HL Deb 15 April 1969 vol 301 cc53-62

5.2 p.m.

LORD GARNSWORTHY rose to ask Her Majesty's Government whether, in view of the fact that regulations under which parental contributions are assessed in determining student first degree and comparable awards are inequitable and unfair towards parents who are tenants, as compared to house-purchasers, they will consider making a review of those regulations. The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. The regulations which determine what contribution a parent is called upon to make when a son or daughter receives a student grant or award for First Degree or comparable courses at universities and further education establishments are based on recommendations of the Anderson Committee who were appointed in 1958 and who reported in 1960. In assessing what the parental contribution shall be certain items of expenditure are accepted as allowances against gross income. Among these charges are mortgage interest and all other interest payments allowed for tax purposes. Nothing at all is allowed the parent who is a tenant for the rental he has to pay; therefore that places him at a disadvantage compared to house purchasers.

That many of these tenants feel unfairly treated is hardly surprising, and I have raised this matter on a number of occasions with the local authority on which I serve, only to be told that the regulations are issued by the Department of Education and Science. At the beginning of this year I persuaded that authority, the Surrey County Council, to take the matter up with the Department, and in a reply dated February 20 they were told: …given a system of parental contribution, the most satisfactory procedure was to base the calculation on income computed as for tax purposes and, as a general principle, to follow the practice of the income tax authorities so far as allowances are concerned. That, of course, is the substance of the recommendation of the Anderson Committee in paragraph 208 of their Report, Grants to Students.

I myself wrote earlier in the year, as my noble friend Lady Phillips will know, and received a somewhat similar reply. On March 5 I raised the matter in this House by way of a Starred Question asking whether the regulations could be amended to ensure some allowance, in assessing parental contributions, for rent for those who live in rented accommodation. The reply I was given again drew attention to income tax procedure and stated: Any departure from this principle would increase public expenditure and cannot be considered now."—[OFFICIAL REPORT, 5/3/69; col. 147.] My Lords, I do not know whether anyone had any idea at all how much money would be involved, but if it is a considerable sum it would seem to me at least that a section of the community is bearing a very unfair burden. If it is not a great amount of money that is involved, then I think it is something that ought to be righted, and indeed could be righted at no great cost. I appreciated in the reply my noble friend gave me on that occasion that she promised to convey to her right honourable friend the views then expressed, although at that time she held out little hope of any major change. I hope that to-day I do not appear to be impatient in pressing the matter again and asking whether consideration can be given to undertaking a review of the regulations.

May I say I take the point mentioned by my noble friend Lady Phillips on March 5 that for a family of three with a net income of below £900 no parental contribution is payable, so it is fair to claim that up to that figure there is equitable treatment. However, I can see no good reason at all why a sense of equity and fairness should begin or end at any arbitrary figure on the income scale. I may have missed some strong argument, but at the present time—and I hope I may be forgiven if I appear impertinent because I should not wish to give any offence at all—I have the impression that administrative convenience may well be the strongest and possibly the only reason for maintaining the present practice.

My Lords, whereas there may have been some case for differentiating between those who paid rent and owner-occupiers when Schedule A tax was payable, since that tax was abolished in 1963 there is now a somewhat different, indeed a very different, position. It is worth stressing that the house purchaser already enjoys income tax relief on the interest portion of mortgage repayments, and if my noble friend Lord Arwyn had been present this evening I think he would have reminded the House that other interest payments, including interest on bank overdrafts, are also allowed not only as reliefs for income tax but also to secure reductions in parental contributions for these student awards.

But I wish to concentrate on the present unfair position of the tenant, and I should like to illustrate the point I am trying to make. If a parent pays £500 a year rent for his home, he secures no allowance at all for that rent when the parental contribution towards the student grant is assessed. But if he is paying, say, 7 per cent. interest on £4,000—that is to say, £280—his contribution is reduced by £28 a year, or over a three-year period a total of £84. If his interest payments are greater than the figure I have mentioned, then the reduction is still more, since there is a reduction of £1 for every £10 interest found.

There are many people who to-day are paying quite high rentals, and so far as I can gather from the Guardian of last Saturday there are likely to be many more, for it was reported that tenants of a row of new council houses built by the London Borough of Camden will have to pay a total rent of between £13 and £14 a week. I would mention in passing that the rateable value of those properties has been assessed at £300. There are also many who face substantial rent increases. Indeed, I have here a copy of a letter addressed by the Greater London Council to a tenant who has leased a house from them, as he had done from the L.C.C. for some 12 years before, at a rent of £170 a year. He is now offered by the Greater London Council a newly drawn-up agreement, and the rent is to be increased in three stages. Because of the Prices and Incomes Act 1968 the increase is limited to £26 in the first year; in the second year another £90 is to be added, raising the rent to £286, and in the third year it is to go up a further £89, making a new rental of £375 a year—an increase of over 120 per cent.

Incidentally, the tenant is to be called upon to pay all rates, taxes and assessments and to insure the premises against loss or damage by fire in the sum of £4,500. Under the present regulations that tenant cannot expect his rent to be taken into account in assessing his liability to contribute towards student grant for his child. Your Lordships will be well aware that the majority of the Anderson Committee, as set out on page 59 of their Report, took the view that parental contributions should be abolished. As yet this has not been conceded. For my part, I am this afternoon seeking only a minor amendment of the regulations to ensure that those who pay rent shall get some allowance for it in assessing their contributions.

May I offer as a constructive idea the suggestion that gross rateable values might be used as a basis for an allowance for parents who pay rent? If that is not a perfect solution, at least it offers something a little more fair than the present inequitable arrangement, and it would have the merit of being easy to administer. I hope that my noble friend Lady Phillips will at least be able to indicate when she replies that the matter will be considered sympathetically so that one may feel it unnecessary to press the matter further than this Question this afternoon.

5.12 p.m.

LORD BEAUMONT OF WHITLEY

My Lords, I should like to thank the noble Lord, Lord Garnsworthy, for having raised what is an important matter, which goes slightly further than he has taken it to-night. He has eloquently shown that there is a very definite case of injustice here, and that the present arrangements do not work out equitably. I shall not re-cover the ground on that, but I should like to ask the noble Baroness to comment on two extra points.

First, I would ask: is this just administrative convenience, or is there a kind of social engineering behind the present arrangements? If so, it seems to me that it is possibly misconceived. These arrangements militate against the people who pay rents, and while I think that all sides of the House are in favour of a property-owning democracy, and would like to see more house-owning, there are fairly good reasons at the moment why we should not discriminate at all against the person who pays rent. One of those reasons is that we are trying, and the Government have been trying very hard for some time, to have a shake-up in British industry which means mobility of labour; and labour, of course, is more mobile with more rented houses. The second reason is that with a housing shortage—and this is possibly one of the most important factors in Britain to-day—greater use of rented accommodation can mean that there is not the under-occupancy which there is when one or two people are left in big houses after other members of the family have moved. There is much more mobility of housing in that way. So there is a case for saying that if there is any kind of social engineering it is misconceived. I should be interested to hear the comments of the noble Baroness on that.

My second point may be thought to go slightly wider than the Question, but I hope your Lordships will bear with me for a moment, as I think it bears on it sufficiently strongly and, indeed, urgently. I refer to the whole question of parental contributions when the age of majority is changing to 18. It appears to be quite inequitable and silly that grown-ups, who do not legally any longer come under the power of their parents, should be put in the position where a grant which is given to them largely by right, if they have certain qualifications and can get a place in a university, should be entirely dependent upon whether or not their parents are willing to pay the contribution. This seems totally unjust with the change in the age of majority.

Therefore, I hope that the noble Baroness will be able to say whether Her Majesty's Government are thinking of reviewing the regulations in toto—not just this one point, which I entirely agree is unsatisfactory, but the whole system which I think is now seen to be absurd and will have to be abolished sooner or later. Although it will be expensive, there is surely a good case for reviewing the arrangements now and making them as equitable as possible as soon as possible.

5.17 p.m.

LORD PARGITER

My Lords, before my noble friend Lady Phillips replies I hope that I may be permitted to intervene briefly. I accept that the present position with regard to regulations is infinitely better than it used to be when the local authorities could do just as they liked. We know of the glaring inequalities in those times between enlightened authorities and backward authorities, in the treatment of children in their areas. I know of many cases in different parts of the country where quite brilliant children were deprived of a university education because local authorities were not willing to pay reasonably towards it, and the burden fell on parents who could not afford to pay. So that regulations are here to stay; and it is quite right that they should be. It is also right that there should be equality throughout the country about the way in which parents are treated.

I support what the noble Lord, Lord Beaumont of Whitley, has said about the reduction of the age of majority to 18, and the logical effect of the age of consent being 18 for all purposes except education, where it becomes an age of non-consent, with the grant being dependent on whether or not the parent is willing to make a contribution. I believe that a good deal of the present unrest among students is due to their resentment at being dependent on parents' contributions. But whatever is done must be fair as between one section of the community and another. To say that someone buying a house is entitled to relief but that a person renting a house is not entitled to it is basically unfair. It may well be that the gross rateable value could be taken as the basis upon which something could be done. May I suggest, to make the arrangements general and to avoid administrative inconvenience, that the gross rateable value might be taken as the basis for all purposes, whether buying a house or renting it? If it is a matter of getting some sort of basis for the two, each person should be treated the same. However, the method is not particularly important, so long as the principle is admitted that those who pay rent are entitled to the same consideration as those who pay mortgage interest. The matter should be considered in that light.

I know that the regulations are reviewed every three years, and it may be said that nothing can be done in the interim. I hope that this excuse will not be used because, after all, the regulations can be reviewed, if the Government so wish, when they are ready to review them; and if they are willing to say that, quite apart from the major issues which must be involved in the question of the reduction of the age of majority to 18, they are prepared to do something to remedy this particular inequality, so that all people may be treated reasonably alike, it will be helpful to many people at the present time.

5.21 p.m.

BARONESS PHILLIPS

My Lords, I should like to thank the noble Lord, Lord Garnsworthy, for again asking his Question. I salute the way in which he has held to this. Were I sitting where he is sitting, I am quite sure that I should in fact pursue the same course; but standing where I am standing, I am sorry that I am perhaps going to disappoint him. This seems to be an afternoon for disappointing people in reply.

I should like to dispel at once the idea which has been put forward by, I think, each of the noble Lords who has taken part in the discussion, that this is purely a matter of administrative convenience. I think I must remind your Lordships that the individuals who made up this very important Committee which considered the grants to students are not the kind of people who would be concerned purely with administrative convenience. They were concerned totally with the question of grants for students, and they gave this matter a great deal of thought. As the noble Lord, Lord Garnsworthy, mentioned, they made several other recommendations in connection with the parental contribution.

But the Committee considered whether rent should be taken into account, and concluded that there was not sufficient reason to depart from the general principle. I will not repeat the relevant section of the Report, as I did on the previous occasion, because those of your Lordships who have studied this question will be well aware of it. Nevertheless, I think it is important to reiterate what I believe I said before to the noble Lord, Lord Garnsworthy; that is, that questions of income tax practice are, of course, for Treasury Ministers. The rationale of the differing treatments accorded under the Income Tax Acts to payment of rent and mortgage interest is as follows. Mortgage interest is one of a number of annual charges on income for which allowance may be made for tax purposes. That it constitutes expenditure on the provision of housing is irrelevant. It may not be so irrelevant to the people who are being housed, but in connection with tax purposes it is irrelevant. Expenditure on housing, including rent, is taken into account by other means, and this is one of the factors which determines the standard levels of personal allowance.

So, as a general rule, the Department follow income tax practice, and any departure from this principle could have very wide repercussions and would involve additional expenditure, which cannot be contemplated at present. Whether this comes under the heading of administrative convenience or the economic situa tion, I should not like to hazard a guess. Detailed investigation into rent payments at various income levels and into the current pattern of income distribution among award holders' parents would be necessary to estimate accurately what the expenditure might be if allowance were made for rent. On present information, my Lords, the best estimate that can be made is that up to an extra £2 million would be involved in respect of students in higher education in Great Britain.

Because no parental contribution is payable if the net income after all allowances have been made is less than £900, the suggested change would not benefit parents at or below this net income level. In England and Wales, 60 per cent. of the occupiers of rented property are tenants of local authorities or new town corporations; and when their average income was taken there in 1967 it was shown to be £904. An important point to remember, when we are talking about equity, is that the charge the noble Lord wished to see might not, in fact, help the very group he is anxious to help. The best estimate that has been made of the cost of this (if we were to take, for instance, allowances for rent and rates, plus allowances for repayment of mortgage principal) is that we should have £2 million in respect of allowances for rent, £2 million in respect of allowances for repayment of mortgage principal and £1 million allowance for rates, giving a total of £5 million. I am sorry, ray Lords; but this would be a very substantial increase in public expenditure which cannot be considered at the present time.

The question of the logic of parental contribution in the light of the new age of majority is of much wider implication, and I am sure the noble Lord, Lord Beaumont, would not expect me to give him a reply on this point. I am bound to say that the logic seems something from which one cannot escape, and I assume that my right honourable friend will be looking at this matter. But I cannot give the noble Lord, Lord Garnsworthy, any further comfort at this point of time, as this is not the moment to increase expenditure, even though it be on a cause of this kind. What I can assure him is that I shall follow it up as I did before, and again take it back to my right honourable friend. It was looked at last time—no promise given here is ever disregarded; the Secretary of State always looks at anything of this kind—but, bearing in mind the very practical suggestions which the noble Lord has offered, I will see that it is again considered. I hope the noble Lord will accept that.

LORD GARNSWORTHY

My Lords, before my noble friend sits down I should like to ask her one point for clarification. I understood that the figure of £2 million which she quoted included rates as well as rents, and indeed it made reference to the position of people with a mortgage. I wonder whether at some time it could be broken down, so that we could really ascertain how much it would cost to mete out this measure of equity to tenants. Further, I hope that the; time may not be too far off when somebody will appreciate that this form can quite easily be altered, and that it would not be a bad thing if the Department of Education and Science had standards of its own and did not slavishly follow income tax practice, which is not always fair to everybody. I hope my noble friend does not mind my putting those points.

BARONESS PHILLIPS

My Lords, I accept particularly the point about the form. If I were to make a long speech on this subject I might be able to suggest simplication of many forms; but these practical points can certainly be taken back to the Department, and this I shall be very happy to do.