HC Deb 08 July 1977 vol 934 cc1710-20
Mr. Stephen Ross

I beg to move Amendment No. 40, in page 5, line 40, at end insert— '(2A) The conditions subject to which assistance may be given under subsection (1) or (2) above include, without prejudice to the generality of either of those subsections, conditions requiring the voluntary organisation receiving the assistance to keep proper books of account and have them inspected and audited'.

Mr. Deputy Speaker

With this we can also discuss Amendment No. 41, in page 5, line 40, at end insert— '(2A) The Secretary of State, Greater London Council and any housing authority shall be concerned as to the proper application of moneys for the purposes for which they were granted or loaned under this section.'.

Mr. Ross

The effect of this amendment is to make clear that it is contemplated that the conditions which may be attached by an authority to assistance to a voluntary organisation would normally include requirements in relation to keeping of proper accounts by the voluntary organisations and to the audit and inspection of those accounts.

Amendment No. 41, which I would be happy to accept, would require the Secretary of State, housing authorities or the Greater London Council to be concerned that loans or grants are spent for the purposes for which they were granted or loaned. Amendment No. 40 is brought forward in fulfilment of undertakings we gave in Committee. Members of the Committee were understandably anxious that Clause 8 should stress that public money should be adequately accounted for, especially in view of the concern caused by the film "Goodbye, Longfellow Road".

This amendment provides that the body giving the grants, loans or other assistance, whether the Secretary of State, a housing authority or the GLC, may make it a condition that the voluntary organisation shall keep proper books of account, have them audited and allow them to be inspected. The amendment improves that which was considered in Committee, in that it says not simply that accounts shall be kept but deals with the means of ascertaining that they are kept, and kept correctly.

Mr. George Cunningham

When I read Amendment No. 41 I thought that there must have been a misprint. It says: 'The Secretary of State, Greater London Council and any housing authority shall be concerned as to the proper application of moneys for the purposes for which they were granted or loaned under this section.'. I do not know whether any other hon. Member has leapt to an understanding of what that means. It is most appallingly grammatically bad. I do not know to what the word "they" refers. It does not refer to the subject of the sentence and personal pronouns should always be used in a sentence as referring to the subject of the sentence.

What does it mean? We are compelling authorities to be "concerned", but what do we do if they are not? Is this the normal thing? I know that "concerned" does not mean "worried"; I take it that it means "given some responsibility".

Mr. Stephen Ross

I said that I was prepared to accept Amendment No. 41. I should have said that I would consider it. It would be better to look at its terms again.

Mr. Rossi

When the hon. Member has finished his speech, perhaps I could explain.

Mr. Cunningham

If I am to receive an answer from the hon. Member for Hornsey (Mr. Rossi), Mr. Deputy Speaker, perhaps you would regard my intervention so far as a question to him and allow me to come back when he has finished.

Mr. Rossi

Again I thank the hon. Member for the Isle of Wight (Mr. Ross) for implementing at least in part an undertaking that he gave us in Committee to deal with the problem of accountability of public money loaned or granted for specific purposes. We suggested that there were two aspects of the same problem— the requirement that people should keep proper accounts and the requirement that they should show how they had used that money.

Normally, we should have been satisfield if the sponsor had agreed to accept an amendment to Clause 8 to substitute for "voluntary organisations", "registered charities or registered housing associations". Registered charities are accountable to the Registrar of Charities and registered housing associations are accountable to the Housing Corporation.

However, under this clause, the Secretary of State, housing authorities or the GLC are empowered to make loans or grants to bodies which are not subject to the disciplines of registered charities or housing associations. Any group of people could decide to band together for some ostensibly good purpose and induce an authority to grant or lend them money. When the authority sought to find out what had happened, there would be no books or accounts.

That was the situation which received such notoriety in the film "Goodbye, Longfellow Road". One association was a registered charity and the other was not. The fact that one was suggested to us that the mere keeping of books of account was not sufficient in itself, that a public body dispensing money should be obliged to ensure that the money was spent for the purposes for which it was granted or loaned.

Normally, borough treasurers are cautious gentlemen. When they lend money they take care to ensure that proper books of account are kept by the recipient and inspected regularly and that when the date for repayment falls due, the money is there to be repaid. But there is a different attitude to money which is granted. That is partly the reason for the Longfellow Road scandal.

Grants were made by the GLC to voluntary organisations—one a registered charity and the other not—and there was absolutely no follow-up. Although one body may have been required to keep proper records because it was a registered charity, the other was not. But certainly the GLC was in no way concerned to see how the granted money was applied. In the event, it appears, or it would seem at first sight—I must use those terms because the matter is now subject to investigation by the police and the Director of Public Prosecutions—that the money was not used for the purpose for which it was granted.

4.45 p.m.

The intention is that the amendments should deal with that situation. Amendment No. 40 deals with the requirement that these organisations shall keep proper books. Amendment No. 41 provides that a public authority lending or granting the money has a legal obligation to ensure that the money is used for the purpose for which it was granted or loaned.

The language in those amendments is that which is frequently used in trust documents where trustees are appointed and directed under a will to carry out the deceased person's wishes and make payment to a third party for specific purposes.

In some wills the trustees have an obligation to ensure that the money is used for the purposes that the testator intended. In other cases the will is so worded that they shall not be concerned about the proper application of the monies. The language used is borrowed.

In this case the Secretary of State, the Greater London Council or the housing authority has granted money which is entrusted to a third body. The Secretary of State, the Greater London Council and the housing authority must be concerned about the proper application of the money.

Clause 8 deals with three bodies—the Secretary of State, the GLC and the housing authority, who may grant or lend money to third bodies which are then entrusted to use the money in a certain way. I hope that that explanation, how- ever inelegant the language in the amendment, will satisfy the hon. Member for Islington, South and Finsbury (Mr. Cunningham). It follows the form used in private documents.

Mr. George Cunningham

I am grateful for that explanation. It clearly explains the purpose behind the amendment. However, I suggest to the hon. Member for Hornsey (Mr. Rossi) and the Minister that this is not the proper way to do it. It would be better to use such words as "authorities must take steps to ensure—" or something of that nature which is similar to the wording used by the hon. Member for Hornsey in his commonsense explanation.

The hon. Member invoked the language of wills but his example does not meet the purpose. He said that sometimes a will provides that trustees shall take steps to ensure that the money is used for a specific purpose and that in other wills that the trustees will not take those steps. The purpose of that is to exclude the trustees from any responsibility. That is not only elegant but effective language for achieving that purpose. The matter can be dealt with in another way. I hope that some peer will get his beady eye on that language and find some other way of achieving the same purpose.

Mr. Stephen Ross

Amendment No. 40 covers the point made in Amendment No. 41. I appreciate that it is a worthwhile attempt to put a more positive duty on the authorities and I give the hon. Gentleman an assurance that we will give it attention in another place. I hope that that will satisfy him.

Mr. Rossi

I am grateful to the hon. Gentleman, but I would like to press him further and ask him to accept the amendment at this stage. We all know that these things can be lost sight of. I should like the principle of a positive obligation on a public authority to see how money is spent to be put into the Bill. If the wording is not correct, it can be altered in another place, but I am rather frightened of letting it go and not indicating to their Lordships that we were concerned to see that an obligation was placed on a public authority to ensure that money granted or loaned was properly spent. I do not think that Amendment No. 40 goes far enough to ensure that their Lordships will understand what is in our minds, and I ask the hon. Gentleman to accept my amendment on the basis that it can be corrected at a later stage.

Mr. Ross

Time is marching on, and at the special request of the hon. Member I will accept his suggestion.

Amendment agreed to.

Mr. Hugh D. Brown

I beg to move Amendment No. 42, in page 6, line 13, leave out subsection (6) and insert— '(6) A housing authority shall debit to the housing revenue account costs or expenses incurred in carrying out their duties under this Act only in so far as they conform to the categories of expenditure laid down in the Housing Finance Act 1972 and the Housing (Financial Provisions) (Scotland) Act 1972 '.

Mr. Deputy Speaker

With this we may take Amendment No. 43, in page 6, line 13, leave out subsection (6) and insert— '(6) A housing authority may debit any expenditure and credit any income attributable to functions undertaken under this Act to their housing revenue account maintained under the Housing Finance Act 1972 and the Housing (Financial Provisions) (Scotland) Act 1972.'.

Mr. Brown

This is a clarifying amendment. I would like to leave the matter there, but I gather that there is difficulty about it. My hon. Friend the Undersecretary of State for the Environment will give further clarification of any points that may be raised.

The amendment states that expenditure under the Act is to be charged to the housing revenue account only on those items already specified in statute— mainly loan charges on accommodation provided and management and maintenance costs. Other expenditure such as that on bed and breakfast is excluded from the account.

Subsection (6) was inserted in Committee, following an amendment by my hon. Friend the Member for Edinburgh, Central (Mr. Cook). He has apologised for having to leave. He accepts Amendment No. 42 and has asked me to convey as much to the House.

I understand my hon Friend's reasons for moving the amendment carried in Committee. He wanted to ensure that the costs of providing accommodation for the homeless did not fall on the housing revenue account, except where that was already the statutory position, and so become a charge on rent income from tenants. This was a major point in the representations made by the Convention of Scottish Local Authorities on the Bill.

The subsection as it now stands, however, may appear to allow local authorities discretion to decide whether or not to charge any expenditure arising from the Bill to the housing revenue account. If it has this effect, it is at cross-purposes with the statutory basis of the housing revenue account, set out in the Housing (Financial Provisions) (Scotland) Act 1972 and its English equivalent. Under those Acts, no discretion is available; they prescribe the housing costs which must appear in the housing revenue account.

I think that that is sufficient explanation to give the basis of the case. The spirit of what prompted hon. Members to support the amendment in Committee was clear. But the difficulty is twofold. The discretion envisaged in Amendment No. 43 is quite inconsistent with the present mandatory basis of the housing revenue account, and including bed and breakfast in the account would undermine its status as a property account, and would have wide implications, perhaps calling into question the position of other major items, such as housing advice centres.

We therefore suggest that the House should leave matters as they are under general legislation. Perhaps something will need to be done, not necessarily arising out of homelessness, and there may be ideas for discussion, within the context of the Green Paper, on what should be in the housing revenue account in future, because the system is intended to be changed in any case. Nevertheless, I hope that for the immediate purpose the House will accept Amendment No. 42 and reject Amendment No. 43.

Mr. Younger

We are in a little difficulty here, because the situations are different north and south of the Border. I think that Scottish hon. Members on both sides of the House will agree with the Minister and will accept Amendment No. 42. It is in line with what COSLA wants and it is in line with what some of us argued in Committee.

The basic aim of both sides of the House on Scottish accounting is that the present expenditure for dealing with homeless persons should in future still qualify for needs element or the equivalent of the rate support grant. The Government have given an undertaking that they will find a formula for ensuring that that is so. If any of this expenditure were put into the housing revenue account that could not take place, and the full weight of it would fall upon rent payers, who fund the housing revenue account.

Both sides of the House therefore would prefer Amendment No. 42 and would be glad to agree to the Minister's proposal. I think that my hon. Friends from south of the border have reservations, however, and would prefer Amendment No. 43 to apply to England. No doubt they will wish to make their points about that. If that is so, I presume that something will have to be done to sort the matter out in another place.

As matters stand I do not think that we can satisfy both these problems by accepting either of the amendments, and we clearly cannot accept both of them. So the point will have to be cleared up in another place. But, from the Scottish point of view, we would be glad to accept Amendment No. 42.

Mr. Rossi

Obviously in seeking to ameliorate the situation for authorities in England and Wales, I do not wish to create a situation which would cause difficulties for Scottish authorities. I am not quite sure where the difference lies between the two. I suspect that it arises from the fact that nowhere in Scotland will one find a housing revenue account in credit.

In England and Wales, one finds frequently that housing revenue accounts are in surplus. That immediately gives rise to the problem that, where a housing revenue account is in deficit, any additional expenditure incurred by the authority on housing has little effect upon the ratepayer, in the sense that it does not matter to the ratepayer which account is charged for the additional expenditure. If it were charged to the housing revenue account, the deficit would be increased, and at the next financial year the deficit would have to be mopped up by increasing the amount to be demanded from the ratepayers and by a transfer of money being made from the general rate fund into the housing revenue account.

When there is a surplus, a different problem arises. If there is a surplus on the housing revenue account and a local authority incurs additional housing expenditure but is unable, because of artificial accounting rules, to debit that to the housing revenue account and use up the surplus, the ratepayers have to make up the money out of an additional rate increase the following year. This is the anxiety that has been put to us by the Association of District Councils, which is the association representing the English and Welsh interests in these matters.

5.0 p.m.

I should like to read to the House, so that it may be on the record, a note that I have received from the Association of District Councils setting out its request. It is essentially the association's request and not mine. I regard this more as a matter between the Government, the Department of the Environment and the local authorities themselves. It is something that the Government will have to sort out, and no doubt discussions will take place following the debate.

The association states: By virtue of section 12 and schedule 1 of the Housing Finance Act 1972 only specified income and expenditure may be included in the statutory housing revenue account of a housing authority. Without this amendment some expenditure on homelessness e.g. the cost of bed and breakfast accommodation or housing advice could not be included in the housing revenue account. Inclusion of expenditure in the HRA gives a housing authority the option to meet it from rent income or from a rate fund contribution to the account. If the expenditure is not in the HRA it could only be met from the rates. That is the anxiety of the association.

The statement continues: The Association considers that the principle on which the inclusion of homeless expenditure in the HRA could be based is that this account should include all expenditure in relation to persons for whom the housing authority accepts a housing responsibility (including any necessary investigations). Bed and breakfast charges should be within the HRA because this enables rent pooling e.g. high bed and breakfast charges could be abated by pooling where necessary. The HRA is at present more than a proerty account since the cost of housing welfare officers are included in it. It is expected that most expenditure on homelessness will be included in the HRA without this amendment, but this merely strengthens the case for all homelessness expenditure to be included therein. Items such as bed and breakfast, the giving of advice, caravans/mobile homes, and the cost of storage of furniture should not be left out. It would seem doubtful whether expenditure on homeless persons accommodated in caravans (a flexible method of providing accommodation in emegency) can be in the HRA because the account is limited to houses and other buildings (section 12 HFA 1972). That is the case that the Association of District Councils has asked me to put to the Minister in support of Amendment No. 43. It has raised a number of valid points, and I hope that they will not be rejected out of hand.

Mr. Armstrong

I do not reject the arguments out of hand. They have been put to us by the district councils. The hon. Gentleman having put the matter quite clearly, and, knowing that we take it seriously, I hope he will not press Amendment No. 43.

The housing revenue account is a property management account and is confined to expenditure and income in respect of action related directly to the local authority housing stock. Authorities at present have no discretion as to which items of expenditure or income are in the housing revenue account. Therefore, expenditure on homelessness is chargeable to the housing revenue account where it relates to the use of local authority stock, but not in other cases.

There are two difficulties, if I may put them to the hon. Gentleman. The first is that the discretion that is envisaged in Amendment No. 43—and I understand the case—is quite inconsistent with the present mandatory basis of the housing revenue account. Secondly, to include bed and breakfast in the housing revenue account would undermine the status of the housing revenue account as a property account and would certainly have wider implications. Nevertheless, housing finance is constantly under review.

The truth is, of course, that the majority of expenditure on the homeless —the House ought to be aware of this, and I know that the hon. Gentleman is aware of it—comes within the housing revenue account, because a great number of the homeless are on the housing list and are eventually housed in local authority property. The rest of the expenditure amounts to a very small propor- tion of the expenditure by councils, by housing authorities, on the homeless.

Following the Green Paper, however, we are discussing more widely the function of the housing revenue account, and I suggest that it is too wide an issue to be dealt with in this Bill. I take on board the representations that the hon. Gentleman has made and those made by the council, but I ask the hon. Gentleman whether he will consider not moving Amendment No. 43 and accepting Amendment No. 42.

Mrs. Millie Miller

Before my hon. Friend finally sits down, may I point out to him that there are other considerations in this matter? As he said, the major authorities dealing with homelessness are those under the metropolitan districts. For them, the cost of bed and breakfast accommodation can be very great, and it represents an impost on council tenants many of whom find rents difficult to meet. It would be laying the burden of the greatest number of homeless persons on a very small number of authorities. I hope that my hon. Friend will bear this in mind in his further consideration.

Mr. Armstrong

As I say, the allocation of resources in this way is, a very difficult matter and a subject for continuing discussion between us and the housing authorities. I shall bear in mind what my hon. Friend, as well as the hon. Member for Hornsey (Mr. Rossi), said.

Amendment agreed to.

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