HL Deb 21 May 1962 vol 240 cc863-92

6.5 p.m.

Order of the Day for the House to be put into Committee read.

Moved, That the House do now resolve itself into Committee.—(Lord Craigton.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF BUCKINGHAMSHIRE in the Chair.]

Clause 1:

Payment of subsidies

1.—(1) The Secretary of State may approve for the purposes of this Part of this Act, proposals received by him on or after the first day of November, nineteen hundred and sixty-one, for the provision of new houses—

  1. (a) by a local authority in the exercise of 864 their powers to provide housing accommodation, or
and in respect of each such house so provided in accordance with proposals so approved (in this Act referred to as an "approved house") the Secretary of State shall, subject to section eight of this Act, pay for a period of sixty years an annual exchequer subsidy determined for that house in accordance with this Part of this Act.

(3) No exchequer contribution or other payment shall be payable under any of the following enactments—

  1. (a) sections eighty-four, eighty-six, eighty-seven, and eighty-eight of the Act of 1950;
  2. (b) sections two and three, and subsection (1) of section twenty-three, of the Act of 1957,
in respect of any house proposals for the provision of which were or are received by the Secretary of State on or after the first day of November, nineteen hundred and sixty-one.

LORD GREENHILL

With your Lordships' permission I should like to take the two Amendments to Clause 1 together: they are in the same terms. It is a simple point. I am asking that, instead of having a date already past for the coming into operation of Clause I, it should operate after the coming into operation of this Bill as an Act. I beg to move.

Amendment moved— Page 1, line 9, leave out from ("him") to ("for") in line 10 and insert ("after the coming into operation of this Act").—(Lord Greenhill.)

THE MINISTER OF STATE, SCOTTISH OFFICE (LORD CRAIGTON)

I shall be very brief on this point. I am sure that the noble Lord appreciates, in regard to the November 1, 1961, date, that the new subsidies will not actually be paid until the houses are completed. In most cases this is unlikely to be before the financial year 1963–64, because few houses approved after November 1 last year can be completed before then. There is sound reason for the November 1 date, as I think the noble Lord will understand. If we had given the date of operation, rather than the date of publication, just think what would bave happened. Local authorities who were to receive lower subsidies would have rushed in to submit tenders before the operative date. Those getting the higher subsidies, and therefore those in greatest need, might have delayed submitting their tenders until after the operative date. Either way the steady flow of labour and supply would have been disrupted.

Apart from this quite clear policy reason, I hope that the noble Lord will feel able to withdraw his Amendment for a reason which seems to me to be overriding. We have allowed some local authorities to start building houses already on the Parliamentary promise of the higher subsidy. We do not want to break faith with them, especially as those authorities who will get the lower rate of subsidy have started building already, in the full knowledge of what they are to receive. We do not want to break faith with Glasgow, in particular, who may well at this moment be building houses on sites which will qualify for the brand-new, expensive, site subsidy, and who would lose the subsidy on these houses if the Amendment were agreed to.

LORD GREENHILL

I should not like to interfere with any arrangement that has already been made and agreed to, and I am bound to say that I am to some extent impressed by the reasons behind the Government's view in having this earlier date, rather than the date of commencement of the Act. At the same time one has a general feeling that this is what might be called retroactive legislation, and that in committing yourself to a date already past for actions you are to take in the future, there is a danger that you may find yourself as a result worse off. However, in view of the explanation given, and with faith in the intentions of the Government in this matter, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 agreed to.

Clause 3:

Amounts of subsidies—other approved houses provided by local authorities

3.—

(3) For the purposes of the comparison required by the last foregoing subsection—

  1. (a) it shall be assumed that in the credits, for the income for the relevant financial year from rents in respect of the houses to which the said account relates and any amounts carried to the credit of the account for that year under paragraph (c) or paragraph (d) of subsection (1) of section one hundred and thirty-eight of the Act of 1950 and under subsection (1) of section five of 866 the Act of 1957 there has been substituted an amount equal to the aggregate of—
    1. (i) the local authority's total housing valuation for the relevant financial year (ascertained in accordance with Part I of the First Schedule to this Act) and
    2. (ii) if the total housing valuation is less than the amount arrived at by multiplying sixty pounds, or such other sum as the Secretary of State, after consultation with the Treasury, may by order prescribe, by the total number of houses for the relevant financial year (ascertained in accordance with Part II of the said Schedule), an amount equal to half the difference;
  2. (b) there shall be excluded from the debits any expenditiure by way of rebates from rents;

LORD HUGHES moved, in subsection (3) (a) (ii), to leave out "or such other sum as the Secretary of State, after consultation with the Treasury, may by order prescribe". The noble Lord said: This Amendment applies to the power of the Secretary of State to fix such other sum as he may, after consultation with the Treasury, prescribe, in substitution for the figure of £60 which, together with the gross annual value, enables the notional rent figure to be fixed.

Your Lordships may recollect that on Second Reading I suggested that no one outside of St. Andrew's House knew where the figure of £60 came from, and I was not alone in this House in being of that opinion, because the same opinion was expressed from the other side. But the noble Lord, Lord Craigton, in dealing with the matter, explained—and I think quite logically—that the figure of £60 was imported into the transaction in order to create a situation whereby the aggregate of subsidies paid out under the two figures of £32 and £12 would broadly be the same as under the present general level subsidy of £24. If only the gross annual value had been taken, obviously the amount being credited to the accounts would have been a smaller one, and more authorities would have been in at £32 than would be in at £12, so that the total sum payable in subsidy would have been greater.

It was made quite clear that the Government did not intend that at this stage the amount payable in subsidies should be greater. I am not arguing that point at the moment. I do not agree with it, but I am not disposed to quarrel with the reasoning behind it. What I do object to is the provision that the Secretary of State may at any time substitute some other figure for the figure of £60. Your Lordships may recollect that on Second Reading the Minister of State informed us that this formula would produce for Scotland as a whole an average figure of £53, the average gross annual value being £46 at the present time, and half the difference between £46 and £60 produces an addition of £7, making a figure of £53, which on average would be credited throughout Scotland to the housing accounts.

The authorities would be treated not on the rents they received, but their finance would be dealt with as if they had in fact received a rent of £53. It is quite obvious that, in the course of time, the authorities which are presently in notional surplus and entitled to receive only the subsidy of £12 per house will move one by one into figures of notional deficiency unless they stop building. If I might give an example of how that works, one local authority which I have consulted expect that, for the year just ended, they will have a notional surplus on their accounts of £110,000. They will, therefore, for those houses which have been approved after November 1 last, and which are becoming eligible for subsidy probably at the end of this year or the beginning of next year, receive the £12. During the coming year, they will build approximately 1,000 houses. The houses cost them £130 each, so if they debit the account with £130,000 and credit the account with £55,000—because in the case of the authority I am quoting the sum of the two figures of gross annual value and half the difference produces a figure of £55, a little above the Scottish average—they have in respect of 1,000 new houses a deficiency of £75,000, so that this year they will still remain in notional surplus. But by repeating the same transaction the following year, they will have moved from notional surplus into notional deficiency and, in the second part of the year beginning May, 1963, they will begin to receive subsidy at the rate of £32. That will happen with more and more authorities as they continue to build houses which cost them a great deal more than the notional amount which is being credited to their accounts.

I know this is terribly complicated, but if the Government had accepted a much more simple way of doing it I should not have been involved in all this manœuvring. The Minister made it perfectly clear that the Government expected subsidies to rise gradually, but I think it was also clear, at least by implication, that the Government were not prepared to accept the situation that every local authority was to be on the £32 subsidy and nobody was to be on the £12 subsidy, and this is the machinery by which the expenditure of the Treasury will be controlled. If too many authorities land in notional deficiency and attract the £32 subsidy, the Secretary of State may substitute for the figure of £60, say, a figure of £70 or of £80.

I am afraid that I have been unable to make it in any way simple, but this part at least is simple. If £10 is added to that figure of £60, and half of it is taken into account, every house which the local authority has built up to that date will entail £5 being added to the credit of their account. The authority I have quoted have at the moment 22,000 houses constructed. If the figure goes up from £60 to £70, it will be presumed to have received another £110,000 in national deficiency, and will then move back on to the £12 subsidy for at least the ensuing two years. That may be very good from the point of view of the Government's seeking to maintain the expenditure on housing subsidies at a given total level, but it is hopeless from the point of view of a local authority which is seeking to do the best it can, first for the people who are in need of houses and, secondly, for the ratepayers who generally have to foot the bill, because they will not know from one year to another whether they are to remain for any length of time on a £32 subsidy rather than on a £12 subsidy.

It seems to me that this is grossly unfair to the local authorities, because I elicited from the Minister after the Second Reading debate that if a local authority by being in temporary surplus attracts only the £12 subsidy, that figure remains payable for these houses throughout the whole of the sixty years, unless of course the Minister has reduced the period in which he is going to pay subsidies. But assuming he has left that alone, the £12 subsidy never becomes a £32 subsidy in respect of these houses. But if the authority has for some years been receiving £32 in respect of houses, by virtue of a later clause the Minister can in fact take power to reduce that £32 to such figure as he may then determine to be right. So that, whichever way one; looks at it, the local authority can see the situation that any alterations which are made as a result of Clause 3 or Clause 8 can mean only that their subsidies will be varied in a downward direction, and that they have no guarantee that, for any length of time during the operation of these subsidies, they will be in receipt of a figure higher than the £12. For that reason I think it would be much more reasonable that the Secretary of State should not seek to have this power to alter the calculation completely by substituting some other figure in place of this figure of £60. If the circumstances have at any time altered to such an extent that the Secretary of State has an overwhelming case for altering the level of subsidies that are payable, he ought to do so by the introduction of a short, amending Bill on subsidies. He will then be justifying the tiling on its merits, and not slipping it in by the back door, as this particular power will enable him to do. I beg to move.

Amendment moved— Page 4, line 17, leave out from ("pounds" to ("by") in line 20.—(Lord Hughes.)

LORD CRAIGTON

The noble Lord has explained very clearly to your Lordships what the position is. He does not want the Secretary of State to be able to alter the figure of £60. As he knows, the power to review subsidies is contained in all legislation of this sort; and, of course, the effect of the review in this case, the change in the £60 figure, would apply only to houses completed after the date of change. I should like the noble Lord to consider what would be the effect of agreeing to his proposal. There might, for instance, be a change in valuation in 1966 which made the figure of £60 unrealistic; or we might find at any time that the test based on £60 was not working out fairly in the light of our estimate about the extent of total subsidies and our desire to help the poorer authorities—including Dundee, if they qualify.

The fears expressed by the noble Lord have been taken into account in the calculations that we have made, to the best of our ability, in fixing £60, and unless something unexpected occurs in the foreseeable future we hope to be able to balance up, as it were; because while some authorities will, as the noble Lord pointed out, go into deficit, others will go into surplus. I think we shall see justice done if the Secretary of State, after consultation with the local authorities, has to vary the £60, because there is an opportunity for Parliamentary discussion.

The noble Lord finally said that this makes long-term planning difficult: the local authorities will not know where they are. I do not think that the knowledge that the £60 can be varied need necessarily make planning more difficult. The noble Lord is a builder, and he knows that in the building industry there are many factors against long-term planning, such as the cost of materials, the cost of wages and the changing price of money—and indeed, the ability of tenants to pay any particular level of rent at any particular time. So, basically, because there is room for manœuvre, it is as much in the interests of the local authorities as in those of the taxpayer that the Secretary of State should be able to vary this £60. I would ask the noble Lord, in view of that, not to press his Amendment.

LORD HUGHES

I might be inclined to do so if the noble Lord, Lord Craigton, would follow my example. I gave an indication of how an authority presently in notional surplus could move into notional deficiency. I wonder whether he could recite to me the circumstances in which an authority presently in notional deficiency could move into notional surplus. It might be possible, but, quite frankly, I cannot envisage how it could be done.

LORD CRAIGTON

I cannot see how the reverse would not happen. If a local authority stopped building, then it would go into surplus, because what makes a deficiency or surplus depends not on the calculation of how much the local authority are going to get but on how much they are going to spend. It s the expenditure test that really qualifies them for the subsidy.

LORD HUGHES

But, surely, if a local authority is at the present time in notional deficiency and then stops building, it would be maintained permanently in deficiency at that point. Now it cannot, presumably, do away with any of the houses that it has built, and it cannot wipe out the loans it has incurred. How, therefore, does it transfer from notional deficiency into notional surplus?

LORD CRAIGTON

The noble Lord gave an example of a local authority which stops building when in a state of deficiency. If you do not build, you must make up ground to that extent. What matters is the expenditure of the local authority. If, for that reason or for any other reason, a local authority spend less, the moment their expenditure is less they would go into surplus.

LORD HUGHES

No. The example I gave showed a local authority with a notional surplus at the present time of £110,000. If they do not build another house, they will remain with a notional surplus of £110,000 a year next year, the year after that and the year after that. How can they go from that point into deficiency merely by stopping working?

LORD CRAIGTON

The authority is in surplus now?

LORD HUGHES

They are in notional surplus.

LORD CRAIGTON

Then, if they do not build a house, they would remain in notional surplus.

LORD HUGHES

But the noble Lord said it would work both ways. I showed how that authority, by building more houses, would go into notional deficiency and would then attract the higher subsidy. The noble Lord envisaged circumstances in which it would work in reverse. I cannot see an authority, whose circumstances are so bad that at the present time they are getting £32, being able to improve on those circumstances, because the only alteration to their circumstances which they can make is by building more houses. If they build a house which is costing them £130 and they are crediting only £55 to the house, the deficiency is becoming worse. I hope that is the answer.

LORD CRAIGTON

The powers-that-be have given me another reason. They say it could happen if loans on older houses—for instance, the 1919 Act houses—have become fully repaid. That would affect the circumstances of the local authority's expenditure.

LORD HUGHES

There are very few of those, and it would not affect the calculation for more than an exceedingly-limited period, because the noble Lord knows how few houses were built under the 1919 Act, and these were the only ones where loans were repayable in 40 years. After that, the loans were repayable in 60 years, and you have to get to 1997; so it is going to be a long time before we land in that favourable position. I will not withdraw my Amendment. I do not think the Minister has made a case to my satisfaction, although I have no doubt that he has made it to the satisfaction of the Officials' Box.

On Question, Amendment negatived.

6.28 p.m.

LORD GREENHILL moved, in subsection (3), to leave out paragraph (b). The noble Lord said: My noble friend Lord Hughes has given some indication of the confusion which this particular clause has caused, not merely to noble Lords on this side of the House but also, I should imagine, to a great many noble Lords on the other side of the House. It is not surprising, even if you take the words which the noble Lord, Lord Craigton, himself used during his Second Reading speech in order to try to explain that part of the Bill with which I wish to deal. Paragraph (b) of subsection (3) says: there shall be excluded from the debits any expenditure by way of rebates from rents; Now, if one looks at the earlier words, to that part with which my noble friend dealt one finds that, to some extent, comparisons are made between the credits and the debits in order to arrive at this notional income, which, again, is dependent upon its relationship to the valuation of the whole of the city or burgh.

As the noble Lord will know, it has caused a good deal of concern and bewilderment to friends, to our way of thinking, in another place. What they say, in effect, is this. If, for example, you take the case of Glasgow, where according to the rating review for 1961 (the most recent one so far published), out of a gross rent income of £2.4 million, the rent rebate cost in 1960–61 was £7,300, it would appear to be a very trivial sum affecting even the notional income which one is trying to arrive at in what is called the resources test. I can picture what the noble Lord may say in reply—namely, that, if rents had been higher, then the figure for rebates would have been higher too, because a greater number of people would have been unable to pay.

Since the noble Lord is certainly encouraging in this Bill an increase in rents, on the ground that Scottish rents are traditionally low, it may be that it is an indirect way of making the rebate figure a very substantial figure, and therefore one which might affect the notional income to which the Bill refers. It is all very complicated, particularly when one is told that there is a misunderstanding as to what is meant by this debit; whether it is not a reduction of the income of the authority, or whether it is just again a means of accounting for figures, and also having the quality of being more or less notional. But because, as I say, of the strong feeling which undoubtedly exists, that this is a means of penalising particularly those poorer authorities by virtue of the difficulty of getting even the higher rents without a substantial rebate system, there is the fear that this may work in a harmful way to the finances of the authority as a whole. Therefore, I would ask that there be a clarification of this matter in order to allay the anxieties of very many informed people, who are either bewildered or suspicious that it is some kind of sinister step which the present Government are taking in this matter. I would ask the noble Lord to let us know clearly what the Government have in mind in insisting, as they are doing in this Bill, on the exclusion from debits of any expenditure by way of rebates.

Going to the explanation which the noble Lord gave on Second Reading, I think it is worth reading that the noble Lord said [col. 6]: Which of these rates is paid to a particular local authority will depend on the result of a 'resources test' applied to their housing revenue account, on the basis of a notional income related to the gross valuation … of all the houses in the account. The actual income from existing Exchequer subsidies and any other sources will be included unaffected in the resources, with, in addition, a notional income from rent and rate in place of the existing one. This notional income will be obtained by taking the gross valuation of all the local authority's houses and adding to it a sum per house equivalent to half the amount by which the average gross value falls short of £60. I should like to read the final sentence of that paragraph. The noble Lord went on: But the traditionally low Scottish rent levels have to some extent depressed market values; and we have therefore allowed for this by providing for the adjustment of actual area average gross values by bringing them halfway towards the notional figure of £60. I think the noble Lord will, in all honesty, admit that it would need a highly skilled accountant to appreciate the significance of this notional income, particularly when one remembers that notional figures in the past, however, perfect they may be to statisticians, have, in practice, proved not to support the theories upon which the statistics were based.

I do ask the noble Lord, if only to relieve the apprehensions of so many people who have tried to understand this, to explain in a convincing manner that the inclusion of this rebate item is, in fact, not adversely affecting their financial position, so far as their revenue account goes, when it comes to ascertaining what the subsidy is to be. Perhaps the noble Lord will do that.

Amendment moved— Page 4, line 24, leave out paragraph (b)—(Lord Greenhill.)

LORD CRAIGTON

The noble Lord said that some people were bewildered and suspicious about this paragraph, and I know that my colleagues in another place had difficulty in explaining to the Opposition the reason why it was in the Bill. But because the noble Lord and his noble friend—and, indeed, many of your Lordships—have such intimate knowledge of these matters, I hope to meet with complete success. Subsection (3) deals with a hypothetical income which might be expected to be obtained from the rent and rate contribution applicable to a local authority's houses. The actual income from rents, which is affected by rent rebates, does not come into the calculation at all. The yardstick under this subsection is the notional income, as compared with the actual expenditure; and the actual expenditure, of course, is again not affected by rent rebates. What the noble Lord said is quite true. It is true that this simple test of the level of housing prosperity ignores the difference between one authority with a relatively poor population needing many rebates, and another authority with a relatively wealthy population needing few rebates; although, of course, as the noble Lord said, the valuations must to some extent reflect this disparity.

But there is one overriding reason against accepting the noble Lord's Amendment. Unless this paragraph was in the Bill it would be possible for a local authority to raise their rents to a very high general level, to the extent where, in practice, a high proportion of tenants were getting generous rebates. Such a policy need not alter their present income from rents, but their expenditure for the purpose of the calculation would rise by the amount of rebates given. Such an opportunity might be taken by an authority to qualify for the higher rate of subsidy over the head of a more deserving authority. Unless this paragraph were in, it would be possible for an authority, perhaps in a borderline case, so to adjust their account as to qualify for a higher subsidy. I am sure the noble Lord would not like this to happen, and I assure him that it could if we were to agree to his Amendment.

LORD HUGHES

I really expected the noble Lord, Lord Craigton, to do better than that.

LORD CRAIGTON

I thought I did very well.

LORD HUGHES

The noble Lord says he has done very well; and perhaps on the basis of making bricks without straw, he has. But it is well known to your Lordships that the policy of the Government is to attack local authorities who let houses at what they consider unduly low rents, and I have said at least twice in this House that that is a policy with which I am prepared to associate myself. But the corollary of fixing rents at a reasonable level is that there is to be relief through differential rent schemes, rent rebates, to those who cannot pay at that high level. The Minister's real justification came at the end: that if we did it this way and allowed rebates to stay in, a local authority might fix high rents and then give it all back in subsidy, so defeating the purpose of the Act. They can manœuvre themselves into a £32 subsidy instead of a £12 one. I admit that that is possible and I am willing to give an example of the sort of thing that has happened.

My noble friend Lord Greenhill has referred to the Rating Review, 1961, the last one which is available. Your Lordships will recollect that on the Second Reading the noble Lord, Lord Molson, referred favourably to the rents paid in the County of Roxburgh, where the average rent was not exactly as he stated but was not very far from it. The general principle in relation to Roxburghshire was correct. But the noble Lord might have taken another authority not so far from Roxburghshire—the County of Dumfries, concerning which there has been a great deal of publicity recently about the raising of rents and where there have been court actions by tenants against its being done. If we look at the figures for Dumfries, we see the interesting fact that the average rent for each house is £47.66, the highest rental figure in the whole of Scotland, although that is not unreasonable in relation to the economic rental, which is £137.

But Dumfries paid out in rent rebates during the same year the sum of £61,844, if these figures are correct, and I have no reason to doubt their accuracy. What figures emerge from that? The gross rental of £47.66 is no doubt quoted by Government supporters all over Scotland as the sort of thing which ought to be done in fixing council house rents. But the average rebate is £21.22, so that the net rent is £26.44—in other words, exactly the same result, more or less, as is accepted in a whole series of other areas.

Your Lordships might say that I am agreeing with the case which the Minister has made. Yes, if we stop there I should be, but in another clause the Minister takes power to say that it does not matter how much money a local authority may debit for a contribution to the repairs fund, he can exclude such sum in excess of the minimum as he may determine. And the justification for doing this, as stated in another place, is that if the Minister did not do it, a local authority could obtain a £32 subsidy instead of a £12 one by the simple expedient of debiting the account, say, £20 a house for contributions to the repairs fund instead of the minimum of £8. The Secretary of State is entitled to look at the debit and if the local authority have put in £15, he may say that £10 is all he is prepared to allow them.

Exactly the same thing could be done in relation to rent rebate. The Secretary of State knows what is considered a fair rebate scheme, because he has approved somewhat identical rebate schemes for the new towns in Scotland. He has approved them for the Scottish Special Housing Association. So it would be a simple matter for the Secretary of State to say that the accounts will be permitted to be debited by the monies paid out in rebates to such a figure as he may approve. But if we take two local authorities, each of Which might fix a high rent of say £50 a year, which is higher than anybody has done up to the present—and of which, in relation to the economic rent (if that were £130), nobody could say that it was an unduly high figure—one local authority, which has a much larger number of people able to pay may say that the degree of hardship which is created in their area is immaterial and therefore they will give no rent rebates; they will get the full amount of £50 from each tenant. The other authority, which has a much poorer section of population, may say that they will take the Government's advice to make it easier for those who cannot afford the rent of £50, and give rebates. They may give £20 or £30 rebate on a scheme which no Government or any individual could disapprove. And under this Bill as it stands the local authority must carry the full responsibility for the rebates. So the Government say that they may give rebates in justice to their poorer tenants, but that that must be done at the expense of the ratepayers.

I hesitate to use an example which comes into my possession by virtue of my chairmanship of a new town development corporation, but I think it is not without significance. In the town of Glenrothes, which has recently been in the news—and I am sure the figures will grow worse, rather than better, in the immediate future, because of the closure of the Rothes colliery and until people are absorbed in alternative employment—of the 3,200 people living there one in five is receiving a rebate of some sort or another and one in eight is receiving a maximum rebate Which is a reduction in the rental of approximately 6s. a week. The average rental level in Glenrothes is higher than in any other of the surrounding local authorities—£44 a year for a 3-apartment house, so that if everybody received the maximum reduction of £15 even the poorer person would still be paying a rent of £29, which, by and large, is more than people pay in most of the Scottish local authorities.

If these conditions are applied in local authority areas with similar circumstances, the whole of these rebates must be carried by the ratepayer. It might seem logical to the Government, it might even seem fair to the Government, but I assure your Lordships that it is neither fair nor logical to local authorities, who have the carrying out of the Government's policy that rents should be raised and rebates given to those who are unable to pay the higher rents arrived at; and for that reason I think we are justified in seeking the deletion of this part of the clause.

6.48 p.m.

LORD CRAIGTON

I have already given what I believe to be the overriding reason why we cannot see our way to accept this Amendment. The noble Lord has suggested that the Secretary of State should have power analogous to that in the repairs check; but, of course, the amount given in rent rebate depends on rent levels. I think he will agree with me there.

LORD HUGHES

Not necessarily.

LORD CRAIGTON

It must be so to a great extent. The noble Lord gave the case of Dumfries, where the rebates are enormous and the rents also.

LORD GREENHILL

Surely it depends on the poverty of the rent-payers.

LORD CRAIGTON

If we were to agree to the noble Lord's suggestion, the Secretary of State would have to fix the level of rents as well as of rebates, which, of course, is not in this Amendment. I feel that relief through differential rebate schemes is really a matter for the ratepayer, not for the taxpayer. I believe that rent relief is a matter which should be chargeable properly to rates and not to taxes. To some extent expenditure on rebates is not real expenditure at all. The net income from the rents—the gross rent less rebate—is being disregarded altogether and replaced by a notional income. For all these reasons, but especially for the reason I gave in my original speech, I would ask the noble Lord to consider not pressing this Amendment.

LORD HUGHES

It is for my noble friend, Lord Greenhill, to say, but I certainly hope that he does not withdraw this Amendment, because the Minister of State has now been forced back into the position adopted by the Under-Secretary of State in another place, where he was reduced to saying that rebates were not expenditure, and that therefore they ought not to be on that side at all. He persisted in that, although his attention was drawn to the fact that, as far as the wording of the Bill was concerned, rebates were expenditure. I would draw your Lordships' attention to the fact that the clause states: There shall be excluded from the debits any expenditure by way of rebates from rents. So the Government's justification for asking us not to press the matter is to say that rebates are not expenditure. If they really feel that way, then they ought to amend the wording of their own Bill.

LORD CRAIGTON

I said that the reason was that it would not be proper to put it in the Bill.

LORD GREENHILL

In view of the attitude taken by my noble friend Lord Hughes, I certainly do not wish to appear to be too accommodating in this matter, and I am bound to say that I prefer not to withdraw my Amendment.

On Question, Amendment negatived.

On Question, Whether Clause 3 shall stand part of the Bill?

6.52 p.m.

LORD HUGHES

I do not wish to make a long speech on this, but I had intended to put forward a number of other Amendments. I am far from happy about the general level of subsidies which are payable under this Bill. After discussion, it was thought better not to put forward Amendments which, while constitutionally perfectly proper, might have been regarded as tramping on the toes of another place in the matter of financial supremacy. While I have concurred in that, I think it right that I should express the opinion that the general level of subsidies fixed in this clause is not such as to encourage local authorities to expand their housing programmes in the way which is still so necessary in many parts of Scotland. I have deliberately said, "in many parts of Scotland" because I am aware of the act that the situation is not the same throughout the whole country. There are areas of large centres of population where overcrowding and slums are still a big problem waiting to be dealt with, and where the local authorities can look to a considerable measure of building for a number of years ahead. If the Government had been anxious to see the housing problem solved at the earliest possible date, they would have been more generous in the figures which are put forward in this Bill.

It will not have escaped the notice of those of your Lordships who have had to do with housing in Scotland that local authorities were very dissatisfied with the level of subsidy which is passing away. The subsidy of £32 bore little relation to the costs of housing in comparison with the subsidies under earlier measures. The best that has been said in justification of the level of subsidies is that, by and large, it maintains the same limits of expenditure as under the previous Bill. There are many authorities receiving subsidies at £32 and many at £12. Taken over all, it will have much the same effect as if they were all receiving £24.

My complaint about the clause is that that does not give the necessary assistance and encouragement to those authorities whose problem is still one which needs a great deal of tackling. It is admitted that the cost of putting up a house is £130 a year, and the contribution of either £12 or £32 to that means that each local authority will have to face considerable expenditure from the rate fund for every house it puts up. Even if there is a continued and progressive increase in rents, it will be a long time before rents are raised to such a level as will enable the local authority to contribute in respect of new houses built after the passing of this Act.

I know perfectly well that everything I have said on this matter will make no difference, but it seemed to me to be appropriate that I should express what I believe is a large measure of feeling among local authorities in Scotland. I am not unmindful of the fact that local authorities generally tend to take a different point of view in relation to housing subsidies than Government Departments, irrespective of which Government is in power, but I think that the measure of dissatisfaction in recent years has been much greater than it ever was in the past.

LORD CRAIGTON

I join with the noble Lord in wanting to see Scottish building expand. But, as he knows, after so many years all the local authorities have differing resources, principally in the existing pool of subsidy. The new system tries to do justice as between the richer and the poorer. We are being as generous and as wise as we can in this Bill. Of course, the money available is not all that he would like or we should like, but it is as much as the state of the country can afford. The local authorities' income from housing does not reflect the true measure of their resources, and, because of low rent levels in the past, the assessor's valuation, based on rent levels, to some extent does not reflect the true measure of the resources.

The average gross value of local authority houses in Scotland is £46 and the £60 target fulfils two purposes. First, it brings the notional average gross value from £46 to £53 and, as the White Paper said—and I do not think the noble Lord will disagree—it does not seem unreasonable to obtain a figure of the order of £53 from rent and rates. Secondly, it irons out the wide disparity between the richer and the poorer by the "half way to £60 "formula, but it gives an" edge "in favour of the poorer authorities. If the rateable value is, say, £40, the notional rateable value goes up by £10 to £50, but if the rateable value is £50, the notional rateable value goes up by only £5 to £55. The noble Lord will bear in mind that it is still for each local authority to decide how much of their expenditure should be met by the rents and how much from rates. He says it will take a long time for rent levels to reach a figure where local authorities' housing accounts can be self supporting. Be that as it may, my right honourable friend is very anxious to see the rents go up. But it is rather a matter for the local authorities.

All this clause says, in effect, to the local authorities—those who are getting the lower rate and think they should get the higher rate of subsidy—is: on the facts of your case, if you are in difficulty you should be able to improve your position by increasing your rents. So I take a pride and pleasure in Clause 3. I think it is the most realistic movement towards being fair to both the richer and the poorer authorities that we have had in housing subsidy legislation for a very long time.

Clause 3 agreed to.

Clauses 4 to 7 agreed to.

Clause 8 [Power to abolish or reduce subsidies]:

LORD HUGHES moved, in subsection (1) (b), to leave out "reduced" and insert "altered". The noble Lord said: This Amendment, I think, explains itself. You will see that paragraph (b) says that subsidies under this part of the Act— shall be reduced to such amount as may be specified in the order …". There are two other provisions, which I do not 'seek to alter; my Amendment calls for the substitution of the word "altered" for the word "reduced" in paragraph (b). It may at first sight seem inconsistent that we should seek to quarrel with the wording of only one part of the clause, but I hope to suggest to your Lordships that it is not. We are, in fact, being perfectly reasonable from this side of the House. We are not prepared to say to your Lordships that circumstances would never arise when it would be justifiable to cease paying subsidies. It is exceedingly unlikely, but it is at least theoretically possible. So, from that point of view, we are quite happy to let that part stand in the belief that it will never be operated.

Similarly, just as the earlier reference showed that in the beginning subsidies were payable over a period of 40 years and then, under later legislation, over 60 years, it is conceivable that in some time in the future the reverse possibility might arise, in which it would be reasonable to give some period other than 60 years. I can think of something quite different, say, from the cost of housing. It may be that trends in house building will change. We know that one of the difficulties in Scotland is that because of the substantial nature of some of the older houses the main structure is still almost as good as when the house was put up, yet because the amenities within are hopelessly out of date, it is impossible to turn the building into a good modern house. Standards might change in such a way that we should not be building a house to last 60 years but only on the basis that it might be used for 30 or 40 years. Obviously, in such circumstances, it would be ridiculous to lend money and pay subsidies over a long period. I do not quarrel with that.

I do not quarrel with the possibility that the situation could change in such a way as to make it reasonable to refuse the amount of subsidy payable. What I do object to is the implication that any alteration should be only in a downward direction. After all, it is against the whole trend of our experience in house building during all the years local authorities have been building houses. Except for a very short period in the 1930s, the cost of building houses has continued to grow. So that there is at least a case that subsidies should be increased, rather than be reduced.

It may be argued that, if certain circumstances so change, the Government of the day will introduce a new measure to authorise subsidies at a higher level. Admittedly that is a possible way of dealing with it, but it would be just as reasonable to suggest that there should not be any provision in this Bill for altering subsidies, and that if justification for reduced periods or reduced rate subsidies should arise, the Government could effect that by a new measure. But obviously in a matter of this kind it is simpler to import into the Bill, as has been done, provision for making alterations; and, as I say, I do not quarrel with that, provided that it is done on the basis that the subsidy can move either up or down, with the approval of Parliament in accordance with the procedure laid down at the time. I therefore suggest to your Lordships that the insertion of the word "altered" in place of the word "reduced" is an improvement in the Bill.

Amendment moved— Page 8, line 21, leave out ("reduced") and insert ("altered")—(Lord Hughes.)

LORD CRAIGTON

In seeking to vary the powers in this clause, as his Amendment does, the noble Lord is raising a basic point of Parliamentary practice rather than a political issue. The power to reduce but not to increase subsidies by order has been hallowed by time and by Governments of different shades of political opinion. Where a Minister has the power to reduce payments such as these he must first consult, as in this case, with the local authorities concerned, and then, as in this case, go to Parliament for an Affirmative Resolution. Of course, the Secretary of State, having reduced the subsidy after this procedure, has power to restore it to the original level. But it is quite another thing to give a Minister a blank cheque to alter upwards a whole range of Exchequer subsidies at some date in the future, merely by process of an Affirmative Resolution. Parliament has always held that major increases in charges on the taxpayer should have the full Parliamentary discussion afforded only by an Act of Parliament. I hope that, on reflection, the noble Lord will not seek to press any such radical departure from Parliamentary precedent. In fact, both his Party and mine have always shown willingness to come to Parliament with a Bill to increase a subsidy when the need arises.

LORD HUGHES

In these circumstances I will not press this Amendment. It is probably the wrong time to start altering the Constitution of this House.

Amendment, by leave, withdrawn.

7.7 p.m.

LORD HUGHES moved, in subsection (2), to omit all words after "an order", and to insert instead: shall not specify for the purposes of this subsection a day earlier than the day on which the draft of the order is laid before Parliament under the next following subsection".

The noble Lord said: This is a horse of a different colour, I think the Minister of State will agree. He referred to the Amendment which has just been withdrawn as seeking to interfere with tradition which has been hallowed by long observance, or words to that effect. This second Amendment does something quite different. It seeks, in fact, to maintain the existing practice.

May I draw your Lordships' attention to what is under consideration. I will read from subsection (2): An order made under this section shall be so expressed as to apply only to approved houses the proposals in respect of which were or are received by the Secretary of State after such day as may be specified in the order; and an order may specify for the purposes of this subsection a day earlier than the day of the making of the order: I may be wrong, but I think that what is done in this clause is, for the first time, to enable a retrospective reduction in the rate of subsidies to take place. Subsection (1), which we dealt with in the previous Amendment, enables the Secretary of State to say that after a certain date the subsidy should be at a lower figure than had previously been paid; but that did not affect the rate of subsidy payable on houses which had already been approved. If they qualified for subsidy of £32 or £12 that rate of subsidy continued throughout.

The effect of subsection (2), however, is to enable the Secretary of State, after a lapse of ten years, to alter the rate of subsidy being paid, not in relation to the houses which are being approved for the first time, but in relation to houses which had perhaps been built ten or twenty years earlier. While the Secretary of State binds himself not to alter this subsidy for ten years, the position is that if, in two years' time, he decided to reduce the renewal subsidy because circumstances justified it, it would apply only to the houses which were approved after the date of the order. If he did the same in five, seven or nine years that would still be the position; but in ten and a half years he can go forward with an order not only reducing the subsidy for all houses built after that date, but applying it to November 1, 1961, so that all the people who had been receiving £32 will in fact be getting £20, or such other figure as is suggested. If I am right in my assumption that that is what is being done, it is a complete departure from precedent, because the hallowed position is that the local authority which has been receiving a given level of subsidy for houses at a given time knows that it is going to retain that and that any cut is going to take place only afterwards.

Your Lordships will recollect that one justification Which was given by the Minister of State for fixing the date November 1 for approval of subsidies was that if it had been some date ahead local authorities which thought they were going to get a cut would have rushed to have as many houses as possible approved before the Bill came into operation, and local authorities which thought they were going to get higher subsidy would have held back until after the Bill came into operation so that they would get the benefit from it. Under this clause it would not have mattered one way or the other at the end of ten years because the Secretary of State can "do the dirty" on both groups just as he wishes by making a retrospective alteration to the subsidy.

I think that Parliament generally has not been terribly keen on retrospective legislation—I think, with one exception: Where it was necessary to have retroaction to rope in people who had taken advantage of an intention to alter the law to evade what were their responsibilities, Parliament has occasionally, but even in those circumstances not very often, been prepared to act retrospectively. But here is a case, not of local authorities who are seeking to "do" the Exchequer, but of local authorities acting under the provisions of Acts of Parliament so that they may build houses. And under this clause, for the first time they can have subsidies taken away from them, not for a future period but for a period that has gone past—or if not for a period that has gone past (obviously money they have cannot be taken away) at any rate in respect of commitments they have entered into in the past. Instead of holding on to their subsidy, as they have always been able to do, they are now going to find the subsidy for the last 20, 30, 40 or 50 years is in fact going to be at a reduced rate. I have sufficient faith in the Minister of State to know that he has some reason to advance why this should be done. I have sufficient confidence in myself to know I shall not be satisfied by it.

LORD CRAIGTON

In that case it is hardly worth answering the noble Lord, but I will try. I must first of all thank him for his prognostication of what my right honourable friend will do ten and a half years from now. I sincerely hope we shall all be here, but I do not think my right honourable friend the Secretary of State will personally be here to "do the dirty", using the noble Lord's colourful term, on the Scottish local authorities. But as the noble Lord says, this subsection (2) of Clause 8 is a horse of a different colour. It is, I agree, a radical departure from past subsidy practice. We believe it is right to have power to reduce after ten years in order to allow for future changes in prosperity, in the value of money, changes such as we have seen taking place and which are taking place now. I do not expect the noble Lord to agree. But I ask him to consider the other side of the argument.

We could in this Bill have taken power to reduce the subsidies already contracted to be paid. We did not; it would have been a breach of faith. We do not intend to think of varying subsidies for ten years. But the nation under some future Government may want to vary them in ten years' time, and unless there is to be a breach of faith we must give notice now; and that is what subsection (2) does. We are doing no more than to put a future Government in a position so that, if after ten years from the passing of the Act they wish to reduce the subsidies, they must go to Parliament and get approval of an Order. But if they want to vary this ten-year guarantee in any way, they must go to Parliament for a new Act. We have in fact given the local authorities the greatest possible degree of security consistent with our view of sound Government finance, and I hope the noble Lord appreciates this point of view, even if he does not agree with it.

LORD HUGHES

I am afraid I neither appreciate it nor agree with it. You say that you are holding faith with the local authorities by encouraging them to embark on a borrowing programme which compels them to repay money at exceedingly high rates of interest over a period of 60 years, and telling them that their only security is for a period of ten year. I cannot see how that can possibly be described as holding faith with the local authorities. The only consolation I have out of the Minister's remark is his acceptance, his promise, that his right honourable friend will not be Secretary of State in ten and a half years. I hasten to say I do not say that because I hold any animosity for the present Secretary of State for Scotland, for whom as an individual I have high regard; I merely welcome it as a hope that the Minister is forecasting the going not merely of the present Secretary of State for Scotland but of a whole host of other people, himself included.

LORD STRATHCLYDE

Surely the noble Lord who has just spoken remembers this and, as a good Democrat, places his faith in the House of Commons. This is not a matter which can be carried out on the word of the Secretary of State alone; it can be done only if a change of circumstances is such that the House of Commons approves. I should have thought that is sufficient safeguard for all of us.

LORD HUGHES

If that is the case the noble Lord should be supporting me; he should not find it necessary to import any form of words into the Bill at the present time. I think my noble friend Lord Strathclyde wishes to be in the category of those who will have their cake and eat it.

On Question, Amendment negatived.

Clause 8 agreed to.

Clauses 9 to 23 agreed to.

Clause 24 [Determination of unfitness for human habitation]:

LORD HUGHES moved, in subsection (1), to leave out paragraph (g) and substitute: (g) a separate indoor water supply for each house".

The noble Lord said: This is a very simple Amendment and I think it would make an improvement if the Government were to accept it. The Bill refers to a house which might be unfit for human habitation having regard to certain matters, which include "adequacy and accessibility of water supply". As that stands, it could be held that a house which has an outside water tap, a tap on the landing which was shared with two or three houses—as we still have in so many cases in Scottish cities—in fact had an adequate and accessible water supply. It would be difficult to argue it was not accessible and its description could be stretched to being an adequate one, depending entirely upon the point of view of the person considering it.

The suggestion which is made in the Amendment is that in the second half of the 20th century it is reasonable to improve on what has been the position in the past, and if a house is of such a nature that it is impossible to give it an internal separate water supply for itself it ought not to be regarded as a house which is suitable for human habitation. As the Bill stands, in the present situation we are merely repeating what were considered to be satisfactory methods of dealing with the problem 20, 30 or even more years ago, when we were dealing with a situation when there were buildings with no water supply in them at all or when the water supply was on a common landing with a tap that could be used by two or three houses. Obviously, that was an improvement on a situation where the alternative was to go to a tap in the street which was shared by perhaps 40 or 50 householders. I do not think that is a reasonable situation to-day, and I would therefore move that the words in the Amendment be substituted for those in the Bill.

Amendment moved— Page 22, leave out line 17 and insert the said new paragraph.—(Lord Hughes.)

BARONESS HORSBRUGH

I wonder whether the noble Lord, Lord Hughes, who has moved this Amendment can tell us whether he has any estimate of the number of houses in Scotland, above all in the rural areas, which would be condemned as unfit for human habitation if his Amendment were accepted?

LORD HUGHES

No.

BARONESS HORSBRUGH

I thought not.

LORD CRAIGTON

Let me make it clear at the outset that our objections to this Amendment do not imply that we do not consider that a separate indoor water supply is a highly desirable, if not essential amenity. We do, and should like to see one in every fit house. But consider what Clause 24 is, and who has to operate it. It is no more than a helpful list of specific matters which the local authority should take into account in reaching a decision about unfitness. It is, as it were, a check list. The local authority has power to decide that a house is fit for habitation, even though it does not get, as it were, full marks under all the headings (a) to (k). Essentially the decision about whether or not a house is unfit is one for the local authority, not for the Government; and this clause leaves things in that way.

On the question of adequacy and accessibility of water supply, the local authorities would, of course, take into account whether there was a separate indoor water supply, and, if not, whether it was practicable to put one in. This, as much as any other item, would influence their decision on the fitness of the house fox human habitation. Looking at it in this way, we feel that the noble Lord's wording, "A separate indoor water supply", is narrower than the words in the Bill which refer to "adequacy and accessibility". It would be difficult to envisage an outdoor or common landing water supply that normally was both adequate and accessible; but it would be less difficult to envisage an indoor water supply, say, a tap in the cellar, which, though it was indoors, would be neither adequate nor accessible. This is admittedly a point of detail, but it is not a point of detail that the local authority should be given the widest latitude to make their own decision on unfitness, and that the guiding check list of Clause 24—and it is no more than that—should be drafted as widely as possible. For this reason I would ask the noble Lord not to press his Amendment.

LORD HUGHES

I am willing to admit that a great deal depends on how the local authority and its sanitary inspectors view guidance of this kind. I believe that the Amendment would strengthen the hands of sanitary inspectors in seeking to close unfit houses. At the same time I must accept that those inspectors who approach their task mainly from the point of view of helping the tenant rather than from any other motive would, in most cases, probably be able to act under the wording as it stands. As I have said, I think that the alternative would strengthen the hands of authorities in other cases; but I am not going to press the matter, except to take the opportunity of twitting the Minister of State that in this case it is he who is standing still. He bothered me by suggesting, when I said that I preferred the status quo of a subsidy of £22 to a potential £12 for everybody, that it was better to move forward than to prefer the status quo. He wants to stick to a status quo which has been the status quo for a very long time. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 24 agreed to.

Remaining clauses agreed to.

Schedules agreed to.

House resumed: Bill reported without amendment.