HOUSING SUBSIDIES (INTEREST RATES)

HC Deb 21 July 1969 vol 787 cc1429-46

1.11 a.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl)

I beg to move, That the Housing Subsidies (Representative Rates of Interest) Order, 1969, a draft of which was laid before this House on 9th July, be approved. Perhaps it would be convenient to discuss at the same time the similar Motion on the Order relating to Scotland.

The Motions come up under the two parent Acts, the Housing Subsidies Act, 1967, and the Housing (Financial Provisions) (Scotland) Act, 1967. These Acts provide for Orders to be presented to the House annually specifying the representative rates of interest on which basic subsidy is to be calculated.

The formula which is laid down in the 1967 legislation provides in effect that the new basic subsidies shall represent the difference between the loan charges on the aggregate approved cost of dwellings completed in each financial year at a representative borrowing rate and the loan charges which would have been incurred at a fixed borrowing rate of four per cent.

The procedure is that these figures are negotiated with the local authorities and the formula is discussed. There was no difference of opinion about the formula which was to be adopted for England. The rates for local authorities and for new towns are different and this is because the methods of borrowing are different.

From time to time the question has been raised whether or not there should be a different rate for housing associations. The position remains the same. There is no point of principle about this. There is no evidence that it is necessary to do this and, on balance, we concluded that it was better to use the local authority rate.

The rates which have been reached are 7.93 per cent. for local authorities and housing associations and 8.21 per cent. for new towns, as against last year's rates of 7.07 per cent. and 7.13 per cent. The Scottish rates are this time nearer to the English rates, 7.94 per cent. and 8.15 per cent. respectively.

The House will, no doubt, like to know the effect of the subsidies. Last year, when the rate was 7.07 per cent. in England, the estimated average subsidisable cost of a dwellinghouse completed in 1968–69 was £3,900, on which the basic subsidy was £108 a year. The equivalent figures for 1969–70, at a representative rate of 7.93 per cent., are £4,100 for the cost, representing a subsidy of £148 a year.

The total overall figure for all the different methods of subsidy in 1968–69 was £107 million, of which £27 million represented new subsidy and £80 million the older subsidies. This year the figure is £131 million, of which £49 million represents the new subsidy and £82 million the old subsidy. These are the main points which I wish to put to the House.

1.16 a.m.

Mr. Graham Page (Crosby)

In the draft Order, the Government are asking the House to approve a substantial increase in the rate of subsidies payable to local authorities for dwellings completed during the present financial year, from last April to next April. This is an increase over the rate of subsidy payable last year, which itself was an increase over the rate of subsidy payable the year before, which itself was an increase over the rate of subsidy payable in the previous year. And so the story goes on.

These increased payments out of the taxpayer's pocket are due to the effect upon rates of interest of the Government's general mismanagement of the country's economic affairs. For this purpose, the rates of interest have risen over the years from 6.19 per cent. in 1965–66 to 6.35 per cent. in 1966–67, 6.52 per cent. in 1967–68, 7.07 per cent. in 1968–69 and 7.93 per cent. this year for local authorities and housing associations and as much as 8.21 per cent. for new towns. For local authorities, the interest rate has increased over that period by l¾ per cent.

I said that the rates were for this purpose. The actual cost to local authorities of borrowing money for building new dwellings has risen by a far greater amount. The figure of 7.93; per cent. is worked out by a formula which arrives at an average by projecting into the future and assuming that times will not be as bad as they are now. That is probably true; a General Election will ensure that. Even as calculated on the Government's rather complicated formula, however, which was never approved by the House—it is not in the statute; it is a formula arrived at by the Government—the result is bad enough for the taxpayer and certainly, temporarily, bad enough for the local authorities and, through them, the ratepayer. Although the basic subsidy goes up each year, the ratepayer never seems to benefit from that by any reduction in his rates.

The procedure is that a council will by now, at this stage of the year, have fixed its programme of completions of dwellings for this year; it will have obtained the Minister's approval for the purpose of subsidies, and the promise to pay those subsidies; it will have borrowed money at the current rates in the open market; and it cannot now, at this stage of the year, do much to alter its programme. But it is now that it is informed of the amount which it will receive by way of subsidy from the Exchequer.

Each dwelling is taken at a cost of £x which, we have just been told by the Joint Parliamentary Secretary, for this year is £4,100; not necessarily the actual cost to any particular local authority, but an average, arrived at by another formula. The subsidy will be the difference between 4 per cent. and 7.93 per cent.—that is, about 4 per cent.—multiplied by the number of approved dwellings. An individual authority really has little to say in these calculations of averages, and because they are averages—an average rate of interest at which the local authority is assumed to be able to borrow, and an average cost of houses which the local authority is assumed to be able to build—there are, of course, some councils which are above the line and some councils which are below the line.

The Minister has taken the attitude recently, particularly during Parliamentary Questions, that because subsidy above 4 per cent. is paid, no local authority should hesitate to build right up to its capacity. This completely disregards those local authorities which find that they have to borrow above this assumed average rate and whose building costs in their area are, again, above the average, and those local authorities, if they build up to their full capacity, have to resort to their general funds, which are already over-stretched, to meet the deficit.

As for the taxpayer, by reason of the increase in the price of houses since 1965 and by reason of the increase in rates of interest since 1965, which, I say again, are both factors which are the fault of the Government in their general policy, he has to fork out an ever-increasing amount in subsidies, £12 million in 1967–68, £27 million in 1968–69, and the estimated figure which we have just been given for 1969–70 of £49 million. Of course, as I have said, this is not due only to an increase in interest rates. The cost of building, even on the Government's formula, has shown this steady increase over the years. Taking it only for 1967–68, then it was £3,800; in 1968–69, £3,900; in 1969–70, £4,100.

When total subsidies, not only for new houses, but the other subsidies as well, have risen over the past three years—£94 million a year up to £107 million a year and now up to £131 million a year, and yet we have terrible living conditions remaining in many parts of the country—surely it is time to think about a thorough reform in our system of housing subsidies, to see that we are really spending the money wisely, and for those who really need it.

We shall be spending it wisely only when this is a subsidy to human beings and not simply a subsidy to bricks and mortar. I hope that we shall ensure in the not-too-distant future that these subsidies reach those who are in need.

1.26 a.m.

Mr. Arthur Jones (Northants, South)

I should like to supplement some of the remarks of my hon. Friend the Member for Crosby (Mr. Graham Page). I hope that I shall not be guilty of just duplicating what he said but will add some positive evidence to the substantial case which he made.

I start from a Parliamentary Question which I put down for 13th May. The Answer, reported in column 191 of the OFFICIAL REPORT, was to the effect that a notional rise of 1 per cent. would increase the total housing subsidy by about £6 million a year. We have not had an increase of quite 1 per cent., but it is 0.86 per cent., which means that the notional rate of interest now to be determined results in an increase of about £5.14 million on the estimated subsidy expenditure under the Housing Subsidies Act, 1967. The estimated housing expenditure for 1969–70 is no less than £147.6 million, of which £47 million arises from the Housing Subsidies Act, 1967, which under the proposals before us should be amended to £54.1 million. This gives a total increase in housing subsidies over the previous year of no less than £29.2 million, of which £26.1 million arises out of the 1967 Act.

This is a tremendous escalation of housing subsidies. May I make a brief comparison between the years 1966–70 and the four years from 1960–64. In the four-year period up to the end of the current financial year housing subsidies increased by no less than £67.6 million. In the last four years of the previous Government the increase was £3.8 million. We may expect this rate of increase to continue as long as the present method of financing is continued and therefore by 1971–72 we may confidently predict that housing subsidies will reach over £200 million, of which over £100 million will be the result of the 1967 Act. This is the important effect of that Act.

To that figure must be added the rate fund contribution if we are to consider the total level of housing subsidies. In answer to a Written Question which I put down on 8th July, as reported in column 240 of the OFFICIAL REPORT, I was informed that on the last figures available in 1967–68, the contribution from the rate fund into the Housing Revenue account totalled for England and Wales £37 million. We now have to add to that figure the Government's decision not to allow rent increases to housing authorities—

Mr. Deputy Speaker (Mr. Harry Goorlay)

Order. The hon. Member must relate his remarks a little more closely to the Order. We are not discussing rent policy generally or the policies of any particular authority.

Mr. Jones

I am not discussing any particular authority, Mr. Deputy Speaker. The point I am trying to make—I hope with your agreement—is the degree to which housing subsidies are escalating. It is important to add the rate fund contribution, because it looks as though by 1970 we shall have a housing subsidy rate of no less than £250 million a year. This will not be offset to any degree by the termination of older subsidies. Under the various subsidies paid from 1919 to 1938 there has been a drop over the 10-year period from 1958 to 1968 of only £360,000 a year. So we have only a modest saving from the old subsidies which are running out. From 1946 subsidies have been paid on the basis of 60-year loans. This will not be a source of any reduction for many years to come. Thus, if the Government seriously expect local authority housebuilding to continue at or around the level of 1968—that is, some 192,000 completions—under the Act and this Order and those which will follow it we must expect subsidies to increase at a rate of about £25 million a year. The alternative is to cut back building programmes, which the Government strenuously deny they intend to do.

The Joint Parliamentary Secretary said that the basic subsidy—I assume it is an average figure—on a £4,100 house now runs at the rate of £148 per annum for 60 years, which is to be compared with the £8 or £24 under the £1961 Act. That is an average figure. Today the Chairman of the Housing Committee for the Kensington and Chelsea Corporation told me that the Exchequer subsidy for building in the London borough is at a figure of £750 a year. This highlights the tremendous difference between the average figure and a particular figure in a London borough.

The Government are now raising money at 9 per cent. and local authorities are paying 9¾ per cent. for current money. So we are faced wih the substantial increase not only this year but next year as well. We are entitled to ask the Government whether they ever expected this sort of escalation in costs when subsidies were tied to the rate of interest. I suspect that this was done purely on the basis of a foolish promise by a well-known eccentric.

We must also ask whether this is not an appalling extravagance and a misdirection of resources. I support the view that my hon. Friend the Member for Crosby expressed that housing subsidies are random and indiscriminate, moderated only by those enlightened authorities which operate sensible rent rebate schemes. It is unfortunate but true that in general they seldom help those most in need, but usually act as a bonus to the tolerably well off or, worse, a gift by the taxpayer to the very well off in some cases. Last week it was stated for the Government in another place that there were 60,000 council tenants with incomes of over £2,000 a year. The same source—the Family Expenditure Survey—recorded average levels of income—

Mr. Deputy Speaker

Order. The hon. Gentleman is getting rather wide of the Order. We are discussing the rates of interest on which the subsidy is to be calculated. We cannot make the debate as wide as the hon. Gentleman is trying to do.

Mr. Jones

I will try to narrow it so that it may be acceptable to your direction, which I entirely accept, Mr. Deputy Speaker. It is necessary to ensure that if this Order is to be operated equitably there shall be recognition of misdirection as my hon. Friend the Member for Crosby has said.

This year we will increase the amount of this subsidy by £26 million, and will probably do the same next year. But over a five-year period we are spending only £25 million under the urban programme in the ghettos of our cities, and little of this will be on housing. This is the full extent of the criminal stupidity which is the result of the indiscriminate way in which we dole out money for houses, and not for people, in areas of need.

The only way to give assistance to people is on the basis of an identified need—

Mr. Deputy Speaker

Order. The hon. Gentleman is discussing the basis of the subsidies. This Order merely changes the rate of interest. Therefore, the hon. Gentleman's remarks must relate much more specifically to the Order than they now are.

Mr. Jones

Perhaps I may conclude, Mr. Deputy Speaker, accepting your Ruling, by saying that the point of principle which this Order raises is whether we want to create a permanently dependant group of our population, many of whom are far from impoverished, living in pub- licly provided accommodation, whilst the truly poor continue to rot in multi-occupied hovels, the victims of the diminishing amount of cheap rented accommodation.

The draft Order is, in my view, evidence of a grave misjudgment on the part of the Government on the operation of housing subsidies, and a misdirection of public resources.

1.37 a.m.

Mr. Arthur Lewis (West Ham, North)

We are told by the hon. Members for Crosby (Mr. Graham Page) and for Northants, South (Mr. Arthur Jones) that there are ghettoes in the urban areas, a terrible housing shortage, and so on. I agree, but this housing shortage has not occurred just over the last four years. It has been with us as long as I can remember, and before, and much as I blame the Government for many things I do not think that they can be held responsible for the slums that have been with us for hundreds of years.

I was pleased to hear the housing subsidy figures quoted. My only regret is that they are not higher. Perhaps the local authorities and housing associations should be a little more generously dealt with to encourage them to get on with the job of clearing up the mess that has been created mainly by private landlords under the control of previous Tory Governments. It is not true to say that these houses go to people on £5,000 or £2,000 a year. Most councils work a rent rebate scheme of some kind, and every local authority has its points priority scheme.

The percentage figure in the Order is not the fault of the Government, but results from international high interest rates. It is true that local authorities now have to pay 9 per cent., 9½ per cent. and 9¾ per cent. for their money, and the Government are tomorrow issuing a ticket for 9 per cent. I wonder whether this 7.93 per cent. is sufficient to offset the difficulties in which many local authorities may find themselves.

That is particularly the case because of difficulties which are not the fault of the Government, but which result from international interest rates going up again. How will this percentage bear a relationship to a possible increase in the interest rates? Some local authorities are in more urgent need than others. Probably it would be out of order to go into detail about Kensington, but Kensington does not build many houses for those in urgent need. I do not know for how many there was the subsidy which the hon. Member quoted.

Mr. Arthur Jones

The hon. Member cannot deal with that subject properly unless he takes into account the question of availability of land.

Mr. Deputy Speaker

The hon. Member for West Ham, North (Mr. Arthur Lewis) should not be tempted to reply to that.

Mr. Lewis

I will not be tempted, but if the hon. Member thinks that we have a lot of land available in Newham, I wish he would tell me where it is. I wonder whether the percentage is sufficient for areas such as that of my authority. We have many difficulties. Because we have not the land, we have to build upward. I do not know if Kensington has ever heard of this. We do not like having to build upward.

Mr. MacColl

It is more expensive.

Mr. Lewis

It is more expensive and tenants do not like it. We have difficulties such as those of Ronan Point.

Mr. Deputy Speaker

Order. The hon. Member is getting wide of the Order. It is not in order on it to discuss problems of any particular authority.

Mr. Lewis

I mentioned this in passing, as the hon. Member for Northampton-shire, South referred to Kensington. There is a relationship between the salubrious area of Newham and the derelict area of Kensington. In Newham, we have to build expensive properties with higher densities and high buildings. I mentioned Ronan Point as an example and I want to ask a specific question. What happens in regard to subsidies and interest rates on them for areas which will have to borrow and get subsidy at 9.93 per cent. additional interest rate when they get on with the work of strengthening tower blocks? They will be landed with a heavy bill.

I assume that under this Order they will get reimbursement to the extent of 7.93 per cent. on the subsidy. Will they be given further assistance? These are some of the areas which the hon. Member referred to as different from others. I am in agreement with him to the extent that there should be no cut in subsidy. I see you edging forward on your seat, Mr. Deputy Speaker, but the hon. Member dealt with this point at length. Should not some of these areas be given further assistance? Would the Minister consider taking the Order away and reconsidering it?

Unless a more satisfactory arrangement can be made, perhaps by having differential interest rates between the poor and rich areas, we may have to vote against the Order. After all, although we are told that the figures of 7.93 per cent. for England and Wales and 7.94 per cent. for Scotland have been arrived at following discussions, we do not know who was discussed. Did the Ministry consult the local authority associations and individual authorities? Were they satisfied with these percentages? Would they have preferred differential interest rates? Perhaps we should alter the Order so that—

Mr. Deputy Speaker

Order. It is not in order to suggest alterations to the Order. The hon. Gentleman may only argue for or against it.

Mr. Lewis

I was explaining why I opposed it.

Mr. Deputy Speaker

I stopped the hon. Gentleman when he was adducing reasons for altering the Order, not when he was opposing or supporting it.

Mr. Lewis

I oppose the Order because rather than have average percentages, the agreement of local authorities should be sought on the right percentages for certain areas. Perhaps the poorer areas which are badly in need of housing could be given a higher subsidy, with less being given to areas which do not need it. This would result in the subsidy bill not being increased, which should appeal to hon. Gentlemen opposite. The people of my area would like to see more subsidy going on housing. If wealthy authorities could he given less subsidy, that would enable more to be given to authorities which are anxious to build more homes.

1.50 a.m.

Mr. Alick Buchanan-Smith (North Angus and Mearns)

I always enjoy listening to the hon. Member for West Ham, North (Mr. Arthur Lewis). He started by chiding this side for questioning the size and growth of housing subsidies and went on to answer his own question. My hon. Friend the Member for Northants, South (Mr. Arthur Jones) is entirely right to raise the question whether we are spending this amount in the best way. We are right to question whether we are getting value for money. My hon. Friend was asking whether we were getting our priorities right, and that is how the hon. Member for West Ham, North, ended.

I want to deal with matters relating to Scotland. I appreciate that the Secretary of State has come to this debate at short notice, for certain reasons.

The Parliamentary Secretary said that housing associations were being treated in these Orders in the same category as local authorities, as they have been in previous years. He said that in England and Wales, they agreed. Does this apply in Scotland: that housing associations are agreeable to being treated in the same way as local authorities?

We know that it is the Government's intention to change the financial year for local authorities for certain specific reasons. We know that the period to which the calculations in the Order are to be related is being altered to suit local authorities. Does this suit the housing associations?

It is important in these arrangements that we should make sure that we look after the interests of the housing associations, although the local authorities are a far greater section.

The Secretary of State has kindly provided a detailed memorandum of how weighting is worked out in relation to the different types of borrowing. In the debate last year, the Minister of State, Scottish Office, said: … we will not necessarily stick to that calculation next year."—[OFFICIAL REPORT, 22nd July, 1968; Vol. 768, c. 218.] I ask this evening whether the weighting we have, which is still the same as last year, is still correct in relation to the current borrowing situation. This point was referred to by the hon. Member for West Ham, North in relation to high interest rates charged at present.

Evidence was given to Sub-Committee B of the Estimates Committee by the City of Glasgow. In reply to question 3374, the City Chamberlain, Mr. Esslemont, said: At the present time, we are paying fantastic prices for money. We are getting very little long term money, and temporary money to keep us going is costing over 9 per cent. In fact, over 10 per cent. was sought at the end of last week for seven day money. That was on 19th May this year. This indicates the high rates of interest local authorities are having to pay for money borrowed short at present. The indication of that reply to the Estimates Committee was that the local authorities were having to rely increasingly on short-term borrowing at this high rate of interest. I would ask the Secretary of State whether local authorities are satisfied that sufficient weight is given to short-term borrowing. From the memorandum I see that in the weighting, one-sixtieth is given to short-term borrowing.

I should like to turn to one or two more general points. The subsidy that we are discussing relates to the excess of loan charges on approved aggregate cost at a rate of interest representative of the borrowings of local authorities over loan charges of the same amount at 4 per cent. I want to refer to the concern felt, particularly in Glasgow, at the procedure in relation to the calculation of this aggregate indicative cost.

It is interesting to note that a memorandum was prepared by the City Architect, Mr. Jury, and was submitted to the Estimates Sub-Committee. He said: What is really most disturbing is the fact that the preparation of cost plans and the collecting of the necessary information to complete the various forms to enable a submission to be made to the Department has resulted in a slowing down of the house building programme in Glasgow. It is particularly alarming if matters of procedure so far as the subsidy arrangements are concerned are holding back house building in Glasgow.

I ask the Secretary of State to bear in mind that in Glasgow there are particular problems. The city architect went on to say in his memorandum that many of these problems are specific to Glasgow. Therefore, I ask the Secretary of State to bear in mind these figures because in Glasgow we have our greatest housing problem.

May I repeat the concern that has been expressed on both sides of the House at the rate at which interest rates are rising? I recognise that in this Order—this was agreed in the parent Act—the basis for interest rates is of an historical nature. They are based on the previous year. When we debated the Measure in Committee we had no idea that when we accepted this historical base, rates of interest would rise so quickly. This is certainly true of local authorities in Glasgow, and when they have to refinance their loans they are having to do so at a rate of 2 per cent. above the rate applicable to the loan which has expired.

I quoted the city chamberlain's evidence that at present Glasgow is paying fantastic prices for money. We are also aware of the rate at which house prices are rising. We debate this Order against this background of rising interest rates and housing costs, and these are a judgment on the Government's mismanagement of the economy.

1.58 a.m.

The Secretary of State for Scotland (Mr. William Ross)

We have had the usual interesting and probing debate, and I congratulate hon. Members who succeeded even in getting a little wide of the subject. I used to be quite good at it myself. I do not blame anyone for making the best of an opportunity. But it is going a bit far for the party opposite to talk about mismanagement of the economy.

That sounds very nice, but I have been here a long time, and so has the hon. Member for Crosby (Mr. Graham Page). I can remember a former Under-Secretary of State, the hon. Member for Glasgow, Hillhead (Mr. Galbraith), talking about the red herring of interest rates, and telling us that interest rates did not matter. I always thought that they did. That is why we have got the kind of subsidy arrangements we have got.

I can assure hon. Members that, in the hon. Member's time, housing costs rose, yet year by year subsidies remained fixed. I believe that it was £24 in England and Wales, and in Scotland it depended upon which side of the formula one fell as to whether it was £12 or £32. I can assure hon. Members that the local authorities took a dim view of that.

Hon. Gentlemen talk of mismanagement of the economy. They know very well that we cannot isolate interest rates in this country from interest rates internationally. We must look at the matter in that light, and the extent to which this has happened has made local authorities appreciate more than ever the inbuilt securities of our subsidy system. I know from my own experience how house building went in Scotland in the years up to 1964, when the Problems were just as bad —

Mr. Arthur Lewis

Worse.

Mr. Ross

—or much worse, as my hon. Friend says, because what ought to have been done had not been done.

The numbers of houses being built by local authorities in Scotland fell year after year, and we reached the nadir on one occasion of about 18,000. It was dreadful. Hon. Members should be careful when they speak about these things.

When we take calculations of cost into account, let us remember that what is subsidised now is not just the cost of the house; we include the cost of the land, roads and sewers, and professional fees. The hon. Member for Northants, South (Mr. Arthur Jones) talked of higher rates of subsidy in particular parts of London. My hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) gave the real reason—the cost of land, when one can get it. What is the option? Are we not to build houses in Notting Hill? That is the area about which the hon. Gentleman was speaking. We must appreciate the problems which arise out of the deprivation there. It would not help the social problem if we stopped building houses. The hon. Gentleman was too facile in his criticism.

The amount of subsidy payments will increase. They have been increasing as more houses are built. It is automatic. There were not many houses built under the 1919 or 1921 Acts, and it was not until the 1924 Act, the Wheatley Act, that we really started building. That increase came in 1925 and 1926. The money was borrowed over 40 years. Obviously, there has been a growing number of houses becoming debt-free, but on those same houses we are spending more today in trying to modernise them These matters must be kept in proper perspective.

The implication of hon. Gentlemen's speeches seems to be that we must change the system. But what change? Are we to go back to a fixed subsidy rate? I am sure that the local authorities would not like it. Incidentally, I can tell my hon. Friend that we consulted the local authorities, and I can tell the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) that we consulted the Scottish branch of the National Federation of Housing Societies, and they accepted their inclusion in Scotland along with the local authorities. There is no solution in going back. We are certainly prepared to embark, and we are pretty well embarked now, on the preliminary work of an examination of housing subsidies. One can never be sure one has the right answer in the face of the problem.

We are delighted to have spelled out from the party opposite what its detailed proposals are. We should like to know how these fit in with the problem in Glasgow. The background to the Scottish Order is the same, and the rate is calculated on the same principles as in England and Wales. As required, I have consulted the recipient authorities, the local authorities, the new town corporations, the Scottish Special Housing Association and the Scottish branch of the National Federation of Housing Societies. They are content.

The local authorities raised one point of substance which I shall explain, but let me first put on record the rates for Scotland in respect of housing completions in 1969–70. They are well above the rates prescribed last year for the 1968–69 completions. For local authorities and housing associations, the rate of 7.94 per cent. is 1.16 per cent. higher than last year's rate of 6.78 per cent. For new town development corporations, the rate of 8.15 per cent. is 1.09 per cent. higher than last year's 7.06 per cent. For the S.S.H.A., the rate of 7.52 per cent. is 0.92 up on last year's 6.6 per cent.

I will not go into the precise calculation—the hon. Gentleman probably knows it as well as I do—but this time the Scottish local authority rate of 7.94 per cent. is marginally above the rate of 7.93 per cent. applicable in England and Wales. The marginal difference results entirely from the different amounts and timing of borrowing and implies no differ- ence of principle. The hon. Gentleman mentioned the change which we are making in the Housing (Scotland) Bill about the financial year and the resultant complications. On the whole, the local authorities are satisfied that this system is better than the one which they have been using.

Is the percentage sufficient? There is this inbuilt guarantee as costs rise, and the local authorities are pleased with this. If local authorities are in urgent need, consideration is given to this in examination of individual cases. We have the urban programme and support is also given to those poorer authorities in the other grants and the rate support grant, which builds up towards full support. My hon. Friend the Member for West Ham, North mentioned the problems of a particular area, but there are special subsidies. Ronan Point does not relate to new building and the Government have made an offer of 40 per cent. towards the cost of remedial works, but this is outside the scope of the Order.

My hon. Friend also mentioned the representative rate used in the calculation of the subsidy. It is what the Act requires, and the reasons are generally accepted. One is the administrative impracticability of trying to get the actual interest rate available for the year, which probably would not be relevant anyway in relation to the houses which are being completed in the year. There is more relevance in what we have been doing the preceding year. No-one has brought forward a practical alternative, and we have been open to suggestions.

The hon. Member for Crosby asked whether the local authorities had been asked whether they had anything to say about the method of calculation. The method was agreed with them at the beginning and the details are agreed at the beginning of each year. On the question of Glasgow and of the indicative cost procedures slowing down the programme, this is something which was introduced earlier this year for the first time. If something new tends to be complicated, as here, there will tend to be a slowing down at the start.

We are doing all that we can to help, and have told the corporation that we will help in individual cases, but cost planning is an essential part of the housing operations of any authority. With the kind of subsidy related to cost, which we are now paying, there must be some control on cost. This is why we have gone over to this system. It is in the interests of the taxpayer. It goes far beyond just keeping control of the level of subsidies. It is a process of considering the economics of development on particular sites. An example is a site in Glasgow. I do not want to instance one or two particular cases, but I have been fairly generous in respect of Glasgow's costs, when the hon. Gentleman might have asked us on other occasions why we allowed such costs to be supported by subsidy. We have to think of the taxpayer, the ratepayer and the actual needs.

There was a discussion with Glasgow on the form of the subsidy. Glasgow has suggested that there should be a new form of pool subsidy based on a notional deficit on housing revenue accounts. It admitted it had not worked it out. We are always willing to listen to suggestions, and we are associated with the Ministry in a long-term look at the matter.

Taking all in all and bearing in mind exactly what the position now is and what the position of local authorities under the Order is, with, for example, a subsidisable cost of £4,000 per house completed in 1969–70 the subsidy will be £144 8s. for local authorities, £152 8s. for the new towns and £128 for the S.S.H.A. Under the hon. Gentleman's system, at most it would have been £32 per house. He can imagine what would have happened if we reverted to that system. The houses would not have been built. If they had been, the rents would have been prohibitive and people who needed houses would not have been able to afford them or the rates would have been very much higher than they are. This demonstrates the advantage of the present system which gives an authority a subsidy which reflects building costs and costs of borrowing for building.

I commend the Order, and am sorry if I have not been able to deal with all the points at fairly short notice.

Question put and agreed to.

Resolved, That the Housing Subsidies (Representative Rates of Interest) Order 1969, a draft of which was laid before this House on 9th July, be approved.

Housing Subsidies (Representative Rates of Interest) (Scotland) Order 1969 [draft laid before the House 11th July], approved.—[Mr. Ross.]