§ Motion made, and Question proposed, That this House do now adjourn.—[Mr.Barber.]
§ 10.28 p.m.
§ Mr. G. M. Thomson (Dundee, East)
I wish to plead with the Secretary of State for Scotland tonight to take action which lies within his power to protect about 300 householders in the City of Dundee who are threatened with an increase in rent in circumstances which I hope to show are such as to justify his intervention. I wish to put before the House the facts of the case as plainly and as straightforwardly as possible.
These householders are almost all tenants of the Northern Housing Association Ltd., Dundee, a housing association registered under the Industrial and Provident Societies Act, 1893. The Association has apparently been completely excluded from the protection of the Rent Acts by the Housing (Repairs and Rents) (Scotland) Act, 1954. It has as its agents in Dundee a well-known firm of factors, Messrs. J and E. Shepherd.
In March this year, all the tenants received from Messrs. Shepherd by separate post, first, a notice to quit their houses, and, secondly, the offer of a tenancy under completely new conditions. One would have expected that an organisation like the Northern Housing Association, registered as a friendly society, would have operated primarily as one providing a social service in housing, but my purpose tonight is to show that the Northern Housing Association does not operate in that way.
I begin by pointing out the way in which it informed its tenants of the proposed increase in rents. The tenants were told that they could continue their tenancies under the new conditions, but they were not given any copy of the new conditions. They were invited to go down to the officers of the factor, and the new conditions having been read in a hole-and-corner manner, they were expected then and there to sign on the dotted line. I am told that tenants asked —and reasonably asked—for a copy of 706 the conditions to take home and study, but that request at that time was refused.
Yet these new conditions contained radical alterations in the conditions to which the tenants had been accustomed. It was sought to pass on to the tenants all the owners' rates in respect of those houses. The owners were anticipating legislation which has not even appeared in the House of Commons. They were presuming to do the job of the House of legislation. In addition, they took away all the rights of the tenants in the amenities, the gardens, the drying greens, and so on. The tenants were also removed completely from the protection of the Rent Acts. These were very big changes, yet Messrs. Shepherd, the agents, were not prepared to allow the tenants a copy of the conditions or time to study them in privacy.
Fortunately, the tenants had too much self-respect to submit to such conditions. They refused to sign. They formed themselves into an association. They had the benefit of good legal advice. Subsequently, they had a meeting with Messrs. Shepherd, and my right hon. Friend the Member for Dundee, West (Mr. Strachey) and I were privileged to be present at it. At that meeting some minor but useful concessions were obtained, especially about the use of the drying greens and the gardens. Nothing, however, could be done at the meeting about the general protection of the tenants or about the rent increase which was to be imposed on them.
It was only some weeks after, when my right hon. Friend and I were pursuing this matter here in Parliament, that I learned from a question to the Joint Under-Secretary of State for Scotland that under the rules of this Association the permission of the Secretary of State had to be obtained before an increase in rent could be allowed. This is rather curious, because, during that very long meeting with Messrs. Shepherd, no indication of that fact was given to us at all, though it was hardly likely that the firm was not aware of the provisions of its own rule book. I have a copy of the rule book. Rule 115 says:The approval of the Board "—that is, the Scottish Board of Health, now the Scottish Department of Health—must be obtained to the rents proposed to be charged by the Association.707 Nothing could be clearer than that. There was an attempt to conceal from the tenants the powers under which the Association was working. But for my question to the Joint Under-Secretary of State and but for the information he provided, this business might have taken place behind the scenes, and the tenants would not have known of the protection afforded to them through the Secretary of State.
But that is not by any means the worst of it. The Association, despite this provision in the rules I have read, proceeded to impose the increase in rent as from 28th May. The increase is rather complicated because of this arrangement about rates, but, as I understand, it works out at around £11 per annum on the rent, an increase of about 25 per cent. Since 28th May, about £700 in increased rents has been paid by the tenants, despite the rule; and so, as I understand it, illegally. I should have thought that action by the Association would, by itself, justify the Secretary of State in refusing to give his approval to an increase in rents carried through in that way.
It may be said that, however undesirable the behaviour of Messrs. Shepherd has been as the agents of the Northern Housing Association, at least the Association itself is a non-profit-making body registered under the Act. I must confess that when the Housing (Repairs and Rents) (Scotland) Act went through this House I, in my innocence, assumed that Section 25, which excludes these housing associations, was intended to deal with public bodies like the Scottish Special Housing Association and charitable and philanthropic bodies which were providing housing as a social service.
I can only excuse my innocence by saying that apparently the Minister, now Lord Strathclyde, who piloted the Bill through the House, was under the same impression. It is true that the Northern Housing Association is, by regulation, a non-profit-making body, but I submit to the Joint Under-Secretary of State that there are more ways of making a profit than those that are shown on a balance sheet.
Let me quote one rather interesting instance. During the discussion that the tenants and my right hon. Friend and myself had with Messrs. Shepherd, we 708 spoke with one of the members of the firm, a Mr. David Shepherd. He was at great pains during our interview to make it clear that the relationship that existed was a professional one between the firm of Messrs. J. and E. Shepherd and the Northern Housing Association. On a number of points about which we asked he said that he would have to consult his clients.
I asked him at one point if he would tell us the names of the board of management of the Association and he told us that he was not at liberty to reveal the names of his clients. I am able to reveal the names to the Joint Under-Secretary who may be aware of them already. The chairman of the board of management of the Association, whose agents are Messrs. J. and E. Shepherd, is a Mr. A. Inglis Shepherd, of Pitlochry. One of his fellow directors is the same Mr. David Shepherd with whom we had our interview. Another director is Mrs. N. M. Shepherd, and all three are of the same address. There are only two other directors.
I think, therefore, that we are entitled to say that in fact the Northern Housing Association is Messrs. J. and E. Shepherd and that, when the board of management of the Association decides to pay its agency fees to its agents, it is a case of Messrs. J. and E. Shepherd making a payment to Messrs. J. and E. Shepherd.
To take another example—the question of repairs. Mr. Shepherd, in our interview, told us that £22,000 had been spent on repairs to these properties during the last three years. The tenants' association say that this must be an exaggerated figure. I am in no position to judge the real value of the repairs that have been done, but I know who did many of the repairs. They were done by a firm called Messrs. Inglis Shepherd (Dundee), of the same address as Messrs. J. and E. Shepherd; so here we have the intriguing situation in which Messrs. Shepherd, in the capacity of board of management of the Northern Housing Association, pay Messrs. Shepherd, in the capacity of agents, to employ Messrs. Shepherd, in the capacity of house repairers, to carry out presumably profitable repairs. Yet this is called a nonprofit-making organisation.
I suggest seriously to the Joint Under-Secretary that the real relationship here 709 is the normal relationship between private landlord and private tenants. The only unfortunate feature is that these 300 private tenants have been completely excluded from the normal working of the protection that exists for private tenants, and the single protection left to them now presumably is the Secretary of State for Scotland. I hope that we shall find that his protection is adequate for these people.
The Association is really a disguise for a normal private, profit-making, property-owning concern. The setting up of this organisation under this Act of Parliament was presumably needed in order to obtain the public subsidies which it acquired between 1925 and 1932. At that time it was £125 per house, which cost £440.
My conclusion is that they have had about £40,000 of public funds, and that, I submit, is another good reason why the Secretary of State should exercise his prerogative. I might now perhaps turn to the fact that it is interesting to find the reasons put forward by Messrs. Shepherd for this money being granted to the Northern Housing Association. Their description of the way in which the Association was to work has proved, in the light of subsequent developments, to be grotesquely inaccurate, and I have here a copy of a letter sent to Dundee Corporation at the time, from which I quote:The Association is formed for the benefit of those who wish to be tenants, and as long as the Association stands on an economic basis it cannot be in the interests of any of the Members of the Association to charge themselves a penny more rent than necessary —indeed, with careful legal consideration, there is no reason why in a few years' time the tenant should not have the house conveyed to his own name and become his own proprietor.That was the basis on which these sums of public money were paid by Dundee Corporation, but I suggest that the tenants may be excused some feeling of irony when they find that thirty years later, instead of becoming their own proprietors, they are faced with higher rents.
This is a completely inaccurate and, indeed, misleading description of the way in which the Northern Housing Association does work. It is not, in the ordinary sense of the term—and I think that I have given evidence to prove it—what was described during the Committee stage of 710 the Bill as "a body providing houses on a non-profit-making basis as a service." Those words are not a fair description of what has taken place in this case. These tenants are a body of intelligent and, in my experience, fair-minded people, and they would make no objection to paying a fair increase of rent if they were assured that the increase was wholly to maintain the houses in proper condition and to provide a decent standard of accommodation. But they have had no assurance at all that this is going to take place under the present arrangements. Although this book of rules from which I have quoted speaks of tenants' committees and tenants' representation, nothing like that has taken place. The tenants, so far as I know, have not been given a copy of the book of rules, and I say again that they are simply private tenants.
We ought to ask the Secretary of State to tell the Northern Housing Association that he is not willing to give approval to their anticipation of his decision. I hope he will inform the Association that he will not approve of this increase of rent, but will tell the Association that it must hand back the increase of rents obtained without his permission, as is required by the rules.
Furthermore, I hope that an investigation will prove that there is no need for an increase in rents. If there is to be any increase at all, it ought to be guaranteed to be for repairs, and only for repairs. One has only to quote the Association's own description of itself:… as long as the Association stands on an economic basis it cannot be in the interests of any members of the Association to charge themselves a penny more rent than necessaryto show how it ought to work. It is the duty of the Secretary of State to ensure that it does work in that way. When it conies to the question of money spent on repairs, I hope that the Secretary of State will ensure that an independent certificate of the cost of repairs is obtained, in view of the very close association that exists between the firm doing the repairs and the firm factoring the property.
Hon. Members opposite sometimes feel resentment because we say that they are the party of the landlords. The Secretary of State and his Joint Under-Secretary have an opportunity to disprove that tonight. We had this matter before us in 711 Dundee during the Election. One of the Conservative candidates in the Election refused to do anything about it. He said he was too busy. I think we could say that that was political inexperience. The Joint Under-Secretary has the opportunity to show that he is not too busy to step in and give protection to these tenants from this really impudent rent increase, in view of his power of consent which is required.
§ 10.46 p.m.
§ The Joint Under-Secretary of State for Scotland (Mr. J. Nixon Browne)
I am sure that the House is very grateful to the hon. Member for Dundee, East (Mr. G. M. Thomson) for having raised this very important and interesting point. It might serve a useful purpose if, first, I briefly outline the essential facts of this case as a background to the debate.
The Northern Housing Association, which is registered under the Industrial and Provident Societies Act, 1893, was formed in 1925, and in the immediately subsequent years built a number of houses in Dundee, with financial assistance. At that time assistance was available to housing associations and private persons under two distinct schemes. The first, framed under the provisions of the Housing Act of 1923, made available to private enterprise generally housing grants which were free from any statutory conditions with regard to the rents to be charged for the houses. The other scheme, framed under the Housing (Financial Provisions) Act, 1924, made assistance available also to private persons and bodies, but this was subject to the observance of special statutory conditions governing the rents to be charged and the letting of the houses.
The Northern Housing Association chose to take advantage of the scheme under the Act of 1923. Under this Act it received lump sum grants of £125 per house from the Corporation of Dundee which, in turn, was recouped by annual payments from the Exchequer, spread over a period of 20 years from the completion of each house. The final annual payment in respect of the Association's houses was made to the Corporation by the Secretary of State in May, 1954, since when the Secretary of State has had no financial interest in the houses.
712 At present, when a housing association desires financial assistance, it is required to make arrangements—in other words, to enter into agreements—with the local authority concerned, under Section 80 of the Housing (Scotland) Act, 1950. These agreements include provisions requiring the rents of the houses to be approved by the local authority. But since the Act of 1923, under which the Northern Housing Association was assisted, laid down no conditions whatever about the fixing of rents, no agreement with the Corporation of Dundee was entered into—and, indeed, in the circumstances, none was called for.
What did happen was that a rule was incorporated in the Association's constitution which, among other things, provides that the approval of the Scottish Board of Health—now the Secretary of State—must be obtained to the rents "proposed to be charged" by the Association. The rule, which is No. 115 of the Association's constitution, reads as follows:With respect to housing schemes approved by the Scottish Board of Health the lay-out and design of the houses to be erected by the Association shall be subject to the approval of the Scottish Board of Health, and the same authority shall be entitled to supervise the carrying out of the plans. The approval of the said Board must be obtained to the rents proposed to be charged by the Association. The Association shall not be at liberty to sell any of its houses except subject to the consent of and under such conditions as may be stipulated by the said Board.The Association did, in fact, submit an application to the Secretary of State on 7th May, 1955, seeking his approval for increases in the rents of 283 houses belonging to it in the city. This had become possible because of the passing of the Housing (Repairs and Rents) (Scotland) Act, 1954. The House will recall that it was felt that housing associations, as bodies who do not trade for profit, could be trusted to act reasonably with their tenants; and it was therefore decided that the houses belonging to housing associations, like local authority houses, should be removed from the scope of rent control.
Section 25 of the Act lays down conditions, however, which have to be fulfilled in the first place. The Section provides, in effect, that the tenancies of houses belonging to a housing associa- 713 tion are excluded from control under the Rent Acts if one of the following two conditions is satisfied, namely:
As the Northern Housing Association houses were provided with assistance under the Housing Act of 1923, and as the Association itself is registered under the Industrial and Provident Societies Act, 1893, both of these conditions are satisfied in the present case, and it is clear that the houses in Dundee which we are considering are no longer subject to rent control. So far as the statutes are concerned, therefore, the Association is free to increase the rents of its houses without obtaining the consent either of the Secretary of State or of the local authority, and, but for the provision of Rule 115, no question of seeking the Secretary of State's consent would have arisen.
- "(a) that the premises comprised in the tenancy were provided by the housing association in pursuance of an arrangement made under Section eighty or one hundred and twenty-one of the Housing (Scotland) Act, 1950, or with the assistance of a local authority under section two of the Housing &c. Act, 1923, that is, broadly that Exchequer assistance was given in respect of the houses; or
- (b) the housing association is registered under the Industrial and Provident Societies Act, 1893, and the provision of the premises comprised in the tenancy forms part of the purposes for which its business is mainly con-ducted and those premises were provided by the housing association before the commencement of this Act."
As I explained earlier, the application for the Secretary of State's consent was made on 7th May, 1955. Naturally, an application based on a rule made thirty years ago involved considerable re-searches, to ascertain the actual position of the Secretary of State in the matter; and as these researches proceeded, a number of important issues emerged which called for close examination before the application could be disposed of. Before the Secretary of State had time to examine all the issues involved, the Association raised the rents with effect from 28th May, 1955, without waiting for a decision by my right hon. Friend, and without any intimation to him. It is only fair to say that the rents were raised by the Association after consultation with a committee representing the tenants.
§ Mr. Browne
Well, my information is —and I will read what I said—that the rents were raised by the association after consultation with a committee representing the tenants.
§ Mr. Thomson
Perhaps the hon. Gentleman will accept my assurance that the tenants did not consent to the increase. Quite the reverse.
§ Mr. Browne
We are not saying that it was with consent. Having taken legal advice, this committee, with its solicitors, had a series of meetings with the Association's factors and, as a result, full agreement was reached subject to one or two minor adjustments which had been made in new missives of let. The new rents are now in payment on the basis of these new contracts entered into after full consultation between the tenants and the Association.
The effect of this on the position of my right hon. Friend was fundamental. While he was still considering the Association's application for consent to the increases, the increases were put into operation without his consent and he is thus faced with a fait accompli. My right hon. Friend takes the view that the whole matter has been taken out of his hands by the action of the Association in raising the rents. The question whether the increases are invalidated by the fact that they have been put into effect without the consent of my right hon. Friend raises legal issues which turn on the interpretation of the rule in the Association's constitution.
It would be inappropriate, and indeed improper, for my right hon. Friend to express any opinion on this matter, which only the courts can authoritatively determine. Since, however, the Association appears to have taken a committee of tenants along with it and to have achieved agreement about the new rents to be charged, it may be that no questions will arise. If, however, objection is taken by any of the tenants, it seems to me that they must resort to action in the courts.
In all these circumstances, my right hon. Friend has decided to refrain from 715 further consideration of the Association's application and he will inform the Association to that effect.
§ Mr. Thomson
Is the hon. Gentleman aware that this is a shameful and abject surrender to private property interests and that his information is wholly wrong about the tenants? I speak for them and with their full support. I think it absolutely disgraceful that the 716 hon. Gentleman should take Messrs. Shepherd's word without going fully into the matter.
§ Mr. Browne
It is not in any way a surrender. My right hon. Friend has decided to refrain from further consideration of the application.
§ Question put and agreed to.
§ Adjourned accordingly at two minutes to Eleven o'clock.