HC Deb 14 June 1989 vol 154 cc958-73
Mr. Soley

I beg to move amendment No. 184, in page 75, line 31 at end insert— '(5) Notwithstanding the previous provisions of this section, in determining a formula for the purposes of this section and insofar as the said formula includes variables relating to the rents payable by tenants of a local housing authority, the Secretary of State shall assume that the average rent payable by tenants of that authority will change by an amount or factor from the average rent payable in the year prior to that to which the calculation relates and that amount or factor shall be the same for each local housing authority.'. It may be helpful if I keep my remarks short at this stage because I think the Secretary of State may want to intervene. Perhaps I shall be able to speak again later.

The amendment deals with council rents. We want to try to tie the Secretary of State, when fixing housing revenue account subsidy for each year, to assuming the same level of rent increase, in money or percentage terms, for each local authority. The Secretary of State and other Ministers know that we have been worried for some time because the Government have continually ducked the question of what they believe acceptable levels of rent to be. I and everyone in the housing movement know that no absolute definition can satisfy everyone, but we also know beyond reasonable doubt that rents are becoming increasingly unaffordable for many people, which is why so many have been driven to desperation or homelessness, and why the housing crisis is growing so rapidly. The concept of affordability shuld play at least some part in policy making.

In an earlier debate, I repeated some of the statements that the Minister had made in Committee about rents. I said that they showed an incredible confusion within the Government about what rents should be. In the past 12 months, Ministers have been saying that they do not want market rents, but the Minister is on record as saying—and a number of Government documents show—that not all council rents will rise to market levels. That strongly implies—it necessarily entails—that some council rents will rise to market levels. The Government must deal with this.

Mr. Trippier

Which document?

Mr. Soley

A consultation paper from the summer of 1988 includes the phrase would frequently be below market levels". Various other statements show that rents may at times rise to market levels.

I and my right hon. and hon. Friends have argued for a long time that Britain's housing crisis derives largely from the Government's having driven up rent levels at the same time as house prices inflation has pushed up house prices. As a result, market rents have crept in, thereby approximating to the revenue people could obtain if they sold the houses they owned, invested the money and took the return on it. That is what pushes rents to market rates.

The Government have never addressed this problem, whose complexity I concede, but it is important to realise that a free market in housing, in any serious sense of the term, is impossible. I do not want to debate whether there is such a thing as a free market in other senses—almost certainly there is not, except possibly in fruit and vegetables at the end of the road. But in housing, perhaps more than in anything else, the market is grossly distorted—by the time lag in supply and demand, by land prices and policies, by planning, and above all by the subsidy system, under which we provide a massive and ever-growing subsidy to the purchase sector and a declining subsidy to many people in the rented sector.

We give a dangerously low subsidy to people who rent. Consequently, British people are trapped more than many others and cannot move around the country to seek work or for other reasons, because there is no neutrality in the costs of buying or renting.

Similarly, it is difficult to move, for example, from the south Wales valleys where two-bedroomed houses are sold for about £10,000 to the south-east of England where a similar house costs about £80,000. It is also difficult to move to areas such as mine in the south-east because it is common to pay £60, £70 or £80 a week for a room, never mind a flat or a house. That is the sort of nonsense that the Government have created.

7 pm

I shall not pursue the matter further at this stage, because I know that the Secretary of State wishes to intervene and it may be helpful to hon. Members if that happens. We are trying to tie down the Secretary of State in the way that I have described to a method of assuming the same level of rent increase either in money or percentage terms for each local authority. It is an important amendment and raises the whole issue of rent levels.

As I have said many times during the passage of the Bill, it is grossly unreasonable to have to address such important matters in a debate that has almost become a Committee stage running late into the night on what is supposed to be Report. My hon. Friends, and I think Conservative Members, know that the Bill is virtually out of control in terms of the number of amendments and new clauses.

Mr. Trippier

Come off it.

Mr. Soley

The Minister has no grounds for saying that. He knows that we have been passing on Report legislation that is basically Scottish legislation, which should have gone through the proper procedure.

The Secretary of State for the Environment (Mr. Nicholas Ridley)

It is not true to say that council rents have been driven up during the currency of this Government. Throughout the 1980s the guidelines for rent increases have mostly followed increases in earnings, and actual rents have closely followed the guidelines. Before dealing further with the analysis of the housing situation by the hon. Member for Hammersmith (Mr. Soley), with which I do not entirely concur, I thought I would put him right on that.

The amendment is concerned with the assumption that we will make about the rental income of an authority when we set its entitlement to the new housing revenue account subsidy. The point of the new subsidy is to help an authority to balance income and expenditure on the housing revenue account once we have ring-fenced it from the rest of the authority's funds.

In determining how much subsidy authorities need each year, we obviously have to make an assumption about the amount by which they would increase their rents, if at all, from one year to the next. Under the present housing subsidy system we decide each year on a uniform increase in rents for all authorities, to be assumed for subsidy purposes. This year it is £1.95 per week. The amendment would require us to continue to operate the system in this way either by assuming a uniform cash increase for all authorities or a uniform percentage increase.

It is nonsense to assume that every authority should put up its rents by the same amount from levels that have no logical basis. I shall give as an example two pairs of authorities which are similar and neighbouring, and which apparently differ little in their characteristics. I shall give the current average rents in those authorities. In Manchester city the average in rent in 1988 was £15.63 and in Tameside next door it was £19.40. There is no justification for that variation. I shall now look at a different sort of area. In mid-Bedfordshire the average rent last year was £16.22 and in south Bedfordshire next door it was £20.63. Those are big variations.

Mr. Allen McKay

The Minister has given us the differences in rent levels. Could he tell us why they occur? On the reorganisation of local government when 14 authorities came together, there were 14 different rent levels. That was because the authorities had 14 different levels of service and the rent levels depended on the level of service and how repairs were dealt with.

Mr. Ridley

There are many factors that have historically determined local authority rents. Probably the biggest is the historic debt cost. An authority which built most of its houses in the 1920s and 1930s will have a much lower historic debt than an authority which built in the 1970s. That is no fault of the tenant, and there is no reason why those who live in 1930s houses should have a far lower rent than those who live in houses that were built more recently. That is the inequality about which I spoke earlier.

Mr. Tony Banks

Will the Minister give way?

Mr. Ridley

No. I should like to make progress but I shall give way later.

We need a way of accommodating different assumptions for different authorities. We have now reached the stage where I think I can help the House by giving more details about how this would work. The starting point would be a decision each year—as now, there is no change℄on the average increase to be assumed. That would produce a new national total of the income from rents. We must remember that it is a hypothetical figure which is used only for subsidy calculation and is not an instruction to councils.

The new national total can be shared between housing authorities according to the number of dwellings that they have and an assessment of their local circumstances. That local assessment is central to our thinking. We want rents to vary geographically, not as they do now in a way which is unfair, discriminatory, haphazard and often based on historical or political bias, but in a way which takes more account of the geographical spread of housing, its type and the demand for it.

I make it plain once again that we are not proposing market values. We are saying that if demand for housing is lower in one part of the country than in another, property values would be seen to be lower there and rents should also he lower. Conversely, where demand is higher it is reflected in property values, and should also be reflected in rents.

A good measure of the variations in the value of property can be found in right-to-buy prices of council houses. In order to assess local circumstances we would look at the prices of council houses and flats that are being sold. To be precise, we would take the average undiscounted valuation for each authority of its right-to-buy sales and other sales of individual properties. We would apply this average price across the whole of the council's remaining housing stock to arrive at an approximation of the total value of the housing stock in each authority.

No one, least of all me, would pretend that that gives a precise valuation of a council's stock, but precision is not needed. We are looking for a convenient and sensible comparison between councils. We would then distribute the assumed new national rent bill pro rata to these local values. For example, if an authority was seen to have one three-hundredth of the national value of council houses, we could reasonably assume that it should raise one hundredth of all the rent that is raised nationally. We would thus reach a new assumption each year about the new total rent bill for each authority which we would use in setting its rent increase guideline.

If the present total rent income of an authority was so far behind the new assumption that a large increase was implied, we would dampen the increase so that no authority was assumed to increase its rents by more than a reasonable amount. The damping factors would be decided each year in the light of prevailing circumstances. Equally, we could dampen the effect of the policy if no rents were assumed to be reduced.

That policy will achieve all three of our main aims. It will encourage rents increasingly to reflect the pattern of house prices around the country, thus to some extent reflecting supply and demand. It will expect those authorities that were furthest behind to catch up more quickly while protecting those who have followed sensible rent policies in the past. Through the damping mechanism the policy will prevent undesirably high increases in individual rent bills from year to year.

As I have stressed, the assumption that we have made about rents is just that. It is a notional assumption which we use for setting subsidy entitlements. It is up to each authority to decide on the basis of its planned expenditure and its other sources of income the level at which to pitch its rents.

Furthermore, the assumption is based on the average rents charged by authorities. Within each authority there will be variation around the average. Rents generally vary according to the size of different properties, but other matters should also affect the spread of rents within an authority. It seems common sense that a three-bedroomed house with a garden should command a relatively higher rent than a similar sized flat halfway up a tower block and that people should pay more for a better location. But that is not always the case in every authority.

Clause 137 of the Bill requires authorities, when setting their rents, to have regard to how rents would vary if the properties were in the private sector. It does not mean that the rents themselves must be pitched at private sector levels, only that they should vary in the same sort of relationship. This will ensure a more sensible distribution of rents within an authority, just as part VI aims to influence the distribution between different authorities. The clause gives authorities a lot of scope in deciding the criteria for their rent structure so long as they have regard, among other things, to this principle.

I have spent some time outlining our proposals on rents because I want to leave no doubt about our intentions. I stress again, as we have done at earlier stages of the Bill's passage, that we have no ultimate target for rents. We are not aiming for market rents and we are not expecting to see large increases result. The decision on the annual guideline will be taken afresh each year. We simply want to see a gradual move towards a more sensible pattern in rents in different areas of the country and within each authority, removing present unfairnesses and reflecting more of the variation in the value of housing rather than the accident of historic cost accounting or the incidence of extra subsidies from rates.

It will remain the responsibility of local authorities, not the Government, to set rents and expenditure taking account of all the circumstances, including their subsidy entitlement. The system is not so different from the present one, except that the calculations currently made are on a uniform basis, but in future will be on a basis taking into account local variations in factors which affect housing in its wider aspects.

It is likely that the drafting of clause 71—the subsidy determination clause—might have to be tightened up in the light of our detailed proposals. If so, we will introduce amendments during the passage of the Bill in another place.

The Opposition amendment now before the House, however, would prevent the improvements that we aim for. It would treat all authorities the same, irrespective of their individual circumstances or how they have set their rents in the past. It would ensure that local authority housing continued to be insulated from the real world, and I therefore urge the House to reject it.

Mr. John Fraser (Norwood)

The voters of Vauxhall will be interested in the announcement that has just been made by the Secretary of State. I have been thinking of comparisons in house values as between one part of the country and another. As the Under-Secretary will be aware, my father-in-law lives in his constituency and I live next door to the Vauxhall constituency. The comparative value of property between the two constituencies is in the region of 3:1.

There are many examples in Rossendale of two-bedroom houses selling for between £10,000 and £20,000. On the other hand, the comparative price of a property of that kind in my constituency, or the adjoining one of Vauxhall, would be between £60,000 and £80,000, and I imagine that the value of comparative properties will be similar as between local authorities.

I appreciate that the Secretary of State said that he would not be forcing local authorities to increase their rents, but the standard from which he will be working, and which he announced, will mean that if the average rent in Rossendale is £15 a week—the figures that the right hon. Gentleman gave for Manchester are not untypical of Rossendale—it would be about £45 in Vauxhall or Norwood.

That would seem to imply an increase in rents in the long-term for council properties in Vauxhall of about £30 a week. The Secretary of State says that he would not for a moment contemplate a rent increase of £30 a week. I also appreciate that it would be subject to damping down and that some discretion would remain with local authorities in terms of rents to be charged. I appreciate all those matters and I assure the right hon. Gentleman that I am not trying to be dramatic or to exaggerate the position by suggesting that immediate rent increases of perhaps £30 a week are in train for council tenants in Vauxhall. Nevertheless, that is the direction in which the Secretary of State's proposals are pointing, if he proposes to follow the formula which he described.

The electors of Vauxhall—indeed, tenants in London and elsewhere—will be grateful for the indication that the right hon. Gentleman has honestly given, immediately before the by-election, of the plans he has in mind.

7.15 pm
Mr. Matthew Taylor (Truro)

I listened with interest to the Secretary of State's announcement, which was couched in what one might call friendly terms. He seemed to be saying, "It will not happen in practice" and, "We do not mean this to happen. We want to encourage things to move in a certain direction, though not too much so."

The right hon. Gentleman made a crucial mistake, as I shall show. There is an argument for paying close attention to what happens in the regions, not so much to house prices but to what people can afford, which involves taking account of wage levels and the restraints that lower wages place on people. I come from an area which, because large numbers of people are coming in—to retire or to escape from the pressures in the south-east—is experiencing high house prices, even though the local people are earning low wages.

It seems from the Secretary of State's remarks that his plans do not take account of people's ability to pay as they move from one region to another. In other words, house prices do not reflect people's ability to pay, and my constituency is not the only part of Britain in which house prices are now way above the ability of the local people to pay. In many parts of London and elsewhere the same applies.

Nor has the Secretary of State allowed for the fact that local authority houses which sell are, almost by definition, those of the highest value. Much of the housing stock is too unattractive for people to buy. In my constituency, people seek transfers because they do not want to buy on one estate but want to move and then buy on another. I fear that his proposals could cause a distortion which, in turn, could lead to higher house prices.

There is another distortion in my area which, to an extent, argues against the point that I have made, although it does not justify the Secretary of State's position because it shows that his argument will be distorted once his plans are put into practice. I refer to those cases where council house sales are distorted because of housing defects. In my district council of Carrick and in the borough council of Restormel there are large numbers of Cornish unit properties, the sale value of which is massively reduced because, except in unusual circumstances, they cannot normally be mortgaged. They are classified as defective and accordingly are of less value. I am referring to big estates and to a large proportion of the housing in those areas. While problems such as that could probably be overcome, the Secretary of State seems not to have taken account of those difficulties.

What would the right hon. Gentleman consider to be a reasonable rent increase? That question has been put to Ministers time and again. Today the right hon. Gentleman spoke of "a reasonable increase". He accepts that the implications of what he is doing are large increases, but says, in effect, "We will ensure that that does not happen in practice. In any given year there will not be an increase larger than what we regard as a reasonable increase." If he had said that any increase would be "tied to inflation", we would have understood what he meant. If he had said, "tied to benefit levels", we would have understood and might even have given that commitment a cautious welcome. However, he said only "reasonable", and all politicians know that one person's reasonableness is another person's outrage. I hope that he will be able to clarify his position a little more.

The Secretary of State is seeking to tie rents to the value of properties. I have tabled amendments and my predecessor in this job, my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes), tabled amendments that would have tied rents to social housing so that those who need such housing could afford to pay for it. There is a justification for saying that different people in different parts of the country can afford to pay different amounts, but people's ability to pay should not be tied to the value of property in the areas in which they live. That is affected by quite different factors, while people come in widely different wage brackets.

Mr. David Winnick (Walsall, North)

The Secretary of State's statement will be no consolation to council tenants. Their rents will be substantially increased yet again, as they have so often been through the lifetime of this Government. Rent levels are much too high, but I do not expect the Secretary of State to show any sympathy to those who have to pay them.

The Under-Secretary made the point quite clearly in Committee when he said that the Government were anxious that the councils should play their part in the wider housing market and that the Government felt that an important consideration was that a council's rent policies should not cause distortions in the market. What that means in practice is clear. Although the Secretary of State is denying any wish to bring council rents up to the market level, that remains the Government's objective. It may not be the immediate objective but the whole point of the Government's actions over the past few years is so to increase council rents that there will not be much difference between the public and private sectors.

On Second Reading, my hon. Friend the Member for Newham, North-West (Mr. Banks) intervened in the speech of the Secretary of State with a question about rent levels. In reply, the Secretary of State said: First, I hope that the hon. Gentleman has advised such people that they should have exercised the right to buy and they can still do so, avoiding the trap of paying for a lifetime and ending up owning nothing. What that means is clear. The aim of increasing rents far higher then they should be is to pressure considerably more people to buy their own houses, or to price them out. In effect, the Government are saying, "Why pay these rents? What purpose? What logic?" In the Secretary of State's words, such people would be paying for a lifetime and ending up owning nothing."—[Official Report, 14 February 1989; Vol. 147, c. 175.] That is one of the purposes of substantially increasing rents, apart from considerable savings in central Government expenditure.

The Secretary of State's words on Second Reading are in line with the consultative paper, published before the Bill was brought out, "New Financial Regime—Regime for Local Authority Housing in England and Wales". Paragraph 14 brings to the attention of council tenants their right to exercise an option to buy a property or what is described as "tenants choice". That document, the Secretary of State's words, and what the Under-Secretary said in Committee all add up to the same point—substantial increases in rents, which will put the utmost pressure on council tenants to buy.

The level of subsidy on mortgage relief, which is very much connected with this matter, has increased substantially. Like my right hon. and hon. Friends, I believe that tax relief on mortgages is right and justified, but what cannot be justified is the way that people living on very high incomes are being subsidised through that relief. There are no objections from those on Government Benches about that, but subsidising of council tenants is another matter. We hear from them all kinds of stories about how well off council tenants are, how there are Daimlers and Rolls-Royces outside council houses and other such nonsense. There is a disparity between the way in which council tenants are treated and the way in which rich people who buy their houses are subsidised by the taxpayer.

I have been genuinely shocked by what I have heard in my constituency surgeries about the high rents that people on incomes as low as £60 or £70 per week have to pay. I can hardly believe it. As one would expect, I write to the local authority, but in nearly every case I am told that that is the right rent level. This happens because of what the Government did last year when they substantially reduced housing benefit and removed the right of local authorities to apply discretion over housing benefit. My constituents are being penalised by an unacceptably high level of rent, and many of them are those least able to afford it. Furthermore, they are hardly able to buy the dwellings in which they live. That is one way in which poorer people have been penalised by the Government in the past few years.

What the Secretary of State has announced today will bring no satisfaction to council tenants. His purpose is to continue increasing rent levels so as to bring them as near as possible in line with the private sector. This is unacceptable, and I hope that my hon. Friend the Member for Hammersmith (Mr. Soley) will press his amendment to a vote.

Mr. Tony Banks

The Secretary of State would have done us a greater courtesy by letting us have this information in Committee. This so-called Report stage is nonsense. As we know, it is like a mini-Committee stage, but it is getting worse and worse. We should go back into Committee to consider the enormous list of amendments and new clauses that the Government have tabled. The Secretary of State now chooses this time to make a major statement on rents. It is no good him saying that it would be helpful to the House to give it the information now. It would have been more helpful if the statement had been made in Committee so that we could have had more detail and longer to consider it.

I have not yet had the opportunity to study the fine print of the statement, but I shall do so—one should always count one's spoons quickly when the Secretary of State is around. I know one thing: the statement will mean that council rents will go up, particularly in inner-city areas, whatever it might mean in Tory areas. Knowing the way in which the Department of the Environment works under this Government, no doubt these proposals will be so manipulated as to bring down rents in Tory areas and to stick them up as hard and as high as possible in Labour areas. That is the prejudiced and partisan way in which the Government operate. Even if I had not heard a word from the Secretary of State, I could draw the conclusion that his statement will result in higher council rents for people in inner London and the people of Newham. If I am proved to be wrong, I will make an abject apology to the Secretary of State, but I suspect that he will not have to call in that promise and I shall not have to make that apology.

We know about the Government strategy on council rents. Perhaps strategy is too grand a word—conspiracy is a much more appropriate word to describe the Government's approach. They are trying to catch council tenants between ever-increasing rents and ever-decreasing subsidies and benefits. As my hon. Friend the Member for Walsall, North (Mr. Winnick) said correctly, this policy is aimed at forcing council tenants into the private market. The Government hate everything in the public sector, and in particular council housing.

The Secretary of State said in so many words that he wants local authorities out of housing provision, other than at a very basic level. The Government's strategy and conspiracy since 1979 indicate that that is so. I refer to the sale of council houses, massive reductions in housing investment programmes, statutory rent rises, benefit cuts, and, under the Housing Act 1988, the pick-a-landlord and housing action trust schemes. They are geared to forcing local authorities out of the housing market. If the Secretary of State admitted that, he would not earn any plaudits but least one would say that, miserable, cantankerous, surly and ungrateful though he is, the right hon. Gentleman is prepared to speak his mind. We could then go away and hate him with a light heart and with an easy conscience. Nevertheless, I may tell the right hon. Gentleman that my conscience is very easy in my feelings towards him now.

7.30 pm

We need to know what the national assessment will be, because we can then make some calculations. I want to be able to leave the House tonight and when I come to write my local press releases say what the legislation will mean for council rents in Newham. If the Secretary of State did not have some idea what the assessment will be, his civil servants would not have given him the statement that he read this evening.

In his statement, the Secretary of State said that he will reject historic costs when making rent assessments. That is grossly unfair to people who have been living in good houses built by the old London county council in the 1930s for all those years, who paid increased rents, and who have met the historic cost of their homes. They are fairly elderly by now, but if they want to stay in the rented sector they will see their rents continually increasing, knowing that they have already paid for the property in which they live.

I would not like to be in the shoes of any Minister who started arguing the case for rejecting historic costs in respect of mortgage relief. When mortgages increase, that is not because of the increasing value of property but because of the Government's idiotic and lunatic policies on interest rates. What would mortgage payers say if they were told, "Your mortgages must relate not in any way to historic costs but to the existing value of your property. Notwithstanding any interest rate increases that the Government force upon you, you will have to carry on paying a higher and higher mortgage because it must reflect the increased value of your home."? No one would say such a thing because it would be nonsense so to do. Why is it that such a thing can be said to public sector tenants? That is another example of the Government's hypocrisy and double standards, which overlay their intensive, obsessive hatred of people living in public sector housing.

Mr. Winnick

Has my hon. Friend noticed that, while Conservative Members always complain that people receive subsidies when they do not need to do so, not one Conservative Member has stated that because of his various incomes—and some Government Members enjoy very substantial incomes—he is not willing to receive any form of state subsidy and will return his mortgage relief to the Exchequer?

Mr. Banks

I assume that my hon. Friend applies that stricture to all right hon. and hon. Members. I do not see any great rush by right hon. or hon. Members in any part of the House to make such a declaration, and it would be unusual if they did so. In general, we all have much higher incomes than people living in council houses. I should like to know how many Members of Parliament live in council accommodation. I certainly do not, and I do not particularly want to. I would not want to be continually finding my rent forced up by Government policies and not able to enjoy any great benefit.

If local authorities are left to implement their own policies, they should be able to provide decent, affordable rented accommodation. Many people who are currently owner-occupiers would probably then be willing to leave private housing for the public rented sector. We know that the Government are trying to force people out of public housing. They hate anything being in the public sector. That hatred probably extends to public lavatories. Given that public lavatories are being closed down because public authorities can no longer run them, I suppose that that is another of the problems that will be self-liquidating under Government policies.

Until I read the fine detail of the Secretary of State's comments, I shall not know their full implications. However, I know for certain that his statement will mean higher rents for the people of Newham. I challenge the right hon. Gentleman to tell me that that is not so.

Mr. Rooker

Tonight, we have seen proof that neither the Secretary of State nor the Minister is at all concerned about the seedy aspects of electoral politics. Electoralism passes the Secretary of State by. My hon. Friend the Member for Norwood (Mr. Fraser) went unchallenged when he made it clear that the Secretary of State at least had the courage to come to the House tonight to announce that in reality the target council rents for Vauxhall—though not for this year or for next month—are £45 per week. Today, the House has debated rent rebates, and it is now discussing a massive hike in public sector rents. So far, not one Conservative Member has uttered a word, save for the Secretary of State or the Minister. Not one Conservative Member has spoken about the extra cuts in housing benefit or their effect on poor tenants, who will have to subsidise rebates to the poorest of tenants.

We have now listened to a statement about what I consider to be capital value rents. If it had taken the form of a statement at 3.30 pm, the annunciator would have displayed the caption, "Statement—capital value rents". Never mind the fancy phrases or fancy arithmetic: rents will be targeted and subsidies organised in such a way as to compel local authorities to fix rent levels that reflect the capital value of their properties.

Mr. Ridley

With the leave of the House, I shall respond to the points made by the hon. Gentleman and by his hon. Friends, which are false. As the hon. Member for Birmingham, Perry Barr (Mr. Rooker) has given way, perhaps I may ask him why he opposes capital value rents when his own party is busy advocating capital value rates. We are not advocating capital value rents. How can the hon. Gentleman traduce me over rents and ignore the fact that his own party believes that people should be taxed on the basis of property capital values in paying for local authority services?

Mr. Rooker

It is not as though the Secretary of State has come to the House—

Mr. David Shaw (Dover)

Answer.

Mr. Rooker

The otherwise silent hon. Member for Dover (Mr. Shaw) will vote for anything that is put on his plate, not for reality.

The Secretary of State announced a formula for capital value rents tied to the value at which houses and flats can be sold in the market. No matter how it is described, rent —as the Secretary of State freely admitted, and as I would be the first to admit—is money down the drain. Rates or poll tax, however the Government care to describe it, form a community kitty to pay for local services. Nobody denies that, but we are opposed to the way in which it is collected. We have to have local taxation. It cannot be abolished, because it has to provide for our community.

We cannot all have a swimming pool in our back garden, our own fire brigade and a library in our house. We have to pay for them from the community. I will argue until the cows come home—[Interruption.] If you, Mr. Deputy Speaker, are prepared to accept a debate on the amendment and alternatives to the poll tax, I will stay all night and all day tomorrow to continue that debate. However, I will not go halfway and then be pulled up by you, Mr. Deputy Speaker, and be unable to complete the rest of my arguments. I want to debate what the Secretary of State has brought to the House tonight: capital value rents.

As I was about to say before the Secretary of State interrupted me again, it is not as though this hike in the rent and the extra money that we will get from it will be used for a certain purpose. We all know what will happen: the money will be creamed off the housing revenue account to subsidise the poll tax. That is the reality.

Rents will be tied to capital value. That is an interesting proposition from the Government because they have always said that they do not want market rents to be fixed by the market of supply and demand and the link between the scarcity of properties and rental values. However, they have found another way of doing the same thing, and the end result of the formula is exactly the same.

It would be interesting if the Government were to do the same for private rents and landlords and, as they moved towards ending the control on private rents, proposed that rents in the private sector should be tied to the capital and market value, at vacant property values. That is what the Secretary of State was talking about, not tenanted values.

Later, I suspect that we shall argue about how the averages are worked out, particularly for local authorities which sell an excess of houses with front and back gardens but in which the majority of properties are tower block flats or deck access flats. That may well be the case in London, in the Lambeth and Vauxhall authority. It is wrong for authorities to fix the rent by applying the average value of the properties they sell to those which they cannot sell, but which people could, if they wished, buy under the right-to-buy scheme.

I understand it when the Secretary of State says that neither he nor the Government will fix the rent. I tell my constituents that and explain that, by manipulating the money that they have taken from local authorities, the Government fix the rent. They use the local authority as their proxy to fix the rent. The Government, not the local authority, will bring in a rental system which is based on the capital value of the property. The House and the Labour party have not asked for that.

7.45 pm

My hon. Friend the Member for Norwood (Mr. Fraser) was right to remind us of the housing tenure mix in the Vauxhall constituency. The long-term consequence of the Secretary of State's statement will be that council house, flat and maisonette rents in Vauxhall will be £45 a week at today's values, and a lot higher in the future. If we also face the prospect of the ring fencing of the housing revenue accounts in respect of rent rebates, that will be appalling. In three or four years, nobody in his right mind will be paying £45 a week rent plus the extra to subsidise the rent rebates for everyone else. They will not do that but will instead buy the deck access and tower block flats. That is what the Government's policy is designed to do.

The Secretary of State deserves our congratulations on having the courage to say, "This is important to the Government. We have a fantastic new rent system I am determined to rush down to the House of Commons on Wednesday 14 June. I don't care what is happening on Thursday 15 June because this is so important that the House of Commons should get it hot off the press. My message is that capital value rents in Vauxhall will hit £45 a week, at 1989 values, at some time in the future".

Mr. Soley

My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) has got it exactly right and my hon. Friend the Member for Norwood (Mr. Fraser) hit the nail on the head: it is incredible.

I have made many allegations about the Ministers being confused about what they want as regards rents, but the Secretary of State is not at all confused. He knows exactly what he wants. I am astounded at his audacity. He emphasised that he did not want market rents, but then described a system which, over a period, would lead to market rents. The system is based on market rent assumptions.

The Secretary of State said that his policy would achieve three goals. First, it would encourage rents increasingly to reflect the pattern of house prices around the country, thus, to some extent, reflecting supply and demand. The important part of that statement was the first part because, as I said earlier, market rents are largely determined by house prices. Therefore, if a system is devised which will, as my hon. Friend the Member for Perry Barr said, have a capital value rent system, inevitably, over a period, prices will move towards those which properties would fetch in the market. That is the other side of the coin that I use as a rule of thumb guide to what a market rent would be—which is the money one would receive if one sold a house, invested the money and drew the interest on it. That is why the private sector continues to decline.

We all know that it pays to buy and sell houses in this country, but it does not pay to rent them. That has nothing to do with the Rent Acts, which are only marginal, but everything to do with the way we subsidise finance for purchasing houses. The Minister has created a system which links that to market values over a period.

My hon. Friend the Member for Norwood, who is astute and quick in such matters, has picked up the figure. My hon. Friend the Member for Perry Barr was exactly right when he said we should thank the Secretary of State for coming here today and telling the electorate that anyone who is in council property can expect to have his rents moving towards market rents over the next few years, because that is what will happen.

Will capitalisation, such as repairs, be included in this system? If it is, the system will be even more incredible and will put up prices even further. My hon. Friend the Member for Perry Barr is right. A great attempt has been made to push people out of the council sector into home ownership or the property of other landlords. However, the reason that the system will not push people into home ownership is that people with the right to buy are increasingly those who cannot exercise it because they cannot afford to do so.

People are trapped in paying rents when, with a little more money, they would be able to buy, but because they cannot afford to pay their rents, even with the assistance of housing benefit, they will not be able to buy. Therefore, their only option is to transfer to another landlord. There is a problem with that as well, because the Secretary of State is also pushing up housing association rents by cutting grant. Some of the examples that I have given recently show how housing association rents have risen and are continuing to rise.

If tenants made the worst choice of all and went to a private landlord, their rents would rise even more rapidly —for we know that private rents rise more rapidly than others. Whatever they do, they are trapped: they will be financially clobbered.

Sooner or later—this has not yet been said today, but the whole tragic situation focuses on it—the Government must take a view on what is an affordable rent. Many people in the housing movement are saying that it should be a maximum of 20 per cent. of net disposable income. That is a common-sense guideline, for we know that those on average or even above-average incomes who spend more than 20 per cent. of their net disposable incomes on housing will get into serious economic difficulties sooner or later—usually sooner. They will find themselves in debt; they will be unable to pay gas or electricity bills.

Under the present Government, more and more people are spending up to 40 per cent. of their net disposable incomes on rent—and, in some cases, mortgages, although I should like to concentrate on rent. As far as I am aware, that has not been the case under any previous Government, Tory or Labour. Those people cannot survive: the facts are as bald as that.

The Government must understand that the crisis is becoming desperate. People are in trouble, whether they are renting or buying. They are trapped at both ends: because of the interest rate policy they cannot buy, or, if they bought recently, they are in trouble because of the dramatic increase in their mortgage rates. If they try to rent, they find that rents are being driven up in the housing association, private and council sectors. This is an extraordinary proposal for the Government to advance now.

Mr. John McAllion (Dundee, East)

I am concerned to hear of the massive rent increases that the Tories are imposing on people living in Vauxhall and elsewhere in London. Does my hon. Friend believe that the same will apply in Glasgow—particularly in Glasgow, Central, where voters are also going to the polls?

Mr. Soley

My hon. Friend is right to ask that question. The references that we have made to Vauxhall apply equally to Glasgow, Central, and are also relevant to the European elections. People need to understand that, almost uniquely among western European countries, we are reducing the housing subsidy as a proportion of gross domestic product. Most other countries are increasing it. My hon. Friend the Member for Perry Barr put the electoral message very clearly.

Having spoken twice, I do not wish to delay the House. We cannot vote on the proposal; it is something that the Government intend to do. Let me say this, however: the Minister talks of amending clause 71, and he will probably need to, even with the wide-ranging power that he has given himself with a variety of local government Bills. I assume that that will be done in the House of Lords; but, either there or when the Bill returns to the Commons, we shall want to return to the issue again and again, because the message to those who are renting is desperately serious.

Mr. Ridley

With the leave of the House, I should like to speak briefly to clear up a major and deliberate misinterpretation by many hon. Members.

What I announced today was a new mechanism for local authority rents, in place of an existing mechanism which has been used by the Government for the past 10 years and which is proving more and more defective. As a result—as I have already pointed out—we have not increased council house rents, on average, by more than about the level of the increase in earnings over that period. Nothing that I have said today suggests that we will increase them by more than that, or by less, or by any particular amount. All that I have announced is a mechanism: that is my first point.

Mr. Fraser

rose—

Mr. Ridley

I am coming to the hon. Gentleman's point. He got it completely wrong on two counts. First, he assumed that this was not a mechanism, but a major rent increase, and that rents in Lambeth would in due course rise to £45 a week. He has no right to make such an assumption. When, each year, the annual subsidy is determined, he can come back and say whether he thinks that we have done too much or too little—as he could have done in each of the past 10 years.

Secondly, the hon. Gentleman missed the point that I made earlier—that the adjustments will be from where council rents now lie on the scale to where they would lie under the formula. He assumes that the present base is correct, although I went to some lengths to tell him that I did not consider it fair, equitable or even. If we were to name a percentage of right-to-buy values over a number of years, it might be 50, 40 or 30 per cent.; it might be any percentage. That is not what we are talking about—we are talking about a mechanism—but some authorities are closer to that "x per cent." now than others, and it is right to take into account that inequality within the base.

Mr. Fraser

Surely the Secretary of State understands that—although there will be a revision of base levels— because the average price of a house in Lambeth for a first-time buyer is about £80,000, the base level will if anything go up as a result of market conditions. As for rents, in a borough such as Lambeth they are barely enough to pay maintenance and management charges. Ring-fencing the housing revenue account will inevitably lead to rents being driven up. In future there will be no other source from which to obtain the cost. It cannot be obtained from rate funds.

Mr. Ridley

The hon. Gentleman is entirely wrong. Clearly he has not followed the debates on the new housing subsidy in which we have engaged all afternoon as well as in Committee. The housing subsidy is there to fill that very gap.

I must say that I expect trouble in Lambeth, because the efficiency of its maintenance and management does not give a great deal of satisfaction: I could talk about that at some length. It is, however, within Lambeth's ability to put the matter right, and to adjust that slightly higher rent. In answer to the hon. Member for Truro (Mr. Taylor), who asked what was a reasonable increase, the figure will be determined every year just as it always has been, just as a Labour Government have had to do it before and just as his party would have to do it if it came to office.

I concede—if "concede" is the right word—that the proposals that I have announced bear some relation to right-to-buy values. As hon. Members have rightly pointed out, the best houses tend to be sold under the right to buy, and the inequality that the hon. Member for Norwood (Mr. Fraser) tried to find is present in all authorities, so it will probably work itself out. We feel that the right to buy is a reasonable yardstick, but we are happy to discuss possible modifications with local authorities. We propose only a proportional relationship.

I marvel at the hypocrisy of Opposition Members who are trying to create fuss and indignation just because there are a couple of by-elections tomorrow. They themselves have been going around the country trying to conceal the fact that their system of local taxation is based on capital value rates, not just related to them or a proportion of them. That applies to full capital value rates in Lambeth, Norwood and every other constituency that they have been bleating on about. The hon. Member for Walsall, North (Mr. Winnick) advocates capital value rates for council tenants in Walsall and then he comes here and bleats. He ought to be ashamed of himself for his rank hypocrisy.

The hon. Member for Newham, North-West (Mr. Banks) is the worst of the lot. The Government have been pressed to make a statement about their rent policy. I made a statement. I told the hon. Member for Hammersmith (Mr. Soley) that I intended to do so. What did the hon. Member for Newham, North-West do? He accused me of a conspiracy. I never realised that to say something on the Floor of the House could form part of a conspiracy. The hon. Gentleman is determined to misinterpret. However, I shall tell his constituents that he bases their contribution to local authority services on capital values, whereas we shall only take them into account in determining fair rents.

Amendment negatived.

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