which I enjoyed chairing.
The political priority was clearly lower mortgage rates. The technical problem was how to achieve these without open-ended subsidy. Of course, the purist view would be that artificially controlling the price of borrowing for house purchase was bound to be counterproductive. And in this matter the purist, as so often, was right. If we had pursued a responsible economic policy there would have been no boom and bust of property prices, and rising inflation would not have driven up mortgage rates. Policies providing for sound money and the release of sufficient quantities of development land are the proper way to ensure an orderly housing market. But of course we had not pursued policies of that sort. And Labour was already embarking on a vendetta against property development. In these circumstances, holding the mortgage rate down below the level the market — or more precisely the building societies — would otherwise have set made short-term political sense. In Government we had introduced a mortgage subsidy, and there had even been talk of taking powers to control the mortgage rate. The Labour Government quickly came up with its own scheme devised by Harold Lever to make large cheap short-term loans to the building societies. Our task was to devise something more attractive.
As well as having an eye for a politically attractive policy, I had reasons of conviction for action on the mortgage rate and for the other measures we devised to help homebuyers. I had always believed in a property- owning democracy and wider home ownership. At this point too, I was acutely aware of how much the middle classes were suffering. Because of the inflation which we and the Labour Party had conspired to create, the value of people’s savings had been eroded by negative real interest rates. On top of that, by 1974 house values had slumped. So had the stock market: the FT Ordinary Share index went down to 146, the lowest level for twenty years. Trade union power and left-wing socialism were in the ascendant. Tax increases were bearing down on businesses and people.
In such circumstances, it can be right to make modest temporary provision for the interests of the middle classes of a country on whom future prosperity largely depends. Moreover, it is cheaper to assist people to buy homes with a mortgage — whether by a subsidized mortgage rate, or by help with the deposit, or just by mortgage interest tax relief — than it is to build more council houses or to buy up private houses through municipalization. I used to quote the results of a Housing Research Foundation study which observed: ‘On average each new council house now costs roughly ?900 a year in subsidy in taxes and rates (including the subsidy from very old council houses)… Tax relief on an ordinary mortgage, if this be regarded as a subsidy, averages about ?280 a year.’
My housing policy group met regularly on Mondays. Housing experts and representatives from the building societies gave their advice. I reported from time to time to Shadow Cabinet where, in the absence of real agreement on economic policy or much constructive thinking on anything else, attention focused heavily on my areas of responsibility. It was clear to me that Ted and others were determined to make our proposals on housing and possibly rates the centrepiece of the next election campaign, which we expected sooner rather than later. For example, at the Shadow Cabinet on Friday 3 May we had an all-day discussion of policies for the manifesto. I reported on housing and was authorized to set up a rates policy group. But this meeting was more significant for another reason. At it Keith Joseph argued at length but in vain for a broadly ‘monetarist’ approach to dealing with inflation.
The question of the rates was a far more difficult one than any aspect of housing policy, and I had a slightly different group to help me. There was a huge amount of technical information to master. Moreover, reform, let alone abolition, of the rates had profound implications for the relations between central and local government and for the different local authority services, particularly education. I drew on the advice of the experts — municipal treasurers proved the best source, and gave readily of their technical advice. But working as I was under tight pressure of time and close scrutiny by Ted and others who expected me to deliver something radical, popular and defensible, my task was not an easy one.
That said, I could well understand how much was at stake politically. For example, on Tuesday 21 May I met 350 protesters from Northamptonshire — one from every town and village in the county — who were furious about rate rises of between 30 and 100 per cent. Several factors combined to raise the issue to such political prominence: there was the basic unfairness of a system which taxed a single widow at the same rate as a family with three grown-up working sons; our own rating revaluation in 1973 had led to inordinate rate rises;[31] and, more recently, Labour’s rate support grant settlement had treated the rural shire counties particularly harshly. There was, in short, on the rates issue as on housing, a full-scale middle- class anti-socialist revolt, and it was essential that it be harnessed, not dissipated. This I was determined to do.
The housing policy group had already held its seventh meeting and our proposals were well developed by the time the rates group started work on 10 June. I knew Ted and his advisers wanted a firm promise that we would abolish the rates. But I was loath to make such a pledge until we were clear about what to put in their place. Anyway, if there was to be an autumn election, there was by now little chance of doing more than finding a sustainable line to take in the manifesto.
Meanwhile, throughout that summer of 1974 I received far more publicity than I had ever previously experienced, mainly as a result of our housing policy. Some of this was inadvertent. The interim report of the housing policy group which I circulated to Shadow Cabinet appeared on the front page of
The final point related to the right of tenants to buy their council houses. Of all our proposals this was to prove the most far-reaching and the most popular. The February 1974 manifesto had offered council tenants the chance to buy their houses, but retained a right of appeal for the council against sale, and had not offered a discount. We all wanted to go further than this; the question was how far. Peter Walker constantly pressed for the ‘Right to Buy’ to be extended to council tenants at the lowest possible prices. My instinct was on the side of caution. It was not that I underrated the benefits of wider property ownership. Rather, I was wary of alienating the already hard-pressed families who had scrimped to buy a house on one of the new private estates at the market price and who had seen the mortgage rate rise and the value of their house fall. These people were the bedrock Conservative voters for whom I felt a natural sympathy. They would, I feared, strongly object to council house tenants who had made none of their sacrifices suddenly receiving what was in effect a large capital sum from the Government. We might end up losing more support than we gained. In retrospect, this argument seems both narrow and unimaginative. And it was. But there was a lot to be said politically for it in 1974 at a time when the value of people’s houses had slumped so catastrophically.
In the event, we went a long way in Peter’s direction. The October 1974 manifesto offered council tenants who had been in their homes for three years or more the right to buy them at a price a third below market value. If the tenant sold again within five years he would surrender part of any capital gain. Also by the time the manifesto reached its final draft we had quantified the help to be given to first-time buyers of private houses and flats. We would contribute ?1 for every ?2 saved for the deposit up to a given ceiling. (We ducked the question of rent decontrol.)
It was, however, the question of how low a maximum mortgage interest rate we would promise in the manifesto that caused me most trouble. Although, for the reasons I have already outlined, I had convinced myself that some kind of pledge in this area was justified, I was very aware of how the cost to the Exchequer might escalate alarmingly if inflation and interest rates kept on rising. Ted and those around him seemed to entertain no such caution. On Thursday 1 August he summoned me back from Lamberhurst for a meeting at his new house in Wilton Street with Peter Walker, Ian Gilmour and Robert Carr. I was put under great pressure to go beyond the phrase which had by now been agreed for the manifesto of pegging the mortgage rate at a ‘reasonable’ level. Ted and the others wanted a specific figure. I argued strongly against, but in the end I had to concede a pledge that we would hold the rate ‘below 10 per cent’. Beyond that, I did not agree to a specific figure. I hoped it would be the end of the matter.
