§ 3.26 p.m.
§ Lord HUGHES
My Lords, I beg to move that this Bill be now read a second time. I should like first of all to set this comparatively short Bill in perspective. As your Lordships are aware, the reform of housing finance is one of the Government's major political commitments. This task is being tackled in two stages. We are embarking on a longer-term review of housing policies and finance, which will no doubt lead to further housing legislation. Meanwhile, we have introduced this Bill, which has immediate significance for housing in Scotland, since it repeals the parts of the Housing (Financial Provision) (Scotland) Act 1972 which aroused widespread objection and makes a number of improvements in existing subsidy arrangements. The Bill deals with both the public sector and the private rented sector.
1204 In the public sector Clause 1 of the Bill restores freedom to local authorities to determine for themselves what rents should be charged for the houses built and managed by them. It does so by restoring the well tried principle of reasonable rents which allows authorities to have regard to local circumstances in determining rent levels. The Bill also requires authorities to review their rents from time to time; they may do this when they are preparing their annual budgets or at such other intervals as they think appropriate.
Authorities are required in fixing rents to disregard the personal circumstances of their tenants; so the rents charged continue to reflect the value of houses rather than the means of the tenants, who —to the extent that they require assistance—are protected by the rebate scheme. Authorities are permitted to maintain a working balance in their Housing Revenue Account, so that they may take account of fluctuations in expenditure from year to year, but they are not permitted to make a surplus on their Housing Revenue Account. This is an especially apt time for these changes—when the new district authorities will be taking over responsibility for housing for the first time.
From the meetings which the Under-secretary of State and I have been having with the new district authorities, we know how keen they are to get on with their task, and how they welcome the freedom the Bill provides for them to reach their own decisions—decisions for which, let us remember, they are answerable to the tenants and rate-payers affected by them.
So far as Clause 2 is concerned, as a Government we are naturally concerned about the effects of very steep rent increases. We have therefore subjected the rent freedom to a counter-inflation safeguard: a maximum limit of £39, which may be variable by order, on the rent increases which may be imposed on any individual house in any period of 12 months. This is not a prescribed average increase, comparable to the £26 under the 1972 Act. This limit also applies to development corporation and Scottish Special Housing Association houses. Clause 3 and Schedule 1 strengthen Exchequer support for housing.
1205 The Bill provides for an increase of some £5 million in the payment of housing expenditure subsidy for 1975–76, with cumulative increases thereafter. This means that Central Government will be paying in subsidy 75 per cent. of all the increases in expenditure per house over the previous year, without any contribution from rents. The Bill also continues the payment of rent income subsidy under the Housing (Scotland) Act 1974 for the year 1975–76. We estimate that together these additional subsidy payments of some £16 million should serve to contain the growth in rate fund contributions to the bottom end of the range quoted in the Financial Memorandum to the Bill; that is £7 million to £9 million.
Clause 4 makes some minor adjustments to facilitate the closing of Housing Revenue Accounts at the end of the current year. Clause 5 inserts into the New Towns (Scotland) Act 1968 a provision, already present in English New Towns legislation, which allows the Secretary of State to recover all or part of any surplus which may be made by a New Town development corporation, after he has consulted the corporation and the Treasury. This is purely an enabling provision which we do not expect to use in the near future. Schedule 1 to the Bill also repeals the Secretary of State's special powers in relation to housing default. This is part of our approach towards creating the right climate of co-operation between Central Government and local authorities. The Secretary of State will retain the same general default powers as he has in relation to all other local authority functions, but authorities will no longer feel that their housing functions are singled out for special attention.
To turn to the private sector, we have provided a logical extension of the principles recognised in existing legislation. Within the fair rents system we have ensured that where rent increases take place, they take place at a gradual rate for all tenants. As to Clause 6 and Schedule 2, the main private sector provisions extend the phasing of rent increases to all cases where the tenant has had a fair rent registered. This means that, generally speaking, rent increases which are due after a fair rent has been registered by a rent officer will be made in three equal stages, normally over a 1206 two-year period, subject to a minimum increase in any one year of 40p per week and a maximum of £1.50 per week. Special arrangements have been made in the Bill for adjusting phasing for rents registered during the freeze and for rents which were caught at stages of phasing by the freeze. The purpose of these arrangements is to ensure that the benefits of the standstill will not be wiped away by steep increases immediately it ends on 15th May. We think that where rents must rise they should do so in a steady progression enabling tenants to adjust their budgets.
Section 34 of the 1972 Act provided that all controlled tenancies should be brought out of rent control in bands related to the rateable value of the houses concerned without any reference to their condition. Clause 8 stops this automatic process of decontrol in the case of the remaining controlled tenancies; namely, those with a rateable value of £25 or less. Though their numbers have been shrinking recently, in the main because of redevelopment, it is estimated that there are still some 5,000 such houses in Scotland. In order to convert a controlled tenancy into a regulated one, a landlord will now require to obtain a qualification certificate by satisfying the local authority that the house contains all the standard amenities, meets the tolerable standard, and is in a good state of repair.
We are concerned to ensure that continuing rent control on properties under £25 rateable value does not result in their falling into hopeless disrepair, with distressing consequences for the people who rely on them to provide hearth and home. For the first time landlords are to be allowed, under Clause 9 of the Bill, to make rent increases directly related to the cost of any repairs which they carry out. They may increase rents by 12½ per cent. of the cost of any repairs carried out to a house which is let on a controlled tenancy. By tying rent increases to land-lords' performance in this way we hope to exert a direct influence to prevent these houses from sliding into irremediable disrepair.
My Lords, this Bill marks the first stage in a review of housing and finance to which we in the Government are committed. But it is no ephemeral piece of legislation. It unmistakably conveys the Government's faith in the responsibility 1207 of local authorities who have traditionally taken their housing functions very seriously. Central Government is being taken out of essentially local decisions on rents and rate fund contributions. At the same time, the Bill shows the Government's realism in providing in the private sector for a steady adjustment towards fair rents from a comparatively low historic rent base. While the logic of upward rent movements cannot be ignored, it would be irresponsible not to provide a framework to prevent the serious social and individual consequences of steep rent increases, to which tenants cannot readily adjust. I confidently recommend this Bill to your Lordships. I beg to move.
§ Moved, That the Bill be now read 2. —(Lord Hughes.)
§ 3.36 p.m.
Lord CAMPBELL of CROY
My Lords, housing legislation is needed from time to time to adjust the system to changing circumstances, in Scotland as elsewhere in the United Kingdom. But much of this Bill is unnecessary, and the effects of Clause 1 are likely, we believe, to be harmful in Scotland. The Bill is turning the clock back on housing progress in Scotland. Having fabricated a false mythology about the Housing (Financial Provisions) (Scotland) Act 1972, the Labour Party are now apparently left with no alternative to changing the provisions of the Act on council rents, although they accept the principle of balancing housing accounts and accept that that principle is right. The 1972 Act required housing accounts to be balanced in due course—as distinct from the English Act which provided for surpluses—but any increases in rent in the Scottish Act were limited to an average of only £26 a year. This should be compared with the limit of £39 a year for any house in this Government's present Bill. Our arrangement was that the increases in rent would be more gradual.
The 1972 Act also prescribed generous and comprehensive rebate and rent allowance schemes for private housing as well as public. As a result, no family needed to pay more rent than they could afford. Indeed, many families then started paying less rent than they had been paying before. Over much of Scotland councils have behaved responsibly, both before 1208 the 1972 Act and after it, and have balanced, or been within reach of balancing, their housing accounts. But in other areas —and the noble Lord, Lord Hughes, will be well aware of this—there have unfortunately been councils which have kept rents ridiculously low, have refused to operate proper rebate schemes to eliminate any hardship, and have heaped an intolerable burden upon their ratepayers.
In 1969 about 34 per cent. of council housing costs in Scotland were being met by the Scottish ratepayers; the equivalent in England was about 8 per cent.—the difference being between 34 per cent. and 8 per cent. That was the measure of the distortion to the detriment of Scotland. One result was that the building of private houses was running at less than one-third of building in the public sector—sometimes much less than that. But with the distortion coming to an end a welcome transformation took place in the private house building sector in Scotland. There was a fourfold increase between 1970 and 1973. Moreover, housing societies and associations—which had understandably been little interested in Scotland before that—were starting schemes for co-ownership. Such private building was badly needed because—as a few years ago the Cullingworth Report stated—there was less home ownership in Scotland than in any other European country West of the Soviet bloc. That was one reflection of the sad state of housing in Scotland which the 1972 Act was starting to change.
Regrettably, this Bill will be a charter for certain councils, which are often dominated by extremists of different kinds, to act irresponsibly. Despite the rebate scheme, their interpretation of what is a reasonable rent would be nil, or as near to nothing as is possible. This is grossly unfair to their local ratepayers who have to foot the bill. The 1972 Act was reducing the housing contribution from ratepayers. At a time when the Government ought to be doing everything possible to slow down increases in the rates, it is shocking that through this Bill they are adding in the coming year at least £7 million to the rates in Scotland; that is according to their own estimates in the Financial Memorandum which is attached to the Bill. In fact, the sum is likely to be much larger because of the irresponsible, but predictable, action by certain councils.
1209 The Government are relinquishing any means of protecting ratepayers. The only apparent sanction will be the public inquiry into whether a council has properly reviewed its rents. In the past in Scotland, this has proved to be a clumsy, vague and thoroughly ineffective method which all who are concerned with good housing conditions had hoped was buried in the past. Since there is nothing in the Bill to indicate when reviews should take place, or what is a reasonable rent, the stage is being set for understandable repercussions from ratepayers—probably, and regrettably, including refusal to pay identifiable amounts related to housing. Very often ratepayers can see that they are paying for people who are a good deal better off then they are.
All this should be considered against the background that the average weekly council house rent in Scotland is about £1.30 less than in England and Wales. There is no particular reason why this should be so. According to the latest statistics, the average Scottish council house rent is about £2.40. Therefore the average rent South of the Border is over half as much again as it is in Scotland. Certainly there is no question of Scottish tenants being faced with higher rents than tenants in England and Wales.
The Government have been unable to give any respectable reason for replacing the Scottish rent system for the public sector in the 1972 Act. That is a system, known as the "pooled historic cost system", which has been accepted by virtually everybody working in housing in Scotland, including the Labour Party who have also accepted it for England and Wales. At the risk of being immodest, I myself claim some credit for having introduced this system which is especially suited to conditions in Scotland. The Government's attitude in dropping the fair rents system in England and Wales, which allows for surpluses, is just comprehensible to me, although they themselves introduced the fair rent concept in the private sector in the 1960s. But it is incomprehensible to me that they should seek to change the Scottish system, except to try to give some substance to the bogus legends about the 1972 Act which an unscrupulous political campaign invented at the time. People whose rents were, in the event, reduced as a result of the rebate scheme had first been scared by 1210 a campaign into thinking that they were going to have to pay a large increase. That is what happened in 1971–72.
While retaining the main principles of balancing the housing accounts and the universal rebate scheme, all that this Bill is doing is giving carte blanche to certain councils not to comply. The result will be to create unfairness between different areas, which the 1972 Act was removing. Above all, it will create unfairness for the ratepayers. Some councils will observe the principle which is still enshrined in this Bill, as it was enshrined in our 1972 Act. They will aim to balance their housing accounts, increasing rents by easy annual stages, as we prescribed. But other councils will do nothing; and so far as we can see, they will not effectively be brought to book for failing to carry out what both this Bill and the 1972 Act set out as the best system for Scotland.
Also, most councillors will find that the 1972 Act helped them by providing a limit for average rent increases—the limit of 50p a year. That was a modest increase. It meant that while they were approaching the balancing of their accounts, rents went up by no more than a modest amount. Most councillors in Scotland knew that this was right, but under this Bill many councillors will be faced with invidious comparisons with what other councils are doing. Rents are usually delicate matters for decision. Councillors will not thank this Government for having moved from an orderly progression to an uncharted "free-for-all."
Before 1970, when I was moving among social workers and both voluntary and professional bodies working in housing, I constantly heard this plea from all shades of political opinion, and none: "In future, please change the system to steer the help which is coming from the taxpayers and the ratepayers to those who need it; relate that help to the circumstances of the tenants and get away from the system of subsidies being attached to the houses—to the bricks and mortar or to the stone—depending in amount upon the historical coincidence of when those houses were built and in what circumstances". That was their plea, and the major change which we succeeded in carrying out in 1972, with the rebate system and subsidies to meet the rebate payments, did meet that 1211 request. It would be tragic to throw away that system, which this Bill still confirms in principle, simply because there is no way of ensuring that it is carried out. Therefore, during the later stages of this Bill we shall examine what is meant by "a reasonable rent" and also what is meant by "reviewing rents from time to time".
The first part of the Bill upon which I have dwelt so far deals with the public sector. It is of main significance to Scotland, because about one-half of the population are tenants of public authorities—a much larger proportion than in England and Wales. What happens in the public sector affects considerably housing in Scotland as a whole. In the 1960s there were some vast and seemingly soulless council housing estates and tower blocks built by local authorities; both were lacking in amenities for tenants and their families. Apparently, it was then the purpose to produce large numbers of units at highly subsidised rents. However, that policy is now being widely condemned, even by Scottish Labour Members of Parliament, as indicated by the Committee debates in another place on this Bill.
There is also the problem of empty council houses in Scotland. Usually, of course, these are the older ones. I understand that at the moment there are well over 1,000 empty council houses in Glasgow. For some time there has been the problem of hundreds of empty council houses in Dundee, Paisley and elsewhere, and unfortunately that situation has been aggravated by vandalism. However, this state of affairs can be assisted if there are more opportunities for home ownership in Scotland. I hope that the Government will not again adopt a doctrinaire attitude towards that idea. It has become acceptable to Socialists in England and Wales, and more and more Labour supporters in Scotland are seeing the benefits of enabling tenants to buy their council houses, although inflation and economic troubles at the moment may make this difficult. I am sure that the noble Lord, Lord Hughes, would not be risking a public rebuke from the Prime Minister if he were to concede this point.
Clause 5 deals with the New Town corporations and provides for payments of surpluses from them to the Secretary 1212 of State for Scotland. These New Towns in Scotland have set a good example in selling their houses; the oldest Scottish New Town, East Kilbride, has sold a great many. This is a credit to the noble Lord, Lord Wallace of Campsie, the chairman of East Kilbride, because I understand many hundreds of houses have been sold while he has been chairman, and I trust the Government will not discourage such sales by New Town Corporations or local authorities in appropriate circumstances where everyone— including applicants on the housing list— is likely to benefit. The second part of the Bill proposes some changes in the private rented sector. This is a comparatively small part of the Scottish housing scene, but it is important that this housing stock should be maintained in good repair and not be allowed to sink into slumdom because of lack of money to mend roofs or carry out other essential work. I was glad to hear the noble Lord, Lord Hughes, draw attention to this in his speech.
We are also concerned that the system should be fair as between tenants and owners, and we know that a considerable number of amendments were made by the Government in the other place in order, it seems, to avoid anomalies which the Bill in its original form would have caused. We shall examine those clauses in the Bill, with all this in mind, during its passage through the House. It is a pity, my Lords, that when valuable Parliamentary time might be occupied with other measures more urgent and relevant, much of this Bill is unnecessary and is likely to confuse and upset a system introduced into Scotland by us and accepted in principle by the Government.
§ 3.52 p.m.
§ Lord FERRIER
My Lords, although my name appears on the list after that of my noble friend Lord Lyell, I understand that if I speak now it will be more convenient to your Lordships. In any case I shall be brief. I have little to say, although I feel strongly about this Bill, the purpose of which is to reverse the policy of the last Government. That is clear from the opening phrases of the preamble. As I have said before in your Lordships' House, that policy of the late Government was revolutionary. What we now see is part of a counter-revolution. We are back to the old, outdated, 1213 disreputable Socialist system, detrimental to the most deserving of house owners or occupiers—a system which, in the view of some people, may be regarded as putting temptation in the way of the potentially corrupt, and as such I oppose the whole principle of the Bill, which is what we are here to discuss. If, when the Question is put I express myself as being Not Content, I assure your Lordships that I have no intention of dividing the House, but I can do no less than so express myself.
§ 3.54 p.m.
§ Lord LYELL
My Lords, we on these Benches have to consider this Bill as a measure which enables the Government to fulfil their Election pledges. As such I do not think we would seek to destroy it, or indeed to alter it too drastically, while we still reserve the right to consider that there are various aspects of it which we hope the Government can see their way to amend or alter. We accept that the Government wish to repeal the Housing (Financial Provisions) (Scotland) Act 1972, but we believe it must be a cause of regret that so many council and private tenants are no longer eligible for the fairly substantial rent rebates paid towards the economic rents charged all over Scotland on a nation-wide basis. Nevertheless, we hope that the Bill, which enables local authorities to charge reasonable rents, will continue the trend towards local authorities' Housing Revenue Accounts being paid from rents charged. As we have already heard from my noble friend Lord Campbell of Croy, in 1969 there was a shortfall in Housing Revenue Accounts in Scotland of around 34 or 35 per cent. which was not covered by rents, but by 1974 it had been cut to about 13 per cent. As noble Lords are aware, shortfalls in Housing Revenue. Accounts in Scotland are normally met from local authority rates, so that over those years the substantial burden which had rested on the shoulders of ratepayers was progressively lifted, which we believe was a useful and helpful movement.
The Bill admits that £27 million is currently paid (in the year 1974–75) from local authority rates to Housing Revenue Accounts, but under the financial provisions of the Bill that figure will increase by £7 million to £9 million during the year 1975–76 and, as has been said that is a 1214 matter of regret. Further, the rents paid by council tenants all over Scotland will vary quite alarmingly, depending on the geographical situation of the tenant and not necessarily on his financial situation or the region. We understand that in 1974 about 30 per cent. of council tenants were enabled to receive a rent rebate and these averaged about £75 per annum. So there were fairly substantial rebates available under the old Act which is now to be repealed. Nevertheless, the Government have said that they intend to take adequate substitute steps. Of course there is nothing to prevent local authorities from operating their own rebate schemes; however it appears that the cost will be borne by the rates.
There is also one point on Clause 5, which enables the Secretary of State to require any surplus from New Towns' Housing Revenue Accounts to be paid direct to him. There is no indication that any such payments would be used to benefit a New Town in any way; for example, by reducing the capital debt incurred by a New Town Corporation. This is a point which concerns the New Town Corporations very much and we should be grateful to the noble Lord and to the Government for any observations on it. There is one further point which I think the Government could explain. It concerns the qualifications which the noble Lord mentioned—
§ Lord HUGHES
My Lords, will the noble Lord forgive me for interrupting. I must apologise, because I was seeking information on one of his earlier points, and I am not absolutely certain what he asked me in relation to the New Town Development Corporations. Perhaps he would be kind enough to repeat it.
§ Lord LYELL
My Lords, the point that I was requesting an answer about was whether any surplus on a New Town's Housing Revenue Account would be used to the benefit of that New Town rather than being completely at the discretion of the Secretary of State. As we understand Clause 5, there is no indication that the Secretary of State is under any obligation to see that the surplus accrued by the New Town shall go to the benefit of that New Town. We seek some clarification of this point, and wonder whether the noble Lord can give us any further information.
1215 The noble Lord, Lord Hughes, mentioned the qualification certificate in respect of a controlled house in the private sector. He gave the figure of 12½ per cent. of the cost of repairs, which is the maximum rent increase which can be charged by a landlord. Perhaps the noble Lord can explain where the finance for such repairs—let alone any improvements—could be obtained at a rate of 12½ per cent. It does not cover the cost, even of financing the repairs or the borrowing for any improvements. If this rate could be raised slightly to 15 per cent., this would cover the cost of bank borrowing. This is a situation which will affect many landlords in this particular sector.
My Lords, we are pleased to see that any rent increases which are to be introduced are to be graduated over three years. Nevertheless, there is the point that the liberty granted to local authorities under the Bill we believe too often slides into licence. Reasonable rents will mean different things and different amounts to different councils. We are gravely concerned about the prospective burdens liable to end up on the shoulders of the ratepayers.
In conclusion, there is one small point that the noble Lord might be kind enough to explain to the House. Precisely what is meant in Clause 1(5) by, reasonable working balance, while forbidding the local authorities to budget for any form of surplus. Can the Government say whether local authorities are in dereliction of their duty if they make a small, or perhaps fairly large, unexpected surplus on their Housing Revenue Account? I can understand that local authorities will wish to make provision for a reasonable working balance, but if this balance has to be a deficit balance, perhaps the Bill should lay down that there should be a deficit balance. This is perhaps merely a matter of drafting, but may we have the point clarified?
§ 4.2 p.m.
§ Baroness ELLIOT of HARWOOD
My Lords, I have listened to my noble colleagues speaking on this Bill. There is no doubt that one of the most difficult things one has to face when in local government—the noble Lord, Lord Hughes, has been in local government for a great many years, and I have been in local 1216 government now for almost thirty years —is being an elected councillor sitting for an industrial area, where possibly the houses are in poor condition and where to raise rents is a near impossibility because the electors are prejudiced against one when one stands for re-election in that area. That is a very well-known phenomenon in being elected to represent a city. It does not happen quite so much in rural areas, because there the shortage of houses is not at all great. In rural areas there is bad housing; housing that is not up to standard, and so on. That is the biggest bugbear, but in agricultural and rural areas the number of houses is on the whole, somewhat surplus to the number required, because there are fewer people living on the land. A shortage of housing has existed in the City of Glasgow ever since I can remember—and that is a great many years. I do not know what the latest figures are.
Under the 1972 Act, there was a progession towards a reasonable rent, or having rents which made the Housing Revenue Account a progression which did not depend so much upon the elected members, but was built into the system. I thought this was a very good idea indeed, because it meant that the Housing Revenue Account was balanced in a proper way and other ratepayers were not being charged for the failure to balance that account, which is what has been done in many areas over many years. In this way, one achieved a properly balanced Housing Revenue Account. In many areas, this meant that assistance had to be given to those who, through circumstances possibly over which they had no control, were not able to meet the rent which was the proper rent for their house, and who were able to get supplementary assistance. Again, I thought that was a very good idea. It meant that one was not charging people on the general rate sums of money to meet the failure properly to balance the Housing Revenue Account.
My Lords, I know that this Bill requires that local authorities should balance their accounts, but not provide for a surplus. If local authorities balance the Housing Revenue Account, shall we be quite sure that those councils, particularly in big industrial areas where there is the problem of less good housing, will be 1217 able to charge reasonable rents to cover the Housing Revenue Account? It would be a tragedy if we went back to the bad old days when, in certain parts of the country, particularly in Scotland, in the days before the money changed, there were rents of something like 7s. 6d. and 9s. 6d. a week for a house, which would not cover the costs. Yet nobody would put up the rents. On occasions, I remember that we had to take special powers from local authorities to make them put up their rents. Those were the bad old days. I do not think such things happen at the moment, and I should hate to see those days come back.
My Lords, I have been serving on a council now for a great many years. I have served on every single committee, including the housing committee. To put up rents is a very difficult thing to do. You are extremely unpopular; people resent it very much indeed. Yet something has to be done, particularly if you are building good standard housing. The rent must be an economic one unless you are going to run into debt, or ask the ordinary ratepayer to meet the difference. I always thought that to do that was unfair, because the ordinary ratepayer may be living in a lower standard house than the council house tenant, yet paying more rent. His house is not subsidised by the rates. I hope that the noble Lord, Lord Hughes, can assure us that this will not happen, because if it does it will be a step backwards.
My Lords, I hope too that this Bill will not in any way discourage expansion in the building of houses where they are badly needed. I ask the noble Lord whether this Bill will have a discouraging effect. My hope is that it will encourage rather than discourage house-building. That point is most important, because there are still parts of the country where housing is in very short supply indeed.
My other question to the noble Lord is this: What are the Government going to do about those councils, which, for want of a better description, I call the bad councils, namely those who will not balance their Housing Revenue Account? Of course, there are good councils who do balance their Housing Revenue Account. Our council in Roxburghshire is a good council. We do not run into debt in our Housing Revenue Account, but we are a small council and our task 1218 is easier than for those in a large area. There are a number of good councils who are prepared to do this, but a number of bad ones will not. What sanctions have the Government in this Bill to make the bad councils balance their Housing Revenue Accounts? This is an extremely important matter. The noble Lord, Lord Hughes, is a great expert on all these matters of local government, and I am sure he will give us the answers. It is a pity that when one has got into a good system—and a system of rent rebates when the rents were too high, and of rents based on costs, was a good system—one should change it to something which I only hope will not revert to what I call the bad old days. We still have good housing accounts that do not run into debt. I hope that we shall continue to enlarge our house-building programme in areas where it is still badly needed.
§ 4.10 p.m.
§ Lord HUGHES
My Lords, I think I can say that the response which has been given to this Bill is as favourable as I could expect in the circumstances. I am not surprised that the noble Lord, Lord Campbell of Croy, as a former Secretary of State for Scotland and the one responsible for putting the 1972 Act on the Statute Book, sees virtues in it of which very many people in Scotland found themselves totally unaware. I do not expect him to change his view because he has proved to be in a minority in holding that view. After all, he can probably tell me that there have been occasions when it has been the minority that has been right. But I do not think that he is entitled to refer to false mythology and bogus legends. We consider that what we are doing in this Bill is taking account of the facts which have emerged since the passing of the 1972 Act.
If there is any question of bogus legend, the noble Lord is on the way to perpetrating one himself when he compares the £39 maximum laid down in the Bill to the £26 mandatory average increase for which he was responsible. I would remind him that there is one sense in which his Act and our Bill are identical; that is, in laying down a maximum increase of £39 for any one house. The difference between the Act of 1972 and this Bill is that we do not lay down any mandatory increase. We agree with the 1219 noble Lord that the figure of £39 is a reasonable maximum, but we do not say that authorities should be compelled to have an average increase.
Lord CAMPBELL of CROY
My Lords, would the noble Lord give way? That is exactly what I sought to say, too. In the Bill, any house can have its rent put up by as much as £39, so in theory the rent for every house could be so put up. I was comparing not like with like, but the average; I said, "average" in the case which we had in 1972.
§ Lord HUGHES
My Lords, I think that if the noble Lord looks tomorrow at what he said, it at least gives the impression that he was comparing an average of £26 under his Act with a possible average of £39 under this one. I am emphasising the fact that we, like him, have felt that, in these inflationary days, it is reasonable to have a maximum laid down, and we have accepted his own maximum figure of £39. I seem to remember that, between the years 1964 and 1970, the constant theme of noble Lords opposite was that the town hall knows better than Whitehall; it was even interpreted that the town house knew better than St. Andrew's House. He forgot about that in 1972. Generally speaking, we think that the argument is right on matters where local interest is a factor to be taken into account; local circumstances should be considered, and the people best in a position to know them are the local authorities.
The noble Lord gave away part of the case of the Government when he said that most councils in Scotland behaved responsibly, even before and after the passing of the 1972 Act, but that there was a minority which did not so act, and then he went on to say that the action of certain councils is predictable. At the present time there are some 200 housing authorities in Scotland. It has surely escaped the notice of the noble Lord that as from 16th May these authorities are swept away and we have approximately 60 new housing authorities. How, therefore, can the noble Lord predict what any of these new authorities will do in relation to housing in respect of the Bill? I do not see how he can, because not one of the authorities that he criticised remains unchanged as a result of the new 1220 Act. I have no doubt, for instance, that he has Clydebank in mind. It is not a single new authority in terms of reorganisation. I think we must wait and see. If the noble Lord will permit me, I have been having meetings—and so has my honourable friend the Under-Secretary of State—with the new district councils.
The noble Baroness, Lady Elliot of Harwood, will be interested to know that last Thursday I spent a very pleasant day in Hawick meeting the chairmen and the housing conveners of the four district councils into which the Borders are divided. I have no doubt whatever that she will have no occasion to describe any of these new councils as bad councils. I also met the council in Dundee and various others, and I have so far met two regional councils. I am quite certain that the Government are not making any mistake in trusting these new bodies to exercise their responsibilities in a reasonable way. I shall give way to the noble Lord, Lord Strathclyde.
§ Lord STRATHCLYDE
My Lords, I thank the noble Lord. I wanted only to ask him, in view of what he said a moment ago, whether he really anticipates any change in housing policy, in regard to the rents of the Glasgow district, from what has existed in theory' for the last 30 or 40 years?
§ Lord HUGHES
Yes, my Lords. I may be optimistic, but, in this set-up, I think it is reasonable that we should assume that the new authorities will act in a reasonable way. The best way of guaranteeing that they do not act in a reasonable way is to go about telling them that we expect them to do the opposite. I certainly have not done that in meetings with any of them. On the question of increases in rents—and what is meant by regular reviews of rents—I have been asked that question and I have said, as I said in my speech, that it would, perhaps, be reasonable for the authorities, when they are considering their annual budget, to consider as part of that budget what the rent level should be in the ensuing year. So far none of them has dissented from that point of view, so I think I am justified, so far, in being optimistic. I must mention the division which has taken place between my honourable friend and myself; I 1221 have taken the East and South and he has taken the West and the North. So I do not know whether any differences will emerge on a geographical basis when we compare notes at the end of the day about the response of the district councils.
Lord CAMPBELL of CROY
My Lords, I am most grateful to the noble Lord for giving way again. He did. quite unwittingly I am sure, misquote my words, which I have in front of me. Just to remind the House of what I said— because this makes a great deal of difference to the sense—I said that over much of Scotland councils have behaved responsibly. But I went on to say that in other areas there have, unfortunately, been councillors who have kept rents ridiculously low. My point was not that it was the individual councils of the future but that it was very much a matter of areas. My noble friend Lady Elliot confirmed this from her own experience in her speech. This is the point. It has been a matter of different areas. While I, naturally, hope that councils will behave responsibly, we have, unfortunately, memories of what has happened in the past in these different areas.
§ Lord HUGHES
My Lords, I am sorry if I misunderstood what the noble Lord said. We are dealing with what councils do. It is not pieces of land which take action; it is the councils which exist in these areas, and I have emphasised the fact that they are new councils. The councils which are taking power are the councils for which the noble Lord, Lord Campbell of Croy, was responsible. It was he who chose, not all of but almost all of, the councils. Your Lordships made certain improvements, and if the noble Lord had been as reasonable on this as he has been on other matters, there would have been even more changes made, provided another place had accepted them. However, that is water under the bridge. In this connection, the indications are—and I am glad to be able to say this—that the relationship between the Strathclyde authority and the district councils in the West seems to be developing into a very good one indeed. From that point of view, therefore, the noble Lord's faith in Strathclyde may yet be justified. That is slightly away from the question of housing.
1222 On the question of the empty houses, the noble Lord, Lord Campbell of Croy, is out of touch. He spoke of figures of a thousand in Glasgow and some hundreds in Edinburgh—I do not remember whether it was three or four hundred, but it was something of that order. I should like to give the more up-to-date figures. I cannot give them completely up-to-date; the last set we have is as at November 1974, and at the end of that month 263 houses in Glasgow were available for letting but had been unlet for more than eight weeks. At the same time Edinburgh Corporation had 631 houses which had been empty for more than six weeks, but most of these houses were not in fact available for letting because they were being improved and repaired. At the end of December 1974 Dundee Corporation had 149 houses which had been empty for more than eight weeks. Of these only 13 were available for letting, the remainder having been withdrawn from the letting pool for modernisation and repair. So the situation has completely changed in the interval, but, I would emphasise, not for a good reason. It has changed because of the inability of many people who would have wished to purchase their houses being unable either to afford to borrow from the building societies, or other borrowers, at current rates, or being unable to get mortgage finance, and many of these people then turn to local authorities to rent a house instead. So although the situation has improved it has, I would suggest, improved for the wrong reason.
The noble Lord referred to improved private building as a result of the 1972 Act. I do not think he is entitled to say that this position was due entirely to the Act of 1972, and, in fairness, I do not think that he said "entirely", but one could imply that he was saying the position was improved because of the 1972 Act. If that were the case, how does one attribute to the 1972 Act the dreadful slump which has taken place in private building? The fact is that over a period of years (and I myself in 1968, 1969 and 1970 went up and down Scotland encouraging the local authorities to do everything they could to make land available for houses for owner occupation, and I was not without success in that direction) if we look at the statistics we will see that we go back to the middle of the 1223 'sixties, when the figures of owneroccupation in Scotland started to improve. I would emphasise that during my visits I have told local authorities, first—and this meets the point of the noble Baroness —there is no financial restriction on the number of new houses which a local authority may build to meet their ascertained needs. Secondly, I have emphasised to the authorities, as has the Under-secretary, the desirability of using the "housing action area" principles to improve the existing houses, and that where possible they should take steps to build in gap sites in the centre of cities and that they should use demolition in the central areas only as a policy of last resort.
Obviously if a house is totally unfit and incapable of being brought into a reasonable state of repair, then demolition is the proper course; but it should be regarded as the last course to be considered, and I am glad to say that each of the authorities we have met is happy to fit in with these views. So far as the encouragement of private development is concerned the attention of the new housing authorities has been drawn to the improved lending facilities which are available to them. Instead of lending at their most recent public works loan board rate of borrowing, plus the quarter per cent. which is mandatory, we have encouraged them to lend at the pooled rate, which means, for instance, that in Glasgow the rate at which they are lending for private house-purchase is about 9 or 9½ per cent. We are encouraging them in that way, and we are encouraging them to make use of the deferred mortgage system, and of lending for a fixed period of years during which only interest would be payable, with the bond falling to be repaid or renewed at the end of that period.
So in all of these steps we are taking to encourage the build up of owner-occupation, and in reference to what has been said about the selling of houses in East Kilbride, we accept that both in the New Towns and in the local authority housing stock, it should be possible to sell houses, but, in the words of the noble Lord, Lord Campbell of Croy, "where the circumstances are appropriate". I must say clearly that possibly his and 1224 my view of what are "appropriate circumstances" can be very different. But as between the local authorities and the New Towns there is at least one difference which we are keeping in mind; that is, that unless attempts are made to provide owner-occupation you could have a situation that a New Town would be totally artificial in that all houses were rented. So there is a greater encouragement given to the selling of houses in New Towns, but not at the expense of depriving people of the opportunity to rent if their need exists and renting is the only thing which is possible for them.
I come to the remarks of the noble Lord, Lord Ferrier. He at least made my task easy. All I have written down against his name is the word "against". That is a fair summary of his speech. It is a simple position to take up. Unfortunately, or fortunately, it is not a position which the traditions of your Lordships' House encourage people to carry to its logical conclusion. The noble Lord has accepted this and he does not propose to divide the House against the Bill.
I come now to the noble Lord, Lord Lyell, I must say right away that he is under a total misapprehension when he talks about the Bill annulling the rent rebate system. We did not believe that it was possible, even for the last Government, to produce a Bill which was totally bad. That requires a degree of genius which is seldom given to human beings and even less to normal politicians. The rebate system is one which we are continuing. We do not say that it is perfect and it may well be that in the review of the housing finance, which we are undertaking, that there will be changes in the system. But the rebate system is sufficiently workable, and sufficiently reasonable in its results, to be maintained as it is. So under this Bill no one will be deprived of the benefits of the rebate system in the 1972 Act.
The noble Lord went on to ask about the surpluses on New Towns. I said that we did not expect this surplus to be used in the near future; I am not certain, but I may have even said, "In the foreseeable future". But the position, so far, is that the only New Town in Scotland which has had a surplus has been 1225 East Kilbride. But it is not a surplus that would be annexed in these terms, because it was applied by them instead of borrowing for new purposes. There will not be a surplus of this kind until a New Town has completed both its housing and industrial operations and has no further need to borrow.
In these circumstances, the likelihood is that the surplus would go to the Ex-chequer for general use, since it would not be required for use in the New Town. But so long as there was need for further borrowing to carry on the purposes of the New Town there would be no annexable surplus in terms of the Bill. The noble Lord then asked a question about repairs. I expected this because I am certain that it is a perfectly fair question, and it would have been just as fair if the figure in the Bill, instead of being 12½ per cent., had been 15 per cent., 20 per cent., or 10 per cent.; and the noble Lord would obviously be entitled to ask, "Why that figure?" Quite frankly, I do not know why, except that it does not seem unreasonable given at least the theory— and it may be very much theory nowadays—that the rent is expected to provide some money towards repairs. Whether that is a reasonable expectation when the rent is as low as £25, I should not like to argue. It is the figure which is in the Bill. I think that there are precedents for a figure of 12£ per cent. on repairs and that may be its origin. Does the noble Lord wish to come back on this?
§ Lord LYELL
My Lords, I thank the noble Lord for the speed with which he has replied. The only point which I was worried about was that the figure of 12½ per cent. may have appeared reasonable in the "foreseeable future"—and I take the noble Lord's words—but it does not repay any of the repairs. I sought to point out that the landlord was financing the repairs at a loss and that, with a rent increase of 12½ per cent., he will not even cover the cost of financing the repairs, let alone: the cost of the repairs themselves. It is that point which I was worried about. It would be a very small increase—perhaps 13 or 14 per cent.— to cover the cost of finance, but I was seeking to point out that, in these days, 12½ per cent. does not cover the cost of financing.
§ Lord HUGHES
Yes, my Lords, but there are hopeful signs. One of the big banks will be reducing its base lending rate tomorrow, so we may be moving into a more hopeful position in that respect.
My Lords, the noble Lord asked what was meant by the "reasonable balance" on local authority accounts. The position is quite simple: the Bill accepts the principle that a prudent authority will want to have a balance of some kind to make certain that it does not at the end of a year find itself with an unexpected deficit so that it has to rate for that the following year. Authorities ought not to be aiming at making a deliberate profit on the Housing Revenue Account. That is forbidden. However, they will be allowed to take reasonable balances and I think that this must depend entirely on the size of the Housing Revenue Account. A reasonable balance in the case of an authority with 200,000 houses will be a very different figure from a reasonable balance for an authority which has 2,000 houses.
§ Lord LYELL
My Lords, if the noble Lord will give way briefly, I am sure that he is aware, as I and, I hope, the House are aware, that the term "balance" can imply a deficit as well as a surplus. So far as I understand it, the Bill and everything that the noble Lord has been saying assume that the term "working balance" means a surplus. If it means a surplus balance, I think that it should say so. I am sure that the noble Lord is aware that a balance may be a surplus balance or a deficit, and if the Bill seeks to prohibit a surplus balance I think that it should say so. The word "balance" cover both surplus and deficit and it is just this woolliness of phraseology of which I was seeking some clarification.
§ Lord HUGHES
My Lords, I take the noble Lord's point and I will look into it. I must say that, in my simple, non-chartered accountant way, I should have regarded a deficit as a not very workable balance, though most of us with overdrafts seem to manage on what is probably a deficit balance. I think that the intention was that the local authorities, while being forbidden to make a profit on the revenue account, are not being forbidden to have a workable surplus on that account. It may be that the noble 1227 Lord has put forward a point which should be made clear in the Bill and I shall certainly have it looked at to see whether the words should be put in, provided that we do not create a situation in which a local authority is breaking the law if it ends the year with a deficit. We cannot proceed from one anomaly to another.
My Lords, I think that I have dealt with most of the points raised by the noble Baroness, Lady Elliot. The only thing is, as I said to the noble Lord, Lord Campbell of Croy, that we approach these things from a different standpoint altogether. The noble Baroness spoke of what had taken place as a good system. I suggest that it was like the curate's egg—good in parts. I believe that we are seeking in the Bill to preserve the parts which are good and to improve the parts which we think are bad. To refer to something which happened a little earlier and not accepting the parallel of sending the eggs back to be restamped, we think we are doing something a little better than that in relation to housing.
My Lords, I believe that eventually your Lordships will find that the Bill can go through without radical amendment, but I look forward to what will in due course emerge from the further close scrutiny which the noble Lord, Lord Campbell of Croy, and his colleagues will give to the Bill when we reach the next stage.
On Question, Bill read 2a, and committed to a Committee of the Whole House.