HC Deb 13 August 1947 vol 441 cc2530-43

5.19 p.m.

Mr. Skeffington (Lewisham, West)

I am very glad at this eleventh hour, or, should. I say, twelfth hour to have the opportunity of drawing the attention of the House and of the Board of Trade to a very serious obstacle which is confronting thousands of small enterprises today, both in London and in many of our great cities. I hope that it is not inappropriate that the last subject to be debated during this historic and memorable Session should concern small firms, many of which have contributed very greatly to our economic fortunes in the past.

The problem of the acute shortage of office accommodation, and the resulting hardships to many small business firms, which I wish to raise, was first brought to ray notice by some of my own constituents of Lewisham who have their normal residence there, but whose daily place of work is in the City and who, in the course of years, have come to own their own organisations, and to rent premises outside the Division. There are three elements in this problem centring around the shortage of accommodation. First of all, there are the very heavy increased rents which are being imposed without any check, legal or otherwise, upon tenants owing to the shortage of accommodation which itself has been affected by war circumstances. So severe are some of these increases in rent, as I shall show in the course of my remarks, that a number of small firms face ruin or extinction. The second grievance of office tenants is the fact that many of them find their leases terminated without any option or any safeguards at all, and they have nowhere else to go. Thirdly, where a tenant is successful either in retaining his old or in securing fresh accommodation, there is the most objectionable practice of demanding a very high premium.

I first drew attention to this problem in a Parliamentary Question on 26th November last year, and I followed it up by writing to the Board of Trade a letter giving some of the reasons which led me to feel that there was need for investigation and possibly for action. The Board of Trade said that they were aware of some increases in rent, but that they had to get sufficient evidence as to the need for action. I hope that in the course of the Debate I will be able to give them some evidence. I may say that since I first raised this matter, I have had letters from small business firms, not only in London but from all over the country.

One of the results of these prevailing hardships can very readily be seen if one takes a walk into our own City of London. Instead of finding it a busy hive of industry, contributing to the renewal of the economic life of our country, we find that in many parts there are large blitzed areas which are now only the haunts of artists painting the ruins made picturesque by willow-herb and evening primrose. The need for providing accommodation for living purposes is, of course, most urgent and must come first; but, surely, some balance has to be maintained. It seems perfectly useless providing people with places in which to live if there are no places for them to work in. This is particularly a problem in places where there are great concentrations of population doing office, secretarial, managerial and professional work, in London, Birmingham, Liverpool, Manchester and other cities which are affected in this way. The first grievance, as I have said, is that in contradistinction to tenants of ordinary dwelling houses, there is no security of tenure for the tenant of an office, and there is no restriction on the rent which may be charged. In consequence, buildings in the cities are changing hands at very inflated prices, and existing tenants are being turned out as their leases expire. People who have been conducting socially useful businesses for many years find themselves without accommodation and, therefore, are unable to continue. The second grievance which springs from this situation is the device, which I understand is perfectly legal, of demanding a high premium for what office accommodation is available. This has the advantage, from the point of view of the landlord who charges it, that he does not have to show it in his business accounts, and he pays no Income Tax on it, just as if he were winning a bet; whereas the poor unfortunate incoming tenant is not permitted to treat this ex premium as a rent, and it is deemed by the Inland Revenue officials as a capital asset.

I now come to the first suggestion. It would be out of Order for me to suggest that new legislation ought to be introduced to make premiums illegal, even if it were practicable to do it, and I realise that there are very acute difficulties in devising any legislation which would prevent this practice taking place between a person who feels he must pay a premium in order to get accommodation, and a landlord. But I do ask the Parliamentary Secretary to see that his officers have talks with the board of Inland Revenue, to consider whether or not some redefinition of this type of transaction can be made. I understand that it might be arranged, without any new legislation, that if a premium is charged it should be treated as rent and, therefore, chargeable to tax upon the person who receives it, and count as a normal business expense of the person who has to pay it. I think that is a bad solution, but as it would be out of Order for me to suggest any other I ask the Parliamentary Secretary to have it considered. There used to be in the Board of Trade, when I had the honour to work there during the war, a taxation sub-committee of which I acted as secretary. On some occasions we had meetings with the Board of Inland Revenue. I am quite certain that this matter might well be tackled by that body if it still exists; and if it does not, there may be a case for resuscitating it.

I should like to give examples covering the two points I have made, because I think that that is the most effective way of bringing home what the situation means to hundreds of small firms. I do not want to give the names but I have the complete documents in my possession. I am not making wild or baseless allegations. I have the facts in every one of the four cases of hardship to which I want to refer.

Let us take the first case. It is that of a young man whom I will call "Mr. G." He set up just before the war as a designer and consultant. I am sure we are all very glad that a young man should, as a result of his own initiative, be able to get going in business for himself. This man took offices in Fleet Street—or, rather, I should say an office. He had only a table and telephone with which to start. He worked very hard and was employed by a large number of firms. His staff now includes some six artists and others, carrying on this good, useful work. A few months ago he was given notice, without any option. He was glad to get any premises during the war, and had not got them on the conditions he wanted; he had no legal safeguard. He has had to stop his work mainly to search for new accommodation. A short time ago he was offered an office of 900 square feet on a four-year lease with no guarantee, of course, that after the four years he could continue to stay there. The rent was £250 a year. He could manage to pay that, but it was undoubtedly grossly in excess of prewar prices. But in addition to that, he was quite blatantly asked by the estate agents for a premium of £2,500. It meant that it was quite impossible for this young man, with his assets, to consider those premises. There was a suite of two rooms on a floor of the same building that he could have had provided he paid a premium of £1,250. That man has been searching for 12 months for premises and has been unsuccessful. He has worked extremely hard and has had all kinds of people searching for him. The outcome is that his energetic work for eight years in providing a really useful service is likely to be completely dissipated if some sort of accommodation cannot be found.

The second example, the details of which also are fully documented, concerns an old-established but small export merchanting firm. I would point out that many of these firms are small. The very fact that they have had to specialise, and that they have specialised successfully, means that they are of a small nature, for their work could not be done by large organisations. This small export business, with contacts in the Far East, has, over the course of years, built up a very considerable business. I will call the firm "Brown and Company," but the Parliamentary Secretary can have full details if he so desires. They occupied a small office in London for the rent of which they paid, until a few months ago, £13 a quarter. The building was sold last October, and they immediately had notice to quit or to pay three times the rent per quarter, namely, £39. They wanted to move elsewhere, but they could not, and very reluctantly agreed to pay the increased rent. Since then the building has twice been sold over their heads, and in order to retain the occupancy of the building, with a lease of 21 years, they have been asked to take on a whole set of offices which they do not require, with the use of four additional rooms, at a rental of £700 a year. Probably this firm, with their assets, could pay £700 a year, but it means it would no longer be worth while, because it would entail paying over the whole of their proceeds in that fashion, and that firm has been forced to close down.

An additional feature I do not like in this type of case is that not only accommodation is let, but that a certain amount of furniture goes with the offices. In the example I have given, as soon as the building had been sold the furniture was also sold, so that before the firm had taken its books and ledgers out, the office tables and desks had gone.

My third example concerns a firm of a rather similar character, namely, an exporting firm with a useful trade to this country in foreign markets. They occupied two small offices at a rent of £27 a quarter. I think that the landlord in this case must have been a descendant of Scrooge, for on 25th December they received an order either to move or to pay £82 per quarter; in other words, an increase in rent of 300 per cent. Again, this firm could not afford it, but they managed to get accommodation with friends of theirs in another office building not far away. They thought they were happily settled, but now that building has been sold, and both concerns will have to find alternative accommodation or be forced to close down. I apologise to the House for these details, but I think precise examples are much more telling evidence than anything else.

The last example concerns a man whom I shall call Mr. "F," who rendered very valuable services to many firms in the City for over 30 years. Recently the building in which he worked was sold, and he was turned out with his staff after a court order. He was offered, first of all, two rooms, with floor space of about 500 square feet, at the top of the building, for a period of three years—the unexpired portion of the lease. He was told he could have those two rooms at what, I suppose in present circumstances, is not an unreasonable rent, but again provided he paid a premium of £800. There was no certainty that at the end of the three years he would be able to retain possession, and, as he pointed out to me, with Income Tax at its present level, he would have to earn about £1,500 in order to find the money for the premium alone, before he could get possession. Among other offers which this particular individual received was one of two rooms on the second floor of a building in Clerkenwell. One room was 15 feet by 15 feet, and the other 12 feet by eight feet six inches; the rent asked was £284 per annum, exclusive of rates, plus a premium of £395.

Since I first raised this matter I have had innumerable examples brought to me of this kind of racket which is going on in London, Birmingham, Glasgow and other of our large cities. It affects thousands of small firms, and is a matter which the Board of Trade, as the guardian of trade, ought particularly to consider. I have three or four suggestions to make. I have already made a suggestion about this very objectionable form of additional payment called a premium. In addition to that, there ought to be some way of freezing rents. Again, I should be out of Order if I suggested that some form of new legislation was necessary.

I am advised that it might be possible to extend the action of rent control tribunals, in certain circumstances, to cover office accommodation. If we could dc that, it would be possible to give some stability and permanency to these small business firms, who at present do not know when they may be faced with extortionate increases in rents. It would bring a welcome permanency into their commercial life, and would enable them to make arrangements for the future. I ask, therefore, whether that proposition has been considered, and if not, whether the Board of Trade will consider some other kind of action, so that stability may be given to these tenants, and so that they will not have to face these repeated rises in rents. Thirdly, I suggest there are many unusable buildings which could be made useful at the expense of a relatively small amount of labour and materials. I went into some buildings not very far from Blackfriars Bridge the other day which could be made, not into first-class business premises, but into better alternative premises for those firms whose history I have been discussing in this Debate. I am wondering whether there could not be more drive along these lines.

My final suggestion is in connection with additional accommodation. If additional accommodation could be provided, it would bring about most desirable results. How can that be done? I am wondering whether it would be possible to allow the erection of some sort of prefabricated buildings on blitzed sites. A number of local authorities have now very nearly come to the end of their temporary housing requirements, and there must be some existing productive capacity of temporary buildings in the country. I have made inquiries in regard to the purchase of huts from surplus Government stores which would be quite suitable for office purposes for small firms. These huts could be purchased at about £100. I know there are snags which immediately arise in pursuing this course. It is extraordinarily difficult to obtain sites in the City, because the ground landlords naturally are very anxious that there shall be no delays when it is possible to start permanent buildings; they feel that if there is a temporary structure on the land, a considerable time might elapse before they can get possession to build. The result is that there is great reluctance on the part of ground landlords to allow temporary structures to be erected on their land, and even if they agree to a temporary structure being put on their land, there is a pretty heavy ground rent; for example, for a £100 hut of the type I have mentioned which is something like 25 ft. by 12 ft., an insurance company wants £500 a year for three years, with no certainty after that period has elapsed of the firm being able to continue their occupancy.

The Government ought to make some announcement that the building of office accommodation is not likely to take place for five or more years. I am wondering whether it would not be possible, under the Town and Country Planning Act, for the Board of Trade, in co-operation with the local authorities, to take over, for temporary development, certain blitzed sites for a period of five years. It would mean that the installation costs could be shared among a group of firms, and that these individuals would have to pay far less rentals than at the present time. Installation costs in the case that I have just mentioned of the £100 temporary hut, are heavy. In addition to the £500 a year required for rent, the cost of connecting the office with drains and services, if done by one firm which had to prepare a concrete raft and various other things, would work out at something like £600. There again, no small firm could afford to pay that plus installation expenses. If it were done in consultation with the City of London authority, in the case of London, or with the other appropriate authority, it should be possible for a whole area to be serviced simultaneously, which would obviously reduce the cost to the individual tenant. The result would be three-fold. Many firms would obtain some temporary accommodation for a period of not less than five years; the fact that accommodation was available should have some effect on the high rents being charged now; and the local authorities would benefit because they could charge rates for the premises and obtain some revenue for land which is now idle and making no contribution at all.

It seems to me to be vital that speedy action should be taken by the Government to restore our commercial life to its fullest extent. Many of these small but highly specialised firms have contributed a great deal to our national life in the past and I believe that many of them can do much more, but they find themslves faced from day to day with this ever recurring threat and apparently no one is there to protect them. I feel that it is the function of the Board of Trade to act on behalf of small firms who are defenceless as circumstances are today. It is a matter which the Board cannot ignore and I shall wait with interest to hear what my hon. Friend the Parliamentary Secretary has to say.

5.42 p.m.

The Parliamentary Secretary to the Board of Trade (Mr. Belcher)

I am well aware of my hon. Friend's keen interest in this matter. He, together with some other hon. Members, has been very active in this connection for quite a long time, and I hope that these activities will be appreciated by those on behalf of whom they are undertaken. What he says is quite true, and at a time like the present when we are doing our utmost to stimulate the trade and interest of the country and to expand our commerce——

Mr. Deputy-Speaker (Mr. Hubert Beaumont)

I am sorry to interrupt the hon. Gentleman. I am at fault as much as he, but as this is the second occasion on which he has addressed the House he must ask leave to do so.

Mr. Belcher

I had overlooked that, Mr. Beaumont, and it is with your permission and that of the House that I wish to speak again. It is not my desire that I should bother the House unduly with my speeches, particularly on the last day, before the Recess but this is something which has been thrust upon me rather than sought by myself. It is true, as my hon. Friend the Member for West Lewisham (Mr. Skeffington) has said, that we should be doing all we can at present to stimulate our trade and industry and to expand our commerce. It is also undoubtedly true that there is a considerable shortage of premises of the kind to which he has been referring, as well as of housing premises and the like.

We have received at the Board of Trade since VE-Day something over 100 complaints or representations arising from the fact that, unlike the occupant of the controlled dwelling, the business tenant has no security outside the terms of his lease or tenancy agreement. He has no security against a landlord who wishes either to raise his rent or to give him notice to quit, and the cases which have been brought to our attention have included office premises, business premises of various kinds, shops, garages and small industrial premises. A large number of these cases have come to our notice through Members of Parliament, and we have had some 14 Parliamentary Questions on the subject, all indicating that there is very considerable feeling about it. So much so that people have been stirred to get into touch with their Members of Parliament, and the Members concerned have thought the matter of sufficient importance not only to write to Ministers at the Board of Trade, but, in addition, to raise the matter in this House by means of Parliamentary Questions.

In Scotland there has been a very considerable outcry, and as a result of a discussion which took place in the House about retail shop premises the Secretary of State for Scotland, as my hon. Friend knows, set up in April of this year a committee of inquiry which has still to report. In England and Wales, among the representations we have received, quite a number have concerned retail shops, but there has been an equal if not greater prominence given to offices and small industrial premises. That would be the case particularly in London, of course, and especially in the City of London.

It is not easy for me to deal with this matter fully and still remain in Order, for the obvious reason that we do not possess the power at the present time, so far as we can see, to deal with any abuse which may be brought to our notice, and that I would not be allowed by you, Mr. Deputy-Speaker, to go into the question of obtaining such powers. As to the extent of the problem, we have little evidence outside the correspondence and the Parliamentary Questions to which I have referred. I have no doubt that if we were to set up a committee of inquiry we should find a very much larger number of cases than those which have been brought to our notice. It would be foolish to deny that some tenants of business premises have suffered very acutely indeed. In my public life and in my private life I have come across these cases, particularly in London and in the more sought-after parts of London.

My hon. Friend has made some suggestions. He suggested that officials of the Board of Trade might have talks with the Board of Inland Revenue about including premiums—I do not like these premiums any more than does my hon. Friend—as rent and allowing to the tenant a claim for relief from tax as a business expense. This is the first time that the suggestion has been made to me, and I will certainly go into it and see that the talks do take place, in order to discover whether anything can be done along those lines. I do not feel particularly happy about taking any kind of action which will encourage the extension of what I regard as the not too desirable practice of asking for premiums. It may well be that if action were taken along the lines which the hon. Member has suggested, instead of doing what he and I want, namely, ensuring fairness to the tenant of business premises, we might be encouraging the extension of this not very desirable practice of premiums, and the giving it a façade of legal responsibility. I will, nevertheless, certainly look into the suggestion.

My hon. Friend also mentioned the freezing of rents. That has been tried previously. In the period 1920–21, business premises were included in the operation of the Rent Restrictions Act. I understand that experience then was not particularly happy. It carried difficulty for the landlord, and the possibility of some unfair discrimination, in view of the rights and opportunities of other potential occupants. It is extremely difficult. Perhaps the difficulty does not occur to the same extent with a tenant of a dwelling house, because it is fairly easy to decide who ought to be the tenant and what ought to be the rent. In the case of premises which are to be occupied for business purposes, it is not easy to decide among tenants A, B and C which of them, from the point of view of national importance, is the right tenant of the premises. I understand that the experience in 1920 and 1921 rather suggests that that might be the case.

The house-owner is more vulnerable than the business man. The business man may be able to deal with the situation created of having to pay an increased rent by increasing his own prices or by doing something to increase his turnover. Again, the domestic householder is frequently, I should have thought, in a more difficult position than the business man because his choice of premises is in many cases more limited. However, like the other suggestion made by my hon. Friend, I am certainly prepared to give it further consideration and see whether anything useful can emerge.

My hon. Friend then spoke about making small additional repairs to existing premises to bring them into use or to extend their use as business premises. He will know as well as I do what the difficulty is there. All over the country there are clashes between rival claimants for the very restricted supplies of building materials available. In some parts of the country the emphasis is on the building of factories, as in the development areas, but in other parts like London the emphasis is all the other way—restriction on the building of industrial premises and concentration of the available building labour and materials on the provision of living accommodation for the people. While I quite agree that it is altogether possible that something might be done by way of extensions to or adaptations of existing premises, I would not hold out any hope that we can meet this very widespread and difficult problem altogether by the extension or the adaptation of existing premises; but it shall certainly be looked at.

There was also the interesting suggestion that the Board of Trade, together with the Ministry of Town and Country Planning and the local authorities, might go into the possibility of taking over blitzed sites for the erection of prefabricated business premises. I remember, as my hon. Friend does, that during the war years when, as in the City of London, vast quantities of office premises were destroyed in the blitz, temporary offices made their appearance almost over-night, including inquiry offices to which people could go if they wanted to do business with a firm whose premises had completely vanished during the night. That was a remarkable example of improvisation, and I take it that is the kind of thing my hon. Friend suggests. I am so anxious to meet my hon. Friend in this matter and to do all I can to assist these people who do not at present have the accommodation they need that I will certainly ask officials of the Board of Trade if they will inquire into the possibility of any such developments.

The real answer to this question, whether the extortion of exorbitant rents, or the asking of a premium, or the inability of a business house or an individual business man to have the accommodation he requires, must in the long run be the provision of suitable and sufficient accommodation for the needs of our business and commercial communities. Once there is a sufficiency of the right type of premises, at least two of the evils will tend to disappear of their own accord. When it is fairly easy for a firm to get the premises it requires, it will be in that degree more difficult for the rapacious landlord to demand a premium or a rent higher than is really economic having regard to the nature of the premises.

I am certain that the long-term solution, whatever we might do in the meantime to deal with the more pressing and immediate difficulties, must be the provision of a sufficiency of suitable accommodation. I agree that the cases which have been brought to my notice by my hon. Friend and in Parliamentary Questions and by letter indicate the existence of a very disagreeable feature in our commercial trade. We think that it should be an endeavour of the Government, whatever Department is involved—in this case the Board of Trade—to do everything we can to assist in this matter. Because we do not possess, so far as we can see at the present time, legislative power to deal with this matter, it is not easy to give encouragement to those who hope for immediate alleviation.

My hon. Friend has performed, I am sure, a most useful public service by bringing up this matter on the Floor of the House. I am extremely grateful to him for his interest as, I am sure, will be all who are concerned with the encouragement of business, trade and industry in this country. I find his suggestions interesting, and I give the House a promise that I will take them, together with a report of the Debate, back to the Board of Trade. We will use our utmost endeavour to see if it is possible to adopt any or all of his suggestions or the suggestions any hon. Member may care to put to us on this matter. It is so important that we will deal with it very seriously indeed, as it is our desire, that as, I am sure, it is the desire of the House, to do everything that we can to encourage trade and industry, particularly at the present time.