Politics, the State and the Market in Land


Politics, the State and the Market in Land

By Eamon Dyas

A core component of the post-war political delineation between Labour and Conservative policies was formed around the question of the relationship of the State to the market. Ever since the foundation of the Labour Party this had been the main line of the ideological divide between the two parties but it was only after the 1945 Labour Government that the implications of that ideological divide began to express themselves in terms that the ordinary citizen experienced in their day-to-day lives. The areas where this had its most immediate impact were those of health and housing provision. For the first time, the post-war political environment provided the Labour Party with the opportunity to introduce policies which enabled the citizenry to experience a government that could help them overcome the adversity which the inequalities of capitalism inevitably brought in its wake. The State was to be made into a direct instrument in the struggle for greater equality and opportunity on a scale never experienced previously. From the Labour perspective, health and housing were considered the two areas of primary social need where an absolute reliance on the vagaries of the market was seen as anathema to the welfare of the wider society. And so it was that the National Health Service was constructed to deliver a first-rate health provision for the populace and the market in land was to be made to serve the wider needs of housing provision for the community. [For a detailed account of this see the previous article in this series].

In the immediate post-war years, such was the general political atmosphere that the Tories were compelled to operate a kind of modus vivendi in which they accepted the NHS and acknowledged the principle that empowered local authorities to compulsorily acquire land for the provision of public housing. But, within the two distinct but related areas of health and housing there was a core difference which would ensure that, as time went on and the post-war political atmosphere waned, the principle of public health provision would out-live the principle of public housing provision within the British political consensus. While the NHS remained sacrosanct for much longer it only occupied that position because the principle of public health provision did not directly impact the area of finance capitalism on which the British economy became increasingly reliant in the decades after the war. It could be argued that finance capitalism had always been an important component of the British economic system and increasingly so during the years between the wars. While that would be correct, it was only in the decades after the Second World War that it began to assume the role of engine-driver of the economy. Because of this, land, an essential resource on which British financial capitalism had come to rely, became the arena of direct conflict between Labour and Conservative policies. This in turn meant that the Labour policy on publicly provided housing – a policy that relied on the movement of significant areas of land from private to public ownership – was inevitably going to be the one that first came under attack from the Conservatives. It was this difference between the principle of publicly provisioned health and publicly provisioned housing that ensured the latter would become the first of the two to crumble. 

Yet, despite the gradual withdrawal of Conservative support for the underlying principle of publicly owned land – the principle on which the idea of a meaningful stock of public housing relied – all the post-war Labour Governments under Attlee, Wilson and Callaghan until 1979 adhered to policies that displayed a determination to retain that principle. After 1979 there was no further support by a Labour Government for that principle. While Labour continued to advance that principle in the way it contested the 1983 General Election with a policy of reversing – or at least seriously modifying – Thatcher’s “Right to Buy” legislation, that was a far cry from what the party had stood for during its last tenure in power. If we consider the principle of publicly acquired land as central to what Labour stood for in terms of its ambition for extensive publicly owned housing provision, then it has to be said that even before 1983 the Labour Party had ceased to view any serious role for the State in a resolution of the land issue that might favour social need over market greed. By this time that principle may have continued to have a formal existence but it had ceased to possess any vigour or capacity to serve a wider Labour perspective on society. Consequently, in terms of practical politics, it can be said that the idea of the State directly underpinning a significant housing sector – and with it, being a serious holder of land – began its demise as part of the political debate in British politics in 1979.

Labour then went into the 1987 General Election with no policy of reversing the Tory “Right to Buy” legislation. This proved to be the earliest indication that the party had thrown in the towel on any serious ambition to use the State as a pro-active agency in shaping the market to serve the wider social interest and it was left to Tony Blair to formally abandon it at the 1995 Conference with his redefinition of Clause IV. After that, the arrival of the 1997 New Labour Government, finally delivered the coup de grâce on any illusion that the party might continue to view the State as an instrument for directly confronting the market in areas deemed critical to the welfare of the greater society.

From that point on, the market was no longer viewed as something to be confronted even when it was patently failing to serve the community. Instead, the market was to be “worked with constructively” to find political, rather than socially effective, solutions. In other words, the extent of the Labour Party’s ambition vis-à-vis the State was restricted to its use in policing the worst excesses of the market. Where previous Labour Governments had designated the State an active role in the service of a wider reconstruction of society, it was now to occupy the position of mere facilitator.

The Tories make the State serve the market

However, the arrival of the Thatcher Government in 1979 did not represent the end of the role of the State in the market. Where Blair was later to show a distinct lack of ambition when it came to the use of the State, Thatcher displayed a breadth of ambition that saw it being put to use in changing the entire post-war political landscape. Thatcher and the interests she represented set out not only to reverse the State’s post-war intrusions into the market but to ensure that the State would be permanently excluded from any future intrusions on any meaningful scale. In other words, the debate around the State’s role in the market that had characterised British politics over the previous 30 years was to be taken off the political agenda. The paradox was that Thatcher came to rely on the State to execute the policies that were to bring about such a removal.

In pursuit of that change in the political landscape the State was first set to work on establishing the legal right for council tenants to buy their own home. Aside from the role it was meant to play in the realisation of the Thatcher/Heseltine goal of creating the “property-owning democracy”, the “Right to Buy” scheme had the political advantage of effectively “buying off” of a significant sector of Labour’s traditional voting constituency. In other words, it made it difficult for the Labour Party to reverse that policy without alienating those Labour voters who previously voted for the party and who now sought to take advantage of the right to buy their own home at give-away prices. 

However, aside from the wider political and economic scenarios in which the Thatcher Government operated, there remained the important task of creating the specific economic conditions that would help prevent the chances of her flag-ship “Right to Buy” being reversed by any future Labour Government. But she was also eager to choke off the remaining stubborn adherence of certain Labour (and, indeed, some Conservative) local councils to the idea of local governments continuing to be a serious provider of social housing. In her determination to generate such conditions Thatcher showed that her commitment to the sacredness of the market was never an absolute. In certain circumstances the free market was treated as subservient to political needs if those political needs guaranteed an outcome that in the long term helped bolster the market against future State interference. In the case of land, the primary political object of the 1979 Thatcher Government and its successors was to ensure that local authorities were permanently removed from the position they previously occupied as major home providers.

This is the context in which the Thatcher and immediate post-Thatcher conservative governments became the most unlikely of conservationists in the way in which they dramatically increased the Green Belt areas around major cities between 1979 and 1997. (See part 7 of this series for an account of this). The enormous increase in the Green Belt area at this time is usually only seen in terms of its conservation impact. But there was another, more economically significant, impact.

The primary purpose of the Green Belt legislation was to impose a prohibition on the development of land surrounding major towns and cities. Whatever might be the case in favour of the protection of such land from the “despoiling” impact of development – commonly called “urban sprawl” – the economic impact was to place a premium on the limited areas of land available for development within the boundaries that these Green Belts established. The effect was to add to the inflationary pressure on the value of land within those urban areas as the demand for development land was now compelled to find expression within the artificially limited geographical area inside these Green Belt boundaries. The result of course was to provide a stimulus in the price of urban land within these boundaries. In their eagerness to introduce these measures the Tory Governments between 1979 and 1997, in effect, showed a willingness to use the State to interfere with the operation of the market in land. 

But, judging by its wider impact, that interference was to find a more significant expression in the way it served to thwart the use of publicly-owned land within the urban areas bounded by the Green Belts. From the viewpoint of the future of local authority housing the impact of the Green Belts expressed itself on two fronts. In the first place, the way in which it artificially inflated the cost of land within the urban boundaries made it difficult for financially strapped municipal authorities to compete with private developers in adding to their stock of land that was now commanding a higher price than the one the natural market would otherwise have determined.

What this went on to create was a situation where private developers, who continued to be able to access funding, were now more favourably placed than cash strapped local authorities which were compelled to operate under strict borrowing rules. It was, in effect, now the opposite to the situation which prevailed under the now repealed Labour Government’s 1975 Community Land Act and the 1976 Development Land Tax. While those articles of Labour Government legislation had interfered with the market in ways which provided a significant advantage to local authorities, that situation was now reversed. With local authorities no longer financially equipped to adequately compete with the private developer, the way was now open for these developers to begin to dominate the house-building sector as never before. Construction companies like Barratt Homes, which in 1979 was building 10,000 new homes a year, four years later had increased its capacity by 65%. The situation also had the effect of pushing out the smaller private constructing companies as they too found themselves unable to access the levels of finance that serious land procurement now required. The result was an increasing tendency towards monopolisation in the construction industry. While the recession of the early 1990s slowed down this tendency, the trajectory was revived thereafter with the likes of George Wimpey buying out competitors like McAlpine Homes and then merging with Taylor Woodrow in 2007. There were admittedly some exceptions, but what eventually emerged from all this was a local authority structure in Britain which was increasingly unable to re-establish any significant foothold in the direct supply of public housing and fewer, ever larger, private construction companies providing the bulk of the house/apartment building capacity in the country. 

Privatisation of urban public land

This brings us to the second front which the extension of the Green Belt brought to bear on the ability of local authorities to survive as serious providers of housing. Once established, the Green Belts had to be protected from encroachment. These encroachments usually took the form of officially sanctioned private building developments inside the Green Belt and they were justified as a means of alleviating the artificially inflated pressure created by the finite amount of development land that remained within their boundaries. It is here that the conservationist sentiment both within and outside the Conservative Party came to be put to use as leverage to diminish the surviving publicly-owned urban land within the Green Belt boundaries. In that situation, those who viewed Green Belt measures as protection against urban “contamination” of the countryside became a useful and very effective means by which this pressure on publicly-owned urban land was exerted.

But before we get to this, it is useful to put it in the context of the general issue of public land and the way in which privatisation played its part in moving significant areas of that land into private hands.

The Thatcher policy towards privatisation developed independently of Heseltine’s housing policy and in fact grew out of the industrial unrest of the 1970s. In the aftermath of the defeat of the Heath Government by the 1973-74 miners strike the more gung-ho free market section of the Conservative Party began to gain influence and sought to develop a strategy which would destroy what they believed to be an obstacle to the full blossoming of the market as well as being a major cause of wage-induced inflation – the trade union movement. This section of the Tory Party cohered around what became the Selsdon Group with Nicholas Ridley as its first president and founding member. In 1977, in response to the earlier defeat of the Heath Government by the miners, Ridley produced a report on the nationalised industries in which he provided the blueprint for taking on and defeating the trade unions in what he saw as their strongholds. This blueprint in fact became the strategy of the Thatcher Government in its victory over the miners in the 1984-85 strike. In achieving this victory and through the introduction of various pieces of anti-trade union legislation Thatcher clipped the wings of the trade union movement and in the process effectively removed the main obstacle to the privatisation programme which had been part of the Selsdon Group’s agenda. 

However, with the trade unions still at that time a potent force, the first Thatcher administration proceeded cautiously in terms of privatisation. The object at this stage (between 1979 and 1982) was to focus on privatising already profitable public companies in order to raise revenues and reduce public sector borrowing. With these considerations in mind profitable large public sector companies like parts of British Aerospace and Cable and Wireless became the earliest privatisations. After this, during the period 1982 to 1986, we witnessed the likes of Jaguar, British Telecom, the remainder of British Aerospace and Cable and Wireless, Britoil and British Gas. Then, between 1987 and 1991 there was the privatisation of British Steel, British Petroleum, Rolls Royce, British Airways and the utility water and electricity sector.

But by this point, the electorate began to become uneasy with the accelerating progress of privatisation and the fear began to take hold that the National Health Service was not far off. This resulted in growing expressions of dissent with the result that any plan to directly privatise the NHS had to be taken off the table. Nonetheless, the mindset that continued to dominate government thinking ensured that market-driven “initiatives” continued to be imposed in the public sector, from the concept of the “internal market in the NHS” to John Major’s idea of the “citizens’ charter”.

That basically is a brief history of privatisation but what concerns us here is the implication of these privatisations for the value of land in situations where the artificially constrained pool of urban land continued to impact the capacity of private developers to produce what had been promised. If we look at the nationalised industries and companies that were privatised during this time it reveals that what was significant to the long-term evolution of the British economy wasn’t the businesses as such but the land that went with the sale of these businesses.

Brett Christophers explains this aspect of the privatisations as follows:

“In terms of land area, these nationalisations were very significant. The National Coal Board, which was the public corporation established to run the coalmining industry, owned 258,000 acres (just over 100,000 hectares) in the late 1970s. British Rail’s holdings, comprising primarily tracks and stations, were a little smaller, at 175,000 acres (in the same period). The National Health Service (NHS) estate in England alone – ‘2,000 or so hospitals of various sizes, together with health centres, clinics, laundries, offices and residential accommodation’ – still amounted to around 50,000 acres in 1982, even after a ‘substantial increase’ in disposals since the beginning of the decade. To those one can add the nationalised water boards, area electricity boards, and local authority gas supply undertakings.” (The New Enclosure: the Appropriation of Public Land in Neoliberal Britain, by Brett Christophers. Published by Verso, London, 2018, pp.97-98)

Much of the land owned by these companies and institutions would never find its way onto the market and as a consequence the market was impervious to it. For instance, much of the land owned by the National Coal Board existed in rural locations or in areas where the worked seams restricted its future alternative use. Similarly, with the land owned by British Rail. Most of that land consisted of track and stations which placed it beyond the position of becoming, in itself, a transferable commodity. Nonetheless, in the critical urban locations the land did become a transferable commodity with places like station car parks, and railway arches and even the main railway stations (witness the way in which the likes of Kings Cross and London Bridge have in effect become shopping malls under private overlordship) did become part of the volume of public land that ended up as a transferable commodity under private ownership. Likewise, although some of it did end up, through post-privatisation re-sales, as investment land, the major proportion of the land owned by the privatised water boards and the electricity and gas board was in rural locations and critical to their ongoing operations and consequently could not be released to the general market in land. 

Thus, despite the fact that a significant proportion of it ended up in private hands, the land associated with these specific privatisations didn’t, in itself, provide the main impetus for the ongoing trajectory of the British economy set in train by Thatcher’s policies. In other words, these particular privatisations didn’t represent the most significant movement of public land into the private sector when defined in terms of its influence on land values. 

Rather, these contributions, in the context of the market in land, only assumed a defined role in the context of an earlier and more seminal event, or more accurately, a series of events. In this context, Christophers goes on to explain that:

“In terms of land value, if not in area, the post-war expansion of the state’s role in investment in infrastructure broadly defined, was probably more significant still.”

In other words, it wasn’t the land that entered the market as a by-product of the privatisations of State-owned businesses that set the future agenda for land values. That was done through the release of land which had been accumulated by local and public bodies operating in a political environment that had previously been sympathetic to such accumulations. Christophers adds that during the 1950s and 1960s, those favourable land valuation policies meant that certain public bodies were able to compulsorily acquire land at its existing use-value rather than its potential future use value. As a result of this, swathes of land came under public ownership and was put to direct and immediate use for things like house building, town centre redevelopment and new road construction. However, aside from the land put to such direct use, many local councils, at this time and later, procured land which they put aside to hold for future contingencies. Christophers goes on to explain the significance:

“The upshot of all this public investment in urban land was profound: British urban space literally became, in considerable measure, public space, inasmuch as its ownership lay substantially with the state. The degree of state ownership of urban space varied considerably: studies of British cities in the 1970s and early 1980s showed publicly owned land proportions ranging from a low end of one-third (Birmingham, Coventry, and Plymouth) to a high end of 65% (Manchester), with Newcastle (51%), Nottingham (55%) and Brighton (60%) falling in between. But whatever the variance, the average public share was clearly high – these were anything but private spaces.” (p.100).

By 1982, of the 65% of all the urban land in Manchester that was owned by the combination of the nationalised industries and public bodies, 90% of that publicly owned land was owned by Manchester City Council with the only other public body holding more than 4% being the British Railways Board. In terms of how Manchester City Council had utilised this land, Christophers provides the following breakdown by area as follows: “housing (34%), ‘land and development’ (28%), recreation (13%), cleansing (13%) and education (6%).” What is relevant here is the fact that 28% of the land held by Manchester City Council was designated under “land and development”. In other words, it was public land that remained unused. This was a situation that was repeated, to a greater or lesser extent, in many urban and metropolitan areas throughout the county. It was this land that provided local councils with the means by which they could theoretically overcome the constraints which the Conservative Government had placed on them through a combination of the cut in the Central Government Grant, the prohibition against raising funds through rate rises and access to loans, and the way in which the manipulation of the land market through the dramatic expansion of the Green Belt had inflated urban land values. Access to these reserves of land ensured that, under more favourable political circumstances, local councils could once again become big players in the area of housing construction and provision and because of this it was a resource that the Conservatives set out to remove.

The assault on the publicly owned urban land reserves

The Thatcher administration targeted this resource from the outset. The first objective was the identification, location and quantification of such land.  This was to be done through one of the main provisions in its 1980 Local Government Planning and Land Act. That Act involved the introduction of land registers. These land registers were to constitute a record of all land sites of over one acre (approximately 4,000 sq. metres) which were held by public bodies “for future operational needs but which are at present not used or used for temporary purposes.” Christophers describes the purpose of these land registers as follows:

“The register scheme was mainly though not exclusively, directed at local authorities. Other bodies to which it applied included New Town Development Corporations, nationalised industries, so-called statutory undertakers (accredited companies that carry out development and highway works), health authorities and government departments. But there is no doubt that local authorities were in the spotlight, nor that central government had little confidence or trust in their actual registering all of the land they were expected to register. Regional officers of the Department of the Environment, which was responsible for the registers, were encouraged to ‘check the position literally on the ground [and] suggest sites which should be put on the register’. So too were private-sector developers.” (p.187).

So, in order to counter any attempt by local authorities to conceal their reserves of unused or underused land not only were officials of Heseltine’s Department of the Environment employed to scout their local areas for such land but also, “private-sector developers” were encouraged to act as spies. The launch of these public land registers took place in 1982 where a government spokesman reiterated the purpose of these registers: “We want to see publicly owned land brought into use instead of lying idle. We hope the registers will act as a catalyst to bring as much publicly owned land forward as possible for development, creating new wealth and jobs.” (Quoted in Christophers, p. 186).

It is significant that one of the loudest voices underpinning the government’s objective of moving publicly owned land to the private sector was also an advocate of the expansion of the use of Green Belts. That voice belonged to Conservative M.P., Anthony Steen. Steen was an early enthusiast for the expansion of the Green Belts and at the same time an inveterate opponent of public landownership. In 1981 he had written a booklet, “New Life in Old Cities”, in which he advocated the auctioning of surplus public land to the highest bidder. During much of the 1980s his was a constant voice counterposing the perceived infringements of the Green Belt by developers against what he viewed as the “national disgrace” of so much unused publicly owned land in urban areas. His reasoning being that such land, if freed to the market, would ensure the ongoing protection of the Green Belt from developers who, as long as that land was kept beyond their reach would inevitably seek land that was currently in the Green Belt.

For their part, local authorities, deprived as they were of adequate central government funding or the means of borrowing, increasingly leant on the sale of land to bolster their budgets. This was done over a prolonged period as neither the Thatcherite objective nor the interests of local councils were served by a sudden surge of such land onto the local markets in ways that created an oversupply and a corresponding drop in its value. In the meantime, at a point when it was deemed that they no longer served a purpose, and because there was no additional land being acquired on any significant scale by local authorities or public institutions, the land registers ceased to be published. The first registers, thirty-three of them, were produced in 1981and by 1983, there were some 365 such registers. At that time these registers showed that the amount of publicly owned (and deemed to be un-used or under-utilised) land ripe for private exploitation was just short of 180,000 acres across 11,000 sites at an average of 10 acres per site. Of this land:

“Local government accounted for the biggest share of registered land, with approximately 60%. Nationalised industries and statutory undertakers accounted for about a quarter of the total, the biggest contributors being British Rail (14,000 acres) and the electricity boards (almost 3,500 acres). Only two government departments, meanwhile, had registered a material quantum of surplus: Defence (a paltry 2,466 acres) and Health (2,185 acres).” (Christophers, p.187).

Christophers estimated that the total of publicly-owned land that was privatised since the end of the 1970s to be 2 million hectares. This includes all the land that was privatised consisting of the “active” land that went on to serve a private development purpose as well as the “static” land which, because it was intrinsic to the ongoing operation of the newly privatised businesses, could not serve that purpose. He estimates that the latter only constitutes 20% of the total in which case the other 80% constituting 1.6 million hectares of previously publicly owned land, went on to play an active role as a commodity in the ongoing land and property development market.

As to what proportion of this land consisted of land on which council-owned houses was built is not stated. However, regarding the percentage of the cost of building a house in relation to the other costs of materials and labour, the price of land was estimated at just over 25% of the total cost of building a house in the late 1950s and by 2013 this had risen to close on 70%. (“Is it time for housing policy to pay more heed to the costs and benefits of location”, by Brian Green, Building, 23 July 2013. This can be seen at: https://www.building.co.uk/comment/is-it-time-for-housing-policy-to-pay-more-heed-to-the-costs-and-the-benefits-of-location/5058188.article ). Since 2013 that percentage had already hit 70% in 2018 as confirmed by the claim in Christophers’ book which was published that year. 

As for the market value of residential land compared to other types of marketable land it has been estimated that in 2015 the average value of English residential land was £6 million per hectare which was 12.5 times that of industrial land at £482,000 per hectare and nearly 300 times more valuable than agricultural land at £21,000 per hectare. (See: Christophers, pp.114-15). Given that the relative positions which both residential and industrial land continue to occupy in the British economy it is certain that the 2015 disparity in the value of residential land has become even larger in 2022.

This dramatic increase in the value of development land has had implications not only for the way in which it contributes disproportionately to the cost of building homes and consequently the cost to the purchaser, but it also has had implications for the type of homes being constructed in urban settings. Cities are increasingly being dominated by tower blocks that have reached heights that were previously unimaginable as developers seek to optimise the number of units – and consequently, the retail value – of homes being constructed on increasingly expensive land. Geological factors which might previously have made the cost of high-rise constructions prohibitive now provide no such inhibition. In the case of London, its clay-based geology always made it difficult to construct buildings beyond a certain height as the deep-pilings required to raise a building beyond a certain height made no economic sense. However, just like the price of oil in the 1970s and 1980s made it economically worthwhile for oil companies to invest in deep sea off-shore extraction, so too with the building-construction situation in London. The growth in the price of land reached a point where the balance between cost and return was soon reached and has resulted in a proliferation of high-rise buildings the likes of which London had never seen before. 

In many ways the cost of preventing the despoliation of the green areas surrounding the cities has resulted in the despoiling of the towns and cities themselves with a corresponding depletion in the quality of life for their residents. In urban areas on the edges of the Green Belts, land that had previously accommodated the likes of local cricket clubs, tennis clubs and school playing fields have all succumbed to the temptation of the high prices offered by speculators willing to take a punt on the possibilities (usually realised) of gaining planning permission to develop that land. Similarly, and indeed more so, within town centres where working people usually reside and particularly in impoverished or semi-impoverished areas that are seen by speculators as the “next great location”. Local pubs, shops and libraries, and even small industrial and business estates, are fair game for the temptation of the big money offers of the speculators and developers – offers that are not based on purchasing the business or the buildings occupied by those businesses but for the land on which those buildings lie. Then, once procured, in the place of these local amenities there arises another tower block where the apartments are purchased either by young professionals moving into the area or investment companies that have acquired multiple apartments which they use for their rental income. 

Looking back from 2022, is undeniable that Thatcher was successful in how she used the State to refashion the political debate to one where land (and with it the prospects for a revival of a significant local authority public housing sector) has effectively been taken off the political agenda. Throughout the 21st century, with the exception of the ill-fated, and ultimately ineffective, Corbyn years, the Labour Party has shown no ambition to do anything more than tinkering with the problems created by the way  the market has been bestowed by Thatcher – and every government that came after – with the main responsibility for housing the people. As long as that remains the case, not only will there be no solution to the housing crisis but there won’t even be the political space in which any meaningful debate can take place on what that solution might be.

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