Selling the Welfare State

The Privatisation of Public Housing

Ray Forrest, Alan Murie

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317829331
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

Originallypublished in 1988, this book offers the first comprehensive and critical analysis of the privatisation of public housing in Britain. It outlines the historical background to the growth of public housing and the developing political debatea surrounding its disposal. The main emphasis in the book, however, is on the ways in which privatisation in housing links to other key changes in British society. The long trend for British social housing to become a welfare housing sector is related to evidence of growing social polarisation and segregation. Within this overall context, the book explores the uneven spatial and social consequences of the policy.

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Introduction: Privatisation and Housing

Privatisation has become a dominant theme in politics and policy in many countries. It has risen to the top of the British political agenda (Ascher, 1987) and has achieved, it is argued, ‘the largest transfer of property since the dissolution of the monasteries under Henry VIII’ (Pirie, 1985). It has generated considerable academic literature and debate and is a regular theme in newspaper, television and radio presentations. Many of these contributions acknowledge that what has been labelled as privatisation is a very mixed bag. Different contributions have focused on the formation of a company and sale of at least 50% of the shares to private shareholders (Beesley and Littlechild, 1983); the privatisation of public enterprises or the public sector of industry (Heald and Steel, 1981; Heald, 1985); on contracting out of public services (Ascher, 1987); and on the transfer of service or goods production activities (Dunleavy, 1986). Any such focus leaves out the largest transfer of assets which has occurred as a result of public policy. At least until the end of 1986 the sale of council housing had generated more receipts than all the other sales of assets combined. It has involved over one million households in the acquisition of a substantial, individually owned and controlled capital asset.

In social, political and economic terms, the most important element in the privatisation programme of the Thatcher governments has been the sale of publicly owned dwellings. This book provides the first comprehensive analysis of this major component of privatisation. It offers a critical assessment of the original claims made of the policy and the ways in which it has been pursued. The main emphasis, however, is on the relationships between privatisation in housing and other broader dimensions of social and economic change. In this sense the book argues against any narrow assessment of the pros and cons of selling council housing. Patterns of access and opportunity have been affected by council house sales but explanations of what is happening in the British housing market demand a broader based analysis of contemporary social change.

The lessons and questions raised in relation to the privatisation of public housing are not easily transferable to others, but are important for any overall assessment. Heald and Steel (1982) have identified four main objectives in privatising public enterprises: enhancing freedom; improving efficiency; reducing the public sector borrowing requirement; and tackling the problem of public sector pay. The first two objectives are characterised as philosophical and the third and fourth as more pragmatic. For council house sales it is the first of these which most nearly reflects initial objectives while the third emerged as of major importance later.

Although privatisation of public enterprises had been a major theme of the Conservative government of 1951–5, Heald (1985) refers to the radicalisation of the Conservative party during its 1974–9 period in opposition; and to the ‘hostility to public sector unions after the humiliations suffered by the Heath government’. He also identifies the inability of policy makers to devise a viable framework for economic and financial control as supporting the ideological motivation for privatisation.

Heald and Morris (1984) also refer to four classes of privatisation activity — denationalisation (selling off nationalised industries and withdrawal from comprehensive provision); substitution (of customer fees for tax finance); liberalisation (relaxation or abolition of monopoly powers of nationalised industries); and contracting out (arrangements for work in services which remain the responsibility of public authorities to be carried out by private firms). The background to the largest privatisation programme is different. Sales of council houses have taken place and been discussed for as long as council housing has existed and the sale of council houses occurred between the wars. Local enthusiasm for sales also predated the radicalisation of the 1970s or the anti-municipal stance apparent in the 1980s. Nor has the form of privatisation which has initially been embarked upon been principally about introducing competition. While that has been a dominant theme in contracting out and in discussion of the efficiency of services and industries it has not featured in the same way in housing.

Not surprisingly council house sales do not fit neatly into any of the classes of privatisation referred to earlier. Council housing has never been a monopoly service, customer fees (rents) have always operated and contracting out in construction of dwellings has been normal. Pirie’s (1985) list of different methods of privatisation reflects his broader definition of what is involved. He refers to selling the whole of an enterprise, selling complete parts or proportions, selling and giving to the workforce and the public, charging, contracting out, diluting the public sector, deregulation, repealing monopolies, encouraging exit from State provision and providing rights to private substitution. He lists council house sales under ‘buying out existing interest groups’ when it would be more appropriate to talk of selling and giving to users (rather than the public or the workforce). But if the sale of council houses is to be treated alongside other forms of privatisation it is important to acknowledge the range of questions surrounding it. The sale of council houses does not only involve sales to users: vacant dwelling sales have been a continuing feature and privatisation of estates is a growing one. And selling council houses does not mean the severing of relationships with government. Government regulation and subsidy (if only through tax reliefs) involve elements which could be presented as similar to the hybrid privatised enterprises which continue to involve substantial government shareholdings. Privatisation in housing more generally involves deregulation, increasing the role of private sector institutions and developing partnerships between public and private sectors (especially with private sector finance). In some of these cases issues of efficiency are involved. However, at least in relation to the sale of council houses to sitting tenants, it is aspects of choice and of ownership and control per se which are more likely to be involved.

Selling council houses is not only of interest in relation to discussion of privatisation. It involves an important element in restructuring the housing market and a re-organisation of the welfare state. Especially in the decade after 1945 there was a general consensus that state provision of housing was an essential element in the general attack on poverty and ill health and in the development of a more equal society with greater equality of opportunity. As with the development of the welfare state in general council housing both before and since that period was subject to a variety of attacks. However, in the general restructuring of welfare in Britain the demunicipalisation of council housing has been among the most dramatic changes. And just as the development of public housing and of the best examples of public housing (including the new towns) attracted considerable attention from other countries and influenced policy development there, so the privatisation of council housing has attracted the same attention.

In spite of this a wide-ranging published consideration of the restructuring of council housing is not available. There is a range of questions about what it involves and represents and about its impact. There are important questions about local autonomy, ownership and control, gainers and losers and the impacts on home ownership as well as on council housing. In a period of increased concern for the problems of inner city and similar neighbourhoods, the impact of a policy which changes the structure of housing opportunities is of enhanced importance.

Particularly since 1979 privatisation has entered the popular consciousness as shorthand for a variety of policies aimed at reasserting market forces and rolling back the frontiers of the state. This broader philosophy has been developed by the Conservative party in government. On coming to power, the notion of a return to the ‘free’ market was a matter of rhetoric rather than explicit policies. Indeed, the sale of council houses was an exception in this respect, representing the vanguard of what was to become a much more pervasive strategy associated with cost cutting, efficiency and less tangible notions of individual freedom and the perceived debilitating effects of dependency on paternalistic, oppressive bureaucracies. A view of council housing estates as corrosive islands of socialism has been translated to a perspective of an overextended state, stifling freedom and entrepreneurial flair and inculcating a habit of dependency. Where deregulation has occurred, for example in urban public transport or planning legislation, the aim has been to remove the fetters on private capital rather than on individuals. Thatcherism is certainly not libertarian and some accounts emphasise the growth of a coercive state and greater restrictions on individual freedom (Dearlove and Saunders, 1984; Hillyard and Percy-Smith, 1987).

The most prominent features of the Thatcher administration’s privatisation programme have been denationalisation within the public market sector with the sale of shares in public enterprises such as British Gas, British Airways and British Telecom and the sale of council houses. In terms of cash receipts, the value of sales and the number of households directly affected, the sale of council houses represents the most significant single element in the government’s privatisation policy. Until the sale of British Gas its claim to be by far the most important was difficult even to challenge. Within the welfare state it is housing which has been most affected by this new philosophy. The key institutions of the welfare state, such as the National Health Service and state education, may be facing financial stringency but they remain largely intact as state services. The contraction of the state housing sector through privatisation and reduced investment and the more general exposure of housing provision to market forces has been more striking. No other welfare programme has been cut so substantially. As O’Higgins (1983) noted: ‘Housing is not only the welfare programme suffering the largest cuts, it is also the only programme where cuts have been overachieved…’ The results in terms of investment and subsidy can be briefly summarised. Public sector dwelling starts and completions have fallen dramatically. Council house building has declined to its lowest peacetime level since 1925. The availability of council housing to rent has contracted for the first time. Exchequer subsidies for council tenants in general have been drastically cut and council rents have risen dramatically. Those dependent on state benefits in housing increasingly face a stigmatising, means-tested regime. And the general thrust of housing provision has been towards commodification — the reassertion and extension of a market ideology (Murie and Forrest, 1980; Forrest and Williams, 1981, 1984; Harloe, 1981).

Whilst council house sales have been the most important aspect of privatisation, developments such as rent deregulation, the shift towards privatised forms of residential accommodation for the elderly and recent measures to encourage the disposal of whole council estates to private developers and quasi-private trusts have also developed. Far from the Right to Buy representing the thick end of the privatisation wedge, in retrospect it may be seen as the precursor to the complete dismantling of the council housing sector and the removal of housing provision from the control of locally elected bodies. Why this has been possible is open to some speculation. At this point it is appropriate to note that council housing, unlike the other major elements of the welfare state, has always been a minority provision for the working classes. There is no middle-class vote in council housing. When there has been a risk of or actual opposition by vociferous middle-class interests, as in proposals to alter the basis for student grants or to reduce investment in the National Health Service, the government has been forced to backtrack or tread warily.

We have shifted a long way from the academic debates of the 1960s and early 1970s when critical analyses of contemporary capitalism emphasised a relationship between the welfare state and the capitalist economy which was both symbiotic and contradictory. Capitalism could neither live with nor without the existence of a pervasive and burdensome welfare system. Moreover, what was then the new left generated powerful critiques of the possibilities of socialist transformation through welfarism. The welfare state was said to be ineffective, inefficient and the repressive and more likely to stabilise than undermine the system. And it was the middle classes who were reaping the greatest benefits from state education and the National Health Service.

Within Britain, council housing found itself in a particularly exposed position. It was a highly visible part of the welfare state. And this visibility was real rather than metaphorical in the form of the mass, high rise housing which dominated the inner areas of some of the major cities. It mattered little that the vast majority of council dwellings were houses with gardens and that unpopular dump estates were the exception rather than the rule. Council housing provoked images of drab uniformity, long waiting lists, insensitive bureaucracies and second-class citizenship. Basic housing standards may have been raised but the approach of local bureaucracies derived from the market and private landlordism.

In short, it seemed to have little to do with socialism. Such criticisms found a new and ‘unwelcome ally in the antiplanning and antistatist ideologies of the new right’ (Szelenyi, 1981) with notions of self-help, decentralisation, and self-determination being translated into the democracy of the free individual competing in the free market. For the right, home ownership represented decentralisation and self-determination in its purest form. The creation of a property owning democracy was a central part of the ideological crusade of the Thatcher administration — and council house sales were the principal mechanism in achieving this social revolution. The left found itself politically and theoretically compromised. It was clearly stretching credibility to mount a spirited defence of what had been the object of such harsh criticism. Consequently there was little possibility of any mass mobilisation in defence of council housing. Those tenants able to buy and occupying desirable dwellings were being offered an attractive opportunity. Those living in the less desirable parts of the council sector, on the inner and outer city estates of high rise flats and run down houses, were unlikely to take to the streets to proclaim their deep seated faith in collective public provision. For them the issues were more likely to revolve around what had been built, what they had been allocated and what rent they paid, rather than the speculative consequences of selling council houses. Whilst it might have been accurate to suggest that the sale of council houses could only make things worse, it was too abstract and remote an argument to win strong and widespread sympathy. Those tenants who had benefited most from public provision, those in spacious well-built houses on cottage estates stood to gain most from the sales policy. And those who had experienced a different phase of council housing, a more residual downgraded form of provision, had little to express but disenchantment. It is somewhat ironic that whilst the negative residual image of council housing provided much of the justification for its erosion and disposal through sales, the very viability of selling council houses was dependent on its earlier achievements as a relatively privileged, high status form of provision for the skilled working classes. In other words, the fact that large numbers of public sector tenants were living in highly desirable dwellings which they were keen to buy was an indication of what council housing was and could have been rather than an indictment of what it had become.

Writing in 1987 over a million council houses have now been sold and academic debate is more likely to be pre-occupied with the limits to the contraction of the welfare state rather than the consequences of its further expansion. And political positions, on the left at least, have been diluted to the extent that it is difficult to imagine the fierce controversy over council house sa...