§ The Secretary of State for the Environment (Mr. Anthony Crosland)
With permission, Mr. Speaker, I will now make a statement about the late implementation of the Housing Finance Act 1972. It is a little long. I am not usually guilty of this sin, and I apologise for it.
When my right hon. Friend the Prime Minister made his statement about Clay Cross on 4th April, he undertook that recommendations would be brought before the House when the Government had reviewed the full extent of the problem of late implementation of the Act by other authorities.
It is now clear that in many of these areas the councillors concerned will be able to establish that there were reasonable grounds for the delay. But there are perhaps a score or more of authorities where, in the process of audit, the district auditors way well conclude that the councillors concerned should be surcharged. I stress that decisions to surcharge would fall to be made only after the full processes of the law had been observed.
But on the scale which now seems likely, were surcharges to be made a large number of councillors—probably some hundreds—who were holding office at the relevant times would be disqualified. The sums involved are in most cases likely to be considerable—indeed the total may be between £1 million and £2 million—and it would be far beyond the means of the individuals concerned to meet them.
This situation is, as far as I know, unprecedented though not, alas, unforeseen. I made my position clear during the Committee stage of the Bill. I said that as a democratic socialist, profoundly 1077 committed to the rule of law, I could not condone, let alone encourage, defiance of the law; and I told the special Labour Party conference in July 1972 that I could not support non-implementation.
But I also said that democracy is a two-way bargain between government and governed, and that the Housing Finance Act infringed the tacit agreement as to what is permissible and what is not. By excluding a large group of our citizens from democratic protection, it offended a basic sense of natural justice. I added that while I would in no way encourage a confrontation between democratic central and democratic local government, if one should come I would hold the Conservative Government mainly responsible.
The confrontation did occur, and we now face the question of how to deal with the late implementers.
There are three possibilities. First, the putative surcharges—that is, the amount of rent income lost by late implementation —could become a charge on the central revenue and be met by the national taxpayer. I am adamantly opposed to this. If people deliberately disregard the law, they must not be baled out by the national Exchequer.
Secondly, we could allow the district audit process to proceed unchecked, with the full panoply of formal hearings, possible High Court actions, attachment of earnings, seizure of goods by bailiffs, and ultimate bankruptcy being brought to bear on large numbers of councillors up and down the country. This seems to me a foolish course of action. It would resurrect in an intensified form the bitterness and anger of those earlier days of social confrontation from which we surely want to move away.
Moreover, only a minuscule fraction of the lost rent income would in practice be recovered. The bad debts would eventually fall to be met by the community. We should have a lot of bankrupt councillors, but negligible recoveries. And this harsh approach would not in my view be morally justified, because we have to recall the circumstances under which late implementation occurred.
The rent provisions of the Act did not come into force until well into August 1972. But they required local authorities to operate new rent schemes from 1078 1st October 1972. During this period—this outrageously short period—local authorities were required to adjust themselves to the loss of their traditional freedom to fix rents for their own dwellings and to the task of implementing complicated provisions which were widely held to be repugnant.
It is not surprising that many authorities encountered difficulties—not only of administration but also genuine misunderstanding of the law. Many councillors thought they would be acting legally if they did nothing and waited for the Government to activate the provisions for the appointment of housing commissioners. Some authorities indeed invited this intervention. I therefore concur with the New Law Journal, which wrote editorially on 18th July thatthere does seem a case for not instigating Draconian measures against these other local council members … Justice ought always to be tempered with mercy and there are times when the exercise of compassionate judgement may have more long-term effect for good than a strict adherence to the absolute letter of the statutory provision.We do not want to hound some hundreds of councillors into bankruptcy. Yet disregard of the law must not be allowed to place a charge on the taxpayer. So I propose the following. The lost rent income will be recovered by the local authorities concerned, and not by the process of surcharge. Local authorities will be empowered to make good the losses over a period of years out of future rents; alternatively they may decide that the losses shall be borne in whole or in part on the rates. [Interruption.] Such rate payments would be excluded from Government rate support grant. Where late implementing authorities have, as a result of local government reorganisation, been absorbed into new and larger authorities, it will be for the new authorities to decide whether to recover the losses by means of differential rents or a differential rate levy applying solely to the areas of the former authorities.
I emphasise that the point of a surcharge under the law is to recover moneys; it is not a penalty or a fine. What is now required is to give the local authorities concerned a second chance to collect the money which they should have collected in the first place.
1079 The Clay Cross Council never implemented the Act at all; and a surcharge of some £7,000 has already been imposed on the former councillors and upheld by the High Court. The Government do not intend to rescind this surcharge retrospectively, nor to use public funds to discharge the financial liabilities incurred by those councillors. Any funds for this purpose must come from private subscriptions, organised by those associated with the decisions taken at the relevant party conferences.
I understand that a fund for this purpose is likely to be set up. In view of this, as my right hon. Friend the Prime Minister has already foreshadowed in the House, we shall end the disqualification already incurred by any councillors as a direct result of the aftermath of the Housing Finance Act. The loss of rent income in Clay Cross beyond the £7,000 already surcharged will fall to be recovered from local rentpayers or ratepayers at the discretion of the new district council.
These proposals, which will be embodied in early legislation, accord with the crucially important need to maintain the observance of the law—[HON. MEMBERS: "Oh."]—even a law as offensive and provocative as the Housing Finance Act. They ensure that no burden is borne by the taxpayer as a result of non-implementation of the law. They provide for the responsibility to rest with the local councils concerned. The communities affected must themselves find the lost income; and how they do it is a matter for local democratic decision.
I believe that these proposals are fair, humane and realistic, and will bring to a close an unhappy chapter in our social history.
§ Mr. Rossi
This is a sorry day for the constitution of this country, for the rule of law and, indeed for the Labour Party itself. The right hon. Gentleman has distinguished between Clay Cross and the other authorities, and I would like to comment upon or ask questions upon these matters separately.
We welcome that public funds will not be made available to relieve the Clay Cross councillors of the consequences of their defiance of the law of this country.
1080 With regard to disqualification, I ask the right hon. Gentleman whether this means an act of indemnity, and, if so, where that places the advice that he has received, because an act of indemnity contravenes constitutional practices, sets a dangerous precedent and acts as an incitement to others in the future to disobey the law.
I turn now to the matter of lost rent income, which I understand to be about £120,000—not simply the £7,000 surcharge—to which must be added the loan charges incurred in borrowings by the local authority to make good that loss, as well as the additional administrative costs incurred.
If this cost is to fall upon tenants they must now feel that they have been grievously deceived by those councillors who led them along this road; but how much worse is it for the ratepayers of the area concerned who may have to bear the burden, let alone the ratepayers who elected those councillors? All ratepayers of the new district may be saddled with this outrageous burden which need not have been incurred if the law had been obeyed.
With regard to other councillors concerned, the right hon. Gentleman mentioned in his statement that there were cases in which authorities encountered difficulties of administration and genuine misunderstanding of the law. Where that has happened relief should be given. But we must distinguish between those cases and the remaining cases where authorities embarked upon deliberate disobedience and flouting of the law which had been passed democratically by this Parliament. Are they to be distinguished from the Clay Cross councillors, and what will the Clay Cross councillors themselves think of that situation? Are they to be the scapegoats of the indecision of the Labour Party?
The right hon. Gentleman and his colleagues bear grave responsibility in this matter—[HON. MEMBERS: "Ask questions."]—because many of them incited councillors up and down the country. My question is: will those right hon. and hon. Gentlemen who incited those councillors now dip into their own pockets and make good the deficits?
§ Mr. Crosland
What the Clay Cross councillors think about this we shall no doubt hear in the course of the next few minutes.
With regard to the distinction between cases of deliberate disregard for the law and cases where no misconduct or negligence was involved, that distinction was made automatically by the district auditors in the course of investigations.
With regard to the hon. Gentleman's other points, this is a sorry day—which, alas, has its origin in the day when the Housing Finance Act was first introduced. I have never known an Act of Parliament which so outraged the feelings of large numbers of moderate councillors up and down the country.
The hon. Gentleman is, with respect, confused on the subject of the act of indemnity. The advice, to which he referred, relating to this subject was not advice on the subject of disqualification but advice on financial penalties and a surcharge, and the advice concerned a possible act of indemnity to indemnify councillors already surcharged. But I am proposing no such thing, and the £7,000 surcharge stands.
The question of ratepayers and rent-payers can be argued either way, and should be decided locally, but the crux is that lost money should be found from the locality which gained from failure to implement the Act in time. Whether it should be found from the rentpayers who precisely gained or from the ratepayers, the ones who elected the councillors who were late in implementing the Act, is a matter for local decision.
§ Mr. Swain
Is my right hon. Friend aware that this is the squarest curate's egg he has ever announced in the House? As the Member for Derbyshire, North-East, I would prefer to hear the statement in the House instead of reading it in the columns of the Star in Sheffield.
Is my right hon. Friend aware that the Clay Cross councillors who broke or defied the Housing Finance Act were proceeded against under the Local Government Act 1933 in a way which was proved beyond doubt to be punitive? They were proceeded against, on behalf of the Minister involved, after six short weeks under Section 237 of the Act that I have just mentioned.
1082 Is my right hon. Friend aware that the part of the statement removing the disqualification will be welcomed, but that the other part of his statement is so full of complications that it needs further explanation as far as we are concerned and, indeed, as far as the councillors are concerned? Obviously there must be a distinction in the statement between the Clay Cross councillors and the other councillors involved.
Would my right hon. Friend accept a suggestion from me that he should at an early date meet a deputation to discuss the complications that he has himself made in his statement and to enable us to have a clear understanding of what it means before legislation is introduced?
§ Mr. Crosland
It is true that punitive action was taken against the Clay Cross councillors because they knowingly disregarded the law. Whether the action taken was wise is a different matter, and here I have some sympathy with my hon. Friend, because not only I and other right hon. and hon. Members on this side but indeed The Times, in a leading article in October, strongly criticised the allowing of lost rent income to build up instead of the housing commissioner being sent in.
I would like to consider my hon. Friend's suggestion about a deputation, and I would be happy to talk to him, but without, of course, making any commitment.
§ Mr. David Steel
Will the right hon. Gentleman accept that whenever people break the law in pursuit of a cause in which they passionately believe, knowing full well the penalties they will incur, they receive some respect from the public at large, even from those people who disagree with them, but where they break the law in the belief that their friends in high places will come along subsequently and legalise what they have done they are merely cardboard martyrs who deserve nothing but contempt? Does he recognise that, whatever common sense there may be in some of the financial proposals he announced today, his setting aside of the disqualification will encourage the growth in lawlessness in our society that we see today?
§ Mr. Crosland
No, Sir, I do not think that. It should be made clear that there is no question of retrospective removal of 1083 the disqualification. What I am suggesting is that we should shorten the period of the disqualification. By the time of Royal Assent the councillors concerned will probably have been disqualified for a year and a half.
On the more general point, I do not think that my decision is likely to encourage lawlessness. Any Minister in my position must try to find a balance—it is very hard to do so—between two conflicting aims. One is to try to close an extremely unhappy chapter in our social history—in the words of the New Law Journal, to temper justice with mercy. The other aim is to do so in such a way as gives maximum defence to the principle of observance of the law, by saying that we shall not find public funds to cover the £7,000 surcharge, to say that not a penny of the likely loss of rent income will fall on the taxpayer, that it must all fall on the areas where the late implementation occurred. We have come as close as we can to finding a balance between two crucial objectives.
§ Mr. Skinner
Does my right hon. Friend agree with me that so discredited and so outrageous was the Act that even the Tory Opposition in the latest election campaign decided not to include it in their manifesto, just as they did not include the Industrial Relations Act?
Has my right hon. Friend looked at the auditor's report on Clay Cross? Has he noticed the other side of the equation? There was a loss in rent revenue of £7,985. The auditor declared both verbally and in writing that the councillors had failed to disburse £10,000 in rent rebates, thereby saving the taxpayer and the ratepayer combined £10,000 in that period, a saving of £2,015. How can the £7,000 be collected, when they have been saving the ratepayer and the taxpayer money?
My right hon. Friend is prepared to remove the disqualification. Is he not prepared to follow the logic of that argument and remove the phoney surcharge as well? Is it not sad that within the Labour establishment we now say that those who fight valiantly and give in will be excused but that to some degree those who fight valiantly to the bitter end will be ostracised?
§ Mr. Crosland
My reading of the Tory manifesto was not so detailed as to enable me to answer my hon. Friend's first question. This is not the moment to go into the financial affairs of Clay Cross, but I am bound to accept the finding of the district auditor, as confirmed by a court order. That is the figure that has statutory reality for me. My hon. Friend also asked why I did not pursue the proposals to what he considers to be the logical conclusion of also removing the surcharge. I am not prepared to do that. I think it reasonable to say that, as part of a general attempt to bring this chapter to an end, the disqualification should be lifted after a year and a half. I do not think that it is right—and this has been repeated in every statement on the matter by my right hon. Friend the Prime Minister and other leaders of this party—that the £7,000 should be recovered out of public funds. We have never said that it would be.
§ Mr. Graham Page
Is the Minister really saying that, in President Ford-like fashion, he can pardon the Nixon-Clay Cross councillors without any legislation passing through the House? Does he not think that unless a person is prepared to observe the rule of law he is not fit to be a councillor?
§ Mr. Crosland
The right hon. Gentleman clearly did not hear my statement. Incidentally, I should like to tell the right hon. Gentleman that it is much better at least to announce definite recommendations than to pursue these matters through the sly and devious route of using the Official Solicitor. I made it clear in my statement that legislation will shortly be introduced into the House.
§ Mr. Faulds
Will my right hon. Friend ensure that the first contribution to the voluntary payment of the Clay Cross surcharge—and a sizeable one—is made by his right hon. Friend the Leader of the House, whereupon the rest of us will grudgingly cough up?
§ Mr. Maude
Is the right hon. Gentleman aware that his attempt to justify authorising Labour councillors to pass the burden on to ratepayers, on the ground that, as he said in a supplementary answer, they elected the councillors, is totally disingenuous? As there is universal 1085 adult suffrage in local government elections, the rent payers and all other citizens who voted are equally liable with the ratepayers, and it is wrong that people who may have been in a minority should be saddled with this burden. Is not the right hon. Gentleman saying, despite all his protestations that he wishes to uphold the law, that Acts of Parliament shall be obeyed only if the Minister makes an ex cathedra pronouncement that they are just?
§ Mr. Crosland
It is extraordinary that the myth still appears to persist on the Conservative benches that council tenants do not pay rates. They pay rates like anyone else. I have not said that the money shall be found out of rates or rents. I have not made the choice myself. I have simply established the principle that it will not be found by the national taxpayer; it will be found from the communities that benefited by late implementation. I regard it as a reasonable matter for local decision whether the money should come out of rents or rates.
§ Mr. Edwin Wainwright
Will my right hon. Friend take into account that the Act was one of the most vicious ever? It was passed against the will of the people. It was pushed through the House in the face of tremendous opposition. The Tory Government knew full well what they were doing to the councils. Will my right hon. Friend also bear in mind that when there were a few councils left in the bitter fight they were somehow or other singled out so that Clay Cross would be on its own and could be defeated without the support of the others? When councillors met officials in London, a promise must have been made to them that if they gave up the fight they would be forgiven for their action. Will my right hon. Friend look into that? If the new councils say that they will not put into effect my right hon. Friend's suggestion, what will happen to the councillors concerned?
§ Mr. Crosland
I well recall how the Housing Finance Bill was pushed through the House. I was in charge of the Bill in Committee for the Opposition. I well recall that it had the longest Committee stage that any Bill has had since before the First World War. My hon. Friend has in his constituency one of the former councils that were involved. It was one 1086 of the five councils in England—there was another one in Wales—which actively invited in the housing commissioner and were refused by the then Government.
If the new councils were to refuse to implement the Act—I very much hope that this will not occur—the district auditor process would have to start again.
§ Mr. Amery
I do not wish to re-open the debate which the right hon. Gentleman and I waged for so long in Committee. I do not wish to embarrass him in any way. I congratulate him on having the courage to stand firm on the Clay Cross surcharge, but I feel some doubt about the appropriateness and the propriety of passing the burden from the councillors to the ratepayers or rentpayers. For the other councils concerned, does the right hon. Gentleman accept that this will at least be a good lesson to the local electorate that local electors get the local governments that they deserve?
On disqualification, I submit that the right hon. Gentleman is setting a dangerous precedent for any controversial legislation which may arise from one side or the other. Finally, I ask the right hon. Gentleman to put on record that the work of Mr. Skillington at Clay Cross was discharged in difficult circumstances with the greatest efficiency and humanity.
§ Mr. Crosland
The right hon. Gentleman speaks with his usual moderation. During our previous discussions the only reservation that he had about the Bill, which he so skilfully conducted through Committee was whether the housing commissioner should be sent in in the event of non-implementation of rents and rates. If the lost rent income is not found from one or other of the local sources there are only two other alternatives. One alternative is that it will be found by the taxpayer. That I would regard as intolerable. The second alternative is that the loss will not be found at all, in which event the bad debt will fall on public funds. By that method we would not avoid public funds paying for the loss in the end.
On disqualification, I do not think that we shall be setting a dangerous precedent. Like a lot of hon. Members, I have pondered very hard all the way through this matter. I think that it is right to shorten the period. Even prison sentences are sometimes shortened. It is 1087 not a unique notion that a sentence is shortened after it has been imposed. I am as anxious as the right hon. Gentleman that this decision should not act as a precedent for non-implementation of the law.
§ Mr. Speaker
We cannot debate this matter further. We have had an indication of legislation. We must now move on.