Houses: choosing the Tory Christmas box

by Michael Jones and Muriel Bowen

It was only a last-minute decision to name Christmas as the delivery date for cheaper mortgages that brought the Conservative election campaign to life last week and thrust Mrs Margaret Thatcher into the forefront of the electoral battle.

Stung by Labour's derision of her plans to reduce mortgage interest rates at a time of economic crisis, but encouraged by constituency reports that her proposals were widely popular, she decided to give a pledge leaving no room for doubt.

Robert Carr, the shadow Chancellor, was consulted; and at Friday's press conference at Tory Central Office, the new pledge was given: homebuyers would see their interest rates come down from 11 to 9½ per cent by Christmas.

Advance copies of Mrs Thatcher's statement, however, made no reference to Christmas, an indication of the sudden and somewhat desperate decision.

Mrs Thatcher explained yesterday: “I've been finding going round the country that when I said the 9½ per cent mortgage was a top priority, people kept coming up to ask ‘but when?’

“So I knew something had to be done to make it clear beyond all doubt. It was always clear in the party that it was something we would aim to do in the first weeks of taking office. We're not moving into uncharted sea. It's something we've done before and other countries have done it.

“But to be on the safe side and give myself a little leeway, I said Christmas” —a headline-grabbing touch which has put Labour on the defensive.

Mr. Wilson, momentarily incredulous at Mrs Thatcher's audacity but respectful of her grasp of Tory orthodoxy, has long been aware of the vote-winning potential of her housing package: lower mortgage rates, cut-price council house sales, grants for the first-time buyers and the end of domestic rates.

Set against that giddy array, Labour's plans for a National Housing Finance Agency, appear somewhat grey, a fault perhaps more of presentation than content.

For Mr. Wilson, the immediate problem is how to rebuff Mrs Thatcher's bravura attack—particularly in the marginal constituencies—without allowing it to dominate the election debate.

Housing has been a major election issue since the First World War promise of “homes fit for heroes.” For Neville Chamberlain and Harold Macmillan, successful careers in charge of the housing drive led to Downing Street.

In this election, however, the nature of the housing debate has changed. Old arguments about the number of houses that should be built have given way to more fundamental disagreement.

So far, Mrs Thatcher has been far more outspoken in spelling out her views than Tony Crosland, the Environment Minister and her opposite number in the Labour Party. To her, council housing should be confined for people with special needs—slum dwellers, the old and “social cases.”

She put it bluntly on Friday: “There are 5¾ million council houses, 30 per cent of the total housing stock … there's nothing like 5¾ million social cases.” For her, the aim is a property-owning democracy, and huge estates of council houses stand in the way.

Her views on the social undesirability of more council housing echo deep-rooted Tory sentiment: “It's better to help people towards independence as houseowners than to pay continuous subsidies for them to remain tenants of local authorities,”

The Inspiration for her views on the economics of housing come largely from academic studies by the Housing Research Foundation, which argue that low income families are much better [end p1] off buying than renting and that new housing finance schemes can make this possible.

But although she is convinced that buying is cheaper than renting, Mrs Thatcher has not embraced the foundation's comments on new ways of raising the money. On this score, the Liberal plans for new mortgage schemes, with repayments based on the cost-of-living or rising income levels or part ownership with an outside investor, come nearer to the foundation's views than Mrs Thatcher.

Mrs Thatcher's election window-dressing is also, some housing economists suspect, based on a fallacy, in that her proposed mortgage subsidy will not help homebuyers in the long term.

Richard Harrington of Manchester University says that the position is “both absurd and tragic.” To stimulate demand as Mrs Thatcher's cheaper mortgages will do, he says, will only push up house prices, a forecast supported by analysis of the 1971–73 boom in house prices and mortgage advances.

Mrs Thatcher counters this with the argument that there are “a fair number of newly built houses and older houses which are unsold” and that the grant money earmarked for first-time buyers will not affect demand for at least two years. Builders are currently trying to offload 70,000 new unsold properties.

Long-term arguments seldom make much impression in a volatile election, anyway, and special Tory leaflets are already being distributed.

According to the Building Societies Association, the average price of a new house mortgaged by its members in the second quarter of this year was £11,160. After tax relief, a £10,000 mortgage over 25 years at 11 per cent now costs about £74 a month. Mrs Thatcher's scheme will bring that down by £6.50 or £1,950 over the life of the mortgage.

Where will the money come from? Mr Carr said on Friday that efforts would be made to save it in other areas of government spending. Mrs Thatcher was open in her judgment of where that might be: the allocation by the present Government of £350 million extra to public sector building.

There was, she thought, a lot of “switch money” in that, particularly in the £200 million budgeted for the municipalisation of private houses, which the Tories would stop.

In this, she will have no choice if she is to ensure that most firsttime buyers with Tory grants have a selection of houses for sale to choose from. Even with a grant, these buyers will have to be content with a modest pre-war house.

House building contracts now being signed allow for price rises of 2½ per cent a month during the construction period, which may be anything up to three years. This rampaging inflation gives Labour the opportunity to make its counter-bid for house-owner support. For there is general agreement that, whatever the political argument may be, Labour plans to nationalise development land will make a major dent in house-building inflation.

How the debate develops depends largely on how Labour presents its case, of which land is only a part. But at this stage of the debate, Mrs Thatcher is sure that Labour has reason to fear her Christmas offer.