HC Deb 25 June 1974 vol 875 cc1220-9

(1) The Secretary of State may, in accordance with the provisions of this section, pay a grant (in this section referred to as a "revenue deficit grant") to a registered housing association, other than an association falling within paragraph (a) or paragraph (b) of section 18(1) above, if the association incurs a deficit on its annual revenue account for an accounting year of the association ending on or after 1st January, 1974.

(2) No revenue deficit grant shall be payable in respect of an accounting year of a registered housing association unless—

  1. (a) an application in respect of that year is made by the association to the Secretary of State not later than the expiry of the period of 15 months beginning immediately after the end of that year and that application is approved by him; and
  2. (b) the application is in such form and contains such information as the Secretary of State may from time to time determine; and
  3. (c) the application is accompanied by the audited accounts of the association for the accounting year to which the application relates.

(3) Subject to subsection (4) below, for the purposes of this section, a registered housing association shall be treated as incurring a deficit on its annual revenue account for an accounting year of the association if—

  1. (a) the expenditure of the association for that year which, in the opinon of the Secretary of State, is attributable to dwellings provided by the association and any related property and is reasonable and appropriate, having regard to all the circumstances, exceeds
    2. 1221
  2. (b) the income which, in the opinion of the Secretary of State, the association might reasonably be expected to receive in respect of those dwellings and any related property in that year, including any sums received or to be received in respect of that year by way of grant or subsidy under any enactment, other than this section,
and for this purpose expenditure and income shall be calculated in such manner as the Secretary of State may, with the consent of the Treasury, from time to time determine.

(4) Notwithstanding anything in subsection (3) above, no account shall be taken for the purposes of this section of so much of any deficit as, in the opinion of the Secretary of State, arises by virtue of any such difference between income and expenditure as is specified in section 30(1) above.

(5) The revenue deficit grant payable to a registered housing association in respect of any accounting year shall be of such amount as the Secretary of State may determine in relation to that association but shall not be greater than the amount of the excess determined for that year under subsection (3) above.

(6) If he considers it appropriate to do so the Secretary of State may make payments on account of any revenue deficit grant which he considers is likely to become payable to a registered housing association in respect of any accounting year but, subject thereto, any such grant shall be paid in a single sum in respect of the accounting year to which it relates.

(7) No revenue deficit grant shall be paid before the operative date but applications for such a grant may be made before that date and such an application may be so made by a housing association notwithstanding that it is not then registered.

(8) In subsection (3) above "related property", in relation to dwellings provided by a housing association, means property of the association which is provided for the benefit of the persons occupying those dwellings.—[Mr. Freeson.]

Brought up, and read the First time.

Mr. Speaker

It is convenient at the same time to discuss new Clause 2—(Compensation to Housing Associations for Prevention by Law from raising rents)—and new Clause 5—(Houses unfit for human habitation).

The Minister for Housing and Construction (Mr. Reginald Freeson)

I beg to move, That the Clause be read a Second time.

I hope I can show that the Government's new clause more than meets the requirements being sought by hon. Members as set out in the other two clauses and as were discussed in Committee.

The Government's new Clause 11 is introduced to fulfil an undertaking which I gave in Standing Committee to deal with some of the financial problems of housing associations in regard to their existing housing stock as distinct from new projects, which are already covered in the Bill. The clause provides the Secretary of State with discretion to make a grant towards the annual revenue deficit of a registered housing association in respect of an accounting year ending on or after 1st January 1974.

In the Standing Committee I also gave an assurance that we were looking constructively and positively at the cost of service charges for central heating and related heating charges. My right hon. Friend the Secretary of State gave a similar assurance to the conference of the National Federation of Housing Associations at a meeting subsequent to Standing Committee consideration of the Bill. We are still pursuing the feasibility of granting some relaxation of provisions in the rent freeze order, but if this proves to be difficult or impracticable and it takes too long, we shall certainly consider additional fuel costs as one of the grounds for making a revenue deficit grant as it is put forward in the new clause.

The calculation of the annual deficit will be determined by subsection (3) of the clause which relates to the expenditure and income on housing to the extent that it is considered reasonable as set out in the criteria. The grants will then be paid up to that amount. In describing the amount of grant to be paid, the wide discretion implicit in subsection (5) of the clause will enable income from other sources to be taken into account, where appropriate, in deciding what amount of grant should be paid.

Clause 28 provides for the main source of grants available to registered housing associations in the form of grants for new projects calculated to meet the deficits arising over the whole deficit starting from the fair rent base. These grant structures were decided on to enable housing associations to embark on the expansion of the voluntary housing movement called for by the Government's policies and accepted by all sides of the House.

The general movements in interest rates and other running costs coupled with restrictions on increases of rents by virtue of the fair rent system and later the rents freeze are placing the financial stability of existing schemes in jeopardy. It has been represented and largely accepted that housing associations will be unable to play their future rôle successfully if they cannot start from a sound basis as regards the finances of their existing schemes. The transitional arrangements in Clause 33 will help in the main only those current schemes which are not substantially complete. Accordingly, the powers in the clause provide for a wide measure of discretion to be exercised in support of existing schemes which are running into deficit. The clause gives the Secretary of State a wide discretion whether to pay subsidy in a particular case and as to the amount in relation to the deficit.

4.0 p.m.

The grant is payable towards a deficit incurred on annual revenue account for any accounting year of the associations ending later than 1973. The deficit will be calculated in such a manner as the Secretary of State may determine. Although consideration will be given to the applications on their merit, the intention will be to pay grants related to identifiable losses because of specific causes beyond the control of associations, such as the rent freeze, unexpected rises in interest rates, rises in central heating charges and the like—matters of external cause rather than matters related to the management policies and competence of the associations.

I stressed in Committee that we wished to design a scheme which could pave the way towards relating more closely policies on subsidies for housing associations and policies on subsidies for local authority housing—that is, to pave the way to a more effective revenue deficit subsidy scheme than was under discussion in Committee. The clause is designed to achieve that objective.

Mr. Emery

In Committee we debated to some extent how far the deficit grants would have to go. Can the hon. Gentleman or his Department give any further information? Have they any estimate of how much would be involved overall in this deficit financing? It is important that we should know. Some inquiries must have been made to ensure that there was the necessity to carry this through, further than the examples which the Opposition gave the Government in Committee.

Mr. Freeson

There could not be an estimate of that kind. Arguments were put forward on the matter not only in Committee but in the Department. We were aware, as a result of representations from individual housing associations and the National Federation of Housing Societies, that a number of associations were running into serious difficulties, for the kind of reasons I have given. The applications will be received only from registered housing associations and co-ownership schemes. Until we receive the applications and have arranged the grants, it will not be possible to make any calculation of the total sum carried by the Exchequer.

Mr. Rossi

We on this side of the House are most grateful to the Minister for responding so well to the arguments we advanced in Committee for urgent assistance to housing associations finding themselves running at a deficit because they were unable to increase their rents for various reasons, of which we know, and at the same time were having to meet rising costs—interest charges, central heating charges and so on.

The proposal we made in Committee is encompassed in our new Clause 2, which speaks very simply of the Secretary of State making grants by way of a single lump sum or by annual payments to any registered housing association operating existing schemes, to assist it to meet a financial deficit incurred as a consequence of being prevented by law from raising their rent to meet increased costs and interest charges outside their control. Having listened to the Minister, I am satisfied that he has met the points in our clause. His new Clause 11 is a more elaborate creature, dealing with matters of accounting, the year of account and the number of months within which the accounts must be rendered to the Secreary of State in order that the deficit grant may be calculated. Those are all administrative matters that the Government are best suited to deal with in detail. That is why we were unable to include them in our clause.

However, there are still one or two matters outstanding. I hope that the Minister will give us an assurance that he will deal with the matter generously and not in a cheese-paring or niggardly manner.

We wish to see the voluntary housing movement flourishing and providing a much needed supply of rented accommodation for the people who are unable to qualify for one reason or another to go on to the housing waiting list. I have in mind particularly young married couples whom local authorities as a rule will not consider because they do not qualify under the points schemes that most local authorities operate.

One of the housing associations in that kind of difficulty is one that I mentioned in Committee. I mention it again because it gives the House an indication of the problem. The London and Quadrant Housing Trust, which operates in the Greater London area, and which has about 3,000 dwellings in the area, will be incurring a loss of a little over £250,000 a year because of its difficulties in bridging the deficit resulting from frozen rents and increased charges completely outside its control. We welcome the assistance that can be given to it and similar bodies doing valuable work throughout the country.

Many local authorities are providing a grant out of rate revenue to housing associations operating in their area to assist them, because most housing associations work on schemes in close collaboration with local authorities. In considering the deficit grant that will be paid to housing associations under new Clause 11, will the Minister take into account the grant that some local authorities are paying, or will he say that it may be entirely disregarded?

I shall not pursue new Clause 2.

Mr. George Cunningham

I wish to express my gratitude to my hon. Friend the Minister for the forthcoming way in which he has responded to the representations from both sides in Committee on this point. I am sure that a number of housing associations, not least in the London area, will be safeguarded from going to the wall for the rest of this year because of the clause.

Mr. W. Benyon (Buckingham)

I, too, warmly welcome what the Government have done, which will also be welcomed by the whole of the voluntary housing movement, although when I telephoned it at lunch-time the National Federation of Housing Societies was no more aware of the clause than I had been a little earlier.

The Government are right to keep the provision as flexible as they can in view of the circumstances in which we find ourselves.

I note the Minister's point about the register of housing associations. That raises a small matter. We do not know when the Bill will become law, but we hope that the registration procedure will be fairly rapid, because the first year in which the grant becomes available will end fairly shortly and the claims will then have to be made.

Mr. Bruce Douglas-Mann (Mitcham and Morden)

I associate myself with the remarks made concerning new Clause 11. I had intended to move new Clause 5, but in the light of the Government's new clause I no longer wish to do so.

Unless a procedure for registration is to start to operate soon—it is not yet clear how carefully it will operate and what the provisions will be—many housing associations will find themselves in difficulty.

Mr. Emery

I have nothing to add to what my hon. Friend the Member for Hornsey (Mr. Rossi) said in welcoming the new clause because it goes a long way to meeting the point which we wanted met at Committee stage. But if registration is suddenly introduced there would be a specific difficulty if a number of housing associations came forward at one particular time to register. In such circumstances there would be a delay.

I want an assurance from the Minister that he will make absolutely certain that where a housing association has indicated to the Government that it may wish to have some deficit financing through registration, that association shall take precedence over consideration of the registration of a housing association which is not claiming extra financial aid. I am trying here to ensure that some form of priority is established in the correct order. It would be helpful if the Minister could give an assurance that he will consider this point, and thus the Government will not have to be pressed later on this matter of priority.

Mr. Freeson

I do not expect that what I have to say will be so warmly welcomed so often in future, although I hope that there will be at least some further welcoming words during the proceedings.

I should like to consider the question of precedent relating to registration of housing associations which apply for grant under the system we propose. Off the cuff, I do not think that there will be a problem here because the system will operate retrospectively, going back over the previous year which has been subject to accounting. We shall be discussing the question of registration of housing associations a little later, but I do not think that it is likely that much time will be taken in carrying out registration. The kind of objectives which the registration scheme will have to meet will largely have to be met after registration has taken place. But I shall elaborate on this point when we come to it later. I do not foresee a problem here, but if necessary we shall discuss the matter with the Housing Corporation.

I appreciate the remarks of my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) in welcoming the Government's new clause.

The hon. Member for Hornsey (Mr. Rossi) urged that we should not treat housing associations in a niggardly fashion. I can give an absolute assurance on that. The Government have put forward the new clause in order to be as careful and as flexible as we can in handling the problem which we recognise housing associations have. We would not have introduced this proposal had we not intended to operate it in a thoroughly reasonable fashion. That is our general attitude towards the operation of what is proposed in the new clause.

I would have liked notice of one of the other points raised by the hon. Gentleman, in reply to which I can only react in an off-the-cuff way at the moment. This relates to local authority grants given to some housing associations. I am aware of this matter. I was involved with some of those housing associations when I was in local government. But I do not believe that the point mentioned is likely to arise as a problem because the grant which the Secretary of State will be in a position to make to a housing association will be based on the deficits shown in the accounts of the association for the preceding accounting year. Therefore, if the association is normally in receipt of a grant it will have received a grant and to that extent larger deficits will have been reduced.

The question of a future change in policy in this respect is for the local authority and the housing association involved. The Secretary of State would deal with the net result of the financing of the housing association at the end of the accounting year. We need not get involved here in the precise question of local authority grants.

Mr. Rossi

If we take a case of a local authority making a grant and the Secretary of State diminishing his deficiency grant by the amount of the local authority grant, side by side with a case where a local authority makes no grant and the Secretary of State then has to make up the whole of the deficit, there could be a situation in which indirectly the local authority was making a grant to the Secretary of State.

4.15 p.m.

Mr. Freeson

It would hardly be the Secretary of State making the grant—rather it would be the taxpayers or the Exchequer. Much of the kind of net expenditure which local authorities carry on their own housing accounts in this and in other connections which on the face of it appears to be expenditure carried only by the rates is, at the end of the day, largely carried by the rate support grant.

Most of this is fitted into the calculation of the general rate support grant and therefore there is further assistance from the Exchequer to local authorities and to the taxpayer which is often overlooked when considering local authority housing accounts.

I stand by the broad interpretation I gave a few minutes ago. If the grant has been received there is therefore no deficit, or less deficit, and therefore there is less money to be made up by the discretionary grant from the Secretary of State. If in future years the grant from the local authority is withdrawn, whatever the agreement between the local authority and the housing association, the Secretary of State will have to take account of the accounting position presented to him.

However, I shall pursue this matter in some detail in my Department to ensure that there is no hiatus which could arise.

Question put and agreed to

Clause read a Second time, and added to the Bill.

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