ELIGIBILITY FOR HOUSING ASSOCIATION GRANT AND REVENUE DEFICIT GRANT (Hansard, 24 February 1975)

§ Mr. Freeson
I beg to move, That this House doth agree with the Lords in the said amendment.

§ Mr. Deputy Speaker
With this amendment we shall take Lord amendments 24 to 32, 34, 38, 40, 56 and 61.

§ Mr. Freeson
In moving the amendments as a group I can first briefly explain to the House their effect. Amendment No. 8, which has inserted a new Clause A in the Bill, is designed to enable the co-operative movement to operate in housing association as well as in local authority matters, by removing a restriction on the membership of the associations. The other amendments in this group extend the principle of co-operation in the local authority area to new towns and to the North-Eastern Housing Association. There is also one change in nomenclature: for clarity the name of these co-operatives has been made "housing co-operatives".
For convenience, I turn first to the new clause, briefly to explain the way in which it will enable grant to be paid to co-operatives which are registered housing associations. The provisions of the Housing Act 1974 prevented housing association grant and revenue deficit grant from being paid to associations where all the tenants have to be members and vice versa. This constraint was introduced to make co-ownership schemes, the 195 members of which benefit from option mortgage subsidy, ineligible also for housing association grant. But the effect was also to debar from grant other housing association co-operatives which adopt rules involving full mutuality between tenants and members. Such rules are necessary if the members of the co-operative are to be able to determine their own rents without the intervention of the rent officer, and thus to be in a position to meet their ongoing costs, once the initial payment of grant has been made.
It may be that in the present uncertain situation of high and unpredictable cost inflation, housing association co-operatives will find it difficult to go on covering costs by increasing their rents in this way, and for this reason we have made it possible for them to have recourse in the last resort, like other registered housing associations, to revenue deficit grant. But I hope and believe that within the housing association movement there are people anxious to pioneer co-operative schemes, and this new clause will give them the necessary flexibility to do so. I also hope that building societies and other financial institutions will be encouraged to consider making loan finance available to such schemes. I shall shortly be consulting with them and with builders to examine ways by which this can be done.
There is one further point. As will have become clear, the amendment to Sections 29 and 32 of the Housing Act 1974 will, in addition to encouraging housing association co-operatives, enable us to grant-aid co-ownership schemes. This is a topic to which the Campbell Working Party on housing co-operatives and tenant participation, which I appointed some months ago, will be returning in its second report—I recently received its first report—and I will at that stage make a further statement to the House. But it is clear that we need to consider ways in which grant can be paid to schemes in which people can contribute towards acquiring an individual share in the equity of their homes, so that we do not polarise the housing market between owner-occupiers and tenants.
I turn to local authorities. The aim of the co-operative provision for local 196 authorities in the Bill, as inserted on Report in this House, was very simple. Where houses are in the ownership of a local authority, which has either built them or bought them, they receive subsidy. Traditionally that subsidy is cut off if the council sells or leases a house. Assistance after that point is usually given to the purchaser by tax relief. But that would be inappropriate where the houses were passing into a new form of social ownership, a lease to a housing co-operative. The provisions in paragraph 9 of Schedule 1 accordingly continue housing subsidy to the local authority after such a disposal. The benefit of the subsidy may be passed on by the authority to the co-operative in fixing the rent under the lease. This preserves the benefit of subsidy in a flexible and easily adjustable way, since the local authority may either fix a rent which passes on to the co-operative the exact amount of subsidy the council itself receives with or without the rate fund contribution it makes in addition; or by fixing a lower rent it may pass on more; or by fixing a higher rent it may pass on less.
A willing association of tenants and a willing local authority are both required for the arrangements to be effective. There are also ample safeguards for the taxpayers' interest in the requirement that the Secretary of State shall approve the co-operative, to ensure that it is a properly constituted and well-supported body; the terms of the disposal, to ensure that the dwellings remain in social ownership; and the actual transaction, to ensure that the arrangements are being applied to the right sort of dwellings on the right sort of scale. Controls, as the House will appreciate, may be a means of stimulus as well as a power of veto. It would not be the intention to operate them in a negative or deadening way—on the contrary.
Let me say briefly what housing co-operatives in the local authority are not. They are not intended to provide a means by which the responsibilities can be moved from shoulders able to bear them to shoulders unable to bear them. I say this to allay any fears there may be that local authorities will be permitted or encouraged to shuffle off the responsibility for running difficult or unsatisfactory housing on to an under-financed, 197 inadequately supported ad hoc group of tenants. That is not the intention. A co-operative of tenants must, first of all, be willing to take on the responsibility. It must satisfy the terms of the advisory circular and the model scheme we shall be drawing up that it is itself a properly-constituted body. Next, the functions it will assume, and the terms on which it will assume them, will need to be approved. There will also be control of the individual transaction so that we could say that even where the terms were satisfactory these were not the right sort of dwellings for the responsibility to be devolved. There are, therefore, ample safeguards.
The provisions allow for co-operatives to have more or fewer housing management functions, for a longer or shorter period. Thus, a tenants' association could initially take over a limited range of repair and management functions for a few years, while to begin with wider powers such as fixing rents and selecting new tenants could remain with the council. When the co-operative had proved its ability to discharge the limited functions well, the agreement could, subject to approval, be expanded to give it wider powers for a longer period, making it to all intents and purposes its own landlord. That is one way in which it could work, but there could be many variations.
11.15 p.m.
When I introduced the local authority provisions on Report I referred to the need to involve tenants more deeply in the process of taking the many decisions of a major or a minor kind which affect their homes, their environment and their rents. I touched on the housing advantages, somewhat narrowly defined, which would flow from this—the better maintenance, reduced vandalism, etc.—and mentioned also the wider social advantages. I described two primary examples of the kinds of situation where I could see that co-operatives would have immediate potential. One of these is the old-established local authority estate where the tenants are ready and willing to take over the management.
The second example is the block of property now rented privately, where the tenants can see immediately that only social ownership will defend and improve what they now have. In this second 198 instance the tenants may also see equally well that only if they arrange to run the property themselves will they get things done as and when they like, and that the local authority, whose machinery is almost certainly hard-pressed at present, would take an altogether different view of the transaction if it knew that a tenants' co-operative stood ready and willing to take over the day-to-day running from the landlord.
There is, thirdly, an area of new policy in which local authority or building society mortgage facilities will be useful to prospective tenant-owners.

§ Mr. F. P. Crowder (Ruislip-Northwood)
On a point of order, Mr. Deputy Speaker. I do not know how many pages of this letter from his mother the Minister is reading, but this will not do—just reading out a lot of drivel to the House on an important question of this nature.

§ Mr. Deputy Speaker (Mr. George Thomas)
Order, The content of the Minister's speech is not for me to comment upon, but there was nothing out of order in what the Minister was doing.

§ Mr. Crowder
When a Minister comes to the House, Mr. Deputy Speaker, and reads out pages of stuff which really is very difficult to follow, is that a speech?

§ Mr. Deputy Speaker
Order. The hon. and learned Gentleman has been a Member almost as long as I have, and he will know that it is a very old custom for what the House considers to be the copious use of notes by Ministers to be accepted.

§ Mr. Freeson
I am tempted to intervene in what I was saying to remark that the hon. and learned Member has every right to intervene, comment and have a view about the content of what I am saying but that what he has said shows a lamentable ignorance of what people are interested in in the housing sector.

§ Mr. Crowder
We are interested. That is why we should like to hear something from the Minister—not something he is reading out at express speed.

§ Mr. Freeson
I hope that if the hon. and learned Member cannot follow what I am saying tonight, he will show sufficient interest to take a leisurely moment or two tomorrow to read the 199 text of what I am saying, and I hope to hear further from him of his great interest in housing co-operatives and in housing matters generally. I have not yet heard from him in the House or elsewhere on such subjects.
I was saying that there is a third area of new policy of housing co-operatives in which local authority or building society mortgage facilities would be useful to prospective tenant-owners. I hope that I may have the opportunity shortly of having further discussions with local authority representatives and with building societies and the builders to discuss possible developments in this field. I am awaiting a second report from the working party on housing co-operatives and tenant participation, which will give some lines of consideration in this field as well as those I have been discussing.

§ Mr. Michael Latham (Melton)
Since the Minister is advocating tenant management of co-operatives, may I ask why he is so opposed to the sale of flats to council tenants?

§ Mr. Freeson
I prefer to confine myself to discussing what I hope the hon. and learned Gentleman will agree is a new and worth-while form of tenure which this country has seen little of. I trust that he will be as flexible in approaching this matter as I know he is on other matters without introducing something that is not relevant.

§ Mr. Ivan Lawrence (Burton)
While the Minister is dealing with the different forms of tenure, will he explain what is in essence the practical difference between a housing association and a housing co-operative?

§ Mr. Freeson
I am a little surprised to hear that question coming from the hon. Gentleman. I do not think it would help if I spent a lot of time in explaining that a housing association, with a few exceptions—there are exceptions, and indeed there are three in my constituency—is not a tenants' co-operative but is run by other people who rent dwellings to the tenants. In other words, the dwellings are not properties owned collectively by the tenants or managed by themselves. Technically, that is the simple difference.
200 I referred also to the options opened up for the longer term by the development of provisions for co-operatives—namely, the scope for developing arrangements for equity-sharing and forms of tenure which release us from the trap of having only owner-occupation, council or housing association renting in our housing market. Therefore, one of the objectives of the policy is to introduce a new and variable form of tenure of which we have seen little up to the present. I am examining further ways by which privately rented properties might be brought into social ownership and control.
We shall now have a solid piece of initial legislation on which to build an important social reform. I describe it as an initial provision because we cannot claim to have provided in this Bill all the powers and machinery that a progressive housing co-operative movement may need in the years to come, and we shall bring further proposals before Parliament as we gain experience and in the light of the further reports to which I have referred.