HL Deb 07 June 1956 vol 197 cc777-86

3.29 p.m.

Order of the Day for the Second Reading read.

THE MINISTER WITHOUT PORTFOLIO (Tin EARL OF MUNSTER)

My Lords, I beg to move that this Bill be now read a second time. Many of your Lordships will recall that the Bill is the outcome of an undertaking given by my right honourable friend the Minister of Housing and Local Government in another place last December, when he stated that legislation would shortly be introduced to relieve hardship in certain cases due to the resumption of slum clearance on an increasing scale. The cases he had in mind—and they are all incorporated in the Bill—were of those people who in recent years had been driven by the housing shortage to buy unfit houses at high prices and for which the law would entitle them to compensation only at little more than the value of the land. He therefore proposed that an owner-occupier living in an unfit house purchased since the outbreak of war, should, if the house is compulsorily purchased or demolished, receive compensation at the same rate as would have been payable if the house had not been declared unfit. Somewhat similar provision would be applied in the case of a small shop or business which forms part of a dwelling-house. The occupier, whether owner or tenant, would be compensated for his shop at the same rate he would have received if it had not been declared unfit.

There was a third case with which my right honourable friend was also anxious to deal. Severe hardship might well be caused by insufficient compensation for houses which, although unfit, had been well maintained. The rates of compensation under the Housing Act of 1936 are based upon building costs at that time and, consequently, are now quite inadequate. I have no doubt your Lordships will readily agree that it is right and proper to remove these causes of hardship.

With those few introductory words to this small Bill, let me now turn to deal with the three main clauses. Clause 1, which has a ten-year life, expiring in 1965, is designed to meet the plight of owner-occupiers who since the outbreak of the last war have been compelled, by the housing shortage, to purchase at enhanced prices houses which ought to be demolished. Anyone who has purchased a house between September, 1939, and December 13 last year, and was occupying the house on that date, will receive the full compensation which would have been paid if the house had not been dealt with as an unfit one.

Clause 2 deals with cases of hardship arising where businesses form part of a dwelling-house. To-day, as the law stands, the shopkeeper receives no compensation for the loss of his premises or means of livelihood except in the instances where the local authority, under the Housing Act of 1936, make an ex gratia payment. To remedy what I think is clearly an injustice the clause will provide as a permanent measure that when a condemned house has been used, wholly or partly, for business purposes the local authority shall pay the same amount as would have been paid if the house had not been dealt with as an unfit one.

Clause 3 deals with payments made in respect of unfit but well-maintained houses. Under Section 42 of the Housing Act, 1936, provision is made that, where the Minister is satisfied that houses included in slum clearance orders have been well maintained, he may award payment in recognition of that fact. This payment is made by the local authority. Where the aggregate expenditure on maintenance during the preceding five years cannot be shown by reference to receipts, the sum payable is at present calculated as one-and-a-half times, or in the case of an owner-occupier three times, the rateable value of the house. This level of payment, specified in the 1936 Act, was related to maintenance costs prevalent before the war, and I think your Lordships will agree that it has now become disproportionately low. Accordingly, the Minister may by order, subject to Affirmative Resolution, adjust these rates to take account of changes in the cost of maintenance.

There is one further point to which I ought to refer before resuming my seat, and that is this. Subsection (2) of Clause 3 enables payments to be made for well-maintained houses which are affected by demolition orders and closing orders. This extension will apply to compulsory purchase orders made for the purpose of providing temporary accommodation, and also where agreements have been reached between the owner and the local authority for the demolition of an unfit house. This subsection removes an existing anomaly where payments for well-maintained houses can be made for premises affected by clearance and compulsory purchase orders but not for those affected by demolition or closing orders. Clause 3 also provides that these payments cannot be made to those already entitled to compensation under Clauses l and 2 of this Bill. That is all I need say to the House at the present stage, except to add that the expenses of this Bill, which in any event will not be large, will be carried by the local authority. With those few words, I commend this small Bill to the House for Second Reading.

3.37 p.m.

LORD SILKIN

My Lords, this is a Bill with a very limited purpose. The greater part of it will be in operation for a limited period, and I prophesy that it will have very limited results. It is intended mainly to benefit one particular class of person, though there are, of course, others, like the shopkeeper and the person who is the owner of a well-maintained house, who will also benefit. I do not think I need say much about those two categories, except that I approve of their being assisted in the way laid down in the Bill. The main purpose of the Bill, as I think the noble Earl would agree, is to benefit the owner-occupier who bought his house after September, 1939, and who remained in possession of it. His benefit is limited to a period of ten years.

The Minister has, presumably, selected from among a great many categories of persons that class which he thought was most injured and which suffered most as a result of the slum clearance operations. I am not sure that he has picked out the ones who will be hurt most. In the past, we used to hear a lot about widows, elderly persons and others who had put their life's savings into property of this kind and to whom the income represented the sole means of livelihood. I should have thought that, as between different categories of hardship, the categories I have mentioned deserve at least as much consideration as the person who bought his house possibly in 1939, who has lived in it for a number of years but who, at any rate, will be provided with another house by the local authority when he is dispossessed in the present house.

If we are to introduce this new practice of basing compensation not upon the value of what is acquired but upon the category of hardship, then I suggest that the Government have probably chosen the category which is less deserving, or at least no more deserving, of consideration than the other classes to which I have referred. It may be that the Government will find themselves in the position of having to introduce a similar measure to assist people whose life savings have been invested in this class of property and who will be hit very hard indeed if it turns out that their property is made the subject of a compulsory purchase order.

I thought that the noble Earl skated rather skilfully over the question of what compensation they would receive. He said they would get the compensation that they would have received if the property had not been declared slum property. I do not know what is the intention of the Bill, but I wonder what that means in practice. After all, the property is slum property. If we take an individual house, it is, by definition, a house which is unfit for habitation and which, in practice, cannot be made habitable at a reasonable cost. If a house of that kind is put on the market, what will it fetch? Presumably this house has already been put into the category of a slum house; it will have been declared to be a slum house, possibly as the result of a public inquiry, and the only question that will be outstanding will be the question of compensation—for no question as to its condition will be involved.

The Bill refers to compensation as laid down under Section 40 of the principal Act, the 1936 Act. I have looked at that section and it says that where land is purchased compulsorily by a local authority under this Part of this Act, the compensation payable in respect thereof should be assessed in accordance with the Acquisition of Land (Assessment of Compensation) Act, 1919. So one has to go back to the 1919 Act. When one goes back to that Act, what does one find?—simply that the compensation is to be what a willing buyer would pay to a willing seller. I ask the noble Earl: how much would a willing buyer pay for a house which has been declared to be a slum, which is unfit for habitation and which cannot be rendered fit at reasonable expense? In the ordinary case the answer is nothing, or possibly a minus quantity. But what is going to be the value under this Bill? How much will the owner get now?

I doubt whether, in fact, the Government are giving such an owner any very great concession. It all depends on the way in which the local authority choose to interpret this provision. If they choose to interpret it strictly, they will say, as is the fact, that such a house has no value except site value. If they choose to be generous they can stretch a point, but not very far, and pay some compensation. I would suggest that it might have been better if we had done with this Bill what has been done in the class of case equivalent to what is now known as the Pilgrim case—that is, to give the local authorities reasonable discretion, having regard to the amount of hardship involved, as to what they should pay by way of compensation for such houses. I think that in that way an owner might have been expected to derive some benefit. Without in the slightest degree casting any imputations upon the intentions of the Government under this Bill, which I accept as being wholly honourable and proper, I think that, Es the Bill is drafted, the result to the owner-occupier of a house who qualifies for the additional compensation will be most disappointing.

There is one part of the Bill that the noble Earl omitted to say anything about, and that is the provision where there was a mortgage. He will remember that the Bill is intended to provide some benefits to an owner-occupier whose house is condemned while still the subject of a mortgage. In such a case, the owner-occupier can go to the county court, and in certain circumstances he may be relieved of his obligation to pay any outstanding balance owing on the mortgage. As the House will appreciate, it can, and very often does, happen that an owner-occupier or, for that matter, an owner, may be deprived of his property while there is still a mortgage on it. It may be, however, that the amount of compensation is quite inadequate to pay off the balance outstanding on the mortgage. The Government have endeavoured to deal with that problem—and I give them great credit for their attempt—but how hake they dealt wilt it? Simply by saying that the owner may make an application to the county court.

Some of my friends in another place felt that that was putting too much of an onus on the owner-occupier; that very often he was a person inexperienced in going to courts, and would hesitate to go to the court to get this kind of relief. But supposing that he did go to court, then it would be open to the court to make an order, either unconditional or subject to such terms and conditions, including conditions with respect to the payment of monies, as the court might consider it just and equitable to impose. My Lords, what is the equity there? In what way can a judge exercise his discretion? The mortgagee has advanced the money. Is it equitable that he should lose it? Where is the equity in that? How can a county court judge ever exercise his equitable discretion and say to a person who, in good faith, has advanced money on the security of a house and whose money remains unpaid, that it is equitable that he should be deprived of it? Of course there may be cases in which the lender acted improperly. He may have taken advantage of the owner-occupier; he may even have sold a house to the owner-occupier and advanced the money, charging an inflated price. But those will be quite exceptional cases. It therefore seems to me wrong to hold out to an owner-occupier the hope that he can possibly get relief in respect of his mortgage, except in the most unusual cases.

Subsection (5) of Clause 1 lays down certain criteria which the court will have to exercise: whether the mortgagee or person entitled to the benefit of the charge acted reasonably in advancing the principal sum on the security of the house. Suppose he did act reasonably, and acted in a way which he thought might be helpful to the occupier, and not primarily in order to get interest on his money. Then, presumably, the owner-occupier will get no relief. He may still find himself burdened with the responsibility. There is a second proviso: that if the house has become unfit as the result of the neglect of the owner-occupier himself, then he will get no relief. I do not wish to challenge the propriety of such a provision; but, by and large, it seems to me quite illusory to expect that an owner-occupier who finds himself burdened with a liability on a mortgage will be able to go to the court with any real expectation of being relieved of the burden of that mortgage; and if he were it would be grossly unfair to the lender of the money. This would be an additional risk which lenders would have to take into account—that a court can say, without any real justification, that they are not to get their money back. That is why I say that this is a benefit which is really illusory.

It would have been much more straightforward to say in this Bill that a local authority shall have discretion to take all factors into consideration, including any liability on the house, and to pay such compensation as seems to them reasonable. I should then not have minded if there had been a right of appeal to the Minister where an owner felt himself aggrieved; but to lay down conditions of this kind, which one knows in advance no county court judge could carry out, save in the most exceptional circumstances, is "leading the owner-ocupier up the garden path".

Then, what is the position of an owner who is living in a part of the house and has let off the other part to a sub-tenant? Is he to be treated as an owner in occupation of the house? That would not be quite fair. Perhaps it is a Committee point, but if the noble Earl would be good enough to tell me that he will look into the matter and will bring in an Amendment, should the Bill need modification on that point, then I should not wish to trouble the House by putting down an Amendment of my own. I would commend Her Majesty's Government for introducing this Bill as indicating a desire to help a limited class of person in cases of hardship, but I believe that the class of person they have selected is too limited. I cannot commend Her Majesty's Government on the way in which they are setting about this aim, for, as I have tried to explain, their method is illusory. I feel that there will be considerable disappointment among the kind of persons who are supposed to benefit under this Bill. For my part I say: let the Bill go forward; we on this side shall put no difficulties in the way. But it will not surprise me in the least if, in a year or so, the noble Earl—if he is still occupying the same position, as I hope he will be—comes forward with an amending and widening Bill to give real "teeth" to the purpose of this Bill.

3.44 p.m.

LORD MESTON

My Lords, Her Majesty's Government are to be congratulated on having introduced a Bill which is intended to relieve the very real hardship that may arise in an appreciable number of cases. I want to say only a few words on one aspect of the matter not specifically mentioned in the Bill but which I think is nevertheless related to this new legislation. I am referring to Section 44 of the Housing Act, 1936, as extended by Section 6 of the Housing Act, 1949, which provides, in effect, that where a person is displaced by means of a clearance order or a compulsory purchase order from a house which is unfit for human habitation, or displaced from a house which is not unfit for human habitation by means of a compulsory purchase order under Part V of the Housing Act, 1936, the local authority may pay to that person such reasonable allowance as they think fit towards his removal expenses; and if he is carrying on any trade or business in the house they may also pay such reasonable allowance as they think fit towards the loss which, in their opinion, he will sustain by reason of the disturbance of his trade or business consequent upon his having to quit the house.

I wish to underline the word "may" in both cases where it occurs in Section 44 of the Housing Act, 1936. Using moderate language, I say without any hesitation that the word "may" is capable in this particular case of inflicting hardship, not to say injustice. One thing which your Lordships will not tolerate is a lot of figures; therefore I will not deal with many figures but only briefly with two concrete cases which have been brought to my notice, in connection with which I will deal with very humble figures. The first case is that of the tenant of a shop in Lambeth Road. The London County Council acquired the property, among others, for the construction of a future highway. The tenant had paid £200 to the previous tenant for fixtures and fittings. His cost of removal was £18. Loss of business and other items amounted to about £70. He had to pay £222 for a new shop front at the premises to which he moved. The local acquiring authority, in their munificence, offered him £75 in all. The other case is that of a widow who was a tenant of premises in Stepney where she carried on business as an ironmonger. The premises were compulsorily acquired as being within the Stepney and Poplar Reconstruction Area. Her claim for the freehold shop, loss of stock, fittings and profits came to £964. She was offered £250 by the London County Council for the freehold shop and business. Ultimately the case was settled at £680.

The question arises whether Section 44 of the Housing Act, 1936, is in any way linked up with the Bill which we are considering to-day. I think it is, in the following connection: Clause 2 of the present Bill deals with payments in respect of business premises in unfit houses. I understand the position to be that in cases coming within Clause 2 of the present Bill the displaced person will be paid full compensation for disturbance; there-for the type of grievance to which I have referred is not likely to arise. But there are probably hundreds of thousands of cases of houses, unfit and fit, which have been or will in the future be acquired under the Housing Act but which do not, by any stretch of imagination, come within Clause 2 of the present Bill but are dealt with by what I may call the inequitable provisions of Section 44 of the Housing Act, 1936. I observe that in the present Bill Section 44 of the Housing Act, 1936, has not been repealed. If it had been I should have nothing to say on the subject; but I understand that it is still in existence and I believe that the word "may" in both places in that section is a veritable instrument of injustice.

That was all that I had intended to say, but when the noble Lord, Lord Silkin, got up and spoke I nearly jumped out of my boots with astonishment. He said something which is perfectly true and completely relevant. This Bill may be of no effect whatsoever. It has been stated by Her Majesty's Government in another place, and I assume it is their policy in this House, that the amount of compensation is not in any way related to the price which a person paid for the house. In a few cases it may happen that a person paid some very small sum, say £50, for a tumbledown house, and in that peculiar and unusual case he will, under the Bill, receive more in compensation than he originally paid for the house. On the other hand, it may happen that a person paid £1,000 for a house which was not worth anything at all. What will he receive? He is the very type of person who is intended to be helped by this Bill; but he may receive only about £180. I think that is all that I have to say except to emphasise that the point raised by the noble Lord, Lord Silkin, is important. It goes to the root of compensation. It deals with Clause 1 of the Bill, and it is a matter upon which I hope the Government will give a reply.