Housing Defects Bill

HL Deb 06 July 1984 vol 454 cc524-45

11.42 a.m.

Lord Skelmersdale

My Lords, I beg to move that this Bill be now read a second time.

The Housing Defects Bill which applies to Scotland as well as to England and Wales, will have come as no surprise to your Lordships, who will recall the Government Statement on 10th November last year, repeated in this House by my noble friend Lord Bellwin, which announced a scheme of assistance to private owners of houses sold by the public sector and since found to have serious structural defects or potential defects. What may have surprised your Lordships is the speed with which the Bill has arrived before the House today for a Second Reading. It shows how important we think it is to help owners of defective dwellings which have been sold by the public sector. The relatively speedy passage which the Bill received in another place proves that this is shared by all parties. I trust the Bill will be equally well received by the House.

It may be helpful if I very briefly explain a little of the background to the Government's initiative in this matter. Following the investigation of an Airey house damaged by fire, the Building Research Establishment undertook a study of the prefabricated reinforced concrete system of construction used in that type of dwelling. Their findings, published in May 1981, were that the reinforced concrete components in all Airey houses were liable to cracking and eventual disintegration because of carbonation and, in some cases, the presence of excessive levels of chloride in the concrete, resulting in the corrosion of the steel reinforcement in the concrete.

The Department of the Environment informed all local authorities of the Building Research Establishment's findings so that they could consider the implications for any dwellings of this type forming part of their stock and inform private owners of such houses.

These owners were faced with immediate and serious problems. They had bought at a price based on a valuation which took no account of the latent or potential defect identified by the Building Research Establishment. On discovery of the defects, these owners found themselves with a greatly depreciated asset, because such properties were unmortgageable. In September 1982, the Government announced a discretionary scheme of financial assistance for private owners of Airey houses, many of whom had sunk their total resources into the purchase of their home. The scheme was brought into operation in February 1983 and most local authorities are now helping owners under it.

But by February of last year, we were receiving reports that the problems of carbonation and chloride attack were not confined to Airey houses. The Government therefore asked the Building Research Establishment to investigate six other types of prefabricated reinforced concrete house. Their findings revealed that the problems associated with prefabricated reinforced concrete houses were far more widespread than at first thought, and on the day these findings were published the Government's intention to legislate and bring forward a statutory scheme of assistance to the many more private owners therefore affected was announced to both Houses.

I must point out that in the vast majority of cases we are not talking about dwellings which are structurally unsafe; they will continue to provide perfectly good housing for a long time to come. I stress that because many have criticised this Bill for failing to provide help to tenants and local authorities. Local authorities do not need new powers to deal with the prefabricated reinforced concrete houses that remain in their stock, and as many of the houses will not need repair for many years, in some cases not for 20 or 30 years, local authorities' expenditure on repairing their own houses can be spread over a long period.

But the private owner's problem is that he has sunk his resources in his house and now finds that its value has been greatly reduced, because building societies will not issue mortgages on it because it will not last for the 50 or 60 years that societies normally look for if they are going to lend. This is a serious and immediate problem and the object of the Bill is to provide assistance to private owners in these circumstances. They purchased in good faith from the public sector and, through no fault of their own, the value of their homes has been substantially reduced. We think that it is entirely right that the public sector which produced these defective houses in the first place should give help to them.

I should say that the further investigations by the Building Research Establishment indicate that there are 28 types of house designed before 1960 which use prefabricated reinforced concrete load-bearing components and which are likely to suffer from the faults which the Building Research Establishment has investigated. Initially, it will be the owners of these types who will be assisted under the Bill. The 28 types are: Airey, Boot, Butterley, Cornish Unit, Dorran, Dyke CC, Gregory, Hamish Cross, Lindsay, Myton, Newland, Orlit, Parkinson Frame, Reema Hollow Panel, Schindler, Stent, Stonecrete, Stour, Tarran, Teebeam, Underdown, Unitroy, Unity, Waller, Wates, Whitson-Fairhurst, Winget, and Woolaway.

In the time available I do not think the House would wish me to go through the Bill clause by clause. We have tried to be helpful in explaining what is in some respects a complex scheme by providing a rather full Explanatory and Financial Memorandum. I shall be very happy to make the Notes on Clauses available next week. However, I should like to describe briefly the outline of the scheme.

As I said earlier, the object of the Bill is to provide for financial assistance to private owners of dwellings which have been sold by public sector authorities and which are defective by reason of their design or construction and which, as a result of these defects having become generally known, have been substantially reduced in value. For the purpose of establishing the scope of the scheme of assistance, the Secretary of State is given a power in Clause 1 to designate classes of buildings which appear to him to fall within the category I have just described. As I have just said, designations will initially be made in respect of the 28 types of prefabricated reinforced concrete house already identified by the Building Research Establishment.

Local authorities will have a duty to give assistance to eligible owners, either by way of reinstatement grant or, in certain circumstances, by way of repurchase under Clause 3. The Bill makes provision for certain criteria to be met in determining the form of assistance, the most important being that before a reinstatement grant can be given the local authority must be satisfied that the repaired dwelling would be likely to be mortgageable immediately after repair by a lending institution in the private sector. Reinstatement grants will be at the rate of 90 per cent. (or 100 per cent. in hardship cases) subject to an expenditure limit specified by the Secretary of State. In repurchase cases, the owner will be entitled to 95 per cent. of the defect-free value of the dwelling, plus any costs reasonably incurred in negotiating the transaction. Additionally, in the case of repurchase the owner is to be granted a secure or protected tenancy. Schedules 1 and 2 make detailed provision for the payment of reinstatement grant and the terms of repurchase.

There will be a specific Exchequer contribution towards local authorities' expenditure under the Bill. For reinstatement grants, this contribution will be at the very generous rate of 90 per cent. In the case of repurchase, the Exchequer contribution will be 75 per cent. of the difference between the price paid to the owner of the defective dwelling and its defective value.

Those are the essential ingredients of the scheme as it will apply in cases where a designation has been made by the Secretary of State at national level. But there is also provision in Clause 10 of the Bill for local authorities to designate classes of buildings which have not been designated by the Secretary of State. This will enable local authorities to deal with defective dwellings with problems of a local nature, where a particular design or method of construction may have been used at a local rather than national level. Once a local authority has designated a class of buildings, owners of the dwellings concerned will be eligible for assistance on exactly the same terms as when the Secretary of State makes a designation.

I ought perhaps, before finishing, to make mention of one provision in the Bill which is not concerned with the scheme of assistance for owners of defective dwellings. The provision concerned is contained in Clause 21. The Building Societies Association at present recommends building societies to lend on new houses only when the buildings are registered with the National House Building Council. This recommendation is a registered agreement under the Restrictive Trade Practices Act 1976. As such, it could be referred to the Restrictive Practices Court by the Director-General of Fair Trading. The recommendation, first made in 1966 with the full approval of the then Labour Government, has worked well.

The Government believe that the public interest can best be served by ensuring that new houses are built according to high standards and sold with a warranty such as that offered by the NHBC. That can be done by ensuring that the present or any future BSA recommendation is not open to possible legal challenge. The new clause will remove the BSA's recommendation from the scope of the Restrictive Trade Practices Act 1976 and from the register of restrictive practices that is kept by the director-general.

I am sure that there are some aspects of the Bill which I have not dealt with today, and I await with interest any points your Lordships may wish to make in the context of this debate. I shall endeavour to deal with any outstanding points in my winding up.

As I have said, this is a much needed Bill, and an important one in that owners of prefabricated reinforced concrete houses have had a raw deal through no fault of their own or of their surveyors. I hope that your Lordships agree, and in those terms I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Skelmersdale.)

11.52 a.m.

Lord Graham of Edmonton

My Lords, I begin by echoing the words of the noble Lord, Lord Skelmersdale, in saying that there will be no opposition or undue delay in putting this Bill on the statute book. However, I was concerned by the latter part of the noble Lord's speech, when he said that in the time available it might not be proper or possible to deal with the Bill more fully today. So far as we are concerned, we attach great importance to this Bill and we are not prepared to lose the opportunity that we have today to debate its impact. Certainly we are not minded other than to give this Bill the maximum scrutiny it needs because of its importance, not only to those who are directly affected but also to the millions of people who will be indirectly affected.

I begin by welcoming the principle of assistance for private owners of defective houses, but I have to say that this Bill provides no help for more than a million families who remain tenants of publicly-owned, non-traditional and industrialised defective homes. Further, the Bill itself is defective in that it will place another burden on ratepayers and local authorities. Also, it fails to place a duty on Her Majesty's Government to help all occupants of defective non-traditional and industrialised homes, irrespective of tenure.

If those opening words sound familiar to the Minister and to his advisers, it is because they were the terms of the Opposition amendment on the Second Reading of the Bill in another place. I sincerely hope that, other than when it comes to the remedy, there will be little time lost in seeking to apportion blame for the catastrophe facing the nation.

When we are talking about the state of public housing, I believe that the nation is facing a catastrophe. That catastrophe is due to the latent defects which emerged in the 1970s and 1980s, the seeds of which were sown in abundance in the 1950s and 1960s. I must declare an interest. More than 20 years ago I served as a housing chairman, as a chairman of planning and as the leader of the council for the London Borough of Enfield. I know from speaking to other noble Lords, and in particular to my noble friend Lord Stallard, that we on this side of the House can parade similar credentials, about which we are not ashamed.

The 1950s and the 1960s were exciting times. After the first dash for 300,000 houses per year so vigorously pursued by the noble Earl, Lord Stockton, in the 1950s, there was a lull. But pressure from families desperate for a place of their own built up and created an incessant demand for housing. And why not? The owner-occupier route was neither universally popular nor possible for millions of people in housing need. I can recall the fierce arguments: do we build more new towns? Can we consider the concept of not only a first generation but also a second and third generation of new towns? That concept was enthusiastically embraced by Governments of both complexions in the 1960s and 1970s.

Sadly, those who are directly associated with the Association of District Councils will recall the enormous problems which the new town councils experienced, born out of the problems of derelict housing. The aftermath of the policies of those councils in respect of new towns has not only been felt in the 1960s, 1970s and 1980s, but, alas, will be felt also into the 1990s, with very little understanding by the Government of how these new town authorities will solve their problems.

The other question was: shall we not merely build new towns, but shall we build traditional housing with a density of 60 or 70 habitable rooms to the acre within urban areas where land is at a premium; or shall we use the fast-developing industrialised systems for both low- and high-rise buildings to reach a density of as much as 200 habitable rooms to the acre? We considered the opportunity which that latter policy would give to long-waiting families to obtain the key to their dream home; more often than not, a key to a flat in a tower block. Without the hindsight which all smug and self-righteous pundits acquire, I plead guilty, with no plea of mitigation, to the charge of trying to house as many families as we could in the 1950s and 1960s—and to do so as quickly as we could. I stand at the Dispatch Box and confess to shedding tears of despair when standing in the middle of rat-infested hovels called homes and to sharing the tears of joy with the self-same families when they received their key; out of darkness and into the light—very often, a flat in a tower block. Ronan Point changed all that, and gave us an opportunity to re-examine the policy we had been following and the advice we had been receiving.

The Minister has, as usual, been fair and helpful to the House in introducing this Bill, but I believe that he used certain words in order to put a gloss on the purpose and the intent of the Bill. He could equally have told the House that that most privileged category of citizen—the council tenant who buys his house—is due to receive a further layer of protection. For those who qualify for a state handout of 50 per cent. (now 60 per cent.) in regard to an asset—often a gift worth up to £20,000—there will be further benefits denied to less-favoured groups; that is, less favoured by the Government.

This Bill will give 16,500 former council tenants who have purchased their houses two new and unprecedented rights. First, those tenants covered by this Bill (and we shall speak later of those who are excluded) will have a right to sell back their house if it is found to be defective. Secondly, they will not only be given their money back, and more, but will also have the right to rent. That is not bad. If only 1 million other families who are living in comparable worrying circumstances could be so lucky.

Perhaps either today or in Committee we shall be given an up-to-date assessment of the Government's estimate of the proportion affected who will ask for reinstatement grant or for repurchase. Can we be told that proportion today? Our assessment, backed up by the Association of Metropolitan Authorities, but based also on experience of human nature, is that more owners will sell back than will rent and will then exercise their right to buy again. Does the Minister have any idea of just how unfair that will be? First, it will be unfair on the councils who will bear the sharp end of this largesse and, secondly, on the million other families living in comparable defective housing whose crime in the eyes of this Government is that they chose not to buy; often because they could not afford to.

We know who will benefit from this Bill, and we do not cavil at that, but why should other tenants and other ratepayers pay? Why should the effect of this Bill on reducing waiting lists penalise those who have already waited a long time? Thus, the burden of our disquiet rests not on the ability of those who have to get a bit more but on the totally unfair way that that bit more is to be obtained by heaping more burdens on those who suffer equally—from poor housing, defective systems, tight budgets. The beneficiary is the couple who bought and thus already enjoy state largesse to a considerable extent.

The unfairness of the unmet problems after the solution in the Bill for private owners cannot be overstated. The potential cost to the public purse of this scheme is estimated to be £250 million. The Minister needs to reply—and I know he is taking a careful note of what I am saying; I repeat, I know he is taking a careful note of what I am saying—on where this extra £250 million of public resources is to come from. We need Government understanding and an undertaking that they are talking about new additional money and not money which is to be filched from other heads with hardpressed budgets. We want a direction from the Government to councils, "Certainly bail out these deserving cases but do not diminish the available resources for others in desperate need".

Housing improvement programme allocations are an imperfect instrument to solve this particular problem. We must have new money or the Government will stand condemned of a cynical piece of jiggery-pokery in helping those who have already helped themselves to a slice of public assets at the expense of millions of equally deserving families. When we are looking at what is required to treat others in the same generous way, what kind of money are we talking about? The Bill assumes a cost of a reinstatement grant at £8,000 and the cost of repurchase at £18,000. A global total to satisfy all the 16,500 owners affected is between £170 million and £200 million. However, the Bill makes no financial provision for dwellings once they have been repurchased. Will not the council then be under an obligation to carry out repairs? Where will that money come from? Will the Minister tell the House of the fate of the 150,000 families living in the selfsame kind of properties which are still in public ownership for which the total cost of reinstatement will be in the region of £1.5 billion?

In another place, and by Statements, Ministers have rested their answers in this field on the HIP allocations providing the sums required. That is a dangerous and fallacious premise and I shall tell the House why. The magic ingredient in the Government's housing formulas is called capital receipts; the retention by authorities of a portion of the capital raised by selling council houses. Last year councils had to rely on retaining 50 per cent. of such receipts. This year they have been assumed to retain 60 per cent. However, we all know the trend in council house sales is going down. The peak has been passed. That is why the latest Housing Bill increased the discount from 50 per cent. to 60 per cent. This means that as authorities are forced to budget to find millions of pounds to meet their obligations under this Bill it will inevitably result in a worsening crisis for all others: tenants, those on waiting lists and improvement grant users. In my view, that is an incredible priority.

Shelter has provided Members of this House with some graphic illustrations of the crippling effect of implementing this Bill in some areas. Bristol faces an estimated bill of £ 10 million to £15 million. Its annual HIP allocation is £12.6 million. Epping has to face a bill of between £4 million and £5 million but its annual HIP allocation is about £2.5 million. Rochester faces a bill of between £6 million and £9 million and its annual HIP allocation is £2.5 million. I know that the Minister will tell us that the repair bill may be, and must be, spread over a number of years; but it still represents a resented additional impost on hard pressed councils, and it is resented by councils and councillors very much indeed.

This is a crazy policy which will force councils to reduce their monies for the homeless, the waiting families, those who wish to repair and renovate their homes—private and council—so that those in the designated categories can sell their houses, get another council house as of right and eventually buy again. It is a good illustration of the mess into which the Government's housing policy has fallen.

I turn to the vexed question of designation of the class of system to be eligible for treatment under the Bill. On Second Reading in another place—and today the Minister has kindly repeated them—the criteria and the types were given that will be dealt with as prefabricated, reinforced, concrete houses that have been designated. He mentioned the 28 types. But setting aside those that were built after 1960, what about the many thousands in other classes which fall as squarely to be designated as those listed?

My honourable friend Mr. Terry Davis, the Member of Parliament for Birmingham, Hodge Hill, has drawn my attention to the deep concern of many of his constituents who live in what are known as Smith houses. As I would expect of him, he has been most diligent in pursuing their interests. On Second Reading in another place he challenged the Minister to get a move on with his consideration—that is, the Minister's consideration—of designating Smith houses and outlining the persistence that he—that is, Mr. Terry Davis—had deployed in getting him to do so over many years, but especially in the past 12 months. At his request the Minister visited Birmingham to see the problems.

What were those problems? Walls with internal movement; internal cracks at wall and partition joints; movement between external walls; external cracking; repointing, matched pattern of cracks. Floors with cracks at the centre and junction with walls; heaving and waviness; doming; jamming of doors; door frames disturbed. On the windows, window sills have fallen; gaping and cracking at the base of windows.

I can assure the Minister that Mr. Terry Davis will not let this matter go away. He is a good Member of Parliament and a good constituency Member. Ministerial noises that it is possible to have local designation—the Minister said it is perfectly possible for the Birmingham council to designate the Smith houses—are certainly not the answer. What a terrible dilemma for the Birmingham council and Birmingham councillors to have to decide who to push to the hack of the queue to allow those unlucky homeowners to jump to the front for access to limited housing funds. Mr. Davis wants a favourable answer soon; so do his constituents; and so do I.

The Bill is riddled with anomalies in that it seems to help some lucky and then unlucky individuals but puts the most outrageous burdens on innocent councils. For example, let us take the Rotherham metropolitan borough council. The Bill requires local authorities to provide assistance to owners of houses formerly owned by other public sector authorities. This means that they not only will have to provide grants but will have to repurchase houses which were never previously owned by a local authority but were sold by other agencies such as, in this instance, the National Coal Board. The National Coal Board will have the benefit of the capital receipts. My honourable friend Mr. Peter Hardy, who has been tireless in his efforts on behalf of his authority and his constituents, tells me that there are 189 National Coal Board sales of properties that fall within the Bill. Rotherham will have to find £2.5 million to repurchase those houses. Where is it to get that kind of money from?

My honourable friend Peter Hardy draws my attention to the problems arising from difficulties in getting building societies to grant mortgages on reinstatement houses. I realise that the Minister will need to take advice, but can he say a little more about the understandings that the Minister has with building societies and the associations on how helpful they will be about the repurchase of those houses? It is all very well to put the house in what your Lordships may agree is a saleable state, but what happens if it cannot be sold because of a phobia or other psychological factor? What is the building society to do? It is not easy for the building society. We need to consider that further.

The Southcote Residents' Association is well known to my noble friend Lord Stoddart of Swindon, who is in the Chamber at the moment. He lives in Reading, from where the association operates. It has written to both my noble friend and myself, and I believe that the House should know the burden of its distress, which arises from the Bill as it presently stands. The secretary, Mrs. Caswell, of 9 Frilsham Road, Southcote, Reading, writes to me in the following terms: There has so far been no positive outcome with the building societies that we know of, and this seems to form the core of the Bill". That touches on the previous point that I made. I know that, if he can, the Minister will be helpful there.

The letter continues: The Bill is solely for home owners, many of which live in blocks of houses along with tenants. As these blocks were constructed as one, the need to repair them as one is of great structural importance to the unit. As we understand the Bill, reinstatement grant would cover the work to be done in certain cases up to 100 per cent depending on hardship. In the event of owners having to vacate their property, there is no provision in the Bill for hardship cases to assist with any cost incurred by storage of furniture and alternative accommodation. In the event of a person who in the local authority's opinion is eligible for reinstatement and after the work has been carried out could still not sell due to the blight on the house type, as the house would be non-defective, would re-purchase still be possible, and, being non-defective, at 100 per cent?". I think that the burden of that last point is that, if having gone for the reinstatement grant, a person finds that he still cannot sell the property, will the council purchase it on the same terms? In other words, can these people gain access to the two sprigs of the legislation? That letter came to me only today. Other points have been raised.

From this side of the House we look to the future against a background of what we consider to be mounting catastrophe. That is the view among those who care and who are concerned to see all families enjoy a good standard of housing as a basis for good family life. I believe that there is gloom and despair in a great many quarters. I am a local government man, and proud of it. It is depressing beyond measure to view the task facing councils. Eighty per cent of housing authorities no longer receive any form of subsidy towards existing or new loan repayments. If those authorities have to spend money because of this Bill, it will almost certainly come out of tenants' resources.

Because we are talking about schemes appraised, and in many cases designated, by Government agencies, the Government should accept much more responsibility for the solutions and not leave the problems to be solved at the expense of other necessary housing activity. Ways in which that could be done have been urged on the Government, not least by the Association of Metropolitan Authorities. I declare an interest as a vice-president. First of all, there should be provision of adequate subsidies to offset the burden of loan charges on the capital costs of remedial work—demolition costs and compensation costs. There should be a take-over of the existing loan debts on dwellings demolished as beyond redemption. The Government should provide a subsidy for dwellings erected to replace those already demolished. There ought to be a special subsidy arrangement for additional management costs associated with tackling industrialised building defects.

We shall in Committee come to the problem of asbestos removal. If we face up to the cost of putting right in the remainder of the century what we did wrong in the past, mind-boggling figures will emerge. I have been told of a total of £10 billion, but it is likely to prove to be an underestimate—and that is just to remedy the errors of the past. The figure of £10 billion is enormous and mind-boggling. It is against such daunting factors that we view this Bill as a modest attempt to bring relief to a tiny number of the people in need of such direct assistance—16,500 out of 150,000—but a million families now live in houses of the industrialised building type and face uncertainty and have no security of mind.

I repeat that on this side of the House we do not oppose the Bill. We welcome its main thrust and approve the relief that will be given by it to 16,500 families, but in Committee we intend to press for comparable relief for others and for a better understanding by the Government of the burden that they are heaping on the backs of councils and council tenants. Above all, we shall use our opportunity to remind this Government that there is more to a housing policy than simply selling off our housing stock and delivering those who buy a bad bargain from the misfortunes which beset the owner-occupier. A housing policy should also be about housing the people—all of our people—and we shall remind the Government of their responsibilities there.

12.15 p.m.

Viscount Hanworth

My Lords, whatever criticisms are made of this Bill, I believe that we must all welcome its intent. Nearly all the points which I was intending to make have already been covered by the noble Lord, Lord Graham, but I should like just to repeat some of the figures which I think have already been given.

Let us take the reinforced concrete houses. It is estimated that about 16,500 are privately owned, but the total owned by local authorities is almost 10 times more. There is therefore a problem of people living in potentially unsatisfactory accommodation, and an eventual commitment on that type of housing alone could cost £1½ billion to cover the whole problem. I am of course taking the figures given by the Government in the Bill. I therefore understand the Government's reluctance to extend their commitment, and the commitments of the local authorities, and, in a way, their cheeseparing contribution of a 90 per cent instead of 100 per cent grant. I should, however, be interested to know how they can morally justify this reduced grant. It cannot be on the caveat emptor principle, because nobody could reasonably have known that the defects which now appear would arise.

Other worrying points, which have already been mentioned, are the mortgageability of houses after restoration (in other words, can the buyer get a mortgage, and therefore is the house easily saleable?) the financial help which the Government are giving to the local authorities; and whether that will come out of an already inadequate housing grant. The doubts about this Bill are therefore not about its intentions, but about how it will work in practice.

There are many areas where the Bill could be unfair, and there is doubt as to whether the Government will be able to control its workings in practice. That of course was why in another place there was a major amendment put down to set up a quango to oversee its operation. I do not support that idea, but I believe that a full annual report should be made to Parliament, so that we can see where improvements can be made and what is going wrong. With the complications, and the fact that the Government have apparently not worked out their policy in detail, I cannot help believing that things are bound to go wrong. Nevertheless, I welcome this Bill.

12.18 p.m.

Lord Sandford

My Lords, I had not intended to speak at this stage on the Bill as I had only some points to make in Committee, when we reach Clause 15. But I find myself provoked by what has already been said to say a few words now. I share the view of my noble friend on the Front Bench that this is an important Bill which must be got onto the statute book with all due dispatch, but I also certainly share the view expressed by the noble Lord, Lord Graham, that it would be quite wrong to assume that this House is ready to pass it on the nod, because a very large sector of the housing stock of the whole nation is involved. Very important, very large sums of money are involved and very important judgments and balances have to be taken between the new increase in the private sector and the public sector and the expenditure required of central Government and of local government.

For instance, when my noble friend says, passing quite quickly over it, that the public sector has produced all these houses, of course that is true. Yet it disguises the fact that the public sector, the Coal Board, the local authorities, the housing authorities, the new towns were operating under enormous pressure from central Government to get on and to build. As the noble Lord, Lord Graham, said, they were glad to do so.

However, this has the effect that it is quite inappropriate for my noble friend to talk about a rate of 90 per cent. being generous, as though it were generous in every case. When we get to Clause 15, I will endeavour to show, and I am sure other noble Lords will as well, that nothing less than 100 per cent. will be essential if any degree of fairness is to be achieved in some cases in respect of houses put up by other authorities like the Coal Board, which are having now to be dealt with by the local housing authorities. There is absolutely no reason why the local authorities, who certainly have the necessary powers, should be required to put into that any of their own resources at all.

These are matters to which we can return at Committee stage. However in view of the way the debate has gone and the amount of detail we were getting into, I thought it proper to say that now.

12.22 p.m.

Lord Stallard

My Lords, I want to refer to the debate so far. I should like just to say that, although very few noble Lords have spoken, it does not necessarily mean that the House does not think that this is an important Bill. The noble Lord, Lord Sandford, who has just spoken, outlined that this is an important Bill. I take the view that the fact that the Government have decided to slot it in, albeit on a special day as far as this House is concerned, underlines the importance that the Government attach to this particular measure.

My noble friend Lord Graham referred to his personal experience in local government. That experience is shared by many of us who were involved in local authorities in the 'fifties and 'sixties. I would not necessarily agree that we were all enthusiastic. I can assure your Lordships that certainly amongst individuals, architects and traditionalists there were great pockets of resistance to this innovation, as it then was. There is also this traditional resistance in local authorities—and, thank God! it still remains. They are always suspicious, to say the least, as to whether the man in Whitehall knows best. Certainly in those days the pressure from Government, from Whitehall, was quite intense.

I can sum it up by quoting from a Ministry of Housing and Local Government circular in the 'sixties, which said, The Minister proposes to launch a concentrated drive to increase and improve the use of industrialised methods in house building for the public sector … The advantage for housing authorities … On numbers"— he says, this is the only way to build the number of houses we need. On speed of erection: most industrialised techniques show worthwhile savings. On price: for flats, industrialised techniques are already slightly cheaper … but efficient organisation of supply and demand can bring down promotion costs. On design: the use of carefully prepared standard designs will release scarce professional time to concentrate on raising the quality of layouts. On construction quality: industrialised methods facilitate quality control. On top of that, special subsidies were given for councils who were prepared to accept this kind of industrial factory-built houses (as we called them in those days). Positive encouragement in the way of more and more circulars was given to local authorities. You can therefore imagine the pressure under which local councils were in those days.

I can remember an experience that I had. I visited a Reema factory in Salisbury. I was extremely impressed by the efficiency and the way that these houses come off a conveyor belt like motor cars. It was a very impressive sight. I had been a critic. That is why I had been invited to visit the place to see how they were produced. Having witnessed the method of production and the end product, with the vast variety of finishes that were available, a lot of my criticisms certainly subsided. I think that on this particular type of house there were about 350 different finishes from which you could choose. Certainly, although I was never totally convinced, I was converted to the fact that smaller units could usefully be built. Further, I was convinced when Reema, amongst others, were prepared to cut their costs to a bare minimum in order to get sites. That was because there was great competition at that time to get the sites that were already very short in the London areas. So all these pressures were placed on local authorities from the centre and from Governments in order to get into this field.

That affected all councils; not just councils of my own persuasion but those of other persuasions as well. I have said that just to illustrate that there is no point in seeking to find out who was to blame for this particular exercise. We shall share a certain amount of responsibility. Some of us can be a wee bit more righteous than others if our conscience says that we certainly objected. I did object to high rise, battery type tenancies in these great blocks of flats. I do object and I always will. I always maintain that we ought to try to replace in horizontal lines rather than in vertical lines the streets that have been destroyed. That is my own conscience salve. However, it does not exonerate me from responsibility for the part I played in encouraging some of the non-traditional types of housing.

So I was in local authority when all that was going on. I remember the Ronan Point disaster. As my noble friend Lord Graham has said, that was a turning point. People said, "There must be something wrong here; things do not happen like that".

Then there was a shift in the opposite direction, thank goodness. I was in the other place when the Building Research Establishment surveys were carried on and reports were debated in that other place. I can also remember the pressure from all sides of the House, from our side and from the other side, for assistance to tenants who had purchased or who were living in these kind of houses. So again the pressure was from all sides and there was nobody looking for anybody to blame.

I remember the Airey proposals. They were very generous proposals, far more generous than seems to be the case now with this particular Bill. That has also already been referred to by my noble friend. So we moved on from the Airey houses that we thought were a problem. Later, in February 1983, there were further statements made about Orlit houses, mainly in Scotland, though there were some in England as well. It began to appear that it was possible that many more of these non-traditional type houses could be in trouble. I remember my noble friend Lord Dean saying in the course of that statement that in his opinion we were seeing the tip of the iceberg; there were literally scores of types of houses, runing into millions and millions of pounds, that would be involved if a proper inquiry and programme of research were conducted.

I have checked the figure: 20 other speakers participated in the debate on the Statement given by the then Minister of Housing. They all made similar points. Again they were proved absolutely correct because further surveys showed that there were many more types. We are not yet convinced that we have reached the end of the list. Although the noble Minister read out a long list, there are a lot of people who think that that list will be much longer before all the inquiries and researches are complete.

The Bill deals with three main problems. They have dominated all the discussions both in the other place and so far this morning here. First, there is the plight of the private purchasers who purchased their houses from the local authority. Secondly, there is the plight of thousands of tenants who will still be forced to live in what are apparently, in their minds and in the minds of a lot of people, potentially dangerous houses still owned by local authorities.

The third and probably the most serious problem of all mentioned by noble Lords today is the financial one affecting local authorities. As already stated, we shall want to develop all these points in Committee. I should however like to say a few words about the matter now. On the point about private purchasers, there is general agreement and no argument in my experience on the need to assist purchasers of these homes from local authorities. The noble Viscount, Lord Hanworth, mentioned a figure of 16,500 private owners who had bought defective houses. That may be an under-estimate. It is a matter that will be developed in Committee.

According to my understanding of the Minister's remarks and after reading the debate in the other place, three new rights have been given to tenants who purchase these properties. They have the right to sell back. That is welcomed by all of us. They have the right to rent another property. They also have the right to purchase a second time. After having sold back and rented, they can then purchase a second time. I do not suppose that any of us will quibble in present circumstances about those rights. However, when posed against the problems of tenants who will be forced to remain in the original dwelling, the situation begins to take on a slightly different appearance. As well as that, these three rights will exert tremendous pressures on local authorities, both housing pressures and financial problems. I speak in relation to the inner London scene that I know reasonably well. I am aware of the tremendous pressures already faced by local authorities. These were discused in a recent debate initiated by my noble friend Lord Wells-Pestell. We dealt with some of the problems facing London boroughs, in particular, in regard to homelessness and so on, and the tremendous pressures under which councils are working. Those pressures will be intensified in areas where many of these houses exist. People will have to be re-housed. Their names will go to the front of the list and take priority in re-housing and other matters.

Noble Lords have also mentioned the financial pressures. These were examined in great detail by my honourable friend Mr. John Fraser who spoke for the Opposition in the Second Reading debate in the other place. I anticipate that we shall spend a great deal of time on this aspect in the forthcoming Committee stage. A number of questions arise in relation to tenants who have purchased from local authorities. I should like to know for instance whether a tenant will be able to appeal against a decision about defectiveness. The decision will be taken elsewhere. It will be taken by the local authority and in some cases by the Secretary of State. Will the tenant be able to appeal against the cut-off date to be fixed by the Secretary of State? Will the Secretary of State consult with local authorities before designating new types of non-traditional building. The Minister may be able to give us some satisfaction on those questions.

A big question to which we shall want the answer is what is to happen to tenants living in defective houses still in council ownership. What is their expectation of improvements? Inevitably, repairs to these houses will be delayed because some of the funds will have to be used to finance the grant to owner-occupiers even though, in some cases, those houses still in council ownership will be in a worse condition. That is more than a possibility. Will those tenants be forced to live in what many would consider to be dangerous conditions? If it is dangerous enough for people to be moved out and to qualify for grants and assistance in another rented property, or possibly another purchased property—a proposal with which we agree—is it different for people who are left in some of these houses? We shall want to develop those points.

It is possible that councils will be forced under pressure to empty some of those houses. There will inevitably be campaigns against people being forced to live in houses from which other people have been moved. Will they have to remain in those houses until the council closes them? If the council is then unable to repair them, will they remain empty? Are we developing another slum programme where there are many of these industrialised or factory-built houses? The Government must bear responsibility for this situation in view of the pressures exerted by all Governments on local authorities in the first place to build these places, and in view of the pressures on tenants to accept them and live in them. The Government must go much further than they propose in the Bill. They must pick up the bill for the results of the pressures that they themselves put on local authorities now that the whole scheme has apparently gone wrong. Resources must be made available to local authorities.

I have mentioned that the Minister read out a list of 28 types of houses that were suspect at this moment. I have seen figures elsewhere from the Association of Metropolitan Authorities and also from Shelter of from between 167 and 300 types of houses. The Minister put the cost at about £250 million. Even if we accept his figure, the amount in relation to the numbers that I have just mentioned will be astronomical. I want to know, in that event, what provision is being made. Will sufficient resources be made available to local authorities? From what I have heard and the comments I have read, it seems that the Government expect the Bill to operate within present HIP allocations. I know that they have said that they will take into account this and that and therefore make additional allocations.

However, the payments, in the initial stages, are mandatory and councils will be obliged to make payments without reference to any other priority. They cannot say that they have not the money at the moment and that they will provide it when they can. They have to find the money at that moment and in those amounts. The Bill, as Shelter says, effectively puts owners at the front of the queue for limited resources. All of us echo that worry and that fear.

In another report, Shelter, with AMA support, has outlined the plight of various local authorities. Many of the repair bills of local authorities in respect of these houses are far higher than their HIP allocations or even higher than their HIP allocations will be. According to the list and the table published, the repair bill in Leeds is £60 million while the HIP allocation is £28 million. Wakefield has a £20 million repair bill and an HIP allocation of £10 million. There is a long list. I know from my experience that Camden has tremendous problems. We estimate a repair bill there of £32 million. Many of our industrialised building consists of high rise and tower block types. The HIP allocation for 1983–84 was only £33 million. That has been reduced I understand by about 80 per cent. for 1984–85.

We are therefore talking about a local authority in inner London with massive problems. It has 23,000 people on the waiting list and thousands of others applying for homes because of homelessness from all parts of the United Kingdom. Its repair bill at the moment is far greater than the HIP allocation. The Minister will have to give the House some indication of how the Government view the problem and what they intend to do about it.

My noble friend Lord Graham has mentioned the position of the National Coal Board houses. There are others in this situation. There are houses, I understand, built and owned by the United Kingdom Atomic Energy Authority. There must be many of those, and I believe that some of them may well fall into this category. We know that there are houses owned by the water authorities. Will the local authority be expected to purchase these houses, and on what terms? We have to know that, and local authorities are entitled to know that because of the way it will affect their financial burden.

I reserve my right to go into much more detail on the Committee stage. When we look at the size of the problem, when we hear the kind of figures that are being estimated, we recognise that the Bill is a very limited measure and will have to be improved in Committee if it is going to be meaningful. We hope that we shall be able to convince the Government that finance must be made available to local authorities.

I end by quoting from the AMA brief that I received recently. It says: This Bill is discriminatory and unfair, and we believe that assistance should be available according to the need, irrespective of the tenure of the dwellings concerned. Not only will local authorities receive no extra financial aid to assist with their defective housing problem, but this Bill will increase the financial burdens of local authorities". The Government must address themselves in realistic terms to the financial burdens they are placing on local authorities with this Bill. We welcome the assistance given to the owner-occupiers, and on Committee stage we would expect to improve the Bill along those lines.

12.42 p.m.

Lord Skelmersdale

My Lords, we have had a useful debate on this most unfortunate subject. It is heartening to see such a broad measure of agreement on a Government Bill, and I hope it is indicative for the passage of this measure through its later stages in the House. I feel that noble Lords have been unusually gentle with me today; but even so I should like to comment on as many as possible of the points which have been raised in the debate. For example, I am most grateful for the opening words of the noble Lord, Lord Graham. However, I would say that he misunderstood my phrase, "in the time available". I mean that in the context of today's debate; I was not referring to any other stage which the Bill may or may not have.

He referred to the history of housing in the 1950s and 1960s. I am well aware of the problems caused by the pressure of the need for housing at that time. I am glad that today I am not answering the charge of, "I told you so", which earlier this week was levelled against the Government. I agree with the noble Lord, Lord Stallard, that no one knew the dangers of system building at the then stage of the art.

The noble Lord, Lord Graham, should not be allowed to leave this debate with the idea that this Bill is needed solely because of the Government's right-to-buy policy; it is not. Defective houses have been sold under the local authorities' right to sell, which they have always had. I would agree with him of course that the problem may or may not have been made slightly worse because of the right-to-buy policy, but it is not due solely to the right-to-buy policy of this Government.

Talking about rights, I should like to say that people should not be denied their legal rights simply because their home might require structural repair, any more than it would be right or reasonable to deny people's right to buy, in the private sector, houses that may need structural repairs. Indeed, I bought such a house. The key requirements are that people should be informed fully about the structural condition of the house that they are buying, and its potential condition, and that the position should be reflected fully in the valuation.

The noble Lord, Lord Graham, and the noble Viscount, Lord Hanworth, both raised the point—and I think it has run through this short debate—as to why, under the Bill, there is no action for public sector tenants. There is no unfairness to local authority tenants in a Bill to give assistance for private owners. Local authorities do not need new powers to deal with houses which remain in their ownership, and under the Housing Act 1961 they have obligations to repair those houses.

Lord Graham of Edmonton

My Lords, will the noble Lord give way? I am grateful. He keeps saying that local authorities do not need new powers. What they need is new money; they need the resources. Is the Minister acknowledging that the tenants in properties at present owned by councils are entitled to the same benefit—that is, better housing and security of mind? The release for these people is that they can get out or have the house improved. We are saying that the same right and relief should he given to council tenants. I am sure that councils would want to do it. The enormity of the global sums frightens anyone. The Minister should be a little bit more sympathetic to the inability of councils to do what he says they have got the opportunity of doing.

Lord Skelmersdale

My Lords, if the noble Lord, Lord Graham, would allow me to make my speech in my own way, I think he will find the enlightenment that obviously he is seeking. I was going on to say that there is no need to make special financial arrangements for the cost of repair of defective houses in local authorities' own stock. First, present subsidy arrangements take into account expenditure on redevelopment and capitalised repairs. In general, 75 per cent. of the loan charges on capitalised repairs, improvements and redevelopment count towards an authority's subsidy entitlement. Secondly, we have said repeatedly that special needs for expenditure of this kind are being taken into account in deciding the HIP allocations of the authorities concerned. It is for each local authority, in its responsible role as landlord, to decide, in the light of this and its other priorities, how it should spend its allocation.

We were well aware of the need for spending on prefabricated reinforced concrete houses in arriving at the total provision for housing capital expenditure in our expenditure plans published last autumn. I stress again that there is no need for panic spending. Local authorities need to understand fully the nature of the defects associated with PRC houses. In many cases, for a good many years the houses will remain sound and the gradual deterioration of the concrete will have no discernible adverse effect on the occupiers' living conditions. The noble Lord, Lord Stallard, and others talked about waiting lists, which is germane to the point I am making. Before the noble Lord, Lord Graham, again leaps to his feet, let me point out that I shall have much more to say on the subject of HIP allocations.

In regard to waiting lists, for exactly the same reason it will make a negligible difference, because in most cases a usable house will pass back to the public sector and the owner can remain in it as a tenant. It would then be repaired as part of the council's normal repair programme. Therefore, it is most important that authorities should consider very carefully programmes of repair or replacement so that they take into account the present condition of the dwellings and their likely future life. They may well conclude that there is no immediate need for action. Where the dwellings remain in local authority ownership it would make no sense to spend large sums repairing them at the expense of other, more pressing priorities for capital expenditure on housing.

By contrast, the private owner is faced with the immediate problem of the mortgageability and blight of his property—a factor which has been raised in the debate this morning. Living in a house he cannot sell, the private owner's position may be one of extreme distress. It is this problem to which our scheme of assistance addresses itself. It is this distress which our scheme will alleviate. In my book, it is quite irresponsible to encourage tenants to believe that this very necessary scheme represents discrimination against them; quite simply, it does not.

The noble Lord, Lord Graham, and my noble friend Lord Sandford raised the question of the £250 million in the financial memorandum. The cost of the scheme will be a charge on the HIP allocation, plus capital receipts. But the Government have said that they will take into account this need in varying the size and distribution of HIPs.

Lord Graham of Edmonton

My Lords, will the noble Lord allow me? I promise that this will be my last intervention. I understand what he is saying. Suppose an authority is faced suddenly with the reality of having to solve the problem of the private owner, plus what is laid upon it by law. It may be that, without that, it would have been making a bid in a HIP allocation of, say £20 million, and perhaps getting £14 million. Then along comes an obligation to find £3 million or £4 million more for this particular problem.

Is the Minister saying that, outwith all of its other considerations, the increase in the HIP allocation will be sufficient to take account of the additional burden? Is the Minister able to say that in the future an authority will be in no worse position than it would have been in without this? Is that what he means when he talks about things being taken into account? I have heard the phrase, "taken into account", in respect of many other things, not least the terrible defects in new town housing. I am bound to say that I am suspicious, but that suspicion can be allayed if the Minister will be helpful and say there is every intention that the future HIP allocations for those authorities will fully take into account their additional responsibilities.

Lord Skelmersdale

My Lords, I am grateful for the noble Lord's question because it explains the framework of his thinking on this Bill. The noble Lord starts from a false premise. He asks me what would happen if the local authorities were suddenly faced with this problem. I have been at pains to stress that they are not suddenly going to be pesented with this problem with their own stock or, indeed, with private stock, and I shall go on to explain that in a minute.

We fully appreciate the local authorities' concern that they should have the resources under the housing investment programme system to discharge their responsibilities under this Bill and their responsibilities towards defective housing in their stock as well as towards their other housing needs. My honourable friend the Minister for Housing and Construction has met representatives of the local authority associations to discuss the whole question of defective housing. The total for gross capital expenditure by local authorities has been set at more than £2.5 billion for 1984–85. In this connection I note that the noble Viscount, Lord Hanworth, mentioned a total sum of £1.5 billion for the entire problem, which is likely to be spread over 20 or 30 years, and I would say that, in spite of the enormous sum involved, it does rather pale into insignificance.

Despite the £2.5 billion for 1984–85 on the HIPs, we took into account the result of the BRE's investigations which pointed to the eventual deterioration of 170,000 PRC houses built before 1960 and what evidence we had of the extent of defects in local authority housing more generally. We also took into account the likelihood of spending as a result of designation of PRC houses under the Bill. Where local authorities had definite plans for spending on these houses and other defective dwellings, such as some Bison schemes, the department's regional controllers took these into account in distributing the local discretionary element of HIP resources at the regional level. We shall continue to take account of these needs in future in fixing both the overall total and individual authorities' allocations, but local authorities are largely free to spend as they wish the HIP allocations as enhanced by the prescribed proportion of capital receipts. Accordingly, there is no sum identified for expenditure under this Bill or on defects more generally.

The noble Lord, Lord Graham, has suggested that we should provide additional subsidy to help local authorities in financing their capital expenditure on defective housing. I take it that that was what his hollow laughter was indicating just now. The Government see no reason to do that. The subsidy system in England and Wales is devised to help those authorities where the need to spend on housing exceeds the resources which the Secretary of State considers should be available to them from local sources. Expenditure on defective housing is, of course, considered in deciding whether housing subsidy is needed. In fact, 75 per cent. of its loan charges in respect of both improvements and capitalised repairs are admissible for subsidy. It would be wholly unjustified to provide a special subsidy in excess of what an authority can be expected to raise locally in order to meet a particular type of housing capital expenditure.

The noble Lord, Lord Graham, also asked—as, indeed, did the noble Lord, Lord Stallard, in rather more horrendous terms—about extending the scheme to cover other types of defective housing. The scheme will cover only dwellings which suffer from, or can be expected to suffer from, structural defects or potential defects resulting from their design or construction and which were not generally known at the time of purchase. I have no reason to believe that this is true of any dwellings nationally other than those built before 1960 of prefabricated reinforced concrete.

Lord Stallard

My Lords, I understand that further research is already taking place into—

Lord Skelmersdale

My Lords, the noble Lord is pre-empting me again.

Lord Graham of Edmonton

My Lords, it is a preemption right.

Lord Skelmersdale

It obviously is a pre-emption right, my Lords. If the statutory criteria were met, it would be possible for the local authority to exercise its discretion to help owners in respect of those houses. That, I think, answers the noble Lord's point.

The noble Lord, Lord Graham, referred to his honourable friend in another place and again asked on his behalf about Smith houses. The Building Research Establishment has completed a thorough study of the Smith house. It is constructed not of structural prefabricated reinforced concrete, but of foamed slag concrete blocks. The most serious problems which the noble Lord, Lord Graham, described, as regards this type of house are caused by the shale fill used in the foundations in some places. We are now considering whether it would be justified for owners of all Smith houses to be eligible for mandatory assistance under the scheme. We hope to reach a decision on this matter shortly.

Lord Graham of Edmonton

My Lords, does that mean soon?

Lord Skelmersdale

My Lords, shortly is shortly.

What the noble Lord, Lord Graham, was really asking at one point in his speech was what would be my advice to the unfortunate owners of these particular houses—not the Smith houses, but the defective houses in general. Local authorities know who live in these houses; the owners have been told and we shall shortly be in a position where owners of 18 out of 28 types will have had a detailed report on their type of house and what to expect. This covers 98 per cent. of the privately-owned dwellings. My advice, therefore, to the individual owner, would be that if he or she intends to remain in the house, then considering the upheaval caused by building works while one is resident—an unhappy experience that I have undergone in the past—he or she should wait until effective repair methods are available. If, however, they need to move for a change of job or for family reasons or whatever, they should apply to their local council immediately, and either the local authority will reinstate the house—in other words, put it back in a mortgageable state—or if that is inappropriate, repurchase it. The noble Lord, Lord Stallard, and I think possibly the noble Lord, Lord Graham, has the idea that these were options that the owner could exercise. In fact this is a matter entirely at the disrection of the local authority.

The Bill does not give a free choice between reinstatement and repurchase. The proportions depend on whether, and how quickly, effective repair methods are developed and whether the institutions will consider them mortgageable. So there can be no clear answer. It will change over time towards reinstatement.

The range in the Explanatory and Financial Memorandum assumes limits of 25 per cent. repurchase and 75 per cent. reinstatement on the one hand, and 75 per cent. repurchase and 25 per cent. reinstatement on the other hand. It is expected that in time the proportion of repurchase will fall and reinstatement will definitely become the norm as there emerge reinstatement methods which are mortgageable.

That brings me to the subject of a guarantee or warranty for repaired PRC houses. It may be helpful if I say that over some months we have been in discussion with the Building Societies Association and the National House Building Council about a proposal that the council should operate a scheme for approving requirements for, or methods of, repair of prefabricated reinforced concrete houses and providing a warranty similar to that offered by the NHBC in respect of new houses built by the private sector. Discussions are continuing to see whether such a scheme could be devised.

The noble Viscount, Lord Hanworth, asked why there was a 90 per cent. instead of a 100 per cent. grant and he said, "Wasn't it mean?". I am paraphrasing the noble Viscount; those were not quite his actual words. Without the Bill, the owner would carry all the risk, as I know the noble Viscount will understand. It is reasonable that owners should be left with a small degree of this risk, given that the public purse is taking over most of that risk from the owner. The noble Viscount also asked about a full annual report on this subject being laid before Parliament. No, my Lords; this matter came up in the Commons and was resisted as unnecessary because the Secretary of State will undertake extensive consultation and study before making a designation and, therefore, he can be questioned directly because these days the results of consultations are known almost before they have happened.

Viscount Hanworth

My Lords, I should like to make only one point. The Minister must realise that one must know what question to ask, but without the information one cannot know. It is like "Yes, Minister", and all that.

Lord Skelmersdale

My Lords, without the information one does not know what question to ask. But since noble Lords on all sides of the House are briefed by outside advisers, I do not think that there will be any difficulty in their coming up with the right question, which may or may not be extremely difficult for me to answer at the time.

The primary purpose of this legislation is to assist people who have bought their homes from the public sector, only to discover that the value of their homes has since been substantially reduced because of serious defects in their design or construction. The Government's prompt action in bringing this legislation forward is in recognition of the public sector's responsibility towards people who bought their homes in good faith, and of the need to bring them early help. I trust that your Lordships will endorse the Government's intentions. I beg to move.

On Question, Bill read a second time, and committed to a Committee of the Whole House.