CAB129-53 — Page 215

CONFIDENTIAL

C. (52) 239

15th July, 1952

Printed for the Cabinet. July 1952

CABINET OFFICE RECORD COPY

CABINET

Page 215

Copy No.

66

THE INVESTMENT PROGRAMME

MEMORANDUM BY THE MINISTER OF WORKS

In our discussions the Chancellor of the Exchequer asked us to assume that the building industry should not do more than £900 million of new construction in 1953. He desired all claims on new building, including housing, to be coerced within that figure. I think this plan too rigid. Nobody can forecast with accuracy what such a motley and sprawling industry can do a year ahead, but once an arbitrary ceiling is clamped on, not only are the possibilities of expansion beyond the target killed, but the target itself is unlikely to be reached.

2. The underlying reason for the Chancellor's plan is that building in the public sector of the economy, which includes the nationalised industries and subsidised houses, has grown to intolerable proportions. Private building can only be squeezed out of the way of the State by restricting everybody.

3. There are two methods of increasing the amount of privately-financed building:

Either the demands of the Government for new construction must be

reduced

or

the demands of the Government can be held where they are while the total of new construction is increased, and the increase goes to the private sector.

4. Our discussions showed how difficult it would be to cut the Departmental programmes because of the political consequences, and how reluctant the Chancellor is to allow the building industry to produce beyond the £900 million because of the possible diversion of resources from exports. Thus the taxpayer gets the worst of both worlds. His burdens are not alleviated. He is forbidden to expand the industry which by providing houses and factories could help the nation to earn its living. A queer policy for a Conservative Government.

5. To put a maximum in money on what may next year be invested in building must depress the industry which has the most successful record since we came into office. I believe this unique expansion to be the direct result of the freedom given by the Cabinet to the Minister of Housing and Local Government to build as many houses as he could. This was a breach in the comprehensive planning of Sir Stafford Cripps. It enabled the Minister of Housing and myself to tell masters and men that however hard they worked they would not work themselves out of a job.

6. It is now proposed that housing should go back to the prison from which we set it free last October. This will shock the country. Perhaps it might be explained if some other programme were to be given the freedom now taken away from housing, e.g., building for the export trades. But this is not so. We are to return to 100 per cent. planning with only a modest shift to industrial building to cover the retreat from housing.

7. The real limits on new building are set by savings for investment, labour, materials and old-fashioned methods of construction. The pationis 578 saving

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Page 216 enough, but this is not the place to discuss the remedy. Building labour can do more and new techniques can be more widely used if the supply of materials is increased. In short, we need a production policy to get the best out of the industry.

8. Such a policy would pay regard to the balance of payments and accept a limit on the quantity of imported building materials which we can have next year. I understood the Chancellor to agree to the same amounts as we shall have had in 1952. I would be content with this provided the Minister of Housing and Local Government does not go short on what he needs to complete the houses already started and planned to start before the end of this year.

9. The same volume of scarce materials can support a larger total of new building provided-

(a) The steel is obtainable in the forms required for construction and fitments. The Minister of Supply is looking after reinforcing rod and wire. Since the mills prefer to make steel for other purposes than building, we must also reduce the delays caused by the over-allocation of steel in general. (b) The Government puts no check on the expansion of home-produced building materials. The most important of these are bricks and cement; and products made from materials such as plasterboard and cement, which save steel and timber.

By increasing the output of these materials we can bring down building costs and encourage the growing export market in materials and prefabricated houses.

(c) Exports of cement in 1953 are kept to 1.9 million tons.

(d) Contractors' plant and spares get the steel they require. It is wasteful to allocate steel to building itself if there is not sufficient modern plant to do the work efficiently. The same applies to steel for the plant of build- ing material producers. As long as a material is allocated it is better to be generous at the beginning of a process of production rather than at the final stages.

10. A production policy of this kind will not work unless part of the building programme is free to expand beyond a money ceiling. The output of bricks this year would not be 13 per cent. higher than last year if the Minister of Housing and Local Government had not broadcast his appeal to build as many houses as possible.

11. I suggested in the course of our discussions that next year freedom to expand should be given to unsubsidised houses and building related to earning foreign exchange. Both would have to be subject to a system of starting dates regulated by local availabilities, but neither would be subject to a money ceiling. The important thing is for me to be able to tell the manufacturers of building materials, architects, civil engineers and builders that there is some programme where more work can be started in step with their success in saving scarce materials and in using new techniques.

12. My recommendations are:-

(a) The estimate of £900 million of new construction in 1953 to be taken only as a guide. Some part of the programme to be allowed to expand to the limit of the capacity of the building industry.

(b) The building industry to receive in 1953 not less of imported materials than

it will have consumed in 1952.

(c) Steel to be supplied in the forms required by the new building techniques.

Over-allocation of steel to be avoided.

(d) The output of home-produced building materials to be encouraged.

(e) Contractors' plant and spares to get the steel they require. (f) Exports of cement in 1953 to be held at 1.9 million tons.

Ministry of Works, S.E. 1,

15th July, 1952.

D. E.