1. Britain will win with Labour, Labour Party Manifesto, October 1974, with foreword by Harold Wilson, posted on www.ukpolitical.info, accessed 08.10.08

2. Let us work together - Labour's way out of the crisis, Labour Party Manifesto, February 1974, with foreword by Harold Wilson, posted on www.ukpolitical.info, accessed 08.10.08

3. Martin Pawley, Home Ownership, London, The Architectural Press, 1978, p 138

4. Firm action for a fair Britain, Conservative Party Manifesto, February 1974, posted on www.ukpolitical.info, accessed 08.10.08

5. Putting Britain First, Conservative Party Manifesto, October 1974, posted on www.ukpolitical.info, accessed 08.10.08

6. Royal Institution of Chartered Surveyors, RICS UK construction market survey, Q3 2008, RICS, 6 October 2008, posted on www.rics.org, accessed 08.10.08

7. Kate Barker, Barker Review of Housing Supply: Final Report - Delivering stability: securing our future housing needs. London, HMSO, 2004, posted on www.hm-treasury.gov.uk

8. Kate Barker, Barker Review of Land Use Planning: Final Report - Recommendations. London, HMSO, 2006, posted on www.hm-treasury.gov.uk

9. Margaret Beckett, Communities and Local Government ministerial changes announced, Communities and Local Government, Press Release, 6 October 2008

Margaret Beckett's 35 year old broken promise

'Everybody is entitled to a decent home at a price they can afford.' (1)

That sounds like something Margaret Beckett will now say, following Caroline Flint and Yvette Cooper as Housing Ministers. It sounds like classic John Prescott as the Deputy Prime Minister. In fact it is from the Britain will win with Labour election manifesto of 1974. It was the second election in the year that Margaret Beckett was first elected a Member of Parliament, and promises were being made, regardless of whether they could be kept.

Beckett will no more be able to deliver on New Labour housing targets in 2008 than her political predecessors were able to do over the last 35 years of British financial ups and downs. She will talk more about the environment as the housing market is returned to inflation, finance flows again, but new house building remains low. There is an historic trend.

Claiming in February 1974 that the Conservative party, led by Edward Heath with Anthony Barber as Chancellor, had '... brought the country to the edge of bankruptcy and breakdown' (2), the electorate was offered Labour's way out of the crisis. The offer was unconvincing, and the February general election of 1974 resulted in no parliamentary majority for Prime Minister Harold Wilson. He called a further general election in October, and the Labour party won a slim majority of 3 seats.

Then, long before New Labour enabled Margaret to fully abandon her socialist pretensions, Old Labour talked about '... co-operation and conciliation, not conflict and confrontation.' (1) What the British people got was the miserable "Social Contract" at a time when a political contest was needed to combat the succession of governments in the 1970s:

'Immediately, for the vast majority of families, the economic crisis takes the form of fear for their jobs, ever-rising prices, particularly food prices, and ever-rising housing costs, particularly council rents and high mortgage rates, coupled with the most drastic cuts in their income which our people have experienced since the 1930s - caused by the three-day working week introduced in panic by Government.' (2)

Heath and Barber had tried to extend finance to Britain's ailing industrialists, but instead of the money being borrowed for productive investment it was lent by banks for lucrative property speculation, and notably popular residential property speculation. There was a shift in housing priorities in the early 1970s, as housing became more important as a financial transaction than as a useful place in which to live:

'The means by which home owners derive wealth from their dwellings developed over a number of years but were thrown into sharp relief by the events of the 1971-73 gazumping boom; at which time they became so universally obvious that the nature of demand for owner-occupied housing underwent a massive change as a result... the period began with a market in which new houses were worth more than existing houses and ended with existing houses worth more than new houses.' (3)

For Martin Pawley this was the beginning of British private housing being valued more as an appreciating asset to exchange than as a home to use, with security of tenure available in ownership. By 1974 more than half the families in Britain were in owner occupation, and significant at elections. Conservatives maintained '... the number of new home-owners would have been still larger had certain Councils not opposed the sale of Council houses to those Council tenants who were willing and able to buy them with the help offered by the Government.' (4) For Beckett 70% of voting households have an interest in the housing market.

Margaret Beckett entered into politics as MP for Lincoln between 1974 and 1979. Old Labourites were looking hard at the property speculation occurring within the system of planning adminstered by local and central government, and as that related to the "welfare state" commitment to build public housing for rent. For the election the Labour party suggested land would be taken into public ownership, to be cheaply available for new houses, schools, hospitals and other purposes. Having missed the chance for land nationalisation in the 1942 to 1947 period when the planning system was first institutionalised, they insisted that '... public ownership of land will stop land profiteering.' (2) Yet they were emphatic that nationalisation of land would not affect the owner-occupiers who were exploring the benefits of house price inflation:

'The Labour Government will take into public ownership land required for development, redevelopment and improvement. These proposals do not apply to owner-occupiers, whose homes and gardens will be safeguarded. But the public ownership by local authorities of necessary land is essential to sensible and comprehensive planning both in our towns and in the countryside. The land will be paid for at existing use value and the expensive disgrace of land speculation will be ended.' (1)

This helped to make the "Social Contract" appear sufficiently "socialist", claiming they wanted to '... get rid of the major inflationary element in the cost of building.' (1) Land nationalisation never happened of course, but Conservatives, along with many Labour supporters, believed it might:

'We wholly reject Labour's policy of preventing any further extension of freehold home-ownership by the nationalisation of every acre of land for new building.' (4)

Many imagined that Old Labour was intent on nationalising land, but they had no real need to. The freedom to build had been denied to the population through the passing of the 1947 Town and Country Planning Act. Land could only be developed with planning approval, which government controlled then, as Beckett's New Labour does today.

Old Labour was encouraging owner occupation while weakly investing in public housing for rent. Public house building declined after 1979 when a "socialist" Labour lost the general election. When New Labour gained power in 1997 there was to be no return to the public house building policies that politicians like Beckett had advocated in 1974. 35 years ago Old Labour was boasting that '... we gave loans to the building societies to help house-buyers - who would otherwise have faced mortgage rates of 13%.' (1) In 1974 the Conservatives promised to maintain interest rates at lower than 9.5%, but did not win the election. (5) The manipulation of interest rates for housing finance has been important ever since. While Beckett takes office as Housing Minister the Bank of England Base Rate is reduced to 4.5%. From 1974 the promotion of home ownership rather than house building was the priority:

'We have made an agreement with the building societies which will ensure in the long term greater stability in the flow of funds for house purchase, and the building societies have agreed to introduce as soon as possible a scheme to enable first-time purchasers to pay less in the early years of their mortgage. We shall also seek other new ways to help young married couples to become home-owners earlier, including new ways of channelling the funds of leading financial institutions into the finance of house purchase.' (4)

Building new homes has become increasingly less important than sustaining inflation in the stock of existing ones. Without that inflation housing finance is not borrowed or lent. Inflation will return to the market while Beckett is Housing Minister, but building new homes will be less significant than the repeated attempt to renovate the stock of 26 million houses and flats that already exist, worth more than the £1.2 trillion of mortgage finance in circulation. The Conservatives insisted in 1974 that '... a policy of maintaining and modernising older houses is often preferable to demolition and rebuilding.' (5)

It is now official that house building has reached an all time low in Britain. Annual housing completions will be reduced to about 100,000, or 50% of the number of houses and flats built in 2007. The Royal Institution of Chartered Surveyors report that only 66,220 new homes have been built in 2008, with quarterly production likely to fall below 25,000 by the end of the year. (6) That looks like this:

There is no getting over the prospect of building only 100,000 new homes a year, and no way that 2007 levels of output will return. The so called "credit crunch" is partly beyond the British government's control, but also follows the explicit attempt, most influenced by Kate Barker in 2004, (7) and then again in 2006, (8) to take high inflation out of the existing housing market. Beckett, working with Yvette Cooper at the Treasury, will be trying to get the house price graphs to rise again, even if the house building graphs do not.

Planning supports that aim, not through a restriction on land supply, as Barker imagined, but because people are not free to build anywhere. The planning system was strengthened by Barker, because if people were able to build freely on the vast surplus of land available within easy travel distances across Britain existing house prices would be falling fast, reconnected to the costs of building, as they were in 1970 when old homes cost less than new ones.

New homes are not sold at 5% or 10% above their total cost to build, but into the existing housing market, where an average house or flat anywhere in Britain is valued at far more than the cost of producing it. It is in that mark up that the commercial "home builders", with the means to engage with the planning system, make their profits.

We are witnessing a British built "housing crisis" that Government is powerless to resolve 23.07.2008

Housing a working population in twenty-first century British capitalism is a surprisingly volatile conundrum that government is powerless resolve. The habit of breaking election promises to house everyone affordably was established 4 decades ago, in 1968, under Harold Wilson, when Beckett was learning how to be a Labour politician. She has learned to disregard the way property speculation is made possible by the denial of development rights and talk up planning as an environmental good.

In 1970 Old Labour set up the permanent Royal Commission on the Environment, and first appointed a Minister with overall responsibility for the environment. By 1974, as part of their "Social Contract", Old Labour saw electoral popularity not only in wider home ownership but in '... an increasing awareness of the need to treat the natural environment with more respect.' They sought to discipline '... a wasteful society at a time of economic stringency.' (1) The Conservatives similarly claimed recognition as '... acknowledged world leaders in environmental action in caring for towns, cities, villages, rivers and the countryside.' (4)

Saving the environment from development was and is entirely compatible with well financed house price speculation. In the name of protecting the environment the planning system prevents people from building useful homes as somewhere cheap to live. Beckett voices her concern about the environment, and no doubt she believes she is saving the planet. Yet if everyone were free to build a decent home at a price they can afford the ability of the banks to finance house price speculation would be removed.

Beckett is protecting the interests of finance, which are now, more than ever, inseparable from the interests of government.

Of course the government faces no political threat from the "housing crisis" of 2007, which has turned into a "financial confidence crisis", which will soon be over. There is no effective challenge to the denial of development rights. There are no groups of building industry workers demanding houses are built, or organising themselves to prevent rates of pay being cut. There are no serious demonstrations of families objecting to the unaffordability of a the dilapidating British housing stock, and the diminutive size of new "eco-homes" for a luxury market. Homeless people are not even aggressively begging in the streets where politicians and other higher earners live. Nothing much is happening.

Caroline Flint was evidently powerless during a dramatic phase in the long decline in new house building. This has caused a painful "consolidation" of the construction products and materials manufacturing "supply chain", and the full extent of that is not yet apparent. Margaret Beckett will no doubt be a stabilising influence, bringing political confidence to the job of Housing Minister, and in a way that Caroline Flint did not.

In 1974 Margaret Beckett's colleagues insisted that '... Labour doesn't go along with the prophets of doom and gloom. We have great confidence in the British people.' (1) Today, while the fickle prophets of economic doom and gloom are everywhere, New Labour is not about to allow the British people to build homes in sufficient numbers for a small percentage on the cost of construction. Beckett will discover, if she does not know already, that being Housing Minister in October 2008 means not doing anything that might further undermine a financial system that depends on an inadequate stock of housing being valued and traded at prices that are well above the cost of building new ones.

While the Treasury nationalises banks Beckett will not be relinquishing the nationalisation of development rights that dates from 1947. Whether the banks are nationalised or not is of little consequence, since finance will flow again, one way or another. Beckett has seen worse than this political and economic "crisis". In 1974 the political capitulation of the trade unions to the government mattered greatly, and Beckett was instrumental in winning that "Social Contract":

'The Social Contract is no mere paper agreement approved by politicians and trade unions. It is not concerned solely or even primarily with wages. It covers the whole range of national policies. It is the agreed basis upon which the Labour Party and the trade unions define their common purpose.' (1)

In 2008 there is a new "Financial Contract" being established as politicians deliberate about whether the banks should be nationalised fully, partially, or at all. What matters is that we are not free to build cheap homes to use, and minimise our need for finance. It matters that there is not going to be a political demand for Margaret Beckett to reinstate development rights on all land, and permanently undermine the ability of the housing market to reinflate. Inflation will return, and there will be no decent homes at prices everyone can afford.

Instead, the caravanning Minister will find "common purpose" with the electorate. She will say that '... everybody is entitled to a decent home at a price they can afford.' However most people will not mind if that promise is broken in 2008, as it has been since 1974. Most of us want the home we live in to be expensive, and will put up with it being far from decent. Most households have an apolitical hope that Britain's housing market will be re-inflated by the government supporting and taking more direct responsibility for private financial institutions. Beckett will not disappoint, as she said on being appointed Housing Minister:

'I am very pleased to be taking forward this important agenda. My priority will be to help overcome the challenges in the housing market caused by the current global turbulence, whilst maintaining our focus on delivering the affordable homes needed to meet long term demand.' (9)

Margaret Beckett will protect the environment and little new housing will be built. She knows from 1974 that she can promise housing affordability when in reality financiers and the majority want house price inflation.

Ian Abley 08.10.2008

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