§ 3.46 p.m.
§ Mr. Hugh Jenkins (Putney)
I wish to raise the subject of the consequences of Government policy on the rents of privately-owned dwellings. I apologise to the Minister for the fact that the subject of the debate has been changed, but I did my best to give him as much notice as possible so that he should not 1092 come here without being fully informed of the nature of what I had to say. I say that as a preliminary because I shall be severely critical of Government policy —there are times when it is one's duty to be severely critical, and this is one.
I draw attention to the way in which property companies are using the Government's rent legislation to exploit their tenants. The examples that I shall take are from my constituency, though what is happening is widespread, as is well known, certainly all over London, and probably other great cities, too.
One of the most unscrupulous—and that is the word I must use—of the companies exploiting the present situation is the Freshwater company. Among many others it owns blocks of flats in my constituency. One example is the block next to that in which I live, University Mansions in the Lower Richmond Road.
The company uses rent officers as its agents as a means of extortion, so that the officials willy-nilly become, as it were legalised Rachmans. As they have the law on their side, they have no need of thugs or dogs to intimidate the tenants.
In case that is thought to be an exaggeration, I should like to point out that there is no doubt that the tenants are intimidated. I take an example from this block. It is an oldish block and many elderly people live there, paying rents that have rapidly increased from the small rents that they have paid for 20, 30, or even 40 years.
The lift in one of these blocks was out of order for six months. For four months it was locked so that it could not be used, and for six months an 84-year-old lady who lived in a top floor flat had to walk up and down 100 steps. That is not only intimidation; it is torture. That is an example of how people are being "encouraged" to vacate premises so that they may be let to people able to pay bigger rents.
I take as another example the case of 78-year-old Mr. Thick of No. 7, University Mansions. He has lived there for more than a quarter of a century. His rent has been quadrupled, from £2 to £8 a week. Freshwaters fixed this with the full co-operation of public servants by the trick of getting one flat empty, doing it up and letting it to four men. A rent of £600—the market rent—was agreed 1093 and accepted by the rent officers as being the fair rent. In other words, the market rent has now become accepted as the fair rent, and that is precisely the opposite of the intention of my right hon. Friend the Member for Coventry, East (Mr. Crossman) when he introduced his Bill in 1965.
§ The Under-Secretary of State for the Environment (Mr. Reginald Eyre)
Did not the hon. Gentleman say that the tenant to whom he referred was paying a rent of £8 a week?
§ Mr. Hugh Jenkins
Yes, I did. I see the hon. Gentleman's point, and I will come to it in a moment. The £600 rent was for a better flat than that presently occupied by Mr. Thick. But it set the standard, in that £600 has become the standard rent for flats in that block. This practice is being adopted widely. A single flat is accepted as the standard and all flats in that block and in the area are set against that standard.
Mr. Thick, a spirited and intelligent man, appealed to the committee against his assessment. It seems to me that the rent officers betrayed the brief under which they were appointed and became the strong-arm men of the extortionists by co-operating with them. In this case the appeal committee, which is supposed to protect tenants, did no such thing. It, too, became agents of this near-Rachmanism.
Alone, my constituent, with no knowledge of what was to happen, faced another battery of Freshwater stooges, this time a squad of four lawyers—people who apparently can be paid to do wrong as well as right. My constituent was given no warning that he would be faced with legal opposition. If he had been he would have applied for legal assistance.
Mr. Thick went before the committee. The opposing team of lawyers placed upon the table a massive document of appeal setting out their case. My constituent had no warning, and the appeal committee made no attempt to protect him. Instead, it allowed him—a man of 78—to be exposed to this without any legal protection.
As I say, Mr. Thick is a very intelligent man. He was intelligent enough 1094 to know that he was at a grave disadvantage in appearing against four lawyers. He tried to get the matter deferred. The appeal committee refused his request. At the end of the hearing, it increased my constituent's rent to £440 a year. If that is not acting as the agent of extortionists, I should like to know what is. By its action the committee volunteered to assist in the process that is developing all over London, and I have no doubt that the committee members went home feeling that they had done a good day's work in sending my constituent, for the first time in his life, to a local body with a view to trying to get some help to meet his rent.
The rent will not go up immediately to £8-odd a week. It goes up in stages, and has now reached £4. Since my constituent is 78 years old, his income is hardly likely to increase. It means that he will get further and further into public debt, as he sees it.
The Act ought to have a new Title:A Measure for the further improverishment of the poor by the wealthy.It is no good the Minister's telling me that this system was invented by my right hon. Friend the Member for Coventry, East. Some of us told my right hon. Friend at the time that this bright notion of his would prove to be a stinker. That is just what it has turned out to be. But who can doubt that, if my right hon. Friend were still in office today, he would have seen and corrected his error? This Government's sin is that they appear to condone and encourage the exploitation which has come about as a result of my right hon. Friend's foolish error. My right hon. Friend no doubt thought that his measure would bring down rents. In fact, he said so at the time. However, some of us doubted it. When the contrary is proved—when the Act is proved to be increasing rents and not reducing them—to fail to take action and to allow it to continue is worse than error. Indeed, it is condonation.
Freshwaters and others have exploited the Act, and the Government have done nothing. They have expressed regret, but the exploitation goes on. They know that rent officers have been bribed—no doubt with bottles of whisky to drown their twinge of conscience at having exploited the poor in a way that even Rachman 1095 would have regarded as heartless. A great deal of fuss has been made about this scandal. But what will be done about it?
I have now finished the rough-words part of what I have to say. I think that these rough words are necessary. When one sees exploitation of constituents on this scale, whatever the excuse or reason, one has a duty to be rough on their behalf. Whether the landlords in these blocks of flats—many of them have changed hands recently—are called First National, Berger, Daejan, or whatever it is, makes no difference.
I hope that we are seeing the death throes of private landlordism. However, in this process it is my constituents and not the landlords who are getting thrashed. My constituents need the protection of the law, and without further delay. What is more, they need it retrospectively, so that some of the grave injustices done in the name of the law, such as that to Mr. Thick, can be rectified.
I hope that the Wandsworth Borough Council and other authorities—and perhaps the GLC—will expropriate the expropriators by compulsory purchase. Will the Minister agree to a compulsory purchase order in circumstances when a block contains only one or two unoccupied flats? Will he tell us whether, if Wandsworth Borough Council applies for a compulsory purchase order to acquire University Mansions, the Secretary of State will grant it? If he cannot commit himself completely, will he say whether there is a good chance that he will grant a compulsory purchase order to the council?
What price, then, should the Wandsworth Borough Council have to pay, assuming the Minister agrees? Is it to pay Freshwaters and others a further reward for their Rachmanism, and thus be forced to compound it themselves? If the council pays a price reflecting the new unfair rents, it will have to continue them. It will not be able, except by a heavy specialised subsidy, to reduce the rents if the price for the block is the current valuation. What will the Minister do about that?
I suggest that the price should not reflect scarcity value any more than rents were intended to reflect scarcity value. There should be a recognition of the 1096 undesirability of scarcity value not only in the ownership of property but in the rental value. If we do not recognise the scarcity value element in the price of property as a whole, it becomes hard to reflect it in the long run in the rental value of the property.
I suggest that the Government should take a fresh look at this subject. The price for this property should be based on its value in 1965, or 1970 at the latest, plus an addition to allow for the increase in the cost of living. That would be a reasonable accretion instead of a Rachmanised accretion.
Ways must be found for local authorities to purchase. I hope that the Greater London Council will find such ways—that the beneficent management of my wife, who is Chairman of the Greater London Council Housing Management Committee, will be extended over wide areas of London and that that management will be operated in the interests of the tenants and not the landlords. If local authorities cannot do this the companies will continue the process that they have already started, which is almost equally worrying, of avoiding the odium——
§ It being Four o'clock, the motion for the Adjournment of the House lapsed, without Question put.
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hawkins.]
§ Mr. Jenkins
I was saying that companies are beginning to regard the position of landlord as one which has paid off handsomely in the past but is no longer paying off quite so handsomely. Landlords are beginning to adopt the practice of selling flats to tenants, whom they continue to exploit by imposing exorbitant service charges, over which there is no control—not even "phony" control. The long-term lease is sold to the tenant, service charges are paid, and the landlord derives the benefit of those service charges—which are greatly in excess of the cost of the services—without attracting the odium of being an exploiter of tenants.
Mr. Thick's rent book and the record of the rent assessment committee's hearing tell a grisly tale, in which all concerned appear to have conspired to defraud my constituent by charging him a 1097 market rent and then calling it a fair rent. It is grossly unfair, and if I were a member of the Church I think I would call it sinful. In his rent book, Mr. Thick's new landlords are described as DAEJAN Properties. That is one of the many companies owned by the Freshwater family, who have acquired a personal family income beyond the wildest dreams of Rachman. It is over £500,000 a year. This one company of DAEJAN made a total profit of nearly £2 million in 1970.
All this money comes from the pockets of the poor and medium-income people. My constituent can apply to the State or to the local authority for help. The local authority is already acting as the medium of State help. Why should my constituent be forced to do this after 78 years without asking anyone for anything? It is criminal. Wandsworth Borough Council has agreed to help with the aid of the provisions laid down by the Government. Even with a rent allowance of £1.91 my constituent's income will still be below subsistence level.
The Chairman of DAEJAN is the Earl of Stradbroke. What does he think about it? A member of the board is Mr. D. M. Mountain, who is the managing director of the Eagle Star Insurance Company—the main backer of the whole operation. The original capital was found by Eagle Star, and it continues to be, because further profit is made from the estate by having mortgages on most of the properties.
The Eagle Star gave £5,000 to the Conservative Party last year. To be allowed to fleece the public at this level it seems to be fairly cheap. To be allowed to go on doing it at public expense seems to be worth more than £5,000. I think that a contribution of at least £50,000 would be called for to show the company's full appreciation to the Conservative Party for its failure to take action.
The company has had good value for money and it would be right for the Minister to tell us that he thinks the time has come for him to take action to bring this exploitation to an end. I talk of "public expense" because it is not my constituents and other Londoners whom Wandsworth Borough Council and the Social Security office are financing. 1098 The money is going into the pockets of Mr. Freshwater and his friends. My right hon. Friend's Act has been turned into a gigantic dole, making the rich richer at the expense of the community and at the cost and humiliation of the poor. The State is now financing the Freshwater operation by finding part of the money that poor constituents have to pay.
The latest news is that Freshwater has set up its own charitable body to help those that it has exploited, with the State's connivance, to such a degree that even the company is ashamed. The robbers and thieves have turned Samaritans, but it is a bit late.
I should like to believe that the company really did not realise the consequences of its actions in terms of human misery and that, having made its pile, it is now willing to get out of the property business altogether. I am close to Wandsworth Borough Council and I know that if the company went to the council, the council would be willing to buy this block on the free market if the Minister would now allow a compulsory purchase order. But at what price? If there is reality in Freshwater's change of heart, let it sell at a reasonable price. The same applies to as many other blocks as the present property owners are prepared to sell.
What will be done? This rather bare afternoon might be an opportunity for a startling pronouncement, which would come appropriately from the Under-Secretary, who I am sure does his best within the confines of his responsibility. It would be pleasant if he could announce that a real improvement will be made and that there will be no more talk. This has been going on year after year and this announcement will reward the gentlemen of the Press who are not normally here at 4.30 p.m. on a Friday.
More is needed than just a charity action, or a further dole. Further action is needed against the property owners—against Freshwater and their like—because not all property owners have seen the light sufficiently to set up their own charity organisation, as Freshwater has done.
I doubt whether capitalism has an attractive face. I have seen only one or two glimpses of it acting beneficently. It has happened in the theatre, but it is rare. I am surprised that the Prime 1099 Minister was astonished to discover that the face of capitalism was unattractive. I could have told him that some time ago. It has a very greedy face. The face of the property company is particularly ugly, and might give shudders to members of the Monday Club.
If the Minister decided to take action here, he would be pleasing not just Labour Members and the tenants concerned but also his own hon. Friends, who must be as concerned as we are at some of the practical consequences of the use of this Act as its authors never intended it to be used and as I should have thought the present Government would not want it to continue to be used.
I feel that the time has come for us to admit that, whatever may be said of the rôle of the landlord, the rôle of the large-scale property owners is one over which we should place a very large question mark. If they are to continue to be allowed to operate, they should not be allowed to operate on existing terms I sincerely hope that we shall hear something constructive from the hon. Gentleman.
§ 4.10 p.m.
§ The Under-Secretary of State for the Environment (Mr. Reginald Eyre)
I appreciate the prior notice which the hon. Member for Putney (Mr. Hugh Jenkins) gave me. The general answer to the question implied by the hon. Gentleman is that since Government policy for privately rented dwellings has been to uphold and support the fair rent system introduced by the Labour Government, the effect of the policy of this Government has been to keep privately rented dwellings under the control of the rent officer and the rent assessment committee.
Indeed, the Government have extended the fair rent system by introducing a phased programme of decontrol of those properties which have had their rents controlled since 1957, and by bringing a number of higher rateable value tenancies within the fair rent system. The introduction of rent allowances has given for the first time generous and much-needed subsidies to a very large number of private tenants. In his speech, however, the hon. Member has shown that his interest in initiating the debate has 1100 been to talk about the operation of rent officers and rent assessment committees, and the rents which they determine, as well as the broader subject he embarked upon.
I must point out at once in the clearest possible terms that the operation of the rent officers and rent assessment committees is entirely independent of central or of local government. Once a rent officer, or member of a rent assessment panel, from among whom the members of rent assessment committees are chosen, has been appointed, he operates as an independent statutory officer whose conduct is governed by Act of Parliament. He is answerable for the legality of his decisions only to the courts. There is no scope in individual cases for an administrative review of the decision either of a rent officer or of a rent assessment committee.
Having said that, I should add with equal emphasis that the Government fully endorse the way in which rent officers and rent assessment committees carry out their duties, and reject completely any suggestion, such as those that have been made by the hon. Member, that the operation of the system is biased against tenants or that it is resulting in the registration of rents which approach market rents.
When one considers the pressure on on accommodation in London especially at the moment, and the rapid increase in property values which has taken place in the last year or two, the achievement of the rent officers and rent assessment committees operating in London in maintaining the balance of interests of landlords and tenants as they are required to do by the statutes has been considerable. They deserve our commendation rather than our criticism.
§ Mr. Jenkins
Would not the hon. Gentleman at least admit that if an Act intended to hold rents down has had instead the effect of vastly increasing them, there is a case for an inquiry into how the officers and the committees are carrying out their duties?
§ Mr. Eyre
I shall come to the very fair way in which they are carrying out their duties.
I think it would be helpful at this stage if I were to read subsections (1) and 1101 (2) of Section 46 of the Rent Act 1968. This section sets out what is to be taken into account when a fair rent is being determined, either by a rent officer or by a rent assessment committee. It has proved a responsible and workable formulation. Subsection (1) says:In determining for the purposes of this part of this Act what rent is or would be a fair rent under a regulated tenancy of a dwelling house, regard shall be had subject to the following provisions of this section, to all the circumstances (other than personal circumstances) and in particular to the age, character and locality of the dwelling house and to its state of repair.Subsection (2) says:For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in the locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms.It is subsection (2) which excludes scarcity value from the determination of a fair rent. It is the effect of this subsection which has been questioned by the hon. Member. He has suggested that this subsection has not had the effect of keeping rents below market rent level.
I can think of two very clear and impressive pieces of evidence which make it absolutely certain that the scarcity element which is discounted in fair rent calculations is considerable. The first such piece of evidence is simply the figures for fair rents which have been registered on an application three years after the registration of an earlier fair rent, as the Statutes provide. Fair rents which were registered in these circumstances in the first three months of 1973 were on average 17 per cent. higher than those which had been registered for the same dwellings three years previously. This shows an increase of a little over 5 per cent. per year compound.
When one considers that not only property values but also landlords' costs for maintenance and decoration have risen very considerably during those same three years, it becomes perfectly clear that no great change in the pattern of these rents has taken place. Indeed, when one considers that a market rent would represent a reasonable return of the sale value of a property, it becomes clear that fair rents are representing a 1102 much lower rate of return than they were doing three years ago. This conclusion is inescapable from the evidence.
The other piece of evidence I would cite is of a more direct kind. During the passage through Parliament of the Counter-Inflation Act, as the hon. Member will remember, the Government made an amendment the effect of which was to bring more tenancies within the scope of the fair rent system. The Government did this because they became convinced that the hardship which was being suffered by some tenants who were forced either to leave their flats and houses in London at the end of their leases or to pay market rents which—this is the important point—were generally around twice what the fair rent level for such property was likely to be, outweighed the likely adverse affects on the supply of such accommodation which would result from an extension of the Rent Act. In other words, for properties of almost identical rateable values, fair rents of around £800 to £1,000—I am referring to the higher rented tenancies—corresponded to market rents of £1,600 to £2,000.
§ Mr. Jenkins
If the Under-Secretary believes this to be so, he could have no objection to an examination. My information is precisely to the contrary. The facts which support my information are that whereas the rent tribunals were originally used Quite a lot by tenants, nowadays they are used almost exclusively by landlords for the purpose of getting an increase in rent.
On a point of fact, I do not recall that I supported my Government on the Bill to which the hon. Gentleman referred. Even if I did, it would be no excuse for the Under-Secretary not changing his mind.
§ Mr. Eyre
This evidence is publicly available and is recorded in the report of the work of the rent assessment committees. The evidence in support of everything that I am saying is available to the public.
All tenants of regulated tenancies pay the same rate if it has been set by the rent officer. Therefore, it is not true to suggest, as the hon. Gentleman said, that poor tenants are moved out and replaced by richer ones. The protection operates.
When the hon. Gentleman's right hon. Friend was introducing the Act which 1103 is the basis of fair rents he did not make any provision at all for the rent allowances that are now there. This Government have done a great social justice in making rent allowances available in cases where tenants need help.
From what the hon. Gentleman said I believe that the tenant of the flat to which he referred is receiving a rent allowance. Under the increased needs allowance which was introduced in April I am happy to think that this old gentleman will get specially generous help. The case cited by the hon. Gentleman appears to be a decontrol case.
The hon. Gentleman referred to rents which had been paid for 20, 30 or 40 years and was sufficiently fair as to acknowledge that those are very low rents. There can be no justification for such rents being kept at the same level since 1957 as they have been in the case of controlled tenancies. That is why they are moving on to regulated tenancies.
I stress that on the basis of 1957 rent values it would be impossible to maintain these properties in good condition. It would be impossible to maintain the lift to which the hon. Gentleman referred. The only way in which these properties can be kept in order, not only for the present generation of tenants but for the benefit of those who come in the future, is to see that resources are channelled to keeping these properties maintained properly and in good order. It would be irresponsible of the Government to take any other view.
The hon. Gentleman made references to "well-known" case of bribery of rent officers. No such case has ever been proved, and I must strongly reject his allegation. The hon. Gentleman referred to tenants in a block and suggested that if the local authority took over the block there would be a change, but again the tenants would be paying fair rents which would be the same basis, for the same basis applies to tenancies in the public and the private sector. It is necessary that this should be so in order to preserve our housing stock, to see that it is available for those who come after the present line of tenants. The level of these fair rents is very carefully determined so that scarcity values are excluded.
Having rejected firmly the general allegations of abuse made by the hon. 1104 Gentleman on such inadequate grounds. may I go on to say that the decline in the supply of rented accommodation is yet another sign that fair rents represent much less than the market rate of return on the value of privately rented property It is common knowledge that the private rented sector is declining at the rate of some 150,000 dwellings a year, to a great extent as a result of the control of rents. The Government have said that they do not feel that it is realistic to attempt to halt this decline because the gap between fair rents and market rents has now become so large. This again provides the clearest refutation for the suggestions made by the hon. Member that fair rents are now approaching market rents.
In his speech the hon. Member placed some emphasis on the way in which rent officers and rent assessment committees operate under the Act. He suggested that in some ways there might even be something amounting to a conspiracy between committee members and property owners. The House should know that each rent assessment committee consists of a lawyer, a surveyor and/or a layman, and that each committee is appointed specially to deal with a particular case. Amongst other things, this ensures that the standards applied by committees are constant throughout each panel, and that fair rent levels are consistent for the same type of property. This consistency is generally furthered by having rent assessment committees to deal with the cases in which there is an appeal against the findings of a rent officer, though rent officers themselves pay particular attention to comparable cases when they are determining fair rents, and it is very much to the point that on average rent officer and rent assessment committee determinations diverge by only some 5 per cent. in respect of the 4 per cent. of cases which go to appeal.
There have, from time to time, been allegations that unduly high rents have been registered for property belonging to a specific landlord, but the evidence of the rent register has never borne out any of these allegations. The rent register, which contains all the existing fair rents for a particular registration area is open to public inspection. I stress this fact to the hon. Gentleman. Not only would any attempt to set a particular group of rents at artificially high levels involve the 1105 attempted corruption of a committee whose composition is unknown until the day on which it first meets if such a conspiracy had been successful, its results would have been available for all to see.
These are the reasons which lead me to rebut so strongly the allegations of the hon. Gentleman.
§ Mr. Eyre
I was going on to say that I will, of course, look at this particular case in detail and write to the hon. Gentleman about it, but on the basis of this case, he has raised such a fantasy of allegations that I must say strongly that there is no evidence in support of his allegations. That is why I have gone to some length in explaining the system which applies and the public safeguards which operate.
It has been suggested that landlords have been enabled to achieve very high rent increases because they can afford to be represented professionally at hearings before rent assessment committees whereas tenants are unable to do so. Once again, I can only say that there is no evidence to bear this out. There are obvious advantages in having a case presented professionally, not least for the committee itself, which is helped by having the evidence presented to it as clearly as possible. At the same time, I know that committees, and rent officers, too, go to great lengths to assist tenants and, indeed, landlords who are not represented professionally to present their cases as well as possible.
1106 The hon. Member has referred to the Freshwater group of companies. It is no part of my responsibility to defend this group or its business interests, but in fairness, I can only tell the House that on no occasion have allegations of illegal or sharp practices against it been supported by evidence on investigation.
It is true also that this group of companies is almost alone in providing a large number of homes to let at fair rents —I believe, about 40,000 flats—despite the manifest fact that these rents do not provide an adequate return on the present investment value of the property. There may well be sound commercial reasons for this, but, in view of the shortage of accommodation, I suggest that it is unwise to make the sort of vague attack which has been made by the hon. Member and is only likely to encourage the selling off of the property.
The hon. Member has suggested, on the basis of an isolated case—I have said that I shall be glad to investigate it if he will let me have the details—that something is seriously wrong with the operation of the fair rent system. I must tell him that I do not consider that he has supported that general case with anything beginning to look like adequate evidence. Rent officers and the London Rent Assessment Panel are independent of the Government. They operate within the strict limitation of the Act passed by the hon. Gentleman's Government, the material part of which I have quoted. I emphasise that the results of their deliberations are recorded and are open to public scrutiny, and it follows that the system has strong safeguards for the public interest.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-seven minutes past Four o'clock.