(c) crown copyright
Catalogue Reference:CAB/129/76
Image Reference:0017
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(THIS D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y S
GOVERNMENT) SECRET C.P.(55) 67
COPY NO.
O 7
12th July, 1955 CABINET H O U S I N G SUBSIDIES M e m o r a n d u m b y the Minister of Housing and -Local G o v e r n m e n t I w a s invited by m y colleagues to submit a m e m o r a n d u m " O n the question of housing subsidies (C. M . (55) 21st Conclusions, Minute 7 ) , 2.
A t present 4 0 per cent of the cost of the typical Council house is paid for out of subsidy (three-quarters by the E x c h e q u e r and one-quarter b y the local authority).
This year the E x c h e q u e r subsidy on p e r m a n e n t houses in England a n d W a l e s a m o u n t s to nearly £ 5 0 millions, and is increasing at the rate of £ 5 millions each year. 3.
T h e large subsidy has encouraged local authorities to charge unjustifiably low" rents.
In m a n y areas the rent (exclusive of rates) for a post-war t h r e e - b e d r o o m e d h o u s e is n o m o r e than 12/- a W e e k , and in s o m e Cases the rent for a similar p r e - w a r h o u s e is as little as 7/-. With "the average w o r k e r in industry to-day earning over £10 a w e e k , it is' evident that the majority of Council tenants could well "afford to p a y m o r e than they do and that an increasing n u m b e r have n o need to b e subsidised at all. 4.
T h e r e is, therefore, a clear case for a substantial reduction in the E x c h e q u e r contribution to local authority housing. 5.
W e will, of course, h a v e to continue to p a y subsidy on houses already built or approved. 6.
A s regards house-building, I a m in process of working out proposals which would have the effect of reducing the n u m b e r of n e w houses o n which subsidy w a s payable to about 100,000 a year, a s c o m p a r e d with about 180,000 at present.
This would b e achieved by concentrating the subsidy on the m o s t important objectives, n a m e l y s l u m clearance and the relief of u r b a n congestion. 7.
T h e curtailment of subsidy would no" doubt lead to s o m e reduction in house-building by local authorities in areas w h e r e the need is no longer great.
O n the other hand, in districts w h e r e t h e r e is still a serious shortage of a c c o m m o d a t i o n , it should not prevent Councils f r o m maintaining a high rate of construction, 8,
T h e n u m b e r of n e w dwellings built each year normally represents only a small proportion of the total'pool of Council houses in the area. T h e lose of subsidy could, therefore, usually be offset b y small increases in rents spread over the whole pool. A s a n alternative, it c o u l d b e offset b y introducing one"or other of the differential rent s c h e m e s , under which tenants are required to pay as m u c h as they can reasonably afford. 9.
T h e Cabinet"will obviously not w i s h to take a n y final decision on this important matter without a good deal of further thought.
Meanwhile,
the raising of the "interest rates of the Public "Works L o a n "Boards, with the resultant increase in the costs of local authority housebuilding, is bound to lead to Questions in Parliament as to whether w e intend to increase the housing subsidy. 10.
say:­
If m y colleagues approve, I should like to take this opportunity to (a) that the G o v e r n m e n t definitely do not intend to increase the housing subsidy; (b) that, in fact, w e are at present examining the rates of the housing subsidy a n d the purposes for Which it is allocated, with a v i e w to considering whether any changes are desirable; (c) that I shall shortly be having discussions with Local Authority Associations on this "subject and that a further statement will be m a d e after the recess. 11.
A statement of this kind would h a v e t w o advantages". "First, it would begin to prepare the m i n d s of all concerned for s o m e reduction of the housing subsidy.
Secondly, it would enable m e to discuss the p r o b l e m , in general t e r m s , with the Local Authority Associations and to obtain f r o m t h e m the information and advice w h i c h I need before I can formulate firm proposals. 12.
I accordingly a s k m y colleagues to authorise m e to reply to Questions on the lines indicated in paragraph 10 above. D.S. Ministry of Housing and Local G o v e r n m e n t , S. W . 1. 11th July, 1955.