§ Mr. Peter Doig (Dundee, West)
I beg to move Amendment No. 87, in page 82, line 42, leave out from beginning to 'the' in line 43.
I propose here to delete the wordsthe arrears of rent which have been written off in that year as irrecoverableI wish to take this course because such a provision has nothing to do with the housing revenue account, bearing in mind that this account's deficit will determine the amount of rent that council tenants will have to pay.
It must be borne in mind that this is a variable item. In some years, such as this one of very high unemployment, there can be large amounts of rent arrears. Officials or other members of the local authority may decide to write off as unlikely to be recovered many of 352 these sums at the end of the year. First we have debts that accumulate as a result of unpaid rents. Then it is at the discretion of the elected members of the local authority whether they should be written off.
Some officials feel that debts should be written off if in their view they are unlikely to be revovered. Others take the view that the debts should be left in abeyance for a number of years and every possible attempt made to recover the money. The sum therefore fluctuates from year to year and the individuals who decide whether or when to write them off also vary.
Elected councillors often act on the advice of officials of the corporation. An official may decide to hold on to debts for a number of years, but he may retire and the official taking his place may decide to clear the books of all old debts and start afresh. A substantial sum can be written off in this way and if this sum is to increase the housing revenue deficit in any one year, because the housing revenue account must balance under this legislation, larger rent increases will have to take place. In other words there will be rent increases which would not otherwise occur.
It sometimes happens—this happens in my constituency—that a number of houses remain unlet for some time. This uncollected money could increase the housing revenue deficit considerably, which makes all the more reason for deleting this provision when calculating the housing revenue account. The Minister can best remove this anomaly by accepting the Amendment and so prevent tenants from suffering unnecessary rent increases.
§ Mr. Younger
I appreciate the problem which the hon. Gentleman has outlined. It exercises the minds of local authorities from time to time, but I do not entirely agree with his idea of the best way of dealing with it.
Paragraph (2)(d) of the Schedule provides that written-off arrears of rent and income lost as a result of unlet property should be treated as an item of expenditure on the housing revenue account. We consider that these costs are legitimately part and parcel of a local authority's costs of managing its housing stock and should therefore be borne in the normal 353 way on the housing revenue account, which is where all the normal costs of managing the stock of houses that the local authority holds are carried. What the hon. Member for Dundee, West (Mr. Doig) is suggesting would be a change not merely in the Bill but also in current practice, where this is a normal charge on the housing revenue account.
There are, however, two other factors which the hon. Gentleman might like to bear in mind which will be changed by the Bill and which I believe make a stronger case for leaving the provision as it is. The first is that having a universal national rent rebate scheme will, by protecting tenants more comprehensively over the country as a whole, generally speaking make it less likely to have arrears of rents as a result of people being unable to pay. This will never be eliminated. I merely say that it will be less likely than before. That is one factor which leads one to suggest that the present system of carrying this on the housing revenue account is reasonable.
The second new factor is that as the costs of these arrears of rent or "voids", as they are known, are borne on the housing revenue account as part of the normal management costs of managing the authority's stock of houses, they will be eligible for housing expenditure subsidy. Thus, to the extent that an authority may have a higher number of arrears of rents or empty houses than it would like to have, it will increase the increase of expenses on the housing revenue account, which will tend to raise its costs in that year compared with the previous year over the threshold, and this will bring it into the housing expenditure subsidy.
Therefore, whereas at present the cost of voids is borne entirely on the housing revenue account and, in so far as that is passed on as a deficit to the rate fund, entirely by the ratepayers, in future it will at least for the first time be subsidised to some extent, assuming that the authority concerned qualifies for housing expenditure subsidy.
§ Mr. James Dempsey (Coatbridge and Airdrie)
Would the hon. Gentleman agree that at present irrecoverable arrears of rent are borne not only by the tenant but by the tenant plus the ratepayer but that under the new system, as the tenant must meet the whole cost 354 for the year, rent arrears will become fully borne by the rent payer, the tenant? Is that really fair?
§ 8.30 p.m.
§ Mr. Younger
I see the point the hon. Gentleman is making but it is not quite correct as he puts it. The present position is that with the cost of this landing as it does on the housing revenue account, one can argue that it falls on the other tenants, because their rents have to be geared to some extent at any rate to correspond to the burdens on the housing revenue account; but one can also argue that in so far as all housing revenue accounts are supported by the rates, the cost falls on ratepayers. It all depends on the portion to which one assigns it.
But we can say this about the present system. All these costs to which we are referring are borne by the inhabitants of the local authority, either ratepayers or rent payers, and in some cases both. In future that will not be so because, for the first time, at least some of the cost will be subsidised by the Government, when expenditure rises by over £6 per house in one year compared with the previous year.
With respect to the hon. Member for Dundee, West, I believe that the right way would be to leave the costs of voids as they have always been, a charge on the housing revenue account. We should also bear in mind that the rent rebate scheme will make it less likely for needy tenants to fall into arrears of rent and that, for the first time, we have subsidisation by the Government paying some part of the cost of voids.
§ Mr. Eadie
I have been following the hon. Gentleman's argument about what the Government are doing. On the rent rebate scheme, 25 per cent. is being met by the general body of ratepayers. But the hon. Gentleman has the figures available and he should confess that about £6½ million will have to be met by ratepayers, a sum which was previously met by the Exchequer in payments to people receiving supplementary pensions. That £6½million is taken from the general ratepayer. How can the hon. Gentleman talk about this as a gift from the Exchequer when that sum is being taken from ratepayers and is a sum that they did not pay previously?
§ Mr. Younger
Yes, the hon. Gentleman is quite correct in that particular point. I could also add another factor which points in the opposite direction but which is again not strictly relevant, and that is that at present the entire cost of rent rebates is borne by local authority ratepayers or tenants. In future the Government will pay at least 75 per cent. The hon. Gentleman is correct in saying that 25 per cent. is being carried by ratepayers. That is true and it is a valid point, but it is not the point being argued here, which is that the cost of voids and rent arrears should be transferred for the first time from the housing revenue account to the ratepayer directly. I am arguing that although I appreciate that argument, it is much better to leave it with the housing revenue account in view of the two factors I have outlined.
§ Mr. Doig
Does the Minister recall that part of the Bill states that the housing revenue account has to be balanced as nearly as possible, neither too much nor too little, neither profit nor loss. He agreed with this earlier. Can he visualise a year in which a great many housing debts are written off? Presuming—though this is unlikely—that the Government can stabilise the cost of living, rent, and so on, he will be faced with a situation of raising rent one year because of this extraneous item but reducing it the following year once the extraneous item has disappeared.
§ Mr. Younger
That could happen but it is a somewhat unreal example, as to have the effect described there would have to be no other factors involved. But in the very extraordinary situation that the hon. Gentleman has outlined, that is what could happen. In general, in almost all authorities there would be all sorts of other factors which would have this effect. If an authority faced an unusually high amount of rent arrears, for all sorts of reasons, such as a high level of unemployment, it would fall as an increased burden on the housing revenue account, and for the first time, in so far as it represents an increase on the previous year's expenditure, it would be subsidisable through the housing expenditure subsidy. To that extent the local authority will get more help than it does now.
§ Mr. Strang
The Under-Secretary said earlier that the number of those in arrear 356 is likely to be reduced because of the rent rebate scheme. He then accepted that the amount of arrears will vary from area to area because, for instance, of high unemployment in areas such as the West of Scotland, or Clydebank. For months we have hammered away in an attempt to convince the Government that it is nonsense to have a uniform rebate scheme. The Under-Secretary has implied that it would be sensible to give local authorities freedom to have a rent rebate scheme appropriate to the level of unemployment in their areas.
§ Mr. Younger
That shows that one should not give examples in one's argument. The background to what the hon. Gentleman says is correct, namely, that the universal national rent rebate scheme will—which it does not do now, because there is not one—protect an area which suddenly comes into a high level of unemployment through no fault of its own. The universal national rent rebate scheme will protect tenants from the cost of the rebate falling on local authority people either as ratepayers or tenants. Now the major part of the cost will fall on the Government in the form of at least three-quarters of the cost of the rent rebate scheme.
My example was probably not a good one. I amend it and say that, if a local authority area has an unusually high number of rent arrears for any particular reason in a year, it will in future have the protection of the rent rebate scheme; and in so far as it represents an increased cost on the housing revenue account the authority will have the help of the housing expenditure subsidy.
I hope that the House will not accept the Amendment, although I appreciate the hon. Gentleman's reasons for tabling it.
§ Mr. Dempsey
I follow the Minister's arguments, but to what extent has he assembled his facts accurately? Only a few weeks ago I received a long circular containing details of rent owed by tenants to Coatbridge Town Council. The total is the highest known in the history of the town, although a rent rebate scheme is in operation and even with supplementary payments on social security to those who are unfortunately unemployed. Unfortunately this state of affairs applies throughout local authorities in the West of Scotland.
357 If the tenant is to be asked to pay not only his own rent but, in addition, the annual Government subsidy and the annual rate burden, is it not unfair that he should be asked to pay the arrears burden of other people? The tenant does not do that now. It is wrong to say that when it is a charge on the housing account the tenant pays that, because at present the tenant gets the rate subsidy and the Government subsidy. When the Bill is enacted, there will be no rates contribution and no subsidy contribution. In addition, the tenant is to be asked to pay the irrecoverable rent arrears which have arisen as a result of defaulting tenants.
§ Mr. Dempsey
I am coming to the rateable contribution. The Minister has made great play of the fact that Government will be paying 75 per cent. and the local authority only 25 per cent. of the rent rebates cost. He has overlooked the fact that town and county councils will also bear the cost of administration of the rebate scheme. Nobody has yet been able to assess what the costs of administration will be. No town or county clerk to whom I have spoken has been able to hazard a guess. Thus local authorities will pay 25 per cent. of the cost plus the administrative cost, which will be considerable if the appropriate individuals are to take advantage of the scheme.
Apart from the valid point raised by my hon. Friend the Member for Midlothian (Mr. Eadie), wages, salaries and the cost of materials will continue to rise year after year. This will be another burden on the shoulders of ratepayers. In all the circumstances it is unfair that tenants who are about to pay rent plus Government subsidy plus rateable contribution on the house are to be asked to pay, in addition, the rents of defaulting tenants.
§ Mr. Ross
This is a simple point and I am surprised that the Government are seized of it. The background to it is that there are a number of people who cannot and who do not pay their rents and whose rents must be written off as irrecoverable. The background to the 358 Bill is that rents are rising. There are about 1 million local authority houses in Scotland. By the end of the next financial year rents will have risen on average by about £50 a year. Therefore, an extra £50 million must be found somehow. The rents are going up by that amount. The chances are that if there are irrecoverable debts they will be very much greater.
Despite what the hon. Gentleman says about the national rent rebate scheme, he is flying in the face of the facts. Most local authority houses in Scotland are already covered by rebate schemes; the figure is about 95 per cent. Some of them are even more generous than the Government's proposed scheme. Therefore, the hon. Gentleman used a very poor argument.
Looking at the calculation of the rents, it is clear that the rent must cover the housing revenue account; it must make up any deficit year to year. The tenants who have been paying their rent will have responsibility, under the law, for making up annually the cost of the debts. That is basic to the Bill. Is it fair? The Minister says that people will be relieved to a certain extent simply because of the rebate scheme. Twenty-five per cent. of the rebate scheme, together with the whole of the administration costs, will be paid by the ratepayer. The present burden—and someone suggested that £6¼ million is borne by the taxpayer through the cost of the social services—will be transferred to the ratepayer.
I wish that we had been able to deal with all these points, but we have been denied that opportunity. We have been working under a guillotine. We have not debated the question of the housing expenditure subsidy. It does not begin to work until after an expenditure of £6 per house or any other figure which the Secretary of State may decide to introduce later. I wish that we had been able to debate the rebate scheme, which will affect a tremendous number of people in Scotland. Not one of our Amendments on it has been called because of the guillotine.
In view of the size of the rent increases, people will still be paying higher rents even with the rebate scheme. That applies equally to private tenants, although we are not concerned with them 359 in this debate. I am sure that the rent arrears which must be written off as irrecoverable will be greater, which means that the burden of the increase on those who live in local authority houses will be greater. This is basically unfair for the simple reason that housing, if we construe it as part of commercial enterprise of a local authority, is run for the whole community. If the burden is not to be borne by the taxpayer, it should be borne by the general body of ratepayers and not by a particular section.
That is our basic point. I do not wish to labour it because we are pressed for time. I wished that we had time to vote, but we have not. If the Minister has a sudden access of wisdom and decides to accept our Amendment, which he could do without upsetting the apple cart of the Scottish Office—and, after what the Secretary of State said, he would not even notice it—I can assure him that it will be welcome on this side of the House and it will make an improvement in the Bill from the point of view of equity.
§ Mr. Younger
With leave, may I say that I cannot change my view. Neither the right hon. Member for Kilmarnock (Mr. Ross) nor the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) is right in saying that the rent payer will have to carry not only the cost caused by people who do not pay their rent but the Government subsidy and that there will be no Government contribution. There will be a very considerable Government contribution. There will be a Government contribution on the housing expenditure subsidy for all local authorities whose costs increase by over £6 per house per year in the housing revenue account. Virtually all authorities will qualify for this subsidy. It is therefore not true to say that the rent payer will have to take over the Government contribution. We know from the Bill that the Government contribution will increase and, in particular, it will help ratepayers through the housing expenditure subsidy.
I can appreciate the arguments, but I do not think it would be wise to change the procedure. It is much better to leave the matter as it always has been; namely, a charge on the housing revenue 360 account. I ask the House not to accept the Amendment.
§ Amendment negatived.