Clause 87.—(GRANTS TO HOUSING ASSOCIATIONS FOR AFFORDING RELIEF FROM TAX.) (Hansard, 22 June 1965)

§ Mr. F. V. Corfield (Gloucestershire, South)
However desirable the object of this Clause—and I think that most of us welcome the provision of some relief from taxation for certain housing associations—it seems a very odd way of going about it. I would suggest that we are entitled to some explanation why this means has been adopted by the Government. The difficulties facing housing associations providing houses to rent—as opposed to co-ownership associations—from a tax point of view have been well set out in the Milner Holland Report, pages 33 and 34, and I do not propose to repeat them tonight. As I understand it, the main problem arises because, when housing associations borrow on an annual repayment basis, they are not entitled to put down the repayment of capital as an expense for Income Tax purposes. As a result, the rents which they have to raise have to be inflated very substantially, particularly towards the end of the loan, in order to cover the taxation on these repayments.
The other item which causes difficulty is the fact that revenue placed to reserve for future repairs is held subject to tax at the time that it is placed to reserve, and, for a housing association, this again can be a very heavy additional item to raise from rent. It would seem perfectly easy for provision to be made in the Bill whereby these items can be made quite clearly not subject to tax. Instead of that, we have this remarkable approach, in which a purely permissive, discretionary power is given, not even to one Minister, but to three Ministers, to decide whether or not they should give the grant 1710 back to the housing association in relation to its tax.
This is a very wide discretion. In subsection (2) of the Clause, it is made clear that: Any grant…shall be of such amount, shall be made at such times and in such manner and shall be subject to such conditions as the Minister thinks fit… I suggest to the Government, in the first place, that this is a most undesirable way in which to frame a taxation Statute. Surely, the subject is entitled to know his taxation liability, and to have provisions by which that tax liability can be ascertainable. Secondly, I would suggest that, if this is the only way, it surely ought to be one Minister for the whole country, and he ought to be a Treasury Minister.
I hope that we shall be told why it is necessary to do it in this way. I also hope that the Government would try to make this Clause very much more specific, so that the taxation position of housing associations is made clear.
In conclusion, I remind the Parliamentary Secretary that Milner Holland made other comments on the taxation system and the very disadvantageous position of the private landlord in this connection. I hope that the Government, if they really want to contribute something to the solution of the housing problem this year, will not neglect this either.

§ Mr. Temple
The Committee welcomes the help which the Clause will give to housing associations. Nevertheless, it is an extraordinary Clause, by any standards. What precedent has guided the Government in giving the Minister of Housing all sorts of powers under various subsections to give this relief? As my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) said, it would have been more appropriate for a Treasury Minister to be chosen. I had thought, indeed, that it would have been even more appropriate if the Inland Revenue had been made the arbiter in these instances. Different Ministers have been chosen for different parts of the country, and I cannot think that the Ministers chosen will be the best fitted to judge the taxation angle involved here.
Why is there no appeal procedure under the Clause? The Minister of 1711 Housing in England and Wales is to have power to call for any particulars he may reasonably require, and any grant is to be subject to such conditions as he thinks fit. The Minister is gathering to himself almost unwarrantable powers in order to administer the Clause. I think that he will find it unfortunate to be saddled with the duty of being both judge and jury in these cases.

§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Robert Mellish)
We are grateful for the general welcome accorded to the Clause by the hon. Members for Gloucestershire, South (Mr. Corfield) and for the City of Chester (Mr. Temple), who will know that the housing associations have already told us that they are well satisfied with the important step which my right hon. Friend has taken. As the hon. Member for Gloucestershire, South said, the Milner Holland Committee reminded us all of the anomaly that housing associations of this kind, non-profit making bodies, were subject to tax. My right hon. Friend took note of this when framing his Budget and made provision to give them relief.
Hon. Members who have spoken do not complain about this; they complain about the way it is done, and they ask why the Clause provides for repaying the tax liability of the housing associations out of the Votes of the Housing Ministers instead of giving the associations a straight exemption from tax. A straight exemption would have had the advantage of avoiding the need to work out the tax liabilities of associations and it would, of course, lead to the same result in the end.
The first answer, however, is that the tax affairs of housing associations are normally quite straightforward and do not give rise to serious problems. The amount of work involved in calculating their liabilities is very small, and no burden is imposed on them on that account. But the main point is that, on taxation principles, there is no case for exempting housing associations. Although they are referred to as non-profit making, they do in fact make a profit in the tax sense. The principle which it is desired to preserve is that, wherever a profit emerges, it should be taxed regardless of the argu- 1712 ments which might be advanced on social grounds for some assistance from the State. We believe that, if this principle were widely breached, there would be no end to the claims for tax exemption on some ground or other for this or that body.
In our view, there is a special case here on social grounds for assisting the non-profit making housing associations to play a proper part in the provision of houses to let, and the Chancellor has taken the view that the right way to do it is by way of grant. It falls to the Housing Ministries to make this grant.
I give the assurance that we have consulted the housing associations. They are quite satisfied with this arrangement. At the end of the day, we shall have done what Milner Holland set out to do, that is, to remove an anomaly under which these people have suffered. I would tell the hon. Member for Gloucestershire, South that I think that the part which they will play in housing in the future throughout the country is a considerable one, and we want to encourage them in the best way we can.

§ Mr. Temple
I am afraid that the Joint Parliamentary Secretary has not answered the questions put to him, certainly those put by me. There was no answer about the precedents for these grants, about the appeal procedure and about why the Minister of Housing was chosen rather than a Treasury Minister. I hope that the hon. Gentleman will reply to those questions.

§ Mr. Mellish
I do not know the answer to the question about precedents, and it is no good my pretending that I do. I wish the hon. Gentleman had given me notice, for I would then have done some research and given him the answer. All I can say is that it is a general principle which is widely welcomed by the housing associations and everybody else concerned. I ask the hon. Gentleman to accept it in this spirit.
The hon. Gentleman also talked about the position regarding grants. Let us see how the method works. If there are anomalies, future legislation can deal with them. I can only say that we think that we have met the point which arises.