§ 5.8 p.m.
§ THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)
My Lords, I beg to move that the House do again resolve itself into Committee on this Bill.
§ Moved, That the House do again resolve itself into Committee.—(Lord Drumalbyn.)
§ House in Committee accordingly.
§ [The LORD GRENFELL in the Chair.]
§ Clause 4 [The rising costs subsidy, and associated rate fund contribution]:
LORD DIAMOND moved Amendment No. 36:
Page 7, line 24, leave out ("60") and insert ("66⅔").
§ The noble Lord said: We return to our duties refreshed and even hopeful of getting some sensible explanations out of the Government as to why they are continuing with this Bill. But perhaps before coming to that I ought to deal with the Amendment on Clause 4, reminding your Lordships that Clause 4 is the clause which provides for the rising costs subsidy—a most important subsidy. In fact, it is the main subsidy. If one thinks of it in terms of the subsidies which are provided for housing, as opposed to the subsidies provided for rent rebates and rent allowances and for the contribution which otherwise would be made by the S.B.C.—the Supplementary Benefits Commission—this is overwhelmingly the most important of the subsidies. In fact from the figures which the noble Lord was good enough to give me and which I welcome and for which I am grateful, and which I take the first opportunity of publicising because I am sure figures of this kind ought to be enjoyed by the whole Committee and not just by one member—the figures which the noble Lord gave me on behalf of the Government for the year 1976–77 show a tentative 590 estimate (we understand quite well that it is a tentative estimate but tentative estimates are far better than no estimates at all) of a rising cost subsidy of £75 million for that year, an operational deficit subsidy of £15 million and a slum clearance subsidy of between £15 million and £30 million, and the other subsidies making a total of between £320 million and £385 million are the subsidies to which I have referred—the social service subsidies as opposed to the housing subsidies. The position is that we are dealing with the rising costs subsidy, which provides about three-quarters of the building subsidies under the new structure of subsidies provided for in this Bill.
§ Having established therefore that it is a most important subsidy one turns now more particularly to the Amendment, which relates to the calculation of the subsidy. On page 7 of the Bill the calculation of the subsidy is set out. It starts with the figure of 90 per cent. of the qualifying amount. I will deal with the qualifying amount a little later; but let us deal with the percentages first. That starts by providing a central Government subsidy of 90 per cent. in 1972–73 reducing to 75 per cent. in 1975–76 and continuing at that rate to 1981–82. After that, that is to say in 10 years' time, the Government propose under subsection (5) to take power by order to substitute such other percentage for 75 per cent. as may be specified in the order, that other percentage not being less than 60 per cent. So the Government are saying that with regard to this, which is by far the most important house building subsidy, they propose to say here and now that from 10 years hence it will be right to take power to reduce the percentage of 75 per cent. to 60 per cent. That is a miserable point of view. There is no need for the Government to contemplate doing that at this stage. There is no need, indeed, to contemplate taking powers in the Bill now for what they want to do in 1982, for two reasons. The first reason is a political one that it is a little too early in the day to refer to, namely, that the Government will not be there; the second is a much more relevant one, that there is bound to be further legislation between now and then in which further provision could be made, because of course in five years' time, seven years' time, 10 years' time—whenever the Bill comes forward—the Government of the 591 day will have a knowledge of the facts at the time and we shall not be looking forward over 10 years, as the Government are attempting to do now. So in my view the whole thing is far-fetched. It is reprehensible that the Government should be taking power to reduce the contribution to 60 per cent.
§ But that is not the total story. This is merely the percentage which one applies to the relevant amount (called the "qualifying amount"); but if one refers back to subsection (3) which describes the qualifying amount, we have already passed that subsection—but not yet the whole clause—which provides that the Government may alter the formula by which the qualifying amount is computed, so that the qualifying amount can be reduced to anything that the Government want to reduce it to. So that one has a reducing percentage of a vanishing sum. I do not think I am overstating the matter when I say that after 1981–82 the position cannot be held to be encouraging to local authorities.
§ As the Government well know, local authorities take the view that this provision ought not to be there. I take the view that that provision ought not to be there. In fact having already accepted, as we were compelled to accept—it was not willingly; we were compelled to accept—this variation of the qualifying amount down to zero there was no need to make any further provision in relation to the percentage. Already the answer would be a reducing sum without doing anything further about it at all, if the Government so desire. So this is a double reduction, a double penalty, and it proposes a figure of 60 per cent.
§ Therefore I think it would be right to leave the figure of 75 per cent. unaltered for all the reasons I have given, and particularly because it is pure conceit on the part of any Government to claim at this point of time that they can foresee what they will want to do after 1982; and the only argument, namely, that of saving legislative time by having premature provision in a Bill, does not apply. Therefore I should like to see the figure remain at 75 per cent. However, that is not the proposal in the Amendment—not because I would not like to see 75 per cent. but because I have come to the conclusion that, notwithstanding that the arguments put: forward from this side of 592 the Committee are always, by merit, the persuasive ones, somehow or other at the end of the day they are not the arguments which carry. There must be some kind of procedure which intervenes between the making of the arguments and the altering of the Bill which militates against the persuasiveness.
§ In view of the circumstances in which we find ourselves placed in this House, I am bound to go virtually on my knees and tell the Government that the local authorities have asked and I now repeat their request because they have not succeeded in obtaining their request. Their request has been that the figure should stay at 75 per cent. The logic of the argument is that it should be 75 per cent. I think it should be 75 per cent. I put forward the arguments for 75 per cent. But as the Government are proposing in the Bill to reduce 75 per cent. to 60 per cent. will they at all events give us a crumb and alter the figure from 60 per cent. to 66⅔ per cent., being simply an alteration of the qualifying proportion which was three-quarters and is now suggested as two-thirds?
§ That is only a power; it is not a compulsion. It is only putting a lower limit on the exercise of that power in a period later than 10 years' time. I should have thought that the combined request of the local authorities, the A.M.C., the Opposition and, I would hope, many more, including noble Lords opposite who have been asked to support the views of the A.M.C., would have persuaded the Government to listen to this appeal and give us this Amendment. I beg to move.
§ 5.20 p.m.
§ LORD AVEBURY
I support whole-heartedly the remarks of the noble Lord, Lord Diamond, and endorse his plea for the Government to think again on this issue and accept the Amendment, even if they cannot go as far as deleting the provision altogether, remembering that this Part of the Bill seems undesirable to noble Lords on this side of the Committee, I believe to many noble Lords on the Benches opposite and, as the noble Lord, Lord Diamond, said, to the local authority associations. It is not as though the Secretary of State will not have perfectly adequate powers apart from those mentioned by the noble Lord, 593 Lord Diamond. For example, in subsection (3), with which we have already dealt, he has adequate power to alter the qualifying amount. If the qualifying amount is left as it is in the Bill, the Minister could alter the reckonable expenditure under subsection (11), to which we shall come, for under that provision hemay from time to time determine"—any sumas being reasonable and appropriate having regard to all the circumstances.He can take that action in regard to what constitutes "reckonable expenditure" for the purposes of the calculation. Thus, the Minister has two powers; not only the one that the noble Lord, Lord Diamond mentioned—of being able to alter the qualifying amount—but also in relation to what shall be treated as reckonable expenditure.
All that we are told in this connection is what we read in the OFFICIAL REPORT of the Committee proceedings in another place. There, the Minister said that consultations were proceeding with the local authority associations as to what should constitute reckonable expenditure. Although Mr. Amery himself said—this is reported in col. 349—that it was not practicable to leave at large the question what expenditure it was reasonable to debit from the Housing Revenue Account, two columns later he said that consultations had begun with the local authority associations. How can we leave the matter in thin air when Mr. Amery himself says that this is un-undesirable and when the percentage figures given in the table may be applied to an amount which could vary enormously one way or the other, depending on how the Government treat the calculation of reckonable expenditure and whether or not at a future date they exercise the powers under subsection (3) to which the noble Lord, Lord Diamond, referred? I was extremely interested in the figures the noble Lord gave. I had not heard before that the rising costs subsidy was likely to amount to £75 million in 1975–76.
§ LORD AVEBURY
I am obliged to the noble Lord for correcting me. That sum compares with the figure given by Mr. 594 Amery of £55 million for 1975–76, which means that the rising costs subsidy will increase at a steep rate up to the middle of this decade. It might help if I were to give the figures in years. In 1972–73, the figure is £10 million; in 1973–74, £20 million; in 1974–75, £40 million; in 1975–76, £55 million; and in 1976–77, £75 million. Thus, contrary to the expectations of Mr. Amery in the other place, the rising costs subsidy does not look like levelling off. I wonder whether the noble Lord who will reply will do a bit more crystal ball gazing in this connection. I promise that we will not hold him to his estimates, though they may help the Committee. I promise him that we will not look back to these proceedings in 1980 and point to the errors he may have made. In any event, the noble Lord will probably not be answering then, even if his Party is still in power. It would be valuable to the Committee if further figures could be given.
Let us assume, for the sake of argument, that the rising costs subsidy continues to increase at the rate of £15 million a year, a not unreasonable assumption and less than the average increase if the overall figures are worked out between 1972 and 1977. On that basis the rising costs subsidy in 1982–83, when this power comes into effect, will be £150 million. That would be the 75 per cent. figure allowing for a £15 million increase annually. Noble Lords will see that the figure on which this calculation is made—of 100 over 75, giving £150 million—works out conveniently at a reckonable expenditure in that year of £200 million. I hope that the Minister has followed me so far. If this power is exercised and immediately the Minister of the day deduces the amount to 60 per cent., then the payment of rising costs subsidy in that year would be £120 million. Local authorities having had £135 million in 1981–82 and having expected to get £150 million in 1982–83, will in fact be knocked back to £130 million, thus losing £30 million which they would otherwise have expected to receive if this subsidy had been continued in its present form.
The Minister may say that the rising costs subsidy will not reach anything like £150 million in that year. If so, I hope he will correct me. On the other hand, if my calculations are correct, then this will be a very serious matter indeed for 595 local authorities because they will suddenly have to find £30 million from other sources. I can envisage those other sources. The money would certainly come out of the pockets of the tenants if noble Lords opposite and their friends are in power at that date. I should like to know how this clause can be reconciled with paragraph 62 of the White Paper which says:In areas of housing stress the most powerful instrument for the promotion of new building will be the proposed new rising costs subsidy.If that is to be the case, then an abrupt reduction of £30 million would be intolerable.
Ministers have said that they expect to clear the bulk of unfit houses by the end of this decade. Unfortunately, Ministers have been saying that since the war, whichever Government have been in office. We cannot risk the sort of catastrophe that would occur if their predictions did not come about and we still have areas of housing stress in 1981–82. If that were to happen, we should still want to use the rising costs subsidy in the way the Minister said, as the most powerful instrument for the promotion of new building. I am not talking just about Greater London, although I was disturbed to note that Mr. Amery said in Committee in another place that most of the money allocated under this heading would probably be for authorities in Greater London. He said that it was difficult to foresee what would happen in areas such as Liverpool and Sheffield.
I do not believe that we shall cure the housing problems of our cities, in addition to Greater London, within the period between now and 1981–82. Since this uncertainty exists, uncertainty which Ministers have agreed remains—they have agreed there is uncertainty about the calculations, about the rate of new house building and about the time it will take to get rid of the slums—why not leave things as they are and come forward with fresh legislation towards the end of the decade? It is inconceivable that we shall go for 10 years without having another Bill dealing with housing subsidies. We are starting off here with a brand new, untried system. Can the Minister say that this scheme of things can be left unchanged for 10 years, irrespective of what happens? Of course not. There 596 will be plenty of opportunities between now and 1982 to amend this measure and alter the provisions of Clause 4. The Government would lose nothing by accepting the Amendment.
§ 5.30 p.m.
§ LORD DRUMALBYN
To listen to the noble Lord, Lord Avebury, one would suppose that this was a mandatory provision requiring the Secretary of State to reduce the proportion to 60 per cent. in ten years' time. In fact, of course, it is not: it is a permissive power. The proportion may be reduced in ten years' time to 60 per cent. on the amount of rising costs subsidy by reference to the base year. But at the same time, of course, it is also an assurance that it cannot be reduced lower than 60 per cent.
The noble Lord will also have noticed that under Clause 16 the alterations can be made in respect of particular authorities or a particular class of authorities. It says that an order shallapply to any description of local authorities or new town corporations specified in the order, or to a specified local authority or new town corporation.So it is a minimum percentage below which the Secretary of State cannot go in regard to any particular authority or any class of authority or indeed the authorities as a whole. What is important to recognise also—and this may be an answer to some of the projections of the noble Lord so far into the future; I am sure he will excuse me from projecting more than five years, but we do not think it is proper to do so—is that this provision only bites on the rising costs subsidies which arise in 1982–83 or later years. It does not bite on the elements from the previous years. Therefore there cannot be a reduction in the elements which would otherwise be payable in the years 1982–83 but which arose in the years before 1982–83. It is very important that this should be recognised.
It is very difficult to foresee what the situation will be in ten years' time, as the noble Lord, Lord Avebtury, himself recognised, and indeed as the noble Lord, Lord Diamond, very much recognised because he doubted whether it was at all proper to put a figure in for a time so far ahead. It is very difficult to do that, but it is worth recognising that it might well be equitable ten years from now to 597 reduce the percentage of the qualifying amount which was met by subsidy for those authorities with few outstanding housing problems, and to increase the percentage for those authorities with serious outstanding housing problems. It is in order to give reasonable flexibility that the scope for reducing the percentage should not be too small in comparison with the scope for increasing it. The normal percentage is fixed at 75 per cent. and the maximum up to which presumably it could be raised by order is 90 per cent. although in theory it could be raised to 100 per cent., but I would think it unlikely that it would be raised higher than 90 per cent. As 75 per cent. is midway between 60 per cent. and 90 per cent., 60 per cent. seems to be the appropriate floor if 90 per cent. is the appropriate ceiling.
I would simply mention that this question will arise on two other occasions—the rent rebate subsidy, and again Oil the rent allowance subsidy—and exactly the same Amendment has been put down in each case. I hope that the noble Lords will be inclined to accept the suggestion that I have made because it seems to me that this is desirable for the two reasons that I have given—that it provides a balance on either side and that it does give the necessary flexibility to make reductions in some cases and possibly to make increases in others.
One has to visualise that over the next few years we shall be gradually approaching a position where fair rents are charged all round and it is in that way that the Housing Revenue Account income is gradually going to increase; the subsidies are conceived as deficit subsidies and it is quite impossible to foresee ten years ahead what the position will be. All we can do is to give this assurance that in any case there will not be a reduction below 60 per cent. in the rising costs subsidy after that period for any authority and it seems to me that that really is what this is about. It is desirable to have the flexibility, bearing in mind that this is for the expenditure that will be taking place at that time in 1982–83 and not the expenditure that has gone before, where the amount of the subsidy will have already been fixed. It seems to me that this is a sensible step to provide a balance for the future—and it is admittedly a distant future, for ten years 598 is a long time in circumstances such as these.
§ LORD AVEBURY
The noble Lord seems to be approaching the end. May I ask him to deal with one point before he sits down? I agree that ten years is a long time and I did ask him whether he anticipated that this scheme of housing subsidies as set out in the Bill we are considering to-day is going to last unchanged for the next ten years, or whether he does not think it is highly improbable there will not have to be fresh legislation at some point during that period. Will the noble Lord therefore say why lie does not think it would be appropriate, bearing in mind the basic unpredictability of these things, to introduce this percentage on some other occasion when the opportunity has been taken to amend the subsidies in any case?
§ LORD DRUMALBYN
The trouble is that that is not the Amendment we have before us. The Amendment is to increase this rate from 60 per cent. which is the minimum rate proposed in the Bill, to a lowest minimum of 66⅔ per cent.
§ LORD AVEBURY
If the noble Lord objects for that reason, he is welcome to restore the 75 per cent. and leave it as it was.
§ LORD DIAMOND
The noble Lord is on a very weak point there because the previous Amendment, the one we have just passed, was to leave out subsection (5). So if the noble Lord is making the point that the way of giving effect to the greatest weight of argument is to leave out subsection (5), he is quite right; but he did not let us do it. What are we to do once subsection (5) has been required to be within the clause and not outside the clause? The only way we can move is the way we are moving.
I was very glad to hear the noble Lord say—and I took down his words; I hope I have got them accurately—it is quite impossible to see ten years ahead what the position will be. At all events we start off on some philosophical basis of agreement there. May I invite the noble Lord to turn his attention to answering the question which the noble Lord, Lord Avebury, made in his very helpful and persuasive speech, which the noble Lord did not feel like answering? Would he like to look at page 167 of the Bill in 599 his hands where he will see a schedule of the housing subsidies Acts which are being varied. If he will look at the middle of page 167 he can refresh his memory as to the number of times per annum or per decade housing subsidy Bills or Bills in which subsidy elements could be incorporated in the Bill conic before your Lordships' House. There was the Housing Subsidies Act 1956, the Housing Act 1957, the Housing (Financial Provisions) Act 1958, the Housing Act 1961, the Housing Act 1964, the Housing Subsidies Act 1967 and the Housing Act 1969. The noble Lord, as a reasonable man, will recognise that it is a million to one that there will be another Housing Act between now and 1981–82 into which could be accommodated properly any provision the Government then want to make in the light of the knowledge of the then facts, without attempting the impossible task—indeed we are agreed it is an impossible task—of, to use the noble Lord's own words, seeing ten years ahead. So that is the first point, that there is no need for this provision at all at this time.
The noble Lord went on to say that there are two reasons why we should be persuaded to withdraw the Amendment, and he gave us two good reasons for pressing this Amendment to a Division, which I am proposing to my noble friends—and the Liberal Party if they are so inclined. The first reason he gave was that this cannot affect the earlier elements, that it affects only new payments on which the subsidy is then calculated. That is, of course, true so far as it goes. But what does subsection (6) say—unless the noble Lord is going to accept my Amendment to remove subsection (6)? It says:(a) rising costs subsidy, so far as based on any of the years 1972–73 to 1976–77"—that is those five years—shall not be payable for the year 1982–83 or any subsequent year.So of course it is the new expenditure which counts, and the noble Lord's argument that the total subsidy is at that time a combination of the new subsidy he is seeking power to reduce and the old subsidy on a higher rate, so that if you mix the two together you are not going to get such a vast reduction, is a totally invalid argument. So far as those years 600 are concerned, the subsidy will have ceased.
Subsection (6) goes on:(b) rising costs subsidy, so far as based on the year 1977–78 or on any subsequent year, shall not be payable for more than five years …".So after 1982–83 the subsidies on the first of those years stops. So the following subsection, which phases out the subsidy over a period of years, gradually phases out the subsidy in time, is a complete answer to the noble Lord's point that one must not merely look at what we are looking at, namely, the impact of his proposal on new subsidies, but also at the effect on old subsidies as well. I repeat, so far as the old subsidies is concerned, most of them will by then have gone.
That brings me to his other argument—it is not a very substantial one, so I hope he will forgive me if I do not devote a great deal of time to it; namely, that 75 per cent. happens to be conveniently midway between 60 per cent. and 90 per cent. That is true. I do not know why he did not fix his lower figure at 50 per cent. because he could then have said the 75 per cent. would be midway between 50 per cent. and 100 per cent., and the argument would have been just as weighty. But if he looks at how the percentages have moved, he will see that they do not move in those amounts each year; they move in gradual steps. If the Government in 1982–83 are going to reduce the amount of percentage, they would not reduce it in one fell swoop from 75 per cent. to 60 per cent., even if they are determined to go on on this disastrous path, but continue the reduction in force for five years—90 per cent. to 85 per cent., to 80 per cent., to 75 per cent. and then of course to 70 per cent. He does not take power to do that specifically. He refers to the figure of 60 per cent. It is not impossible for the Minister to do that. I agree, but the argument that you need the figure of 60 per cent. in order to provide a floor which is equidistant from the point that we are considering as is the ceiling, is, I think, a slight argument and is contradicted by the rates, which are 5 per cent. per annum.
So I come back to the main argument, which was the main argument of the noble Lord, Lord Avebury, that there 601 is no need to contemplate this at this stage; there will be plenty of opportunity if the Government want to do it. This is the most important subsidy affecting local authorities; it is, on such evidence as one has, of growing importance. The amount proposed would be a crippling blow, a blow possibly of some £30 million, which is at the moment the combined contemplated amount of the two other housing subsidies contemplated for 1976–77. That gives an idea of the measure of it. It would be a crippling blow on local authorities for this to be done, and there is no need to contemplate it at all at this point. So I am totally dissatisfied with the noble Lord's reply and will seek to divide the House on this very important Amendment.
§ LORD DRUMALBYN
I think the noble Lord is perhaps exaggerating the problems that will arise here. He says that many changes take place. This has been so, and that is precisely why an effort is being made in this particular Bill to devise a system which can last, and we hope that this will last. Of course, we are not saying that it is never going to be changed; there are plenty of powers in the Bill for variation, and it has been said by my right honourable friend in another place that a review will take place in about ten years' time to examine the working of housing finance as a whole. Obviously the figure we are discussing is not an absolute figure. One cannot say that it is an absolutely right figure for ever and ever. If the noble Lord wants me to look at this figure again, I shall gladly do so. I am obviously not in a position to accept this particular proposal of his to-day; he knows how these things work. But the purpose is to give what is both a warning and an assurance for the future, so that people will know that a change downwards may occur after 1982–83, by which time the subsidies will be running for five years only instead of for ten years, for any particular year. It will be a warning that a change may occur, and an assurance that it will not go below a certain figure.
As the noble Lord says, ten years is a long way off, but it is clearly desirable, in my view, contrary to what the noble Lord, Lord Avebury, says, that there should be a figure there, and 60 602 per cent. does not seem to be a bad figure. But I am quite prepared to look at the figure again in the light of what the noble Lord has said. I would say to the noble Lord, Lord Avebury, that he ought to bear in mind that over the whole of this period the various authorities that will be in need of this kind of subsidy will be changing, depending on the number of houses that they have to build in order to meet housing need, and that will give rise to widely varying requirements from authority to authority throughout the country. As I said, some may have a need for a higher subsidy in view of the state of their Housing Revenue Account. Others may not need it, and indeed may not need as much assistance as the 75 per cent. they will be having for the previous five years. It was not without reasonable justification, in my view, that 60 per cent. was put into the Bill. It may not be the right figure and we are quite prepared to look at it again, though I must say without any assurance that we shall be able to change it.
§ LORD ROBBINS
I appreciate that this argument is about percentages, but percentages can apply to price levels of 100 per cent. or 1,000 per cent. or 10,000 per cent. I wonder whether the noble Lord would enlighten me as to what assumptions were made regarding the movement in the value of money in the next ten years when this Bill was being thought out in the first instance?
§ LORD DRUMALBYN
Perhaps I could reply to the noble Lord. As I said, one of the objects of this Bill is to get away from the flat level of subsidy that had to be altered from time to time, and, because these are percentages known in advance, it does not matter what the movement in the value of money may be in future in relation to the Bill. I am grateful to the noble Lord for pointing this out, although we hope that as a result of the co-operation of everyone in this country we shall be able to moderate the rate at which money has been losing its value.
§ LORD GARNSWORTHY
In the light of what the Minister has just said in reply to the noble Lord, Lord Robbins, and in the light of what his noble friend Lord Sandford had to say last week, I wonder whether he could explain what is 603 meant in the Explanatory Memorandum by the heading "Financial Effects of the Bill", where these words are used:… to remain at about the estimated level of such charges for 1971–72 (£350 million), at current prices, until 1975–76 and may be reduced thereafter".
§ LORD DRUMALBYN
We have had a long discussion on this point, and I would have thought the Committee would not wish us to go over that again. It seems to me that what transpired in the discussion with the noble Lord, Lord Diamond, was that it meant exactly what it said.
§ LORD GARNSWORTHY
I am raising the matter in view of what the noble Lord, Lord Sandford, said so specifically last Thursday night, when he attempted to present an entirely different picture.
§ BARONESS GAITSKELL
I wish to intervene with only a couple of sentences. I regard this kind of legislation, with percentages of this kind, as interference legislation. To presume to have percentages of what is going to happen 10 years hence, to look so far ahead and put a precise percentage, comes back to what Lord Robbins has asked for, which is simply unnecessary and only causes trouble to people who are trying to improve this Bill.
§ LORD AVEBURY
Before the noble Lord, Lord Diamond, intervenes I should like to clear up what I think is a misunderstanding between the noble Lord, Lord Drurnalbyn, and myself. When I say that I do not want this figure to appear I mean that, having had the 75 per cent. for five years, the local authorities should continue to enjoy that rate of support unless Parliament should otherwise determine. I am sorry if I did not make that absolutely clear in my intervention to the noble Lord, but, as I have already pointed out to him, we are likely to have many opportunities for amending this Bill between now and 1982. The noble Lord is being very disingenuous when he says the Government have decided to undertake a comprehensive review of the system after 10 years of operation. If he likes we will have a little bet on this. I will give him £100 to £1 that between now and 1982 this Bill, after it has become law, is amended. If he would like to put some money on that I am prepared to offer him generous odds.
604 As the noble Lord, Lord Diamond, pointed out, when one looks at the Schedule one finds that fresh Acts have to be brought forward every two or three years. What I said to him was this. When one is embarking on a totally new and untried system, obviously it is more likely that it will have to be amended than if one is merely tinkering with something which has existed for many years. My point was a valid one. If the noble Lord does not like the figure of 66⅔ per cent. he ought to strike out this provision altogether and continue the 75 per cent., which local authorities will have enjoyed at that time for a continuous period of five years, into the indefinite future unless Parliament should otherwise decide in the intervening years.
§ LORD DRUMALBYN
That is precisely what the Bill does. Clause 16 gives the Secretary of State power, with the concurrence of the Treasury, to make an order by Statutory Instrument subject to annulment. This is not the kind of thing one could amend in great detail. If one is simply altering a figure it seems to me eminently appropriate that it should be done in this way. It cannot be said that it will not give Parliament an opportunity to look at it in the light of the circumstances of the time.
§ LORD AVEBURY
I am sorry to say this, but the noble Lord is again being disingenuous because he knows perfectly well that we cannot amend orders, whereas we can amend legislation. If, when the time comes, we do not think the percentage decided by the, Minister is correct we shall only have the opportunity of saying "No" and not of suggesting some alternative.
§ LORD DRUMALBYN
I entirely agree with that, but I should like to take up another point the noble Lord made. This is a difficult concept for noble Lords—for any of us, including myself sometimes—to realise, because it is so different from what has gone before. What we are legislating for here is a percentage payment of a deficit. If there is no deficit—if by that time the Housing Revenue Accounts are in balance—then there is no deficit and no subsidy. It is where they are in deficit that the subsidy will be payable, and it is on this particular subsidy that there will be the greatest variations because of the wide variation of need for 605 housing in different parts of the country. The mere fact that there is a need for more building will not necessarily mean that there will be a deficit. That is the kind of thing that will have to be looked at.
§ LORD DIAMOND
I notice the noble Lord did not take up the bet—£100 to £1. It is smaller odds than the one I suggested of a million to one. Mine was rather an oratorical comment. I was much too cautious to attach the word 44 "pounds" to it.
May I join with the noble Lord, Lord Avebury, in suggesting that there is no conclusion we can draw but that there will be another Bill? This is a totally new proposal, and it is common sense to assume that in the working out of it there will need to be some structural alterations of the kind which one cannot incorporate in a statutory order. The Committee has any number of examples before it. I can think of provisions of the Finance Bill, where we set up a new tax each year, to last for ever. But the following year we find it needs adjustment in relation to experience. There is hardly a provision in the Finance Acts which does not have to be altered year by year. The noble Lord, who had such great experience of the Treasury, will confirm what I am saying. We can assume that there will be another Bill, into which a proposal of this kind could conveniently he incorporated, and therefore that there is no need for this provision, but as the Bill includes it we have to deal with it as best as we can.
Before going on to the noble Lord's suggestion, which was a welcome one, I would say to the noble Lord, Lord Robbins, that I hope he will find it convenient to come on several future occasions when we are discussing other clauses in this Bill. It was like manna from Heaven to hear what he had to say. As the noble Lord, Lord Drumalbyn, indicated, I spent a long time trying to get the Government to say, notwithstanding the Financial Memorandum to the Bill, which refers to the cost remaining about the estimated level of such charges at current prices, what it would be at constant prices. But, alas, I have had no answer so far and that means that at least two sections of the Committee—the first importantly represented by the noble 606 Lord, Lord Robbins, and the second by myself and my colleagues—have had no answer to the request that we should be told what the figure is at constant prices, or within what bracket at constant prices it is. But, in my view, it is a figure of such size as to make nonsense of the claim that the level of subsidies is being maintained. But we shall come back to that many times.
In the meantime, I want to deal with the very generous suggestion which the noble Lord made—he said that I understand these processes, and indeed I understand them very well—that I should withdraw the Amendment and that he should take the suggestion away and think about it without commitment. He meant by that, if I may just fill in the gaps, nothing more than that there will be an opportunity at a later stage of the Bill when he will be able to tell us what conclusion he has reached. If I may suggest it to my noble friends, and I hope to the noble Lord, Lord Avebury, and his noble friends, that is the most we could reasonably ask the noble Lord to do in present circumstances. So if I have understood his remarks correctly, I am happy to beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 6.2 p.m.
LORD DIAMOND moved Amendment No. 37:
Page 7, line 26, leave out subsection (6).
§ The noble Lord said: Subsection (6) provides that the subsidy—and I have no need to repeat what an important subsidy it is, and how it is of far greater importance than any other housing subsidy—should be withdrawn in the manner described in paragraphs (a) and (b). It will be phased out according to those periods if subsection (6) remains in the Bill. The purpose of this Amendment is to suggest that reconsideration should be given to withdrawing it, mainly because the period suggested is broadly one of five years, once the provision gets going, because the best information one has is that those authorities which are, in the main, likely to be affected by this subsidy regard 10 years as the appropriate—though not necessarily the minimum—period. They feel that the figures will work out in that way.
§ The most important of the authorities is the G.L.C., which has worked out its 607 figures with great care. I have them in front of me, worked out and forwarded by Mr. Wilson, the Solicitor and Parliamentary Officer. Therefore, the figures come with the full authority of the Greater London Council. Its calculation, by way of example, is that if you had a building to accommodate three persons and you paid £3,000 for the land and £6,500 for the building, making a total of £9,500, your probable outgoings in land charges would be £760—that is, a 60-year funding period at 8 per cent. interest—and in management and maintenance would be £80, making a total of £840. Assuming a fair rent of £8 a week making £416 per annum, you would be left with an initial deficit of £424 per annum. If you assume an inflation rate of a modest 5 per cent. per annum—it is a curious reflection on our affairs that I should have to refer to 5 per cent. as modest, but I think it is reasonable to use that adjective at the present time—it would take about 20 years before the development moved into an annual financial surplus.
§ LORD DIAMOND
This is a reducing amount, so it would be equivalent to compound. The subsidy provision is for a fixed amount, and the view of the G.L.C. is that it should continue to be payable for 10 years in relation to the deficit on any base year. By "base year" the G.L.C. means the starting year or the year in which the expenditure is incurred. That is its view, carefully calculated and put forward with full authority. I do not know whether the Government have any other figures to justify their proposal for withdrawing the most important housing subsidy twice as fast as that. I think all I need do is to leave the Government with those figures and listen to their explanation. I beg to move.
§ LORD SANDFORD
The noble Lord, Lord Diamond, is perfectly right to continue to stress the importance of this subsidy, because it is the one on which authorities with severe housing stress will rely. I do not quarrel with that at all. But I would ask noble Lords not to be unduly disturbed or dismayed or put off by the apparently negative sense in which subsection (6) is worded. What it means 608 is that the rising costs subsidy, in the form in which we have been discussing it and as it is set out in subsection (4), may well need to be drawn to a conclusion on the dates set out, in order that a fresh and more suitable form of the rising costs subsidy can be brought forward and adopted for those authorities which, in 10 years' time, are still labouring under a severe housing problem.
The position, as set out in subsection (6), is this. Under paragraph (b), the Government agree to a minimum period of five years for this subsidy in all circumstances. They have already agreed in certain circumstances, under paragraph (a), to a period of 10 years in the case of elements of the rising costs subsidy based on 1972–73. Under subsection (7), the Government are willing to contemplate a period of 10 years or even longer in all cases. But all of this is subject to the review which everybody regards as necessary in a period as long as 10 years.
I should like to make a general point, carrying on the point which my noble friend made on Amendment No. 36. In this Bill we are not adding on a fresh subsidy. We are not enacting another Bill in the same series as those to which the noble Lord drew our attention, which are all enumerated in the Schedule. We are not piling a fresh subsidy on to the 60 subsidies which are already in the Schedule to the Bill. What we are doing here is undertaking a very radical reform of the whole system of housing and of financing housing, incorporating nine subsidies only and building into this system a flexibility which will enable the Secretary of State of the time to respond, flexibly and effectively, to a change in circumstances, rather than just adding a new subsidy on top of all the other old subsidies. Recognising that circumstances will change—and they will change very considerably in 10 years—and admitting that we cannot at this point tell by how much, in what direction, to what extent, I submit that it is sensible to make provision for the Secretary of State to define in due course precisely the form of subsidy, the percentages, the date and all the detailed provisions and directions which as noble Lords opposite have so rightly said, we cannot possibly do at this stage.
What we are doing is establishing the framework in which the Secretary of State 609 can exercise that discretion. Subsection (6) is the one in which we set out the dates beyond which we think it would not be sensible to continue rising costs subsidies in the precise form set out here. But for those housing authorities which still have to mount and increase their housing programmes we envisage that not less but more subsidy will be available. Most of this subsidy for many authorities, and all of it for some, will in any case have been phased out by the operation of the Bill as we have it before us. But it may be necessary to invoke Clause 16 and exercise more selection and discretion as to which kind of authorities should continue to receive the rising costs subsidy; whether for those authorities the prescribed scale is adequate and whether for other authorities the rising costs subsidy as set out here should be brought to an end. This is the kind of flexibility which this subsection, together with subsections (3) and (7), introduces. There is no question of cutting off all these subsidies dead, just when this system is beginning to overate well, and certainly no question of cutting them off for those authorities which have major housing programmes ahead of them.
§ LORD LEATHERLAND
If the words which the noble Lord, Lord Sandford, has used had been incorporated in the Bill perhaps we should not feel as suspicious as we do at the moment. In subsection (6) the Bill states specifically that this rising costs subsidy shall end in 1982–83. If the subsection went on to say:and shall then be replaced by a new subsidy which will either be more generous or less generous …then the situation would be understandable and we should be—
§ LORD LEATHERLAND
I think so. The vagueness of subsection (7) would mystify a lawyer, never mind an ordinary Member of this House. When one looks at the table in subsection (4) to which my noble friend Lord Diamond was 610 referring earlier, one sees that something is envisaged for the years subsequent to 1982–83. The table refers to:1982–83 and subsequent years: 75 per cent., or such other percentage as may be substituted…If this Bill is to be the "bible" for rent regulation in future years then it ought not to say in subsection (6) that the subsidy ends in 1982–83 without proceeding to explain what will happen in subsequent years. Is there to be a new subsidy at the end of that period or is there not? Is the new subsidy at the end of that period to apply to all councils or only to certain councils? The Bill ought to go into a fuller explanation of the situation than it does.
§ 6.14 p.m.
§ LORD AVEBURY
The problem with this subsection is much the same as the one we were discussing in relation to the figure in the previous Amendment. In spite of all the files to which the noble Lord, Lord Sandford, has referred in subsection (7) and in Clause 16 it is possible under this provision for local authorities suddenly to suffer a drop in their income from the rising costs subsidy in the years after 1982–83. If the Minister decides not to exercise his discretion either under the next subsection or under the other clause, then all the rising costs subsidies which are based on the years 1972–73 to 1976–77 will suddenly disappear from the calculations, and the councils will face a very stark drop in income which, as I said in relation to the last clause, may increase the burden on their tenants. It is no good the noble Lord, Lord Sandford, standing up and saying, "We might not apply it to all authorities. We have power to limit it to certain classes of authorities or to particular authorities, so we are not going to be nasty to all authorities but only to some." This is a most unsatisfactory situation in which to leave local authorities. They will be completely in the dark as to how these powers may be exercised and will not know whether they will suffer enormous drops in income. I do not agree with the noble Lord when he keeps talking about the need for flexibility.
I do not propose to repeat what has been said about the likelihood of further legislation, but I think we can carry this flexibility argument too far. We need 611 only to look ahead to 1977 or 1978. This is as far as the Minister can make calculations. During the course of the proceedings on this Bill he has continually said that there is no point in continuing it any further because of the uncertainties; that any estimates which he might be able to give the Committee for the years after this would be absolutely valueless. If that is so, let him not make provision for a deduction such as is envisaged in subsection (6) for any authority or class of authorities, but let him leave the authorities with the rising costs subsidies of which they are then in possession unless Parliament brings along fresh legislation. I hope that the Minister will be just as forthcoming as he was in relation to the previous argument and say that, after listening to the splendid arguments from this side of the Committee, he will take back the subsection and introduce a better one on Report stage.
§ LORD DIAMOND
I am very grateful to the Minister for what he has said and, like the noble Lord, Lord Avebury, I have every hope that he will proceed by logical steps from what he last said and take the subsection away and look at it again. Inasmuch as the whole purpose of this most important subsidy is to meet the difficulties of local authorities building new property until such time as the rents provide for the costs, then the right period for which to provide is the period which those with experience tell us it takes in order to move from a position of deficit to a position of balance. A most important local authority Las told us that that period is 10 years. When I moved the Amendment I said, "I am told that it is 10 years. I should be very glad to listen to any figures or any evidence the Minister can give to show that it is not 10 years". The noble Lord was conveniently silent on that score.
May I take it that he agrees with the important evidence that I have that the right period for this provision, according to the philosophy of the Government in providing the subsidy, is one of 10 years? We move from that to ask, "Why, then, is there a provision in the Bill which at first glance such people as read the Bill with scant knowledge like myself or like the Solicitor and Parliamentary Officer of the Greater London Council 612 are driven into the mistaken conclusion that the purpose of the Bill is to reduce the period from 10 years to five?" I cannot think why we should reach that conclusion, except that that is what the Bill says in the plainest of languages.
But the Minister goes on to say, "Ah! but you must not judge Conservative Bills by what they say" That may be so: we are rapidly being driven to that conclusion. But I think the traditions of Parliament are that, broadly, a Bill should say what it means, and this Bill says in subsection (6) that the subsidies are to be phased out in the first five years over the period laid down and from then are to last for five years and not for ten. But (and I am not leaving out a jot of the noble Lord's speech, because it was a welcome speech) the noble Lord. Lord Sandford, went on to say, "But in subsection (7) we can vary that, alter it, or make it less restrictive by an order in, broadly, whatever way we want to." That is very nice to know, but I am bound to say to the noble Lord that if you see in a Statute that the period of a subsidy is reduced from ten years to five years, and that in ten years, eleven years, twelve or thirteen years a Government may come forward and vary that, you are a wise person to assume that, other things being equal, the subsidy period is going to reduce from ten years to five years.
That is what I have assumed; that is what the Greater London Council has assumed, and that is why we are saying to the noble Lord that if, as apparently is the case, we are all agreed on the three main steps of this argument—(a) this is the most important subsidy for local authorities which are affected in this way; (b) the uncontroverted evidence is that it is required for ten years to serve its purpose, and (c) the Bill takes power in subsection (7) to introduce a state of affairs in which it could be paid for ten years—then for heaven's sake! let subsection (6) coincide with that. Please take away subsection (6), which says that the period is to be reduced from ten years to five years, and bring it back saying what it means, namely, that it is going to continue at ten years unless in due course a Government decide to alter it and have it the other way round. Let subsection (6) say that the subsidy will continue for ten years, and let subsection (7) say, as indeed the part of the Bill 613 we have just discussed said, that if in ten years' time the Government think ten years is too long then they will come along and alter it.
But, in the meantime, all those local authorities who have enormous responsibilities and have to work out their budget years ahead, and who cannot rely, who would not dream of relying and whom the noble Lord would not ask to rely, on what a Minister has said in Parliament about the meaning to be attached to a particular clause or what a Government might or might not do in ten years' time, will know where they are. They would be in a position to know that ten years is the figure agreed on all sides and that ten years is the figure provided in the Bill.
I therefore hope that the noble Lord is going to say that, as all the steps in the argument are agreed between us and as the Bill, unhappily and uniquely, is upside down—and I will not make too much comment about that at this stage, because I am hoping the Minister is going to be helpful—he will take this part of the Bill away, put it the right way up and bring it back again at a later stage. If he would say that, then we would have achieved our objective of improving the Bill.
§ BARONESS GAITSKELL
I was very interested in what the Minister said on the previous Amendment, when he remarked that a certain clause was both a warning and an assurance. I find it very difficult to understand this Bill, I must confess. I am for this Amendment on this subsection (6), because I find in it a warning but absolutely no assurance.
§ 6.25 p.m.
§ LORD SANDFORD
I should have thought the assurance given in, for instance, subsection 6(a) was worth a considerable amount. It is an assurance that if a housing authority qualifies for rising costs subsidy of £X thousand in 1972–73 and that has not been eliminated by a surplus occurring on its housing revenue account, it can count on receiving that subsidy for ten years. I should have thought that that assurance was worth a very great deal. A local authority which attracts rising costs subsidy of £Y thousand a year later knows that unless it moves into surplus on its housing revenue account it can count on that subsidy for nine years, and so on.
614 Subsection (6)(b) operates in a similar way for a shorter period. It starts at a later date and operates over a shorter period. But it seems to me that those assurances, given in this Bill at this moment of time, are as much as it is reasonable to give, with human frailties being what they are and our incapacity to prophesy precisely ten years ahead. They are backed up by the assurance in subsection (7) that if the Secretary of State sees right to do so he may make those restrictions and those limitations on that very considerable assurance that much greater. I do not really see, my Lords, how it can be expected that any Government can give assurances firmer than that or further ahead than that.
As I said, I do not ask the Committee to judge the intentions of the Government by a superficial reading of subsection (6). The noble Lord, Lord Diamond, knows perfectly well that when intentions are drafted in legislative form they sometimes take on a superficial appearance very different from their actual one. I think I have explained very clearly what the intentions are here. It could not conceivably be in the interests of any Secretary of State deliberately to reduce and take away subsidies which a housing authority, still dealing with massive housing problems in ten years' time, desperately needed. Local authorities and central Government may well be at odds from time to time about ways and means, but they are not at odds on objectives, aims and ends to that extent. The Secretary of State and local authorities have a common objective in dealing with severe, serious and massive housing problems with the greatest expedition, and their interests will come together in this way at this point. I honestly do not think that it is possible to extend the assurance which is there already, namely, that a local authority which attracts rising costs subsidy in 1972–73 will be sure of continuing it and receiving it for ten years unaltered unless its housing revenue account moves into surplus.
§ LORD DIAMOND
My Lords, I am very glad that the noble Lord said what he did in that last half sentence—"unless the housing revenue account moves into surplus"—because I am bound to remind him and to remind your Lordships that the previous statement, that the whole of the subsidy would be payable for ten 615 years, or in the following year for nine years, or in the subsequently following year for eight years, is only partly accurate. It is now an accurate statement as amended in the way the noble Lord finally amended it, because the Bill provides that if you are getting into a stage where the housing revenue account is in surplus, or would be partly in surplus if the whole of that subsidy were paid, then the whole of that subsidy is not paid. Therein lies all the protection which the Government need, because the Government know that if they provide it for ten years continuously under the present structure they would not be giving one penny to a local authority whose circumstances were happily such that they did not need the whole of the subsidy, because it has a built-in protection, as he recognised, against that happening.
He also knows that where there is a likelihood of it moving into surplus not only is it the case that the Government do not contribute more than they need to for the housing revenue account to be in balance but if, for example, the figures are 75 per cent. and 25 per cent. the Government do not even pay the whole of the reduced amount which is necessary for the housing revenue account to be in balance: they pay 75 per cent. of it and the local authority pays 25 per cent. of it. So there is the complete safeguard
§ for the Government if it had accepted the Greater London Council's view or our view or the completely uncontroverted view that 10 years is the appropriate period. So I do not know where we are on the Government's intentions.
§ I was sorry that the noble Lord made this great attack on the draftsmen and I must rush to their defence. Any Government Minister who says that the draftsmen cannot draft the intentions of the Government is making a most libellous statement and I must rush to their defence. But one has to deal with the Bill as one finds it and while the intentions of the Government, as interpreted by a Minister, are interesting to us and we are grateful for them, to put it precisely they are totally irrelevant. We are concerned with what the Bill says and the Bill says that after a period this subsidy—which needs to be for 10 years, which could never be paid to a local authority which did not need it because there is a protection built in the Bill against it—this needed major subsidy shall be cut oft after five years. This is what the Bill says and this is what we strongly object to. I must therefore seek to divide the Committee on it.
§ 6.33 p.m.
§ On Question, Whether the said Amendment (No.37) shall be agreed to?
§ Their Lordships divided: Contents, 50; Not-Contents, 83.617
|Archibald, L.||Gladwyn, L.||Platt, L.|
|Avebury, L.||Granville-West, L.||Popplewell, L.|
|Bacon, Bs.||Greenwood of Rossendale, L.||Serota, Bs.|
|Beswick, L.||Hale, L.||Shepherd, L.|
|Blyton, L.||Henderson, L.||Shinwell, L.|
|Brockway, L.||Heycock, L.||Slater, L.|
|Buckinghamshire, E.||Hoy, L.||Southwark, Bp.|
|Burntwood, L.||Hughes, L.||Strabolgi, L. [Teller.]|
|Champion, L.||Leatherland, L.||Summerskill, Bs.|
|Crook, L.||Lee of Asheridge, Bs.||Taylor of Mansfield, L.|
|Delacourt-Smith, L.||Llewelyn-Davies of Hastoe, Bs.||Walston, L.|
|Diamond, L.||Watkins, L.|
|Energlyn, L.||Lloyd of Hampstead, L.||Wells-Pestell, L.|
|Evans of Hungershall, L.||McLeavy, L.||White, Bs.|
|Fiske, L.||Maelor, L.||Wright of Ashton under Lyne, L.|
|Gaitskell, Bs.||Morris of Kenwood, L.|
|Garnsworthy, L.||Phillips, Bs. [Teller.]||Wynne-Jones, L.|
|Aberdare, L.||Balfour, E.||Brentford, V.|
|Ailwyn, L.||Balfour of Inchrye, L.||Brougham and Vaux, L.|
|Alexander of Tunis, E.||Belhaven and Stenton, L.||Burton, L.|
|Allerton, L.||Belstead, L.||Colville of Culross, V.|
|Amory, V.||Berkeley, Bs.||Cork and Orrery, E.|
|Auckland, L.||Birdwood, L.||Cowley, E.|
|Balerno, L.||Boothby, L.||Craigavon, V.|
|Crathorne, L.||Hawke, L.||Napier and Ettrick, L.|
|Cromartie, E.||Hood, V.||Northchurch, Bs.|
|Daventry, V.||Hylton, L.||Nugent of Guildford, L.|
|de Clifford, L.||Hylton-Foster, Bs.||Oakshott, L.|
|Denham, L. [Teller.]||Killearn, L.||Pender, L.|
|Derwent, L.||Latymer, L.||Penrhyn, L.|
|Digby, L.||Lauderdale, E.||Peterborough, Bp.|
|Drumalbyn, L.||Long, V.||Rankeillour, L.|
|Elles, Bs.||Lothian, M.||Reigate, L.|
|Elliot of Harwood, Bs.||Loudoun, C.||Ruthven of Freeland, Ly.|
|Emmet of Amberley, Bs.||Lovat, L.||Sandford, L.|
|Ferrers, E.||Macleod of Borve, Bs.||Selkirk, E.|
|Fisher, L.||Macpherson of Drumochter, L.||Sempill, Ly.|
|Fraser of Lonsdale, L.||Massereene and Ferrard, L.||Somers, L.|
|Goschen, V.||Merrivale, L.||Stonehaven, V.|
|Gowrie, E.||Milverton, L.||Strathclyde, L.|
|Greenway, L.||Monck, V.||Sudeley, L.|
|Grenfell, L.||Monckton of Brenchley, V.||Vivian, L.|
|Grimston of Westbury, L.||Monk Bretton, L.||Wimllesham, L.|
|Hailsham of Saint Marylebone, L. (L. Chancellor.)||Mowbray and Stourton, L. [Teller.]||Wolverton, L.|
On Question, Motion agreed to.
§ 6.41 p.m.
LORD DIAMOND moved Amendment No. 39:
Page 8, line 9, leave out from ("1972–73)") to end of line 23 and insert ("means the expenditure which is reasonably debited to the Authority's housing revenue account and shall include all expenditure which the Authority incurs in maintenance repairs, improvement and management of the dwellings within the account and reasonable appropriations to a reserve fund for the purpose of meeting expenditure on repairs maintenance and improvement where such expenditure is unlikely to be on an annual recurring basis ")
§ The noble Lord said: This, again, is a major Amendment which we are about to discuss and it refers to—
§ LORD SANDFORD
I wonder whether I may interrupt the noble Lord for one moment? I suggest that it might be convenient to take Amendments Nos. 39, 40, 41 and 42 together.
§ LORD DIAMOND
I am always anxious to accommodate the noble Lord but, frankly, it would not be convenient, for several reasons. Amendments Nos. 40 and 41 we might conveniently take together, but No. 39 rather stands by itself; and, of course, there would be no need for Amendments Nos. 40 and 41 if, as I hope, Amendment 39 is accepted.
So far as Amendment No. 39 is concerned, we are still on the main subsidy which we have to bear in mind the whole time. As it seems to me, three things in particular are wrong and the Amendment I am moving seeks to put them right. 618 First, there is the known difficulty which we touched on the other night—we have no need to go over that part of it again—relating to the yardstick. The situation which emerged from that debate—I hope I have it correct—was that so far as expenditure incurred up to 10 per cent. over the yardstick is concerned, that will rank for subsidy; but so far as expenditure incurred in excess of the 10 per cent. over the yardstick is concerned, it will not rank for subsidy. The question that arises is, how that excess, the excess over 10 per cent., is to be treated, both the excess which arises on expenditure incurred before the Bill becomes an Act and also expenditure which arises subsequently. I make that distinction because it is open to anybody to say that so far as concerns expenditure which arises subsequently, anyone knows when they are putting pen to paper to incur the expenditure that this is the fate with which it will meet; whereas with expenditure incurred beforehand, if one is proposing to alter the treatment one has to be careful one does not offend against the principles of retrospective legislation. So I have to refer to the two parts of it.
The essential point I want to make, which really covers both parts, is this: where you have built at a cost in excess of the yardstick—for instance, where a local authority has thought it right to build at 120 per cent. of the yardstick instead of a maximum of 110 per cent.—it has been in order to provide appropriate amenities or standards of living which the authority, at all events, thought appropriate. What we are now moving into is a system of so-called fair rents under which there will be a method of 619 fixing the rent having regard to the standards of the building and the amenities provided. We are moving into a system of subsidies which will have regard to the Housing Revenue Account, and on the right hand side of that account, if I remember my accountancy—on the receipts side, at all events—will be credited the revenue accruing from the rent.
The rent of what? I will divide it into three parts. There will be the credit of the rent for 100 per cent.; there will be the credit of the rent of 10 per cent., both of those being the amount covered by the subsidy, and there will be the rent attributable to the last 10 per cent. which is in excess of the yardstick plus tolerance; the yardstick and the tolerance being 110 per cent. So the first point I am making is that we are moving into a system under which rents will be fixed which will be based on the amenities provided by the total expenditure of 120 per cent., and the total of those rents will be taken to the credit of the Housing Revenue Account. No deduction will be made for those rents in respect of that part of the rent which is attributable to the excess. I am sorry to have to go into the technical accounting details but I am moving on the simple principle which appeals to all of your Lordships that you must compare like with like.
What we have on one side of the account, therefore, is the total revenue attributable to the total expenditure on these particular dwellings. What we have on the other side of the account, alas! is only part of the expenditure; and the proposal in the Bill is that you should compare part of the expenditure with the total of the revenue, and that the subsidy should be based between the difference of those two figures. If you want to compare the whole of the revenue with the whole of the expenditure, that is a fair way of doing it. If you want to compare a given proportion of the expenditure with a similar proportion of the revenue, that is a fair way of doing it. But what cannot be a fair way of doing it is the proposal in the Bill, as I understand it, that, for calculating subsidy, you compare the whole of the income and a part of the expenditure.
Any one of your Lordships responsible for large businesses which publish 620 accounts every year will know that if you went to the market, for example, on the basis of a set of accounts in which you invited the public to subscribe on the basis that the accounts show the whole of the revenue but only part of the expenditure, you would before long find yourselves guests of Her Majesty. What I am saying is, of course, what applies to individual noble Lords. That, alas! is not what applies to Ministers. Ministers can come here and propose, without any risk of going to gaol, that we should base our accounts for subsidy purposes in a way that would not be permitted by the Stock Exchange, or by company law or the criminal law, for the purpose of raising money, paying dividends or anything of that kind. So we must recognise that there is some slight fallacy in the Government's thinking which needs to be put right. That is the first point I want to make about this proposed treatment which stems from the subsection that I seek to alter.
Another major defect is that certain expenditure incurred by a local authority in running its housing revenue account will certainly be subject to some argument about how it should be apportioned—for instance: some expenditure in relation to supervision, in relation to management, in relation to certain repairs; indirect expenditure on the whole. There could be an argument about how that should be apportioned and what part of it should be charged to the housing revenue account. But where it is directly incurred it is, in my view, properly apportioned. Therefore there should be no lack of clarity in saying that in the Bill.
The Bill provides at page 8, line 9, a definition—which would be acceptable to the Minister, I suppose, but to nobody else—of what is reckonable expenditure; namely, expenditure which is debited to the Housing Revenue Account and on the basis of which subsidy is calculated. The Bill states that that expenditure means,so much of the expenditure debited to the authority's Housing Revenue Account as the Secretary of State may from time to time determine as being reasonable and appropriate having regard to all the circumstances.I repeat, that is a definition which may be acceptable to the Secretary of State; he will know that whatever he says is right. But that is no way of convincing the world that this is the proper way of 621 doing it. It is a totally inadequate, authoritarian, description and we must have clarity in the Bill. What the Amendment proposes is to leave out this vague phrase which could mean anything or nothing; which says that the Secretary of State shall determine what is expenditure and what is not for these purposes. We should have instead clarity in the form of the words I have proposed that "reckonable expenditure":means the expenditure which is reasonably debited to the authority's housing revenue account and shall include all expenditure which the authority incurs in maintenance repairs, improvement and management of the dwellings within the account and reasonable appropriations to a reserve fund for the purpose of meeting expenditure on repairs …".So the second point I am making as to the reason for this Amendment is that the definition of what is allowable expenditure is totally inadequate and vague.
The third reason why I move this Amendment is that, quite apart from the accountancy point which I have been discussing, there is a point of substance; namely, the question of the standard at which the properties shall be maintained. That, I should have thought, is one of the few things that we should leave to local authorities to decide. They are responsible for the houses in their area. This is one of the very few responsibilities left to them. If the Government have their way we shall be removing power after power from any number of local authorities. We shall be making it impossible for there to be any worthwhile local authority candidate coming forward to do a job of work, because with a very large number of authorities there will be no job of work worth doing.
The great problem at present is drawing the balance so that there will be enough for a local authority to do to attract people of ability to come and do it. All those things will be happening unless we continue at all events to allow local authorities to do their natural task of looking after their own local authority houses. One of the important parts of that task is maintaining properties and setting their own standard of what should be the level of maintenance and repair expenditure. As the Bill stands, that is totally at large. The Secretary of State can say what he likes from time to time. He can alter his mind each year, or even, so far as I know, between years; but 622 certainly it depends entirely upon what the Secretary of State may from time to time determine. This is no way for a local authority to be able to exercise responsibility; to exercise its discretion in a responsible way. One must have in the Bill a clear provision that local authorities shall be able to decide for themselves what is a reasonable level of maintenance of their own properties.
The Amendment goes on to provide:… shall include all expenditure which the Authority incurs in maintenance repairs, improvement and management of the dwellings within the account and reasonable appropriations to a reserve fund for the purpose of meeting expenditure on repairs maintenance and improvement where such expenditure is unlikely to be on an annual recurring basis".We all know that there are various major items of repair which do not arise year by year in any house. A local authority, like any one of us in respect of our own house, has to incur this expenditure from time to time. How should a local authority provide for that? In the same way as any reasonable businessman provides for it: not by just charging each year the expenditure that arises in each year, otherwise he will have a terribly wobbly line of expenditure—up one year; down for another four; a peak again in the fifth year and so on. In order to level out those peaks and have a reasonable plateau of expediture one would have to provide, as the Amendment says:… reasonable appropriations to a reserve fund for the purpose of meeting expenditure … where such expenditure is unlikely to be on an annual recurring basis.I hope that I have satisfied your Lordships that the Amendment is sweet reason and nothing else. Its proposals are no doubt in line with the Government's own thinking. I should be astonished if the Government said that they have any objection to those proposals. What the Government have unfortunately omitted to do is to state that they have no objection to those proposals. The Government prefer to legislate by saying, "The Secretary of State shall get up in the morning and do what he feels like doing then and there." I am not sure that that is the reliable way of legislating. Certainly so far as I am concerned it would not be reliable on all mornings; some mornings would be better than others. Therefore I do not think it is right that we should merely 623 have to leave it to a Secretary of State from time to time to determine what he thinks fit. It is totally inadequate, horribly authoritarian, frightening to the local authorities and, I am quite sure, unrelated to what will actually happen. Therefore it is only sensible that we should remove that rather silly phrase from the Bill and put in what is likely to happen. I suggest that my Amendment provides a very good framework for a sensible relationship between the Government and the local authority in this respect and I therefore beg to move.
THE EARL OF BALFOUR
Purely on a point of information, this Amendment seems to me to be unnecessary because the points are covered in Schedule 1, Part I, paragraph 3(1)(c), at page 111.
§ 6.59 p.m.
§ LORD SANDFORD
I am grateful to the noble Lord, Lord Diamond, for moving this Amendment because it gives me an opportunity to elucidate the matters about which he has been talking. It is important for all concerned to be able to forecast accurately the reckonable expenditure between one year and the next because it is the difference between the two which qualifies the authority for rising costs subsidy and we are all agreed that that is a very important subsidy. It is not practicable for this to be done in respect of the first two years in which this Bill will operate, and for that reason all the expenditure debited to an authority's housing revenue account which exceeds the expenditure so debited for 1971–72 will qualify with only two exceptions. One is in the case of expenditure incurred in connection with what are known as patched houses, which is therefore excluded for 1971–72 because it will not appear in 1972–73. There is another adjustment to allow for the fact that under this Bill the housing repairs account is also abolished, and therefore expenditure on that account debited to the housing repairs account for 1971–72 will count towards reckonable expenditure instead of the repairs and maintenance contributions for that year debited to the Housing Revenue Account. That deals with the first year.
As for the subsequent years, the items which will or will not count are currently the matter of negotiations between the 624 Secretary of State and the local authority associations. In conducting these consultations and arriving at the end of them with the determination mentioned in subsection (12), the Secretary of State is not exercising any different or more extensive powers than he already has; but they do need to be exercised with care and circumspection, and after consultations, because of the effect they will have in future on the calculations that we have been talking about. Therefore it is important that I should set out the use which the Secretary of State proposes to make of these powers. I think it would help the Committee if I do so at some length.
§ LORD DIAMOND
I am sure the noble Lord is absolutely right in saying that it will be helpful to the Committee if he makes those observations and makes them at some length. I only rise to inquire whether he thinks this is the right opportunity to do that, or whether he would prefer to postpone such an important statement for a short time.
§ LORD SANDFORD
There is a good deal of force in what the noble Lord has said, and with the agreement of the Committee, I beg to move that the House do now resume.
§ House resumed.