HL Deb 10 July 1972 vol 333 cc90-9

8.0 p.m.

House again in Committee.

LORD HUGHES moved Amendment No. 120: Page 45, line 14, leave out subsection (8).

The noble Lord said: I should like to speak to Amendment No. 121 with Amendment No. 120. These Amendments are probing Amendments, with the possibility that redrafting may take place in due course if I elicit the information that I expect. If I may refer to Amendment No. 120, the effect of subsection (8) which I am querying is to remove the assumption that every house is let for the whole year at a rent equal to the fair rent and to give the Secretary of State power to substitute some other assumption. In the light of enquiries which I have made I do not believe that it is possible to have a higher assumption, because the provisions of subsection (5)(b) represent the maximum that can be charged. But nearly always in legislation of this sort, if you use the word "other" it means the possibility of varying either up or down, whereas it is obvious that the only assumption which can be made and which would differ from that given in subsection (5)(b) would be a lower one—in which case I suggest that the next move would be to substitute at the next stage the word "lower" for the word "other". In other words: such lower assumption as may be specified in the direction.

The purpose of the Amendment is to find out if this is a correct reading of the situation. If it is, then I suggest that at the next stage a drafting Amendment might be made. In fact, it makes no difference, because if it can move only one way it does not matter a great deal if it says "other". The only point is that it keeps it as a consistent practice that when you use the word "other" you mean the possibility of going either way ; if you are intending only to move down, you say "lower", and if you are intending to move up, you say "higher". I beg to move.

THE EARL OF BALFOUR

In this case, in reference to the word "other" to which the noble Lord, Lord Hughes, is referring, I wonder whether it would be in order to allow the Secretary of State to take into consideration any house which may have been built under subsection (5)(b) and which the building association have failed to let. I feel that this is an important point, because sometimes houses are built and, for a short period of time, may be reserved for some key workers coming into the area. I think it would be most unfair if, to give an example, the Scottish Special Housing Association, who do so much of this work of keeping houses specially for key workers, were to be penalised if the houses were not let within that financial year, when at the same time they might be desperately needed.

LORD HUGHES

I do not think there is any doubt that that is a possibility, but this reinforces the point that there would be a lower assumption than would otherwise be the case, because they would not assume that they were getting rent for a whole year when in fact they could not get rent in the circumstances. So I do not think there is much doubt (though one can never be sure with this kind of complicated legislation) that subsection (8) can mean only a move in one direction.

8.7 p.m.

LORD POLWARTH

I think the noble Lord has really answered his own point. The whole purpose is to enable account to be taken of the possibility that all houses are not let for the whole time and therefore not all are producing rent incomes. So subsection (8) is for the benefit of the housing association in that it will increase the amount of this new building subsidy. As to the drafting I think that here again the noble Lord has pretty well answered his own question. If the assumption in the other subsection is that every house so comprised were let for the whole of the year, I do not see how another assumption can be other than that they were not all let for the whole of that year. I fail to see how it could be otherwise.

I appreciate the noble Lord's anxiety about the advantage of expressing the term "lower", but I submit that this is not necessary here. While I would not contest his skill s a draftsman, I would humbly suggest that an assumption could be "a lower assumption". I am not sure that this would accord with the form of language that we use in the Bill, but this is a matter of drafting and I have a feeling that if he were to have the word "lower" put in, this would require a rather lengthier form of words than is now in the paragraph. I feel that what is expressed there leaves absolutely no doubt, and accordingly, while I would certainly not try to discourage the noble Lord too much from putting down another Amendment later, I am not sure I should be prepared to [...]sider accepting something that might have to be longer and more complicated in its expression.

LORD HUGHES

I think I can get it without being very much longer than that. For instance, one can say in the paragraph: … in that paragraph of such assumption of lower amount … or something of that kind. It is not beyond the wit of the ordinary layman to get something of this kind. I do not think I am letting any very disreputable cats out of the bag when I say that when he looked at this wording for the first time. and when I looked at it for the first time, and when the noble Earl, Lord Balfour, looks at it for the first time, none of us realised that the taking together of subsection 5(b) and subsection (8) meant that the assumption could move only in one direction. It was only when the experts told us that was the only possible meaning we could take from it, that we realised this.

If not one of the three, each reading it separately, can arrive at this obvious conclusion as to the only thing the wording can mean, it seems to me there is an obvious case for putting it in clear wording so that any of the three of us, dim though we may be, should be able to recognise it the first time we see it. After all, it would be quite possible, after a year had gone by and we had forgotten about this debate, that we would still not understand it. That is quite a possibility. So may I suggest to the noble Lord that he should have a look at this with his experts, and I will do it on my own in an amateur way, so that one or other of us may put something down for the next stage? I do not really want to leave out the whole paragraph: it was only a way of getting the point discussed, and of course I did not understand the provision at first. Now that I do understand it, I should like it to say what it means. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 55 agreed to.

Clauses 56 to 62 agreed to.

Clause 63 [Phasing of progression to registered rent]:

8.13 p.m.

LORD HUGHES moved Amendment No. 122: Page 52, line 26, leave out ("£0.75") and insert ("£0.25").

The noble Lord said: Amendments Nos. 122 and 123 go together. At line 26 this Clause says: for any rental period beginning in the second or any subsequent stage, the rent limit shall be the rent payable for the first rental period of the last previous stage plus £0.75 per week, or the registered rent, whichever is the less. I propose that that should be 25p per week instead of 75p which is in line with what we have been arguing throughout the passage of this Bill. I need say no more. I beg to move.

LORD POLWARTH

As the noble Lord has said, we are back to one of the principles which we have been discussing throughout the Committee stage. I should find it difficult to accept an Amendment in these terms after the Committee's decision on the previous Amendment. As we know, housing associations are not obliged to apply for registration of fair rents for their houses. Where such a rent is registered for a house and it exceeds the previous rent limit they are not required to increase the rent to the new limit. Where they do so the amount of the increase in any year, which is specified as 52 weeks, is limited to 75p per week. That is the same figure as we have agreed to in the Bill for houses in other categories as the maximum amount of increase. All I can say is that the same protections apply as to other tenants in the form of the rent rebates and allowances. This is the first time that housing association tenants like others will be eligible for these. It is difficult again to adduce—all right, I know what the noble Lord will say— fresh or different arguments in relation to this category of tenant from the others we have already discussed.

LORD HUGHES

This has had a fair run. All I would say before begging leave to withdraw the Amendment is that the blithe way in which Ministers talk about its being only 75p—

LORD POLWARTH

No.

LORD HUGHES

Well, the unblithe way in which they talk about 75p or 50p per week leads one to think that they have forgotten that we have gone on to decimals. When this was being drafted the thought at the back of their minds must have been that 75p was 6s. 3d. They do not realise that 75p is a great deal of money. However, having said that, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 63 agreed to.

Clause 64 [Previous rent limit exceeding registered rent: special rent limit]:

LORD HUGHES moved Amendment No. 123: Page 52, line 31, leave out ("£0.75") and insert ("£0.25").

The noble Lord said: The effect of this Amendment would be to make the clause read: Where the rent limit for a dwelling-house immediately before the date of registration of a rent for that dwelling-house exceeded the rent so registered, the excess rent shall not be recoverable from the tenant. The rubric of this clause is "Previous rent limit exceeding registered rent: special rent limit". So far as I can see, if the rent limit for a dwelling-house immediately before registration was higher than the rent so registered the registration would be provisional only until it took effect in accordance with this clause. I am not certain exactly what the effect of that is, except that it gives me the impression, perhaps erroneously, of enabling a higher rent to be charged than might otherwise be the case. I should be obliged if the Minister would explain exactly what it will do. If that is the effect, then I do not like it. If not, I shall be glad to hear what it actually does. I beg to move.

LORD POLWARTH

I will do my best to explain this slightly complicated provision. What the noble Lord seeks to delete is the power of the Secretary of State under subsection (4) to direct that where the rent limit before the date of registration was higher than the fair rent registered then the rent limit may be still in excess of the registered rent, provided that it is no more than previously. At the moment the rents of some housing association houses—for instance, costrent associations or modernised flats—are likely to exceed the fair rent at the time the association or its tenants apply for the registration of the fair rent. In those circumstances a housing association would under Clause 62, which we have passed, be unable to charge a rent in excess of the registered rent. It would therefore be in quite serious financial difficulty because of the resultant loss of rent incomes. In other words, the association's finances are based on the basis of the rents at present being charged to their tenants. Therefore the provision in this clause is inserted to allow the Secretary of State, if he is satisfied that a direction is necessary in the light of the housing association's finances, to direct that the rent may remain at any figure above the new registered rent provided it is not in excess of the previously current rent. The period from which the direction can have effect is not to exceed three and a half years.

That is the sole purpose of the provision in the Bill. It may in some cases, where the Secretary of State directs mean a higher rent than the registered rent, but in no case will the rent be higher than the rents at present being paid by the tenants of the housing association concerned. The power will be exercised by the Secretary of State only if he is satisfied that it will jeopardise the financial basis on which the housing association is established. We feel that this flexibility is necessary and that without it some housing associations could be put at risk financially. We are told that is the view of the Scottish Committee of the National Federation of Housing Societies and the Government would not wish to accept such a risk. The Secretary of State will wish to consider the circumstances of each individual case. There is the provision about the maximum time for a direction having effect not exceeding three and a half years.

LORD HUGHES

At the beginning of the noble Lord's remarks I missed part of what he said. He referred to cost rent associations. I missed the words after that ; he referred to some other association.

LORD POLWARTH

Cost rent associations or those comprising modernised flats.

LORD HUGHES

Do I take it that it is only in that case, or anything which would be comparable, that this provision would bite ; that this is not something which is generally intended to be applied to the ordinary run of housing association houses?

LORD POLWARTH

That is my understanding.

LORD HUGHES

In those circumstances, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 64 agreed to.

Clauses 65 to 81 agreed to.

Schedules 8 and 9 agreed to.

Schedule 10 [Transitional provisions]:

8.25 p.m.

LORD HUGHES moved Amendment No. 127: Page 111, line 4, leave out ("deficit or").

The noble Lord said: I have no doubt that members of the Committee will be pleased to hear that Amendments Nos. 127 to 135 are a series and I need to speak only to the first of them. If we turn to page 111, all the Amendments fall in sub-paragraphs (2) and (3) on that page. Paragraph 2(2) says: Any deficit or surplus in a housing repairs account as at the end of the year 1971.72 where such deficit or surplus exceeds an amount per house which is £1 for the year 1971–72 shall be treated for the year 1972–73 as a capital sum:

Paragraph 2(3) says that anything which is £1 or less shall be debited or credited to the local authority's housing revenue account and any deficit shall be treated as if it represented expenditure on repairs for that year in addition to any repairs actually carried out. The effect of my Amendments is to leave the application of these sub-paragraphs only to surpluses, and not to deficits or surpluses.

It is perfectly reasonable, as you are doing away with the housing repairs account as from the end of the financial year just past, that any surplus on the funds should be treated as capital and will therefore diminish the costs for the future. It would be wrong to treat any deficit as a capital item and to borrow that amount, thereby needlessly increasing the liabilities. The sums involved for any local authority are not likely to be very great one way or the other. While it is an advantage to use the money in such a way as to get the maximum future advantage by diminishing interest charges, by the same consideration it is a mistake to multiply the burdens for the successors of local authorities, or their ratepayers, by borrowing money when the sums are likely to be comparatively small. It is much better that that should be treated as it has been hitherto, as a revenue item disposed of there and then in the last year of the accounts. I do not think that it is desirable to treat revenue expenditure as capital merely in order to put off to future years something which can probably be carried in the present year. This is a case in point and I hope that the Minister will at least consider the point. If it does not appeal to him as a Minister, it ought to appeal to him as an accountant. This is what would be called (without any capital letters) good conservative finance. I beg to move.

LORD POLWARTH

I am not quite clear in what sense the noble Lord was describing this as "good conservative finance". But we do not need to pursue that particular aspect. This is a perfectly fair point that the noble Lord has raised. I am glad that he accepts that the method of dealing with any surplus is the right one. But when we come to the matter of a deficit I am not sure that it is quite so simple. Owing to the operation of the system, whereby most authorities have dealt with the deficit on their housing repairs account in the subsequent year, the position is that if we were simply to charge this to housing revenue account it would, together with the new provisions in the Bill, mean we were virtually having a doubled repairs expenditure in the one year, 1972–73. We should be dealing with the deficit for the previous year in the same year that we were dealing with repairs expenditure for the first time in the housing revenue account on the new system. There would be a double burden on the rates in that one year. It might be said that it is good "conservative" accounting to get rid of that and write it off in one year. The question is, what sort of sums might be involved.

I have been given one example which shows that the amount might not be quite so trivial as one might think. Taking the case of Dumbarton Burgh, at the end of 1971 they had a deficit on their housing repairs account of rather over £105,000, which is equivalent to about £27 per house. It seems to me that that is a not insubstantial amount to be added on to whatever is going to be incurred in the following year. It would in fact more than offset the reduction in the rateborne deficit resulting from the other provisions in the Bill. That is the basic reason why this suggestion has been put forward: that it should be funded and dealt with over a period and that the latter achieves a greater equity as between tenants and ratepayers. That is all I feel inclined to say. I would be perfectly prepared to have another look at this, again without holding out strong hopes. I am perfectly prepared to look into what it might involve in burden on ratepayers of different authorities, but I should not like to hold out too much hope of being prepared to accept alteration of the principle.

8.31 p.m.

LORD HUGHES

I am quite certain that in quoting Dumbarton Burgh the Minister has quoted an extreme case. I can think of perhaps one or two others that might, because of rental policies, have found themselves in a somewhat similar position. I must admit that I should not be happy about throwing so large a burden as £27 per house into the following year's accounts. I think the trouble arises from having the threshold set at so very low a figure as £1 a house. I should like to withdraw these Amendments and come back with some other proposition, perhaps on the basis of giving a discretion to local authorities to apply to the Secretary of State as to the way in which it might be treated, giving the Secretary of State. of course, the final decision on the matter. One would expect this to be dealt with so that the sum would not be an undue burden to take during a year. It would be a mistake to fund a deficit in this way. I am not quarrelling about the surplus. I think that the way proposed is the best way of dealing with it. But giving a discretion in connection with borrowing to meet a surplus I think should only be clone where the alternative of dealing with it on a revenue basis would place an unduly high burden on the year in question.

What I would endeavour to do is to produce a proposal fairly early and, instead of tabling it straight away, pass it to the Minister for his comments as to whether he was likely to accept it or, alternatively, if he thought the idea was workable, to produce something along lines which would accomplish an objective of that kind. When I said it was "good conservative finance" I was using the words in the totally respectable, nonpolitical sense and on the basis that one should never borrow to meet to-day's commitments if one can possibly meet them out of income. If you start on the other road you reach a situation where there is no money to meet to-day's commitments because you are up to the hilt in paying previous debts. I should have thought that the last thing that a Minister and accountant would wish to do would be to uphold a heresy of that kind. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule 10 agreed to.

Schedule 11 agreed to.

House resumed: Bill reported, with the Amendments.