HOUSING FINANCE BILL

HL Deb 08 June 1972 vol 331 cc496-533

7.45 p.m.

House again in Committee on Clause 3.

LORD GARNSWORTHY moved Amendment No. 20: Page 5, line 2, leave out ("not being less than 60 per cent.") and insert ("being more than 75 per cent.").

The noble Lord said: I beg to move Amendment No. 20. I suppose to the onlooker this will appear as a continuing debate, and for that there is no reason for apology from this side, for this Bill affects something like one-third to one-half of the people in this country, and nearly all of those people are in the lower income brackets. For those who earn decent wages it represents a threat to their standard of living, and to rate-payers generally a burden that they ought not to be called upon to bear. The Amendment is designed to ensure that transitional subsidy does not fall below 75 per cent., and it is further designed to limit the amount of rate fund contribution associated with that subsidy to 25 per cent.

Clause 3(2) says: A local authority shall be entitled to transition subsidy if for the year 1972–73, or for any subsequent year, there is a shortfall in the local authority's rent increases. I think I am safe in saying that nobody knows what that shortfall will be. Is not this one of the great difficulties about this Bill? It is one of the great difficulties about this clause. Nobody knows exactly in terms of pounds and pence what is going to be involved—nobody, that is, except the Government, who set out from the beginning to cut subsidies. It is true that they have had to change their mind on a number of matters as the Bill went through the other place, but reading the Reports of the Committee proceedings in the other place I have been struck by the fact that, instead of firm estimates, all too often the Committee were given (and I think the Secretary of State himself called them) "guestimates". Little wonder then that we had an article in yesterday's Times which, if it was intended to present to the readers the case that we have been trying to make and are trying to make, could not have been better written. I refer to an article by Mr. T. J. O. Hickey in The Times of Wednesday, June 7. He certainly brings home what we have been saying and what we are saying again and again, that when members of the Front Bench opposite talk about fair rents they cannot tell us what they are; they cannot tell us the implications of the so-called Birmingham Amendment, which I think was really the lessor Amendment and was carried last November and which represented a tremendous change of front on the part of the Government—in fact two changes in one day.

In this article he states that the fair rent is presented as a kind of platonic form laid up in Heaven to which the statutory formula gives unique access. It is, strictly speaking, incoherent. It would be truer to say that fair rents are plucked from the air. But I do not want to go too far with that because we shall be coming to the question of fair rents. The point I am anxious to make is that nobody knows what local authorities are being committed to. This Government know what they do not want to give, but local authorities do not know to what they are being committed. Subsection (3) gives a table showing the transition subsidy falling from 90 per cent. in 1972–73 down to 75 per cent. in the years 1975–76 to 1981–82. It then goes on to say that in subsequent years the figure shall be 75 per cent., or such other percentage as may be substituted for 75 per cent. for the year in question by an order under subsection (4) … Subsection (4) states: The Secretary of State may from time to time by order, for such years after 1981–82 as may be specified in the order, in column 2 of the Table above for 75 per cent. substitute such other percentage, not being less than 60 per cent., as may be specified in the order.

The effect of reducing the transition subsidy is to place an increasing burden on the associated rate fund which rises from 10 per cent. in 1972–73 to 25 per cent. in 1975–76 and stays at that level until 1981–82. Thereafter the Secretary of State's contribution from the rate fund can rise to 40 per cent. It may well be that it will be claimed that the need for the subsidy will depreciate as the years go by. In that case the Government can afford to be magnaminous and to accept the Amendment moved by my noble friend Lord Diamond—that is to say, make 100 per cent. contribution—and all the talk about interfering with the free- dom of local government was the most utter nonsense to which I have ever listened.

The situation being created by the Government is that local authorities can have no option, no choice; it is unrelated to anything they themselves determine. In other words, they have no say in what the shortfall will be. The shortfall is as a result of Government policy and if ever there was a notion that responsibility depended upon the contribution from local ratepayers, this is not that kind of subsidy. The Amendment would set the limit of 25 per cent., but it would at the same time allow the Secretary of State to reduce the burden so far as 'the local authority is concerned. It is not burdens but help that local authorities need. If the appropriate figure is 75 per cent. up to 1982, what possible justification can there be for giving power to the Secretary of State to reduce it to 60 per cent. thereafter?

In any case, this is budgeting for a situation 10 years ahead, and I hope that the Government will have another think about the situation. As this Bill goes through the Committee stage in this House they should begin to show that they are not inflexible in their thinking. We should like to see a little flexibility, a little willingness, to meet the arguments being put not only from this side of the House but from outside the House from various associations. Indeed we should like to feel that when a point has been reached when papers like The Times are publishing articles like this that in their own interests the Government would do some re-thinking. If they continue to show inflexibility and stubbornness, I hope that the Committee will encourage the Government to do what they are reluctant to do; that is, take a new look at a situation that is based on "guestimates" rather than factual information.

LORD SANDFORD

I am glad to respond to the invitation from the noble Lord, Lord Garnsworthy, to demonstrate some flexibility. It is because of the flexibility in the system which we are commending to the Committee that it is not possible for anybody at this stage to be precise, or more precise than we have been, about the scale of subsidies that will be payable to particular authorities. Because there is this flexibility, local authorities will be free to exercise their responsibilities as housing authorities in deciding what their building programme shall be: it will not be dictated to them by the Secretary of State, or anybody else. Under this system they can work out for themselves what assistance will be given to them under the combination of all these arrangements and, in particular. what amount of rising cost subsidy their expanding building programme, if that is what is required, will attract. There is no restriction, no limit, imposed by the Exchequer under these arrangements on the amount to which housing authorities can commit themselves in the way of capital investment on their housing programme. This is the reason why it is not possible for us to be more specific.

The particular Amendment to which the noble Lord was speaking is the one which seeks to substitute for 75 per cent. 60 per cent. I think I explained adequately enough our reasons for including this figure.

LORD GARNSWORTHY

I think the noble Lord has got it the wrong way round. I want to rectify that error.

LORD SANDFORD

Yes, I understood that. I am sorry.

LORD GARNSWORTHY

I can understand the noble Lord's making a mistake. Quite clearly, he thinks the figure ought to be 75 per cent.

LORD SANDFORD

I know what the noble Lord is driving at. But as I explained when we discussed the two earlier Amendments, the reason why we want this figure is that we are providing for the possibility of a review after the lapse of a long period of time—10 years—at the end of which it may well be necessary for the Secretary of State, after consultation with the local authorities and subject to a Negative Resolution in either House of Parliament, to make further modifications, further adjustments, as between one class of local authority and another, or as between individual local authorities. In those circumstances it may well be right for certain authorities to have to bear a larger share of whatever small amount of transition subsidy may remain.

If the figure goes down from 75 per cent. to 60 per cent., it will not go down to some figure below which Exchequer subsidy has never fallen before. The noble Lord will know from his experience in local government that the police subsidy is paid at 50 per cent., the planning grant is paid at 50 per cent., and the rate support grant is paid at something under 60 per cent. These are quite normal percentages. There is nothing particularly inappropriate or burdensome about this figure. I am not saying that this will be a general adjustment, but it may be appropriate in some cases. As I said, it may well be appropriate in other cases, where an authority is still labouring under a heavy burden of housing stress, to alter it in the other direction. But I am sure that flexibility must be there, after that long period of time has elapsed.

LORD GARNSWORTHY

I am sure that we are all grateful to the noble Lord, Lord Sandford, for the explanation which he has given. He indicated that the Government's attitude demonstrates flexibility, but I think his explanation demonstrates the need for a little more information than we have. It is no use saying that local authorities will be free to determine their own programmes unless they know that they will get subsidy help. If subsidies overall are to be limited—the noble Lord indicates that he does not agree with that—and that is surely the aim of the Government—

LORD SANDFORD

No.

LORD GARNSWORTHY

It is. The aim is to keep subsidies within a global figure. It is an argument which we have been having almost since the Bill was proposed.

LORD SANDFORD

It is a point which the Opposition have been putting to us and we have been trying to disabuse them of it. I have said it once before and I will say it again. No capital investment restriction is imposed by the Government under this system. The figures which we have been giving are estimates of what the subsidies will be running at.

LORD GARNSWORTHY

I take the point which the noble Lord is making, but I do not for one moment accept that there is anything in the Bill which leads us to anticipate that subsidies will grow to meet inflation, or to meet expanded housing programmes. We had that argument on Second Reading. We have already had it on a number of occasions during this Committee stage. Clearly, one of the main purposes of this Bill is to contain the contribution which the Government are prepared to make in assisting local authorities in the matter of housing provision. If I am wrong, then The Times article is wrong and everybody outside the Government is wrong on this matter. I really think that the noble Lord, Lord Sandford, will have to go a great deal further than he has done this evening, if he is to convince us that we are in error on this point. There was a wonderful opportunity when my noble friend Lord Diamond analysed these figures and asked for confirmation on the very point which the noble Lord is trying to make, that the Government would meet this situation, but he certainly did not get that confirmation. When we are told that local authorities are free to work out costs and what programmes they like, and there is to be no limit by the Exchequer, we wonder whether that is seriously meant. Is it really suggested that local authorities will be free, no matter how many houses they build, no matter what they do, to come to the Government and automatically get subsidy support?

LORD SANDFORD

That is right.

LORD GARNSWORTHY

We shall be pleased to hear what the noble Lord has to say, and particularly pleased to read it in Hansard, because I think he is saying something which nobody speaking for the Government has said to date. My Amendment is intended to avoid a growing contribution under this head on the part of local authorities. If it be said that there will be a reduction in the shortfall as the years go by, then, quite clearly, the clause with which we are dealing will lay upon local authorities the need to provide an increasing percentage of whatever shortfall there may be. It is to avoid that situation that this Amendment has been moved. I should like the noble Lord to tell the Committee whether different rates will be paid to different authorities, when that will be determined, how it will be determined and, if the Secretary of State is to determine what those different subsidy rates will be, how much freedom the noble Lord thinks local authorities will really enjoy. It is really no good talking about 50 per cent. grants for the police and for services of that kind.

I repeat what we have said before from this side: we regard housing as a social service. The Party opposite, who at the present time are in Government, regard housing as a profit-making exercise. That is the great difference between the two of us. I hope that we shall get from the noble Lord a little more indication than he or anybody opposite has shown up to the present time of an understanding of the position of local authorities, who want to know where they stand, not merely now but in the years to come. They want to know that they will not have to bear an increasing burden, and they have a great yearning to continue to be as free as they have been up to the present time.

LORD DIAMOND

While not wishing to delay the Committee unduly, I should like to thank my noble friend Lord Garnsworthy for the excellent contribution which he has made and for eliciting a most extraordinary statement from the noble Lord, Lord Sandford, which I wish to pursue in order to inform myself more fully of the Government's intention. As I understood him, the noble Lord indicated that there would be no bar of any kind to the size of a local authority's building programme, or to the capital expenditure raised for that purpose. That is an important and novel statement of Government policy and we ought to get it absolutely clear. Is the noble Lord saying that there is to be no limit, for example, on the amount of Treasury approved local authority borrowing for housing purposes? Is the noble Lord also saying that, for subsidy purposes, there is to be no restriction on the amount spent per house in relation to any possible limitation of the kind that used to be known as a yardstick? There are two areas there, in particular, which were excluded from the definition given by the noble Lord, and I should like him to be good enough to reassure me on both those points.

8.10 p.m.

LORD SANDFORD

I think the debate on this Amendment has been most useful, and I am most grateful for the opportunity to confirm what I have just said. I will speak with as much precision as I can on this point, because I detect a certain amount of incredulity on the Benches opposite. How much new council house building is planned is a matter for each local authority. No capital investment restriction will be imposed by central Government. Thus, what is done depends not upon estimates of subsidy; it does not depend upon the figures we were discussing yesterday, or on central Government public investment control. It depends on what local authorities, on their initiative, decide to spend in the light of their own assessment of need and demand.

If noble Lords will look carefully at Hansard tomorrow, they will find that those are precisely the words used by my noble friend Lady Young. I was listening carefully to what she said, and she used virtually the same words. If this point has now registered with noble Lords, then this is indeed a tremendous gain. I think it is the fact that perhaps it had not registered yesterday which was delaying us and causing a certain amount of confusion among us. The figure of £350 million was mentioned as an estimate of what the effect of the operation of all these subsidies will be. But there never has been a question—and it is only noble Lords opposite who have continued to assert it—of one of the objects of this Bill being to contain the subsidies within this figure. That figure is an estimate of what these subsidies will amount to when this system is operated.

The noble Lord, Lord Diamond, asked me about the cost yardstick, and so on. These factors will certainly apply, and when we come on to rising cost subsidies the noble Lord will already have observed that these are based on the difference in reckonable expenditure (that is, expenditure approved under the cost yardstick) as between one year and the next; and to that extent there is a restraint and a restriction. Local authorities are not allowed to count any expenditure of any kind, whether approved or not; and I do not suppose that the noble Lord, from his previous position, would ever expect that that should be so. But I want to confirm that there is no capital investment restriction imposed by the Government. I hope that with that confirmation of this absolutely cardinal point in the system the noble Lord will find a number of his misgivings and doubts removed. I do not think I have anything, further to say about the precise matter of his Amendment—the difference between 60 per cent. and 75 per cent. I have explained our reasons for that already.

LORD DIAMOND

I am very grateful to the noble Lord, who detected a certain amount of incredulity. Unfortunately, some of those on this side of the Committee are so advanced in years or "long in the tooth", as the case may be, that they find a little difficulty in swallowing new facts. In what he has said, is the noble Lord making a distinction between approval of borrowing and approval of development? I understand what he said with regard to no restriction on the capital expenditure of a local authority. When a local authority has freedom to spend capital, it has only one question to ask itself, and that is, "Have I any capital?", and it proceeds therefore to borrow the capital on the market either in this country or abroad, as the case may be. I leave out the point about it being abroad, because that is perhaps rather a separate question which need not detain us at the moment in this Committee. Is the noble Lord saying, therefore, that there is no requirement on a local authority which requires to borrow money for capital expenditure purposes in regard to housing to get central Government approval in any way?

LORD SANDFORD

What I have just said is a broad observation on the general policy that arises here. When we get on to particular subsidies, there will be a number of restraints, restrictions, caveats and so on, such as the application of cost yardsticks, in the calculation of reckonable expenditure. We will come to all these points as we go along; but I do not want to detract from or add at all to the main, broad observation which I have made and which I think does considerably alter the approach of noble Lords' understanding if they have thought hitherto that the object of the Bill is to keep the overall subsidy figure within a certain global amount. This is not the object of the Bill at all.

LORD DIAMOND

I understand that point. I am very grateful to the noble Lord, and I assure him that I have taken that point fully on board. I only wanted to be absolutely sure—and perhaps it is a little unfair to shoot this question at the noble Lord without warning—as to whether the freedom he was referring to was a complete freedom. I do not press the question now. We shall not seek to divide the Committee on this particular Amendment, having regard to the discussion which we have already had on the previous one. I am very grateful to the noble Lord, but I hope that at some convenient point, perhaps between now and the Question, That the clause stand part of the Bill, he will be able to refresh his memory as to the precise position which the Government envisage in future with regard to local authority borrowing for the purpose of capital expenditure in relation to housing.

LORD SANDFORD

I shall certainly look at that point, and when I can get more clearly exactly what it is the noble Lord is asking me to say I will respond to it. But as we go through the clauses we shall see more precisely what the exact frontiers of this freedom are.

LORD GARNSWORTHY

I am quite sure the noble Lord opposite will not be surprised if I say that we shall need to examine very carefully what he has said to the Committee. If we have long memories, well, it is because we have reason to have long memories. When he uses the term, "This is only a broad observation", then that is so wide open that I am afraid it still leaves us, and is bound to leave us, somewhat incredulous. We shall certainly probe and press as the Bill proceeds, because we are quite clear that the Government, when they first started talking about subsidies, talked about cuts. Yes, they did—when they first started talking about them. That was before we knew anything about the terms of this Bill. So far as the Party opposite is concerned we have learned that there is a point at which the leopard does not change its spots; and we have a duty to at least one-third of the people of this country, since this Bill aims at increasing their rents, at extracting more from them and at making those earning decent wages pay towards subsidies for those earning poor wages—but of course it does. It is no use the noble Lord shaking his head. Fair rents are expected to produce, overall, a profit.

LORD SANDFORD

If the noble Lord would allow me to interrupt, I cannot let slip this opportunity to confirm again that the rent is fixed without any relation to the factors we are talking about here. It is a fair rent fixed by reference to the principles set out in Clause 50, which have been taken over wholesale from the principles first devised by the Party of the noble Lord opposite. There is no question of anybody paying any more, of paying a subsidy to anybody else, in the course of paying those fair rents.

LORD GARNSWORTHY

I can begin to understand why the noble Lord earlier suggested that we should not concern ourselves with the principle of the Bill but should confine ourselves to points as they arose. I can understand why he made that suggestion because clearly he wants to avoid the overall picture. At this stage I think there is little point in pressing the argument further and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

BARONESS YOUNG moved Amendment No. 21: Page 5, line 9, after ("water") insert ("rates or").

The noble Baroness said: This is a drafting Amendment to make it clear that the amount of any water rates as well as of any water charges is to be excluded from rent income of a local authority in calculating the authority's rent increases for the purposes of this clause. I hope that the Committee will feel able to accept it. I beg to move.

On Question, Amendment agreed to.

8.22 p.m.

LORD DIAMOND moved Amendment No. 22:

Page 5, line 13, at end insert— ("Provided that in calculating the local authority's rent increases there shall be deducted from the figures of rent increases in any year an amount equal to that proportion of the rent received in that year by the local authority which it attributes reasonably to the repair and maintenance of, and the repayment of interest and capital moneys borrowed for that part of the cost of dwellings which is or was in excess of the 'approved cost' for the purposes of Part 1 of the Housing Subsidies Act 1967.")

The noble Lord said: The words of this Amendment refer to a matter which we have recently been discussing, and perhaps I could take up that point first. In the wording of the Amendment, "approved cost" is another way of saying the yardstick; and the yardstick is a matter that I want to probe very fully. When the Housing Subsidies Act 1967 was introduced, it was necessary to have an approved cost in the context of that Act and the approved cost system has worked reasonably well, as I understand it. Many local authorities have built at a cost in excess of the approved cost and they are authorised to borrow the necessary funds to build at that increased cost provided the increase is not more than 10 per cent. above the yardstick. The questions which arise, and which arise out of this Amendment, in connection with the yardstick are twofold. First, what is to happen under the new system of subsidies with regard to the costs which are attributable to that excess so far as existing dwellings are concerned? Secondly, what of the future?

So far as existing dwellings are concerned, I recollect that the Minister said in another place, in reply to an inquiry by the Opposition spokesman who had asked if he intended to abolish the yardstick: We do not. Power to impose the yardstick is taken in subsection (11). Later, in replying to a request from the Opposition whether the Minister could explain, where dwellings had been built since 1967 which were in excess of the cost yardstick, whether the cost of paying for and maintaining those dwellings would be reckonable expenditure for the purpose of new subsidies introduced in this Bill, Mr. Amery's answer was "Yes."

So what the Minister was saying—and adding the two quotations together—is that the yardstick is to continue; yet payments in excess of the yardstick are to be treated as reckonable expenditure for the purposes of the new subsidies. What I am first asking the Minister to do is to clarify the situation and let us know, in case there has been a misprint, what the situation is with regard to subsidies under the new system as applying to, first, the excess costs attributable to exceeding the yardstick where the dwellings have already been built; and, secondly, the costs attributable to exceeding the yardstick where the buildings are about to be built.

One of the purposes of this Amendment is to enable a local authority to look after the repair and maintenance of its property without suffering in any way so far as subsidy provisions are concerned. Repair and maintenance is a regular item of expenditure in all local authority housing accounts. In some cases it is treated on the basis of the actual expenditure incurred; in other cases there is a reserve charged and the creation of a reserve fund serves to level out the cost of repairs and maintenance over a period of years. The purpose of this Amendment is to ensure that either of those systems would continue to be permitted without suffering any prejudice to their subsidy entitlements. Similarly the latter part of the Amendment refers to repayment of interest and capital monies borrowed for that part of the cost of dwellings which is or was in excess of the 'approved cost' for the purposes of Part I of the Housing Subsidies Act i967. I have already referred to approved cost. Those are the purposes of the Amendment. If we can get the assurances that I have asked for we should not need to press the Amendment unduly. In that sense, I beg to move.

LORD SANDFORD

I think we are getting a little ahead of ourselves but I have no complaint about that. If we can discuss matters which fall to be discussed in Clause 4 when we are on Clause 3 I shall not complain so long as we do not have to discuss them all over again. But if I could, nevertheless, deal with these matters in the context of the Amendment moved by the noble Lord, I think that would be more orderly than to deal with them straight away in the form in which he put them to me.

His Amendment is asking that expenditure on repairs and maintenance should be taken into account when we come to make calculations about transitional subsidies, which is what we are discussing now. My answer to that is "No, they cannot"—not because they do not come into the overall calculations but because they come in on the calculations of the increase of reckonable expenditure which attracts rising costs subsidy under the next clause. So I hope that will satisfy the noble Lord that the factors to which his Amendment refers are taken into account and do attract subsidy; not under this particular subsidy, but under the rising costs subsidy. If I were to agree to his Amendment, local authorities would get subsidies for the same factor at two different points. That would lead them to get 150 per cent. or 180 per cent.; and I do not think that even noble Lords opposite would consider that to be equitable.

Turning to the second point about the cost yardstick, I confirm that approved expenditure within the cost yardstick will attract subsidy in the terms provided for under rising costs subsidy in Clause 4. But when the Party opposite introduced their Housing Subsidies Act in 1967—and that included the housing cost yardstick—they did not provide for any subsidies to be payable towards housing costs not approved under the yardstick, and we do not propose to introduce them now. So the answer to the noble Lord is that housing costs, yardstick costs, are certainly taken into the calculation under the rising costs subsidies, but these do not go beyond what is approved cost under the yardstick; and I do not think that the noble Lord would expect them to.

8.30 p.m.

LORD DIAMOND

I am sure that it is my fault that I did not understand that, and not the noble Lord's fault. I agree that once you deal with the question of the yardstick you cross the border between Clause 3 and Clause 4; that there is no need for us to consider it again under Clause 4 and that it will save time to get the whole point cleared up now. I thought the noble Lord was saying that the yardstick will still be used, but that it will not be used for the purpose of restricting the subsidy. Is that what he was saying? If so, I do not know for what purpose it will be used.

LORD SANDFORD

It will be used for deciding what should be counted as reckonable expenditure and what should not be. And it is the increase in reckonable expenditure that qualifies the authority for rising costs subsidy.

LORD DIAMOND

So then it will not attract rising costs subsidy? That is the point I am getting at.

LORD SANDFORD

It will, but expenditure over and above the yardstick will not.

LORD DIAMOND

That is what we are talking about and I am glad that at last we are ad idem, as the lawyers say. We are talking about the expenditure attributable to the excess above the yardstick. The yardstick is, presumably, being used for some purpose, and what I am seeking to get clear is whether or not the Minister was right when he said, "The answer is 'Yes'". The question he was asked was: "Can the Minister explain to me whether, where dwellings have been built since 1967 which are in excess of the cost yardstick, the cost of paying for and maintaining those dwellings will be reckonable expenditure for the purposes of the new subsidies introduced in this Bill?" I repeat that the Minister said, "The answer is 'Yes'". Now we have the refreshing situation in which a Minister in the House of Commons says "Yes", and a Minister in the House of Lords says "No".

LORD SANDFORD

No, we are not quite in that position. I notice that in the other place they, too, got ahead of themselves at this point. The cost of paying for and maintaining these dwellings are two separate things. Maintenance repairs I dealt with earlier. The cost that lies within the yardstick, plus the tolerance about which the noble Lord spoke, is reckonable expenditure, and counts. Any expenditure above that does not qualify as reckonable expenditure. If the noble Lord looks carefully, he will see that what I am saying now is quite reconcilable with what my right honourable friend said then.

LORD DIAMOND

Perhaps the noble Lord has not got Hansard handy.

LORD SANDFORD

Yes, I have.

LORD DIAMOND

Then may I invite the noble Lord to look at it?—I am not allowed to refer more precisely than I am referring to what was said in another place by a non-Minister. What the Minister said I can refer to, and what he said, clearly and precisely, was, "The answer is, 'Yes'". For that to have any meaning I have to describe what the question was to which the Minister said, "The answer is, 'Yes'". And at the risk of boring everybody intensely I am bound to repeat that what we are talking about is the excess cost beyond the yardstick; and I am grateful to the noble Lord because he has now clarified that the yardstick includes the tolerance. What we are talking about is the excess cost beyond the yardstick tolerance. So if the yardstick is 100 and the tolerance is 10 per cent., what we are talking about is excess over and above 110. Suppose there to have been expenditure over and above 110, the question asked was: can he—the Minister—explain whether, where dwellings have been built since 1967 which are in excess of the cost yardstick, the cost of paying for those dwellings (that means paying for the figure up to 110, and paying for the balance in excess of 110) will be reckonable expenditure for the purposes of the new subsidy introduced in this Bill? Mr. Amery: "The answer is, 'Yes'". The noble Lord, Lord Sandford: "The answer is, No'".

LORD SANDFORD

We could go on for a long time like this, but it might be as well to stop now. My right honourable friend was not answering quite the same question that I am answering. He was not answering as fully as I am answering. I am dealing with the sole question of the yardstick, the tolerance and the excess above it. I am saying that the cost of the yardstick plus the tolerance are reckonable expenditure. The excess above that is not reckonable expenditure and never has been; and the noble Lord's Party, when they introduced their 1967 Subsidies Act, never provided for the excess to count as reckonable expenditure.

LORD DIAMOND

The noble Lord really keeps making the answer as plain as a pikestaff by saying that his right honourable friend was wrong in giving as an answer a simple, "Yes". What his right honourable friend should have said—this is what I thought his right honourable friend should have said and why I am pursuing it to get it clear, because I thought there must be a misprint or a mistake—is: "The answer is 'Yes', so far as the approved cost plus tolerance is concerned; and No', so far as the excess above approved costs tolerance is concerned." His right honourable friend did not say that, and therefore somebody has to clear up the Government's muddle.

LORD SANDFORD

If I may say so, we are in some difficulty because we can- not quote the passage immediately before that. My right honourable friend was asked a further question about maintenance, which I am not answering. Perhaps the noble Lord would be good enough to take my assurance that I will look at this point to see whether there is any other way in which I could make the position clear to him. Then we could perhaps leave it now.

LORD DIAMOND

I am broadly content with the information which the noble Lord has given. What he has said, really, is the usual ambivalent answer, "Yes, my right honourable friend made a mistake, but I am too much of a gentleman to say so." That is all right; we all understand that. It is perfectly clear now, at all events, that the yardstick is going to be maintained; and, of course, there could be no possible purpose in maintaining the yardstick unless you use it to measure. The part that you measure and approve of is paid for under the subsidy and the part that comes outside your measurement is not paid for. That I understand very well. That was one of the main purposes of putting down the Amendment—to clarify that situation. I think that the Committee has been more than generous in permitting this exchange of conversation to go on at this almost interminable length and will gladly permit me to seek to withdraw the Amendment.

Amendment, by leave, withdrawn.

8.40 p.m.

LORD DIAMOND moved Amendment No. 23: Page 5, line 15, leave out ("amount") and insert ("sum")

The noble Lord said: It is perhaps convenient to discuss Amendments Nos. 24 and 25 together with Amendment No. 23. These are drafting Amendments, not suggesting drafting, but suggesting the need for redrafting. One finds in subsection (6) a possibility of confusion. The subsection reads: For the purposes of this section there is a shortfall in a local authority's rent increases for any year if the amount of those increases is less than the local authority's standard amount for that year as defined below, and the amount of the shortfall shall be equal to the difference (or, if the amount of those increases is zero, of an amount equal to the local authority's standard amount for the year). There are a great many "amounts" in that subsection. That could be well understood were it not for the fact that in one case the "amount" is part of the phrase "standard amount"— the local authority's standard amount for that year as defined below". So "standard amount" becomes a term of art. "Standard amount" has a separate and special meaning which is defined later on in the Bill. In those circumstances, I think it is less than elegant, and possibly confusing, to have in the same subsection continual references to the word "amount" when they are not connected with that standard amount, because one would normally use the word "amount" to identify it with the standard amount.

It is not as if there are not other words in the English language which would serve just as well. I have suggested, for example, that the word "sum" might serve; in other cases I have suggested that the word "amount" is no longer necessary where it is just a description and not a term of art; and in Amendment No. 25 I have made the matter more pointed by indicating how many "amounts" you would have to refer to if you substituted for the verb "is" the verb "amounts to". All I am indicating to the Government is that perhaps the subsection would be clearer if the word "amount" was left for use with the word "standard" to mean "the authority's standard amount", and any other use of the word "amount" were avoided by using some other word. Nobody other than a draftsman ever suggests to a draftsman what drafting should consist of, because it is a very recherché and arcane art with which nobody else would possibly attempt to interfere. Nevertheless, it seemed to me that there was a confusion here to which I might draw the attention of the Government. I will listen to what views they have, having considered the matter, which no doubt they have done. I beg to move.

LORD SANDFORD

As one layman to another in these matters, I must confess that this is the kind of Amendment which I should have liked to be able to accept if it were possible to achieve the purpose the noble Lord has in mind. I can see what he is trying to do, and I should have liked to do something on similar lines. But if we accept that the noble Lord has managed to introduce a measure of greater elegance with the first two Amendments, he has to add to the lack of elegance in the third Amendment, where we get the phrase, "and if the amount of those increases amounts to zero." I think this merely demonstrates the difficulty that laymen get into if they try to improve on the drafting of Parliamentary Counsel. I have looked into this, and done what I could to find which particular bits I could accept, but I am afraid I do not find it possible to accept any.

LORD DIAMOND

So long as the noble Lord has looked into it—I hope he realises that the third Amendment was a tongue in cheek Amendment, sort of rubbing of nose in it—and the draftsman cannot suggest a way of avoiding the possible confusion between "standard amount" and "amount" used in the ordinary sense, I leave it there and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

8.45 p.m.

LORD DIAMOND moved Amendment No. 26: Page 5, line 36, leave out subsection (9).

The noble Lord said: This Amendment is one of substance. It refers to the circumstances in which any subsidy or rate fund contribution is to be paid and relates thus to Part III of Schedule 1 and to Schedule 2 to the Bill. I realise that we have not yet got as far as Schedule 1 and that the proposal is to deal with that Schedule a little later, after Clause 12. That is what the Committee in its wisdom decided. and I think it is the right decision. Nevertheless, even though we are on a much earlier clause, it does refer to Part III of Schedule 1, and I have to refer to it to cover some of the difficulties.

There are two difficulties: one a lack of clarity, and the other a matter of substance. Part III of the Schedule, on page 113, sets out the limitation of certain subsidies, and correspondingly of the rate fund contributions, and it is a part of the Bill which is extremely complex and difficult to follow. There is a Table A (1) (2) (3) and so on, and A (2) reads: If the subsidy and contribution comprise elements based on different years, the reduction shall be made first in the elements, if any, based on the year of account, and, subject to that, in the element based on an earlier year before a reduction in the element based on a later year. That of course is as plain as a pikestaff to everybody except me. It is because of the complexity in that Table and in the Schedule, which determine how the provisions of this clause are to apply, that I then come on to the substance. I refer to that because it seems to me that there could be a circumstance in which the subsidy being paid under this clause, varying between 90 per cent. to 75 per cent. (shall we say for the moment?)—although it could go even lower in a future year, down to 60 per cent.—could be phased out before the operational deficit subsidy under which the Government pay 50 per cent., I think it is, of the cost involved came in. It seemed to me that one way of avoiding this lacuna or gap would be to leave out subsection (9).

As to the meaning of the Table and of the Schedule, I think it would be more convenient to go into that in greater detail when we come to deal with the Schedule, and between now and then I may have had an opportunity of considering any information which the Minister has been good enough to provide which will enable one to understand the Schedule the better. But as to the substance of it, that is the reason for my moving the Amendment now—in order to prevent the occurrence of the situation I have just described.

BARONESS YOUNG

I wonder whether I may take advantage of the offer of the noble Lord, Lord Diamond, to leave the part dealing with the Schedule until we have reached that point in the Bill. I know that if there is any information we can supply by way of clarification or explanation, the Government will be very happy to supply it. The reason the Government are not able to accept this Amendment is because of the way in which both the transition and the rising costs subsidies are to work: they are paid to a local authority as a result of deficits arising in the Housing Revenue; Account. If this particular clause were removed from the Bill the subsidies could be paid regardless of whether the Account was in surplus or deficit; and that is not really the purpose of the subsidies.

LORD DIAMOND

I am grateful to the noble Baroness, and, as she says, we can come to the Schedule later. I quite see that the Government must have support for the purposes which she mentioned; but to move this Amendment was the only way in which I could seek clarification and alleviation of the anxiety which I have expressed and to which I do not think she has fully turned her. mind. This clause refers to the transition subsidy, and the noble Baroness rightly referred to the effect this has jointly with the operational deficit subsidy. My concern was to ascertain whether or not it would be possible to have the phasing out of a transition subsidy before the operational deficit subsidy applied. I am only concerned with that lacuna, or gap, and if I could be assured that when one ends the other comes in, then I should feel inclined to seek to withdraw the Amendment.

BARONESS YOUNG

My understanding is that the transition subsidy can go on—it might not, but it could go on—and the operational deficit subsidy—which concerns an authority that at present (that is to say, either in the years 1970–71 or 1971–72) makes a rate fund contribution—is a separate one and would go only to that particular authority. But the transition subsidy could go on.

LORD DIAMOND

I think we have to leave it at that and perhaps consider it further when we come to the operational deficit subsidy. I seek leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 3, as amended, agreed to.

Clause 4 [The rising costs subsidy, and associated rate fund contribution]:

8.56 p.m.

LORD DIAMOND moved Amendment No. 27: Page 6, line 5, leave out paragraph (a).

The noble Lord said: I beg to move. We are now dealing with a new clause which concerns the rising costs subsidies. If we leave out paragraph (a) we should leave out the reference to a figure of £6 which, according to my recollection, was a diminution from the subsidy that might otherwise be obtained. It is a diminution which does not apply except in the years mentioned; that is, 1972–73 and 1973–74. Paragraph (b) goes on to deal with the rising costs subsidy and says: (b) if for the year 1974–75 or any subsequent year there is any increase in the local authority's reckonable expenditure whereas paragraph (a) referred to the circumstance where: … there is an increase in the local authority's reckonable expenditure which exceeds £6 multiplied by the number of Housing Revenue Account dwellings … So what we are concerned to do in this Amendment is to achieve for 1972–73 and 1973–74 what the Bill achieves for 1974–75 and subsequent years. There seems to be no reason for differentiating those two earlier years and a very good reason for having the procedure defined in paragraph (b), namely, …any increase in the local authority's reckonable expenditure. I hope, therefore, that the Government will feel able to look kindly upon this Amendment which I now move.

LORD SANDFORD

We now move on to the rising costs subsidy. The noble Lord's Amendment in fact invites me to explain why for the years 1972–73 and 1973–74 there is, as it were, a threshold of £6, over which a housing authority must go before it qualifies for a rising costs subsidy. The reason is that these are the years in which, under the movement towards fair rents, there will accrue to local authorities an increase in income amounting to roughly £26 per H.R.A. dwelling—an average increase in rents of 50p per annum per H.R.A. dwelling, which would yield an increase in income on the Housing Revenue Account of £26.

LORD DIAMOND

I am sorry: I did not quite hear the year.

LORD SANDFORD

The first two years of the changeover to this new system are expected to yield roughly those broad figures—an increase in income on the Housing Revenue Account of £26 per dwelling, corresponding to a rise of 50p per H.R.A. dwelling. That increase in income has to be seen against the withdrawal of the existing subsidy of £20 per dwelling, leaving an increase of income available to the local authorities in those areas of £6 per H.R.A. dwelling. After these years, during the initial stages of the progression towards fair rents, about which we shall be speaking shortly, that increase in income ceases, and therefore the threshold comes away. I think the noble Lord will agree that during these first years it is reasonable to have a threshold for the reasons I have given.

LORD DIAMOND

I do not see that it is reasonable at all. What the noble Lord is saying is, as I had indicated to him earlier but which he rejected at the time, that the whole of this Bill is drawn up on the framework of an increase in rents of £26 per annum. The first year is 1972–73. This Bill could not possibly be enacted before halfway through 1972–73 and therefore the increase for 1972–73 will fall wholly in six months and be an increase of £1 a week; that is, £26 in 26 weeks. Therefore, what the noble Lord is now confirming is that this clause is part of a whole scheme embodied in the Bill and this subsection which I wish to remove is one in which there is an assumption of an increase in rents of £26 per year and a falling away, a withdrawal of subsidy, of £20 a year which we have already passed. As we have passed the £20 a year, and as there is £6 here, it can only be on the basis of an increase of £26 a year.

I am therefore invited by the noble Lord to come back to the point that I was making that this Bill is predicated on that assumption and that that assumption has now been riddled by the Government because in the case of Binning-ham, and any authority like Birmingham, the £26 a year will no longer apply. How many "Birminghams" there are we do not yet know; what the Government are doing about Birmingham we do not yet know. The Government are being understandably coy and shy about what they are going to do about Birmingham. They have, however, introduced into the Bill a clause (I think it is Clause 63) which will come later that destroys the whole basis on which the Bill is built. This is part of the structure which has been destroyed, and that is why I am coming back to it. We could not possibly contemplate letting this Amendment go.

Am I not right in saying that the £6 referred to here is part of the framework and is the difference between the £20 which we have already passed and the £26 which therefore falls to be regarded as an inflexible increase in rent for those local authorities which are with reckonable expenditure being dealt with in this clause for rising costs subsidy purposes? There can be no doubt that that is the case. There is an opportunity for the noble Lord to say something more about it if he wishes to do so. It is a further example of the way in which the Bill, since it was originally conceived, has been completely altered by the Government. It is a totally different situation now. Our anxiety is to prevent the £26 increase in rent for the reasons which I have referred to many times: economic, inflationary, hardship—a whole variety of reasons. For those reasons alone, I could not contemplate suggesting to the Committee that this subsection should remain in the Bill. I want to nail it completely and clearly that I have understood from the Minister aright that this £6 is the difference that I have already indicated. It is part of the framework of the Bill and has been shot to pieces by the clause which deals with Birmingham, and all the other Birminghams—and Birmingham is the second largest city in the country; we are not talking about a hamlet—and subject to anything further the noble Lord has to say, I strongly recommend the Committee to divide on this Amendment and I hope to get considerable support upon it.

LORD HYLTON

Can my noble friend tell us whether the Secretary of State has discretion to reduce the withdrawal factor of £20 a year in those cases where the local authority made out a case for not raising its rents by the foreseen £26?

9.5 p.m.

LORD SANDFORD

The noble Lord has introduced the Birmingham case into the discussion and I agree that it has relevance here. The discretion to which my noble friend refers is contained in Clause 63, the first one dealing with the increase to fair rents. The so-called Birmingham situation is the one which will be applied only to a limited number of authorities where it will not be necessary to increase rents by as much as an average of 50p per year in order to reach the fair rent figure. Birmingham's application to be considered under this clause is before the Secretary of State at the moment, so I cannot say very much about it. That makes it rather difficult for me to respond as fully as I should like to the noble Lord, Lord Diamond, at this moment. I am very ready to agree that he has a point here which will apply to these particular authorities. I do not think it will apply to very many authorities; the great majority of authorities will have an increase of income of the scale which I have just described; namely, an average of £26 per annum per H.R.A. dwelling. I recognise that he deserves a fuller response than I am able to give him at this moment in respect of particular authorities that are in the same situation as Birmingham.

I will undertake to reconsider this matter in respect of those particular authorities with a view to giving him a better explanation than I am able to at the moment of how their circumstances will be met in this respect. How their circumstances will be met in respect of the rise to fair rents is clear enough from Clause 63. The noble Lord is perfectly right, it has repercussions in this clause as well. I wonder whether the noble Lord will accept my assurance. I shall be only too glad to give him further assurances and explanations when in a position to do so, which I am not at the moment.

BARONESS GAITSKELL

Is not this the real, crucial criticism of this Bill? The Minister said that there will not be many authorities to which this applies. But how is it that the Government have not worked out, do not know, which are the authorities? I think Newcastle is another of them. And how can the Minister say that there will not be many authorities? On what authority does he say it? On what knowledge does he say this? Is not this, whatever one calls it, the real criticism that all of us have of this Bill on this side of the Committee?

9.9 p.m.

LORD SANDFORD

I really do not think so. Everybody knows that Birmingham are in many ways a unique authority in the housing field. They are the only authority which have already introduced rent allowances for private tenants. They are unique in many other ways. The fact that they are in this position does not in the least invalidate the structure of the Bill as a whole for the great majority of authorities.

LORD GARNSWORTHY

I do not want to add to the confusion because the Bill creates enough already, but Birmingham surely was not the authority which sparked this off. Amendments were introduced (if my recollection is right) in November of last year and at that time I think the case was more concerned with Leicester. It really was only as the local elections approached that Birmingham came into the picture.

LORD SANDFORD

That may be so, but Birmingham has been a unique housing authority since long before the last elections.

LORD DIAMOND

It is true that Birmingham is a very special case but it is an extremely large case. The noble Lord first of all has offered to give me further information. May I say that I am grateful to him. Of course the noble Lord will do that. We rely on him and accept his assurance in that regard. The noble Lord will not consider me discourteous, however, if I say that we are at the moment considering something which is even more fundamental than his assurances with regard to information. The noble Lord is not able to give us information about the Birmingham matter although it has been under consideration. The noble Lord said that the matter is before the Minister. It has been before the Minister and everybody has inquired about it and everyone has received the same answer for two months now, although it is something which cannot take all that time to consider.

The noble Lord recognises—and I am grateful to my noble friend Lord Garnsworthy for making it clear—that Birmingham is not unique in this situation at all events. It is not unique in the situation that it is an authority

which, if it were to increase its rents all round by £26 a year, would puncture the ceiling because the fair rent figure is a maximum; it would puncture the ceiling and therefore could not do that. So the provisions of the Bill could not be enacted—the Government's own Bill could not be enacted. This is a subsection which depends upon that being enacted because it concerns £6 of that very £26. So we are in a situation where we have to recognise (with the greatest possible respect to the Minister Lord Sandford, for whose courtesy I am always grateful) that the Government themselves are in a terrible difficulty. It is clearly a difficulty which does not relate to Birmingham only. The noble Lord says that he cannot say to how many other authorities it applies. No, he cannot. But I think I can tell him that there are many authorities which are scratching their heads at the moment to see the extent to which they can come within the same walls as Birmingham has fitted itself into, acceptably so far as the Minister is concerned. You only have to have a few authorities of that size to make the Bill quite ridiculous. So I am saying to the noble Lord, Lord Sandford, that I am grateful for the information he has promised to give, but we shall obviously have to come back to this question many times if the Government insist on going on with the Bill. I repeat that this is evidence that the whole structure of the Bill has been punctured, and we certainly must show our views about this particular subsection here and now.

9.12 p.m.

On Question, Whether the said Amendment (No. 27) shall be agreed to?

Their Lordships divided: Contents, 17; Not-Contents, 60.

CONTENTS
Avebury, L.	Garnsworthy, L.	Shepherd, L.
Beaumont of Whitley, L.	Hale, L.	Stow Hill, L.
Beswick, L.	Llewelyn-Davies of Hastoe, Bs. [Teller.]	Strabolgi, L. [Teller.]
Davies of Leek, L.		Tanlaw, L.
Diamond, L.	Seear, Bs.	White, Bs.
Gaitskell, Bs.	Shackleton, L.	Wynne-Jones, L.
NOT-CONTENTS
Aberdare, L.	Balfour, E.	Berkeley, Bs.
Ailwyn, L.	Barnby, L.	Bessborough, E.
Allerton, L.	Beaumont, L.	Chesham, L.
Amherst of Hackney, L.	Belstead, L.	Cork and Orrery, E.
Cowley, E.	Gowrie, E.	Reading, M.
Craigavon, V.	Hailsham of Saint Marylebone, L. (L. Chancellor)	Reay, L.
Crawshaw, L.		Redesdale, L.
Daventry, V.	Hertford, M.	Reigate, L.
de Clifford, L.	Hylton, L.	Ruthven of Freeland, Ly.
Denham, L. [Teller.]	Kemsley, V.	Sandford, L.
Digby, L.	Kilmarnock, L.	Sandys, L.
Drumalbyn, L.	Latymer, L.	Sempill, Ly.
Dundonald, E.	Lauderdale, E.	Sinclair of Cleeve, L.
Elles, Bs.	Lothian, M.	Strathclyde, L.
Ferrers, E.	Margadale, L.	Terrington, L.
Ferrier, L.	Massereene and Ferrard, V.	Tweedsmuir, L.
Fisher, L.	Milverton, L.	Tweedsmuir of Belhelvie, Bs
Fortescue, E.	Monsell, V.	Vivian, L.
Fraser of Lonsdale, L.	Mowbray and Stourton, L. [Teller.]	Wolverton, L.
Gage, V.		Young, Bs.
Gainford, L.	Rankeillour, L.

Resolved in the negative, and Amendment disagreed to accordingly.

9.20 p.m.

LORD DIAMOND moved Amendment No. 30: Page 6, line 18, leave out subsection (3).

The noble Lord said: I beg to move this Amendment and it would perhaps be convenient if at the same time we considered Amendment No. 35—Page 7, line 21, leave out subsection (5). The first of these two Amendments concerns subsection (3) under which the Secretary of State has power to order that the amount on which the rising costs subsidy is based shall be determined in accordance with a formula specified in the order, being a formula designed to reduce the amount of rising costs subsidy so far as based on any year after 1981–82 specified in the order. In short, here is a provision under which the subsidy is to be reduced, as I understand it, after the year 1981–82 if the Secretary of State so decides.

The second Amendment, No. 35, at page 7, line 21, concerns subsection (5), which states: The Secretary of State may from time to time by order, for such years after 1981–82 as may be specified in the order, in column 2 of the Table above for 75 per cent. substitute such other percentage, not being less than 60 per cent., as may be specified in the order. Really both these subsections are saying the same thing: giving the Secretary of State power, for reasons undisclosed, to reduce the amount of the subsidy after the year 1981–82. This is a subsidy which has been frequently referred to as vitally necessary for local authorities—the rising costs subsidy—and so long as the local authority is subject to a rising cost which has to be calculated annually, I cannot see 'why there should be any erosion of the subsidy. I therefore move the Amendment in the hope that the Government will either justify it or accept the Amendment.

LORD SANDFORD

It would be convenient to discuss this Amendment and Amendment No. 35 together because they both form part of the review which we think is necessary to have after the year 1981–82 to give the Secretary of State an opportunity to adjust the provisions of this clause in three different ways. All the remarks I made on a similar provision under Clause 3 apply here; namely, that after this length of time there may well be a need to refine still further the selectivity under which all these subsidies apply and to make distinctions, using Clause 16, as between certain classes of local authorities or even between individual local authorities. Some may need to have their subsidy increased, as the noble Lord, Lord Diamond, himself recognised; others may no longer need to have the subsidy at the rate of 75 per cent. It may also be convenient to re-introduce a small threshold of the kind we were talking about a moment ago. The Secretary of State has power to do all this, but it is prescribed in Clause 16 that before exercising the power to make these orders he has to consult with the local authority associations and the order that he eventually makes is subject to Negative Resolution in either House of Parliament. I think there are sufficient safeguards; there is the requirement to consult. The noble Lord will recognise that after the lapse of this period of time there may well be changed circumstances which will require the Secretary of State to exercise his powers in one or more of these directions.

LORD DIAMOND

I am very grateful to the noble Lord. I take it we are still on Clause 4 of the Housing Finance Bill. One should never jump to conclusions, and I wanted to check that first of all; and I take it we are still dealing with subsection (3).

LORD SANDFORD

And subsection (5).

LORD DIAMOND

In that case I find it difficult to relate the Bill to what the Minister said, but no doubt we shall achieve success if we plod along. What the Bill says is: The Secretary of State may by order direct that, for such years after 1981–82 as may be specified in the order …(b) the qualifying amount, if any, shall be determined in accordance with a formula specified in the order … If we had left it there what the noble Lord said would, of course, he relevant. But the subsection goes on: being a formula designed to reduce"— not to vary but to reduce— the amount of rising costs subsidy, so far as based on any year after 1981–82 specified in the order. As I read it, that order may only reduce the amount. If he did not want to reduce the amount he would not bring in an order. If he wanted to increase the amount of the subsidy he would be stuck; he has no power to vary upwards.

I am somewhat confirmed in that daring suggestion that the noble Lord, Lord Sandford, was talking about a different clause in a different Bill by referring to subsection (5). There again it provides: The Secretary of State may from time to time by order, for such years after 1981–82 as may he specified in the order …" — substitute some other percentage for 75 per cent.— not being less than 60 per cent, as may be specified in the order". There is there no limitation to the direction in which the variation can go, but the indication that it could go down to as low as 60 per cent. So we have in the second case an indication of the variation being a variation downwards to anything between 75 per cent. and 60 per cent.; but in the other case—unless I am misreading the Bill completely—there is a formula which gives the Secretary of State power only to reduce the amount of rising costs subsidy after the year 1981–32. So I am bound to ask the noble Lord for a further explanation, in particular of subsection (3).

LORD SANDFORD

I used the term "vary" in respect of the rate of rising costs subsidy and was referring then to subsection (5). But when we are talking about the qualifying amount it is the Whole increase in reckonable expenditure between one year and the preceding year which qualifies, and as it is a whole amount it is not possible to vary that except by a small reduction in the qualifying amount, which is the same thing as introducing a threshold. There is scope for doing that under that particular subsection; but when we are talking about subsection (5) and the variation in the rate of the rising costs subsidy there is scope for reducing it to 60 per cent., or increasing it and selecting one local authority or class of local authority against another class of local authority in order further to refine the ability of the system to concentrate need on areas that need it.

LORD DIAMOND

As for the 75 per cent./60 per cent., we have had this argument before and at this hour one does not wish to delay the Committee longer on that. We have made it clear, as the noble Baroness said in a most persuasive speech earlier, that the frequent financial relationship between central Government and the local authority of 75/25 does not mean 60/40. Sixty/forty is much too low and there is no reason to give the Secretary of State power to introduce a diminution of that order in 1981–82, and it is better that that part of it should he emitted. If we cannot get that part omitted we have to omit the whole of it.

So far as the qualifying amount of subsection (3) is concerned, the noble Lord refers to this as a "threshold". I am a simple man and I do not exactly know what a threshold is. I do know whether you get your subsidy as before, or less than before. Even at this hour I can just about encompass that. It seems to me that the subsection is providing a latitude on behalf of the Secretary of State to retain more to local government and pay less to local authorities. That is why we must vote against it.

LORD SANDFORD

The noble Lord must vote against the subsection if he thinks he has to, but I am happy to be drawn further into explaining this particular part of the noble Lord's Amendment, particularly as it may save us time because the next Amendment, No. 31, refers to this point. It comes into the general view. No. 31 is an Amendment to leave out the word "reduce" and to insert the word "vary", and for the reason which I have just given, that the qualifying amount is the whole amount by which one year's reckonable expenditure exceeds another, it is not possible to vary it upwards, but you can reduce it. The possibility is to reduce the qualifying amount, for instance by saying that the first £2 per H.R.A. dwelling should not qualify for rising costs subsidy except in the case of certain local authorities.

It may well be desirable after 10 years for certain authorities to qualify for rising costs subsidy for any increase in reckon-able expenditure over the previous year and at the same time to provide certain other classes of local authority which only qualify for rising costs subsidy for that amount of increase in their expenditure over a £2 threshold.

LORD DIAMOND

The noble Lord should not be so shy. He should say in more simple terms that it means that if this subsection is passed there can be less money paid to a local authority by way of rising costs subsidy. Am I not right?

LORD SANDFORD

The operation of all three options by the Secretary of State may well enable him to increase rising costs subsidy to some local authorities and reduce it to others. That is the kind of additional selectivity which may be desirable in 10 years' time.

LORD DIAMOND

The noble Lord insists on these subtle words such as "selectivity", but I insist on these plain words such as "more" or "less". So far as this subsection is concerned, a local authority will, if this power is exercised,

get less, as the noble Lord said. It may, for example, be desirable for the Government to exclude the first £2. Then on £2 you get that proportion of subsidy less. I can see no reason whatever why the Government should be taking that power as far ahead as 1981–82 so that, for all the years from 1974–75 until the system is altered, the Bill provides for the qualifying amount to be the whole of the excess in reckonable expenditure. There is a separate issue about the percentage to be applied to it, but "it" is the whole amount. The noble Lord now seeks to argue that there should be some reduction for some selectivity basis in 1981–82.

I do not have the power of the precise foresight with which the noble Lord is gifted, and I do not recommend to the Committee that we should give a Minister those powers at this stage. It is not inconceivable that, by the year 1981–82, it will be necessary to have a further Bill on housing finance in which changes can then be incorporated. It is even conceivable, although I am not persuaded of it, that by 1981–82 the Government may be out of their legislative mess and muddle and may have got matters straight. But I do not know, and perhaps that is going too far. At all events, it is not beyond the realms of possibility that there could be another Bill to deal with the situation in ten years' time. I doubt whether there has been any period of ten years in our history when there has not been a Housing Finance Bill of some kind or other. So I am not impressed by the argument, and I think we must divide the Committee in order to show that we believe that local authorities should from 1981–82 continue to get what they will be getting up to 1981–82.

9.38 p.m.

On Question, Whether the said Amendment (No. 30) shall be agreed to?

Their Lordships divided: Contents, 11; Not-Contents, 57.

CONTENTS
Beaumont of Whitley, L.	Hale, L.	Strabolgi, L. [Teller.]
Beswick, L.	Seear, Bs.	Tanlaw. L.
Diamond, L.	Shackleton, L.	White, Bs.
Garnsworthy, L. [Teller.]	Shepherd, L.
NOT-CONTENTS
Aberdare, L.	Ferrers, E.	Mowbray and Stourton, L.[Teller]
Ailwyn, L.	Ferrier, L.
Allerton, L.	Fisher, L.	Nugent of Guildford, L.
Amherst of Hackney, L.	Fraser of Lonsdale, L.	Rankeillour, L.
Balfour, E.	Gage, V.	Reading, M.
Barnby, L.	Gowrie, E.	Reay, L.
Beaumont, L.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Redesdale, L.
Belstead, L.		Reigate, L.
Berkeley, Bs.		Ruthven of Freeland, Ly.
Bessborough, E.	Hertford, M.	Sandford, L
Cork and Orrery, E.	Hylton, L.	Sandys, L.
Cowley, E.	Kemsley, V.	Sempill, Ly.
Craigavon, V.	Kilmarnock, L.	Sinclair of Cleeve, L.
Crawshaw. L.	Latymer, L.	Strathclyde, L.
Daventry, V	Lauderdale, E.	Terrington, L.
de Clifford, L.	Lothian, M.	Tweedsmuir, L.
Denham, L.[Teller.]	Margadale, L.	Tweedsmuir of Belhelvie, Bs.
Derwent, L.	Massereene and Ferrard, V.	Vivian, L.
Drumalbyn, L.	Milverton, L.	Wolverton, L.
Elles, Bs.	Molson, L.	Young, Bs.

Resolved in the negative, and Amendment disagreed to accordingly.

9.45 p.m.

LORD GARNSWORTHYmoved Amendment No. 31: Page 6, line 23, leave out ("reduce") and insert ("vary").

The noble Lord said: If I may say so, my noble friend Lord Diamond has served the Committee well. If it is the duty of an Opposition to probe and to press a differing point of view, then he has put up a remarkably good performance this evening. If he needed a rest—and I am not quite sure that he did, for he seemed to be in good form—then I am delighted that it should fall to me to give him a brief respite. I beg to move the Amendment standing in my name on the Marshalled List. I am hopeful that the Government on this occasion may accept an Amendment that is so innocent and yet could achieve so much. Although there has been much objection from the other side this evening when we have referred to subsidy reduction, and despite what Lord Sandford said just now, I should like to think that they will seize this opportunity to accept the Amendment.

I wish to make clear what the Amendment aims at doing. We are still on the rising costs subsidy. The use of the word "reduce" has an ominous connotation. As I think the Government this evening have demonstrated, they clearly do not like us to talk about reductions. The use of the word "vary" would at least avoid the conclusion that movement of subsidies could be in a downward direction only. The use of the word "vary" would give the impression that there would be a power of flexibility (of which we have heard so much) up or down. The Secretary of State clearly ought to possess this power. It may be said, and I have no doubt that it will be said, that he does possess it. At this late hour I feel that I have a duty to try to be helpful and to make it clear that he has this power. The word "vary was in fact used by the Secretary of State himself, in Standing Committee E on December 9, when he said: We may have major housing legislation before then or during that period; but that gives the Secretary of State a fair amount of flexibility which both sides of the Committee would wish to give him to be able to vary the amounts after local authority associations have been consulted and after the 10-year period. I hope I have spoken with clarity and perhaps with some brevity, because there is a great deal more that could be said. Those are two qualities which I hope will commend themselves to the Government and persuade them to be a little magnanimous at this hour. I can see no harm being done to the Bill.

9.50 p.m.

LORD SANDFORD

I will certainly be as magnanimous as I can in response to this Amendment, but, as I have already explained—because we strayed into this Amendment when dealing with the previous pair—when the qualifying amount to which this Amendment refers is the whole of the increase in reckonable expenditure, it is not possible to increase it. If there is a variation is must be a reduction. It is just playing with words to no purpose to make the substitution which the noble Lord is asking us to make. But the scope provided for the exercise of the Secretary of State's discretion at this point is coupled with his discretion under subsection (5). Under that subsection lie has power to increase the rate of rising costs subsidy from 75 per cent., which is what it would probably be at, to some higher figure if, in 1981 and 1982, there are housing authorities still burdened with heavy problems of housing. If there were such authorities it would very likely be the Secretary of State's intention and wish to do that very thing. In that case the amount of subsidy to those authorities—and it may well be necessary and desirable to be selective—would be not reduced, but increased. But we cannot use the word "increase" in subsection (3) because it is grammatically impossible.

LORD GARNSWORTHY

I thank the Minister for that very clear statement. He has reiterated what he said earlier and I take his point, that he regards this as a quite trivial Amendment. That was why I was hopeful that the Government might have been willing to accept it. If they will not accept Amendments of vital importance one would have thought that they would want to be a little conciliatory. The use of the word "vary" would do no harm. It would indicate quite plainly that there was a possibility of the figure going even above 100 per cent. If the Minister is so unresponsive in a small matter like this I would not wish to take up the time of the Committee in pressing it to a Division. But I express regret, and if this kind of attitude, this unwillingness to make any kind of concession, is taken, clearly it is likely to temper our approach to further debates. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

9.53 p.m.

LORD GARNSWORTHY moved Amendment No. 32: Page 6, line 32, leave out from ("below") to end of line 40.

The noble Lord said: I think that it might be for the convenience of the Committee if with this Amendment I speak to Amendments Nos. 33 and 34. When this Bill was in another place, during Second Reading the Secretary of State said—I quote from the OFFICIAL REPORT of November 15, 1971, at column 36— Clause 4 provides a rising costs subsidy which will be of particular importance in encouraging local authorities with an existing programme to expand and continue their housing programmes without any fear of those expansions of programme having an adverse effect on their revenue. As I understand it, rising rents are expected to produce a surplus which can be used to finance new building. But the more they build, the greater the likelihood, some think the certainty, of an increased burden on the ratepayer. Putting encouragement on one side, that would seem to risk positive disincentive to building.

Local authorities tend to differ in their approach to building houses. Some of the worst flatly refuse to tackle building by public enterprise; certainly they object to building to let at reasonable rentals on a scale commensurate with local need. Some feel that the home seeker should buy. Others see housing as a social service—we on this side do —realising the importance of families living and growing up in a decent environment, with rents at levels that permit a good living standard. All the means testing that features so prominently in current thinking by the present Government is disliked and rejected by masses of the people of this country.

These authorities who are keen to build, to do a good job, can be discouraged if they have to face too heavy a burden on the rates. If they are to undertake a programme commensurate with local need, then they require the financial resources to carry it through. So it would seem pregnant to inquire what advantage this new subsidy will have over the existing system, if it continues. The Amendment would ensure that the Government pay the full cost of subsidy instead of shifting the burden steadily on to the ratepayers, with all that that would involve in the building programme.

I should like to touch on the source of income which local authorities are expected to rely on; that is to say, ultimately, rent income. It has been said that when a local authority achieves surplus it can devote a good deal of money to new building projects. Does not that mean from the profits extorted from tenants? What sort of morality is that? These people pay rates and taxes as well as the rest of us. Further, the issue of being in surplus is to be decided after meeting administrative costs that again are most questionable—and we shall be coming to this later in our consideration of the Bill. I beg to move.

BARONESS YOUNG

At this late hour I do not wish to take up the time of the Committee in reiterating the arguments that we have had about the proportions of the subsidies paid by central Government and local government. I can only say in answer to the noble Lord, Lord Garnsworthy, that we take the view that it is not satisfactory from the point of view of this relationship between central and local government for there to be 100 per cent. deficit subsidies, in this case in relation to the rising costs subsidy. I do not think I need go through the arguments that we had about this before. We believe that this is the right proportion, and we therefore feel unable to accept the Amendment.

LORD GARNSWORTHY

I. can only regret the reception given to this Amendment. At this hour I certainly should not wish to delay the Committee beyond an agreed time arranged through the usual channels, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

House resumed.