HC Deb 05 May 1983 vol 42 cc533-8

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Major.]

11.48 pm
Mr. Colin Shepherd (Hereford)

I wish to express my appreciation to Mr. Speaker for his kindness in selecting this subject for debate tonight. I am especially grateful because the issue affects a substantial number of my constituents who have been concerned about this matter.

I also wish to thank my hon. Friend the Minister for coming to the House to participate in this important subject. I feel some relief that we approach this stage of the business of the House at what is, compared with the remainder of the week, a modestly early hour. That is a plus point.

The saga of Sherborne close in Hereford has been going on for a long time. My hon. Friend the Minister is well aware of the background, and I do not intend to take much time this evening going through it. It is known not only to the Minister but to the residents of Sherborne close, Hereford city council and a substantial number of people within the city of Hereford.

My hon. Friend will agree that the matter has gone on for far too long. When the Minister for Housing and Construction gave his agreement to proposals put forward by the chairman of housing in Hereford, Councillor Mike Prendergast, I thought that all was well and in hand. I raised a small cheer and thought it was another problem written off the problem list. I was a little premature. I note with a certain dry interest that it is now three years and two days since I first wrote to the Minister with the proposals. It would be wrong to say that we are no further forward, but we are not there yet. There is a logjam, which I want to get cleared.

I take this opportunity to pay tribute to the work that has been done by Councillor Prendergast. As a Labour councillor in the city of Hereford, he is not a political friend of mine, but he has nevertheless been devoted to the cause of housing in the city and has espoused many innovative developments in his time. It is particularly appropriate that I should pay this small tribute to his work on the night that he retires from being a councillor in the city of Hereford. I hope that how I feel about his contribution to the city will be taken on board by the people of the area.

The stage is now set for a transfer of ownership from the Spiral housing association to the Hereford city council, at outstanding loan debt value, of the scheme known as Sherborne close, but with one small but significant aspect unresolved — the outstanding litigation against the architect and contractor for the scheme. The scheme, which is now seven, eight, nine years into occupation, showed substantial defects in design and construction. Alas, the architectural practice that was responsible for the design is no longer. I believe that the architect is no longer in the country and the firm of contractors is not in a position to rectify the damage that has been done.

I have great sympathy with the councillors of Hereford, who are reluctant to take the final step of the transfer of ownership without being quite certain that what is, after all, an unconventional manoeuvre, will not land them in hot water. I have been through the issues as best I can —the various questions that are involved—and I have attempted to set them out in a logical order. We need to clarify whether Hereford city council loses the right or ability to take over the litigation that has been initiated by the present owners, Spiral housing association, against the architect and contractors, if it has bought the flats that are known as Sherborne close and which are defective, at a knockdown price, which reflects the defects. It is much along the lines of the purchase of seconds which are known to be defective.

If Hereford does not have the right or the ability, with whom does the responsibility lie to seek to recover the moneys that are involved in the rectification? Is it left with Spiral housing association to continue to sue for what is, in effect, the missing sum? If Hereford has not lost the right, or still has the duty to sue, should the city council pour more good ratepayers' money after bad in conducting expensive litigation against defendants who are men of straw? If it is clear that the defendants are men of straw —I believe that there is advice to that effect—and that a successful judgment would not lead to the recovery of the moneys to correct the defects, does that constitute an action that could render the council open to censure or complaint? Those are the questions that need to be answered to enable the councillors to come to a proper decision on how to proceed.

For the residents of Sherborne close, the questions of who should do what and to whom are academic points. They could be described as lawyers' points. At the end of the day, they would dismiss them as such. For them, the situation is clearly unsatisfactory. The present owner, Spiral housing association., although it has initiated litigation, does not appear to be actively pursuing it—understandably so, for the reasons that I have outlined. It does not have the resources to rectify matters and understandably it has been refused housing association grant for the purpose, because of the nature of the way in which the defects have arisen.

Nevertheless, the situation must alter. The objective of any change must be to achieve rectification of the defects and upgrading as appropriate. The achievement of those objectives will make these properties attractive to tenants to live in and to purchase under the right-to-buy provisions and, by so doing, return money to the public purse. Failure to achieve those objectives will lead to an inevitable further deterioration of the close, even to the point of the generation of a slum, and that cannot be tolerated.

The certainty of no sales of the other properties not immediately affected by construction defects can only add to the already considerable and justifiable grievances and frustrations of the tenants. It is apparent that there is need for an urgent resolution of the problem. Indeed, that is essential. Hereford has the money set aside in the housing investment programme for this year, of which one month has already gone, and I am grateful to the Minister for his assistance in that respect.

Hereford city council told the tenants in a circular which was sent round in February that it hoped to see the work start as from 1 April 1983. As I say, here we are in May. Expectations therefore have been raised and I am sure that nobody wants to see them dashed. The problems have been going on long enough. I am also certain that the council acted in good faith in advising the tenants of their reasonable hopes.

I cannot emphasise too strongly how much help and constructive thought has been given by the Minister, the Minister of State and, in Hereford, Councillor Prendergast and his team and how that has enabled matters to get this far. But I was deeply disappointed by the stand-offish and negative approach adopted by officials of the Department when they responded to the plea of the chief executive of Hereford city council in their letter of 28 February. Having re-emphasised the Minister's view that things should crack along as soon as possible, they took the rather high and mighty line that The Department does not hold any views on the question of litigation in this case and certainly is in no position either to approve or disapprove such action whether entered into by the Spiral Housing Society Limited or the City Council". I cannot accept the tone or nature of that. The real nature of the problem needs minds to be addressed to how the litigation aspect might by set aside from the problem of the transfer of ownership. That is the key to it. How do we achieve that? At the same time it is essential that Government maintain their sympathetic approach to the problem, are not seen to be backing off when the going gets rough, and maintain their sympathetic approach to the needs of the tenants of Sherborne close. We need one more push of lateral thought, and that is why I am taking this opportunity to raise the matter tonight.

I believe that the Minister and the Department, which is generously endowed with resource and talent, can help to break this logjam and give Hereford the confidence to complete the job in line with the Minister of State's wishes, as clearly set out in his letter to me of 6 August 1980 when he gave his approval, and re-stated in February of this year that the ownership should be transferred as soon as possible.

I have sought to set out the problem and what I am seeking. I know that it is not a straightforward matter and that much difficulty has been encountered in getting matters even this far. I look forward with interest to seeing what help the Minister can give to Sherborne close.

12 midnight

The Under-Secretary of State for the Environment (Sir George Young)

I thank my hon. Friend the Member for Hereford (Mr. Shepherd) for the clarity of his explanation of the present position, and commend him for the unstinting efforts he has made to resolve the problem. No one could have done more to try to break the logjam he has described.

My Department has known of the general position since November 1979. The decision to encourage the Spiral housing association to sell this development to the city council was taken in May 1980. Since then every effort has been made to secure this transfer of ownership; and that remains my aim.

I was aware that the present owners, the Spiral housing association, had instituted legal proceedings against the builder and the architect for alleged latent defects in the development, caused, so the association claims, by poor design, inadequate supervision and poor construction. I cannot, of course, comment upon the merits of these allegations, but it might be helpful if I described the somewhat tangled history of the development.

The scheme, as my hon. Friend knows, consists of 78 flats built about seven years ago by the San Pierre housing association. That association was unable to obtain registration with the housing corporation and consequently it was unable to apply for housing association grant. Without this grant-aid, it could not afford to fund this scheme at the then prevailing level of rents. This problem was solved by the North British housing association which, as a purely interim measure, took over the scheme and as a registered association applied for and was paid housing association grant. That grant-aid discharged part of the debt owed to the city of Hereford, which funded the development.

In 1978, in order to rationalise the property holdings of various housing associations, ownership of the development passed to its present owners, the Spiral housing association, an association based in the west midlands. It simply took over the property as it stood, together with the outstanding debt.

In November 1979 it became clear to the association and the city council that major repairs to these flats, which were then only some four years old, were required. They arrived at this conclusion after receiving the report of a consultant architect which detailed the defects, and suggested and costed the remedies. This was discussed with my Department, as my hon. Friend said, and the decision was taken to suggest transfer of ownership to the city council.

My hon. Friend the Minister for Housing and Construction decided that unusually it would be in the best interests of the tenants, who had suffered considerable discomfort and, indeed, hardship from the faults in these flats, if ownership were to pass to the city which had consistently assured him that it could readily and speedily deal with the problems of this development.

I should perhaps explain that no call on the funds available to the city could be involved in this further change of ownership. The city loaned the money for the development; the existing outstanding loan is owed to the city, and the transfer of ownership that my hon. Friend approved was to take place at outstanding loan debt.

The city and the Spiral housing association were told of my hon. Friend's views in August 1980. There then followed protracted discussions between the association and the city council about this transfer of ownership. These now appear to have reached a satisfactory conclusion except, as my hon. Friend said, that the city is plainly concerned that the litigation instituted by the housing association might prove difficult or indeed impossible to pursue once ownership changes hands again.

My understanding is that the Spiral housing association would no longer be able to pursue this litigation. The association will no longer own the property and its debt in respect of the development will have been extinguished. If litigation is to be pursued, and I repeat that I cannot comment on the propriety or wisdom of such a course, then the city would have to commence proceedings from the beginning.

I fully understand, as my hon. Friend does, the city council's concern that if on taking over this development it discovers that it is unable to institute legal proceedings or are advised that it would be unwise so to do it might be open to criticism from its ratepayers and its auditors. It is right that the city council should consider this aspect, balancing its concern on this point against the problems of the tenants of these flats, a matter which has consistently disturbed the city council.

However, the city council cannot look to my right hon. Friend the Secretary of State to indemnify it in advance against the possibility of such criticism.

My right hon. Friend has powers now under section 19 of the Local Government Act 1982 to give an indemnity or—to give its more usual name—a sanction to a local authority where its actions, or its proposed actions, could give rise to criticism or query. This power is normally used to protect local authorities which resolve to make payments or which have made payments for which they do not have appropriate powers.

The proposed acquisition of Sherborne close is well within the existing powers of the city council. It could not be criticised for taking over the property. I imagine that it is just possible that such criticism could arise if, in the event, the city found itself unable to institute proceedings against the builder and architect or was advised that it would be unwise to do so. If that proves to be the case and if the city council then believes that it needs to seek a sanction from my right hon. Friend, then it could do so after acquiring Sherborne close. But the acquisition of the property is well within the city council's powers and sanctions are not normally given by my right hon. Friend when an authority has acted properly and lawfully.

I am well aware that my hon. Friend may not consider that I have given a total, final and satisfactory response to his proposition. However, I ought to make it quite clear that in making the housing investment allocation to the city for 1983–84 it was assumed that the property would pass into the ownership of the city council during the year and that repairs would begin. The city's allocation would have been somewhat less had that assumption not been made. It is my view and that of my Department that during the past few years we have done all that we can to assist Hereford and Spiral to solve the problem that has been described.

The city has all the powers it needs to acquire this development. It has all the administrative consents it needs, and additional funds to allow it to start repairs.

Since the city has consistently expressed concern over the well-being of the tenants who live in some discomfort in Sherbourne Close, the ball is in its court. It is now entirely for the city to remedy the situation.

Mr. Shepherd

Before my hon. Friend brings his remarks to a close, I should be grateful if he could help me on section 19 of the Local Government Act 1972. That section indicates that the Secretary of State has powers to grant a sanction, but it does not set out in any way the framework within which such a sanction might be granted. Bearing in mind the fact that the city council would want to know roughly how to tackle that problem if it took the decision to proceed, knowing that it would probably have to make an application for a sanction afterwards, can my hon. Friend give me a little guidance on how that point might be considered?

Sir George Young

The best advice that I can give the city council is to ask its members to read carefully what I said some three minutes ago, when I outlined the possible scenario if the city council found itself unable to institute proceedings against the builder and the architect, and was advised that it would be unwise to do so. If that happens, and if the city council then believes that it needs a sanction from my right hon. Friend, it can apply for one and the application would then be considered on its merits. 13ut it cannot be done now, because to acquire the property is well within the existing powers of the city council, and we do not normally give sanctions when an authority is planning to act properly and lawfully.

My hon. Friend should draw the DoE's view of the situation to the attention of the city council. I hope that, on the basis of what I have said, the city council will feel able to take the decision that is now before it, and try to resolve the problem.

Question put and agreed to.

Adjourned accordingly at eight minutes past midnight.