§ 3.16 p.m.
§ Lord MELCHETT
My Lords, I beg to move that this Bill be now read a second time. My Lords, may I begin by apologising on behalf of my noble friend Lady Birk for the fact that she is unable to be here today, due to a bad attack of 'flu. I should also like to apologise on my own behalf for the fact that anyone who remains for the whole of this debate will have to listen to two speeches from me. I will try to keep both of them reasonably brief.
Your Lordships know that one of our principal political aims and commitments is to reform housing finance. This large and important task is being tackled in two main stages. There is to be a major review by the Government of the ways in which we as a community assist ourselves and each other to obtain the standard of housing necessary for health and desirable for comfort. Such a review must be a complex and extended piece of work. Before it can be concluded and legislation framed, we must tackle urgently the job of stopping the harm currently being done by some key aspects of the Housing Finance Act passed by the previous Government. That is why this Bill has been introduced so speedily. It is short, which will be a welcome change from the Housing Finance Act. But it does much with few clauses.
In the public sector, which means the nearly 5 million dwellings owned by local authorities, the Bill will abolish the 319 system of imposed "fair" rents and mandatory progression to them. It will return to local authorities the power and the duty to charge reasonable rents. It will make provision for a new subsidy system designed to give strong support to local authorities' housing activities. This subsidy system is essentially of an interim character and will be looked at again after the conclusion of the review of housing finance, but has been designed to be sufficiently robust for the next few years. In the private sector, the Bill will provide for the phasing of increases of regulated rents, and also stop the programme under which controlled tenancies were to be converted automatically to regulated tenancies according to their rateable values. The Bill will also pro-vide, in the private sector, for a change in the basis on which a fair rent is determined so that the return to landlords, and the burden on tenants, is not in-creased by reason of improvement in the amenities of the locality for which the landlord bears no responsibility, and from which he should not, therefore, gain reward.
These are the main principles of the Bill. Before I go on to explain its provisions in more detail, I would emphasise that the Government do not see the measure as one dealing purely with the mechanics of rents and subsidies, but as one which will improve the lives of all tenants of rented property, for whom the weekly or monthly rent is a major part of their expenditure. The benefit of having rents fixed by democratically elected representatives will be restored to the tenants of local authorities, and these tenants will also be able to benefit from an important new provision in the Bill.
This provision will make it possible for local authority tenants, with the support of their councils, to form housing co-operatives. The provision was added to the Bill at a rather late stage in another place, and is tucked away in Part I of Schedule 1, but this does not mean that it is any kind of after-thought; it merely took a little longer to formulate than the rest of the Bill. Its potential in human terms is considerable, and we regard it as a new point of departure which will have great social value. It will enable people to involve themselves in the process of running their houses 320 jointly with their neighbours. This would be valuable in housing terms alone, but it should also serve to strengthen the social links between people living in the same neighbourhood. Housing co-operatives will, we hope, reduce the cold indifference which sometimes permeates even well-run local authority estates, and help to reduce the helplessness and sense of isolation that so many people feel today.
Turning to the main provisions of the Bill that affect the public sector, noble Lords will remember that under the Housing Finance Act "fair" rents were determined by appointed Rent Scrutiny Boards. Democratically-elected local authorities lost their rent-fixing functions, and had power only to argue with the Boards on behalf of their tenants. This method of rent fixing for local authority houses is, we believe, wrong in principle ; and the Bill removes it, and returns to the concept of reasonable rents fixed by local authorities. This was in force for many years before the 1972 Act, and is understood by local authorities and by most tenants. It means in practice that councils must strike a reasonable balance between various interests in their communities, particularly the tenant and the ratepayer. Local authorities know their tenants, know their area and are in an altogether better position to fix rents than an elusive, transitory, appointed board remote from the electors, a board that did not even remain in existence afterwards to see the consequences of its decisions.
My Lords, a second objectionable feature of the Act which the Bill removes is the statutory requirement to increase rents by fixed amounts at set intervals. This is a rigid and unreasonable provision which adds to inflationary pressures and tries to move authorities to a position of profit from housing; even though expectations of profit have, in the event, proved illusory. We reject utterly all the propositions implicit in this argument: first, the concept of making a profit out of local authority housing; secondly, increases of fixed amounts on fixed dates irrespective of the local authority's financial situation; and, thirdly, the assumption that underlay these provisions in the first place, that local authorities were generally undercharging their tenants.
321 Accordingly, Clause 1 of the Bill removes these provisions. Under it, local authorities will fix their own rents. They have a certain expenditure to meet; in meeting it, they will have the Exchequer subsidies as a first resource, which will be paid on a basis not affected by their rents. The remainder of their expenditure they will meet from rents and rates in the proportions they determine. They will not be allowed to budget for a surplus bigger than a reasonable working balance; they must aim for what I would call a triangular relationship in which reasonable rents, a reasonable rate fund contribution, and a reasonable working balance together enable them to balance their accounts with neither a profit nor deficit.
My Lords, Clause 2 gives the Secretary of State a reserve power to limit increases in rents in both the public and private sectors. This power is necessary on broad grounds of Government economic policy, and is similar to the power in the Counter-Inflation Act under which the current rent freeze was imposed.
In many areas there is an absolute shortage of homes and no realistic prospect of anyone but the local authorities providing sufficient housing. London and the larger conurbations are particularly affected by housing shortages, while the problem of unfitness is present in most industrial areas, and in small towns and the countryside. Added to this problem are the many families whose hopes of owner-occupation have been snatched away by increasing house prices, and who are now turning to the local authorities to provide them with their own homes. There is also the pressing need for more public ownership of privately rented accommodation. The underlying principle behind the new subsidy system is that local authorities should have sufficient financial support to undertake vigorous housing programmes without imposing an unacceptable burden on rentpayers or ratepayers.
The new subsidy structure is set out in Clause 4 and described in more detail in Schedule 1 to the Bill. The new housing subsidy will comprise five main elements. The basic element of subsidy will, subject to certain minor qualifications, pay to local authorities and new 322 town corporations a sum equal to the amount of subsidy they received for the year 1974–75 under the Housing Finance Act. This will form a robust base for the other elements of subsidy. The new capital costs element will subsidise reckonable expenditure which is attributable to new capital costs at a rate of 66 per cent. The new capital costs may be related to buying land, to the building of new houses, to the acquisition of houses, or to improvements made to houses already in the housing stock. The figure of 66 per cent. is a very high rate of subsidy. It is a gross rate and will be significantly better for authorities than the rate in the Housing Finance Act— which was 75 per cent, of the costs, including maintenance, but net of the rent income. This element of subsidy will provide substantial financial support and will enable local authorities to pursue the enlarged housing programmes so urgently needed, and which the Government are vigorously promoting.
The supplementary financing element will subsidise at a rate of 33 per cent, the extra costs incurred in refinancing old debt, and thus be a substantial contribution to meeting inflationary pressures as they show through in higher interest rates. But this element is not, by itself, enough in the current inflationary situation in which all local authority costs are rising. If there were no further help, rent or rate increases could easily be intolerable. The Government have therefore added a further special element of subsidy, payable for the next financial year only, in order to assist authorities and their tenants as they emerge from the rent freeze. Where a gap remains between a local authority's necessary expenditure and its income (including the other elements of subsidy) the first part, up to £23 per dwelling per year, must be met locally, from either rent or rates. Above this figure the increased costs will be met to the extent of 50 per cent. by the Exchequer. The remaining 50 per cent. will be met locally together with the initial £23 per dwelling. The high costs element of subsidy will not be payable next year, but will come in the following year.
It will be paid from 1976–77 onwards to those authorities, who, through no fault of their own, have higher than average costs per dwelling. The GLC and 323 some of the London boroughs in particular are in this situation, but some authorities elsewhere in the country will also benefit from it. This element of subsidy has yet to be formulated, but it will be aimed at lifting the financial burden of those authorities, most of which lie in the areas of greatest housing shortage. For this year the special element of subsidy serves both these and other authorities.
My Lords, the essential enabling provision to allow bodies of tenants or prospective tenants to form co-operatives to take a lease from the local authority, and thereafter manage the houses themselves, appears in the general rules for subsidy in Schedule 1. It has been universal in housing legislation to cut off subsidy if a council sells or leases a house. Now, for the first time, the council will continue to receive subsidy when it leases its property, if the lease is to a tenants' co-operative. This lease would be controlled by an agreement requiring the approval of the Secretary of State.
My honourable friend the Minister for Housing and Construction, mentioned in another place two kinds of situation particularly suitable for co-operatives. One is the existing housing estate where there is a demand from tenants for a greater say in managing their own affairs. The other is where the tenants of a block of privately-rented dwellings want better standards but the landlord is uninterested and wants to sell the property. In this situation, the council may buy the property, and let or lease it to a co-operative formed by tenants collectively. This provision in the Bill means that housing subsidy will continue to be paid in respect of such dwellings, and the rent or ground rent can be fixed at a correspondingly lower level than would otherwise have been the case.
There is no need to pass on precisely the amount of subsidy attaching to the dwellings concerned; the council can, in fixing the rent, pass on either more or less as may be appropriate. As I have said, the Government see in this provision a starting-point for a new movement in housing, which will need to be developed by advice and perhaps by further legislation in due course. This is not being put forward as a cut-price compromise 324 between renting and owner-occupation. Co-operatives offer a new form of house tenure, which, we believe, will have its own real and distinctive values.
My Lords, turning now to the private sector, my honourable friend the Minister for Housing and Construction is anxious that landlords and tenants should know that the residential rent freeze did not expire on 31st December last, as was stated when it was originally introduced. The Counter-Inflation (Private Sector Residential Rents) No. 2 Order, which came into force on 24th November, provided that the freeze should continue until 31st March 1975. The freeze does not, however, continue to apply to lettings to students of accommodation provided by educational institutions.
The Bill contains provisions for the restriction of the rate of increases in private sector residential rents when the freeze comes to an end. These are to come into force immediately after the end of the freeze. I hope that noble Lords, particularly those concerned with housing problems, will do what they can to make sure that both tenants and landlords know where they stand. Under the present freeze, no rent for a dwelling may be increased above the amount recoverable on 8th March 1974, save where the increase reflects an increase in rates, or the carrying out of improvements by the landlord, or—since 25th November 1974—where and in so far as the cost of services provided by the landlord has risen in consequence of a rise in the cost of fuel consumed in providing these services.
Clause 8 of the Bill creates permanent machinery for the phasing of increases in registered rents. Increases exceeding 40p a week—apart from increases in respect of services—would be phased in two or three annual instalments according to size. The details are set out in Schedule 2. There is also a transitional provision under which tenants who have had a rent re-registered during the standstill period should not be faced with paying two of the annual instalments in one go. In these cases, the phasing anniversary (the commencement of the period of delay) would be the date when the Bill comes into force. Unless rent increases are phased, the whole amount of any increase would be payable in a single year and 325 where the increase is, for example, a pound or more a week, this could impose an intolerable burden on the tenant. Phasing protects tenants against sudden rises and will enable them to adjust their budgets gradually to the payment of the full fair rent when it falls due.
Fair rents have on average been rising at some 7 per cent a year but there are cases where the increase has been much steeper. Some of these excessive rent increases are due to the fact that more than three years has elapsed since the previous registration or to improvements in the condition of the dwelling. But it does appear that some excessive rent increases are partially the result of the registered rent reflecting improvements in the neighbourhood. Under the Rent Act 1968 locality of the dwelling is one of the criteria which must be taken into account in the determination of a fair rent. This means that, when local amenities have been improved, the fair rent will reflect the value of these improvements. But the improvements, which could, for example, result from the declaration of a general improvement area, do not usually take place at the cost of the landlord and it is not right that the tenant should pay more rent on account of them. Clause 9 therefore provides that new or improved amenities provided at the cost of someone other than the landlord or superior landlord are to be disregarded in the determination of a fair rent. It will be necessary to deal with the situation where rents re-registered during the freeze reflected such improvements; tenants in such cases should not be exposed to rent increases—
§ Lord ROBBINS
My Lords, I am sorry to interrupt the noble Lord. He is giving a very lucid account of the details of the Bill, but I wonder whether he could give the House some indication as to his general attitude and the attitude of the Government to the relation between rents and the rate of depreciation in the value of money. Is it the position of the Government that there should be no such relation?
§ Lord MELCHETT
My Lords, if I may, I will deal with specific questions on rents when I come to wind up. I shall be making another speech and I will then deal with the points made in debate. I must say that the Government's attitude 326 is that rents should be fixed at a level decided by rent tribunals or rent officers. The policy is that the increases should be phased so that they do not place an intolerable burden on the tenant. I was saying that it will be necessary to deal with the situation where rents re-registered during the freeze reflected such improvements in the general area in which the property is situated. Tenants in such cases should not be exposed to rent increases greater than they would have been had the improvements been disregarded. Clause 9 and Schedule 3 allow a tenant in such circumstances to apply for a rent reassessment disregarding these amenities.
These provisions should ensure that rent increases following the end of the standstill period are reasonable and fair, and do not impose an intolerable burden on the tenant. It is true that the whole basis of fixing rents under the Rent Acts needs to be looked at—and the noble Lord, Lord Robbins, will be pleased to hear that it is our intention to do this— but this must take second place to the review of housing finance which, as I have already said, the Government now have in hand. The provisions are, therefore, based on existing procedures and are relatively simple.
Section 35 of the Housing Finance Act introduced a provision under which controlled tenancies were decontrolled on the basis of rateable value, irrespective of the condition of the property. This enabled many landlords to reap a gain which they had done absolutely nothing to earn and obliged tenants to pay a fair rent on property which generally did not contain the standard amenities. Clause 10 brings to an end general decontrol by reference to rateable value. The Bill however leaves untouched the provisions for decontrol of dwellings which are certified as reaching the qualifying standard. So where there is a sitting tenant any properties which have all the basic amenities, and are in good repair, can still pass from control into the fair rent system.
Some landlords will not, for a variety of reasons, improve their property to the standard which qualifies for decontrol. It is important that tenants do not suffer unnecessarily as a result of this and that the property is not allowed to decay so 327 that when finally taken into social ownership there is no option left but to demolish. Clause 11 therefore gives landlords who carry out repairs to controlled dwellings the right to raise the rents they charge by 12½ per cent. of their expenditure on repairs (net of any grant) completed after the Bill comes into force. This provision is, of course, modelled on the existing provisions for the increase in controlled rents in respect of improvement and, like them, it entitles the tenant to challenge the increase in the courts if he thinks the repairs unnecessary or excessively costly.
My Lords, this Bill restores rent-fixing responsibilities to local authorities and recognises their status and responsibility. It is therefore unthinkable that those sections of the 1972 Act imposing penal sanctions on local authorities should exist alongside the Bill. Accordingly Schedule 5 repeals the default provisions of the Housing Finance Act. Few, if any, noble Lords will mourn for those controversial provisions which have done so much damage to relations between local authorities and Central Government and between local authorities and their tenants.
The Bill makes no difference to the situation of those local authorities who either refused to make, or were late in making, the rent increases required under the Housing Finance Act, and thereby lost rent income they were legally obliged to collect. The Bill provides only that such a situation cannot recur. Each local authority will decide its rent income, and any increases in rent, for itself, and the Secretary of State will have no power to declare an authority in default. Past actions by local authorities, or, indeed, by Housing Commissioners, are quite unaffected. This is a matter on which, as your Lordships know, further legislation will be brought before Parliament.
The subsidy provisions of the Bill, are, as I have stressed, of an interim nature. They ensure that local authority building programmes do not fail for lack of finances and that rents are kept at a reasonable level. Meanwhile a searching and far-reaching inquiry into housing finance has been set up by my right honourable friend the Secretary of State. One aim of this review is to establish 328 subsidy system which will last for longer than has been usual in the past. Topics such as long-term tenant participation in housing schemes and the financing of the Housing Revenue Account, will all be looked at in this major review, and so will the position of the owner-occupier and first-time house purchaser. We hope and expect that this review will enable us to prepare legislation for a comprehensive, fair, effective and durable system of housing finance.
My Lords, you will see that, though for a Housing Bill, this Bill is brief, in explaining it I have had to cover a great deal of ground. This Bill will improve conditions for private tenants, for local authority tenants, and for all those people who are desperately hoping for a local authority house or flat and who depend on their council being able to build for them. It introduces a more generous, and, so far as possible, simpler system of Exchequer support for local authority housing work. It should do much to strengthen the independence of local authorities and to restore a more realistic and harmonious relationship between central and local government. My Lords, these are not negligible objectives and I confidently recommend the Bill to the House in moving the Second Reading. I beg to move.
§ Lord ROBBINS
My Lords, before the noble Lord sits down may I press him to elucidate one point. In the last 12 months the level of prices has risen a little below 20 per cent. It would be wildly optimistic to expect the increase in prices in the next twelve months to be much less than that. Let us suppose, for the sake of argument, that it is 15 per cent. and let us suppose that in the year following, the efforts of the Government having had some partial success, it is 10 per cent. On that hypothesis, anyone in possession of a house on which he proposed to charge a rent a year ago would have seen a diminution in the value of the money that he received, if my calculation is correct, of about 45 per cent. Is it the intention of the Government that if there were no improvements there should be no increase in rent?
§ Lord MELCHETT
My Lords, I was sorry, when the noble Lord intervened for the first time, with his obvious interest 329 in the subject, that he had not seen fit to speak in the debate. He has now tried to remedy that deficit. I thought I had answered the noble Lord's inquiry about the level of rent increases when he first intervened. If not, I will gladly write to the noble Lord.
§ Moved, That the Bill be now read 2a. —(Lord Melchett.)
§ 3.41 p.m.
§ Baroness YOUNG
My Lords, I should like to begin by thanking the noble Lord, Lord Melchett, for introducing this Bill and to congratulate him on the clarity of his explanation of it. It is a very complicated Bill with much detail and some provisions which are difficult to understand. I am very glad to have heard his explanation and am grateful to him and to his noble colleague, Lady Birk, for sending me notes on clauses.
A Second Reading debate such as this provides the opportunity for a general debate on council housing. The Bill before us repeals large sections of the 1972 Housing Finance Act. The debate must inevitably centre around two important points: first, the principle of fair rents, what it is and whether it should be applied both to private and council tenants; and, secondly, the issue of freedom of local authorities to fix rents. On both issues it is only too easy to repeat all the arguments, but as the noble Lord, Lord Melchett, has set out the arguments in this Bill, I feel that it is only right to state what my Party believe on the issue of fair rents. I do so while recognising that, in the end, it is the tenant, and those who wait on the ever-lengthening council house queues, whom we must consider. Nor, in a Bill such as this, can we leave out the ratepayer, for if there is a deficit on an authority's housing revenue account either the tenant, through his rent—and a higher rent at that—or the taxpayer, through higher subsidies, or the ratepayer, through higher rates, must make up the difference. These are inescapable facts.
The basis of the 1972 Housing Act was that there should be no distinction between tenants of private and council houses, that all should pay a fair rent which would be determined, in the case of private lettings, by the rent officer and, in the case of council houses, by the Rent Scrutiny Board. The same basis 330 would apply—based on the recommendations of the Francis Committee which was set up by a former Labour Government—to determine fair rents; that is,to have regard to all the circumstances other than personal circumstances, and particularly age, character and locality of a dwelling and its state of repair.However, it is not and never was intended to be an economic rent. It assumes that demand and supply of houses are in balance—a fact that is simply not true in any area of housing stress and in very few other housing areas either. So good is the principle of "fair rents" that the present Government have, in the Rent Act 1974, extended it to all furnished letting. As I said during the Second Reading of that Bill, I welcome that extension and, indeed, I was delighted to hear last Thursday afternoon the noble Lord, Lord Janner, telling us how excellent a principle is that of fair rents. Not only did the 1972 Act introduce a system whereby all council tenants would eventually pay a fair rent, but it also introduced a national scheme of rent rebates, and this was followed by a scheme of rent allowances for private tenants. I am glad the Bill includes the national scheme of rent rebates because until the Conservative Government's Act of 1972 there were many local authorities without a rent rebates scheme at all, and it is a compliment to that Act that this Government have seen fit to keep the scheme.
What does seem to me to be unfortunate is that the Advisory Committee on Fair Rents was stopped in its tracks in March, 1974, and therefore was unable to make any report on how the 1972 Act was working. We do, however, know from the Housing and Construction Statistics No. 8 that in April 1971, before the 1972 Act came into being, the average weekly rebated rent in England and Wales was £2.48 per week and in October, 1973 —15 months after the passing of the Act—that rent had risen on average to £3.31 per week. In the same period unrebated rents went up by half, but at the same time average earnings went up by 36 per cent.; and, of course, all rents were subject either to rebates or allowances. It therefore seems to me extremely difficult to draw the conclusion that tenants suffered under the 1972 Act. On the contrary, the proportion of their income that some 331 tenants paid in rent actually decreased, and on the coming of the rent freeze in March, 1974—at a time of very large increases in earnings—the proportion actually diminished further. What I would hope the noble Lord, Lord Melchett, will tell us when he comes to reply is what happens to tenants who are now paying a "fair rent"? Will their rent be reduced? Will they have a right of appeal or will they continue paying "fair rents" while others continue to enjoy lower rents?
The second issue concerns the freedom of the local authorities. I would agree with the noble Lord, Lord Melchett, that this is a completely impeccable sentiment. I am very sorry that his Government have not seen fit to apply it either to the General Rate Bill that we discussed last Thursday afternoon or to education legislation. However, we have a housing Bill before us and it proposes to give back to local authorities the power to fix "reasonable rents" which is a phrase taken from the 1957 Housing Act, though there is no definition in this Bill as to what constitutes a "reasonable rent". All we are told is that the housing revenue account must not show a surplus. On the other hand, local authorities clearly must take into account the fact that there is to be a national rent rebate scheme, which suggests that rents are not to be too low. But beyond that, we have no clear idea of what the Government propose on rents, and I was most interested to hear the intervention of the noble Lord, Lord Robbins, on this matter.
Of course, rents must be seen, once again, against the backgrond of the Government's now famous Circular 171/74. In this circular local authorities are being asked to economise on maintenance and repairs on housing properties. It is suggested that:local authorities should look at ways of increasing the degree of responsibility for maintenance borne by tenants".So that although the Bill proposes "reasonable rents" which are presumed to be at a lower level than "fair rents", the hard fact of the matter is that when the housing committee comes to fix its level of rents, and when the local authority comes to fix its level of rates, it must be borne in mind that for the tenant the alternative will be either a higher rent which may cover repairs, a lower rent and 332 paying for the repairs himself, a lower rent and no repairs at all—and certainly less management—or, alternatively, a lower rent and very considerably higher rates. The freedom for manoeuvre is very limited and, at the end of the day, it will be exceedingly difficult, I suspect, for housing committees to put together the provisions of the Housing Rents and Subsidies Bill and the current circular. If the noble Lord, Lord Melchett, or any noble Lord opposite is in any doubt about this, they should ask some of their colleagues presently sitting on housing committees and having to look at this great question and at the rate estimates coming up next month.
However, there are restrictions placed on local authorities on their ability to fix rents under Clause 2. The Association of District Councils seems, quite rightly, worried that under this clause there is a reserve power by the Government to restrict or limit rent rises. I have not seen or heard an adequate explanation by the Government as to why these powers are needed in a housing Bill rather than being left to be part of the normal counter-inflation legislation. Local authorities will want to know two things: first, whether there will be increased Government help by way of subsidies if these powers are to be invoked and they are prohibited from raising rents; otherwise the ratepayers will have to make good the deficit on the Housing Revenue Account. Secondly, they will want to know in what circumstances the powers will need to be used. I was most interested to see the proposal for tenants' co-operatives in Schedule 1 to the Bill, and to hear the explanation which has been given regarding these proposals. I and my colleagues believe that what is needed now is a tenants' charter, and I was interested to see what the Secretary of State, addressing the Conference of Housing Managers, said about management:Some of our stock"—that is, stock of council houses—remains badly under-utilised, and a residue of councils remain too rigid and paternalistic in their attitude to their tenants. The tenants of such authorities may become persuaded that they are second class citizens, and that is a sure way of making them behave like second class citizens.I am not sure I agree with all the sentiments expressed there. The fact is that 333 tenants do have rights and they should be treated as the very best landlord would treat his tenants. Among those rights is the right to buy their own house, should they wish to do so, and I hope that will be included in any future proposals.
Clauses 4 to 7 in this Bill set out the new subsidies. These are very important indeed, and I was interested to see that the housing subsidy includes most of the subsidies of the 1972 Act. I understand that local authorities have benefited very considerably from the recent cost subsidy of that Act during the period of rent freeze, and I hope that the new subsidies will be equally helpful. The local authorities need to know now how much they may expect to receive. This is essential in order that they may know at what level to fix their rents now and their rates next month.
There are two important points that I should like to raise on the subsidy proposals. The first concerns the high cost subsidy to which a local authority will be entitled for 1976–77, or a later year if their relevant expenditure for that year exceeds the standard level of expenditure as determined by the Secretary of State. As I understand the Bill, this applies only to London. When I listened to Lord Melchett's explanation, he suggested it might apply to other places. When he comes to reply to this debate perhaps he will confirm this. There are a number of places outside London whose costs are equally high, and they therefore feel that they are equally entitled to this particular subsidy. The other point is the subsidy on Clause 5 which I was most interested to see because I believe it to be basically unchanged from the 1972 Act; 75 per cent, of the cost of rent rebates will be paid for by the Government and 25 per cent, by the ratepayers. This proportion was very much criticised when the 1972 Bill was being debated in this House and in another place. I am interested to see that the arguments we used then, to show that it was necessary that ratepayers should make a contribution to these subsidies in recognition of the benefits they were getting, are being used once again in this Bill.
334 Clauses 8 to 11, which are concerned with private lettings are, I believe—and I am sorry to have to say this—another example of this Government's vendetta against the private landlord. Private landlords are being held up as scapegoats for all our housing ills. This Government seem determined to drive them out of the market. The number of private landlords has been declining, and the policy in this Bill seems to be, "Now they are down let us give them a good kick". The fact is that local authorities cannot provide accommodation for many of the tenants of private landlords, and we are already seeing the consequences: more homelessness and more squatters.
I do not understand the reason for Clause 10. The effect will be that landlords will have to revert to the old qualification certificate procedure in order that a controlled tenancy may become a regulated tenancy, the certificate being given when all the standard amenities are provided in the house. Then, and only then, can the tenancy become a regulated one. Current rents—many fixed in 1957—are far too low to allow for any improvements at all and this proposal will, in my opinion, lead to more squalor. There is no incentive whatever to improve property, and as fast as new houses are built, others will become slums. Furthermore, when we talk about increased rents we must always remember that every tenant in a private house is entitled to a rent allowance, just as a council tenant is entitled to a rent rebate. This provision should help all those who are unable to pay an increased rent. It is a very serious matter of public policy that by this Bill we are positively encouraging houses to deteriorate, because there is no incentive at all to improve them. Nor am I happy about the phased increases for fair rents. This means that the rent will always lag behind the cost of the full registered fair rent which will not be reached for a period of three years. Again, this is an encouragement to allow the property to deteriorate and it means a fall in the number of fit houses in the country at large.
The new Clause 9, which was added at Report stage in another place, appears to be retrospective in its effect. It means yet again that the private landlord is 335 being attacked and a new basis of fair rent is to be introduced which will discount any amenity provided in the neighbourhood of the dwelling. We shall return on Committee to this matter, and to the others. I should like to know whether this new clause is to apply to fair rents fixed by the voluntary housing movement, and also whether it is retrospective in its effect. In the meantime, I find it deplorable that public policy is based on what appears to be Party prejudice against the private landlord.
In conclusion, on this Bill as a whole I would only say this: housing is one of the most important needs in the life of every individual. Housing policies of both Parties since the end of the war have not been as successful as any of us would like. I am not convinced that this Bill will help the situation. It may indeed increase council house waiting lists, for one hard fact of life is that if something good is provided—and a modem council house is a very good house—at a price well below its market value, there will always be long queues waiting for it.
May I illustrate this by one experience from my time in local government? When I first went on to Oxford City Council in 1957, the council house waiting list stood at just over 2,000. I well recall in 1958 putting up my hand and voting for the city council to buy from the county council a large piece of land on which to build a council estate of 2,000 houses. Well, my Lords, the purchase was completed and the houses were built; indeed, I think there are now something like 3,000 houses on the estate. But by 1964 the council house waiting list still stood at just over 2,000. Well over 1,000 houses have been built since then. I checked last week and the council house waiting list still stands at about 2,500. Of course, there are all kinds of other reasons for this. Bui the fact remains that if a modern council house is built—and in Oxford a modern three-bedroomed council house costs now. including the land charges, about £13,000—and the rent charged for it is about £6 a week, in relation to an economic rent the deficit on that house is about £38 a week; because it is a council house, the subsidy on it is about £20 a week. So 336 anybody who gets into it is on to a very good thing indeed.
This is the situation which we have created and which the Bill, for a whole variety of reasons, will continue. No one has ever suggested—certainly, it is not my Party's policy that this should be so—that economic rents should ever be charged for council houses. All that was ever being asked was that fair rents should be charged. We believed, and still do, that this would have brought fairness into the housing market, and fairness on the basis of a scheme first propounded by a Labour Government. I believe that, as a result of this Bill, not only shall we see longer council house waiting lists, but with the shrinking private letting market, further helped of course by this Bill, we shall see ever more squatters.
I was interested to read in an article in the Economist this weekend, headed, "Less Welcome Guests" that there are now 30,000 squatters in the London area. It stated:London's alternative housing system has its own beaucracies. The Family Squatting Advisory Service helps 25 affiliates who operate licensed squatting. As the councils have waiting lists, so do squatters—three months in Lewisham.This is an interesting sidelight on where all these policies are leading us. And I suspect that the position will get worse. I am afraid, although it sometimes sounds funny, that it is fundamentally a tragedy; a tragedy for all those who are waiting to get into houses and who will not be provided with them from the councils' waiting lists, because of course management policy does not make provision for the young, single homeless person.
What disturbs me most of all about this Bill is that it shows no evidence at all of any new thinking on the part of the Government. We shall indeed be interested to hear the outcome of their housing review, which I believe to be a matter of very great importance. In this Bill policies which have failed before are being produced yet again. My Lords, I do not believe that this Bill will provide any answers at all to the complex problems of housing.
§ 4.5 p.m.
§ Baroness HORNSBY-SMITH
My Lord, I would join with my noble friend Lady Young in congratulating the noble 337 Lord, Lord Melchett, on the clarity with which he spelled out this Bill. I might not agree with all he said, but I congratulate him on the clarity with which he explained the Bill's provisions for the Government. I must declare a minor interest. I have never been a landlady, but I speak as Vice-President of the Association of Metropolitan Authorities who have a great interest in this Bill. I welcome the provision in the Bill, as do the AMA, which gives local authorities the opportunity to fix again the rents of their own council dwellings. I hope that that provision will be the rule rather more than the exception, since in later clauses of this Bill this provision is hedged around with the Government's reserve powers to limit rent increases.
They can, to an extent not yet defined to us, mitigate the effects of the unfreezing of rents to meet the terrific inflation of costs by imposing a percentage increase of a reasonable rent or a threshold figure for a dwelling. The overall application of a percentage basis of increase makes utter nonsense of a household's ability to pay—not an inflated rent—nobody wants them to pay an inflated rent—but a fair rent. I believe that councils should be left absolutely to fix fair and appropriate rents, with good and more generous rebates for those who really require larger subsidies and additional aid in meeting their rents.
Unhappily, the Government cannot get away from the theory that everyone who lives in a council house is automatically on a low-income and poor. Many a newly-married clerk, young doctor, teacher or junior salesman, with a wife and young family, struggling with a mortgage, is far less well off than many a council house dweller. I fully support the provision of low rents and more heavily subsidised rents for the low income group, for the pensioner, for the handicapped, for the widow, for the man with a large young family. But can we justify piling up the rates or the taxes of many less well-off in the private sector to subsidise well paid households, sometimes with three or four incomes coming into them? A reasonable rent for a family with young children is not a reasonable rent when that family becomes one with five adult wage earners.
I can think of many cases on an estate which was on the boundary of the constituency I represented in another place— 338 it has now been in operation for about 20 years. Initially, there was a terrific drive to bring larger families who were under-housed, or who were desperately seeking accommodation from Central London, down to a vast and very good new estate in the Chislehurst division. A man and wife perhaps came to a council house there 20 years ago. Initially they paid a heavily subsidised rent of £l.25p a week and over the years, with the increased income of the man, and perhaps with one of the children reaching working age, the rent went to £3—still heavily subsidised. That same family now has three children—and I am thinking of a particular case—aged 17, 19 and 21; they are all living at home, all working, and now mother, relieved of looking after young children, has a part-time job, too. Five incomes are coming into the house.
Under the fair rent scheme, the council were prepared to apply a rent of £5 a week, which was certainly not excessive for a four-bedroomed house. Immediately there was a scream, "This is putting up the rent by 66⅔ per cent. and it is outrageous!" Statistically, that 66⅔ increase is correct, but for 20 years the family, quite rightly when they had young children, had a very heavily subsidised rent; they had never been called upon to pay either the economic or the fair rent which the householder is overwhelmingly capable of paying now. There is a great deal of distortion as the young children in a family grow up and themselves become contributors to the household. Percentages completely falsify the real picture if they are applied overall to those with young children who need the greater subsidy and equally to those who have three, four or five incomes coming into the house.
In a London survey carried out not very long ago, it was established that far and away the majority of those in the lowest income groups in the country, including, of course, many pensioners, lived in privately-owned dwellings and that a much higher proportion of council dwellers were in the high-earning artisan group. At this moment none of us knows how the Government will interpret the provision that rent fixing should be changed from fair rent levels to what are called "reasonable rents". If not universally applied, to what type of areas will these "reasonable rent" allocations be made? 339 It will deprive local authorities of the freedom to fix fair rents where there is undoubtedly ability to pay. If that is the case, I believe that the Government are unfairly placing yet additional burdens upon the taxpayer and are denying to local authorities the right to use their judgment and their local knowledge in such assessments. If, regardless of the circumstances, the Government still insist upon lowering what the local authority may have assessed as a reasonable rent, then I do not think it is unreasonable that the local authority should be asking that if they are not to be allowed to charge the reasonable rent or the fair rent then the Government should foot the bill of their losses.
§ Lord MELCHETT
My Lords, I hope the noble Baroness will forgive me for interrupting. I am trying to follow carefully what she is saying, and I am not sure that I have fully understood her point about reasonable rents. In opening this debate I said that the Government were intending to return to the system which was in operation before the Housing Finance Act was passed, when the local authority had complete freedom to fix reasonable rents. The local authority can be challenged by somebody who is paying a rent going to the courts and claiming that the rent is not reasonable. It is not for the Government to interfere. Local authorities will have freedom now. Another point is that I think the noble Baroness implied that under the Housing Finance Act local authorities had freedom in some way to fix fair rents. Local authorities had no freedom to fix fair rents ; this was done by the assessment panels. The local authority merely had the right of representation. In that case the final decision of the panel was binding.
§ Baroness HORNSBY-SMITH
My Lords, I quite agree with the noble Lord and I am sorry if I did not make it clear that I was aware that the panels fixed the fair rents. However, it was an analysis of fair rents and we are not quite sure what this reasonable rent is going to be.
My Lords, may I turn to the question of the provision of furnished accommodation. I believe and accept that the Government meant well by these provisions, but they simply cannot turn a 340 blind eye to the effect that has been created by this impending legislation. Without doubt, it frightens the wits out of many single houseowners who would normally let rooms. This impending legislation has had the effect of drying up the supply of an enormous amount of much needed privately-rented accommodation. It did not help matters that the Bill was published in, I think, the Summer Recess and that landlords and solicitors could not obtain a copy of the Bill until many weeks afterwards because of the printing strike.
The Government have made certain concessions in regard to the resident landlord, but the lone widow or the elderly couple are frightened to death by all the paraphernalia which now surrounds the letting of rooms. They are frightened also of the pressure groups which advise tenants of their rights and of the excessive demands that are made, and they are frightened, too, of harassment—the threats to take them before this board, or before that tribunal, or before the magistrates' court. Many a time in my constituency I had just as many people coming to me who were complaining landlords as were complaining tenants—generally elderly people who felt that they were being unduly harassed. They had no solicitors and they did not know how to cope with difficult, unreasonable and often destructive tenants. As I understand it, for a landlord to harass a tenant is a criminal offence, but short of physically assaulting their landlord or landlady, tough or irresponsible tenants can harass them virtually with impunity. I am not referring to the large, property-owning syndicates; they are big enough and tough enough to look after themselves. I am referring to those tens of thousands of people, many with old-style houses which are their sole capital asset. The asset of an elderly couple or a widow is their house. They have brought up their family who have moved away and they have a dwelling in which they could let out rooms. There are hundreds of such dwellings which are under-occupied and which are now even less occupied solely because the couple, or the widow, or the spinster, are frightened that, should they get undesirable tenants, they will not be able to give them notice to quit. They would have to find a solicitor, and some of them are terrified of going to law. 341 They would have to go to court. They are frightened that it may cost them more money and that the tenant may do a "flit" so that they get the worst of both worlds.
There are old people—I know of many in the suburban areas of London—who are living in three-storey houses where they themselves, through infirmity or the desire to economise on fuel, are living only on the ground floor. They will never qualify for a council flat because they are regarded by the council as adequately housed, yet their houses are grossly under-occupied. The owners of those houses are too frightened to let rooms for fear that they will not be able to get rid of undesirable tenants.
I believe that there are many thousands of people who could be rehoused and get the digs that they require. I believe that students could obtain the accommodation that they require if the Government would contribute by taking another look at this clause which these small, and by no means wealthy, people believe is so damaging and is inhibiting them from allowing more accommodation to come on the market. The old people may be "choosey", but in their old age and, perhaps, disablement, they may want quiet and sober tenants. However, they could provide much more vitally-needed accommodation. As I have said, they do not have a solicitor. They cannot afford the stress and strain and they cannot afford the cost of going to court if they let rooms to a young bully who refuses to go and who threatens them will all kinds of proceedings. Many of these people are good barrack-room lawyers; they are good at haranguing the unfortunate landlord or landlady.
Even if the Government are hell-bent on this clause, they might at least protect the landlord from overcrowding and give him the right to specify the number of occupants. A landlord may put a card in the window of his local news-agent. A charming, young, softly-spoken young girl may come along who says that she and her friend would like to take a couple of rooms, but within a week the landlord finds that there are six people living in those rooms. I have had experience of the interminable trouble a poor, harassed old couple had to justify the fact that they had given such people 342 notice. These are not the big, multiple landlords ; they are not all Rachmans. They are small folk who are trying to augment their pensions and earn enough to keep their houses in proper repair, thus avoiding going on national assistance. The suffererers are the students, the young men and young women who want digs in the big cities where they have found jobs. Single men and women have no chance of getting council houses until they are rather elderly pensioners. They will never qualify for council accommodation. They rely on the people who will provide them with the digs or the flat that they require near their job. The bachelors and the spinsters of this world rely almost entirely on this type of accommodation and I profoundly hope that Her Majesty's Government, through the noble Lord, will do something to allay the very genuine fears of these people, because all the evidence shows that the accommodation we desperately need has dried up.
§ 4.20 p.m.
§ Lord CASTLE
My Lords, the two noble Baronesses who have preceded me in this debate will not, I am sure, construe it as discourtesy on my part if I fail to elaborate the arguments they have so ably put forward. The noble Baroness, Lady Young, would hardly expect me to join her in her obvious adulation of that so-called munificent Act, the 1972 Housing Finance Act. Whatever its intentions may have been, I think we all know that its effects were to spread bitterness, anger and resentment among a very large section of the community. Clay Cross was only the tip of the iceberg of that general resentment felt among the working class. Conservative Party members themselves have told me more than once that they attribute the implementation of the provisions of that Act to be one of the major contributory causes of their Party's defeat in February. I think we can be glad that in the interests of doing some repairs to national unity, which at that time was badly threatened, the incoming Labour Government fulfilled an electoral pledge and postponed any increases in council house rents of the kind which were to be imposed under the Housing Act. But having done that, they were under the obligation to find a formula for adjusting the contributions between local and national finances towards the maintenance and 343 improvement of our housing stock. As my noble friend Lord Melchett has been so diligently expounding, this is the aim of part of this Bill.
Not only has the Bill received a generous welcome from Labour local authorities but, as the noble Baroness, Lady Homsby-Smith, pointed out, the Association of Metropolitan Authorities has given it a welcome as an interim measure before a thoroughgoing survey of housing finance, which one hopes will give some of the answers for which the noble Lord, Lord Robbins, was asking earlier.
Basically, the five-pronged proposal for assessing what subsidies shall go from the national Exchequer towards the support of local housing funds is honest and fair. It is intended to temper the financial breeze to the shorn lamb, and I intervene in an unfamiliar Bo-Peep role to plead on behalf of some of the lambs who at the moment believe that they may be left surprisingly cold. I am certain, knowing my noble friends in this House and the attitude of their honourable friends in another place, that if defects seen by such experts as borough treasurers—I am so sorry, I will give them their "poshed-up" name nowadays of "directors of local finance"—are pointed out to people of the calibre, good will and attitude of my noble friends and their associates in another place, they will be able to produce remedies which, if not painless at least will not require a general anaesthetic for the Bill itself.
Such time as I feel I can spare from my duties in this House I still give as a member of Islington Borough Council. Islington is charming but poor; it is a stress area with a terrifying, horrifying waiting list for council properties, of which there are 25,000. I do not plead for Islington as a special case needing special treatment. I cite it because I believe it is typical of other boroughs where the housing problem is heavy and where endeavours to improve the position are undertaken with the same seriousness and sense of urgency. Your Lordships will, I hope, be shocked to learn—I am sure the Front Bench will be shocked to learn—that the total subsidies available to Islington under the Bill we are discussing will, on present computation, be substantially less than it would have received under the Housing 344 Finance Act. I was dismayed to learn this from an official statement and I report it with much alarm. Taking all five proposed subsidies together, the help for 1975–76 that Islington can expect will be £12,418,000 against the £12,650,000 it would have received under the Housing Finance Act. In other words, well-nigh a quarter of a million pounds more will have to be found from rent and rates. This is largely because an extra £1.2 million in interest will have to be found; and whereas this would have ranked for 75 per cent. subsidy under the 1972 Act, the two appropriate subsidies under this Bill will provide only 66 per cent, relief. I say this with some fear, some shame and some trepidation.
The remedy, however, which has been recommended to the Secretary of State is not a change in the framework of this Bill. Let the five-subsidy structure remain, but alter the figures by which the sums of aid are calculated. This Second Reading debate is not the time to develop that suggestion in detail, but may I commend two suggestions to which I am sure the Government will listen with sympathy and understanding. First, the percentage payable under the supplementary financial element should be increased from 33 per cent, to 50 per cent., so that when taken with the special element subsidy—we are all liable to get rather mixed up with the nomenclature—the total payment as a result of rises in interest would be the same as that payable under the Housing Finance Act, that is, 75 per cent. Secondly, the Secretary of State, who has the power at any time, should fix the threshold under the special element at £10 and not £23, as he is stated to be now suggesting. Such measures as these will help authorities with large housing programmes who, I am sorry to say, at this moment feel they are likely to be penalised for their enthusiasm in speeding up their housing programmes.
My Lords, I hope what I have said will not be regarded by my friends as a kind of criticism which should be whispered when one's own Party is in Office, or dealt with by an interchange of letters. I have had some correspondence with a Minister on this matter, but we have not yet reached agreement; we are in the early stages. However, I think it is here, in this Chamber, that we should approve 345 the Bill; we should see that where the Bill needs further scrutiny, it shall receive it. It would be a very sad thing if as good a Bill as this were used as an excuse for any deterioration in our rate of building and rehabilitation. With comparatively small changes, this Bill can provide a real stimulus to housing authorities to become even more active. I believe that that view is shared by my noble friends on the Front Bench.
§ 4.32 p.m.
§ LORD MIDDLETON
My Lords, I shall confine what I have to say to that section of the Bill dealing with the private sector. Here I must declare an interest, in that I am a landlord of rented property in a country area. However, I assure your Lordships that I am not moved to speak on this Bill by any personal reasons.
My Lords, even before this Bill came into existence, the law governing tenancies in the private sector had become so complicated that few tenants understood it. Many professional people find it hard to keep up with the alterations and reversals that follow each change of Government. The Bill provides yet another reversal. It is not surprising that a great deal of Parliamentary time is spent on housing, and that a large proportion of complaints from the constituencies of Members of Parliament is about housing. No one can be satisfied with the physical condition of the nation's housing stock; no one can be anything but concerned about the present difficulties and distressing experiences of so many families in congested urban areas. In the country areas, I have no doubt that the tied cottage problem, so vitally affecting agriculture, could best be taken out of the political arena by better provision of rural housing. Each Party thinks it knows the answers, brings in fresh legislation when in Office, yet today the housing situation is as serious as ever, and the building industry is grinding to a halt.
My Lords, it is sad to see rigid Party attitudes clouding the main issue. When the Secretary of State introduced this Bill in another place, one could have expected his opening remarks to give some indication of its practical advantages, or how it would alleviate accommodation difficulties. Yet the opening sentence of the right honourable gentleman was as follows:With this short Bill the Government aim to cut the throat of the Tory Housing Finance Act 346 at a stroke."—[Official Report, Commons, 18/11/74; col. 904.]So now we know why this Bill is in front of your Lordships today.
We have had sixty years of rent control legislation, brought in often for the most praiseworthy motives. No one can deny that tenants in the public sector have been well treated. Private sector tenants have protection from eviction and their rents kept to the minimum, but the supply of rented houses in the sector has dried up completely. Of course, many tenants have bought their houses, and many old houses have been scrapped, quite rightly. But we now have a situation where privately rented dwellings form only 14 per cent. of the total stock. In 1951, the proportion was 45 per cent. According to the Department of the Environment, for July to September 1974 the figures for housing starts in the private sector are 55 per cent. lower than for the same period in 1973. I know that most of this missing housing would have been for private sale, but these statistics show that the public sector just cannot cope with the problem by itself—the noble Lord, Lord Melchett, admitted that when he opened the debate. I cannot agree, however, with his proposed long-term solution—and I hope he will forgive me if I quote him incorrectly—that of the official taking into social ownership all controlled housing. However, objectionable in some quarters, the private sector must be given some encouragement, and this is just what this Bill does not do.
The noble Baroness, Lady Young, referred to Clause 10 of the Bill. As the noble Baroness pointed out, this clause ends decontrol of tenancies by reference to rateable value. On the front of the Bill this is written as one of its main purposes. A Second Reading debate is not the occasion to delve into the history of protected tenancy, nor into the finer points of distinction between controlled and regulated tenancies. But perhaps it should be said that controlled tenancies applied to the tenants of housing at the lower end of the scale of rateable values. From 1957 it was those houses with a rateable value of £40 or below in London, and £30 or below elsewhere. The 1969 Housing Act of the Labour Government provided, in my view rightly, for the conversion of controlled tenancies to regulated tenancies. The 347 significance of the regulated tenancies was that whereas a controlled rent was limited by reference to a very out-of-date scale of rateable values, a rent under a regulated tenancy could be referred to a rent officer for assessment on a fair rent basis, and thereafter registered with a local authority.
The same Labour Government also set up the Francis Committee, which was no doubt made fully aware of the reverse side of the rent control coin; that is, the great reluctance of landlords of property of low rateable value to create new tenancies, and the cumulative effect of below-economic rent on the improvement and repair of the housing. The Report of the Francis Committee came out strongly in favour of conversion of tenancies from controlled to regulated status by means of a procedure less cumbrous than that laid down in the 1969 Act. This recommendation was implemented by the 1972 Housing Finance Act. But the process of conversion initiated by that Act was halted by the last Government half way through, at the £35 to £25 rateable value band. No further conversions have been allowed since last March, and this clause seeks to give statutory effect to that order. In my view this proposal is retrograde. Our housing stock under controlled tenancies will not be improved, and can only deteriorate, notwithstanding the concession proposed under Clause 11, which I believe to be wholly inadequate. This proposal will further discourage the letting of low rateable value houses, and it disregards the recommendation of the Labour Government's own Francis Committee.
I now turn to Clause 8. The 1972 Housing Finance Act provided a measure of comfort for tenants whose rents came to be registered under the fair rents system, so that the payment of the increase was phased over two years; you paid one-third of the increase on registration, two-thirds after a year and the full amount two years after registration. This phasing of fair rents never seemed to me to be logical, though no doubt at the time it was expedient. Even at the 1972 rate of inflation, if a rent was fair to both parties on registration it would certainly not be a fair one for both parties two years later on. So if a rent was judged fair for a tenant why should 348 it not be fair for him to pay it right away? Indeed, the system provided for re-registration after three years, so that it was clear that Parliament recognised that a rent would need revision after three years.
I believe that with inflation at its present rate a phasing system is already obsolete, and any extension of the number of tenancies that can be phased—as Clause 8 seeks to achieve—is not, provided we keep the system of rent allowances in case of hardship, in the interests of the people who matter, those who are desperately in need of decent accommodation. These two clauses provide just two examples of what I am afraid I must call political tinkering. For all the good intentions and the vast amount of thought and political energy given to housing, failure over a long period to allow sufficient minimum economic return to landlords under rent control legislation in the private sector has by now just about cut off the supply of rented houses altogether.
It is now virtually impossible for young couples to afford a mortgage on a house. Whatever is done to foster public sector building, and whatever is done at the ratepayers' and taxpayers' expense to subsidise council house rents, we must make it possible for that most unpopular creature, the private landlord, to fill the gap. I believe that the 1972 Housing Act, for all its shortcomings, made a serious attempt to solve that problem, and I entirely support the noble Baroness. Lady Young, in what she has said. It perpetuated the fair rents system conceived by the Labour Government and provided for rent rebates and rent allowances for poorer tenants. Had it been allowed to continue, the conversion of controlled tenancies would have given some encouragement to landlords to provide housing of a decent standard. Now we have before us a Bill brought in for what purpose?—to cut the throat of a Tory Bill. It really is time we learned to tackle these problems in a more responsible way.
§ 4.44 p.m.
§ Lord CRAWSHAW
My Lords, I had not intended to make a general speech on the Bill this afternoon, but having heard the debate and all the speeches I feel that I should like to say a few words in support of my noble friends who have 349 expressed considerable misgivings about the effects of this measure. Like the previous speaker, I am a comparatively small rural landlord. I do not personally feel that I am a scoundrel in that respect. In some ways, I think that perhaps he and I do our neighbours some sort of service. We do, at any rate, provide a good deal of employment and I think we try to keep our properties in good repair. I feel that many of us as private landlords should be positively encouraged. The noble Lord, Lord Robbins, mentioned earlier the practical economic problems that a landlord has to face at the moment. The noble Lord, Lord Melchett, mentioned the intolerable burdens that a tenant might have on various occasions. But the landlord himself, as the noble Baroness, Lady Hornsby-Smith, pointed out, has similar problems. Raising money at 16 per cent, to finance improvements means a great deal of money to pay back in interest and repayments, and one has to face the fact that a landlord has grave economic problems. Although he may not want to charge a high rent he must in many cases, in order to make the proposition add up at all, charge a rent which will satisfy his bank manager.
I also believe that any shortage of rented accommodation which has been brought about by legislation must, in the long run, make things much worse for tenants. They do not have freedom of choice and must face many frustrations and exasperations. I also believe, as the noble Baroness, Lady Young, said, that council housing is the most expensive way of providing housing. She quoted a very good example, and I know for a fact that this can be done much cheaper in the private sector. I will also mention in passing that I happen to be a member of the Advisory Committee on Rent Rebates and Rent Allowances, introduced under the Housing Finance Act. I must say, having listened to the noble Lord, Lord Melchett, this afternoon, that I am still confused as to whether it is the Government's intention to dismantle that Act or to build on it by such measures as extending the fair rent system to the furnished sector. I should like a little more clarification from him on this point when he winds up. One of the main problems with which we have been faced over the past two or three years is the question of take-up of rent allowances and rent 350 rebates. I do not see much about that in this Bill.
I now move on to that part of the Bill about which I had intended to speak almost entirely, because my attention was drawn to it a month or so ago. I refer to part of Schedule 5 to the Bill which makes what are known as minor or consequential amendments to the Housing Act 1974. The amendments may be minor but the subject is important, particularly as the matter was first raised in this House and was welcomed in all quarters of it. The Government spokesmen have now changed. In July 1974, when the Report stage of the Housing Act was being discussed, the noble Lord, Lord Hughes, spoke for the Government, so I think I ought to give a little history of what I am talking about.
On that occasion I asked your Lord-ships to agree to three Amendments which enabled disabled people to receive improvement and intermediate grants to help with the construction of amenities such as ramps, wide doorways, downstairs bathrooms, simple lifts, et cetera. I further explained that although the Chronically Sick and Disabled Persons Act 1970 required local authorities to provide assistance in arranging for the carrying out of such work, this requirement had in practice been interpreted in widely varying degrees and the majority of local authorities had been using a means test—sometimes very severe. So I asked your Lordships to agree that such work should be included in the 50 per cent. of cost of improvement and intermediate grants. The Government had initially resisted this proposal in the other place, and did so again here at the outset, but because of your Lordships' support the noble Lord, Lord Hughes, departed from his original brief and accepted the Amendments. I mention that fact because I wanted specifically to point out the important part which your Lordships played on that occasion.
Coming to the present Bill, since that time the Minister of Housing, Mr. Freeson, has been in touch with me—and, in passing, shown great courtesy to me—and acquainted me with his intention to include some consequential amendments to the Housing Act by means of this Bill. He has assured me throughout—and I accept his assurance—that it was in no way his intention to alter the 351 substance of the original provisions, but simply to clarify them. In this process of clarification luck has been on my side because in Schedule 5 there are several references to "disabled occupant". This goes further than I originally hoped was possible by covering the situation where either the applicant, or someone else living permanently in his house, is the disabled person. I can assure your Lordships that this is not only a great clarification but is a great gain.
I realise that, this is only a comparatively small part of the Bill, but I should like to raise it at this stage because it has not been raised by any other speaker so far; it is important, and I wanted, despite my misgivings on the main part of the Bill, to support the Minister on this, and I also wanted to point out how it came into the Bill and to thank your Lordships for your original support.
§ 4.52 p.m.
§ Lord HYLTON
My Lords, I should like to follow a rather new line in this debate by saying something about the human misery and human and economic costs of bad housing and homelessness. I do not have a great research staff and therefore I can do so only from my own experience and speaking, as it were, from the heart. Looking back, I find that I have been involved in the housing situation in this country for 13 rather laborious years. From 1962 to 1964 I was responsible in a small way in the South-West for old people's housing. The situation then was bad. Of course there have been improvements. There has been a good deal of new building for old people. However, we have to remember that the ordinary man and woman is tending to live longer now, and the proportion of elderly retired people in the total population is constantly edging up, so that the situation is by no means good now. I regret that the noble Lord, Lord Maybray-King, and others of your Lordships who have great experience in this field of old people's housing are not taking part today.
In 1964 I had the privilege of serving as a co-opted member of the old London County Council Housing Committee. In those days there was a real sense of urgency in that authority. There was an authority that was prepared to make use 352 of mobile homes on every available site, despite the known and acknowledged problems and difficulties that one has with temporary mobile houses. I was encouraged to hear the noble Lord, Lord Castle, pointing out the problems and difficulties facing the borough of Islington. I hope that he will join me in a plea which I have made before and which I have no hesitation in repeating, that the outer London boroughs and the large nationalised authorities, who are some of the biggest land holders in the whole London area, will see the urgency and the necessity of their coming to the rescue of the hard-pressed inner London boroughs.
While talking about London, it is essential to go into the question of land. It is not quite the problem and the bogey that has sometimes been painted. The real difficulty is in the administrative planning procedures which block the development of land on which houses could be built. Let me give a few examples, perhaps bring a few skeletons out of one or two cupboards. Let us take British Rail. I think of Hither Green sidings in Lewisham, with about 20 acres. There is the Feltham goods depot in Hounslow, and some 16 acres at Somers Town near King's Cross. Can we turn to the Gas Board. In the report at the end of 1973 on rebuilding dock-land which came from the distinguished firm of consultants commissioned by the Government, it was said:Much of the Gas Corporation land is at present not in use, but the land is being kept by the Corporation in case they need to manufacture or store gas on a large scale.Some of that land is at Fulham Gas-works; I believe about 30 acres. Then there is the Wandsworth Gasworks.
It is not only nationalised boards which clutch great quantities of land. There is a very big acreage belonging to Central Government. At Hounslow Heath, so I am informed, one branch of the Department of the Environment offered land for housing, but another branch of the same Ministry is proposing to withhold planning consent. I wonder which branch is right. Then again, if we take the total of the dockland area, it seems that there are 3,200 acres which will become available between now and 1991. The consultants, in the report to which I have just referred, made what is 353 perhaps one of the major understatements of recent years when they said:It is desirable to start as soon as possible".They said then, in 1973, that design work of new homes for up to 7,000 people had already started. I should like to ask the Minister, when he comes to reply, what progress has been made in physical starts of actual houses on this great area of dockland.
Coming down the years, from 1964 to 1968 I was involved in interviewing, on behalf of a voluntary housing aid body in London, people in all the varying shades and degrees of homelessness. There were some who were statutorily homeless, others who had been evicted or were facing eviction, others living in extreme overcrowding, split families who were split simply because of housing pressures and problems, families paying excessive rents—one might say the lot—and one came face to face with mental breakdowns produced by housing stress. In more recent years, from about 1965 to the present time, I have been a trustee of Shelter Housing Aid Centre, through whose doors there pours a cross-section of the housing misery of London. I happened to be looking at the statistics produced by this Centre for the third quarter of 1974, and no fewer than 46 per cent. of the new inquiries came from people who were either literally homeless—when I say people, I mean families, because it is a centre that deals with families—or, if they were not literally home-less, they had no tenure of their own in the place in which they happened to live.
Just in case anyone should think, "Oh well, you need not worry too much about these people. They are feckless and irresponsible", it is worth pointing out that only a mere 2 per cent, of these inquiries came from people on supplementary benefits, and they probably had good reason to be in receipt of those benefits. Ninety-six per cent. of the total were from people in full-time regular employment. In the last five years I have been involved in a small village scale housing association in Somerset. There, some three years ago, we built five new houses. As they neared completion there was a slight degree of worry as to whether we would find tenants to rent them—at rents, moreover, approved and fixed by the local authority. In the 354 end we did and now they could be let three or four times over. We are now receiving applications and requests from people such as schoolmasters, who only a few years ago would never have thought of applying. This goes to show how housing problems, which were closely concentrated in certain big cities and major towns, are now spreading out and covering the whole country, including the rural areas.
I wonder how many of your Lordships in 1966, or a little later, saw the film, Cathy Come Home. It was a very moving film closely based on real life, although of course fictionalised. It made an impact at the time and influenced Governments and voluntary bodies—everyone who witnessed it. But what has happened since? The position seems to be getting worse. We get more, not fewer, applications from homeless families for temporary accommodation. We get rather more, not fewer, children taken into care because of the homelessness of their parents, as I had to emphasise only last week on the Second Reading of the Children Bill. It is almost enough to make one despair. However, I am not easily given to despair. I look back to the year 1840 when the great Earl of Shaftesbury, after some 7 or 8 years of struggle, wrote in his diary :For years I laboured in the factory cause; some few sympathised, more ridiculed; as many resisted and far more were indifferent.Can we, as of now, overcome the indifference to housing misery?
I turn now to the Bill. I must confess that it does not raise my hopes very much. The noble Lord, Lord Melchett, talked about imposed fair rents. Does he, I wonder, realise that these were voted and passed by Parliament? Mentioning his reasonable rents, he spoke of them as being democratic ones. Is he aware that there is a far higher democratic turnout in Parliamentary elections than in local government ones?
§ Lord MELCHETT
My Lords, I am sorry to interrupt the noble Lord, Lord Hylton. I was talking about the system by which the rents were fixed, not about the way in which the legislation setting up that system was passed.
§ Lord HYLTON
My Lords, I am grateful to the noble Lord, Lord Melchett, 355 for that clarification. He mentioned repeatedly the intolerable burdens on tenants. To avoid precisely that was surely the reason why Parliament legislated to provide rent rebates and to provide for the phasing of rent increases. It seems that what was sauce for Mr. Crosland's goose is no longer to be sauce for the local authority's gander. There is only one provision which I warmly and wholeheartedly welcome in the Bill—it has already been mentioned by my noble friend Lady Young—and that is the one for tenants' co-operatives. This scheme is something which is really hopeful. It has been proved by experience in Scandinavia and in some housing associations in this country—I admit on only a small scale—that it could be the thing of the future.
I mentioned despair. In his recent Dimbleby lecture, the noble Lord, Lord Goodman, mentioned "passion". He said that our first requirement was to provide "pure passion" and called for an attack with real vehemence and real force. That is what I hope we shall have. It would help the situation enormously if there could be a great deal more clear-cut responsibility for "who does what" in housing. At the moment, there is this dialogue to and fro between Central and local Government. I cannot help feeling that in other spheres—perhaps in education where there is comparable coming and going between the two levels of Government—they manage things slightly better.
In London we have, on the one hand, the Greater London Council and, on the other, the boroughs. It is interesting to see what the Layfield Report had to say on page 219, which is highly relevant. It said that all the evidence supported the view that the interests of the boroughs and the Greater London Council were quite naturally in conflict. It went on:Any scheme must provide for the resolution of this conflict. None of the common housing policies is being achieved and unless the London Government Act is amended housing proposals in the Greater London Development Plan will remain largely academic.One understands that it will take time to get responsibility better defined and better located, but certainly in the interim there is a great deal that can be done to simplify both housing and planning 356 procedures. I made this plea in your Lordships' House in March 1974, and I have no hesitation whatsoever in repeating it.
Finally, there is another thing that could and should be done in the interim, and should be done straight away, as of now. There is this considerable section of the population which is desperately badly housed, and is homeless in the sense that it cannot enjoy normal family, human life. Physical circumstances prevent it doing so. As I see it, the need is to organise this great army of homeless people in ways comparable to those in which the working population has become organised over the centuries in trades unions. This may appeal to the noble Lord, Lord Melchett, who has some experience of organising the victims of the housing situation in Pimlico. It is an aim that I should like to see this House supporting and putting forward, bringing about something which I would strongly recommend to a wide range of voluntary bodies outside, who, like me, are being pushed towards the edge of despair by the acuteness of the situation.
§ 5.10 p.m.
§ Lord MELCHETT
My Lords, I am sure that all your Lordships will agree that this has been an extremely interesting debate. It was natural that it should range very widely, but I am sorry that we did not avoid a rehash of last Thursday's short debate on the successful working of the 1974 Rent Act. I think that I should be right in saying that the noble Baroness, Lady Hornsby-Smith, spent a considerable time talking about that Act and not about this Bill, and I was very sorry that she was not able to take part in the debate which we had on the Rent Act. I had thought that my noble friend Lady Birk had settled any lingering doubts on the working of the Rent Act and I do not intend to go over the ground again today. Perhaps I may recommend to the noble Baroness, Lady Hornsby-Smith, that she should read the speech which my noble friend made on that occasion. Those of us who were in the House on the occasion of that debate will also be sorry that the noble Lord, Lord Avebury, missed a brilliant exposition of the case of the poor old lady, which he said was always raised in discussing Rent Acts.
357 My Lords, I was very glad to hear the welcome of the noble Lord, Lord Hylton, for the important and exciting innovation of housing co-operatives running local authority houses, which is introduced by the Bill. This is a new concept in the public housing field, as I said earlier, and it is one which we feel has enormous potential. The new subsidy system set out in the Bill will, we believe, help to direct local authorities much more effectively towards expenditure on new building and modernisation. The subsidy system is designed to achieve an objective which I know will be welcomed on all sides of the House. It is designed to achieve an increase in the number of housing starts in the public sector. The noble Lord, Lord Hylton. was very gloomy about the situation, but I hoped that he would welcome the subsidy system as it is designed to give most to those local authorities which do most in the way of building new properties. For that reason, I think he might have been more enthusiastic about the system.
My Lords, as I have said, our debate ranged very wide. Many of the matters raised are not within the scope of the Bill and, indeed, there were times when I thought that very little that was raised was actually within its scope. As I have already said, the Government have embarked on a major review of housing finance, and as my honourable friend the Minister for Housing said in another place when he introduced this Bill,It will aim to cover such questions as methods of investment in housing, needs and demands and how they are calculated, analyses of the ratio and efficacy of total subsidy expenditure in relation to total capital investment in achieving housing objectives, various systems of help to people in all kinds of tenure and housing, relationship of rebates and allowances to the social security system generally and a number of other fundamental questions".—[Official Report (Commons), 18/11/74; col. 1020.]My Lords, these issues, along with many of those raised in the debate today, go well beyond the issues of rents and subsidies with which the Bill deals. Because I do not want to keep your Lordships too long, I shall confine myself to answering as many of the points raised on the Bill itself as I can. I shall endeavour to write to those noble Lords whose points I do not deal with today, and I hope that any noble Lords who have queries on the Bill will ask either 358 my noble friend Lady Birk or myself for any assistance that we may be able to give before the Committee stage.
Having said that I would not deal with any of the general points raised, I feel bound to deal with one. It would not be right to suggest that the general housing situation is getting worse. I should point out that the Government have taken vigorous action to improve the situation since they came into Office. To take a single example, let us compare the first eleven months of 1974 with the same period in 1973. The number of houses started in the public sector in Great Britain was 137,000, which shows an increase of 30 per cent.; the number of houses put into new contracts was 131,600, which shows an increase of 35 per cent.; the number of houses completed was 115,600, which was 18 per cent. up. The Government are certainly not indifferent to this problem, and I should have thought that every utterance by my right honourable friend the Secretary of State and other noble Lords in this House would have shown how much the Government are concerned with the problem, and how eager they are to get more houses built and more people properly housed.
My Lords, the noble Lord, Lord Hylton, mentioned the question of the amount of land available for housing in London. Of course this has nothing to do with the Bill, but I would say that the Government are not able to accept the figures which the noble Lord gave. I am afraid that they do not accord with our information. The dockland redevelopment is, of course, a matter for the joint committee of the GLC and the London boroughs concerned, which is now responsible for handling the future planning of the area.
My Lords, does the noble Lord mean that so far as planning is concerned this immense area down in dockland, which would provide an enormous number of homes, is entirely in the hands of bodies over which the Government have no influence at all?
§ Lord MELCHETT
My Lords, of course the Government have influence over planning matters. I was merely saying that the immediate responsibility was that of the committee set up by the GLC and the local authorities involved.
§ Lord HYLTON
My Lords, could the noble Lord tell us what is happening to the London Housing Action Group, which was a joint effort between Central Government, the GLC and London boroughs?
§ Lord MELCHETT
No, my Lords, I am afraid I cannot. That is a matter which is outside the scope of the Bill; but, if the noble Lord would like me to, I will certainly write to him about this.
My Lords, turning to the points made by the noble Baroness, Lady Young, she made two points which I did not think were entirely fair. The first was the question of fair rents, in which connection she mentioned the Francis Committee. Of course the Francis Committee was set up to investigate the working of the Rent Acts and dealt with private sector letting only: it was not concerned with the public sector. Also, I think I am right in saying that the noble Baroness, in speaking about phasing, said that the fair rent would not be reached for three years. However, it will be reached in, at most, two years. The longest phasing possible is a three-stage phasing. The first stage comes into effect immediately. That is the date of registration, except where the rent was registered during the freeze. The second stage falls on the first anniversary of that date, and the third stage (the full fair rent) is recoverable on the second aniversary of that date—that is, two years after registration.
§ Baroness YOUNG
My Lords, I am sorry to interrupt the noble Lord. I am very glad to have had his explanation of that point. I think that I had misunderstood it in the Bill. However, it does not invalidate the point that the full new fair rent will not be obtainable for two years after the registration of the fair rent and, with inflation running at about 20 per cent, per annum, repairs will become very difficult.
§ Lord MELCHETT
My Lords, that is true where phasing bites, but if the increase in rent is below 40p per week, there will be no phasing at all.
The noble Baroness asked me about the reserve powers in Clause 2 of the Bill. She wished to know why this power could not be left in the Counter-Inflation Act. 360 The answer is that a power concerning rents is much better included in a housing Act. Under the Counter-Inflation Act, the power would expire early in 1976 and, since it is not possible to say whether the need for this power will expire at that date or if it will need to be continued for longer, the Government feel that it is right to put the power into the present Bill.
I think that I was also asked in what circumstances this power might be used. The power must be flexibly worded in order to cope with all situations in which it might be needed. In the private sector it could be used to deal with particular categories of dwelling, and in the public sector, where landlords are non-profit making bodies, the same problem does not arise. Clause 11(5) limits the power to specifying a description of authorities or dwellings—in. other words, the use of this power in the public sector could not be aimed at an individual local authority without going beyond the plain intention of Clause 11(5).
The noble Baroness also asked about subsidies payable as a result of an order made under Clause 2 of the Bill. No formal provision would be appropriate in this case. It would be impracticable to give extra subsidy where a council proposed a large increase that was not fully necessary, but in imposing any limit the Government will necessarily have to have regard to any loss of essential rent income that results. Essential local authority costs must be met and we recognise that if not met from rents, they must be met from rates or subsidy; however, no undertaking can be given, although the Government will certainly keep the matter in mind.
The noble Baroness also asked me about the high costs element of the housing subsidy, and whether this would merely be payable to London authorities. The answer is that the high costs element is designed to give extra help to those areas where costs are and have been for many years well above what is usual. These extra costs cover such things as higher land costs and higher wage rates on maintenance work. Our experience is that this is a particular problem in inner London, but there are likely to be a number of authorities outside London which qualify for this extra assistance. The formula will be subject 361 to consultations with local authorities in due course, but the answer is that it is not limited to London authorities. I mentioned maintenance and management costs, and the noble Baroness also asked about the policy on that matter. In the rate support grant negotiations the policy propounded by the Government has been that the level of work for dwellings should not rise in real terms next year compared with 1974–75, except in the most exceptional circumstances. This is a matter of broad economic policy.
It is naturally regrettable that work cannot expand although a period of stringency may come from time to time. One looks to the ingenuity of local authorities to help in these circumstances. Of course, the costs can rise in money terms. It is merely in real terms that the Government are hoping that they will not rise. Economy of this degree of severity, however, makes a key contribution to keeping down local authority costs, and so rents and/or rates. The costs nationally are very large and, avoiding an increase of about £40 million or £50 million which would otherwise occur, means avoiding an increase of 20p per week for council tenants nationally.
The noble Baroness also asked me what happened to a tenant who was now paying a fair rent. The reasonable rents are not necessarily lower or higher than fair rents; this is a matter for the council to decide. If the rent was relatively high in relation to other dwellings, it might be reduced or held still to let others catch up. The essential difference between a fair rent and a reasonable rent is not only or mainly the actual sum involved. A reasonable rent is one chosen by the elected council who know their own area and their tenants' position. A fair rent is imposed on the council from outside. Tenants will, of course, qualify for rebates on the same basis as all others.
The noble Baroness also raised a point on Clause 9, and the disregard of amenities in the district. This clause incorporates some degree of retrospection in that it authorises the re-assessment of some already registered rents. Since, however, this is possible only in respect of registrations during the freeze, and the freeze will not end until the Bill comes into operation, there will be no 362 effective retrospective reduction of rents lawfully being recovered before this clause comes into force. Also on Clause 9, the noble Baroness asked whether this would apply to dwellings of the voluntary housing movement and the answer is that it will. A good deal of concern has been expressed—
§ Baroness YOUNG
My Lords, I am sorry to interrupt the noble Lord. I am most grateful for this explanation. Can he tell me whether the voluntary housing movement was consulted about this alteration? If he cannot give an answer now, perhaps he could write to me on it.
§ Lord MELCHETT
My Lords, I am grateful to the noble Baroness for that parting shot. If I may, I will write to her about that.
A good deal of concern has been expressed by the noble Baroness and others about the possible effects of terminating general decontrol. It has been suggested this will lead to the disappearance of this part of the private sector or, at least, to its further decay, as landlords will have no incentive to undertake repairs. I should remind the noble Baroness and others that the number of properties available for private letting has been declining steadily since the war. Between 1968 and 1973, for example, the number fell by about 500,000. Even the previous Government recognised that revitalisation of the private rented sector was not feasible, and this Government have, of course, announced their intention of bringing privately rented accommodation into social ownership. Until we can do this, we must do everything in our power to protect tenants in privately rented accommodation.
The point at issue here is that it is quite indefensible that a tenant should pay more than the controlled rent where his dwelling does not have the standard amenities for his exclusive use. The standard amenities are by no means luxurious. Noble Lords will know that they include a fixed bath or shower, a wash handbasin, hot and cold water supply to all of these, and a W.C. which should normally be in the dwelling. These amenities are certainly no more than basic. We accept, of course, that it is in the interests of the tenant and necessary for the preservation of our older housing stocks that landlords should be 363 encouraged to carry out repairs and improvements, even though they are, for a variety of reasons, unwilling or unable, as the noble Baroness suggested, to improve their properties to the qualifying standard. We have, therefore, introduced the provision enabling the landlord to recover a rent increase of 12½ per cent. of the cost of the repairs.
My noble friend Lord Castle raised the question of Islington. As he said, my honourable friend the Minister for Housing and Construction has written to him about this point. I think I am right in saying that my honourable friend pointed out in the letter that that council's expenditure was expected to be up by about 32½ per cent., next year and the subsidies payable under this Bill will go up by about 40 per cent. If my noble friend is still unhappy about the situation, I will certainly undertake to write to him further , about it—
§ Lord CASTLE
My Lords, I think my noble friend and his honourable friend elsewhere will appreciate that if you have more houses your expenditure goes up, and I thought it was the policy of the Government—and I am sure it is—to encourage the building of more houses.
§ Lord MELCHETT
Yes, my Lords. It is certainly the policy of the Government to encourage the building of more houses, and I think I have already said that at least twice this afternoon.
The noble Lord, Lord Middleton, made some points on the phasing provisions in Clause 8. Some doubt was expressed as to whether phasing of rent increases is really necessary when the annual rate of increase in rents is only 7 per cent., which is lower than the rate of inflation. Latest figures show that the average percentage increase on re-registration, which is normally at least three years after previous registration, is between 20 and 28 per cent. Taken over the three years this represents an annual rate of increase of some 7 to 9 per cent. Without phasing the whole of that increase would be payable at once.
It is, of course, exactly in times of inflation that phasing is most important. It is the steep rent increase that injures the budget already affected by price rises. The phasing of such increases in annual 364 stages protects tenants against such sudden rises, enables them to adjust the budget gradually to the payment of the full fair rent, when, after ample warning, it falls due. The phasing provisions do not, as I think the noble Lord suggested, stop a landlord from getting the increased fair rent to which he is entitled. Obviously, they restrict the amount of increase recoverable in any one year, and it is necessary that they should do so to protect the tenant from the undesirable effects of a large single increase. It is important to note that the phasing arrangements do not affect the anniversary for re-registration purposes, so that the landlord can have a new rent registered three years after the previous registration, and can recover a further increase then. If, as will happen in some cases, a new fair rent is registered when the previous fair rent is still in a period of delay—in other words, before the total of the previous fair rent is recoverable under the phasing provisions—the difference between the new rent and the rent recoverable at the time of registration will be taken as the rent increase and will be subject to phasing.
The noble Lord, Lord Crawshaw, made some points. I was very glad that he was happy with the part of the Bill with which he was especially concerned. He also asked me about the position on the take-up of rebates. The Government are not satisfied with the take-up rate. On the evidence we have, based on the family expenditure survey data and local authority returns, the take-up by council tenants is reasonably good at around 70 per cent. of those eligible and the take-up by private tenants is unsatisfactory—around 20 per cent. As I say, we share the noble Lord's concern about the low take-up rate. As the noble Lord will be aware from his service on the Advisory Committee, we have set up several research projects to see how take-up can be improved. We hope that these projects will be completed by about June and that will then enable us to see how our efforts can be better channelled to improve take-up. I can assure the noble Lord that we are not complacent about the low take-up rate and that the Government will not rest until the take-up figure has much improved, subject only to the constraints on the finance necessary to improve it.
365 The noble Lord, Lord Crawshaw, asked about fair rents and I think that the noble Baroness, Lady Hornsby-Smith, also made some points about this. It might be helpful if I gave some of the technical background to the difference between a fair rent and a reasonable rent. Fair rents are rents assessed and registered by the rent officers and the rent assessment committees for dwellings let on regulated tenancies. They are assessed on a basis laid down by Section 46 of the Rent Act 1968, and basically are designed to yield what would be the market rent if the supply and demand for dwellings to let in the locality were roughly in balance. The formula will be amended slightly by Clause 9 of the Bill. Reasonable rents are rents assessed under Part VI of the Rent Act 1968 by the rent tribunals for dwellings within their jurisdiction, and, since the Rent Act of 1974, for lettings by resident landlords only. No formula for the assessment of reasonable rents has ever been laid down. Part VI derives from a measure passed in haste in 1946 (and intended to run for less than two years) to deal with the post-war pressure on furnished lettings. It ante-dates the concept of a permanent system of rent limitation under which maximum rents are determined in the light of actual dwelling values.
My Lords, this is a difficult Bill. There are many noble Lords who, unlike me, were here when your Lordships' House had to try to deal with the Housing Finance Act of noble Lords opposite. I am sure that those noble Lords will agree with me that the death of that monster will be a quicker and neater business than its messy birth and its disruptive and disastrous, though mercifully short, life. The Housing Finance Act imposed rigid rent increases in the public sector that were unrelated to the local authorities' individual requirements. Such fixed statutory provisions for increasing prices would be quite incompatible with this Government's commitment to fight inflation. The Housing Finance Act took away from democratically-elected local authorities the power to fix rents of individual dwellings and put it into the hands of Rent Scrutiny Boards. These Boards were outside the control of elected national and 366 local government; they were non-elected, unrepresentative, accountable to no one; and there was no appeal against their final decision. This Government pledged in their Manifesto to restore to local authorities the rights taken from them; and this Bill fulfils that pledge.
My Lords, the Housing Finance Act was based on a concept that illustrates a major difference in philosophy between noble Lords on this side of the House and noble Lords opposite. The Act envisaged that local authorities might make a profit on the provision of housing. The concept of making profits out of socially necessary housing was rejected in our Manifesto; and this Bill will make it impossible. Having talked at length about those parts of the Housing Finance Act with which we disagree because it is those parts with which this Bill largely deals) in closing I ought to say that we are retaining for the time being such parts of the Act of 1972 which still have point and value. Thus, the private sector provisions in Part III which provide for the conversion of controlled tenancies into regulated ones where dwellings reach the qualifying standard are untouched. So are the provisions for the phasing of rent increases in these cases and where a dwelling has been improved with the aid of grant.
On the public sector side, we are continuing with the rent rebate and rent allowance schemes established by Part II of the Act. We were preparing to introduce them ourselves in 1970 and there is no disagreement between us on that subject today. We are also continuing with the rent and subsidy regime for housing association under Parts VII and VIII of the Act. This operates in associations with the new system under the Housing Act 1974 by which the Government now meet the actual deficits arising on housing association projects. So, my Lords, with the best of the old Act retained and a great deal of good new provisions introduced, I have absolutely no hesitation in wholeheartedly commending this Bill to your Lordships' House.
§ On Question, Bill read 2a;and committed to a Committee of the Whole House.