New Housing Supply

Debate between Clive Betts and Lord Jackson of Peterborough

Tuesday 5th March 2013 Commons Chamber

[Mr Betts]

I thank the Minister for that and we look forward with anticipation to reading what he has to say. We will do so closely, and the Committee might give it further consideration.

The report, which was signed up to by all members of the Committee on a cross-party basis, tried to consider the issues in the longer term. I am pleased to see in the Chamber several members of the Committee, both past and present, whom I hope will be able to catch your eye, Mr Deputy Speaker.

We started off from the basic position that we have not been building enough homes in this country for a long time. The basic requirement is about 250,000 homes a year, based on household formation, plus an increasing number to make up for the backlog of past under-investment. Since the report was published, we have had the figures for housing starts in 2012. There were 115,620 housing completions, up 1% on the previous year, and 98,280 housing starts, an 11% reduction. Therefore, if our recommendations were correct a year ago, they are probably just as correct now.

This is not a short-term problem. The report acknowledges that even at the height of building in the mid-2000s, we were building a maximum of only 170,000 homes a year, which was not sufficient, either. The private house-building industry has never managed to build more than 150,000 homes a year, so the likelihood of being able to rely on it to deliver the extra homes is probably very small indeed.

We also know that historically, the percentage of owner-occupied properties has been falling since about 2002. That represents a change. The number of private rented properties has been rising considerably and is now slightly greater than the number of social rented properties.

We can also see the consequences of the failures over a long period and of the immediate problems of 2008 and beyond, including young people in particular being unable to afford a mortgage and increasing waiting lists for social housing. People with heart-rending stories who ought to be given a house immediately visit our surgeries every week, but they cannot all have priority because there are not enough homes to go round. Rents in the private sector are also rising. I will not say too much about the private rented sector today, because we are in the middle of a further inquiry into it and what we should do. We look forward to having Ministers before us at the end of that inquiry.

While we were conducting the inquiry into new housing supply, the Government produced their housing strategy for England. It contained measures that everyone could support, such as the release of public sector land. It also included the NewBuy scheme, on which we were promised an update after 12 months. I am not sure how much there is to update us on, but the Minister may be able to give us a few figures.

The Committee concluded that we needed a long-term strategy. There is an issue with homes, but there is also the immediate issue of jobs and growth. The National Housing Federation gave us the interesting figures that every affordable home built in this country provides £108,000 in added value to the economy and creates 2.3 jobs. We should bear that in mind. We also concluded that we needed radical changes. Members of the Committee recognised that we needed to be brave and think outside the box in coming to our conclusions.

We made a number of proposals because we recognised that there was no silver bullet, magic solution or switch that could be flicked in Whitehall that would make everything okay the following day.

[Mr Stewart Jackson (Peterborough) (Con)]

Has the hon. Gentleman given any thought to the problem in the planning system of land banking, whereby many approved planning applications remain unactioned? Local authorities have put significant amounts of money into those sites, for example via supplementary planning documents, but they are now idle. Were they to be actioned, it would go some way towards ameliorating the housing shortage.

[Mr Betts]

The hon. Gentleman helpfully anticipates my next point.

The Committee concentrated on funding issues because that was the remit of the report. However, we said in passing, as we did in our report on the national planning policy framework, that we did not believe there was evidence that planning was the obstacle to growth. We accepted the point, which the Local Government Association has made again recently, that there are 400,000 planning permissions for new homes that have not been activated. Getting at those is a major challenge that we should talk about. I do not believe that the measures in the Growth and Infrastructure Bill will deal with that problem, although that did not form part of our report because it has been published since our inquiry. The LGA also says that 87% of all the planning applications made last year were given permission. Planning is therefore not the problem.

There is a potential long-term problem, which I have raised with Housing Ministers on a number of occasions, if local plans become the heart of the planning system, as they ought to be. Many local authorities ought to speed up the process of getting those plans in place, because they are a crucial part of the planning system. The problem is what we should do if the housing numbers in the local plans do not add up to a figure that meets the national housing requirements. I asked the previous Minister for Housing that question on a number of occasions and he never seemed to have an answer.

I congratulate the new planning Minister, the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford (Nick Boles), who came to the Select Committee a couple of weeks ago with Lord Taylor of Goss Moor, who was reviewing the supplementary planning guidance. At the top of their list of issues that were not addressed properly in the supplementary planning guidance was the need for a consistent measure of housing need that could be incorporated into local plans on a consistent basis. That will be a helpful move. It will take time for it to be effective, but there is a recognition that the abolition of regional spatial strategies and the total reliance on local plans has created a disconnect with the national targets.

[Mr Jackson]

The hon. Gentleman is being most generous in giving way. Does he agree that when developers have made a value judgment to bank a portfolio of land because the market is failing, there is no fiscal incentive for them to develop that land? We know about housing need, but the Treasury and others are giving no incentives in terms of supply. Perhaps we should consider tax changes as a catalyst for development.

[Mr Betts]

That is not something the Select Committee looked at. I will pass it over to the Treasury Committee, just as Ministers pass matters over Treasury Ministers.

There is, however, a worse problem in certain areas. I have been advised by Les Sturch, the director of planning at Sheffield council, but this is also happening in other councils. Because of market changes in housing, many developers are saying that although certain sites have—or could get—planning permission because the land is owned for housing in a local plan, they are not developable in economic terms. Local authorities therefore have to revisit their local plans and look for new housing sites in more favourable areas. That is a real problem and will put pressure on green open spaces because developers will say, “These sites are much more attractive to develop in the current climate.” Ministers must address that problem in the planning system, or else Members will be knocking on ministerial doors and saying, “Why do I have to provide lots more housing sites in my constituency when so many sites have not been built on, even though they have planning permission or could get it if developers applied?” That is a longer-term problem.

We recognised that public funding will, of course, be limited for the foreseeable future, so we looked at the private sector and markets to see what was available. There is a long-term problem. Everyone has said that such housing is an obvious form of investment, but sums have traditionally shown that investors believe they can get a 6% return, although they need 8%. There is therefore a gap, and evidence to the Committee suggested that that is why developments have tended not to happen.

However, there is increasing evidence that developments are beginning. The Greater Manchester Pension Fund is working with Greater Manchester council to provide homes, and Aviva pension fund and Derwent Homes are coming forward with schemes. Places for People gave evidence to the Committee.

Communities and Local Government (CSR)

Debate between Clive Betts and Lord Jackson of Peterborough

Thursday 13th January 2011 Westminster Hall

[Mr Betts]

I agree with that. I believe there are statistics to prove it, although other Members might come to a different conclusion when looking at the same statistics. We had a discussion with Ministers about that in our evidence session. I shall come on to that specific point, which is an important one.

Moving on from the spending for the Department at the centre to local government budgets, there will be a 28% reduction in Government grant over the four-year period. I believe that that figure is agreed; I do not think that anyone denies it. Why is local government taking a hit that is much larger than the average reduction in Government spending as a whole? There is a slight feeling that it is because it is easier to give the problem to someone else to deal with rather than dealing with it oneself. Pass it on to local government: it will deal with the difficult job and someone else might be blamed.

[Mr Stewart Jackson (Peterborough) (Con)]

I hear what the hon. Gentleman says. However, given that the right hon. Member for Edinburgh South West (Mr Darling) committed to 20% revenue reductions before the election, and that, as I understand it, the policy of the Opposition is not to ring-fence any particular Government Department, it is clear that local government would have had to take substantial reductions if Labour had been re-elected. The difference is that the reductions have never been quantified by the hon. Member for Sheffield South East (Mr Betts) or any of his colleagues.

[Mr Betts]

I said at the beginning that I do not want to get into a long debate about the overall nature of deficit reduction, apart from saying that the Labour party has a different view about the scale—reducing the deficit by half, not totally eliminating it, over the four-year period—and the pace, which would not have been as great. We would not have started the cuts in this financial year, before the economy had properly started growing. There are differences.

However, I come back to the point that, whatever the average level of cuts across Government, there still has to be a justification as to why spending on local government—the money passed on by central Government to local government—is taking a hit that is much bigger than the average for all Departments. Why is that happening, particularly when local government has a good track record in making efficiency savings? If one looks at government as a whole, it was local government that led the way, even under the previous Government: 2% year-on-year efficiency savings were built into its budgets.

If one looks at the impact of government services as a whole, the services that are provided by local government are some of the most immediate to our constituents. They include services to the disadvantaged and those in need: social services care provision, aids and adaptations. They are about the quality of life: things such as parks, libraries and sports centres. They are about essential provision for daily life from which everyone benefits, whether it be refuse collection, street cleaning, highway maintenance, street lights—the kinds of things that everyone benefits from in terms of the taxes that they pay and the services that they get. Why put those immediate services for most of our constituents at more risk than the average in terms of cuts of Government spending as a whole? The Government must answer that question.

[Mr Betts]

I accept what the Minister says about the different ways in which figures have been presented, and I shall come to that in a second. I am not going to complain about or disagree with how that was done, because it is important to look at spending power, but I come back to the point that I made. If central Government are looking to cut their spending, why have they cut the resources that they pass on to local government by more than the average cut in central Government spending as a whole? That seems a reasonable question, irrespective of the issue of local authorities’ spending power.

The second issue is: why have spending reductions been so front-loaded? Local government has rightly complained about that. There is no doubt at all that there is front-loading: of the 28%, 10% is in the first year and 8% in the second. Local authorities, not just the councillors but the officials, say that the immediacy of the actions they have to take means that decisions will be less well made and there will almost certainly be less opportunity for the transformation of service delivery, which we all agree can make savings without the need for service cuts. It also means that local authorities will be pushed back into the salami-slicing approach, which Ministers say they do not want. I am not making a party political point. Authorities of all political persuasions—Conservative, Liberal Democrat and Labour councillors in the Local Government Association—will all say the same thing: that the pressure of front-loading will lead to a less effective and less efficient use of the available resources.

The front-loading will also mean that authorities have less chance to use natural wastage to save money, and will be forced, to a greater extent, into making compulsory redundancies, which are expensive; the money used to pay people to leave and to enable cuts to be made, could have been used to provide service delivery. We know there is an argument there. In the evidence session, the Secretary of State said he thought that the LGA figure of 140,000 job losses in the next year was wrong, but we never quite got from him what the right figure was. Nevertheless, there will be significant job losses.

The Government believe that £200 million of capitalisation will be sufficient to cover redundancy costs; the LGA says £2 billion. Even if the figure is somewhere in between, local authorities will struggle if redundancy costs are of that scale, because getting rid of people in the first year might not make savings and might actually become a cost. The offer that I think the Secretary of State made, that if he had to provide another £1 billion of capitalisation he would cut the revenue grant by a further £600 million, does not seem to be the best offer that local government has ever had from central Government on such matters. Indeed, I think the rather angry response to the evidence that the Committee received from Baroness Eaton on behalf of the LGA has been circulated. In it she states that her recollection of the discussions with the Secretary of State on capitalisation was slightly different to that of which he had informed the Select Committee. She could not understand why, if local government had to make necessary redundancies and wanted to capitalise that cost further, it would be penalised by the Government’s reducing the revenue grant. It would be helpful to have some comments from the Minister, bearing in mind the LGA’s response.

There is a very big issue here of the speed of the cuts and their front-loading, and the effect of that on local authorities’ ability to digest the cuts into their systems and make sense out of them, as opposed to having to salami-slice at least an element of the cuts and having to pay quite a bit of money out for redundancy costs that would otherwise not have been necessary.

I shall now respond to the Minister’s point about how the announcement was phrased. The Secretary of State obviously tries to get the figures down in his announcements, and I happen to agree that looking at spending power rather than at simply grant allocation is the proper approach. We still should look at the grant that central Government give as opposed to what they are doing to cut spending elsewhere in central Government, but it does matter in the end how much local authorities have to spend. When we look at the figures, however, we see a difference between the 8.9% maximum reduction in spending power that any authority has to face and the 0.1% increase that Dorset has managed to receive.

As my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) mentioned, there is a significant difference in the level of cuts and the reductions in spending power between the most and least deprived authorities. The figures that came out of the Library from the Scrutiny Unit show that the 10% most deprived single unitary authorities lost 8.4% of spending power and the least deprived 10% lost 2.2%. That is a significant difference. We have had a discussion about the Scrutiny Unit’s figures, and those figures clearly show a correlation between authority deprivation levels and how much spending would be cut. I do not think it is fair, but I accept, to a degree, that it is more difficult to protect authorities that have large grants because they are deprived, when grant cuts happen. I accept that the Government have done something, at least at the beginning of the process, with the £85 million transitional money to mitigate the problem, but whether that money will be available later in the spending round remains to be seen.

[Mr Stewart Jackson]

Surely, the hon. Gentleman misses a number of points. One is that he is not looking holistically at the cumulative picture over the past number of years of the grant settlement between local authorities in the south-east of England and those in the north-west and the north-east. Frankly, his Government, when in power, had the opportunity to deal with those issues through, for instance, working neighbourhoods funding, and only very belatedly disaggregated that into super-output areas to tackle the worst cases. They had that opportunity to tackle the underlying problems of social deprivation, but failed to do so.

[Mr Betts]

I do not agree. We can always have discussions and disagreements about the extent to which grant allocations are fair, and I do not think there has ever been a grant allocation about which some Member has not stood up in the Chamber and complained, saying that their area gets a raw deal. That will always be the case, no matter where we get to. What tended to happen during the spending settlements of the Labour Government was that it was Conservative Members from the leafy shires who tended to get up and complain that they were getting a raw deal and that Labour was doing too much to help deprived areas. That was the general theme of discussions. I think that funds such as the working neighbourhoods fund were, in the end, both reasonably targeted to help some areas of deprivation and reasonably effective. I accept that the Government have decided to abolish the fund and to incorporate it into the revenue support grant.

Fundamentally, this is a matter of principle: as long as a fair settlement can be obtained through the RSG, I am not against the initiative. Over the past few years, there has been a move—under the previous Government and now under this one—to reduce, and hopefully eventually to abolish, ring-fencing and I am generally supportive of that as a principle. With the proviso that the allocation is fair, it should be up to local councils, once the allocation is given to them, to determine how to spend the money in their areas. There will be certain statutory requirements, but essentially, as a move away from ring-fencing and towards a more open method of allocation, I am supportive of this.

--- Later in debate ---

[Mr Betts]

There is a role for different approaches to the provision of housing such as intermediate market rents, more private institutional investment in housing, or links between housing associations and private institutional investors. Those ideas are interesting, and I would welcome them if we were building social houses at existing rent levels at the same time. My concern is that the Government are withdrawing from that. The other ideas are interesting, and in some cases exciting. I support those ideas, but not to the exclusion of money for social housing or of funds to get all homes to a decent standard. I am worried about that, and my overall concern is that we are approaching a housing crisis. Levels of homelessness will rise as unemployment increases. It is not only a matter of Government funding being cut; it is about mortgage availability. With increased deposit levels, young people are not able to get on the housing ladder at present.

[Mr Stewart Jackson]

I hear what the hon. Gentleman says about the availability of housing. However, in a period of substantial economic growth, the previous Labour Government managed to build no more homes over the course of each year than were built in 1926. That seems faintly unbelievable. Despite the Rugg review of the private rented sector, the Treasury never produced realistic proposals on real estate investment trusts, which have had great success in Europe and north America. The previous Government had the opportunity in a growing market to look into such trusts and remove the fiscal and legal impediments to grow that market. They failed to do so.

[Mr Betts]

I am not going to defend the level of social housing building by the previous Government; I do not think that it was adequate and I have said that many times in the Chamber and in Committee. A lot of the things that the Labour Government did, including the decent homes programme, were good, but we ought to have built more social housing. I am not sure that the Government proposals will address that matter. There is effectively a total withdrawal of funding from social housing as we know it, so that does not address the reasonable criticism made by the hon. Gentleman.

We should perhaps look harder at the tax and other impediments to real estate investment trusts. They are a good idea. Yesterday, I met with organisations that seek a more direct way of getting institutional investment linked to people who may want to part rent, part own houses. Is the Minister willing to meet a delegation to look at that? Some interesting ideas ought to have cross-party support.

I am sorry for taking up so much time, Mr Robertson, but I have tried to take interventions. My questions for the Minister are: why are local governments taking cuts that are well above the average for other Departments? Why is such front-loading necessary? It creates particular hardships, as councils up and down the country are explaining. The cuts have been large and fast. Is that why the Government have not been able to make them fairer, meaning that they hit poorest areas the hardest? If changes are made to eligibility criteria for social care, if libraries and sports centres are closed and if bus services are withdrawn, will it not be those suffering the greatest deprivation and need who are hit hardest? Is it not likely that the housing crisis that is looming large will be worsened, not helped, by the Government’s measures?

Those are my questions, and it is probably appropriate to end on them. I am sure that the Minister will have positive and good things to say in answer to all of them, although whether I totally agree with him remains a matter for doubt.

--- Later in debate ---

[Mr Jackson]

My hon. Friend makes an astute point. In fairness, one interesting success—my hon. Friend the Minister may not agree—was the Firebuy initiative. It was mixed, admittedly, but the model was that, in the procurement of equipment for the fire service—whether helmets, appliances or other kit—instead of the authorities making 46 pitches and carrying out 46 tests and experiments, there were economies of scale and purchasing power. It never quite worked, but I think it was on the right track. No doubt the Minister will consider my words when he thinks about the future of Firebuy. However, my hon. Friend the Member for Harrow East (Bob Blackman) is right that that side of local government function has not worked as well as it could and should.

Local government makes a massive impact in local economies in terms of people who work for local government and people who contract with local government. In fairness to the present Government, throwing open the contracting process, the tender process and the purchasing process in terms of who makes the decisions and what value judgments they make on what they are buying is being looked at by the Minister of State, Department for Communities and Local Government, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), and by others, including, I think, my right hon. Friend the Minister for the Cabinet Office and Paymaster General, to revolutionise transparency and openness in local government, so that we know why it costs £400 for every 1,000 wheelie bins in Reigate and Banstead but in Windsor it costs only £250. People have every right to know that in this age of transparency. After all, if they know how many toilet rolls that the Member of Parliament for wherever is buying for his office, they should certainly know about and care about how their money is being spent on key services, although God help the concept of the Independent Parliamentary Standards Authority being involved in purchasing in local government.

[Mr Betts]

It would treble the cost, probably.