LEASEHOLD REFORM BILL

HL Deb 10 July 1967 vol 284 cc899-996

2.50 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 Kennet.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clause 1:

Tenants entitled to enfranchisement or extension

1.—(1) This Part of this Act shall have effect to confer on a tenant of a leasehold house, occupying the house as his residence, a right to acquire on fair terms the freehold or an extended lease of the house and premises where—

1. (a) his tenancy is a long tenancy at a low rent and the rateable value of the house and premises on the appropriate day is not (or was not) more than £200 or, if it is in Greater London, than £400; and

and to confer the like right in the other cases for which provision is made in this Part of this Act.

(2) In this Part of this Act references, in relation to any tenancy, to the tenant occupying a house as his residence shall be construed as applying where, but only where, the tenant is, in right of the tenancy, occupying it as his only or main residence (whether or not he uses it also for other purposes); but—

1. (a) references to a person occupying a house shall shall apply where he occupies it in part only; and

(4) In subsection (1)(a) above, "the appropriate day", in relation to any house and premises, means the 23rd March, 1965 or such later day as by virtue of section 43(3) of the Rent Act 1965 would be the appropriate day for purposes of that Act in relation to a dwelling house consisting of that house.

THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWEL)

Before I call Amendment No. 1Z, I. should point out to the Committee that if this Amendment is agreed to I cannot call Amendments Nos. 1 or 2.

LORD BROOKE OF CUMNOR

On a point of order. I do not know whether this suggestion would make confusion worse confounded. I do not want to take an unnecessary amount of time over this Bill, and if it would be acceptable to the noble Lord, Lord Silkin, and to the Government, to discuss the Amendment of the noble Lord, Lord Silkin, and my Amendments Nos. 1 and 2 together, so as to have a general discussion about rateable value, that would be acceptable to me. On the other hand, it may queer the pitch for the noble Lord, Lord Silkin, and therefore I shall not press it.

LORD SILKIN

My Amendment was put down only on Friday, and I doubt whether the Government have had adequate time to consider it. It is in a rather different category from the Amendment of the noble Lord, Lord Brooke of Cumnor. I think I should prefer to move it separately, but I shall not take very long.

LORD SILKIN moved, in subsection (1)(a), to leave out from "rent" to the end of the paragraph. The noble Lord said: As I have said, I doubt whether the Government have had adequate time to look at this Amendment. With it go Amendments Nos: 4A and 34A, and if I may discuss the three Amendments together I think the House will be much clearer as to what I have in mind. In another place there was a strong feeling that the limitations to rateable values of £400 in London and £200 outside were rather arbitrary and that there was no justification at all for having any limit, and an Amendment was moved and carried, I think almost unanimously, that there should be no limit at all on rate-able values. I believe the Government later had second thoughts about it and these limits were restored. But I still feel it is wrong, that there should be this sudden break at £400 rateable value in London, since if the rateable value is £401 then all advantage to the tenant goes. He gets no advantage at all out of this Bill, which seems to me quite wrong. Similarly, outside London where there is a £200 limit there is no advantage whatever for a tenant with a rateable value of £201.

This is a scheme—it is not my own—to graduate the benefits of the Bill, so that, whatever the rateable value, certain people over the limit will get some advantage. Let us take people with a rateable value over £1,000. In their case, it is proposed by my Amendment No. 34A that they should have the advantage of being able to apply for a long lease, but the rent they would pay would be the normal market rent including the value of any buildings on the land. That is a very limited advantage.

Between £400 and £600 in London and £200 and £800 outside, it is proposed to have a graduated scale so that people with a rateable value over the limits in the Bill will have the advantage of getting a long lease—I am not proposing in my Amendment that they should purchase the freehold—at a rent graduated according to the rateable value. So as they get nearer to the higher limit set out in my Amendment they will gradually be paying the full amount of the market rent. Someone with a rateable value of, say, £500 in London would pay the rent laid down in the Bill plus one-half of the difference between the rent laid down in the Bill and the market rent.

I am not expecting my noble friend to jump at this Amendment and to stand up and say, "I accept it". I do not even expect him to say that he accepts the principle. But I should be grateful if he would at least say that it is worth considering and that he would be prepared to consider it between now and another stage. If he will say that, then I shall be happy to withdraw this Amendment and to have any conversations which he feels worth while, in order to clarify further what I have proposed. I beg to move.

Amendment moved— Page 1, line 12, leave out from ("rent") to ("and") in line 15.—(Lord Silkin.)

THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET)

On the Second Reading of this Bill I declared an interest as a leaseholder. I think I should perhaps say that, so far as I can understand the Amendment before us, I have a direct interest, in that if it were accepted I should be better placed than if it were not. The question of the rateable limit was discussed at very great length in Committee in the House of Commons and again on Report. The Government resolved, after considering the matter very fully, that the rateable limit should stand at £200 and £400, and the House of Commons endorsed that resolve. The Bill therefore comes before us with the rateable limits in, and no-one can say that the matter has not been fully discussed and debated. Therefore, I should recommend the House to reject without further discussion any Amendment which sought simply to knock the+ rateable value limits out again. But it seems that this Amendment is introducing something new, which I believe has not been discussed in the House of Commons; namely, the scheme of graduated increases up to £1,000 rateable value.

I myself saw this Amendment only this morning and I have not had time to discuss it even with my closest colleagues. But since, so far as I can see, it introduces a new element I think it would not be right to recommend the House to reject it, as I would if it were simply the same again. That being so, I would ask my noble friend whether he would withdraw it and the consequent Amendments which follow upon it later in the Bill, on the understanding that I will examine it with my colleagues and will have something further to say about it on Report.

LORD SILKIN

I thank my noble friend and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

2.57 p.m.

LORD BROOKE OF CUMNOR moved, in subsection (1)(a), to leave out "£200 "and insert" £150". The noble Lord said: I beg to move Amendment No. 1, and it may be convenient to discuss at the same time Amendment No. 2 which is to alter the rateable value within London from £400 to £300. I will not go over all that was said in another place about rateable values. I rest my case for these Amendments on the one fact that, from the beginning, the Government have commended their White Paper and this Bill to Parliament and the country on the ground that this is a measure to relieve hardship; and I want to ask the Government straight away whether they can produce any cases of hardship that would be created by accepting my Amendments.

All through the debates on this Bill they have been arguing, from experience in South Wales and the like, about the small house built at periods up to 100 years ago on a small plot. I do not think there is now any great dispute between the Parties that enfranchisement should be allowed for cases of that kind, where the family has been living in the house for a long time and has come to regard the leasehold house as its own. But that, of course, is very different from the type of case which would be excluded from the Bill by my Amendment—the leasehold house which in London has a rateable value of between £300 and £400, and outside London a rateable value of between £150 and £200. So far as I have been able to read the proceedings on this Bill in another place, as well as our discussions on Second Reading here, I do not remember a single instance being given on behalf of the Government which would lead anybody to suppose that the leaseholder of a house in the bracket suggested by the Amendment would suffer hardship. If my Amendment were accepted, he would suffer hardship only in that he would be deprived of a quite unwarranted capital gain.

One could obviously quote a variety of cases. I do not want to take up your Lordships' time on this, but I will just quote a case in London of a house of £355 rateable value—obviously a substantial house—with an unexpired lease of 27 years at a ground rent of £40 per annum. To judge by recent property transactions and the estimates of estate agents which have been obtained on this property, the present value of that leasehold is in the neighbourhood of £10,500. The enfranchisement price, calculated according to this Bill, will be about £1,500. So the leaseholder could put himself in the position of becoming the freeholder at a total cost of £12,000., The freehold value is similarly estimated by the same people at £17,000. If therefore this Amendment is not accepted, the Labour Government are voting a tax-free capital gain of £5,000 to a person who has already been in a position to pay over £10,000 for his leasehold.

If that is the Labour Government's idea of hardship, it is not mine; and I find it extraordinarily hard to discover any reason on grounds of equity why my Amendment should not be accepted. I know one can argue back to Rent Act limits, but we are not here discussing the Rent Act. We are discussing a leasehold Bill: we are discussing something quite separate. Surely it is the Government's desire to try to eliminate hardship but not to create unwarranted capital gains. Indeed, that was the main reason in the Government's mind, as I understand it, why they changed their view on rateable value limits and, having first accepted an Amendment that there should be no rateable value limit, then restored the rateable value limits at the Report Stage in another place.

One may say that it does not greatly matter what the rateable value limits are if the terms of compensation are fair and equitable, and obviously one cannot discuss them at this stage because we shall come to them on later clauses of the Bill. But that will make a difference, of course, so far as enfranchisement is concerned. Quite clearly, the higher you fix the rateable value limits the more fragmentation of estates is likely to take place. The noble Lord, Lord Silsoe, has put down an important Amendment to Clause 19 (which we cannot discuss at this stage) which may reduce fragmentation of well-managed estates; but here and now, discussing this Amendment which is before your Lordships, we must assume that the rest of the Bill stays unchanged. We must look at what the Bill says on its face: that is, that it is desirable that there shall be opportunities for fragmentation of estates in respect of houses up to £400 rateable value in London or £200 rateable value outside London, and that there shall be substantial capital gains handed by the Labour Government to the present leaseholders of these more expensive houses in and outside London, which my Amendment seeks to exclude.

That, very simply, is the case for this Amendment, and I trust that the Government will not argue against it on the ground that the rateable value limits must be identical with those in the Rent Acts, because that, of course, is an unsound argument. We are discussing a quite different matter here. If the Government could produce cases where, supposing the Bill were left unamended, people who had bought these pretty expensive leases would suffer genuine hardship if they were taken out of the Bill by my Amendment, then a new situation would arise; but, again, I am not prepared to accept as a case of hardship a case where a person is by this Amendment deprived of a £5,000 tax-free capital gain. It is nasty for him, but that is not to our minds hardship.

These questions about the rateable value are big questions, and we are discussing here the scope of the Bill. Whatever view any of us take about the rest of the Bill I think it is desirable for us to give our attention to what should be the scope of the Bill, particularly as the Government changed their minds twice in another place about that. What I am suggesting is that the Government have still got their rateable value limits too high, and that it will be creating scandal indeed in the cases of some of these more expensive houses if they do not accept an Amendment somewhat on these lines. I beg to move.

Amendment moved— Page 1, line 14, leave out ("£200") and insert ("£150").—(Lord Brooke of Cumnor.)

LORD MITCHISON

It is perfectly true that the Government changed their minds, but so did the Opposition; and at one Period the Opposition were arguing exactly the opposite of what the noble Lord, Lord Brooke of Cumnor, has just been saying. Let us consider for a moment exactly what the object of this Bill is. On Second Reading, I think it was, Lord Brooke of Cumnor found socialism under the bench somewhere. He smelt it coming. He got perilously near losing his temper about it, saying that he had spent the whole of his life fighting it, and that he would go on fighting it. As I see it, this Bill is about something rather different. It is about the relations between leaseholders and freeholders in cases where a leaseholder has lived long enough in his house to claim that it is his home, and where there is a long lease and the other conditions that one sees in the Bill.

The root injustice here, as we see it, is that in the course of years the freeholder becomes entitled to get back property which has been the leaseholder's home for a long time, and which is now, of course, of a very much greater value than when it was originally disposed of at the beginning of the lease. One may point out—and I think one is entitled to point out—that the degree of hardship on the leaseholder and the extent of his moral rights will vary from case to case. This mischief was recognised by the Conservative Government when they brought in the 1954 Act, and it has been recognised since. There was one notable occasion when Sir Keith Joseph let the cat out of the bag, if I remember rightly, and was stopped by all the other leading Members of his Party. The Conservatives, both here and in other places, have fully recognised that this is a case where the moral rights of the leaseholder and freeholder cannot depend on absolute contract and must involve something more than giving the leaseholder the right to buy back at market price the house of which he would otherwise be deprived by the ending of the lease. That seems to be the moral point behind this.

Then one comes to whether or not, in this particular case, the rateable values in the Bill should be altered by £100, in the case of London, and by some smaller amount in the case of the Provinces. This seems to me to depend, in spite of what the noble Lord, Lord Brooke of Cumnor says, on the fact that the rateable values here shown indicate the type of house which is also covered by rent control. My feeling, which I think may be shared by others on this side, is that if the occupant of rented lodgings is entitled to protection—as he has been since 1915, or thereabouts; and he has had it from successive Governments—and if you are going to decide the limits within which the occupying leaseholder should get protection, it is quite reasonable to say that he should get it up to those rateable values; and that beyond that, he should look after himself, as does the occupant of rented property in relation to rent control.

I think the whole object is clear enough. The difficulty is that, below the limits in the Bill, the leaseholder is not in a good bargaining position, and has not been for a long time. He is a man living in a small, or comparatively small, house, and not a man who has been able to buy a considerable and valuable piece of property. As with any other line one intends to draw—as, for instance, in the Rent Restrictions Act—one is bound to have hard cases on one side or the other, simply because they are just beyond the line one way or the other. That is inevitable. If that problem has been faced over rent control, I see no reason why it should not be faced in this case. The linking factor is the fact that in both cases the occupant of the house, whether it is under rent control or under long leasehold arrangements, stands otherwise to lose his home or to have to pay more than he can afford. That being so, I wonder why should one wish to alter the limits already in the Bill.

I cannot help noticing, as the noble Lord, Lord Brooke of Cumnor noticed, that this subject has been very fully discussed below; there have been Divisions about it and conclusions have been reached. I waited to hear for what reason your Lordships should be specifically invited to differ from the place below on a matter which I should have thought was essentially Commons' business, far more than it is any business of ours here. I am not for a moment denying that we have the right at present to pass Amendments of this character if we so wish—

SEVERAL NOBLE LORDS

Hear, hear!

LORD MITCHISON

—but I am saying that if we do make changes, it is extremely unlikely, when an opposite conclusion has been reached in another place, that they will get any further. The net effect will be what is dear to the Opposition, a certain amount of wasted Government time in the Commons.

LORD INGLEWOOD

The noble Lord opposite has been accusing my noble friend Lord Brooke of Cumnor of changing his mind. I was reminded of the arguments that he and his friends developed at length when the New Towns Bill was being argued in another place. If I remember aright, the whole argument from the Labour Benches was that it was wrong to own a freehold. Many small freeholds were bought out—and at market price, which was preferable to what is proposed to-day—and converted into leaseholds. If this is not the case then I hope the noble Lord will correct me.

3.15 p.m.

LORD KENNET

There is little to add to what my noble friend has said about the general background to this limit and its relationship to the Rent Act. The noble Lord, Lord Brooke of Cumnor, gave figures of capital gains available to leaseholders enfranchising at rateable values in London of between £300 and £400. I am not in a position to say whether I accept those figures or not. But, assuming that they are correct, I would point out to the Committee that we are talking about a very small number of such cases. I would also point out that the real consideration here is not so much the gross value of what we may call in shorthand the "windfall", but the value of the windfall relative to the value of the property itself. I expect the noble Lord, Lord Brooke of Cumnor, will agree with me when I say that figures proportionately similar to those he quoted could be found for houses of a London rateable value of £299. The problem will exist wherever we draw the line, so long as there is a line drawn.

The noble Lord said that the Rent Act limits (£200 and £400) were quite a different matter. I do not understand his line of argument; for both in the Rent Act of 1965 and in this Leasehold Reform Bill we are dealing with rents, values and contracts between landlord and tenant very much in the same sort of social territory. He says that they are a different matter, but I should like to ask him this question. Did he think that they were a very different matter when, in 1965, he argued that the Rent Act limit should be £300?—because that was arguing for exactly the same limit as that for which he now argues in the Leasehold Reform Bill. One would assume that he would argue for the same limits on both Bills because he thought they were rather the same matter. I think I can understand the objection of the noble Lord and his Party to the £400 limit. It is that after mature consideration—and I repeat "mature consideration"; because the noble Lord will remember that in the House of Commons his friends argued for the complete abolition of all limits—he has, like the Government, come to the conclusion that there must be a limit. Having accepted that, he has gone a step further and asked himself whether he could suggest a limit that would reduce the incidence of a Bill which he dislikes. This is the comprehensible reason for which he must have put down this Amendment.

The Government are against it, as they were at an earlier stage. It seems that it would not reduce greatly the problems around the limit, wherever it is, which we admit are in the Bill because of this matter of proportionality. There is a strong argument for having the line the same as in the Rent Act, which is one of simplicity. If we have overall a type of housing which we agree is in short supply, and therefore meet to control more closely than the other sort of housing, the more expensive sort which is not in short supply, the inhabitant of which does not therefore need protection, it is surely infinitely simpler that in the two principal measures governing this field we should have the same definitions for that sort of housing. I would therefore advise the Committee to reject this Amendment.

LORD SILSOE

Having heard noble Lords speaking on both sides, I should like to suggest that the problem has not really been put. There is something to be said for a limit for an extended lease, which is security of tenure comparable with that given under the Rent Act. There is nothing to be said for the same limit for enfranchisement. Unfortunately, this Bill has been drafted with the same figures for both. There is at the moment no Amendment. Later on, I intend, with your Lordships' permission, to propose several which will draw this distinction. I cannot see that the present limit of £400 for enfranchisement will prevent all the main abuses. I think it will prevent all the abuses for extended leases. I think there is something to be said for some reduction—not, I suggest, in the rateable limits, which I consider to be a very bad yardstick for all purposes—but I consider that some further consideration should be given to the question of enfranchisement. I am confident that at this limit of £400 in London (your Lordships will forgive me if I do not speak always about both figures) all the problems, such as those referred to by the noble and learned Lord, Lord Stow Hill—the hardships in Newport—and by the noble Lord, Lord Mitchison, who spoke of what he called "black" and "white" leases—and I refer now to the "black" ones—could be met by a sensible reduction made, in some way or other, in the enfranchisement limit.

When my turn comes I am going to propose a different method altogether from that of the noble Lord, Lord Brooke of Cumnor. I think rateable limits cause far more trouble at the breaking level than any other yardstick which could conceivably be thought of. Therefore, in respect of this Amendment I want to sound a note, and to say, as I shall say considerably more often as the debate goes on, that to have the same figures, or the same yardstick, or the same anything, for enfranchisement and for extended leases is essentially wrong. That is all I wish to say at the moment.

3.22 p.m.

LORD BROOKE OF CUMNOR

The noble Lord, Lord Mitchison, delivered an emotional speech, saying how essential it was to protect the person who had, with his family, lived in a house for many years and who had come to regard it as his own; and that it was unconscionable that such a person should have to hand the house back to the landlord. I do not know whether the noble Lord thought that any sort of answer to the case which I quoted of a leasehold house in London on which I put a present-day value of £10,500. I put it at that figure because the house had been bought for £10,500 eighteen months ago. I simply cannot understand why a person who quite freely entered into a transaction at that figure eighteen months ago, to buy the remaining 27 years of the lease of a house at a rateable value of £355, should now be presented to us by the Government as a man suffering from hardships whom we have to protect because his house is in the rateable value limits for rent control. Our discussions will be clouded and befogged if we are constantly to have the case of a small house in Cardiff or in the Welsh valleys adduced in support of arguments that relate exclusively to a house of a completely different character in London or in a big city. I ask the Government to produce cases of hardships which would result from the acceptance of my Amendment.

LORD KENNET

I wonder whether the noble Lord will yield a moment before he rushes away with his case between his teeth across several fields. If the man in question bought the lease only eighteen months ago, he is not entitled to enfranchise at all.

LORD BROOKE OF CUMNOR

But he certainly will be. Are the Government going to propose an Amendment that only those who have lived five years in a house at the time of the passing of this Bill shall be entitled to enfranchisement? If so, I think that such an Amendment ought to have been tabled. I suggest that we must discuss each of these Amendments in relation to the Bill as it stands and not in relation to some other changes which may possibly be made.

I simply cannot understand the argument that the type of person who is in a position to buy a leasehold in London for £10,500 needs the protection of the Government. It is not as though all houses in London were leasehold. It is not as though it is impossible to buy a house for £10,000 with some choice. The house may not be in Mayfair, or exactly where you would like; but none of us, when we buy a house, is likely to get the right house in the right place at a sacrificial price which is within our means.

LORD MITCHISON

I wonder whether the noble Lord, Lord Brooke of Cumnor will allow me to intervene for a moment. He has, no doubt, borne in mind the provisions in Clause 1(1) of the Bill, that the tenant must have been the tenant under a tenancy at a low rent and occupied the house as his residence for the last five years. Is the case he is putting to us the case of someone who so occupied a house and bought the reversion eighteen months ago?

LORD BROOKE OF CUMNOR

No, I am not putting that case. I explained exactly the case I was putting. Like the noble Lord, Lord Silsoe, I see no reason why there should be the same limit in this Bill as in the Rent Acts; and when the noble Lord, Lord Kennet asks me whether, when I proposed or supported an Amendment in 1965 to change £400 to £300, I was thinking forward about what I might do regarding this Bill which had not then been published, I think he must be very hard up for arguments. I do not propose to press this Amendment for the reason indicated by the noble Lord, Lord Silsoe. Whether it would be right to alter the rateable value in the way suggested will depend, in part, on what happens to the rest of this Bill. I reserve entirely my right to move this Amendment again, or a similar Amendment, at Report stage, if Amendments have not by then been made to later clauses of the Bill to bring greater equity into its provisions. I think these Amendments of mine are sound, but I entirely agree that it would be wise to wait and see what your Lordships decide to do on later clauses; and in that spirit I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

3.28 p.m.

LORD SHAWCROSS moved, after subsection (1), to insert as a new subsection: ( ) In this Part of this Act references to a leasehold house shall not include a house situated on land belonging to a landlord which is an institution, organisation or trust establishment for charitable purposes.

The noble Lord said: I am going to ask your Lordships to be so good as to bear with what, I am afraid, will be a long and tedious speech about a matter which is of great importance to the handful of estates involved, but which really involves a very minor and limited amendment of this Bill. The Amendment in no way detracts from the real purpose of the Bill and the philosophy behind it. Moreover, it is an Amendment which, if accepted, would involve the introduction of no new kind of principle in regard to the law relating to charities. On the other hand, it is an Amendment which is essential if what I have described as a handful of small and, I think admittedly, well-managed estates—such as Dulwich and Bournville—are to survive as well-managed estates, contributing to worthy, charitable objectives. The rejection of the Amendment—I can only conceive of its being rejected on grounds of a somewhat doctrinaire kind—would involve estates like the two I have mentioned (the Dulwich one now forming, as I think my noble friend Lord Silkin will agree, something of an oasis in what is otherwise a rather dreary part of South-East London) being condemned to a gradual deterioration into slum conditions; and at the same time those beneficial activities which have hitherto benefited from the charitable endowments which these estates provide will greatly suffer.

I should say, to indicate my interest, although it is not in any sense a financial one, that I speak as Chairman of the governing body of two schools in South-East London, the Alleyn's School and Dulwich College. These schools are among the beneficiaries of the Dulwich estate. It was called, when established in the reign of James I, the Estate of Alleyn's College of God's Gift in Dulwich. They both derive a substantial amount of their income from the existence of the estate. Although originally founded under a charitable deed, the estate is now the subject of a statutory scheme approved by the Secretary of State for Education and Science.

Before I say anything about the beneficiaries of the estate, may I explain why I ask your Lordships to feel that the acceptance of this Amendment would not in the slightest degree detract from the real purpose of the Bill? I have always understood that the philosophy behind the Bill—and I fancy that I was making speeches even before my noble friend Lord Mitchison about the reform of leasehold law and taxes on land; speeches from which I do not wish to depart in the slightest degree—which originally led to the movement for leasehold reform, was the fact that some tenants, towards the fag-end of their leases, were being subjected to extortionate treatment by landlords, who were securing large amounts for dilapidations and who were succeeding in obtaining excessive rents when they renewed their leases, and indeed very often they did not renew them at all. Such conditions undoubtedly existed in South Wales and in certain parts of the North-East, but the very places where they have nexer existed have been Dulwich and Bournville. I think it is safe to say that in none of the landed estates which have been conducted by charitable foundations have tenants received anything but the fairest and most meritorious treatment.

I have always been in favour of a measure that would remedy the evils I have described, but this Bill in its present form, because of what I am going to suggest has really been a quite inadequate study of the whole problem before the Bill was introduced in another place, would simply substitute other evils, and some just as great, in place of those which the Bill is designed to remove.

The Dulwich Estate covers about 1,500 acres in South-East London and contains just under 4,000 houses which are the subject of leases. Its income goes, first of all, towards the comprehensive management and systematic redevelopment of the estate, and then to the support of no fewer than six schools in different parts of London, of one of the most beautiful picture galleries outside Central London, of some almshouses, and of one or two minor charities. If all those who under this Bill were entitled to enfranchise their leases were to do so (and one would expect them to do so because they would make substantial profits from so doing) the total annual ground rental which the estate receives, now in the order of £83,000, would be reduced to £28,000.

It is perfectly true that against that amount one would have to set the income which would be received from the so-called compensation payment. What would that be? The compensation provided under this Bill—and in some cases there is no doubt ethical justification for it—is so inadequate that, in the case I am putting to your Lordships, I think it is accurate to say that there has been nothing so confiscatory on the Statute Book of this country since the reign of Henry VIII. Take, as an example, what would happen in a typical house on the Dulwich Estate, say in the Alleyn Road. As a house with vacant possession, such a house would probably command on the open market a price of about £8,000 for the freehold. That is the amount which the enfranchised tenant would expect to get under this Bill, if it is passed in its present form; but not, of course, what he would have to pay. As your Lordships know, what he will have to pay for getting the lease enfranchised is based on two curious assumptions: first, that the bricks and mortar of the house, in spite of the contract into which he entered, it may only be seven or ten years ago, belong and always belonged to him and, secondly, that vacant possession will not be available for fifty years.

Your Lordships have only to ask in relation to this kind of property: while it may be understandable that someone would pay £8,000 for such a house with vacant possession, who would pay anything for a plot of land on which there was no house, of which he was going to get possession only in fifty years' time, and then as part of a single lot on what had already become a completely fragmented estate? The plain fact is that in cases like these, the charity's loss would be substantial—something like £55,000 in the Dulwich case—and the amount to be set off against the annual rental loss is a completely speculative and derisorily inadequate figure by way of compensation. It is obvious that the loss to the schools, to the picture gallery, to the almshouses and to the other charities will be of the gravest kind.

I know that these schools which, because of this substantial endowment, have been able to take pupils for comparatively low fees from very humble homes, are, in the view of some people, not schools which ought to continue to exist. There are those who feel that the whole system of education in this country should be conducted by the State and that independent schools should go. This is not the occasion to argue that, but I am sure that no noble Lord would wish to destroy the independent schools by an indirect and inequitable method of this kind. By all means at some appropriate time let us debate whether independent schools serve a useful purpose or not, but this is not the way in which fair-minded people would wish to put an end to them as one of the methods of education available to citizens in this country.

Another effect of the Bill on schools of this kind is that it becomes impossible to raise money on the security of the interest in the estate. As a matter of fact, my Board have negotiated a substantial loan on that security in order to put up new buildings and make various developments necessary in the interests of education, but this Bill has destroyed the whole basis for that advance.

I pass from the effect of the Bill on the beneficiaries of charitable estates of this kind to say a word or two about the effect on the estates themselves. Here the position of Dulwich is, I think, very much the same as the position of Bourneville and the position of a small number —and it is only a small number—of other charitable estates. I do not pretend to have any special knowledge of these other estates. I hold no brief for Bournville. I know nothing much about it, except, of course, of the great concern which the, Cadbury family—that, distinguished family—have had in the beneficent development of this estate in Birmingham for the last seventy or eighty years. It is an estate of about 1,000 acres, within four miles of the centre of the City of Birmingham, and the present site value of the different plots there must be exceedingly high. The estate as a whole is a housing charity. It has been developed progressively in that way for seventy or eighty years (I think it is), and there is no doubt that that development has resulted in very great benefit not only to the tenants living in Bournville, a model village, but also to the whole of the City of Birmingham.

The curious thing is that in both of these estates, and no doubt in many of these charitable estates, rack-rented and leasehold properties exist side by side. One road may contain an equal number of houses, some of which are leasehold houses and the subject of possible enfranchisement under this Bill, while others are rack-rented and do not come within the scope of the Bill. If the leaseholds are enfranchised, as they will be if the Bill is passed, the estate will have no further or continuing obligation towards those properties, whether it has to maintain the roads, to maintain the park, to maintain the picture gallery or the other amenities there. Moreover, it will have no right to redevelop the road in relation to those particular premises. In regard to the rack-rented premises, on the other hand, the obligation to maintain would continue; and there would remain also the right to redevelop those houses as and when it became appropriate so to do. The rights would be quite illusory. How can you redevelop a road if you only own every other house in it and the remaining houses are owned by separate leaseholders, sitting tenants themselves, as very often they would be, in the hands of mortgagors?

In Bournville a great many of the older leased areas will require redevelopment when the leases fall in, and a curious situation exists there. At present the density is something of the order of 16 to 18 persons to the acre—this within four miles of the centre of Birmingham. The City Council now require redevelopment within these areas at a density of not less than 50 persons to the acre—and that is a sensible and economic development of property of that kind, so near to the centre of a great city like Birmingham. Obviously, redevelopment of that kind cannot take place without ownership, and without ownership of the whole estate.

It may be said that a scheme for the continuation of management (under, I think, Clause 19 of the Bill) might be granted by the court. I cannot at present see why any charity should be encouraged to engage in the outlay involved by such a management scheme when it would result in no gain whatever, so far as I understand, to the beneficiaries of the charity. In Dulwich not only are there the gallery, a very beautiful park and other open spaces, but every tree is owned and maintained by the estate; and they look after them. The maintenance of these trees—and there are many beautiful trees there—has kept up the value of the individual houses on this estate. If the leaseholds go, what use is it to the beneficiaries to maintain the amenities of an estate which has become completely fragmented in this way and which provides no income for them?

The fact is, I think, that the Government have now realised (I assume this from some of the Amendments accepted in another place and proposed here) that it is really impossible to divorce good estate management from ownership and the right to redevelop as occasion requires. Had this Bill been law in its present form in, say, 1939, just before the war, virtually none of the developments which have since taken place in Dulwich could have occurred. In fact, over 1,500 new houses have been erected since then, where only 270 houses existed before. And even at this time we are building, or have agreements to build, over 1,000 more houses where only 140 existed before. If the estate had been fragmented into private ownership, not only would it have been largely sterilised in its development but the absence of user covanants, and the disappearance of the common amenities, would have led to a steady deterioration. The position is exactly the same at Bournville and in other similar estates owned by charities.

I venture to be so bold as to say that this Bill has perhaps been introduced without sufficient study of some of the problems involved, and I suggest that this is, to some extent, evidenced by the attitude of the Government in regard to the £400 rateable value limit. If that limit had gone, there would have been, as the Government I think rather belatedly realised, absolute chaos in regard to the redevelopment of the big estates in Central London. The rateable value limit of £400 is quite inappropriate in an area like Dulwich. But the consequences of chaos in regard to redevelopment will follow in exactly the same way.

There is just one other matter, which I should hardly have raised had it not been mentioned in another place and by the noble Lord, Lord Brooke of Cumnor. It was said in another place by the Minister that one of the reasons for restoring the £400 limit was that if it were not restored a number of rich members of the Socialist Party would get tax-free capital gains from the Bill. It may be that many members of the Socialist Party are rich and live in houses the rateable value of which is over £400 (I have heard it said that only the very rich or the very poor can afford to be Socialists nowadays), but I venture to suggest that a great many more members of the Socialist Party, and some of them Members of Parliament, are likely to benefit financially from this Bill at under £400 limit. I gave your Lordships one particular example of a capital gain. I think it is fair to say that in places like Bournville or Dulwich those who enfranchise their houses may easily make a capital gain of anything between £5,000 and £10,000 tax-free.

I do not know whether this Amendment will be accepted or not, but possibly the Government will consider, if they reject it, the possibility of introducing another Amendment on Report stage, in regard to charities, inviting those who live on estates owned by charities and who make capital gains of this kind to hand those gains over to the charities concerned. It is one thing to enrich oneself at the expense of an ordinary landlord; it is a little less agreeable to do it at the expense of a charity.

It may be said that, from the point of view of remedying the evils with which this Bill is supposed to deal, it does not really matter, from the tenant's point of view, whether the landlord is a charity, or what the landlord is. The matter has to be considered, it may be argued, from the point of view of the tenant. But that is not what this Bill does. This Bill exempts land required for redevelopment if owned, not only by a local authority or a New Town Commission, as one might expect, or a nationalised industry or a Hospital Board, but by any university or college. If those are exempted, why would it not be right to grant a similar exemption to other educational charities or institutions? The principle seems to me to be exactly the same.

Finally, as to the effect of introducing a provision of this kind in regard to charities, I said that it involved no new principle. Charities have always received special treatment in regard to income tax, capital gains tax, betterment levy, selective employment tax, and all the rest. I venture to ask your Lordships to say that this is a case which would detract in no significant measure from the valid purpose of the Bill, but that it would give protection to estates which ought to be protected and enabled to continue the beneficent activities in which they are at present engaged. I beg to move.

Amendment moved— Page 2, line 6, at end insert the said subsection.—(Lord Shawcross.)

3.52 p.m.

LORD MITCHISON

I am sorry to intervene again, but I have had associations with this Bill for some time, and I would first say that no one could put the broad purposes of it more eloquently and, I think, more accurately than the noble Lord who has just sat down. He did it infinitely better than I could ever have done it. But I was a little puzzled to hear from him that he thought the subject of charities had not been fully considered or discussed.

LORD SHAWCROSS

I did not say that I thought the subject of charities had not been fully considered or discussed. The noble Lord and I have known each other for a long time, and he may do me the credit of supposing that I have not omitted to read my brief or the debates in another place. I said that the consequences of this Bill in general had not been fully considered.

LORD MITCHISON

I am glad to accept that. I supposed that the noble Lord had read his brief (as he puts it), and I was going to remind him, since it is a very long brief indeed, that the specific subject of charities was in fact discussed on a new clause at the Report stage, and it has one rather remarkable aspect. Not only were the Government in favour of not exempting charities, but so was the Conservative Party in another place, and so was the Liberal Party in another place. Therefore, we get the rather peculiar position that there was no support at all, and consequently no Division, on the new clause which was going to exempt charities. It was going to exempt them in terms not very different from those in the present Amendment, but subject to the provisions of Clause 19, which I think would have been more logical than the present arrangement.

Listening to the noble Lord, I felt that a great part of his speech was devoted to matters of compensation which we shall have to deal with under Clause 9, and also to matters of the management of well-conducted estates, which we shall have to deal with under Clause 19. Therefore, to exempt charities completely was likely to be—I say no more than that—a rather drastic remedy for some particular matters. It may be so; but let us just see what was said on Report in another place. I make no apology for reading the very short passage in which the right honourable gentleman the Minister, pointed out that: there is no real reason for the exception that he sought to be made. First of all, there is no precedent. These charities were not exempt in the 1954 legislation"— that was Tory legislation— although the effect of that legislation was very much to depreciate the value of the freehold interest."—[OFFICIAL REPORT, Commons, 20/6/67; cols. 1467–8.] I would say at once that, quite obviously, this Bill has the effect of depreciating the freehold interest and conferring benefits, beyond the present state of the law, on the leaseholder. There can be no doubt about that. I have suggested that there are moral reasons for it. The noble Lord himself agreed with that. The Minister continued: It also affected the way in which charities felt it right and proper to deal with the leases, which was unfortunate". There are a great many charities in this country, and some inhabitants of North Oxford would not share the view that all charities are good freeholders. There are tenants of an Oxford college which is very unpopular, whether rightly or wrongly is not for me to say, and may be affected by this Bill because of rateable values. But there is no doubt about it; and there are others. I do not think it is right to say that university bodies are generally exempted. What is exempted is the question of development rights. That I agree about, and that is a matter, I think, for Clause 19.

But may I go on for a moment?—and this really seems to me to be the kernel of the argument: The second objection to the clause is that one cannot justify this indefensible distinction between leaseholders which would result if it were accepted. One cannot differentiate, for example, between the leaseholders of the Hampstead Garden Suburb"— which is not a charity— and leaseholders of the Dulwich Estate"— the very estate which the noble Lord was referring to. The cardinal difficulty is that one cannot distinguish between leaseholders according to their character. That is why hitherto it has not been possible to exempt charities." (col. 1468.) He then went on, a little later, to say: … I agree with the right honourable gentleman when he asks how in that respect we can distinguish reasonably between the landowner who is a charity and the landowner who is a private individual". (col. 1468.) I made a slip—those were the words of the Conservative spokesman and not of the right honourable gentleman, the Minister.

LORD BROOKE OF CUMNOR

I wonder whether the noble Lord would allow me to speak. He is seeking to drive a wedge between the noble Lord, Lord Shawcross, and the Conservative Party in another place. I think that if he had read his brief better he would have realised that there was a new clause in Committee in another place, proposed by the Conservatives and supported in the Division Lobby by the Conservatives; and what he is speaking about is a limited clause on Report concerned only with Clause 19.

LORD MITCHISON

That is not so, with respect. Of course I read the proceedings in Committee, and of course—and the noble Lord knows it very well—I should not have tried to deceive the Committee in any respect about this. The clause on Report was this: Where a certificate under section 19 of the Act is given by the Minister in favour of a landlord which is"— I may short-circuit here—a charity no person shall be entitled under Part I of this Act to acquire the freehold or an extended lease of the property of that landlord".

LORD MOLSON

Would the noble Lord give the reference?

LORD MITCHISON

It is col. 1466, of June 20, 1967. This is exactly what I said it was. It was an attempt, as this clause is an attempt, to remove charities from the whole operation of the Bill—or virtually the whole operation; I think the whole of it—subject in that case, but not in this, to the provisions of Clause 19. I described this perfectly accurately. That is what happened, and it was to that clause, and that attempt, that the words I have just read out—first by the Minister and next by the Front Bench spokesman of the Conservative Party—were directed. I am really very glad when Conservatives repent. I think they did so on this occasion. I think they came to the conclusion they had gone too far in Committee.

LORD BROOKE OF CUMNOR

Will the noble Lord read out the new clause which was moved by the spokesman for the Conservatives in Committee on May 11 and in favour of which the Conservatives divided? This is the major passage in another place. The other is a minor one relating to Clause 19. The noble Lord has in fact sought to deceive the Committee.

LORD MITCHISON

I object to that sort of remark. It ought not to be made, and it is quite indefensible. But I cannot cure Lord Brooke of Cumnor of bad manners, and I am not going to try at my time of life. All I can say is that the Committee can judge for itself. I read out the clause. I stated the effect of it quite correctly; and the observations which were made, both by the Minister and by Mr. Graham Page, would have been inappropriate to anything else. I do not think one ought to say that sort of thing. Be that as it may, I have said hard things about the noble Lord, Lord Brooke of Cumnor, in my time and I shall no doubt find the noble Lord occasionally saying some more. For the moment, let us leave it at that. But I do not want to leave the Liberal Party out—that would not be fair. I should like to read what was said by Mr. Hooson (and I quote)—

THE LORD PRIVY SEAL (THE EARL OF LONGFORD)

May I intervene, in a spirit of neutrality? Whatever may be thought about the observation of the noble Lord, Lord Brooke of Cumnor, which was certainly unusual in this House, I would point out to the noble Lord, Lord Mitchison, that it is out of order here to quote verbatim remarks made by speakers in another place who are not Ministers. It is quite in order to quote Ministers, but I hope he will paraphrase the statements of those who are not Ministers.

LORD HAWKE

May I just intervene for one moment? It might interest the noble Lord to know that he certainly succeeded in deceiving me. I thought he said that the Conservative Party in another place did not put forward a clause and vote to exempt charities.

LORD MITCHISON

I think perhaps the noble Lord, Lord Hawke, might care to look at Hansard to-morrow. I am prepared to rest on that. As to the rest, I was of course in order in quoting the Minister and out of order—and I must apologise for it—in attempting to quote Mr. Hooson, but I think your Lordships will agree that I was a little tempted when the opposite was said in this House. As to Lord Brooke of Cumnor's distinction between Committee proceedings and those on Report, I think on the whole I prefer the later version, which was the Report version; but really there can be little doubt about this. There are these two perfectly good answers: one is that it would be strange indeed to put into this Bill something which was deliberately omitted by the Conservative Administration of the day from the 1954 Act.

The second is the even stronger argument that the leaseholder's rights ought not to have to depend on the character of his landlord. This is the very mischief we are trying to remedy. Half the trouble in South Wales is that some landlords holding their tenants under long leases behave very well and others behave very badly. We know perfectly well there is always the same problem in questions of rent control, and what we say—and I am confident that here I speak for all my colleagues—is that it is wrong in matters of rented property, when we are dealing with people's homes, to have their rights as tenants depend on whether or not they happen to strike a good landlord. I am sure the Dulwich estate is a good landlord, and also the Hampstead Garden Estate, which is not a charity, and there are many more. But what we are trying to do is to give leaseholders the right to own their homes or to extend their leases—rights independent of the character of the landlord and dependent on the relationship of the long leaseholder himself and the freeholder; and surely that is the right way to tackle legislation.

4.6 p.m.

LORD KENNET

The White Paper on which this Bill was based contained no suggestion that landlords which were charities should be outside the scope of the Bill. Nor did the Bill as it was introduced into another place; nor does the Bill here. This was a difficult decision taken by the Government, but a perfectly deliberate one. The Bill is intended to rectify an unfairness to the leaseholder in the present state of leasehold legislation. It is irrelevant to this purpose whether the charity (which may be, in a certain case, the leaseholder) is devoting its money to a worthy end—as it usually is. If a leaseholder, by reason of the leasehold system as it bears at present, is suffering unfairness, he suffers it just the same, whatever the person of the landlord. Very often, indeed, charities could not vary the terms of their leases in favour of the leaseholder, even if they wished to, since they are bound by the terms of their trust to exploit the law as it stands to the benefit of their beneficiaries and no other parties.

I think this is the point at which the House ought to remember its own position in the country. We must think and feel clearly. The chairmen of great property companies and the chairmen of great charitable foundations and charity land owners can come here with briefs. Leaseholders do not have experienced and eminent leaders to lead them. They do not, as such, have leaders at all, and if they did they would not be in the House of Lords. Let us not forget this.

SEVERAL NOBLE LORDS

Oh!

LORD KENNET

The noble Lord, Lord Shawcross, said of the charitable estates which he was representing that if the Bill goes through unamended the houses on those estates will be condemned to degenerate in time into something like slum conditions. I note his assessment of the owner-occupier as a householder. The question of Dulwich is a difficult one. Of course, when one sees a great and famous charitable foundation doing a great and famous job one's instinct is to say, "Well, for heaven's sake! let us exempt them and let them go right on doing their great and famous job". But it is not all as simple as that.

If we turn back to the days of Edward Alleyn himself (God rest his soul) we find that his charity was set up—and the noble Lord will correct me if I get the facts wrong—it was in fact by a tax levied on those who might live on the land round about Dulwich, the proceeds of which were devoted to educating a rather small number of poor scholars. London engulfed Dulwich; the value of that land shot up, but what is still in effect a local tax (and this is common to all leasehold estates) is levied on persons who may or may not get any benefit from the educational institution concerned and is paid over for the education of persons who may or may not live on the land so taxed. There are many differing interpretations of a great charity like Dulwich and the Alleyn Estates. I do not think they are on one foot, but this is not the point. The point why the Government resist this Amendment is simply that this is a Bill to help leaseholders, and it cannot—except in one specific circumstance which has been mentioned and to which I will return—take account of the status of the freeholder himself.

Let me turn now to the point made by the noble Lord, Lord Shawcross, with some force; namely, about the different position of local authorities, universities, Hospital Boards, and so on. They are not exempt from the entire operation of this Bill, as the noble Lord's Amendment would exempt charities. They are exempt only in certain circumstances and for certain purposes which are defined in later clauses in the Bill. If it is the noble Lord's purpose to secure for the charities he has in mind the same status as the Bill provides for universities, Hospital Boards and local authorities, then the right way to do it would be by means of an Amendment at a later stage in the Bill.

Having said all that, I would remind the House that the provisions for the scheme of management under Clause 19 are pretty broad. They can be well exploited by a freeholder who retains some part of the leasehold property on his land in his own possession, as no doubt they all will, not only because some of the properties will be over the £200 or £400 limit but also because not all the tenants will wish to enfranchise. I take the point of the noble Lord, Lord Shawcross, here. If a freeholder found it difficult, under the terms of his trust, to spend any money on a scheme of management, part of the benefit of which would go to those who were no longer his leaseholders (I do not know whether this would be so or not) I would remind the House that there is a Government Amendment coming to Clause 19 which would entitle the newly enfranchised freeholders to make their own application for a scheme of management, and it may be that such a provision would be useful in the kind of circumstances the noble Lord has in mind.

LORD MOLSON

It is a remarkable thing when the Parliamentary Secretary advances it as an argument that this House of the Legislature is not in a position to discuss matters of this kind because, in his opinion, there is not a sufficient voice for tenants to make their voices heard here.

LORD KENNET

I advanced no such argument. Nothing was further from my mind than to suggest that the House was not in a position to discuss these matters. I asked the House only to remember certain facts about its position in the country and the kind of representation here.

LORD MOLSON

The Parliamentary Secretary will be able to read what Hansard took down as his remarks in that speech. Whether, if he did only refer to our being not in a position to take a fair judgment on the matter—

LORD KENNET

If I might intrude again, I did not imply that the House was not in a position to take a fair judgment on the matter. I think the words I used were as I repeated them just now, which is another suggestion.

LORD MOLSON

It has often been made ground of complaint against this House by members of the Party opposite that when matters like rent restriction came to be discussed there were noble Lords on this side of the House who expressed the point of view of property owners and complained about the unfairness and anti-social effects of the rent restriction Acts. I have no doubt at all that this House is in an extremely good position to take a fair line about all these matters.

The Government find themselves in some difficulty in arguing about this Bill. They try to stand on two entirely different legs. In his speech, the Parliamentary Secretary talked as though this Bill was generally critical of the whole leasehold system. When this Bill was introduced, and especially when the noble Lord, Lord Stow Hill, made his very remarkable speech in support of the Second Reading, he talked about it as being a special measure in order to deal with particular hardship. He referred to South Wales, to conditions in which a landlord was the sole owner of all the land in the district and the working man had no option but to take a lease on land on such terms as the landlord chose to dictate. But when we come to discuss London there is no parallel with that situation at all.

The reason that was given in another place, by the Minister who wound up the debate there, for the complete change in the attitude of the Government was that a number of members of the Socialist Party had discovered that if there were no limit upon the rateable value it would result in completely unjustifiable capital gains by a number of wealthy leaseholders in London. The position has already been explained by my noble friend, Lord Brooke of Cumnor. A person can acquire a lease of an expensive house in a fashionable part of London and pay a large sum for it, and under the provisions of this Bill, as soon as the Bill is upon the Statute Book, he will be in a position to obtain enfranchisement, to leave the house and to sell it, at a vastly increased price, with vacant possession. It is cases of that kind in the Dulwich Estate to which the noble Lord, Lord Shawcross, has been referring. It is the ill-effects of breaking up a well-managed estate of that kind and the completely unjustifiable capital appreciation gained by certain individuals, while at the same time preventing a properly planned redevelopment of the estate as a whole.

It is no good the Parliamentary Secretary advancing general arguments about a criticism of the leasehold system as a whole when the particular injustices to which the noble Lords, Lord Stow Hill and Lord Shawcross, both referred have no application here whatsoever. This Bill, in the form in which the Government have brought it to this House, is not a measure dealing with leasehold as a whole. It is a discriminatory measure, trying, as I think unsuccessfully, to deal with particular cases of hardship. If such exceptions are to be made, according to the rateable values of houses, there is not the slightest justification in reason why further exceptions should not be made in the case of estates, whether privately owned, as under Clause 19, or charitable estates, as in the case of the Amendment proposed by the noble Lord, where in fact the abuses against which this Bill is directed do not arise and where the whole effect of the Bill will be merely to result in a deterioration in the living conditions of most of the tenants there, to put excessive, unexpected and unjustified profits in the hands of particular individuals who avail themselves of the clauses of this Bill, and, above all, to prevent proper and advantageous redevelopment of these areas of London.

4.17 p.m.

LORD SILSOE

Unfortunately, the noble Lord, Lord Kennet, said that charities, some of them, had to exploit their beneficiaries because of the terms of their trust. That is a horrible thing to say. It should never have been said. It is not correct of any charity.

LORD KENNET

The noble Lord's enthusiasm impinges on his hearing. I said that charities, some of them, by the terms of their trust, were bound to draw—

LORD SILSOE

"Exploit" was the word used.

LORD KENNET

Exploit—not their beneficiaries but—

LORD SILSOE

"Beneficiaries" was the word, too.

LORD KENNET

—those who invested in them for the benefit of their beneficiaries. I do not char se any charity with exploiting its beneficiaries. I did say "exploit" the investors. I would withdraw the "exploit", and say "obtain a high rate of return from its investors for the benefit of its beneficiaries".

LORD SILSOE

I am very grateful. I hope the noble Lord will see that Hansard is dealt with. That was a very awkward and unpleasant thing to hear. It just is not true, even as now said.

May I say on this particular clause, as your Lordships were told in my Second Reading speech, that I do represent a charity—perhaps the largest of all. We have given very careful consideration as to whether the Amendment moved by the noble Lord on behalf of Dulwich was the right one either to move or to support. We have, and I have, a great deal of sympathy for the view expressed by the noble Lord, Lord Mitchison, when he was speaking about this House and not the other. I am glad to say that I am the only person who has not read the Report of the proceedings in the other place, so I do not know what happened. But the noble Lord, Lord Mitchison, said that it was difficult to treat a tenant who happens to be the tenant of a charity differently from a tenant of somebody else. I have sympathy with that remark. I also have sympathy with the remark that the best way of dealing with this is to have well-managed estates, under Clause 19. Unfortunately, having waited to listen to the noble Lord who speaks for the Government, I found that there was only one word of hope—and I am afraid in my case it is not hope—that the clause will be amended so as to make this feasible. I hope it will. I must not trespass by going into it now. There is an Amendment down in the name of the noble Lord, Lord Kennet, which gives the enfranchised freeholders power to join in a scheme. I have read it. It makes the matter much worse. The trouble is that when we stand up here and ask for some help we are asked to wait for a later clause.

I shall venture later on to move a new Clause 19, and I hope that I shall succeed. The expense entailed by the present clause is quite ridiculous. Public inquiries, Chancery courts and Heaven knows what! No charity, least of all Dulwich and Bournville, if I may say so, could possibly afford the expense. If we could have some simple arrangement in Clause 19 for exemption for a well-managed estate I should be quite happy. But I think it right to say that if that is not included in the clause, then at the next stage those people I represent will ask for exactly the same as the noble Lord representing Dulwich asks to-day.

LORD BROOKE OF CUMNOR

Perhaps the first thing to do is to get the Record straight. Noble Lords have been able to read on the Marshalled List the Amendment we are now discussing, moved by the noble Lord, Lord Shaw-cross. In Standing Committee in another place the honourable Member who was leading for the Opposition moved a new clause which began with these words: This Part of this Act shall not apply to land belonging to a charity and forming part of the permanent endowment of the charity. The Conservatives supported that new clause with their voices and with their votes.

I sought to follow the reply of the noble Lord, Lord Kennet, to this new clause. As I understood it, what he was saying was that the Government had decided that protection and assistance must be given to all leaseholders against the exploitation that was inherent in the present law, and that therefore it was irrelevant for the Government to consider who the freeholders were or what happened to them. I hope your Lordships will not consider that it is irrelevant to yourselves to consider both sides to this transaction.

No case of hardship, so far as I know, has been adduced by the Government at any time connected with the management or affairs of one of these charitable leasehold estates. With the rest of the field we are normally discussing a situation where the capital gain that will accrue to the leaseholder who enfranchises will be at the cost of the private freeholder. In this case, we are considering the example where the capital gain accrues to the freeholder, which in the normal instance will be wholly undeserved and will be at the expense of a charity. This is not a nice idea. It needs a great deal of justification, far more justification, I would submit, than it has received either here or elsewhere.

Questions were raised by the noble Lord, Lord Mitchison, as to whether this was a representative House. I am quite sure that the general public would wish this House to guard carefully the interests of charities, and not so to legislate that their funds are taken away from them for the benefit of private individuals unless an absolutely cast-iron case is made out that that is necessary.

On an earlier Amendment I quoted a case of a rateable value of £335 in London, and pointed out that a capital gain of some £5,000 would accrue. I do not know whether there are on the Dulwich estate, for example, any leasehold houses with a rateable value as high as £355. But there certainly would be a number of houses there with a rateable value of around £200, and if the capital gain is not £5,000 it will be £2,500, or whatever it may be proportionately. That £2,500 will be taken away from the charity and put into the pocket of the leaseholder who can, immediately the transaction is completed, sell the house and pocket the capital gain.

The majority of these houses that we are talking about are not in the sphere of maximum scarcity. They are sought after, as is practically every house within reach of Central London; but the kind of people who nowadays take leases on the Dulwich Estate are people who have some margin of choice as to where they go, and certainly are not people who are compelled by their poverty to take a house on that particular leasehold estate because they cannot go anywhere else.

I do not know what the noble Lord, Lord Shawcross, intends to do about this Amendment, but if he proposes to press it I shall advise my noble friends to support him.

4.24 p.m.

LORD SHAWCROSS

I have already occupied far too much time of the Committee, and the observations I wish to address to your Lordships now will be short. The noble Lord, Lord Mitchison, made the point that it was impossible to distinguish leaseholders according to their character. It is an odd argument, to my mind, that in a Bill which is intended to remedy evils one must apply the remedy indiscriminately although the evils themselves do not exist in the case in point, and the remedy itself will create greater evils.

LORD MITCHISON

I wonder whether the noble Lord will allow me to say that I was misled by the argument put forward by the Conservative spokesman in another place?

LORD SHAWCROSS

I am afraid that I fail to understand that intervention. Nor did I understand the point that the noble Lord made earlier, when he said that in 1954 the Conservatives might have done this and did not do it. It is a matter of supreme indifference to me what the Conservatives said in another place, or did in 1954. I was not then, and am not now, a member of the Conservative Party. I hope that the Conservative Party will be capable—as indeed I hope the noble Lord will be capable—of listening to an argument and dealing with it on its merits, and that they may decide to do now what they failed to do at an earlier stage. The noble Lord's intervention and reference to the Conservative Party's view about this matter in another place appears to be totally inaccurate. The fact is that this Bill—

LORD MITCHISON

That is not so.

LORD SHAWCROSS

The fact is that this Bill does precisely that which the noble Lord said the Bill could not do. In Clause 29 the Bill distinguishes between the character of tenants according to their character. I am referring not only to the Crown Commissioners; I am referring to that whole body of public authorities, including universities. It is perfectly true that it makes that distinction only in connection with the right to redevelop. But that is not the point. The distinction is made between tenants according to their character about what is perhaps the most important aspect of this Bill. I should not have so great a quarrel with this Bill if charities were included within the scope of Clause 29, but the principle of distinguishing between tenants according to their character is clearly one which is already embodied in the Bill.

The noble Lord, Lord Kennet, made a somewhat debating point about the owner-occupier. I am a great believer myself in owner-occupation. But I also realise (as I have no doubt the noble Lord would if he gave a moment's thought to the problem, which clearly he has not so far done) that owner-occupiers have shown themselves to be quite incapable of developing obsolescent property, maintaining roads and maintaining public spaces. It is in those cases—and one has seen this all over the country—where old estates, not charitable estates, but big estates, have been fragmented; property has become obsolescent; roads have not been taken over—

LORD KENNET

The noble Lord is changing his ground. He said that the owner-occupiers were going to let the property degenerate into slum conditions. That is different.

LORD SHAWCROSS

That is what I am saying has happened. I have not changed my ground in the slightest degree. That is what I am saying that experience has shown all over the country. Obsolescent property has got more obsolescent. Streets which have not been taken over have fallen into greater decay; open spaces, no longer the subject of any

obligation upon the owners of the original estates, have fallen into neglect and desuetude. In many great provincial cities one can see that that is precisely what has happened where estates have been fragmented and left in the ownership of single individuals who have lacked the financial resources to engage in redevelopment. That is what I venture to fear is likely to happen in places like Bourn-vine or in Dulwich, if the Bill is passed without Amendment to deal with these cases.

The noble Lord, Lord Kennet, pointed out that a later clause, Clause 19, and later Amendments, may have some bearing on the position of charities. That is quite true, and I hope that some of the later Amendments will be considered in the light of the position of charities. May I just ask your Lordships' indulgence to explain why I spoke at some considerable length on this Amendment? I say this because only last Thursday, I am afraid, I committed the serious discourtesy of leaving the House before the end of the 'debate; although I explained to the noble Lord who was speaking in reply that I had to catch an aeroplane. The fact is that to-morrow and Wednesday public duties elsewhere make it impossible for me to be here. I tried to make whatever points there were to be made in the case of charities, not only in relation to this Amendment but the other Amendments. I apologise in advance for not being able to take part in the work of the Committee on those later Amendments. In the meantime, I feel I should press this Amendment to a Division.

4.32 p.m.

On Question, Whether the said Amendment (No. 3) shall be agreed to?

Their Lordships divided: Contents, 91; Not-contents, 43.

CONTENTS
Aberdare, L.	Buccleuch of Queensbury, D.	Denham, L.
Aberdeen and Temair, M.	Byers, L.	Derwent, L.
Ailwyn, L.	Caccia, L. [Teller]	Dilhorne, V.
Albemarle, E.	Carrington, L.	Drumalbyn, L.
Ampthill, L.	Clinton, L.	Dudley, L.
Amulree, L.	Clwyd, L.	Ebbisham, L.
Auckland, L.	Cork and Orrery, E.	Eccles, V.
Balfour of Inchrye, L.	Cottesloe, L.	Emmet of Amberley, Bs.
Bessborough, E.	Craigavon, V.	Erroll of Hale, L.
Boston, L.	Croft, L.	Falkland, V.
Brooke of Cumnor, L.	Cromartie, E.	Fleck, L.
Brooke of Ystradfellte, Bs.	Daventry, V.	Fortescue, E.
Glendevon, L.	Lambert, V.	St. Helens, L.
Goschen, V.	Latymer, L.	St. Just, L.
Greenway, L.	MacAndrew, L.	Salisbury, M.
Grenfell, L.	Merrivale, L.	Sandford, L.
Grimston of Westbury, L.	Meston, L.	Sempill, Ly.
Guest, L.	Mills, V.	Shawcross, L.
Hacking, L.	Milverton, L.	Somers, L.
Harvey of Tasburgh, L.	Molson, L.	Stamp, L.
Hawke, L.	Monsell, V.	Stocks, Bs.
Horsbrugh, Bs.	Monson, L.	Stonehaven, V.
Hunt, L.	Montgomery of Alamein, V.	Strang, L.
Hylton-Foster, Bs.	Morrison, L.	Strange of Knokin, Bs.
Iddesleigh, E.	Mowbray and Stourton, L.	Templemore, L.
Ilford, L.	Nugent of Guildford, L.	Thurlow, L.
Inglewood, L.	Oakshott, L.	Wakefield of Kendal, L.
Jellicoe, E.	Redmayne, L.	Wedgwood, L.
Jessel, L.	Russell of Liverpool, L.	Wolverton, L. [Teller.]
Kahn, L.	St. Aldwyn, E.	Wrottesley, L.
Kemsley, V.
NOT-CONTENTS
Addison, V.	Hilton of Upton, L. [Teller.]	Royle, L.
Archibald, L.	Hughes, L.	Sainsbury, L.
Beswick, L.	Kennet, L.	St. Davids, V.
Bowles, L.	Latham, L.	Samuel, V.
Brown, L.	Leatherland, L.	Segal, L.
Buckinghamshire, E.	Lindgren, L.	Serota, Bs.
Burden, L.	Longford, E. (L. Privy Seal.)	Shackleton, L.
Chalfont, L.	Mitchison, L.	Shepherd, L.
Champion, L.	Moyle, L.	Sorensen, L.
Cooper of Stockton Heath, L.	Pargiter, L.	Summerskill, Bs.
Crook, L.	Phillips, Bs. [Teller.]	Taylor of Mansfield, L.
Gaitskell, Bs.	Plummer, Bs.	Walston, L.
Gardiner, L. (L. Chancellor.)	Popplewell, L.	Williamson, L.
Hall, V.	Rowley, L.	Winterbottom, L.
Henderson, L.

Resolved in the affirmative, and Amendment agreed to accordingly.

4.43 p.m.

LORD MOLSON moved, in subsection (2)(a), after "only" to insert: provided that that part forms the main part of the house".

The noble Lord said: The effect of this Amendment is that paragraph (a) of subsection (2) would read: references to a person occupying a house shall apply where he occupies it in part only; provided that that part forms the main part of the house". This is a probing Amendment to obtain an explanation from the Government as to how they think that the Bill as at present worded would operate in the case of a house which had been divided. It could be partly residential property, it could be partly commercial property, or it could be a case where the long leaseholder continued to occupy only a small part of the house and was profitably—perhaps very profitably—letting other parts of the building. A tenant living in a small part of the house, even though he qualifies as the holder of a long lease, surely should not be put in a position to obtain enfranchisement of the whole house, thereby making exactly the same kind of unintended and undeserved and unexpected profit which has been referred to before and which was the main reason why in another place the Government reintroduced the limitation on the value of houses. I beg to move.

Amendment moved— Page 2, line 14, after ("only") insert ("provided that that part forms the main part of the house").—(Lord Molson.)

LORD KENNET

The main reason why the Government do not think that the Amendment of the noble Lord, Lord Molson, is necessary is because of the size of the kind of property which is going to be enfranchised. The noble Lord mentioned the case of a leaseholder who lived in only a very small part of the house and let the rest of it at a large profit. That is not really going to happen if we have rateable value limits of £400 in London and £200 outside, because the kind of house where one can let most of it at a great profit has a higher rateable value than that. In any case, the words provided that that part forms the main part of the house seem to me, in the first place, to be difficult to interpret, and, in the second place, probably leading to anomalies. The courts, God knows!, are wonderful at interpreting dubious language in the Statutes which we pass, but "main part" seems so very vague. It is not half by space, it is not half of what would be the rateable value if you were to split up the house into two separate hereditaments. What is "the main part"? What a job the courts would be faced with!

Secondly, let us suppose that a shopkeeper who lives above his shop, and who undoubtedly qualifies as he is in possession of the whole house, lets the shop and retires and retreats to the flat upstairs. He would probably take himself outside the provisions of the Bill if he did that, and that would be an undesirable result of the Amendment. In view of that, I would ask the noble Lord whether he is not satisfied that the word "main"' is so vague, and the possibility of anomalies of the type I mentioned is so high, that he is prepared to withdraw the Amendment.

LORD HAWKE

May I ask the noble Lord whether he could elaborate a little further as to how the retired shopkeeper manages to take himself outside the scope of the Bill, because it is not quite clear to me.

LORD KENNET

He is the leaseholder of a house which has a shop in it. He is a shopkeeper and is resident in that single leasehold. Let us suppose that he has been there for less than five years, so he is just coming up to the time when he could enfranchise. But just before that he has to retire and he wants to carry on living upstairs, but naturally enough he lets the shop down below to someone else. The shopkeeper is no longer likely to be living in the main part of that hereditament, and if we accept the Amendment of the noble Lord he could not enfranchise.

LORD BROOKE OF CUMNOR

I feel sure my noble friend Lord Molson will accept the Parliamentary Secretary's statement that "the main part" is somewhat vague. But my noble friend said that this was a probing Amendment, and I hope the result of it will be that between now and Report stage the Government will give rather more thought to this matter. I cannot believe it is really the Government's desire that the Bill should give rise to successful speculation by people moving into a small part of a leasehold house and living there for five years, when they would otherwise have no intention of doing so, simply in order to pocket the capital gain at the end of five years.

The noble Lord will have had his attention drawn to advertisements which have already been appearing in some papers, drawing attention to the possibilities of a capital gain by methods of this kind. I am aware of a case—I think, in fact, details of it were sent to the Minister—of a surveyor who was consulted by a client who owned a leasehold house (it was not a very big house) which would have come within the rateable value limits. He did not live there, but he let it off in rooms or non-self-contained flats. This non-occupying leaseholder immediately saw the pecuniary possibilities of this Bill, and went and consulted a surveyor as to how much his profit would be if he moved into one of the rooms or non-self-contained flats for a period of five years while continuing to let the others.

As I read the Bill, there is no safeguard against capital profits of that kind, and in certain circumstances it can be a very attractive speculation. You buy a house at leasehold value, you move into a small part of it yourself, you let the rest in rooms without creating self-contained flats, you enfranchise at the end of five years' occupation and then you collect your tax-free profit. I really cannot believe that it is the desire of the Government that this Bill should give an encouragement to that sort of customer; and it seems to me that unless there is introduced some Amendment on the lines of that of my noble friend Lord Molson—although it may have to be a more complex one—the Bill is wide open to that form of speculation. It does not seem to me a very desirable form of money-making, or a very desirable form of house occupation. That is why I would, in all seriousness, ask the Government to see whether between now and Report stage they cannot introduce some words which will make it absolutely plain on the face of the Bill that there is going to be no encouragement to speculation of that kind. The Bill, I am sure, has no such intention, but I cannot see how at present there is any safeguard against it.

LORD SILSOE

May I say a word on this subject? This is an important point which I hope the Government will look at. I have no constructive ideas as to how to alter it, but one of the things about this Bill which worries landlords is that after the publication of the Bill lessees who have no intention whatever of living in the premises will come in for the money. We are worried very much indeed about it. It is so easy to do it under the present wording, and I am sure that no one really wants to encourage it. The word "occupies" is a difficult word. "Occupies" usually means in rateable occupation, but I do not believe it means that here. It is too loose a word. If it said "rateable occupation", it would help a bit, I think. I am quite sure that the Government do not want this to become a sort of "ramp", and I hope very much indeed that some suitable words will be introduced so that the man who comes in to occupy really comes into occupy the property as his home and is not a "wangler." I say no more. I am sorry that I have no suggestion to make. If I do think of one, perhaps I might write to the noble Lord about it. But I support the noble Lord in saying that something better than this should go in.

LORD KENNET

Before the noble Lord says what he is going to do with his Amendment, I should like to say that the Government have already given a good deal of consideration to this matter, and there is another difficulty. If we put in a provision about occupying the main part, then we run another risk. I certainly recognise the risks that the noble Lord has outlined, about the owner of the leasehold moving in and establishing occupation in one room. But suppose the owner of the leasehold is already living in one room when we pass this Bill, and has let all the other rooms, and we suddenly say that, in order to qualify, he must occupy the main part. This is then an invitation to him to turn out half his tenants, and this also is undesirable. In other words, one is on a razor's edge between two undesirables here. Having said that, I shall look at this matter again, but I should not like to go so far as to hold out any hope that at Report stage we shall be able to come down on the other side of the razor's edge than the side on which we have come down at the moment.

LORD ST. HELENS

May I ask the noble Lord one question on what he has said? He said that there would be an incentive for the owner to turn out the tenants. But how is he going to turn out the tenants? I thought the tenants were protected under the Rent Act.

LORD KENNET

One does not want landlords to be even tempted to turn out tenants.

LORD INGLEWOOD

Before the noble Lord sits down, may I ask him one question? If it was answered in the early part of this debate, I apologise, because I am afraid I missed the first few minutes. Is there anything in the Bill to prevent anybody taking advantage over and over again of the one-room occupation principle which my noble friend described: of having one room in any number of houses and getting not just one tax-free benefit but a very large number, if he is sufficiently skilful in his dealings?

LORD KENNET

He can only do so in a house which has been for five years, or for five years out of ten, "his only or main residence".

LORD MOLSON

I said that this was only a probing Amendment, and I think it has been very useful for that purpose. As much as I am opposed to many of the provisions of this Bill, I am anxious that if it is to go through it shall be as practical and as workable as possible. I really do not think that the Parliamentary Secretary is right about being able to get rid of tenants. I think my noble friend Lord St. Helens is right about that; and I do not think that in most cases this is a real danger at all.

I think it is essential that some safeguarding provision should be inserted, and I hope the Parliamentary Secretary will not be put off by the difficulty of drafting. The courts frequently have to interpret words that are used in common parlance. In all the rent restriction Acts there is the phrase, "alternative accommodation". I have no doubt that when that was originally put into a rent restriction Act in 1915 people said, "What is 'alternative accommodation'?". There have been hundreds, if not thousands, of cases deciding what is, in a particular case, "alternative accommodation" within the meaning of the Act; and even if it does require some rather more complicated provision than my very simple Amendment, and even if it does mean that nobody will know exactly what it is until it has been decided by the courts, it will only be in exactly the same position as any other legislation that we pass. I therefore rely upon the Parliamentary Secretary to see that something is done to meet what is, in his own admission, a serious danger in the Bill as it is at the present time. With those words, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD SHEPHERD

Before the next Amendment is called, may I make the short statement which I promised earlier, in regard to the adjournment this evening? I understand that it would be for the convenience of a number of noble Lords if we were to adjourn this Committee stage at about 8 p.m. this evening. I think it is understood that in view of the fact that we shall be rising a little earlier than was anticipated last week we shall require to sit until fairly late tomorrow. But, again, this is a matter about which I will undertake to have discussions with the noble Lord, Lord Brooke of Cumnor, and the Opposition Chief Whip.

LORD BROOKE OF CUMNOR

I am grateful to the noble Lord for what he has said. I am sure that it would be best to stick to the arrangement to rise at eight o'clock to-night, but I think that that arrangement was arrived at on the assumption that we should have considerable time on the third day, Wednesday, for this Bill. Certainly I think that this Committee stage will require three days, or the equivalent of three days, and that we shall not be able to compress it into less.

LORD SHEPHERD

The noble Lord, Lord Brooke of Cumnor, will remember that this is the very point I made on Thursday; but I have since been pressed to rise at eight o'clock. However, this is a matter which I hope we can discuss. Certainly we wish to see the Committee stage completed this week, and to provide adequate time for it to be discussed. But I think we can arrive at a satisfactory arrangement.

5.0 p.m.

LORD LINDGREN moved to add to the clause: ( ) Notwithstanding anything in subsections (1) to (3) of this section, this Part of this Act shall not confer on the tenant of a house any right by reference to his occupation of it as his residence if the house forms part of an estate which on application made by the owner to the High Court either before the appointed day for this Part of the Act or within not more than three months thereafter is certified by the High Court as an estate held under statutory enactment or trust deed the purpose of which is to maintain the entity of the freehold estate and that on the date of application to the High Court the owner of the estate was required to have regard only to the letting value of the site (without including anything for the value of buildings on the site) in granting to a tenant of a house and premises an extension or renewal of an existing long tenancy at a low rent: Provided that in the event of the conditions not continuing to apply to the estate the High Court on aplication by the Minister of Housing and Local Government or the Secretary of State shall be empowered to cancel the certificate and thereupon this Part of this Act shall apply to the estate as from the date of cancellation of the certificate. In default of agreement between the owner of the estate and a tenant of a house held on a long lease at a low rent as to the letting value of the site of the house and premises the provisions of section 21 of this Act shall apply as if it were rent to be fixed under section 15.

The noble Lord said: This Amendment refers to Letchworth Garden City. I am sure that most noble Lords are aware that Letchworth was the first Garden City and that it is world-famous as a British achievement in town planning. The intention behind its establishment was that the land should be developed as a Garden City on behalf of the community and that the profit arising from the development should be used for the benefit of the community as a whole. The Bill we are now discussing is a Bill to deal with the common case where a landlord leases land to a person, who then builds, or has built, a house or a factory on the land and, at the termination of the lease, the building as well as the land goes back to the landlord. This is not the case so far as Letchworth is concerned.

It has been the practice since the foundation of the Garden City in 1903 (and it is enshrined in the Letchworth Garden City Corporation Act 1962) that in the event of extension or renewal of ground leases, regard is to be had only to the increased value of the land (clear of the buildings on it) and of any improvements to the surface made by the lessees. Therefore, so far as Letchworth is concerned, the land is leased by the Corporation, and no regard is had to the value of the property on the land. It is a lease for the land; the buildings belong to the person who put them on the land, or purchased them from someone else who had put them on the land. It has always been a peculiarity of the Letchworth leasehold system that the ground belongs to the landlord and the bricks and the mortar to the lessee; and it is this very principle which the Leasehold Reform Bill seeks to extend to leasehold properties generally.

My contention is that there is no point in granting Letchworth leaseholders the right of enfranchisement contained in the Bill. In fact, I am going to assert that Letchworth as a whole will be harmed by the introduction of this Bill; for the application of its provisions will make it difficult for the landlords, the Letchworth Garden City Corporation, to maintain the characteristics of the town. I say this despite the provisions of Clause 19. I am afraid that the Corporation running Letchworth are as sanguine as are many others as to whether Clause 19 will, in fact, be at all effective. The Corporation own the Garden City Estate in perpetuity and are charged under Section 32 of the 1962 Act to devote their surplus revenue to the provision of traffic facilities, lighting, drainage, markets, libraries, baths or otherwise for the embellishment of the undertaking of the Corporation, the provision of means of education, recreation or amusement for the people or for any other purpose which the Corporation may deem to be a requisite public service". Any loss of ownership of the land, with its consequent loss of incremental value, would be at the expense of the community of Letchworth as whole.

The First Garden City, Limited, the original landlord, had fallen under the control of interests who had made it clear that they did not intend to fulfil the earlier intentions of the Garden City Company. As a result of the 1962 Act they were succeeded by the Letchworth Garden City Corporation. The Lands Tribunal award of compensation to the company by the Corporation took account of the development value inherent in the land which goes with many houses in the Garden City. The original population density at Letchworth was low—as it was in many other parts of the country in the early 1900s. There are much higher densities these days, and if the Letchworth leaseholders were to secure enfranchisement in respect of some of the earlier property, with the possibility of development, they would be getting the increased value and the town as a whole would suffer. The leaseholder who purchased the enfranchisement would gain materially not only from the development of that portion which was ripe for development but also from the continuance of the other services provided.

I ought to make it clear that the issues arising from this Bill have been well publicised in Letchworth. The people still vividly remember the take-over bid for the original Garden City Company that led to the 1962 Conservative Government, through the Conservative Member of Parliament for the Hitchin Division, securing the establishment of the Corporation. All this has meant that in Letchworth, a very social conscious community, there has been lively discussion on the effect of this Bill. And there is not the slightest degree of discord in any section. Both political Parties, the Labour-controlled council and its Conservative minority, desire to see Letchworth excluded from this Bill. I understand that an attempt was made to establish a leaseholders' protection society in Letchworth; but it fell by the wayside. And one can say now that the town is united asking for its exclusion from this Bill.

The Parliamentary Secretary, during the Standing Committee in another place, called attention to the fact that the 1962 Act does not oblige the Corporation to extend or renew leases. It only lays down the principles on which this shall be done, when it is done. I have the authority of the Corporation to say that on their exclusion from the provisions of this Bill (they have already given an undertaking locally during the passing of the 1962 Act in another place) leases would be refused only if the property were required for redevelopment. They are prepared to promote a Private Bill if they are excuded from the provisions of this Bill. It will be seen, therefore— at least, I hope that I have made clear—that in order for the Government to implement their leasehold reform policy there is no need to include Letchworth in the provisions of this Bill; secondly, that the inclusion of Letchworth would be prejudicial to its interests; thirdly, that public opinion in Letchworth is virtually unanimous in favour of exclusion; fourthly, that the Corporation are prepared to promote a Private Bill to give statutory force to the closure of any loophole which might cause the Government fear that the basis of the leasehold reform policy would not continue to operate in Letchworth. I beg to move.

Amendment moved— Page 2, line 31, at end insert the said subsection.—(Lord Lindgren.)

5.12 p.m.

LORD SILKIN

I wish strongly to support this Amendment. My noble friend Lord Lindgren has based his case on the position of Letchworth, although that place is not mentioned in the Amendment. However, I think we all appreciate that Letchworth is probably the outstanding example of places which would be affected by the acceptance of this Amendment. Other places also would be affected, and I wish to anticipate a possible objection on the part of the Government that, by treating this Amendment as if it applied only to Letchworth, the Bill might be regarded as a hybrid Bill. The noble and learned Lord, Lord Shawcross, referred to other places—Bournville, Port Sunlight and so on—where the same kind of conditions may apply, and if this Amendment were accepted it would probably affect those places.

Letchworth is unique. We all have a great affection for it. Its creation pointed the way to New Towns. It was founded by Sir Ebenezer Howard, a humble official of this House, a shorthand writer, who started and successfully carried through the creation of this new town which pointed the way to many others. I have no doubt at all that if this Bill went through without amendment Letchworth, as such, would die. It would not be able to take advantage of the provisions in Clause 19, even in the proposed amended form. Letchworth would not have the money, and certainly not the initiative. I suppose that practically every lessee in Letchworth would take advantage of the provisions in the Bill, and the result would be that Letchworth would find itself with a certain amount of money but with no property. And as the Corporation are in debt to the extent of over £3 million to the company they bought out, the probability is that the greater part of this money would go in repayment of the loan. There would be no particular fund, and certainly not a prospective fund of money, for redevelopment or to carry out the task which the Letchworth Garden City Act enables them to do.

I refer to Letchworth because it is the most important of the towns affected, and its character is unique. This is not merely a case of a charitable organisation owning a section of a community: this is an organisation that owns the whole of Letchworth. Every house and building in Letchworth is affected. To that extent the place is unique and outside the scope of this Bill. If the Amendment were accepted it would affect a large number of other places in a similar position to Letchworth. I hope that the noble Lord, Lord Kennet, will at least be able to promise further consideration of the matter, even if he cannot accept this particular Amendment. I understand that there are certain defects in the drafting, but I should be very happy if he would indicate that he was prepared to reconsider the matter.

It is of vast importance that the Corporation, this pioneer in new towns, should not die but should be allowed to continue its good work. As was pointed out by my noble friend, and as the noble and learned Lord, Lord Shawcross, pointed out, it is similar to the work being done at Dulwich College with the proceeds of their funds. In the case of Letchworth, surplus funds are utilised for the benefit of the town as a whole; and it would be quite wrong if certain individuals could secure the benefit of development value, thus depriving the town of the advantages which the Letchworth Garden City Corporation are aiming to give. So I hope very much that favourable consideration will be given to this Amendment.

LORD WOLVERTON

I should like to support this Amendment, having visited Letchworth Garden City on several occasions and seen the beautiful layout there. As was said by the noble Lord, the intention was that property should be leasehold, and that the Garden City Company should own the freehold and control development. That is very important, as is the maintenance of the amenities. The avenues and roads at Letchworth are beautifully laid out, and if this is all fragmented we may, as was said by the noble and learned Lord, Lord Shawcross, see the same thing happen at Letchworth as we fear will happen at Dulwich. There are not many other places affected, but they ought also to be protected. They were laid out on the same principle, and I think it wrong that places should be broken up where there are tenants who knew that they were not buying freehold land but only leasehold. I hope therefore that the Government will accept the Amendment.

5.20 p.m.

LORD KENNET

My noble friend Lord Silkin was quite right when he pointed out that we are not talking only about Letchworth, and that Letchworth is not mentioned in the Amendment: we are talking about a number of places. I am not able to inform the Committee what is the number, but if the Amendment were accepted, we might expect that a good many of these places would be polishing up their claims to come under its provisions. So let us not concentrate solely on Letchworth, which we all agree has been a great achievement. My noble friend Lord Lindgren said that if Letchworth is exempted from the Bill, that does not oblige the Corporation to renew leases by any other provision. The Letchworth Garden City Corporation Act, 1962, says only that if the Corporation renew a lease, they are to do so on ground rent terms only.

The Corporation have recently issued a policy statement saying that they will normally comport themselves in this manner. If it is their intention to do this in any case, why should they object to being bound to do so by Statute? Their policy statement is reasonable and comprehensible, but it does not explain why the Corporation resist being held to their policy by an Act of Parliament.

LORD SILKIN

Is not the answer that this Bill would enfranchise the leases? What they would be prepared to do is to grant extensions, to grant long leases, as they have been doing up to now.

LORD KENNET

I will come to that at the end of my remarks, when I hope to be a little more constructive. My noble friend described Letchworth as a united town. He said that all parties at all levels were united against the Bill and wished the Corporation to be exempted. Then he said that he was sure that if the Bill were passed unamended, Letchworth would die. This can only mean that a great many people would enfranchise under the Bill and fail to do their duty as freeholders. It means that there must be a great many people who desire to enfranchise and therefore wish the Bill to pass. I am at a loss to know which of these arguments is right. Is everybody in Letchworth solidly against the Bill, or are there some people in favour because they wish to enfranchise?

Our common admiration for the history, traditions and present situation of Letchworth should not lead us to assume that any freeholder whose position we admire should be exempted from the Bill. I would remind your Lordships that the Crown itself has undertaken to abide by the provisions of the Bill, to act as though it were bound by the Bill. To put it shortly, if the Crown can live with it, I think Letchworth ought to be able to do so.

To return to the Corporation's statement of policy, this declaration of intention would be followed up by the introduction of a Private Bill by Letchworth Corporation to cover certain other aspects which they agree ought to be covered. I would ask my noble friends: would it not be more reasonable for the Corporation to accept the Leasehold Reform Bill unamended and then introduce their Private Bill to exempt themselves, Parliament being willing, to such an extent as they can show it is desirable, rather than take themselves out at this stage and put themselves back in again to a certain extent by a Private Bill?

I would remind my noble friends that Clause 19 provides for the postponement of any enfranchisement while the freeholder applies for a certificate of good management. While, of course, I cannot prejudge the Minister's decision on the certificate, let alone that of the court on the scheme itself, obviously this provision has been introduced precisely for the benefit of places like Letchworth Garden City. It is clear that if they avail themselves of this provision they will have a few months of surcease, during which time they can prepare the kind of Private Bill which the Government think they would be better advised to do in order to take themselves out of the Bill to a small extent. I hope, for all those reasons, that my noble friend will agree to withdraw his Amendment this afternoon.

LORD MOLSON

I would beg the Government not to show themselves too inflexible in this matter. They have argued, in favour of the Bill, that they do not think that the landlord should acquire the bricks and mortar when in fact he had only leased the land. In the case of Letchworth, before the Labour Party was, that great pioneer, Sir Ebenezer Howard, devised this whole conception of the perpetual renewal of leaseholds. Before the Town and Country Planning Association, before I think the noble Lord, Lord Silkin, was born, Letchworth was conceived as a place where it would be possible, owing to an enlightened Corporation exercising full planning authority over the whole of the area and carrying out all the necessary redevelopment, to have all the advantages, and some others, that we derive from the town and country planning legislation.

Why should it be that when the Government introduce a measure to deal with particular abuses in certain parts of the country, they are showing such a rigidity that they are not prepared to make an exception in favour of this remarkable enterprise, which has worked so satisfactorily and which has been prepared to give the undertaking for which the Government are now asking? The Parliamentary Secretary—and I had hoped that he was going to make a really constructive suggestion—asked why it was that Letchworth objects to the enfranchisement proposals. The noble Lord, Lord Lindgren, explained that. There are two principal reasons: first, that Letchworth has been planned with a small concentration of population. Owing to new developments, it will be possible for individual tenants, if they avail themselves of the right of enfranchisement, to make an entirely unwarranted profit out of the disposal of their land. If these tenants enfranchise their land and sell it at an enhanced price, the whole machinery for the planned redevelopment of Letchworth falls to the ground.

The Parliamentary Secretary put the dilemma. Do the tenants want to enfranchise or not? The answer is extremely simple. They have all joined a co-operative society, in which none of them is seeking to make a profit for himself, and such profits as there are to be equitably distributed for the benefit of the whole community. If a Socialist Government comes along with the extraordinary proposal that those who have entered this co-operative society should be allowed to dispose of their own particular holding and make an uncovenanted and unexpected profit out of it, is it entirely to be wondered at if many of them fall and say: "Here is a chance of making a profit"? And, in so far as other people do not avail themselves of it, but continue to renew their leases, those who have obtained enfranchisement of their own holding and sold it at a profit derive that benefit for themselves, or before they sell, when they have enfranchised and own this greatly increased capital asset, they continue to live and enjoy the benefits which are to be derived from the fact that their neighbours have not gone in for enfranchisement.

If the Parliamentary Secretary, as I thought at one time he indicated in his speech, wants to meet us halfway, I am not authorised to make any proposal, but it seems to me that what Letchworth particularly objects to is the enfranchisement proposal in this Bill. They are perfectly prepared to promote a Private Bill and give to their tenants a right of renewal of their leases. If the Parliamentary Secretary is prepared to put forward an Amendment which will incorporate in this Bill a statutory right to all the tenants of Letchworth to a renewal of their leases, that would not be going any further than the promise that has been made by Letchworth that they would promote a Private Bill; indeed, it would save them all the cost and bother of promoting a Private Bill. I am not authorised to make a proposal on behalf of Letchworth, but I believe a compromise on those lines might commend itself to Letchworth. It would meet the main point that has been made by the Parliamentary Secretary, and it would preserve Letchworth.

If every tenant in Letchworth is to be given the right of enfranchisement, then to break up his holding and sell to somebody else, the whole character and nature of Letchworth will have been destroyed: and, indeed, it will go down in social history that the great and imaginative work of Ebenezer Howard, which had prospered for a long time and which even a Conservative Government went out of its way to preserve by giving facilities for the Act of 1962, which I had the honour to move in this House, was destroyed. It is only when a Socialist Government comes into power that, with their doctrinaire ideas, they destroy a Garden City of this kind, the first and most imaginative scheme of town development.

5.34 p.m.

LORD BROOKE OF CUMNOR

I feel that the Government should give further thought to this matter. It is clearly a non-Party or an all-Party issue. The noble Lord, Lord Lindgren, has spoken forcefully and admirably in support of his Amendment, which I think he will agree is identical with an Amendment which was moved by a Conservative Member in another place and the Committee divided upon. To the best of my belief, everybody wants Letchworth preserved. Virtually everybody, except the Government, believe that Letchworth will not be preserved in its excellence if this Bill goes through unamended.

There is no case made out in the Government White Paper for interference with an estate like Letchworth. That White Paper was based on the argument of hardship. In the second sentence it said: In the case of long leases experience has shown that the system has worked very unfairly against the occupying leaseholder. But nobody has ever suggested that the system in Letchworth operates unfairly against the occupying leaseholder. The proof that it is considered to operate fairly is surely shown by the fact that the two leaders on the Letchworth Council, the leaders of the Labour and the Conservative groups, joined in writing a letter to The Times imploring the Government to take some action. It is occasionally said that this House is not a fully democratic assembly. But, surely, if the House of Lords can do anything, it can beg once again the Government to pay attention to the desires of the people of Letchworth and their elected representatives, regardless of Party. I have spent many years in local government, and I know that it takes a considerable degree of unanimity to bring together the two Parties which are normally fighting for power on a council.

My noble friend Lord Molson explained clearly how under the normal working of human nature enfranchisement is bound to take place if the Bill goes through as it stands; and that means fragmentation, which over the years will render it literally impossible for the Corporation to secure the kind of wise re-development which it envisages.

I have nothing like the same close acquaintance with Letchworth as some other of your Lordships, but I was the responsible Minister at the beginning of the discussions which led to the 1962 Act, and, at any rate, I can claim the credit—and I hope that I shall be given credit for this by the Party opposite—for having given the original Government blessing to a Bill which was going compulsorily to take property away from private enterprise and invest it in a responsible Corporation. For Heaven's sake! let us give that Corporation the chance to do the work for which it was set up. I do not know what is the intention of the noble Lord, Lord Lindgren, but if he presses this Amendment, I for one will support him.

BARONESS STOCKS

I should like to ask the noble Lord, Lord Kennet, for an opinion on one matter. We can assume that the Civic Amenities Bill will become law. If certain clauses of that Bill are seriously and vigorously operated by the Ministry of Housing and Local Government, should it not be possible to obviate some of the ill-effects indicated by noble Lords opposite, when it comes to preserving the character and amenities of a neighbourhood operated by a trust, a public-spirited individual, a charity or any other body responsible for preserving the character of the neighbourhood as a neighbourhood?

THE EARL OF IDDESLEIGH

I speak with great hesitation, but I think this is the first occasion in my career in this House that I have heard it suggested that we should do something that we believe to be wrong and mistaken and then allow the victims to put it right by a Private Bill. It seems to me to be a thoroughly unusual suggestion.

LORD FARINGDON

I wonder whether my noble friend can tell me this. Is it his idea that this Private Bill, if promoted, would operate to affect all the other Garden Cities of which my noble friend Lord Silkin has made mention, or would it apply only to Letchworth?

LORD KENNET

To take up those queries, on which I do not want to spend too long, may I say, in answer to my noble friend Lord Faringdon, that I think it would be for the Letchworth Gardens City Corporation to decided whether the Bill they introduced should affect only themselves or others as well. The noble Lord, Lord Brooke of Cumnor, has said that there has been no evidence of hardship in the working of the leasehold system at Letchworth; and of course this is so. But I would point out that all the leases at Letchworth still have 40 years to run, so there can hardly have been hardship yet. One would not expect hardships to arise in the middle of the first batch of leases.

My noble friend Lady Stocks asked whether the Civic Amenities Bill could be used to help preserve what ought to be preserved at Letchworth if there is enfranchisement. The answer is, most emphatically, Yes. Why not? That is precisely the sort of case it was invented for.

LORD MOLSON

May I interrupt the Parliamentary Secretary? I do not pretend to carry the whole of the Civic Amenities Bill in my mind, but is he saying that in the Civic Amenities Bill the power to which I suppose he is referring—the power to declare an area to be a notified area (or whatever it is called)—would prevent a person who is enfranchised from selling part of his holding in order that an additional house should be built there?

LORD KENNET

No. But it would bind the local planning authority, in determining the application for permission to build the next house there, to have regard to the character of the area. The noble Lord shakes his head. Two noble Lords shake their heads. My memory of the Bill is fairly good, and Clause 1 binds local authorities, in the exercise of their planning function, which of course includes determining applications for permission to build new houses, to have regard to the desirability of maintaining and enhancing the character of areas which they will have designated as conservation areas.

The noble Lord, Lord Molson, appealed to the ghost of Ebenezer Howard—and how right he was to do so! He was indeed the grandfather of town and country planning. It was he who set out many of the principles which have been brought to their first fruition by my noble friend Lord Silkin, and are about to be brought to second fruition under the Town and Country Planning Bill, about which the Government have recently published a White Paper. And it will, we hope, continue to grow throughout the centuries as our techniques, and our public consciences, become more refined and civilised.

But in the days of Ebenezer Howard there was only one way to achieve proper planning, and that was by property; and that was why he took the right step, the only possible step if one were to introduce the idea of planning in the late nineteenth century. He had recourse to property to do it. The situation to-day is no longer the same. We have now a system of democratically controlled planning provisions, which can achieve decent standards of environment and conservation and new development, without actual ownership of the ground and the houses in question. I think it is time that Ebenezer Howard should merge himself into the general system of planning values which he himself so largely created. I wonder whether, if he were here to-day among us, he would insist now that it could be done only by property. I think we have done better than that.

As to the question of the wishes of the people of Letchworth, I must admit that my perplexity remains completely undiminished. The noble Lord, Lord Molson, referred to people joining a society and agreeing in common not to draw profit from it, by not seeking to enfranchise. He said that this was why they chose to become leaseholders at Letchworth. But this Bill is not going to force them to enfranchise. The friends of the Amendment have been arguing as though they were seeking to get the Government to withdraw an implement which would condemn all the leaseholders of Letchworth to enfranchise, whether they wished it or no, which would force the Letchworth Corporation to go round with a compulsory enfranchisement instrument and say, "Sign here or appeal within two weeks". This is not the case at all. If the leaseholders of Letchworth are content with their leaseholds under the present law, and they can remain content with their leaseholds under the new law, they need not move a finger to do anything about it if they do not want to—

LORD MOLSON

May I interrupt?

LORD KENNET

May I finish my sentence? —and if the situation is as it has been described—that is, that there is a completely united town against these provisions—I have not the least doubt that they will not move a finger to enfranchise.

LORD MOLSON

But suppose that three-quarters of them choose to continue in that way, and that the other quarter decide to take a short-term capital appreciation. What then?

LORD KENNET

Then there is not a completely united town. That quarter is in favour, prima facie, of the Bill. I should be far from admitting that that is the only reason for which any Letchworth leaseholder could be in favour of the Bill.

As to accepting the Amendment, I should tell the Committee, from my own personal knowledge over the past months, that I have never seen a Government machine give more thought to a particular conundrum in the preparation of legislation than has been given to this question of Letchworth. The problem is still as it was when we first faced it many months, or even years, ago, when the White Paper was prepared— "If Letchworth, then others". My noble friend, in introducing the Amendment, has not been able to frame it in such a way as to mention Letchworth, and to do it in that way alone. I do not know—the Government cannot know; indeed no one can, until the matter has soaked through all over the country—how many freeholders would seek to come in under a broad Amendment of this nature. For that reason, with the greatest possible regret, I have to maintain my request to my noble friend to withdraw his Amendment, or, if he is not able to do so, to advise the Committee to vote against it.

LORD LINDGREN

I had intended to withdraw and to look again at what my noble friend has said in regard to the future proposed action of Letchworth, but I cannot do so in view of the unsatisfactory nature of the reply. I have been in planning for a very long time. If anybody wishes to convince me, as the Parliamentary Secretary has tried to, that planning permission is an alternative to a system owned by the community, I am willing to listen. But, having been in planning for such a long time, I should have thought that he would realise that planning permission has now become a saleable commodity and as such it goes to the landowner.

In a place like Letchworth, where leaseholds are taken by the Corporation, the proceeds are used for verges, playing fields, public baths and all the amenities of the community, under planning permission. We do not want to go back to the old days of ribbon development, but under the present system of planning permission the values created by the community do not go back to the community, as they do in Letchworth, but go to those who are obtaining planning permission and selling the land. Planning permission has become a saleable commodity, as I say, and that is a tremendous factor. I think the manner in which it has been dealt with by town planners in local government, in view of the fact that it is a saleable commodity and has been so profitable, is really remarkable.

Again, it is suggested that the Civic Amenities Bill covers the work which was previously done by a corporation, such as the Letchworth Corporation. Really? And who pays? If it is done, of course it can be done only by one body, the local authority, and then it is paid for out of the rates. So my noble friend is asking me to agree to a system which would put thousands of pounds into certain persons' pockets, if they were to take advantage of it, and that the work which is being done now should be paid for out of the rates.

The other point is that my noble friend twitted me—and it is a good debating point—by saying that, if everybody in Letchworth is against enfranchisement, why are we afraid of some persons doing it. I can only go by the Hertfordshire Express of June 15, which said that the Electors' Action Committee formed in order to support the Bill had only ten

Resolved in the affirmative, Amendment agreed to accordingly.

members. But if this provision is enacted, and it becomes possible to enfranchise, someone will see someone else doing it; and I confess that I have not sufficiently great faith in human nature to think that others will not follow. And in that event all that will be left under leasehold control will be the council houses which are under a peppercorn lease from the Corporation. In view of the unsatisfactory nature of the reply, I cannot withdraw this Amendment, and I shall take it to a Division.

5.50 p.m.

On Question, Whether the said Amendment (No. 5) shall be agreed to?

Their Lordships divided: Contents, 77; Not-Contents, 46.

CONTENTS
Aberdare, L.	Foley, L.	Monsell, V.
Ailwyn, L.	Glendevon, L.	Morrison, L.
Ampthill, L.	Goschen, V. [Teller.]	Mowbray and Stourton, L.
Audley, Bs.	Grenfell, L.	Nugent of Guildford, L.
Blackford, L.	Hacking, L.	Oakshott, L.
Boston, L.	Hawke, L.	Redmayne, L.
Brooke of Cumnor, L.	Henderson, L.	Russell of Liverpool, L.
Brooke of Ystradfellte, Bs.	Horsbrusgh, Bs.	St. Aldwyn, E.
Caccia, L.	Hunt, L.	St. Just, L.
Carrington, L.	Hylton-Foster, Bs.	Sandford, L.
Clinton, L.	Iddesleigh, E.	Silkin, L.
Clwyd, L.	Ilford, L.	Silsoe, L.
Colville of Culross, V.	Inglewood, L.	Somers, L.
Cork and Orrery, E.	Jellicoe, E.	Stocks, Bs.
Craigavon, V.	Kinloss, Ly.	Stonehaven, V.
Cullen of Ashbourne, L.	Kinnoull, E.	Strang, L.
Daventry, V.	Lambert, V.	Strange of Knokin, Bs.
Denham, L.	Latymer, L.	Swanborough, Bs.
Derwent, L.	Lindgren, L. [Teller.]	Templemore, L.
Dilhorne, V.	Lucas of Chilworth, L.	Tweedsmuir, L.
Dudley, L.	Mancroft, L.	Wakefield of Kendal, L.
Emmet of Amberley, Bs.	Merrivale, L.	Wedgwood, L.
Falkland, V.	Mills, V.	Windlesham, L.
Faringdon, L.	Milverton, L.	Wolverton, L.
Ferrers, E.	Molson, L.	Wrottesley, L.
Fleck, L.	Monckton of Brenchley, V.

NOT-CONTENTS
Addison, V.	Hilton of Upton, L.	St. Davids, V.
Beswick, L.	Hughes, L.	Samuel, V.
Blyton, L.	Kahn, L.	Segal, L.
Bowles, L. [Teller.]	Kennet, L.	Serota, Bs.
Brown, L.	Latham, L.	Shepherd, L.
Buckinghamshire, E.	Leatherland, L.	Snow, L.
Burden, L.	MacLeod of Fuinary, L.	Sorensen, L. [Teller.]
Chalfont, L.	Maelor, L.	Stonham, L.
Champion, L.	Morris of Kenwood, L.	Strabolgi, L.
Collison, L.	Moyle, L.	Summerskill, Bs.
Crook, L.	Pargiter, L.	Taylor of Mansfield, L.
Gaitskell, Bs.	Phillips, Bs.	Walston, L.
Gardiner, L. (L. Chancellor.)	Rowley, L.	Wells-Pestell, L.
Gifford, L.	Royle, L.	Williamson, L.
Granville-West, L.	Sainsbury, L.	Winterbottom, L.
Hall, V.

On Question, Whether Clause 1, as amended, shall stand part of the Bill?

LORD BROOKE OF CUMNOR

I simply rise to say that, although I have strong objection to much that is in Clause 1, we debated the principle of the Bill at length on Second Reading and I do not propose to start a new debate on one of the essential principles of the Bill on the Motion that Clause 1 stand part.

LORD MOYLE

I was pleased to hear my noble friend Lord Kennet say that he would look at the proposal made by my noble friend Lord Silkin on the question of the respective rateable limits of £200 and £400. The scheme that he suggests might solve the difficulty that was met on this issue. The limit has nothing sacrosanct about it, and I have a feeling that it is rather overloaded with the problem of the hardships of the leasehold system experienced in South Wales. I should like to suggest that the hardship experienced in South Wales when a lease expires is not to be measured by the experience of other parts of the country.

I would say that in Cambridge and Oxford and in parts of the Midlands similar rented properties will be outside the scope of the existing limit. Indeed there are properties in Oxford which, I suggest, would be almost comparable with London. Yet because the limit is £200 in Oxford as against £400 in Greater London, people will feel that they are suffering a rank injustice when they are denied the rights of enfranchisement in the operation of this Bill if the present limits are adhered to. Therefore, I would ask my noble friend to look at this and see whether he cannot, by extending the limits, endeavour to avoid those injustices that will be experienced by many leaseholders if the present limits are adhered to.

LORD KENNET

The Committee will not wish me to reply substantially to my noble friend's remarks. We shall, of course, bear all these arguments in mind in looking at the noble Lord, Lord Silkin's Amendment, which appears to be an entirely new plan and must be looked at as such.

Clause 1, as amended, agreed to.

Clause 2 [Meaning of "house" and "house and premises", and adjustment of boundary]:

LORD KENNET

This is a drafting Amendment which seeks to make clear the fact that in relation to minerals the leaseholders' rights cannot extend to property not comprised in the lease. I beg to move.

Amendment moved—

Page 4, line 5, after first ("minerals") insert ("comprised in the tenancy").—(Lord Kennet.)

On Question, Amendment agreed to.

Clause 2, as amended, agreed to.

Clause 3:

Meaning of "long tenancy"

3.—(1) In this Part of this Act "long tenancy" means, subject to the provisions of this section, a tenancy granted for a term of years certain exceeding twenty-one years, whether or not the tenancy is (or may become) terminable before the end of that term by notice given by or to the tenant or by re-entry, forfeiture or otherwise, and includes a tenancy for a term fixed by law under a grant with a covenant or obligation for perpetual renewal unless it is a tenancy by sub-demise from one which is not a long tenancy:

Provided that a tenancy granted so as to become terminable by notice after a death or marriage is not to be treated as a long tenancy.

6.4 p.m.

LORD BROOKE OF CUMNOR moved, in subsection (1), to leave out "twenty-one" and insert "fifty". The noble Lord said: I beg to move Amendment No. 7, and I think it would be for the convenience of your Lordships to consider with this Amendment Amendments Nos. 9, 13, and 14, which are identical with it. We are now considering the definition of a long tenancy. This is an important criterion in the Bill. Subsection (1) of Clause 3 says that a "long tenancy" means a tenancy granted for a term of years certain exceeding twenty-one years … The first point I would make is that this is not at all the kind of tenancy to which the White Paper was directed. The White Paper says in the first sentence: This White Paper is concerned with residential long leases particularly those granted originally in the latter half of the last century. In order to deal with them it is not necessary to define a long lease as any lease that goes back further than 1946. Indeed my Amendment would broadly say that leases granted for a term of years certain before the First World War would be caught by this Bill, but leases which have subsequently been granted for a term of 50 years or less would not.

The broad distinction between the two is really this. The long lease in its normal meaning is a building lease where the leaseholder will undertake to pay a small ground rent and to put up a building, a house, and he and his successors will enjoy the benefits of occupation of that house for a period of 99 years, sometimes 999 years, or occasionally 75 years. The term that has normally been fixed in a lease of that sort has been the prospective period of existence of the house as a satisfactory residence. If a lease is granted for a period of something between 21 and 50 years, quite clearly no leaseholder is going to put up a house on that site at his own expense and expect to hand it back to the freeholder at the end of 22 years, 30 years or 50 years, or whatever it may be. That kind of lease has been granted and entered into originally for quite a different purpose.

I think those among your Lordships who have professional qualifications as surveyors or otherwise will agree that in certain cases it has been the policy of the freeholders to grant leases for 30 years, 40 years or 50 years on terms normally which will amount to a payment of rack rent for that period by the leaseholder, whether in fact it is paid annually as a rack rent or part of it is embodied in a premium that is paid at the beginning with a smaller payment of rent like a ground rent each year thereafter. The essential point is that these shorter long leases are nothing like the 99-year leases where the leaseholder undertook to put up a house knowing that at the end of 99 years it would cease to be his property. It is, so far as I am aware, entirely in that second category that I have mentioned, the 99-year lease, the 75-year lease or a term of that kind, that the hardship adduced by the Government as the reason for this Bill is stated to arise. I have never heard it argued that hardship arises under the leasehold system where in fact the payment for the house has not fallen upon the leaseholder but upon the freeholder. This matter was discussed but briefly in another place, and the Government agreed that there were problems here. They were not able to offer a solution, and they did not find wholly satisfactory the solution suggested in an Amendment, or a series of Amendments. But my Amendment does not affect the main basis or principle of the Bill at all. If it, or something like it, were introduced into the Bill, it would cut out of the field of the Bill a number of cases where the leaseholder will obtain an altogether unneeded advantage. He has never paid for the building of the house, and has never supposed himself to be the owner of the house. This is a relatively short lease, and he is occupying it generally on the terms of an ordinary occupying tenant and not as an ordinary long leaseholder.

I will not trouble the Committee with particular examples which were quoted in another place, showing how extraordinarily unfair the operation of the Bill is going to be if it is assumed, as it will be if the Bill goes through unamended, that a leaseholder who is occupying a house on what are rack rent terms, or the equivalent of rack rent terms, can in fact claim under this Bill the ownership of the bricks and mortar.

Whether fifty years is precisely the right period I could not say for certain, but it appears to me that the division, broadly, is that leases granted for more than fifty years have the character of the ninety-nine-year or the seventy-five-year lease, when the original leaseholder will have erected the building, and that leases granted for fifty years or less will not have that character. That is why I suggest that we should amend the Bill in this way.

I know that it can be argued, as with regard to rateable value limits, that to retain a period of twenty-one years would keep the Bill in line with other legislation passed by Parliament. But in this Bill we are doing something new: we are introducing completely new terms of compensation. Therefore we have to look at this as a new issue and, assuming that all the rest of the Bill stands unamended, we have to try to define a long lease in such a way that it will include the ninety-nine- or the seventy-five-year lease, but will exclude the shorter long lease, where in fact the cost of building the house has not fallen on the leaseholder. I beg to move.

Amendment moved— Page 4, line 26, leave out ("twenty-one") and insert ("fifty").—(Lord Brooke of Cumnor.)

6.14 p.m.

LORD OGMORE

May I, as a convinced leasehold enfranchiser, one who has been in favour of leasehold enfranchisement for many years, say a word in support of what the noble Lord, Lord Brooke of Cumnor, has just said? I was associated with the Leasehold Enfranchisement Association thirty years ago, and in fact formed part of a delegation to the then Attorney General, Sir Donald Somervell. So my interest in this question has been one of long standing. I was most happy that the Labour Government had introduced in this Parliament a Bill for leasehold enfranchisement. Of course, it was intended, as the noble Lord has said, to deal with leases where there was originally a grant for a long period, usually ninety-nine years, and it was not intended to cover rack rents, where the period is quite short and where, in every case I should think, the actual house had been put up by the landlord or his predecessors in title, and the lessee or his predecessor in title had certainly never put up the house. And we had seen the evils of the system in South Wales.

I believe that to leave the words "twenty-one-years" in the Bill will to a large extent make a nonsense of it; it will, in fact, create a completely new hardship. There will be many cases where the person—it may be the father, or the grandfather—had erected the house and then let it for a short period, and would find that the terms of this Bill would apply. In the old days, when the Leasehold Reform Association was pursuing its activities and was trying to impress the Conservative Government of those days with its views, this was never intended and I think it is not a wise plan to try to remedy one injustice by creating quite another one.

In those circumstances, I would ask the Government to look again at this particular provision, to see whether something can be done to meet the point so clearly put by the noble Lord, Lord Brooke of Cumnor. As he says, whether 50 years is the right term or not, I should not like to say. Generally speaking, in South Wales the term has been 99 years, but I believe that the 50 years in the Amendment is a much fairer period than the 21 years proposed by the Government. I therefore ask the Government to look at this most carefully before the next stage of the Bill.

LORD GRANVILLE-WEST

I realise and appreciate the experience of Lord Ogmore with regard to the conditions in Wales; but I am most surprised that he did not draw the attention of the Committee to the fact that in South Wales there are many building leases where the lessee is under an obligation in regard to building and maintaining property; and these leases are granted for 21 years, renewable every 21 years if notice is given, up to a term of 99 years. If this is accepted, it will mean that the lessee who has built this house and has, by reason of the powers of the ground landlord, been compelled to accept a lease which is renewable every 21 years up to 99 years, will be outside the scope of this Bill. I therefore hope that my noble friend will resist this Amendment.

LORD INGLEWOOD

I cannot claim to know the condition of South Wales in detail, but what the noble Lord has just said surely indicates that what we want in this Bill is a few clauses specially drawn to deal with the particular problems of South Wales, rather than vaguely worded clauses which will apply to the United Kingdom generally and bring injustices in their train. I should like to support my noble friend in his submission. It may be that there is some reason for a special case in some parts of Wales—that I do not know—but, taking the United Kingdom as a whole the term of 21 years is clearly less welcome. If noble Lords have studied the White Paper, which I believe is the thinking behind this Bill, they will have read that the Government intended to deal with residential long leases, particularly those granted originally in the latter half of the last century. That was much more than 21 years ago.

Furthermore, they refer from time to time to the terms "ground rent" and "long leases". When it comes to the Bill, both these clear definitions are blurred, and we find the Government referring to a term of 21 years—which is not a long lease in the generally accepted sense of the term—and to a low rent of two-thirds the rateable value, which is something very much removed from the normal definition of "a ground rent". I submit that in practice that makes a large part of the Bill extremely difficult to work and will cause a great deal of resentment. There is one other injustice which we ought not to overlook. It seems unjust that under this Bill a leaseholder of a lease of 21 years should be able to extend it, not for another 21 years, but for a term of 50 years. We should give close attention to this Amendment, and we do not want to let it go until we are sure that we have the right figure. I am sure the majority of us are not happy with the figure of 21.

LORD MITCHISON

The noble Lord, Lord Brooke of Cumnor, always tells the House the truth. He does not, however, tell it the whole truth. I was waiting to see whether he was going to disclose what nobody has so far mentioned, that in the 1954 Act, brought forward under the Conservative Government to deal with the mischief which we are considering to-day, the term of the leases affected was anything over 21 years. That was not only the case in 1954; it was the case in two groups of Acts going back to 1920.

This mischief has been there for a long time. People were entitled to consider that when the Conservatives, not always notorious for their social benevolence, were willing to do something about it, those who had leases of over 21 years would probably be all right. What happened? I think I am right in saying that, in Committee at any rate, the Conservatives brought forward an Amendment for 90 years. We are now talking of a figure of 50 years, which I think has been suggested by the Chartered Surveyors or some body of that sort. I agree that it is not easy to fix a figure in a case of this kind, but where there has been previous legislation dealing with what everyone understood to be long leases—whether they were called long leases or not—and where the term was taken as 21, and where you have had 21 mentioned in previous proposals, people ought not to be disappointed by a last-minute alteration of what a long lease is.

My noble friend Lord Granville-West gave instances in South Wales where there were building leases. When one considers the type of lease affected by the Bill, one has to remember that it is not only to be a long lease, but it is to be a long lease at a low rent; and in fact the next clause of the Bill deals with that precise point. I suggest that it would be grossly unfair now to deprive people of the remedy which they hoped to get, and which until this moment they imagined they were getting—and which of course they may get anyhow—by altering 21 to 50, 90 or some other figure at the very last moment.

I am not allowed to say what members of the Opposition said in the Commons, but I am allowed to point out that Mr. Boyd-Carpenter, when discussing this matter before the General Election, was quoted in Hansard as having said that his Party agreed with the selection of 21 years by the Labour Government. For all those reasons, it seems to me to be a lamentable piece of Party politics to try now to substitute some other period for the 21 years which has been the rule in three previous Acts, including the last one introduced by a Tory Government.

LORD SILSOE

I seem to have had the pleasure for many years of following the noble Lord, Lord Mitchison, both at lunch and otherwise. I could not care less whether the Tories did something or not—I am rather against it if they did it. I have no interest whatever in the past politics of this matter. I am genuinely trying to get the thing right. All these political points just pass over my head. I have no doubt it is the noble Lord's duty to say it all, just as he did in the old days, but it does not "ring a bell" with me at all.

I should like to look at the merits of the matter. I was told that it was "the last moment". Well, it is the first moment that I have had a word to say on the subject, and I propose to use it to do so. We are now trying to evaluate a lease which is let at a ground rent so that everybody should be covered who is suffering from worries and troubles in this matter. There has never in the history of the world been a ground lease granted for 21 years. There is not such a thing that I can think of anywhere. Why the Tories thought of it in 1954, or why somebody else thought of it in 1920, I have not the remotest idea; but there has never been in existence such a thing as a 21-year lease at a ground rent. Nobody is going to be such a fool as to put up a building and expect to recover his money in 21 years. It is absolute and complete folly, and such a thing has never existed.

The second thing that worries me is this. What is not understood by some of the Ministers guiding the Government on this matter is that 21 years is a perfectly common lease after the ground rent is over. In London the ground rents are over; in Wales they are not. I have enormous sympathy for the Welsh position. If we go on as the noble Lord, Lord Kennet, is going on, I think I should like to move an Amendment to Clause 41 that while excluding Scotland and Northern Ireland, we should also exclude England. There seems to be a lot to be said for it. The point is that these 20-year leases now are rack rent leases. The house which I occupy under a landlord—I have never owned a freehold in my life—is not on a 21-year lease, but is a 24 or 25-year lease, at a rack rent negotiated, after some argument with the landlord's agent, by myself and taken by me. That was some 24 years ago, and now it is two-thirds of the rateable value and therefore is called a ground rent. The whole thing has gone "popeyed".

I feel that 21 years is too short a period. In my experience—and I have a great deal of it as to the ground leases which are created now—people are shortening their odds a bit. In some cases they are granting leases for 50 years. I think the noble Lord got his figures from the surveyors. This period is roughly right. I have never known a ground lease granted for less than 50 years. Something should be done. Fifty years is perhaps rather generous, but those who talk about 21 years for a ground lease do not know the facts of life at all. I hope very much that the noble Lord will at least ask the Chief Valuer, who knows these things better than anyone in England, between now and the Report stage, whether what I have said is right or wrong. Surely we can have what he advises is a reasonable length of long lease.

LORD GRANVILLE-WEST

Before the noble Lord sits down, I wonder if he would tell the House whether he is denying the existence of the 21-year lease at ground rent renewable at 21-year intervals.

LORD SILSOE

May I say at once that if you had a 99-year lease renewable for ever at the whim of the landlord, which I think is what the noble Lord said, I should be entirely in favour of asking the noble Lord to amend his words to cover it. May I tell your Lordships a story to show that nothing is new in this world? There was a Prebendary of Finsbury in 1396 who granted a 99-year lease with a rent review. He was a clever chap, and when he was told that by law he could not have a longer lease than 99 years, he created four leases, each running for 99 years. So nothing is new. My own personal view is that if there is a lease of 21 years, renewable solely at the whim of the landlord for one, two, three or five years, then I hope it is caught by the Bill.

6.32 p.m.

THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES)

I would not deny the right of any Member of your Lordships' House, whether it is the first opportunity or otherwise, to speak to a proposal of this kind. What I had been hoping was that somewhere during this discussion something would be said which was different from what was said in another place when a similar Amendment was moved. I do not think anything has been said which has not already been said in another place, and while I accept that that may not cut any ice at all with the noble Lord, Lord Silsoe, it is bound to cut some ice with Her Majesty's Government.

I should not wish to pretend, however, that there was not disquiet in another place at the effects of the choice of 21 years, because noble Lords have only to refer to the record of the discussion in another place to find that there were misgivings on both sides of the House. But the misgivings were not resolved, simply because in another place they saw the difficulties which have emerged during the discussion here this afternoon, to which the noble Lord, Lord Brooke of Cumnor, referred and to which, by implication, the noble Lord, Lord Silsoe, has also referred that in substituting some other figure for 21 we may just create another set of difficulties. The only thing which the noble Lord, Lord Brooke of Cumnor, said with which I disagree is that the 21 years are not referred to in the White Paper. My information is that the 21 years' period is referred to in the White Paper.

LORD BROOKE OF CUMNOR

I agree entirely about that.

LORD HUGHES

I may have misunderstood the noble Lord, but I had the impression that he thought the 21 years was something which had emerged subsequent to the White Paper. I am glad we are in agreement that it is in the White Paper.

At the risk of falling foul of the noble Lord, Lord Silsoe, I must say that there is some justification for accepting this period. Precedent is something which has a value in legislation, and my noble friend Lord Mitchison referred to the fact that a Conservative Government in 1954 accepted twenty-one years as being a period which could be called a long lease for the purpose of the Landlord and Tenant Act of that year. My noble friend went further back and said that there were two previous Acts. He is one up on me, because I have been given information about only one, but it is one which has some value because the Places of Worship (Enfranchisement) Act 1920 fixed twenty-one years as the period. Obviously, in a Bill which is intended to be helpful to leaseholders, it is rather difficult for this Government to seem to be patently less kind to leaseholders than a Conservative Government was in 1954 or a Coalition Government was in 1920.

We have to remember that if we accept the Amendment and substitute a period of fifty years, we are legislating not only for the position as it exists, but also for the future. It would therefore be a direct encouragement to people to grant leases which fell short of the fifty years, which would prevent this Bill from applying. When I first entered local government I was still working on a basis where local authorities putting up houses were supposed to pay off the debt in a period of forty years, because at that time there was a hope, which subsequently was abandoned, that the changes in building might be such that a house which was erected then might have outlived its usefulness in a period of forty years. I think he would be a bold man who would suggest to-day, with the changes taking place in building, that any house which is put up must of necessity have a life of fifty years or more; and, therefore, we must accept that some period below fifty years may be perfectly reasonable. I obviously cannot say on soul and conscience that we have to go down as far as twenty-one, and that twenty-one is necessarily right. This is a case of trying to choose a figure which has some basis in past legislation and which is not going to be obviously unfair on the basis of existing experience. For that reason, in a difficult situation, Her Majesty's Government chose the figure of twenty-one.

I hope, therefore, that the noble Lord, Lord Brooke of Cumnor, will not find it necessary to press this Amendment. Admittedly, it is a difficult situation, but Her Majesty's Government think, having regard to the fact that the 21-year period is one leg of the argument and the other leg is the low rent, that not all the rack-rented houses—and the noble Lord, Lord Silsoe, quoted his own case where the rack rent has become a low rent—granted on 21-year leases will have become low rents during that period of 21 years, and if they have not the Bill will not bite on them. I do not know whether there is any possibility of finding another figure between 21 and 50. My brief certainly does not permit me to advise the House that 50 is a proper period to accept, and I therefore have no option but to ask the noble Lord, Lord Brooke of Cumnor, not to press his Amendment.

LORD MOLSON

The speech of the noble Lord was extremely moderate and reasonable, but he indicated that he doubted whether there were many cases where a ground rent had been granted for so short a period as 21 years. Also, he agreed that, owing to changes in the value of money and so on, the other safeguarding provision of the low rents which we are going to discuss shortly had ceased to be an adequate test of what was a ground rent as opposed to a rack rent. The Government have made it perfectly plain all along that they base their justification for this Bill upon the idea that long leases have been granted in order that the tenant should provide the house, and that it is inequitable that at the end of a long lease the owner of the freehold should obtain back not only the land but the house which has been built on it.

It has not been thought possible to draft the Bill so as to say that where the house has been built by the landlord or his predecessor in title the Bill shall not bite. The Government have relied upon two things: the long period of the lease and the lowness of the rent. If we can show that there is a danger that a house let at a rack rent—that is, a rent which represents the value of the house as well as the value of the land—is going to be caught by this Bill, will the Government be prepared to make some amendment to it? Do they accept that, if a house has been let at a rent which really includes the value of the house as well as the value of the land, it is inequitable and undesirable that this Bill should so operate—as a result of the changes in circumstances, the value of money, rateable values and so on—that a tenant will be able to obtain by enfranchisement under this Bill a house which was genuinely the property of the landlord and which was let to the tenant at a reasonable rent? There are the two points, and the fact that they are dealt with under different clauses makes it difficult to present the two arguments at the same time, but I hope I have made it clear. In view of the line the noble Lord has taken I should be grateful if he would give me an answer to that point.

LORD HUGHES

On a previous Amendment, proposed by my noble friend Lord Silkin, it was indicated by my noble friend Lord Kennet that a completely new proposal had come before the Committee, and that therefore he would undertake to look at it. Until the noble Lord, Lord Molson, got up I should have been able to say that nothing had been said which had not been said already. But obviously, if something should emerge while the Bill is before your Lordships' Committee which raises a consideration which has not been previously before Parliament, it would be grossly wrong for the Government not to say that they were prepared to look at the matter. But the Government must be their own judges, and must seek to prove that it is not new, if that is the line they take—and it would be rather difficult, in some ways at any rate, in view of what was said about the official Conservative Party policy on this matter before the Election, when it was stated that the Opposition accepted the Government's view that 21 years was a proper term.

LORD BROOKE OF CUMNOR

The noble Lord, Lord Hughes, made a very reasonable speech in reply to my Amendment. I hope he will agree that I made a very reasonable speech in favour of it, too. This is a difficult matter. I think the noble Lord's speech proves up to the hilt that this Amendment of mine is not what is normally called a wrecking Amendment. It is simply seeking to draw a line in proper accord with the principles on which the Government have said they desire to legislate. I quite agree with the noble Lord that the term "more than 21 years" is included in the White Paper, but there did not seem to be any logical connection in the White Paper between the figure of 21 and the principle on which the Government said they were going to frame their legislation.

LORD HUGHES

May I interrupt to say other than, perhaps, the ordinary political line that if the Conservative Party had said 21 years was a good thing it was rather difficult for us to say it ought to be something higher.

LORD BROOKE OF CUMNOR

I was hoping that the Labour Government would show consistency in all their thinking, but perhaps that was a desperate hope. After a series of paragraphs which appear to be directed mainly to the South Wales case, with which we are all familiar, the White Paper says: … a leaseholder will have to satisfy two conditions: (i) he must hold a lease, originally granted for more than 21 years at a ground-rent … My submission is that we are going to find a number of leases granted for a term somewhat exceeding 21 years at a rent which could not be properly described as a ground rent. As to the noble Lord, Lord Granville-West, and his case in South Wales, I have no desire to catch the leaseholder whose predecessors built the house, the lease having given them a reasonable certainty of 99 years' enjoyment. I quite accept that any simple Amendment here may need further Amendments to prevent injustice later.

But I come back to what I was saying at the beginning. There are a number of leases granted for between 21 and 50 years which do not appear to create the kind of conditions at which this Bill is directed. I am inclined to agree with the noble Lord, Lord Silsoe, that politicians of all Parties can spend too much time arguing back as to what they did in the past, or what somebody else did not do. I see the noble Lord, Lord Mitchison, shaking his head—I expected that.

LORD MITCHISON

I was merely thinking that the noble Lord finds it better not to mention it.

LORD BROOKE OF CUMNOR

I was not a member of the Government at the time of the 1954 Act, but a principal

effect of that Act was to give to the occupying leaseholder a right to a new tenancy, whereas this Bill gives a right to enfranchisement; and the question is whether it is proper to give a right to enfranchisement, on the terms that the leaseholder owns the bricks and mortar, in a case where it is quite clear from the form and term of the lease that the leaseholder cannot have been responsible for building the house. I therefore think that the right course to press this Amendment, and it may be that between now and Report stage, if it is going to create any difficulties or unfairness, the matter can be further examined. Because I, for one, should be only too happy to consider any additional and consequential Amendments that might be desirable in order to ensure that the change in the term which I think is essential does not cause injustice.

6.45 p.m.

On Question, Whether the said Amendment (No. 7) shall be agreed to?

^*Their Lordships divided: Contents, 63; Not-Contents, 59.

CONTENTS
Aberdare, L.	Emmet of Amberley, Bs.	Monckton of Brenchley, V.
Ampthill, L.	Falkland, V.	Monsell, V.
Auckland, L.	Ferrers, E.	Monson, L.
Audley, Bs.	Glendevon, L.	Morrison, L.
Birdwood, L.	Goschen, V. [Teller.]	Mowbray and Stourton, L.
Boston, L.	Greenway, L.	Nugent of Guildford, L.
Brooke of Cumnor, L.	Grenfell, L.	Oakshott, L.
Brooke of Ystradfellte, Bs.	Grimston of Westbury, L.	Rathcavan, L.
Caccia, L.	Hacking, L.	Redmayne, L.
Carrington, L.	Hawke, L.	St. Aldwyn, E.
Clinton, L.	Horsbrugh, Bs.	St. Just, L.
Colville of Culross, V.	Ilford, L.	Silsoe, L.
Congleton, L.	Inglewood, L.	Somers, L.
Cork and Orrery, E.	Jellicoe, E.	Stonehaven, V.
Craigavon, V.	Kings Norton, L.	Strange of Knokin, Bs.
Cullen of Ashbourne, L.	Kinnoull, E.	Stuart of Findhorn, V.
Daventry, V.	Latymer, L.	Templemore, L.
Denham, L. [Teller.]	Lucas of Chilworth, L.	Wakefield of Kendal, L.
Derwent, L.	Mills, V.	Windlesham, L.
Dilhorne, V.	Milverton, L.	Wolverton, L.
Effingham, E.	Molson, L.	Wrenbury, L.
NOT-CONTENTS
Addison, V.	Faringdon, L.	Kennet, L.
Beswick, L.	Gaitskell, Bs.	Latham, L.
Blyton, L.	Gardiner, L. (L. Chancellor.)	Leatherland, L.
Bowles, L.	Gifford, L.	Lindgren, L.
Brown, L.	Granville-West, L.	Lloyd of Hampstead, L.
Buckinghamshire, E.	Hall, V.	Mitchison, L.
Burden, L.	Henderson, L.	Morris of Kenwood, L.
Champion, L.	Hilton of Upton, L.	Moyle, L.
Chorley, L.	Hughes, L.	Pargiter, L.
Collison, L.	Hunt, L.	Phillips, Bs. [Teller.]
Crook, L.	Kahn, L.	Rhodes, L.
* Note: See subsequent announcement by the Deputy Chairman (col. 988) revising the number of Not-Contents.
Rowley, L.	Shepherd, L.	Strabolgi, L.
Royle, L.	Snow, L.	Taylor of Mansfield, L.
Rusholme, L.	Sorensen, L. [Teller.]	Walston, L.
Sainsbury, L.	Stocks, Bs.	Wells-Pestell, L.
Segal, L.	Stonham, L.	Winterbottom, L.
Serota, Bs.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.

LORD HUGHES

Amendment No. 8 is a drafting Amendment. In another place at Report stage the words "or after" in the first line of Clause 3(4) left the drafting of the subsection somewhat inelegant. As with existing tenancies, so also with future tenancies, they will not rank as long tenancies until virtually renewed so as to take effect for more than 21 years. I beg to move.

Amendment moved— Page 5, line 5, leave out from ("Where") to ("been") in line 6 and insert ("a tenancy is or has").—(Lord Hughes.)

LORD BROOKE OF CUMNOR: I beg to move Amendment No. 9.

Amendment moved— Page 5, line 7, leave out ("twenty-one ") and insert ("fifty").—(Lord Brooke of Cumnor.)

LORD HUGHES: Amendment No. 10 is also a drafting Amendment. I beg to move.

Amendment moved— Page 5, line 9, leave out ("had") and insert ("is or has").—(Lord Hughes.)

LORD HUGHES: Amendment No. 11 is also a drafting Amendment. I beg to move.

Amendment moved— Page 5, line 10, leave out ("that") and insert ("as to bring to more than twenty-one years")—(Lord Hughes.)

LORD BROOKE OF CUMNOR

We are in some difficulty here. I do not know whether it would be acceptable if I were to move a Manuscript Amendment to No. 11, to leave out "twenty-one" and insert "fifty". I appreciate that Amendments Nos. 11 and 12 are two drafting Amendments that go together and, no doubt, they improve the drafting of the Bill. I should not wish to oppose them on that account; but I should like to suggest that it might introduce consistency into the clause if the Committee were willing to accept a Manuscript Amendment to Amendment No. 11. At any rate, we should then get both drafting and consistency right. I appreciate that the policy was opposed by the Government.

Amendment to Amendment moved— Leave out ("twenty-one") and insert ("fifty").—(Lord Brooke of Cumnor.)

LORD HUGHES

It will be quite obvious to the Committee that agreeing to the noble Lord's suggestion in no way means that the Government accept the policy: but we may as well be consistent in our unreasonableness.

Amendment, as amended, agreed to.

LORD HUGHES: I beg to move Amendment No. 12.

Amendment moved— Page 5, line 12, leave out ("exceeded twenty-one years").—(Lord Hughes.)

THE DEPUTY CHAIRMAN OF COMMITTEES (LORD OAKSHOTT): Amendment No. 13 is pre-empted by Amendment No. 12.

LORD BROOKE OF CUMNOR: I beg to move Amendment No. 14.

Amendment moved— Page 5, line 14. leave out ("twenty-one") and insert ("fifty").—(Lord Brooke of Cumnor.)

Clause 4 [Meaning of "low rent"]:

7.2 p.m.

LORD SILSOE moved, in subsection (1), to leave out, "or more than two-thirds of the rateable value of the property", and to insert: less than the rent which would be payable for the premises under section 15(2) under an extended lease".

The noble Lord said: I wonder what is the relationship between Amendments Nos. 15, 16 and 17. No. 17 is one of my Amendments which is alternative to No. 15. The noble Lord, Lord Molson, has said that if it was agreed he would not mind if I spoke on Amendments Nos. 15 and 17, and then he followed with Amendment No. 16. But I do not want to press that.

THE DEPUTY CHAIR004DAN OF COMMITTEES

If I can help the Committee, Amendments Nos. 16 and 17 are alternate Amendments to the same place in the Bill, and both would be pre-empted by Amendment No. 15. If Amendment No. 15 were disagreed to, I could call Amendment No. 16 in the usual way.

LORD SILSOE

I thank the noble Lord. Although I have already spoken—and perhaps I have spoken too much—this is the first proposed Amendment to the Bill which I have moved. There is a group of Amendments to follow, if I may say so without being out of order, which have been designed sincerely to try to meet the desire of the noble Lord, Lord Kennet, as was mentioned on Second Reading, that between us we should improve this Bill in Committee. In all my Amendments, possibly albeit unwillingly, I hope that I am accepting the principles and objectives as stated in the Second Reading debate by the noble Lord, Lord Shackleton, who opened the debate, and the noble Lord, Lord Kennet, who closed it. I wish to refer to them.

This Amendment is one of the two most important Amendments that I want to suggest, and Amendments which I hope that the Committee will accept completely. Although I declared an interest on Second Reading, to-day I am speaking on behalf of no one but myself. I have spent over fifty years, professionally and administratively, in the management of land, and as such I speak. It was very pleasant to hear the other day that the noble Lord, Lord Kennet, accepted that I had some experience in this matter, but I was disappointed to be told that my experience was from the landlord's eye-point. I am not sure what an "eyepoint" is.

LORD KENNET

It is a point of view.

LORD SILSOE

I think the noble Lord, Lord Kennet, may have forgotten that, at the urgent request of the noble Earl, Lord Attlee, and the noble Lord, Lord Silkin, I undertook for a previous Labour Government to try to make a success of the Central Land Board. And I had experience even before that. I hope that I have acted as impartially as possible in respect of these Amendments. I have never owned property, and I more usually act for tenants than for landlords. Amendments Nos. 15 and 17 are alternative to each other. Both seek to make the Bill follow the principles of the Government as stated during the Second Reading debate: to limit its provisions to cases where hardship would occur and to prevent those people who would not suffer hardship from obtaining an undeserved tax-free gift. I hope to be judged on the fact that I have succeeded or failed in this objective.

I played a leading part in reducing considerably the number of those cases in which the Government reduced the limits in the Bill to £400 and £200. I led a deputation to the Minister of Housing and Local Government on behalf of 18 estates, and drew attention to the position which would arise if the reduction was not made. I was glad to be told that it was accepted in another place as not being improper pressure. Among the people whom I excluded by my "foolish" act was myself, because I was going to get these enormous advantages in respect of my house, and in my view I had no merits whatsoever. But there are far too many who are still left to benefit. Among them are Members of both Houses of Parliament and Ministers, who should not be included and who, if this Bill is not amended, will obtain quite unnecessary advantages for themselves. They are not to be coupled with the hard cases about which we have been told, and I hope that they will search their consciences, as I did, before rejecting these Amendments which I am proposing.

In the discussion on the last Amendment is was said that to come within the provisions of this Bill a leaseholder must have a long tenancy and be paying a low rent. I have no more to complain about regarding the definition of a long tenancy, although it is clear that a long tenancy of as little as 21 years may, in no possible sense of the term, be called a ground lease, or a building lease or any similar term. No properties are let at ground rent for such a short period.

May I, at some length, remind the Committee of the principles set out by the Government speakers on Second Reading, and refer to the mischiefs which they sought to cure? They were listed very sympathetically by the noble and learned Lord, Lord Stow Hill. I hope that my Amendment will cover every case of hardship which he mentioned and every one of the cases referred to in the debate. I have been carefully through the speeches in Hansard and I hope they will also cover the "black" cases referred to by my noble friend Lord Mitchison.

These principles were set out with great care and particularity. The noble Lord, Lord Shackleton, will, I hope, not mind my reminding him that he was new to this Bill, and therefore spoke on Second Reading on June 26 from a carefully prepared brief, which I accept completely. I hope that I may be allowed to mention the column numbers in Hansard and not read from it. The first principle which the noble Lord enunciated (column 13) was that the leasehold system, that is, the leasing of land for a long term of years for building, is peculiar to England and Wales. The noble Lord went on (in columns 13 and 14): The essentials of the leasehold system are that the freehold owner agrees to let his land at a ground rent for a term of years, usually a long term, 99 years or even longer, to a builder or developer who is required by the terms of the lease to put buildings on the land to the satisfaction of the owner. That could not be clearer. The leases are what we call building leases, and they are accurately described. They are long leases. They are not 21 years but usually 99 years or even longer. The noble Lord did not mention the fact that there are some, unfortunately, which are 999-year leases which have to be dealt with.

He then proceeded to say—and he was speaking on rateable value limits: Interference with contract ought to be kept to a minimum, and plainly there are some people who do not need protection in any form, and who, if there were no limits, would obtain very large windfalls out of proportion to the particular hardship of their need.—(col. 18). One of my intentions is to carry out the idea of the noble Lord, Lord Shackleton, that interference with contracts should be kept to a minimum. The noble Lord continued: … any limits entail awkward cases of people just over the limit while their neighbours are just below; … My Amendments will try, so far as possible, to avoid rateable limits altogether, because I accept the view that they produce awkward positions.

In replying, the noble Lord, Lord Kennet, said this: If you have a rateable value limit, then you have a border problem. You create friction between the leaseholder who is just below it, and the leaseholder—who may be his neighbour—who is just above it. … Wherever you put the limit, there would be friction at the boundary. On the other hand, if you abolish the limit you come face to face with the phenomenon of the windfall,…"—(col. 76). I hope to suggest ways in various Amendments to abolish the limit and avoid that trouble. Lastly, the noble Lord made this important announcement: But in this Bill we are rectifying an old abuse. We are rectifying the system where, typically, it was not paid for by the landlord—in the Welsh situation which gave rise to the whole pressure for this change."—(col. 72). I apologise for reading these quotations, but I accept all those principles completely and wish to see how the Bill can be improved, by suggesting Amendments which I hope will not be controversial.

The aim in all the remarks I have quoted is to put within the Bill ground leases and ground rents where the capital has been invested by the tenant or his predecessor. That is the accepted aim of the Bill in clear and unambiguous language. My Amendments seek to do just that. But I am sorry to say, from my knowledge of the Bill in its present form, that it covers thousands of houses where the rent was fixed as a rack-rent and thousands of others well above ground rent, sometimes loosely called improved ground rent. They are still within the Bill and I see no reason why they should be. Why has this mistake arisen? The noble Lord, Lord Kennet, said this—and this may be partly- the reason why it has not gone well in England and why a great case had been made for it in Wales: This Bill, … is urgent, and it is urgent because of the historical fact that it was in the late 1860s that many thousands of industrial workers in the valleys of South Wales and in Cardiff fled from their original landlords into the arms of the new ground landlords and built their own houses; and those leases are now falling in."—(c. 75.) I think that in fairness to the noble Lord, Lord Stow Hill, Monmouthshire should have been mentioned as well. Lord Kennet also said: The need in England is no less real, but it is less urgent because, for historical reasons, leasehold property in England is more scattered. It is possible for a leaseholder to find another house without leaving his native community. In Wales it is not.… However, there is another reason for this difference, which I think is an important one. The noble Lord mentioned the late 1860s (I have not been able to check his figure, but I accept it completely); in other words, the 99 years are not quite up and ground leases are still subsistent, as we know, in most parts of Wales. In England, it is quite different. I can mention only the places I know, but I have had experience of a wide area. The Nash Terraces are more than 100 years old. If I may say so, I was proud to be Crown Estate Commissioner managing the Nash Terraces and responsible for the starting of the redevelopment. When I was concerned with them over ten years ago the building leases were at an end and in most cases second short leases for 21 years were in existence.

The noble Lord, Lord Shackleton, referred to the 18th century and to the Grosvenor, Bloomsbury and Cadogan Estates. Certainly they were leased at not more than 99 years, and in most cases the ground leases have gone and rack-rents have come in. The Church's estate in Paddington was started in 1827 and finished in about 1850. There again, the ground leases are over and the Church Commissioners are proud to have started and gone half-way through a redevelopment with a master plan which has been agreed with the local authorities. Maida Vale, the northern part of the Borough of Paddington, was developed from 1840 and later. Here, alone of all the estates that I know, there are a few ground leases still subsisting because the 99 years are not up. My Amendments will keep these within the Bill.

In Chelsea, in Royal Terrace, which we are proud to manage, the development occurred between 1856 and 1860, and the ground leases are over. In Chelsea, Old Church Glebe was started in 1850, and St. Mary Abbot Glebe, in Kensington, between 1840 and 1850. All these ground leases are over and rack-rents are in being. Lastly, as I have mentioned before, my own house in Smith Charities is much older than 100 years. Those who know their history will know the date; I cannot remember it, but they were built for the families of people killed by the Barbary pirates.

All these estates show that in most places—though I do not say all—we have got to the stage of being past the problem that exists in Wales. One exception is the 999-year leases. So far as I can make out—and I agree that they have to be brought into this Bill somehow they never accept the principles. What is now being sought by the definition of low rent, and, to some extent, the definition of the 21-year lease, is the rack-rent leases which follow the building leases. No Minister has said they want to catch them within the ambit of this Bill.

I do not know why the Government have changed their policy about this Bill. With the Rent Bills, the Land Commission Bill, betterment Bills and so on, full consultation has taken place. No one has consulted anybody concerned with this Bill. I say that quite deliberately. It is a great pity. It is a complete change of policy on the part of the present Government, who usually consult fully. Way back in 1965 I wrote to the then Minister of Housing and Planning a long letter about this Bill which was first introduced as a White Paper, begging him to send someone or to come himself to see the properties in London. No one has been up till this day to see any. I am sorry about it, because it is quite foreign to the normal policy of Ministers of the present Government.

How did it come about that a definition of low rent came into the Bill? How did it come about that the low rent is measured by two-thirds of the rateable value? I do not know; I can only guess. The White Paper of February, 1966, makes it perfectly clear when it says in paragraph 5: In order to come within the scope of the legislation a leaseholder will have to satisfy two conditions: (1) he must hold a lease originally granted for more than 21 years at a ground rent of a house … And then it goes on to deal with rateable limits. The Government, I suggest, must satisfy your Lordships that what they are defining now is a ground rent, and for reasons which I shall now give I cannot believe that there is any doubt whatever that it is not.

For example, who in this Committee has ever heard of a ground rent being two-thirds of the rack-rent? You may say it is not two-thirds of the rack-rent. But a rateable value nowadays, valued by the Crown—and very well done, if I may say so—is as near a measure of rack-rent as exists, and is often accepted. This says that a ground rent is two-thirds of the rateable value, and I am not unfair in saying that that, near enough, is two-thirds of the rack-rent, because that is what rateable value is.

Who in this Committee has ever heard of any ground rent on a house amounting to two-thirds of £400? Two-thirds of £400 for a house in London is £266 a year. Who can give me a single example of a ground rent of £266 a year on one house? I cannot give one I do not believe anybody can, although there may be some odd case somewhere. It is a huge figure for a ground rent, even fixed to-day. Who has heard of a ground rent of two-thirds of £200, which is £133, for a house in Wales? It is absolutely absurd. There is no such thing. Why this definition producing these maxima? I do not know. All I can say is that it is clearly not a definition of a ground rent. It is a definition of something else; it must be.

Your Lordships will remember that we are coming soon to Clause 15, which is the clause about fixing the rent for extended tenancies, and in that clause it clearly says that the rent is to be a ground rent. Who thinks that figures of over £200 in London and over £100 in Wales will be paid under the ground rent formula in Clause 15? Quite clearly, they will not. We are thinking in terms of much lower figures than that. If anybody had thought that it would be that sort of price there would have been frightful trouble from the tenants.

Practically the whole of my family except myself—and I am an honorary one—are surveyors, and I know from my father, my brothers, my uncles and my cousins something about their profession, and I know something about their training. They are trained as young men to answer questions about the relationship of ground rent to rack-rent. That is one of the things they have to learn. They are taught at the schools that a proper answer to give if you want to pass the examination is that the ground rent is one-fifth of the rack-rent. I have no doubt that if they answered a paper and said it was two-thirds, they would be ploughed. I am perfectly certain that if they said it was a half they would be ploughed. I am doubtful whether they would get through if they said it was one-third. But this is not a definition of ground rent, or anything like it. It obviously is not meant to be, and cannot be.

Also, the right to extend leases has been put forward by Ministers as a reasonable alternative to a right to enfranchisement. They are mentioned in the same breath, rightly and properly. There is no doubt that under Clause 15 the right to enfranchisement is based upon the ground rent. Why, therefore, should not the right to enfranchisement also be based on the ground rent, and not on two-thirds of the rack-rent? I just do not follow. I will give a reason—a very bad reason—why I think this has all happened. Why was ground rent put in the White Paper? Who changed it; and why? Nothing in the speeches that we have heard in this House—as I have said, I have not read the speeches in the other place—gave us the slightest indication why it had been changed from one to the other. As has been said, it certainly was not mentioned as a justification for not opposing Second Reading here. The voters were not told at the last election that it was something above a ground rent. I believe that the real reason is—it was mentioned, incidentally, on the last Amendment—that this has been chosen because it can be found in a rent Act. The low rent is mentioned in an early rent Act. It is also mentioned in the Act of 1954, by which I am supposed to be bound by the Opposition Party. To neither of them do I pay much attention. But it is said, and it is true, that this low rent figure is in both.

Is that a reason for this provision? I think it might be a reason in regard to extended tenure. It was mentioned in the rent Acts to stop evictions. It was put at a very high figure—it was way back in the 'twenties, but I am old enough to remember it—in order that people should be quite certain not to be evicted. It was chosen by the present Opposition Party in 1954—I know not why. I think it was a very foolish choice, but it was chosen. That may be the reason. Having brought in a Bill; having explained with complete exactitude in the White Paper why it is needed; having said it applies to ground leases and ground rents; having said the whole object of the Bill is to provide for ground leases and ground rents, the Government have a reason. What is the reason? Because it is something which Ministers can pick up in two Acts of Parliament—two-thirds of the rateable value.

I have pointed out that there is no ground rent in England or Wales (Scotland and Northern Ireland are fortunate enough to be out of this altogether) where the rent is approached by this formula. But I believe that is the reason why it is in here, and, if it is, I ask all your Lordships to say it is a very bad reason.

On one occasion in the last two years or more we were told, "You cannot define a ground rent. Therefore, we had to do some arithmetic." In fact, the Government have defined a ground rent, and with all due respect, I think that the definition is a very good one. It is in Clause 15(2), on page 25, line 14, which we are coming to fairly soon, and it seems quite excellent as a definition of a ground rent. It is: the rent shall be a ground rent in the sense that it shall represent the letting value of the site (without including anything for the value of buildings on the site) for the uses to which the house and premises have been put since the commencement of the existing tenancy, other than uses which by the terms of the new tenancy are not permitted or are permitted only with the landlord's consent". With all due respect to the draftsmen, I think that that is an extremely accurate and fair description of a ground rent. My first Amendment, therefore, says that those words should be translated into Clause 4 and become the test for being enfranchised. I have used those very words.

Having proposed that Amendment, I think that it has one bad defect as drafted. It means that nobody will be able to know without a valuation, or perhaps a court case, whether they are in or not; and I accept that that is therefore probably a bad weakness in the suggestion. I felt bound to put it in in the first Amendment to remind the Government that they referred to a ground rent, and defined it in Clause 15. Therefore, if they want something else they must have it extremely close to that figure. Now, what is "close"? I have already told your Lordships that the tradition with regard to managing land and everything else, for surveyors is one-fifth. I agree that to put in one-fifth might very well entail hard-luck cases just on the margin. I have therefore decided, without much logic, to offer an alternative, in Amendment No. 17, of one-quarter. One-quarter, I am absolutely as sure as I can be, will cover all the hard cases which the noble Lord, Lord Stow Hill, mentioned—every one of them. The noble Lord, Lord Mitchison, is not with us, but it will cover those that he mentioned. All that one desires will be covered by one-quarter. I see that the noble Lord, Lord Molson, is mentioning one-third. I will leave him to make his own speech about that.

There cannot be any magic between, perhaps, my one-quarter and one-third; they are somewhere in the same realm. But two-thirds cannot possibly be a ground rent, and I ask the Government—and I think the onus to give an answer is upon them—why they referred to a ground rent in their White Paper, and why they have at least doubled it, if not more. I wrote this before I saw the Amendment of my noble friend, Lord Silkin. It is a bit out of date now, because he has made an Amendment. I said. "Since all above £400 and above £200 are now out of the clutches of this Bill". I cannot exactly say that now, because the noble Lord has promised to look at it. I am going to say it, all the same. None of those are affected. Who are affected? The people most affected are those on the fringes of Greater London. Wales is not affected, because I am perfectly certain that my Amendment will cover all of them. I believe there are some cases, such as your Lordships have heard about on past Amendments to-day, which are concerned. I would mention Dulwich, and especially Hampstead Garden Suburb, which seems to be full of Members of Parliament of both Houses, and should be looked at rather closely, I think, for declarations of interest. It once belonged to me. Birmingham is not affected, but areas on the South Coast of England are.

I venture to suggest—and I apologise for my long speech—that either of my Amendments, whichever is desired by the Committee, will contain the Bill within its proper limits; and with respect to the noble Lord, Lord Brooke of Cumnor, I think it will contain it without 50 years being added, because I do not believe that at one-quarter of rateable value there are low rents of this sort within 21 or 50 years. This situation is all right in Newport; it is all right in Cardiff and Abertillery, and the other places mentioned of which I know. There was mention of North Oxford. It will be all right there. I do not know of a problem there, but it will certainly be all right there. It will also cover the very few cases of modern ground rents created recently. There are very few of them, but I agree that there are some, and it will cover those.

I hope that when this Bill leaves this House the limits of the mischief which Ministers have themselves defined will be kept to. I hope also, most sincerely, that words which have been used already in reply from Whitehall to letters I have written will not be repeated this afternoon. The time should be devoted to considering whether something can be done on the lines I have suggested. I hope this very much. I hope that we shall not be forced, as I shall have to suggest to the Committee, to vote on this question to-night. There must be second thoughts. To say that there are no second thoughts when nobody—I underline this three times, nobody—has been near the estates to see them at all, just cannot be accepted, and ought not to be accepted at this stage.

If your Lordships care to look at the end of this List of Marshalled Amendments (I say this as a joke) you will see that I have the honour to be grouped with the noble Lord, Lord Kennet, in moving two Amendments, headed, "By the Lord Silsoe and the Lord Kennet". It is a most amazing thing, but we are shown as jointly tabling two Amendments. I hope that at the Report stage this Amendment will be a third.

Amendment moved— Page 5, line 39, leave out from ("or") to ("on") in line 40 and insert the said new words.—(Lord Silsoe.)

THE DEPUTY CHAIRMAN OF COMMITTEES (LORD CHAMPION)

Before putting the Amendment to the Committee, I have a correction to make in the figures announced to the Committee after the last Division, on Amendment No. 7, in the name of the noble Lord, Lord Brooke of Cumnor. The Tellers in the Not-Contents Lobby inform me that the number voting in that Lobby was 49, not 59 as announced. The correct result was therefore: Contents, 63; Not-Contents. 49.

7.38 p.m.

LORD KENNET

I think I can say that I have understood the case the noble Lord was putting and have a clear grasp of the kind of property that caused him to put it. I hope the Committee will bear with me if I am not able to follow him into as much detail as he went into, because, as he said himself, he has fifty years' experience of this world, and I have not. However, I shall do my best with it. If I understood him aright, he introduced his Amendment as part of a package of several Amendments which would get rid of the rateable value limits and institute another test about who should be allowed to enfranchise and who should not, especially in the case of more valuable property. But he has not moved an Amendment to get rid of the rateable value limits, and that being so, I think the Committee must confine their attention solely to the Amendment before them at the moment, since we have already passed the clause on which it would be appropriate to move the taking out of the rateable value limits.

LORD SILSOE

May I explain? I have not moved the top rateable value limits. I agree. The first of my two Amendments—the test for enfranchisement—will not relate to rateable value; the alternative, for the reasons I have given, would.

LORD KENNET

It was my misunderstanding; I apologise. The noble Lord is proposing to remove the rateable value as a test under this clause.

LORD SILSOE

I am quite content to take the second.

LORD KENNET

The noble Lord charged the Government with having changed their policy about this matter, in that in the White Paper the Government said that people could enfranchise if they were paying a ground rent. He asked what we meant by that, and whether it was reasonable to say that something as high as two-thirds of the rateable value was a ground rent. In seeking to determine how we should express in detail the rather vague concept of ground rent, which was as far as we thought we could reasonably go in the White Paper—the noble Lord agreed that a ground rent does not carry a label; it can be assessed only by some numerical test—the question is, what test should be applied? As the noble Lord said, the Government had recourse to the 1920 Rent Act, in which a rack-rent is defined as being two-thirds of the rateable value or above. The question arises: if a rack-rent is two-thirds or above—and that was laid down by Statute in 1920—and if we are to accept the noble Lord's and the valuing profession's definition of a ground rent as being one-fifth and below, what are all the rents lying between one-fifth and two-thirds? It seems that this is an "either/or" question: there is either a ground rent or a rack-rent, and we concluded that the ground rent in fact would be less than that; that is, two-thirds and below. I am not sure whether I followed the noble Lord correctly, but it seemed to me that at one moment he was speaking of rateable value and rack-rent as if they were often, or even very often, the same; but, of course, the rack-rent can be far higher than the rateable value.

LORD SILSOE

I am afraid I must interrupt the noble Lord because I did not say that. The rateable value is what the hypothetical tenant would pay for a rack-rent of a building, and it has been going on since the time of the first Queen Elizabeth. It does not always represent the full rack-rent which can be obtained from people by being awkward, but it is a neutral figure when assessed. On my very small house my rateable value is now £660; to be told that rack-rents are higher than that would shock me to the core. Ground rent has nothing whatsoever to do with the rateable value and is not used in rating matters. It is, in fact, accurately and very well described in Clause 15.

LORD KENNET

The Government are sometimes taken to task for not providing for the upward revision of rateable values quite as often as they should.

LORD SILSOE

It is done every five years.

LORD KENNET

And that is one of the ways in which a discrepancy arises between the rateable value and the theoretical rack-rent which may be charged.

On the point of whether or not the Government went near the estates, the noble Lord charged us with not having been to see certain estates which are in this position. I do not quite know which estates he was complaining about but there are a good many estates in a good many different conditions in the country, and while I should feel hound to defend the Government against any general charge of being ignorant about these estates, I hope the noble Lord will be prepared to exonerate us if we do not visit individual estates. Coming to the terms of the noble Lord's Amendment—

LORD HAWKE

Before the noble Lord, Lord Kennet, leaves the general and moves to the particular, I should like to ask whether he is reiterating the policy of the White Paper that the Bill is really intended to catch only ground rents. I am not quite clear about that.

LORD KENNET

Yes, it is intended to enable people to enfranchise only when they have a ground rent. The question is, what is a ground rent? For the purposes of this Bill it is reasonable to say that a ground rent is any rent that is not a rack-rent. I am informed that the actual wording of Lord Silsoe's Amendment would have what I think must be the opposite effect to that which he intends. I believe it is simply a question of a "not", which would literally define "a low rent" as one greater than a modern ground rent, which seems to me to be upside down.

LORD SILSOE

The noble Lord will remember that I made that point myself.

LORD KENNET

That is correct, the noble Lord did make the point. The Amendment provides for the modern ground rent to be assessed on the appropriate day, namely March 23, 1965, or the first day of the term if the lease was created after that date. The object is presumably to ensure that the qualification to enfranchise shall include a genuine ground rent, and to cut out tenancies which may originally have been created at rack-rents but which are now tenancies at low rents within the definition of the Bill because of the increase in rateable values in recent years. This test would be extremely cumbersome to operate. Before any leaseholder could exercise his right under the Bill he would, in most cases, have to employ a valuer to assess what an up-to-date ground rent would have been on March 23, 1965, and this would be a figure which the landlord could dispute. In the great majority of cases the result would be that by this test the rent currently payable would be a low rent.

The criterion of two-thirds of the rateable value not only is one which is given in the Rent Act 1920, and in certain respects, as the noble Lord himself pointed out, by the Act of 1954—and I will not, in this case, necessarily go along with him in his contention that in that respect the Opposition, when they were in Government, were foolish to introduce that test—but has the advantage of being understandable and easy to work. It has fifty years of tradition behind it and it has turned out to be a good means of distinguishing between a rack-rent and a ground rent.

The introduction of the noble Lord's Amendment would bring serious complexities into the operation of the Bill. Moreover, there are cases in which the test of a modern ground rent in the case of a long lease granted in the past decade might work wrongly, if since the lease was granted there had been development in the neighbourhood of the house which lowered its rental value. Then the leaseholder would find himself deprived of the benefits of the Bill owing to the disagreeable development nearby. The objection to the test which the noble Lord proposes to introduce is very much the same as the objection which I shall have to state to the Commitee in respect of the next two Amendments—those which substitute "one-third" or "one-quarter" for two-thirds of the rateable value.

The difficulty is that the Bill we are discussing has to provide for rents fixed a century ago, a decade ago, those which are being fixed now and those which are to be fixed in the future. A ground rent does not declare itself to be such; it is not born with a flag on it saying, "I am a ground rent"; so some form of mathematical formula has to be found. Whatever fraction one fixes on, whatever more complex procedure one adopts, such as that proposed by the noble Lord, there are bound to be some cases falling on the wrong side of the line which generate friction and difficulty. Some cases which do give trouble are long leases granted soon after the war for periods just above 21 years at rack-rents, as these may sometimes be less than two-thirds of the rateable value in 1965—just what the noble Lord based his arguments upon. On the other hand, I am informed that there are ground rents granted quite recently which are more than one-third of the rateable value. One could devise definitions of infinite complexity, with fractions to be applied according to when the lease was granted, not to mention that some long leases are continuations of previous leases with more or less property. The anomalies would always arise, whatever one did.

Now I come to the Government's point in resisting this Amendment. If there are to be anomalies, as there are, I think it is better that they should arise from a simple rule rather than from a complicated one, and it is in essence for the sake of simplicity that I would ask the noble Lord whether he could withdraw this Amendment. If he cannot do that, I would advise the House to stick to the simple rule which is in the Bill as it stands.

LORD INGLEWOOD

In reply to this debate, which is a very serious one, I think the noble Lord has missed a good deal of the point. It is perfectly clear, surely, that what the Government have tried to do is to deal with long building leases let at ground rents. I am sure the noble Lord does not wish to mislead the House, but it is in effect entirely misleading to pretend that there is not a generally accepted sense of what a ground rent is. The noble Lord, Lord Silsoe, has said that examination candidates—and I have been one in my day— have it rubbed into them that a ground rent in those circumstances is one-fifth, and I am sure it is still current to-day.

LORD KENNET

One-fifth of what?

LORD INGLEWOOD

Of rateable value.

LORD KENNET

Not rack-rent?

LORD INGLEWOOD

It is the same figure.

LORD HUGHES

It is not the same figure.

LORD INGLEWOOD

That is the figure Lord Silsoe gave; it is the same figure, he said.

LORD KENNET

If I understood the noble Lord, Lord Silsoe, I thought he said that they were often different.

LORD SILSOE

I am sorry, I did not hear either noble Lord.

LORD KENNET

I think it is to the interests of the House that this should be cleared up. I believe I asked Lord Silsoe whether he would agree that a rack-rent is often above rateable value, and I believe he agreed. Of course, this affects very much the question of one-fifth. If we are talking of one-fifth of rateable value that is one thing, but if we are talking of one-fifth of rack-rent which may be way above rateable value, that is another.

LORD SILSOE

The rateable value formula is a rack-rent. Rateable values are done only once every five years. Therefore during the period when they are four years old they are not the rack-rent. I do not think they are very far wrong just after they are in force. I hope that is a fair answer. The rack-rent is fixed every year; the rateable value is done every five years; a ground rent has no beginnings of being either.

LORD INGLEWOOD

I do not think I was so far wrong. I am going to return to my figure of one-fifth. Where a low rent, as it is called, for the purposes of this Bill is in payment for a lease of medium length, that rent must include an element of rent for the buildings on the land. To say that any rent which is below the figure of two-thirds is a ground rent and any figure over and above two-thirds is a rack-rent is lust misleading. We know what the full rental value of property is. One can test it in the market. It is fixed for the purposes of training for the profession, and surely for professional practice generally a ground rent it taken at one-fifth for all normal purposes. Why in heaven's name do the Government want to introduce another figure in this Bill unless for political reasons? We have heard political speeches from the other side, as well as professional speeches. The noble Lord, Lord Hughes, himself admitted he was taking part in a political auction in this Bill, and he could not have a figure which was not at least more favourable to the tenants' cause than any figure mentioned in Conservative proposals. I fear that is at the bottom of his decision, and I hone that in the course of time this House will be able to get a figure into the Bill governed by other considerations.

LORD HUGHES

I hope the noble Lord never becomes an official interpreter, because he can certainly attach to a form of words what the user never intended. I did not say that I had entered into an auction with the Opposition. I said I thought it very difficult for this Government to accord less favourable treatment than even the Tories had found it necessary to do. I should not have bothered to reply to this, but I wanted to say that I disagree intensely with what the noble Lord has said, and what the noble Lord, Lord Silsoe, said by implication, that a rack-rent and rateable value are the same thing. In the first place, the present rateable values are based on something now out of date; on figures taken in 1960, seven years ago. Secondly, the rateable value is not the same as gross value, and we have a much more up-to-date basis of assessing what are fair rents in the 1965 Rent Act. The information I have is that at present rents which have been worked out as fair rents under the 1965 Act are working out at 1.7 times the gross annual value. The noble Lord, Lord Silsoe, can shake his head, but these are the facts ascertained from the rents fixed under this recent Act. If we take account of the extent to which gross annual value is diminished to reach rateable value, we find that at the present time fair rents are being assessed at approximately twice rateable value. On that basis the one-fifth or one-quarter becomes two-fifths or a half.

LORD SILSOE

I must say that my figures are from my own head, too. I do not agree these figures, and I would ask the noble Lord where they come from.

LORD HUGHES

I cannot give the noble Lord any evidence other than this: that these are the figures ascertained from rents fixed by rent officers and the like. But we can easily, at the next stage, furnish the evidence as to this, and I can assure the noble Lord that they did not come out of my head, whatever may have come out of his.

LORD ILFORD

The figures that are used in the Rent Act are surely the assessments of the rent officer, and no more than that.

LORD HUGHES

The rent officer is supposed to arrive at a figure which is a fair rent for the subject in existing circumstances.

LORD BROOKE OF CUMNOR

May I play my not infrequent part of seeking to pour oil on the waters? It is now three minutes to eight, and the noble Lord, Lord Shepherd, announced earlier that we should adjourn at about eight o'clock. It seems to me, therefore, that we cannot deal to-night with all the Amendments to Clause 4, because though the noble Lord, Lord Silsoe, has spoken to Amendments Nos. 15 and 17, my noble friend Lord Molson has not had an opportunity to speak to No. 16. Indeed, the noble Lord, Lord Kennet, addressed most of his reply to No. 15. It would seem to me, from what the noble Lord, Lord Silsoe, said, that he regards Amendment No. 15, the one we are actually discussing, as theoretically perfect but practically inferior, in that it would make it very difficult in some cases to reach firm decisions. I therefore hope that perhaps the noble Lord may be willing to withdraw Amendment No. 15. We could then adjourn and deal to-morrow fairly quickly with the remaining Amendment, or Amendments, to Clause 4, because we have substantially debated the problem here, though my noble friend Lord Molson has not yet had the opportunity to put his solution to it. I do not know whether that course would be generally acceptable, but it seems to me that it might be the best way of proceeding without waste of time.

LORD SILSOE

I am very happy to do that, if it is the will of the Committee I just wanted to make quite clear that this was the theoretically correct way of doing, it. But if it is the will of the Committee, I am quite willing to withdraw Amendment No. 15 and to rely on No. 17.

Amendment, by leave, withdrawn.

House resumed.