COMPLETION

HC Deb 06 August 1980 vol 990 cc609-20

Lords amendment: No. 23, in page 13, line 39, after "price" insert that price to be determined by adding half the difference between the value of the dwelling-house at the time of completion of the transaction and the value at the time the notice exercising the right to buy was served.

Mr. Stanley

I beg to move, That this House doth disagree with the Lords in the said amendment.

The whole purpose of the option provisions of the Bill is to give a tenant who is not able to afford to buy outright immediately the opportunity of saving for a two-year period while the price of his house or flat remains fixed. Yet the intention of this amenedment is not that the price should remain fixed during the option period but that it should go up by half of the increase in the value of the house between the time that the tenant applies to buy and the time that he actually completes the purchase.

We made it clear at the election that the price would be fixed during the option period. Our objective is to help council tenants to buy, and that means keeping the price fixed so that tenants know exactly how much they have to save during the option period.

Unless the price is fixed, tenants will simply not know how much they will have to save. They will be at the mercy of whatever happens to be the rate of increase in house prices during the option period and, as the House knows, that can vary greatly from year to year.

A tenant, and perhaps other members of his family buying with him, could, for instance, save furiously for the two-year period and accumulate perhaps an extra £200 to £300. But, if this amendment were accepted, they would not know whether they had saved enough until the house was valued again at completion. If they even found themselves, say, £500 short because of the rise of house prices, the family would reasonably feel that they had had a thoroughly raw deal, having saved hard and then found themselves short.

This amendment is yet another reflection of the fact that the Labour Party wants to stop as many tenants as possible from being able to buy their homes. Our objective is quite the reverse, and I ask the House to reject the amendment.

Mr. Frank Allaun (Salford, East)

This is one amendment on which the Opposition strongly disagree with the Government. The vote in the other place was 90 to 86 in favour of the amendment. The amendment was moved by Baroness David—a Conservative—which should make Conservative Members in this House hesitate before they pursue the point. An enormous bonanza is given to purchasers—up to 50 per cent. discount on the price of the house if they have lived in it for 20 years, plus up to 20 per cent. or more if this clause is included in the Bill. A discount of 70 per cent. is a giveaway, and clearly the buyer's gain is the community's loss.

Baroness David said that the objective of her amendment was: to prevent quite such a big present being handed to the prospective purchaser at the expense of the local authority ratepayers and taxpayers "—[Official Report, House of Lords, 21 July 1980; Vol 412, c. 65.]

Mr. Deputy Speaker

Order. Unless the hon. Gentleman is quoting the words of a Minister in the other place, he will have to find another method of communicating his message to this House.

Mr. Allaun

I was quoting the words of Baroness David, who is not a Minister.

Mr. Deputy Speaker

The hon. Gentleman must use some other words to express the same message to this House.

Mr. Allaun

I have made a mistake, and I cannot put it right, but that is what Baroness David said. She said that it was a tremendous gift at the expense of the local authority, the taxpayer and the ratepayer.

I repeat that the purchaser's gain is the community's loss. We cannot give such a vast handout without someone having to pay for it—and it is the rest of the community who will have to pay. Under this amendment a further two years' bonus will be given to the purchaser.

Every year house prices rise and, according to the Nationwide Building Society, with which many hon. Members are familiar, in the two-year period from 1977 to 1979 house prices rose by 63.7 per cent.—31.8 per cent. per annum. Admittedly, that was a period of high inflation, but there have been other periods of high inflation. Purchasers will be able to buy their houses at the price that was payable two years previously. In addition to the discount of up to 50 per cent., they will receive a discount of up to 20 per cent.

I and my hon. Friends maintain that if options are allowed the house should be purchased at the existing market price.

We are giving away a lot in allowing a discount of up to 50 per cent. The proposal from the Lords is a generous compromise. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) nods assent. The price should not be one penny less than the market price.

Governments are not bound by acts of previous Governments, but I can envisage, on the eve of the next general election, queues of people forming to pay the £100 option of this sort. That would mean that for the first two years of their existence a Labour Government would be forced to compel councils to sell houses which neither the council nor the Government wished to sell. That is monstrous, and it is in conflict with the principle that I have stated.

If the sale of the house had been completed, it would be wrong for a Labour Government to interfere. However, if the sale of the house had not been completed, a Labour Government should pay back the £100 deposit or the option payment plus interest. That would be fair to all concerned.

Lord Bellwin's brief reply to the debate on this amendment was worthless, depreciatory and hardly worth making. He said: it is harder to save up when the price against which you are saving is in fact increasing as you save,"—[Official Report, House of Lords, 21 July 1980; Vol. 412, c. 66.] That was really all that he did say. Everything else is increasing in price. Are people to be protected because the price of potatoes increases, so that they may buy potatoes at their price two years earlier? Clearly, that is ridiculous. Why should one item be under the Government's protection? It is because the Government are so desperate to sell council houses. For the reasons that I have stated, I and many of my hon. Friends are completely opposed to the Bill.

8 pm

Mr. Bruce Douglas-Mann (Mitcham and Morden)

I endorse the argument of my hon. Friend the Member for Salford, East (Mr. Allaun). I draw to the attention of the House the finding of the Environment Committee on the sale of council houses. It appears in the Committee's report on the implications of the public expenditure White Paper. It states: Your Committee estimates that an average of between five and 10 houses will need to be sold in order to build one replacement. For that reason the Committee considered it extremely important that the volume of sales should be limited as effectively as possible.

If sales are to be effected at a price which is subject to 20 per cent. per annum inflation in house prices, we are discussing a price that will be 40 per cent. below the market price, without taking into account the discount. The pressure on local authorities to replace the houses that are lost to meet the housing need will be greatly intensified.

There was a strong thread running through the evidence that the Select Committee received from local authorities of all political complexions—namely, that the option provisions are causing them great anxiety. They feel that it will be extremely difficult to ascertain to what extent a secure tenant claiming to exercise the right to buy genuinely fails to meet the financial qualifications and is thus able to claim the option provision.

The scope for abuse is enormous. It will be very much to the advantage of anyone to seek to use the option provision rather than to purchase at the price that applies when he gives his notice. The option provision is a bad one and the Lords amendment, which limits the damage that will be caused by it, deserves the support of the House.

Mr. Don Dixon (Jarrow)

There is no doubt that anyone with average common sense will rush along to put down his £100. It is a pity that the Government do not treat private assets as they treat public assets. Their aim is to boost the sale of council houses. That policy does not produce one additional housing unit.

I was chairman of a housing committee for a considerable time. I am still the committee's vice-chairman. The authority has been selling council houses for almost three years. It has 37,400 council houses and it has sold about 300. The 300 are all semi-detached houses on the best parts of the estates.

If someone lives in a council house, he has secure tenure. The house is his in any event. Anyone who knows anything about public housing knows that allocations and transfers are decided mainly by relets. There is an average reletting of between 3 per cent. and 5 per cent. Most new building is slum clearance. A total council house stock of 37,400 leads to 1,000 relets a year. If council houses are sold, tenants do not apply for reallocation.

What happens if the price of a house decreases? Consett, Corby and other towns are being murdered. Houses in those areas may decrease in value in two years' time. Will the Government say that that price will not apply and there will be a revaluation? Will they acknowledge that Government policy has murdered the town, that no one is living there and that houses have become readily available?

The other place did not go far enough. The Government's policy is nonsensical. Their aim is to persuade tenants to rush to deposit their £100 and to give a boost to the section of the Tory manifesto on the sale of council houses. The provision is nonsensical and I hope that it is rejected.

Mr. Kaufman

My hon. Friend the Member for Jarrow (Mr. Dixon) escorted me round some of the housing in his constituency a short while ago. I was able to see for myself the difficulties in his area. I had explained to me the situation that he has described to the House. He has spoken with great experience of local government housing. That is the most authoritative experience, from which the House can benefit.

I take the opportunity to congratulate my hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann), the chairman of the Environment Committee, on his Committee's report. His Committee produced an outstanding report a few days ago. It indicts the Secretary of State on a number of issues. It draws attention to facts that otherwise would not have been elucidated. My hon. Friend and his Committee have done a service to the House by providing us with those facts and by giving the Secretary of State a case to which he will not easily find a credible response.

In moving disagreement with the Lords amendment the Minister made a most amazing claim. He said that when another place decided to insert the amendment it was an example of the hostility of the Labour Party to home ownership. I live and learn every day, but that is the first news that I have had that there is a Labour majority in another place and that the Labour Party is able to impose its will upon that place.

My noble Friends who campaigned against the Bill and who won a significant number of victories by their dedication and hard work could not have won one victory if they had not been joined by members of other parties and by those of no party. They could not have won if the Conservative Party had been able to muster its full strength in another place. Such is the disillusionment with the Bill in another place that my noble Friends were able to obtain a majority for their amendments. That did not happen because we have a majority in that place. If we had, some of the accidents that took place in the previous Parliament might not have taken place.

I express my agreement with all my hon. Friends who have spoken in this debate. It is undoubtedly one of the nastiest aspects of the compulsory sale of council houses. I refer to the £100 option. It is nothing less than a rip-off of public assets. The Government are forcing up the cost of so many items such as fuel, telephone bills and railway fares, and this is the one price that they have decided to freeze. They are in favour of the free market on every other issue.

The £100 option with a frozen price is especially offensive to private house buyers, who are finding it especially difficult to buy because of the high mortgage interest rate that has been brought about by the Government's economic policies. House price inflation is still very high. The rate has been falling because of the lack of buyers caused by the high mortgage interest rate, but, it is still very high. Other purchasers have to accept it.

The Minister tried to draw tears from us by painting a picture of council house tenants wishing to buy and being at the mercy of house price increases. Thousands of people in humble circumstances who are not council tenants wish to buy houses. They are at the mercy of increased house prices. The Government are responsible for those price increases, yet they can offer them nothing. Such people have been priced out of home ownership. In addition, they must pay their rates and taxes and contribute to a rip-off that will benefit a small and privileged minority.

Private home owners have to accept house price inflation. Yesterday, figures were published showing that only 628,000 new mortgages are expected this year, compared with 715,000 last year. That is a reduction of 12 per cent. Such people get no help from the Government. A small minority will have its privilege paid for by everybody else. The £100 option is an offence to the taxpayers and ratepayers who must pay for it.

If I have a criticism of the noble Lords who carried the amendment against the Government's wishes, it is that the amendment is over-generous. It still gives the beneficiary of the £100 option a large gift at the expense of taxpayers and ratepayers. Those taxpayers and ratepayers will pay interest on the building of such houses while the purchaser is given the option to buy. The purchaser will not suffer fully from house price inflation. In addition, the discount will eat up some of the price increase.

If the amendment is accepted, the purchaser on the £100 option will have to share some of the burden of inflation with his benefactors, mainly the taxpayers and ratepayers. It redresses the balance to some extent. That is why we believe that the amendment should be accepted.

Mr. Stanley

With the leave of the House, I shall respond briefly. The hon. Member for Salford, East (Mr. Allaun) referred to the noble Baroness who moved the amendment in the other place. He described her as a Conservative peer. I note that Dod's Parliamentary Companion describes her as a Labour Life Baroness. I am delighted to know that there has been yet another convert to the Tory Party. No doubt there are many more to come.

The hon. Member for Salford. East made a significant statement in his capacity as a member of the national executive of the Labour Party. He made clear that his view—and I assume that his view represents that of the national executive—was that, if there were a change of Government, the Labour Party would not honour options that were still running. Although he accepted that if an option had been completed it would have to be honoured, he made clear that the Labour Party would not regard itself as bound by options that were running when a change of Government took place. I am sure that that will not be forgotten.

The hon. Member for Salford, East and the right hon. Member for Manchester, Ardwick (Mr. Kaufman) made similar points. They suggested that there should be continuing price inflation during the option period. That would effectively nullify the effect of the option. The purpose of the option is to enable those who cannot buy immediately to save up during that time and to accumulate the difference between their maximum mortgage capacity and the price of the house. Inevitably, the price of the house will be somewhat higher. However, if the price escalates all the time that will defeat the purpose of the option. There would then be no point in having an option provision.

We want to give those council tenants who want to buy their homes every possible opportunity to do so. Inevitably, a considerable number will wish to exercise the right to buy for the first time. Although they may not be able to afford the full purchase price, they might have a maximum mortgage capacity equal to 70 or 90 per cent. of the purchase price. Over a two-year period, those tenants would have a reasonable opportunity to increase their earnings and savings, and would then be able to buy their houses.

8.15 pm

Mr. Douglas-Mann

Does the Minister intend to introduce a similar provision to assist the young people who come to my surgery every week? They do not have the advantage of being council house tenants and they are desperate either for a council house or to buy a house. House prices are increasing faster and faster. They are trying to save money in order to buy a house, but as they have no house at all, they have no opportunity of buying the house in which they live.

Mr. Stanley

In accordance with the logic of his argument, the hon. Gentleman should urge the considerable number of predominantly Labour-controlled London authorities which have empty property in poor condition to sell it under the new powers, particularly those relating to improvements being made for sale. Those authorities will then be able to meet some of that demand.

Mr. Frank Allaun

The Minister will find out that option holders cannot buy a house at present. How will he ascertain that means? Will everybody who puts down £100 be given a means test? How will he discover that a person does not have enough money to buy the house on the spot?

Mr. Stanley

If the hon. Gentleman refers to the relevant clause, he will note that that will be automatically ascertained. The tenant will apply to the local authority in the normal way to exercise his right to a mortgage. The local authority will immediately see whether his maximum mortgage capacity is in excess of or below the price of the house that it has valued. Therefore, such knowledge will be in the hands of the local authority in the normal way.

Mr. James Hill (Southampton, Test)

If a local authority is opposed to selling council houses, it could make things very difficult. It could increase local authority mortgage interest charges to a level that is above the norm.

Mr. Stanley

There is a provision establishing a ceiling on a local authority's mortgage interest rate. In addition, the Bill also provides for an independent means of valuing the house if the tenant and landlord cannot agree. The tenant has that protection.

The amendment carried in the other place would substantially nullify the purpose of the option, namely, to enable council tenants who cannot buy immediately to save up and to buy at a fixed price over a two-year period.

Mr. Dixon

What does the Minister suggest local authorities, which have planned maintenance and modernisation programmes, should do if someone puts down a £100 option? Does he suggest that local authorities should take those houses out of such programmes? If they do not, an authority might add to the value of the house after it had been assessed. My local authority has a planned manitenance programme on pointing, reguttering, bathroom furniture, and so on. Does the Minister suggest that my authority should take such houses out of the programme? If it does not do so, it is likely to fall foul of the legislation by adding to the value of the house.

Mr. Stanley

Ultimately, that will be for the decision of local authorities. There are provisions in the legislation under which secondary legislation will deal with improvements as regards the cost floor and for valuation purposes. It is essential for the efficacy of the option that the price should remain fixed for a two-year period. I ask the House to disagree with the Lords amendment.

Question put, That this House doth disagree with the Lords in the said amendment:

The House divided: Ayes 262, Noes 159.

See Division 447

in column 1079

Question accordingly agreed to.

Lords amendments Nos. 24, 25 and 26 agreed to.

Lords amendment: No. 27, in page 14, line 17, at end insert: and, if there is then a subtenancy, section 139 of the Law of Property Act 1925 shall apply as on a merger or surrender.

8.30 pm

Mr. Geoffrey Finsberg

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

This is a minor technical amendment. Clause 15(9) provides that a purchaser's secure tenancy shall come to an end on the completion of his purchase under the right to buy. The amendment is designed to protect the position of any sub-tenancies which he might have granted before then. It provides for that by applying section 139 of the Law of Property Act 1925.

Question put and agreed to.