Jess McCabe

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We have just celebrated Inside Housing’s 30th birthday -…

We have just celebrated Inside Housing’s 30th birthday – so I dug through the National Archives’ latest releases under the 30-year rule to find out about the housing politics of 1984. Read it on Inside Housing’s website, or here.

Thatcher’s secrets

In 1984, Margaret Thatcher’s housing minister threatened to resign over proposed cuts to his budget. Jess McCabe uncovers the top secret files, hidden until this year, that reveal the full story

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‘Resign,’ roared a mob of MPs. ‘Resign!’

The House of Commons is always boisterous. But in 2014 it would be unheard of for irate members of parliament to interrupt a secretary of state (in this case environment secretary Patrick Jenkin, whose brief included housing) to bellow that social housing tenants ‘need repairs’ – and housing budget cuts would never be considered contentious enough to be a resignation issue.

Not so in 1984, the year of Inside Housing’s launch, when MPs bayed for blood over cuts and the housing minister did indeed threaten to resign because of them. Now, thanks to the release of secret documents by the National Archive, and interviews with some of the key players, Inside Housing can reveal the full story 30 years on.

The impact of the decisions taken in this critical period were so huge they are still being felt today, particularly for council housing. They were made against a backdrop of 1 million Britons on the waiting list for council housing. Nearly 200,000 households were living in overcrowded accommodation. Another 78,000 households were homeless. The right to buy was in full swing, with more than 600,000 council tenants already having taken advantage of discounts as steep as 70 per cent to buy their flats and houses since it was launched four years earlier.

And Margaret Thatcher’s cabinet, intent on cutting the national deficit, wanted to slash £310 million from the housing budget – the steepest cut of any department. So contentious was this plan that the housing minister of the time, Ian Gow (see box, overleaf: The housing minister), threatened to resign in order to rescue funds that would pay for building new social housing and grants to put indoor plumbing into poorly built private homes. It seemed the gambit worked – the Treasury capitulated, appearing to reduce the cuts to just £65 million from a total budget of more than £3 billion gross.

Media backlash
However, there was an even tougher blow still to come. Local authorities would only be able to spend 20 per cent of capital raised from the right to buy a year, a real-term reduction of more than £1 billion in 1984 money (or £2.25 billion in today’s money).

Even the Daily Mail railed against the cuts, describing them as a ‘bitter freeze’ on housing investment that was ‘as stupid as it is shortsighted’. Meanwhile, the Financial Times strongly questioned the Conservative government’s economic logic. Only the Economist was supportive. In an editorial headlined ‘Blood on the cabinet office carpet’, the magazine scoffed at Mr Gow, ‘once driest of the dries, going native in defence of one of the “wettest” programmes, housing’.

The result was a furious parliamentary fight over the housing budget for that particular year – and also an ideological fight over the future of public housing in Britain. In its earliest print editions, Inside Housing reported on press speculation that Mr Gow and his boss Mr Jenkin were being scapegoated.

‘The government’s direction was very clear: discouraging local authorities from building. And eventually it stopped them from building,’ recalls David Hucker, who was then chief executive of Orbit Group and is now chair of Orbit Charitable Trust.

The records of how the government undertook this approach start on 6 November 1984. It was only days before the then chancellor Nigel Lawson would get up in parliament and announce the next year’s spending plan in the autumn statement.

Most of the budget had already been settled. Only a few issues were left to be resolved – the biggest among them was housing. A massive gulf had opened between the spending increase of £250 million in 1985/86 which the environment secretary proposed, and the Treasury’s plan to slash spending by £380 million – of which £200 million was to come off spending on new dwellings and conversions. Mr Jenkin had proposed enough funding to build 40,000 council homes, while arguing that in fact 75,000 homes a year should be built to meet Britain’s needs. The Treasury wanted to slash this funding to somewhere between 15,000 and 20,000 homes.

Big budgets
The annual house building budget under consideration sounds high by 2014 standards – £1.3 billion, or more than £3.5 billion in 2014 money. By comparison, the entire 2011 to 2015 affordable homes programme amounts to £4.5 billion.

Leading up to the announcement, the prime minister’s political advisors, the housing minister and environment secretary exchanged a series of frank memos, with Mr Gow and the environment secretary warning of dire consequences if housing spending was cut.

In one previously unseen letter from Mr Gow to Mrs Thatcher, the minister warned that the cuts ‘would mean an increase in homelessness (which has risen substantially since 1979) increasing disrepair (involving even greater expenditure later on) more overcrowding and more housing conditions which, as I have seen for myself, are unacceptable’.

The right wing Tory MP John Redwood – in those days head of the Number 10 policy unit – wrote a frank memo to Mrs Thatcher in response. ‘We should not underestimate the political row there will be about the proposed reduction in the housing programme. We should be robust about increasing council house sales and reducing the level of new build,’ he concludes.

And, Mr Redwood – then aged 30 – conceded the cuts would ‘lead to substantial opposition from local authorities, the construction industry, the jobs lobby and some Conservative MPs’.

It was at this point that Mr Gow played his astonishing hand of threatening to resign. ‘He was his own man. He didn’t discuss that with me at all,’ says Mr Jenkin speaking to Inside Housing 30 years later – now Lord Jenkin, a Conservative peer. ‘He rather spoilt his own pitch. He had been Margaret Thatcher’s private secretary for a while and I had always thought very much a blue-eyed boy in her eyes.’

Still, no agreement had been reached. ‘And Margaret Thatcher handled that in a way that I was not aware of her having done for anything else,’ Lord Jenkin recalls.

The Cabinet met and tried to hammer it out. When that didn’t work, Lord Jenkin continues, ‘she [Mrs Thatcher] got up and took all the Cabinet out of the room with her’. He was left alone with two Treasury ministers. ‘It was two to one. And, not to put too fine a point on it, I did not get all that I was seeking.’

Limiting provision
A secret report on those meetings summarised Mrs Thatcher’s thoughts on the matter: ‘The government’s aim should be to reduce the extent of public sector housing. The public sector should limit new construction to provision for the aged and disabled.’

Today, Mr Redwood recalls: ‘Some people felt that housing took too much [funding], relative to other things. It was a very tough budget for housing but there wasn’t an easy solution to cut something else, like health for example.’

On 12 November, as the chancellor read out the autumn statement, announcing the £65 million cut in spending, the public was unaware it would have been much greater had it not been for Mr Gow’s resignation threat. They were also unaware of the sting in the tail – restrictions on local authority spending. This wasn’t revealed until 18 December, when Mr Jenkin, came on to the floor of the Commons to announce that local authorities would only be allowed to spend 20 per cent of the money raised through right to buy.

What followed was a grilling by not only Labour MPs, but some Conservatives – who were particularly horrified by what they saw as the government preventing councils from spending their own money. John Cunningham, then shadow environment secretary, concluded: ‘Stripped of jargon, he has today announced a cut of £400 million in housing investment and the freezing of £1.2 billion of local authorities’ own assets – their own money! Will not the consequences of this be appalling for all those in difficulty in the housing sector – for people wanting homes as well as those engaged in the industry?’

Fred Silvester, a Conservative MP, asked ‘why we should be asking councils to pursue our policy of selling council houses, when plainly that is no longer of much benefit to them?’

The answer – that local authorities would be able to spend all the money raised, eventually – didn’t satisfy many MPs, or many in housing. It would not be a good idea, the government argued, for all the money to be spent at once. And, in a confusing twist of economics, if councils spent the money raised, it would still count as borrowing on the public balance sheet.

‘I have never forgotten that uncomfortable hour,’ recalls Lord Jenkin of the time he spent defending the very policy that, behind the scenes, he had fought against. ‘They [the MPs] felt they got the minister on the run.’

‘I think it was a pity,’ says Lord Michael Heseltine, speaking today. When right to buy was launched in 1981, Lord Heseltine was environment secretary. Today, he recalls the battle with the Treasury to make sure councils would spend 75 per cent of receipts on housing. ‘There was bound to be a demand for housing. There was a demand – that was why the original deal was 75 per cent.’

Building of council housing had already begun its descent. In the 1970s, under the Labour government, local authorities were building more than 150,000 homes a year across the UK. In 1985/86, it fell to just 30,000 before grinding down to a nadir of just 130 homes in 2004/05. Although housing associations filled some of the gap in 2012/13, just 42,800 affordable homes were built.

‘It was the height of Thatcherism and I think we are still living through the after-effects of what was going on,’ says Tom Murtha – then deputy director of Mosley and District Housing Association, which had 2,000 homes in Birmingham, now chair of housing charity Hact. ‘We’re still paying the price today, with the lack of affordable rented homes.’

Lord Heseltine agrees it was a transformative time. But, he sees the legacy differently. ‘It’s been a remarkably successful period of policy, which [reinvigorated] homeownership, recreated the private sector and led to one of the great renaissances of the 20th century, the regeneration of city centres on a scale without precedent.’

Thirty years on, whatever your political stance, the decisions made in Inside Housing’s first year are still having a direct impact on the state of the housing sector.

The Treasury Minister of State, Mr Ian Gow.

The housing minister

Back in 1984, the housing brief was in the hands of Conservative MP Ian Gow (pictured). Elected to represent Eastbourne in 1974, Mr Gow became Margaret Thatcher’s parliamentary private secretary in 1979 and reportedly a close personal friend.

In 1983 he became housing minister, his first ministerial position. After his rebellion on the housing budget, in 1985 he was moved to the Treasury. Richard Best, now a Labour peer, recalls of his time in the job: ‘At the time it felt we were having to do battle, but with a charming and charismatic minister.’

Shortly afterwards, the staunch unionist actually did resign – over the signing of the Anglo-Irish Agreement in 1985, which set up the first meetings between British and Irish ministers to discuss Northern Irish policy.

At 8.39am on 20 July 1990, Mr Gow was killed by a Semtex bomb planted under his car by the IRA at his East Sussex home.

‘He was a man who always spoke his mind,’ says his former boss Lord Patrick Jenkin. ‘Ian Gow was a marvellous man.’

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