'(1) The following paragraph shall be inserted after paragraph (b) of subsection (3) of section 46 of the Rent Act 1968 (determination of fair rent):—
(bb) the provision in the locality after the material date of any new amenity or the improvement after that date of any amenity already existing in the locality, where the amenity is provided or improved—
(2) The following subsection shall be added at the end of the said section 46:—
(5) In subsection (3)(bb) above "the material date" means—
§ (3) Where a rent has been registered or confirmed on or after 8th March 1974 but before the coming into force of this section, the tenant may apply, not later than the end of a period of six months from the date on which this section comes into force, for another rent to be determined, in place of that rent, on the ground that the determination or confirmation took account of a matter which would have fallen to be disregarded by virtue of section 46(3)(bb) of the Rent Act 1968 if that provision had then been in force.348
§ (4) Schedule [disregard of amenities] shall have effect.
§ Brought up, and read the First time.
§ 11.0 p.m.
§ The Minister for Housing and Construction (Mr. Reginald Freeson)
I beg to move, That the Clause be read a Second time.
§ Mr. Freeson
The clause amends Section 46 of the Rent Act 1968, which prescribes the basis upon which fair rents are to be determined, in line with our general undertaking in Committee to look at this possibility. It is designed to prevent tenants from being faced with large rent increases when the amenities in the locality of their houses have been improved. This would apply in the case of general improvements and also where properties have their localities improved as a result of the declaration of general improvement areas, housing action areas and priority neighbourhoods under the Housing Act 1974. It provides that in the determination of a fair rent the provision of any new amenity or the improvement of any existing amenity in the locality of the dwelling carried out otherwise than at the cost of the landlord or a superior landlord and completed after a certain date shall be disregarded.
The clause also provides that where a rent has been registered or confirmed during the current rent freeze, that is to say on or after 8th March 1974 and before the coming into force of these provisions, and where a tenant claims that the rent officer or the rent assessment committee took into account any matter which would have fallen to be disregarded by virtue of this clause had it then been in force, the tenant may apply for the determination of another rent on the basis of Section 46, as amended by the clause, in place of that which was previously registered. The procedure for applications for the determination of a new rent under this clause is set out in the new schedule.
Subsection (1) contains an amendment to Section 46 of the 1968 Act. A new 349 paragraph is inserted into subsection (3) of that section which sets out the matters to be disregarded in the determination of a fair rent.
Subsection (2) adds a new subsection to Section 46. It defines the dates from which new or improved amenities are to be disregarded. Where a rent is already registered, the material date is the date defined in Section 44 of the Rent Act 1968, namely the date on which that registration took effect. That is normally the date of application to the rent officer.
This means that the clause will allow tenants who, when the Bill becomes law, may be faced with rent increases which are partially due to neighbourhood improvements to apply for a new rent to be determined. It will in the future be for the rent officers and, as appropriate, the rent assessment committees, to ignore such neighbourhood improvements and in one case recommend, or in another adjudicate on an appeal on a rent to be regulated and registered.
I shall turn briefly to the new schedule. It sets out the procedure to be followed for the determination of the new rent in place of the registered rent when application is made under the new clause. It requires the rent officer or the rent assessment committee to consider whether the determination or confirmation of the fair rent took account of the matters which, by virtue of the amended Section 46, would have been disregarded, and spells it out in some detail.
§ Mr. Michael Morris
I find the clause most surprising. Are the Government saying that where there are amenity improvements—perhaps gardens which were previously bomb sites, or a traffic management scheme, or additional facilities, with traffic removed from an area—the tenants shall be treated as if the improvement had not been made? Are they saying that the rent levels shall remain exactly the same as for comparable properties on a main road, where the tenants suffer from noise and do not have the benefit of any of those facilities?
Do the Government realise the implications of the clause? The Minister must know that in determining their reasonable rent, particularly on large council estates, local authorities take the amenties into consideration. Some of the new developments 350 quite rightly have first-class amenities, which the rents reflect. The rents reflect the difference in amenties between one council estate and another, built by identical builders to identical Parker Morris standards.
Unless the clause is part of a hidden counter-inflation policy, as a sort of long stop, it does not add up. If it is a serious proposal, it would have been better if it had been put before us in Committe, where we could have considered it in depth. We saw it only just before the weekend.
I hope that the Minister will answer the point about what local authorities will do about their amenities. Are they to disregard them as well?
§ Mr. Bruce Douglas-Mann (Mitcham and Morden)
I welcome the proposal in the clause, which is much overdue. It is absurd that the landlord should have taken the benefit of an improvement in a locality to which he contributed nothing, collecting additional rent in respect of it.
What a rent officer or rent assessment committee regarded as an improvement to a locality frequently meant to the low-income tenants a deterioration in the amenities they required, such as the loss of the kind of shop they needed and the gentrification which changed the nature of the area and increased the rental value but reduced the value of the area to the tenant.
I agree with one point made by the hon. Member for Northampton, South (Mr. Morris). It is a pity that we were not able to discuss the clause in greater detail, in Committee, although my hon. Friend the Minister foreshadowed what was coming. I am sorry that we were not able to discuss it earlier, because certain difficulties will arise in the operation of the clause owing to the various dates which may become the material dates under subsection (2).
I urge the Government to consider introducing further amendments in another place. If we have a provision that the material date shall be a date three years before the date when the measure comes into force, it will be possible for the rent officers in each locality to get to know the extent to which there have been changes there since a date in March 351 1972. They will be able to get to know what changes have taken place and will be able to make an appropriate allowance. With the variable dates that we have in subsection (2) the rent officers will have to assess in relation to each specific case that comes before them the changes that have taken place in the amenities of the area since 8th March 1971, 9th March 1971 or 10th March 1971 and so on, depending on the date of the last registration of rent. That will make it almost an impossible task, or at least a very difficult task, for the rent officers.
It will very nearly be impossible for the rent officers to make an adequate determination of the amount that they should be disregarding when assessing rents. It will also make it more difficult to use comparable rents as a guide to the rent to be assessed in relation to individual properties. A rent assessed on 7th March would have had taken into account all the improvements that had taken place in the locality during the previous three years. For a rent assessed on 8th March 1974 the improvement in the locality must be disregarded over the preceding period. A lower rent will be registered or the tenant will be entitled to apply for a review of any rent registered after 8th March 1974. The comparable rents will go up to a peak, and then drop down. There will be no adequate basis for using comparables to assess what the new rent should be.
I suggest that it would have been much more appropriate—I accept that whatever date is chosen there will be some anomalies—to say that the date should be put as far back as possible, to the earliest date practicable with which the rent officers are capable of coping. I would tentatively suggest a date three years before this measure comes into force. Rent officers would then disregard the improvements in the locality that have taken place since the given date. That could apply as long as a date is chosen that will not overload the rent officers completely. I hope that my suggestion will be considered seriously by my hon. Friend. I believe that it will prove difficult for rent officers to apply the test that the variable dates contained in subsection (2) provide. I believe that there 352 would be fewer anomalies by fixing a date in the past from which could be disregarded the improvements that have taken place since, thereby giving a greater degree of certainty to the rent levels assessed. Such an approach would make life easier for rent officers and provide a greater degree of opportunity to use comparables in determining rents from now on.
Subject to that comment, I entirely endorse the principle embodied in the clause. It is one which is wholly in accordance with the principles which I hope will be put forward in our proposals relating to land.
§ Mr. Hal Miller (Bromsgrove and Redditch)
I support the hon. Member for Mitcham and Morden (Mr. Douglas-Mann) in his contention that a great deal of confusion is likely to be caused by the question of the material date for the purposes of the new clause.
I support my hon. Friend the Member for Northampton, South (Mr. Morris) in his consideration of the likely effects of the clause in relation to other cases.
I pay tribute to the Minister for the care that he has taken to brief members of the Standing Committee during the recess. I express my gratitude to him for the material that he has supplied. In the main it has been most helpful but it has also been slightly confusing to myself and to those I have endeavoured to consult during the recess. The new clause follows up a letter from the Minister of 6th January. His letter did occasion some difficulty and I should be grateful if at a later stage he would give us some figures to back his assertions.
As I understand the position, we are talking about rents registered since 8th March, 1974. In subsection (3) there is now provided an opportunity to bring a claim for the matter to be reassessed. Is not this trying to gild the lilly? Will the Minister give us some idea how many improvement areas have been introduced since that date? How many registered tenancies does he think are affected? It occurs to me that we are using a steamroller to crack a walnut, quite apart from the danger of giving rise to a lot of false hopes among tenants. The definition of fair rent has worked satisfactorily for a number of years, and scarcity value has 353 been eliminated from it. I would have thought that this attempt to tinker with the definition will only lead us into a great deal of trouble. I should be grateful if the Minister would reconsider and, in another place, do something to resolve the difficulty.
§ 11.15 p.m.
§ Mr. Arthur Latham
I first place on record my gratitude to my hon. Friend the Member for Hemsworth (Mr. Woodall), but for whose co-operation I would not have found myself serving on the Standing Committee at some 12½ hours' notice. I was grateful for the opportunity because it gave me the chance to follow up the points I had made on Second Reading.
I do not think that it would be right, even at this late hour, for me to let pass the opportunity to pay tribute to my hon. Friends the Minister and the Under-Secretary of State for the care with which they have listened to the representations about the St. Mary's Mansions problem, as it has come to be known. It applies not only to St. Mary's Mansions but to many other properties, both in Paddington and in other constituencies.
As I have said, there are three amendments on Report as a result of the constructive support given by Labour Members in Committee. That view of our work in Committee was confirmed by the hon. Member for Shipley (Mr. Fox) when he said, at the last meeting of the Committee,It is a pity that the hon. Member for Paddington (Mr. Latham) is not with us … because I intend to be constructive this morning.… "—[Official Report, Standing Committee A, 17th December 1974; c. 316.]It was only at the seventh and last sitting of the Committee that he felt able to make that claim. It was indeed the case that attempts to improve the Bill came from the Labour side, but they would not have been fruitful or worth pursuing if the Minister and the Under-Secretary of State had not been so willing to listen, understand, and try to find a solution to the problems.
I am disappointed that several suggestions that I made on Second Reading have not proved acceptable to the Government. I thought that a monetary or percentage ceiling, or an extended phasing, would have represented a more 354 certain solution to the St. Mary's Mansions problem than new Clause 2 may do. At the same time, I acknowledge that new Clause 2 is a worthwhile attempt on my hon. Friend's part to try to meet the situation.
Those of us who served on the Standing Committee will recall that the Minister had established that about 15 per cent. of private sector tenants were being adversely affected by grossly excessive rent increases, and that, as far as he could discover, the factor that was distorting the rent pattern was that of improved neighbourhood amenities which had nothing to do with the services provided by the landlord. I agree with my hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) that that should not be something from which the landlord should benefit, or something to which the tenants should be asked to make an additional financial contribution.
I hope that the solution that my hon. Friend the Minister proposes in new Clause 2 and the very detailed new schedule, which bear testimony to the hard endeavours he is making to meet the problem, will be successful, but I am afraid that I have some doubts.
I ask the Opposition, in their more constructive frame of mind since the last meeting of the Standing Committee, and following the statement by the hon. Member for Bromsgrove and Redditch (Mr. Miller) that fair rents had worked satisfactorily, to tell us whether they think that a rent increase of £9 a week, with which many of my constituents are confronted, represents a satisfactory operation of the fair rents system, whether they think it should be left alone, or whether they have any alternative constructive suggestion which might alter the difficult plight of those tenants facing such an increase. I should not have thought that such an increase could be regarded as light by anybody's standards.
I doubt whether the new clause will do the trick, which is why I have asked questions about reserve powers. I hope that these provisions will not result in giving the Freshwater Company, which is concerned with St. Mary's Mansions among other properties, another £468 a year for doing nothing to contribute to the amenities of a tenancy or district.
355 If the clause is successful and the rent officer or rent assessment committee acknowledges that of that £9 a week perhaps £6 or £7 is on account of neighbourhood improvements, will it be possible for the rent officer or the committee to reduce the rent increase from £9 to £2 or £3? As I understand the new clause and the Bill as now drafted, that cannot happen until the rent officer or the rent assessment committee has considered the representations that the tenant now has the right to make.
At the end of the freeze, if Amendment No. 34 is not carried, will the tenant facing a £6 minimum increase have to go on paying that increase until the new determination has been made by the rent officer or the rent assessment committee? I am worried about the delay, particularly when, as in the instance of St. Mary's Mansions, the matter has to come back to the rent assessment committee. It will mean that tenants will have their standard of living attacked by £150 a year during that delay. My hon. Friend the Under-Secretary has already said that he would regard an increase of £1 a week for local authority tenants as rather steep. If such an increase is steep for local authority tenants, an increase of three times as much must be unacceptable.
We can avoid that situation if there is some machinery for provisional determination by the rent officer, or some provision to allow that increase not to begin to take effect until after an application by the tenant has been considered and determined by the rent officer and the rent assessment committee. I have been unable to find provision for a refund. If I am unsuccessful in my first plea and the rent is subsequently reduced as a result of new Clause 2, will there be provision for refund to the tenant of any excess rent that he may have paid by having paid a grossly excessive rent in respect of the local neighbourhood factor? I shall be grateful if my hon. Friend can deal with those points.
I ask a further question. Will my hon. Friend not agree that there are some cases in which tenants may feel that it is appropriate to apply for a new determination under new Clause 2 but in which the sum of increase is not of the scale 356 to which I have referred? Could my hon. Friend consider offering some guidance to rent officers as to an order of priority, so that they might deal with these applications for new determinations under new Clause 2? If the margin is small, the increase will be much less than those applying to St. Mary's Mansions tenants, who are facing extremly high increases and to whom the decision of the rent officer will be very material indeed.
I hope my hon. Friend will not think that in asking these questions I am unappreciative of the way in which he has tried to respond and to be helpful in overcoming these problems.
§ Mr. Freeson
May I first deal with the general points raised by other speakers before replying to the points raised by my hon. Friend the Member for Paddington (Mr. Latham) who initiated our fresh thinking on this question in the first place.
The hon. Members for Northampton, South (Mr. Morris) and for Reading, North (Mr. Durant) objected to the proposal in the amendment on the grounds that it would result in rents not being related to improvements in an area where private tenants lived, whereas in a similar situation where there are large or even small local authority housing estates, which include environmental improvements, the local authority would be free to take account of the amenities of an area in fixing the rents.
The hon. Gentlemen are perfectly correct. Indeed, they have made the central point which is at issue here. The local authority, when it does this, is making an assessment based upon expenditure which it has undertaken. What we are seeking to do, as my hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) rightly underlined, is to delete, from the basis for rent fixing in the private sector, elements of rent increases which relate to improvements which have not been undertaken by the landlords who are applying for the rent increase—in other words, improvements in the locality arising from the activity of other people and not of the landlords. That is the sharp distinction to be drawn.
The local authority has undertaken the expenditure on these estates. In the situation with which this amendment seeks to deal, the property companies in 357 question have not undertaken the expenditure, which until now has given rise to a difficulty, in certain situations, in relation to rent increases of a certain order.
§ Mr. Michael Morris
Surely that would appertain only if it were locally-determined expenditure. If it is not locally determined expenditure, the actual expenditure by the local authority is in most cases met from the central Government fund, from taxpayers who include landlords. It comes from all the people living in that area. Unless it comes specifically from individual ratepayers in the area, the Minister's argument falls.
§ Mr. Freeson
The hon. Gentleman is saying that if the general body of taxpayers are specifically liable for expenditure on improvements in the locality, there is an entitlement to an increase, but that in a local authority area, because there are various sources from which public expenditure is met, through the Exchequer or through the rates, such a situation should be treated rather differently. We are saying that, whether it be done by locally determined expenditure or by way of expenditure direct through the housing vote—and it would be unwise to be too categorical about which vote head these expenditures come under in local government—there is an entitlement because the community has undertaken the expenditure. This is not the case with the private landlord, except in the most convoluted of circumstances.
I stress to the hon. Gentleman that what he has said about locally determined expenditure is not strictly valid. A considerable volume of the expenditure on improvements or amenities to housing estates by local authorities comes under key sector expenditure under the housing vote.
§ 11.30 p.m.
§ Mr. Nigel Lawson (Blaby)
The point made by my hon. Friend the Member for Northampton, South (Mr. Morris) was not at all convoluted. It was perfectly sound. The Minister will doubtless accept that the private landlord will have to pay for the increased amenities, because he will have to pay increased rates if the amenities are enhanced. Is it not also the case that it is unjust for the tenant to benefit from amenities for which he has paid nothing if the assumption 358 behind the Minister's whole case is that the landlord is rich and can pay for everything whereas the tenant is poor and needs to be subsidised all the time? In many cases the landlord is poor and needs to be subsidised as against richer tenants.
§ Mr. Freeson
I have been advised that the hon. Gentleman has been or remains a distinguished financial journalist. I am somewhat surprised to hear from him the intervention we have just had in the light of the advice I have just received. I will remind the hon. Gentleman of one or two facts which seem to have totally escaped him. It is not the landlord who pays the rates at the end of the day. It is the tenant. Rates are paid either as part of some kind of consolidated rent arrangement or, as is the practice particularly in the case of the more expensive properties, separately by the tenants and directly to the local authority.
The argument here, arising from the second intervention by the hon. Member for Northampton, South, is that, although the general body of ratepayers—and that includes landlords, although for the most part landlords pass on the rate cost to tenants—provide the resources from which trees are planted, open spaces are laid out, and traffic management schemes are provided, the landlord should nevertheless continue to get the benefit of an increased rental value. I do not understand the reasoning behind that argument.
I made it clear in Committee that I am not suggesting that by introducing this amendment to Section 46 of the Rent Act we are establishing a pure and rational basis for the future. In Committee I indicated that I should like to have pursued further some of the alternatives which were suggested by my hon. Friend the Member for Paddington as to rent fixing or rent policy for the future. However, this could not be done within the constraints of time related to the Bill. We shall be looking fundamentally at the question of rent policy, quite apart from the review of housing finance upon which the Department will be embarking fairly soon. These are all fundamental questions.
I am not suggesting that by these amendments we are asking for some fundamental reform of the criterion of rent fixing which will stand for years 359 to come. It is something that has been proposed, short of a more fundamental look at the basis of rent fixing for the future, which we must come to at a later date. In the meantime, all I am saying is that the principle that we have adopted is a reasonably good one, and it will become even more valid as we move down the road to improving action areas.
This consideration extends to the kind of problems that have arisen in cases where it may be clear that grant-aided public expenditure will result in improvements in the neighbourhood. If a property company happens to be in the area of the action authority the property company or the landlord will have received grant aid.
In that context we are putting this proposal forward as a way by which we can avoid a sharp increase in rents in these areas where improvements have been attributable to expenditure by the local authorities in question.
My hon. Friend raised a very important point about dates. The date we have chosen is the date which comes nearest in time to the date in respect of the rents which are being registered for the first time. I am on record as having said that this is something which I would be prepared to look at again, if it is possible to get some more effective means of date fixing. Before it comes back to us for final decision we shall gladly give such consideration as we can to the matter, but for the present we have done the best that we can do. There may be problems which, as my hon. Friend has said, raise anomalies whichever date is chosen and whatever method is used, but we shall look again at the possibility of tightening up the date situation so that we can get a firmer policy. I hope that I can leave the matter there, with the general undertaking that we shall take what measures we can.
On the question raised by my hon. Friend the Member for Paddington, the matter of priorities is something in which the Government have never intervened. It is a matter for the judgment of the rent officers and rent assessment committees, and we shall consult them and be as helpful as we can. But it is not easy for a Government Department to intervene in matters of this kind, and it 360 may be that some tenants would not thank us for our intervention. Nevertheless, I take the point that is worrying my hon. Friend and will consult further.
Turning to the question of the waiting period before there has been a reassessment of the rent in the light of the amended Section 46, it is true that at the end of the freeze rents will go up, subject to phasing. If a lower rent is registered, part of the increase will be made retrospectively irrecoverable and the tenant would then be able to deduct it from the rent within two years under the phasing arrangements.
This is as far as I have been able to check the position between the time that the Bill left Committee and reached Report stage. I am prepared to consider this further to assure myself, if I can, as well as my hon. Friend, that we have done all we can to protect tenants who might benefit financially from the amended Section 46 but who, in the process, might not be sufficiently protected during the period between the passage of the Bill into law and the time when the rent assessment committees or the rent officer recommend or confirm a revised rent in the light of this clause. I am particularly interested in this question of a refund or something equivalent to it. I am afraid that I cannot give a full undertaking about the position tonight.
§ Mr. Arthur Latham
Will my hon. Friend comment on the possibility of some intermediate or transitional determination by the rent officer, so that the period of delay does not result in hardship? One of my worries is that whereas it may be fairly simple for a tenant to go back to the rent officer, when the tenant has to go back to the rent assessment committee there may be considerable delay. There ought to be available to the rent officer the considerations which the committee took into account in fixing that high rent so that the officer should reasonably be in a position to say what the lower rent ought to be.
§ Mr. Freeson
The procedure as we have set it out in our amendment will require tenants who wish to exercise rights under it—if their cases are those which have been dealt with previously by the rent assessment committee—to go 361 to the rent officer in the first instance, who would automatically have to refer to the committee. I will look at the possibility, where in any case the application or referral has to be routed through the rent officer, of its being considered by the officer on a provisional basis. I will seek advice and consider that. I cannot undertake that I shall be able to meet my hon. Friend.
§ Question put and agreed to.
§ Clause read a Second time and added to the Bill.