HL Deb 18 May 1972 vol 330 cc1442-50

3.27 p.m.

LORD DRUMALBYN

My Lords, I beg to move, That this Bill be now read a second time. On the basic aim of housing policy we can all agree. It is surely a common objective that everyone, every family, every household, should have a decent home, suited to their needs, at a price they can afford, with, if possible, a choice of owning or renting their home. At least we agree that home ownership should be encouraged, and both Conservative and Labour Governments have striven to make it more easy to achieve. We are all anxious to see the slums cleared and to improve those older dwellings than can still be made into decent homes. Again, successive Governments have brought forward legislation for improvement grants. My noble friend, Lord Brooke of Cumnor, introduced in 1959 standard grants for basic amenities, and Lord Greenwood's Housing Act of 1969 gave a further stimulus to the improvement of older dwellings and of areas of twilight housing; and this Government added impetus by a publicity campaign. The Housing Act 1971 raised the level of grant to home owners in development and intermediate areas from 50 per cent. to 75 per cent. and the level of Exchequer contribution from 75 per cent. to 90 per cent., and also increased the grant to local authorities for the improvement of their houses temporarily to 75 per cent. Finally, we are agreed on supporting the voluntary housing movement.

It is also common ground that the present system of providing, maintaining and paying for rented accommodation—if it is a system—is, to say the least, defective. The last Administration undertook a fundamental review of housing finance which was not completed by the time of the General Election. Mr. Crosland, the Opposition's principal spokesman on housing, said in his Herbert Morrison Memorial Lecture last July that our present system of housing finance is riddled with anomalies and inconsistencies, and the Government agree with this judgment. The present "system" is disjointed and unfair. To a large extent it has "just growd", like Topsy. It had its origin in a total national shortage of houses, made very much worse by two world wars and the measures which the wars required. The national shortage no longer exists. There is an absolute shortage of houses only in certain areas, particularly London and some other conurbations. In many parts of the country the physical problem is more one of the quality of the housing stock; in some areas the physical problem is slight.

But the financial problem persists everywhere because of the structure of the subsidy system and the principles which determine how rents are fixed. Nearly 30 per cent. of households in England and Wales are council tenants, and about 15 per cent. are tenants of private landlords. Two-thirds of council tenants live in dwellings built since the war. The general standard of their dwellings is good, in many cases very good. The dwellings in which private tenants live tend to be older and many of them are in poor condition, particularly those still subject to rent control. The rents of council dwellings depend basically on the expenditure which falls on their authority's Housing Revenue Account, If their authority has solved its housing problems the rents of their dwellings are low. If not, the rents of their dwellings are high. The facts of history and geography result in dwellings of identical size, quality and amenity in neighbouring authorities having quite different rents. Moreover, there is no consistent system for helping the poorer council tenants with their rent. Forty per cent. of local authorities have no rebate scheme. Many authorities have a scheme, but it is not always generous enough.

Private tenants of unfurnished accommodation have their rent determined on two different principles. About half of them are subject to rent control. Their rent is in effect frozen at the 1957 level and averages about 90p a week outside London and about £1.50p a week in London. These controlled tenants are not as fortunate as their rent suggests. Because the rent is so low, it often does not even cover the cost of keeping the dwelling in repair. So the dwelling deteriorates and the tenant suffers; indeed, the whole country suffers because dwellings needlessly degenerate into slums. The other half of private unfurnished tenants are subject to rent regulation. Their landlords can charge a rent up to the fair rent under the scheme introduced by Mr. Crossman in 1965. But, except in Birmingham, no private unfurnished tenant who is in work can receive any help towards his rent, however poor he may be.

These arrangements for fixing rents are manifestly unfair between council tenants and private tenants, between council tenants of one authority and of another authority, and between private tenants of rent-controlled dwellings and private tenants of dwellings which are subject to rent regulation, that is, to the fair rent system. The unfairness is compounded by the subsidy arrangements which go with the arrangements for fixing rents. In the private sector the subsidy is concealed. The landlord of the controlled tenant who pays a very low rent often in effect subsidises the tenant, who may be better off than the landlord. In the public sector subsidies are provided by taxpayers, and in some local authorities by the ratepayers as well. A little over 10 per cent. of the Exchequer subsidies are used to provide rent rebates; that is, they go to reduce the rent of the poorer tenants. The remainder of the subsidies and rate fund contributions are used to keep down the rents of all tenants, irrespective of their means and of the rental value of their accommodation. This is particularly unfair on those taxpayers and ratepayers who are no better off, or worse off, than the tenants whose rents they help to reduce.

Moreover, unless something is done, the burden on taxpayers and ratepayers of this unfairly distributed charge will go up and up in the foreseeable future. Housing subsidies (excluding rent payments made by the Supplementary Benefits Commission) were about £200 million in England and Wales in 1971–72. If the present system continued they would be £300 million a year by the middle of the decade and over £400 million a year by the end of the decade. And rate fund contributions would also tend to increase above their current level of £60 million a year. These are anomalies and unfairnesses which have not only continued but have been growing for long enough. The time has come when any Government, whatever its political propensities, would have had to deal with them. I recognise that in remedying unfairness one is liable to offend and estrange, temporarily at least, some of those who will in consequence lose advantages over their fellow citizens that they may at present enjoy. But I cannot believe that had the Party opposite won the last Election they would not now, as we are, be introducing a radical measure of reform.

In this Bill we are proposing to remedy these anomalies and unfairnesses in three ways: first, by basing the rent of all unfurnished dwellings on their fair rental value; secondly, by giving a subsidy to those tenants who cannot afford the rent based on this principle; and thirdly, by concentrating subsidies on those local authorities who need subsidies to solve their housing problems. For private unfurnished dwellings the Bill completes the process begun by the previous Government in the Rent Act 1965. It provides for the progressive conversion of controlled tenancies to regulated tenancies; that is, it brings controlled tenancies into the fair rent system as was recommended by the Milner Holland Committee and the Francis Committee. This is to be achieved under Parts III and IV of the Bill over a period of three years. Where the fair rents are considerably higher than the present rents, the increases can be phased over three annual steps. Tenants who cannot afford the full increase—and also tenants who cannot even afford to pay the present rent—will be eligible for the rent allowances introduced by Part II of the Bill. Under Part VIII of the Bill housing association tenancies will also become subject to rent regulation, with phasing arrangements to mitigate the impact of the increases.

The right of a tenant to apply for the determination of a fair rent where such a rent has not already been registered is preserved in all circumstances, whether the rent remains unchanged or is fixed by agreement between landlord and tenant. Where the rent for a tenancy coming out of control is fixed by agreement between the parties after January 1, 1973, a copy of the agreement must be given to the local authority, which also may apply for a registered rent if it thinks the agreed rent is too high. Security of tenure is not affected by the Bill. It remains as it was under the 1965 Act. I should add that housing association tenants, too, will become eligible for rent allowances.

The fair rent principle devised by the previous Government will also be applied to council tenants. Part V of the Bill sets out the proposed arrangements for determining the fair rent of council dwellings. Under this Part of the Bill the local authorities will themselves provisionally assess the fair rent for their dwellings on the basis of principles which are in effect those used in determining fair rents in the private sector under the 1968 Act. Tenants will have the right to make representations to the council about its provisional assessment, and the assessment will then be checked and, if necessary, revised by rent scrutiny boards. Those boards will be composed of the members drawn from the same rent assessment panels from which are constituted the rent assessment committees who are concerned with the final determination of fair rents in the private sector. In this way the same equitable principle will govern the rent determined for unfurnished dwellings in both public and private sectors. The rents of council dwellings will reflect the fair rental value, excluding any scarcity value and related to the age, character and locality of the dwelling and to its state of repair. They will no longer be arbitrarily determined by the state of the authority's Housing Revenue Account or the housing problems of the authority. Rents will no longer be affected by rebates granted to other tenants, or by the extent to which council tenants are made to bear part of the burden of slum clearance, or by the amount of housing subsidy paid to the authority or of the rate fund contribution it makes. The sole determining factor of the rent of the dwelling will be the criterion of the fair rent.

The progression of council rents to the fair rent is covered by Part VI of the Bill. This progression is on the basis of reasonable steps, and authorities have been able since the publication of the White Paper so to arrange matters that in any year the average increase for any dwelling is limited to 50p a week and the increase for any individual dwelling is limited to 75p a week. It is only those authorities which have deliberately chosen to make no general rent increase during the twelve months October, 1971, to September, 1972, that will have to make an increase of £1 per house on October 1, 1972.

Parts III, IV, V, VI and VIII of the Bill apply to the rents of dwellings. What matters is the rent actually to be paid by the tenant. Part II of the Bill introduces a national scheme of rent rebates and allowances under which any tenant of an unfurnished dwelling who cannot afford the rent can obtain a rent rebate from his local authority if he is a council tenant, or equivalent cash payment towards his rent, called a rent allowance. if he is the tenant of a private landlord or a housing association. Each local authority must introduce rent rebate and allowance schemes which are not less generous than the model scheme set out in Schedule 3 of the Bill. That model scheme is more generous than the great majority of existing rebate schemes of local authorities. It will be kept up to date by regulations made by the Secretary of State in the light of changes in conditions and of the advice of an expert committee.

Let me give some examples of the help under the proposed model scheme in a straightforward case. A married council tenant with 2 children, and a weekly rent of £5, will have his rent reduced to £366 if his weekly income is £30, to £2.81 if it is £25, and to 94p if it is £16. If his weekly income is £25, his rebate will be calculated as follows: a needs allowance is first deducted from the tenant's weekly income to allow for the basic cost of necessities for himself and his family. In this case the allowance will be £20.25 (that is, £14.75 for himself and his wife and £2.75 for each of his two children). As his needs allowance is less than his income, the rent paid by him will be the normal minimum rent for all in receipt of rebates or allowances (40 per cent. of the rent or £1, whichever is the higher)—in this case £2—plus 17 per cent. of the difference between his income (£25) and his needs allowance (£20.25)—in this case 81p. So the rent to be paid by him will be £2.81 (£2 plus 81p) and his rebate will be £2.19. I thought your Lordships would like to see just what the effect was of the proposed arrangements.

These arrangements for fixing rents for dwellings and for helping all those tenants who cannot afford the rent of the dwelling are underpinned by a completely new system of subsidies which replaces the existing system. This change is effected by Parts I and VII of the Bill. All existing subsidies are phased out and replaced by new subsidies. The basic principle behind the new subsidies is that subsidies are for people and should be paid only in so far as the authorities cannot meet the housing needs of people from the income which they receive by charging the fair rent to those tenants who can afford it and a rebated rent to those who cannot afford it. If a local authority provides all the dwellings it needs to provide, charges rents on this equitable basis and can do all this without a deficit in its housing accounts, it does not require a subsidy. But if it still has a deficit, then broadly speaking the new subsidies will meet 75 per cent. of the deficit, and the liability of the ratepayers will be limited to 25 per cent. of the deficit.

This basic principle is exemplified by the new subsidies under Part I of the Bill which directly or indirectly benefit the Housing Revenue Account. The residual subsidy is the vehicle for phasing out existing subsidies to which housing authorities were entitled for 1971–72. If this phasing out is not offset by extra income from increases of rents towards fair rents under Part VI of the Bill and there is in consequence a deficit in the authority's Housing Revenue Account, from 75 per cent. to 90 per cent. of that deficit is met by the transition subsidy (the second subsidy). If there is a deficit in the account as a result of an increase in expenditure (for example because of a housing programme) then the rising costs subsidy meets 75 per cent. or more of that deficit. Any deficit in the account arising from the granting of rebates is met by the rent debate subsidy, which meets from 75 per cent. to 90 per cent. of that deficit. Finally, if an authority goes into the new system of housing finance with a deficit which has arisen under the existing system, the operational deficit subsidy, broadly speaking, relieves the authority of 50 per cent. of the deficit. The Bill lays a new duty on local authorities to give allowances to private tenants who need them. These allowances are to be on the same basis as rents rebates. The Government will reimburse the cost of such rent allowances in full for the first 4 years, and thereafter at least 80 per cent. of the cost.

I referred earlier to the way in which the present system of rent control had accelerated the deterioration of our older homes into slums. The Bill provides for the first time a subsidy directed specifically towards slum clearance. The new slum clearance subsidy will meet 75 per cent. of the loss represented by the difference between the cost of acquisition and clearance and the value of the land when cleared. The new slum clearance subsidy will provide a financial incentive to clear slums not only if the land cleared is used for council housing as under the present arrangement, but also if it is used for private housing or some other purpose. The most recent survey which will shortly be published will show that there are now about 700,000 slum dwellings in potential clearance areas. As a result of the new slum clearance subsidy, there is now no financial reason why all existing slums that need to be cleared should not be cleared in 10 years.

Part VII of the Bill provides for a new system of subsidies for housing associations. Government Amendments were made in the Committee stage in the other place which have been warmly welcomed by the voluntary housing movement as a whole. As a result of these Amendments the initial deficit which is calculated on a new building scheme will now be met in full by the Government for the first 3 years, and for the next 7 years it will be possible, where necessary, to meet up to 90 per cent. of the deficit. The new subsidies enable the movement to play an increasingly important part as a provider of houses to rent.

As a result of the Bill, total Government subsidies, including rent payment by the Supplementary Benefit Commission towards housing in England and Wales, are expected to remain at about their present level, which is some £350 million a year. But they will be concentrated on the people and areas in housing need. The Bill is complicated in detail because it effects radical and far-reaching changes, and many specific provisions are necessary to deal with the transition to the new system, given the widely differing circumstances of individual local authorities, housing associations and citizens. But the Bill's principles, as I indicated, are clear. Taken together, the provisions of the Bill give expression to an overdue reform which makes housing finance more relevant to the housing problems of the country, more appropriate to the real needs of the individual householder and more fair as between one citizen and another. This is a rational Bill, a fair Bill, a compassionate Bill, and I commend it to your Lordships. I beg to move.

Moved, That the Bill be now read 2a.—(Lord Drumalbyn.)