DISCOUNT (Hansard, 19 May 1980)

§ Mr. Alton
I beg to move amendment No. 156, in page 5, line 25, leave out subsections (2) and (3) and insert:— ' 7.—(1) A person exercising the right to buy shall be entitled to a discount of 50 per cent. if he has been in occupation for 20 years or more and a person exercising the right to buy who has been in occupation for less than 20 years shall be entitled to a discount of 2½ per cent. for each complete year he has occupied the premises.'.

Mr. Deputy Speaker
With this it will be convenient to take the following amendments:
No. 157, in clause 8, page 7, line 5, leave out ' five ' and insert ' ten '.
No. 158, in clause 8, page 7, line 11, leave out ' 20 ' and insert ' ten '.

§ Mr. Alton
I do not wish to delay the House unduly, but I should like to refer to clause 7. Hon. Members must consider the difficulties that will beset council tenants and local authorities when they determine the levels of discounts to be made available to those tenants who decide to buy their homes.
I am not arguing against the principle of providing discounts. However, a person should receive a discount towards the cost of buying the house that is based on how long that person has lived there. Clause 7(1) provides: A person exercising the right to buy is entitled to a discount equal, subject to the following provisions of this section, to the following percentage of the price before discount, that is to say— (a) if the period to be taken into account under subsection (4) below is less than four years, 33 per cent.; and (b) if that period is four years or more, 33 per cent. plus one per cent. for each com.-plete year by which that period exceeds three years, but not together exceeding 50 per cent. The average council tenant in my constituency would be perplexed, to put it mildly, if he were confronted with such terminology. One might argue that it would need a Philadelphia lawyer to interpret it.
11.45 pm
The amendment seeks to clarify the way in which I believe that the discount scheme should work. It is an attempt to simplify the procedures. It states, in effect, that a person exercising the right to buy should be entitled to a discount of 50 per cent. if he has been in occupation for 20 years or more, and that a person exercising the right to buy who has been in occupation for less than 20 years shall be entitled to a discount of 2½ per cent. for every year that he has occupied the premises." It is an attempt to make the system easier for tenants to understand.
I ask the Minister to consider carefully the terminology in the Bill. If he were an average council tenant, how would he go about trying to penetrate the language that no doubt will be contained in a form 212 that is difficult to understand that will be circulated by the Department to council tenants who want to think about buying their own home and who will be put off by the language in the Bill?
I contend that my proposal is more equitable. It would ensure that every council tenant starts on the same basis. It would be easily understood by tenants and it could be fairly applied to them.

§ Mr. Wyn Roberts
I listened carefully to the hon. Member for Liverpool, Edge Hill (Mr. Alton). Although his proposition allows the secure tenant of 20 years' standing to receive the same 50 per cent. maximum discount as the Bill, it does not take account of all the circumstances that will be relevant to a sale under the right to buy, and it would treat unfavourably any secure tenant of less than 20 years' standing by comparison with the arrangements in clause 7(1)(a) which provide that a secure tenant of three years' standing is entitled to a basic discount of 33 per cent. on the valuation of his dwelling in accordance with clause 6. Clause 7(1) (b) entitles him to one extra percentage point of discount for each year of secure tenancy in addition to the basic 33 per cent., bringing him up to a maximum of 50 per cent. after a total of 20 years as a secure tenant.
The hon. Gentleman pleaded that this proviso is difficult to understand, but I do not think that it is. It is 33 per cent. after three years and 1 per cent. per annum thereafter up to a maximum of 50 per cent. As well as reflecting the length of time during which a purchaser has been a secure tenant, the basic 33 per cent. discount entitlement was intended to reflect that he was buying as a sitting tenant with, once the Bill is enacted, security of tenure. It seemed that to ignore the purchaser's status as a sitting tenant in fixing the terms on which the Bill allowed him to buy would have misrepresented the relationship in which he stood to his landlord. That would have had an unfair effect on his interests. The hon. Gentleman's proposal that the discount should simply accrue pro rata over 20 years' tenancy does not take these considerations sufficiently into account.

§ Mr. Alton
Surely the hon. Gentleman should take into account how long 213 someone has been a tenant and not only the property in which he has been living. Many tenants move from one tenancy to another, not necessarily at their own request, but through modernisation or improvement.

§ Mr. Roberts
The hon. Gentleman could not have been listening very well. I said that, as well as reflecting the length of time during which the purchaser had been a secure tenant, we took into account his status and his security of tenure. We take the length of tenure into account and also the possibility that he may have been a tenant in different local authority areas. The extra percentage point of discount to which a secure tenant would be entitled under clause 7(1)(b) for each of 17 years spent as a secure tenant, in addition to the basic three, represents something different. We intended it to give a reasonable advantage to secure tenants of longer standing in recognition of the extra contribution they made by paying rent over a number of years.
I do not think that the hon. Gentleman would argue with this reasoning, which is implied in the amendment that he has put down. The discount arrangements in the Bill are the product of careful consideration. Our judgment is that they are fair and reasonable both to landlord and tenant. I hope that the hon. Gentleman will withdraw his amendment in the light of my explanation.

§ Mr. Stanley
I beg to move amendment No. 6, in page 5, line 35, leave out from beginning to end of line 3 on page 6 and insert— ' (2) The discount shall not reduce the price below the amount which, in accordance with any determination made by the Secretary of State, is to be taken as representing so much of the costs incurred in respect of the dwelling-house as, in accordance with the determination, is to be treated as incurred after 31st March 1974 and as relevant for the purposes of this subsection; and if the price before discount is below that amount, there shall be no discount. (2A) A determination under subsection (2) above may make different provision for different cases or descriptions of case, including different provision for different areas, and may provide for exceptions from the requirements of that subsection.'.

Mr. Deputy Speaker
With this it will be convenient to take Government amendment No. 24.

§ Mr. Stanley
These amendments concern the cost floor below which the price of a dwelling house sold under the right to buy may not be reduced by discount. As originally drafted, clause 7 (2) would have provided that no dwelling house first let under a secure tenancy after 31 March 1974 could generally be sold at a discounted price below the cost of its provision estimated in a manner determined by the Secretary of State.
This cost floor was intended to ensure that no landlord would be required to incur an immediate capital loss on the sale of a dwelling under the right to buy. It is based on the arrangement that has operated for a number of years in relation to sales by local authorities under successive general consents. The cut-off date of 31 March 1974 is the date of the reorganisation of local government in England and Wales under the Local Government Act 1972.
Changes in the boundaries and administrative structures of local authorities that took effect then mean that data for calculating the cost of dwellings provided earlier might now often be insufficient or difficult to obtain. Also, because of subsequent movements in building costs and market values, few dwellings provided since March 1974 would be priced below cost even if sold at maximum discount.
As originally drafted, however, the cost floor in clause 7(2) would have applied only to the cost of providing dwellings built or acquired from the private sector since local authority reorganisation. The financial safeguard it provided would not have extended to expenditure by public landlords on the improvement or conversion of dwellings, which is part of the cost of provision of a dwelling no less than expenditure on land, site works or construction. I therefore said in Standing Committee on 12 February that I should bring forward amendments to allow significant expenditure on those items since 31 March 1974 to be taken into account in the cost floor. These amendments make this possible.

§ Mr. Moate
As one who did not serve on the Standing Committee, I am concerned about the occasions on which the Secretary of State would be able to exercise this judgment and make a determination. I am concerned especially about council houses that might have 215 been built five years ago at rather too high a price. I am talking not of cases where exorbitant costs were involved but of substantial costs in excess of what the ordinary private builder would consider reasonable. A current market price in Sittingbourne, in my constituency, might be £17,000. A council house tenant for 20 years who may have been expecting a 50 per cent. discount and anticipates that he will be able to buy for £8,500 wants to buy. He is then told that, because of excess building costs five years ago, the house to which he moved five years ago cost £16,000 for the simple reason that the local authority did not exercise the sensible controls that a private builder would have exercised and paid too much for the construction of that house.
Would the Secretary of State in those circumstances be prepared to intervene, to exercise his discretion and to say that that property could be sold at below the construction price? This situation arises more often than we like to think. If my right hon. Friend is not prepared to do that, a large number of prospective buyers will be prevented from buying their houses and will be frustrated and disappointed. The fact that a tenant moved from one council house to that particular house a few years ago would mean that he lost out substantially. I am sure that we would not want that to happen. Will my hon. Friend say what would happen in those circumstances?

§ Mr. Stanley
My hon. Friend has made an important point. There is certainly some evidence, although it is not too widespread, of local authorities and new town development corporations—some of my hon. Friends have written to me about this problem—whose construction costs were in excess of the subsequent market value of those properties.
The cost floor applies only to the operation of the discount. That means that a person cannot buy with the benefit of a discount at a price below the cost floor. It is open to a person to buy below cost if he buys at market value—in other words, without a discount. That has always been possible under general consent. That will continue to be possible under the right to buy.
We have included a power in the Bill for my right hon. Friend in certain circumstances 216 to waive the cost floor. That obviously will be a matter for him to decide when we see how the pattern of values and costs emerges after the Bill is enacted.

§ Mr. Stanley
I beg to move amendment No. 9, in page 6, line 15, after first ' the ' insert ' regular '.

Mr. Deputy Speaker
With this it will be convenient to take Government amendments Nos. 10 and 11.

§ Mr. Stanley
These minor amendments concern the special discount arrangements made by subsections (4)(b) and (5)(c) for secure tenants who were serving in the Armed Forces on or after 21 December 1979, the day after the Bill was published. These arrangements allow for a secure tenant or his spouse to count towards their discount entitlement under clause 7 any time during which he occupied accommodation provided for him as a member of the Armed Forces of the Crown. If his spouse spent time in accomodation provided because of his membership of the Armed Forces, that, too, may be counted for discount.
These special arrangements for the Armed Services were included in the Bill in recognition of the uniquely valuable job which Service men and women do and the price that they often pay in sacrificing the ability to make satisfactory housing arrangements for themselves by serving in the Armed Forces.
However, we have had to give further consideration to the definition of armed forces of the Crown in clause 7(4)(b), which has led us to the view that it went rather wider than we should wish. When drawing up the provision we had in mind men and women serving in the Regular—I stress "Regular"—Army, Navy and Air Force. But the expression in the Bill as originally drafted, armed forces of the Crown"' 217 according to the legal advice that we had, was sufficiently wide to include all the members of the Territorial forces and the other voluntary reserves. Indeed, it might even have extended to the armed forces of the Commonwealth. Though, of course, our admiration for those groups knows no bounds, we did not think that it was altogether appropriate that all members of the Commonwealth forces should be able to exercise the right to buy with a discount under this legislation if they came to this country.
Clearly we have had to make a small amendment to reflect our intention of giving this——

Mr. Deputy Speaker
Order. Under the terms of the allocation of time order, I have to interrupt the proceedings.
Further consideration of the Bill adjourned.—[Mr. Cope.]
Bill, as amended (in the Standing Committee), to be further considered this day.