Peter Jay
Hallo, good morning and welcome again to Weekend World. We were planning to make this programme about a little known member of the House of Lords, whose housekeeper, rumoured to be a one-time Labour voter, threatened to defect to the Liberal Party unless everyone in the country signs an oath of allegiance to the Common Market Agricultural Policy by next Thursday: but most unfortunately, we've lost her 'phone number. So we'll leave that story for the Daily Mail, and instead we'll concentrate on another election issue, almost as important. Last week we looked at the problems of industry. Next we'll be examining the crisis in the economy as a whole. But this week our subject is housing. Do we really have a housing problem at all? And if so, is it quite the problem which we and the politicians have always assumed it to be? We'll be asking spokesman for the three main parties what solutions they have to offer. And just how relevant these are to our real housing problems. Finally, at the end of the programme we'll be giving the results of the second poll of the Weekend World panel, and trying to show how opinions have shifted over the last few days. But first, if there's anybody there, let's go over to ITN for the latest news from Ivor Mills.
ITN News Bulletin
Peter Jay
Thank you Ivor. Housing as an election issue presents a glaring political paradox, and that's where we start. Almost everyone who votes has somewhere to live, and yet in election after election, housing remains high on that small list of hardy issues which makes the difference between victory and defeat. At the last General Election in February, the Conservatives certainly felt that they lost votes on the housing issue, and in the last [end p1] few days, housing has become one of the major issues of this campaign. So what is it that makes housing so vital to the winning and losing of votes, even though virtually every voter has some kind of roof of his or her head? Well, the answer I think is simple. For the great majority, the problem isn't really housing at all—it's money. The amount that will be left out of your income, and mine, after we've paid our rents and mortgages. Whether you're rich or poor, rents or mortgages are still a big part of your income, so any Government that makes homes cheaper makes you and me richer. And that's why every voter cares about housing.
Nelson Mews
All the same, of course, there are some, like Mr. and Mrs. Norris and their four children for whom the problem is much simpler, and much more tragic. They have no home at all. A council hostel gives them a precarious shelter.
Mr. Norris
We was moved here on the 13th March this year, from Basildon, And this has been our position since the 13th March. In this hotel. The prospects in the future of being re-housed are very slim at the moment, and all we have here at the moment is just one room for the er, for the six of us. Wife and er, four boys.
Nelson Mews
Other people have homes, but ones that scarcely deserve the title. Like Vivian Smith, who's been waiting four years to be re-housed.
Vivian Smith
I bought this house, and find it was bad condition, so I begin to repair it; Council come and say no need to repair, we take it over. This house is slum, and I live here for five years, but I don't when the Council will re-house me.
Nelson Mews
People like the Norris ' and Vivian Smith have a real housing [end p2] problem. They don't have anywhere satisfactory to live. But people like them make up only a small proportion of those who are concerned about housing policy. Most people already have somewhere more or less satisfactory to live, like Sheila Wheeler and Ron Collins. Their problem is that they want to get married and own their own home, but they can't afford to. So they have to live with Ron 's parents.
Sheila Wheeler
The position is that I'm expecting a baby. We've looked for a Council place, but they can't give us anything like that because we haven't got enough points. They said that when we've had the baby we'll get one extra point. We couldn't get a mortgage because his wages isn't enough. Unless you've got quite a few thousand to put down, I mean you couldn't possibly get a house under three thousand anyway, without the three thousand deposit.
Nelson Mews
Already, with Ron and Sheila, we can see that the problem is becoming one of money and standards of living rather than physical housing. But even people who are already buying their own homes often feel they have a problem. Like Mr. and Mrs. Hendre, who could just afford their mortgage until interest rates went up by an extra three per cent a year.
Mrs. Hendre
Well, you just had to make half a pound of meat do for the lot of you for two days, and that sort of thing. Things are, you know, have been very difficult and now, you know, with the mortgage going up as it is, we don't go out at all, now. We've got Elizabeth starting school this Christmas, we've got to find the money for her uniform. Coming up for Christmas, where that's coming from I don't really know.
Mr. Hendre
If the Building Society said that you'll, you'll just have to [end p3] pay more, then we will just have to pay more, but it will be extremely difficult.
Nelson Mews
Those are just a few examples of what are loosely known as housing problems. We could quote many more. But they're enough to show that as we've said there are really two quite different meanings to housing policy. The first and most serious, which thankfully effects relatively few people, has to do with housing in the purely physical sense, with people who've no where decent to live. The second meaning which effects nearly all of us, and is therefore perhaps more politically important, is basically financial. It has to do with how much spending money people have left after paying their rents or mortgages. In other words, it's a simple down-to-earth matter of our standard of living. As we'll see, these two problems constantly inter-act on each other and this why Governments often find it difficult to deal with them both at once.
Peter Jay
Still, let's start by looking at just how great the physical housing problem, the real problem of homelessness and slums, actually is. The figures show that we in Britain have roughly as many homes as we have households, or families to live in them. There are about 20 million of each. Nevertheless, we still have 32 thousand people who are without any home at all. And of course, there are far more people whose homes are hardly worth the name. They live, effectively, in slums. Just how many slums there are in this country today is partly, of course, a subjective question.
Nelson Mews
It all depends on how you define a slum. But according to the official Government definitions, around 1 million of our 20 million homes are not fit to live in. That means that 1 in 20 is a slum. And that's just the official estimate. There are [end p4] a further 2½ million homes in Britain that lack the basic amenities that most of us take for granted. That means nearly a sixth of our homes are substandard. Both these very real physical housing problems, homelessness and slums, are seen by Government's to require the same straightforward kind of remedy. For while such measures as home improvement grants can help alleviate the problem of slums, we'll still never achieve the aim of having everyone living in houses of a good standard, unless we build enough new houses. Houses for the homeless, houses to take the place of slums, houses to meet the population needs of the future. It's very difficult to estimate exactly how many new houses and flats this adds up to, but most experts agree that we need something between 350,000 and 500,000 houses a year. We've never been able to reach that upper figure of 500,000. The closest we ever came to it was in 1968, and since then our performance has been getting steadily worse. Last year, for instance, we only managed to build 294,000 new houses.
Peter Jay
So we appear to have an almost permanent building gap. In some years we do better than in others, but we never manage to build as many new homes as we should. Why is [this] so? Let's examine the two areas in which Governments can try to influence the number of new homes being built. Public housing, built for local councils, and private housing. And let's start with public house building.
Nelson Mews
Governments can increase the amount of council homes being built by increasing the amount of money available to councils to spend on new building. But any extra money for public building has to come out of a purse that must also pay for all our other needs. The Health Service, for example, Education, Defence. So any government has to decide which of these demands on the purse should have priority at any particular time. And this decision clearly changes from government to government. [end p5]
Peter Jay
What's more the overall size of the purse is also subject to changes in the general health of the economy. When governments want to expand the economy, the amount of money available for public spending increases, but when the economy gets overheated, and the government decides to cool it off, then government spending, including council house building, gets squeezed. So, not only is the amount of money we spend on new council housing restricted by the governments other political and social priorities, it's also effected by the Stop-Go cycle which has plagued our economy for the last 2½ decades.
Nelson Mews
We've seen the pressures on public house building. What about the private housing market? Why have we also failed to build as many private houses as we'd like? Well, here to the government has a very powerful, though more indirect effect, on the number of new houses put up. Private houses get build when there are customers to buy them. No builder is going to risk his own money building houses unless he's confident of selling them. So what's critical is the demand for houses, and this is where governments come in, in two separate but complementary ways. First of all they encourage people to buy homes. Owning one's home, own home has long been the deep desire of many people in this country. But partly for straightforward political reasons, and partly to keep demand high, successive governments have reinforced this desire in practical terms by making home ownership a very good financial deal as well. They've done this in a number of ways. They've given houses immunity or special privileges under Capital Gains Tax, VAT, and Death duties. They've given houses lower rates then industry and that made house owning a more privileged investment than any other, by dropping the Schedule A Income Tax owner/occupiers once had to pay. But above all they give tax relief on the mortgage costs people pay. A straightforward [end p6] subsidy to house buyers. This especially has made house buying a very attractive investment.
Richard Harrington—Manchester University
The present system of tax relief on mortgages has er, a drastic effect, a very surprising effect and one which I think very few people have realised even now. The situation is becoming quite ludicrous in that over the life time of a mortgage, on present rates of inflation, if someone were to take out a £10,000 mortgage today, in money, in money of real value, today's value, they would only repay about £6000. They're not even re-constituting the capital that they borrow, and yet the Government is giving additional tax relief on top of this. So, the combination of inflation and generous tax reliefs, has made housing perhaps the best investment that one can go into.
Peter Jay
And of course, by making it such a good investment governments have greatly reinforced peoples innate desire to own their own homes. But no matter how strong their desire is, people can't actually buy the homes they want unless they can borrow the money to do so. Or very few people can. And peoples ability to borrow depends on a large extent on the governments handling of the economy and financial conditions. On whether, in other words, we're in a Stop or a Go phase. In a Go phase it's relatively easy to get a mortgage and in a Stop phase, Building Societies don't have so much money to lend. So ultimately the supply of new private housing, just like new public housing, depends on the economy's overall performance. They're both effected by the Stop-Go cycle. Of course, there's nothing special about that. Nearly everything we produce is vulnerable to Stop-Go, but the building industry is the most vulnerable of all.
Nelson Mews
Nobody knows how many firms there are in the building industry. Best guesses say there are over 100,000, most of them extremely [end p7] small. How are these firms effected by the Stop-Go cycle? Let's look first at what happens when the market for house building goes up. Professor Archie Campbell, is Chairman of the building industries Economic Development Council.
Interviewer
Can the industry respond immediately to a rise in demand for houses?
Professor Archie Campbell
Oh no! No. There, there are time lags. I mean, it takes er, ten to fourteen months to build a house in the private sector and before that, you've got all the planning permissions and all the bureaucracy to go through. So that if there is an immediate rise in demand for houses, the building industry is going to take a year upwards to respond.
Nelson Mews
As builders try to cope with the new demand, they run into shortages. Of supplies and of skilled workers. Michael Maund a small builder in Leighton Buzzard, explains.
Michael Maund
Um, as work becomes more plentiful, chaps becomes more scarce. And so therefore they demand a higher wage. Er, and you find that this causes problems price-wise, like my own little firm. I used to employ 18 men. We had er, we were on a standard sort of income, everybody was quite happy. Along comes a small boom and the chaps start, the chaps are offered higher money to go and work for someone else, and therefore I have to match the money to hold them.
Nelson Mews
Even if builders can keep their labour, they may not be able to get the materials they need. The supply of bricks for example, can't be increased overnight. When the boom comes, manufacturers can only respond slowly. [end p8]
Jack Milsted
We've got to try and recover our labour, and at the moment there's 2000 men stood-off and 20 factories closed. And we've got to move from that position to stuggle back to full capacity, and in many cases er, re-start er, new works or re-start capital expenditure that's been planned and had to stop.
Nelson Mews
So the building industry struggles for a year of so to catch up with the new boom. Supply starts to flow at the right rate, and new men join the industry. Then, just as house building is settling down at these new levels, governments change their economic policy. Cutting back on public building and the supply of mortgages.
Interviewer
What happens to the building industry when demand for house building falls away?
Archie Campbell
Well, you, you can see that by what's happening just now. The er, there are large numbers of houses overhanging the market, unsold. The amount of work in progress, that is houses under construction are higher than they usually are, and er the building firms find that they are not getting cash. They get rid of labour and some of that labour may leave the industry forever. The er, the, some of the firms may close down and move into other areas away from house building.
Nelson Mews
Firms that stay in the industry have to compete for the little work available. Mostly building houses on contract for local councils. To get the contract they pare their profit margins to a minimum, but it's a dangerous game.
Michael Maund
If this recession lasts much longer I can see that the contract work will become er, more cut-throat. People will be prepared to do it for er, figures which are just not viable. [end p9]
Interviewer
Is there a high rate of bankruptcy in the industry?
Michael Maund
I'm afraid there is. We seem to be er, leading the race.
Nelson Mews
Everytime the industry is weekened in this way, the after effects last for years. So when the governments economic policy changes once again, and there's new demand for houses, the industry is even less equipped to provide the houses we need.
Peter Jay
Well, so far we concentrated almost exclusively on the real, the physical aspects of housing policy. The problems of actually building houses. We've seen that housing has to compete with other government priorities for finds, that the amount of new housing we get is often hit by the up's and down's of economic policy, and that the building industry gets less able to cope every time it's hit by a slump. These are the problems of actually building houses. But what of that other aspect we talked about at the beginning of the programme? The question of how well-off we are after we've paid for our houses. We've already in fact seen one government measure which, though it was designed to effect supply by encouraging us to buy homes, also keeps down housing costs for many people. And that's the Tax Relief and privileges granted to owner/occupiers. In Part Two we'll be looking more closely at this subsidy and its effects, as well as grambling [sic] all the other subsidies and controls which governments now use right across the housing spectrum. But first we take a break. [end p10]
Weekend world
Part II
Peter Jay
Welcome back. In part one we looked at the real physical housing problems, the problems involved in actually trying to get a more homes built, but most of us are more concerned with how much our housing costs us, and this is what makes housing a major election issue, and it's why a large part of what we call housing policy is as much to do with incomes as to do with houses.
Nelson Mews
Over the last hundred years, governments have introduced a whole series of policies to affect the amount we pay for our housing. It's a vast structure of subsidies, privileges and controls which spreads right across the housing spectrum, and affects nearly everyone in the country, but because the problems of housing are so inter-related, these policies tend to overlap and even contradict one another, thus, any one policy may help some people, whilst making life harder for others.
Peter Jay
We'll start by looking at one such policy, the one we mentioned in Part II, it's the heavy subsidy given to owner-occupiers in the form of tax relief and other privileges. Governments use it to make people more keen to buy their own homes, and thus it's a way of encouraging new building, and it has made people keener to buy their own houses, over half the families in the country now own their own homes, nearly twice as many as just after the war, and the policy has helped to boost private house building, but by how much? Between 1970 and 1973 for instance about 16,000 extra private houses a year were built when mortgages were plentiful as part of government economic policy, a grand increase in fact, of 0.2%; in the total housing [end p11] stock in three years, but at the same time the policy has had a number of harmful affects, the first, and in some ways the most important, is the affect it has had on house prices. In the same three years, 1970–1973 house prices doubled, they rose, that is, by 100%;. Well why was the affect on house prices so completely out of proportion to the increase in the number of houses built, the answer is, that housing reacts differently from any other commodity to a sudden rise in demand.
Nelson Mews
Let's imagine for instance, that there was a sudden increase in the demand for cars, almost immediately, more cars would be produced or imported, to meet the extra demand, and there would only be a small side effect on the price of second hand cars, but this doesn't happen with houses, as we saw earlier, houses take a long time to build, a minimum of a year, this is partly because they're built to last a long time, so when there's a sudden increase in demand for houses, it's impossible to start producing more new houses to meet this demand for at least a year, and even then, there will still be very few new houses in comparison to all the old second-hand houses which still exist. So because all the people who are clamering to buy houses can't get new ones they turn to the second-hand market, and the price of the existing stock of houses soars. The bigger and faster the rise in prices. And this is why whenever governments boost demand for houses, by far the biggest affect, is the pushing up of the price of existing houses, there's only a small increase in the number of new houses, this is one of the harmful affects of government attempts to get more houses by boosting demand, but the subsidies by which we encourage demand [end p12] have other harmful affects.
Peter Jay
First of all, they make house prices rise even faster if there were no subsidies, or privileges to the house buyer, the upward spiral of prices would, of course, be slower, as house prices rose, people would become increasingly reluctant to pay the higher mortgage costs involved, but as we saw in the first half of this programme, house buying has been made such a good investment especially in times of increasing inflation, but people will go on trying to buy houses just as long as they can get a mortgage, at almost any price, and that's not the only harmful affect of subsidies to owner occupiers, they also affect the way we share out the present stock of houses.
Richard Harrington—Manchester University
We've made housing such a profitable investment, that those who are able, middle income and higher income people have consumed the maximum possible and this has squeezed out other groups, and therefore, this explains the apparent paradox, why average standards of housing have been increasing across the country, yet at the same time, we've had an increasing number of homeless, and people living in really dreadful conditions in the inner urban areas.
Peter Jay
So what Richard Harrington is suggesting is that as we get richer we tend to occupy more and more space, perhaps at the expense of the less well off, certainly the figures show that we now occupy twice as much space on average, as we did fifty years ago. So perhaps subsidising owner-occupiers means that we often don't use the existing supply in the best possible way.
Chris Holmes—Shelter
I think it should be pointed out that even in London, and to a greater extent in the other cities, the basic problem, is not a problem of shortage, it's a problem of the allocation [end p13] of the housing space that is there, I was working until very recently in North Islington, which is one of the worst areas of housing stress, in the whole of London, and we carried out two very detailed studies of two areas of the most over-crowded multi-occupied substandard privately rented accomodation in the whole of London, and what we found even within those very overcrowded areas of Islington, was that there was enough space to provide everyone who was living there with self-contained accomodation with proper amenities, and the amount of room that they needed, the problems were, that owner-occupiers tend to have more space, and in many cases, than they need and the tax system encourages that.
Peter Jay
This then, and the increase in prices, are both harmful affects brought about by governments making house owning cheaper for people with mortgages, but as well as giving house buyers tax relief and privileges, governments have in the past helped to keep down mortgage rates as well, usually by pressurising Building Societies into keeping rates as low as possible, this has had the positive affect of keeping housing costs low for those who have already got mortgages, but because the low rates have made it more difficult for building societies to attract funds from the depositors, it's had the negative affect of shrinking the amount of money available for new buyers to borrow, so if you please the people who've got mortgages, you upset those who are trying to get them.
Nelson Mews
So far we've looked at the ways in which government policies have tried to cut the cost of housing for owner-occupiers, but other people have had their housing costs lowered too. Council tenants who pay rent below the market level are being subsidised by the rest of the countries tax payers, the policy benefits them, but it's a burden on the tax payers as a whole. [end p14] Many people feel this is unfair, it's a cause of much social bitterness, as all those rather savage jokes about the Jaguars outside every council house go to prove. The feeling of unfairness was partly behind the Housing Finance Act which tried to raise the cost of council housing for better off tenants.
Peter Jay
And the third category whose housing costs have been lowered by Government action is the Tenant and Private Rented Accomodation here Government have used controls rather than subsidies, rent control, in fact, were introduced fifty years ago, to protect first World War workers from profiteering landlords, since then the controls have been alternatively strengthened and weakened by various governments, but in their present form they now control rents and security of tenure in almost all flats, furnished or unfurnished, rents have been kept down to what poorer people who mostly inhabit rented accomodation have been thought able to pay, Chris Holmes of Shelter feels that the benefits for the poor are overwhelming, but he recognises there have been harmful affects as well.
Chris Holmes
Oh, certainly I mean, I think it's been the affects of rent controls being one major factor why the privately rented sector has declined from providing something like 90%; of accomodation in this country in the early part of this century to a mere fifteen percent now. And if you have really comprehensive rent controls and protection against eviction and the kind of tax constraints on private landlords, and it does become uneconomic even for the good responsible landlord, to let cheaper rented accomodation at a decent standard and the latest Rent Act to a limited extent makes that still more true, because it's actually closed one of the major loopholes by which landlords have been able to evade controls for [end p15] last few years.
Nelson Mews
So control of rent has made it unattractive for landlords to keep property as rented accomodation, particularly when inflation has meant that fixed rents become increasingly cheaper for the tenant and more uneconomic for the landlord, and at the same time, Government incentives to home buyers have insured a good price for landlords anxious to sell off their houses, and this drying up of rented accomodation is inevitably making it more difficult for some people to find somewhere to live.
Chris Holmes
I think it is making it more difficult particularly for the more mobile single people, the new comers to the city.
Interviewer
And if there isn't any alternative, what happens to those people?
Chris Holmes
We're going to see an increasing amount of homelessness, an even more desperate search for accommodation, and landlords looking for any kind of loophole by which they can evade protection, because the profits are going to be so high if they can.
Nelson Mews
So yet again, action is taken by the government to keep down the cost of one kind of accommodation, has brought benefits to some, but distinct disadvantages to others, we've seen how often government actions have similarly backfired, of course, few people would disagree that governments should aim to keep our housing costs down to a tolerable level, but it's worth asking perhaps whether the present system of subsidies and controls is the best way of doing this, not surprisingly we think the subsidies [end p16] and benefits we get are a good thing, but we have to remember the disadvantages as well, for as we saw in the field of private housing much of the effect of subsidies tax privileges, is to push up the price of the existing stock of houses, this gives a capital gain to existing owners of course, but it doesn't help new buyers at all.
Peter Jay
But, and this is really the nub of the matter, one mans subsidy turns out to be somebody else's too high price. One man's protected tenancy, turns out to be another man's inability to find a place to rent at all. One man's subsidised council rent, is someone else's tax bill. One man's cheap mortgage is another man's inability to get a mortgage, and so on and so on. So is it perhaps time to start asking whether our present system of subsidies and controls and tax privileges is really the most efficient way of making sure we don't pay too much for our housing? Indeed is manipulating the housing market really a sensible way of trying to boost incomes at all? In a moment I'll be putting these and other questions, which we've raised to spokesmen from the three main political parties, but first we take a break. [end p17]
Weekend world
Part III
Peter Jay
Hello again. Here now with me in the studios to discuss the problems which we looked at in Part I and II are spokesmen from the three main political parties. We have Mr. Anthony Crosland—Secretary of State for the Environment, for the Labour Party and Mr. Paul Tyler from the Liberals and Mrs. Margaret Thatcher from the Conservatives. Mrs. Thatcher, I would like to come to to you first. In view of the very sober tone which er Mr. Heath is taking in this election campaign and the emphasis which he is putting on national unity and national emergency and also in view of the apparent scepticism of the public about too extravagant election pledges that, er, at election times do you now regret your er pledge to introduce this 9½%; mortgages by Christmas?
Mrs. Margaret Thatcher (Conservative)
Good heavens no, I'm absolutely convinced it's right, and so are a large part of the public. We have limited our promises very strictly to housing and pensions. That's what makes them so credible. And that's why we're putting so much emphasis upon them.
Peter Jay
Your feeling is that you allowed up to one or two promises which your critics would call bribes per election is it?
Margaret Thatcher
Well I hardly think that one would go into election without trying to tackle the existing problems. That's what we're doing on the housing front. There are very severe problems. I noticed on the film that you pointed out, Mr. Jay, that there are in fact housing subsidies in almost every sector. Now it's no good we can't go back and start as if there aren't any. I notice Mr. Harrington 's views. He in fact wrote them in a very excellent article in the Bank Review a few months ago [end p18] pointed out the folly of rent control as well. I am dealing with a problem in which the economics are probably different from the human answer. I would think …
Peter Jay
Could we look at the economics of the problem because I think that's what really follows on from the er treatment we've had so far in the programme. I mean, one thing I would like to know about this 9½%; mortgage is how long is it guaranteed to last? Clearly if you promise to get to 9½%; by Christmas and it was back to 12%; by Easter that would not be very significant to electoral promise, so presumably that's not what you mean?
Margaret Thatcher
No of course not. It is a maximum of 9½%; whatever happens to the interest rates. I hope the success of Governments will not have them so high, that the amount demanded would be very great, it is possible they may fall below 9½%;. I bought my house at 6%;. Mortgage rates have only been 11%; for about one year.
Peter Jay
But are you …
Margaret Thatcher
… Before that they were lower.
Peter Jay
Sorry to interupt you. Are you guaranteeing then that it will not go above 9½%; during the whole of the next Parliament if you are elected with an overall majority?
Margaret Thatcher
Just exactly that. 9½%; maximum mortgage.
Peter Jay
For the whole of the Parliament?
Margaret Thatcher
Indeed yes.
Peter Jay
Whatever happens to international interest rate, whatever happens to interest rates in the City of London? [end p19]
Margaret Thatcher
Mr. Jay, if they go as high as I think your thinking they might we shall have very, very severe problems on our hands indeed and Governments would have had to have taken action far, long before that to hold them down. But in fact there is another reason. If they go as high as that the cost of housing people in the public sector would similarly go through the roof and it would still be cheaper to help people to help themselves by offering them a 9½%; maximum mortgage so that eventually they become self reliant and independent and own their homes and by having them in the rented sector, when they could be subsidised for ever and own nothing.
Peter Jay
Let's look at what effect this will have because, of course, making a mortgage cheaper does not, of itself, make more mortgages available, indeed under the traditional arrangement if you keep down the interest rates you, building societies have to keep down the rate they pay to the depositers, less money comes in to building societies, less mortgages are available and less people can buy their houses. Presumably that is not the effect which you intend, so how will you be going to guarantee that everybody who wants a cheap mortgage at the subsidised rate can get it?
Margaret Thatcher
But I am not interfering in any way with the rate which the building society have to offer to the saver. They know the market that they are tapping. They know who saves with them, they know what sort of scheme to offer to get people still to save with them. I am not interfering with that. They tell me that if they are free to get the flow of money in they believe they can do it. What I am anxious, is that the rate that they have to pay to keep it coming in and I am the first to understand that they have to compete with Governments who are trying to borrow in similar sectors. They tell me if they have a free hand with getting the money in, er, they can do that. What normally happens is they have to pass on that rate to the borrower. I don't want them to have to do that [end p20] and that's where the subsidy comes.
Peter Jay
So that the Government is undertaking an open ended commitment of 5 years that whatever the difference between the market rate of interest and 9%; it i.e. the taxpayer will pay the difference—that's correct is it?
Margaret Thatcher
That's not quite right. You've got the figure wrong, Mr. Jay, 9½%; you said 9%;.
Peter Jay
I beg your pardon, I meant 9½%;.
Margaret Thatcher
9½%; for all existing home buyers which is about 4 million. You see about half the people who own their homes have already paid for them so you've got the existing home buyers who are now paying 11%;. They would pay 9½%; and then you've got special help for the first time buyer with the deposit. 9½%; maximum over the lifetime of the next Parliament.
Peter Jay
I only wish to be clear about the shape of the proposals and I am sure the voters will as you must have intended, be very interested in. Will it be available to anybody with any kind of mortgage or will it just have to be a building society mortgage on a first house?
Margaret Thatcher
A building society mortgage and, of course, we would have to extend it to a Local Authority mortgage which are given very similar, under very similar circumstances. On your main residence not if you are purchasing a second additional home.
Peter Jay
It doesn't apply to your second home.
Margaret Thatcher
No. [end p21]
Peter Jay
Not even if it's in the South of France?
Margaret Thatcher
Shall we be quite careful of course when you use the phrase ‘second house’, some people think you mean that when you've sold your first house and go into a second one.
Peter Jay
No I meant a holiday cottage or something like that.
Margaret Thatcher
it will not apply for an additional home.
Peter Jay
I see. Um. Well if extra demand is to be met by selling council houses is that part of your intention? You see, I see now that you hope that building societies will be able to get the money because they will put the rates up to whatever is necessary on be market to bring the funds in so that will make the mortgages available to enough people. Now as we saw in the earlier part of the programme—the chief effect of making more money available for buying houses is just to force up the price it doesn't bring any more houses into existence. Is it your intention to make up that gap by, um, requiring local authorities to sell their council houses?
Margaret Thatcher
At the moment, Mr. Jay, there is a glut of houses on the market, the price is falling and there is still no demand. I have looked at the supply/demand argument. At the moment it is on my side. The excess is on supply. After all only one in five of the houses which are bought every—is a new house. The majority is second hand houses. There is a glut of supply, there are not enough buyers at the moment even at existing prices so it's the demand that has to be stimulated.
Peter Jay
I'm not quite sure what's meant by saying there are not enough buyers at existing prices. I mean presumably if that went on for more than a short while the prices would come down which would be a good thing. The effect of making more money available for buying [end p22] houses must surely be to push prices higher than they otherwise would have been not to bring any new houses into being? And the point here that I am interested in is how you think this proposal is relevant to solving the housing problem because you've said you wanted to tackle the real housing problem. And the real housing problem surely is a lack of physical houses in the right place at the right time of the right kind?
Margaret Thatcher
Well, now, you've put rather a lot of ideas there. Let me deal with the first one. If you are looking at it in economic terms the thing to do will be to let prices fall and fall and fall until people started to buy. If you did that practically every house builder would go out of business and go bankrupt. That would not help me to get the next generation of houses up and it would not help the labour problem which you dealt with so vividly in the film. So that's the economic answer but it's not the human answer. I am looking at the housing market now. I know there are people in real difficulties with their 11%; mortgage, particularly if they bought within the last two years. I am looking at a sector in which subsidies to the public sector are about £600 million a year and which a large amount of money has been allocated to buy up private houses. My approach is let's help people to help themselves. It will be better for them. The subsidy will be limited in duration because in the end they'll own their own homes and therefore that will end their need for subsidy and they will look after their own houses. Unless I do that I'm going to have to spend vastly more sums from building and buying up houses and that's much more expensive than my way.
Peter Jay
One last question, Mrs. Thatcher though I would like to continue that discussion a long way. Er is it your intention to reactivate the Housing Finance Act which is, was introduced by the previous Conservative Government and which is still, I think, on the Statute Book, to resume the er, increase in council rents which was planned under that Act? [end p23]
Margaret Thatcher
That is the Fair Rents Act. We've not finally made a decision of the differences between a Fair Rent and a Reasonable Rent. I don't find it a very easy difference to explain to election audiences because so much depends upon the kind of housing stock a local council has. I want first to see the reports of the Rent Scrutiny Boards which should be reporting fully in October, before we make a final decision. But the rent freeze will stay on until December and then there will be graduated increases after that, I believe under either scheme.
Peter Jay
Thank you very much. Now I turn to Mr. Tyler who's the Liberal Housing spokesman. Mr. Tyler the Liberals seem as reluctant as the other two parties do, as some people might say, tackle the problem with the roots by just building the number of houses that are required directly and then scrapping the whole system of taxes? Subsidies, tax privileges, er, controls and so forth. Why are they so reluctant? Some people would think that was more in tune with traditional Liberal philosophy.
Paul Tyler—Liberal
Well I've been involved in housing for the last 11 years. First of all in an Architect's office, subsequently with the Royal Institute of British Architects. So I've seen this from the other side. Not from the politician's side but from the business of actually getting houses built. And I think what came out so well from your two parts is that in fact, demand and supply are linked irretrevably. And if you don't make demand effective, you wont get supply. This is the basic fact. I mean
Peter Jay
You must agree that it also came out that about 90%; of the extra demand when you put it in tends to spill over into putting up the prices of existing housing. [end p24]
Paul Tyler
Just that. And this is my complaint with Mrs. Thatcher's scheme and incidentally may I take great pleasure in seeing this wonderful pantomime transformation of the awful goblin that removed the milk from children and saved us 9 million pounds at a time when the economy was supposed to be booming and now we have a lady who is going to give £280 million to those who already have mortgages and are doing rather well. And most important point about the Conservatives scheme is that it is not indiscriminate. It discriminates in favour of those with the big mortgages, the bigger incomes, the bigger houses. Because of course, if you peg the interest rate the interest rate on a small mortgage is less subsidy. If you paid the interest rate on a large mortgage more subsidy and personally I object to subsidising Jim Slater and Harry Hyams ' mortgages. This is the worst feature of the Conservative scheme. That it increases the demand in the wrong end of the market. It doesn't help those at the bottom end of the market who are coming in for the first time, as Richard Harrington showed earlier. Those who are already on the second, third or fourth rung of the home ownership ladder are doing very well at the moment. An appreciating asset is to get them all to the first rung that's important and that's why …
Peter Jay
In your Manifesto you have some quite complicated proposals. Various different kinds of new mortgages designed, I think, to achieve what you've just been talking about. Do you think the voters at large understand these highly complicated proposals?
Paul Tyler
I find that on the doorstep I have to go in and explain them but I think the main point is this. We are trying to tailor different schemes for differing needs. One of the faults of excessive governments, and one of the reasons why demand has not been made effective is to assume that every home owner, or potential home owner is in the same position and they're not. There are young people who have a good career prospect going up ahead of them and if inflation goes the way it is should certainly be able to pay back later on much easier than they can now and hence our low starting scheme. The index [end p25] link scheme also helps those who have a reasonable prospect of a growing family income particularly after the first few years. Our Equity Link Scheme which has has now been backed by the Housing Research foundation very strongly, er, helps those who don't have a great interest in capital appreciation in their homes, want a roof over their heads for a reasonable price. In each case we're not asking building societies to give up normal conventional scheme what we are saying is that if we've only got limited public funds available, and we have, every economic spokesman of every party is saying so, even Mrs. Thatcher's party is saying so at the moment, we must concentrate that help on those who really need it.
Peter Jay
I wanted to ask you about the public funds aspect. I mean, do not your mortgage proposals if you are to insure that they are, will be available to people in the form which you want them to be available also involve an open ended commitment by the taxpayer—rather as the Conservative proposals seem to because if the, er, building societies are to be sure of getting the amount of funds which people will want to borrow on the basis of your proposals—if they are as attractive as you think—then they are going to offer the going rate in the market to get the money and that may create a gap between what they have to pay and what they get back on the mortgage from the house buyer and so the tax payer has to make up the difference?
Paul Tyler
The danger is rather the reverse. Since the building societies association have told us. They think that if they did introduce an index length scheme which meant the borrower could go, er, could repay in tune with an increase in the cost of living that means, of course, the saver too gets a return which is inflation proof. And this would be enormously attractive to the saver with the building society at the moment and would certainly have to be controlled. If you were offered the certainty that by putting money into an index length scheme in a building society you would get automatically all that inflation was taking away with present [end p26] building society investment you'd be very, very keen to take that investment and the difficulty would be to prevent it from being too popular.
Peter Jay
You're not going to guarantee the present rate of return whatever it is, that is, er er a depositer in the building society now gets, against inflation are you?
Paul Tyler
No automatically a small ½%; or so above the rate of inflation would guarantee to the saver who chose this scheme.
Peter Jay
But is it not a well known fact, I mean accepted I would have though by all Governments, by all Parties that the only people who can give absolute guarantees against inflation to compensate people for the effects of inflation are Governments because governments are the only people in a position to print the money that may be necessary to redeem those … .
Paul Tyler
But if the building society is lending on a basis that it will get back from the borrower automatically at least the amount that is needed to keep pace with inflation.
Peter Jay
So it's the house buyer who has the open ended commitment?
Paul Tyler
They're linked together, they're linked together. But the guarantee that the house buyer has is that he will never be called upon to repay more than inflation asks us. He can start low land it can go up with inflation but as long as he has the prospect of a reasonable development to his career and his salary as a result this is a very good scheme.
Peter Jay
Just to be quite clear about this. This does mean that for the first—person who is buying his house under this scheme every time the retail price index goes up as it were his mortgage [end p27] repayments go up to so that the inflation that he is suffering has being reduplicated.
Paul Tyler
But then at the beginning as Richard Harrington again made clear is the beginning. The first three or four years which also, I mean I'm in this age group so I know, it also tends to be the time when your starting a family, furnishing the house, your career is only just developing, your wife can't go out to work because the family is started so as long as you can guarantee that you start very low then at perhaps 2 or 2½%; your quite prepared to pay more later on when it is easier for you to do so.
Peter Jay
Mr. Tyler, thank you very much. Mr. Crosland, following on the theme of our opening presentation though I'm sure you may want to cross refer to what's been said, what in fact would be wrong with the housing policy which really departed rather radically from the assumption of post-war housing policy and had the following features that um the Government, ensured that there was adequate physical supply by actually building houses that were needed in the places that were needed, ensured fair play for the less well off members of society through the social security and tax systems and then allowed a free market in housing both rent, the rent market and the buying market, abolished all the tax privileges, all the subsidies and all the controls?
Anthony Crosland—Labour
Well on your first point I think it will be very undesirable for the government itself to do all the house building. I think this is much better done by local authorities.
Peter Jay
Not … . just making up any shortfall that there was below the desirable number.
Anthony Crosland
I see. Well that would be possible I suppose, but I though you meant that the Government were to build all the [end p28] houses.
Peter Jay
No, that they would just guarantee there would be enough by making up the differences.
Anthony Crosland
I see well there's no objection to that part of the theme. What is the objection to going back to a free market in housing altogether? I think the objections are absolutely overwhelming. Um, the notion that you have simply a market price, the consequence of supply and demand, the consequences of supply and demand and then make up the problem of low income families and the poverty by paying them the money, um, I think is open to … . … . It hasn't worked in any country in the world. There is not one country in the world which is prepared to leave housing to a market solution and this must be for a series of very convincing reasons.
Peter Jay
Well no doubt, but many people say that the present system is very far from working even in that sense that the effect for example of the help which is given to owner/occupiers or the tax privileges which we discussed is gravely to distort that market, to turn buying a house into an inflation hedge and investment rather than just provision of a home with all the results which we talked about in the early part of the programme—the misuse of space and so on that the effects of rent controls in the private sector is to dry up supply almost completely so that the whole lot of potential flats in owner/occupier houses are not being used and that the effects of subsidies in the council sector is that your—helping the incomes of the wrong people?
Anthony Crosland
Well we'd better take these one by one. Um, as far as the owner/occupier is concerned and the price of owner/occupier houses, I didn't think the film got this right. In fact it was the main thing which has driven up the price of houses over the last three years has not been what has been happening to the mortgage rate of [end p29] interest, um, it's been due to the fast fluctuation in the supply of mortgages. During those years in which the supply of owner/occupier houses 70–73 increased by 0.2%; as the film told us, the volumn of building society mortgage lending went up by something like 60%; but that was
Peter Jay
Yes, but it was supplyable which is not the costable …
Anthony Crosland
Well, it rather gave the impression in the film, I thought, that the critical thing was the subsidy to the owner/occupier that that was the critical factor in driving house prices up., Historically the critical factor is always a huges surge in mortgage lending and that's why the essential thing there is, no that system is working extremly badly and that's why the essential thing on the owner/occupier side is to stabilise the flow of mortgage lending. Which is, of course, what we have been doing for the last several months.
Peter Jay
But I mean, is there not equity in removing the tax privileges for the house buyers? Afterall it, as I understand it from Labour Weekly, which is an official organ of the Labour Party, it was on September 20th in the middle of an article with a large photograph of yourself in it Labour policy to set about removing these tax privileges, the tax relief which people get as well as the other tax privileges which the owner/occupier gets yet none of this appears in the manifesto—why is that?
Anthony Crosland
No. Well it couldn't appear in Labour Weekly.
Peter Jay
It does appear in Labour Weekly. I'll read it out to you it says:-
“Secondly Labour will knock some sense into the whole question of mortgage tax relief. At the moment the more you earn, the more expensive your house, the bigger you tax relief. For instance if [end p30] the mortgage rate is 11%; and your on the standard rate of tax, then tax will reduce your rate of interest to 7%;. If your on the top rate of sur tax it will reduce it to only 1%;.”
Anthony Crosland
Oh, certainly, but I thought you were giving the impression rather strongly that we wanted to remove the tax concessions. And what we want to do as that article makes absolutely clear is within the total is to redistribute the total so that the less well off people gain relatively more and the better off gain relatively less. And there's no question of removing the system or altering the total, no certainly not.
Peter Jay
There's nothing about even redistributing it in the manifesto is there?
Anthony Crosland
Um the Manifesto talks out, I'm a great Manifesto reader but I can't nevertheless pretend to recall the exact words, but certainly Labour's Programme 1973, which is the Official party document, we made it absolutely clear that within the existing total of tax relief that we wish to re-distribute away from the top end towards the lower end.
Peter Jay
But what is the intellectual, to take the third point which you didn't quite come to, the intellectual justification for helping the incomes of the less well off through having subsidised council rents rather than tailoring the supply of tax-payers' money to the income position of the people that you want to help through the social security system?
Anthony Crosland
Well, in …
Peter Jay
… (Interupted) doing according to where people happen to live. [end p31]
Anthony Crosland
No, we do a mixture of the two at the moment. After all expenditure on rent rebates, as on rent allowances in the private rental sector is now a considerable part of the total help that goes to councils, so in fact we are using both methods. Mind you, if you talk about how far council houses are subsidised you've got to remember that in any council home built more than 10 years ago, um, paying above the market rent now, is in fact subsidising other tenants of newer houses. It's a really complicated system. I believe that the only thing you can rest on, I mean there's a lot of muddle in the system, yes, I don't for a moment dispute that, anything that you can risk on at this moment of time is to say that broadly the amount of help going to the owner/occupier through tax relief should be equal to the amount of help going to the council tenant through subsidies and we are very near that position, now. £528 million a year is going to the owner/occupier in tax relief and about £420 million is going to a slightly smaller and smaller number of council tenants.
Peter Jay
Mr. Crosland don't you then wind up with a very odd situation in which the tax payer who is after all everybody, is subsidising all categories of er home owners and home renters equally? I mean a huge operation of some administration cost is going on in which money is being taken away from the same 20 million families and is given back to the same 20 million families, no doubt on an equitable basis causing great distortions in the allegations [sic] that the housing market in between? What's the point of all this operation?
Anthony Crosland
The operation which is carried out in every country of the world, there is subsidy to housing in every country and the basic reason, if you are asking for the intellectual reason, the basic intellectual reason for this is that good housing has an extremely important social spill off and therefore all governments [end p32] take the view that you should deliberately distort the market in favour of good housing. There are all kinds of social consequences which would result from bad housing on the one hand and good housing on the other and that's the intellectual reason why all governments intervene in the housing market.
Peter Jay
One more quick question Mr. Crosland, why can't you offer a 9½%; mortgage to home buyers by Christmas?
Anthony Crosland
I'm morally outraged by the offer of 9½%; something that the Conservative Government said they couldn't do when they were in office um they attacked us even for the loan to the building societies. Something that should not be done in this moment of national emergency and something that will help better off people more than the worse off people. I find it an absolute moral outrage that this should be done in the middle of a general election.
Peter Jay
Mrs. Thatcher.
Margaret Thatcher
I don't find it a moral outrage to help people who are in severe difficulties with mortgages at the moment. I think it's a very much better use of money to help them to help themselves than it is to spend vast sums of money on nationalization and on various other schemes. My promises are very modest indeed. You've been talking about it as an economic problem. We look at it as a human problem but I can't avoid the laws of economics, I accept it. It is a much, much better use of resources to help people to help themselves so that they become independent and then don't need subsidy, and look after their own homes and to say that we must house all of the people by providing them with houses and subsidising those for life. We are riddled with subsidies. We can't start as if we weren't. We can only start from where we are now. I've made one very limited group of promises, much more limited in expenditure and in promises in other manifestos so the wise use of [end p33] resources, they're credible. 9½%; for all house borrowers on, who are trying to buy on mortgage. Help with the deposit and helping council tenants to achieve their ambition to own their own homes and I believe that's right for Britain.
Peter Jay
A final comment Mr. Crosland, would it be possible if you abandoned nationalization proposals perhaps of land to provide people with 9½%; mortgages to help themselves?
Anthony Crosland
Mr. Jay, you are a well known economist and it's for you to explain to your millions of viewers what the difference between capital account purchases and assets and current account subsidies is and I hope that you will do that now or on some future programme that the two, as you know very well, are utterly incomparable.
Peter Jay
That's very generous of you to make this reference that I'm here as the Chairman of the discussion of the three parties thank you.
Margaret Thatcher
I would enter into a discussion with you on it perfectly happily.
Peter Jay
It would be delightful if we had more time perhaps another Sunday perhaps after the election we can take it up in greater depth. Thank you all very much indeed. And now from housing the Weekend World Panel. Last week, if you remember we gave the first results of our interviews with a randomly selected panel of over 1,000 voter who will be re-interviewed each week during the campaign. The point of this kind of poll, of course, is not only to give us an estimate of the state of the parties each week but also to enable us to identify the shifts between them and the reasons for those shifts. Last week Louie(?) Harris International carried interviews on Wednesday and Thursday with a random sample of 1,086 voters in 120 [end p34] throughout Great Britain. First then the State of the parties with the ‘Don't Knows’ distributed proportionately among the parties according to the most common way of presenting opinion polls these days. In answer to the question:-
If I the General Election was held today how would you vote? 34%; said they'd vote Conservate 43%; said they'd vote Labour 20%; said they'd vote Liberal 3%; said they'd vote for the Nationalist or other parties.
This gives Labour a lead of 9%; a drop of 3%; on last week. But let's look now on the results of the don't knows still shown separately and compare them to the results we saw a week ago. Remember, of course, that our panel has already been interviewed twice before. The first time towards the end of August and the second time 10 days or so ago. In August 38%; said they'd vote Labour last week it was 37%; and now it's back to 38%;. 32%; said they'd vote Conservative in August, last week it was 27%; and now it's gone back a little way to 29%;. In August 19%; said they'd vote Liberal last week it was 16%; and now it's 17%;. On both previous occasions 2%; said they'd vote for Nationalists or other parties. And now that figure is up to 3%;. Those who wouldn't vote or refused to answer totalled 6%; in August, 7%; last week and now 5%;. Finally the ‘Don't Knows’ counted for 3%; in August, they shot up to 11%; last week and they're still a high 9%; now. What these figures show most clearly is that there's been remarkably little shift in opinion over the last week. After one week of full campaigning the Tories and Liberals have still not made really very clear impression on Labour's commanding lead. [end p35] Apart from the state of the parties the most interesting views we uncovered this week were on the subject of a coalition. A subject which has been much mentioned in the campaign so far. In answer to the question ‘If no political party has a clear majority which would be the best for the country? Only 18%; opted for a minority government with all ministers coming from the largest party—as, of course, they do now. 9%; said they favour the Liberal/Labour coalition. 10%; said they'd like a Liberal/Conservative coalition. While 51%; said they'd favour a grand coalition of all the major parties. 4%; said they favoured none of these and 8%; said they didn't know. So if we don't get a clear result this time the majority of our panel say they'd like a grand coalition of all the parties.
Tape Ran Out Before Completion of Part III.