HC Deb 02 July 1986 vol 100 cc1090-100

Lords amendment: No. 9: in page 21, line 37, at end insert— () where a landlord so mentioned has at no time let (or had available for letting) more than 250 dwellings; or

Read a Second time.

9.15 pm
Mr. Ancram

I beg to move, as an amendment to the Lords amendment, to leave out "250" and insert "100".

If the amendment were agreed to, it would be my intention to ask the House to agree with the Lords amendment as amended. I have to say that I move the acceptance of this amendment with my proposed modification with some reluctance. I believe that the problem that it is intended to deal with—that the right to buy would have some apparently harmful effect on small associations' viability—is overstated, and that its proposed rectification by straightforward exemption from the right to buy is wrong. But I recognise that there is strong feeling on the subject and I certainly do not wish to damage the prospects for new small associations.

The viability of associations, whether large or small, is secured through a variety of allowances set, and grants paid, by my Department. The allowances which are of principal interest to us here are those for management and maintenance of the ordinary stock of an association. Those allowances are set at a fixed amount per house let by an association and are designed to cover all the ordinary expenses incurred by the association in running that house. If the association loses that house, whether by sale to a sitting tenant or to another association, it no longer has that day-to-day work to do and does not therefore require the accompanying allowance. Thus, in broad terms, the association's income matches its outgoings whatever size of stock it may have.

Some evidence has reached my Department that, for associations with relatively small numbers of houses, the allowances do not meet the full costs of running the stock. The evidence requires further investigation by my Department, and more detailed discussions with the Scottish Federation of Housing Associations, but if circumstances can be shown to warrant it, I am certainly prepared to modify the allowance system to help small associations. A revised allowance system would go a long way towards protecting small associations from a number of pressures which they may come under. The loss of a house under the right to buy is, to my mind, one of the smaller and probably less frequent events likely to disturb the finances of a small association.

For that reason alone, I should prefer small associations to stay in the right to buy so that their tenants may have the same rights as other tenants of housing associations. However, I am prepared to accept that there may be some justification for an exemption for the smallest associations so that their first tentative steps are not brought to an end by the sale of one or two houses. I suggest that the size of an association above which the right to buy should apply, and always apply, should be 100 rather than 250 as at present.

Mr. Bruce Millan (Glasgow, Govan)

If the amendment is carried, how many associations will be excluded?

Mr. Ancram

I shall come back to the right hon. Gentleman on that. I do not have the figure to hand.

Mr. Millan

Why not?

Mr. Ancram

Obviously, over the years, associations, especially newer ones, have grown. I should not wish to mislead the House by giving figures on which I was not certain. The number of 250 houses, which was put forward by way of amendment in the other place, may have been chosen because it was thought that at that point an association becomes financially stable and is able to employ its own full-time staff.

Mr. Henderson

Is it not true that, since the right hon. Member for Glasgow, Govan (Mr. Millan) left office as the Secretary of State for Scotland, the annual funding of housing associations in Scotland has increased tenfold? It is not surprising in those circumstances that individual housing associations may have grown considerably in that time.

Mr. Ancram

I am grateful to my hon. Friend. He has made the good point that, despite the Opposition's protestations, this Government have considerably supported the housing association movement, compared with our predecessors. I am sure that my hon. Friend the Member for Fife, North-East (Mr. Henderson) is aware of the growth and diversification of housing associations. The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) is equally aware of the growth in housing associations—initially small ones—in rural areas. We welcome that. That is one of the elements which we have considered in tabling the amendment.

If the discussions on allowances bear fruit and smaller associations make sensible provision — perhaps for sharing staff—I see no reason to exempt associations from the right to buy unless their size is below 100. The amendment would extend the right to buy to a further approximately 1,700 people. I am sure that they will welcome this as much as the tenants of larger associations. I am informed that the 1,700 difference would effectively leave 22 associations which have fewer than 100 houses. There are 33 associations which have fewer than 250 houses. Obviously, the figure of 1,700 is the difference between those two in terms of the people who will be affected.

We cannot make available to small associations the transferable discount which we know as HOTCHA. HOTCHA applies only to a tenant who is the tenant of a charitable housing association to which the right to buy does not apply. Small associations are not necessarily charitable, and thus the tenants of these associations cannot he given the transferable discount which we hoped would be some small recompense for being denied the right to buy.

I cannot amend the Bill to include such a scheme because we can now amend only those parts that have been amended in another place and certainly we cannot introduce new subjects. Therefore, the amendment I propose to reduce the size of an association to 100 has, to some extent, the effect of damage limitation. It would confine the absence of a right to buy and the absence of the second-best alternative, the transferable discount, to tenants of very small associations. To make the exemption any wider would be unjust to tenants and unnecessary for associations. I hope that the House will consider, in the light of the amendment in another place, and the present circumstances, that my proposal is a reasonable compromise and will support it.

Mr. Maxton

I suppose that with this Government any small concession of principle is worth taking, even if, as is typical of the few occasions on which I have seen the Government accept the principle, they ruin it by being mean-spirited in the way they do so. The Government accept the principle that there are small housing associations that require protection. That is what the other place said. The amendment was not the result of a figure being plucked out of the head. It was tabled with a certain amount of rationality. People thought it out.

Along come the Government who say, "Yes, we accept that some small housing associations might be affected, but we do not want a figure of 250. We shall make it 100." As far as I can see, that is a figure plucked out of the air. It is not based on any great rationality. Perhaps the Under-Secretary of State will tell us exactly what is the rationale of 100 as opposed to 250.

I accept that in the past two weeks there has been a change of mind, certainly in the Department if not in the Government. Two weeks ago, it appeared from a letter by Mrs. Gunn to the director of the Scottish Federation of Housing Associations that the Department was not going to accept the principle. The letter stated: If you set an arbitrary limit, there is the immediately obvious distinction between associations with 249 houses"— which is to become 99 houses— and those with 251"— which is to become 101. There is a whole argument put forward in the letter from the Minister's Department of less than a fortnight ago. I am pleased that the Minister has at least accepted some of the arguments. Why could the Minister not just accept the amendment of 250 put forward? It would have been so much better. The Minister says it is too big. It is not too big. Two hundred and fifty houses is a small number to control, organise and manage. However, one requires a full-time staff and a lot of effort but if one starts diminishing the number, one is in some difficulty. That is true of 250 and it may be even truer of 100.

I hope that the Minister will clarify what he said. I was not clear on the numbers that he gave. He said that there were 33 housing associations with fewer than 250 houses. Was that the total?

Mr. Millan

That was the total.

Mr. Maxton

My hon. Friend may be more percipient than I am. I was not sure whether it was the total or a number between 100 and 250. The Minister said that 22 housing associations had fewer than 100 houses. Therefore, we are talking about some 11 housing associations covering 1,700 people. The Minister may care to tell us how many people are involved in the 22. Presumably it is roughly 2,200 who will be in the smaller housing associations.

For that number of people and housing associations it is not worth the Government's while. It would have been so much better if they had just left it as it was. The other place was right. It put in the correct amendment and it would have been better if the Government had left well alone. Having said that, I do not intend to divide the House because at least the Government have conceded the principle that there are small housing associations and the basis will be there for us to improve on when we come back into office.

Amendment to the Lords amendment agreed to.

Lords amendment, as amended, agreed to.

Lords amendment: No. 10, in page 21, line 51, leave out from beginning to end of line 12 on page 22 and insert is, by virtue of section 360(1) of the Income and Corporation Taxes Act 1970 (special exemptions for charities), exempt from tax; or

Mr. Ancram

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

Mr. Speaker

With this we may take the Government amendment in lieu thereof.

Mr. Ancram

The Government do not feel that all charitable housing associations of whatever size, age or purpose should, just because they are charitable, be able to deny their tenants the right to buy. I and my colleagues in the Scottish Office have been urging housing associations for some years to operate practical voluntary sales policies, including the offering of discount on terms similar to those available to public sector tenants and, as I have said on a number of occasions during the course of this legislation, our requests have been largely ignored.

I announced our intention to legislate on this subject June last year and, very soon thereafter, one of the largest associations in Scotland, which had been operating for many years very successfully as an ordinary housing association, decided that it should change its status to that of a charitable association. The change was done properly, and I have no doubts that the alteration in its objects is entirely consistent with its new programme of work. Indeed, I commend any association which works assiduously for those in special need. However, that association, and, for all I know, others, has substantial stocks of houses which under any ordinary definition would be regarded as for general needs. Their tenants are ordinary families who perhaps, at one time, found that a house rented from the housing association was the only housing option open to them. But now they no longer require the assistance the association gives and are ready and able to take over ownership themselves.

As I have said, we believe that it is right that they should have the opportunity to buy the house in which they have spent so long and that they should have available to them a discount reflecting those long years of paying rent. But their landlord associations have now acquired charitable status and unless the amendments I am are accepted both here and in another place, these tenants will not be able to buy the house in which they live. Opposition Members may say that those people should move elsewhere. I have heard that argument before. However, it seems very hard that people should have to give up the house they have occupied for so long and start again on the housing ladder simply because their landlord association has adopted a new constitutional model.

For those reasons, I do not accept that the exemption of existing charitable housing associations should extend to all such bodies. Unfortunately, the criteria by which we determine those associations which shall be exempt as against those which shall not cannot be as precise as we would wish and there are, inevitably, one or two associations caught on the wrong side of the line. In order to minimise that, we propose in the amendment in lieu that the date by which an association should have achieved charitable tax status should be amended to 14 November 1985, the date of introduction of the Bill, and we believe that a further four associations, over and above those exempt when the Bill left this House, will be exempted.

On the other arm of the exemption, the requirement to have had charitable rules since inception, we see no room for alteration. Associations set up for charitable purposes will, in almost every case, have started out with such rules. I know that there is at least one association, which I think I can name—Edinvar—which, possibly through no fault of its own, falls foul of that requirement, but I doubt that the impact of the right to buy on Edinvar will be at all serious.

9.30 pm

There remains the question of new housing associations. Earlier in our debates and in the debates in another place, the relationship between the right to buy and the Inland Revenue view of its impact on charitable tax status was much discussed. That was because the Inland Revenue had for a long time taken the view that sales by a housing association with discount, whether under a statutory provision or otherwise, would prejudice the ability of a charitable housing association to be granted or retain its charitable exemption from tax. However, that is no longer the view of the Inland Revenue. Following representations that we made at an early stage, it has reconsidered its long-held interpretation of the law. It explained its altered view in a written answer to my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton) on 10 June. My right hon. Friend the Financial Secretary to the Treasury said that, contrary to the view the Inland Revenue had previously taken, the charitable status of a housing association for the purpose of the tax exemption section 360 of the Income and Corporation Taxes Act 1970 would not be prejudiced by sales which the association would be required to make at less than market value to sitting tenants who exercise their right to buy under an Act of Parliament. That means that the right to buy and the exemption from tax may co-exist in a charitable housing association. Thus, one of the main obstacles as seen by both sides of the other place and, indeed, by hon. Members in this House at an earlier stage of the legislation has gone. That was one of the main obstacles to imposing the right to buy on new charitable housing associations.

It is my view that if that information had been available earlier to members of the other place and if there had been time for my right hon. and noble Friend the Minister of State to draw attention to it on Third Reading there, we would not today be debating the amendment. The change in view by the Inland Revenue seems to be a significant change, which provides a powerful argument for exempting only the small group of charitable housing associations which we had originally intended to exempt.

I should say something of the discussions that my Department has had in recent weeks with the Scottish Federation of Housing Associations. One newspaper headline said that we were trying to gag the SFHA. Nothing could be further from the truth. We were asking it to look at factors that we believed had been overlooked, and to say whether their effects were acceptable.

Two major points arise. First, the transferable discount scheme is expensive. Already a number of associations are exempt by reason of their charitable status and some of their tenants may wish to have access to the transferable discount, but of the associations brought into the exemption in the other place, a much greater proportion have said that they wish to buy—perhaps as much as three quarters in one. Debarred from buying, many of them will want their transferable discount. The money for that would have to come from the overall allocation to the Housing Corporation, for there is no other source. Although I drew attention to that in Committee in this House on 4 February 1986, I fear that it has been lost sight of by those who oppose the right to buy. But I thought that it was necessary and right that the SFHA should be reminded of that necessary consequence arising from the wide exemption from the right to buy for charitable associations. We have to make the scheme available on grounds of equity and to place tenants in a position comparable to their counterparts in England and Wales. At the higher level that the Lords amendment would imply, the sums involved might seriously restrict the scope for development by associations generally.

Secondly, a general exemption of this kind opens all kinds of avenues to avoid the right to buy. My Department would have had to impose controls on the registration of new charitable associations so as to ensure that their proposed activities were such as to be easily recognised as charitable. Thirdly, there would have to be close scrutiny of the activities and funding of existing charitable associations so as to ensure that they do not provide further general needs houses in situations where a non-charitable association could do the job equally well. These would have been the inevitable and undesirable consequences of the amendment passed in another place.

I am sorry to have spoken at such length, but this is a subject on which people feel deeply. I hope that I have shown that the Government have had a proper concern for both housing associations and the aspirations of their tenants. We believe that, for too long, the argument has been seen only through the sometimes over-paternalistic eyes of the housing associations. Tenants wish to be free from such attitudes and the right to buy, for those who are able to take advantage of it, is the way forward.

I ask my hon. Friends to disagree with the Lords in the said amendment.

Mr. Maxton

Perhaps you were fortunate. Mr. Speaker, not to be in the Chamber for the first of our debates on the Bill, when the Minister made great play of the way in which the period leading to the maximum discounts on flats could be accelerated. He argued that the relevant provisions had to be inserted in the Bill because that had been done when the House was considering the equivalent English Bill. He contended that this Bill could not be out of line with English legislation. The amendment that has been tabled by another place brings the Bill into line with legislation in England and Wales, yet the Minister is now saying that that cannot be done. He is not prepared to allow that charitable status in England, Wales and Scotland should be the same.

The Minister has been pleading and arguing since the Bill first came before the House that he is introducing the right to buy to Scottish housing associations—this is almost the only major argument that he has advanced—because housing association tenants in England and Wales have the right. He forgets to mention that nearly 70 per cent. of associations in England and Wales are so registered charities whereas only a small percentage of the Scottish associations are so registered.

Initially, the Minister did not intend to allow any of the Scottish associations to be recognised as charities and for their tenants not to have the right to buy. He has made a concession but he has been mean in the way in which he has done it. He should have accepted the amendment which would mean that all associations would be recognised by the Inland Revenue. That would be the only way forward because in Scotland there is not a register of charities as there is in England and Wales. The amendment suggests that all the associations should be recognised as charities and that the rules that apply in England and Wales should apply also in Scotland. That would allow housing associations to become charities in future if they could convince the Inland Revenue that they had charitable status. That would mean that their tenants would not have the right to buy as in England and Wales.

The Minister recognised from the beginning that there were anomalies. There are housing associations in England and Wales that operate in Scotland and their tenants would not have the right to buy while others would. A housing association may go to Berwick-upon-Tweed, establish an office and set up a small housing association there, then move to Edinburgh. It might be registered as a charity in Berwick-upon-Tweed, which arguably the Minister may recognise in future, while the Minister may not recognise the one in Edinburgh as a charity in future. He is creating further anomalies by the way in which he is acting.

Let us examine what the Minister is doing. Essentially, he has taken four existing housing associations out of the charitable status which the Lords put in. What are they? There is the Grassmarket in Edinburgh. That is below 100, so he has exempted that. There is the Gowrie in Dundee. That is almost entirely special needs housing. The Minister mentioned Edinvar. That is larger. It is over 100. But, again, it is almost entirely special needs housing, so again most of it is exempt.

We come down to one housing association that the Minister is concerned about — the Link housing association. From the beginning, I have always labelled the Bill as the "Lord James Douglas-Hamilton Benefit Bill". The Link housing association is largely in the constituency of the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton). That is about saving a Member of Parliament who has a majority below 100. It may be just above 100 but it is certainly not many.

Lord James Douglas-Hamilton (Edinburgh, West)

Four hundred and ninety eight.

Mr. Maxton

Nearly five hundred.

Many of the tenants of the Link housing association live in pleasant houses in an attractive part of Edinburgh and they are worth a great deal of money. Because the Link housing association is now recognised by the Inland Revenue as a charity, the tenants will be denied the right to buy.

The Minister may put up an argument to exclude all housing associations that are recognised as charities. Or he can put up an argument recognising that all housing associations recognised by the Inland Revenue as charities should be exempt. In this place we should not be spending our time debating the exclusion of one housing association which is recognised as a charity, because that is all it really is, because of the constituents of one hon. Member, who happens to have a small majority. They will now have the right to buy as a result of what the Minister is doing.

I do not want to be too personal, but one of the ironies is that the amendment in the other place was moved by the uncle of the hon. Member for Edinburgh, West.

Mr. Robert Hughes (Aberdeen, North)

The hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) is going to find out whether it was his uncle.

Mr. Maxton

I can assure my hon. Friend that it was the uncle of the hon. Member for Edinburgh, West who moved the amendment. It may be that we should not get too involved in what is obviously a family squabble on this matter.

It really is rather strange that hon. Members are debating one housing association out of all the housing associations in Scotland. It is all down, as was the Western relief road, to the hon. Member for Edinburgh, West. I am sure that the Dunfermline college of education will be saved as well. The hon. Gentleman is a powerful Member of Parliament. He manages to get the House to spend a lot of time debating issues which are designed to save his seat. I congratulate him on that, but it is not worthy of the Minister that he should do this in this particular way.

Mr. Ancram

The hon. Gentleman is coming to that traditional tailing off, for which his speeches are so well known, but before he sits down, can he explain why on this occasion, when he is resisting the line being taken by the Government, he fails to make all the arguments which were so powerfully made last time, that without exemption these charitable associations would lose all the advantages of being charities? Is it possibly because the income tax law has now been reinterpreted and the hon. Gentleman has to make a specious attack on my hon. Friend in order to get anywhere with his argument?

9.45 pm
Mr. Maxton

The Minister knows my speeches better than I know them myself, but if he thought that I was tailing off he had better think again. I shall come to the point about the Inland Revenue, in a moment. The Minister makes great play about the Inland Revenue, but he should be consistent. If he is to be consistent, the only housing associations that he should exempt are those which were set up and by which many houses were bought and modernised through public subscription.

The Minister was one of the sponsors of Shelter in the 1960s. Such organisations are genuine, in the sense that they are not financed by public money. If the Minister wishes to be consistent in his argument about the In land Revenue, that is the sort of organisation that he should exempt, but that is not what he has done. Large numbers of housing associations that were recognised as charities in the past few years will still be recognised as charities, but the Minister is excluding one, the Link housing association.

Is it strange that the Inland Revenue is now giving advice different from that which it gave a few months ago? The Inland Revenue believed one thing six months ago and now says something different. That is reasonable, because it is not written into statute: it is advice from the Inland Revenue and is contrary to advice that it gave some time ago. What is to stop the Inland Revenue six months from now again giving contrary advice? If the Minister had gone to his Treasury colleagues when the Finance Bill was going through the House and said that he wanted an amendment in the Bill to deal with this, he would have been on better ground.

The Minister is basing his decision on advice that I have not seen written down. Perhaps the Minister has written advice from the Inland Revenue but advice can change and I am not prepared to trust the Inland Revenue not to change its mind in the future. The generous and right thing for the Minister to do is to agree that housing associations should continue to be recognised as charities. That is what the other place wants to do and the Minister is being mean-minded in the way that he is treating this amendment.

Mr. Henderson

The hon. Member for Glasgow, Cathcart (Mr. Maxton) has been uncharacteristically mean-minded in his speech. I would not be surprised if there were some Link housing association houses in the constituency of my hon. Friend the Minister in addition to those in the constituency of my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton). I have housing associations in my constituency and I am also interested in this question of charity. Many hon. Members will have had representations and will have been involved in discussions during the course of the Bill.

Mr. Ancram

My hon. Friend said that there were Link houses in my constituency. I can confirm that and tell the House that there are 159 such houses in Grangemouth. I am sure that the hon. Member for Glasgow, Cathcart (Mr. Maxton) will suggest that we are trying to help the hon. Member who represents that area as well.

Mr. Henderson

I am grateful to the Minister for that additional information. This is a difficult subject and I am grateful to my hon. Friend the Minister for the way in which he has worked assiduously to get the right answer to extremely complicated questions. If I have time, I shall return to that later.

This might be an appropriate point to take up a comment which the hon. Member for Cathcart made about my hon. Friend the Member for Edinburgh, West, whom we know must remain silent during the debate. He has been present for the entire debate and it is fair to recognise that his persistence and persuasiveness have most consistently argued for the right to buy for the tenants of housing associations. That arises directly from his constituency experience.

This is also a moment to reflect that we do not seek to extend the right to buy to tenants of housing associations because we are suddenly seized of some new concept of the right to buy. We have had years of it working in the remainder of the public sector, and it has worked extremely successfully for everyone involved. Local authorities have had about £750 million worth of new resources available to meet today's needs in housing as a result of the sale of council houses. The policy has been good for tenants who have bought their houses, and it has improved the balance of housing in Scotland substantially. Indeed, balance is exactly the right word. We have reached the point where 50 per cent. of the Scottish people live in a home which belongs to the family. In other words, they are owner-occupiers. Perhaps fractionally under 50 per cent. are tenanted. That is a considerable achievement and a balanced one. Tens of thousands of tenants have benefited from the right to buy, so it is not a novel policy but an extension of a policy which has worked well in other sectors and which is now to apply to housing associations.

Mr. Maxton

Would the hon. Gentleman wish to see his hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton) introduce a Bill next year extending the right to buy to tenants in the private sector, as it works so well?

Mr. Henderson

The hon. Gentleman drew a similar distinction in relation to charities. I think he was trying to draw a distinction between one sort of genuine charity and another. He was making a distinction between charitable housing associations operating with their own money and those which operate with public money. The fact is that most housing associations operate substantially with public funds.

Earlier the right hon. Member for Glasgow, Govan (Mr. Millan) sounded surprised when I said that the Government had been infinitely more generous to housing associations than the Labour Government when the right hon. Gentleman was Secretary of State for Scotland. He will find the figures given to me by my hon. Friend the Minister in a written reply. I asked the Secretary of State for Scotland how much public money had been paid to housing associations in Scotland since May 1979, and how it compared with the preceding five years. My hon. Friend answered: Total payments from public funds amounted to £524.3 million in the six years from 1 April 1979 to 31 March 1985; this compares with £41.91 million for the five years from 1 April 1974 to 31 March 1979." — [Official Report, 11 December 1985; Vol. 88, c. 688.] That supports my remark that there has been a tenfold increase in housing association funds under this Government.

I wish to give full credit to the part that housing associations have played in meeting the needs of Scotland's housing, especially in the case of special needs housing. They have been far ahead of local authorities in providing houses for people with special needs. Special needs were referred to specifically in the Green Paper published by the right hon. Member for Govan in 1976 as pressing needs, yet there were more met by housing associations, as he will agree, than by many local authorities.

Finally, my hon. Friend the Minister has been patient in meeting the representations from both sides of the House. In my case I have even given him contradictory representations from constituents and, curiously enough, he has been able to meet both because of the change in the Inland Revenue's advice. I am extremely grateful to him for the way in which he has met the needs of housing in Scotland and the interests of hon. Members.

Question put and agreed to.

Lords amendment No. 10 disagreed to.

Amendment made to the Bill in lieu thereof: in page 22, line 1, leave out '3 October 1980' and insert '14 November 1985'.—[Mr. Ancram.]

Subsequent Lords amendments agreed to.

Committee appointed to draw up a reason to be assigned to the Lords for disagreeing to their amendment No. 8 to the Bill: Mr. Ancram, Mr. Dewar, Mr. Durant, Mr. John MacKay and Mr. Maxton; Three to be the quorum.—[Mr. Ancram.]

To withdraw immediately.

Reason for disagreeing to Lords amendment No. 8 reported, and agreed to; to be communicated to the Lords.