§ Motion made, and Question proposed That this House do now adjourn.—[Mr. Ashton.]
§ 11.52 p.m.
§ Mr. Stephen Ross (Isle of Wight)I am extremely grateful for this opportunity to raise a matter which is a cause of real anguish to a limited number of owner-occupiers throughout the country and certainly of considerable concern to a larger number of householders generally. I refer to the problems arising from structural subsidence, which can occur for a variety of reasons but which has been particularly prevalent since last August, when the side effects of the exceptionally dry summer began to show themselves, more especially in properties erected, frankly, with insufficient foundations on a clay subsoil which, with the dry weather, contracted and cracked.
My wish to secure the debate stems originally from a visit that I received from a young couple and their family of three about two months ago. In 1971 they purchased, with the aid of a mortgage, a semi-detached four-bedroomed, late Victorian villa in my constituency. They spent the next five years modernising it, installing bathrooms and all facilities, decorating it, getting it up to modern standards and creating a very pleasant home.
Suddenly their whole security and plans for the future were ruined by the appearance of large cracks in the main walls of the adjoining house, which slowly but surely extended to their own. The house next door is now a complete write-off, and theirs is also considered by the structural engineers and the insurance company to be beyond repair, though not 875 quite so badly affected and still capable of occupation.
On checking their insurance position with the building society they find that they are covered for only £5,500, which, with a 10 per cent. additional allowance towards the cost of alternative accommodation, possibly brings the total compensation to them to some £6,050. As to purchase a house of similar size on the open market at present would certainly cost at least £10,000 and as they have an existing mortgage on their property of over £3,000 to pay off, one can understand their feelings.
Of course, it can be rightly said that they should have checked their insurance and made sure that it was adequate. We all know that the diktat caveat emptor still applies—buyers beware. Many building societies and insurance companies are now reminding their clients of the necessity to ensure that their insurance cover is adequate.
When we speak of adequate coverage, it means full replacement value, which many of us neglect and ignore at our peril. I have been caught on this myself. Insurance companies are drawing clients' attention to it and some are making an automatic increase of up to 50 per cent. at no extra charge and withdrawing it after six months if the client then cancels the increase and does not wish to have the extra protection. This action is justified but it does not help those whose property has already been adversely affected by subsidence.
Subsidence cover has been automatic since 1971 at no extra premium, but, with the substantial increase in claims, that inevitably is under review. However, most policies carry an excess clause which requires the policy holder to pay the first part of any claim, either 3 per cent. or 5 per cent. of the overall sum insured, according to which company arranges the insurance, subject to a minimum which varies between £150 and £500. That additional 3 per cent. or 5 per cent. can be the cause of further difficulty since underpinning of property affected by subsidence can be a very expensive business. Estimates from the British Insurance Association range from £2,500 to as much as £35,000, depending on the circumstances, so that even those who have 876 insured adequately can find, as other constituents of mine have found—other pensioners—that they are required to provide as much as £500 or more towards the remedial work.
For retired couples living on fixed incomes in particular, with ever-increasing costs to meet, that can come as a great shock, to say the least. In my constituency 22 per cent. to 25 per cent. of the residents are retired people many of whom have purchased bungalows with their savings. It is a terrible shock when they have to face finding money of this order, which they had not bargained for.
What do I want the Government to do about this? It would be wrong to ask them to set up a fund to compensate people in this case when there are so many other cases which should receive help.
I should like to know whether the Department of the Environment has any idea of the extent of the problem. How widespread is it? The British Insurance Association suspects that claims this year may amount to as much as £60 million, but that is only an approximation. Most claims are still being negotiated and have yet to be settled. The building societies are working flat out and people do not know where they stand.
Although I am certain that all reputable building societies and insurance companies are trying to make sure that people cover themselves adequately, should such cover not be obligatory on all building societies and local authorities which lend money?
Should not greater efforts be made to bring home to people through television advertising, posters and circulars the need for full cover, not just for cover of the amount of the mortgage? The cost of new building today can be as much as £16 a square foot. If people are advised how to measure the floor area of the house and to multiply the figure they will know what amount of cover they should provide for. It is the complete reinstatement figure which is required.
Secondly, local authorities should be encouraged to step in where houses are a complete write-off and where, perhaps, more than one owner is concerned, so that sites can be parcelled together, purchased at existing use value, and then resold.
877 Applications from local authorities for financing this sort of work should, therefore, receive favourable consideration from the Department of the Environment and funds should be made available, to be repaid when the land is sold off.
If something like that is not done, there will be long delays, and some properties will be left empty and others will be left in a dangerous condition. If this initiative is not taken, some unscrupulous person will come along and doll up the property and pass it on to someone five years hence when all this is forgotten.
Thirdly, some method should be devised to help people on fixed incomes whose houses can be repaired but who are unable, because of under-insurance or inability to find the 3 per cent. to 5 per cent., to pay for the repair, even if they are properly covered.
As we have no national disaster fund, which I regret, will the Minister consider allowing local authorities—providing them with the necessary cash—to advance low-interest loans, secured on the freehold of the property where it is adequate, to be repaid on sale or death? I have in mind the sort of scheme which can be offered to elderly people faced with substantial road charges. In this way they can retain their houses and do not become a charge on the State, which they might otherwise be forced to become through no wish or fault of their own.
I emphasise that most properties can be repaired. Only a limited number are a complete write-off. Even in those cases, where there is real hardship, we surely could afford to meet the cost of removal and legal fees out of national resources. I ask that dispensation be given to local authorities to deal with these cases. If the matter is not dealt with in that way people will become a charge on the State because they will have to be rehoused, presumably in local authority housing.
Finally, we should look again at the planning procedures that allow houses to be built on known trouble-spots. In some areas in my constituency houses are known to be slightly suspect because of the nature of the subsoil. We should insist upon the standards laid down by building regulations being strictly enforced. There has been far too much 878 bad building in the United Kingdom over the past 10 years.
I could go further and comment on the rôle of the National House-Building Council in the matter of subsidence claims, which is not entirely satisfactory, but time does not allow. I would, however, express the view that this, too, is an area that needs to be clarified for purchasers of new property. The present procedures should be improved upon.
I should like to give way to the hon. Member for Harrow, Central (Mr. Grant).
§ 12.2 a.m.
§ Mr. Anthony Grant (Harrow, Central)I am very grateful to the hon. Member for the Isle of Wight (Mr. Ross) and the Minister for allowing me to make a brief intervention.
The Minister will know, because I have been in correspondence with him, that a startling number of people in my constituency have suffered from subsidence because of the recent drought. The extent of the problem is perhaps not sufficiently widely appreciated.
To support the plea made by the hon. Member for the Isle of Wight, I will illustrate some of my constituents' problems by quoting from a letter from one constituent, which reads as follows:
Apparently I am not covered on my insurance … for subsidence (although I am for earthquakes) and I will have to pay for all the repairs myself which have been estimated at approximately £1,500. I have been a resident in Harrow for almost 50 years, and as I am in my eighties and recently widowed, I should very much appreciate any assistance and advice.I quote that letter as an example of the hardship that is being experienced. I entirely understand the need to contain public expenditure; indeed, I support it.In answer to my letter to him, the Minister told me:
I am afraid I could not encourage local authorities to make an exception to the normal rules where repairs are required as a result of subsidence.In hard cases, will the Minister please look sympathetically at the proposals made by the hon. Member for the Isle of Wight, perhaps with a view to local authorities advancing money for the work to be done and taking a chance. In the case of my constituent the only way the local authority could recover would be 879 on death by having a charge on the property. I ask the Minister to make a full investigation of the extent of the problem. If he can find a way to help the hardest cases along these lines, many people will be very grateful.
§ 12.4 a.m.
§ The Under-Secretary of State for the Environment (Mr. Ernest Armstrong)I am grateful to the hon. Member for the Isle of Wight (Mr. Ross) for raising this important matter, and also for the contribution made by the hon. Member for Harrow, Central (Mr. Grant).
There is no doubt that great hardship has been caused in some cases, and I am sorry that I cannot give an estimate of the claims which have been made this year. All I can say, on behalf of my Department and the Building Research Establishment, is that there has been an increase in the number of claims, probably because of the drought this summer. We are well aware of the hardship that has been caused in individual cases. Both hon. Gentlemen who spoke raised specific cases, and that is an indication that, although I speak in general terms, the problem means a great deal to the persons affected.
As the hon. Member for the Isle of Wight said, total insurance payments will be about £60 million this year, and that figure may well increase because some people will not claim until 1977. Therefore, this is just a rough estimate. I am aware of the concern of people up and down the country. The problem has, of course, arisen predominantly in areas, mainly in the South of England, where houses have been built on clay subsoil which has dried out excessively and shrunk because of the long drought, although every year there are claims because of subsidence. The result has been movement of house foundations and cracking of walls. I know that many approaches have been made to the Building Research Establishment as well as to my Department, and I should like to draw on the advice which the Building Research Establishment has issued, since generally it would not be wise for owners to rush into expensive repairs. In almost all cases that the BRE has dealt with, the answer has been to do nothing until the spring because the soil will largely 880 recover its original form in the winter rains, partially closing the cracks. Only in very exceptional circumstances is the damage sufficiently severe to affect significantly the structural strength of the house as a whole.
But all householders who have suffered damage from subsidence should immediately notify their insurance companies of the damage, and warn them that they may be submitting a claim when the full scale of the necessary repair work has been assessed.
The Building Research Advisory Service has been giving advice on this problem for many years. It has produced a technical information leaflet TIL43, "Damage to Buildings on Shrinkable Clay Sites", which can be obtained free of charge from the Building Research Station at Garston. Anyone who is concerned with the problem would, I think, find it very useful to have that leaflet as a starting point. I have given the general advice provided by the BRE in the light of its expertise and long experience, but I should say that it cannot be taken as an individual prescription for each property. It is vital that the owner should base his decision on what to do by a particular judgment on his own property.
I was very interested in some of the suggestions put forward by the hon. Member for the Isle of Wight. It has been suggested that, in view of the extent of subsidence and the cost of remedying the damage caused, the Government should provide some special financial assistance, by way of a grant, an interest-free loan or a loan. I assure hon. Members that I will read very carefully what has been said in this debate because I know how concerned they are. I do not want to appear unsympathetic to those who are worried and worse off as a result of what has happened but I find the suggestion a difficult one to accept as a matter of principle. The ownership of almost any asset carries with it the risk that it will at some stage need repair or replacement. As a general rule, it seems a doubtful proposition that the Government should stand the cost of that work rather than the individual owner himself.
The argument here, I realise, is that the scale of what has happened makes it a national problem outside the normal responsibility of the individual owner. 881 That seems to be a fairly slippery path to follow. It is, of course generally accepted that the owner of any costly asset, whether it be a house, or anything else, will be responsible for its upkeep and that the prudent person will safeguard himself against exceptional cost by insuring against the risk. Nevertheless, I take on board what has been said about insurance policies and the need for people to be very cautious and to read what is involved. I will consider very carefully what the hon. Member for the Isle of Wight suggested drawing people's attention to this.
In principle, I suggest that the individual owner must be responsible for the maintenance of his property and should take steps to see that he is insured for potential major costs if he feels unable to meet them from his own resources. That is certainly what I would expect to be the view of most owners. Indeed, since 1971 comprehensive policies taken out by house owners have, I believe, generally included cover for subsidence, and those whose policies date from before then have since had the option to extend them either at no extra cost or for a small additional premium. The owner normally has to meet a limited percentage of the total insured sum. I know that even that small percentage can make a nasty hole in one's pocket in relation to a substantial capital asset, but it is, I think, one of the hazards an owner faces. However sympathetic I feel when I hear and read of the distress that has been caused by this problem, I find it hard to think that the general principle of individual responsibility is wrong.
An interest-free loan would, of course, constitute a subsidy in another form and is, therefore, ruled out for the reasons I have given. Nor, since a Government loan would constitute public expenditure, can I agree that we should at this time increase the public sector borrowing requirement in the way suggested.
It has been suggested also in letters I have received, as well as tonight, that there should be a national disaster fund. A disaster fund established by the Government would be contrary to the principles on which Parliament votes money to set sums aside to meet unspecified needs for expenditure. Nor, I think, is the idea of a general fund primed from time to 882 time by voluntary contribution very realistic. Either would, of course, be some sort of generalised insurance. It would certainly be difficult to defend the application of public money to provide for the repair of damage which is or could reasonably be, covered at least for the major cost by insurance.
I have already said that for many people much of the cost of large repairs will be covered by their household insurance, subject to the terms and conditions which apply in each particular case. There are also other forms of help which may be available. If a house is less than 10 years old, it will probably be covered by the National House-Building Council's protection scheme. While the NHBC scheme specifically excludes the council from liability for the cost of remedying structural defects caused by subsidence in so far as such costs are already separately covered by insurance, the council will consider claims not covered by insurance —for example, the excess which, as I have already explained, owners are required to meet under most policies.
Further, I understand that where an owner has a building society mortgage his society will consider making an additional advance to cover the uninsured part of the cost of remedies if his circumstances are such as to necessitate a further loan. If an individual does not have an existing mortgage, he would probably be advised to take professional advice if he requires a loan to help him meet costs. The house itself should normally provide sufficient security.
It may also be possible to secure some assistance to reduce the burden of the loan. A borrower could, for example, borrow the money through an option mortgage and, subject to the conditions of that scheme, the interest charges would be reduced by means of a Government subsidy. Alternatively, it might be possible for the borrower to get tax relief on the interest of any such loan. The availability of relief will depend upon what is the precise nature of the work to be done. As each case rests on its own facts, individuals should get in touch with their inspector of taxes about their own particular circumstances.
There are some for whom the decision not to make special assistance available 883 will be a disappointment, and I am particularly sorry for those for whom the payment for repairs will mean hardship. I acknowledge that there are such cases. But I cannot regard a very dry summer as such an exceptional circumstance as to throw overboard the principle that successive Governments have followed in relation to the prime responsibility for an individual's property to rest with that individual, and I hope that many who are advised and able to wait and see the effect of the return of normal soil conditions 884 will find that their early worries are substantially dispelled.
As I say, I recognise that this is a very serious matter for the people concerned. My post-bag has convinced me of this. There are a number of people who have been wondering whether any extra help could be given. I shall study carefully what both hon. Members have put to me, but I can make no commitment.
§ Question put and agreed to.
§ Adjourned accordingly at fifteen minutes past Twelve o'clock.