Queen’s Speech

Viscount Hanworth Excerpts

Tuesday 10th June 2014 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, this year the Speech from the Throne has been a very dull affair; it is distinguished more by its omissions than by its inclusions. It has failed to address the urgent problems that have arisen from the previous enactments of the Government. The programme of privatisation and deregulation, which has been accompanied by the disengagement of the state from all manner of social services and provisions, has surely run its course.

The programme has led to the neglect of some severe social problems, one of the most prominent examples of which is in connection with the provision of social housing. Several speakers in a previous debate mentioned the role of Harold Macmillan at the Ministry of Local Government and Planning in Churchill’s Government of 1951 in providing affordable social housing Macmillan was given the task of overseeing the building of 300,000 houses per year. This was an objective that had been mandated by the Conservative Party conference of 1950, and it was amply fulfilled. The policy of housebuilding depended on close co-operation between central and local government. Local government was empowered to finance homebuilding by issuing bonds and was given substantial subventions from the Treasury. The percentage of people renting from local authorities rose to over one-quarter of the population, from 10% in 1938 to 26% in 1961.

In the era of Margaret Thatcher there was a complete reversal of the housing policies of the Conservatives. The Housing Act 1980 gave a right to buy to council tenants, and within 10 years 1 million council houses were sold. Thereafter the building of houses by local authorities virtually ceased, and none has been built since the early 1990s.

The present Government have taken further steps to prevent local authorities from embarking on housebuilding programmes. The Localism Act 2011 transferred roughly £21 billion of housing debt to the 171 local authorities that currently own houses, in return for fuller control over their housing stock. At the same time the Government introduced a debt cap on each local authority, which restricts the amount of money that they will be able to borrow in connection with their housing stock.

In effect, the Government have divested themselves of any responsibility for publicly owned housing and have allowed local authorities only enough money to cover the cost of its maintenance. This is an encouragement to the authorities also to divest themselves of any ownership of housing, and many have already done so.

Nowadays, the Conservatives appear to believe, in line with a free-market philosophy, that the provision of housing should be wholly a matter for the private sector. However, in recent years housebuilding by the private sector has all but collapsed. Against all evidence, the belief has been fostered that the failure of the private sector is due to its having become mired in red tape and planning restrictions. Accordingly, the Growth and Infrastructure Bill of the previous Session established a new national planning framework which replaced 44 planning documents by a slim document of 50 pages. In the process, a set of documents that had been providing careful planning guidance in many specific circumstances, and which had been developed and refined over the previous 25 years, has been tossed into the rubbish bin. This act of vandalism represents a remarkable triumph of ideology over analysis.

At the same time as we have seen a collapse of housebuilding, we have seen a boom in house prices and a remarkable escalation in the rents charged by private sector landlords. The unaffordability of house ownership and the exorbitant costs of rented property are immiserating a generation of young people. A symptom of their distress is the escalating size of the housing benefit paid to those who cannot otherwise afford any accommodation. The cost of housing benefit in the financial year 2013-14 was £23.8 billion, which was almost 30% of the entire welfare bill. This dwarfs the £1.5 billion that has been spent on capital investment in social housing.

At the same time as they have been subsidising the incomes of private landlords via the housing benefit, the Government have been stoking the rise in house prices by their Help to Buy scheme. This has offered assistance to those who are already rich enough to think of purchasing a house. One can think of few policies that could be more socially divisive.

The house price inflation has led to a massive transfer of wealth in favour of the richer members of an older generation, who are well established in their properties. An obvious recourse would be to tax some of their wealth in residential property. Then, the proceeds could be used for building social housing to be provided at affordable rents. If the houses were built in sufficient numbers, then some of them might be for sale. It has been said, in opposition to such a wealth tax, that it would be unfair to those who are rich in assets but poor in income. The objections seem to deny the close correlation between income and wealth. However, the escalation of house prices could be very effectively staunched by a tax imposed on the sellers of properties. This could be assessed on the basis of their capital gains derived from the increased value of their houses. There would be no disadvantage to asset-rich and elderly people who choose to linger in spacious and valuable properties. The proceeds of such a tax would be used predominantly for the purpose of financing the building of social housing in the areas from which they have been derived. To the extent that rising house prices are a reflection of the scarcity of housing, the revenue would be reinvested where the need is greatest.

The costs of investment in social capital, whether they are met through taxation or by the issue of bonds, should not be reckoned as part of the central government’s current account. Such costs should be deemed to have no bearing on the Government’s financial deficit. Nevertheless, the present Government profess that, in a time of financial stringency, they cannot afford to meet the costs of major investments in social capital. This is surely a spurious excuse with which they are hoping to conceal their wilful neglect.