houses, more housing units, both for sale and to let.114
§ It seems to me that recent Government policy has tended to have the opposite effect and, owing to a time lag between the starting of a building operation and its completion, the consequences of Government policy have not yet been fully felt. Furthermore, there is a great deal of uncertainty. It is true that bank rate has been reduced to 6 per cent., but we do not know what will happen in the coming months. It is building starts, the commencement of building, that are important. I understand that in the first four months of this year there has been a drop in building starts of just over 4,500, and I shall be obliged if the noble Lord, Lord Mitchison, when he comes to speak, will give the figures for the first four months of this year and the comparative figures for the first four months of last year.
There have been warnings from many different sources as to the possible decline in house building, and I do not think the warnings are alarmist. In the Sunday Times on April 25 of this year there was an article by Mr. Stephen Aris, in which he said:
Three of Britain's largest contractors, who have already cut their house-building programme for the next six months by up to 25 per cent., have started to lay off their workers. To-morrow the McManus Group, which has large estates on the South Coast, will reduce its building site labour force by about 20 per cent. … Mr. Denis McManus, the Group's Chairman and managing director, said: 'We have had a number of cancellations because people are finding it difficult to get mortgages, and as a result we are, from Monday, cutting back our production by around 15 per cent. Once that was decided, we had no alternative but to lay people off'.
More recently, Mr. Laing, the President of the National Federation of Building Trades Employers, said:
The worst is yet to come in the house mortgage situation".
I am quoting from the Daily Telegraph of June 2, which reported him as saying
The private house-building situation was still deteriorating. Mortgage advances in the first three months of this year arose from commitments made by building societies well before Christmas. The full extent of the shortage would not be known until the societies announced their lending figures for June, July and August. They are bound to be well down'.
§ It would seem to me that the decline in building starts arises from three causes: first, the cost to local authorities of high interest rates; secondly, the effect of the 115 credit squeeze on building firms; and, thirdly, the rationing of mortgages. I should like to say a few words about this subject of the rationing of mortgages, and I am sorry if it is a little technical. In the realm of home buying, the rationing of mortgages has a particularly unfortunate effect. It not only creates hardship for many people, particularly young people looking for a house, but also has the indirect effect of restricting building development. I believe that the shortage of funds, particularly on the part of building societies, could have been foreseen last year. I have already spoken on that subject, on another occasion. On the one hand, there was expanding demand, and, on the other hand, substantial withdrawals from the building societies. Thus, when bank rate was raised to 7 per cent., rationing of mortgages became inevitable. I think it would have been rather less serious if some action had been taken a year ago.
Here, may I quote from the Building Societies' Gazette, which reported a speech by Mr. Andrew Breach, Chairman of the Building Societies Association? This is from the Gazette of May, 1965. Speaking at the annual meeting of the Northumberland and Durham Association, at Newcastle, he referred to discussions which had been held with both the Conservative and the Labour Chancellors—that is last year—and to the forecast that had been made by those interested in building societies' affairs. The report goes on:
Mr. Breach said that at the Edinburgh conference last year"—
that is, in 1964—
the Association foresaw to a greater extent than some in greater power"—
and I suppose he was referring to the Government—
the likely train of events. They were warned in May that by the autumn there would be a shortage of funds.
§ This availability of funds is of very great importance if the building of homes is going to be, as I say, a growth industry, because most home-buyers require some form of mortgage; and pressure on the building societies to reduce their interest rates without at the same time helping in any way to increase their funds does aggravate the position. I think much of the criticism of the building 116 societies has been unjustified. I should perhaps make it clear that I have no interest to declare. I am not a director of a building society, although I am an Honorary Vice-President of the Building Societies Association; but anything I have to say is my own personal view.
My Lords, what are the possible remedies? In the first place, I believe—and I have felt so for quite a long time—that too large a slice of building society surpluses (that is, their potential reserves) is taken in taxation, by way of both income tax and profits tax on their surpluses. This will remain true after the new tax changes which are proposed in the present Finance Bill have been introduced. The latest decision of the building societies has been to raise the interest offered to investors to 4 per cent., while retaining the amount charged to borrowers at the same rate. I think this can be regarded as only a temporary measure. To quote from the Financial Times of June 11 of this year:
… keeping mortgage rates at 6¾ per cent., and eating into the margins that provide for expansion, can be regarded as only the most interim of measures.
At present, therefore, the incidence of taxation makes the situation rather worse, and I think there is a case for reform there.
§ Then there is another, more radical reform which I think would help. That relates to income tax relief on mortgage interest. It is difficult to justify the present system. Those who are better off get more relief, and those who are less well off get less relief, so far as setting mortgage interest against income for tax purposes is concerned. If this tax relief is regarded as a subsidy, then the subsidy is not equitably distributed. Two suggestions have been put forward for dealing with this. One, proposed by Professor A. J. Merritt and Mr. Allan Sykes, is that all borrowers should get tax relief at 8s. 3d. in the £, even though they would normally pay at lower than the full tax rate. I understand that this would cost the Exchequer about £20 million in a full year.
Another proposal, which I prefer, is that building societies should charge net interest rates with no tax relief. I am advised that this would enable them to reduce an interest charge to borrowers of 6¾ per cent. to an all-round figure of
5 per cent. This would bring substantial benefit to home-buyers in the lower income bracket. According to the Economist on June 12 of this year:
The attractions of this method are its simplicity; and that it avoids giving a subsidy to owner-occupation.
Already the building societies have an arrangement whereby they pay interest to investors on which tax has already been paid, and a composite rate to the Exchequer. I see no reason why there should not be some similar arrangement whereby they charge a lower rate to borrowers and the Exchequer recompenses the building societies by the amount which they would have had to pay if they had paid out tax rebates to a large number of individuals. if this idea were adopted, I think other bodies could negotiate a similar arrangement with the Government; and I believe it would be much better than a two-tier interest rate system, which would lead to all kinds of anomalies.
§ If these proposals are not sufficient in a period when there is a shortage of funds, I think another idea might be adopted, known as re-financing. In effect, this would mean that the Bank of England would back the building societies and enable them to run down their reserves to an extent which normally would not be prudent. In saying this, I should make it clear that in my view it is absolutely essential that all bodies concerned with lending money to home-buyers should be absolutely sound financially, and should be known to be sound. But I have mentioned these rather technical subjects in order to make it clear that in my view some of the hardships that have been suffered, particularly by young people, are not absolutely necessary.
§ It has been suggested in some quarters that the Government are deliberately providing handicaps for the building societies in order to reduce the amount of building society activity and to encourage the building of houses through other media. I hope that the noble Lord, Lord Mitchison, will be able to give some assurance that the Government are not deliberately out to handicap the building societies. It seems to me that we must make use of all media. We need more houses for sale, as well as more houses to rent; and the local authorities, the housing associations and the building societies 118 must all be allowed to play their full part.
§ I have discussed the removing of certain handicaps to the building of houses, particularly the building of houses for sale, and of handicaps to the financing of home buying and home building. The other problem is the capacity of the building industry to cope with the growing demand. Even assuming that funds are available, I doubt whether conventional building will be able to meet the total demand. The target is 400,000 a year, but I believe that we need 500,000 a year if we are to build all the flats and houses required to reach a state of affairs where everyone can find a house, and in a reasonable period of time. But even 400,000 a year is quite a difficult target to reach. It would seem to me absolutely vital that more use should be made of industrialised building—that is to say, of factory building. Weather conditions alone in this country, I think, make it necessary that more should be done in the factory, under cover.
I am aware that there are already some consortia, such as the Yorkshire Development Group, which covers Hull, Leeds, and Sheffield, which are working along these lines, with a view to entering into contracts for the supply of industrialised buildings; but progress is very slow and has been rather disappointing. I had a letter yesterday from the managing director of a firm which, I understand, is a very progressive one, specialising in industrialised housing. He speaks of the difficulties (I will not go into them in detail), and goes on to say:
I understand that certain measures are now being taken by the Government to attempt to rectify the matter, but these are unfortunately very belated. In the past we have had ample production capacity standing idle when we could have been erecting badly needed houses.
I hope that the noble Lord, Lord Mitchison, will be able to tell us something about the subject of industrialised building and what is being done by the Government to encourage it. I appreciate the fact that there is a need for a steady demand and that it must be carried out on a large scale to make it really worth while; but, at the same time, I think we must look ahead. The day may come when a private owner-occupier will go to a building firm and say: "I am tired of my house. Will you please take it away and bring me a new one." Or he
may say: "Please may I see a catalogue of your houses? I do not want to move from my present situation, but I should like a more modern house." And the old house will be taken away and a new one put in its place. That may be a little fanciful, but I think that that time will come.
I would not say that these industrialised houses or flats are necessarily better than the older types. But I recall the words of the late Dean Inge:
There are two kinds of fools. One says, 'This is old; therefore it is good'. The other says, 'This is new; therefore it is better'.
Neither may be right. Personally, I think that there is nothing to beat good local stone which fits into the local surroundings and climate. But one must be realistic in these matters. We shall never build 400,000 houses out of stone; we must therefore think of modern methods. It is not only a matter of material. All kinds of changes must take place if we are to bring down costs and reach our target. I should like to talk about quality, but time does not permit. I am hoping that we may hear something on that aspect, particularly from the noble Baroness, Lady Elliot of Harwood, when she speaks later.
§ The task of providing houses for all at a reasonable cost is made more difficult by two other factors: the price of land and the heavy burden of rates. I shall deal with these briefly, because my noble friend Lord Henley will be developing this subject later this afternoon. Some years ago a successful businessman of my acquaintance said to me: "The thing to do nowadays is to buy up peninsulas. It does not matter where in the world they are, so long as the climate is right; but if you find a good peninsula and you buy it, it is bound to appreciate in price." I had neither the time nor the money to go around the world buying up peninsulas; but it was an interesting proposition. It was not suggested that I should do anything with the peninsulas when I had acquired them: I should just have had to wait for the land values to rise, for other people to improve the transport facilities, for the population to grow and for more and more people to want a house with a bit of land by the sea. Then, in due course, I should have been able to sell out and take the profits.120
§ I suppose it may be argued that for me to go around the world looking for peninsulas was a form of creative activity; but in this country there have been many cases where those who own the freehold of their land did not have to go looking for land. They were just fortunate: land values increased, and the time came when they had a very attractive offer and sold at a very great profit. It seems to me that the making of very large profits out of land values has been accentuated by modern town planning procedure but this only highlights what has been going on for a long time. The practical question is how to recoup some reasonable part of these increased land values; how to achieve greater justice, without holding up building development.
§ There are all kinds of ideas on this today and the proposals fall broadly into four categories: first, nationalisation of all urban land; second, the introduction of some development charge or betterment tax, imposed on the granting of planning permission; third, an extension of the capital gains tax on the sale of land; and, fourth, reform of the rating system to ensure that the assessment will be based on the value of the site, following a period of time, so that part of the increased site value will go to the community. I believe that there are serious practical objections to the first and second of these propositions. I think that the acquiring of land by a Land Commission, the selling or leasing back and the possible appeal procedure would involve long delays, much uncertainty and a good deal of administrative work. Therefore, I think that that proposal should be turned down. I think that probably it would have the opposite to the desired effect. At any rate, let me make quite clear that, so far as the Liberal Party are concerned, the nationalisation of urban land is a non-starter.
§ THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF LAND AND NATURAL RESOURCES (LORD MITCHISON)
My Lords, may I interrupt the noble Lord for one moment? I am very interested in this point, because when I was younger I read the Liberal Green Book—I think it dated from the time of Lloyd George. May I take it that the Liberal Party have now abandoned that?
§ LORD WADE
No, my Lords, we certainly have not abandoned it. We not only hold to the principles laid down there, but I think that we have made improvements on the suggestions then put forward. I was going on to say that, on the other hand, while turning down the Land Commission idea, we wholeheartedly welcome the proposal that there should be a Land Development Corporation, which would help to finance local authorities and provide technical assistance, especially in the field of comprehensive development.
So far as rates are concerned, may I just say this? I understand from the Economist of May 29 of this year that the total rate burden on both housing and industrial property is now £1,115 million a year. I believe that we should stop tinkering with the rating system. In my view, part of the burden must be taken over by the Exchequer. And it is high time that empty property and vacant land bore some burden of rates. I do not think that they should be any longer exempt. I do not think that owners who make improvements should be penalised by having to suffer increased rate liability. Once we accept that, we shall have gone a very long way towards adopting site value rating, but I should like the subject to be discussed calmly and dispassionately. In March of this year I was at a conference of economists, valuers and experts on urban development when the whole subject of land acquisition and site value rating was considered. I was interested to hear the views expressed, and there were a number who favoured site value rating.
The point I wish to make—this is really my last point, although one could go on discussing this matter for a long time—is that there is a great need not only to find some way to recoup for the community the land value created by the community, but also to reach a conclusion that will have some degree of permanence. I think that the Town and Country Planning Act, 1947, failed for several reasons. It tended, of course, to freeze all development, but one of the reasons was that many people did not really believe that it would last. They had certainly doubts about whether that the imposition of the development charge would be retained. I say that, whatever proposal is adopted with regard to land 122 values, we should avoid uncertainty for the future. No scheme will work satisfactorily if it is thought likely that it will be scrapped by the next Government. Therefore I think it is relevant to ask what the Conservative Party would do, and whether there has been a change of heart on their part. According to the Daily Mail of January 5, 1965, Mr. Iain Macleod said this:I want to see a tax on the appreciation of urban building land values collected for the community.Perhaps the noble Lord, Lord Hastings, can tell us whether that is official Conservative policy. I have also read in the Guardian an article reporting on a speech by Sir Alec Douglas-Home on May 27, 1965. The article was entitled, "Sir Alec projects a Golden Image." It stated:The Conservatives would tax some part of the profits made on land—' I think perhaps we ought to have done it earlier,' said Sir Alec, with his well-known capacity for understatement.It would be helpful to know precisely what is the Conservative policy. I am not attempting to score Party points—or, shall I say, in addition to any Party points that may be involved—but certainly I think that uncertainty may be very damaging. Long-term planning by Governments, by developers and by builders is essential if we are to reach this housing target.
I said at the outset that this was not a subject which offered an easy solution: that it is a complex one, I admit. But there is great need to solve this problem of providing adequate housing, and it is a subject which does not brook delay. I believe that the difficulties can be overcome. Consider the tremendous advances that have been made in the manufacture of cars and of domestic appliances, not to mention television sets. Surely it is not beyond the wit of man to ensure that every family in this country has the opportunity of a decent home. My Lords, I beg to move for Papers.
§ 3.25 p.m.
§ LORD HASTINGS
My Lords, I am sure that we listened to the speech by the noble Lord who moved this Motion with great interest. He made his maiden speech on a somewhat similar subject, on February 4, on an Unstarred Question, dealing with housing and mortgage rates. I said on 123 that occasion that the Government would do very well to consider most carefully every single thing the noble Lord had said, and to-day I hope that we shall have a reasoned as well as a reasonable answer to all the constructive suggestions that the noble Lord has put forward. They related in particular to the field of housing and to the aspect and importance of mortgage rates. He made certain suggestions about land acquisition and rating which no doubt the noble Lord who replies for the Government will refer to later.
My Lords, when I first saw the Motion on the Order Paper I was rather intrigued, because I was not sure precisely how it was going to be possible to deal with housing, rates and land acquisition all in the space of one debate. It was quite obvious that each one of these subjects could form the subject of an entire afternoon's debate on its own, and if they were to be comprehensively covered the opening speaker would be required to talk for something like two hours. I therefore turned my attention more closely to the wording of the Motion, and came to the conclusion that the emphasis of this debate should lie upon the two words "imaginative" and "realistic" in relation to the Government's policy.
Although the noble Lord, Lord Wade, had some criticisms to make, and some constructive suggestions as well, he did not dwell unduly upon those two words. I had rather expected that he would set out to prove that the Government's policies were neither imaginative nor realistic, and that he would then demonstrate that the policies of the Liberal Party were both imaginative and realistic, and that finally he would turn to these Benches and show that the past policies of the Conservative Government were not much more imaginative and realistic than those of the Labour Party. It would not have been at all difficult for the noble Lord, or indeed for myself, to prove the first point, that the Government's policies in these fields are neither imaginative nor realistic. It would have been rather more difficult, I think, for the noble Lord to prove both points in respect of the policies of the Liberal Party. Perhaps the building of 500,000 houses, the abolition of the present system 124 of rating and its substitution by site valuation, by which golf courses and open spaces would be rated at 80 times their present value, and the acquisition of land by some process which is not yet clearly defined, might be described as highly imaginative, but hardly as realistic.
It is not my purpose this afternoon to go once again over the record of past Conservative Administrations. I remember that, when I first spoke from these Benches in the debate on the humble Address, the noble Lord, Lord Silkin, chided me gently afterwards by suggesting that perhaps I had not yet become accustomed to sitting on the Opposition Benches. I dare say there was something in that, because I had been here in Opposition for only three days; but now I am speaking eight months later and I know very well that my duty is not to praise what the past Government did, but to criticise what the present Government are doing. I only hope that the Government are prepared to stand on their own feet and be judged, not by what they say, but by what they do, and not to rest their case any longer on useless accusations of the failings of the previous Administration.
If I may, I would start, in the reverse order to that in which the Motion is phrased, by dealing with the question of land acquisition. In the gracious Speech, we were promised that a Land Commission would be set up as soon as possible. Presumably that meant during this Session, because it is not the custom to mention matters in the gracious Speech which are not for legislation. We are in this quandary: although legislation on this matter has been promised, we have not yet been presented with the Bill or even with the White Paper. It looks as though this promise of the Labour Government has gone with the wind, like a good many other promises, and we are not to have this Bill in the present Session, unless the Session is to be extended up to, or even after, Christmas.
The question of land acquisition was discussed thoroughly before the last General Election. Then I frequently asked noble Lords opposite how their Land Commission was going to operate. But we do not yet know. We have an inkling that the original idea has been modified considerably, but we do not 125 really know what they are going to produce. It still seems to me to be a wholly unrealistic policy. It is unrealistic in that it will not cheapen the prices at which houses are sold. It is unrealistic if the Government believe that people will sell land voluntarily when it is to be sold at prices below market values, and when such profit as is allowed beyond present use value is to be subject to a capital gains tax. It is unrealistic when we consider the number of experts who will be required to value properties and deal with compulsory purchase orders with such rapidity.
Although I am not here this afternoon to be questioned—it is the Government who have to be questioned—I would say in reply to the question of the noble Lord, Lord Wade, that our policy has been clearly stated not only by the gentleman mentioned by the noble Lord but also by Mr. John Boyd-Carpenter, who is in charge of these matters for the Opposition. Mr. Boyd-Carpenter has said:We do think that it will be reasonable to impose a charge relating to the increased values arising from the development of land following planning permission. It is our intention, when we return to office, to introduce provision for such a charge among our measures".I am not going to enlarge upon that, because I do not think that this is the occasion to do so, but I am sure that no doubt will remain upon this subject.
§ LORD MITCHISON
My Lords, I am much obliged to the noble Lord. I was going to ask him to identify the document from which he is reading and its date.
§ LORD HASTINGS
My Lords, this statement was made at the Conservative Central Council Conference on March 5, 1965, and has been circulated to Conservatives as part of the Opposition's policy for their future Government.
I would turn for a moment to the question of rates, which comes in the middle of this Motion. We have not discussed this vast subject for a long time and I think it right to take this opportunity to make some reference to the Report of the Committee of Inquiry into the impact of rates on households, under the chairmanship of Professor Allen. This Committee was set up two years ago by my right honourable friend 126 Sir Keith Joseph, and its Report was published as long ago as February. In fact, there is a Motion on the Order Paper, for a day unnamed, by my noble friend Lord Ilford, but I do not think that I should let this moment pass without extending our thanks to Professor Allen and his Committee for the extraordinarily hard work they have done and for the fat volume they have produced. As the Report says, they were not asked to make recommendations but to produce the facts. This they have done, and the facts produced are very useful indeed, not only for consideration of the whole rating system but, as your Lordships will see from the Appendix on "regression analysis", also in a wider field than might at first be supposed.
The main fact which comes out of this Report is this (paragraph 346):Looking at rates as a form of taxation, we find that domestic rates are less now than before the last war, as a proportion of all local authority expenditure, or of all personal incomes, or of total taxes.One wonders why there has been such an outcry about rates. The real answer is that the effect of the incidence of overall taxation is so much greater than it was 25 years ago, which is the basis on which these figures are compared. In those days, people did not mind the proportion of rates being so high because their other taxes were not particularly high. Now, all taxes are so near the point of being intolerable to all classes of the community that a little bit extra on the rates makes all the difference. And it has to be paid in two lump sums, demanded rather unceremoniously twice a year, instead of being spread over. Some people also maintain that they are paying for services which they do not personally receive. But the warning is given that, although this is a lower proportion than previously, there is now a tendency for the proportion itself to increase. Therefore, it is quite clear that something will have to be done about this particular problem.
The Report goes on to show that the last Government were not so wrong in supposing that the hardship cases rest chiefly among the retired and aged, and among the one and two person households. Out of the selected study of households chosen just above the National Assistance level, it appears that there are over one million such households affected 127 who are not receiving National Assistance; and among the households with earner heads, although there are only 9 per cent. of them who suffer from hardship, this adds up to a large quantity, and it means another one million. So there seems to be about 2 million households that one has to deal with by way of giving some concession in regard to rates. Otherwise, the Report says that the revaluation has introduced consistency, which is an important matter. There were gainers and losers, but not, in general, any unfairness; and without consistency one could not have considered this subject objectively.
I hope that we may hear from the noble Lord who is to wind up the debate what progress is being made in considering this Report and, at the same time, the review of central and local government finance, with which it is so closely tied up. I quite appreciate that no decision can be taken finally about the rates, and what should be done about them, without a decision being taken at the same time about the redistribution of central and local government finance. But I hope that the noble Lord will be able to give us a progress report.
Finally, I turn to the most important aspect of this debate, with which the noble Lord who moved the Motion dealt primarily, and that is the question of housing. The essence of a housing policy is, and must be, surely, the building of the maximum number of houses without either overloading the industry or straining the national economy. When we were in office we managed to build just over 370,000 houses in our last year, and we were aiming to build 400,000 this year. We saw no reason, considering that there were over 430,000 houses started at the end of the year, why this target should not be achieved. We should like to know how things are going to-day. It is clear from the figures of the first quarter that the building completions are up to schedule. But in view of the number of houses started in the previous quarter, that is what one would expect. The same applies to the building societies: that they have lent about the same amount as they did in the same quarter—or even, perhaps, the same first four months—last year. But what we are concerned with is the future, and perhaps the noble Lord will be able to tell us something about it.
128 I should like to make particular reference to this question of overloading the industry and the matter of industrialised system building. A good many actions were taken by us, when we were the Government, in preparing the ground so that the industry should not be overloaded. The National Building Agency was set up. There was a report on the production of building components in shipyards. There was the Working Party on Building Research and Information Services, for instance, which recommended that there should be a statutory levy on the building industry itself for research and services, with £150,000 a year promised by the Minister of Public Building and Works. I wonder what has happened to that suggestion, and whether anything has come of it. Certainly the Minister of Public Building and Works has set up a special research unit. The Industrial Training Council for the construction industry is already in operation, and one hopes to see an improvement in the apprenticeship training schemes and in the number of trainee places available at the Ministry of Labour Centre. All this is going ahead. Therefore, one has reason to believe that the industry could comply with the demand of 400,000 houses a year without finding itself overloaded.
We had made great progress in forming local government consortia. When we left office, there were already 70 local authorities in consortia, representing 25 per cent. of the total local authority building programme, and there were discussions going on with another 400. What progress has been made in that direction? Perhaps the noble Lord will be able to tell us.
There is one new factor that has arisen since we left office: the Government felt constrained to put a 15 per cent. surcharge on imports. That, I believe, must have had an effect upon some parts of the building industry—on the importation of timber, for instance, and various other materials. This means either that the cost of houses has gone up, or will go up, as a result of the surcharge, or that the import of these materials has fallen. If that is so, it will obviously be more difficult for the construction industry to meet the target at which we are all aiming. I wonder which of those two things has happened, and whether 129 the noble Lord is in a position to tell us, before the end of the debate, the answer to that question.
I come now to this tremendously significant matter of interest rates. We discussed this matter fairly fully on February 4, and then again on an Unstarred Question by my noble friend Lord Kinnoull, when, unfortunately, I could not be present. On neither occasion, with all due respect, did we receive a proper answer from the noble Lord, Lord Mitchison. This was some time ago, and I hope that we shall have a much better answer to-day. After all, we are not talking about the present. It is the future that matters, and we have been given a good deal of warning as to what the position is.
§ LORD MITCHISON
My Lords, before the noble Lord goes further, would he be kind enough to repeat the question which he says I did not answer last time, and to which he now wants an answer?
§ LORD HASTINGS
My Lords, I have asked the noble Lord certain questions in my speech, and I hope he has taken note of them and will answer them. What I am saying now is that, in respect of the debates we had on mortgage interest rates on two occasions, he did not give an adequate reply.
§ LORD HASTINGS
To the whole debate. To all the questions of all noble Lords who spoke. That is my general complaint. I hope that I have made myself clear. What we did get (I quote from the noble Lord's speech in the first debate, where we had a very good speech from the noble Lord, Lord Wade, and some very pertinent questions and admirable criticisms from myself) was the noble Lord saying this:I will not attempt to answer in detail a good many points raised because, if I may say so, this is a rather ridiculous sort of Question." [OFFICIAL REPORT, Vol. 262 (No. 35). col. 1341, February 4, 1965.]
§ LORD HASTINGS
The noble Lord went on and ended up with the usual attack on the sins of omission of the previous Government. And he did exactly 130 the same a month later, when my noble friend Lord Kinnoull asked something of the same sort. Therefore, I hope that to-day we are not going to have a repeat performance of this—
§ LORD HASTINGS
—because, after all, the President of the Federation of Registered House Builders, a gentleman who wishes to co-operate with the Government—with any Government—wrote to The Times and pointed out that the effects of the shortage of finance for mortgages began to be felt and further inquiry taken from his members in April indicated that about 60 per cent. of those firms replying expected their completions in 1965 would fall short of their original plans. This trend was apparently confirmed by the Building Societies' Association, who have indicated that their level of lending for 1965 is likely to be about 25 per cent. below the amount advanced in 1964. As the President of the Federation of Registered House Builders points out:As advances during the first four months of this year were about the same as 1964, this reduction is likely to fall entirely on the latter half of this year (and therefore be twice as bad) at a time when completions should be at a high level.That is the sort of situation with which the Government have to deal. It makes sense.
The Government may reply, "We dropped bank rate by 1 per cent." Apparently it is not going to have the slightest effect on the balance-of-payments situation, if I read my financial pages correctly, but we can hope at least that it may help the building societies.
§ LORD MITCHISON
My Lords, T am sorry to interrupt the noble Lord, but he is trying to get me to answer questions, and I am trying to find out what the question is. Would he give us the benefit of his thirteen years' experience as to what the Government ought to do?
§ LORD HASTINGS
I am asking the noble Lord to tell me what the Government are going to do. It is no use his asking me. I did not ask members of his Party when I was in the Government. We made the decisions. That is what I am trying to drive into the noble Lord. They have to make the decisions, and they have to stand on their words and 131 their acts. They have done a lot of things. Among other things, they have had two Budgets. These are their decisions, and they have got to explain them and justify them, and that is what I am asking the noble Lord to do to-day. I hope he is not going to try to slide off the back of the whole debate with an answer blaming this side, not for what the Government have done, but what they say the Government had to do, assuming that we would have done the same thing if we had been in their place. Of course we should have done nothing of the sort. There would never have been a 7 per cent. bank rate.
§ LORD HASTINGS
We will not go into that. That is economics and we are talking about housing, rating and land acquisition. That is the point. We are asking the Government why they have not done anything yet, and what they are going to do. The Minister has promised that he is now going to have consultations, which he should have had long ago, with the building societies and the construction industry, and he is going to produce a scheme in time for the next Session. But by that time the damage is likely to have been done, and we may find the number of houses being built is considerably less than anticipated. I am asking the noble Lord this: when he replies, if he does not believe that is true, will he please explain to all quarters of the House why he does not believe it is true; why the building industry is not overstrained, if it is not overstrained; how it is going to meet its commitments in the present conditions in which it is operating at this moment with the shortage of money for the building societies. It is answers that we want to these questions, and not any further accusations against anything that this Party may have done. Therefore, I hope that when the noble Lord replies he will take up all the constructive points made by the noble Lord, Lord Wade, and that he will explain the policies of his Government and justify them, for at this stage he has not even attempted to do so.
§ 3.55 p.m.
§ LORD COHEN OF BRIGHTON
My Lords, I suppose it is only natural that anyone making a maiden speech in your 132 Lordships' House should feel very nervous, and I am no exception to that rule. But having seen the Motion on the Order Paper to-day on housing, and particularly on finance and rating, and as it is a matter of which I know a little, I have had the impertinence at a very early date to intervene. I have had many years' experience of local government, many years on a housing committee and, since the formation of the planning committee in my authority, on the planning committee. And, as I know the House is aware, I am associated with a building society in which, of course, I declare my interest. So this matter is one in which I am particularly interested and one in which I may be able to be of some slight use.
It seems to me that in dealing with this question of housing, one has to look at it from three main points of view. The first is the question of land—that is basic. The cost of land, the possibility of acquiring land—surely that is basic to any matter concerning housing. The next question is the kind of housing and the type of houses that are going to be built. I want to deal with that later, because I feel that this afternoon we have been inclined to concentrate on one particular type of housing, the type financed by building societies, and have not dealt with the other type, the type built by local authorities, which is an extremely important consideration when dealing with the housing problem of the country—possibly even more important than the other. The third point, of course, is the question of the finance, of which we have heard so much.
On the matter of land, there is no doubt—and everyone will agree—that part of the profit which arises on the creation of a planning consent obviously should come back to the community. I was particularly interested to hear Lord Hastings's comment, because when the South-East Study was under consideration I had the opportunity of discussing the matter and questioning Sir Keith Joseph, who was the Minister in charge and was interested, naturally, in this question of the accretion in value which would take place with the development of the South-Eastern part of this country. The point was raised then whether any of the profit that would come from the new developments that were going to take place, 133 apart from the new towns, would be taken solely by the developers or would in any way come back to the community. Sir Keith categorically told me that the proper way to deal with it was by the supply of more land and not by taking part of the money from the person who owned the land. He said that more land was wanted in the market, and then prices would come down. He had no idea at that moment of any development charge coming back to the community. All of us now agree that some of the charge must come back.
I think we must agree also that there must be considerable revisions of the town planning laws as they stand at the moment. I am particularly interested in the position of local authorities in that connection, and I am interested because of happenings in my own town and what is happening up and down the country. It is important that local authorities should be able to acquire land on the outskirts of their town, either for building or for amenity purposes. But, unfortunately, the last Administration passed an Amendment to the Town and Country Planning Act, whereby where land could not be developed because of town planning but was town planned as open space or the like, the owners of the land could apply for a certificate and, when it was granted, would be compensated for the full value of the land as though it was developable land.
On the outskirts of my town, Brighton, there is an estate which was developed before the war and town planned in accordance with an agreement with the Corporation. In the centre of this estate was a large open space of approximately ten acres. It was agreed with the developers that it should be retained as an open space, it was shown on the town map as an open space, and the people who built the houses round this open space happily thought they were obtaining particularly attractive houses which would have an open aspect for all time. Owing to the concession made by the last Administration, the owners of that particular estate have now applied for a certificate and they have been granted the certificate that the land could, were it not for town planning, be developed at a density of 12 to the acre. So the owners of the estate have said to the local authority, "If you want to retain this 134 open space for all time as it appears in your town map you can pay us the price that the land is worth in the open market, namely £115,000". Of course the local authority could not possibly face the ratepayers with that burden.
So what has happened is that an open space which was planned as such and would have remained open except for the variation in the Town and Country Planning Act will now be crammed with houses, and the people who thought they were going to have an open space for ever have lost their rights. What is worse is that in this area where we want open spaces so badly for playing fields, and so on, the local authority cannot obtain them except by paying very much more than they should pay for the right to have back what in fact the developers had offered years before.
I think it will be generally agreed that, when the Crown Land Commission sits, that is one of the difficulties which will have to be overcome. There have been criticisms with regard to the suggestion of the Crown Land Commission. I frankly do not believe it would be possible immediately for the Commission to nationalise, or, rather, to take back, all land on which town planning consent was granted and then to re-sell or re-let it, but I do believe that the Crown Land Commission, when it comes in—as it is coming in—will, step by step, take control. It cannot be done at once, but it will gradually take control so that as town planning consent is granted the community will have a far greater say in how much the owner will get for his land. He has not created that wealth. The community has created it, and it is the community which should say how much he will get for the land, the wealth of which is given to him by our town planning committees when they grant permission to develop. I believe this will be one of the most valuable proposals to be placed before the country by the Labour Government.
Land is basic. Land is the wealth of the nation and therefore the nation should not have to pay a very large sum, one might almost say in blackmail, when there is an opportunity for development given by the growth of the community in respect of this particular land. Apart from that, it is vital that the price of land should in some way be restricted, and it can be restricted only if part of the money 135 is taken back on the granting of town planning consent and is in some way ploughed back, by a concession of some kind; that is to say, it is resold or re-let only if houses are sold or leased at a certain price. But there is no doubt at all that in my area the price of land going up as it is doing is a very serious obstacle. To-day land is £12,000, £13,000, £14,000 or even £15,000 an acre, whereas it was £2,000, £3,000 or £4,000 an acre not so many years ago.
The price of land is important, but another point we have to remember so far as land and housing is concerned is the question of density. In this small island of ours we have been too anxious to have very intensive densities. I am one who believes that in many cases it would be very much better to have well-designed terrace houses at fourteen or fifteen to the acre, rather than to say, "Well, it is undesirable to put houses there because we can allow only eight to the acre" and therefore to build huge blocks of flats; because there is no doubt in my mind that a young couple with children are very much happier if they have a little unit of their own with a small garden at the back, where mum can be in the kitchen watching what is going on. I am glad that the Minister is taking a more generous and sensible view of this matter. I feel that we must have a new conception so far as the planning of some of the outskirts of our towns are concerned. We have had examples from some of our foremost architects of terrace houses, pseudo-Regency if you like, but quite pleasantly designed, which would give good housing for the people and would allow us to develop many more houses on the land.
Another matter to be considered in dealing with this question of housing is: What are we building? It is said that we want 400,000 houses a year, and somebody suggested 500,000. It is not only a question of the total number but of how many houses are built for the people who need accommodation. I know quite well, both from my building society experience and from my local authority experience, that there are crowds of young people who at the moment cannot get a home for the simple reason that they are not earning enough to qualify for a building society mortgage, but they are earning too much to qualify to go on 136 the local authority housing list. In addition, rightly or wrongly, up and down the country local authorities have been encouraged to go all out for town planning schemes and for slum clearance. By all means let us pursue slum clearance, but in addition local authorities ought to be building more houses than they are now. It is unfortunate that in the last two or three years the number of local authority houses has decreased in proportion to the number of houses which people are being more or less forced to buy. Of the 380,000 houses built last year, too high a proportion was for the people who bought their houses and there was not an adequate number for the people who wanted to rent.
Local authorities up and down this country have long housing lists; in fact, I believe that those lists would be very much longer if all the people who need houses could have their names put down. Take the example of the man earning £13 to £15 a week. In our part of the world the "spec." builders cannot build a house to sell at less than £3,500 or £3,750, which means a building society repayment in the region of £20 to £22 a month. Building societies say, quite rightly, that no one should pay more than a quarter of his income in repayments to the society, so that a man must be earning over £1,000 a year to qualify for these particular houses; and of course most of them just cannot do it. So we find the position that many young couples do not qualify, so far as we are concerned in building societies; and when I go to my housing committee I find that the local authority will not look at them because they are earning too much. The result is that these couples stay with mum or with mum-in-law; and one gets divided families.
We must try to change the quota of houses that are being built to let. Of course it is important that the building societies should make as many advances as possible; of course it is important that everyone who wants to buy should be able to do so. But it is also vital for the couple who do not want to buy their house—possibly because they may be moved in their particular jobs—to have a chance of renting a house. My opinion is that the quota of housing to be let and the quota of housing for sale should be altered so 137 that the local authority housing can be greatly increased.
Also we must not forget that we are told that finance is tight and that not enough people can get mortgages. If some of those people who do not really want to buy their own house could go on to the local authority housing list, the country might be very much better off—but with this one proviso: that we must revise the method of charging for houses on council housing estates. I know I have been very unpopular on this matter. I have addressed meetings when I have almost been turned off the platform. But, of course, it is crazy, when one thinks of it—whether I am speaking for Labour Party policy or not—that some people live on corporation housing estates who can afford to live in their own house at three times the rent they pay, and are subsidised by other people earning a jolly sight less. On both sides I hope we shall come to the position when we face up to the local authorities on this question. I addressed a meeting in Scotland recently. I do not know whether your Lordships know what the Scottish Labour Councils are like, but I was lucky to escape with my life when I put forward this point of view. But it is true, just the same, and the sooner we face this problem the better, because then it will encourage more local authorities to build their own houses.
Perhaps I may for a moment or two deal with Lord Wade's point on the building societies. I am glad he reads the Economist; it is a first-class paper. But I really think that that article last week on housing finance was misconceived. May I, for a moment, explore that suggestion? It sounded very simple and very pleasant and such an excellent way of reducing rates of interest. What was suggested was that instead of charging the gross rates the prospective borrowers, some who pay income tax and some who do not, should make a net payment to the building society of approximately 5 per cent. If the payment to the building society is approximately 5 per cent. and the building society is paying to its investors 3¾ per cent., obviously this will not work unless you get a subsidy from the Government. But how are you to get a subsidy from the Government? Everybody has a different income tax.
138 In my organisation there are some 70,000 members. There are £5,000 million worth of assets in building societies. Can anyone imagine the impossible job of working out the tax returns of all those prospective borrowers, altering every year? The thing would be impossible. We might be able to do it if we all had computers, but at the moment there are only three building societies with computers, and there are some 700 societies. The idea looked all right on the face of it, but when we went into it we were aghast at the implications. I had better not say what one of my accountants thought of it.
I think there is a tendency to give a little too much importance to the question of the rate of interest. The problem is how much money is available. If they can afford it, people do not mind very much if they are paying a shilling or four or five shillings extra a week if they can get a house. But the problem is, the money is not available in the country. It is wrong to assume it is there. We just cannot create it unless we are going to inflate the economy at a time when we must not inflate the economy, when we must go in the other direction. I think we have to accept the situation, so far as building societies are concerned—and they are advancing a very substantial sum of money at the moment—unless the Government are going to subsidise them by making finance available to them, a scheme that was worked in America at the time when Roosevelt came in; when there was difficulty there, the Federal Reserve authority made money available for building societies. But it is not the time to do it now, and it would be unfair to suggest to people that it is ever likely to happen.
As to the suggestion made earlier that the Government are not friendly to building societies, I would say that that is quite untrue. Before the Election there was a letter from Mr. Harold Wilson to the Chairman of the Building Societies' Association making it abundantly clear that the building societies would be in exactly the same position as the local authorities if any concession was made granting reductions in the rate of interest. May I just digress to point out that although the building societies may be criticised because they charge 6¾ per cent., 139 the London County Council charges 7¼ per cent. and practically every other local authority in the country does the same. So I do not think the building societies can be criticised because of that question of the rate of interest, when anyone who is buying a television set pays 12 per cent. or 14 per cent. and does not argue. If he is buying a house, 6¾ per cent. is not too much to pay. Having said that, I would add that I think it is unfortunate that the building societies did put up their rate of interest recently. I fought very strongly against this. I think it would have been very much better if the rate had remained as it was, because if nothing else happens it is inevitable that next year the rates to the borrowers must increase, because the margin is not adequate.
Be that as it may, I feel, as I said at the beginning, that we must take some steps to modify in some way the price of land. We must deal in some way with the question of densities. We must change over the relationship between houses for owner occupation, for people who are buying, and those for local authorities. And finally—and this is important—until we have the money in the country and the capacity in the country we must not forget there are other priorities, such as hospitals, schools and prisons; housing is not the only priority.
Before the Election I was on one of the sub-committees dealing with this question and I particularly remember that when one of us said, "What are we going to do about housing?", another member said, "Yes, but I am on the prison commission: what are we doing about more prisons? We have four or five prisoners in a cell." Another said, "I am dealing with the hospitals; I want more hospitals", and another said, "What about railway stations? How are our chaps in the N.U.R. going to react to these old-fashioned railway stations?". There is so much to do. Housing is only one of the things. I think we should face this problem somewhat on the lines I have suggested this afternoon.
§ 4.18 p.m.
My Lords, what a great pleasure it is to be able to congratulate someone on a speech such as we have just heard from the noble Lord, 140 which is one of the best I have heard. I feel it is doubly a pleasure for me on these Benches, because, after all, this is a Liberal Motion, and we have, as it were, got a brand new star to come and appear for our Motion. Really, it was a splendid performance, and I hope to hear a great many more like it. The noble Lord is chairman of one of our most important housing societies and what is interesting is that he is one of the few supporters of the Government among similar chairmen. As he is reputed to have such forthright and independent views, I am looking forward a great deal to what he is going to say.
I was especially struck by his remarks when he spoke about the Crown Lands Commission, because this is partly what I want to talk about today. I was interested when he said that he thought that the Crown Lands Commission was not going to buy up all land at once. I am glad he thought this, as indeed most of us do. We are waiting for the White Paper. In the meantime, I believe this is an indication of what people are thinking. I was also interested to hear what he had to say about betterment. I am anxious to hear what the noble Lord, Lord Mitchison, will say about this problem also. How are the Government, through their Lands Commission, going to try to collect betterment? Are they going to do it by the terms of the leases they regrant to private developers, or by the capital gains tax, or, indeed, by a levy rather on the same basis as the suggested 75 per cent., the Uthwatt levy? I want to enlarge on the problems connected with all these three taxes a little later on.
But, again following the noble Lord, Lord Cohen of Brighton, on the question he mentioned of cheapening land, I do not think that anything the Government can do by means of a Crown Lands Commission or anything else is going to cheapen the price of land. It may redistribute some of the money that is being spent on land. That is another matter. Uthwatt, in 1942, demonstrated, if demonstration were needed, that any device of this kind would not cheapen the price of land. What is interesting is that the Government's thinking is obviously much along Uthwatt lines—at least, in so far as we know yet what the Government's thinking is—as, of course, 141 was the 1947 Act. That was much along Uthwatt lines, and Uthwatt followed Ricardo who, a hundred years ago, demonstrated that land is dear because the corn is high, and not the other way round. That applies equally in this regard. I do not think that the operations of the Commission will reduce the price of land.
I believe there is another device that might—namely, a land tax which is being advocated by Professor Colin Clark. "I his is in operation in Queensland, and by a cunning adjustment of the rate of interest on the rate of tax you can make it not worth while, or even impossible, for a man to sell land at more than a much lower price than its true value. This is a somewhat abstruse idea, but I believe it works in Queensland, which is, of course, a country somewhat different from our own, and what works there would not necessarily work here. But, at any rate, it is nearer to a device for cheapening land than any other I have heard of, and certainly neither the Government's Crown Lands Commission nor our own Liberal idea of a corporation is going to cheapen the price of land.
If the Government are going to use one or other of the three taxes I have mentioned, how are they going to deal with matters of small development? This could probably be dealt with separately, and could, indeed, be dealt with under the Conservative proposals, because I feel that the Conservative proposals are in fact suitable only for small development and are not enough for dealing with the whole problem. I think the noble Lord, Lord Hastings, implied that the Conservative Party would like to have a straight betterment tax on the granting of planning permission, which is, I suppose, a revival of the old development charge. But, again, I take it that the Conservatives would scale it down from 100 per cent. on the old charge to something like 75 per cent. or indeed 66 per cent. Such a scheme, which, as a matter of fact, is also favoured by professional men in the field of land, has one advantage—namely, that it might be acceptable; but I think that is really its only advantage. It seems to me that it does not go far enough.
Again, as Uthwatt said, if you use the betterment tax as the only, or indeed the main, method of collecting betterment, it does not go far enough. It taxes only 142 certain properties at certain times. What would happen, for instance, in the case of a site in the owner's own hands? He will not be taxed because he will not realise that capital appreciation. If he sits on it and either develops it himself or leases it for development, he can get a substantial increase in the value of his property due to betterment, upon which he does not have to pay out. This could be overcome by having some sort of complicated device of a notional sale, but that is not very attractive, and to some extent I think it is unworkable. In fact, as I say, I think that the Conservative proposal, although it would be acceptable not only widely among owners of land but also among people who work for land, does not really collect enough of the betterment charge.
Are the Government going to use their Crown Lands Commission as their only means for collecting this betterment? As I say, it can be done by such means as so regulating leases that the amount that a man has to pay for a lease reflects the betterment. But, again, this does not really cope with small developments. As the noble Lord, Lord Cohen of Brighton, suggested, the Government are clearly not going to envisage buying up all urban land. So there must be some other scheme for dealing with small development. But would they work it so that their main betterment charge was collected under a lease and their small developments were collected under such a scheme as the Conservatives put forward, which is a straight betterment tax?
Again, how is the capital gains tax going to come into this matter at all? I do not feel that of itself the capital gains tax is enough. This raises a rather difficult problem. If the capital gains tax does not go far enough to collect betterment, then it raises the question whether land is in some special capacity—some special state—and ought to be taxed twice; because that, in fact, is what it would amount to. I am a little inclined to think that a case could be made out for doing this. I agree that the old argument that land is unique and the supply fixed is, to some extent, no longer held in its full rigour. I think people feel that for any one parcel of land there are always substitutes. Also people now feel, or economists feel, that planners themselves are in short supply, 143 and that they themselves command what is in fact an element of rent.
Nevertheless, there is something about land which is unique, in this respect: that the increase in value of something which is a stock or share has an element of betterment in it only in so far as the element of land is involved. So far as any other improvement in its value is concerned it is almost entirely—shall I say?—the capital that has been put in, the knowledge, the expertise and so on, and that does not altogether apply with land. So far as land is concerned, there is the question of the capital on it; and if you take the view that land must be separately taxed, then you have, as a corollary, rather to take the view in this context that you have to separate land from what is on it.
Those are the three possibilities I see emerging, or which might emerge from the Crown Lands Commission, and I hope that the noble Lord, Lord Mitchison, when he answers, will say something about them. Now may I say what I feel are the sort of proposals that would be acceptable from us—the Liberal proposals. We start with a Land Development Corporation. This is not the same as I think is envisaged in the Government's Crown Lands Commission. For a start, it is not proposing to buy up land and lease it back to developers. What is proposed instead is to make loans available to local authorities to enable them to defer interest payments on their capital during the unremunerative period. Secondly, it would give grants that would enable local authorities to make good those losses in rent and rates which must take place when any redevelopment takes place. Thirdly, it would, of course, supply, or help to supply, teams of experts, not only with regard to planning but also with regard to finance.
It seems to me that the advantages of this scheme would be that local authorities could acquire land in need of development without over-burdening the rates during this difficult period of unremunerativeness. Secondly, it would mean that important areas could be re-planned without upsetting the balance between the public and private sectors. Land could be leased by the Corporation to a private developer at ground rents which would reflect the change in value 144 resulting from change in user. To some extent the Government have the same idea in regard to their own ground rents. One could have revision clauses so that with changed circumstances one could revise rents; and if there were a further betterment element, that also could be collected. Under the scheme private developers could be allowed to carry out much more extensive schemes than they do at the moment. Furthermore, it would enable the Government to channel their loans and grants into those parts of the country which so badly need them.
These Liberal suggestions are not out of line with suggestions which have been independently arrived at by the Civic Trusts. They differ from the Government's Crown Lands Commission, in that they would make more use of local authorities and existing organisations, such as building societies, and so on. I think that they would also make better use of private development, and mean less of an upset between the private and public sectors. I consider that it would mean less unnecessary buying up of land ripe for development, and would be a better means of collecting betterment. I agree that in the Liberal plan the collection of betterment is not unlike what I should imagine the system of collection of betterment would be under the Crown Lands Commission; that is to say that it would be partly by means of a ground rents charge. In addition, we feel that one would want to have site-value rating as a means of reinforcing the collection of betterment, in that site-value rating covers every form of betterment, as indeed it does of "worsement", as it has been called.
We regard site-rating value primarily as a better form of rating than the existing system. The Whitstable survey has shown what can be made of it. We also regard it as being a secondary means of collecting betterment. If it were to transpire that site-value rating was not acceptable, and did not work as a better system of rating, we do not necessarily feel that it would be worth introducing it for its secondary value, which is the collection of betterment. In collecting betterment, and in rating also, it has the great advantage that it does not penalise enterprise and is an incentive to develop. In an over-developed country like ours, one may say that that is not a particular 145 advantage, but I do not think that that matters much, because any development that did take place would do so within the overall planning permission, and therefore the matter would no doubt work out quite well.
It has been suggested that site-value rating would encourage higher densities. I think that the noble Lord himself said this, though I am not sure that I agree with him. I know that it is very nice to have a back garden to look out upon, and to see the children playing in it; but, unfortunately, this has perhaps gone for ever. The tendency now is towards higher densities, and in my view it would not matter if site-value rating promoted it. It is also suggested that site-value rating encourages piecemeal development. I am not sure that this is so; the evidence is not at all clear.
Connected with this question is a very important problem from a professional point of view, and that is the difficulty of putting the right value on the property. One has to value the permitted development, which is also the socially desirable development, which will be the element of value to be taxed. If one does that wrongly, and puts upon a Georgian house a value which is the sort of value that should be put upon a block of fiats, then one obviously makes a nonsense. Planners are rather doubtful as to whether valuers can perform this difficult operation. I do not see why they should not be able to do it, however. It would seem perfectly possible for valuers to devise means for doing this kind of valuation.
Lastly, one hears the question: does site-value rating do anything that cannot be done by any other method? We feel that it does it better. It is the sort of problem which merits a great deal of research. The Whitstable Survey has made a useful start on this matter. We have thought for a great many years that it could be usefully used in conjunction with some such scheme as our proposed Land Development Corporation, so that one would have a Land Development Corporation assisted by site-value rating. Under such a system one might find that a capital gains tax in regard to betterment could be abolished altogether, because the site-value rating would take care of the betterment, and where there were special betterment charges one could 146 rely upon planning permission to take care of the increased values.
I had rather hoped that I should follow a Government speaker who would have said something officially on this problem of their own plan; and I hope that the noble Lord, Lord Mitchison, will try, even before the White .Paper, to enlarge upon some of these problems. He shakes his head, so I am afraid that we are not going to get anything out of him this afternoon. It looks to me as if the Government plan, coupled with the capital gains tax, and possibly a straight betterment charge for smaller developments, with part nationalisation as well, is a clumsy plan and not necessarily any more likely to work than the Liberal plan which I have tried to outline. As for the Conservative plan, frankly, I do not think that it goes far enough.
§ 4.38 p.m.
§ BARONESS ELLIOT OF HARWOOD
My Lords, I take part in this debate with great interest and pleasure. We are much indebted to the noble Lord, Lord Wade, for affording us the opportunity to discuss these very important matters to-day. At the outset I should like to congratulate the noble Lord, Lord Cohen of Brighton, on his altogether admirable maiden speech. It is a great pleasure to listen to somebody who is actively engaged in local government. I, too, am actively engaged in that field, and I know that it brings one right down to fundamentals. One cannot theorise about things that might happen a long time ahead, but one must deal with things as they come up. When one is connected with local government—and I know that the noble Lord, Lord Leatherland, is another great expert on local government, and he will be speaking shortly—because one has to deal with matters immediately they arise one is very keen to deal with problems practically and to assist in every way one can in their solution. I hope that Lord Cohen of Brighton will often give us the benefit of his views. Although he speaks from the Labour Benches in this House, I know that he has a lot of support from these Benches in many of the things he said. Perhaps that is a good augury for the future.
In all my long association with politics, I cannot remember any year in which there have not been problems connected with the housing of the people. Before 147 the war we were beginning to catch up on numbers and quantities. In England—and I speak now as someone who knows far more about Scotland and Scottish housing than about England—enormous strides were made, great slum clearance programmes were begun; and although we endeavoured to do the same in Scotland we did not manage to be quite so successful. Whether it was because an enormous amount of the building in England was done by private enterprise, and a very much larger proportion in Scotland was local authority building, I do not know. I am not one who makes a distinction between the two, because I think that local authority building in many cases is as good as, if not better than, private enterprise building, but it is perfectly true to say that private enterprise building is sometimes a quicker way of getting houses put up. In any event, in Scotland we did not have as many private enterprise houses as England did, and our housing problem was not so near to solution as that in England.
However, we all know that the war came, that all building was stopped, that vast destruction took place and not only were we back to square one but back to minus a great many houses which we might have had had the war not happened. Since then, all Governments—and in particular the last Government—have made enormous drives for increasing the number of houses built. It is quite true that vast quantities—hundreds of thousands and, indeed, millions—of houses have been built, beginning in the years immediately after the war and continuing on a very much bigger scale in all the years in which we had a Conservative Government. I had not even realised that we were on the way to over 400,000 houses last year. All I can say is that, although I speak from these Benches. I hope the Labour Government will produce as many houses as we have produced, because this is something which transcends all kinds of Party political feeling, since it is for the people that we want to build the houses and we know how much those houses are desperately needed.
In The Times newspaper to-day two very interesting letters appear. I do not know whether your Lordships have had time to look at them. I read these with 148 considerable interest, and I think that there are some important questions here—certainly in the first one, which is signed by a Mr. Brownrigg from Guildford in Surrey. It puts some pertinent questions to the Government on what they are going to do about various matters concerned with increasing house building. The points raised here are ones which I think are worth just glancing at. The writer says:There is therefore a very urgent need indeed for the Government (a) to make abundantly clear whether they wish to encourage high standards of housing or reduce costs at the expense of quality, (b) to see that the Treasury equate cost with quality rather than work to an arbitrary low figure based on low standards and out-dated information, (c)to bring about a clarification of mortgage arrangements so that it is possible for the individual to play his important part in providing the houses the nation needs, (d) to make it possible for the enormous potential of the rapidly rising factory-built housing industry to be harnessed to the housing programme.The second letter is on a different point but one which I feel is equally valuable, and that is the question of using the many Acts of Parliament which enable local government to grant aid for reconstruction of houses—not to build new houses, but to reconstruct houses whose standard is good enough for them to be made to provide good accommodation. In my own housing area in Scotland we have done a tremendous lot in reconstructing agricultural houses, which on the whole are fairly solidly built but do not contain the amenities which we like to have in modern days. The grants available, and the many Acts that have been passed on these matters, have been extremely helpful and very important. I hope that everything will be done to continue with that policy, particularly in areas where substantial but old-fashioned houses can be converted and made into perhaps two or three different apartments, instead of remaining as just one house. It is a quick method and it is a way which I find has been extremely successful.
Nevertheless, as the noble Lord, Lord Cohen of Brighton, has said, the provision of new houses remains the basic need, and I do not think that any method should be overlooked. In the early days immediately after the war, your Lordships will remember we heard first of what was called the "Portal" house, a mass-produced house. Curiously enough, it was not the first mass-produced house, 149 because I can remember that before the war the late Lord Weir produced the "Weir" house in Scotland, which was very successful and used alternative materials, although it was not at all well supported by the then members of the Labour Party. In those days steel was in very large supply—quite different from the position to-day. Alternative materials were in use even as far back as about 1928 or 1929.
There are many variations in house building to-day, and I do not suggest that one type is necessarily better than another, but I think that we must somehow or other be quite sure that, whatever type is used, there is a minimum standard below which houses cannot be produced, whether they are factory produced houses, whether they are reconstructed or whether they are traditionally built. I am fairly worried because in my capacity as Chairman of the Consumer Council I get many complaints from people on a variety of subjects. Housing is one of the subjects, and we get complaints from people who move into new houses and find bad workmanship in the finishing of the houses and faulty fittings of one kind or another—whether it is doors, windows, plumbing or whatever it may be. I feel that these faults could be eliminated by more care and more inspection in the case of local authorities, and by more insistence on the building by-laws being not varied. I should even like to see the standards raised so that the quality can be maintained. That would also mean that a builder could not get away with shoddy materials, which are all too often used in the building of large quantities of houses.
I think it is important to realise—I expect we all do, but it is borne in on me all the time—that buying a house through a building society, or buying it in some other way, is one of the most important things that a man or woman does. This is particularly true in their early lives when they are perhaps starting out on family life, and when a great deal of their thought and happiness, not to say their finances, are involved. I should like to suggest one or two things to try to help this aspect of this most important transaction. I was immensely interested to hear the noble Lord, Lord Cohen of Brighton, talking about building societies. We are in touch with the 150 building societies, and we all respect and know what wonderful service building societies give to the public. I should like to suggest—and I do this only very tentatively because I am no authority on building societies—that when they examine to whom they are going to give a mortgage, and seek information about the house they are going to make it possible for a person to buy, they should insist upon a certain quality in the house. I should like to see finance and quality linked together; they are not at the moment. I suppose there is a cursory look at the property to see that it is wind and watertight, let us say; but a closer inspection as to whether it is really going to be something which is going to last, and last during the repayments of the building society's mortgage is, I think, very important indeed. I should like to suggest to the building societies that they link their loan not only with the bona fides of the person, but also with the quality of the house or apartment that is being bought.
I should also like to support, and ask that the building industry might support, the National House-Builders Registration Council. This is a very useful body, but is not as well known as it should be. It calls for standards, for proper inspection, for a close look at contracts between builders and buyers, and for a close look at the fittings, the finishings, and so on, of houses. The object is to ensure that when a house is built it conforms to a standard which the Council approves. One cannot, I think, make membership of this organisation compulsory, because, in life, compulsory things are so difficult to enforce. But if the value of this Council could be stressed, and made known, I think that a great many of the people who are building houses would join this organisation (it is not an expensive thing to do), accept its standards and conform to them.
I should like to mention one other thing that would improve the quality of some of our housing estates and our houses in general; that is, we should encourage architects and architectural building to be part and parcel of this big housing expansion. A great many houses are built without architects at all—and private people are often more guilty in this respect than others. They get somebody—a local surveyor, an engineer, or somebody among the builders they are 151 using—to be their architect. I think that is a great pity, because we want to keep up the standard of architecture, as well as the standard of materials—the finishings, and so forth, that I have been talking about in connection with houses.
There is one other point which has been brought to our notice. I cannot speak with experience of this, because I am not a builder, but I have been told that, because of this huge amount of building that has taken place, a number of small firms have expanded suddenly, and very quickly. They have had to. But, while they have the orders and the materials, the fact remains that on the managerial side they have not the experience of the very large building companies, and often there has been a failure to keep up the flow of materials, of men and so on. Firms can get into a terrible muddle if the top, managerial level of building operations is not highly experienced, and very good indeed. I do not know whether it is possible for more people trained in the managerial side to be encouraged into the industry—I have never examined the question closely enough to know—but there is no doubt that there is a tremendously difficult job to do in the managerial ranks of these great building concerns. Very often, some of the hold-up in building is due to a failure in the flow of materials, which means that people cannot get on with their jobs. I should like to feel that one could encourage a higher standard of managerial training in some of these great companies.
I suppose that the competition, let us say, or the contrast, between the factory-built house and the traditionally-built house is one that we shall find difficulty in resolving. I expect we shall have to use both. I have seen a great deal of building of the factory-type house, and I have also seen a great many traditional houses built very quickly. Quite honestly, I do not think there is a great deal to choose between them, unless a very big company takes on a big contract and does the whole of one given area. Otherwise, I am inclined to think that traditional houses are sometimes built as quickly as the others: because it is not the shell of the house that takes the time; it is the installation of the fittings inside—the 152 plumbing, the electricity and so on. But anything one can do to speed up the building of houses, whether of the traditional type or of the factory type, we should encourage in every way possible.
To sum up, my Lords, I should like to see a minimum standard below which no house could be built. There is supposed to be a minimum standard now—with building by-laws, and so on—but, judging by the complaints that come our way, and judging by the survey which the Consumers' Association did on a variety of houses, there must be some way of getting round some of these building bylaws and standards; otherwise, we simply could not get such bad workmanship as that which one knows takes place in certain types of houses. I hope that in no circumstances will the local authority building by-laws be lowered: indeed, they should be raised, if possible, in order to achieve a higher minimum standard. I should like to see an inspection which is really effective in connection with houses built both by local authorities and by private enterprise.
I would agree very strongly with what the noble Lord, Lord Cohen of Brighton, said on the subject of costs and the subject of rents. I know Scotland very well. I can well imagine the sort of reception he would have if he went up to some of the Clyde towns and told them that they had to pay an economic rent, or even a partially economic rent, for their houses, and not be subsidised out of the rest of the rates. It was a controversy which I can remember in almost every election which I ever helped to fight in Glasgow, and it is a controversy that is still going on now. But there is absolutely no reason at all why there should not be a proper relationship between the rents of new houses and their costs. It is perfectly possible to assist in other ways those people who cannot pay an economic rent. That has been done, and done successfully, I know, in England. In some places they operate a rent-rebate scheme. I do not think that in Scotland we have done it to anything like the extent—if we have done it at all—to which it has been done in England; but I know that we are particularly bad at not putting the rents of houses up to the point at which they at least balance, so that council house 153 rents are not subsidised by the rest of the rates.
I entirely agree with the noble Lord, Lord Cohen of Brighton, that this is one of the subjects we must all face up to. If we are howled down on platforms, we shall be howled down in a very good cause, because it is something which should be done. It is perfectly proper that rents should have some relation to the cost of housing. I agree at once that there are many insistent calls on the public purse—education, hospitals, and, as the noble Lord also mentioned, prisons; but I believe, after a long experience of public service, that unless one makes a priority of housing, one is not meeting the full needs of the community. Housing is the most fundamental of all the things that we supply for a community; and I would say, whatever Government are in power—and I would say this equally if my own Party were in power—that, though there are many other things which I should like to do in the way of helping people, I would not do them if it meant cutting down on the help given to housing, which is the greatest of the social services of this country.
§ 5.0 p.m.
§ LORD LEATHERLAND
My Lords, it is a great pleasure to me to be able to follow the noble Baroness, Lady Elliot of Harwood, because whatever there may be that divides us—and there is much on many questions—we have an affinity through our mutual interest in local government. The noble Lord, Lord Hastings, said that he could wish that we did not dwell too much on the failures of the last Government. I quite agree with that. I think that the beauty of a debate such as this is that it enables us to look forward and to put forward constructive ideas into the common pool, so that we may solve some of the difficulties facing us today. Therefore I thank the noble Lord, Lord Wade, for having introduced this debate, and I should particularly like to congratulate my noble friend Lord Cohen of Brighton for the admirable contribution which he made.
I wish the noble Lord, Lord Hastings, had spoken a little longer. That is probably a peculiar request to make in your Lordships' House; but he led us up to an exciting crescendo and said that some- 154 thing will have to be done, some rate concessions are needed, for these 2 million poor householders; and then, just as we expectantly waited for the solution, there came complete silence on that particular point. I noticed that there seems to be common ground between the two Opposition Parties on the need for some kind of betterment tax or levy, but I should have been more excited about that disclosure had I not remembered that in 1953 both those Parties were partners in killing the betterment tax introduced by my noble friend Lord Silkin.
This debate has seemed to departmentalise itself into a number of subjects. I shall say nothing about housing and nothing about land acquisition, but deal solely with the question of rating. Rating is a question that interests a very large number of people to-day. I must speak with humility, because I know that in this House there are many Members with long experience of local government. I myself, I suppose, should declare my interest. For nearly a quarter of a century I have been a councillor or an alderman, a finance committee chairman on an urban district council, finance committee chairman on a very big county council, leader of that county council, vice-chairman of that county council, chairman of that county council, and then, more recently by some queer arithmetical quirk in the electoral statistics, I find myself promoted to the position of leader of the opposition. I would add that before I answered the high ethical call of journalism I was a municipal officer myself. I was in charge of the costing system in a department of one of our big municipal corporations, working night and day to try to save the ratepayers' money. So, I may be biased in my approach to this subject, but I hope that no one will accuse me of not having an affection for and a devotion to the cause of local government in this country.
It is fashionable in some quarters for people to blame councillors for the heavy increase in rating. That is not quite fair. Councils have laid upon them certain specific duties; these are laid upon them by law. They have to carry out those duties and they find that all the services are extending rapidly and becoming more and more expensive. We want more 155 schools, more midwives, more policemen, more firemen, more ambulances, more of everything; and every time we buy anything it seems that it costs more.
But there are two sides to this picture. I think we must look not only at what we pay, but at what we, the community as a whole, get in return for that payment. If it were not for these local government services we should have very few schools, very few opportunities for educating our children up to the high standard that modern industry demands; we should have far fewer sanitary and sewerage services which protect us against the plague; we should have very elementary maternity and child welfare services instead of those which are year by year reducing the number of mothers and babies who fail to survive. We should have very elementary fire brigades—and the fire brigade plays a big part in protecting our homes and our places of work. We should have hardly any roads on which to go to work, on which to send our children to school and on which to go out to do our shopping. These local government services are the things that divide our very civilised society from what would be a state of almost barbaric anarchy.
There is, of course, an occasional extravagance by local authorities; but I do not think that a charge of that kind can be pushed home seriously. Those of us who serve in local government know the many channels through which every item of expenditure must pass before it is finally approved by the council. Below the member level there is a constant thrust and cut between the officials; an officer thrusts his schemes forward and the treasurer cuts them. And when the ultimate figure emerges it usually is pretty realistic. We have to bear in mind, too, that when councillors put up the rates they are imposing an additional tax on themselves, either as householders or as industrialists in their particular area.
I come to the conclusion that so long as the present system of local government finance exists, the present rates are necessary and, furthermore, they will keep on rising year by year. So what we have to do is not to tinker about with trifles but to examine the whole system. We have to bear in mind that if the money does not come from one source then it 156 will have to come from another. We have not yet reached the state of that German town before the First World War which levied no rates or taxes whatsoever on its citizens but which paid them a dividend year by year, a dividend earned out of municipal estates and trading enterprises there carried on. I sometimes feel that if some of our municipalities had been more enterprising and more farseeing in days gone by and had bought up freeholds in their town centres, then some of our towns might have been approaching that happy state here to-day.
The noble Lords, Lord Wade and Lord Henley, spoke for the Liberal Party and have set great store by the policy of site value rating. I do not intend to be sidetracked too far down that by-way because I do not think it is a real remedy for a situation which demands urgent attention to-day, but I will make a few casual comments on it. First, site values are already rated; they are an integral part of the assessment of every hereditament. That is one of the reasons why assessments to-day are so high. Secondly (and this is a matter of machinery) a large number of long leases have been let on condition that the lessee pays the rates. If site value rating were introduced, the landlords would be rated. I want to ask the noble Lord, Lord Wade, whether those contracts are to be altered. If they are, what does he think about retrospective legislation, about which we have heard so much recently?
I should like him to tell us whether he intends that annual site value or capital value is to be rated. It is capital value which is rated in many of the overseas countries which are held up as examples. If it is the capital value that is rated, the capital value of the land will fall year by year to the extent of the capitalised value of the tax that happens to be imposed. That would virtually be a capital gains tax on gains that have not yet been realised, that may never be realised, or if they are realised may not be realised on a scale to justify the tax which in the meantime has been imposed.
I should like him to tell us whether he proposes that council-owned land should be exempt from his site value rating—streets, parks, open spaces, market places, and the five million council houses which stand on council-owned land, five million which will, be six million before many 157 more years have passed. Would the councils tax themselves in respect of these open spaces and municipal housing estates? If they would tax themselves, would they recover the amount from the tenant? If they did so, what becomes of the traditional argument which we have heard for fifty years that this is a tax which cannot be passed on?
I know that overseas communities are cited in support of the rating of site values, but most of those communities have been new, pioneering, developing communities where it was very urgently necessary to press land into development use. Here the position is exactly the opposite. In some senses we are already over-developed, and in many senses we are facing a land famine, not a superfluity of undeveloped land. I think that if we are to organise the use of land, it would be better done by town planning through the planning machinery than by the imposition of a tax. We are often told that site value rating would stop speculation, yet in Vancouver, one of the first places to adopt it, speculation was rife and furious for many years. Throughout the whole of British Columbia the consequences of site rating were disastrous, and thousands of people were ruined.
Finally on this point, the yield from site rating would be comparatively small. The last authoritative figures we have were in the Simes Report of 1952 which, of course, shirked the issue of whether there should or should not be site rating because a betterment charge was in active operation. That Report said that two shillings in the pound would produce between £10 million and £30 million a year. That is rather a wide range. I am quite sure that if any of my noble friends on the Government Front Bench came before your Lordships with a scheme for a TSR 2 or a Blue Streak to cost between £10 million and £30 million, they would be open to very severe criticism for not bringing forward something more precise. So that figure has to be viewed with a certain amount of reserve. At that time the total rates of the country were £400 million a year, so it would have needed a site value rate of somewhere around 27s. in the pound in order to provide the whole rating revenue needed.
158 Of course, site value rating is sometimes put forward as a supplementary tax and not one which is supposed to provide the whole of local government revenue. We had an example of that in 1939. That is a long time ago and values have, of course, risen, but concurrently so has council expenditure and probably we should arrive at something of the same kind of proportion now. Then, under the L.C.C. Bill which was introduced, a 2s. site value rate was proposed, to yield £3 million and take Is. off the rates. I wonder whether, to get 1s. off the rates, it is really worth while to go through all the complicated trouble which would be involved in levying a rate on land values.
My Lords, may I interrupt the noble Lord for a moment? A lot of the arguments which he has been producing against site value rating are, if I may say so, rather old-fashioned ones. I wonder whether he has had a look at the Whitstable Survey. It seems to me that if he had he would not use some of the arguments or put forward some of the propositions which he has put forward.
§ LORD LEATHERLAND
Site value rating is of course an old-fashioned policy—one of those doctrinaire, 19th century Liberal policies and, of course, the arguments and answers must be old-fashioned. I have looked at Whitstable, but if the noble Lord wants me to take an experiment made in a little town of 20,000 people and use that as the criterion for imposing this policy on Birmingham or Manchester, I am afraid I must tell him that I am not quite so naive as that.
There were some surprising disclosures in the Whitstable Report of huge taxation that would have fallen on golf courses, open spaces and other such places. No, Whitstable cannot be taken—much as one values the experiment which was made there—as a fair criterion upon which to judge this whole question of site value rating.
Regarding site value rating and its introduction or otherwise, I think one thing which is essential is our ability to feel that it is something which is stable. It is Liberal policy. We know it is put forward officially as Liberal policy and so I have to ask myself, "Can we rely on the Liberals?" They would certainly help a Labour Government to introduce 159 this kind of scheme. But I think that they would be just as likely to help a Conservative Government to kill it in the following year. The Liberal record on this matter is not one of complete reliability. Back in the 1890s, when a Liberal Government were in power, the whole fiscal world was being shaken by propaganda in favour of the taxation of land policy. We had Henry George's Progress and Poverty in 1894. A Liberal Government was in office, and the whole political world had been steeped in propaganda from this valuable report. That Liberal Government did nothing whatever about it.
In 1908, the Liberal Government in power introduced a land values Rating Bill for Scotland. Your Lordships' House rejected it in the first year; your Lordships' House diluted it in two respects in the second year. Were the Liberal Government of that day so keen on introducing this pioneering policy that they pushed it ahead to the Statute Book? No, they abandoned it. It is true that in 1909 they got busy in a constructive way again, and we had the famous Land Budget. That was for raising revenue on a national Exchequer basis. The councils had thought, as a result of the propaganda of the intervening years, that this would be a partial source of revenue to them, and they protested when the Chancellor said that all the money would go to the Exchequer. "All right!" said the Chancellor in the Liberal Government of those days, "One half of this shall go to the local authorities." In the following year the Chancellor of the Exchequer in that Liberal Government "ratted" on his promise and double-crossed the councillors, and they again were angry for the second year in succession. I am just trying to test the reliability of the Liberals as allies in this great reform.
It did get on to the Statute Book, and your Lordships will remember the to-do there was in your Lordships' House about this whole matter. In 1910 they started to carry out the valuation, and they continued the valuation in 1911. They continued it in 1912. They continued it in 1913. They continued it in 1914, and then, of course, some of us had to go elsewhere. But they returned to the valuation in 1919, and continued it in 1920, and it still was not finished. When 160 we are asked to deal here with a matter which demands urgent attention, I am afraid, my Lords, that I cannot go with the Liberals in supporting a policy that would take eight years at least to get to the starting post, let alone the winning post.
That, of course, was not the end of this great reform. In 1920 the whole scheme was repealed, lock, stock and barrel. By whom? By a certain Mr. Lloyd George—one of the emblems of the Liberal Party in those days. That does not make for Liberal reliability as an ally. What Mr. Lloyd George had to do then was not only to strike the whole measure off the Statute Book, but to say, "Some of you taxpayers have been making payments on account. You can have all those payments refunded to you if you care to make application." In 1932 we had Lord Snowden's land taxation effort suspended, and at that time the Liberals, both the Samuelites and the Simonites, were in the Government. In 1953 we had the Uthwatt betterment scheme killed. There were National Liberals in the Government then, although the more virtuous Liberals, I agree, had moved out. And I think that if the Labour Government at this moment were to say they would put site-value rating on the Statute Book, the Liberals might turn the Government out and put a Tory Government in, and the whole thing would be repealed again. So I have no confidence in the stability of site values as an important factor in rating.
Of course, we have to bear in mind that since those days fresh legislation has been introduced to deal with what, in practical language, we will call unearned increment; the capital gains tax and the corporation tax, both of which will catch the land owner and property owner; income tax, surtax and death duties on what is called euphemistically "a far more realistic scale" than ever it was in those far-off days. I think that the only proper policy for dealing with this land question is the policy that is being prepared by the Government, that of publicly purchasing urban land which receives planning permission for building. I think that that is the fairest way all round. If we were to discuss the question of site values in an academic vacuum, which is a much different place from your Lordships' House, I should not mind giving some support to this theory, but I am afraid 161 that, as a practical policy for dealing with a situation which requires an urgent and stable remedy, I cannot give it my backing. Valuation would take at least five years, and in that time the rates would have risen by 50 per cent., if they go on rising at the present rate. And we know that there is a shortage of valuers throughout the realm of local government. So I say that we come down to the question of a drastic overhaul of the system.
In deference to the request of the noble Lord, Lord Hastings, I shall pass over a page of my notes, headed, "Tories' bad record" (we can take that as read) and come to the general rating situation. Rates come to about £1,000 million a year, with grants from the Government of another £1,000 million a year, and these rates are rising at the rate of 10 per cent. a year. A figure of 8 per cent. has been quoted, but 8 per cent., with compound interest, makes 10 per cent., so that the two are not very different.
Once upon a time—though I do not want to start with Queen Elizabeth I—the rating system was a fairly equitable one. The rich man paid rates on his castle, and the poor man at his gate did not pay. The rich man paid not only on his habitation, but also on his movable property, and even on his cattle. In those days, it was a fairly fair form of taxation; but to-day, as other speakers have said, it is a regressive tax. The smaller a man's income, the bigger the share of that income that has to be paid in rates. The figures have been quoted. If your income is under £6 per week, you pay 8 per cent. of it in rates: if it is from £6 to £10, you pay 6 per cent. in rates; if it is over £1,500 a year, you pay 2 per cent. of it in rates, and if it is over £5,000 a year, you pay 1 per cent. That would be bad enough, if rates were staying static; but they are not: they are going up every year. So that the injustice will become greater year after year.
I do not question that most people in reasonably comfortable circumstances can comfortably meet their rate bills. I think that there has been far too much hysteria over this subject in various places. But even those people who can meet their bills comfortably are going to have to meet heavier charges year after year; and the poorer people, pensioners 162 and young married couples, are bound to find a great deal of difficulty, because rates are increasing at three times the figure which we have recently established as the national norm of 3½ per cent. So that we have to do two things.
First, we have to dam this flood of rising rates and then try to roll it back for all classes of the community. Secondly, we need a special, separate scheme of relief for people with small incomes. My approach to the first scheme for the community as a whole is the approach I made ten years ago, when the Rating and Valuation Association did me the honour of asking me to present a paper at their Annual Conference. I took the line then, and I take it now, that many of the services which local authorities are asked to administer are not really local services but national services, and therefore a larger proportion of the cost should be met out of the National Exchequer.
May I quote a few examples? A quarter of the cost of Civil Defence has to be paid out of local rating. Is Civil Defence not an essential part of the national defence system? As a local ratepayer in Essex, I was not asked to pay the cost of the Essex Regiment or of the Hornchurch aerodrome. Why should not the National Exchequer bear the cost of Civil Defence? A case can be made out for Civil Defence as a really valuable service. I know that there are other views, but the next war could be won or lost in the first 24 hours, in accordance with the stiffness of the morale of the civil population. Then there is the Mental Health Service, which the Government have recently unloaded from the national Hospital Service, payable by the Exchequer, to the local authorities, paid partly out of rates. Then there is the Fire Brigade service, which in many ways is a local service but also has a built-in war-time potential, because it is the foundation on which would be expanded the whole of our war-time fire-fighting organisation. The fire brigade is something like a soldier serving a period on reserve, carrying on with his civil occupation but ready to be mobilised at a moment's notice in the event of an emergency.
Finally, there is education. There is a very complicated formula by which grants are paid by the Exchequer to local 163 authorities for education, but the contribution comes down to something just over 60 per cent. The cost of education is still growing. The wonderful changes which have taken place since the 1944 Act are only half completed, apart from any further changes that may be superimposed upon that scheme in the next few years. We want more schools and more teachers, and the teachers are just awaiting a big pay rise. So the cost of education is going to be advanced in the coming years. I should like to see the Government grant of just over 60 per cent. increased to 80 per cent. Otherwise, the ratepayer is going to be submerged by this ever-rising tide of educational expenditure.
I know that education is not a service which some people would like to see completely in the hands of the State—I should not like to see that myself. But if people put forward the argument that if we want Whitehall to pay the piper, then Whitehall is going to call the tune, I would retort by saying that Whitehall already calls the tune down to almost the smallest particular. Education is really a national service. We do not have our schools and our teachers so that little boys in Oswaldtwistle can be cleverer than the little boys in Heckmondwike. We have education because we know that we have to raise the intellectual standard and the standard of manual dexterity of our people up to, or above, that of our rivals in the international market. Whether we are faced with war or with peace in the future, we have to make sure that we get every ounce of brain-power out of our children.
It may well be that the Government will feel that any rating relief should be restricted to householders and should not be passed on to industry. I have no view on that, except to say that, if they did take that view, I think the machinery could be easily devised. The assessment of each industrial hereditament could be upgraded by a percentage, just as it used to be downgraded by a percentage of 50 per cent. under the old derating scheme. It could be done quite simply.
I turn now briefly to the special relief which I think should be given to people with small incomes. I would free all householders whose income is £10 a week or under. That would cost £80 million a 164 year. And if you freed them from half the rates, it would cost £40 million a year. That is merely 1d. or 2d. on the income tax. Some form of income return would be necessary for that. Then it would have to be decided whether the return of income would be on a householder basis or an a family basis. I know that there are arguments for the family basis, where one family sees the family next door with three sons earning, but I think a family basis would tend to break up the family and to cause trouble, and these sons, daughters and lodgers are already paying a quota towards the cost of these services through the national income tax. The council would then claim the grant from the national Exchequer in respect of any rebates that it had allowed.
One virtue of this is that the help would go to individual deserving cases and would not be distributed among areas. There are some areas which seem to demand some assistance, but there are a lot of well-to-do people in each of these areas who do not deserve it. This would throw an extra burden on the Exchequer, and I said previously that the money would have to come from somewhere. That would be a much fairer incidence, in any case. But it need not lead to an increase in the income tax poundage, because national production is going up, wages are going up, salaries are going up and profits are going up. So the yield of each penny on the income tax is increasing year by year, and it may well be that the yield would meet the needs.
One must look at some of the other alternative proposals for raising the revenue on a local basis, because much has been said about this. There is the entertainment tax, which it is suggested should be given to the locality. But entertainment tax does not count any more. There are lotteries. Well, private enterprise has scooped the pool in regard to lotteries. There is a local sales tax. We have seen this on the Continent. It would need an enormous administrative machine, and the fact would be that if in my town there were a sales tax of 3d. in the pound, and in the next town a sales tax of only 1d. in the pound, the housewives would trek from my town to the next town to do their shopping, and we should soon get into the ridiculous position of wanting passports for Pimlico and 165 Customs examinations in Petticoat Lane. So I think we have to abandon the sales tax.
There is much to be said for making agriculture—I mean the agricultural part of the farm holding—liable for rating. At the moment, as we know, it is free. At the same time, because it is free, a big burden is cast on the ratepayers of many rural areas. But I should not like to reduce by one penny the assistance the farmers get from the public purse. They certainly need the subsidy in order to preserve a prosperous countryside, and in order to help our balance of payments. But subsidies should come from the national Exchequer, and not from any small local council in whose area these farmlands fortuitously happen to be situated.
Another suggestion that has been made is that the road fund licences should be taken over by the local authorities. There is a lot of misunderstanding about this. People talk in terms of £800 million or £1,000 million a year. But most of that money comes from the petrol tax, and the amount coming from the road fund licences is about £234 million a year. I should not mind that being doubled, because the people who can afford a car can usually afford a little more taxation. And I should like to see this doubled amount of £468 million handed over to the local authorities. This would meet many of their problems.
But if this were adopted by the Government, it would mean that the collection would have to be done on a national basis. If it were done on a purely local basis, it would be unfair. Hertfordshire, for instance, used to (I do not know whether they still do) collect the whole £200,000 licence fee paid by the London Midland and Scottish section of British Railways. Then there are vehicles licensed in Glasgow that come down to London every night. They travel for about three miles over the roads of Glasgow, and then for hundreds of miles over the roads of intervening counties. This would be a legitimate tax to transfere to local authorities, because these vehicles use their roads, but I think it would have to be collected on a national basis and redistributed to the local authorities.
166 I do not know whether it is necessary to say anything about local income tax. I think that idea has already been exploded. The essential point is: is the tax to be levied at the place where a man lives, or is it to be levied where he works? If it is to be levied where the man lives, let us visualise Eastbourne, where Sir John Ellerman lives. Eastbourne would need only 1/100th part of a penny in the pound of local income tax, white the poor dockers of West Ham would have to put up with a local income tax rate of 1s. in the pound. I know that the local income tax suggestion has been modified recently by the suggestion that it should apply only to wages and salaries. That would be most unfair if the richer section of the population were to escape and the poorer section of the population had to pay. I think the simpler way, if one believes in the equity of income tax for local authorities, is to put an extra few pence on the national income tax and then share it out among the authorities in accordance with some predetermined formula. It may not be necessary to increase the tax poundage, because national productivity is rising and the yield of 1d. on the income tax should be able to take care of it.
There are a few other things that I should have liked to say, but I will not do so, because your Lordships have been so generous. To sum up, I would say that our local services are so valuable that they must be preserved and must be improved. The money has to be found somewhere, and it is not being found at the present time in the fairest way. I think we have to face this question of a radical reform and raise more of the money nationally; and I dismiss site value and the local income tax as taking far too long to put into operation. I think any changes that come must shift the incidence of this taxation in the direction of that section of the community which has the greater ability to pay.
§ 5.38 p.m.
§ LORD DOUGLAS OF BARLOCH
My Lords, I had not intended to intervene in this debate, but I am provoked to do so by some of the observations made by my noble friend Lord Leatherland. He has had an opportunity to make a few observations about the Liberal Party, and it is not part of my duty to defend them. On the other hand, I think it is right 167 that somebody should say that, quite apart from the views which may be held by the Liberals, there is a case for the rating of site values, something that a great many members of the Labour Party have recognised in the past and have done a great deal to promote.
My noble friend referred to the London County Council, which went to the length of promoting a Bill for this purpose in 1938 or 1939, and I had a good deal to do with that matter. It is true, as my noble friend said, that the London County Council gave a tentative estimate of what the produce of a rate of 2s. in the pound on annual site value might be. But that was made with express reservations that it was based upon some assumptions which quite clearly made it a great deal less than the probable figure: that it was erring on the side of caution, which I think was quite a proper attitude for the Council to take. But, even so, we concluded that this was a means of giving relief to the ratepayers of London. Since then, of course, quite recently an admirable experiment has been carried out by the Rating and Valuation Association in making a valuation of the site value of Whitstable, a small town, I agree, but still having many typical features in it.
The result of that investigation was quite remarkable. It showed that a rate of very little more than was at present being levied upon the composite value of the land and buildings would have raised from site value sufficient to pay the whole of the local rates. But what is even more interesting is that the experiment also showed that there would be quite a considerable shift in the incidence of rating. Site-value rating would relieve the occupiers of the smaller houses; it would not put any undue burden upon the occupiers of a few of the larger houses, but would bring in a substantial contribution from the central business and shopping area of the town. All this showed quite clearly that there was a very large reserve of rateable value there which was not being tapped at all by the present system of rating.
I know that the result of this exercise has been criticised on the ground that the golf courses were valued, and that some of them would have been called upon to pay a substantial increase in rates. But, after all, suppose that the 168 owner of a private golf course chose to cease to use it for that purpose and to get planning permission to use it for some other development, the present system of rating certainly would not have any influence upon that decision. If you have a proper system of town planing by which you control the development effectively, then you can prevent an undesirable development from taking place. That is the simple answer to that problem, and it is not at all a difficult one.
I think that I ought also to refer to the Report of the Simes Committee. I was a member of that Committee, and so far as the figures which were put forward by the majority of the Committee as to the possible yield of a rate upon site value were concerned, I would say, with all respect to my colleagues who sat upon that Committee, and who put this forward, that that was a pure effort of imagination. It had no relationship whatsoever to any actual data of any kind, and it is perfectly clear that the experiment carried out by the Rating and Valuation Association at Whitstable has completely falsified any suggestion of the kind made by the majority of the members of the Simes Committee as to the possible yield of a rate upon site values.
It is admitted that this subject is of considerable importance, and it is one of the results which has been thrown up by the statistics collected by the Allen Committee. But it was, of course, something that was well known before. Nobody required a Committee to be appointed in order to ascertain the fact that rates, as levied under the present system, are a regressive tax which falls most heavily on those who are least able to bear it. That fact has been obvious ever since anybody began to think about this subject. Rates are a very important element in taxation, and an essential element so long as we are going to have a system of local government which is to have some degree of local finance and some degree of local responsibility for what it does. You cannot divorce the responsibility for administration from the responsibility for collecting the public revenue which pays for it, without having quite disastrous results, either in a complete irresponsibility of mind as to public expenditure, or, as an alternative, a complete central control of the activities of 169 local authorities. Those are the choices. The more central funds are brought in as a subsidy for local expenditure, the greater, of course, will be the central control.
For my part, I value the independence and autonomy of local government, and I think that it ought to be preserved. I agree that there are services which have a national element in them, such as education, towards which the Central Government should make a large contribution. But even in education it is still a principle of our administration that local authorities have a degree of freedom and initiative with regard to educational matters, and that the whole direction of education is not prescribed by the Central Government; and I hope that that will long continue to be the case.
To come back to another element in the subject matter of this Motion, local rating has a considerable bearing upon the question of housing. First of all, as I have said, it is a regressive tax, which falls more heavily upon those who are least able to pay, and therefore it has an extremely detrimental effect in causing people to stint their expenditure upon something which is a basic necessity of life. It ought to be our object, so far as possible, to try to free basic necessities of life from taxation, and our present rating system imposes a considerable tax upon housing accommodation, and therefore upon, not an amenity, but a necessity of human existence. On that account, it is desirable that our system of local taxation should be amended so as to eliminate the structural value of the house out of rating altogether, and to let the burden be imposed upon site value.
It also has a very important bearing upon the whole question of building and the availability of land for building. There is not the slightest doubt—and I think everybody here knows it very well—that the price of land has been increasing by leaps and bounds during the last twenty years, and has reached really fantastic levels. It has reached such figures that, if we had been told twenty years ago that they would be reached, none of us would have believed it. It may be said that something can 170 be done about this by means of some kind of betterment charge, either an express one or as an incident of some other system of taxation, such as the capital gains tax. But no taxation of that kind has any effect at all in the first place upon the value which has already accrued and which as a pure site value is being created and maintained by the labour and activity of the whole community—not by its owner, who is drawing revenue from it, but by the work of the community as it exists at the present moment. To say that any attempt to collect public revenue from site values should be confined entirely to some increase of value which takes place in the future and that all this past accretion which, as I say, owes its existence to what is being done from day to day should entirely escape, seems to me to be a completely illogical and strange proposition.
It has also been said by my noble friend Lord Leatherland that this is a proposal which is only suited to primitive and pioneering communities. I wonder whether he classes in that category places like Sydney, Brisbane, and so on, with populations of over a million people who are deriving their revenue from this source with great ease and without any of the difficulties which are currently prognosticated with regard to this matter. On that point, incidentally, may I remind the House that in the Whitstable experiment it was discovered that it was a great deal easier to value the site value then to make the valuations under the present system of rating, and that it could be done both more accurately and more expeditiously? I therefore reject entirely the suggestion that this is a system which would take years and years to carry out and present great practical difficulties. That is far from being the case. It is true as an historical fact that the complex system of taxation which was introduced by Mr. Lloyd George (as he then was) in 1909 did prove to be complex and unworkable. This was merely a demonstration that he knew nothing at all about the subject which he was trying to handle, and this he acknowledged with great frankness. I remember being in the other Chamber at a time when he made the confession that he had made a great many errors in this, and he advised anybody who did it in the future to avoid the errors which he had made.
171 Let the Liberals, if they like to do so, go back into that ancient history. So far as the practical politics of the rating of site value are concerned, there is the amplest evidence from many parts of the world, not only Australia and New Zealand but Denmark and other places, that it is simple and practicable; that it helps in the ordinary business of life, both by stabilising land values and reducing them to a reasonable level if there has been a speculative increase; that it affords a standard when public purchase of land is contemplated as to the price which ought to be paid, and that it is entirely compatible with a reasonable and effective system of town planning.
§ LORD AIREDALE
My Lords, perhaps I might be permitted to intervene with a single sentence. It is of course a matter of great encouragement to the noble Lords on these Benches to find that the noble Lord, Lord Leatherland, evidently finds the Liberal Party of to-day so formidable that he thought it necessary to attack us with that colossal battering ram, raking up all these wicked things we are supposed to have done, even going back to 1890.
§ LORD LEATHERLAND
Not wicked—I would never accuse the Liberal Party of being wicked, merely mistaken.
§ 5.55 p.m.
§ LORD STRANGE
My Lords, I promise to be brief, and I want to say something that has not been said before. During my lifetime, speaking as one who sits on the Cross Benches, my noble friends in the Conservative Party, my noble friends in the Liberal Party and my noble friends in the present Government have been in power and I believe they have all been perfectly genuine about housing. They have all said that it needs vision and planning; but in point of fact no vision and no planning has come from any of them because it is a matter of slapping mud against the bursting dam. The problems are always so urgent that every Government has to try to find the mud to put against the bursting dam in some way or other.
The noble Lord, Lord Cohen of Brighton, in his excellent speech brought out a whole lot of pressing problems which have been referred to by other noble Lords and which require immediate 172 attention, but the point is that housing is bigger than all that. Housing is one of the greatest problems in this country to-day and it depends on factors which are very difficult to consider in every aspect. We live in an inflation spiral and our population is always rising.
Louis Quattorze appointed a Minister—I think we should describe him to-day as a civil servant—a Monsieur Colbert, who was told to lay down the planning for the oak forests of France for naval timber. He worked hard and laid down the plan. That plan went through the French Revolution and all the other difficulties in France, and it is still carried out to-day. It has produced in France the foremost oak forests in the world, the best run forests and the best timber. That was a plan which has continued through all the successive Governments and changes and revolutions, and this is what we want in this country to-day—a plan above Party politics. We want a national plan for the future, taking into consideration that our population must rise, that our inflation of money must rise and also that we must preserve the green countryside of which we are so proud, and must preserve the beaches. That, I would beg to suggest, is above Party politics. But where Party politics come in is in slapping mud against the bursting dam, which many Parties have done successfully.
§ 5.59 p.m.
§ LORD MITCHISON
My Lords, may I begin by thanking my noble friend, Lord Cohen of Brighton, for what was really a remarkable maiden speech? It was remarkable not only in its content and delivery, but because of the fact that it was based on an experience closely coinciding with the subjects that we have been considering to-day. I have rarely heard anybody put an experienced point of view with such simplicity, with such conviction, and with such clarity.
May I also thank, on behalf of all of us, the noble Lord, Lord Wade, not because I always agree with him—I usually do not—but because he gave us the opportunity to-day of talking about things which are very much the concern of both Houses of Parliament, particularly so, perhaps, at the present moment. For that I think we ought to be grateful, and I am sure your Lordships will share my own 173 feeling that this has been a good and interesting debate over a wide range of subjects. It has been backed by a great deal of experience—and perhaps here I may be allowed to be a little more "Party", and say particularly on these Benches. We have certainly had some noble Lords here to-clay speaking from a lifetime's practical knowledge of these matters.
What we are asked to consider is the need for imaginative and realistic policies with regard to housing, rating and land acquisition. I begin by taking issue with the noble Lord, Lord Hastings. You cannot in these matters neglect the past. You cannot suppose that you are starting to paint your picture on a clean canvas or to draw the future where there is no past and, apparently, hardly any present. The noble Lord, Lord Hastings, is simply interested in what the Government is going to do about this, that or the other. If the answer to these questions is even to be tempered with intelligence surely the present state of affairs must be considered. If, indeed, there is such a need, and I believe there is at the moment, from what does it arise? If you neglect the origins of the disease and the cause of it, what chance do you stand of finding the right cure?
I get a little tired of noble Lords on the Benches opposite and other people one meets in private life who simply think that the Labour Government had an opportunity when they came hack to office of starting this time with a clean sheet, with liberty to draw the picture as they would. What we inherited was a muddle which I should like to characterise with a few simple epithets if Parliamentary decencies permitted me to do so—a muddle not only in our financial position at home and abroad but a muddle, too, in the commitments which the previous Government had embarked on just before the Election, commitments many of which, as we have been told by the Chancellor of the Exchequer, had reached a state which made it impossible for us to back out of them. It was in that state of affairs that we came back and had to consider the urgent matters first.
We had to consider what is called in this Motion the realistic side of the matter. I quite agree that realistic is the right word. We have done a good deal and I 174 want to point out one or two things about housing. After all, housing is not just a matter of building houses, and it certainly is not a matter of seeing how many houses you can build in a year or even how many sound houses you can build in a year. No doubt these are all excellent things. But one of the first things is to see you put the houses in the right places and if you want the right places you have got to know where industry is to go. Housing must therefore play its part in the national economic plan.
There was no such thing under the Tory Government. We have had to start it, and of course it is a colossal job. I do not know whether we shall be lucky enough to do it perfectly—I think it improbable—but every step towards it is surely a step in the right direction. Things like the Control of Office and Industrial Development Bill and so on were merely matters to stop the obvious bad places. And when we are dealing with the question of housing a vital matter that we are trying to deal with is large movements of population which, as we can foresee, are going to cause serious trouble in these crowded islands unless we do something to regulate them, not necessarily by controls—there may be other methods. But they cannot be left completely unchecked.
We all know now that the drift to the South-East corner of England and the continuous growth of Greater London raises national questions, not for the first time but on a scale which we have never had to consider before. While it is perfectly true that as a result London itself presents perhaps the greatest amalgamation of housing problems, there are equally housing problems connected with the growth which we require to see and hope to see in other parts of England and in Scotland, too. That is the background which we have to consider today. The previous Government did not bother about those things. They had, so far as I can see, no housing policy except to build as many houses as possible in the year.
§ LORD HASTINGS
My Lords, I really must tell the noble Lord he is speaking complete and utter nonsense. What about all the regional surveys on which the noble Lord is now basing his Government's policy and tying them together to make what he calls a national plan? The work is already done for him.
§ LORD MITCHISON
I am very glad to hear it. It is news to me and it must be to many other people. No doubt regional surveys were right, but what action was taken over thirteen years about the drift of population to London and the South-East? When were those surveys made? Towards the end of thirteen years of office. What was done about them? Necessarily perhaps, nothing. And I repeat what the noble Lord is pleased to call arrant nonsense and what I believe to be the truth, that the Tory Government had no policy except to build more houses; and even that they were uncertain about. The result was that to start with they built a great many houses of the wrong kind.
My noble friend, Lord Cohen of Brighton, pointed out to-day that, taking Brighton as an instance, houses provided by building society mortgage were not much use to anyone earning less than £20 a week, say £1,000 a year. The result is that the building societies in fact have been doing very useful work—I should be the last to say they had not—but they have been catering for a limited group in the community; and, of course, above that pay scale there is a further group of people who are really well off and can manage to get their own houses built, and that is that. Numerically they are a much smaller group. But the group that suffered under the previous Government and in respect of whom an imaginative and realistic policy is needed is the ordinary man getting the ordinary pay packet, perhaps not so skilled and not earning the £20 a week which in that particular instance would be required if he was going to meet the building society's requirements. It is for that reason, and because that group of people has not been adequately dealt with, that the first emphasis in this matter of allotting houses, if you like to put it like that, must fall on the people who need to rent a council house.
I think this matter was very well illustrated by what the noble Lord, Lord Hastings, himself said. I took down the phrase at the time. It was said with firm conviction that the real key question was the building of the maximum number of houses without overloading the industry or overstraining the economy. That is one side of the matter. But the next question is, which houses, for whom where, and at what rent? I would supple- 176 ment it and say, such houses as are required by the wage groups in the community who need houses at the moment, in places where they need them; and that, of course, is a question of industrial planning. And, further than that—and here I agree with the noble Baroness, Lady Elliot of Harwood—they must be good houses.
While agreeing with her, I must say that in my own experience of the houses in a New Town in my constituency, they were very good houses until the period when the Tory Government came in, and then, for some reason or another, the houses got rather worse. If this was a unique experience I would not have mentioned it, but in fact the standards of housing, the standards of size, the standards of building, the amount of terracing and so on, were lowered and lowered under Tory Governments. Therefore, I agree that you do want good houses and sound houses; and it is true to add that if you look at the work of the building societies and at the type of house upon which they have advanced money you will find that they see that their money is secure and have regard to the general soundness and stability of the house. It may not go very far. It may not be a substitute for what I think is also needed. and that is a careful consideration of the relations between the tenant and the owner of the house, whether it be a public or a private body. I feel no doubt that that falls to be considered.
We are asked about an imaginative and realistic policy. I listened to Lord Wade's views on housing, and if he will excuse my saying so, I did not find anything particularly imaginative in what he had to say on this matter. We all agree, I think, that building societies have an important role to play. My right honourable friend the Minister of Housing and Local Government has said so repeatedly, and my right honourable friend the Prime Minister, as was pointed out during the course of the debate, has promised to see that in respect of any concessionary rates of interest (if I may use that rather untidy phrase) building societies will get a fair part. All that is perfectly true. But since we were left with a terrible deficiency in council houses, owing to the cutting of public 177 house-building year after year by successive Tory Governments, the main point is, and must be, to get the council housing started.
§ LORD HASTINGS
My Lords, I am sorry to interrupt the noble Lord, but figures of this kind are always being trotted out. In fact, the Tory Government, in their first seven years in office, built more local authority houses than had ever been built by the Socialists. It was only in the last six years that the numbers fell, although not by so many as all that. Meanwhile, there was an enormous increase in private enterprise housing, from about 20,000 to 200,000.
§ LORD MITCHISON
The plain fact of the matter is that when one looks at the position now—and I am really not particularly concerned whether it has arisen over seven or fourteen years—one finds that the real shortage all over the country is in council houses to rent at a figure which the ordinary working folk can afford. This is the need in the towns—the situation is very bad indeed in London, and in other big towns—and it is even the case in the countryside. As for Glasgow housing, if we are going into that, all I would say to noble Lords is: "Go and look at it". It is not that the councils concerned have not tried, but it has consistently been Tory Government policy to encourage private building and to discourage public building. That has happened, and it has had its effect.
The rate of council building some time ago was higher than the rate of private building; but it was reduced to about half that rate. You cannot go on doing that year after year, one way and another—there are various ways of doing it—without having a considerable effect on the housing problem as a whole, and without making far the most urgent part of the problem at present the provision of houses by public authorities for those who wish to rent them at a rent which they can afford. If you continue to drive people, as is happening at present, to buy houses which they cannot afford when they would vastly prefer to rent them, then the effect will be to make their housing expenditure a larger part of their total expenditure than it ought to be, and that will lead to industrial trouble be- 178 cause they cannot meet their housing costs.
§ LORD HASTINGS
My Lords, I am sorry to interrupt again. I entirely accept that the noble Lord and the Government are entitled to alter the balance of building as between private building for owner occupation and local authority building. They have the right to do so. I agree that we need a balanced programme. From what he has said, I take it that his Government favour local authority building, and wish to encourage local authority building and to discourage building for owner occupation.
§ LORD MITCHISON
My Lords, I did not say a word about "discouraging"; nor did I say a word about owner-occupation.
§ LORD MITCHISON
In fact what I said was, and I repeat it, that the effect of the last years at any rate—I think of the whole period—of the Tory Government was to leave as the outstanding gap the provision of council houses to rent at rents which ordinary people could afford. That was the outstanding deficiency, and it is the outstanding deficiency at the present time. Surely that must be clear even to anybody who—
My Lords, the noble Lord is skirting an important policy announcement. I have been waiting to hear when he was coming to it. The noble Lord, Lord Cohen of Brighton, in an admirable speech said there is this gap between the £15-a-week man and the £20-a-week man which is covered by nobody. We all know of this gap. Are the Government going to instruct local authorities that they must put people of that income on their housing lists under their new policy?
§ LORD MITCHISON
Will all respect, that is an entirely different question. What I was saying—I repeat it—is that the present shortage of houses in this country is principally a shortage of council houses available for letting at rents which the 179 ordinary working man can afford to pay. It is as simple as that. If noble Lords are so apprehensive of this simple proposition that they must start to divert it on to others, I come back to it, and I commend it to their attention as citizens of the country which has a certain responsibility towards those workers who, after all, play their part in creating the industrial wealth of the country. They are the people who have suffered under the Tory Government's housing policy, and they are the people who are first entitled to be dealt with under the housing policy of this Government; and that is an imaginative policy; or else the last policy was a most unimaginative one.
My Lords, the noble Lord did not answer me. I am asking him. There is this terrible gap, which we all admit, between the man who can only afford to rent a council house and the man who cannot afford to buy but at the same time is too rich to have a council house. Is the noble Lord going to instruct local authorities to provide rented accommodation for those people which, according to Lord Cohen of Brighton, is not being provided at the moment?
§ LORD MITCHISON
With great respect to the noble Lord, I told him once and I will tell him again. I am making one point, and if he cannot understand it, I will repeat it again; and as to his point, which I perfectly understand, I will, if I may, deal with it later on in my speech. But for the moment I want him to understand, as I want other noble Lords to understand—and I think they do and that we all are agreed—that the real gap in housing in this country at the present is in respect of council houses to let for ordinary workers at rents which they can afford out of a pay packet that does not amount to £20 a week or thereabouts—that is the figure which the noble Lord, Lord Cohen of Brighton mentioned.
Turning from that I was asked about "starts" and progress during the current year. The April figures for "starts" are not available. The figures for January to March—that is, the quarterly figures—show that the public authorities in 1964 (I am giving only rough figures) started 45,500 houses, and in January to March this year about 40,500 houses. In 180 January to March, 1964, private builders started 54,600 or thereabouts, and in January to March, 1965, 56,600 or thereabouts. Consequently, the totals were 100,000-odd in the first quarter of 1964. and 97,000-odd in the same period of 1965.
I should add to that, that the 1965 figures have been improving—indeed, the March figures actually were better; they were far higher than in 1964. But one has to be careful with these figures month by month. They are quite easily put out by accidents of one kind or another—the weather, for example. But, broadly speaking, the situation is improving, and though the April figures are not available, there is reason to suppose that they will continue to show an improvement. All this talk—because there has been talk about building being held up, and starting being held up and so on—is really entirely unsupported by the figures. The completion figures are similar. Actually, they are a little better; but it is much the same thing.
I was asked by the noble Lord, Lord Wade, about industrialised housing, and, very rightly, he put considerable emphasis on the importance of methods of building. One or two noble Lords made some rather caustic remarks about the building trade at the present time. However that may be, we can all agree that there is room for improvement in the use of what is commonly called industrialised housing. On April 1 last my right honourable friend the Minister of Housing and Local Government sent out a general circular about housing programmes and covering a good deal of ground. After an introductory sentence, the next sentence said thatlocal authorities will need to make increasing use of industrialised methods of building".The Minister went on to refer to the National Building Agency which has been set up to help authorities in matters of this kind, and the second purpose of the circular was to draw attention to their services which are set out in some detail. This matter has been followed up, and has had a successful start; it is well in the forefront of what we intend to do. I am in agreement with the noble Lord, Lord Wade, on this matter and can assure him that it is being emphasised.
Many of these matters must, of course, to a considerable extent, be left to the 181 housing authorities themselves. One can exhort them and urge them to deal with questions such as the type of buildings they use and also advise them on the questions which they put to tenants, but these are really matters for the local authorities themselves and are not matters which my right honourable friend the Minister has shown any desire to interfere with at all.
I was asked about consortia in housing matters, and would say that this also is going very well. Some local authorities are of course not in a position to give a fairly large contractor a continuous job and it is an advantage for them to combine in a consortium, which in many instances is a far better unit to deal with these matters. There is some reason to hope that in a year or two authorities which are responsible for about two-thirds of local authority houses will be in consortia of one kind or another. Some of the existing consortia are already placing large contracts.
The import surcharge, about which I was also questioned, is not in practice a very important matter. It affects principally manufactured or finished timber, and it has been thought that the surcharge would add less than 1 per cent. to the cost of the average three-bed-roomed house. That was the calculation on a 15 per cent. surcharge; since then the figure has been reduced to 10 per cent.
I was also asked by the noble Lord, Lord Hastings, about the Working Party on building research and information services. That body was concerned not only with housing but also with other kinds of building. I should like to consult the Minister of Public Building and Works on that matter, which falls to his Department rather than being solely a housing matter, and I will write to the noble Lord, Lord Hastings, about it.
I was then told that the builders had said that things were going very badly, and reference was made to a questionnaire from the National Federation of Registered House Builders. This was one of those questionnaires which put questions in such a form that they invite a particular answer. Members of the Federation were asked, for instance, by how much they planned to reduce output compared with output anticipated at the beginning of the year, rather than that 182 they should compare output in the preceding year. That was not a very good way of getting the best information.
A better questionnaire was sent out by my right honourable friend the Minister of Public Building and Works to a much larger number of contractors—about 6,000, as against the 600 to which the Federation circular went. That produced replies suggesting that private house building activities this year would be at much the same level as they were last year, when they started 247,000 houses. I think that that is the present position and it is borne out by the starting figures so far as they go. Therefore, I am sure noble Lords will deplore the stories which are appearing in certain parts of the Press about building coming to a stop, going into disorder, and so on. The real position is that the housing programme is still well under way.
There have been some alterations, the most important being the matter of industrialised building, to which the noble Lord, Lord Wade, referred, and the use of the National Building Agency. I entirely agree with those noble Lords who indicated that we must remember the limits of the building force of this country. It is equally true to say that even when builders are doing similar kinds of work they also have to build schools, hospitals, and so on. However much importance one attaches to housing, nobody would deny that more schools and more hospitals are two needs of this country which are certainly as urgent as the provision of houses. I entirely agree with what was said by the noble Baroness, Lady Elliot of Harwood, when she emphasised the urgency of the housing programme, but one must not allow it to overwhelm the urgent need for schools and hospitals. Prisons are a less immediately attractive programme, but prison-building is an equally urgent matter.
I hope that I have answered most of the questions, and, with respect to the noble Lord, Lord Hastings, one cannot in a debate of this kind answer every question. The noble Lord has had a good deal of experience and knows that one cannot hope to answer every point. The housing programme depends on taking urgent measures, some of which have already been taken. We have begun by safeguarding the position of people being turned out of their houses, which 183 is just as much a part of the housing programme as actually building the houses themselves. And there is a Bill before another place dealing with the control of rents. That Bill will deal with the private property which caters for the same kind of persons—I am speaking roughly and approximately—as those for whom the council house may cater in the way of public housing.
At the back of all this are the questions of the cost of building with which we have to deal. Confirmation can be found in the reports of the New Towns of the immense importance of factors such as the price of land and the fantastic increases in land prices which have been occurring lately. I should not like to stand at this Box and promise your Lordships that land prices can be dealt with at once, quickly, sufficiently, fully or anything of the sort. All I can say is that the land problem takes two shapes: one is the price of land, and the other is the use for which the land is required.
What has been happening in recent years is this. Land has reached such fantastic prices that local authorities have been unable to carry out not only their housing programmes but their school and hospital programmes and the like. So far as housing is concerned, the increase has of course been reflected in the rents of council houses which have gone up or in the rates which have also gone up, and I believe it is really the largest factor in the present position. The net result is that the people who live in these houses, the people who send their children to these schools or who themselves go to the hospitals in sickness, are having to contribute to the profits of those who own or buy the land and who make a profit out of it due to the activities of the community, a profit to which, so far as I can see, we are all agreed they have no moral title or, at any rate, no complete moral title.
§ LORD NEWTON
My Lords, the noble Lord seems to suggest that local authorities build hospitals. I am sure he did not mean that.
§ LORD MITCHISON
I quite agree and the noble Lord is strictly correct, but of course the point I was making is exactly the same. The land is required for hospitals; it is required for public purposes. 184 It is made more expensive if it is in private ownership and suffers a large increase in value—or for that matter if it is in public ownership and suffers a large increase in value—and it is that increase in value with which I think all Parties at present agree to varying extents we are entitled to deal if we can.
It seems to me that what we shall have to do about the land, and what we have said we are going to do, is to look at tins from the question of getting the land put to proper use where it is required for a particular use, especially public use, as the first and most urgent problem. Obviously, I am not going into the question of the Lands Commission, because there is going to be a Bill and there is going to be a White Paper, and it would be premature and rather absurd to start trying to anticipate them now. But this is connected and closely connected with the housing programme and, of course, closely connected with the rating problem.
Next we must have an imaginative and realistic policy about rates. I hope not to take up much of the time of the House on this, because the matter was so fully, and I thought so clearly, dealt with by my noble friend Lord Leatherland, who has had much experience in these matters.
My Lords, I hope that the noble Lord will not forget his other noble friend, Lord Douglas of Barloch, who dealt very thoroughly with rates, and contradicted a great deal of what the noble Lord, Lord Leatherland, said.
§ LORD MITCHISON
My Lords, I shall certainly be prepared to say a word or two, but I am afraid only a word or two, about the taxation of land values. It was first, I think, investigated and condemned in 1885. I think that is about right. But I would say that, listening to my noble friend Lord Leatherland, I noticed that the arguments he was adducing, which were obviously the arguments of a person particularly experienced in this field, were, broadly speaking, those which led the majority of the Simes Committee to decide against the views of the minority—the minority including my noble friend Lord Douglas of Barloch—and I think we must leave it at that. It is getting rather late to venture into an enormous subject which involves all kinds of questions.
185 I would say only this on Whitstable. I did read the Whitstable Report—I cannot say that I read the whole of it, but I went through it fairly thoroughly—and I came to the conclusion, among other things, that Whitstable was not a very typical place. I think it might be very difficult to find a typical place, and perhaps if anything of this sort were to be investigated it would have to be done in a number of centres. But I did not find it a convincing demonstration of the argument that it was thought to make. I would point out, moreover, that the experiment was made at the time when the 1947 Act was just coming into operation, or when it had just come into operation (the Simes Report was made at that time), and exactly the same thing is happening now. Several authorities, including the Chancellor—and let us leave the Lands Commission out for the moment—are keeping an eye on site values in one form or another, and apart from anything else this would be an impossible time to make a major change in the rating system. Where the valuers are supposed to be to carry it out, I do not know. I have not seen them.
Be all that as it may, let me turn, lastly, to the rating system itself. There was an extremely interesting debate about rates in another place the other day on a Supply Day, and the point to which I should like to direct the attention of noble Lords is this. My right honourable friend the Minister of Housing and Local Government raised a whole number of points and suggestions. It is quite untrue to say that he had made up his mind about any of them. He had not. He was trying to see what effect they had in the House. Obviously, he is also bound to consult the local authorities about them. But he did mention the possibility of special assistance for old people with fixed incomes, and without going into the form of it I would remind your Lordships that, where this assistance has been given in this kind of case, it has sometimes been given by altering the scale of the difference between the gross assessment and the net assessment on which the rates are paid. Then he pointed out, quite rightly, that the legislation that is now being introduced about pensions and National Insurance, and particularly the income guarantee, is going to help a very great many of these cases.
186 My right honourable friend went from that to consider a question which several of your Lordships raised: the possibility of shifting some of the burden of the major services, of which I think the most costly is education, from the rates. In that connection he mentioned the possibility of specific grants for education, and rather definitely foresaw the end of the general grant. The general grant, as your Lordships will remember, had a curious history. It was originally opposed by the Ministry of Education. It was introduced by a Tory Government, and created a great deal of opposition among education authorities; but the Minister of Education of the day was one of the Ministers responsible for it. My right honourable friend also spoke about the London position. This, again, is a rather detailed point, but there is no doubt that rate difficulties are larger in London, and are larger than they would have been if the existing London services had been carried on by larger organisations than the boroughs to which they were transferred by the outgoing Government, at a time too late for us to stop the transfer.
Then my right honourable friend pointed out that an actual transfer of the remaining part of the cost of teachers' salaries—the 40 per cent. or thereabouts—which is still borne out of the rates would really not be sufficient to make an enormous difference. He pointed out, too—and this I should like to emphasise before I sit down—that although people say that the rates have increased, the increases have been trifling in comparison with the increases in a number of other directions. He gave the instance of National Insurance contributions. The rate increases have been far smaller than those in the National Insurance contributions, yet both are a form of taxation, if you like, or quasi-taxation, which goes side by side with the ordinary direct taxes. As I say, the increase has been far larger in the one case than in the other. Actually, during recent years the rate increase, the total burden, has varied one side or the other of 10 per cent., in rather a haphazard way but within very small limits.
Though there is no doubt about the seriousness of the rating problem, let us see what the real ground of seriousness is. The real ground of seriousness is that 187 the cost of local authority services and the cost of the development of those services—for instance, in education—which tire obviously necessary, have been increasing year after year, and the grants have not increased pari passu; and perhaps it would not be a very good thing if they did. It is therefore necessary that something should be done to remove or alleviate the growth in the rate burden. What is wrong with it is that it is an intensely regressive tax. Rates fall hardest on the really poor people; and I doubt, with respect, if any shifting of the form of rates—such as the taxation of site values—would meet that particular difficulty. But, be that as it may, there is no doubt that the difficulty exists; and we are driven to conclude that alternatives must be found, to some extent, to the rate burden, with a view to alleviating the increases in it.
I feel sorry, too, if the rate burden is used as a means of stirring up discontent on one ground which I have often heard adduced, and with which I cordially disagree. People sometimes say that rates are a form of payment for services, and that if you do not get the services you should not pay the rates; or people who have had trouble in some form or another with their local council say that they are not going to pay their rates on that account. That, I think, is an entire misconception. As I see it, rates, nowadays at any rate, are a contribution to public services which must be provided for the community as a whole, and to which the community as a whole must contribute in fair proportion to what it can afford. I do not think they are anything else. If we are asked to be visionary about rates, then I would say that it is not a very easy thing to be visionary about; one can be visionary about housing, one can even be visionary about the land—very visionary about the land—but not so easily about rates. But in this House, after such a good discussion as we have had to-day, I hope we can all feel content that, in difficult circumstances, the Government of the day do at any rate appreciate the seriousness of these problems, and are trying—rightly in their own view, wrongly in the view of the Opposition—to take measures to meet what is required.
§ 6.44 p.m.
§ LORD WADE
My Lords, we have had a very interesting and, I think, constructive debate, and I should like to thank all those who have taken part, particularly the noble Lord, Lord Cohen of Brighton, for his admirable maiden speech. I am sure your Lordships would not expect me to reply in detail to all the points that have been made. The noble Lord, Lord Hastings, kindly replied to my question about Conservative policy. Perhaps he will not mind if I say that it is still not as clear as I should like it to be, and I think I am entitled to ask why it was not introduced before.
With regard to the speech of the noble Lord, Lord Cohen of Brighton, I was interested in his reference to land and to the South-East Study. I do not think you can answer this problem by saying, "Provide more land". The land problem cannot be solved by the law of supply and demand, because the amount of it is limited. I was very interested to hear the noble Lord, Lord Cohen of Brighton, express the view that he did not agree that all urban land should be acquired by a Lands Commission, and I wonder whether that is the official view of his Party. Then, I agree with him that we need more houses to rent. I think there is no doubt about that. The problem is how to produce more houses to rent without actually cutting down on the provision of houses for sale. I agree with the noble Lord, Lord Cohen of Brighton, in his objection to subsidising local authority rents in the case of those who are not really in need. I appreciated his great and expert knowledge on building societies, and perhaps on some other occasion I may discuss with him the proposal in the Economist of which he did not approve.
I am grateful to my noble friend Lord Henley for his very interesting contribution. I agree with him that a tax imposed on sale or on the granting of planning permission will not cheapen the price of land. Whatever our views may be about a betterment charge, we must not expect it to lead to an automatic reduction in the price of land. I must say I agree with my noble friend that a betterment charge would not go far 189 enough. Naturally, I support him in his advocacy of a Land Development Corporation. I think there have been many occasions when local authorities have missed opportunities of comprehensive development owing to lack of finance.
I am grateful also to the noble Baroness, Lady Elliot of Harwood, for her interesting observations on industrialised housing, and particularly her reference to quality. I should like to see five-year guarantees becoming customary when people buy houses. I hope that may come in the future; but it is very difficult for a purchaser to press for a five-year guarantee when he is having great difficulty in finding a house at all.
The noble Lord, Lord Leatherland, gave an interesting discourse on what happened from 1890 onwards, but I think most of his comments were answered by the speech of the noble Lord, Lord Douglas of Barloch. I would just say one thing in reply to the comment of the noble Lord, Lord Leatherland, on the betterment tax which was brought to an end in 1953. I think there is no doubt that many faults were found in the 1947 Act, but what I think was unfortunate was that no new procedure was adopted when the 1947 Act was abolished in 1053. That, I think, was a mistake: nothing was put in its place. I am certainly grateful to the noble Lord, Lord Douglas of Barloch, for his valuable and learned contribution.
May I thank the noble Lord, Lord Mitchison,for replying in such a courteous way? I am grateful to him for the statistical information that he has given. I am still somewhat concerned about those in the lower income range. There 190 are some who would like to buy but cannot find the house they want, and there are others who do not want to buy—they want to rent—but who find that there is a shortage of houses to rent. What I fear is that local authorities may be inclined to cut down their programmes because of high interest rates; and I think something must be done to deal with that. It would be inappropriate at this hour for me to start again on a discussion about the rating of land values, but may I mention that I think I am right in saying—and I believe the noble Lord, Lord Mitchison, mentioned it—that the Simes Committee Report was brought out at a time when the development charge was in existence. I am inclined to the view that that Committee might have reported differently if it had not been for the existence of the development charge. All these problems of housing, of land development and of rating reform are very urgent, and I hope they will be dealt with speedily and not left to some time in the future. Once again thanking those noble Lords who have taken part in the debate, I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.