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Column 1014admitted, with the benefit of that great gift of hindsight, that certain actions of the recent past should perhaps not have been taken. One of them was the delay between the announcement and the implementation of the abolition of double mortgage tax relief. The three-month delay in the implementation of that decision by the then Chancellor of the Exchequer undoubtedly increased house price inflation and encouraged people to borrow more than they should. If that had not occurred, the subsequent slump in the housing market, which we are witnessing now, particularly in London and the south-east and to a lesser extent elsewhere, would not have happened. It is incumbent on all hon. Members to learn from those lessons. I am worried about the plight of the housing market and those involved in the construction industry. Companies, large and small, are being forced into liquidation. In particular, small companies are having to lay off gangs of bricklayers whom they have employed for years. Homes for tomorrow are not being built today, and I fear that that will cause an increase in house price inflation in two or three years' time. I ask Ministers to consider the matter not simply in the context of the defeat of inflation--I wholeheartedly agree with and support that policy--but in the context of young people who leave school today and look to buy their first home tomorrow. The housing market is in a state of stop-go. When the Government came to power I hoped that we would see the end of stop-go policies.
Young people and not so young people who are suffering from high interest rates on their mortgages were perhaps encouraged to borrow more than they should from the lending institutions, which include not just building societies but banks which entered the housing finance market. I hope that they will not be tempted to remortgage through some other institution, such as a foreign bank with some so-called product linked to the value of the deutschmark, the yen or the franc. I hope that they will be sensible and will return to their lending institution, lay their cards on the table and say, "We cannot afford to repay what we previously committed ourselves to." I am sure that if they do, they will receive a sympathetic hearing and that their lending institution will try to reschedule their borrowing, whether by extending the loan, freezing the interest or a combination of several levers, to ensure that their hardship is relieved. In the Housing Act 1980 the Government introduced a tenants' charter--something which the Labour Government talked about and the Conservative Government have implemented. In particular, the charter sought to impose on local authorities a duty to compile a list of their tenants who would be prepared to sublet part of their accommodation that was surplus to requirements. The hon. Member for Dagenham told us that the majority of cases that he deals with at his advice bureau are about housing matters. I can confirm that from my constituency experience. A large proportion of those who come to my advice bureau are single and for one reason or another cannot or do not want to live with their parents. For them the answer must surely be to find short- term accommodation, perhaps lodgings in the town where they grew up and seek employment. The best way to find short-term accommodation is to search the local authority list to find the houses that are larger than the tenant's requirements.
Column 1015points arise on subletting. First, the young single people who come to my surgery want a place of their own. Unfortunately, there is a shortage of suitable accommodation. Secondly, does not subletting interfere with a person's housing benefit? That acts as a disincentive to subletting.
Mr. Heddle : All of us, from the moment we leave school, want accommodation of our own, but we cannot always have what we want when we want it. Sometimes it is necessary to take what may be second best, but possibly better than the homelessness to which hon. Gentlemen have referred. The hon. Gentleman also mentioned housing benefit. Surely, for a widow or widower in a three-bedroomed house, to sublet a room that is no longer used except for the storage of trunks and other memorabilia will produce an income supplement which could be substantially in excess of what they might lose in housing benefit. I wholly reject the motion in the name of the Leader of the Opposition and wholly support the amendment tabled by my right hon. Friend the Prime Minister.
Mr. Ronnie Fearn (Southport) : Tory Members have tried hard to put a brave face on the housing problem that the country faces. They have found excuses and ingenious ways of, shall we say, putting the problem into context.
I agree with many points made by the hon. Member for
Mid-Staffordshire (Mr. Heddle), but people's everyday experience is so different. People know that things are wrong as they cancel their Christmas. They know that housing policy has failed as they see the pictures of cardboard city. After 10 years of Tory government they see housing policy in a shambles. They have begun to wonder whether the Government have any answers to the housing crisis.
Perhaps the most prominent issue is the rise in mortgage rates and repayments, which has been dubbed the Tory tax. The cost of Conservative mismanagement of the economy has been huge : the rise in interest rates from 9.8 per cent. in July 1988 to the present 14.5 per cent. ; the increase in the monthly repayments on the average £30,000 mortgage of £75 ; and the increase in the monthly repayments on the average £60,000 endowment mortgage of more than £200. Those rises dwarf the tax cuts of previous years.
The Government used to talk about creating a stable financial climate--an environment where businesses and individuals could plan their investments. We presumed that they realised that people do not always plan ahead. We thought that they realised that people cannot always see what is round the corner. When people do not see what is coming, that does not make them imprudent. I invite the House to look at the most sophisticated economic forecasters, whose job it is to guess what interest rates will be in a year's time. In July 1988, when the mortgage rate was 9.8 per cent., none of them predicted rates of 14.8 per cent. at Christmas 1989, and they are the specialists. This Government do not apologise for their mistakes ; they simply shrug their shoulders as if to say, "You should not have borrowed so much." So much for providing a stable financial climate. The home owners have been hit and they are bearing the brunt of the Government's interest rate policy. They are being punished for this Government's mistakes. The
Column 1016price for house owners is only too real. The number in arrears is beginning to grow. In December 1988, a total of 326,000 individuals were more than two months in arrears.
Mr. Allan Roberts (Bootle) : The hon. Gentleman and I represent opposite ends of the same local authority area. Is he aware that there has been a fourfold increase in homelessness in the Sefton local authority area, mainly caused by people having to default on mortgage payments? That is putting pressure on the supply of homes in Southport, where Sefton council houses the homeless. It is also creating tremendous problems at the other end of the borough, in my constituency, where housing problems and homelessness are increasing dramatically.
Mr. Fearn : The hon. Gentleman is right. We thought Southport was the affluent end of the borough, and that Bootle would be the area to suffer most from homelessness. However, it is the reverse. Indeed, the whole of the Sefton borough has homeless people, including Crosby, Formby and the rural areas.
In December 1988, a total of 326,000 individuals were more than two months in arrears with their mortgage payments. By July this year, the number had shot up to 400,000, and that was before the recent rise in mortgage rates, before the poll tax demands arrive and before the rise in unemployment that the Chancellor mentioned yesterday. Independent housing experts expect the number in arrears to rise to more than 450,000 towards the middle of next year. That is almost half a million households, many of them families, that have to cut back drastically. That is half a million people living with the fear that they might lose their homes.
People say that building societies are being understanding and lenient and that few people are threatened with losing their homes. I am pleased to say that, in many instances, that is true and people are being allowed to extend their mortgages, capitalise their debts and take "repayment respite". Such flexibility is welcome, but it is not the whole story. Many of the new lenders are not friendly building societies. Even the high street banks--where I used to work--are not generally thought to be as understanding as the building societies and some of the new financial institutions can be described only as loan sharks. One firm advertised its mortgages :
"Good news! Up to 35 per cent. saving on interest payments." Such a firm will hardly have the decency to think twice about putting pressure on those in arrears, scaring them and then repossessing.
There is a lack of advice and information. Many lenders either do not give advice or are too busy to give the personal advice that is really needed. The voluntary and local authority finance groups that offer debt counselling are overworked and underfunded. Comments from a debt counsellor, as reported in a recent newspaper article, say it all :
"Assistance can only now be given in dire emergencies If we take on any more people we won't be able to fulfil our role as an advisory service properly."
As the number in arrears mounts, the pressure to repossess increases. It is already clear that the number of repossessions in the south is rising, and that it is likely to become an explosion in the new year. First, many people will not feel the pressure from the recent rise in rates until the new year. Secondly, next year there will be a rise in unemployment--that is forecast. Thirdly, there will be an
Column 1017increase in the number of bad loans sold to professional debt collectors. It puts the fear of God into many people when they realise that debt collectors have hold of their mortgages. Many people fear that the housing market may pick up just sufficiently to persuade lenders that it may be worthwhile to repossess. Any leniency by lenders until now may have sprung simply from self-interest. It costs to repossess, and the lender may not be able to sell the house, even at a knock-down price. A slight upturn in the housing market might be good news for estate agents, but for the indebted--those really suffering under present policies who can sell their houses only at prices lower than they paid--it might mean the bailiffs.
Hon. Members who do not know what repossession means should read last week's The Sunday Correspondent, which gave a description of one family's experience. A brief extract gives the flavour. It said :
"It took 45 seconds for the man to go from homeowner to homeless. He owed £5,455.31 in mortgage arrears : This order means the building society can take possession in 28 days. Have you anything to say?' said the registrar I lost my job, but I got a new one, but I'm waiting for the first month's wages and then I'll start to But the man did not stand a chance.
Can you pay £500 every month on top of the usual payments? No? Well they'll have to repossess. Next.' "
Some hon. Members might be pleased that our judicial system is so efficient that it can deal with an N29 order for repossession in 45 seconds. They might care to reflect on the shame people feel, on their despair and on their futures. We are not unrealistic on these Benches. We do not think that there is a policy that can correct the failure of this Government's economic mismanagement without pain. The problem with the Government's policy is that it does not give anyone hope. People envisage higher mortgage costs carrying on into the distant future. They realise that the Government are divided about what to do.
People should be aware that there are alternatives that would bring hope to home owners, and the House should be aware that there are alternatives that would restore credibility to economic policy. Early membership of the exchange rate mechanism would allow interest rates to fall relatively quickly. If demand began to get out of control, sensible tax reforms would tighten fiscal policy, preventing the need always to resort to high interest rates. The policy would still be painful in the short term, but there would be hope. People would know that the policy was credible and that it would help to bring down interest rates.
While economic policy is put right, the Government could alleviate the problems of the home owner in arrears, whose house is about to be repossessed, through other measures. For example, assistance in debt counselling would not cost a great deal. As the Government's economic mismanagement has caused the crisis, the least that they can do is to help in the provision of advice.
The Government could also tighten control on the misleading advertising of credit. For example, they could extend the Financial Services Act 1986 so that organisations such as FIMBRA could control the actions of its members advertising mortgages in a misleading manner. In that way, investor protection could be extended from the investor in insurance to the investor in
Column 1018property. Surely it is the Government's job to promote consumer protection, especially in an area as important as the housing market.
The home owners of Britain are not asking for much. Indeed, many of them probably realise that there are many others with far more serious housing difficulties. I do not have time to go into the detail of the many other housing problems facing people in Britain. That is not because the problems are not acute. Other hon. Members have referred to the depth of failure of the Government's housing policy, the consequent rise in homelessness and the poor state of the housing stock.
The warning that I am giving the Government is that the home owner in arrears today could be the homeless person of tomorrow. They must not make the housing problems of everyone else worse by ignoring the plight of the home owner. The crisis is not only at Christmas ; it is with us for many years to come.
Sir George Young (Ealing, Acton) : Like the hon. Member for Southport (Mr. Fearn), I read the moving article in The Sunday Correspondent last week. In my brief remarks I want to take up the theme of homelessness on which the hon. Gentleman and other hon. Members have touched.
Last week, a number of Members on both sides of the House and in both Houses who feel strongly about homelessness formed the all-party parliamentary group on homelessness. We look forward to working with the many organisations whose work in that area we applaud and who have some exciting and fresh ideas to help tackle the problems of homelessness. We also look forward to talking to Ministers and obtaining further details of the £250 million package, an announcement which I greatly welcome.
As joint chairman of that newly formed group, I am interested in solutions and practical help for the people who find themselves homeless, rather than in propaganda. Any strategy for dealing with homelessness must start by sending a clear signal to young people who now have somewhere to live but who are thinking of coming to London, or another city, in search of their fortune but who have no clear idea of where they would stay. I hate to cross swords with my right hon. Friend the Member for Chingford (Mr. Tebbit) but the message for them must be, "Don't get on your bike. Don't come to London in search of work unless you have somewhere to live, because if you find a job you will not be able to hold it down unless you have somewhere permanent to stay."
I welcome all the initiatives that are being taken, but we must not weaken the strong signal to young people that the situation in the capital is desperate and that they should not chance their arm and come here on the offchance of finding somewhere because the chances are that they will not.
I want to make two points on the theme of homelessness. The first concerns the tenants incentive scheme. Part of the solution for homelessness in London must be to look at those who are now living in London who neither have to nor want to do so, but who cannot afford to move out--people who may have retired or have children living in other parts of the country and who are
Column 1019local authority tenants. The tenants incentive scheme gives them the opportunity to own their own homes, to move out of the capital and to be near their families.
The advantages of the tenants incentive scheme is that it is quick ; it provides relets without having to build fresh accommodation which can take two years. Not only is it quick, but it is a cost-effective way of getting relets without spending the £80,000 or £100,000 that it would cost to build a new flat. If one gave a dramatic and enthusiastic push to the tenants incentive scheme in London, every family now in bed and breakfast could be out within 12 months. Therefore, I ask Ministers to look again at that scheme to see whether its full potential is being achieved and whether one could put fresh steam behind it to free accommodation and get families out of bed and breakfast accommodation.
My second point relates to planning, but it impinges directly on the problems of homelessness. There is a shortage of houses in the south-east and that is why we have a problem of homelessness. Even if we do all that we can to encourage local authorities to let property that is empty, to encourage the private rented sector to bring back into use property that is unlet and make full use of derelict land, there will still be a shortage of homes in the south-east for those who are already living here. It is nonsense to say that we should let the market work and let prices in the south-east rise so that people find accommodation in the north-east or elsewhere. That is not a practical solution. It means that nurses, teachers, postmen or bus drivers could not afford to live in the south- east, and that would lead to unbalanced communities. Part of any strategy for dealing with the housing shortage and homelessness is to increase the supply of homes in the south-east.
I welcome the solution of new villages or new settlements which provide the opportunity to build new balanced communities with accommodation for rent and for sale, but I am slightly disappointed at the lack of progress that has been made by new settlements or new villages in the past few months. There have been some disappointing decisions on appeal and I hope that next year the Government will look again at the new settlement approach to the housing shortage in the south-east to see whether that should form part of the solution. The Government need not be ashamed of their housing record. If the Labour party had achieved what the Government have achieved over the past 10 years, bearing in mind the disappointing last three years of the Labour Government, it would be well satisfied.
The hon. Member for Dagenham (Mr. Gould) rightly referred to the number of people with housing problems who present themselves at Members' advice bureaux, particularly those of London Members. But a variety of solutions are now available that simply were not on offer 10 years ago--solutions such as shared ownership ; low-cost home ownership ; the revival of the private rented sector, which was dying on its feet 10 years ago ; the priority estates project, bringing back into use council estates that were impossible to let ; the housing association movement borrowing fresh funds from the City, adding to the resources made available to it by the Government. The picture painted by the hon. Member for Dagenham was incomplete. I commend the Government on their ingenuity, initiative and determination in improving the housing conditions of people in Britain.
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Ms. Kate Hoey (Vauxhall) : I am pleased that this debate is taking place today. As a new Member, I may not yet understand the nuances of the House, but it is rather disturbing that the Benches of the House were filled for yesterday's emotional and important debate and yet they are relatively empty today when we are discussing a matter of major importance to the British people. Perhaps we all share some blame for the fact that housing has not become a crusade in Britain. I want to talk a little about the impact of high mortgage rates on London in particular. If anything good can come out of high mortgage rate, it is that it has at least brought the shortage of housing and the importance of that to the attention of many of thousands of people who until now may not have seen that as a problem. Londoners are particularly affected by the increase in mortgage rates, because London has the highest house prices in the country. The average home in the capital costs just below £100,000, while the national average is a little above £60,000. Average incomes in London are above the national average, but they do not exceed them to that extent. The size of London's economy and its continuing buoyancy compared with other areas mean that demand for housing remains high and prices are determined by what a small section of the population can afford, leaving the rest to struggle with high bills. Therefore, it is not surprising that, although some 600 home owners in London have become homeless during the past year, the increase has not been so great in the rest of the country. Until now, the relatively low rate in London has been due to the booming housing market. Many people who have got into trouble with repayments could still sell at a profit and buy elsewhere. With the collapse of the housing market many people will not now be able to do that. Therefore, we are seeing only the tip of the iceberg in terms of homelessness which has resulted from people not being able to afford their mortgages.
It is worth pointing out what a daunting task now faces the first-time buyer in London trying to get on the first rung of the housing ladder. The average mortgage advance for first-time buyers in London is now £70,000. With present interest rates, that means repayments of approximately £850 a month. The Government have told us that high interest rates will continue until such time as they can be cut. Therefore, we may be facing high increases in mortgage rates, and that will mean that more people in London face having to get rid of their homes. As we heard in the moving account in The Sunday Correspondent, they will be forced to go through the stigmatising process of having to sell their home or having it taken from them. I share the sentiments expressed earlier about the availability of tax relief for people who wish to buy homes together. The change in August 1988 cut off a further avenue for young people and is to be regretted. There are alternatives to buying in London, but renting from private landlords is expensive, the accommodation is hard to find, and the security is poor. Due to the complete collapse of local authority new home building and the sale of over 120,000 London council homes since 1979, councils now have far fewer lettings. We have already heard that housing associations are currently starting fewer homes in London than in the 1970s, so councils and local housing associations are overwhelmed with meeting the needs of the homeless.
Column 1021Despite an average of over 60 per cent. of council lettings going to the homeless in London--over half as many again as in the rest of the country--there are now 25,000 homeless households in temporary accommodation in London. That would be the equivalent of a sizeable town such as Stevenage.
Some hon. Members may have seen in a newspaper this week an article on a person in my constituency who was homeless and begging. Attempts were made to prove that he had money and to show that he was not genuinely homeless. The attack was particularly sad. If those reporters had walked through the Bull Ring and spoken to people--although I doubt if many from the newspaper involved would dare to--they would have discovered the type of people who are homeless. It is important to point out that one cannot classify "homeless people" as just one category. Every homeless person is an individual with particular needs, problems and reasons for becoming homeless.
The "Skipper" is one of the projects from the north Lambeth day centre which is involved with homeless people. The centre is an education project where many young people can go to obtain advice and to practise, learn and improve their writing skills to help them obtain a job. An average young person who visited the north Lambeth day centre said :
"From June 1989 to September 1989 I had no money because I'd lost my YTS place and my bridging loan had run out. I went to the DSS in September because I had nowhere to live and was under 18, they wouldn't give me any money. I felt like they didn't want to know and didn't care. I tried to get work and told them this but they made me feel as if I was lying. Eventually I went to the Council who found me a room in a hostel. I had somewhere to live so I went to the DSS expecting money. I was given a £6 crisis loan which was to last two weeks. I was only given this because I was in Severe Hardship' and would eventually get Income Support because of this. This meant I had to live for 14 days on £6. I went again three days later and was told I wasn't entitled to anything else. Luckily the hostel lent me £4 for food and a social services worker obtained £20 from the Salvation Army for me."
In this edition of "Skipper" there are other letters from homeless people who are lucky enough to have the benefit of the people working at the centre. That example shows how false it is for anyone to try to say that all the homeless--or a substantial number--are simply people who have left home and could return. If I look around my constituency I see people who are living in inadequate housing, perhaps on the seventh floor of a tower block, in great overcrowding and in conditions with an enormous amount of damp or where the flat is obviously in disrepair. Are we saying to those people that they are adequately housed and that they have a home and there is no problem?
The definition of "homelessness" should be widened to include people who do not live in decent surroundings or an environment likely to improve their well-being and health. Such places cannot be called a home. In some ways, our narrow definition of homelessness excludes the many thousands of people who are living in appalling conditions and who have little chance--in my constituency--of being rehoused. One in 10 households in my borough suffers from extreme overcrowding. They have no chance of finding anywhere decent to live. There is no point saying to them, as the Government would, "Why don't you try to buy?" First, they would not want to buy the flat in which
Column 1022they are living because it usually needs an enormous amount of work and money spent on it. Secondly, they would have no chance of obtaining a mortgage.
There are many myths about homelessness and housing, and one of the saddest things is that it has not become a crusading issue. All hon. Members rightly feel passionately about the National Health Service, but unless one is suffering directly from a housing problem, it does not reach the top of the agenda. However, at Christmas it does and over the next couple of weeks we will probably see many sad articles in the press about homelessness. But as the hon. Member for Southport (Mr. Fearn) rightly pointed out, after Christmas the problem will still exist.
I hope that this Opposition day debate will mark the beginning of an increase in awareness--not just in the House but in the country--of the state of housing and how dire it is. There must be choice of housing but, under Government policies, only a tiny percentage of the population have real choice. I hope that today we will show that everyone has a responsibility. People in the country who are well housed and have no problems have a responsibility to raise the issue of homelessness with their Members of Parliament. They should bring it to the forefront, so that, by the end of next year, we will be able to say that something has been done about housing. In London, the position is already dire as we cannot get nurses, teachers, or people to staff buses or transport. The basic reason for that is that people can no longer obtain housing in London or live in a safe environment where they are happy and contented.
We must see the problem of homelessness as crucial, and we must develop housing throughout the country but particularly in London. We must see it as a major problem that will engulf us in a year or two if something is not done quickly.
Mr. Douglas French (Gloucester) : The motion moved by the Opposition "condemns", "deplores", "warns" and "deplores" again. However, as my right hon. and learned Friend the Minister made clear, it does not propose any sound solutions.
The hon. Member for Dagenham (Mr. Gould) called for a "fundamental reappraisal" and "reversal of mistakes", but when pressed to come up with details of Opposition policies he made a feature of not presenting any for fear that they might be scrutinised.
The hon. Member for Vauxhall (Ms. Hoey) called for more choice. In the last 10 years, the Conservative Government, to a greater extent than any previous Administration, have endeavoured to provide genuine housing choice.
It is a pity that Opposition Members have not acknowledged the extent to which the Government have sought to provide additional opportunities for people to purchase their own homes, in particular for council tenants through the right-to-buy legislation. That has brought within the grasp of many who otherwise would
Column 1023have been unable to contemplate it both the possibility and the reality of owning the house or flat in which they live. From time to time the Labour party has been slightly more enthusiastic about that policy, but is has never been very keen to endorse it.
Those who have exercised their right-to-buy have, in my experience, almost always been pleased to have done so. In recent years the scheme has been improved. There are better discounts and the range of properties within the ambit of the scheme has been extended. Since 1979, more than 1 million houses and flats have been sold through the right-to-buy scheme. That is an impressive figure, but it still means that the scheme has been only a qualified success. Only one fifth of the properties which might have been purchased in this way have been bought. Since it represents the bargain of a lifetime for those who decide to take up the option, it is worth asking why it is that approximately 14 local authorities have sold only about 10 per cent. of their local authority housing stock. In contrast, those who have done well have sold about 35 per cent., but even that does not represent a very impressive percentage.
It is absolutely clear that the success or failure of the right-to-buy scheme in particular areas and at particular times has no connection whatever with interest rate levels. In the last year, the number of flats purchased through the right-to-buy scheme--just under 27,000--has been the highest ever. That coincided with a period of admittedly high interest rates, but they have not deterred people from exercising their right to buy.
Even at times of high interest rates, it is both desirable and possible that people should still wish to become home owners. For some of them, the arithmetic may look daunting, but even within normal or very low household budgets it is still perfectly possible for people to exercise their right to buy. Nevertheless, the time has come when the scheme should be boosted. I therefore welcome the Government experiment known as the rents into mortgages scheme, which provides an important alternative means of purchasing one's home and additional choice for prospective purchasers.
There have been two experiments. The first was announced on 30 October by my right hon. and learned Friend the Secretary of State for Scotland and applies to houses and flats owned by Scottish Homes. The second experiment, known as flexi-ownership, was announced in September by my right hon. Friend the Secretary of State for Wales and applies to the 1,350 houses and flats owned by the Development Board for Rural Wales. In both cases, the system enables tenants to buy their homes for broadly the same weekly outlay as they currently pay in rent.
The system combines a discount entitlement with a mortgage and a deferred loan but, unlike many low-start schemes, it does not depend on an increasing burden of accumulating interest. It satisfies the deferred loan from the proceeds of the eventual sale of the property, but the cost of the deferred loan facility is calculated by reference to a proportion of the capital gain which has accrued in the intervening period. To that extent it has the characteristics of a shared ownership scheme, but there is no proper shared ownership. It is worth examining the arithmetic of such a scheme, since it is not widely understood. In both cases, the starting point is the rent currently being paid by the tenant. To that rent, for calculation purposes, 10 per cent. is added. Then £5 in the case of a house, or £7.50 in the case of a flat, is
Column 1024deducted from it as a notional allowance for the insurance and maintenance costs that the new owner will have to bear. Taking the average rent in Wales, which is £21.84, if one adds 10 per cent. and deducts £5, that leaves £19.02. That is the amount which the prospective purchaser would have to pay each week under the rents into morgages scheme. The amount of low-start mortgage that £19.02 will buy is the figure that the tenant pays for his purchase. But that is not enough to cover the entire cost : the difference between that amount and the market value of the house is met, first, by the discount and, secondly, by a deferred loan.
An important feature of the scheme is that the discount is 15 per centage points less than the discount that is applied in the right-to-buy scheme. If it were otherwise, the introduction of such a scheme might be less than welcomed by those who have already exercised their right-to-buy under the existing scheme. Discounts under the rents into mortgages scheme start at 17 per cent. for houses and 29 per cent. for flats. They rise to 45 per cent. for houses and 55 per cent. for flats, which is 15 per cent. lower than the maximum that is available under the right-to-buy scheme. The important distinction, apart from the discount differential, is that even after the purchase has been made, eligibility for discount continues to accrue at 1 per cent. per year in respect of the calculation of the deferred loan that later has to be repaid, subject to the maximum percentages. When the time comes to sell the property, the deferred loan is the amount represented by the original percentage, as applied to the sale price, less the additional discount which has accrued at 1 per cent. per year.
By means of that ingenious formula, the loan is repaid, the mortgage is repaid and the purchaser--who now becomes the seller--is left with a significant capital gain, the amount of which will depend on house price inflation in the intervening period. It is not a dream or a nightmare, as the hon. Member for Dagenham suggests ; it is a painless way of achieving home ownership.
My hon. Friend the Under-Secretary of State for the Environment wrote to me on 2 November 1989. In his letter he said that the Government had no plans at present to extend the rents into mortgages scheme beyond the two experiments in Wales and Scotland. He confirmed that they are trial experiments for three years and that they will be monitored and evaluated. However, in the 30 days from 30 October to 30 November, at a time of high interest rates, the number of inquiries in Scotland about the scheme amounted to 360. That is a sign that it will be enormously successful--and so it should be because it is extremely attractive. It would be even more successful if it were heavily promoted. Once the early part of the experiment is concluded, I see no reason why it should be necessary to wait three years before the scheme is promoted nationally. It should be promoted for the excellent scheme that it is, and should apply to all local authority tenants in all parts of the country--or, if that is not possible, particularly where there are housing pressures. I should like it to apply in my own constituency of Gloucester. It is an ingenious and a winning formula and I very much hope that the Government will decide to extend it nationally.
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Mr. David Winnick (Walsall, North) : As my hon. Friend the Member for Knowsley, North (Mr. Howarth) pointed out, it is not surprising that the Government amendment makes no mention of rented accommodation. Basically, it is a problem or a crisis in which the Government take no interest. It is also not surprising that the Government amendment does not boast about the provision of private sector rented accommodation. Had the Housing Act worked in the way in which the Government predicted, they would now be telling us about all the private sector rented accommodation that had been provided through shorthold and shorthold assured tenancies.
In the past few days, I have tried to find out what the position is. I have tabled questions to the Department of the Environment and I have been to the Library where they were good enough to ring up a number of organisations concerned with housing, but hardly any information is available. The general consensus among organisations concerned with housing is that the number of new dwellings available in the private sector as a result of the Housing Act 1988 has been derisory, as Labour Members constantly warned when the legislation was going through the House. The new accommodation that has been provided here and there has been mainly in the high rented sector, and of course that is of no use to the vast majority of our constituents.
I listened carefully to the hon. Member for Gloucester (Mr. French). When people go to his surgery, as they come to mine, and tell him about their acute housing plight I wonder whether he gives them the lecture that he has just given the House.
At present, this country has the largest number of homeless people since the end of the war. Tonight only five minutes from here people will make their homes in cardboard boxes as they have on previous nights, and will in future. A few nights ago, I went to see what was happening outside Embankment station. Any hon. Member who thinks that I am exaggerating should go along there. It is a disgrace that so many people should be living in those conditions in an advanced industrialised country, whatever our economic problems. Many of them do not have drink or drugs problems. Many are perfectly law-abiding citizens who have come to London and simply cannot find accommodation. The Evening Standard provides information about rented accommodation at £150, £200 and £250 per week. What use is that to people coming to London who may find a job paying a modest wage? They will not be able to afford to buy, and nor will they be able to afford rented accommodation. The lectures from the hon. Member for Gloucester are no help to the people who will sleep outside Embankment station tonight. Perhaps the hon. Gentleman would like to go there tonight after the 10 pm vote and lecture those people about the schemes he has mentioned. I am willing to accompany him.
The crisis is not just among the homeless. My hon. Friend the Member for Dagenham (Mr. Gould) said that most people who come to see him have housing problems. Surely that is true for most of us. At least 65 or 70 per cent. of those who come to my regular constituency surgeries or write to me are concerned about housing problems. Because of deliberate Government policy, and not because of the failure by the local authority, my own council has
Column 1026been able to undertake no housebuilding at all in the past 10 years. Of course, as the Government constantly boast, the public rented sector has been substantially reduced. But what should I say to a couple with two children who could wait for years in a small flat? One can imagine what it is like for a mother with two small children in a small flat in a multi-storey block who goes almost daily to the local housing office trying to find a house. People with no children have hardly any chance of finding accommodation ; if they have one child they wait a long time to be rehoused from a flat to a house and more recently even families with two children can wait literally for years. All they want is a house. They cannot afford to buy and they certainly cannot afford any of the schemes mentioned by the hon. Member for Gloucester. What is their crime? Why should they be penalised day in and day out because their income is low? I accept entirely that the majority of people in Britain want to own their own homes. I do not deplore that ; I own my own home, or at least I am buying it through a building society. If it is good enough for us, of course other people should have the same opportunity. I do not deplore the fact that the majority of people want to own their own homes. If Tory Members really believe their propaganda that Labour Members are against owner-occupation, so be it. But we have never been against owner-occupation and in many ways we have tried to encourage it through various schemes when we have been in office. But what happens to the people who simply cannot buy? That is the divide between the two sides of the House. We are not divided about whether owner-occupation is good. We accept that and we believe that it should be encouraged. We know, however, only too well the mortgage difficulties faced by so many people who have bought their own homes in the past couple of years as a result of Government policy. We are not divided over the wish that people should buy their own homes if they can. But there is certainly a very big divide about what we should do about more than a quarter of the people in this country--those who need rented accommodation.
The case against the Government is that through sheer dogma and political calculation, which also comes into the picture, they will not allow local authorities to undertake the work that local councils have been doing for most of the century. Even under previous Tory Governments, council dwellings were built in virtually all parts of the country. Now it is virtually impossible. If it is Government policy that local authority dwellings should not be built, they should provide alternatives. But, as I said, the private rented sector does not provide the accommodation which is so necessary, despite the promises made by Ministers when the Housing Act was going through. What should we do when people who could not possibly afford market rents come to see us? Housing benefit, which has been cut so drastically, does not help. Ministers know that. No matter what fine words they may say at the Dispatch Box, Ministers are callously indifferent to the plight of people who are punished and penalised because they are not in a position to buy.
Council rents are also a form of punishment for tenants. In the past 10 years, council rents nationally have been forced up by 234 per cent. compared with an inflation figure of 110 per cent. over the same period. So in effect the Government have told council tenants that if they wish to
Column 1027continue as tenants they will be penalised. There is certainly no justification for the exorbitant rent increases that have been imposed in the past few years.
It is not surprising that the number of people with rent arrears is increasing. For example, the total income of one widower in my constituency who came to see me is £54 a week. Imagine what it must be like to live on that amount. He pays more than £10 a week in rent. I know that rents have increased and housing benefit has been dramatically reduced, but I could not believe that that man should be paying more than £10 a week in rent out of an income of £54 a week. I checked the amount with my local authority, which is not to blame for it. How could it be to blame? The Government's policy has been to force up council rents while drastically reducing housing benefit. This country needs a substantial council house building programme. Only local authorities, together with genuine housing associations, can provide the rented accommodation which is so desperately needed. My hon. Friend the Member for Vauxhall (Ms. Hoey) said that there were not many Members in the Chamber, unlike last night. The difference is that last night we were not sure which way the vote would go. As with debates on the death penalty and similar issues, one was not even certain what one's own colleagues would say. Ironically, then, though most constituents write to us about housing problems, there are few Members in the Chamber, whether Tory or Labour. The explanation is quite simple : we know that the Government will not listen. Because of dogma and political calculation, they are not interested in the plight of the people to whom my hon. Friends and I have referred.
When historians look back at these times they will find it difficult to believe that there could be so many people without accommodation, so many people sleeping in the open and countless families in flats who cannot get a house, and a Government and their supporters who are indifferent--there will be no abstentions in the vote tonight--to the plight of the many people who want accommodation but cannot afford to buy a house.
Mr. Edward Leigh (Gainsborough and Horncastle) : The hon. Member for Walsall, North (Mr. Winnick) accuses the Government of callousness. The Government will spend £250 million in the next two years on tackling the problem of homelessness in London and the south-east. I do not call that the action of a callous Government. They will spend £20 billion over the next three years in grants and expenditure on housing. I do not call that the action of a callous Government. We do not improve the debate by making such simplistic party political attacks.
To have a serious debate on these issues, we must at least compare alternative strategies. Much of the debate has been artificial. The Government have put forward their view which some may think is wrong headed. The hon. Member for Dagenham (Mr. Gould) was not prepared to say what the Government-in-waiting--as presumably he considers the Labour party to be--would do about the problem.
Mr. Leigh : I deny that, and Hansard will prove that he did not. I invite the hon. Member for Hammersmith (Mr. Soley) to explain what the Labour party would do in the current circumstances. I suspect that he will not.
Two years ago, there was a potential world recession and a stock market crash and it was necessary to have reflation through supply side measures, which inevitably resulted in inflation. The only way to curb inflation is to encourage saving and curb borrowing, which can be done only by increasing interest rates. A Labour Government would have done that, just as this Government have.
Bringing up a young family and having to pay for property with a mortgage, I suffer as much as anyone from high interest rates. Like all people in my age group who are bringing up young families, I urge the Government to bring down interest rates as soon as possible, but not so soon that it would limit the battle against inflation. Some of us suffer from high interest rates, but everyone suffers from inflation.
We should put the matter into context. Average incomes have increased by £67 a year over the past two years, while the average amount paid on an average mortgage of £22,000 has increased by £58 a year, despite the increase in interest rates. The Building Societies Association has proved that there is little evidential link between high interest rates and the number of repossessions. In the latter part of 1988, the number of repossessions fell to 0.01 per cent. of home loans. Repossessions have more to do with personal financial mismanagement, matrimonial problems or unemployment than with high interest rates. High interest rates are necessary if we are to curb inflation and get the economy running along the right lines. We must address the problem of housing for young people. I do not believe that the solution advocated by the hon. Member for Walsall, North was right. We must consider the kind of shared purchase schemes which were advocated by my hon. Friend the Member for Gloucester (Mr. French). I represent a rural area which traditionally has had low house prices. Young people in the villages in my constituency are finding it increasingly difficult to buy cottages and houses. Such housing is no longer within their price range because of the movement to the area of retired people from the south of England. I do not believe that the solution to the problem is to build more council housing in villages and trap people in rural areas subsidised housing from which they will find it difficult to escape in future years. The solution is to develop shared purchase schemes which will capture the imagination of young people. We may have to require local authorities to enter into such schemes.
Mr. Brandon-Bravo : I appreciate the fact that my hon. Friend, like all of us, is worried about high interest rates. He touched on the prices of houses. Are not higher house prices the down side of lower interest rates? Sometimes a person may be in a Catch-22 situation--as interest rates come down, he still finds it difficult to get on to the housing ladder because house prices have increased as a result of low interest rates. That was the position in 1987.
Column 1029Mr. Leigh : My hon. Friend makes his point. Our economic policies are right and necessary. Much of what must be done in Government is as painful as it is inevitable, but it must be done.
In our next legislative programme, we must look much more closely at shared purchase schemes and the private rented sector. We have been successful with assured tenancies and shorthold tenancies. Although I am sure that we will not get the Opposition's agreement, we must look at freeing the private rented sector for all future tenancies. The only way to address the problem of homelessness and to help young people, especially in inner-city areas, is to free the enormous supply of private rented accommodation. Such accommodation exists in under-occupied buildings, yet people do not have the confidence, ability or determination to put rooms in their houses on the market and may not be encouraged to do so. With shared purchase schemes, we can start to address the problem of homelessness among the young people in our great cities.
Mr. John Fraser (Norwood) : I cannot express how much I agree with my hon. Friend the Member for Walsall, North (Mr. Winnick) about the necessity to provide more homes for rent through building by local authorities and--I think that my hon. Friend would agree--housing associations. I listened carefully to the hon. Members for Gloucester (Mr. French) and for Gainsborough and Horncastle (Mr. Leigh). It does not seem to occur to Conservative Members that the great transition which has occurred as many tenants have moved to owner-occupation, because of the opportunity to buy on favourable terms and at discounts, was made possible only because of the efforts over the century of local authorities to build homes which were initially for rent. It is only the investment that took place year after year which has now made possible the transition from tenancy to owner-occupation, which most of us welcome. We should welcome it in the inner cities if only houses were replaced or there was an alternative, such as a transferable discount scheme. There is no contradiction between large-scale building for renting and owner-occupation on favourable terms at a later stage. The two are not incompatible.
I represent Lambeth, an inner-city area, which has considerable problems. It is fair to say that, when I was first elected, the single outstanding domestic problem--because unemployment was virtually unknown and unmeasurable in Lambeth then--was housing. Sadly, that problem has not gone away, although it has been joined by the problems of major unemployment and inner-city deprivation. It is to my deep regret and to the deep shame of the present Government that the housing problem, which was showing signs of improvement in terms of tenure, space standards and repairs, has been getting worse, not as a result of some act of fate, but as a direct consequence of Government policy.
What has happened in the past few years, and especially in the past year, has been critical for the more recent home buyers, who must now despair about where the money will come from after each interest rate rise. The position is also critical for thousands of people for whom the idea of buying a home is either an unattainable dream or a sick joke. The present cost of buying property will rule them out of the market in places such as Lambeth.