Conservatives believe that the right way to meet our housing needs is to spend money on helping more and more families to become home owners rather than to subsidise them indefinitely as council tenants. Most families would prefer to own their homes but they need a bit of help to do so. Owning their homes gives them a sense of independence and a stake in their country. But as well as making good philosophical and social sense, home ownership also makes good economic sense. It is less costly to public funds. For as figures published by the Housing Research Foundation in January of this year show, three families can be helped towards home ownership at the same cost to public funds as it takes to keep one family in a council house.
The Conservative Party is the only Party at this General Election which is putting forward clear and specific proposals to help home buyers. These proposals will do four things.
First, they will help both those already buying their homes and those who will be taking out a mortgage in the future. The proposal to reduce the mortgage interest rate to 9½ per cent and to see that it goes no higher will give badly needed reassurance to many families who in recent years have been worried stiff because their mortgage repayments have risen so sharply. Our proposals will give these families a guarantee for the future that they will never have to pay more than a certain amount. [end p1]
Second, there is our Home Savings Grant scheme under which those who save regularly with a building society for at least two years for a deposit for their first home will get a grant proportionate to their savings—the grant will be £1 for every £2 saved so that a couple who save between them £500 over two years will get another £250 in grant. This will be a great help to those young couples for whom the deposit is a major stumbling block in buying a home.
Third, we propose a new deal for families living in council houses. No longer will they be prevented by Labour controlled councils from buying their homes if they want to do so. We believe that Labour's policy of preventing these families from becoming home owners is both unfair and divisive. Therefore, we will give those families who have lived in their council house or flat for at least three years a legal right to buy their home for two-thirds of the market price, which means that a £6,000 house could be bought for £4,000—a good bargain by any standards. And it is fair to the ratepayers as well because the council no longer has to subsidise the rent and is relieved of the cost of maintenance. Nearly three-quarters of the total of council houses were built before 1964 when costs were much lower than today. So, even though a family would be buying for two-thirds of the present market price, they would still be paying a lot more than the historic cost and the profit would accrue to the local council.
Fourth, we believe strongly that the time has come to take decisive action about rates. So from next year—1975–76—the cost of teachers' salaries up to a specified number of teachers will be transferred from the rates to the Exchequer, and the Exchequer grant to the police and the fire services will be increased. This will help all ratepayers, commercial and industrial as well as house-holders. We believe this action is essential in order to prevent the sort of increases that have occurred this year. For I accept that this would be quite intolerable to ratepayers.
Over the normal 4–5 year period of a Parliament we will abolish household rates altogether and replace them by taxes or a [end p2] combination of taxes which are more broadly based and take more account of people's ability to pay.
The reduction of the mortgage interest rate from 11 per cent to 9½%; would not send house prices shooting up as has happened in the past because there is already a fair number of both newly built houses and older houses which are unsold. The Home Savings Grant scheme would not increase effective demand for at least two years, during which time the building industry will be able to increase the supply of homes knowing that there will be a ready market by the time the houses are completed. So the building industry would get the confidence it needs to get housebuilding moving again.
And now the cost. Mr. Crosland, in his recent Press conference, said that our proposals were financially irresponsible. Here are the facts. The only immediate cost arising from our proposals is that of reducing mortgage interest rate from 11 per cent to 9½ per cent. The cost of this we estimate at between £180 million and £200 million, after allowing for savings in tax relief because of the lower interest rate. Our estimated cost is based, not on theory, but on actual experience of what we did when last in Government when we held the mortgage interest rate down to 9½ per cent for three months. We accept that we ought to have held it down longer but this did give us practical experience of the cost involved.
Our Home Savings Grant scheme will not cost anything at all for at least two years and in about three or four years' time we expect it to cost something like £100 million a year, although clearly the precise figure must depend upon the take-up.
It cannot be too often emphasised that our proposal ultimately to abolish household rates will not add one penny piece to public spending as a whole. What it means is that an unfair system of taxation, namely, household rates, would be replaced by a fairer and more broadly based system which takes much more account of people's ability to pay. I know, too, that there are difficulties for small shopkeepers whose businesses have relatively small turnovers and I give an undertaking that we will see what can be done [end p3] to meet these special problems. It is the case, however, that, unlike household rates, commercial and industrial rates are allowable for tax purposes.
Our proposals are workable, are what people want, and would be far less costly to public funds than Labour's proposed massive extension of council housing. Already the present Labour Government have allocated no less than £350 million this year in order to extend council housing by municipalisation and other means.
The truth is that no Government in the past managed to get on top of the problems of housing and rates. That is why, in the past six months, a number of my colleagues and I formed working groups to take a completely fresh look at these problems with the firm determination to produce practicable proposals. I can assure you that every single promise we make on housing and rates will be kept to the letter by the next Conservative Government.