HOUSING BILL

HL Deb 03 July 1980 vol 411 cc610-732

House again in Committee.

Clause 86 agreed to.

Clause 87 [Power of local authorities to dispose of land held for purposes of Part V of Housing Act 1957]:

Lord BELLWIN moved Amendment No. 163:

Page 60, leave out lines 7 and 8.

The noble Lord said: This technical amendment removes an unnecessary definition. The clause which we are discussing inserts a new Clause 104 into the Housing Act 1957. This gives local authorities a new power to dispose of land held under that Act. Subsection (10) of the new clause defines the word "land". It reads: In this section 'land' includes any estate or interest in land".

That definition is too narrow. Removal of this subsection from the Bill will produce the result that "land" in this context will have its widest meaning, as in the Interpretation Act 1972, which defines "land" as follows: Land' includes buildings and other structures, land covered with water, and any estate, interest, casement, servitude or right in or over land".

We have taken the view that this broader definition is preferable.

On Question, amendment agreed to.

The DEPUTY CHAIRMAN of COMMITTEES (Lord Nugent of Guildford)

The next amendment is No. 163A. Before calling the noble Lord, Lord Bellwin, I should tell the Committee that this is a manuscript amendment. Amendment No. 163A now reads: Page 60, line 12, leave out from 'disposal' to end of line 14 and insert (`made in pursuance of the option')".

Lord BELLWIN moved Manuscript Amendment No. 163A: Page 60, line 12, leave out from 'disposal' to end of line 14 and insert (`made in pursuance of the option').

The noble Lord said: I am grateful to the noble Lord, Lord Nugent of Guildford. I have already spoken to this amendment with Amendment No. 28A. I beg to move.

On Question, amendment agreed to.

Lord BELLWIN moved Amendment No. 164: Page 60, line 23, leave out ("section 88") and insert ("sections 88 and (Appropriation of land).

The noble Lord said: For the convenience of the Committee I should like to speak also to Amendment No. 168. These amendments introduce consistency in relation to all means of dealing with houses held under Part V of the Housing Act 1957. As it stands, Part V of the Bill removes the present complexity in the requirement for ministerial consent to the disposal of "Part V" council houses but only where their disposal is into new ownership. As a result of these amendments there will be a complementary requirement for ministerial comment where there is an appropriation by a local authority of such houses for another statutory purpose.

We have always made it clear that our policy of removing controls over local authorities must be consistent with the achievement of other policies on which we were elected. As the White Paper said: Democratically elected local authorities are wholly responsible bodies who must he free to get on with the tasks entrusted to them by Parliament without constant interference in matters of detail by the Government of the day. On the other hand, there are certain national policies which it is the Government's duty to pursue even though they may be administered locally; for example, where by statute the responsibilities are shared between central and local government or where the Government of the day may have secured a particular mandate at a general election. It would be inappropriate therefore to abandon all control over local government; to do so would he an abdication of the Government's proper role".

This applies in the case of council houses. It is the policy to ensure that dispositions of usually subsidised council houses and related property are to appropriate purchasers and on acceptable terms and prices. This must be done through a consent mechanism, such as Part V of the Bill, as amended, will provide. I beg to move.

On Question, amendment agreed to.

8.6 p.m.

On Question, Whether Clause 87, as amended, shall stand part of the Bill?

Baroness BIRK

While I do not doubt that what the noble Lord said about the last amendment was so, and the rest of the clause—and I am not "rubbing it in" for political reasons—this does underline the need for us to have Notes on Clauses on this Bill. It is terribly difficult to take in what it is about. The amendment as it stands almost means nothing unless one is provided with further information on the clause itself as well. Although we agreed to it simply in order to expedite matters, if we do not understand it we do not know what to say about it, whether opposing it or supporting it. We shall have to look at it and consider it before Report. It is not because on principle we are against these things, but so much of it is practically incomprehensible.

Lord BELLWIN

As I said right at the very beginning, I will gladly send some detailed clarification on this particular amendment to the noble Baroness, Lady Birk. I will see that that is done very quickly.

Baroness BIRK

And any of the other rather obscure amendments, because it is very difficult to understand them. It is one of these occasions where you do not really know what to ask for. You do not know what you want to know until you know what you do not know.

Lord BELLWIN

Then the difficulty is that I do not know what you do not know that you do not know about, and that presents yet another problem for me, too, with the best will in the world!

Lord SANDFORD

May I agree with the noble Baroness. There ought to be an all-party pact not to handle any more Department of the Environment Bills in our House until we resume the excellent practice which the noble Baroness and I both instigated, that we have Notes on Clauses. It is quite impossible to handle these complicated Bills at the rate we are dealing with them without notes on clauses.

Baroness DAVID

May I add that there have been a great many Government amendments since the Bill was printed. It is even more difficult to try to keep up with those. They only come out a few days before the Committee stage. So that makes it even more difficult for us.

Clause 87, as amended, agreed to.

Clause 88 [Consent to disposals and recovery of discount]:

Lord BELLWIN moved Amendment 164A: Page 62, line 11, at end insert ("and for the purposes of this section the grant of an option enabling a person to call for a disposal falling within subsection (4) above shall be treated as such a disposal.").

The noble Lord said: I spoke to this Amendment with Amendment No. 28A. I beg to move.

On Question, amendment agreed to.

Lord BELLWIN moved Amendment 164B:

Page 63, line 33, at end insert— (" (10) For the purposes of this section the grant to any person of an option enabling him to call for a disposal falling within subsection (4) above shall be treated as such a disposal made to that person and a consent to such a grant as a consent to a disposal made in pursuance of the option.").

The noble Lord said: I spoke to this Amendment with Amendment No. 28A. I beg to move.

On Question, amendment agreed to.

On Question, Whether Clause 88, as amended, shall stand part of the Bill?

Lord SANDFORD

May I say a word before we pass on from this particular clause? This is in the general area of the consents which my noble friend has already mentioned. The first part of Clause 88 says: Any consent of the Minister required under section 104(2) or (5) of this Act may be given either generally to all local authorities or to any particular local authority or description of authority and either in relation to all kinds of property or to any particular property or description of property".

I submit to the Committee that you could hardly have a sentence which gives the Secretary of State wider scope for intruding into the exercise of the powers of local authorities. I should have thought that it was necessary for Parliament to have some indication of how this power conferred on the Secretary of State in this respect is going to be exercised before we allowed the Bill to go forward on to the Statute Book.

Up to the present moment there has been no consultation with the local authorities about the exercise of these consents and therefore I should like to ask my noble friend to give us some assurances. Any clause like this causes anxieties and suspicions among local authorities, but particularly so at the pre- sent time. The reason is this: it is essential to bring public expenditure under control and my right honourable friend the Secretary of State has had to send a circular to local authorities telling them to contain and curb their expenditure and to report to him by 1st August on how they are going to do it, at the same time spelling out various steps which he has in mind to take to do it for them if they do not do it successfully for themselves. In this climate, local authorities are bound to be particularly sensitive about the exercise of central Government control in areas which they regard as being their responsibility. Therefore it is particularly important for them to know how they stand here.

Therefore I would ask my noble friend whether he would be kind enough to give us assurances on this point. The best thing would be for him to be able to say that by the next stage of the Bill the local authorities will have been consulted about it. If he cannot do that, perhaps at the next stage he would tell us when they are going to be consulted, and I hope that that would certainly be before the Bill is enacted. At the same time, perhaps he could tell us the kind of controls and the way in which these consents will be drawn. I hope he will be able to say that by the time we get to Report stage consultations upon this will have taken place and we shall know the views of local authorities about it.

Lord BELLWIN

I am not in a position to offer formal consultations at a stated time about the content of the new general consent which will be issued under the revised Part V of the 1957 Act. However, I can tell your Lordships that it is the intention that sales on comparable terms to those set out in Chapter 1 of the Bill should be submitted on a voluntary basis. The consent will also extend to sales on share-ownership terms and to building for sale. I am also glad to say that there has been contact at official level about the provisions in Clauses 87 and 88. Also, in response to a letter, an invitation has been extended to the ADC to take up any points they wish with the departments. Officials would also hope to do that with officers of the other local government associations.

One does want to be helpful here. I entirely recognise the validity of the points made by my noble friend, and we want to be sure as far as possible that local authority associations are as happy about these as they can possibly be. To that extent I will take away the points my noble friend has made about the more formal consultations, and without making any commitment as to that at the moment I will have talks with my colleagues to see what we are able to do.

Lord SANDFORD

I am grateful to my noble friend.

Clause 88, as amended, agreed to.

Clause 89 [Acquisition of land for purpose of its subsequent disposal]:

Lord BELLWIN moved Amendment No. 165:

Page 63, line 41, leave out ("erect houses") and insert "provide housing accommodation").

The noble Lord said: This amendment clarifies the declaration in Clause 89 that local authorities have power to acquire land or houses expressly in order to dispose of them, under their powers to provide housing accommodation in Part V of the Housing Act 1957. Hitherto, it has been arguable that these powers did not extend as far as that. The amendment makes it clear that the power extends to the acquisition of buildings for disposal to someone who will convert them into housing accommodation. This unreasonable gap was brought to light by a recent case which came to the department's notice after the Bill had been introduced. I beg to move.

On Question, amendment agreed to.

Clause 89, as amended, agreed to.

Clause 90 [Options granted before commencement of section 87]:

8.15 p.m.

Lord BELLWIN moved Amendment No. 166:

Page 64, line 5, after ("granting") insert ("to thetenant of a house").

The noble Lord said: In speaking to this amendment I should like also to speak to Amendment No. 167. These are primarily drafting amendments. It is now some years since local authorities began to dispose of council houses under what have been called half-and-half or equity sharing schemes, but are now known as shared ownership schemes. The basic element in these schemes is that the share-owner buys a lease of the house together with an option to buy the council's remaining interest, usually the freehold, which he buys at a later date when he is better able to afford it.

Unfortunately, as the previous Government announced in the other place, there has been some doubt as to whether a local authority's powers to sell and lease "Part V" council houses extend to the granting of such options. The purpose of Clause 90 is to remove any doubt about the validity of options contained in existing shared ownership arrangements. However, Clause 90 as drafted goes rather wider than we wish. These amendments make it clear that the options with which we are concerned in this clause are that shared ownership options and any other options to buy their homes which may have been granted to council tenants. I beg to move.

On Question, amendment agreed to.

Lord BELLWIN moved Amendment No. 167:

Page 64, line 6, leave out from ("in") to end of line 9 and insert ("the house").

The noble Lord said: I beg to move this amendment formally. I have already spoken to it.

On Question, amendment agreed to.

Clause 90, as amended, agreed to.

Lord BELLWIN moved Amendment No. 168: After Clause 90, insert the following new clause:

("Appropriation of land

. After section 110 of the 1957 Act there is inserted the following section— Appropriation of Part V land for other purposes. 110A.—(1) Where a local authority have acquired or appropriated any land for the purposes of this Part of this Act they shall not, without the consent of the Minister, appropriate for any other purposes any part of that land on which there is a house. (2) Any consent under this section may be given either generally to all local authorities or to any particular local authority or description of authority and either in relation to all kinds of houses or to any particular house or description of house. (3) Any such consent may be given subject to such conditions as the Minister sees fit to impose.".").

The noble Lord said: I spoke to this amendment with amendment No. 164, and I beg to move.

On Question, amendment agreed to.

Clause 91 agreed to.

Schedule 10 agreed to.

Clause 92 [Housing subsidy from local authorities]:

Baroness FISHER of REDNAL moved Amendment No. 169:

Page 64, line 37, at end insert— ("(3) In calculating the amount of housing subsidy payable to a local authority no account shall be taken of any receipts by the authority in respect of the sale of any dwellinghouse so long as any debt charges remain outstanding in respect of that dwelling.").

The noble Baroness said: In moving the amendment that stands in my name and that of my noble friends, I should like to link with it Amendment No. 170 in the name of the noble Lord, Lord Greenwood of Rossendale. I should like to link the noble Lord's name with Amendment No. 169, as unfortunately he cannot be with us at the present moment. This amendment that we have put down indicates one of the reasons why we are finding it practically impossible to assess the potential long-term effects which will arise from a statutory sales policy as envisaged in this Bill and that affect the housing revenue account of a local authority. The debt charges will obviously be affected, the money being borrowed over a 60-year period as distinct from the kind of mortgage in which the money is borrowed over only a 25-year period.

There are few capital receipts that arise on the selling of council houses, as has been proved by most local authorities, because most sales are financed by mortgages from local authorities. Capital receipts are relatively small in relation to the properties sold. If my research is anything to go by—and I stand to be corrected by the noble Lord—most tenants who make a purchase are asking for a mortgage from the local authority of anything from 95 to 97 per cent. Therefore, any capital receipts that arise are only to the extent that a sale is privately financed. If the local authority give a mortgage of 95 to 97 per cent., it is merely substituting mortgage income for rent income. It does not receive any capital lump sum; it does that only when the sale is privately financed.

I would draw your Lordships' attention to the fact that in the private sector owner-occupiers are assisted in their house purchase by tax relief, in the same way as the council house tenant is helped with his rent by subsidy payments. I am not suggesting what I might call tax relief subsidies, but just a form of help such as is given to owner-occupiers with their mortgages. There is no provision in the private sector for the Exchequer to claim a refund when an owner-occupied property is sold. What we are asking is: why should the Government expect anything from the sale of a council house?

One recognises that the Government would prefer mortgages to be financed by building societies, since private finance brings immediate capital receipts to the local authority and to the housing revenue account, which helps the Government in their policy of curtailing the public sector borrowing requirement. But I think the noble Lord will agree with me that building societies are not finding it easy to satisfy all the demands for mortgages in the private market, and, so far as I have been able to ascertain, there has been no marked enthusiasm on the part of any building society to get really involved in the council house market. There have been one or two separate and individual mortgages, but no building society has come out and said, "Yes, we are in the market."

In conclusion, may I say that I hope the noble Lord, Lord Bellwin, will consider this amendment very seriously, bearing in mind that if there has to be an incentive for local authorities to sell houses, that incentive should surely be that they ought to be able to keep all the capital receipts that arise from a sale. I beg to move.

Lord HYLTON

This is a very interesting amendment to a very complex part of the Bill, and it prompts me to put this question to my noble friend on the Front Bench. Does he think there will be many occasions when the price at which a council house is sold, less discount, is less than the outstanding loan debt on that house? If this does happen, who will pay for the difference? Will it be central Government or will it be the local authority?

Lord BELLWIN

May I begin by saying to the noble Baroness, Lady Fisher, that experience has shown that somewhere between 20 and 25 per cent. of all sales of council houses are financed privately by the people who buy them. The balance comes from mortgages given by the local authority. As to her point that there is no enthusiasm by building societies, and that no building society has come out and expressed great enthusiasm, I can only tell her from my own personal experience that there was, in the past, no problem at all in getting local building societies, in the area from where I come, to become involved.

That is not the same as saying that building societies have come out and made a statement along the lines which she might like to hear. Also I entirely take her point that at the present time that would be additional competition for mortgages, when funds are less available than one would like them to be. So I take that part of her argument as being fair. But I hope she will accept from me the point I made about the experience hitherto. That is not to say where we shall go from here, because these are difficult times for the building societies. But so far, anyhow —from where I stand—so good. The noble Baroness may not see it in that way, but that is my experience so far.

Even though the Committee will be anxious that we should be moving on, I feel that your Lordships would like me to explain precisely how we see the position at the present time. When a council house is sold, subsidy is withdrawn accordingly. An authority's admissible capital costs are reduced and subsidy is thus no longer payable on the loan charge relating to those costs. At present, the reduction in admissible costs is, in all cases, taken as the historic cost of provision. Where the sale price is greater than historic cost, the local authority benefits from the entire difference between historic cost and sale price. Where the sale price is lower than historic cost—and this is the point which my noble friend Lord Hylton made—the authority have themselves to fund the difference between sale price and the cost of provision. These rules are contained in the general determination issued under Section 2 of the Housing Rents and Subsidies Act 1975. If we were to alter them now, a change in the determination, not in the statute, would be needed.

We have indeed, however, proposed that we should frame different rules to come into force on enactment of the Bill. These are designed to reflect more faithfully the Exchequer's role and interest in sales of council houses. Thus, where the sale is below historic cost to a purchaser who invokes, or could have invoked, the right to buy, we are suggesting that subsidy should be reduced according to the sale price: it follows that the difference between cost and sale price will, in those circumstances, be reckonable for subsidy since it seems only fair that an authority should not suffer a visible and immediate loss resulting from discharge of its statutory duty. Where, however, sale price exceeds historic cost, it is only equitable that the Exchequer's contribution to public sector housing should be recognised in taking a share of the benefit.

No single figure for Exchequer subsidy can apply to all houses alike. On this ground alone, it is reasonable to suggest a 50/50 sharing as proposed in our consultation paper. It is also relevant that between 50 and 55 per cent. of reckonable expenditure by local authorities is at present estimated to be met by Exchequer subsidy. With that estimate in mind, our proposal seems fair and based soundly.

That is our positive reason for advancing our proposal. The counter-suggestion contained in the amendment is objectionable in more than one respect. I imagine, for example, that I am safe in not taking at face value the suggestion that so long as any debt charges remain outstanding no Exchequer subsidy should be withdrawn at all. That would enable a local authority to apply its receipts from a sale to a purpose other than debt redemption as they are quite entitled to do—in the knowledge that in that way the costs of the dwelling would still feature in the subsidy calculation. Similarly, I am prepared to be reassured that the amendment is not designed to count as reckonable expenditure any shortfall between sale price and cost, where sale has taken place on a voluntary basis. It goes almost without saying that both these side-effects would be unacceptable.

Even though these may be unintentional, the point remains that we believe the proposal we have advanced on reduction of subsidy is reasonable and ought not to be set aside by this amendment. Moreover, the basis for reduction of subsidy on disposal is the kind of detail which has been, and should in our view continue to be, the subject of detailed rules rather than of provisions in the Bill.

Finally, one particular argument advanced in support of this amendment seems to me to be misconceived. There is no valid analogy with the owner-occupier on a mortgage who receives tax relief on his interest payments. In the case of council housing, subsidy is paid and withdrawn according to the property concerned and subject to its remaining in public ownership. Tax relief, however, is personal and payable to an individual in respect of his main residence, regardless of which particular property he happens at the time to live in.

Once again, we are getting into complicated areas, as seems to be inevitable with the Bill. I hope that after the explanation I have given, the noble Baroness may feel able to withdraw the amendment.

Baroness FISHER of REDNAL

I thank the noble Lord for what he has said. One is at a distinct disadvantage when listening to somebody who is reading a very complicated answer. Unless one is able to take shorthand and transcribe almost immediately, one is in great difficulties.

The noble Lord spoke about the detailed rules. It would be good if we could see them; then we should know what he was talking about. Our difficulty is that we do not have them; we do not even know what they are. If I had had the detailed rules, it might be that this amendment would not have been moved.

My point in reply is that the suggestion in the consultation paper was that the 50 per cent. which the local authority keep should become part of the housing investment programme of a local authority. Whether in the rules the Secretary of State will make that compulsory we do not know. We shall have to wait for the rules. The Government argue that the money from sales will go towards the replacement of the houses which have been sold. Even when a private mortgage allows a local authority to receive the full sale value as a capital receipt, given the discounts that will fall below the cost of replacement. Therefore the 50 per cent. which the Government are suggesting should go into the housing investment programme will be nowhere near the amount that might have been expected because of the very generous discounts which the Government are giving on the sales side.

Lord BELLWIN

May I put right one or two of the points which the noble Baroness has just made? First, the Government by no means say what an authority should do with the 50 per cent. that it will keep. A local authority may use it to supplement its housing programme in any way it likes: by spending the money on repairs or improvements, or on building new houses, or whatever. But if a local authority wishes not to spend the money on housing, that will be its prerogative. It will be able to apply its own capital receipts as it wishes.

I do not accept the basic premise that because one sells a council house to a sitting tenant one has to build a replacement. I have said time and time again when talking of the right to buy that this is not the object of the exercise. There will be no need to build a replacement for every house which is sold. Heaven forbid that we should go back to the arguments which we had last Thursday! I am sure the noble Baroness knows that the Government do not see it that way. This has not been necessary hitherto when sales have taken place and it will not be necessary in the future.

I take the point that it is difficult to follow some of these complex arguments, but if I were to deal with them more slowly it might have a counter-productive result so far as getting on with the Bill is concerned. There will always be the record to show what has been said and the opportunity to take up any points. When I said the "nth time" last time, I was told that that was the end, but I understand the "nth" time to mean infinity, which goes on and on. So I will say, for the "nth" time, that should any further clarification be required beyond what has been said, the noble Baroness has only to ask and I will do my best to make it clear.

Baroness BIRK

Whether or not it is for the "nth" time, unless everybody is satisfied that everybody is reasonably housed in this country and that there is not a waiting list, how on earth can one talk about not replacing housing stock? We do not want surplus housing stock, but unless people have a home it does not make sense. I do not expect the noble Lord necessarily to answer that point now. He can answer it after my noble friend has replied.

Lord UNDERHILL

The noble Lord the Minister said that he hoped we should not go over the discussions that we had last Thursday. I am an innocent abroad and it may be that there are experts in the Committee, but I am wondering how many other noble Lords are really confused, as I am, as to exactly what will be the position of a local authority when it looks at its finances. When I raised this question in a previous discussion the Minister asked us to leave it until we dealt with the financial implications.

I am still not satisfied about what will be the implications for a housing authority which still has a substantial number of years outstanding in loan charges. In view of the 33 per cent. discount—and it may be a 50 per cent. discount—it may face a quite serious financial position. In the absence of any details about the meaning of clauses or any document which shows exactly how this will work out in a number of examples, I am certain that most of your Lordships, except those who are well informed, are taking a pig in a poke. We just do not know exactly how this will work out.

8.37 p.m.

Lord BELLWIN

I must give an exposition of the financial implications. First, the Notes on Clauses which I have seen on this, such as they are, would serve only to confuse still further. There is absolutely no question about that. Perhaps the noble Lord, Lord Underhill, will take my word for it. What can one do other than quote from experience? The fact is that my own former authority's housing revenue account is today benefiting to the tune of over £1 million a year on sales of houses already made. I am leaving aside any other profit. That is very significant. It will be selling more houses, so it will not be long before that figure can be doubled and trebled. That is a very significant benefit to a local authority.

I know of the arguments that have been put forward by people who have carried out surveys and made prognostications, to the effect that this may be so for a time but in so many years' time that profit situation will turn into a deficit situation; and where, they ask, will you be then? I can only refer noble Lords to the document put out by my right honourable friend in another place, which is there for everybody to see and read, which confirms that there is every reason to believe that for at least 20 years the profit should continue. If one looks at the price of properties 20 years ago and their price today and if we go up to 20 years ahead, that should be satisfactory.

Nobody argues about the fact that there is a gain and a profit to the person who buys. Here, though, we are concerned only about what is the position of a local authority, what will happen to its housing revenue account and what then it will be able or unable to do as regards its spending. I can only refer noble Lords to what I have said.

May I add that the figures that one sees in the many different surveys and calculations made by different groups of people always come down in the end to the facts which you feed into them. The figures are as good as the assumptions you put in. One assumes certain rates of rent increases on the one side and one also assumes what the levels of inflation will be. Those affect what the cost of repairs and maintenance will be, and one takes a supposition regarding the cost of management and so on in the future, and then feeds all those suppositions into the calculations on the one side and the other. One can come out at the end of the day with whatever one feels one would like to have.

Having said that, I return to my first point and say that the only thing that we can quote as fact, not as supposition, not as calculation, is the actual financial experience of those authorities who have been doing it on some scale for some time. When I quote those, as I do, I come out with the kind of figures I have just mentioned. I do not know how helpful or how mystifying that is to the noble Lord, Lord Underhill, or to anyone else; it is meant to be helpful. I would gladly confirm, in any form, anything which I have said, in any way they would wish. I just hope that it is helpful.

Baroness FISHER of REDNAL

I thank the noble Lord for what he has said, and also my noble friends who joined in supporting the amendment. The thing that worries me is that lots of people feed lots of different figures into different things, and different things come out. We have to take it, from what the noble Lord says, that the figures his department pushes in are the right figures, and the right figures come out of the box. Therefore we have no alternative but to reckon that they are backing a winner. What we are saying is that we are not so sure that they are. I would have said it is impossible to assess the potential long-term effects of the statutory policy on the housing levy account. The noble Lord has had his experiences. I should like to say that I have had experiences as well. My experiences do not bear out what the noble Lord has said.

On Question, amendment negatived.

[Amendment No. 170 not moved.]

Clause 92 agreed to.

Clause 93 [The base amount]:

The DEPUTY CHAIRMAN of COMMITTEES

I should explain that Amendment No. 171 pre-empts No. 172, and if No. 171 were agreed to I should not be able to call No. 172.

Lord STEWART of FULHAM moved Amendment No. 171:

Page 65, line 15, leave out subsection (2).

The noble Lord said: Subsection (1) of Clause 93 tells us about the base amount, which is one element in the subsidy. Subsection (2) then gives the Secretary of State power, if he is of opinion the particular circumstances require it, to adjust the base amount for any year by increasing or decreasing it, either generally or in relation to any description of authority or any particular authority. One could hardly have a more wide and general power than that. I should like to ask the Minister what is the value of putting in the base amount as one of the elements determining the subsidy if the base amount can apparently be moved up or down at the judgment of the Secretary of State.

The Secretary of State issued a consultation document to local authorities, and one paragraph of it deals with this subsection. It says: Such a power"—

that is, the power to vary the base amount— might be exercised, for example, where one housing authority had transferred property to another during the currency of the 1975 Act and had made special arrangements for making over each year a payment representing 1975 Act subsidy attributable to the property concerned. In such a case it seems simpler to make appropriate adjustment to the base amount of the transferring authority so as to dispense with the payment.

I have read that at some length because it shows that this is, as far as I can see, a unique example. The assumption is that one authority has transferred property to another and in consequence has to make payment to that other authority in respect of subsidy. We are told that if that happens the Secretary of State will use his powers under this subsection to adjust the base amounts, presumably both authorities so that the payment between them will no longer have to be made. Surely the special feature of that example is this. The local authority who get their base amount reduced do not suffer any loss because they do not have to make the payment they were making to the other authority. That seems clear enough from this paragraph in the consultation document. It is a mere convenient adjustment, and one can see the point of it.

As I say, that is the only example given in the consultation document of the use of this power and it is an example of such a nature that the local authority who get their base amount reduced do not, in fact, suffer any loss, but the base amount is only being reduced because that authority are no longer going to have to make the payment they used to have to make. Can the Minister tell us that in any use he makes of this power under subsection (2) the result will be that a local authority who get their base amount reduced will not in the end suffer a loss? I do not think he can. If he can, well and good, and we need not bother about the subsection; but if this power to reduce the base amount can be used in a way which causes certain local authorities to suffer a loss we really ought to know what are the circumstances in which that would happen.

What we are told about the circumstances so far is that it is simply if the Secretary of State is of opinion that the particular circumstances require it. We were discussing a little earlier, in another context, the powers of the Secretary of State under the Bill and the degree of his accountability to Parliament. I think I am right in saying that the Secretary of State will in no way be accountable to Parliament for any use he makes of the power in this subsection to vary base amounts up or down. I repeat, therefore: why does he want to do it? The only example of a good reason for doing it that has been provided so far is one of an entirely special character that does not cause the local authority who have their base amount reduced to suffer any loss. As I say, if the Minister can assure us that that will always be the case—that if a local authority have their base amount reduced under this subsection it will always be done in circumstances that will cause the local authority to suffer no loss—well and good. But if that is not so, and I do not suppose it is, we really are being asked to give the Secretary of State almost unbelievably wide powers.

This illustrates again what a handicap we are under in not having Notes on Clauses for this Bill. I must say I listened with great interest to an excuse I do not think I have ever heard before, in many years of Parliamentary experience, not here but elsewhere—that we were not being provided with Notes on Clauses because, if we had been, we would have been even more confused than before. It looks as if the Bill is like that famous book owned by the magician Merlin, in which he said: And none can read the comment but myself; and none can read the text, not even myself".

This really will not do. I hope the Minister will give us a convincing reason why the Secretary of State should have this power to shunt the base amount up or down if he is of opinion the particular circumstances require it. I beg to move.

Lord BELLWIN

I think I should first of all put the record straight by pointing out that I did not say that the reason the Notes on Clauses were not given was because they would be confusing. What I said was that I thought that such of the Notes on Clauses as I had seen would be confusing, which is really not the same thing.

Lord STEWART of FULHAM

Will the Minister allow me? Do I understand that there are other Notes on Clauses that he has not seen, which would be elucidatory and not confusing; and if there are such notes, why has he not seen them?

Lord BELLWIN

I do not think the noble Lord should put words into my mouth or say I said things I did not say. If the noble Lord wishes to draw those conclusions then, of course, he is entitled to do so, but I did not say it. It is up to the noble Lord to take it any way he likes.

The power proposed in Clause 93(2) to adjust base amounts will prove useful both to the Secretary of State and to housing authorities. We can in fact envisage precise circumstances in which we should want to invoke it. First, where transfers of property have taken place from one authority to another, notably from the GLC to other authorities (and possibly in transfers from Birmingham to Solihull) we are at present forced by the terms of the 1975 Act into the somewhat cumbersome arrangement of paying subsidy to the transferring authority for them to pass on. For the future we would propose tidying this up by increasing the base amount for the transferee authorities and reducing it for the transferring authority. The GLC incidentally have welcomed this proposal.

Secondly, the power provides a convenient means of transferring subsidy entitlement from new towns to local authorities when there are future transfers of housing. Thirdly, under the Housing Rents and Subsidies Act 1975, when a property is disposed of subsidy is reduced at the start of the next financial year. For property disposed of in 1980–81, one convenient means of making adjustment would be through a reduction in the base amount for 1981–82.

These are examples. There could be other circumstances, as yet unforeseen, where it would be useful to have this power of adjustment. Noble Lords will note that this discretion is similar to that proposed at Clause 45(5) in the Labour Bill. I hope that will reassure them that it has no sinister implications, and I hope the use I have outlined shows that it will be of practical value. In the light of this explanation, the noble Lord may feel able to withdraw Amendment No. 171.

With permission, I will speak also to Amendment No. 172, which seeks to ensure that where this power is used, the local authority concerned should have been consulted beforehand. I hope it will reassure the noble Lord to know that where the Secretary of State intends to change any element in the calculation of housing subsidy, whether the base amount or any other element, he would consult on his proposal as a matter of course. He would consult either the local authority associations or an individual authority, depending on whether numerous authorities or a single authority stood to be affected by his decision.

There are two opposing arguments that can be advanced in circumstances where consultation will in practice take place. The first is that a formal consultation obligation imposes no additional burden on the Secretary of State and therefore ought to be applied universally. There is, however, the counter-argument that because assurances of consultation are not given lightly and because the practice of consultation is well established, a formal requirement adds nothing of substance and is unnecessary.

These two arguments seem to us to mark extreme positions. We have instead taken the view that the statute should prescribe prior consultation for the most important decisions, thereby underlining their significance; but that it is unnecessary to write into the law a formal obligation in respect of each and every case where consultation would in practice take place. We have therefore confined the obligation to consult to those cases where the Secretary of State is to make a general determination affecting all local authorities on the two key elements of the subsidy calculation—that is, reckonable expenditure and reckonable income. I believe that this is a sensible boundary line.

The only other comment I would add to the points made by the noble Lord, Lord Stewart, is that adjustments to the base amount would in fact be made only after consultation, and frankly 1 am not sure how far that goes to answer his point about whether the reduction or increase would apply only in one situation or another. I suspect that it does, and I think he may be comforted by the fact that it is such a similar proposal to what was in the previous administration's proposals in this direction, in which case he may well feel able to withdraw his amendments.

Lord SANDFORD

As my noble friend's remarks have embraced Amendment No. 172 I wonder whether I may comment before the noble Lord, Lord Stewart, responds, to say that in my view the spirit of Amendment No. 172 ought to commend itself to my noble friend and ought to be accepted, but with further amendment to make it applicable not just to a single authority but to authorities in appropriate cases or even to associations of authorities. My view and that of the Association of District Councils is that this is a point on which they would like the requirement to consult to be incorporated in the statute, and therefore I would support Amendment No. 172 if the noble Lord opposite were to move it, or, better still, to invite my noble friend to consider carefully adopting this amendment and coming forward with one along those lines at the next stage.

Lord PITT of HAMPSTEAD

I would support the noble Lord, Lord Sandford, on that. I was going to make a suggestion along those lines because I feel that the base amount is as important as the reckonable expenditure or local contribution and I think consultations should be obligatory on all three. I hope the Government will accept the suggestion made by the noble Lord, Lord Sandford.

Lord STEWART of FULHAM

I have listened carefully to what the Minister has said. I noticed that all the examples which he gave of the use of this power were of exactly the same kind as in the consultation document issued to the local authority; that is to say, they apply where there have been transfers of property from one authority to another and the use of this power would be not much more than a bookkeeping arrangement, more convenient than leaving the transfer payments to be made. We are still left with the fact that the Secretary of State is given a very wide power which can be used in circumstances which, as the noble Lord, Lord Bellwin, himself said, cannot be foreseen. One cannot be entirely happy about that.

However, since the debate has been widened by the inclusion of the next amendment I noted what the noble Lord, Lord Bellwin, and the noble Lord, Lord Sandford, said on this. I hope the Minister will consider carefully what his noble friend has said and consider whether, in this context, and possibly in a similar context in Clause 94, he might not write the duty of consultation in some form into the Bill. I hope he will consider that suggestion before we come to the next stage of the Bill; but, with that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord STEWART of FULHAM moved Amendment No. 172:

Page 65, line 16, after ("may") insert ("after consultation with the authority concerned").

The noble Lord said: I move this amendment formally and invite the noble Lord to say whether he will be able to act on the suggestion that has come from both sides of the Committee. I beg to move.

Lord BELLWIN

Speaking for myself, I rarely believe that it is right to write into legislation a requirement for consultation. We have had a number of debates in a number of different spheres on this, and I am not in favour of it because in practice it can mean what people want to make it mean and it leads to all sorts of confusions and irritations. Consultation is something that people want to do, and that they should agree to do, but they should not be bound to do it, because once they are so bound they then begin limitations to it.

Having said that, I cannot give an undertaking. I will do what I have said so many times on this Bill; I will carefully discuss with colleagues the point made both by the noble Lord, Lord Stewart, and by my noble friend Lord Sandford, and if it is thought that we can usefully add something in the way that is required, then of course we will do so. It may even be that we shall want to talk about it—dare I say to consult about it?—but I am afraid I cannot give an undertaking that it will be written in.

On Question, amendment negatived.

Clause 93 agreed to.

Clause 94 [The housing costs differential]:

9 p.m.

Lord PITT of HAMPSTEAD moved Amendment No. 172A, which was printed as follows:

Page 65, line 26, leave out from ("is") to end of line 30 and insert (" the aggregate of—

1. (i) the amount by which its reckonable expenditure for that year exceeds its reckonable expenditure for the preceding year (and accordingly is nil or as the case may be, a negative amount if its reckonable expenditure for the year of account is the same or less); and
2. (ii) a sum equivalent to payments of capital and interest actually received on disposal of property under Part I of this Act, and the sums which would have been due had purchasers exercising the right to buy not been entitled to any discount.").

The noble Lord said: I am in the embarrassing position of having to ask your Lordships to accept an amendment to my amendment. The fact is that certain words were left out. It may well have been my mistake and I am not blaming anyone for it. Paragraph (ii) says: a sum equivalent to payments of capital and interest".

Before "payments" ought to have been added "the difference between", so that it reads: a sum equivalent to the difference between payments of capital and interest actually received on disposal of property under Part I of this Act, and the sums which would have been due had purchasers exercising the right to buy not been entitled to any discount".

Your Lordships will recognise that that is obviously what I wanted to say because you will remember what I said on Second Reading. The purpose of this amendment is specifically to place an onus on central Government to pay the cost of the discount which they are compelling local authorities to give to their tenants. I think it is only right that that should be so, because, as Lord Hatch of Lusby said on Second Reading, the counterpart of the right to buy is compulsion to sell.

The Government are no longer allowing the local authorities merely to rely on their power to sell; they have got that power now. What the Government are doing is compelling them to sell and also compelling them to make a certain discount. I know that local authorities sell now and local authorities do in fact give discounts. But that is done at their discretion. What this Bill now does is to compel them not only to sell but to give a certain discount, whether they think that that is appropriate or not. I think in the circumstances the right thing to do is for the Government to follow the logic of their decision and agree to pay to local authorities the cost of that discount.

It seemed to me that the simplest way for them to pay the cost of this discount is to regard the discount as reckonable expenditure for purposes of subsidy. It seemed to me that would be quite straightforward, and it is in that sense that this particular amendment has been moved. I hope the Government will accept this. In effect I am inviting the Government to accept the logic of their own proposals.

When we were having an earlier debate there was a suggestion that we were dragging our feet because, when all is said and done, there will be plenty of houses built and therefore the selling of houses cannot be of such importance. Frankly, I agree that if we are building enough houses, then selling some is not a big issue. But what we have at the moment is a situation in which last year we had fewer starts than for the last 30 years, and since the housing finance programme has in fact been reduced the chances are that the year 1980–81 will be even worse than the year 1979–80. Therefore, what we are debating now is a situation in which, in spite of the scarcity of housing, we are being asked as a Parliament to compel local authorities to sell those that they already have. Be that as it may, we have already dealt with that principle. We passed Part I.

The question is now the financial consequences of the decision we made when we passed Part I. One of the financial consequences that flow is that there will in fact be a certain amount of shortage of money because of the fact that local authorities give as much as 50 per cent. discount. Fifty per cent. is a very high discount. It means that when you sell a property with a market value of £30,000 you reduce that by £15,000. If you do that 1,000 times it is £15 million. Therefore it is a large sum of money. What this amendment is saying—I keep repeating myself because I want the point to be clearly understood by all your Lordships—is that that £15 million, assuming 1,000 houses were sold in that fashion, should be borne not by the ratepayer but by the taxpayer, because it is the taxpayer, represented by Parliament, who is saying to local authorities, "Not only must you sell this asset but you must sell it at half price". I await with interest what the noble Lord the Minister will have to say. It is my view that equity demands that central Government pay that discount. I beg to move.

Lord BELLWIN

I was somewhat puzzled when Amendment No. 172A was first tabled, but now with the adjustment that has been made I will say that what this means is the Exchequer counting for subsidy the amount of discount allowed to the purchaser. There is, in my opinion, no justification for this, unless the discount creates a loss, when, as I have said on Amendments Nos. 169 and 170, the loss will count for subsidy.

I do not know how far I should go into detail on this question because to do so would mean covering some of the old ground. What it all boils down to is the belief, or otherwise, that one has in what will be the long-term effect of council house sales on local authorities—whether it will be to their advantage or disadvantage. One reason advanced in support of the amendment is that it would afford compensation to authorities. The order of transfer from the Exchequer to authorities promises, indeed, to he massive, but that is beside the point.

In our debates on the right to buy, I tried my best to explain why we do not subscribe to the view that local authorities stand to suffer; indeed, on the contrary, in which case the question of compensation, whether via the subsidy system or any other means, just does not arise. I am glad that the noble Lord, Lord Pitt of Hampstead, felt that there was not much advantage in getting into the arguments that we have gone over so many times previously. I am anxious to help him, but where a sale, with or without discount, is less than the cost of provision under the right to buy, subsidy reduction will be on the basis of the sale price—that is, the Government will continue to pay subsidy on the difference and that will effectively underwrite any loss.

Where the sale is above historic cost, there is a benefit which the Government propose to share—as was said previously—with the authority, given that the Exchequer has contributed to the cost. No loss arises and there is, therefore, no cause for any underwriting by the Government. I think that it is clear enough. It is a question of the view one takes of what in practice will happen, and that is where there is a difference between us on the matter. I am sure that noble Lords opposite hope that I am right and that their concern is not necessary. Beyond that, I fear that I cannot help. That is why we cannot accept the amendment. Perhaps, in view of what I have said, the noble Lord will feel able to withdraw his amendment.

Lord PITT of HAMPSTEAD

The noble Lord is certainly not able to withdraw the amendment and certainly will not do so. On Second Reading I indicated that I thought that the least the Government could do was to agree to pay 50 per cent. On this occasion I am demanding that they pay the whole lot, because my own view is that that is the equitable arrangement. It is all very well to say, "But if there is a loss, then it would be met by subsidy". I am talking about the Government deliberately depriving local authorities of what might be a profit. If I have an equity, a house, and it is worth £50,000, then it is worth £50,000 to me. Therefore, if the local authority has such a house, it is worth £50,000 to them. If the Government say to them, as they are saying, "You must sell that house for £25,000" then they are taking away, £25,000 from the authority. All that I am saying in the amendment is that if we compel the local authorities to sell their property below its value then we must compensate them for it.

Lord BELLWIN

It sounds all very right and proper until we start to look at from where the money came to build the house in the first place. We cannot get away from the fact that the subsidy came from the Exchequer. It is not good enough simply to say that it is the authority's house. My hat!, if it is still paying off—as it almost certainly will be because funding is over a 60-year period—then to whom is it paying off? It is paying off to where the subsidy came from in the first place. No, I do not accept the noble Lord's basic argument and I am sorry that I cannot help him.

9.12 p.m.

The DEPUTY CHAIRMAN of COMMITTEES (Viscount Hood)

The Question is, That Amendment No. 127A be agreed to. As many as are of that opinion say "Content". To the contrary "Not-Content". I think the "Contents" have it.

Several noble Lords

Not-Content.

The DEPUTY CHAIRMAN of COMMITTEES

Clear the Bar.

Tellers for the "Contents" have not been appointed pursuant to Standing Order No. 50. A Division therefore cannot take place, and I declare that the Not-Contents have it.

If Amendment No. 173 is adopted I shall not be able to call Amendments Nos. 174 or 175.

Lord STEWART of FULHAM moved amendment No. 173:

Page 65, line 15, leave out subsection (2) and insert— (" (2) A local authority's reckonable expenditure for any year shall include any expenditure charged to the authority's Housing Revenue Account in respect of: —

1. (i) new housebuilding including the acquisition or appropriation of land for the purpose of Part V of the Housing Act 1957, and the acquisition of newly built dwellings and the clearance of land acquired under Part V of that Act;
638
2. (ii) the renovation of the local authority's own dwellings, including capitalised repairs, and environmental expenditure;
3. (iii) the acquisition of existing dwellings for continued housing use, including any capitalised initial works carried out within 12 months of acquisition;
4. (iv) the acquisition of vehicles and of moveable and immoveable plant, machinery and apparatus;
5. (v) the renewal or replacement of vehicles and the installation, renewal or replacement of moveable and immoveable plant, machinery and apparatus;
6. (vi) the management, maintenance and repair of buildings within the Housing Revenue Account;
7. (vii) the discharge of such other of its functions as the Secretary of State may determine.").

The noble Lord said: I am hoping that one of my noble friends will bear the burden of explaining this amendment. I think she is here.

Baroness FISHER of REDNAL

I apologise to the Committee. I hope that noble Lords will be as concerned about the subsidies part of this Bill as they have been about those parts of the Bill which affect the private tenant living in private accommodation. The costs of subsidies, and the way they are outlined in the Bill, are of grave importance to the majority of people who live in rented accommodation in this country. Therefore, there are approximately five million people affected by how subsidies are going to be paid in the future by the Government. I say that as an opening to moving the amendment because so many people do not realise the subsidy make-up and how it reflects upon the rent that the council house tenant has to pay.

I accept that the Bill is introducing a new subsidy system for council housing, and I accept that it should be a much more flexible system. As the Minister said at Second Reading on 9th June, at column 25: Instead of the somewhat indiscriminate present arrangements, subsidy will in future be directed to the areas which require it".

I presume from that that he means those areas with the greatest housing need and those houses in housing stress areas. In most cases these will be the large urban areas, the large towns, and the large cities. May I say to the noble Lord, Lord Sandford, who has spoken so eloquently as the chairman of the ADC, that I think in the main the stress areas will be those which belong to the AMA, and I speak as a vice-president of that organisation.

The subsidy proposals are outlined. I say "outlined" because here again the Minister in the other place said that he was hoping to bring forward very quickly the proposals that he was going to make, but the actual figures for subsidies, so far as I am aware, are not available at the present moment. It is important for us to recognise what provisions are going to be made. Local authorities are in grave difficulty at the present moment because they are not able to forecast the next year because no figures are available. What has to be decided at an early stage is what resources the local authority has to find from rents and from rates.

I am not one of those people who tend to talk in—

A noble Lord

Ho, ho!

Baroness FISHER of REDNAL

Was that very funny? I think I deserve an apology from the noble Lord.

Baroness BIRK

I do not know precisely what happened, but I think my noble friend deserves an apology.

Several noble Lords

Who did it?

Baroness LLEWELYN-DAVIES of HASTOE

An apology has been asked for. It seems that none of us was quite clear what happened to cause my noble friend Lady Fisher to seek an apology, but if a noble Baroness asks for an apology for some sort of uncouth interruption in your Lordships' Committee, she is entitled to one.

Several noble Lords

Hear, hear!

Baroness LLEWELYN-DAVIES of HASTOE

I suggest that in the interests of the Committee, some sort of gesture from the Front Bench opposite is required. Nobody wants to make a fuss over this. There was what I repeat was an uncouth interruption. Would the noble Lord, Lord Mowbray and Stourton, out of his usual courtesy, make a move?

Lord MOWBRAY and STOURTON

I am extremely fond of the Opposition Chief Whip. I merely gave a horse-laugh at what I thought was a rather funny remark which the noble Baroness, Lady Fisher, made when she said she did not like to speak much.

Baroness LLEWELYN-DAVIES of HASTOE

I do not think that quite constitutes an apology. We just need a courteous acknowledgment that perhaps it was unfortunate to laugh so loudly.

Several noble Lords

Apologise!

Baroness LLEWELYN-DAVIES of HASTOE

I am sorry to go on about this, my Lords, but we really cannot go on until the matter is resolved. The noble Lord is the only Whip present on the Government Benches. He is the Deputy Chief Whip—

Lord MOWBRAY and STOURTON

I am not.

Baroness LLEWELYN-DAVIES of HASTOE

Whatever the noble Lord is, he is the only senior Whip present and it is up to him to keep the proceedings of the Committee going. My noble friend Lady Fisher is not a compulsive speaker and it was an uncouth thing to laugh so loudly when she said she did not like speaking much. We all know there are many compulsive speakers in your Lordships' House, but she is not one of them. It is extremely ungentlemanly, if I may say so, of the noble Lord, after all this pleading, not to get to his feet and say something courteous.

Lord BELLWIN

As one of the very newest Members of your Lordships' House, what has impressed me so much since I have been here is the fact that not only did everybody tell me that the people here were kind and considerate—which I have found to be absolutely true—but that the standard of debate was of the highest order—which I have also found to be the case. I was also told that the courtesies were, in the main, extremely generous all round, and that I have also found to be the case. The other arena from which one may come, and from which I come, is much more vigorous, in the sense that the interjection, the heckle aloud, and the interruption are part of' the day-to-day routine. One has to go only a little way to the other place to hear an extreme example of that, if I may say so without being discourteous.

The noble Baroness, Lady Fisher, was undoubtedly interrupted in the middle of what she was saying, I am not sure by what and I am not certain that even my noble friend Lord Mowbray and Stourton is sure what it was. But whatever it was or was not, I am sure it was not meant to be offensive in any way. Maybe there was a moment of astonishment at a remark made, perhaps expressed in an over-exuberant form—whatever it may have been—but it is not for me to speak for my noble friend, who is quite capable of doing so far better than I, with all his years of experience in your Lordships' House. It seems to me that as we always have such a good understanding and mutual courtesy, one wants that always to continue. I am sure that nothing was meant of a nature which would disturb that very high standard, and I hope the noble Baroness, Lady Fisher, may feel able to continue her speech.

Lord MOWBRAY and STOURTON

Before the noble Baroness, Lady Fisher, continues, let me say to her straight away that she was rather like one of those people who ask for the answer "Yes"— and she got a sort of horse-laugh from me. In any event, I apologise if I upset her.

Several noble Lords

Hear, hear!

Lord MOWBRAY and STOURTON

I meant it in a sort of jocular sense. The night is getting on and we are having quite long speeches on amendments. While I would not want to offend the noble Baroness, when she said, "I would not like anyone to think I am speaking at length," I just gave a horse-laugh, and I apologise if that upset her.

Baroness FISHER of REDNAL

I accept the apologies of both noble Lords. May I say that I, too, have been in politics for quite a long time and I know of the hurly-burly of being on a local authority, as well as the hurly-burly of another place. One accepts that there is a different code in this place, and I objected to that code being broken. I was not saying that I was not going to speak at great length. The noble Lord has now encouraged me to speak at greater length.

I was trying to point out that the Bill must be read very thoroughly if we are to understand it, and the clauses relating to the subsidy must he read particularly thoroughly. I have read them as thoroughly as I can in order to try to understand them. For quite a long time during my public life I represented the inner city of Birmingham, and I know full well that the people who live in that area depend to a certain extent on council housing. The subsidies are important to these people because they reflect on their rates.

I am prepared to be corrected by the noble Lord if I am wrong, but I reckon that all the existing subsidy entitlement will be added together to form the base amount. There will be added to, or subtracted from, this base amount changes in reckonable expenditure which the authority is assumed to have incurred during the year.

Each year the Secretary of State, after consultation, will announce changes in the authority's deemed local contribution. One expects that the Secretary of State will in fact normally ask for an increase in the local contribution. At least one presumes this; at the moment there are no figures to show which way he will decide. As I say, the change will in fact normally be an increase, and then the local authority will have to decide to what extent this increase is met from rent or rates.

Clearly the amount of subsidy which a local authority will receive under the new provisions, based on what is chargeable as reckonable expenditure, will be of paramount importance. Local authorities will have to press for a very realistic treatment of their items of expenditure on an individual basis. Obviously their commitments will vary from area to area. The commitments of those authorities that are represented by the Association of Municipal Authorities will vary considerably from the authorities represented by the ADC.

In my view, the new system for the first time places the level of services provided by the local authority under central Government scrutiny. It is imperative that the reckonable expenditure should be realistic, and those local authorities that try to improve their services should not be penalised. Many local authorities are involved, and one must take into consideration what the Bill says about the tenants' charter. In considering what is reckonable expenditure there must be taken into account such items as rooms where tenants can meet, the provision of both more decentralised depots, where tenants can see about repairs, and offices where they can pay their rent more conveniently or get in touch with an official because they want a transfer. In my view all such things, if they are being undertaken by a local authority, should be considered as reckonable expenditure.

I would ask the Minister to remember, when he is thinking about this, that the realistic figure, being fixed locally, takes into consideration local circumstances. When I say that, I do not mean that the figure that Whitehall comes out with is the figure that should be paid. I have had experience, being a member of a local authority—and no mean authority, at that —and a member of the housing committee and its chairman for quite a long time, of constantly coming down to meet Ministers and their civil servants regarding the subsidy which ought to be payable. I remember on so many occasions that the Birmingham local authority had to come down and convince Ministers—the civil servants were not susceptible to our arguments—that Birmingham should have a subsidy because it built high-rise flats. It was only thought necessary for London to have a subsidy because they built high-rise flats.

We won the day. Then, only recently —when I say "recently", I mean during my last years on the local authority; that was in 1972—I was in a deputation that came down to meet the Minister regarding the increased price of paint and glass and all the necessary things that have to be carried by a repairs depot. The figures which were being quoted by Whitehall were completely out so far as concerns purchases of the building materials necessary to keep the houses in repair. This is what I mean when I say that it must be a realistic figure.

A decision on what is accepted as reckon-able is vital, because if expenditure is disallowed that automatically means that the burden will fall upon the local authority to decide either to cut out those items or to pay for them out of increased rents or a contribution from the rates. That is why we have itemised the various things in the amendment before the Committee. Under the new subsidy system, the Government would obviously have to consider the amount which is fixed as reckonable expenditure regarding the repairs of properties. At the present moment, while approximately 95 per cent. of new building counts as reckonable expenditure for subsidy purposes, only 30 to 50 per cent. is counted as reckonable expenditure on modernisation and improvement work. When we are seeing the big switch from new house building to making good and modernising older-type council properties, I would ask that the Minister should make quite sure that this is an area which is given added support. I beg to move the amendment.

Lord BELLWIN

Perhaps I may first deal with one or two of the points which the noble Baroness, Lady Fisher, raised. She made much of the necessity for taking local circumstances into account when reckonable expenditure is considered. I do not know what basis she would have a Government take, when she talks of fixing subsidies. She talks about realistic figures. What may be realistic to the authority may not be realistic to others. This would be a question of a judgement at the end of the day; and it would be hardly surprising, would it, if in fact an authority felt that its figures were not too low whereas a Secretary of State may consider quite differently.

Then, what are "realistic" figures? The costs of one authority are so different from the costs of another. The costs of the provision of services in one authority are different from those in another; and one of the great pluses we are going to get, hopefully, out of the Local Government Bill which is coming along is the fact that there will be more information which will be disseminated around, so that everyone will in fact know the relativity of one authority's cost to somebody else's cost of providing the same services. Therefore, it might then be easier to adjudicate on what are realistic figures. I hope that that will make a contribution to assuaging some of the fears which the noble Baroness may have.

As to the kind of reckoning which will be taken into account in coining to that conclusion, the noble Baroness said that the local authority which tried to improve services should not be penalised. It should not—so long as it takes into account, first, the wishes of the Government whose job it is to try to bring down inflation and to see that public spending is not beyond the levels that the country can afford. If it decides that its own wish to improve services is something which should take precedence over that, then that will not receive a very welcome response by Government. How could it?

There are too many authorities who are cocking a snook at or are happy to thwart the Government's policies in this direction. I am sure that the noble Baroness would not expect a welcome response from the Secretary of State to authorities which take that line, even though they may be saying they are there to improve their services. We all want to see these services improved. So long as we can afford it, it will then be done. So I will not take too much cognisance of that part of what the noble Baroness said. She presumed that the Secretary of State would ask for an increase from a local authority. I am not sure on what she bases that presumption. We should have to see.

The Government's fundamental opposition to this amendment is that it departs from the well-established principle in Clause 94; and in our view the Secretary of State should have a wide measure of discretion to act flexibly in determining reckonable expenditure. In this way that expenditure can reflect and continue to reflect the prevailing policy on what housing expenditure is or is not to be supported out of taxpayers' money. In taking this approach we are adopting, as it happens, a practice followed by the last Labour Government; and I am sure that should comfort the noble Baroness. Under Section 15 and Schedule 1 of the Housing Rents and Subsidies Act 1975 they took and operated powers of determination. Under them, the Labour Secretary of State of the day established his general subsidy rules setting out which capital costs were to be admissible and what expenditure related to these costs was to be reckonable for subsidy. He was also able to make special determinations so as to deal with subsidy in particular exceptional cases. Similarly there is to be found, both in the Labour Bill of March 1979 and in Clause 94 now, the proposal that the Secretary of State should have a wide measure of discretion.

Both out of principle and of well established, proven practice we would not want to write a definition into the statute as this amendment inflexibly proposes. Our basic objection apart, the amendment as drafted would force us to support all housing expenditure falling on the housing revenue account, despite sound reasons for wishing to do no such thing. Let me give four examples where the amendment would entail an Exchequer subsidy being paid out on housing revenue account expenditure where we would choose otherwise. The first is building expressly for sale under Part V of the Housing Act 1957. We have no proposal that expenditure on this activity should count towards subsidy as it would under subsection (1). Secondly, because we wish to restrain indiscriminate purchases which can easily result in a waste of public money, we shall only support municipalisation in exceptional cases. Under subsection (3), however, we should be committed to do so willy-nilly. Clearly, we could not have that. Thirdly, an authority may choose to proceed with a scheme which is, in our view, unduly extravagant. All else apart, as a matter of responsibility we need to be able to refuse support for such a case. Fourthly, under subsection (6) all expenditure on management and maintenance would count as reckonable.

We have already invited comment in our consultations on whether amounts related to the cost of managing and maintaining housing revenue account dwellings should become reckonable under the new system; but this would not mean counting in all such actual expenditure. Since there is no limit on its level, the amendment, in effect, invites the Exchequer to write out a blank cheque; and, of course, that we could not accept. On the other hand, the amendment fails to take account of some expenditure which does not fall on the housing revenue account, which is not at present reckonable and which we propose to count as reckonable under the new system. I have in mind in particular the case where an authority finance a capital scheme from capital receipts, and at present do so unsupported, even though the loan charges for repayment of debt would have been reckonable if they had chosen to borrow. In future, we propose to treat such a case as if the authority had borrowed, and thus to count notional loan charges as reckonable. By definition notional loan charges do not fall on the housing revenue account and are not therefore covered by this amendment.

I recognise the concern expressed by the noble Baroness—and so well expressed. I appreciate the intention behind her amendment. On the other hand, I would ask her in turn to accept from me that we are talking yet again about basic aspects of this whole Bill, which clearly we could not move away from because to do so in the way that she suggests would undermine much of what we are setting out to achieve. Whether or not that, with respect, is an aim that she and indeed noble Lords opposite support, I have to doubt. The fact is that this is what the Government are committed to do. It is what we feel is the right thing to do and it is for this reason that I fear I cannot accept this amendment.

Baroness FISHER of REDNAL

I did not for one moment think that the Minister would accept the amendment. I do not know why he thinks I presumed wrongly about the local authority contribution automatically being increased year

by year by the Secretary of State. I know full well that if he accepted the amendment it would undermine the basic tenets of the Bill. I understand that. That is where we differ, and differ fundamentally. If one looks at the financial provisions of the Bill, paragraph 28 clearly spells out the difference between the two sides of this Committee. The last sentence of paragraph 28 on the financial implications says: The subsidy system proposed will assist the Government to fulfil their intention of reducing over a period of years the overall level of public expenditure on housing subsidies by central government and local authorities".

My presumption could not have been wrong. It is clearly spelled out in the financial arrangements. It means to say that obviously the Secretary of State will be saying to local authorities quite clearly: "increase your local contribution and we will be decreasing our subsidy". That is clear and implicit and that is why I readily understand why the Minister cannot accept the amendment.

9.44 p.m.

On Question, Whether the said amendment (No. 173) shall be agreed to?

Their Lordships divided: Contents, 37; Not-Contents, 63.

CONTENTS
Airedale, L.	Gifford, L.	Ponsonby of Shulbrede, L. [Teller.]
Ardwick, L.	Goronwy-Roberts, L.
Birk, B.	Greenwood of Rossendale, L.	Ritchie-Calder, L.
Boston of Faversham, L.	Hatch of Lusby, L.	Ross of Marnock, L.
Brockway, L.	Houghton of Sowerby, L.	Sainsbury, L.
Brooks of Tremorfa, L.	Irving of Dartford, L.	Sefton of Garston, L.
Collison, L.	Janner, L.	Stewart of Alvechurch, B.
David, B.	Jeger, B.	Stewart of Fulham, L.
Davies of Leek, L.	Llewelyn-Davies of Hastoe, B. [Teller.]	Stone, L.
Denington, B.		Strabolgi, L.
Evans of Claughton, L.	Morris of Kenwood, L.	Strauss, L.
Fisher of Rednal, B.	Peart, L.	Underhill, L.
Gaitskell, B.	Pitt of Hampstead, L.	Wigoder, L.
NOT-CONTENTS
Abinger, L.	Craigmyle, L.	Ferrers, E.
Airey of Abingdon, B.	Croft, L.	Fortescue, E.
Auckland, L.	Cullen of Ashbourne, L.	Gainford, L.
Bellwin, L.	Digby, L.	Gisborough, L.
Belstead, L.	Drumalbyn, L.	Godber of Willington, L.
Bessborough, E.	Ellenborough, L.	Gowrie, E.
Brougham and Vaux, L.	Elliot of Harwood, B.	Gridley, L.
Cathcart, E.	Elton, L.	Henley, L.
Cockfield, L.	Faithfull, B.	Holderness, L.
Cork and Orrery, E.	Falmouth, V.	Hood, V.
Hornsby-Smith, B.	Mountgarret, V.	Sandys, L. [Teller.]
Hylton, L.	Mowbray and Stourton, L.	Selkirk, E.
Killearn, L.	Moyne, L.	Sempill, Ly.
Lauderdale, E.	Murton of Lindisfarne, L.	Spens, L.
Long, V. [Teller.]	O'Neill of the Maine, L.	Trefgarne, L.
Macleod of Borve, B.	Pender, L.	Trumpington, B.
Margadale, L.	Rawlinson of Ewell, L.	Vaux of Harrowden, L.
Marley, L.	Redesdale, L.	Vickers, B.
Monk Bretton, L.	Rochdale, V.	Vivian, L.
Morris, L.	Romney, E.	Ward of Witley, V.
Mottistone, L.	Sandford, L.	Westbury, L.

On Question, amendment agreed to.

[Amendments Nos. 174 and 175 not moved.]

9.51 p.m.

Lord PITT of HAMPSTEAD moved Amendment No. 176:

Page 66, line 5, after ("with") insert ("and endeavour to obtain the agreement of").

The noble Lord said: This is a serious attempt on our part to try to secure agreement between central Government and local authorities on the question of reckonable expenditure. The Government have already conceded that that is the objective by including in the Bill the requirement to consult. But, of course, consultation can be a mere formality, and it is in order to try to find a form of wording that would make sure that it is more than just a formality that I have put down this amendment.

I do not necessarily insist on the Government's accepting the amendment in the way I have worded it. There may be a better way of ensuring the objective that I think we both have in mind. Therefore, if the Minister comes up with an acceptable solution I will take it. My own view is that we need to do more than merely say that the Minister must consult. This is my first try when I say, and endeavour to obtain the agreement of",

and there are probably better ways of doing it. I hope the Minister realises the motive behind the amendment and accepts that. I beg to move.

Lord BELLWIN

I did, indeed, understand the motives of the noble Lord, Lord Pitt, and I respect what he seeks to achieve. The problem is the one that I mentioned before, that it is a difference of view about consultation. A general determination of reckonable expenditure will encompass both large issues of principle over what expenditure is to rank for subsidy and points of intricate detail. We intend to issue very shortly further consultation proposals on a number of aspects of reckonable expenditure. I have every reason to believe that this consultation will be full and mutually beneficial.

On reckonable income, our consultation proposals will be framed in the light of the criteria set out at Clause 95(3). It is not yet possible to reach a clear view about expected movements in incomes, costs and prices for the first year of the new sub- sidy system, but our intention is that we should put forward consultation proposals in the autumn. Consultation here will mean what it says. The Secretary of State will naturally want to persuade the associations to endorse his proposals, and he for his part will heed their comments and take them into account.

I hope that, in these very few words, I have indicated that these amendments would not add to the sense of the formal requirements to consult already contained in Clauses 94 and 95. I also hope that again in just a few words I have shown the Government recognise and accept the importance of consultation on these two topics and will act accordingly. I do not know whether the noble Lord wishes me to elaborate further—I suspect that he does not—and in view of what I have said he may feel able on this occasion to withdraw his amendment.

Lord PITT of HAMPSTEAD

Yes, I recognised the difficulty of this amendment when I put it down. I merely hoped that the Government would recognise the spirit of the amendment and accept its spirit. In the circumstances, I will withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 94 agreed to.

Clause 95 [The local contribution differential]:

9.56 p.m.

Lord PITT of HAMPSTEAD moved Amendment No. 177:

Page 66, line 29, leave out subsection (4) and insert— ("(4) A determination under this section may be made for all authorities and shall be made known in the year preceding the year of account to the local authorities for which it is made.")

The noble Lord said: This is another attempt to see whether in some way we can circumscribe this wide power of the Secretary of State. We do not like the power of the Secretary of State to determine the local contribution for individual authorities. I throw it out to the Minister that it should be possible to agree guidelines with the local authority associations and to work along those guidelines. It is that which I genuinely hope the Government will see as the right approach. It is in that sense that I move the amendment and I hope that the Government will accept it.

Lord BELLWIN

A few moments ago we had quite an extensive debate with the noble Baroness, Lady Fisher of Rednal, on this matter and I think that we covered at least the philosophies behind the amendment which the noble Lord, Lord Pitt of Hampstead, has moved. I do not know whether there is a great deal more that I can add without going into the kind of detail which I suspect he would not wish me to do.

May I refer briefly to the special determination which may be made for individual authorities, since this might be helpful. This marks a difference from the Labour Bill and I recognise that at first it caused some disquiet in local authorities. I had hoped that the assurance given in another place by my honourable friend the Parliamentary Under-Secretary of State might have stilled those misgivings—and I still hope so, at least to a certain extent. He pointed out that we envisaged using this power solely when it would prove advantageous to the authority concerned. We are leaving scope to help individual authorities. I reiterate that undertaking.

Without going further into the kind of detail which would be necessary for the purpose of this amendment, may I say that we have given quite an airing to the subject and that clearly we see it differently. In those circumstances, I think the noble Lord will understand why I am unable to accept his amendment.

Lord PITT of HAMPSTEAD

Again I am not going to press the amendment. On this occasion I do not agree with the noble Lord. We do not seem to have narrowed the gap, but there is no point in pressing the amendment.

Baroness FISHER of REDNAL

I had expected to see the noble Lord, Lord Sandford, stand up.

Lord SANDFORD

I will in a minute.

Baroness FISHER of REDNAL

Then may I ask the noble Lord whether he is going to speak?

Lord SANDFORD

No, not on this amendment.

Baroness FISHER of REDNAL

I am surprised that he is not going to speak because I happen to be a Vice-President of the ADC as well as of the AMA. They sent me some literature which touched on this point of the local contribution differential. If the noble Lord, Lord Sandford, is not going to put the point of view of the ADC, I feel that somebody ought to put it, and I will take on that very humble role.

This is what the Association has asked us as the vice-presidents to take into consideration in the Bill: The Association is also concerned about the very wide and uncontrolled powers given to the Secretary of State under Clause 6 of the Bill in relation to local authority subsidies. It is felt, in particular, that any general determination of the local contribution differentials which will effectively settle the rent levels rate fund contributions of housing authorities should be made subject to the approval of Parliament under the Affirmative Resolution procedure, thus allowing debate on the decisions taken".

Perhaps the Minister can tell us whether, in the future, we shall he able to get these contributions made under Affirmative Resolution procedure.

Lord BELLWIN

I cannot so confirm. I doubt very much that it is the intention that it should be done in that way. Probably I do not surprise the noble Baroness too much by saying that, but certainly I have had no intimation from any source that that is the procedural way in which we should propose to operate. Therefore I really cannot hold out too much hope to the noble Baroness on this point. But I would repeat what I have said so many times. I know it is something that does concern the ADC. I am not sure of the extent to which it has been discussed in the past—I have not been privy to those discussions—but it may be that not necessarily that procedure but some other procedural form might be satisfactory, and certainly I will look into that.

From what was said—was it only yesterday?; it seems like years ago—when we were talking about the same thing under the constitutional point raised by the noble Lord, Lord Foot, and when we had the benefit of the observations made by my noble friend Lord Boyd-Carpenter when the whole area of this question came up (I confess I learned something, as I do every day) it may be that that is one reason why we cannot move in that way. Nevertheless, I will take the point away just in case there may be something that could be helpful.

Lord SANDFORD

I should like my noble friend to note, following the remarks of the noble Baroness, Lady Fisher, the enormous self-restraint I am exercising.

Amendment, by leave, withdrawn.

[Amendment No. 178 not moved.]

Clause 95 agreed to.

Clauses 96 to 99 agreed to.

10.2 p.m.

Clause 100 [Interpretation of Part VI]:

Lord MOWBRAY and STOURTON moved Amendment No. 178A:

Page 68, line 45, leave out ("or").

The noble Lord said: If it is convenient to the Committee, I will speak to Amendment No. 178B as well. These two amendments have one simple purpose—to permit us to pay the new housing subsidy to the Isles of Scilly. The Council of the Isles is not a district council and therefore does not fall within the present definition of a local authority in Clause 100. The amendments extend that definition to include the Council of the Isles. I beg to move.

Lord MOWBRAY and STOURTON moved Amendment No. 178B:

Page 68, line 46, at end insert ("or the Council of the Isles of Scilly.")

On Question, Whether Clause 100, as amended, shall stand part of the Bill?

Lord SANDFORD

I am afraid I have come to the end of my self-restraint for a moment. Clause 100 has a rubric which reads: " Interpretation of Part VI". That is the theme I should like to pursue for a minute or two. This Part introduces an entirely new system of housing subsidies. Many of us taking part in this debate have at various times been steeped in this complicated topic. The noble Lord, Lord Greenwood, for instance, has been Minister of Housing and is now a president of the AMA. The noble Baroness, Lady Fisher, speaks with immense experience from the city of Birmingham. The noble Baroness, Lady Denington, speaks from experience in almost every single field of housing, going back to various periods. The noble Lord, Lord Pitt, from the Greater London Council; the noble Baroness, Lady Birk, a previous Minister concerned with these things; the noble Lord, Lord Evans of Claughton, speaks from experience in Merseyside, et cetera. But all that experience comes from different periods and from different places, and if we are only furnished with a single paragraph —paragraph 14 in the Explanatory Memorandum—I would submit that we approach this subject with all this diverse understanding of housing subsidies and no adequate grasp of what the Government are actually intending.

This is a House which tackles Bills like this very thoroughly. Every item of the Committee stage is conducted across the Floor of the House; there is no selection of amendments, so every amendment is called and there is no guillotine. So the whole procedure can be very protracted and in fact it is very protracted. Therefore I submit it is highly desirable that we should be furnished with the Notes on Clauses which give us the material on which we can bring our experience to bear with a common understanding of what the Government are trying to achieve. I am now saying in public what I have been saying privately to my noble friend and my right honourable friends and to the noble Lord the Leader of the House for weeks and weeks past. If the Government are making slow progress they really only have themselves to blame, and I hope that the lesson will be taken before we start on the Local Government Planning Bill, because otherwise the progress will be even slower. That is the first point I wanted to make.

My second point is that we are dealing with this particular Part of the Bill against the background when the Government have announced their intention of abolishing the Parker-Morris standards and the housing cost yardsticks and when they have announced their intention of introducing project control. I should have thought it was desirable that we should know more about their intentions with regard to project control before the Bill is enacted, and I should be grateful if my noble friend could comment on that point.

My third point—and I will make this rather briefly—is that the new housing subsidies very properly introduce more flexible arrangements, but they are being introduced at a time when interest rates are high and fluctuating and the inflation rate is high and fluctuating. I hope that both will be coming down. But this introduces a legitimate reason for giving the Secretary of State fairly extensive powers, and he is certainly taking them. I should have thought it was desirable for some parliamentary supervision over the exercise of the Secretary of State's very wide powers under this Part of the Bill which enable him to influence and control the jurisdiction and expenditure of housing authorities. I ask my noble friend to consider that and to see whether some sort of provision can be included in Part VI whereby Parliament can be given some degree of supervision—not over the exercise of his powers in minor matters but if they have to be used to their extreme limits.

Lord BELLWIN

I was sorry that among the "Honours List" of local authority experience my noble friend referred to he did not include my own bona fides, which I now put on the table, and I hope it was not in any way reflecting adversely upon Leeds. I am sure he did not mean that it should. I will not make any further observation on the observations which have already been made on Notes on Clauses. I have had my say on that and I had rather hoped that everyone else would have had theirs, but apparently not so, and doubtless to the end of the day I shall he reminded at regular intervals. This is just one of the crosses which I have to bear, I presume. Well, so be it.

My noble friend asked whether I would say a little more about project control. I would only say of it, first of all, that I hope he will understand that the one thing that we do intend about it is that we should be doing as we are, and that is having consultations with the local authority associations on the best way of dealing with this, or should I say the best way of not dealing with this. I am not sure that it is not the provisions in the Local Government Bill, which will be coming here, that would lead to greater debate upon project control and all that goes with it. I rather think that would be the better area in which to do it. Meantime I can only say that it is not only the wish, not only the intention, it is happening: discussions are going on about the best way of going about that.

We recognise that local authorities are particularly keen to know our proposals in this matter, or, more accurately, our proposals about the relaxation of these controls. We cannot commit ourselves to a precise date, but we do aim to issue them as soon as possible once we have finalised all the proposals, and we are putting every effort into trying to do that. The Bill is similar to the existing subsidy system in allowing the Secretary of State discretion over what expenditure is reckon-able for subsidy. It is certainly indeed a novel feature of this system that the Secretary of State is to determine an assumed amount of housing income for authorities. Like the Labour Bill last year, we have taken the view that the formal consultation requirement in Clauses 94 and 95 constitutes an adequate safeguard for authorities.

I do not know what more I can say to my noble friend on this whole matter. I think that, as I suspect is the case with all Bills—and here I cannot speak from experience but I would imagine from what T have learned since being in your Lordships' House—that much is yet to come forth as to the breakdown of the regulations, details of project control and other aspects. It is not really quite fair to be overcritical that one does not spell out chapter and verse of every detail. I have read enough to know that there is a whole world of precedents on this, and I shall probably he told by those who have so much more experience and knowledge than I have that it clearly could not be any other way.

I think one would have to stand on that to answer my noble friend. I hope he will feel that, while it may not tell him all he wants to know, at least we do have the intention of doing these things as best we can, with the object of getting to where we feel we ought to be, and when we get there we shall have a better scene than we have at present.

Clause 100, as amended, agreed to.

Clauses 101 and 102 agreed to.

Schedule 11 [Amendments of Housing Act 1974 Part VII (local authority grants)]:

10.13 p.m.

Lord MOWBRAY and STOURTON moved Amendment No. 178C:

Page 113, line 16, at end insert—

("Consideration of application for grant In section 57(3) (application not to be entertained unless certain conditions are complied with) for "entertain"substitute "approve".").

The noble Lord said: This is a simple amendment designed to allow local authorities to consider applications for grant from prospective purchasers of a property. At the moment the grant applicant must actually own the property before the local authority can even entertain his application. This can cause problems in cases where, for example, a building society needs to know in connection with a mortgage advance that grant aid for necessary improvement works will be available. This can be quite crucial in determining whether a sufficient advance can be made to finance the purchase. Many local authorities are quite willing to give an informal indication of the grant availability in such cases and this is usually sufficient for the building societies. But some, understandably, feel deterred from doing so by the very specific wording of the 1974 Act, and in these cases we have a classic chicken and egg, or perhaps in the modern idiom Catch 22, situation. The local authority cannot determine grant until the purchase is completed and the purchaser cannot get the mortgage to complete the purchase until the amount of grant is determined.

This amendment, therefore, is designed to remove any doubts which local authorities may have about their power to consider applications from prospective purchasers. Its effect is to enable the local authority to go as far as they like in considering such applications, short of formally approving them and thus committing themselves to pay. It should, therefore, provide an adequate means of resolving the Catch 22 problem to which I have referred without imposing any duty on local authorities which could lead them into a good deal of abortive work for frivolous or exploratory applications. I beg to move.

10.16 p.m.

Baroness FAITHFULL moved Amendment No. 179:

Page 114, leave out lines 44 to 46.

The noble Baroness said: I beg to move Amendment No. 179. This amendment is a straightforward amendment concerning improvement grants for the disabled. It recommends that the words, "without undue hardship" should be deleted from the Bill. Under the Chronically Sick and Disabled Persons Act, doctors, occupational therapists and social workers are under a duty to recommend to the local authority adaptations and alterations to a house occupied by a disabled person, thus enabling the disabled person to attain the maximum amount of independence and the maximum amount of mobility—and I include children who are disabled.

Improvement grants are given for such appropriate work as is necessary, and much of it is structural work. The amendment recommends that the assessment of payments of such alterations should be left to the discretion of the local authority and that it should not be necessary to assess the disabled under the undue hardship clause. This Will cause a great deal of form-filling, assessment and bureaucracy, and I suggest that it is quite unnecessary and that we can leave it to the discretion of the local authority. I beg to move.

Lord MOWBRAY and STOURTON

In the interests of brevity it might be convenient if I speak immediately after my noble friend. I am grateful to my noble friend for bringing this matter before your Lordships' Committee. Your Lordships' concern for the disabled is a matter of record and it was in this House that the amendment was made to the 1974 Housing Bill which enabled work for disabled people to be defined as "improvements" for the purpose of grant aid.

The background to the rateable value limit for improvement grants is the view that if we are to direct resources towards those in greatest need, then there must be some limitation on the availability of grants. The rateable value of a dwelling has, in general, a broad correlation with one's ability to pay for its repair and improvement without help from the taxpayer—though there are, of course, exceptions. We recognised, however, that in the case of disabled people, this broad correlation becomes pretty meaningless and paragraph 6 of Schedule 11 is designed to give the local authority the opportunity to pay grants in hardship cases notwithstanding that the rateable value of the dwelling exceeds the set limit. The amendment now proposed by my noble friend would abolish the hardship requirement. The effect would be that there would be no rateable value limit in any case where the improvements consist of works which are specifically needed to meet a requirement arising from disability of an occupant of the dwelling concerned. Local authorities would therefore be free, at discretion, to award grants in such cases without any requirement on the grant applicant to establish hardship. Given this general discretion, it seems to me that we do not need the hardship provision and I am therefore happy to accept the amendment.

10.19 p.m.

Baroness FISHER of REDNAL moved Amendment No. 180:

Page 114, line 49, at end insert— (".In section 64(3)(a) for "£2,000" substitute "£7,000" and for "£2,400" substitute "£8,000".").

The noble Baroness said: I shall be brief in moving this amendment and I hope that the noble Lord will perhaps be as kind to me as he was to the noble I Baroness, Lady Faithful], who spoke previously. This amendment is really trying to bring up to date the figures that are recognised as eligible expenses for grant purposes. The figures that are contained in the Housing Act were put in many years ago. I know that the Secretary of State has increased them since, and I understand at the present moment that the current eligible expenses limits are set in the order of £5,000 per dwelling and £5,800 for conversions.

What we ask in this amendment is to make these figures realistic, amend the Housing Act, and make sure that the figures are brought up to date, because in doing so we shall get many more potential improvers taking up the grant. I think that the noble Lord would agree that the improvement picture is really pretty bleak because of the high inflation, and that fewer and fewer people are taking advantage of improvement grants bearing in mind that they are not taking into consideration inflation in the grant level. The amendment is purely and simply to bring the figures up to a more realistic date; in other words, to amend something that happened five or six years ago. I beg to move.

10.22 p.m.

Lord MOWBRAY and STOURTON

If I hiccoughed before at the noble Baroness's rash remark when she invited a hiccough, I congratulate her now on her extreme brevity. I trust that the good rapport between us which existed previously is now re-established.

This amendment seeks to specify, on the face of the Bill, higher eligible expense limits for improvement grants. As the noble Baroness said, the limits specified in the Housing Act 1974 have since been increased by order; the present limits are £5,000 in normal cases and £5,800 for conversions of three storeys or more.

When it was decided to make the increases in eligible expense limits for the intermediate, repair and special grants which were announced on 23rd April, the Government considered whether also to make a general increase in the limits for improvement grants. The present limits for these grants were, after all, set at the same time as those for the grants for which increases are being made. We decided against such an increase pending the availability of the wider powers in the Bill which will enable limits to be set to reflect both priority needs and variations in cost in different areas. Outline proposals for the new grant system generally were included in the department's paper on this subject published on St. George's Day this year; and consultations with the local authority associations are in progress.

In considering changes to the grant limits, whether under the present system or under the more flexible system which will result from the changes we are making in this Bill, the main aim must be to make the most of the limited resources which are available—to direct those resources to the dwellings and to the people most in need. The grants for which we have already announced increases are only available for priority works; that is, the installation of essential amenities or the repair of dwellings where the grant applicant is in financial hardship. For the full improvement grant, the position is, however, much less clear cut. The great majority of these grants are paid only at the 50 per cent. rate, and in those cases increasing the eligible expense level to the £7,000 suggested by this amendment would benefit only those people who could afford to find the first £3,500 rather than the first £2,500 of their own money. For many people living in substandard housing the problem lies in finding the first £2,500 anyhow and they would gain nothing from this increase.

In housing action areas, however, the percentage rate of grant is already much higher—it is 75 per cent. already; it can rise to as much as 90 per cent.—and an increase in eligible expense limits in such areas does not impose anything like the same consequential burden on the occupier who therefore stands a much better chance of benefiting from the increase. It is for that reason that we have announced that we are willing to consider applications from local authorities for increases in the limits as they apply in housing action areas.

We intend to use the new powers under the Bill—which, if you are interested, are in paragraph 29 of Schedule 23—to even out to some extent the great differences which at present exist in the real value of grants. Because of differences in the cost of works, a grant in, say, London is worth very much less than the same grant in some other parts of the country. That makes little sense. The general intention would be to increase the levels for improvement grants by the same broad order of magnitude as has already been announced for other grants, but the very concept of differential limits is incompatible with further national increases to a single national figure. A national increase of the sort specified in the amendment would benefit both high cost and relatively low cost areas alike. Furthermore, since it could not come into effect until after enactment of the Bill, it would directly and inevitably clash with the new grant limits which the Government will be introducing at that time using the order—making powers available under the 1974 Act, as amended by the Bill.

If the noble Baroness is merely seeking in the amendment some indication of the Government's intentions with regard to the limits for improvement grants following enactment of the Bill, I hope that what I have said will reassure her. I cannot, at this stage, say exactly what pattern of eligible expense limits we shall arrive at in the autumn; we are still gathering and analysing cost information. What I can say is that in priority areas and high cost areas of the country, the amount of the increase which we shall be announcing will certainly not be less than the percentage increase already announced in respect of the smaller grants; that, I would think, would be of the order of 30 per cent. Pending the results of our consultations with the local authorities and others, I do not think I can go much further than that, but the new limits which we set will of course be laid down in an order which will he laid before Parliament. I hope, on the basis of what I have said, that the noble Baroness will feel able to withdraw her amendment.

Baroness FISHER of REDNAL

While I thank the noble Lord for that explanation, is he aware that some of it was not directly relevant to the amendment, which deals with a particular point? I am concerned that the present grant limits are below current prices. If owners were able to take up the grant with a higher percentage, they would not have to pay so much themselves; obviously, if one cannot get the maximum—because the grant has not been updated to take modern prices into consideration—then fewer people will be taking up improvement grants. In urban areas there are many young couples who would be willing to buy what we would call run-down houses at a reasonable price if they could be sure of getting a reasonable improvement grant, thereby saving that type of property, and I should have thought the Government would have been interested in that. The amendment is simply saying, "A figure was fixed in a previous Act. Please amend it to make it more suitable to present-day figures". Surely that is a very simple request.

On Question, amendment negatived.

10.30 p.m.

Lord MOWBRAY and STOURTON moved Amendment No. 181:

Page 116, line 39, after ("1957") insert—

1. ("(a) section 60 above shall not apply; and
2. (b)").

The noble Lord said: This is essentially a technical amendment designed to disapply certain grant conditions—for instance, the need to supply certificates of future occupation—where a repair grant is given following the exercise of local authority compulsory repair powers. The effect is simply to bring the position in the case of compulsory repair action in line with that which already exists in the case of compulsory improvement when an intermediate grant is given. This is normally 50 per cent. I beg to move.

Baroness VICKERS moved Amendment No. 182:

Page 119, line 20, leave out ("£5,000") and insert ("£6,750").

The noble Baroness said: On 15th May, Mr. Stanley wrote about his concern regarding conditions in some hostels. He said, We have already taken a series of steps to start dealing with the most pressing problems. I think it would be helpful if I outlined what we have done to date and what more is planned. We have increased the eligible expense limit for Exchequer assistance towards providing fire escapes to £5,000, a ten-fold increase on the figure previously in the Housing Bill"—

and for that we are very grateful. However, Mr. Stanley went on to state that, The Secretary of State will be empowered to go beyond this figure in individual cases".

I should like to suggest that there will be a great many individual cases in which he might take an interest.

The effect of the amendment would be to raise the maximum eligible costs level from £5,000 to £6,750, which, with the 75 per cent. limit on grant set by the Government, would provide hostel owners with a maximum grant of £5,000. But the expenses of most of the hostels are very high indeed, and I should like to mention one or two examples.

A Women's Aid Refuge for 30 women and children in South London—a charity, but not registered as a housing association —consisting of five adjoining terraced houses knocked into one, two floors high, with a third floor back addition, was required in 1979 to comply with the requirements of the G LC. The total costs at 1979 prices were £10,500.

The Salvation Army recently had to close a whole floor of its Victoria Hostel in Edinburgh, losing 30 beds for homeless single people, because it had to comply with works costing £15,000 to make the building safe. The special grant in this Bill does not extend to Scotland. Perhaps the noble Lord who is to reply can tell me whether Scotland can obtain help under any other legislation.

A British Rail hostel in Ilford, providing 200 beds for low-paid rail workers, had to be closed in February 1980 because £105,000 was needed to be spent to instal fire precautions. Over 20 men were made homeless after the run-down period.

The Church Army estimates that costs of works on fire precautions at its hostels nationally are never less than £10,000, and can reach £100,000. I wish to point out that the various hostels I have mentioned, particularly those of the Salvation Army and the Church Army, provide facilities which no other hostels provide. They are willing to take into their hostels anybody who is down and out.

There is of course a differentiation between hotels and hostels. Owners of hotels have automatically to comply with the Fire Precautions Act 1971 and must instal effective fire safety precautions. They can apply under Section 36 of that Act for a loan from their local authority to do the works, and they can then obtain tax relief on that loan. Obviously for many hotel owners this relief can amount to a considerable sum.

Voluntary agencies running hostels, in being required to comply with fire regulations, will, under the Bill as it stands, be eligible for a grant of only £3,750, and will have to raise all the rest from charity, gaining no relief on this exercise.

Finally, difficulties occur when there is a change of fire officer in a district. One fire officer may state that he wants this and that done, and the work may be started. But that fire officer then leaves the district. Another fire officer takes over and he has other ideas regarding certain buildings. I hope that the Secretary of State will be empowered to go beyond the figure now set down in the Bill. I beg to move.

The Lord Bishop of NORWICH

I should like to support the amendment moved by the noble Baroness, because I think it reflects a fairly wide concern, particularly in the voluntary agencies, and there is strong support for the easing of this particular grant and for making it slightly larger. As the noble Baroness has said, all those concerned in the voluntary agencies are immensely grateful to the Government for the change of figure, in a very generous way, in another place from an original figure of £500 to the present figure of £5,000. I know that the Single Homeless Group are concerned with this and support this amendment, and also the Catholic Housing Aid Society.

There seems a general feeling that this is an area, not only of concern for those who are socially dispossessed but of need for giving the widest support to the voluntary societies, for two reasons. The first is straightforwardly humanitarian, in that there are many people for whom such multi-occupied premises are needed, and the voluntary societies care for them in a wonderful way. The second, of course, is straightforwardly financial, in that, on the whole, the voluntary societies can always care more cheaply than Government.

The dilemma is that if legislation is passed making it mandatory to bring the various hostels up to required standards, then a very great deal of money will be needed. It was in 1972, I think, that the DHSS commissioned the Office of Popula- tion Censuses to survey all the hostels and the common lodging houses. That report came out in, I think it was, 1976, and it showed a rather alarming lack of amenity. Amenity as such is something which people may be willing to accept if their own circumstances are themselves worse than the amenities provided; but, of course, this amendment is concerned with life and limb, and particularly with escape from fire. One has heard of dangers in the past, and anything that can be done to remove them in the future should be done, I think; and as it would relieve the Government of anxiety concerning governmental support for those in need and support for the voluntary societies in the marvellous work they are doing, I should like to press upon the Government that they should look with much sympathy at this amendment.

It should be said, I think, that both the Bishop of Southwark and the Bishop of London, whose names are on this amendment, would have liked to be here, but they are (I choose the word carefully)— I was going to say they are "junketing", but they are not. They are seeking to rejoice in the 75th birthday of the Southwark diocese as at this moment, and those of us who know and respect the Lord Bishop of Southwark will know that when I say "junketing" I mean junketing. So, without the force, the knowledge or the ability, or the sheer panache, of those two right reverend Prelates, I am very glad, quietly but humbly, to support this amendment.

Lord SANDFORD

In the absence of the two right reverend Prelates, but as a past chairman of the Church Army, I should like to add my support of this amendment.

Baroness MACLEOD of BORVE

I, too, should like to support this amendment as one who for a very short time of the year tries to help those who have not got homes. Very recently we have had some terrible tragedies where people have been burned, and I gather it is now abundantly obvious that there should have been many more fire precautions in those cases, but they were not able to be provided because of the lack of finance, either statutory finance or voluntary finance. People in fact lost their lives in those cases. The Government have "upped" the amount which is to be allowed, but I support the amendment moved by my noble friend.

10.40 p.m.

Baroness RYDER of WARSAW

I should like to support the noble Baroness in all that she has said and, if I may, add that those of us who have the privilege of working for the homeless, for those who are probably the most unloved in society and for the sick and the disabled often find our work is to a large extent greatly hindered because of the whim of some local fire officer. There are no national regulations laid down but if local fire officers take it into their heads to decide upon so many extra fire doors through which we cannot even get out wheelchair patients at night, not only are we as a voluntary society greatly hindered because we must raise all these funds from the public but, at the same time, we are even prevented from opening further accommodation which is desperately needed for the homeless, the sick and disabled. There are literally thousands of them in this country—those I call "the silent sufferers". I would believe that this Committee would fervently uphold what the noble Baroness has said: that we should get all possible help—not just moral support but actual financial support, in particular because we are so cut in other directions. If any assistance can he given, we should all be extremely grateful—and in particular in respect of the fire precautions.

Baroness BIRK

In adding a brief word to what has been said, may I take the opportunity to wish the noble Baroness, Lady Ryder of Warsaw, a happy birthday today. I should like to add my support and that of my noble friends to what has been said by the noble Baroness, Lady Vickers, by the other noble Lords who have spoken and by the right reverend Prelate. May I say that this is one of the rare occasions when an amendment is supported by every side of the Committee, including the bishops. The Liberals have their name to it; we are supporting it; the Cross-Benches have added their support—it has the support of everybody.

I think that what is being asked for is a modest increase. It is an extremely modest one and I personally would have been inclined to ask for rather more. I think the Government, in accepting this amendment, will have got off very cheaply over this, when one takes into account the economic and human cost which is involved—and which may still be involved because nothing can ever be completely fireproof or foolproof. Nevertheless, it will help; and one hopes that it may help to stop some of the terrible tragedies that occur. I hope that the Government will accept this amendment and do so right away.

Lord DAVIES of LEEK

Despite the late hour—and I shall be very brief—I think this is a very important part of the Government's Bill and they were proud of it. But I want them to make it a reality because it is a cri de Coeur from the homeless. I think this really should be implemented. There are four types of grant: grant for tenants, extended scope for grants, special grants and repair grants. Unfortunately there are relaxed buildings regulations. I would say there is a way out. In view of the fact that the building societies have increased their assets 16 times and now have over £40 billion assets, a modus vivendi, a way of working, with the local building authority might well be found to implement a guarantee of improvement for old properties so that the homeless also would have a chance, not necessarily to buy but to have somewhere to live as human beings.

10.45 p.m.

Lord MOWBRAY and STOURTON

Nobody could have sat in this Committee and listened to the speeches without being moved by the compassion which, as usual, your Lordships have shown. We are discussing means of escape from fire in houses of multiple occupation, and after the very sad case that we had not so many months ago, it is very much in our minds. The right reverend Prelate and others were no doubt thinking about that particular case.

Having said that, the effect of this amendment would be to increase the amount of grant-aidable expenditure on the provision of means of escape from fire in hostels and other houses from £5,000 to £6,750. No doubt there are those who would contend—and I would not blame them—that the figure should be even higher or that we should have no limit at all set for this particularly important provision. I certainly would sympathise with that view, but one has to say, sitting on this side of the Committee—and noble Lords have heard it before—that the taxpayer's purse is not bottomless.

We must take a little credit, for we have already increased the base rate from £500, which was set by the Government of noble Lords opposite, to £5,000. That is tenfold. It is not bad. I must add also that there is a specific provision—and I would ask your Lordships to bear this in mind—in paragraph 18 of Schedule 11, which enables the limit to be increased in particular cases, and also for different limits to be set to reflect, for example, higher than normal costs in particular areas. This I take it would relate to more costly works needed because of the size and height, et cetera, of the building concerned. The noble Baroness, Lady Ryder—to whom I also wish birthday greetings—mentioned extra expensive escapes because of the disability of the people living in the property. That is in the capacity of the Bill as it is, if the Secretary of State wishes to use that clause.

I must emphasise that, although I have said that this clause exists, I would not want everyone to think that it was an "Open Sesame" which would automatically be used. It would only be used where special circumstances would justify it. We take the view that in the present circumstances a £5,000 limit is by no means unreasonable. By some standards compared with what it was only a year ago it seems quite generous, in fact, and, as I have said, we have taken powers in this Bill to deal with the exceptional cases.

I should like to say to my noble friend Baroness Vickers that Scotland has its own grant system. This Bill has no application in Scotland. I have to confess—and I apologise—that I am not briefed to say what the Scots' grant system is; but if the noble Baroness wants to know I will write to her and place a copy of my letter in the Library for the rest of the Committee who are interested.

If the cost is £5,000 now—and £5,000 still does something—the money given would be £3,750. I agree that if the cost were £6,000, it would still only be £3,750, under the Bill as it is now. I re- empasise the exceptional powers that the Secretary of State has in reserve to use for exceptional cases, for buildings which are extra large or for extra special cases. These powers are there. We all know that if you impose an upper limit everyone will tend to use it. Perhaps just to paint the lily a little bit more in times of stress it may be wise to keep the figure down and let the Secretary of State—

Baroness BIRK

The noble Lord says that if the figure is high everyone will use it. But according to the subsection the contributory element has to be so much of the amount determined under Section 70(1)(b), so there is a control over it. It is not just a free-for-all.

Lord MOWBRAY and STOURTON

There is, as I said, a limit of £5,000, up to 75 per cent. I also said that paragraph 18 of Schedule 11 gives the Secretary of State powers, if he wishes, to increase it to what he wants. I cannot be more explicit than that. This is not a fixed limit at all. I am quite willing to take this away and ask the noble Baroness to come and explain it to us. We are sympathetic in this case. We think the Secretary of State's powers in the above paragraph are sufficient to deal with any case which needs looking at. We are not hard-hearted people: we have every sympathy with this. The lives and safety of human beings are at stake. I assure your Lordships that if noble Lords have any points to put to us on this we shall listen. In the meantime, I would ask for the amendment to be withdrawn, so that if necessary we can discuss it further.

Baroness BIRK

Before the noble Baroness replies and decides on what she wants to do, may I say that whatever she decides to do we will go along with her. I should like to make one point for consideration when it is taken back. One clause allows the Secretary of State discretion. If we take the amount which is being asked for, which I believe is £1,650, and consider the cost of an application in exceptional cases and the cost of processing this through the department, I think several hundred pounds would already have gone for each case before the money reached the applicant.

Lord MOWBRAY and STOURTON

This is one of the cases we would be happy to discuss with the noble Baroness.

Baroness VICKERS

I am very grateful to my noble friend for what he has said. I shall ask leave to withdraw the amendment, but I should like to ask for a survey to be made if possible of the number of hostels that would have to be closed in the future. I have to close three myself and there must be many more; but I am grateful for what my noble friend has said and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord MOWBRAY and STOURTON moved Amendment No. 183:

Page 120, line 18, at end insert— ("21A. In section 74(l) after "they shall" insert "(subject to subsection (2A) below)" and after section 74(2) insert— (2A) Where, apart from this subsection, a local authority would be required to impose the conditions specified in subsection (2) above with respect to a dwelling in respect of which a certificate of owner-occupation has been given but it appears to the local authority that in the special circumstances of the case it would be reasonable to dispense with the conditions they shall not be required to impose the conditions.".").

The noble Lord said: This is a small but not insignificant amendment designed to give local authorities more discretion to have regard to the circumstances of particular cases when considering the payment of grant for home improvements. Under the present grant system grant aid is not available for the improvement of an owner-occupied house within a housing action area or general improvement area if that house has been let within the previous 12 months. On the face of it, this is a slightly curious provision, but it was introduced in the 1974 Housing Act as part of a package of controls on the availability of grants for home improvement. The intention was to deter owners of privately rented housing from pressurising tenants to obtain vacant possession with a view to sale for improvement with grant aid.

We have already, in this Bill, removed the so-called 12-month rule in the case of purchase by a sitting tenant, so that he will be able to obtain grant aid to improve his home without waiting for a year. The effect of this amendment is, while preserving the general rule that grant should not be given in such cases, to give a local authority a discretion to dispense with the restriction if they are satisfied that in the special circumstances of the case it is reasonable to do so. I beg to move.

Schedule 11, as amended, agreed to.

Clauses 103 and 104 agreed to.

Schedule 12 agreed to.

Clause 105 [Local authority mortgage interest rates]:

10.55 p.m.

Lord PITT of HAMPSTEAD moved Amendment No. 184:

Page 72, line 6, after ("be") insert ("not more than").

The noble Lord said: This amendment is aimed at enabling a local authority to keep its mortgage interest rate flexible in the way it does at the moment, rather than be forced to do it in the way the Bill requires. As the Bill now stands, local authorities must charge the higher of two rates: either the national rate or the average pool rate. Most authorities charge an average pool rate when they lend on property, and they do not make frequent changes in mortgage rates, as will be required under this Bill. Over a period—usually the whole year—they determine what is the average and then insist on the rate at that time.

The Bill as now drafted will require two things. First, they must charge the higher of the two rates; and, secondly, they must change their rate whenever the rate changes. This amendment is merely intended to enable them to continue to do what they are doing, provided that that is satisfactory. In other words, we are merely asking that the words "not more than"—which mean that they can if they want charge the higher rate—be inserted. They can if they wish charge the lower rate, but they have the flexibility which they now have and of which the Bill is depriving them. I beg to move.

Lord BELLWIN

This amendment undermines the whole purpose of Clause 105. It will enable a local authority to charge a lower rate of interest on its mortgage lending than it needs to do to cover its costs. This means a subsidy to one group of borrowers from other ratepayers, which cannot be justified. The amendment would also enable a local authority to charge less than the "standard national rate"—that is, the rate which building society mortgagors are charged. Local authorities are supposed to be lenders of last resort. This is not possible so long as borrowers are able to obtain mortgages from the town hall at more favourable rates than those—the vast majority—who borrow from building societies. I wonder whether that was in the mind of the noble Lord, Lord Pitt, when he proposed this amendment. If not, perhaps he may feel able to withdraw it.

Lord PITT of HAMPSTEAD

Although I probably shall withdraw the amendment, I wish to point out to the noble Lord that I am fully aware of this point. I do not know what is his authority, but the one that I used to be on invariably insisted on two things: first, that the building societies had turned you down; and, secondly, that the borough council had turned you down. It was only if you were turned down by the building societies and the London borough council that you got a mortgage from the GLC. So we were very much a lender of last resort. But there are other amendments that may meet the noble Lord's ideas better than this one, and I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

10.58 p.m.

Baroness DENINGTON moved Amendment No. 185:

Page 72, line 15, at end insert— ("Provided that a local authority may, subject to there being no cost to the rate-payer, taking one year with another, charge their average rate if it is lower than the standard national rate.").

The noble Baroness said: Reading Clause 105, I turn to subsection (3) and I see: The rate of interest shall be whichever is for the time being the higher of the following, namely—

1. (a) the standard national rate… and
2. (b) the applicable local average rate".

I pursue my way through and down the next page, and I come to subsection (10). I read there: The Secretary of State may by notice in writing "—

and the words "notice in writing" warn me that something is coming— to a local authority direct it to treat a rate specified in the notice as being the higher of the rates mentioned in subsection (3)".

I read it about four times, and it seems to me that what the Secretary of State is saying is that if you get this notice you should call the lower the higher. That is what it seems to me to mean: that you should call the sun the moon. I knew something was coming when I saw that it was to be a notice in writing.

I should like the Minister to elucidate this strange subsection (10) in relation to subsection (3). When I go back to subsection (3) I ask why, if I have read it aright, which I may not have done, the Minister is putting this peculiar thing into subsection (10). I wonder whether he is trying to deal with a position where paragraph (b)—the local average rate—is higher, and is too high, in his view. He wants to encourage house ownership, so he then declares that the higher is the lower. Then you turn to the standard rate. Is that what that is about? I should like the point to be elucidated.

My amendment has to do with a case where the local rate is lower than the standard rate. I do not know whether this happens. From what the Minister said a few minutes ago, perhaps it does not happen in many authorities, but certainly the position today in the Greater London Council is that the Greater London Council's average rate is 13 per cent., based on the Consolidated Loan Fund's average rate of interest on all council borrowings, past and present. The building society rate, as we know, is 15 per cent. If the council had to charge the higher of these two rates, the 15 per cent. rate, it would add some £23 gross, or £15 net of tax relief—which is about 12 per cent.—to the repayments on a mortgage of £15,000. That would hit very hard the people who have their mortgage from the Greater London Council, because it is a lender of last resort. They lay down very stringent regulations in County Hall, London. You must have been turned down by two building societies, if not three. And here are people who are just managing to get a mortgage from the council at 13 per cent.

We talked a lot about this many weeks ago, it seems to me. I have sympathy with the Minister who spoke about it days ago, but I think it was weeks ago when we started on the Bill. We were talking then about the right to buy and we were told over and over again that the Government want to do everything to help people to own their own homes. Surely he is going to accept this amendment, because it will help those at the lower end of the income scale to own their own home. I beg him to be generous to those people and to accept the amendment. I beg to move.

11.4 p.m.

Lord BELLWIN

The noble Baroness referred to the fact that it seemed like days ago or weeks ago since we started. To me it seems like years ago.

Although her amendment takes account of one fundamental objective of Clause 105, that local authorities should not subsidise borrowers at the expense of the ratepayers, nevertheless it conflicts with the other purpose of the clause, which is to ensure that local authority mortgage borrowers should not be offered loans at interest rates more favourable than those generally charged to building society borrowers.

Local authorities have limited funds and are supposed to act as lenders of last resort. This amendment would provide an incentive for everybody, regardless of whether they are coming to local authorities simply as a last resort, to try to secure a local authority mortgage instead of a building society mortgage. I know that the noble Baroness and the noble Lord, Lord Pitt of Hampstead, said that the kind of conditions imposed by the authority to which they referred were likely to mean that unless those who came could show that this was of last resort they would not be considered. That may well be so in the authority to which the noble Baroness refers, but I can assure her from my own knowledge that that is not the attitude some authorities take. They really do not lay down such stringent conditions; at least they have not done so hitherto. With the difficulties there may well be at the present time in getting mortgages, it is likely that local authorities will, more rather than less, be granting mortgages, in which case the point I am making is particularly apposite.

Subsection (10), which caused some difficulty to the noble Baroness, gives the Secretary of State powers to direct a particular local authority to charge an interest rate specified in the direction in respect of the authority's mortgage loans covered by this clause and to operate the other provisions of the clause accordingly. Such a direction can be varied or revoked by a further direction from the Secretary of State. It is expected that little use will be made of this clause, but a specific reserve power has been considered necessary, particularly in relation to those authorities opposed to the right to buy provisions, with which this clause has a link.

The noble Baroness, Lady Denington, expressed concern about people who have to come for mortgage and therefore should be able to get the lowest possible rate. That is something with which everyone would sympathise as a philosophy. The best way in which we can help to ensure that not only they, but all who take out mortgages, are able to get them at the lowest possible rates will be when we are so able to influence the economy that there will not be the necessity any more for rates to be as high as they are at present.

I hope she will be as encouraged as I am by the fact that today—I found this out by being inside this Chamber and not outside it—the minimum lending rate has come down by 1 per cent. It is a step in the right direction. The noble Baroness may smile; I hope she will smile with some glee. As I say, at least it is a move in the right direction. It is an indication, and surely she and the noble Baroness, Lady Denington, want nothing better than that we should reach the point, as I am very confident we shall, when the mortgage interest rates will come down, and then everyone will be able to benefit.

Baroness DENINGTON

I thank the Minister for his explanation about this mysterious Clause 10. I must admit now that I did guess it was in order to deal with the bad boys; my guess was right. But I want something for the good boys. I am very disappointed at the Minister's attitude. It is very fortunate that there are people in London, and maybe elsewhere, who at no charge whatsoever to the ratepayers are enabled to have a slightly lower mortgage rate. I am astonished that the Government should want to push up the mortgage rate of those who have managed to have some- thing lower and be a little fortunate in the. I am really most disappointed, and I hope the Committee will divide on this amendment and make our position on this quite clear.

11.17 p.m.

Baroness DENINGTON moved Amendment No. 186:

Page 72, line 19, at end insert— ("The Secretary of State shall give notice of any change in the national rate at least two months prior to the date of operation.").

The noble Baroness said: This amendment is so, so simple. This is just to give authorities some notice that they have an awful lot of work to do! I beg to move.

Lord BELLWIN

Perhaps not quite so briefly, but briefly, I hope, I think the amendment is not necessary. Subsection (8) already permits a sufficient measure of flexibilty to local authorities when adjusting their rates as a result of either a change in the standard national rate or indeed the local average rate. Notice of

11.9 p.m.

On Question, Whether the said amendment (No. 185) shall be agreed to?

Their Lordships divided: Contents, 29; Not-Contents, 54.

CONTENTS
Airedale, L.	Evans of Claughton, L.	Morris of Kenwood, L.
Banks, L.	Fisher of Rednal, B.	Pitt of Hampstead, L.
Beaumont of Whitley, L.	Gaitskell, B.	Ponsonby of Shulbrede, L. [Teller.]
Birk, B.	Greenwood of Rossendale, L.
Boston of Faversham, L.	Hatch of Lusby, L.	Sefton of Garston, L.
Brooks of Tremorfa, L.	Houghton of Sowerby, L.	Stone, L.
Collison, L.	Janner, L.	Strabolgi, L.
David, B.	Jeger, B.	Underhill, L.
Davies of Leek, L.	Kaldor, L.	Wigoder, L.
Denington, B.	Llewelyn-Davies of Hastoe, B. [Teller.]
Elwyn-Jones, L.

NOT-CONTENTS
Abinger, L.	Fortescue, E.	Mowbray and Stourton, L.
Airey of Abingdon, B.	Gainford, L.	Moyne, L.
Bellwin, L.	Gisborough, L.	Murton of Lindisfarne, L.
Belstead, L.	Gowrie, E.	Redesdale, L.
Bessborough, E.	Halsbury, E.	Renton, L.
Cathcart, E.	Harmar-Nicholls, L.	Romney, E.
Cork and Orrery, E.	Henley, L.	Saint Oswald, L.
Craigmyle, L.	Holderness, L.	Sandford, L.
Croft, L.	Hornsby-Smith, B.	Sandys, L. [Teller.]
Cullen of Ashbourne, L.	Hylton, L.	Selkirk, E.
Denham, L. [Teller.]	Killearn, L.	Sempill, Ly.
Digby, L.	Lauderdale, E.	Spens, L.
Ellenborough, L.	Long, V.	Trumpington, B.
Elles, B.	Macleod of Borve, B.	Vaux of Harroden, L.
Elton, L.	Margadale, L.	Vickers, B.
Faithfull, B.	Marley, L.	Vivian, L.
Falmouth, V.	Monk Bretton, L.	Ward of Witley, V.
Ferrers, E.	Mottistone, L.	Westbury, L.

Resolved in the negative, and amendment disagreed to accordingly.

a change must be given to borrowers within two months of a change. A reduction in the rate will take effect from the first interest payment after a date not later than one month after the change, and an increase will take effect from the first interest payment after a date at least one month and not more than three months after notification.

Baroness DENINGTON

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord PITT of HAMPSTEAD moved Amendment No. 187:

Page 72, line 23, leave out ("not exceeding six months and").

The noble Lord said: I hope I can at last find an amendment that the noble Lord will accept. This is an amendment merely intending to prevent local authorities from having to change their rates as frequently as every six months. I cannot really believe that the noble Lord regards this changing of interest rates every six months as an integral part of the strategy. I hope he will accept this amendment. I beg to move.

Lord BELLWIN

In speaking to this amendment, may I also speak to Amendment No. 188. The deletion of the six-monthly periods, as proposed in these amendments, would leave local authorities free to decide when and how often they should determine and declare the applicable local average rate. It could enable local authorities to charge interest at a rate which did not cover their costs by failing to declare a local average rate which is up-to-date. This would mean a subsidy from the ratepayers which would be unacceptable.

We believe local authorities, the great majority of whom nowadays lend at variable interest rates, will not be inconvenienced by the requirement to monitor and declare a rate of interest at six-monthly intervals. With the recent volatility of interest rates I suggest that it would be foolhardy for a local authority not to keep a close watch on costs affecting interest rate movements.

Lord PITT of HAMPSTEAD

I am sorry that the noble Lord who has been in local government so long has such a poor opinion of local authorities that he thinks that they need to be told that they must change the rate every so often. They will know—if it is in terms of their own financial position—whether it is necessary to put the rate up at that time.

I am saying that as the Bill now stands it is rigid: they must do it every six months, regardless. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 188 not moved.]

Lord MOWBRAY and STOURTON moved Amendment No. 188A: Page 73, line 8, after ("Council") insert ("or the Council of the Isles of Scilly").

The noble Lord said: The provisions in the Housing (Financial Provisions) Act 1958, the main power under which local authorities lend money for house purchase, et cetera, extend to the Isles. It is therefore necessary to similarly extend the Clause 105 provisions governing the interest to be charged on such loans.

On Question, amendment agreed to.

11.22 p.m.

Lord BELLWIN moved Amendment No. 189:

Page 73, line 41, at end insert— ("(10A) This section shall not prevent a local authority, if the conditions stated in subsection (10B) below are satisfied from giving assistance to a person acquiring a house in need of repair or improvement by making provision for waiving or reducing for a period ending not later than five years after the date of the advance mentioned in subsection (1)(a) above or the disposal mentioned in subsection (1)(b) above, the interest payable on the sum advanced or remaining outstanding and for dispensing during that period with any repayment of principal. (10B) The conditions mentioned in subsection (10A) above are that—

1. (a) the assistance is given in accordance with a scheme which either has been approved by the Secretary of State or conforms with such requirements as may be specified in an order made by the Secretary of State with the consent of the Treasury; and
2. (b) the person acquiring the house has entered into an agreement with the local authority to carry out, within a period specified in the agreement, such works of repair or improvement as are so specified."").

The noble Lord said: This amendment enables the provisions that will govern the rate of interest charged by local authorities on their mortgage lending to be relaxed in certain cases at the discretion of the Secretary of State. The Government have decided that it is necessary to enable local authorities to charge a lower rate of interest or to waive interest payments for a limited period in cases where some relaxation of the interest rate régime is essential in order to bring back into use properties in need of significant repair or improvement and which without this additional incentive would be liable to remain unsold and in danger of falling into further decay.

A very good illustration of such a case is the GLC's home selling scheme which is making a significant contribution both to the encouragement of home ownership and to the improvement of the poorer housing stock in London. Under the GLC scheme, a house or flat in poor condition, needing a minimum of £2,000 spent on repairs and improvements, and having been empty for at least two months, is bought by a purchaser who undertakes to put it into good repair and decorative order during a specified period of no more than three years, during which period payments of interest on the GLC mortgage are waived and repayments of capital deferred. The scheme is designed for people who are willing to put time and money into improving a run-down property and who would not normally be able to afford the combined cost of mortgage repayments and repair improvement costs.

I must assure noble Lords that this amendment does not herald a change in the Government's policy on local authority mortgage interest rates. Local authorities should lend only in the last resort, as we have been saying earlier today. Only in the exceptional circumstances which I have described, therefore, should borrowers be able to obtain mortgages from the town hall at more favourable rates than those who borrow from building societies. And only in such circumstances should a local authority be able to lend money for house purchase at a rate below normal mortgage rates.

The general principles remain as set out in Clause 105 which requires local authorities, as we have just been saying, to charge a rate of interest comparable to that charged by the building societies or for those authorities whose borrowing costs are higher than that rate, enough to cover those costs. I beg to move.

On Question, amendment agreed to.

Lord MOWBRAY and STOURTON moved Amendment No. 189A:

Page 74, line 9, leave out ("or")

The noble Lord said: I really spoke to this when I was speaking on Amendment No. 188A. I beg to move.

On Question, amendment agreed to.

Lord MOWBRAY and STOURTON moved Amendment No. 189B:

Page 74, line 9, at end insert ("or the Council of the Isles of Scilly")

The noble Lord said: This was also spoken to when I spoke to Amendment No. 188A. I beg to move.

On Question, amendment agreed to.

Clause 105, as amended, agreed to.

Clause 106 [Local authority and Housing Corporation indemnities for building societies]:

Lord MOWBRAY and STOURTON moved Amendment No. 189C:

Page 75, line 8, leave out ("and")

The noble Lord said: This important amendment to Clause 106 enables local authorities to guarantee building society mortgage advances against a mortgagor's default. It is customary to treat the Isles of Scilly as a housing authority. Therefore, the power should be extended to this council. I beg to move.

On Question, amendment agreed to.

Lord MOWBRAY and STOURTON moved Amendment No. 189D:

Page 75, line 8, at end insert ("or the Council of the Isles of Scilly")

The noble Lord said: What I said on the last amendment applies also to this one. I beg to move.

On Question, amendment agreed to.

Clause 106, as amended, agreed to.

Clauses 107 to 109 agreed to.

11.27 p.m.

Lord BANKS moved Amendment No. 190: After Clause 109, insert the following new clause:

Housing subsidies

( .—(1) The provisions of section 24(1)(B) of the Housing Subsidies Act 1967 shall have effect where a person borrows, or two or more persons borrow jointly, from a qualifying lender on the security of a freehold or leasehold estate of the borrower, or of one or more of the borrowers (including an estate held jointly or in common by the borrower, or one or more of the borrowers and one or more other persons) in land in Great Britain, and the following conditions are satisfied:

1. (a) that the loan is or was made as part of a scheme under which not less than ninetenths of the proceeds of the loan are or were applied to the purchase by the person or persons to whom it was made of an Annuity ending with his life or with the life of the survivor of two or more persons (in this section referred to as "the Annuitants") who include the person or persons to whom the loan is made;
685
2. (b) that at the time the loan is made the person to whom it is made or each of the Annuitants had attained the age of 65 years; and
3. (c) that the person or persons to whom the loan is made or each of the Annuitants uses the land on which it is secured as his only residence.

(2) The borrower or borrowers may by notice in writing to the lender in such form as the Ministry may direct (in this section referred to as an "Option Mortgage") elect that the loan shall be subsidised in accordance with the provisions of Part II of the Housing Subsidies Act 1967 and the Option Notice shall be treated for all purposes as if it were an Option Notice made under the provisions of section 24 of the said Act.").

The noble Lord said: I must begin by declaring an interest. I am an insurance broker, being a director of a subsidiary company of a firm of Lloyds brokers. I moved a similar amendment to this to the first Social Security Bill when it was in Committee in this House. On that occasion the noble Lord, Lord Cullen of Ashbourne, agreed to take the matter back and consider it again. I moved the amendment again on Report stage of that Bill. On both occasions the amendment received a substantial amount of support in all parts of the House. Of course it enjoys the support of organisations outside the House, such as Help the Aged and Age Concern. The noble and learned Lord, Lord Gardiner, and the noble Lord, Lord Maybray-King, spoke as office holders in Help the Aged on this particular matter.

On a Division at the Report stage this amendment was lost by 12 votes. In the discussion before the vote the noble Baroness, Lady Young, argued that the amendment was not relevant to the Social Security (No. 1) Bill as it sought to amend the Housing Subsidies Act 1967. I was able to show that a letter from the Department of the Environment stated that their legal advisers were of the opinion that the responsibility for the area of public policy covered by the proposed reform lay with the Department of Health and Social Security. Nevertheless, it is possible that a number of noble Lords were influenced by the argument of the noble Baroness and voted against this amendment on the grounds that it was not relevant to the Bill. I have felt justified, therefore, in tabling the amendment to this Bill and I imagine that we shall not be told that the amendment falls outside the scope of the Long Title.

The amendment may therefore be considered on its merits, and these are considerable. Elderly people who own their homes but who have an inadequate income may increase that income by raising a mortgage on their house and using the proceeds to purchase an annuity. Out of the annuity they pay the interest on the mortgage and are left with a balance which provides them with extra income to meet their own expenses. Elderly taxpayers raising a mortgage in this way have been made the recipients of Government assistance through being granted tax relief on the interest on the mortgage. Elderly non-taxpayers—those too poor to pay tax and most in need of the additional income—were left out, with the result that these arrangements are often of no use to them.

The amendment proposes that help should be given to the elderly non-taxpayers by extending to them the option mortgage scheme which would allow them to pay a reduced, Government-subsidised rate of interest on the mortgage, thus making the scheme helpful to them and enabling them to increase their income. This mortgage option is available to non-taxpayers buying their house. Since elderly taxpayers have been singled out for the same tax relief in these cases as younger taxpayers buying their house, it is logical and right that elderly non-taxpayers should be accorded the same tax relief in these cases as younger non-taxpayers buying their house. What I am asking for is an elementary act of justice. I beg to move.

Lord BELLWIN

I wish to say at the outset that I consider that this is very much the right place for this amendment, and that will probably please the noble Lord, Lord Banks, greatly, in that, having read carefully, as I did, the previous debate and all that surrounded it, it is clear that he seemed to be bedevilled by the fact that everyone was urging and had done on other occasions, that it should be proposed in various other places. I readily accept that this is where it should be. I assure him also that I will talk to the amendment on its merits and do only that.

I read very carefully indeed the Official Report of the debate of the Report stage of the Social Security Bill (No. 1) on 6th May. On that occasion the noble Lord, Lord Banks, argued that it would be an elementary act of justice to extend the option mortgage scheme as his amendment proposed. He said that Parliament had specifically decided in 1974 to help elderly taxpayers by retaining tax relief for annuities and he claimed that the only arguments against his amendment were those of additional cost. The amendment now before the Committee constitutes exactly the same proposal as was debated and defeated on that occasion, albeit by the majority to which the noble Lord referred. My noble friend Lady Young made a full and effective response to the noble Lord's arguments in that debate. It will not be easy, but I shall do my best to emulate her.

First, would this extension be, as the noble Lord claims, an elementary act of justice? I accept that in the context of house purchase, the option mortgage subsidy is indeed for non-taxpayers the counterpart of tax relief. But that scheme was introduced specifically to help people on low incomes to purchase or improve houses. There is no general principle that tax relief should have matching subsidies. Indeed, the option mortgage scheme is almost unique in this respect, and the noble Lord's amendment has no relation to the aim of extending home ownership; it merely uses option mortgage subsidy as a vehicle to increase the income of a particular group of elderly people.

The arguments are not about housing policy; they are about whether the particular group of people who would benefit under the amendment—that is, elderly householders who do not pay tax—require greater financial help from the Government than they receive at present. Secondly, if they deserve a higher priority for available funds than other groups, would this proposal be the best means of achieving such additional help? And, thirdly, are the additional funds available?

Let us look first at the differences between the treatment of taxpayers and non-taxpayers who take out an annuity on their house. I recognise that the Finance Act 1974 was specifically amended so that tax relief on annuities was retained, but I suggest that this does not imply there should be a corresponding subsidy for non-taxpayers. Those who pay tax receive a smaller net income from their annuity than non-taxpayers. The allowance of mortgage interest relief helps to offset the additional tax liability on the annuity. But to pay option mortgage subsidy to those who, by definition, pay no tax, would be to give them a double benefit, a direct income subsidy in addition to their freedom from the burden of income tax.

We must look also at non-taxpayers likely to be in even greater need than those who own their own home. The average outright owner-occupier has extremely low housing costs. On the basis of the 1978 family expenditure survey he spends only 4½ per cent. of his gross household income on housing, while the housing costs of people in rented accommodation are around 10 per cent., and those of households with a mortgage are over 12 per cent. of their gross household income. These figures take account of the availability of rebates where appropriate.

So in effect the proposal before us would give additional help to a group whose average housing costs are the lowest in the country, whatever their other means may be. If additional funds to help the elderly from the public purse were available, there are many other means which might be used to direct those resources at those who have the greatest financial needs; for example, through the instruments of the supplementary pensions.

We must also not underestimate the ability of elderly householders to help themselves. Although in many cases it is right that elderly people should be able to stay in their home for as long as they are able, some of them will wish to move to a smaller property as their family circumstances change, and thus to realise a part of the major capital asset which they have acquired over their working lives. I ask noble Lords to accept that if the proposal were implemented, there would be—and rightly so—charges of unfair discrimination in favour of owner-occupiers against other old people above the supplementary benefit level who do not happen to own their home.

I hope that I have shown that there is far more to the Government's case than that, but we cannot at any time—particularly in the present circumstances—ignore the potential cost of this concession. I do not at all make my case on that point. Nevertheless it is a factor. I do not propose to hazard a guess about precisely what the amendment might cost, and indeed I say again that that is not the kernel of the argument. I ask the Committee to accept that such a concession could not be contemplated by Government when all forms of public expenditure are subject to such rigorous constraints.

Finally I wish to emphasise to the Committee that this is not a case of taking a doctrinaire, hard-hearted line in response to one of caring and reason. The other side of the Committee has no monopoly on compassion. The noble Lord, Lord Banks, will testify that successive Administrations have resisted the extension of the option mortgage scheme in the way that he proposes. The Government's argument rests not only on grounds of cost or constitutional convenience, important though those points are. My proposition is that the noble Lord's amendment is not the right way for a responsible Government to fulfil their obligations to elderly people. It would indeed help to augment the incomes of particular people who make particular arrangements with particular insurance companies. It would not directly assist those who are most in need.

Lord BANKS

I am grateful to the noble Lord for his detailed reply to the amendment, which he delivered at some considerable speed, no doubt because of the lateness of the hour, and it will take some reading to follow all the points that he made. I shall not attempt to answer them now, but I should like to make one or two brief observations.

First, the noble Lord said that the option mortgage scheme was introduced originally to help in the purchase or improvement of houses, as if that were some reason for not using it for anything else. If another and useful way of using this particular instrument can be found, it would be foolish, and would be a democratic nonsense, not to use it in that particular way.

The noble Lord made the point that has been made previously that there is no rule that there must be matching subsidies for tax reliefs. But that does not mean to say that there must never be matching subsidies for tax reliefs. It has been done in the case of house purchase, and the need to help the non-taxpayers has been recognised in the introduction of child benefit.

The noble Lord spoke about the tax relief on annuities being retained, but think the point is that it was tax relief on the mortgage interest that was retained. I think the noble Lord said that the tax relief on the mortgage interest was to compensate for the position of the annuity. But the interest element in the annuity is never more than one-third of the mortgage interest in these type of schemes. So as these schemes are at the moment the tax relief gives a distinct advantage to the taxpayer.

Finally, on the question of unfair discrimination and singling out a particular group, I think that that argument might carry weight if the preceding Government had not already singled out the taxpayers in this particular case. But they have singled them out, and it seems quite unfair to leave out of account the non-taxpayers. However, I should like to consider all the other points that the noble Lord made, and therefore, with the leave of the Committee, I should like to withdraw the amendment and perhaps come back to the question again at the Report stage.

Amendment, by leave, withdrawn.

Clause 110 agreed to.

Schedule 13 agreed to.

Clauses 111 and 112 agreed to.

Schedule 14 [Rent rebates and allowances]:

11.42 p.m.

Lord BELLWIN moved Amendment No. 191:

Page 127, line 27, leave out paragraphs (f) and (g).

The noble Lord said: This is a minor, consequential amendment to the Government's earlier amendments, Nos. 150 and 152, applying the Rent Acts to the Crown Estate and Duchies. The amendment has no substantive affect. It deletes the provision in Schedule 14, paragraphs (f) and (g), specifically applying the rent allowance scheme to Crown Estate tenants. This is no longer necessary as Crown Estate tenants will now anyway be eligible for rent allowances under paragraph (a) by virtue of being protected tenants under the Rent Act. I beg to move.

On Question, amendment agreed to.

Schedule 14, as amended, agreed to.

Clauses 113 to 117 agreed to.

Clause 118 [Accounts and audit]:

[Amendments Nos. 192 to 196 not moved.]

Clause 118 agreed to.

Clauses 119 and 120 agreed to.

Schedule 15 [Registered housing associations]:

[Amendments Nos.197 to 202 not moved.]

Lord BELLWIN moved Amendment No. 203: Page 132, line 10, leave out from ("committee") to end of line 13 and insert ("or an officer or employee of the association; (b) by way of expenses to a member of its committee who is not an officer or employee of the association; or (c) by way of expenses to an officer of the association who does not have a contract of employment with the association.")

The noble Lord said: Amendments 203, 206 and the first part of 207 are technical amendments made in recognition of the fact that housing associations frequently have two sorts of officers: those who have contracts of employment with their association and are employees in the normal sense of the word, and those who do not. The schedule as drafted covers only those officers with contracts, and accordingly it could have the effect of preventing any payments at all being made to what I might call the honorary officers; that is, those without contracts of employment, such as the honorary secretary of an association.

The first amendment makes it clear that honorary officers should be treated under Section 26 in the same way as committee members who do not have contracts of employment. This means that the Housing Corporation will be able to lay down the maximum amounts that these officers and committee members may receive from their associations by way of expenses.

Amendment 206 and the first part of 207 complement the first by providing that these payments of expenses are not prohibited by the general ban on payments contained in the new Section 27. The second part of 207 will ensure that nothing in Schedule 15 will prevent tenants of housing associations becoming committee members. It will also ensure that tenants who are on committees can be rehoused by their associations or given new tenancy agreements.

It is common practice—and, indeed, it is encouraged by the Department of the Environment—for housing association tenants to sit on the management committees of their associations. It is possible, however, that the present wording of Schedule 15, which prevents associations granting benefits to their committee members, could prevent this perfectly sensible state of affairs and, more particularly, could prevent tenants who were committee members being granted new tenancies. Without these amendments a number of problems could arise. First, honorary officers might not be able to receive any payments at all from their associations. Secondly, there might be difficulties for tenants who become committee members. I invite noble Lords to accept the amendments which rectify these anomalies.

On Question, amendment agreed to.

Lord BELLWIN moved Amendment No. 204:

Page 132, leave out from beginning of line 16 to end of line 20 and insert— ("(5) Where a registered 1965 Act association—

1. (a) pays any sum or makes any gift in breach of subsection (1) above; or
2. (b) pays to any person a sum which exceeds any maximum amount specified in relation to that person under subsection (3) above;

the sum or, as the case may be, the value of the gift or, in a case falling within paragraph (b) above, the amount by which the sum exceeds the maximum shall be recoverable by the association; and proceedings for its recovery shall be taken by the association if the Corporation gives the association a direction to that effect.").

The noble Lord said: This is a technical amendment to ensure consistency within Schedule 15. The Bill already provides for an association to recover payments made in breach of the new Section 27 and for the Housing Corporation to direct recovery. This amendment is designed simply to rectify that omission and I invite the Committee to accept it.

On Question, amendment agreed to.

Lord BELLWIN moved Amendment No. 205:

Page 132, line 34, after ("business") insert ("trading for profit"). The noble Lord said: This amendment restricts the definition of "business" in new Section 27(3) to one which trades for profit. Without this restriction, the Bill could prevent some practices which we want to encourage. By restricting the schedule to businesses trading for profit, these problems would be avoided. I invite the Committee to accept the amendment.

On Question, amendment agreed to.

Lord BELLWIN moved Amendment No. 206:

Page 133, line 10, leave out ("or").

The noble Lord said: I spoke to this amendment when moving Amendment No. 203. I beg to move.

On Question, amendment agreed to.

Lord BELLWIN moved Amendment No. 207:

Page 133, line 13, at end insert— ("; or (d) any payment of expenses to which section 26(3)(c) above applies. (5A) Where a tenancy of a house has been granted to, or to a close relative of, a person who later became a committee member, officer or employee of an association, nothing in this section prevents the grant to that tenant of a new tenancy (whether of that or any other house.)".

The noble Lord said: I spoke to this amendment when moving Amendment No. 203. I beg to move.

On Question, amendment agreed to.

Schedule 15, as amended, agreed to.

Clauses 121 and 122 agreed to.

Schedule 16 agreed to.

Clause 123 [Housing association grant]:

11.48 p.m.

Lord EVANS of CLAUGHTON moved Amendment No. 208:

Page 86, line 13, leave out ("£5,000") and insert ("£9,000").

The noble Lord said: I would ask the Committee to consider Amendments Nos. 208 and 209 together. This is an amendment in respect of which I should declare an interest. I am a member of the management committee of one of the largest housing associations in the country. This is to do with the provision of grant for housing associations who are rehabilitating houses for sale. The question is simply whether the present proposal, at £5,000, in Clause 123 is large enough to cover the gap between, as it were, the production costs of rehabilitating a house and the market value. I concede that in a town like York or almost any market town in the country, where you rehabilitate a house in an urban context in a small town like that, the added value in terms of the value for sale would be probably sufficient on the present proposal of £5,000 to cover the cost, because there is no stigma value in buying a house in the centre of Stratford on Avon or some such place. However, if as are the Merseyside Improved Housing and a lot of other housing associations of that kind—and I expect the noble Baroness, Lady Fisher, has experienced this in Birmingham, as have other noble Lords in other parts of the country—if you are rehabilitating a house in an inner urban area (which I suspect the Government and all noble Lords would be anxious should happen) the sale price is depressed by the area in which the house lies. It is the experience of the housing association with which I am connected that the production cost, the architectural fees, the purchase price, the legal fees, the capitalised interest and the improvement and temporary decanting allowances fall very far short of the price that can be obtained in an inner urban area such as Liverpool 8 for the house when it has been rehabilitated. The reason is the type of area. I agree there are differences between one area and another. For the areas of large cities with inner urban problems, which on the present Government's declared intentions and that of past Governments' they regard as important, the grant of £5,000 is not sufficient. That is why I am suggesting that the figure of £9,000 should be inserted in both cases. I beg to move.

11.51 p.m.

Lord MOWBRAY and STOURTON

I was very interested to hear what the noble Lord said about his amendment. Like him, we regard the improvement for sale scheme as extremely important. It will help in bringing to life some of our most dilapidated housing stock and in providing homes at low cost, especially for young people, as he mentioned. However, we cannot agree with the noble Lord that a maximum grant of £5,000 per dwelling is inadequate, as he put it. We believe it is a realistic figure which will put momentum into the scheme while accepting that the resources which can be devoted to it are not limitless. As the noble Lord knows, a limit of £5,000 also appears in Clause 103, which provides for local authority improvement for sale. We would have to think very carefully before changing the limit in one clause while leaving the other unchanged.

It might also interest the Committee to know that the National Federation of Housing Associations, even when they were considering various regional variations only asked for a maximum of £6,000, so as the Government have given £5,000 I do not think that we have done too badly on this. The clause does however provide for the maximum grant to be changed by order if circumstances warrant it, and the Government will certainly wish to consider this if at any time in the future there is evidence that the £5,000 is proving inadequate. This meets the point the noble Lord was worrying about. However, at the present time we judge that figure to be a perfectly adequate and reasonable one and I ask your Lordships to reject this amendment.

Lord EVANS of CLAUGHTON: I take the point that the noble Lord mentioned about the local authority sector. I also take the point the National Federation have not suggested the figure that I have put in to the amendment. I am aware that the housing association with which I am connected regards the type of problems that exist in central Liverpool as unusual. To give a typical example of the kind of problems we have, we have a contract price of £11,400 to buy; archi- tectural fees of just over £1,000, the purchase of the property for £2,000, very modest legal fees of £60, capitalised interest of £500, acquisition, improvement, re-housing and temporary decanting allowance of £825, which leaves us with an average price for a rehabilitated house in the central area of Liverpool of £15,925 —nearly£16,000. Deduct the £5,000 grant, and there is £10,975. This leaves a gap of £3,675 between that figure and the valuation that the district valuer will give in that kind of area. It is on that basis I have put forward this particular amendment.

Having said that, and taken into account what the noble Lord said about the possibility of reconsidering by order and, having drawn the attention of the Committee to this problem in the area about which I am talking, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 209 not moved.]

Clause 123 agreed to.

11.55 p.m.

Baroness DENINGTON moved Amendment No. 210: After Clause 123, insert the following new clause:

Amendment of s. 29 of 1974 Act.

(". Section 29 of the 1974 Act (Housing Association Grant) is amended as follows:

After paragraph (e) in subsection (2) there is inserted the following paragraph—

"(ee) establishing in respect of any housing or residential accommodation a scheme or schemes for the ownership of the housing or accommodation by an association which falls within paragraph (d) of section 15(3) of the 1977 Act or for the management of the housing or accommodation by a housing cooperative as defined by section 49 of this Act or an association formed by the occupants of the housing or accommodation for the purpose of managing such housing or accommodation.".")

The noble Baroness said: I shall try to speak to this amendment as briefly as I can. It is concerned with trying to get adequate grants to help establish housing associations which are running community leasehold schemes, co-operative management schemes and things of that sort. When they start, these associations really do need professional guidance. They are often groups of people who have no knowledge of committee matters or of how to form a committee, what a chairman or secretary has to do, or anything at all. Their responsibilities have to be explained to them. Essentially they need lessons in book-keeping or else they get themselves into a terrible muddle and then they fail: and it is tragic if they do that. They need guidance from experienced and professional people, and this guidance has to be paid for.

I declare an interest, in that I belong to the Greater London Secondary Housing Association which is doing this work. They fortunately are funded by the Greater London Council, but there are others who are not, and they do need funding. The funding authority is the Housing Corporation and funding should usually come through what is called the non-scheme grant operated by the co-operative services unit. Their money is limited and there is simply no guarantee that they will always make a grant, or do it early enough. It is really a bit of a "hit or miss" business, if I can put it like that, whether you can get them to listen or whether you have a member who is influential enough to get them to listen to you.

So something really needs to be done about these setting-up grants. My friends in this field suggested that this was the right amendment. I am not pressing this amendment as it stands at all. Really, what I am asking the Minister is this. Will he look into this matter and see what is the best way to help? Should it be done, as the amendment suggests, through the HAG system, through a word in the ear of the Housing Corporation, or what? I just felt that it should be raised.

Lord HYLTON

I should briefly like to support the noble Baroness over this amendment. The amounts required can be quite small—£100 or £200 to start the finance. I agree it would be not unreasonable to ask these co-operatives to put up something towards that themselves, but very often they cannot find the whole of the money and there is a lack of charitable funds to cover this kind of thing. It would be very helpful if some Government agency or other could do something about it.

Lord BELLWIN

Without referring to the notes I have here—because I think the last point made by the noble Baroness was the nub of what she was trying to achieve—I think I could best answer by saying that obviously she will not press this amendment, but if there are ways in which we could be helpful then why do not we do it like that? I shall be very glad to look at what can be done to be helpful, perhaps together with the noble Baroness.

Baroness DENINGTON

I thank the Minister, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 17 agreed to.

Clause 124 [Recoupment of surplus rental income]:

11.59 p.m.

Lord MOYNE moved Amendment No. 211:

Page 86, line 21, after ("which") insert ("after the passing of this Act").

The noble Lord said: In speaking to all the amendments standing in my name, I should explain that the first two are really one, and are concerned with the general principle of what seems to me retrospective legislation, while the third is designed to remedy for the charitable housing trusts what would, in my view, be a very real injustice in the Bill as drafted. As the background of all the amendments is the same, and as the arguments are inter-linked, it seems best to speak to them all together.

I should begin by saying that I am a trustee of the Guinness Trust, which was set up 90 years ago, in 1890, and has other activities apart from housing among its permitted objects. Though charging the lowest possible rents over the years, the trust has grown and had become quite substantial even before the admirable housing association grants were thought of. I understand that some of the other older housing trusts, such as the Peabody, the Sutton or the Samuel Lewis, are in much the same position; namely, of having built up a valuable capital of bricks and mortar, the income from which is, and always has been, used for the gradual expansion of their work.

I do not wish to show ingratitude for the housing association grants, which have so enormously contributed to the expansion of the housing associations and trusts. By their help, the Guinness Trust alone has, since 1974, been able to complete some 4,000 dwellings, besides having over 2,000 in the pipeline. Without the grants, it is possible that in the prevailing economic circumstances we should not have been able latterly to afford much new building, but could only have continued our programme of reconditioning. Everybody in the housing movement must be exceedingly grateful for these grants, and to the Governments of both complexions which set them up and which have sustained them.

But the sums advanced were said to be grants—that is to say, gifts—though with conditions attaching as to the way in which they should be spent. The gratitude that I have expressed makes me reluctant to look a gift horse in the mouth but the question is whether this admirable horse was a gift or not. Clause 124 would turn the conditional gifts, after all the conditions have been fulfilled, into a kind of loan to be repaid out of the profits which the trusts since their inception have used to further their work, or they can even be regarded as a kind of investment of the State in the work of the trusts. Well and good, if that had been the understanding when the grants were made, but my objection is to retrospective legislation, which is rightly abominated by all our political parties whenever it rears its ugly head, and my first amendments, Nos. 211 and 213, are to make the proposal for clawing-back surpluses arising from the grants operate only from the passing of this Bill.

I should say that among those who support my amendments the noble Viscount, Lord Boyd, cannot be in his place, being overseas, although he has, I know, written to the Minister and spoken along these lines on Second Reading; and the noble Earl, Lord Jellicoe, who is a director of the Peabody Trust, is also unable to be present. But I am very glad that the noble Baroness, Lady Denington, with her wide knowledge of the housing field generally, and of the Sutton Trust in particular, has put her name to the amendments.

My first two amendments would make the gift horse remain a gift horse, until its new nature of a loan horse had been made manifest by the Act. But, if the Minister cannot accept my first two amendments, I hope that my third amendment, No. 215, at least may find favour in his sight. That amendment is designed to achieve at least that the value of a trust's assets before the grants were made is taken into account, so that a trust's assets received for specific purposes, often wider than actual housing as such, can still be used as the trustees decide. I would emphasise that present and future surpluses are generated not only from the grants under the 1974 Act, but also by the assets which the original endowment has produced.

Some purposes, such as the provision of a club room or specialised provision of housing for the frail elderly or other disadvantaged groups, or other purposes of the kind, may be outside the definition of housing, and so outside the scope of the housing association grants, though within the objects of the charitable trusts.

We want to be able to use the fruit of our original assets for such purposes beyond the peradventure of a Minister's discretion. That the acceptance of a housing association grant should lead to the possible expropriation of income from the original funds of a charitable trust would surely be altogether unjust. If they had known of this clawing-back consequence, trusts might well have chosen to look for improvement grants instead of housing association grants which they might well have hesitated to accept. Timeo Danaos et dona ferentes. They should perhaps have guessed what the benevolent Greeks would be up to in some future Act of Parliament! Seriously, I feel that the right of trustees to use the income of their trust's original assets in accordance with the terms of the trust should be enshrined in the Bill. I beg to move.

12.6 a.m.

Lord BELLWIN

In replying to this amendment, I hope it will be helpful to noble Lords if I also take the points raised in Amendments Nos. 212 to 215, since these are all closely connected and concern the worries of noble Lords about the grant redemption funds and the way in which they will operate. I hope, too, that I shall be forgiven if I range a little more widely than the text of the amendments themselves and attempt to give some explanation of our intentions in relation to the funds. I believe, in this way, I may be able to assuage some of the fears that have been expressed about the Government's intentions.

First, I think I should spell out the nature of the proposals for the recoupment of surplus rental income and the way in which we envisage them operating—although I shall not, of course, be giving a detailed plan of implementation, since we want to have further consultation with the National Federation of Housing Associations and the National Association of Almshouses before we reach that stage.

As a matter of background, noble Lords will know that housing associations which are registered with the Housing Corporation have, for some years now, been eligible for housing association grant under Section 29 of the Housing Act 1974. This grant meets the difference between the total approved capital costs of a project and the capital sum—for which a "residual" loan is raised—which can be serviced from the net income of the project. This will effectively be the net income when an allowance for management and maintenance costs has been subtracted. Typically, grant meets 80–90 per cent. of the costs. The grant calculation is based on the figures relevant to the time of project completion and is not varied afterwards. If rents and running costs later rise with inflation while loan charges do not, associations are likely to build up surpluses on their projects. In a sense, there would have been an overpayment of grant, but the grant calculation was correct at the time it was made and there is no way of forecasting the extent to which surpluses will arise. The purpose of the clause is to allow the Secretary of State to require associations either to pay the surpluses to him or to apply them for purposes he specifies.

It is unlikely that such surpluses have yet arisen in practice, because the increase of management and maintenance costs has been at least as great as the increase in rents, which are constrained by the 75 pence a week phasing arrangements applied to housing association fair rents in the Housing Finance Act 1972. However, surpluses are now more likely to arise, because of the progressive erosion in real terms of the charges on the residual loans and because of the new rent phasing arrangements introduced in the Bill. I cannot say categorically how the Secretary of State plans to use the surpluses which arise, since much will depend on the circumstances of an association at any particular time. I have to say, however, that the Bill clearly envisages that the Secretary of State may wish to recover, rather than simply to direct the use of, surpluses arising. There will often be circumstances in which it will be right to recover the money—for instance, where public funds alone have paid for the activities of an association whose future programme does not warrant retention of large surpluses; but equally there will be occasions when the power to direct is more appropriate.

I have also to say here that I cannot accept the amendment of the noble Lord, Lord Moyne, and the consequential amendment, No. 213, which would restrict operation of the funds to surpluses arising on schemes which received housing association grant after enactment of the Bill. This would discriminate between existing associations, which would be able to retain much of any surpluses arising, and new associations, which would not. It would also allow some associations to retain large sums of money by benefiting from grants which were not intended for that purpose. I shall come on to the detail of this in a moment.

This brings us to another major point which, I know, has caused some concern and is the subject of the noble Baroness, Lady Vickers' Amendment No. 212. I appreciate that it has been argued that it is not right to continue recovering or directing surpluses once an amount equivalent to the original grant has been recovered; and I have received representations suggesting a ceiling on the recoverable amount. I am afraid, however, that I cannot accept these arguments. On recent housing association schemes, housing association grant has typically contributed at least 85 per cent. of the costs, the rest being provided by the residual, long-term loan; and associations have not needed to provide any money of their own.

Moreover, the intention has always clearly been that the grant should do no more than cover an association's costs, not that it should put associations into surplus. In these circumstances I cannot agree that the Government have no call on, or responsibility for, surplus rental income accruing above a certain level. On a more practical point, it also seems to me that many associations, being non-profit making bodies, would not have an appropriate use for surplus funds, even if they were to retain them. This, it seems to me, might apply with particular force to some of the associations providing hostels which are the subject of the noble Baroness, Lady Faithfull's Amendment No. 214.

I believe it right, therefore, that surpluses should always be subject to the direction of the Secretary of State for all stock which has been provided with the assistance of housing association grant. The overriding need here is to protect public money, and all associations, large and small, charitable and non-charitable, should be required to establish the funds identifying the surpluses arising, as a matter of good management and accounting discipline. But there will obviously be cases where recovery is highly unlikely—for example, where an association shows a deficit on its activities as a whole and becomes eligible for revenue deficit grant. In such cases, the Secretary of State would normally expect to offset surpluses against their overall deficit. But this does not breach the principle that these surpluses first have to be identified in the manner we propose.

I come lastly to the concern expressed about houses which were originally built by charitable trusts out of charitable endowments. I know there is general concern about this, but also more particular concern about properties which have recently received small amounts of housing association grant for repair works such as new roofs. Another rather similar problem concerns the use of charitable funds to top-up the grant available, providing for an overall higher standard than is considered appropriate for grant-aid. These, I am sure, are the problems which have concerned the noble Lord, Lord Moyne, the noble Viscount, Lord Boyd of Menton and the noble Earl, Lord Jellicoe, in tabling Amendment No. 215.

Again, I am afraid I cannot accept that such property should not be shown in the grant redemption funds. But I accept that it would not be right to recover the full amount of surpluses arising where substantial amounts of charitable funding are involved, and I can assure noble Lords that we shall be looking for a formula which accounts fairly for the private funding involved and allows for surpluses deriving from those sources to be retained by the association.

I believe that, given flexibility and full consultation on its detailed application, this clause provides a fair and practical way of dealing with surpluses arising on stock provided with public money. I urge noble Lords to support the clause and I hope that the movers may now feel it possible not to press the amendment before us and not to move Amendments Nos. 212 to 215.

Baroness FAITHFULL

I was to have moved Amendment No. 214, and I am grateful to the Minister for taking the amendments together, thus saving time. But I am sorry to press the Minister on this point. The purpose of Amendment No. 214 was to bring to his notice that, where housing associations are running very small hostels for very difficult people, not only the rent is included but also board and lodging. To divide the rent from the board and lodging is in fact going to entail a great deal of administrative work for the small housing associations for, in fact, very little money. I imagine from what has been said that the Secretary of State will take this into account.

Lord HYLTON

I am extremely grateful to my noble friend Lord Bellwin for saying that there would be further consultations, both with the National Federation of Housing Associations and with the National Federation of Almshouses. However, I was disappointed in his reply in that I did not think he really covered the point made by my noble friend Lord Moyne about retrospection. At this time of night I am very uncertain as to whether points made with great force about the assets of old charitable trusts have really been taken into account.

In his reply the noble Lord made some mention of hostels and I would just like to add into the pool the question of Part III homes for the elderly, on which I had an Unstarred Question earlier this year, which was answered by my noble friend Lord Cullen of Ashbourne. It is universally acknowledged that there is an extreme shortage of funds and very little statutory provision on this particular point, and if some of the possible future housing association surpluses could be diverted to this end it would solve a great many problems. I hope that the Government will think a good many times about all these amendments, and I should like to support them in general.

Lord EVANS of CLAUGHTON

Since I understand we are also considering Amendment No. 214, I should like to support what the noble Baroness, Lady Faithfull, has said. I have been involved over the years in the Abbeyfield Societies and it seems that this clause proposes that the Grant Redemption Fund is based on the calculation of rental income obtained from hostels. At the present time hostels only have to identify the rental income proportion of the charge they make to residents at the time they apply for the grant. It seems that under this proposal this calculation will have to be made very frequently and would involve owners of hostels, such as Abbeyfield, in making a fairly complex calculation to divide the rental income from the proportion of the charge that is made for lighting, the proportion that is for heating, for services and for full or partial board, which many hostels of this kind offer.

This seems to me, as I think it does to the noble Baroness, to be an enormous and permanent addition to the work load of the rent officer service for a very small return to the Exchequer. It seems to me that the kind of people we are talking about, who are largely doing this work on a voluntary basis, are having an unnecessary and totally extra bureaucratic load placed upon them, to identify and separate the rental proportion of a charge from the other charges, and I do hope that the Government will reconsider this in order to reduce bureaucracy, which again is something to which we often hear the present Government paying lip-service.

Baroness DENINGTON

I think we shall want to study the Minister's statement very closely. There is a great deal of feeling, particularly on the part of the charitable trusts, about the possibility of having monies that have arisen through the use of their charitable endowments and charitable activities sequestered, and I do not think that is really what the Government can possibly want to do. I noted that it was said they would be looking for a formula. As well as the consultations, which I am sure everybody welcomes very warmly, I wonder whether the Minister would consider including as a group the charitable trusts? I think it would be very helpful to them if they could have direct contact in working out the formulas. I dare say our situations are fairly general and yet differ in certain cases.

In the case of Sutton, of which I am a member, the value of their assets is £138 million and the work that has been done with the help of HAG is £17.7 million; that shows the sort of relationship between the charitable holdings and what has been done with Government money. If we can be included in consultations I am sure everyone will be most grateful.

Lord BELLWIN

May I make two or three brief points. On the point the noble Baroness, Lady Denington, made, I am not quite sure of its implications, but I shall certainly talk to colleagues about that. We will consider the point my noble friend Lady Faithfull made about small hostels and the administrative difficulties in making the order; we will certainly give that some thought. As to the point of my noble friend Lord Hylton, I assure him we will look sympathetically at the cases to which surpluses may be applied.

Lord MOYNE

The noble Lord, Lord Bellwin, in his not unsympathetic reply did mention that he would try and find a formula for separating the endowments of the charitable trusts; I think he said that. It seems to me that the amendment proposed—my long amendment No. 215—does exactly that. It takes the value of the endowments and anything built up, not now, but in 1974 before a penny had been received of the HAG grants. The grants started in 1974. It seems to me that avoids all the accounting difficulties because the assets are known at that date. It may not be exactly fair that it is not done gradually up to the present date, but for rough justice the assets can be taken at that known date before the housing association grants came into it. It seems to me that here is the formula the noble Lord is looking for.

I should mention the new amendment, No. 215A, which is very much on the lines of the hostels amendment but taking it a bit further. The Minister can take into account before clawing back four additional things which are set out in the Act of 1974. It widens Lady Faithfull's hostel exemption (Amendment 214)—taking the hostels and other activities into account before clawing back. It seems to me that Amendment 215A might be deserving of being looked at again. I hope very much that between now and Report stage the noble Lord will look very closely at these things. It seems to me that all of us can have a shot, as we have done, at making the improvements, but that really only the Government can make satisfactory improvements which fit in with their scheme and will stand up. I do think these things ought to be in the Bill, and not dealt with just by assurances. I hope the noble Lord will in the short time between now and Report stage do his best to work out perhaps a few additional sentences as Government amendments. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness VICKERS had given notice of her intention to move Amendment No. 212:

Page 86, line 23, leave out ("for any period") and insert ("until such time as the Secretary of State determines that the grant has been redeemed")

The noble Baroness said: I am in a slightly difficult position because this amendment has already been more or less answered before I have had time to move it. Therefore, I shall not move the amendment, but shall read what my noble friend has said and perhaps bring forward a further amendment at the Report stage.

[Amendment No. 213 not moved.]

12.26 a.m.

Baroness FAITHFULL had given notice of her intention to move Amendment No. 214:

Page 86, line 25, after ("projects") insert ("other than hostels")

The noble Baroness said: I do not wish to move this amendment at this stage, but I shall reconsider, when I have read Hansard, whether to bring it up again at Report stage.

[Amendments 215, 215A and 216 not moved.]

Lord MOWBRAY and STOURTON moved Amendment No. 217:

Page 87, line 21, leave out from ("date") to ("as") in line 22 and insert ("but not earlier than the end of the period of account").

The noble Lord said: I beg to move Amendment No. 217. Your Lordships will have appreciated that, under Clause 124, as drafted, the Secretary of State may demand interest on surpluses accumulating in the grant redemption funds at rates to be decided by him for any period beginning up to 12 months before he serves a notice on a particular association to direct the use of the surpluses. This, however, carries a risk that associations may be charged interest for a period during which they had no knowledge that interest would be payable, or at what rate.

Clearly that is not a satisfactory position for them to be in and we believe the present amendment puts matters right. In practice, the Secretary of State intends to make in advance a general announcement of the rate at which interest on surpluses arising will become payable where these surpluses remain in the funds after the end of the accounting period in which they were generated. When the Secretary of State subsequently gives a notice to an individual association to direct the use of their surpluses, the amendment provides that the earliest date from which interest will be payable is the end of the accounting period. The amendment therefore removes the risk of associations incurring unknown liabilities, and I urge your Lordships to accept it.

On Question, amendment agreed to.

Clause 124, as amended, agreed to.

Clauses 125 and 126 agreed to.

[Manuscript Amendment No. 219AZ not moved.]

Clause 127 agreed to.

Clause 128 [Housing Repairs Accounts]:

Lord MOWBRAY and STOURTON moved Amendments Nos. 219A and 219B:

Page 89, line 39, leave out ("or")

Page 89, line 40, at end insert (" or the Council of the Isles of Scilly.").

The noble Lord said: I beg to move Amendments Nos. 219A and 219B en bloc. These two amendments have one simple purpose—to permit the Council of the Isles to open a housing repairs account, should it so desire. The Council of the Isles is not a district council and therefore does not fall within the present definition of a "local authority" in Clause 128. The amendments extend that definition to include the Council of the Isles. I beg to move.

The Earl of KINNOULL

Do I understand that the Isles of Scilly are included in the Bill? If they are included, may I assume that the Isle of Wight and the Isle of Man are also included?

Lord MOWBRAY and STOURTON

I cannot speak about the Isle of Man. I think the Isle of Wight is included in the local authority of Hampshire.

The Earl of KINNOULL

With respect it is not in the local authority of Hampshire. The Isle of Wight is a separate body.

Lord MOWBRAY and STOURTON

I beg your Lordships' pardon; I am advised that my noble friend is right. But I gather that the Isles of Scilly would not have been a separate authority unless we had particularly mentioned them in the Bill.

The Earl of KINNOULL

Can my noble friend let me know later about the Isle of Man?

Lord MOWBRAY and STOURTON

I shall certainly undertake to do that.

On Question, amendments agreed to.

Clause 128, as amended, agreed to.

Clause 129 [Service charges]:

12.31 a.m.

Lord STRABOLGI moved Amendment No. 220:

Page 90, line 5, at end insert— (" ( ) Where a service charge relates to a later period the monies collected for this charge will be accounted for separately by the landlord or the association or company responsible for the collection of the service charge and will be controlled and administered by a representative of the landlord and one representative of each category of tenant nominated by the respective categories subscribing to the service charge".

The noble Lord said: This amendment seeks to ensure that these funds are administered and controlled by not only the landlord but also by each category of tenant subscribing to these reserve funds for future expenses. In most mansion blocks there still remain three categories of tenant in varying numbers: regulated tenants, short leaseholders, and long leaseholders. All three of these categories should be in a position to control, through their nominated representatives, in conjunction with the landlord's representative, the administration, investment and disposal of these funds, as and when necessary, to defray legitimate expenditure.

The suggested amendment will prevent cases such as that recently of a block of flats in London where the tenants were asked to pay substantial capital expenditure for future repairs. The block was then sold and the funds so collected were mysteriously whisked away; the tenants being asked by the new landlord to pay that money again. Although the tenants were able successfully to contest the matter in court, they should not really have been placed in that position. Indeed, if the vendor had not had other assets in this country, successful as the tenants might have been in court, they might well not have been able to retrieve the funds had these been deposited in certain overseas areas. I beg to move.

Lord JANNER

I should like to support this amendment. In doing so, I point out that we are now coming to matters which affect a large number of people in this country, particularly those whom we commonly call the middle class. Members in this House, Members in the other place, and people throughout the country are placed in a position of serious difficulty. I am sure that it is well known to those Members who are present and to everybody who is being faced with this serious position.

I shall take an opportunity later of discussing the whole matter and showing how shattering it is, and what terrible results are being effected by certain speculators who are making it impossible for people—some of whom have been in houses for 40 and 50 years, and people of the age of 95 and some even over—who are bound to leave their premises at the present time because of the unfortunate situation that has been created.

If there are to be charges, at least let the tenants themselves have something to say about it. I have had a personal experience of this matter. Some time ago I had to leave my own flat because of the enormous rent that was being asked. I then went into another flat. I was told in the other flat—I am paraphrasing—that there would not be any cause for concern for the next three years in regard to any improvements or repairs that were necessary. Within a year they had put up scaffolding, and already they had had one "dangerous" notice served. However, I shall come to that when we debate later clauses.

One thing is certain: whatever else may be conceded, at least this amendment should be accepted, otherwise tenants will be placed in a position of tremendous difficulty and will have no say in what is being done. I therefore hope the noble Lord, for whom we have great respect who has been treating the Committee very reasonably, showing himself willing to consider positions as and when they arise, will appreciate that this is a terribly serious matter.

The Earl of KINNOULL

The noble Lord, Lord Janner, commands great respect in the Committee, but I think he is mixing up a service charge, with which we are dealing here, and the Rent Acts and the rights of landlords under those Acts to charge a certain premium for the right to purchase individual flats.

Will the noble Lord, Lord Strabolgi, explain why he feels his amendment would have a practical effect? I look after the management of certain flats and one knows that under the 1972 Act, as responsible agent for the landlord—and indeed for the tenants—one has a responsibility to notify tenants of capital sums. The noble Lord referred to three categories of tenant, but I do not think they are treated in any way differently. I see the noble Lord looking at me with mystification, but he went on to say that the tenants in the case he quoted resorted to the law and the law supported them, and that is right and proper. However, why does he think his amendment would strengthen the hands of tenants?

I do not think it would.

Lord BELLWIN

I am grateful to my noble friend Lord Kinnoull because he made the point I was about to make. The Government will be studying the question of reserve funds set aside for future expenditure. This is an extremely complex area and any proposals would have to be very carefully worked out. We are not unsympathetic to the idea underlying the amendment, but, as drafted—and my noble friend said exactly what I would have said—it would not be of any practical effect. However, as I say, we are not unsympathetic to it and, if the noble Lord will withdraw it, then it is something we think should be looked at in any case.

Lord ST RA BOLGI

I am grateful to the Minister for what he has said and, in view of his encouraging remarks, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 129 shall stand part of the Bill?

The Earl of KINNOULL

The way subsection (2) is drafted it is extremely complicated. It says that paragraphs 2 to 6 of Schedule 18 shall not apply and then says that Sections 90 to 91A shall apply. Could we try to simplify the clause for those who have to practise the law?

Lord BELLWIN

I am grateful to my noble friend and I am sure that what he says is most relevant. I promise that we shall look most carefully at his remarks.

Clause 129 agreed to.

Schedule 18 [Provisions replacing sections 90 to 91A of Housing Finance Act 1972]:

[Amendments Nos. 221, 223, 224 and 225 not moved.]

12.40 a.m.

The Earl of HALSBURY moved Amendment No. 226A:

Page 139, line 4, at end insert— (" (3) This Schedule shall have effect notwithstanding anything to the contrary contained in any lease or tenancy agreement which makes provision for payment of a service charge.")

The noble Earl said: This amendment arises out of my practical experience of being at one time chairman of a tenants' association in a London block of flats, under the previous legislation. This was rendered unmanageable in one sense as a result of a number of the tenants preempting the decision which ultimately emerged in the case of Frobisher v. the Kiloran Trust on progress payments, notwithstanding the quite clear covenants in their leases.

The drafting of the previous legislation was intended to prevent landlords or their agents from apportioning accruals between accounting periods, which is of course standard practice in accountancy in any other form, but this standard practice had lent itself to abuse, and in the 1974 Act this was restricted. The intention of Parliament was as stated in the judgment in the case of Finchcorn v. Rodriguez, but the subsequent judgment in Frobisher v. the Kiloran Trust clearly went beyond the original intention of Parliament, and the present Bill places that judgment in abeyance henceforward by restructuring the provisions.

It is impossible to run any business without working capital. Whether the business is the British Steel Corporation or a block of flats, somebody has to provide money before money can be spent. If a lease requires tenants to do so by progress payments—and this has nothing to do with the accountancy for accruals—then of course it is the tenants who provide the working capital. An Act of Parliament which relieves the tenants of this obligation without transferring the obligation to the point where it must arrive, or settling the terms on which this shall be done, throws an innumerable number of leases into a state of complete confusion.

The unsatisfactory situation which progressively developed in this context has left a trail of what I might call disputational debris in its wake, which could continue to be troublesome in the future. I hope that the adoption of this amendment will put an end to all these matters and help to forward good relations between landlords and tenants by removing any possibility of doubt that this schedule does override.

I believe that the forward situation is now clear, as stated by the noble Lord's right honourable friend in the other place. If I give the noble Lord the reference as column 449 of Hansard of 20th May, I hope that he will have it handy and be in a position to confirm that the position as there stated by his right honourable friend is unchanged. Failing that, if the noble Lord has not got it by him, I have it here and, with permission, will read it.

I apologise for the short notice of this amendment, but it is part of the price paid for the short notice which your Lordships have been given for the entire Bill from beginning to end. Cross-Benchers and Back-Benchers have no mechanism for studying these Bills intensively and it takes us a little while to come up with amendments. If the noble Lord will promise to study the amendment sympathetically between now and report, I would not this evening wish to treat the precise wording as other than negotiable, and I would be ready to withdraw the amendment in the hope of finding something more acceptable for a later stage of the Bill. At this stage I shall say no more. I beg to move.

Lord BELLWIN

Amendment No. 226A seeks to ensure that the provisions in this schedule will override any term to the contrary contained in a lease or tenancy agreement. I can assure the noble Earl that it is quite unnecessary to make specific provision for this. It will not be possible to evade the schedule by placing any clause to that effect in a lease or other agreement.

Obviously, I am not cognisant of the particular reference which the noble Earl mentioned a moment ago; and because of his concern I gladly undertake that we shall look very carefully, not only into what was said in the other place but also into what he has said. It seems to me that what I have before me perhaps does not quite cover the points the noble Earl has made, and I shall want to satisfy myself, as well as I know would the noble Earl, that what I have said is absolutely true. But perhaps it would be helpful if I repeat that we really feel that it would not be necessary, and that his fears are fears which he need not have. Therefore, for the time being, at least, I would ask him if he would care to leave it at that, as indeed he said he would be prepared to do; and we in turn will look at it very closely. But as I sit down I would be inclined to feel that in fact he need not be as concerned as he seems to be.

The Earl of HALSBURY

In face of that very positive assurance from the noble Lord, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 228 not moved.]

12.47 a.m.

Lord BELLWIN moved Amendment No. 229: Page 139, line 10, after ("incurred") insert—("—

1. (a) no greater amount shall be so payable than is reasonable; and
2. (b) after the relevant costs have been incurred")

The noble Lord said: The purpose of this amendment is to prevent landlords from requiring tenants to pay, as part of their service charges, sums of money in advance beyond what is reasonable. Perhaps your Lordships will allow me to explain how this will work, very briefly. Many leases provide for long leaseholders, and sometimes renting tenants, too, to make advance payments in various ways; for example, through periodic fixed payments or payments based on estimated costs for the year, and in some cases contributions to a long-term sinking fund. I see nothing objectionable to that in principle, and Schedule 18 makes it clear that such advance payments will be lawful.

The position under the Housing Finance Act 1972 was established by a recent High Court judgment. That held that because of the way the Act was worded advance payments were not lawfully recoverable by the landlord. That was not the intention, and I think it would be difficult to justify outlawing such payments. Indeed, great practical difficulties would arise. In the light of representations we have received, however, the Government have tabled Amendment No. 229, which will have the effect of limiting what can be demanded by way of an advance payment to what is reasonable. This limitation will apply whatever the terms of a lease may say.

For example, if there is provision for advance payments to be made on the basis of estimated expenditure in the coming year and the tenant considered the estimates to be excessive, he could challenge the landlord in court to show that the payment demanded was reasonable. Nevertheless, much of the value of provisions of this sort lies in their effectiveness in deterring landlords from making unreasonable demands in the first place. This amendment will further strengthen the protection we are giving to tenants paying variable service charges, and I strongly commend it to your Lordships' Committee.

Lord STRABOLGI

I think this amendment will greatly strengthen Schedule 18, and we welcome it.

On Question, amendment agreed to.

Lord STRABOLGI moved Amendment No. 230:

Page 139, line 13, leave out paragraph 3 and insert— (" 3.—(1) Costs incurred are to be taken into account only to the extent that they are reasonably incurred and costs incurred in the provision of services or the carrying out of works only to the extent that the services have been provided or the works carried out to a reasonable standard and so certified by an independent Surveyor. (2) Estimated costs including costs representing a provision for future expenses of a non-annual nature or a contribution towards a reserve fund in respect of future expenses are to be taken into account only to the extent that they are reasonably estimated and so certified by an independent Chartered Accountant. (3) The test of reasonableness is to be applied after the audited accounts are produced and actual costs incurred for the service charge year are known.")

The noble Lord said: With your Lordships' permission, I should like to speak to Amendments Nos. 231, 232, 233, 234, 235, 236, 239, 240 and 243A. These amendments are all linked, and deal with the whole question, and indeed the whole problem, of service charges, which is one which has arisen in the last 10 or 15 years, of course, and has become increasingly acute—and my noble friend Lord Janner referred to it in a previous amendment. Many thousands of people who live in flats have to pay a service charge to the landlords or managing agents. This is something which has always been customary, and, of course, is acceptable. They include many long leaseholders, who may have leases for periods such as 99, 100 or 125 years on their flats. These service charges are intended to pay for items such as the provision of hot water or heating; the cleaning of common parts of the building, such as the staircases; repairs to the common parts or the main structure of the building; maintenance of installations in the building, the upkeep of the surrounds; external decorations; the payment of the porter if there is one, and so on.

During what I may call the break-up era of flats, these service charges began to be used for quite a different purpose. In the period about 10 to 12 years ago when it was easy to borrow money and people went in for property development as a means of quick gains, these property companies acquired all the old-fashioned Key Flats and other flats owned by family trusts. They bought them up--and there was no control—and they then persuaded the tenants, if they could, to buy the long lease under threat of eviction if they did not. Many did buy the long lease and signed contracts which required them to pay service charges; and then the owners began to recoup what they had not been receiving in rents—for, of course, they had sold the long leases—in the form of service charges. This has accelerated because since the collapse of the property market in 1974—when Mr. Tony Crosland said, "The party's over"—many of these large empires fell into liquidation and the liquidator was obliged to sell them off to other property companies who then sold them off to others, sometimes to overseas and offshore interests.

The position is, therefore, that in many blocks of flats in London, well-known flats, the tenants are being obliged to pay very large sums for refurbishing and tarting up the whole building. The noble Earl wonders at the word I used. It was used in another place, and that is as good a precedent as I know. They are being asked to pay very large sums for this sort of thing which, I submit, is really a capital expenditure. There is no control over it. As well as that, in some cases, if they ask to see the books they find that the landlord is a company which they cannot get at.

The provisions of the present Bill do not tackle the root of the problem which is a lack of control by the people paying for the services, the extent and value for money of the expenditure. Instead, the Government has taken the view that the tenants and leaseholders can retrospect- tively challenge their service charge bills in the county court. But why should they have to go to court every year? These amendments, therefore, seek to tighten up the procedures. I beg to move.

Lord EVANS of CLAUGHTON

I very much support and admire (if that is the right word) the noble Lord, Lord Strabolgi, for putting down these amendments. The service charges problem is mainly a problem in inner London, as I understand it. In spite of many attempts, it has not been possible to cure it by legislation up to now. I think that a number of Conservative Members of the other place have tried in various amendments that have been moved in the passage of the Bill there to deal with the problem in an effective, watertight way. I think that, on the admission of practically everyone who has been involved, it has evaded the best attempts of the amateur draftsmen. One would hope that the attempt made by the noble Lord, Lord Strabolgi, will encourage the Government draftsmen to try again to create legislation which will prevent the taking of advantage of people through the imposition of service charges, which is becoming a very serious problem, as I am advised, in the inner London area, and some other areas but not on a national basis.

The attempt made in these series of amendments is a very good attempt. In Amendment No. 230 he gives two protections to the tenants: that the costs are reasonably incurred and that they are certified by an independent surveyor. Those are great improvements over the present rather haphazard protection that the tenant has. I am not quite so sure as to the efficacy of Amendment No. 231. The provisions of Section 32 of the Housing Act 1961 are absolute prohibitions. Paragraph (b) is welcomed from these Benches. It makes certain a position that is already clear.

Generally, therefore, I think the amendments which are set out here at great length are a brave attempt to deal with what I hope the noble Lord, Lord Bellwin, will admit is a serious problem. I hope that he will be able to offer constructive ideas how the wishes not only of noble Lords on this side of the Committee but Members of the other place and a very wide spectrum of people from all political backgrounds see as a serious blot in the central areas of London and one that cries out for remedy. If the noble Lord is not willing to accept the amendments, I hope he will have something positive and constructive to offer in their place.

12.57 a.m.

Lord BELLWIN

Of course, I know the concern. If I had not known it, it has been raised in your Lordships' House sufficiently—not least by the noble Lord, Lord Janner, on one aspect of it, although it is not strictly speaking so much the service charge aspect that he always raises. Nevertheless, the whole area of mansion blocks is one of concern. I am grateful to the noble Lord, Lord Strabolgi, for putting down these amendments, which I will try to answer in the kind of detail which I think they merit, and for dealing with them in the way he is doing, which is most helpful. I think that I ought to answer them in some detail.

The Government have provided in paragraph 3 of Schedule 18 a very simple and clear-cut limitation on the costs which a landlord may recover in a service charge. First, costs are only to be taken into account to the extent that they are reasonably incurred. This means that if the landlord decides to put very expensive wallpaper on the staircase walls he would only be able to recover the cost of using wallpaper of a reasonable standard. Secondly, costs are only recoverable if—and I repeat the "if"—the services or works are of a reasonable standard This means that if the court decided they had been provided to an unreasonably low standard it could rule that none of the cost was recoverable from the tenants.

Let us now see what Amendment No. 230 would do to that provision. First, it would remove that very important "if", and substitute "to the extent that" thereby substantially weakening protection to tenants given in paragraph 3. Then it would require an independent surveyor to certify that the standard was reasonable, but there is no indication of who appoints the independent surveyor, or what happens if the first surveyor who is asked will not certify that the standard was reasonable, but the next one will, or what effect this would have if the court was asked to say what was reasonable.

It goes on to say that estimated costs, including contributions to a reserve fund, are to be reasonably estimated and so certified by an independent chartered accountant. I think it is very difficult these days for anyone to be sure about what is a reasonable estimate, and that is why in Government Amendment No. 229 which bears on this question we have provided not that estimates must be reasonable, but that demands for advance payments must be reasonable. I fail to see why a chartered accountant should he considered specially qualified to pronounce on estimates. That is really not his job.

But when we get to the final part of this amendment we see that perhaps there was no need to bring in the chartered accountant at that stage because it says that the test of reasonableness is to be applied after the audited accounts are produced and the actual costs incurred are known ! I really do not see the point of saying that estimates must be reasonable if the test is not to be made until the costs have been incurred.

Moving on to Amendment 231, if I understand it correctly, it tries to deal with the problem perceived to arise from the judgment in Campden Hill Towers v. Gardner, 1976. Under Section 32 of the Housing Act 1961, landlords must keep in repair specified parts of the dwelling for all tenancies under seven years, even if the lease suggests otherwise. The apparent problem is that Section 32 only applies—and this was held in the Campden Hill Towers v. Gardner case—to the tenant's own accommodation. Seemingly therefore the landlord can recover the cost of repairs to common parts, and even other tenants' accommodation, through the service charge or rent. The amendment would try to prevent landlords doing so.

I would suggest that this is not the right solution. First, Schedule 18 is not the correct place. Section 32 to the Housing Act 1961 deals only with those on short leases—leases of less than seven years—while the great majority of those to whom Schedule 18 applies will be on leases of seven years or more. Secondly, an adequate and more appropriate safeguard already exists through the rent registration system. If the landlord is trying to pull a fast one by requiring a tenant to pay for repairs to other people's homes, it is highly unlikely that the rent officer would agree to register a service charge as being variable.

Moreover, we have provided in the Government's earlier amendments (Nos. 127 to 130) to Clause 58 and Schedule 6 that the tenant will in future have the opportunity to challenge the landlord's evidence on service costs before the rent officer registers a fair rent.

I am also bound to say that, although this amendment was tabled in another place, no one has submitted to the Government any evidence of an actual problem. I agree that we should also look ahead and try to prevent potential problems arising. This one, however, seems rather remote. I hope that, in the light of this explanation, the noble Lord, Lord Strabolgi, will accept the rent officer procedures as being more appropriate to this issue, and that this amendment really does not hit the target.

I move to Amendment No. 234. This substitutes for paragraph 5 of the Schedule complex arrangements for consultation on works. I could go through it in great detail explaining why it is unsatisfactory, but that would take a long time, so, if your Lordships are content, I should like quickly to summarise just the main objections.

It provides conflicting arrangements for deciding what is reasonable. It would enable tenants who do not have to pay for works to vote on estimates. It contains unworkable arrangements for dealing with disagreements and, by finally referring them to the court, would ensure that costs in such cases would in the end have increased, given the inevitable delay. It disregards landlords' contractual obligations and would require tenants' associations to consult non-members. I do not doubt that the noble Lord's intentions are of the very best, but I fear that in this case it really would not be too helpful. Certainly, this is not, as I see it, a party political matter at all, and one is really trying to find solutions which would get to where I think everyone really wants to be.

If I may turn to Amendment No. 233, it concerns the cost limits above which a landlord must consult tenants about proposed works. Under Schedule 18, the landlord will not be required to consult about works costing less than £500. The amendment would reduce that minimum to £200, so that in a block of, say, 10 flats consultation would be required on works costing more than £250, being £25 per flat. I do not think really we should be justified in requiring landlords to consult tenants about works costing less than £500. Firms could well be unwilling to estimate for such minor works or, if they did, would want to cover themselves against the cost of providing estimates which might not be accepted. That would increase their overheads and would not be in the general interests of tenants. If I understand this amendment correctly, it also tries to limit any subsequent alteration to the proposed amounts of £25 and £200 to the level of inflation as measured by the retail price index.

I grant that the main reason for providing that the proposed amounts can be varied by order is so that they can be up-dated to allow for inflation, but I see no need to put a limitation of this kind in the Bill. For one thing, we need to see how the proposed limits work in practice, and, for another, any change will be made by statutory instrument laid before Parliament.

In connection with Amendment No. 235, we have provided in paragraph 5(6) of Schedule 18 that in an emergency a landlord may begin works before the period for consultation has expired. Paragraph 6 allows the court to dispense with all or any of the consultation requirements if it is satisfied that the landlord acted reasonably. It would be up to the landlord, if challenged, to satisfy the court that there had been an emergency. It would allow the landlord to dispense with the elaborate requirements in Amendment No. 234, if he can demonstrate that there was an emergency, but it does not say to whom he must demonstrate it—the tenants, the association or the court. It would not be a very satisfactory adjunct to Amendment No. 234. Considered on its own, it is totally unsuited to the proposals in the Bill, which already provide for emergency situations.

Moving to Amendments Nos. 236 and 248, they would require every landlord to provide a detailed account of expenditure for the service charge year, and a statement of the reserve fund with an audited report which is to be "circulated" to each tenant. Presumably, that means that every tenant is to be given a copy, whether he wants it or not. I am not convinced that it is necessary to require every landlord to supply all his tenants with something they may not want and, at the same time, to impose a penalty if he fails to do so. The requirement would have its own costs which tenants would have to pay. Why force those who are content to pay for something they do not want?

I shall not go on about that amendment. I have lots of notes about it, but I am anxious to come to the end of this part. If I may come to Amendment No. 239, that really amounts to five separate amendments. If the noble Lord will allow me, I shall not deal with them in detail. I wonder if I may sum up by saying that we are really anxious to know whether there are ways in which we can do better that which is of concern. I have tried to demonstrate that the proposals—although moving in particular directions—have for one reason or another, in the individual circumstances, their own problem and limitations.

What they do which is helpful is that they make us think about whether or not these are the directions, modified perhaps in some ways, in which we ought to be going, but they do not solve the problems as we see them, and do not take us much further. However, I need hardly say that if the noble Lord, Lord Strabolgi, feels that we ought to be talking, perhaps outside the Committee, about these matters and trying to get something that would get us into a better situation, then, of course, we should happily agree to do so.

Lord JANNER

I am sure your Lordships have listened with very great care, both to the proposal in the amendment and to the reply. What I should like to ask the Minister is this. I am sure that he will consider these amendments carefully, as he has very willingly considered suggestions which have been put before your Lordships on previous amendments. But will he please keep in mind that all this has arisen because of the very serious position which has been created by speculators in property? Will he do his utmost to prevent further damage to the tenants, by giving every possible consideration to these matters, as well as to others?

The Earl of KINNOULL

What does the noble Lord mean by speculators benefiting from a service charge?

Lord JANNER

It is now ten minutes past one, and I should very much like to expand on that matter. Putting it very simply, we are now dealing with leaseholds. What is happening now is that under leaseholds, which was a very ingenious idea created at the time of the Industrial Revolution—

The Earl of KINNOULL

This is irrelevant.

Lord JANNER

It is very appropriate. In the leases which one had then, the leaseholder had to do the repairs. They were within his discretion. If therefore there was any dispute about repairs, the landlord had to dispute them. Because of the shocking things which have happened in consequence of the absurd regulations as they stand at present, with tribunals giving entirely wrong decisions in consequence of what I have mentioned time after time in this place and not taking into consideration the scarcity of rented houses in an area, one is now placed in a position where the tenant has to protest and see to it that he is protected.

That is why I am asking the Government to be very careful about this and to try as much as they possibly can to minimise the damage which has been caused by people who have bought houses and speculated in them, and consequently placed hundreds of thousands of people in this country in a position where they have to leave because they cannot afford the accommodation and cannot meet the demands that are made upon them. That is why I am pressing the point. Perhaps the noble Earl will consider it from that point of view. If he is leaning at all on one side or another, he should lean on the side of the tenant who is being placed in this terrible position.

The Earl of KINNOULL

I know that the noble Lord, Lord Janner, feels very strongly about the tenant's position, and rightly so. He is a practising solicitor of great merit. But he is missing the point. We are talking about the service charge. This is the narrow point, although it is not narrow because the service charge is a delicate point. The noble Lord, Lord Strabolgi, has raised a very important point, but it is not Lord Janner's point. support my noble friend. Subsection (3) greatly strengthens the position of tenants. Probably the most vital question is this: May I ask my noble friend what discussions he has had with the professional bodies which look after not only landlords but tenants as well—those who have to interpret the management clauses of leases? Can I assume from him that they were brought into the discussions to try to firm up what we all want to achieve; namely, a better deal for tenants under service charges?

1.14 a.m.

Lord BELLWIN

I cannot give details of the discussions and consultations which took place. I hope that we had them with the professional people to whom my noble friend refers. If he has any suggestions to make about that, we shall be glad to hear of them. Other than that, have nothing to add.

Lord STRABOLGI

I am grateful to my noble friend Lord Janner for what he has said and also to the noble Earl, Lord Kinnoull, who knows a great deal about this subject. There are many good landlords, but I am afraid that there are some bad ones. As the noble Earl, Lord Kinnoull, said, the question of service charges has to be seen in the context of the apartment houses of London and some of the other cities. Ten or 15 years ago we allowed what were ordinary, rented flats which went up in an orderly way and which were run in what I call a Dolphin Square way—indeed, in the way Dolphin Square is still run—to be acquired and suddenly to become long leaseholds. This happened in a very few years, but what we did not do was to back it up with a proper system of law. The French have owned their flats for most of this century and a lot of the last, but they have a proper system of law. The tenants there own the freehold of the flats.

This is something to which I would urge the Government to give their attention, because, as the noble Lord, Lord Bellwin, said—I am most grateful to him for his full explanations—this is not a party matter. It has given considerable concern to all the Central London Conservative Members who have taken it up in very strong terms. It is not a party matter but it is, I think, a major scandal. I know a large block of flats, which was sold off to an offshore company, where the tenants have had the builders in knocking around for six years now, refurbishing, turning flats next door to them into luxury flats. It has been going on for six years, with the builders in and all that that implies. And who is paying for it? They are, because in their leases they have to pay for refurbishing and improvements. They are paying for it. They do not want it, but they are having to pay for it. The block is owned by a company that is based in Curacao, with directors living in Switzerland. This is the sort of thing that is going on in many places in London. It is something to which the Government should give their attention.

I am very glad that in another place a a Select Committee—these Select Committees are, I think, one of the most important developments we have seen in Parliament since the war—is going to look into this whole question of the flats in Central London and our other cities. The Ministers and the department will be required to go and give evidence about it. I hope that some good will come. In the meantime, I am very grateful to the noble Lord, Lord Bellwin. I know he takes an interest, and his heart is in the right place. I beg leave to withdraw the amendment.

Lord DAVIES of LEEK

I do not know whether I am in order, but this issue is so important that I cannot understand why we are considering it at this time of night. Why should we rush it through and why could the Government not give more time? This is important to tens of thousands of people, particularly in our cities.

Amendment, by leave, withdrawn.

[Amendments Nos. 231 to 236 not moved.]

Lord BELLWIN moved Amendment No. 237:

Page 140, line 41, leave out ("and that person") and insert ("(and so on if that person is not himself the superior landlord) and the superior landlord")

The noble Lord said: This amendment closes a gap we have noticed in para- graph 8 of Schedule 18. It relates to a tenant's request for a summary of costs incurred by the landlord or a request to see the accounts or other documents on which the summary is based. Without going into more details, unless anyone requires me to do so, I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 238 to 240 not moved.]

1.15 a.m.

The Earl of HALSBURY moved Amendment No. 241A:

Page 141, line 31, after ("not") insert ("or will be or will not he")

The noble Earl said: This amendment is the second of my two amendments arising from practical experience of onetime chairmanship of a tenants' association. If it is not well run, a tenants' association can be just as troublesome to a landlord as a landlord can be hardhearted towards his tenants. A tenants' association is associated with a number of difficulties, in the sense, as the noble Baroness, Lady Denington, said earlier, that it is badly in need of professional help. To start off with, it is, for example, not a corporate body which can enter into covenants with the landlord, under seal, binding on future members. It has a fluctuating membership which can include the type of barrack-room lawyer who makes cordial relationships between the tenants' association and the landlord almost impossible, despite the will of many to be on friendly terms.

In such circumstances, decisional paralysis can descend on the relationship and the amendment gives the right to ask for a declaratory judgment in the county court with a view to procuring a resolution in advance of matters which can drag on in dispute indefinitely. It merely gives the county court jurisdiction over the same matters before the event as it would have after the event in those cases where no decision can be agreed on between the tenants' association and the landlord. I believe it would facilitate relationships if this were the case and there were a court to which decisions could be referred. I beg to move.

Lord BELLWIN

I presume the intention of this amendment is to enable a tenant to challenge the reasonableness of estimated costs—

The Earl of HALSBURY

Or a landlord.

Lord BELLWIN

Indeed, yes, but I do not think it would be realistic to expect the court to make a declaration of what will or will not be reasonable in the future. I have already explained to your Lordships that Government Amendment No. 229 will enable tenants to challenge the reasonableness of demands for advance payments and I think that is a practical way of dealing with this question. I really have nothing more that I can add in reply to the noble Earl, but I should like to say what I said to him on the last amendment that he moved: I cannot see at the moment that we can be more helpful on the point but we will look at what he has said and I will consult with my colleagues and, if I feel that we ought to be doing something about the matter along the lines that he has suggested, I will take steps so to do. Otherwise I fear I cannot be helpful on this occasion.

The Earl of HALSBURY

I am anxious to oblige the noble Lord and to save the time of the Committee by not prolonging the argument, but when the noble Lord talks about asking what will be reasonable in the future, of course the future means the present when a decision has to be taken, and the court would only be asked to decide in the present how it would view the matter retrospectively. If the noble Lord will, as it were, take that under his belt as well, then I shall be content. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

1.22 a.m.

Lord BELLWIN moved Amendment No. 242:

Page 141, line 37, leave out ("£200") and insert ("£500")

The noble Lord said: This amendment fulfils an undertaking given by the Government in another place. Paragraph 7 of Schedule 18 requires a landlord to supply a tenant who asks for it with a summary of costs which relate to his service charge. There are a number of other points to the amendment but I think that they are self-explanatory. I beg to move.

Lord STRABOLGI

Perhaps I may speak also to No. 243. I agree that the figure of £200 is derisory and I think £500 is more realistic. We felt that £1,000 was probably more appropriate in these days, but there we are: if the Government want £500 and it is not a sufficient deterrent, perhaps they will consider putting it up later.

On Question, amendment agreed to.

[Amendments Nos. 243 and 243A not moved.]

Lord STRABOLGI moved Amendment No. 244:

Page 142, line 17, leave out paragraph 15.

The noble Lord said: Formerly all tenants who paid a service charge which varies, or may vary, had a right to information under the Housing (Finance) Act 1972. Under the present provisions of the Bill about 90 per cent. of Rent Act tenants will be excluded from any right to information. Only those 10 per cent. or so of Rent Act tenants whose rents have the service charge element entered by the rent officer as variable are allowed to have the right to service charge costs information, such as certified accounts I beg to move.

Lord BELLWIN

We have already debated the Government's amendments 127-130 to Clause 58 and Schedule 6. These fulfil our commitment to give fixed fair rent tenants the opportunity to challenge the evidence on service costs deployed by their landlords before the rent officer. The rent officer, in fixing a fair rent, would anyway only take account of service costs which he considered to be reasonable. But our amendments give an added safeguard to the tenant. I would suggest to the noble Lord that this is a somewhat better approach than that in his amendment because it places the safeguard in the right place. Fixed fair rent tenants can only have their rent increased by the rent officer, and it is at that point we are providing them with the right to challenge the landlord's evidence.

The noble Lord's amendment seeks to apply the machinery of Schedule 18, which is designed for those whose leases provide for a service charge which can be varied at any time according to the costs incurred. It is not intended for fixed fair rent tenants, and I could not say quite what the legal effect would be if it was applied to them. All I could guarantee is uncertainty and confusion for all those involved. In the light of this, and the major safeguard introduced by the Government's earlier amendments, I wonder if the noble Lord will feel able not to press this amendment.

Lord STRABOLGI

I am very grateful to the noble Lord for his explanation. I think it is very important to have this on the record, particularly for people outside who are very interested and affected by this. We are grateful, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord STRABOLGI moved Amendment No. 245:

Page 142, line 21, leave out paragraph 16.

The noble Lord said: Clause 16 as now included in the Bill would encourage landlords who have not done so as yet to collect their service charges through an association or management company and in this way give landlords a free and unfettered control of administration and service charges which they could then levy as they see fit on tenants who previously paid their rent direct to the landlord. This is a loophole in the Bill which I hope the Government will be able to block. I beg to move.

Lord BELLWIN

How nice it is to be able to say yes, we do entirely agree.

On Question, amendment agreed to.

Lord STRABOLGI moved Amendment No. 246:

Page 143, line 9, leave out paragraphs 21 and 22 and insert— (" 21. A recognised Tenants' Association is an association of tenants of flats in a building where at least 55 per cent. of the tenants are members of the association. Where an association satisfies this definition the Secretary shall give written notice to the landlord together with a list of members. Annually thereafter the secretary shall supply the landlord with a list of members to prove that the association continue to satisfy the requirements of this paragraph. 22. The County Court or the Secretary of State may issue a certificate to the landlord certifying that a tenants' association is to be recognised Tenants association, notwithstanding that it does not meet the requirements of paragraph 20 and such certificate Hill stand until an application is made by the landlord to cancel same.")

The noble Lord said: There is no minimum level of membership required under the Bill before the landlords may recognise an association. It is, therefore, quite feasible for the landlords to recognise a less representative association or even one specifically set up by the landlords themselves. Formerly associations with over 60 per cent. of the eligible membership were able to take action in the county court in a service charge case. This facility has been, it seems, withdrawn from associations. I beg to move.

Lord BELLWIN

Amendment 246 would amend the provisions in Schedule 18 relating to recognition of tenants' associations.

I agree that it would seem reasonable in most circumstances for a tenants' association to be recognised if 55 or 60 per cent. of the tenants in a block belonged to it, but membership is not the only criterion which will need to be satisfied.

Under the Bill, the association will have the right to be consulted on proposed major works to the block, but not all tenants have to contribute to the cost of works. Generally speaking, it is only long leaseholders. Consequently, in a block containing renting tenants and long leaseholders it would not be right for tenants who do not have to pay to be able to vote on estimates for works. In order to obtain a certificate of recognition under the proposal in the Bill, therefore, an association will have to have rules which ensure that only those who pay vote. I wonder whether in the light of that consideration the noble Lord may feel able to withdraw his amendment.

Lord STRABOLGI

I am grateful to the noble Lord. We will study carefully what he has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos.247 and 248 moved.]

Schedule 18, as amended, agreed to.

Lord DENHAM

Having on previous occasions on this Bill had to say to your Lordships that I was not terribly happy with the progress, I think I really ought to say that I am very grateful indeed for the way that the Committee has really put itself out today to get this Bill through in the way that it has. Having said that—which I feel very strongly and very sincerely—I beg to move that the House do now resume.

Moved accordingly, and, on Question. Motion agreed to.

House resumed.