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Mr. Deputy Speaker (Sir Michael Lord): I have now to announce the result of a Division deferred on the motion relating to banking.

The Ayes were 124, the Noes were 322, so the motion was disagreed to.

[The Division List is published at the end of today’s debates.]

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Repossessions and the Housing Market

Question again proposed .

3.10 pm

Sir George Young (North-West Hampshire) (Con): It is a pleasure to follow the hon. Member for Leeds, East (Mr. Mudie), who is a formidable and knowledgeable member of the Treasury Committee. Unlike him, however, I will need no prompting about when to sit down, as I propose to make a relatively short contribution. The best bit of his speech was when he described the pressures facing an ordinary family: already hit by rising fuel and food costs, such a family could now be forced to come off a fixed-rate mortgage in favour of a more expensive standard rate loan. That simply adds to the problems confronting them and in some cases could lead, sadly, to repossession.

I want to focus my remarks on the second and third legs of the debate title—repossessions and the housing market. We have heard about the impact of the banking crisis on the housing market, and there have been some powerful speeches about those who face repossession and those who cannot afford to make their mortgage payments. I want to focus on some of the less obvious casualties in the housing market, namely those who look to the social housing sector for a solution to their housing difficulties. They are also tied up in this crisis and, paradoxically, their numbers will be swollen by those who find that they are repossessed and those for whom home ownership is no longer a practical possibility.

There has been a fundamental change over the past 25 years in how we fund social housing. If we had had this debate in the early 1980s, the trends that we have been talking about this afternoon would have had no impact at all on social housing, because the Government used to give local authorities powers to borrow, and they built local authority homes. Alternatively, the Government gave grants to housing associations that went on to build housing association properties. So in those days the social housing market was insulated against the broader trends that we have discussed this afternoon; the liquidity problems in the banking sector would have had no resonance in the social housing sector.

That has all changed today, for two principal reasons. First, housing associations now have to borrow significant sums from the banks. Secondly, social housing is now a by-product of market housing. Some 48 per cent, of the Housing Corporation’s programme of affordable homes is being delivered through section 106 of the Town and Country Planning Act 1990, on the back of market-led housing. As a result, it is dependent to some extent on a buoyant housing market.

Let me deal with that point first. On a typical new-build site, where a private developer is building market homes, 25 or 30 per cent. of them have to be affordable. That form of provision has many advantages: it provides mixed developments rather than the polarised ones that we had in the 1960s and 1970s, and it also saves the taxpayer a lot of money because the cost of providing social housing is, in effect, borne by the land owner, who makes slightly less of a windfall gain. Using the planning system to generate affordable homes is an enlightened policy—introduced, by the way, by the previous
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Conservative Government—that has enabled many people to access decent homes far more quickly than under the old system.

However, that use of the planning system also has a downside. Far from being insulated against the broader housing market, social housing is now, crucially, dependent on it. My concern is that the softening of the broader housing market will mean that the target of 3 million new homes, and the social housing component of that target, will not be achieved. If one looks at the annual reports and the share prices of the country’s major house builders, and at the comments of the Council of Mortgage Lenders, one finds that the outlook for housing is not good. That means that the outlook for social housing is not good either.

That brings me to the second factor: the reliance by housing associations on private finance to top up the Government grants that they get to deliver the housing programme. The National Housing Federation—the housing associations’ trade body—is aware of the considerable challenges faced by housing associations in the current financial climate. Between now and 2011, housing associations will have to borrow £16 billion of private finance to provide 155,000 new affordable homes, on top of the £8 billion of grant. I do not want to be over-dramatic about that, as housing associations are well run, regulated bodies that remain attractive prospects for lenders who want to retreat to quality investment. While there is no sign of lending supply drying up, some lenders are withdrawing from the housing association market and the cost of borrowing is rising.

As a result of the credit crunch there is more competition for finance. Lenders report that they are becoming much more selective, and it is inevitable that individual housing associations—especially those with less attractive risk profiles—will find it difficult to raise the money to sustain the build programme. The Council of Mortgage Lenders has warned the Housing Corporation not to push associations to build “at all costs” amid growing uncertainty in financial markets. Andrew Heywood, deputy head of policy at the CML, has said that, in the short to medium term, there is “no certainty” about the lending capacity of the banks. He added:

In response, the Housing Corporation said:

Several housing associations have been told by lenders, after deals were agreed in broad outline, that the price of the borrowing would go up. Signs that the property market has peaked will make it more difficult for those housing associations that top up their building programme by selling houses to maintain momentum.

This morning, I contacted one of the larger housing associations in my constituency to get a report from the front on how those broader problems are having an impact. I was told that all the funders were being very cautious, with some having stopped lending while others were looking at selling on their mortgage books, or were putting up margins by varying degrees. As a
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result, the biggest problem would be for housing associations that would be looking to raise more money because their facilities needed reviewing or increasing. The conclusion reached by the housing association that I contacted was that, if the crisis goes on much longer, it will start to impact on the sector’s ability to purchase sites and property from the private sector.

My point is that it is not just the private housing sector that is affected. The social housing sector is also affected. If the Government want to hit their 3 million target, they may have to act to maintain their social housing programme. They do not have much headroom on the public finance side, and we have not yet reached the stage where dramatic action is needed, but it would be prudent for Housing Ministers and the Treasury to have some contingency measures up their sleeves. Such measures may be needed to maintain the momentum in the housing programme and if we are to hit the housing target, which I am sure we all want to happen.

3.18 pm

Lembit Öpik (Montgomeryshire) (LD): I was very interested in the earlier contribution from the Minister. I like her; she did a good job in Northern Ireland as I guided her towards securing peace there. That is no more of a claim to power than what has been foisted on us from both sides of the House this afternoon, but all the negativity that the right hon. Lady showed makes it clear that she seems to have a real downer in the Liberal Democrats.

The Minister has nothing to fear from the contributions made by me and others this afternoon, as we are trying to offer insights and, I hope, some sage counsel. Any self-respecting Government should take such offerings seriously, regardless of their source. Getting help and support from us is nothing to be embarrassed about, and it should not be shunned. Indeed, the Minister should be proud that we are offering the advice for nothing. If she were to meet Liberal Democrats socially, I am confident that she would quite like us. The crucial point is that the observations made by my hon. Friend the Member for Twickenham (Dr. Cable) are right, regardless of party position, because they are based on the facts of the current economic situation.

The hon. Member for Newcastle upon Tyne, Central (Jim Cousins), who had to go to another event, to some extent underlined the power that we Liberal Democrats have by suggesting that my hon. Friend the Member for Twickenham was single-handedly responsible for the collapse and withdrawal of the Together mortgage scheme. That is power indeed. Perhaps most interesting of all was the way in which the Minister, who sadly is not in the Chamber at the moment, likened my hon. Friend the Member for Twickenham to Private Frazer in “Dad’s Army”. She suggested that he was effectively saying, “We’re all doomed”. To take up that analogy, she surely takes on the role of Corporal Jones by suggesting that we should not panic.

I cannot resist suggesting that the hon. Member for Fareham (Mr. Hoban) has taken on a Vicky Pollard role, as his party’s position this afternoon is “Yeah, but no, but yeah”; I still have not got a clue whether the Conservatives will vote with the Liberal Democrats or
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support the Labour party. That is a bit of intrigue and excitement to look forward to. On the subject of the Conservative position, I must correct something that he said about my choice of leadership candidate. He is right that I had a bit of a bad run of supporting unsuccessful leadership candidates, but my right hon. Friend the Member for Sheffield, Hallam (Mr. Clegg) is so good that I backed him and he still won. [Interruption.] I am willing to give way the hon. Member for West Chelmsford (Mr. Burns); I did not hear what he said from a sedentary position, but I am sure that it was very entertaining. Perhaps he should quit while he is ahead on that one.

The hon. Member for Fareham went on to claim that my words are so powerful that the very utterance of the phrase “brink of repossession catastrophe” will cause such a catastrophe to happen. If that is the case, I must be more cautious about my predictions that we will be hit by an asteroid. In practice, the prediction is not the same as the event. The purpose of the Liberal Democrats calling for today’s debate was to try to avert a repossession catastrophe by trying to get the Government to take a cross-party attitude, rather than a partisan bunker mentality, towards a problem that is obviously coming our way. Perhaps that was optimistic of us, in light of some of the comments made today.

I was interested in hearing what the Conservative position was, but—I do not mean this in a rude way; it is just an observation—it seems that the Conservatives have a series of bits-and-pieces ideas, but no clear philosophical narrative to their housing and economic policies. That is the case in other policy areas, too. They can tell us what they do not like, but I have no idea what economic policy on repossessions in the housing market would be if the Conservatives were in charge. Perhaps we will hear that narrative in the speech of the hon. Member for Fareham, which will immediately follow mine, but I fear that we have not heard that narrative because there is not one. I shall reserve judgment until we hear what the hon. Gentleman says in about 10 minutes’ time.

The hon. Member for Leeds, East (Mr. Mudie) spoke in an erudite, insightful way, as ever. He berated us for talking about the risk of recession, but what kind of debate will this be if we are censored, and prevented from discussing the real and present danger of a recession in this country? I have some disturbing statistics from my constituency. Between 2006 and 2007, average wages in my constituency went down, for the first time in years, by 4 per cent. That is not even a real-terms decrease; it is an absolute decline. The constituency of Montgomeryshire is therefore already displaying signs of recession. We ignore such statistics at our peril. If we take the mature attitude that my hon. Friend the Member for Twickenham has consistently taken in debates on the economy, we will collectively consider the issues and move forward.

Repossessions are rife and are on the up. They, among other leading indicators that we discussed, are harbingers of the doom that we were accused of spreading. Each of us has specific examples from our constituencies, where repossessions and problems with finding housing are arising all the time.

Julia Goldsworthy: I have two examples from my constituency that may inform my hon. Friend’s further comments. First, the local citizens advice branch
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informs me that it is concerned about the number of people who turn up in court for repossession hearings having not sought any advice at all. Does that not underline how important it is that advice is made available when people first experience difficulties? Secondly, it is not just mortgage lenders who are serving repossession notices. Some councils are now serving repossession orders for arrears of council tax. That is of great concern. There are pressures from all sides putting people’s homes under threat.

Lembit Öpik: My hon. Friend illustrates the precise problem. This is not a theoretical debate about what might happen, but a practical debate about what is happening. When councils act in the way that she describes, and when individuals face the desolation of homelessness, we have to take ideas seriously. I ask the Exchequer Secretary to the Treasury to offer us a crumb of hope when she sums up, by saying that the Government will consider the points made by my hon. Friends the Members for Twickenham and for Falmouth and Camborne (Julia Goldsworthy), and by me. I hope that the Government will be willing to work on those ideas on a cross-party basis.

It is implicitly accepted—I shall now say it explicitly—that the problem is not necessarily that loans were given in an inappropriate way in the past. The debt crisis arose because loans were given at a time when the economic circumstances were more stable and promising. Now that we find ourselves in a more precarious position, some loans that previously looked reliable look rather less reliable. The Government cannot be blamed for all the changes in economic circumstances, but they are responsible for responding now, at an early stage, when we can still prevent repossessions—the number of which is relatively small, given the total number of householders—from becoming a big macro-economic problem due to the decelerator effect that a change in fortunes often heralds.

About £7.5 trillion-worth of real estate is in the British public’s possession, but the fact that debt is coming up to £1.4 trillion is a concern, due to the sheer size of the debt and the difficulty in managing it. The British people now pay £1 million of debt interest every nine minutes. That is one reason interest rates are so important, and have such a powerful effect on the general fortunes of our country. So what can we do about it? My hon. Friend the Member for Twickenham—or, as I like to call him, the next Chancellor of the Exchequer—has put forward a cohesive strategic package that we look forward to implementing, but the country cannot afford to wait two years for that. The Minister is perfectly welcome to plagiarise our ideas; what we are talking about is a strategic narrative, to use that word again, that brings us out of the danger of massive numbers of repossessions being made, with the knock-on effect that that would have on recession.

The right hon. Member for North-West Hampshire (Sir George Young) made a very good point about house building and changing circumstances. We can consider other tools in addition to house building, such as shared ownership schemes, modular construction—that can bring down the cost of high-quality housing—restoration and the release of about 1 million homes that are lying vacant for various reasons that include
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financial or planning restrictions. That would immediately increase supply and deal with fixed demand, which is hard to alter.

So we have a basket of opportunities before us, which we can implement; not all of them cost a great deal of money, and some require only creativity, but it is important that we do that now, because we will not alter the demand for housing. We can alter the supply and therefore take some heat and pressure out of the system, reducing the risk of a crash as the market readjusts.

I would say in parenthesis—this is not directly related to what we are discussing today—that I hope that the Government revisit their home information pack policy. The HIP scheme does not seem to be delivering anything particularly useful to householders and, in the words of my hon. Friend the Member for Taunton (Mr. Browne), it is time for a HIP replacement. I hope we get that sometime soon. The evidence that we have seen from the Government’s own surveys shows little faith in the HIP process among purchasers and, indeed, vendors of houses.

Julia Goldsworthy: Does my hon. Friend agree that the Government should be a little more open-minded on the success of some of their other schemes, which are aimed at helping first-time buyers into the market? We see from the figures that uptake of the first-time buyers initiative has been very low. Just last week, I received an e-mail from a constituent who has been trying to take part in the home-to-own programme for more than three years. It concludes:

Do not the Government need to accept the failings of their own schemes?

Lembit Öpik: Individuals such as the one my hon. Friend quotes are not politicians; they are real people who are looking for real solutions. To that extent, I hope that the Government accept the circumstantial and anecdotal evidence, which adds up to clear mood music that this country is experiencing frustrations with some of the laudable proposals made by the Government. I understand that, so far, only 700 individuals have been assisted by the £100 million first-time buyers scheme, so while some of those schemes have potential, they are not realising it yet.

I thank my hon. Friend the Member for Taunton for his HIP replacement joke, which I shall not use again, and conclude with these thoughts. Liberal Democrats, like members of any party, like to compete with the Government and spar for advantage. It is perfectly legitimate for us to make party political points. Indeed, I was quite impressed with the Minister when I saw that normally mild mannered and gentle lady turn into a ferocious tiger at the merest scent of a Liberal Democrat “Focus” deliverer. But this issue is too important for that. If we get it wrong, we all lose.

Whatever the Minister says here in the Chamber, I hope that the Government are listening privately to the sage and considered advice from my hon. Friend the Member for Twickenham and others on the Liberal Democrat Benches who are more concerned with
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averting a housing catastrophe than they are with winning short-term points off the Government. The Minister, if she is listening, will accept that we raise those issues with good intentions and in good faith, and we hope that the dialogue can proceed in that way on a cross-party basis.

Ignoring the warnings is the psychology of denial. The path thereof can spell disaster. Accepting the dangers rationally and working together to do something about them may yet avert a repossession catastrophe and prevent some social damage that goes beyond words but which it is in our power to prevent.

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