HOUSING FINANCE BILL

HL Deb 22 June 1972 vol 332 cc389-441

4.7 p.m.

House again in Committee.

LORD DIAMOND had given Notice of his intention to move Amendment No. 109GU:

Page 51, line 34, at end insert— ("(3) Paragraph (a) of subsection (1) of section 1 of the Rent Act 1965 shall cease to have effect.")

The noble Lord said: The subject matter of this Amendment is already contained in Amendment No. 125, which stands in the name of the noble Lord, Lord Drumalbyn, and Amendment No. 137, which stands in the name of the noble Lord, Lord Bethell. It would therefore be appropriate to discuss it with one or other of those Amendments. In the belief and hope that surrendering our position at the head of the Marshalled List to a later stage in the List will in no way prejudice our ability to discuss this matter fully, I do not desire to move Amendment No. 109GU.

Clause 47 agreed to.

Clause 48 agreed to.

Clause 49 [Duty of authorities to charge fair rents]:

THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWFL)

Perhaps I should point out at this stage that if Amendment No. 109GV is agreed to, I shall be unable to call the following Amendment, No. 109GW.

LORD DIAMOND moved Amendment No. 109GV: Page 52, line 6, leave out from ("dwellings") to end of line 7 and insert ("a rent which in the judgment of the local authority or new town corporation is reasonable provided that the aggregate of rents charged by a local authority or new town corporation shall not exceed the costs of providing the said dwellings plus the costs of managing, repairing, maintaining and improving the same and their associated amenities").

The noble Lord said: Before explaining the reason why we have tabled this Amendment, I should perhaps ask for the understanding of the Committee in the difficulties which will face the Opposition from this point onwards. I see from the Order Paper that this is the seventh day in Committee. As I see the noble Lord, Lord Sandford, in front of me I had better make it quite clear that there is no relationship between this and any other seventh day which may be in noble Lords minds. This is the seventh day, and we have agreed to complete our Committee discussions in a further period ending on Tuesday night. In my view there is no possibility whatever of doing justice to the remaining Amendments and completing consideration in the time in which we have agreed to complete consideration. We have agreed it; we stick to our agreement. So far as I am concerned, I have always held the view that one of the greatest advances in democracy is the "agreed" as opposed to the "imposed" timetable.

It is, in such circumstances we shall have to deal with a vast number of very important Amendments, because your Lordships will recognise that we are barely one-third of the way through in terms of pages and possibly half the way through in terms of parts of the Bill. We have entered into our seventh day out of 9½. The arithmetic does not tally, but nevertheless we shall do our best. That is why I shall seek your Lordships' indulgence in putting forward the arguments for these various Amendments inadequately and with excessive brevity. I hope the Government will manfully be able to disguise their displeasure on hearing that I am going to discuss these matters with excessive brevity.

The Amendment which I now move is perhaps one of the most important Amendments in the whole of the Bill because it deals with essential contact of Part V of the Bill, which is really the guts of the Bill and which provides for what is euphemistically, fantastically, and unbelievably called "fair rents" for housing authority dwellings. The Amendment proposes that from "dwellings" on line 6 one should leave out the words to the end of line 7 and insert instead a rent which in the judgment of the local authority or new town corporation is reasonable provided that the aggregate of rents charged by a local authority or new town corporation shall not exceed the costs of providing the said dwellings plus the costs of managing, repairing, maintaining and improving the same and their associated amenities". It is clear that there are two parts to this Amendment: first, that the rent to be charged shall be reasonable and, secondly, that it shall not exceed—that is to say that there shall be a ceiling, though the floor is not described—the cost of providing the said dwellings with all reasonable associated costs.

The first argument I have to put before your Lordships is that the rent should be reasonable. In this connection I do not think I can put any better argument than the views of the Government, and I read the views of the Government as expressed in recent legislation. Those views are: Subject to the provisions of this part of this Act a local authority in respect of the tenancy or occupation of houses etc., may make such reasonable charges as they may determine". That sentence is not taken from the English Act; that is the Scottish Bill which came before your Lordships' House two days ago and was moved by the Government. It provides that local authorities "may make such reasonable charges as they may determine". So, there is no difference between the Government and the Opposition on the point that a local authority should in appropriate cases have power to make reasonable charges in respect of rent. Indeed, that is what local authorities in England and Wales have been doing for years and are doing at the moment. It is for the Government to justify why we should depart from what England and Wales have been doing and what Scotland is being required to do in the legislation being brought forward by the Government.

Of course, this would not only enable rents to be reasonable, but it would serve a second purpose; it would restore a much needed sense of confidence to local authorities. Local authorities are having a bad time at the hands of this Government. Somewhere or other—it is not quite clear where it is at the moment—there is a Bill brought forward by Her Majesty's Government to alter and to reduce very considerably the powers of many local authorities. In the Bill which we are now discussing the power of local authorities who fix rents is being reduced to nothing; it is being destroyed completely. This power of local authorities to fix rents for their own citizens, is a power which they have had for very many years indeed. I think that the need for local authorities to feel that they are able to carry out a responsible task is great. Here again, I do not think I can do better on this issue than to quote the Conservative Manifesto at the last General Election—the Conservative "bible" as one might say. It reads as follows: The independence of local authorities has been seriously eroded by Labour Ministers. On many issues, particularly in education and housing, they have deliberately overridden the views of elected councillors. We think"— I am quoting here, and when I say "we think" it is of course the Conservative Party which is doing the thinking; and a nice change, too— it wrong that the balance of power between central and local government should have been distorted and we will redress the balance and increase the independence of local authorities.

Your Lordships would not expect me to say that I would vote Conservative, but I would certainly vote for that state- ment: "We, the Conservatives, will increase the independence of local authorities". The Amendment which we are proposing therefore fits in completely with Government policy. It provides (a) for local authorities having the discretion to fix reasonable rents as in the Government's Scottish Bill, and (b) for local authorities having their independence increased as stated in the Conservative Manifesto at the last General Election. So far I am sure we are all walking hand in hand. One might almost say, as the old postcards used to say, "hands across the table".

The next argument I would adduce is that the proposal to move from the private sector to the public sector and to say because one has fair rents in the private sector so one can somehow or other have fair rents in the public sector, is a lot of economic nonsense. I am sorry to speak in such plain and simple terms. In the private sector there is a market and you get a market price when you have buyers and sellers, and when the buyer's consideration is how much he is prepared to pay and the seller's consideration is how much he is prepared to accept. Where you have a market you can ask, "what is the market price?" Then one can attempt to say—although not with any great success—what then would have been the market price excluding one element only, the scarcity element, and arrive at a non-scarce market price. You can do that where you have a market, but it is sheer gibberish to try to pretend that you can do that where you have not a market. There is no market place so far as local authority rents are concerned.

The essential point is, as every one of your Lordships knows only too well, and everyone who has been in the other place and has had to listen to constituent after constituent coming to press him or her about the local authority housing lists, that whereas in the private sector as between private landlord and private tenant cash is what counts, in the public sector as between the local authority landlord and the citizen cash is what does not count. In all the points lists prepared by all the councils all over the country to determine on which basis houses should be let in priority—there have been methods of determining need, generally on a points basis—so far as I am aware, in not one single case has cash been an element. The circumstances of the would-be tenant in terms of family requirements, illness, age, marriage, all these things, and in particular the period of time on the waiting list, have been very relevant in terms of need. So far as I know, no prospective tenant has ever been asked what his bank balance is. You can have a market price in the private sector, and can then claim to have a market less scarcity value in the private sector, and can produce what was then called a fair rent, as compared to the grossly unfair rents which were being charged by landlords at that time and which gave rise to that phrase; but it is nonsense to suppose that you can transfer that concept to a totally different situation, where there is no market place, where cash is no consideration, where 100 per cent. of the consideration is need as opposed to depth of pocket. I am saying, for that reason, that the removal of fair rent determined on the principles set out sections 50 and 58 below should appeal to your Lordships.

The next argument I would adduce, shortly, is the one of profit versus service. It is well-known and well understood that a private landlord—and this comes out most easily if you regard the private landlord as a substantial company quoted on the Stock Exchange, with shareholders to consider—has to fix his rents on the basis that his capital will be fully serviced and that there will be a profit available, partly for ploughing back for further investment and partly for distribution to shareholders. That is a proper, well-understood function of private enterprise in this field. So far as public enterprise is concerned, a statutory duty is laid upon local authorities to provide housing for their citizens, and there is not one word said about providing profits for shareholders or for dividends or for ploughing back or anything of that kind. We are dealing with a totally different situation: in the one case the private entrepreneur needing to provide a profit, in the other case a statutory undertaker being required to provide a service. Therefore, to attempt to say that what is understandably a fair rent concept in the one case can be transposed to the other case is totally invalid.

The next argument I would put before your Lordships is the one relating to historic costs. As your Lordships know, it is the normal practice for local authorities to pool their costs and to charge rents for their own dwellings, which are their property and which they let, which are related to the costs as a whole. They of course make all relevant adjustments, which local authorities are in a position to do, knowing the circumstances, the councillors living in the area, the officers walking the streets every week and knowing the circumstances very well indeed. But they fix them, as I say, in relation to their historic costs, and, as we all know, one has to balance the account in which is recorded the cost of providing the houses and the revenue produced from the houses, and sometimes a contribution has to be made from the rate fund for that purpose. But what I am saying to your Lordships is that that being the case, there can be no justification whatsoever for a community which has provided itself with houses through its representatives, the councillors serving on the community council known as the local authority, charging itself such a figure as would more than cover the historic costs, by whatever method you calculate them, and so providing a profit, a surplus, which would go in part to the Chancellor of the Exchequer.

And yet the fair rent determined on the principles set out in sections 50 and 58 below provides for that very thing. It says to a community, "Notwithstanding that these are your properties, occupied by your citizens, nevertheless we, the central Government, are going to require you in future to charge such a rent as will more than cover in certain cases the total costs, however computed, and will provide a surplus to be handed in part in cash, a cheque drawn in cash, to the Chancellor of the Exchequer to go towards reduction of taxation". So that is a further reason why we could not contemplate sponsoring the proposal which is in this Part of the Bill. In fact we can only regard that surplus as a tax on the tenant, going towards a reduction in the tax on the taxpayer. And when I say we can only regard it, we are not alone in regarding it in that way. If I may quote what the Minister for Housing said in Standing Committee E: The surplues paid into the Fund"— that is to say, the Consolidation Fund, and the surpluses to which I have been drawing your Lordships' attention— make it possible to raise less tax to meet the cost of subsidies which are paid towards the housing revenue deficit. But the surpluses paid into the Fund benefit the taxpayers at large, both those who pay direct taxes and those who pay indirect taxes."—[OFFICIAL REPORT (Commons), Standing Committee E, 18/1/72; col. 586.] It is perfectly clear, therefore, that the reason for charging rents which will create a surplus going to the Chancellor of the Exchequer is to benefit the taxpayers at large, both those who pay direct taxes and those who pay indirect taxes.

It is not surprising that we should have observed and now recollect that the whole of these proposals were not first brought to the other place by the Minister for Housing or by the Secretary of State for the Environment. They are not housing proposals; they are finance proposals, and they were, therefore, very sensibly and properly, brought before the other place by the Chancellor of the Exchequer in his mini-Budget in the autumn of 1970. We now know the context of these proposals. They are a suggestion by the Chancellor of the Exchequer that tenants of local authority houses should be required to pay such rents as will enable taxpayers to have their burden relieved. I have given your Lordships the various reasons why I find that unworkable, why I find it bad in principle and offensive morally. I beg to move.

4.31 p.m.

BARONESS GAITSKELL

Let us compare local authority financing of housing to a business which must yield a profit. The Government have shown that in this Bill they envisage a profit on the Housing Revenue Account. If a profit is made in a business a certain amount of it is ploughed back in order to reduce prices. In the case of the Government's Bill, half of the finance is to go to the Chancellor of the Exchequer and none of it is to be ploughed back either to improve housing or build more houses, or to reduce rents. Where this essence of profit is brought into local authority housing, it is thoroughly bad from beginning to end.

LORD BERNSTEIN

I should like to support this Amendment. I could say nothing on the financial aspect better than the noble Lord, Lord Diamond, and the noble Baroness, Lady Gaitskell. There is another point that the Government should consider. Over the years there have been great attacks on the way various communication media have denigrated Members of the other place, county councillors, local councillors, civil servants and municipal servants. In taking away the responsibility of local authorities the Government are taking from them something which is important to them and to the people who vote for them. Can there be any case for depriving the local authorities at this stage of the responsibility which they have had and which so far they have not handled too badly? Where do we get to if we continue this process? The whole point of this Bill is that it takes away responsibility from local authorities. If we want the public to respect the local authorities, the least we can do is to show that the Government and your Lordships' House respect them.

LORD SANDFORD

I am glad to respond to the suggestion from the noble Lord that we should try to get on. I should like to deal first with the point raised by the noble Baroness, Lady Gaitskell. We are talking about a system into which subsidy at the rate of something over £300 million is now being paid, and will continue to be paid, by the Exchequer—a system in which nobody is going to pay more than a fair rent, which Mr. Francis of the Francis Committee reckons to average 20 per cent. below the market value. I do not think that by any stretch of the imagination it is feasible or sensible to talk about people making profits out of that.

I found it interesting to hear the noble Lord, Lord Diamond, who has been Chief Secretary at the Treasury, arguing that in some cases the removal of a subsidy is synonymous with the imposition of a tax. It is no such thing. Under this system, nobody will pay anything higher than a fair rent, which in any case is not more than the market value and in some cases in London, according to Mr. Francis, is 40 per cent. below the market value. Certainly there is an element of taxation in the present system, under which a number of tenants, under the pooled historic cost system, may well be paying more than the actual historic cost of their own particular dwellings in order to make something cheaper for some other tenant or in order to reduce the burden on the rate fund.

But what the noble Lord has been putting before us, dressed up to look a little like something different, is really the status quo—pooled historic costs as operated by each of the individual housing authorities. For some reason, the Party opposite shrink from extending this system, which has some justification, to the nation as a whole. What they are introducing is the criterion of reasonableness; but they have no way of defining what is "reasonable". What we are introducing is a system of fair rents defined precisely in the terms which noble Lords set out themselves in their Rent Act 1968 and which have now been applied in the case of no fewer than 300,000 private tenancies. We are making it possible to adapt that system for council houses. I will deal in a moment with the question raised by the noble Lord as to whether or not this system can be adapted. I believe it can.

The only guide he is giving us as to what noble Lords opposite mean by "reasonable" is this: that there is a ceiling above which rents cannot go and a floor below which they cannot go. If there were not some way of reducing this ceiling it would lead to rents far higher than we are contemplating. Pooled historic costs would lead to something quite serious, for instance, in Tower Hamlets, and in many other places. They are quoted by my right honourable friend in column 1426 of the OFFICIAL REPORT of the deliberations in Standing Committee E. When it comes to the floor, the noble Lord is proposing that there should be virtually an open-ended cheque on which local authorities can draw, using their own discretion as to what they consider reasonable and sending the bill to the Exchequer. I should be very surprised if this was a system which the noble Lord would have recommended when he was Chief Secretary at the Treasury.

I will deal now with the noble Lord's point about whether this system, which was introduced by the Party opposite and has been applied to 300,000 private tenancies, can or cannot be transferred to the 5 million council house tenancies. The Committee have heard the noble Lord's argument, which was that fair rents registered in the private sector have not, generally speaking, been market rents although they have been originally derived from market rents. That is the case. They have been determined, as the noble Lord agreed, after discounting the scarcity element and it is important that that should have been done. It originally involved looking at rents which had recently been negotiated for properties in respect of which there was no scarcity, and then assessing the fair rent of properties in respect of which there was scarcity by a process of adjustment and extrapolation, which is a quite normal and recognised feature of valuation practice.

As a result of the increasing number of registered rents—300,000—the main method now used in the private sector is the comparability method. Under that method, one looks at the fair rents registered for comparable properties near the time of determination, where similar circumstances exist and where appropriate adjustments can be made. That method can be used not only if the registered rent has been determined for comparable properties in the locality, but also where the determination arose much further afield—again, using methods which are quite familiar to valuers. We have the leading case of Tormes Property Company v. Landau, in which the Lord Chief Justice said that by far the best guide to the fair rent in any case was the fair rent recently registered for comparable dwellings. That process can quite readily be adapted to the public sector on the system which was introduced by the Party opposite, which has now been in force for three or four years and which has been reported upon by the Francis Committee as working quite satisfactorily.

BARONESS GAITSKELL

May I ask the Minister one question? Let us have a fair argument in at least one respect. The noble Lord mentioned the subsidy, and we know that the amount of subsidy is roughly £300 million in respect of local authority houses. Will he be kind enough to state that the relief on mortgages amounts to more or less the same amount of £300 million, and will he agree that it is fair to put them together?

LORD SANDFORD

I am not sure that I see the relevance of the point, but I can certainly confirm that. But the amount for tax relief must be spread over roughly double the number of people.

BARONESS GAITSKELL

It is entirely relevant, because the Minister based the whole of his argument on the fact that local authority housing has an enormous subsidy. So it does, but so do mortgages on very expensive houses; and the more expensive they are, the more relief from taxation does the owner-occupier have.

LORD BERNSTEIN

Will the noble Lord kindly answer a direct question about local authorities? The Amendment moved by my noble friend Lord Diamond includes these words: a rent which in the judgment of the local authority". Is the noble Lord saying that he does not trust the future judgment of local authorities in the matter of rents?

LORD SANDFORD

No. We trust them very much and, as the noble Lord will see when we come to a later clause in this Part of the Bill, we are laying the main responsibility upon them for determining what fair rents should be.

4.44 p.m.

LORD DIAMOND

The noble Lord says some extraordinary things. He has just said that he lays upon the local authorities the main responsibility for determining what rents should be. The noble Lord knows full well that they will not determine the rents. They will suggest a provisional rent, a separate body will determine it, and the local authorities will not have one word at all to say in the matter. It is extraordinary for the noble Lord to say what he has just said. Equally extraordinary is it for the noble Lord to say that nobody is making a profit, when the Government's estimate of the profit—which I do not accept—is £30 million. I do not understand how the noble Lord can reconcile the facts with what he is saying. I could not be more precise than that.

I am sorry that the noble Lord has not thought fit to deal with the argument at all. He said that there is no definition of the word "reasonable". I am sorry that he did not understand that what we are trying to say is that the local authorities are there using their reason—they are elected by their constituents because they are reasonable people—to decide what is a reasonable amount. The Government recognise this by providing for the continuation of exactly the same policy in Scotland. I have read out the provision in the Bill, and unless it is altered that is what the Act will provide for. It is certainly the Government's proposal that local authorities may make such reasonable charges as they may determine, but the noble Lord spent not one second on that point. It is the Government's own Bill, not my Bill. I am therefore saying it is really rather odd that he should ask for a definition of the word "reason". All you can do about reason is to say whose reason; and the reason is the property of the local authority, just as it is in Scotland. They are the appropriate people to judge.

The noble Lord said that there would be no difficulty, because of the scope of fair rents in the private sector. He spent not one second, as I can well understand, dealing with the argument that where you have a market you can have a market price, but where you do not have a market you cannot. It would he pointless for the noble Lord to spend any time trying to demolish that argument. What he said was that you could transpose from one to the other, because there have

been 300,000 rents registered in the last four years and it is now proposed to register 5½ million in the next six months. I think that comparison is a very odd one. It is 20 times as many in one-eighth of the time. The noble Lord may not wish to deal with the argument and may wish to rely on the strength of his support. I am telling him that this is as evil a proposal as the one which the Government introduced last Session in a Bill on which I was privileged to take some small part, together with the noble Lord, Lord Drumalbyn, which is showing whether one of us was right in our estimate of whether it was conducive or opposed to improving industrial relations.

This provision, which goes to the heart of the Bill, will similarly destroy relationships between local authorities and central Government, and between local tenants and central Government. It is a divisive proposal, it is totally unfair, it is unarguable, it is opposed to what the Government are doing in Scotland of their own free will and by their own legislation, and it is something which we can only vote against. But our votes are not what count. What count are the wishes and the will of the people in the days and years ahead.

4.49 p.m.

On Question, Whether the said Amendment (No. 109GV) shall be agreed to?

Their Lordships divided: Contents, 55: Not-Contents, 92.

CONTENTS
	Foot, L.	Phillips, B. [Teller]
Archibald, L.	Gaitskell, Bs.	Platt, L.
Ardwick, L.	Gardiner, L.	Sainsbury, L.
Arwyn, L.	Garnsworthy, L. [Teller]	Shepherd, L.
Avebury, L.	Geddes, of Epsom, L.	Shinwell, L.
Bernstein, L.	Gladwyn, L.	Simon, V.
Beswick, L.	Granville-West, L.	Slater, L.
Birk, B.	Greenwood of Rossendale, L.	Stocks, Bs.
Blyton, L.	Hale, L.	Stow Hill, L.
Boothby, L.	Hoy, L.	Strange, L.
Brockway, L.	Jacques, L.	Summerskill, Bs.
Burntwood, L.	Leatherland, L.	Taylor of Mansfield, L.
Champion, L.	Llewelyn-Davies of Hastoe, Bs.	Walston, L.
Crook, L.	McLeavy, L.	Wells-Pestell, L.
Davies of Leek, L.	Maelor, L.	Williamson, L.
Diamond, L.	Meston, L.	Willis, L.
Donaldson of Kingsbridge, L.	Moyle, L.	Wise, L.
Faringdon, L.	Nunburnholme, L.	Wootton of Abinger, Bs.
Fiske, L.	Pargiter, L.
NOT-CONTENTS
Aberdare, L.	Alexander of Tunis, E.	Balfour, E.
Abinger, L.	Atholl, D.	Belstead, L.
Ailwyn, L.	Balerno, L.	Berkeley, Bs.
Blackford, L.	Elles, B.	Long, V.
Bledisloe, V.	Elliot of Harwood, Bs.	Lonsdale, E.
Brecon, L.	Emmet of Amberley, Bs.	Lothian, M.
Brentford, V.	Falkland, V.	Loudoun, C.
Brooke of Cumnor, L.	Ferrers, E.	Milverton, L.
Brooke of Ystradfellte, Bs.	Ferrier, L.	Monckton of Brenchley, V
Buckton, L.	Forres, L.	Montagu of Beaulieu, L.
Camoys, L.	Fortescue, E.	Mowbray and Stourton, L.
Carrington, L.	Fraser of Lonsdale, L.	Nugent of Guildford, L.
Clifford of Chudleigh, L.	Gage, V.	Oakshott, L.
Coleraine, L.	Gisborough, L.	Onslow, E.
Colgrain, L.	Glasgow, E.	Rankeillour, L.
Colville of Culross, V.	Goschen, V.	Rathcavan, L.
Conesford, L.	Gowrie, E. [Teller]	Reigate, L.
Cork and Orrery, E.	Hailes, L.	Rhyl, L.
Cottesloe, L.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Robertshall, L.
Courtown, E.		Ruthven of Freeland, Ly.
Craigavon, V.	Hankey, L.	Sackville, L.
Cromartie, E.	Harvey of Prestbury, L.	Saint Oswald, L.
Daventry, V.	Hatherton, L.	Sandford, L.
de Clifford, L.	Hawke, L.	Selkirk, E.
Denham, L. [Teller]	Hood, V.	Sempill, Ly.
Derwent, L.	Howard of Glossop, L.	Somers, L.
Devonport, V.	Hylton, L.	Strathclyde, L.
Digby, L.	Hylton-Foster, Bs.	Thomas, L.
Drumalbyn, L.	Ilford, L.	Vivian, L.
Dunleath, L.	Kinloss, Ly.	Windlesham, L.
Effingham, E.	Leicester, E.	Young, Bs.

Resolved in the negative, and Amendment disagreed to accordingly.

4.56 p.m.

LORD DIAMOND moved Amendment No. 109GX: Page 52, line 7, at end insert ("unless a local authority serve a notice in writing on the Secretary of State to the effect that they will not receive from him any of the subsidies mentioned in sections 2 to 6 inclusive of this Act and certifying that no contribution from the general rate fund will be paid to the Housing Revenue Account in which case Parts V and VI of this Act shall not apply to that authority for so long as the conditions stated in the notice hold good.")

The noble Lord said: This Amendment would be to the first part of Clause 49 which deals with the duty of local authorities and housing authorities to charge fair rents. If a local authority wishes and is able to contract out of the whole of the system it should be allowed to do so. It does not want anything from the central Government by way of subsidies and it does not want to pay anything to the central Government by way of excess rents converted into a surplus. It just wants to contract out. There are authorities which would take advantage of such a provision if the Government thought fit to agree to it. I beg to move.

BARONESS YOUNG

This Amendment is an example of the historic pooled costs system working for one fortunate authority which chooses not to receive question asked by the noble Lord, Lord contribution to its Housing Revenue Account. if it is in the fortunate position of being able to achieve both these ends it could opt out of the fair rents system altogether. It could either charge rents that were below the fair rent level or it could prevent any surplus arising in its Housing Revenue Account as a result of charging fair rents. It is the position of an authority which presumably has a large stock of old houses and little or no new building. It would make the tenants of that authority a privileged group vis-à-vis tenants of private houses. One of the basic principles behind the Bill and the reason why this Amendment must be resisted is that fair rents should apply both to council tenants and to tenants of private houses; and by not applying this principle throughout we should be breaking one of the basic principles of the Bill.

LORD DIAMOND

I am grateful to the noble Baroness, but I do not understand what she means by "privileged". Her whole argument is based on the fact that this would be distinguishing council tenants and making them a privileged category, as opposed to tenants of private landlords who would not be able to contract out of the system and who would be paying fair rents. That is the situation to-day, so far as decontrolled houses are concerned. That is the present situation, the situation which has existed since 1965, I think it is; namely, that in appropriate cases—decontrolled houses—private tenants have been paying fair rents, the market rent less the scarcity value in a market situation, and local authority tenants have been paying on a different scale, and have been paying rents which are reasonable.

Then, again, why should the noble Baroness comment on the privilege of local authority tenants when every single one of them is privileged and would not be a local authority tenant unless he or she were privileged to be such a tenant and had established his need to be a local authority tenant on the local authority's points system for determining need? They are all privileged; they are all in need—or were when they obtained their houses; and that is why the local authority provided the houses for them. If the noble Baroness is saying that once need is established you have to prove it year after year, and if, after five years or ten years, there is no longer any need, then local authority tenants should be evicted, then the noble Baroness had better get up and say that that is the Government's policy. But if the noble Baroness is not saying that, then the Government's policy presumably remains what all policies have been, that once need is established according to the list of priorities then the local authority tenant becomes a tenant of a local authority housing estate and the question of need in later years is not considered. So all we have to consider is the question of need at the time. The question of need at the time means that these tenants were chosen on that basis—privileged, if you like; taken out of the general mass of would-be local authority tenants and given the key because of established priority in need, because of established greater need, generally on the points system, as I have said. So I cannot see that there is any argument whatsoever in saying what is an obvious fact, that there is privilege in that sense. There has been throughout, and there will continue to be.

I therefore hope that the noble Baroness will think of some other argument for rejecting what is a perfectly reasonable demand; namely, that where a community has provided itself with a housing stock and wishes to let those houses on a community basis to members of the community, it should be free to do so. If it does not want any help from the central Government, why should it be subject to the requirements of the central Government that it should charge such rent as would produce a surplus for the benefit of the general body of tax-payers? If it does not want to do so, let it contract out of the system. I hope the noble Baroness will therefore agree, on second thoughts, that we should have this Amendment.

LORD HYLTON

The noble Lord, Lord Diamond, labours the question of need at considerable length. I hope he has studied or will study the recommendations of the Cullingworth Committee on the allocation of council properties. He will see there that one of the recommendations was for leases of council houses for varying periods of years—maybe three years, five years or seven years, whatever may be deemed appropriate. I hope that, perhaps as a result of this debate, more regard may be paid to these recommendations than hitherto.

BARONESS YOUNG

I think the point that the noble Lord, Lord Diamond, has raised is really a basic principle of the Bill and one on which we are going to disagree because it is a fundamental principle. The principle that we on this side think is important is that there should not be this discrimination between tenants of private houses and tenants of council houses; that all should be subject to a fair rent and that those who need it should either have a rent rebate or a rent allowance. Either one believes this or one does not. In the particular instance to which this Amendment refers, it would produce in the council sector a group of privileged tenants who could live presumably below the fair rent level, and they therefore would enjoy privileges that tenants of private houses would not enjoy.

I entirely take the point about the council house waiting list, with which, of course, I am very familiar, and the points scheme that goes with it. But there is surely this difference: whereas every person who gets to the top of a council house waiting list will have done so because of his need, it does not necessarily follow that 20 years later the position is the same and that every tenant in every council house who has been there ever since the time he got into it is in need in the same way as he was when he first got to the top of the list. He may be; but, on the other hand, he may not be. The point about the Bill is that those who can afford to pay fair rents will do so, and those who are unable to will have rent rebates. It is for this reason that we are unable to accept this Amendment. May I thank my noble friend for his observations? I do not think I wish to be drawn off this point, either to speak perhaps further on this one or, indeed, to have attributed to me by the noble Lord, Lord Diamond, suggestions which I certainly never made in my opening remarks.

LORD GARNSWORTHY

The noble Baroness has, I think, really emphasised the point which was brought out on Second Reading. The term "fair rent" is used as though this is really a matter that is above dispute. Let us get the position quite clear. The fair rent and the formula for determining the fair rent by the Government is one that is aimed at producing a profit, and I think this is the great divide. We on this side look on housing as a social service; the Party opposite look on it as something out of which a profit ought to be made. Whatever may be said, again and again I think we have to emphasise that this fair rent is one that is designed to produce a profit. We object to local authorities being told what to do and, despite anything the noble Lord, Lord Sandford, said just now about what is going to come before the Committee on a later clause, being given no discretion whatsoever. Here we have it: this is the great divide—local authorities being compelled to toe the line and the Government telling them what they have to do.

LORD DIAMOND

I am grateful to my noble friend for underlining that point. I would only say to the noble Baroness that she is of course right in saying that there is a big philosophical divide between us on this issue. For that reason, I think we are totally opposed to her approach, and she will be totally opposed to ours. But I am reinforced in my opposition to her approach by her con-

cluding remarks; namely, that the fact that a tenant was adjudged to be in need of a house 10 or 20 years ago does not mean that he is in need of a house now. It does not mean that, I agree. Therefore what follows from that? That is what I was asking the noble Baroness. The only relevance of those remarks is that something might follow other than allowing the tenant to continue; namely, that the tenant should be evicted; that you should say to someone who has been in a house for 20 years, "You needed it 20 years ago; you do not need it now."

I agree that the conditions which applied 20 years ago may not apply now. What I do not agree is that we could ever support a policy in which people could be told, and compelled, to move from the house in which they have been living for 20 years because the conditions were not the same. We very much hope—I am sure that it is an essential part of Tory policy—everyone hopes, that every person will get on in the world, improve his economic situation and stand on his own feet. That has nothing to do with the deep psychological importance of not disturbing people who have put down roots in an area and have their own possessions in their homes, who attach enormous importance to that and who rely greatly on continuing to be there. I shall, of course, do what was asked of me by the noble Lord, Lord Hylton, and consider this Report which proposes short-term tenancies with a view to saying at the end of the tenancy, "You are no longer in the same need that you were and therefore you do not need to stay there"—that is the purpose of it. I bear in mind that at the present time all local council tenancies are weekly, for all practical purposes, with weekly rents. But I return to the noble Baroness to say that I agree with her that here there is a deep divide, and it had better be recognised in the Division Lobbies.

5.12 p.m.

On Question, Whether the said Amendment (No. 109GX) shall be agreed to?

Their Lordships divided: Contents, 56; Not-Contents, 88.

CONTENTS
Annan, L.	Arwyn, L.	Beswick, L.
Archibald, L.	Avebury, L.	Birk, Bs.
Ardwick, L.	Bernstein, L.	Blyton, L.
Brockway, L.	Granville-West, L.	Popplewell, L.
Burntwood, L.	Greenwood of Rossendale, L.	Rea, L.
Champion, L.	Hale, L.	Sainsbury, L.
Chorley, L.	Hoy, L.	Shepherd, L.
Crook, L.	Jacques, L. [Teller]	Shinwell, L.
Davies of Leek, L.	Janner, L.	Simon, V.
Diamond, L.	Leatherland, L.	Slater, L.
Douglas of Barloch, L.	Llewclyn-Davies of Hastoe, Bs.	Stocks, Bs.
Douglass of Cleveland, L.	McLeavy, L.	Summerskill, Bs.
Faringdon, L.	Maelor, L.	Taylor of Mansfield, L.
Fiske, L.	Meston, L.	Walston, L.
Foot, L.	Moyle, L.	Wells-Pestell, L.
Gaitskell, Bs.	Nunburnholme, L.	Williamson, L.
Gardiner, L.	Pargiter, L.	Wise, L.
Garnsworthy, L.	Phillips, Bs. [Teller]	Wootton of Abinger, Bs.
Geddes of Epsom, L.	Platt, L.
NOT-CONTENTS
Aberdare, L.	de Clifford, L.	Ilford, L.
Abinger, L.	Denham, L. [Teller]	Killearn, L.
Ailwyn, L.	Derwent, L.	Kinloss, Ly.
Alexander of Tunis, E.	Devonport, V.	Leicester, E.
Atholl, D.	Digby, L.	Long, V.
Auckland, L.	Drumalbyn, L.	Lonsdale, E.
Balerno, L.	Elles, Bs.	Lothian, M.
Balfour, E.	Elliot of Harwood, Bs.	Loudoun, C.
Barnby, L.	Emmet of Amberley, Bs.	Milverton, L.
Belstead, L.	Falkland, V.	Monckton of Brenchley, V.
Berkeley, Bs.	Ferrers, E.	Mowbray and Stourton, L. [Teller]
Bessborough, E.	Ferrier, L.
Bledisloe, V.	Forres, L.	Nugent of Guildford, L.
Brecon, L.	Fortescue, E.	Oakshott, L.
Brentford, V.	Gage, V.	Rathcaven, L.
Brooke of Ystradfellte, Bs.	Gisborough, L.	Reay, L.
Buckton, L.	Glasgow, E.	Reigate, L.
Camoys, L.	Goschen, V.	Rhyl, L.
Carrington, L.	Gowrie, E.	Roberthall, L.
Coleraine, L.	Hailes, L.	Ruthven of Freeland, Ly.
Colgrain, L.	Hailsham of Saint Marylebone, L. (L. Chancellor)	Sackville, L.
Colville of Culross, V.		Sandford, L.
Conesford, L.	Hankey, L.	Selborne, E.
Cork and Orrery, E.	Harvey of Prestbury, L.	Selkirk, E.
Cottesloe, L.	Hatherton, L.	Sempill, Ly.
Courtown, E.	Hawke, L.	Somers, L.
Cowley, E.	Hood, V.	Thomas, L.
Craigavon, V.	Howard of Glossop, L.	Vivian, L.
Cromartie, E.	Hylton, L.	Windlesham, L.
Daventry, V.	Hylton-Foster, Bs.	Young, Bs.

On Question, Amendment agreed to.

5.20 p.m.

BARONESS YOUNG moved Amendment No. 110: Page 52, line 11, after ("service") insert ("with the authority").

The noble Baroness said: This is a drafting Amendment to define more exactly those service tenants who are not required to be charged fair rents. The Amendment expressly limits such tenants to those who occupy Housing Revenue Account dwellings in pursuance of a contract of service with the housing authority. As at present drafted, the clause has given rise to doubt whether tenants occupying Housing Revenue Account dwellings under a contract of service with another employer, other than the housing authority, could be charged fair rents. Several local authorities have made agreements with firms or with other authorities—for example, a county council—whereby Housing Revenue Account dwellings are either leased to the firm or authority, or their employees are allotted Housing Revenue Account dwellings because of their employment. If such dwellings are leased to a firm or another authority and the firm or authority then sub-let or allot them to their employees, it may well be inappropriate to apply Part V to that dwelling. In that case, the Secretary of State would make a direction under Clause 100, subsection (2), to the effect that the dwellings should not be Housing Revenue Account dwellings for the purposes of Parts V or VI. If a dwelling is allocated to the employee of a firm or of another authority by virtue of his employment and he then becomes the tenant of the housing authority, he would be charged a fair rent on the same basis as other tenants of the housing authority. That rent would then be taken into account by his employer in connection with his pay and conditions of service. It is to clarify this point that this Amendment is moved.

LORD DIAMOND moved Amendment No. 110CD: Page 52, line 29, leave out ("or a new town corporation").

The noble Lord said: This clause, which puts on housing authorities the duty to charge fair rents, defines an authority as, "a local authority or a new town corporation". We have tried our best to exclude both but have not succeeded. What we are now trying to do is to exclude new town corporations, because a new town corporation is surely in a special position. It is a clear, new, separately-defined community by its very nature of being a new town corporation and its stock of houses is its own. It should therefore not be included with local authorities which go back many centuries and which have therefore the complexities that the years have brought about—it should not be confused with them—but should be treated on its own. The new town corporation has a very satisfactory structure, a very reliable method of self-government, and it has until now had the responsibility of fixing rents for its own citizens in its own property. In these circumstances, it seems that one can quite properly and readily distinguish between a new town corporation and a local authority. Therefore this particular type of housing authority, namely, a new town corporation, ought to be excluded from the provisions of this clause.

LORD SANDFORD

I must advise the Committee not to accept this Amendment. In the first place, it represents another breach in the general principle of wanting to put all tenants—private and council house tenants, new town authority tenants and council house tenants in other towns—on the same basis of fair rents. But it would have two particularly undesirable effects, in addition to breaching the general principle. The noble Lord, Lord Diamond, is not, if I may say so, quite right when he says that new towns are separate and distinct communities. Some of them are, but most of them have been built up and developed on existing communities. There are three New Towns, Northampton, Peterborough and Warrington, that are being created in and upon, and side by side with, existing towns or existing cities. The present rent differential is a particularly undesirable feature of the existing system. The effect is that if one happens to live in the County Borough of Northampton one pays an average rent of £3.65; if one is the tenant of the Northampton Development Corporation, one pays £5.95. If one is a tenant of the development corporation of the New Town of Peterborough one pays £4.50; if one is a tenant of Peterborough Borough one pays £3.26. These differentials are clearly unfair as between one average tenant and another. There is scope for a differential which reflects the character and age of the houses, and fair rents will take account of that; but that this should be a differential between average rents is clearly undesirable and unfair, as it leads to an immobility as between one part of the community and another which it is very desirable to break down.

LORD DIAMOND

I have been following the argument of the noble Lord, Lord Sandford, very carefully and I do not understand why he says it is unfair. If I have in mind a new town comprising, on the whole, new properties and an old local authority comprising, as to the majority, old houses, what is wrong with one kind of house being more expensive to rent than the other? Is this not something that the rent assessment committees are required to take into account? Has the noble Lord had figures for Northampton? Can he tell us what the new figures would be for the two categories that he has mentioned to show that there would be a difference which is smaller than the one which he is describing?

LORD SANDFORD

The rents I am quoting are existing rents but, as I said just now, the fair rent takes into account the difference in the age, size, locality and other characteristics of two different properties. It is reasonable that there should be a differentiation between them, but it is not right that there should be a differentiation of this kind as between average rents. The ones I quoted were all for three bedroomed houses built to Parker Morris standards, and the differentiation is primarily because one has been built by a new town and others by the County Borough of Northampton. This differentiation is neither fair nor desirable.

Furthermore, a differentiation of the kind and scale that exists now between rents in towns which are acting as overspill for large cities such as London and Birmingham also mitigates against the overall regional strategies of moving people and jobs from the big conurbations, where congestion and scarcity make for bad housing conditions and serious housing stress, into areas where better conditions exist. It is for both of these reasons, as well as for the general reason of principle, that I would advise the Committee to resist this Amendment. But I hope that, with that explanation, the noble Lord, Lord Diamond, will feel able to withdraw it.

LORD DIAMOND

We are in this difficulty: that whenever the Government want to make an argument based on the likelihood of the new rents they make the argument, but without telling us what the new rents will be, because they do not know them. But whenever we want to probe them on what the new rents will be they say: "We do not know them, and your suggestion of what the new rents may be is without adequate foundation." So we are in a little difficulty with the noble Lord's examples. For aught I know, and for aught the Minister has told us, after the new rents have been established for the two circumstances he described the difference will be exactly the same as it is now, or even more. I do not know.—

LORD SANDFORD

If I may—

LORD DIAMOND

Perhaps I might finish. I do not know how this average is arrived at. The noble Lord says now that they are all three-bedroom, Parker Morris standard houses. I do not know what their circumstances are or their environmental conditions. These are all matters which the rent assessment boards are required to take into account. If the noble Lord's Department has made a provisional assessment, or if it has been made and found acceptable, as in the case of Birmingham, then that is some evidence that there would be a distinction as between a new town and its neighbouring old town which it would be difficult to maintain. But so far the noble Lord has not told us that. The noble Lord wanted to interrupt.

LORD SANDFORD

What I wanted to say was that when rents are applied throughout Northampton to the development corporation's housing stock and the county borough's housing stock there will be minor variations between all three-bedroom houses built to Parker Morris standards, depending on where they are located, the size of their gardens, whether they have garages or not and so on. But they will not amount to something like a 70 or 80 per cent. increase of one over the other over the whole of that particular stock of three-bedroom houses.

LORD DIAMOND

The noble Lord gives that as his estimate, but I gather that no calculation has been made of the figures. So I say to the noble Lord that there may or may not be a difficulty. I am not satisfied with the argument that he has put forward, but I understand that in this Committee it is usual, notwithstanding that one is not satisfied with the argument, to seek leave to withdraw an Amendment in which one believes; and so long as it is fully understood that I believe in this Amendment, I seek your Lordships' permission to withdraw it.

Amendment, by leave, withdrawn.

5.33 p.m.

LORD DIAMOND moved Amendment No. 110CE:

Page 52, line 29, at end insert— ("(6) Where the Secretary of State has given a direction under subsection (4) of section 63 of this Act and the local authority resolve to adopt as fair rents the estimated fair rents adopted by the Secretary of State then the provisions of Part V of this Act shall not apply to that authority.")

The noble Lord said: The purpose of this Amendment is to put in order, so far as one can, the Government's strange reactions to the Birmingham situation. In the Birmingham case, figures were put forward at a convenient moment (I mean convenient to the Party then in power in Birmingham) and were apparently accepted by the Minister even in advance of the Bill's arrival in your Lordships' House. This is an attempt to restore the authority of the Minister in relation to the Act. I hope therefore that the Amendment will be acceptable to the Government. I beg to move.

BARONESS YOUNG

This Amendment would in effect exempt authorities from the procedures leading to a fair rent where the Secretary of State has made a direction under Clause 63(4) and the authority has accepted this level of rent. The fact is that Clause 63(4) does not deal with determination of fair rent: it relates only to increases towards a fair rent required for the two years 1972–73 and 1973–74. It says that the Secretary of State may direct a lower increase in the progression to fair rents if 2 per cent. of the authority's qualifying dwellings would otherwise be brought above the fair rent level. As I indicated before when we were talking on the preceding Amendment about another circumstance in which an authority could opt out of the fair rents system, in this particular case the discretion of the Secretary of State is relevant only to two years—that is to say, 1972–73 and 1973–74. Beyond that the rent must be determined between the local authority and the rent scrutiny board. Therefore it would be unfair that some authorities should have their rents determined, as the Bill says, by the rent scrutiny board, and others by the Secretary of State. I find it difficult to comment on the Birmingham situation. I am informed that Birmingham has made informal proposals to the Secretary of State, but they are as yet unresolved and therefore I feel that it would be quite inappropriate for me to comment on their request while it is still under study.

LORD AVEBURY

The noble Baroness said that if the increase towards fair rents for each of these two years was likely to take 2 per cent. of the dwellings above the fair rent level, then the Secretary of State could make a direction under Clause 6314). She missed out a few words, because the subsection begins: "If it appears to the Secretary of State …". That means that before coming to a conclusion on the Birmingham situation (I use that example since it has been quoted) the noble Baroness or her colleagues in the Department will have to decide whether the calculations which have been made by the treasurer of the Birmingham City Council and submitted to that authority are accurate and take into account in a proper manner the formula as set out in the Bill.

I am not going to press the noble Baroness, because obviously if the matter is under consideration by the Department she cannot go into the merits of the calculations in any detail. But I should like to ask her a question about the formula that is being used by the treasurer of Birmingham, a copy of which I have before me. What he has done is to take a multiplier which he has applied to the gross rateable values of various classes of dwellings, and then he has taken into account the amenity factor, which is variable according to the part of the city in which the dwelling is located. He says in the introductory note that there are some parts in which dwellings are in great demand and some in which they are less popular—and this is obviously so. That takes into account the locality element in the formula, does it not? What I am asking the noble Baroness to tell the Committee is whether she is satisfied that a formula which merely takes into account the two factors I have mentioned—that is to say, the gross rateable value of a dwelling and its locality in an estate—fulfils the terms of the Bill.

LORD GARNSWORTHY

I should like to raise a comparatively short point, but I think it is an important one. The noble Baroness referred to the fact that the Birmingham issue had not yet been resolved. It would be of great interest if she could give us some indication as to when it is likely to be resolved. Certainly I think it ought to be resolved before this Bill completes its passage through this House. It is a matter of interest and of great importance that we should know what is likely to happen in regard to the Birmingham situation. Many local authorities would feel, if they knew that, that they were in a much better position to assess the consequences of this Bill than they are at present. At the present time, they feel that they are under intolerable pressure.

BARONESS YOUNG

I think the noble Lord, Lord Avebury, answered his own question. He agreed with me in his first sentence when he said that I was in a difficult position in commenting on the situation in Birmingham as it is under discussion with the Secretary of State. It would therefore be extremely unwise to comment on the Birmingham city treasurer's calculations on fair rents. This is all part of the discussion which is taking place, and I feel that I can add nothing further to what I said before. Neither do I have an answer for the noble Lord, Lord Garnsworthy, on the question of when these discussions will be concluded.

LORD AVEBURY

I was not asking the noble Baroness to say whether she agreed with the multipliers which the city treasurer of Birmingham had applied to the gross values or to the amenity factors which he has applied when determining the rents, for example, of bungalows and one-bedroomed two-storey flats built or converted for old people. I was not asking about the arithmetical calculations, but whether she agrees that in determining a fair rent to the satisfaction of the Government, which will be necessary before the Secretary of State can begin to look at Clause 63(4), the only things that need to be taken into account are the gross value of the dwelling and its locality within the local authority's area.

THE EARL OF BALFOUR

If we are to consider the gross annual values, it is Important to remember that in England these have not been revised since 1965. Therefore I should have thought that the gross annual value was a figure which was pretty hopelessly out of date by now.

LORD DIAMOND

Perhaps it would save the legs of the noble Baroness if she had to get up only once to reply to both of us. We are anxious that she should not be put to physical discomfort in addition to the discomfort that she finds herself in at the moment in relation to the Birmingham episode.

We understand her desire not to make the matter more complicated, but I must turn to my noble friend Lord Garnsworthy's point. These figures have been under consideration for a long time. I daresay that they have moved from being under consideration to being under urgent consideration in the meantime, but we still have not had the answer. The answer is absolutely vital in relation to our understanding of the Bill, to the Minister's attitude and, much more important, in relation to the understanding of local authorities as to where they will be at the end of the day. Therefore we must ask the Government to give us some indication of which way their mind is moving when we come to the relevant clause in the Committee stage or, if that is not possible, before the Report stage is taken.

I hope that it will be carried through to the appropriate channels that, just as when we were considering the Industrial Relations Bill the Government recognised that consideration of that Bill could not possibly be completed until a very relevant piece of Government thinking had been put forward—namely, the code of conduct—I hope it will be equally understood that we cannot possibly move towards the consideration of the Report stage of this Bill until we have heard what the view of the Government is as interpreted by its reaction to the Birmingham situation. I hope that I have made that point absolutely clear. We do not press the noble Baroness; she has a difficult task and we do not want to make it any more difficult. We merely want to stand up for the rights of Parliament to have all the relevant facts when it is considering a Bill. This may be a novel concept so far as the present Government are concerned, but it is one which I feel is not wholly inappropriate to put before them.

LORD AVEBURY

It is not only Parliament which needs these facts. The City Council of Birmingham are going to be placed in an extremely difficult situation if the Department of the noble Baroness does not reply before the Council disperses for the summer recess to the representations that have been made. This will mean that the Council will not be able to consider the decision of the Department until their December meeting, and it gives them only a couple of weeks to implement the decision of the Secretary of State before October 1 when the clause comes into effect.

LORD DIAMOND

The noble Lord is quite right. My noble friend Lord Garnsworthy reminds me that all the other local authorities are anxious to know, but it is the Birmingham City Council which is in an almost impossible position. Therefore these are good reasons why we must press the Government to give us this information. If I may confide in the noble Baroness (now that we know for certain that nobody else is listening), I am beginning to have doubts whether the figures are being considered every hour of every day. It occurs to me that the consideration of the figures may have been put on one side because I find it difficult to understand why consideration should take months. We all know the date when the figures were first put forward—it was conveniently before the last May elections. That is very easy to remember. We do not understand why it should take months for these figures to be considered. It cannot rest with the lack of information, because information has been provided. This is only a matter of Ministers giving their minds to the principles lying behind this Bill and those figures.

We hope that any evil thoughts which are—I will not say "gathering"—possibly going to gather in one's mind if the delay goes on much longer she will do her best to allay; but I repeat that there is one person who is in difficulty beyond Birmingham Council and that is the Minister. He has anticipated Parliament's decision. We all have great affection for the Minister, and we all think that he needs our help and assistance. Having read every speech which he has made in Committee in the other place, I am certain that he needs every assistance that we can possibly give him. If the Committee understood what he was saying then, my colleagues in another place have a greater capacity to understand than I have. So far as the Minister is concerned he is in a difficult situation, having anticipated the will of Parliament. This is a clause (I will not say to put a white sheet on him) to turn him into a respectable married woman. That is the least we can try to do for him. I am sorry that the noble Baroness is not

accepting the Amendment in that spirit. It is something I should not dream of dividing the Committee on. My affection for the Minister is considerable, and I do not want to disturb the Members of your Lordship's Committee to go into the Division Lobbies on that issue. If the noble Baroness does not want to accept the Amendment I can only ask leave to withdraw it.

BARONESS YOUNG

I have said all that I can say on the Birmingham situation. Although I appreciate that this can go on for a long time, I cannot be drawn any further. I should like to answer the point raised by the noble Lord, Lord Avebury, on the criteria for determining the fair rent. These are set out fully in Clause 50(1) and (2). In assessing the fair rent, those responsible for making the assessment can take into account any relevant factor along with these, and could include comparisons with existing registered rents. I hope that that answers the question.

LORD DIAMOND

I am sure that the noble Baroness will be good enough to draw to her colleague's attention the difficulty that we are going to be in in attempting to deal with the Report stage before we have this information. Having said that, I seek your Lordships' leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 49, as amended, shall stand part of the Bill?

LORD DIAMOND

We dislike this clause intensely. It is the heart of the Bill; it is the greatest piece of evil in the Bill, but I have described it sufficiently. I do not think there is anything in the details of the clause which even compare faintly with the evil which we have dealt with on the earlier Amendment. Therefore I will not delay your Lordships, so far as we are concerned, on this clause. We will, of course, seek to have it removed.

5.50 p.m.

On Question, Whether Clause 49, as amended, shall stand part of the Bill?

Their Lordships divided: Contents, 81; Not Contents, 54.

CONTENTS
Aberdare, L.	Atholl, D.	Belstead, L.
Abinger, L.	Balerno, L.	Berkeley, Bs.
Ailwyn, L.	Balfour, E.	Bessborough, E.
Alexander of Tunis, E.	Barnby, L.	Brecon, L.
Brentford, V.	Gage, V.	Milverton, L.
Brooke of Ystradfellte, Bs.	Garner, L.	Mowbray and Stourton, L. [Teller.]
Buckton, L.	Gisborough, L.
Carrington, L.	Glasgow, E.	Oakshott, L.
Coleraine, L.	Goschen, V.	Orr-Ewing, L.
Colgrain, L.	Gowrie, E.	Polwarth, L.
Colville of Culross, V.	Greenway, L.	Rathcavan, L.
Conesford, L.	Hailes, L.	Reay, L.
Cork and Orrery, E.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Reigate, L.
Courtown, E.		Rhyl, L.
Cowley, E.	Hankey, L.	Ruthven of Freeland, Ly.
Craigavon, V.	Hatherton, L.	Sackvilie, L.
Cromartie, E.	Hawke, L.	Saint Oswald, L.
Daventry, V.	Hood, V.	Sandford, L.
de Clifford, L.	Howard of Glossop, L.	Selborne, E.
Denham, L. [Teller.]	Hylton, L.	Sempill, Ly.
Derwent, L.	Hylton-Foster, Bs.	Somers, L.
Drumalbyn, L.	Killearn, L.	Stocks, Bs.
Elles, Bs.	Kinloss, Ly.	Strange, L.
Elliot of Harwood, Bs.	Leicester, E.	Teviot, L.
Falkland, V.	Long, V.	Trefgarne, L.
Ferrers, E.	Lonsdale, E.	Vivian, L.
Ferrier, L.	Lothian, M.	Young, Bs.
Fortescue, E.	Loudoun, C
NOT-CONTENTS
Airedale, L.	Fiske, L.	Platt, L.
Amherst, E.	Gaitskell, Bs.	Popplewell, L.
Archibald, L.	Gardiner, L.	Sainsbury, L.
Ardwick, L.	Garnsworthy, L.	Samuel, V.
Arwyn, L.	Geddes of Epsom, L.	Shepherd, L.
Avebury, L.	Granville-West, L.	Shinwell, L.
Bernstein, L.	Greenwood of Rossendale, L.	Simon, V.
Beswick, L.	Hale, L.	Slater, L.
Birk, Bs.	Hoy, L.	Stow Hill, L.
Blyton, L.	Jacques, L. [Teller.]	Summerskill, Bs.
Brockway, L.	Janner, L.	Tanlaw, L.
Champion, L.	Leatherland, L.	Taylor of Mansfield, L.
Chorley, L.	Llewelyn-Davies of Hastoe, Bs. [Teller.]	Walston, L.
Crook. L.		Wells-Pestell, L.
Davies of Leek, L.	McLeavy, L.	Williamson, L.
Diamond, L.	Maelor, L.	Willis, L.
Douglas of Barloch, L.	Pargiter, L.	Wise, L.
Douglass of Cleveland, L.	Phillips, Bs.	Wootton of Abinger, Bs.
Faringdon, L.

Resolved in the affirmative, and Clause 49, as amended, agreed to accordingly.

Clause 50: [Principles for the determination of fair rent]:

5.57 p.m.

Loan DIAMOND moved Amendment No. 110DA: Page 52, line 32, leave out from ("circumstances") to ("to") in line 33.

The noble Lord said: I hope that with this Amendment it will be convenient to discuss the following Amendment, No. 110DB. Perhaps the simplest thing would be for me at this stage to read out the clause as it would read if we were fortunate enough to have it amended. This is the clause which sets out the principles for the determination of fair rent, and the words we are seeking to leave out are the exclusion from the consideration of personal circumstances. At the moment consideration of personal circumstances is to be excluded and we wish to add, in addition to the circumstances mentioned in the Bill, those mentioned in the second Amendment. Therefore the clause would read: In determining a fair rent for a dwelling under this Part of this Act, regard shall be had, subject to the following provisions of this section, to all the circumstances, and in particular to the age, character and locality of the dwelling and its state of repair; to the duty of an authority as a public body to provide housing to meet social needs; to the opinion of an authority as to what is a reasonable rent and to the effect on the economy and on the general market in housing of increases in rents.

We have already debated or discussed the issue of a local authority's taking an opinion as to what is a reasonable rent. I do not think therefore that I need to go over that ground again at any length. The authorities in England and Wales have their opinion taken into account, as the Amendment proposes. That is the situation at the present time. The opinion of an authority as to what is a reasonable rent is taken into account in the provisions now before your Lordships' House in the Scottish Bill. So this is nothing novel, or nothing opposed to what is within Government thinking. So much, then, for the opinion of an authority as to what is a reasonable rent.

Then we refer in the Amendment to the duty of an authority as a public body to provide housing to meet social needs". Indeed, it is a statutory duty of local authorities to provide housing and all we are adding are the words "to meet social needs". That makes a distinction between meeting social needs and making a profit out of the exercise. The further principle which is to be considered in our Amendment is the effect on the economy and on the general market in housing of increases in rents. So perhaps, as we are pressed for time, I ought to refer only, or particularly, to the effect on the economy.

As is well known by now, those authorities which have not so far anticipated the Bill will be required to increase the rents of their local authority houses by £1 a week in October. We also know that the average local authority rent is £2, and therefore this is going to represent a very sharp increase, both absolutely and proportionately—50 per cent. proportionately; £1 in absolute terms. That is a very sharp increase indeed, and is to be considered against the background of inflationary wage demands, to quote the Government's own words. We also know that the expectation is, and the calculations are, that over a period of three or four years the establishment of fair rents will mean an increase of 100 per cent. in the average local authority rents. So we are heading for an enormous inflationary stimulation if we carry on with the proposals in the Bill and if we do not have regard to the effect on the economy of these proposals.

The background to this, I find to my astonishment, is that in many people's minds there is a feeling or an understanding that housing rents have been holding back as compared with the general rise of other things in our cost of living. We all know that the cost of living has been going up considerably, and continues to go up. It is going up at the present time by something like 8 per cent. per annum. But the general feeling is that the rents of houses should go up because they have been held back. Now nothing could be further from the truth and therefore I want to put the figures on the Record. If one takes the position over the whole of the decade from 1960 to 1971, the cost of living rose in that period by 64 per cent. The cost of housing rose in that period by 122 per cent.—that is, roughly twice as much. So the present situation at the start of the application of this Bill is that the cost of housing is pressing very hard indeed on the minds and on the pockets of everybody; and indeed those Who are seeking to buy new houses or to rent flats or houses, particularly in the whole area from, say, Hitchin. South to the coast, will know how true this is. There are estimates of G.L.C. flats being built to rent at £14 or £15 a week, excluding rates.

So the situation we are in at the present time is that the housing costs have risen out of all proportion to the cost of living; and the cost of living has risen so much as to create enormous wage demands because wage earners have been seeking hard to keep level with increasing costs. If one assumes that productivity has risen by, say, 4 or 5 per cent., and that wage earners are entitled not only to keep their wages constant in real terms but to have a share in productivity, then wage rates will not be inflationary unless they exceed, on this basis, 8 per cent. plus 4½ per cent.—about 12½ per cent. Only beyond that figure can a wage demand be held to be inflationary. In that situation, it is surely unwise in the extreme to go along with proposals which will create a shock so far as a vast number of local authority tenants are concerned. We are concerned with 5½ million local authority tenants all over the country. When I gave the figure of £2 a week average, that is the average applying to 5½ million local authority tenants in England and Wales. It would be extremely foolish, and indeed dangerous, to go ahead with a proposal which provides for that sharp increase—£1 in the majority of cases, or at least ten shillings a week in the rest of the cases, at this particular time.

This is not only my view. It was only recently, barely a week ago, that the Prime Minister said, and rightly said, on a television programme that the fight against rising prices must be one with no holds barred. I share that view. I do not want to get too closely involved with balance-of-payments difficulties, but they exist for everyone to see. Balance-of-payments difficulties arise out of costs of production which are disproportionately high in relation to other countries' costs of production. One of the largest elements in costs of production is wages. Wages rise in relation to needs, and the Government are increasing the needs substantially. Therefore, I am saying that, surely, even if the Government want to go ahead with this Bill—an extraordinary thing to want to do, but even if they want to—they should surely have some regard to the current financial and economic situation, and should delay bringing in the increases at the rate which is proposed. Those increases could be delayed; they could be spread over a longer period. Nobody is saying that rents should be fixed; nobody is saying that rents are fixed. In view of the figures I have given, people should realise that the cost of housing generally has gone up twice as fast as everything else; that is the point to "cotton on to". It is against that background that the Government are proposing to carry on with this Bill. It is for that reason that we are introducing this Amendment—to make it clear that there should be a sense of public responsibility on the part of the Government, who are continually asking trade unions and wage earners to have it in mind. There should be a sense of public responsibility in the Government's mind in pursuing this Bill, as well as in the wage earner's mind. I beg to move.

6.10 p.m.

BARONESS YOUNG

Perhaps I might deal with the first Amendment, which seeks to delete the words "other than personal circumstances", and explain why this particular phrase has been incorporated into the Bill. It is a basic principle of the fair rent principle that personal circumstances should not be taken into account, because of course the circumstances of the tenant can change from time to time or from year to year. The fair rent is fixed and then, according to the way in which the per- sonal circumstances might change, the tenant would receive either a rent rebate or a rent allowance as the case might be. This is why that has been deliberately put in, because the fair rent excludes the personal circumstances of the tenant. It is a rent based on the value of the house.

Turning to the second Amendment, the noble Lord, Lord Diamond, is quite right in saying that there is a duty on local authorities to provide accommodation to meet the housing needs of the area, and local authorities must provide houses to rent to meet this demand by those in need. It is in fact a service that they have been providing for some fifty years, and obviously they will continue to provide it for the benefit of their areas. But there is no reason why charging a fair rent for a council house should have an adverse effect on these duties. It is perfectly possible for them to meet this duty by helping those tenants in real social need by means of a rent rebate, while at the same time expecting those tenants who do not have this pressing social need to pay the fair rent. If I may make one personal comment, in my own authority approximately one-third of the houses are council houses and flats, and I think it would be difficult to say that every one of those tenants could afford otherwise. Some undoubtedly could; others could not.

Perhaps I may now turn to the third part, which was the economic argument about fair rent. The actual provisions of the Bill are that council rents must be increased by £1 a week in October, but of course many of them could have been increased by 50p earlier on. I am told that the average local authority council house rent is now £2.48 a week. So those are the figures that we are talking about.

LORD DIAMOND

That is a new figure to me. Does that include the 50p a week increase which has taken place in the first six months of this year as a result of this Bill?

BARONESS YOUNG

The figure that I have been given is for April 1, 1971, and to the best of my knowledge and belief it therefore does not include the 50p increase that an authority might have made.

Returning to the argument about inflation, the basic provision of the Bill is that the rent of each local authority house ought to be a fair rent, based on the principles in Clause 50, which discounts the scarcity value. It is therefore setting a price on the house which is leaving out all the effects of the market. For the purposes of the argument one is assuming a perfect market in which the numbers of houses and the numbers of people seeking houses are in equilibrium. This principle was introduced by the last Government for private tenants, and it is a principle which should discount inflation of rental value. Therefore we do not feel there is any reason why this principle should not be extended to council tenants, and we cannot accept that setting a fair price on the value of the house can be regarded as an inflationary move.

LORD GARNSWORTHY

May I say that I think too much is being made of the fair rents that the previous Government introduced in regard to the private sector. A quite different situation existed in the private sector than in the public sector. The noble Baroness knows very well that there has been a tension—and a very considerable tension—as between the tenant and the landlord in the private sector. In this Committee we have been discussing the manner in which the landlords have failed to keep their properties in good condition, and she knows very well that the attempt of the last Government to introduce fair rents into the private sector was intended to alleviate this position. The remarks of my noble friend Lord Diamond, in what he has said about the economic consequences of what the Government are proposing, ought not to be treated lightly; there will be very serious consequences indeed. And when the noble Baroness says that if local authorities had taken advantage of the opportunity which they had to put rents up by 50p in April, they would not need to put them up £1 in October, she knows as well as I do that in the 12 months they would have paid exactly as much, namely £26—just as much as the people will pay whose rents are put up by £1 in October.

If I may say so, we are coming to the nub of the issue: the importance that the Government are prepared to attach to the sense of judgment of local authorities and the area of discretion that the Government are prepared to allow; but really we need to know a great deal more than we have been told. Again and again we shall have to come back to the Birmingham situation. Until we get some further information we are bound to hold this view. At the moment, so far as we can assess the position, the Government are saying that they will determine a fair rent according to the formula that is laid down. They are saying, "Whether you like it or whether you do not, you will impose it; and if you do not, we shall appoint housing commissioners to do the job." The noble Baroness drew attention to the fact that in the area in which she served on a local authority one-third of the people lived in local authority-owned dwellings and it would be difficult to say that they were all in social need. I should hope so, because if they were all in social need it would mean that we were having segregation of an economic group that was likely in itself to produce even further social consequences. One has a feeling that there is indeed in this Bill, if not in this particular clause, a danger that we shall get economic groupings because local authorities will be—I think I am correct in saying—encouraged to put tenants into older houses with lower rents, so avoiding the necessity for rent rebates. I hope that more attention will be paid to this aspect and that a more penetrating reply will be given to the case made by my noble friend Lord Diamond on the whole economic consequences of this exercise.

VISCOUNT GAGE

I do not pretend to possess a deep understanding of the Bill. However, I was interested in the philosophy underlying the remarks of the noble Lord, Lord Garnsworthy. I understand that a large number of poor people will get the appropriate rent rebates. In other words, the evil consequences, as it were, of which noble Lords are talking will be confined to the less poor; those who are in work. I appreciate that if their rents are increased there will be a tendency for them to regard that as a good reason for claiming higher wages, and that, of course, will be inflationary. Does the noble Lord, Lord Garnsworthy, regard that as a fact of life, a regrettable necessity, or does he think it right that families with earnings of, say, £30 or £40 a week coming in should receive Government subsidies? I appreciate that it will have an inflationary tendency simply because people do not like to pay higher rents. On the other hand, it is right that the trade unions, because they are trade unions, should seek, as it were, higher subsidies?

LORD GARNSWORTHY

I am glad that the noble Viscount, Lord Gage, accepts that the consequences of this Bill will be inflationary. Leaving all else aside, we are at least making progress when we can get the noble Viscount's agreement on that.

LORD BERNSTEIN

It seems to me that the noble Baroness does not accept the logic of the argument adduced by my noble friend Lord Diamond. Does she accept the figures given by my noble friend relating to the likely economic and social consequences of the Bill? If not, may we have figures from the Government, remembering that sooner or later the logic of the argument will be tested on the figures?

LORD SANDFORD

I will answer the question asked my the noble Lord, Lord Bernstein, first and give the Committee some figures that may be helpful. We do not believe that the Bill is inflationary because of the effect of the rent allowances and rebates which will be applied to the lowest wage earners. Those are the people on whose behalf industrial action is sometimes taken and wage claims put forward. It is in this sector that the rent rebates and allowances, covering between them the whole of the private and public field with generous allowances and rebates—more generous than anything hitherto—will be anything but inflationary. Exactly the reverse will be the case. This is all part of a package which serves to concentrate subsidies not only in the places where they are needed to encourage building, but on the people in need.

I will not weary the Committee by giving all the figures I have. I will compare the position in October, 1968, with that in October, 1971, but bringing into the picture the effect of the tax reductions in the last Budget. Let us apply this situation to the case of a married couple with two dependent children, paying £4 a week rent, and see the effect of our model scheme of rent rebates. Let us say the man is earning the average income of a manual worker on those two respective dates. In October, 1968, he would have been earning £23 a week. Let us say that he would have been paying a rent of £3 a week for a house suitable for a family of that size. The effect of paying that full rent—full because in most cases rent rebates would not have been available, though some local authorities might have run them—then paying the income tax and National Insurance prevailing at the time, would have been that man would be left with a net income after rent, tax and National Insurance of £16. Three years later that rent would have gone up to, say, £4 a week, at the rate at which rents were increasing in that period. But if our rent rebates were available—I agree that they are not available at the moment—that increase would have been brought back to a rent of £3.42. That would be the impact of rent rebate on that family with those needs paying that rent. The man's tax position would have been improved by the Budget and he would have a spendable income, comparable to the £16 he had before, of £22.50. His wages, if they had followed average increases, would have gone up from £23 to £31. If his income is less or if his needs are greater, the effect of the rent rebate would be greater.

LORD DIAMOND We will study carefully the figures which the noble Lord has given, though he omitted to say whether they were constant or current prices; I take it that they were current.

LORD SANDFORD

I was comparing prices and everything else prevailing in October, 1968, with October, 1971, but applying to the 1971 figures the benefits of the last Budget and showing the effect of our rent rebates, which are not yet in force but which would have had the effect I mentioned if they had been in force.

LORD DIAMOND

The noble Lord is comparing like with unlike—comparing £s of a certain purchasing power in 1968 with £s of a considerably lower purchasing power in the later period.

LORD SANDFORD

Yes.

LORD DIAMOND

The noble Lord is taking as an average 1971 rent a figure which his noble friend said was approximately twice the average. Nevertheless, we will work out the figures and see what benefit we can get from them. We are grateful to the noble Lord for giving them. I return to the issue raised by the Amendment, the remarks of the noble Baroness and the interesting intervention of the noble Viscount, Lord Gage. The noble Baroness said that personal circumstances should continue to be omitted. Arising out of her experience—the noble Baroness shone with considerable light in her local authority—I am sure that she was troubled, as all local councillors are, when going into the whole question of rent arrears. Every large housing authority must at each meeting of the housing committee consider these arrears. A document is put before each councillor showing what the arrears are and the circumstances of each individual tenant; the family circumstances, how the arrears have grown and all other relevant matters. They are all what one might call personal circumstances. They are held to be particularly relevant in considering whether action should be taken or whether the arrears should be remitted. Personal circumstances are considered by all councils in relation to the possible remission of rent.

Remitting rent is a matter of simple accounting. It is just a question of reducing the amount of rent. It is like saying "If your rent was £x and we are remitting one-quarter of £x, your liability has been reduced to three-quarters of £x." Is the noble Baroness saying that local authorities will be denied the discretion to take personal circumstances into account in remitting rent? That sounded very much like what she had in mind by her rejection of our request that persons' circumstances should be taken into account. I hope that councillors will still be able to use that discretion and be able to exercise humanity, sympathy and understanding when considering all the personal circumstances of their tenants, in deciding whether arrears of rent should be remitted or carried forward. And if that is so, here is a very good example of personal circumstances entering into the consideration as we think they should and as the Amendment considers they should, albeit I admit the Amendment takes it a step further.

The noble Baroness turns once more to the switch from fair rents in the private sector to fair rents in the public sector. We are going to get confused if we keep on talking about fair rents. Therefore, if I may, I shall use my own vocabulary, so as to avoid any possibility of confusion. The present position is that local authorities can decide on what rents they think are reasonable, and these rents are known shortly as "reasonable rents". What is proposed in the Scottish Bill is that local authorities shall have that power. I will read it out once more. Part IV states: Subject to the provisions of this Part of this Act a local authority, in respect of the tenancy or occupation of houses"— et cetera— may make such reasonable charges as they may determine". Those are reasonable rents. The present position in England and Wales is "reasonable rents". The proposed position in the legislation brought forward by the Government for Scotland is "reasonable rents". Are these wanted for England and Wales under this Bill? No. How should we describe them? They are unreasonable rents. If the noble Baroness will forgive me, I will use that description from now on. We shall be quite clear what kind of rents we are referring to. "Unreasonable rents" are the rents which the noble Baroness is proposing for local authority tenants in future under this Bill. "Fair rents" is what the noble Baroness is proposing should he extended for private tenants of private landlords, both under the old legislation and under the continuing legislation.

Now I turn to the question of the economic effects of the situation as we find it to-day. The noble Baroness will be as familiar as I am with what has happened in Threadneedle Street at the usual hour, and I can assure her that I did not engineer this with the Governor of the Bank. He did not seek my advice before deciding what to do, nor did he trouble to find out whether I was going to move this Amendment this afternoon. With regard to the view of the noble Viscount, Lord Gage, as to whether we think this is right, I am happy to tell the noble Viscount that there is no difference between either side of the Committee on this issue as to principle. There is no difference at all. The Government are not saying, "We think unreasonable rents are right and that therefore they should be imposed". The Government are saying, "Having regard to the economic and other circumstances"—exactly the circumstances which are in our Amendment—"we think that the rent should not go up by more than £1 or ten shillings this October (as the case may be), making a total increase of £1 for the 12 months

". They are saying, "Having regard to the economic effects, and no doubt the political effects, we think it should not go up by more than £1 over the 12 months".

The issue between us is not a matter of principle at all; it is a matter of how fast the rent increases should take place and whether the economic circumstances of the country should be taken into account. All I am saying is that when this Bill was drafted the economic situation of this country was not seen to be what it is seen to be to-day. When this Bill was drafted, if anybody had said that the bank rate would go up by 1 per cent. for the well-known reasons during the course of the consideration of the Bill, he would not have been believed, because the general expectation was a move the other way. If anybody had said when this Bill was introduced that pressure on the pound was going to mount in the way it has done, they would not have been believed.

I am saying that it is irresponsible to have no regard to the economic difficulties of the country or the way they have moved in pursuing a fixed determination about a particular piece of legislation which stemmed from a decision taken years ago at a Party conference. A Party conference is a relevant consideration. The change in the economic circumstances of the country is also a relevant piece of information. If I were to be asked which is of the greater importance, the decision of the Conservative Party Conference or the increase in the bank rate, I should have no difficulty in coming to a conclusion; and that is why I am saying that I hope nobody in your Lordships' House would have any difficulty either. On to-day, of all days, to reject an Amendment which invites the Government to take account of the economic situation passes my understanding.

VISCOUNT GAGE

I am much obliged to the noble Lord, Lord Diamond, for shedding some light on my difficulty. It is not entirely resolved, however. Somebody has to pay for these houses and somebody has to pay for the maintenance. The question seems to be what shoulder should bear the burden. It sounded as if the noble Lord was saying that if you put too much on the shoulders of the trade unions they will go on strike and add to the general confusion. I do not know whether or not that may happen, but I do not think from the moral point of view that it is right that people should have that privilege simply because they have the power to add to the inflationary pressure.

6.37 p.m.

LORD LEATHERLAND

The noble Viscount, Lord Gage, who has a very long experience of local government and for whom I have a very high personal regard, talked to us about the £40-a-week tenants of council houses who were not going to be asked to bear what he calls a fair rent. That kind of story reminded me of what we used to hear 30 years ago, of the coalminers in South Wales who used to fill the baths in the bathroom with coal. Fortunately we are in a position to answer the suggestion about the £40-a-week tenants. Not long ago the Prices and Incomes Board (what a pity it is not in existence to-day ! If it were we might have avoided many of our current troubles) was specifically asked to investigate this kind of allegation, and it found that the percentage of people who were in receipt of £40 a week, or whose incomes were £40 a week, was very small indeed, I believe that it was somewhere about 1 per cent.

The noble Viscount, Lord Gage, also drew into question the morality of paying subsidies. I believe that I said in an earlier speech on this Bill that I do not regard subsidies as such as being iniquitous. We pay them to many sections of the population when we think it is in the national interest so to do. We pay them to landowners and wealthy farmers; and, through one of our subsidiary organisations, we pay them to chorus girls and ballet dancers. We also pay them on a very big scale to the people who buy their own houses on mortgage: we give them a direct subsidy more than twice as large as that which is given to council tenants. So we should see this thing in its proper perspective.

The noble Lord, Lord Sandford, said that this scheme was not inflationary because the distribution of rebates to a large number of council tenants would have exactly the opposite effect. Let us accept that, so far as it goes, but we must bear in mind that even when the rebates are given they will be given from the level of the new increased rents; they are not set against the existing rents. It may well turn out that many of these tenants, even after they have received a rebate, will be facing a rent increase based upon the existing rent which they pay. But I am not talking about the tenants who will get the rebates; I am talking about the tenants who will be mulcted in these increased rents. That is what we are talking about, increased rents—1 this October; 10s. next year; 10s. the next year; and then, for the second three-year period, undoubtedly still further increases. We have to bear in mind that these people are already paying increased rates; rates that have gone up 25 per cent. since the present Government came into power. What I am concerned with is this wording in our Amendments which talks about the national economic position. What is going to happen? We shall have one big wage demand after another—but I will come back to that in a moment.

I want to try to illustrate the way in which the Government's present policy under this Bill is running directly counter to everything promised to the nation two years ago, and repeated time after time since then. Only a few months ago, Mr. Heath was saying at Luton Hoo: Ever since we were elected, we have concentrated on reducing rises in prices. Putting up these rents under this Bill is not going to reduce prices: it is not even going to slow down the increase in prices; it is going to be a positive definite increase bearing upon millions of people.

Mr. Heath also said on the same occasion—and I commend this example to the noble Lord: The employers, by keeping price increases down to 5 per cent., have made their contribution. Can we not all take a longer view now? Let us end the bickering and get on with the job. He was commending to us the example of the employers, the C.B.I., who had limited their increases to 5 per cent. And he has the bare-faced effrontery to come to us this afternoon and say, "Put up these rents by 50 per cent." !—because that is what will happen in a large number of cases, with further increases to follow. Then Mr. Heath told us—he never tires of talking about bringing down the cost of living while his Ministers are putting it up: The people of the country will not lightly forgive any group which is seen to obstruct the improvement in the standard of living. The Government are not going to improve the standard of living by putting up the rents of millions of tenants.

There is a further aspect of this matter. Time after time we have heard from this Government, from various Ministers, that it is their desire to increase the powers of the local authorities, to give them a bigger say in handling local affairs. What is the biggest undertaking that most local authorities have to handle? It is housing. Yet the powers which the local authoritities now have, the powers which they have had for many years, are now to be taken away from them (if I may coin a phrase) "at a stroke". What will be the effect of all this on the economy? This increase in rent is not something we can view in isolation. It is coming on top of increases in the price of food—17½ per cent. since the Government came in; increases in fares, increases in the price of clothing, increases in the price of school meals, increases in the price of everything. It is inevitable that trade union leaders, who have to defend their policy to their members, will be compelled to put in demands for still bigger and bigger wages. We may deplore it, but it is a fact, something that will happen; and we are seeing the first indications of it at this moment, while the miners and railwaymen are talking about the next increase they will demand.

What is going to be the effect of all this on our competitive efforts in world markets? We have already heard that the competitive advantage we received from the last devaluation—I am not going to talk about the next devaluation—have almost worn away. The terms of trade are turning against us. The prices of our exports are going up, and that is leading to a smaller demand from foreign countries for those exports. This must inevitably have a very serious effect upon our balance of payments, which has already turned away from the very rosy hue it had a year ago and is rapidly moving in the direction of a balance-of-payments deficit. I do not want to be panicky about that, but it is coming; the bankers of Europe can see it coming, and that is one of the reasons for the recent run we have had on the pound.

There is a still further effect upon the economic situation in this country. If these people are to pay this extra rent on top of all the other increases they are having to meet, and if they do not get increased wages to counterbalance that, it means that they will have less money in their pockets to buy all the other things the householder usually buys: household equipment, clothing, all kinds of things. What will be the effect if the demand for these goods is reduced in our factories? It will mean that our factories will have to produce fewer goods, and that means an increase in the number of people unemployed.

I take the view—and I used to feel that I was fortified in this view by Members opposite—that local councils should be allowed to handle their own business. If we look at the housing situation through that kind of telescope, we see that many councils have already paid off the whole of the costs on many of the houses they have built. Why, therefore, if they can charge an economic rent which meets all their outgoings, should they be compelled by the Government to pay something very considerable on top of that? I think our Amendment is taking a patriotic view in the wide scope of the national economy, and I sincerely hope that the Government will find it possible to accept it.

6.47 p.m.

On Question, Whether the said Amendment (No. 110DA) shall be agreed to?

Their Lordships divided: Contents, 40; Not-Contents, 67.

CONTENTS
Amherst, E.	Garnsworthy, L. [Teller.]	Sainsbury, L.
Archibald, L.	Granville-West, L.	Shepherd, L.
Arwyn, L.	Hale, L.	Shinwell, L.
Bernstein, L.	Henderson, L.	Slater, L.
Beswick, L.	Jacques, L. [Teller.]	Stow Hill, L.
Birk, Bs.	Leatherland, L.	Strange, L.
Brockway, L.	Lloyd of Hampstead, L.	Summerskill, Bs.
Champion, L.	Maelor, L.	Tanlaw, L.
Crook, L.	Pargiter, L.	Taylor of Mansfield, L.
Diamond, L.	Phillips, Bs.	Wells-Pestell, L.
Faringdon, L.	Platt, L.	Willis, L.
Fiske, L.	Popplewell, L.	Wise, L.
Gaitskell, Bs.	Royle, L.	Wootton of Abinger, Bs.
Gardiner, L.

NOT-CONTENTS
Aberdare, L.	Daventry, V.	Hawke, I.
Abinger, L.	de Clifford, L.	Hood, V.
Ailwyn, L.	Denham, L. [Teller.]	Hylton, L.
Alexander of Tunis, E.	Derwent, L.	Hylton-Foster, Bs.
Alport, L.	Digby, L.	Killearn, L.
Atholl, D.	Drumalbyn, L.	Leicester, E.
Balfour, E.	Elles, Bs.	Limerick, E.
Barnby, L.	Elliot of Harwood, Bs.	Loudoun, C.
Belstead, L.	Falkland, V.	Milverton, L.
Berkeley, Bs.	Ferrers, E. [Teller.]	Mowbray and Stourton, L.
Bessborough, E.	Ferrier, L.	Reading, M.
Brooke of Cumnor, L.	Fortescue, E.	Reay, L.
Brooke of Ystradfellte, Bs.	Gage, V.	Reigate, L.
Brougham and Vaux, L.	Gainford, L.	Ruthven of Freeland, Ly.
Carrington, L.	Gisborough, L.	Saint Oswald, L.
Colville of Culross, V.	Glasgow, E.	Sandford, L.
Colwyn, L.	Goschen, V.	Selborne, E.
Conesford, L.	Gowrie, E.	Sempill, Ly.
Cork and Orrery, E.	Hailes, L.	Teviot, L.
Courtown, E.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Thorneycroft, L.
Cowley, E.		Vivian, L.
Craigavon, V.	Hanworth, V.	Young, Bs.
Cullen of Ashbourne, L.	Hatherton, L.

6.54 p.m.

LORD TANLAW moved Amendment No. 110DC:

Page 52, line 34, at end insert— ("(1A) Regard shall also be had to the differences which exist between local authority and private landlords, and in particular, the fair rent of a local authority dwelling shall be reduced below the rent of an equivalent privately rented dwelling by taking into account the relative interest rates, repayment periods of loans, taxation, profits, and any other factors which may be different in the case of a local authority from the case of a private landlord.")

The noble Lord said: My noble friend, Lord Avebury, apologises for not being present to move this Amendment. He has an outside engagement and has asked me to move it on his behalf. The Amendment modifies the criteria for arriving at a fair rent, in that it makes a clear-cut distinction between the public sector and the private sector. I believe the Milner Holland Report on housing showed that because of the difference in the rates of interest and repayment, as mentioned in the Amendment, the economic rent of council houses would be much lower than the equivalent in the private sector. Hence it would not be just or in accordance with the principles set out in the White Paper to charge the tenants the same. There is little I can add except to say that there are two entirely different matters of principle here: the principle of ownership and the terms of funding and finance behind the council dwelling and the private dwelling. The terms of finance have already been referred to by the noble Lord, Lord Diamond, who mentioned the bank rate, but this is just part of it. The loan terms for a private landlord are inclined to be much shorter than those for councils, which are often for as long as sixty years. This can make a difference, and the Amendment is intended to make this distinction and to ensure fairness in keeping with the principles set out in the White Paper.

LORD SANDFORD

It is perfectly true to say that in determining fair rents and in the process of comparing one dwelling with another, either within the private sector or between the private sector and the public sector, the difference in the return on the original investment is something which can be taken into account. But the fact of the matter is that when there are two roughly comparable dwellings in a balanced market, the difference in profitability as between one landlord and another will have only a minimal effect on the rent which each of those two dwellings would command. What affects the rent far more than that is any difference in the quality, characteristics and amenities of the two particular dwellings. It is for that reason that we already have the ruling of the courts that the determination of fair rent should be based, whenever possible, on fair rents registered for comparable dwellings, and that the return from the dwelling as an investment should be considered only as a check.

What is true as a ruling between one dwelling and another in the private sector has the same validity when we are comparing dwellings in the private sector with dwellings in the public sector. I fully recognise that the difference in the return on the investment made and the difference between a housing authority as a landlord and a private individual as a landlord is very marked indeed. But in view of the rulings of the courts on these matters I hope the noble Lord will not feel it necessary to press his Amendment, and that if he does the Committee will resist it.

LORD HYLTON

This seems to be a very theoretical Amendment. I do not believe that in many cases in the private sector the information could be extracted. Even if it were capable of being extracted, it would produce an administrative nightmare. The complications would probably be greater than anything else in the whole Bill. I hope the noble Lord, Lord Tanlaw, will not press this Amendment.

LORD TANLAW

Let me assure the noble Lord that the figures are in the Milner Holland Report. I have seen them, but they are mislaid under the pyramid of papers which I have here.

LORD HYLTON

The Milner Holland Report deals only with London, and not with the rest of the country.

LORD TANLAW

In view of what the noble Lord and the Minister have said, I am pleased to beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD SANDFORD

I beg to move that the House do now resume.

Moved accordingly and, on Question, Motion agreed to.

House resumed.