Willetts David DP

“How on earth are our kids ever going to be able to afford to get themselves on the housing ladder?” This question, posed by his wife, first attracted David Willetts to the question of fairness between the generations. In 2010, he published a book, The Pinchsubtitled “How the baby boomers took their children’s future – and why they should give it back”, which demonstrated an astonishing mastery of the literature on the subject.

Five years on, the subject is even more pressing: as he says in this interview, ” I think a society where it’s hard to build up a decent company pension and it’s hard to get started on the housing ladder is not a conservative type of society.”

And Willetts finds himself in a position to think from a more independent vantage point about the policies which in future can restore those things. Having stood down from the Commons and taken a peerage, he has become executive chairman of the Resolution Foundation, a think tank which “works to improve the living standards of those in Britain on low to middle incomes”. Willetts says at the end of this interview that to cut tax credits would clearly damage those on low incomes, so he hopes George Osborne will make changes.

But we began by discussing housing, where Willetts (rather surprisingly, in view of his cerebral image) sees a need for “Beaverbrookism” – the dynamic but unscrupulous mixture of public and private sector methods employed by Lord Beaverbrook to increase production of aircraft and munitions during the Second World War. Willetts adds that he would have no objection to the building of houses by local councils: one of the methods used by Harold Macmillan to bring about a huge increase in house-building after the Conservatives returned to power in 1951.

ConHome: “The other day, in a piece in The Times (£), you described the difficulty of getting on the housing ladder as ‘a national scandal’ and said it risks making the Conservatives ‘the party of possession, not the party of opportunity’. This is strong stuff.”

Willetts: “Let me just very briefly set out the argument, which I set out in the book, which I think is even more compelling now. For us as Conservatives, who believe in a property-owning democracy, spreading property ownership, the two main forms of wealth that people build up are your house and your funded pension.

“And in both of these there is sadly a very similar story. So on housing, when the baby-boomers were coming in to the market, we were in the Fifties and Sixties building 300,000 houses a year. And in their twenties, people across the country, on the normal pay you got then, were able to buy a house. Now, it’s a struggle to build half that number of houses. Ministers are absolutely doing their best.

“One of the things that first got me into this, I would go to local meetings in my constituency, Havant, and you would go to the residents’ association, and often on the agenda it was complaining about the new housing development. And these were people who’d got their own house, and they were completely decent people, they weren’t bad people: they just assumed, and even the local paper assumed, that housing development was bad news, and not having housing development was good news.

“I found the most powerful single argument I could use in those circumstances was to say, ‘Hang on, don’t you want your kids or grandchildren to have the same kind of opportunities to buy a house that you had when you were in your twenties or thirties?’ I found for Conservatives that appeal to future generations having the same opportunities as you was the most powerful one.

“But nevertheless, the planning regime is now so tight, and the local opposition is so great, that it’s much harder to put up houses on the scale we benefited from when we were young. And then you look at the other big asset, pension, and you find that there were a lot of company pension schemes, most people were able to join some company pension scheme that provided a defined benefit, and then essentially – it began through Maxwell – governments on behalf of pension fund members passed more and more regulations, making the company pension promise more expensive and more of an absolute property right, as a result of which, companies pull out.

“So the deal is that boomers have got heavily protected pensions, but at the expense of companies not providing pensions anything like that for future generations. And then add the final twist. The requirement to plug pension deficits is such that young workers are helping to generate revenues for companies that go to plug deficits in pension schemes of which the young workers are not even members themselves.

“And I think a society where it’s hard to build up a decent company pension and it’s hard to get started on the housing ladder is not a conservative type of society.”

ConHome: “We some time ago carried a piece about how Macmillan managed after the Tory victory in 1951 to build 300,000 homes a year, and there didn’t seem to be a problem of crowding out, though there was a problem of quality. Macmillan approved every single council application to build stuff. The Tories won again in 1955, and in 1959. They’d shown they could do this better than Labour.”

Willetts: “Yes. It’s a fascinating story. The pledge to build 300,000 homes was added at a party conference rebellion in the autumn of 1950 led by Harmar Nicholls. Rab Butler recalled, when planning the 1951 conference, that the previous year, ‘the conference made its own policy by acclamation’, and said that although this method ‘is hallowed by having been used by the Greek city states, I think it would tend to lead to irresponsibility if proceeded with for a second year in succession’. People were literally shouting out numbers.

“And then Macmillan made his reputation. He described the way it was done as ‘applied Beaverbrookism’, this mixture of public and private: he took as his model what Beaverbrook had done to get the munitions going in the war. It was the same combination of public making land available, granting planning applications in a straightforward way, but also private enterprise building.”

ConHome: “Well what can we learn from that?”

Willetts: “We’ve learned that it should be a lot easier to get planning permission. I worry about the small builders: it’s much harder for them to get funding than it was in the past. Above all, what I find, and I think it is beginning to change, is that the political background needs to change so that people aren’t always campaigning against new houses. In my time as MP for Havant, one of my battles was to get the local newspaper not to report houses being built as bad news, and houses not being built as a triumph for local people.”

ConHome: “Did you get anywhere on that?”

Willetts: “I think we did. My impression is that the popular opposition to building any houses is less intense than it was five years ago. There’s a bit more public acceptance that you need to build more houses. For me, as a conservative, it’s the most powerful appeal you can make. We want to pass something on to the next generation in at least as good a shape as we found it, if not better.”

ConHome: “What about allowing councils to build more?”

Willetts: “I personally have no problem with that.”

ConHome: “The politics of this are surely very attractive, because it’s another invasion of Labour territory. They’ve been moaning since the early 1980s that councils couldn’t reinvest the proceeds of council house sales.”

Willetts: “Beaverbrookism seems to me a good description of what we need again today.”

ConHome: “Including a touch of unscrupulousness. More than a touch of unscrupulousness. I think that was one of the things Churchill liked about Macmillan. He would strike a low blow when it was necessary in order to get something done.”

Willetts: “For me the frustration of being in government, dealing with universities and science, you saw boom towns like Oxford and Cambridge which really had the potential to be major cities. They’re comparable to London in what’s happening to land prices and house prices.

“There the planning constraints on the growth of those cities have been intense. I think Cambridge has now got quite a bold planning agenda. Those are Britain’s great 21st-century cities. They should be and could be significantly bigger than they are.”

ConHome: “Do you think the Government are going to get back to anything like the Macmillan level of house-building?”

Willetts: “The good news is that if you look at the planning permissions that are now being secured, that is going up. They’re not all being built yet, but it does take time.”

ConHome: “I don’t think you said what should be done on the pensions side, to deal with that.”

Willetts: “Well I personally think that the only thing that can be done to ease the cost for companies, to give companies a bit more flexibility, is to soften the regulations so it is a less scary liability for them, so that they would be more willing to offer a decent company pension. I don’t think the two-thirds of final salary model is ever coming back.”

ConHome: “A third area is education, where you had that terrible business about the grammar schools. That must have been an agonising period.”

Willetts: “Well actually, ConservativeHome were very good, I think it was in the days of Tim Montgomerie, I tried to engage with the argument and I remember I set out then in long pieces I wrote for ConservativeHome what my thinking was, which is that I believe in social mobility, but it didn’t look as if there were large numbers of kids from lower-income families who were getting into grammar schools. On education what I’ve been focusing on more recently [as Minister for Higher Education and Science] is expanding post-18 education. Government has stopped controlling numbers at university.”

ConHome: “On the tax credits row, nobody knows how adaptable this part of our economy is going to be when people’s circumstances change because they lose tax credits, how quickly they can either work more hours or their wages can go up. What do you think?”

Willetts: “Well I hope people can adapt, and you’re right, those are both ways in which they could adapt. But all our analysis here shows that the size of the reduction in the tax credit entitlement of some families will make it hard for them to adjust rapidly by increasing hours or whatever. Over time, people do adjust, but I think it’s going to be quite tough for some families next spring when this is introduced.”

ConHome: “So what should the Government do to mitigate that?”

Willetts: “Well there are various options. Starting the phasing out of the allowance at a slightly higher income than they’re now proposing is one option. I understand the constraints that George is under. For me the frustrating thing, which I referred to in that article for The Times (£), is that we’ve got this very powerful argument that One Nation Toryism, blue collar conservatism, these are working people who are doing the right thing, they are in low-paid jobs, but they’ve got family responsibilities, and we are reducing their incomes.

“And in fact ironically, and one of the reasons why this does matter for me personally, is that I was involved in persuading Margaret Thatcher of the case for the Family Credit back in the 1980s, and the Family Credit was the kind of precursor of a lot of this.

“The principle was that you should boost the incomes of people in low-paid work. And our kind of thinking then was you couldn’t lower the benefits of people out of work any lower, they’d reached some sort of minimum acceptable level, but you wanted people to be better off in work than out of work, and for some people if they had children, they were not necessarily going to be better off in work than out of work unless there was some sort of top-up mechanism like the Family Credit, which was introduced in the late Eighties, and which I worked on.

“So that’s my starting point. I hope and believe that George should be able to tackle this over the next few months.”

ConHome: “Do you think he will?”

Willetts: “I can’t predict. I fully understand the Government’s position on eliminating the deficit, so he’s got fiscal constraints. But I think for us at Resolution it would be great if it were possible to find ways in which the impact of these changes in tax credits were alleviated. Here we have these people at Resolution who are crunching the numbers: numbers that are quite worrying.”

ConHome: “So this could be a loss of £1800 or something like that?”

Willetts: “When you try to get individual cases, they’re incredibly complicated circumstances. But certainly our analysis shows some people losing over £1,000.”

ConHome: “Quite a lot of people?”

Willetts: “That’s what we think.”

ConHome: “So should the burden fall more heavily on higher earners?”

Willetts: “George has got the overview of the fiscal position, and I don’t want to get in to whether you should adjust this or that. All we’ve done is shown that there will be a group of people whom most would regard as deserving, working families on modest incomes, who will lose out.”

ConHome: “The basic point is often made by defenders of what the Chancellor is doing, that it’s very bad to subsidise firms which don’t pay their staff enough. That’s a strong argument, isn’t it?”

Willetts: “Well we welcome the National Living Wage for that reason. But our figures show that the National Living Wage is a good thing, but it is not big enough to offset the effect of the losses of the credits.”

ConHome: “Still now’s the time to do it, having just won an unexpected victory.”

Willetts [in a non-committal tone]: “Mmmm.”

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