Clause 2.—(MONEY BORROWED BY OWNER-OCCUPIER TO PURCHASE UNFIT HOUSE OR ON SECURITY OF AN UNFIT HOUSE.) (Hansard, 29 November 1965)

§ Mr. Boyd-Carpenter
I beg to move Amendment No. 7, in page 2, line 4, after "instalments" to insert:

(i) shall not apply to mortgages, charges and agreements in favour of a local authority and any reference in the said paragraph 5 and in this section to a mortgage, charge or agreement shall be so limited; but

(ii).
This Amendment raises an interesting issue but not a point of the same degree of general seriousness and importance as that raised in the previous two Amendments.
Clause 2, to which the Amendment relates, is in itself a very good provision. 1186 It is a good idea that where houses are demolished under slum clearance schemes the question of the fate of the mortgage —as to how the loss shall be divided between the parties—should be referred to the county court.
The Amendment raises a point which I raised on Second Reading and to which no reply was made at that stage. It is the case where the mortgage is granted by a local authority which itself has promoted the slum clearance scheme. That must clearly, in the nature of things, be a case where the owner-occupier of the house could have had no idea when he bought it that the slum clearance provisions would be applied to the house. Obviously, if the local authority went so far as to grant a mortgage in respect of the property, the local authority itself could have had no idea whatever at the time that the house would be demolished 1187 in the forseeable future under a demolition scheme. Therefore, no fault of any kind could, in those circumstances, be attributed to the owner-occupier.
In such a case I think the Committee will agree that it is quite plainly simple justice that further payments under the mortgage should be waived. It is unconscionable for a local authority to promote a slum clearance scheme in respect of a house on which it had granted a mortgage and then insist on further payments under the mortgage. This is so obviously unconscionable that in practice today local authorities do not insist on those payments. There is a procedure—it involves the consent of the Minister which, I understand, is never refused—under which where an authority's own scheme applies to a house on which it has already granted a mortgage, the authority drops its claim for further mortgage payments.
The fear which I expressed on Second Reading—and which was not modified because the Minister did not deal with the matter—is that this procedure may make the position of the owner-occupier in such a case worse than at present. The present position in these cases seems to be perfectly satisfactory, but if there is a provision of this kind under which mortgages generally are taken to the county court, it seems likely that a local authority would feel bound to take all its mortgages to the county court.
Hon. Members who are experienced in local government may feel that to adopt this course may involve criticisms by the auditor and even the possibility, however remote, of a surcharge. This procedure having laid it down generally that all mortgages must be taken to the county court, local authorities might feel it necessary to do just that, and while the court might rule that the loss should fall on the local authority, the matter would still be at risk and legal costs would be involved. All that procedure in this limited class of case would be required to try to do what is much more cheaply, effectively and quickly done at present by a local authority simply waiving the mortgage payments.

§ Mr. MacColl
In this matter I feel that I am between the upper millstone of the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and the nether millstone of my hon. Friend the Member for Oldham, East (Mr. Mapp) who, on Second Reading, took a diametrically opposite view. My hon. Friend's fear about the Clause was that it would discourage loan-granting bodies, whether local authorities or building societies, from lending money on old property because of the risk under this procedure that they might lose their security and right of recourse against the borrower. The right hon. Gentleman has taken the view that this might have the effect of encouraging local authorities to be tough in refusing to forgive a loan which they had given to somebody.

§ Mr. Boyd-Carpenter
I did not put it quite like that. My point was that if this procedure was indicated in this context local authorities, however desirous they might be of waiving payments, might feel bound to submit the matter to the county court lest they themselves might be criticised by the district auditor.

§ Mr. MacColl
I do not think that they would feel bound to do it. They would have power to make an agreement in a case where they thought it right and proper not to enforce the continuance of repayments. They have that power and there is no need for them to go to the court. On the other hand, local authorities are independent bodies. They can make their own decisions. In the short time that I have been in my present job I have come to know that local authorities do not always follow the course of action which we who are outside think that they should follow. If a local authority says to itself, "I am a trustee to the public for public money which I have loaned and therefore it is my duty to get what I can out of the borrower of the money", we cannot interfere.It is something which a local 1189 authority is entitled to do. Therefore it is important that the borrower should have the right to go to the county court to get a settlement of his claim and I would be reluctant to see that right taken away. If we put into the Clause that this shall not apply to mortgages in favour of local authorities my fear would be that somebody reading that would say, "Clearly this applies only to private borrowers and we as a public body are not subject to the provisions of the Cause"—and that would be the exact opposite of the result desired by the right hon. Gentleman.
The right hon. Gentleman raised the question of the power of local authorities at present to make agreements, with the sanction of the Minister. I think that he is, perhaps, confusing two rather different things. A local authority has a general power to make ex gratia payments, with the permission of my right hon. Friend. The permission does not make them valid payments, but it does prevent the district auditor from doing anything about them, though it might still be open to someone else to object. That is a useful provision, but my right hon. Friend would like to see this case put on a rather more formal basis.
To sum up, it is, as the right hon. Gentleman said, most desirable that this procedure of going to the courts should he available. In many cases, because they have encouraged the acquisition of the property, the local authorities must bear some of the responsibility and, therefore, one would think that the balance of argument would be in favour of settling out of court. Nevertheless, it is only right that the owner-occupier should have the right to go to the courts and get legal relief, if that he necessary.
For these reasons, I suggest that the Amendment should not be made in the Bill. I think that our aims are exactly the same, but my misgiving is about what would happen as a result of the adoption of the right hon. Gentleman's suggestion.

§ Mr. Boyd-Carpenter
I am a little reassured by what the Parliamentary Secretary has said, and I agree that our aim is identical. As I understood it, he gave me an assurance that, if the Clause remains as it is, a local authority would neither be compelled to go to the courts not be al risk of surcharge or action by 1190 the district auditor if it simply waived the payments without going to the courts. He has put that on record, and it satisfies my main anxiety.

§ Mr. MacColl
I do not want to wriggle out of that at all, but I am wondering about how far it might be thought to go. The district auditor might think it improvident and reckless of a local authority not to get the money back. Let us suppose that it was the right hon. Gentleman who had been lent the money for the acquisition of an unfit house. It might be thought that he, with his enormous resources, ought to meet the cost rather than the ratepayers. But I think that in the normal case of a sensible local authority and sensible borrower, it would he perfectly proper to make an agreement of that sort.

§ Mr. Boyd-Carpenter
I am grateful to the hon. Gentleman, not least for his tribute to my creditworthiness. I shall send the appropriate copy of HANSARD to my bank manager.
In all seriousness, I think that that was a reasonably fair assurance. I take the point that, if a local authority were sticky about it, it would be right that the borrower should have power to take the matter to the county court, and this might be excluded by the Amendment. In the circumstances. I ought not to detain the Committee further, and I beg to ask leave to withdraw the Amendment.

§ Mr. Boyd-Carpenter
I do not wish to detain the House for more than a few moments, or to hold up the progress of the Bill. So far as it goes, and that is, I am afraid, a very powerful qualification, it will do some good and relieve some anxiety. I can at this stage only discuss that which is in the Bill, which leaves me a very restricted and limited field, because I think it should be made clear that this Bill greatly disappoints those who were 1191 cheered by the announcement of the intention to introduce it. Though its effects are, so far as they go, beneficial, it is a miserable, mean, under-sized, inadequate little Measure.

§ Mr. MacColl
The right hon. Gentleman was enjoying himself rather unnecessarily. This is a useful little Bill which fulfils a pledge. It considerably extends the protection for the owner-occupier because it gives him the protection of having his rights dependent on when the Order was made, and not when his property was acquired, and that is a very substantial improvement. It applies to people who would not have this protection under existing legislation. It gives protection for 15 years, and although no one can pretend this is the answer to all our problems, it is a very considerable step to ease the position.