§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Allen.]
11.24 pm§ Mr. Tony Lloyd (Manchester, Central)This debate is essentially about fairness and about whether, in an area in which tens of millions of pounds are being invested, and in which we hope that many people will have their quality of life greatly improved, we can avoid a situation whereby the 45 or 50 households left in the Lower Beswick compulsory purchase order area will lose out very badly, and whether we can allow them to be cushioned against the worst excesses of the decline in the area.
Let me say a little about east Manchester. It was badly hit by unemployment from the early 1980s onwards; the destruction of the traditional heavy engineering industries, for instance, caused massive damage, while in the background were all the usual patterns of rising crime.
The community to which I refer is traditionally tight-knit; historically, people have been proud to say that they come from it. Sadly, however, we saw the breakdown of that community spirit, and an increase in vandalism and anti-social behaviour that people had not experienced before.
I first became closely involved at the time of the boundary changes, when the boundaries of my constituency were changed. I was shocked by the state of the whole east Manchester area. The Government recognised its plight, and awarded it one of the earliest new deal for the community programmes. Tens of millions of pounds will go to east Manchester, which is good for the area as a whole. The problem for the area that I am talking about is that it was among the hardest hit of the east Manchester sub-communities. It contains, perhaps, only 250 houses, but people living there probably suffered all the problems that hit east Manchester generally, with a vengeance.
Lower Beswick certainly experienced all the problems of property surplus. Houses there began to be left empty, and to be boarded up. It also experienced an increase in the number of unscrupulous speculative landlords—landlords who moved in and tried to purchase property at low prices in the hope of making a quick return from cheap and easy lets, or landlords who saw a rather longer-term opportunity for speculative capital gain.
One housing association, Northern Counties, behaved atrociously. Irresponsibly, it bought numerous properties, and when it could not let them, mothballed the area rather than trying to market them, allowing the blight of empty properties to affect the immediate area in a way that almost guaranteed the long-term destruction of Lower Beswick.
Neither the housing association nor the private landlords were prepared to do anything about the quality of the tenants whom they took in. There was no control by either social or private landlords. There were many anti-social tenants who, although they often stayed for only a short time, in that short time managed to wreak enormous damage. The short-term damage caused massive cumulative long-term damage. I well remember the slum clearances that took place in Manchester in the early 1960s, but I have never seen anything like what we saw in Lower Beswick.
349 People in that small community do not tend to moan. They tend to get on with life, and have put up with a great deal over many years. In this case, however, I have no doubt that the stress of simply living in the area was enormous. Those who are left suffer from ill health, much of it directly caused by intolerable living conditions. Those who could leave—perhaps they had short-term tenancies—simply got up and went, which in itself exacerbated the problem. The good people—those who had invested in the area, who wanted to make a life for themselves, to be part of the community and to build that community—are, sadly, those who have been stranded by the changes that have taken place in Lower Beswick, and it is they who now bear that heavy load. As I have said, of the 250 houses in the area perhaps no more than 40 or 50 are still occupied.
The announcement of the new deal was a cause for great rejoicing. I was delighted that the Government had recognised the needs of east Manchester, and also felt that I had achieved a lot: I had had my own role to play in the new deal, although many others had contributed. However, the problem is that once the new deal was declared, the existing problems of Lower Beswick became intolerable. It was obvious at that point that Lower Beswick would have to be taken out, to allow the regeneration of the greater area. The greater good of the many was pitted against the immediate and longer-term needs of a limited number of people.
It was a prerequisite for the improvement of the new deal area that Lower Beswick had to come down. I think that the people in Lower Beswick themselves accepted that demolition was almost inevitable by the time the new deal was declared, but that had an immediate impact on property prices. They had already suffered a loss from the high mark of the early to mid-1990s. At that time, in about 1993–94, small two-bedroom terraced houses in the area were being sold for £28,000 or £30,000.
I accept that that is not a lot compared with the elevated prices in London, but the people of that area are not on the elevated incomes of London, so those property prices fitted the income and needs of the people of that community. However, once the CPO was declared, property prices—in so far as property could even be sold—dropped to literally a few thousand pounds each. In some cases, property could not be sold.
The choices that people then faced in Lower Beswick were invidious. They could walk away. They could leave the key in the door and walk out—but in doing so, they left behind not only their own way of life and home, but in many cases, debt to building societies or banks. For those who were lucky enough to have paid off their mortgages, it was impossible to raise another mortgage when they had walked away from a property that had become valueless.
The building societies and banks deserve no credit in the story. With one or two exceptions, they have taken an extremely hard line. They have simply told my constituents that where building society debt exists, it is up to the individual to redeem that, and that before he could be even considered for any further loan, he would have to pay off existing and outstanding debt—even though that debt is not the fault of those who find themselves in that position. Of course, for many people 350 remortgage is impossible. If they are elderly or retired, building societies will not look at the possibility of a remortgage.
The compensation scheme available under CPOs is inadequate. The Government recognised that some months ago in the Department's White Paper. There was a reference to the need to look again at the compensation scheme. I think that there is to be a consultation specifically on the question of compensation under such CPOs, but change in the future will not help my constituents, who face the problem here and now. However, compensation is certainly inadequate, as the Government recognise.
The money distributed under CPOs is trivial. It is designed to allow people to refit carpets or whatever; the amounts are modest for people who are losing tens of thousands of pounds. The relocation grant suffers from two major disadvantages. One is the whole concept of what market value means for a relocation grant. The second is that the grants are means-tested. For those who are desperately poor, it is possible to have compensation that may not be adequate, but at least goes some way towards adequacy. For those on very low incomes, the taper and cut-off under the means test is so sharp that they are told that they qualify for virtually nothing.
Again, we can well imagine the plight of the elderly and of those on low incomes who face walking away from their homes with debt, or with no possibility of repurchase. As things stand, some will carry that debt for many years. The stress and ill health that I have talked about have been made massively worse by that situation.
Today, one of my constituents was telling me that since the whole saga began, her long-term condition has been made worse and that she has had to give up work. Ironically, under the compensation scheme, she is better off having given up work. There is something wrong with a scheme in which my constituents become better off by suffering stress and ill health.
There are ways in which the Government and public agencies could help. Two of my colleagues—local councillors Neil Swanwick and John Smith—have worked hard with local residents to determine whether they can relocate somewhere within the broad east Manchester area, in the hope that with the modest compensation they will be given, they will be able to buy into an area with depressed property prices and benefit as that area is regenerated and property prices increase. That is a hope and an aspiration, and it requires an act of faith by local people. Nevertheless, many people are considering taking that step. I applaud the work being done by those two councillors.
As I said, there is also a problem with lenders. I ask my hon. Friend very seriously to examine the lenders' role and to determine what pressure the Government can bring to bear in addressing the negative equity issue. Building societies that have been prepared to lend on the basis of absolute security, although they know better than would-be purchasers that an area is dicey or may be declining, are not operating within the spirit of honesty and probity.
I think that those building societies need to be brought up very sharply and asked to account for their actions. They should also be asked to put together an adequate rescue programme that would allow people to move out, 351 even with some of their current debt, by enabling them to remortgage in a manner that does not cripple them financially for the rest of their lives.
As I have also said, there is a real problem with determining market value. Current market values in the area are based on the depressed values of an area that was being run down, potentially to demolition. However, the market value of properties only streets away is a very different story. Today I was quoted some property values in areas adjoining the CPO area. Although the quotations may not mean much to the House, they will mean a lot to my constituents. Viaduct street adjoins the CPO area and is separated from it only by a railway line. However, I am told that properties there are being valued at £35,000. In Blackrock street—which is only two or three streets away from the CPO area and has almost identical houses—houses are being valued at between £19,000 and £27,000. Market value, therefore, is a subjective matter. I believe that there is an onus on the public sector at least to consider charitably the meaning of market value.
A friend of mine is a surveyor who has dealt with CPOs—I shall not name him; I shall not advertise. He has pointed out to me that
under the Disturbance Rule (Rule 6 Section 5 of the Land Compensation Act 1961) the law specifically says that Councils are not bound by Rule 2 which is the one which refers to market value; precedent says that the Council should pay as part of a Disturbance Claim all losses that reasonably flow from the enforced removal.My friend's point is that negative equity reasonably flows from an enforced removal. Were it not for the CPO, owners would stick with their property—either hoping that its value would increase in a rising market, or letting it out and benefiting from rental income. His point is that in a CPO, negative equity is created artificially. He also said that there was a possibility—I ask my hon. Friend to consider whether it is a practical proposition—of a test case before the Lands Tribunal, backed by the Government, which could resolve the issue once and for all.
We should try to ensure that any compensation package misses out speculative landlords—those who became part of the problem by buying in the hope of making a quick buck. They really do not deserve any consideration in extraordinary compensation schemes. It would go down badly if compensation were wasted on those who have not done anything to prop up the area, but have done much to undermine it. I hope that my hon. Friend will take that point on board.
If the area is cleared, as I am told it will be, it will cost in the region of £1 million to £2 million to buy everyone out and make the area fit for redevelopment. According to quite modest estimates, there will be an immediate capital gain and the land will be worth between £5 million and £10 million. If that is true, the rest of us stand to gain a great deal on that desirable capital increase.
It is not beyond our wit to devise a scheme whereby a limited number of people—those who stuck with the area and tried to keep it decent when others simply left—should be able to tap into the capital increase in the value of the land that has resulted from their removal. I hope that my hon. Friend the Minister will take that idea on board.
Finally, this is a debate about justice; it is about whether a limited number of people will have to pay an enormous price to make things better for everyone else in 352 the area. Frankly, it would not cost much to put right. I know that it is a difficult matter because there are precedents in other parts of the country that are in decline, but I honestly believe that the compensation scheme is now so outdated that we have to look at the situation imaginatively. I hope that my hon. Friend will say something that will be of comfort to my constituents.
§ The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Beverley Hughes)I congratulate my hon. Friend the Member for Manchester, Central (Mr. Lloyd) and thank him for raising with the Government the difficult circumstances faced by some of his constituents in Lower Beswick as a result of a compulsory purchase order. My ministerial colleagues and I are aware of the specific problems as my hon. Friend and some of his constituents have written to us about them.
The general issue of the compensation payable to owners of low value housing subject to a compulsory purchase order has also been considered in the context of the compulsory purchase policy review to which I shall return later in my speech.
On the surface, this is a valuation dispute between an acquiring authority and some claimants. I understand that in this case the acquiring authority is offering about £7,000 for the properties, but the claimants want some £28,000. They point out, as my hon. Friend has done on their behalf tonight, that their houses are well maintained and have been for many years, so it is wrong for them to be offered the same compensation as that for empty or rundown properties. Their valuations are based on those for similar houses in adjacent districts.
My hon. Friend will know that the compensation regime is based on the principle of equivalence—the system is supposed to ensure that a claimant
shall be paid neither less nor more than his or her loss.In normal circumstances—and this is the problem—the open market value for the interest in the property, disregarding the effects of the scheme, taken with the rest of the compensation package will achieve that. However, difficulties arise where there is no proper market and no evidence of recent transactions.Valuers make valuations based on the age, character and location of a property. These are in effect the elements of demand for a property and the weight given to each element will vary from case to case. In areas of low demand, valuers may give a great deal of weight to location which would lead them to give similar values to properties of different character. However, like doctors and lawyers, valuers may disagree with each other.
In terms of the immediate action open to my hon. Friend's constituents—although it is not a guaranteed remedy—I advise them, if they have not done so, to engage experienced valuers who can negotiate with the council on their behalf. If they cannot reach agreement, it is open to them to apply to the Lands Tribunal for a determination of the compensation payable. These cases may be suitable for the new simplified procedure available at the tribunal which is much quicker and cheaper than a full hearing. I urge them to consider that course of action, certainly as a first step, if they have not done so.
There are problems with compulsory purchase in these circumstances, and I have no difficulty acknowledging that to my hon. Friend. The problem of compulsory 353 purchase of low value properties, which he has so clearly described, is not unique to Lower Beswick. It was brought to the attention of the compulsory purchase policy review advisory group, which I think is the body to which my hon. Friend referred, which has been looking closely at how to make recommendations on making the compulsory purchase and compensation system more efficient, effective and, above all, fairer to all parties. That was the remit given to them by my right hon. Friend the Member for Sheffield, Central (Mr. Caborn), when he was the Minister for the Regions, Regeneration and Planning.
Although people may be living in an area where there is no effective market, which may mean that they have negative equity, that may not matter very much if they do not intend to move, and have the means to pay the mortgage. Obviously, the problems arise only when an authority comes along with a scheme, possibly for very good reasons, and compulsorily purchases their properties. That crystallises their loss and if a low valuation is upheld, it can catapult people, as my hon. Friend anticipates, from proud owner-occupation to understandably resentful council tenancy in some circumstances, without making much of a dent in their debt. No one ever thinks, and certainly I do not, that that is a satisfactory situation, especially as it has been precipitated by an outside agency and is no fault of the resident. However, the current compensation code does not make provision for overcoming it.
The compulsory purchase policy review advisory group has produced its report for us, and we will publish it very shortly. While I cannot anticipate any announcement that my hon. Friend the Minister for Housing and Planning will make, the options that it has considered have included giving compensation on a like-for-like basis. That would allow claimants sufficient compensation to purchase an equivalent property elsewhere—an option mentioned by my hon. Friend—even if the open market value of the property taken was insufficient to do so. The Government's policy paper, which we hope to publish in the autumn, will contain proposals to overcome such problems.
Clearly, in order to change the system, we need primary legislation. Framing legislation to overhaul the compulsory purchase and compensation system will be a not inconsiderable job. It is something for the medium term when parliamentary time permits.
I would not like my hon. Friend to think that there is nothing that can be done to help his constituents in the short term. He may know that I visited the area not too long ago. The city council told me about a scheme devised to solve an aspect of the problem that he has described, which enabled a group of owner-occupiers to retain their status and move into newly refurbished premises. Without going into great detail, the scheme involved a registered social landlord buying a property that required refurbishment, Manchester city council using its discretion to give an improvement grant and the registered social landlord granting a new mortgage to the claimant, the previous one having been paid off by the compensation package.
Variations on the scheme were made to take account of differing circumstances. The council has emphasised that the mechanism was successful for a small scheme. There may be difficulty applying it to a large number of 354 claimants, although I do not think that a large number is involved in my hon. Friend's case. The scheme shows that solutions can be found with sufficient good will and imagination by the acquiring authority, other housing agencies and mortgage lenders, working with the claimants rather than against them.
My hon. Friend also mentioned relocation grants. That was a new power that we gave to local authorities in 1997 to help people affected by clearance to buy other houses nearby. The grants are additional to the compensation that people receive through the compulsory purchase process, and are designed to bridge the gap between the value of the property cleared and the cost of a similar home nearby. They are often particularly useful in areas such as Lower Beswick, where market values have dropped sharply in relation to neighbouring areas.
I am pleased that Manchester city council is making use of its powers to give relocation grants in Lower Beswick. Although I know that the grants have worked well in some instances, I understand that some of my hon. Friend's constituents are unhappy with the amount that they are entitled to receive because they have found that the grants do not close the funding gap
I have a great deal of sympathy with the difficulties faced by my hon. Friend's constituents, and with those of other households that have become trapped in low value housing. As he has said, because of the criteria wrapped round relocation grants, they help those in greatest need—those on the lowest incomes—but do not offer so much help to those who are not wealthy but are earning a bit of money. The system is not perfect, and we have acknowledged those shortcomings in the current system. For that reason, we proposed in the housing Green Paper in April to give local authorities wider powers to tackle the problems of low demand housing. In particular, we want to allow greater discretion over where and how to give relocation grants. Consultation on the Green Paper is still open, and we are seeking views.
My hon. Friend raised three specific points this evening, which he has taken up with me in correspondence. I shall reply shortly. However, I shall make a couple of points on some of the issues to which he referred in the debate.
My hon. Friend referred to negative equity. The compulsory purchase review advisory group has considered the problem, and has acknowledged that it can result in people receiving insignificant and insufficient compensation to acquire an equivalent replacement property. As part of our response to the report, we shall consider carefully ways in which we can achieve what my hon. Friend seeks. We hope that mortgage lenders more generally will be able to adopt the sympathetic approach that one or two have offered in the past, to enable people to overcome the problem of negative equity at that point in the process.
My hon. Friend referred to the disturbance payment and asked whether the Government could finance a test case. I have considered the matter carefully and I am advised that it is not an easy option for the Government to make a test case. However, it would be open to the local authority to do so, and that is something that we shall discuss with it.
On rule 6 and the advice that my hon. Friend has received from a professional with knowledge in the field, those are matters that I shall look into and write to him about. Finally, my hon. Friend asked whether existing 355 owners could benefit from the increased value of their own proportion of a compulsorily purchased site. That is anticipating, perhaps hypothetically, increased value of the whole site as a result of redevelopment. It is an interesting question and I think that my hon. Friend acknowledged that it raised some important issues of principle. Currently it would involve an unprecedented use of public funds to apply new deal for the community money to bridge the gap. However, we are prepared to consider the matter.
Such a scheme would favour only those properties that lie within new deal communities. It would not necessarily represent an option for other areas that did not have new deal for the community funding or some similar central Government funding initiative. I am prepared to explore the matter further.
356 My hon. Friend has raised with great clarity the problems for people in Lower Beswick as a result of current deficiencies in the CPO system and the relocation grant system. I regret that I cannot offer him, short of the innovatory schemes that Manchester city council has already explored and I hope will continue to explore for his constituents, an immediate remedy. I can assure my hon. Friend that we are well aware of the serious issues that he has raised. We want to find a remedy as soon as we can to help his constituents and other people in similar situations.
§ Question put and agreed to.
§ Adjourned accordingly at six minutes to Twelve midnight.