Sucking the state dry

At the weekend Jeremy Hunt tried to compare himself to Aneurin Bevan by pointing out that they had both been attacked by the BMA (in 1946 they called Bevan a would-be Führer).

Without wishing to be overly political, Jeremy you are no Nye Bevan. I’m not sure what you have achieved to date but as Minister of Health and Housing (now there’s an idea) Bevan created the NHS and boosted post-war house-building from nothing to over 200,000 a year by 1950.

Bevan

Aneurin Bevan

As an example of Bevan’s towering status, take the speech he made in the Commons on the 6th March 1946 when pushing through his Housing Bill. It is as relevant now as it was then. The country, he explained, was facing shortages of labour and materials (as now) and Bevan stated that he intended to give priority to local authorities.

A house is at the end of a production line, not at the beginning of it. It is the last product. …if we are to have any correspondence between the size of the building force on the sites and the actual provision of material coming forward to the sites from the industries, there must be some planning. If we are to plan we have to plan with plannable instruments, and the speculative builder, by his very nature, is not a plannable instrument.

 He goes on to explain that the private sector should not receive subsidies (as it had after the first war) “..because it is building a lot more houses today without the subsidy than it built two years after the last war with a handsome subsidy… we shall use our building materials and our labour first…for those who need houses, and not for those who can buy them. Hon. Members opposite come forward with the old Tory clap-trap. The only remedy they have for every social problem is to enable private enterprise to suck at the teats of the State. That is the only kind of remedy they have —that we should pour out public money to private enterprise at the moment in order to build houses to sell…If I accepted the logic which has been put forward from those Benches today, the consequence would be inflated housing prices”.

House prices, he explained, had risen between 1919 and 1922 “…by 200 per cent., because no controls of any sort were exercised over the building industry.”

Well, today the private sector sucking is well and truly “sucking on the teats of the state”. Most of the £2 billion annual housing budget is propping up home ownership through help to buy and starter homes, which will also replace affordable housing on section 106 sites. Viability assessments are allowing developers severely to reduce the the amount of affordable housing being built. Take this site in Cambridge where 84 homes will be built. The normal requirement for 40 percent affordable homes has been reduced to 25 percent after the developer pled poverty, but he will walk away with a guaranteed £7 million profit!

As a consequence, housebuilder profits are soaring at a time when the FTSE is in deep trouble. According to this house builder, the current administration is the most “developer friendly” he had seen in his career. “You would have to go back a long time to see something that’s so in favour of developers,” he said.

Yet for a party that claims the mantle of free enterprise the Conservatives appear to be remarkably ignorant of how housing markets work.

This report suggests there has been a stampede for Help to Buy in London. Any economist will tell you that if you pump demand into a market without increasing supply then prices will rise. As Bevan pointed out, a house is at the end of a long production process that can last up to five years or more. Housebuilders, even if they wished to, could not ramp up supply to meet the huge demand that has been unleashed by the government, and so the policy is objectively inflationary. The caps on starter homes are also  inflationary, because if you set a price cap when demand is high there will be an obvious temptation to sell at the cap, and not below it. Likewise, the current “market price” of a house will inflate if you can walk away with a subsidy of up to £112,500 after five years. So the billions of pounds of taxpayer money that are beng pumped into the housing market will be swallowed up by inflation within a short space of time and we will be back at square one, with nothing concrete to show for it. At a time when almost no social rented housing is being built, when there is a danger that thousands of social rented homes will be lost though Right to Buy it seems to me to be a public scandal that the private sector is being feather-bedded in this way. The National Audit Office should get on the case.

When will this government realise that house builders are not “plannable instruments”? If you want to end the housing crisis you need a plan and a strategy. At present, we have neither.  Aneurin Bevan has a lot to teach us.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One thought on “Sucking the state dry

  1. Pingback: From the summit | Colin Wiles

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