3 min read

Thatcher's ministers warned her of a potential housing crisis if she cut housebuilding

Given everyone, even the London Review of Books, is now talking about Britain’s housing crisis, it’s striking that no-one seems to have picked up on one of the elements of newly-released Cabinet papers this morning. The hitherto secret papers, which you can find in a BIG pdf here at the National Archives, cover 1984, when Margaret Thatcher was involved in discussions over a whole series of spending cuts including vast reductions in the budget for housebuilding.

In essence, the Prime Minister wanted to make major cuts to public spending to get the budget deficit down. But given it was proving difficult to trim welfare spending and the National Health Service, a big cut in the housing budget, helped along by sales to the public of council homes (Right to Buy) was to be responsible for the biggest cuts, as you can see from the chart below.

barchartspending

 

The problem, however, was that making enormous cuts to public sector housebuilding would mean that the private sector would be relied on, more than ever before, to make up the shortfall. This would be fine if that would, indeed, happen, but could prove potentially disastrous if it would not, leading to, at best, a massive mismatch between supply and demand (and, in turn, ever-rising house prices) and at worst a nasty increase in “homelessness” and “housing stress”.

What is revealed by the newly-released papers is that Mrs Thatcher was indeed warned of these risks by no less than her own housing minister, Ian Gow, and her Environment Secretary Patrick Jenkin, who both urged her not to cut the budget for new homes as much as she was planning. Here is an account of Jenkin’s argument (click on the picture for a bigger version): 

jenkinargumentagainst

And here is an excerpt of a note from Ian Gow, warning about the likelihood of higher homelessness as a direct result:

iangowletter1

In essence, the ministers responsible for the sector recommended that anything less than 40,000 new government-financed homes each year would be insufficient. The Prime Minister’s position was that 15,000 to 20,000 would be adequate. A note from her advisor John Redwood, now a Conservative MP, shows that even among those pushing for a sharp reduction in housebuilding there were no delusions as to the likely unpopularity of the policy.

redwoodrecommendations

However, what few seemed to countenance was the possibility that the private sector might not step into the breach and start building enough homes to compensate for the sudden drop in government housebuilding. However, as you can see from this chart, in the LRB article linked to above but, I believe, originally by Shelter, that is precisely what happened.

meek01_3601_01

The housing crisis of recent years, in which far too few new homes have been built to satisfy demand, and prices have risen sharply, is one of the main upshots.

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