Clause 10 (Hansard, 26 June 1968)

Mr. Deputy Speaker
The next Amendment selected is Amendment No. 86, with which we may discuss Amendment No. 93, in page 11, line 6, at end insert: 'or unless the average standard rent after the proposed increase would represent less than 70 per cent. of the average historic cost per dwelling'.

§ Mr. Bruce-Gardyne
I beg to move Amendment No. 86, in page 9, line 28, after ' Minister ', insert: 'and except in cases where the average standard rent charged by a local authority represented less than 65 per cent. of the average historic cost of houses of which the rents fall to be carried to the local authority's Housing Revenue Account'. These are really two alternative propositions. I prefer Amendment No. 86, which would provide that in any case where the average standard rent charged by a local authority amounted to less than two-thirds of the average historic cost of its stock of houses the Minister's power to scrutinise and control rent increases proposed by it under the Clause would not apply.
Amendment No. 93 provides that in any case where the average standard rent amounted to less than 70 per cent. of the historic cost of a local authority's housing the Minister would be required to give favourable consideration to further proposals for rent increases which it might submit. Amendment No. 86 goes much further to release local authorities from the trammels of this iniquitous Bill, and that is why I prefer it.
If there is one thing that stands out a mile from the Prices and Incomes Board 756 Report on increases in local authority housing rents, Cmnd. 3604, it is that the structure of rents for council houses in Scotland is infinitely lower both absolutely and relative to the cost of housing than it is in England. I hold no brief for Mr. Aubrey Jones and his Board. I have a healthy disrespect for anybody who thinks he has an instant answer to any question regarding anything from the prices of a pinch of salt to the road to the moon. But in this instance at least, Mr. Jones and his Board have treated us to a blinding glimpse of the obvious.
The gospel according to Aubrey tells us that the estimated average rent of council houses in Scotland amounts to 18s. and in England to 37s. 9d. a week. The average council house rent in England is, therefore, rather more than double the average rent in Scotland. The reference is page 40 of the Board's Report. The gospel according to Aubrey further shows that among the 21 local authorities which the Board was told to examine, which include four in Scotland, the rate of increase in rents of council houses in recent years has been appreciably lower in Scotland than in England and Wales. For the past three years, the average increases were 10.9, 10.6 and 5.8 per cent. respectively in England and Wales and 8.3, 7.2 and 3.3 per cent. in Scotland. Therefore, not only are the rents of council houses in Scotland very much lower than in England and Wales, but in recent years the gap has been widening. This is the evidence which the Board produced
It is worth pointing out that over the past 30 years the local authority rents in terms of constant prices have fallen substantially in Scotland. A report in the Glasgow Herald of 14th June showed that there had been a fall of 6 per cent. in average council house rents in Glasgow over the past 30 years at constant prices, a fall of 15 per cent. in Aberdeen and a fall of 17 per cent. in Edinburgh. That is the situation regarding the structure of local authority rents in Scotland which this Clause would seek further to control.
I must refer briefly to what we might call the remedies according to Aubrey. Remedy No. 1, as laid down on page 27 of the Board's Report, reads as follows: As a short term aim, standard rents should be fixed in relation to historic costs ". 757 This, in effect, is the short term aim which we seek to embody in the Amendment.
I turn to the table on page 17 of the Board's Report which compares average estimated historic costs per dwelling in the current year in the 21 authorities examined by Aubrey and his men with the average standard rents charged in those 21 authorities. This table makes clear that of all the authorities investigated, the gap between the standard rent and the historic rent was widest in Kirkcaldy where the standard rent amounted to 45 per cent. of the historic cost Only one Scottish authority—one which I happen to represent, Arbroath—ranked above the lowest percentage ranking in England, which was the constituency of the Chancellor of the Exchequer According to either the 65 per cent criterion or the 70 per cent, criterion, Stretford would join the four Scottish burghs in ranking for special treatment under the Amendment —Stretford alone among the 17 English boroughs examined This is not just an arid arithmetical calculation, because what is not paid by council (house tenants must be paid by someone else In part, this means the taxpayer and in part the ratepayer.

§ Mr. Roebuck
Is the hon. Gentleman suggesting that council house tenants do not pay rates?

§ Mr. Bruce-Gardyne
If the hon. Gentleman, who does sometimes attend our discussions, will allow me to continue, I am coming to that point. Of course they are also ratepayers, as are tenants of private property. The point is that if local authorities are prevented from making increases in their rent structures which they believe desirable the whole body of ratepayers, including the council house tenants, must take the extra burden.
I refer for the last time to the Good Aubrey. Of the 21 local authorities investigated by his holy men, the four with the highest contributions by local ratepayers to housing were, not surprisingly, four in Scotland. The Secretary of State's Kilmarnock ranked top with more than two-fifths of its housing revenue coming from the rates, with Kirkcaldy, Kirkcudbright and Arbroath following in that order, closely followed by Barrow-in-Furness, the only English borough coming anywhere near.
758 Unless the Amendment is accepted, what the tenants in Scotland might gain in this Clause on the swings the ratepayers will lose on the roundabouts. I regard the attempt by the Government to place their sticky fingers in the market mechanism in the manner suggested by the Bill as iniquitous, but if they are determined to make fools of themselves and the House at least they should do it in a manner which treats all our electors with an equal degree of offensiveness. Unless they accept the Amendment they will be imposing more offensiveness on some than on others. There is no case for saying that council house tenants in Scotland should be allowed to escape the medicine of lower living standards to this extent—the medicine the Chancellor has prescribed for the nation—by this device, which transfers a part of the dose to add to the burden already borne by the ratepayers. It does not offer me any consolation to recognise that in some cases the tenants and the ratepayers are the same people. This is simply a question of equity in a most inequitable Bill and I therefore hope that the Minister of State will see fit to accept if not the first at least the second and more modest Amendment.

§ Dr. Dickson Mabon
I agree with the hon. Gentleman that at least in his treatment of the National Board for Prices and Incomes and Mr. Aubrey Jones he has been consistently offensive. If he studies the report of his speech tomorrow, he will see that he rested a great deal of his case on some of the excellent work done by the Board, and done very rapidly, on this very difficult problem. The Bill, least of all the Clause, does not try to sort out historic housing economic problems. They are inheritances. The purpose of the Clause is to ensure that the size of unavoidable rent increases is kept within tolerable limits, having regard to the needs of the prices and incomes policy.
I accept that there are historic housing economic problems to be sorted out, but the Clause is not the vehicle for that. They must be solved over a considerable number of years and by a consistent policy of the Government, a policy on which the Government have tried to embark, as witness their Housing Acts 759 and the exhortations of Ministers from time to time about what should be done by local authorities. I do not accept that it is or could be the purpose of the Clause to limit the rate fund contribution or, as was suggested earlier, to fix a minimum standard rent.

Mr. Brace-Gardyne
If the hon. Gentleman studies the Amendments, he will see that that could not be their purpose. Their purpose is simply and solely to limit the right of the Government to intervene in the decisions of local authorities in specific circumstances when they themselves decide that the gap between a standard rent and the historic rent is so large that there should be a movement upwards.

§ Dr. Mabon
If the hon. Gentleman had allowed me to proceed, I was about to make a comment on his second Amendment, which he does not prefer, but which, in fact, comes nearer to the point. The graphs on page 17 of the Board's report make no pretence at accuracy and the footnote on that page explains how difficult it is to compare like with like. There are references to the high cost of land and the amount of work in progress and various other factors which vary from area to area. The hon. Gentleman made the mistake of referring to Stretford as the constituency of my right hon. Friend the Chancellor of the Exchequer. In fact, it is Birmingham, Stechford. That was only a minor inaccuracy, but it illustrated the point that while the position in Birmingham may be compared with that in Glasgow, one could hardly compare it with the position in, say Arbroath.
I was surprised that the hon. Gentleman should have castigated Mr. Aubrey Jones and then quoted him with relish and in the hope that they would carry conviction. The housing costs of local authorities vary widely from area to area according to factors such as the actual cost of building, the scale of the local authority's housing activities and so on, and it is unreasonable to assume that any given proportion of rent income and rate fund contributions are reasonable for all authorities. That blanket assumption should not be made.
I suggest that instead of quoting a bit of paragraph 85(i) he should quote all 760 of it or the final part. I turn his attention to paragraph 86 of the White Paper on page 28 which states: We see rates as serving three functions. It is within these functions that we are asking the authority to make a decision. On the second amendment, we are in Clause 10(6) providing that the Housing Ministers can take into account exceptional circumstances which could justify their consideration of fresh proposals for rent increases. There is specific provision for the Ministers to look at the situation which would meet the position of a local authority which had done its best to balance one factor against another and came to the Minister for guidance.

§ Mr. Bruce-Gardyne
I beg to move Amendment No. 87, in page 9, line 28, after ' Minister ', insert: 'or except in cases where failure to apply rents exceeding the former rents would lead to termination of the resources element in the Rate Support Grant paid to local authorities in Scotland under the terms of Schedule 1, Part II, paragraph 4(1) of the Local Government (Scotland) Act 1966.' There is a misprint for which I accept full responsibility through my handwriting. In the second line, "termination" should be "diminution". I think the Minister of State will realise that was the implication.
Hope springs eternal even at this hour although our expectations get lower as the clock advances. Of the three Amendments I have moved tonight this is the most modest and advances the proposition which must be regarded as the most indisputable. I hope the Minister of State will make us grateful for small mercies. The amendment advances a fairly complicated proposition which I will explain broadly. Behind it is the theme that it is inevitable that if council tenants' rents are kept down by this Bill ratepayers will suffer to a countervailing extent. It would be doubly improper in Scotland if ratepayers were made to suffer twice over.
For several years successive Governments, including this, have been trying to persuade local authorities in Scotland to reduce the deficits on their housing accounts. One method used has been to say that if the so-called notional rents 761 represented less than a certain proportion of the gross annual value of the House to that extent the exchequer grants they received would be cut back. Successive Secretaries of State have said to Scottish local authorities that they cannot tell them what rent to charge—although that is being changed in some respects—but if they insist on running up huge deficits by charging grossly uneconomic council rents they cannot look to the exchequer to bail them out. That, in crude terms, would describe what successive Governments, including this Government, have been doing.
The provision governing this situation at present is Schedule 1, Part II, paragraph 4(1) of the Local Government (Scotland) Act, 1966, which states: Where for any year the actual rent income of a county council or town council is less than the council's notional rent income, the relevant local expenditure of the council shall be calculated for the purposes of this Part of this Schedule as if the council's notional rent income were substituted for the council's actual rent income. The purpose of Amendment No. 87 is to lay down that in any case where a local authority in Scotland seeks to raise its rent incomes, because, if it does not, it will lose Exchequer grant, the Minister shall not have power to intervene, under Clause 10, in the raising of such rents.
The alternative and much weaker proposition in Amendment No. 96 is that if a local authority seeks to raise the rents of its council houses and the Government intervene under this Clause to turn the local authority's request down, and, because that request is turned down, the local authority stands to be penalised under the part of the 1966 Act which I have just quoted, then that part shall not apply.
These are two complicated propositions to grasp at this hour of the morning, but I think that, at any rate, the Minister of State will be aware of the ground we are on because he has been dealing with it for some time.
I will give the House a few examples of what we have in mind. Last year the average council house rent in Scotland represented 92 per cent. of the average gross annual value. Within this average there were wide variations. Edinburgh was 79 per cent., Coatbridge was 67 per cent., and the new town corporations 762 were at the other end of the scale at 146 per cent.
One difficulty in discussing this matter is that it seems by no means clear what St. Andrew's House is currently regarding as a notional rent for the purposes of the 1966 exercise. I hope that the Minister of State will tell us when he replies. Is it the 90 per cent. of gross annual value in 1964–65 or the 95 per cent. in 1965–66? It is difficult to get a clear answer. Until we do get a clear answer it is extremely difficult to tell whether any local authorities in Scotland —and, if so, which—will stand to suffer loss of Exchequer grant as a result of being denied the right to increase council house rents under the terms of this Clause if these Amendments were not accepted.
All that we can say—and this seems to be an irrefutable proposition in equity —is that ratepayers in Scotland will suffer twice over by the intervention of the Government under the terms of the Clause. Once, because the Government intervene to prevent rent increases and thereby transfer part of the burden of rising costs from council tenants to ratepayers; and a second time over because, as a result of the Government intervening to prevent council house rents going up, the Exchequer subsidy is automatically cut under the 1966 Act and ratepayers have to bear that consequential burden as well.
8.30a.m.
That is basically the proposition, and it seems to me that it is one which the Government must, in equity, accept. It is tough enough when we make the ratepayers bear the burden. If we double the burden by saying that they must be penalised by the Exchequer for something which is effectively within the control of the Exchequer, it will be wholly improper. For those reasons I hope the Minister will be able to reassure us.

§ Dr. Dickson Mabon
Perhaps I might preface my remarks by saying that just how the burden bears on ratepayers and rent payers depends on what proportion of the housing stock is accounted for by council houses, and what proportion is accounted for by houses in the private sector.
I am sure the hon. Member for South Angus (Mr. Bruce-Gardyne) does not mean this, but he sometimes seems to 763 imply that council tenants do not pay rates. In one town in Scotland 93 per cent. of the housing stock consists of council houses. Rents and rates are, therefore, very much a matter of into one pocket and out of the other. It does not matter how the judgment is made, except in respect of the 7 per cent. On the other hand, in some places the figures are reversed. Circumstances decide how the judgment is made, and therefore the judgment must in the first instance be that of the local authority.
The hon. Gentleman acknowledged the defectiveness of Amendment No. 87. I do not blame him for its defects. These mistakes occur from time to time even with Ministers, although Ministers are usually more charitable than the hon. Gentleman was when mistakes are made.
It would not be fair to say to a local authority which had pursued a policy of low rents that it is to be given a free hand to raise rents substantially in one go, and thus disrupt the incomes policy. I think that we must try to find some willingness on the part of such an authority to bring in the increase by instalments. That is the essence of what we are trying to argue.
I come, now, to Amendment No. 96. As the hon. Gentleman suggested, the percentage in Scotland under the rate support grant is 100, that is to say in the financial year 1967–68. Discussions are taking place with local authorities through the working party, but I agree that it is no secret that it is reasonable to suppose that that figure will be reviewed, and that it is likely to go up from the present 100 per cent, of gross annual value.
If a local authority in Scotland wants to keep its rent precisely at the level set for the purpose of rate support grant, on past practice rents would have to rise by about 5 per cent, a year on present gross annual values. I remind the House that we are in a quinquennium which does not end until 1971. That would average £53 for Scottish local authority houses, which would mean that rents would rise on average by 1s. per week each year. That would be within the policy that is being outlined here.
The situation envisaged in the Amendment would arise only if the local authority had substantial increases in 764 housing expenditure. I concede that that might happen, but we do not think that it will happen on a large scale. Alternatively, the situation envisaged could arise if rents before they were increased were substantially less than 100 per cent, of gross annual value, and I agree that that is more likely.
We have to leave the position open. We shall consider sympathetically any proposals which a local authority puts forward for rent increases of more than 7s. 6d. a week on average, and 10s. a week in individual cases. We have offered these as guidelines. We have announced them as guidelines, but it does not follow from these guidelines that any increase under this limit is acceptable or anything above it is forbidden.
I concede that the position in Scotland is not easy, but nevertheless we do not believe that making these Amendments would help us at all. The primary purpose of the Clause is to substantiate the position of the prices and incomes policy, not to solve the housing problems of Scotland which have been with us for some time. We are trying to solve this in a progressive, reasonable and moderate way, and I would ask the House not to accept these Amendments.

§ Mr. Gordon Campbell (Moray and Nairn)
The hon. Gentleman has not answered at any rate one point raised by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). The Government, we know, are seeking to peg prices in this Bill and also to set limits on rent increases, but they appear to be ignoring rates completely.
I hope I may have the attention of the hon. Gentleman. This is the first time I have spoken on this Bill—

§ Dr. Mabon
Actually, it is a message from the hon. Gentleman's own whips.

§ Mr. Campbell
I am delighted to think that it may bring some relief to the hon. Gentleman, but I want his attention because my hon. Friend raised some very important points and the hon. Gentleman has not replied on this question of rates.
In Scotland rates are regrettably higher than elsewhere in Britain. This was not only brought out by the Prices and Incomes Board on page 4 of its 765 Report, but we have also had this from the Allen Committee when it reported on the impact of rates in Britain.
In this debate and in the last debate my hen. Friend has been seeking to avoid increases in rates because these increases are going to be felt too by those whose incomes are being restrained by this Bill. But there appears to be no attempt to put any kind of curb on these increases, while proposals are being put forward to curb rent increases.
This must be a most unsatisfactory situation for Scotland, where rates are higher in any case and where an attempt to peg rent increases may well have the effect of increasing rates.
I will not go into all the complicated details of the resources element of the rate support grant, but it appears from what the Minister has said that some local authorities could lose part of their grant. In reply to a Question which I put to the Secretary of State when this Report first came out and the Government declared their view, the Secretary of State indicated that local authorities would not lose any grant in Scotland.
It may have been an off-the-cuff reply at a very early stage, but the Minister has not said anything this morning to remove our fears that some local authorities may well not get their full grant because they will not be able to raise rents in the way they would have done in order to qualify for the full amount of the resources element.

Mr. Brace-Gardyne
Would not my hon. Friend agree that it would go some long way towards satisfying our anxieties if we could have from the Minister of State a clear and categorical undertaking that in no circumstances would local authorities be penalised under the terms of the 1966 Act if the Government intervene under Clause 10 of the Bill to prevent them raising rents?

§ Mr. Campbell
My hon. Friend has put it in another way. As I indicated at Question Time some weeks ago I had an answer from the Secretary of State which appeared to say what my hon. Friend has said, but the Minister of State this evening did not say anything on this. He carefully avoided giving any such assurance.

§ Dr. Mabon
I am sorry that the hon. Gentleman showed such a preference for an hon. Member on his side. Perhaps he would put a Question on average household income and the rates, because I think that he is wrong. Speaking off the cuff, I believe that the figure for England and Wales in respect of the average household rate for the last financial year was £40 8s. and for Scotland £39 12s. 6d. If he would like to put down a Question about the average rise in rates, speaking off the cuff again I believe that the rise over the present financial year was 1.6 per cent. for Scotland, which is better than in England. I do not want to be held too closely to those figures. That is why I have said that this matter should be pursued by way of Question and Answer. I do not want to be discourteous.

§ Mr. Campbell
The hon. Member has complained that I gave way to my hon. Friend first; that was in order that the question could be put quite clearly. But he has not answered that question. He has come up with something quite different about rates. The Prices and Incomes Board Report, at the top of page 4, says: In Scotland rate contributions tend to be much higher than in England and Wales. Such variations have a bearing on the variations in rent levels between one authority and another. I have not got a copy of the voluminous Allen Report, but I can remember that its conclusion was that in Scotland rates are high and rents low, and the former subsidise the latter.
Council rents are very much higher in England, and rates, in comparison, are very much higher in Scotland. The Minister cannot argue about this now. This is a comparison between two countries and the averages may come out as he says, but both the Board and the Allen Committee have put it in a nutshell and I am prepared to stand by what they have said.
The Minister of State has not given us an assurance that some Scottish local authorities will not lose the resources element of the rate support grant as a result of action which they had proposed to take in increasing the average standard rent this year and then being prevented from doing so by the intervention of the Government. The Minister 767 said that if they were in that position it was because they were charging too low a rent before and that therefore they should not be helped this year. That is a difference of opinion; we believe that councils which are being encouraged to end the distortion that exists in council house rents in Scotland should not be stopped from doing so. We think that it is wrong to stop them by making them lose part of the grant, so that they pass it on to their ratepayers. The rate is being increased and nothing in the Bill seeks to curb this increase.

§ Dr. Dickson Mabon
I beg to move Amendment No. 88, in page 9, line 38, leave out ' Housing (Scotland) Act 1950' and insert: 'Housing (Financial Provisions) (Scotland) Act 1968'. Would it be convenient for hon. Members to discuss, at the same time, Government Amendments Nos. 98 and 99?

Mr. Deputy Speaker
If the House so pleases.

§ Dr. Mabon
The first two Amendments are consequential on the enactment of the Housing (Financial Provisions) (Scotland) Act, 1968, which completed the consolidation of the Housing Acts. Clauses 10(2) and 12(4) of the Bill define the local authorities and the houses which will be subject to the provisions of these Clauses by reference to the Acts under which housing revenue accounts are kept. The Amendments substitute the 1968 Act for the Housing (Scotland) Act, 1950. The purpose of the third Amendment in this series is to continue the application of the 1950 Act during the interval between the passing of the Bill and 30th August, 1968, the date on which the 1968 Act comes into force.

§ Mr. G. Campbell
The hon. Gentleman will be aware that I took a keen interest in this matter and, not so long ago, undertook to start this consolidation.

§ Dr. Mabon
But I did it.

§ Mr. Campbell
I was pressed to give a date for the consolidation and to give an undertaking. The hon. Gentleman and his hon. Friends urged this action to be taken when they were in opposition. We were at that time, as the Gov- 768 ernment, trying to get the consolidation achieved as soon as possible. At last the necessary consolidation provisions are available. We welcome this and are glad that the necessary Amendments have been introduced.

§ Dr. Dickson Mabon
I beg to move, That further consideration of the Bill be now—

§ Mr. MacColl
Oh, dear.

§ Dr. Mabon
I have made a mistake. I am sorry. I withdraw what I almost completed saying.

§ Mr. MacColl
That was a rude shock. I beg to move Amendment No. 89, in page 10, line 23, leave out ' either rent' and insert: 'one or both of the rents'.

Mr. Deputy Speaker
I suggest that we take with this Amendment the following one, Government Amendment No. 90.

§ Mr. MacColl
That is satisfactory, since they are drafting Amendments following a discussion we had in Committee.

§ Mr. Rossi
I thank the Parliamentary Secretary for trying to meet an objection which my hon. Friends advanced to subsection (4) in Committee. We had something of a game with the Parliamentary draftsmen at that stage because my hon. Friends realised the virtual impossibility of putting into clear and decisive language the woolly and muddled policies of the Government.
I want to be certain that I understand the Clause. Am I to understand that where there is a differential rent or rebate scheme in operation with a local authority, and where there is a change in the circumstances of the tenant, then for the purpose of deciding whether or not an increase is justified, one applies the circumstances of the tenant at the date of the increase to both the former rent and the latter rent? In other words, assuming that at the date of the former rent the family income of a tenant was £16 a week, but his income increased from £16 to £20, so that his rebate decreased—that is, his rent went up—to see whether it was an increase which justified intervention under these provisions, is the Minister saying in the 769 Bill that one applies his second set of circumstances—that is, his income of £20 a week—to the former rent and adjusts the former rent to the position it would have in the rent rebate scale of the local authority on an income of £20? One if left with a situation of a former rent and a latter rent, comparing them from the rent rebate scheme point of view, at the income point of a tenant on the scale of £20 a week.
If that is right one assumes that the conclusion reached is that no increase in rent has actually taken place. I think that is right, because one is applying the latter circumstances of the tenant to the previous rent and his rent would be increased by saying that his income was that much higher at the earlier date. If the Parliamentary Secretary has been able to follow what I have been saying after staying up all these hours—and I am afraid I have not explained myself very clearly—I hope that he will be able to answer the point.

§ Mr. MacColl
The circumstances of the tenant at the time of the latter rent would govern the situation. That is the point of the definition in the terms of the circumstances at the later date. The important change is not so much the rebate scheme as the lodger charge. The difficulty arises that if the local authority reduced the standard rent but increased the lodger charge there would not be an increase in rent because only the lodger charge would be increased. To deal with that we introduced these proposals. If it is merely that the tenant's circumstances 770 change because he has another lodger coming in, that would not be an increase in rent but a change of circumstances, which would not be taken into account.