HL Deb 20 July 1972 vol 333 cc880-9

3.38 p.m.

LORD POLWARTH

My Lords, I beg to move that this Report be now received.

Moved, That the Report be now received.—(Lord Polwarth.)

On Question, Motion agreed to.

Clause 3 [The housing expenditure subsidy and associated rate fund contribution]:

LORD HUGHES moved Amendment No. 1: Page 4, line 17, leave out from (" expenditure ") to end of line 19.

The noble Lord said: My Lords, with permission I wish to speak also to Amendments Nos. 2 and 3, because Nos. 1, 2 and 3 are a series which effect the change I wish to bring about in the Bill. The effect of these three Amendments—and I now beg formally to move Amendment No. 1—is to bring the provisions under the Scottish Bill into line with what the Government have done on the Bill in England and Wales. I appreciate the fact that what was originally in the other Bill was not identical with what is in the Scottish Bill because, if I may speak first of all of the Housing Finance Bill, what was in that Bill was that for the first two years the £6 threshold was applicable and after that it was not applicable. It might be said that one of the reasons for the difference after two years was that perhaps a majority—perhaps even all—English and even Welsh local authorities might have moved into surplus on their housing revenue accounts. We are aware of the fact that some of them are in that position at the present time ; but that is not the case in Scotland at all. But the position under the Bill which we are considering now is that the £6 threshold applies right from the beginning in Scotland, and continues. In so far as there is an authority on this side of the Border which is in deficit on its housing revenue account, it will benefit from the way in which the English Bill has been amended. The authorities in Scotland which are in deficit on housing revenue account, unless this Amendment is made to the Bill, are going to be £6 per house worse off than their opposite numbers South of the Border. I can see no justification for that position being allowed to continue, and it is in order to enable the Government to give us the benefit of the same concession in Scotland as they have conceded in the rest of the country that I now wish to move this Amendment. I beg to move.

LORD POLWARTH

My Lords, the noble Lord has, I think, to some extent produced an argument against this Amendment, in that the two systems are not merely slightly different, they are fundamentally different. This goes back to the basic principle underlying the future of rents: that whereas the English system is based on an advance to fair rents, outs is based on bringing the housing revenue account into balance on the basis of historic full costs. The whole thing starts from a different basis. In the English Bill the rising costs subsidy, which is the one the noble Lord has compared to our housing expenditure subsidy, is a deficit subsidy. If there is no deficit on the housing revenue account it is not payable. If the local authority's building programme causes a deficit in the housing revenue account it will be payable. The receipts of the housing revenue account will depend on progress towards a level of fair rents. The position in Scotland is a different one. The housing expenditure subsidy is payable for ten years from the start of its operation and for a minimum of five years from 1977–78 onwards. The entire basis here is different. The differences are so fundamental that I would question very much whether it could be said that the tenant in Scotland under the proposed Scottish system is £6 worse off than his English opposite number. His English opposite number is going to advance towards a totally different level of rent from that proposed by us.

LORD HUGHES

My Lords, I am sorry to interrupt the noble Lord, but I do not want him to proceed too long on the wrong argument. I did not suggest the tenant would be £6 worse off ; I suggested the local authorities would be £6 per house worse off.

LORD POLWARTH

My Lords, I apologise for not taking the point, which I now do. But we have to look at this in the context of all the subsidies, and the make-up of them in Scotland is quite different from the make-up in England, the main ones relating to housing as opposed to rent rebates and allowances. We discussed very fully at an earlier stage the position which would arise if in that case we were to reduce this threshold, instead of, as the noble Lord is now proposing, abolishing it altogether. As I explained at that time, it seems to us that to abolish the threshold, and indeed even to halve it, is going to disturb the balance of the sharing of the process of moving on to the new rent basis between tenant ratepayer and taxpayer. This is carefully designed for a fair sharing of the extra cost. The other drawback I see is that if this threshold were abolished, when the residual subsidy was finally phased out tenants would then be faced with a very substantial and abrupt increase in rents because they had not been progressing faster in the meantime. That is why I could not recommend the House to accept the Amendment.

LORD HOY

My Lords, I should like to say one or two words on this Amendment. It is quite obvious that the noble Lord has not really understood the Amendment and the argument as it was presented. First of all, his argument was on the basis that the tenant would be £6 worse off if this Amendment were not accepted, and this would be the difference between the Scottish and English tenant. Finally, having gripped the argument that was being put, he said, " If you do not like the original argument I have made I will put another one to meet the new case ". He then argued about the threshold. Is the noble Lord aware that changes have taken place even in the passing of the English Bill? As a consequence of the passing of the English legislation, the threshold has been abolished. This shows a very considerable change indeed, and I am certain that even his noble friend Lord Drumalbyn would not deny that this change has been made. All my noble friend is saving is that you should not put Scotland in a worse position than the tenants in England and Wales. Perhaps this news had not reached the Scottish Office when the brief was prepared, but now that the noble Lord knows about it perhaps he would tell us whether he is prepared to consider it.

LORD DRUMALBYN

My Lords, I must reinforce what my noble friend said about the differences between these two systems. The fundamental difference is that in England progress is to be made towards fair rents, whereas in Scotland the rents are to be fixed by the local authorities themselves in such a way as to balance the housing revenue account.

LORD HOY

My Lords, may I interrupt the noble Lord for one moment? He really ought not to mislead the House. When he says that rents will in fact be fixed by the local authorities themselves, he knows that this is not really correct. The local authority will have to impose these increases, and it does not matter how long the period of the year is ; the Government have said to the local authority: " No matter when they are introduced, in that given period they have got to produce the extra rent. The Government are ordering you to do so ". It is not a question of the local authority doing it.

LORD DRUMALBYN

My Lords, in one sense I suppose it could be said that the local authority has always imposed rents. I do not see any difference between imposing and fixing. They are the landlords. Surely, this is not the point. The point is simply the fundamental difference between the two systems. There is progress towards fair rents in England to be made in specified stages. It follows from that that the income of the housing revenue account will benefit by certain specified stages. The rising costs subsidy is to be paid in respect of expenditure which is in excess of expenditure in the previous year on the reckonable expenditure of the housing revenue account. The noble Lord will see that with this kind of arrangement the position is totally different from the Scottish position.

What is more, as my noble friend has already pointed out, and as the noble Lord, Lord Hughes, himself said, it was only in the first two years anyway that the £6 limit applied because of the operation of the various subsidies in England: the transitional subsidy, as well as the residual subsidy, the operational cost subsidy and so on. Apart from the residual subsidy those other two are special to England. So there is a totally different system here. It was thought right, after careful consi- deration of the representations made by the Opposition, that we could in the circumstances afford to withdraw the £6 threshold for the first two years—and it only applied for the first two years in England and Wales—with a view to maintaining the encouragement to house building in England and Wales, where houses are needed to be constructed. But the system in Scotland is to give that encouragement all along the line—not just in the first two years, but throughout. The £6 threshold is considered as a reasonable contribution of something like 12p per week per house in respect of the increase in expenditure over one year as compared with the year before. It is thought right that there should be some contribution from the tenants towards the provision of houses in the area as a whole. This is the threshold, and there is in addition a contribution to match the 75 per cent. contribution ultimately from the Exchequer. From what I have said, I should have thought it is evident that the conditions are so different that it would be impossible to say that because the subsidy had been withdrawn for the first two years in England it should also be withdrawn for the full period of ten years, down to five years, as the case may be, in Scotland. I should have thought that that was a complete non sequitur, the subsidies having been carefully adapted to meet the needs of the two countries.

LORD DIAMOND

My Lords, I feel that this is where I came in because I have previously heard the noble Lord, Lord Drumalbyn, make almost exactly the same speech regarding this £6 threshold and, indeed, using almost word for word of it to explain that the Government thought this was a contribution which ought to be made and that the Government continued to think so. The Government drafting of both the English and the Scottish Bills was virtually in the same words so far as this particular matter was concerned. What happened as regards the English Bill, as the noble Lord knows, was that the Government thought in this way for a long time, but they listened to the arguments and decided—and we are grateful for it—on the weight of the argument that it was a deduction which should not be continued, that it was not a justifiable deduction. It was a figure conjured out of their heads which they thought would represent fair contribution to be made in relief of the Government, but then they finally decided that their original idea was wrong. The Scottish Bill still shows the original idea and I am hoping the Government will be good enough to go through the same processes of thinking and consideration as happened with regard to the English Bill and come to the conclusion that here again second thoughts do nothing but add to the stature of those who do the thinking.

So far as the difference is concerned—and it is recognised it is a different Bill—this one has the word " Scotland " in it and, so far as I can recollect, the English Bill did not have that word added to it. There are a number of other differences. The reason I make that facetious remark is because this part is not different, it is exactly and essentially the same point—should the Government be relieved of a particular figure and, if so, how much? One might also say, for how long. I agree there is a separate point here. But as for the first two questions, the Government thought they should be relieved and thought that the figure should be £6. They thought exactly the same with regard to the English Bill and were finally convinced by our argument—because in this House we have no opportunity of convincing them except by argument—to alter their thinking.

The noble Lord may say that there is a separate point going beyond two years ; but I do not think that is a valid point because one is merely removing what was there for two years. Therefore, for all time the English Bill now provides what my noble friend seeks in his Amendment, namely, that exactly the identical position should exist, and there should be no deduction. I hope the noble Lord will give the matter the kind of consideration that he has done on other occasions and I hope history will repeat itself.

EARL BALFOUR

My Lords, I gave this Amendment a great deal of thought. I felt to begin with that what the noble Lord, Lord Hughes, had put down was something which should have serious consideration from your Lordships. At the same time, I took some time comparing some of the differences between the Scottish and the English Bills and came to the conclusion that I could not support this Amendment moved by the noble Lords, Lord Hughes and Lord Hoy. I should like briefly to give the reasons why. Although the withdrawal factor in the English Bill is related to the number of houses on a local authority revenue account, none of the subsidies mentioned in the first six clauses are related directly to the number of houses. The reckonable expenditure in England means expenditure debited to the housing account which the Secretary of State may from time to time determine. That was why in Clause 4 of the English Bill the definition relating to houses was deleted and the £6 disappeared. In Scotland all the subsidies are related directly to the number of houses on the housing revenue account and, therefore, each subsidy is related directly to the number of houses. Hence, in the Scottish Bill the housing expenditure subsidy must be related directly to the number of houses and, therefore, Clause 3 of the Scottish Bill must stand as it is written.

LORD POLWARTH

My Lords, I am grateful to my noble friend for his contribution which I hope has helped to explain to the House the fundamental difference between these two systems.

LORD HUGHES

My Lords, do not rely on that.

LORD POLWARTH

Well, maybe.

The noble Lord, Lord Diamond, produced a seductive argument based on the similarity of wording of the provision in the English Bill for one subsidy to the provision in the Scottish Bill for what is a different subsidy, and wished us to deduce from that that what had been done to the English Bill should likewise be done to the Scottish Bill. As I have explained, the whole system is fundamentally different. My noble friend Lord Balfour, has just explained one of the ways in which it is different—to remove the threshold entirely in Scotland would disturb the balance of the financial framework and I must reiterate that we cannot accept this.

LORD HUGHES

I suggested to the noble Lord, Lord Polwarth, he ought not to rely on what the noble Earl has said because to put it briefly but perhaps crudely, as is necessary, the noble Earl is completely off his eggs. The English Bill as it was originally and the Scottish Bill as it is now are in the form which the noble Earl stated—it was the sum per house. But as soon as the threshold was removed from the English Bill it ceased to be a subsidy per house ; it was a subsidy based on the difference between the expenditure in one year and that for the preceding year, and the authority got a percentage of that difference. If the noble Lord would kindly read my Amendment, that is exactly what I am suggesting should be done in the Scottish Bill. That is why there are three Amendments putting it on exactly the same basis as is in the English Bill. We start off with expenditure, debit it to the housing revenue account in 1971–72 and instead of working out the figure per house and subtracting £6 and finding a difference per house, and multiplying it by the number of houses, all we do in the succeeding year is find the amount of the expenditure, and if it is greater than the preceding year, the difference is subject to subsidy. That is what is happening South of the Border.

I was sorry that the noble Lord, Lord Drumalbyn, found it necessary to intervene, because it is not possible to make use of private discussions in our proceedings ; otherwise, I might well have prayed the noble Lord in aid. But the position is that there is little difference in this respect between Scotland and England. It is true that the Secretary of State for Scotland showed greater wisdom than his opposite number on this side of the Border by not putting it in the Bill that he was proceeding to fair rents, but he has made it perfectly plain that if this Government continue in power it is their intention in Scotland to proceed to fair rents. So the principles in Scotland and England so far as rents are concerned are identical. The fact is that the Government have accepted the facts of life in Scotland, and have realised that if they are going to be allowed to proceed to fair rents they must do so at a slower speed than they are attempting down here. So that on the rents side the ultimate objective is the same.

Let us look, however, at what the subsidy is based on. The subsidy is not based on the rent ; the subsidy is based on the expenditure—and in both cases the expenditure is the same. Certain items of expenditure are debited to the Housing Revenue Account in England: the same items of expenditure are debited to the housing revenue account in Scotland. The noble Earl, Lord Balfour, said, " Ah, but they are subject to approval in England, and the Secretary of State may say, ' You can put that in or you can leave that out '". But the Secretary of State for Scotland has exactly the same powers. He can say that certain things are not to go in or that certain things are to go in. So exactly the same applies to both accounts: we take the expenditure one year and we take the expenditure the preceding year, and the subsidy is payable on the difference.

It may be that because the Bill differs in wording, if not in intent, the Amendments which we are discussing are not completely technically correct ; but there is no opportunity to remedy that situation in this House because I have already agreed that we should take the Third Reading to-day, immediately after the Report stage. If the Government wish, not only to be fair as between Scotland and England but for it to be shown clearly that they intend to be fair, the only way in which they can accomplish this is to accept these Amendments, and if they are defective then, in another place, put them in the form which would give to Scotland exactly the same benefits as are conferred on England—although I agree that, in the case of a Bill of this kind to talk about anything that the Government do as " conferring a benefit " is, of course, a misuse of language. However, if the Minister is not prepared to adopt that course, then I certainly could not allow the matter to go unchallenged ; and I would certainly hope that some noble Lords sitting on the opposite Benches, to whom only the traditions of this House prevent my referring as " my noble friends ", will remember that they have local authority interests, too, and that they should take these into account as well as Government loyalties in deciding how they should vote on this matter.

On Question, Whether the said Amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 57; Not-Contents, 90.

CONTENTS
Annan, L. Fulton, L. Royle, L.
Ardwick, L. Gaitskell, Bs. Rusholme, L.
Beaumont of Whitley, L. Garnsworthy, L. [Teller.] Sainsbury, L.
Bernstein, L. Hale, L. St. Davids, V.
Beswick, L. Henderson, L. Seear, Bs.
Birk, Bs. Hoy, L. Segal, L.
Blackett, L. Hughes, L. Serota, Bs.
Blyton, L. Jacques, L. Shackleton, L.
Brockway, L. Kings Norton, L. Shinwell, L.
Buckinghamshire, E. Lee of Asheridge, Bs. Simon, V.
Burton of Coventry, Bs. Llewelyn-Davies of Hastoe, Bs. Slater, L.
Chalfont, L. McLeavy, L. Stocks, Bs.
Champion, L. Maelor, L. Stow Hill, L.
Chorley, L. Moyle, L. Summerskill, Bs.
Davies of Leek, L. Nunburnholme, L. Taylor of Mansfield, L.
Diamond, L. Ogmore, L. White, Bs.
Donaldson of Kingsbridge, L. Phillips, Bs. [Teller.] Willis, L.
Douglass of Cleveland, L. Platt, L. Wootton of Abinger, Bs.
Energlyn, L. Popplewell, L. Wynne-Jones, L.
Faringdon, L.
NOT-CONTENTS
Aberdare, L. Eccles, V. Lothian, M.
Ailwyn, L. Elgin and Kincardine, E. Loudoun, C.
Albemarle, E. Elles, Bs. Macpherson of Drumochter, L.
Alexander of Tunis, E. Elliot of Harwood, Bs. Mancroft, L.
Alport, L. Emmet of Amberley, Bs. Mar, E.
Atholl, D. Erroll of Hale, L. Massereene and Ferrard, V.
Auckland, L. Essex, E. Merrivale, L.
Balerno, L. Ferrers, E. [Teller.] Milverton, L.
Balfour, E. Ferrier, L. Montagu of Beaulieu, L.
Balfour of Inchrye, L. Gisborough, L. Moyne, L.
Belhaven and Stenton, L. Goschen, V. Napier and Ettrick, L.
Belstead, L. Greenway, L. Nugent of Guildford, L.
Berkeley, Bs. Grenfell, L. Polwarth, L.
Bessborough, E. Grimston of Westbury, L. Rankeillour, L.
Bradford, E. Hailes, L. Reay, L.
Brecon, L. Hankey, L. Rockley, L.
Camoys, L. Hanworth, V. Rothes, E.
Carrington, L. Harvey of Prestbury, L. Saint Oswald, L.
Colville of Culross, V. Hawke, L. Sandford, L.
Cowley, E. Hood, V. Sandys, L.
Craigavon, V. Howard of Glossop, L. Sempill, Ly.
Craigmyle, L. Hylton-Foster, Bs. Stonehaven, V.
Croft, L. Ilford, L. Strange of Knokin, Bs.
Cromartie, E. Inglewood, L. Tweedsmuir, L.
Daventry, V. Jellicoe, E. [L. Privy Seal.] Tweedsmuir of Belhelvie, Bs.
Denham, L. Kemsley, V. Vivian, L.
Derwent, L. Kilmarnock, L. Wakefield of Kendal, L.
Drumalbyn, L. Kinloss, Ly. Windlesham, L.
Dundee, E. Lauderdale, E. Wolverton, L.
Ebbisham, L. Long, V. Young, Bs. [Teller.]

Resolved in the negative, and Amendment disagreed to accordingly.