CAB129-53 — Page 111

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Printed for the Cabinet. June 1952

CONFIDENTIAL

C. (52) 216

26th June, 1952

CABINET

Copy No. 73

A PROPERTY-OWNING DEMOCRACY

MEMORANDUM BY THE MINISTER OF HOUSING AND LOCAL GOVERNMENT

I very much welcome the Lord President's paper, C. (52) 207.

Naturally I have had all these matters much in mind and have been preparing with my advisers for the next forward move. We are governed by two factors; by the labour and materials available and by the political and economic climate. I have not brought to my colleagues any further proposals on private building since I raised the permissible proportion of private licences from 1 in 5 to 1 to 1. I have been waiting to learn from the Import Programme and Capital Investment Pro- gramme for 1953. For it would be foolish to step further forward to freedom only to be forced back again by circumstances.

My instructions from the Cabinet are to build 230,000 houses in 1952, 260,000 houses in 1953 and 300,000 in 1954 (Great Britain figures). I cannot say exactly what will be built in 1952. So far we have built 90,000 odd in five months. Last month production was just over 19,000; so unless we run into serious difficulties over fitments I think we will reach the 230,000. As I told the Prime Minister and my colleagues I am anxious about fitments, especially metal fitments. We must have either more steel for steel windows, or more timber for wooden windows.

There has been a big dammed up demand for private building over six years, which our new licensing system has to some extent let loose. For instance, private building starts in May totalled 4,700 against 2,700 in January (England and Wales). There are 116,000 applications outstanding. But like all such queues and long order books this is certainly fictitious. There are already signs of licences not being taken up because of the heavy burden of cost and other difficulties of the private

owner.

The Lord President says that the subsidised dweller of a council house pays a rent of 18s. average. Of course, in fact the rents vary according to local conditions but the figure is correct actuarilly, as an average figure. He says the private owner will have to pay 45s. a week for twenty years. This is, if anything, too low, since it makes no allowance for Schedule A income tax and for repairs.

There is therefore a gap of more than 27s. Some of it, of course, ought not to be filled; for the private owner obtains a permanent asset which the renter does not. But the subsidy element in the gap is at least 13s. How can we fill this gap? There are two methods; by the reduction of various imposts or by some form of subsidy or special assistance or both. In respect of the first, the most urgent thing is to get rid of development charge. This I am trying to do. Development charge falls not upon the landowner, or even on the commercial developer but like every other such tax upon the final consumer. Again, we might abolish Schedule A income tax, for houses below a certain value.

Direct subsidies can take the form which Lord Woolton suggests, of a lump sum payment per house. It is worth recalling that the Coalition Government agreed in 1944 to £100 per house. This was when the subsidy to the tenant was £300. Now the tenant subsidy is £769 (£577 exchequer and £192 rates). So an equivalent subsidy would be of the order of £250.

But there are other and perhaps healthier methods of assistance than direct subsidy (which in any case involves legislation). We are studying in my Ministry various methods. We could arrange for borrowing for Housing at lower rates:

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