HL Deb 29 January 1986 vol 470 cc692-8

4.15 p.m.

Debate resumed.

Baroness David

My Lords, I should like to thank very sincerely the noble Lord, Lord Seebohm, for initiating the debate. This is a very important and a very challenging inquiry. After many years in which the subject seems to have been accorded very little or only casual notice, this report has brought into sharp focus the lamentable state of housing in Britain. It has come out almost at the same time as the Department of the Environment's inquiry into the condition of the local authority housing stock, the Royal Institute of British Architects' Decaying Britain, and, also Faith in the City. Their effect has been cumulative and constitutes a damning indictment of government housing policy, or rather the Government's lack of housing policy, in spite of the supposed impartial nature of the inquiry.

The members of the inquiry were deliberately chosen not on any party political ground but for the individual contributions that they could make. My only criticism of the make-up of the committee is that it was short on local authority representation. But the report from this very varied group of people was unanimous. It was also short. I should like to thank and to congratulate most warmly the members, the Duke of Edinburgh for chairing the inquiry—it would have been very nice if he had been here today—and the National Federation of Housing Associations for initiating it.

The report has been welcomed and praised in almost every quarter, the exceptions being the Tory Daily Telegraph and Daily Express with surprising and unwarranted personal atacks on the Duke. The praise must have given great satisfaction to the members. They deserve the praise because whether or not one agrees with all the recommendations they have forced everyone involved in housing affairs to take a fresh and radical look at the multiple problems that exist. New solutions have been proposed. The diagnosis of the problems no one can disagree with. There is an acute housing shortage with fewer houses being built—below 200,000 a year in the 1980s compared to over 400,000 in the late 1960s.

The housing stock is deteriorating in every tenure. The number in serious disrepair is increasing; slum clearance is slowing down. There is a lack of choice. One must agree that the administrative and legislative framework is rigid and inflexible. Housing is increasingly compartmentalised into sectors and tenures that deny choice, mobility and diversity, which are of course what modern conditions demand. Social divisions result. We are in danger of having two classes, the owner-occupiers and the council tenants, who will find themselves, after the better council houses have been sold, increasingly welfare tenants concentrated in second-rate housing in a deprived tenure and carrying, as the report says, the stigma of failure. I was concerned to hear what the Minister said about the social obligations of local authorities in providing housing. It sounded to me as if he was prepared to go along with that sort of situation.

Again, we can go along with the reasons that the committee gave for the housing shortage. One is the lack of capital investment both overall and in the public sector. The Government's expenditure plans, as the noble Lord, Lord Seebohm, said, show a decrease of 54.6 per cent. between 1979–80 and 1984–85 in real terms. And now it is more. Everything else has increased, albeit education by only 1 per cent., except for environmental services, reduced by 6.3 per cent., and one can link those with housing.

A second reason is the lack of private investment in rented housing; and a third is the inadequate investment in improving and maintaining the existing stock, both owner-occupied and owned by landlords, private and public. According to the DoE's own figures, £19,000 million is required now for renovation of the local authority housing stock.

The Minister mentioned £200 million for repairs but one has to take that in relation to the overall reduction in the allocation for housing. We would agree that the current financial framework is thoroughly unsatisfactory and contributes to the imbalance between owning and renting, the decline in the privately rented sector, the constraints on development in the public and housing association sectors and the inadequate maintenance and improvement levels in all sectors. Where we do not agree in all respects with the report is in the way to break out of the acknowledged straitjacket.

I shall tackle the thorniest problem first, and the one which has had the greatest publicity—mortgage interest tax relief. This has to be looked at and radically reformed. I suggest that the members of the inquiry were perhaps a little politically naive to think that it could be abolished even if by degrees and over a period of 10 to 12 years. With 64 per cent. of households owner-occupied there are too many to offend and frighten.

A system of help to home owners is likely to be with us as long as income tax remains, and the Labour Party has announced that it will not abolish MTR but will reform it. In the housing document Homes for the Future, published last autumn, it says: The intention of financial help with mortgages must be to direct assistance in accordance with housing need, income levels and housing costs. It is unfair that those on five times average earnings receive so much more in relief than poorer families. Therefore we will limit tax relief to the basic rate of 30p. In addition, to help first-time buyers in the early years of a mortgage, we propose to restructure the system and make available index-linked mortgages to those who need lower initial payments". These proposals will go some way to removing the anomalies, inequities and complexities of current assistance with housing costs.

Limiting tax relief to the basic rate should save a very substantial sum, which can be redirected towards a new package of help to first-time buyers and for maintenance and repairs for those owners without the necessary funds to keep up their property. Reform of this sort should have the effect of preventing house and land prices rising so fast. They have been rising in most areas much faster than inflation.

As a postscript to this discussion of MTR I ask, is it fair, is it right, that the limit a married couple can claim is £30,000, whereas if an unmarried couple are living together they can each get a mortgage of £30,000?

The treatment of owner-occupiers with MTR is only one of the ways in which they benefit from the present tax system. They have to pay no capital gains tax on real capital gains realised on their homes. And the removal of Schedule A—which the noble Lord, Lord Seebohm mentioned—has exempted them from paying any tax on the benefit of living in their property.

Four EEC countries tax this benefit. I wonder whether, if harmonisation of EEC taxes comes about, it could mean a return to Schedule A taxes. The Labour Party is currently undertaking a review of the benefit and tax system as they are very much aware of the unfairness that exists in the differential treatment of tenants and owners. There is means testing if tenants are helped. There is none for owner-occupiers. What we want is equality of treatment between those who rent and those who buy. There is certainly no equality now.

A few further criticisms of MTR, as it now is, are these. It provides no stimulus to new house building or modernisation or maintenance. As the report says: Loans that attract tax relief can 'leak' out of housing into the purchase of consumer durables, holidays and current expenditure. Rather than borrowing from any other sources, many home owners find ways of borrowing on the security of their homes and obtaining tax concessions from the Exchequer. The Bank of England estimate that some £7 billion may have been withdrawn from the private housing market in 1984". That £7 billion could have built quite a lot of houses. I should also like to ask why MTR is not shown as Government expenditure on tables of local and central government support for housing.

I turn to the state of the housing stock. The older owner-occupiers often have great difficulty in finding money for repairs and maintenance and it should be possible for them to borrow and get tax relief for this purpose. Another way of encouraging owner-occupiers would be to allow repairs to be set against tax. Improvement grants should continue but the system itself needs improving because it has not, as the report says, been fully effective in reaching the poorest and most vulnerable occupiers, nor does it always reach the worst properties. This is partly because of the complexity of the system, partly because of the amount of effort the occupiers themselves must make in getting a grant and organising the work, and partly because of the financial contribution the owner must make". It is also important that the improvements should be done by areas. On that point the report says that whole areas should be tackled rather than individual properties, and that local authorities can help by, encouraging the improvement and repair of the privately-owned housing stock through the administration of area policies and the grant system, and through the establishment or encouragement of agency services". The Labour Party has said that VAT on improvement works should go; it has helped the cowboys—and householders and reputable house builders need protection from them. The report makes a number of sensible suggestions to help in this area and agency services to advise and protect could be useful.

As for improving and modernising council houses, financial restraints by government have made this very difficult indeed. But I shall not go further into the finances of housing, as my noble friend Lord Dean is to deal with this when he winds up.

I want to float just one idea. Many noble Lords will remember the Public Loans Board, where the local authority borrowed at subsidised rates of interest. I wondered whether any thought had been given to this recently.

We would agree with the report that the financial help should go to the tenant, the occupier. If a needs-related housing allowance can be satisfactorily managed, that would be good. One has uncomfortable memories of the appalling difficulties and delays that were encountered when housing benefit was introduced. If a simpler system that would be understood by those wishing to make use of it were created and if there could be minimum bureaucracy, that would be good.

I turn to rents. The suggestion of rents based on capital value is radical and interesting and should be looked at. We do not, however, want to move towards free market rents. There is no doubt that rent fixing in this country is in a complete mess. The sheer jumble of arrangements means that the subsidies via the DHSS and DoE are just as haphazard and undirected as the other subsidies such as tax relief. The new government proposal to force everyone to pay 20 per cent. of their rate bill adds yet another complication. The fair rent system is not working as it should. Local authority rent fixing is part of the mess. We can find identical homes in the same road built at the same time housing similar families with massive variations of rent if there is a local authority boundary down the middle of the road. The one factor which such homes have in common is a current capital value; and to use this figure as a basis for rent fixing would be fairer. The rents would reflect popularity. Some rents would fall. If the same basis of rent fixing was used by all sectors, this would increase equity between tenants and provide better opportunities for movement within the rented sector. It would help in the formulation of a coherent, universal housing allowance, which is what the report recommends.

I see a danger, however, that there might well be areas where few would want to go, where rents would be low, and where all the difficult and more impoverished people would collect. We do not want ghetto housing. If capital value rents were to be introduced in the public sector, it would take away from the freedom of the local authority in formulating its housing plans. Local authorities are democratic and accountable to the electorate and, therefore, to their tenants; private landlords and housing associations are not. So long as housing committees base their rents on historic and current costs, and the housing revenue account is in balance, there is something to be said for allowing them to run their own affairs and to enjoy the experimentation and diversity that would result. Noble Lords will see that I am a little ambivalent on this matter.

I turn to the private rented sector. Everyone regrets its decline; everyone wishes for there to be greater choice. Many people—the young, the elderly and the mobile—prefer renting to purchasing. It is also undoubtedly wiser for many people to do so. Indeed, 10 per cent. of families accepted by councils as homeless in the first nine months of last year defaulted on their mortgage payments, adding to the number of families living in bed and breakfast accommodation, at enormous cost to the local authorities. There were 7,200 such families at the end of 1984.

Even if owner-occupation caters for 74 per cent. of households by the year 2,000, that will leave a significant minority needing to rent. The report estimates that 107,000 new houses for renting may be needed each year. Current building since 1980 has averaged 58,000 a year, and it has been almost entirely carried out by local authorities and housing associations. The report suggests that, with capital value-based rents and some certainty of a stable situation, major institutions may be willing to invest, if not themselves providing and managing the properties. Approved landlords, housing associations, housing co-operatives and building societies would take on that role. I hope that the members are right. However, I confess to grave doubts about this possibility in spite of the presence of the chairman of the Midland Bank and the general manager of the Nationwide Building Society among the members. I fear that there will be a continuing decline in the private sector. That means that the local authorities and the housing associations will be the major providers of rented homes.

However, the local authorities will need to make major changes in housing management to provide the service which tenants want and to move away from an outdated paternalistic role. Tenants should have a far bigger say in the management of their homes and environment and in their design. The report encourages that. It sees a more flexible role for the local authorities with very much more spread in the management of estates. Co-operatives of tenants are suggested as one solution.

The report recognises the need for a strong democratic base for housing policy, but sees the local authority in the future more as a co-ordinator and enabler than just a provider. It must remain responsible for the homeless and the more vulnerable in our society, and we would agree and hope it can be brought about that: The homes to which homeless people have access must be sufficiently numerous, varied and geographically dispersed to prevent the build up of ghettos and stigmatised housing where the poorest and most vulnerable are concentrated with very little hope of escape". While speaking of the vulnerable, let me say that local authorities should be supported in their efforts to keep the houses they have for the elderly. The tough policy of refusing large numbers of exemptions applied for by local authorities—the policy currently being followed by the DoE—makes it very difficult for them to look after the vulnerable, and this at a time when authorities are denied the funds to build new homes. The Government's dogmatic belief in the hallowed right to buy and owner-occupation shows little sympathy with the problems which local authorities face in housing the old and frail.

Another role which the local authorities must perform is to ensure that minimum standards are met and they must take enforcement action. That is important if property in all sectors is to be well maintained. The environmental health officers play the main part here; and I agree with them, and the report, that it is not right that they cannot issue enforcement notices on the council when the council is the landlord. That should be changed.

Housing has been a major responsibility of the local authorities since 1919. It will go on being a major responsibility and the authorities will, without doubt, be the main providers of rented housing. Local councillors and their officers are the right people to decide on the needs of their area, and to decide where and what to build. But the freedom of local authorities has been deliberately curtailed by this Government. By their control of their finances they have prevented them from being able to plan ahead for a number of years rather then having to cope with annual budgeting forced on them by the Treasury.

I hope that this debate will alert the Government to the appalling crisis in this country and stimulate them to some action. Nothing is more important than to have a home that is safe, warm, in good condition and in an area and an environment where you want to live. The Government, with their emphasis on home ownership, do in part recognise that, but thousands and thousands of families do not have that home, either because sufficient houses do not exist or they are in the wrong place or their owners and local authorities cannot afford to maintain them. Housing has always had to be subsidised, as the noble Lord, Lord Seebohm, said in his opening speech. Are the Government going to have any change of heart?