Housing Bill

HL Deb 26 July 1988 vol 500 cc191-243

5.22 p.m.

The Earl of Caithness

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(The Earl of Caithness.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD NUGENT OF GUILDFORD in the Chair.]

Lord McIntosh of Haringey moved Amendment No. 97:

Before Clause 46 insert the following new clause: ("Housing Association tenancies.

.—(1) In this Part, 'housing association tenancy' shall have the meaning specified in this section.

(2) A tenancy which is entered into on or after the commencement of this Act shall be a housing association tenancy, where the tenant—

1. (a) is a new tenant of a housing association; or
2. (b) is an existing tenant of a housing association to whom a new tenancy is granted; or
3. (c) is transferring from a tenancy of a local authority, a new town corporation; or an urban development corporation: (all within the meaning of section 80 of the Housing Act 1985), a housing action trust established under Part III of this Act or the Development Board for Rural Wales.

(3) A tenancy under this section shall include each of the following:

1. (a) the right to a fair rent, which shall be a registered rent under the Rent Act 1977;
2. (b) the rights of a secure tenant under the Housing Act 1985;
3. (c) the right to buy, in circumstances where the housing association is able to identify, and secure (whether by purchase, refurbishment or new building), a replacement unit of housing of broadly equivalent size and type of use.").

The noble Lord said: In moving Amendment No. 97 I shall speak also to Amendment No. 99. These amendments refer to the concept of housing association tenancies which we are proposing to put into this part of the Bill. Before any Members of the Committee point to the fact, I am aware that the concept of housing association tenancies is not a new one and that it occurs in Part I of the Bill, notably in Clause 35.

The reason we did not refer to the matter last night when we reached Clause 35 was that it was extremely late at night and it would not have been a good opportunity to secure a full discussion of the very important issues which are raised by housing association tenancies. Moreover, it is actually easier to put forward positive alternatives to the Government's proposals in Part II which deals with housing associations. I am sure that noble Lords will forgive me therefore if I concentrate on the aspects of housing association tenancies which arise in Part II. I recognise that if my amendments are carried—and I say this from the outset—further amendments would be necessary to Clause 35 in Part I; otherwise the Bill would be inconsistent to some degree.

The purpose of our whole approach to Part II of the Bill is to seek to secure that housing associations remain in the public sector and are not spatchcocked into the private sector because the Government have the intention in Part I of the Bill, and indeed in other parts, of improving the conditions for private rented accommodation. We have been through the issue of private rented accommodation at considerable length in Committee over the past few days and we are now moving on to the housing association sector.

What I want to suggest o the Committee is that is is not appropriate in this Bill, or anywhere else, for housing associations to be brought into the thrust of the Government's arguments which take place on other parts of the Bill. Housing associations, as indeed the Government have recognised on many occasions, provide services especially for tenants with low incomes and also for tenants in need who would not otherwise be able to find accommodation. In other words, they are complementary to the public sector of the housing market, rather than being comparable to the private rented sector.

The Government have recognised that and they claim that Part II of the Bill maintains that situation. Indeed, as regards existing housing association tenancies that is undoubtedly true. Existing housing association tenants, provided that they stay in the same dwelling or at least within the same housing association, continue to be protected tenants, to have the benefit of protected tenancy status and to have the benefit of fair rents.

The problem arises, as indeed it does in the private sector, where new tenancies are necessary either because the housing association tenant is moving, because he is moving out of the housing association sector and a completely new tenancy is being created or indeed because new housing association accommodation will become available after the passage of the Bill. The problem is that such new tenancies will be subject to the assured tenancy conditions and that the fair rent provisions will no longer apply.

The Government recognise that that is a problem. They point out that the housing associations should be expected to provide additional rights for housing association tenants in such conditions. Indeed, the whole of the tenants' guarantee procedures, which have been set out and which were discussed by the Minister on Second Reading (and which also apply to applicants for the transfer of local authority housing under Part IV) seek to provide further protection both in terms of security of tenure and in terms of fair rents for new housing association tenancies.

The problem is that this tenants' guarantee does not match up to the tenants' charter which has been produced by the National Federation of Housing Associations and, above all, it is not statutory. The Government have firmly resisted its becoming statutory. I must say that it is most difficult for me to understand quite why that should be the case, if they share with us the view that it would be highly desirable for housing association tenancies to continue to have additional protection over and above that which will be available under the assured tenancy procedure.

If we are talking about voluntary agreements between housing associations and their tenants, which is what the tenants' guarantee in effect means, the only remedy that the tenant will have against the breach of that voluntary agreement will be to sue for breach of contract. Unfortunately there are examples, although I am not lawyer enough to be able to quote them with any conviction, where the courts have found that the statute law, which is the law that will be introduced for such tenancies when the Bill is enacted, takes precedence over any agreement that might be made between a housing association and its tenant. That is our concern. I am thinking especially of what the Minister said at Second Reading on 11th July at col. 675. He has confirmed that housing associations exist mainly for those with lower incomes and those with special housing needs. If that is to be the case and of that provision is to be enforced, it is necessary that housing associations should not be in the private rent regime. They should have fair rents. I shall deal with that point when I speak to Amendment No. 98. It is necessary that their tenants should have the rights of a secure tenant which exist under the Housing Act 1985. It is necessary—some noble Lords may be surprised that I should say this—that they should have the right to buy, which is now accepted in all parties as being an important part of tenants' rights, where the housing association can identify and secure a replacement unit of housing or broadly equivalent size and type of use.

We propose an extension of tenants' rights. We propose measures which will keep the housing association movement where it wishes to be—still in the public sector providing mainly for those with lower incomes and special needs. We welcome the emphasis given to the housing association movement by the Bill. That emphasis, we believe, can only be made truly effective if our amendments are agreed to and we maintain the special and important role of housing associations in our housing structure. I beg to move.

5.30 p.m.

Lord Ross of Newport

I support the amendment. As I said on Second Reading, I accept that the Bill is far better today than when it was introduced in another place. For that we thank the outgoing Minister whom we wish well in his new place. Proposals relating to housing association tenancies have not much changed. At the outset, when the National Federation of Housing Associations published its document Rents, risks, rights it made clear its wish that housing association tenancies should continue. It said then and the situation remains the same: As the Government's proposals stand at present, new housing association tenants would be treated very differently from existing tenants and from both new and existing council tenants". That is the problem which housing associations will face throughout the country unless we make some concessions on the amendment. It cannot be right to have one set of tenants who have protection and whose rents are controlled to a certain extent and new tenants who do not have those rights.

Housing associations have co-operated with one another and with local authorities to assist tenants who need to move. Housing associations operate a mobility scheme called HALO. Local authority assistance is usually by way of reciprocal arrangements whereby the housing association takes a nominated tenant from the local council in return for the council rehousing the association's tenant. Those arrangements of mutual co-operation are threatened by Clause 35, referred to earlier by the noble Lord, Lord McIntosh.

The Government recognise that tenants would naturally be reluctant to abandon their secure tenances for assured tenancies. The Under-Secretary of State said: It is unlikely that housing associations will encourage their tenants to switch accommodation in order to deprive them of their statutory rights".—[Official Report, Commons, 2/2/88; col. 603.] I think I am right in saying that if tenants move within that housing association they retain their statutory rights. If they move to an Isle of Wight housing association from a London association they do not retain them. They would have done so if they had already been a tenant or had moved within that association. That is what we are up against. On Tuesday of the week before last the national federation pressed again for statutory rights for its tenants. The national council voted on 12th July to continue its campaign in your Lordships' House for a statutory housing association tenancy to ensure that future tenants will enjoy rights similar to those enjoyed by existing tenants and to ensure also—this comes later—that future rent levels are affordable by housing association tenants.

When he introduced the discussion, the outgoing national federation director, Mr. Richard Best, a power in the housing association movement whom many of us are sorry to see leave, stated that it was his view that the legislation in its present state was considerably better than the consultation papers and the original form of the Bill. He said that while the terms of the tenants' guarantee were a step forward, they could be changed at a later date a a new tenant could be offered worse conditions. Thus it was right to continue to pursue a statutory housing association tenancy in your Lordships' House. He said: The Housing Corporation says it will incorporate what we want in a mandatory tenancy but we must take the lead to avoid a wishy washy situation". I hope that that will convince your Lordships that we believe this to be an area which will cause immense problems and bureaucracy for the housing associations which, when charitable, are run by management committees made up of volunteers who receive no payment for their services. I beg the House to consider the amendments seriously and to support them.

Lord Hylton

I must apologise to the noble Lord, Lord McIntosh of Haringey, for not having been here to hear his opening words when he moved the amendment. The amendment will be welcome, first, to the management committees of existing housing associations whether charitable or non-charitable. Numerous people give their services entirely free. Until now they have been distinct from local authorities, on the one hand, and private and commercial landlords on the other. That is how they wish to go on. The amendment will also be welcomed by housing associations' existing tenants.

As to the present local authority tenants who, under the terms of the Bill, may be moved into the housing association sector, the amendment, if adopted, will make their choice very much clearer. It is on those grounds that I recommend the amendment to the Government. I am sure that they will take the matter seriously.

Lord Moyne

I should like to cross swords with the noble Lord, Lord McIntosh, who is my ally on many aspects of the Bill. He said that he thought that housing association tenants should have the right to buy. I think that was an obiter dictum. I do not think that it is contained in the amendment. I felt that that point should not go unchallenged. I speak as a trustee of a charitable trust which is organised to look after its tenants and could not have a patchwork of owners receiving the same services. The tenants have the right to buy houses outside. They receive full benefits from the Government for so doing. They are not disadvantaged. When they leave, the houses are available for other tenants within the organisation.

Baroness Fisher of Rednal

It is not strictly related to what my noble friend said, but yesterday the noble Earl, Lord Caithness, said: I should like to stress to my noble friend Lady Macleod of Borve that housing associations can at present charge premiums for tenancies and that some do"—[Official Report, 25/7/88; col. 66.] I was hesitant when the noble Earl said that. I happen to be a member of a housing association. Will the Minister check whether that statement is correct? I understood that housing associations were debarred from fixing a premium and that if one does, it is subject to disciplinary action by the Housing Corporation. We are discussing the clause on housing association tenancies and I feel sure that the position ought to be clarified.

Lord Brabazon of Tara

The Government are aware of the concerns in some parts of the housing association movement which I believe underlie these two amendments and about which noble Lords have expressed concern this afternoon. Let us be clear: they are concerns about future tenancies granted by housing associations because existing tenancies will of course continue in their present form, as the noble Lord, Lord McIntosh of Haringey, reminded us. We are dealing therefore with the reletting of dwellings where an existing tenancy comes to an end or the letting of a newly developed property.

The concerns expressed are twofold. First there is a general concern that future tenants of housing associations should have terms of tenancy which offer more than the basic statutory rights available under the assured tenancy regime and ideally should be the same as under the existing secure tenancy regime. Then there is the more specific concern that the level of rents charged under new tenancies should be controlled so as to remain within the means of people who are most in need of social rented housing.

The Government respect these sentiments. Let me make it quite clear, first on tenants' rights generally, that we expect housing associations to continue in their honourable tradition of being good and socially responsible landlords. Secondly, we expect them to let their housing at rents which are within the reach of people in low-paid employment. In terms of broad objectives, therefore, there is little between the Government and their critics. Where we differ—and the reason why the Government must resist these amendments—is in the degree to which these matters should be fixed in statute and in the danger which the amendments pose to the greatly enhanced role which we would like to see the housing association movement play.

We think it would be wrong to move away from the basic provision in this Bill setting up the new assured tenancy regime. To recreate, as these amendments do, a statutory form of housing association tenancy would be to recreate also much of the complexity of the landlord and tenant legislation that we are trying to simplify. We have provided instead for tenancies granted by registered housing associations, both existing tenancies and new ones, for something known as the tenants' guarantee. Under Clause 49 of the Bill, the Housing Corporation will be empowered to issue guidance to all registered housing associations on matters of housing management practice. The corporation, which is already consulting interested parties on what such guidance should contain, will also have the power, as part of its normal monitoring function, to ensure that associations comply with the guidance.

The draft of the guidance already produced by the corporation adds on to the basic assured tenancy regime a number of additional rights for housing association tenants. There is in the guidance, for example, the right to take in lodgers or sublet part of the property, the right to carry out improvements, and the right to exchange with a tenant elsewhere if this has been agreed between the parties involved. This sort of approach, which will be enforceable by the corporation, is a much more practical and flexible approach to responsible landlord-tenant relations than would be the approach of erecting a whole new apparatus of statutory controls, which could never fit every individual circumstance and would probably become quickly out of date.

On the question of rent levels, everything about housing associations' honourable traditions argues against their charging tenants a penny more than they have to. But again we have taken the precaution, through the avenue of Clause 49, of ensuring that they do not do so. The draft of the tenants' guarantee makes clear that rents for assured tenancies granted by registered housing associations must be within the reach of people in low-paid employment. That too will be enforced by the Housing Corporation. The corporation will be able to make its own judgments about individual cases in different localities; and there is certainly no need for it to be tied by some rigid statutory formula. I shall come to that issue when we debate Amendment No. 98. For the reasons I have given I must ask the Committee therefore not to accept these two amendments.

I should like to say to the noble Baroness, Lady Fisher of Rednal, that I understand that what my noble friend said yesterday is quite correct that housing associations can charge premiums for tenancies but it might be helpful if I arranged for a letter to be sent to the noble Baroness with more details.

5.45 p.m.

Baroness Fisher of Rednal

I thank the noble Lord for that reply, which I find very difficult to accept. I telephoned the Housing Corporation this morning after I had contacted my housing association. I received the advice from the Housing Corporation. I was given the reply which I gave to the Minister, that it would be a matter of discipline by the corporation if any housing associations were found doing this. If the noble Lord knows of any housing associations which are charging premiums to tenants, I think that is important. I received the answer from the Housing Corporation at about a quarter-to 11 this morning.

Lord Brabazon of Tara

My understanding is what I said, and perhaps it would be best for me to write to the noble Baroness clarifying the situation, if that would be helpful.

Baroness Macleod of Borve

I wonder whether my noble friend would answer a question. I have not discussed it previously with him and it might be outside his knowledge at this time. In that case perhaps he could kindly write to me. He has just mentioned that the people who rent from housing associations can take in lodgers. We have a very great problem so far as concerns widows; they are not allowed to take in male lodgers. If they do there is a great possibility that they will lose their rent book because someone will accuse them of cohabiting. This is quite a serious problem. I do not expect an answer from my noble friend today, but perhaps he could very kindly write to me. Widows find that there is discrimination against them when it is supposed that "lodgers" means both sexes.

Lord Brabazon of Tara

I shall certainly look into that situation. We propose that tenants should have the right to take in lodgers. I shall have to look into the detail of whether that applies to widows and write to my noble friend.

Lord McIntosh of Haringey

I welcome the noble Lord to the Dispatch Box on this Bill, but I can hardly be expected to welcome what he has said. I think he has taken a very narrow view of the purport of these amendments and of the impact of the legislation on the housing association movement.

He has quite rightly quoted one part of the tenants' guarantee and referred to the fact that the Housing Corporation will be expected to enforce agreements under the tenants' guarantee. However the Housing Corporation is not statute law. It is a quango, and as a result of this Bill it will he one of the biggest quangos in the country, We shall be seeking to show the Committee the degree to which the powers of the Housing Corporation have increased, are increasing and ought to be not diminished but at least made subject to democratic control. Perhaps I should not stray on to that issue at the moment.

I must insist that even a guarantee which is supported by the Housing Corporation does not provide the same degree of protection as statute. It is not as if, as the noble Lord asserts, we are talking about a whole new structure of protection. It is not a whole new structure. The protection already exists under the 1977 Rent Act and under the 1985 Act. There are perfectly good precedents for the kind of structure for fair rents and secure tenancy for all the things we want to do. We are not going into new territory in the law. We are simply proposing to maintain for all housing association tenants what the Government have agreed will be maintained for some housing association tenants. That cannot be thought of as something wildly extravagant, innovatory or anything which is contrary to the intentions of the Government in putting forward this Bill.

It is common sense that housing associations will not wish to have varying kinds of tenancies on an irrational and indiscriminate basis in the housing that they control. How can they manage housing where some tenants are governed by secure tenancies and fair rents while their next door neighbours and the people above and below them are governed by assured tenancies and are, in effect, on market rents? That cannot be the proper way for housing associations to work as businesses, quite apart from the fact that has been referred to by the noble Lord, Lord Ross, and my noble friend Lady Fisher of Rednal, that the housing associations are run by volunteers.

Those volunteers run the associations because they consider that the associations offer a worthwhile contribution to the housing of those with lower incomes and special housing needs. If that objective is taken away from them, these housing associations will become businesses rather than a housing movement. That will progressively damage their ability to provide a distinctive form of housing for those most in need. I am sorry to say that the Minister's arguments are completely unconvincing. I think it is necessary that I should seek the opinion of the Committee.

5.51 p.m. 5.51 p.m.

On Question, Whether the said amendment (No. 97) shall be agreed to?

Their Lordships divided: Contents, 88; Not-Contents, 128.

DIVISION NO. 1
CONTENTS
Addington, L.	Lawrence, L.
Airedale, L.	Listowel, E.
Alport, L.	Lloyd of Hampstead, L.
Ardwick, L.	Lockwood, B.
Aylestone, L.	Longford, E.
Banks, L.	McGregor of Durris, L.
Birk, B.	McIntosh of Haringey, L.
Blease, L.	Mackie of Benshie, L.
Bonham-Carter, L.	McNair, L.
Boston of Faversham, L.	Mayhew, L.
Bottomley, L.	Morton of Shuna, L.
Brooks of Tremorfa, L.	Mountevans, L.
Buckmaster, V.	Nicol, B.
Carmichael of Kelvingrove, L.	Ogmore, L.
Carter, L.	Oram, L.
Cledwyn of Penrhos, L.	Pitt of Hampstead, L.
Cocks of Hartcliffe, L.	Ponsonby of Shulbrede, L. [Teller]
David, B.
Dean of Beswick, L.	Prys-Davies, L.
Diamond, L.	Rea, L.
Dormand of Easington, L.	Ritchie of Dundee, L.
Elwyn-Jones, L.	Rochester, L.
Ennals, L.	Ross of Newport, L.
Ewart-Biggs, B.	Rugby, L.
Ezra, L.	Seear, B.
Falkland, V.	Serota, B.
Fisher of Rednal, B.	Sheffield, Bp.
Foot, L.	Stallard, L.
Gallacher, L.	Stewart of Fulham, L.
Galpern, L.	Stoddart of Swindon, L.
Graham of Edmonton, L. [Teller.]	Strabolgi, L.
	Taylor of Blackburn, L.
Grey, E.	Taylor of Gryfe, L.
Grimond, L.	Tordoff, L.
Hampton, L.	Underhill, L.
Harris of Greenwich, L.	Wallace of Coslany, L.
Hart of South Lanark, B.	Walston, L.
Hatch of Lusby, L.	Wells-Pestell, L.
Hayter, L.	Whaddon, L.
Houghton of Sowerby, L.	Wilson of Rievaulx, L.
Hughes, L.	Winchilsea and Nottingham, E.
Hylton, L.
Jeger, B.	Winstanley, L.
Jenkins of Hillhead, L.	Winterbottom, L.
John-Mackie, L.	Young of Dartington, L.
Kennet, L.

NOT-CONTENTS
Alexander of Tunis, E.	Caithness, E.
Allenby of Megiddo, V.	Cameron of Lochbroom, L.
Allerton, L.	Campbell of Croy, L.
Ampthill L	Carlisle of Bucklow, L.
Arran, E.	Carnegy of Lour, B.
Ashbourne, L.	Carnock, L.
Auckland, L.	Colnbrook, L.
Beaverbrook, L.	Colwyn, L.
Belhaven and Stenton, L.	Constantine of Stanmore, L.
Beloff, L.	Cork and Orrery, E.
Belstead, L.	Cottesloe, L.
Bessborough, E.	Cox, B.
Blatch, B.	Craigavon, V.
Borthwick, L.	Crathorne, L.
Boyd-Carpenter, L.	Crickhowell, L.
Brabazon of Tara, L.	Davidson, V. [Teller]
Broadbridge, L.	Deedes, L.
Brougham and Vaux, L.	Denham, L. [Teller.]
Broxbourne, L.	Dilhorne, V.
Bruce-Gardyne, L.	Eden of Winton, L.
Butterworth, L.	Elibank, L.

Elliott of Morpeth, L.	Morris, L.
Fanshawe of Richmond, L.	Mottistone, L.
Ferrers, E.	Mowbray and Stourton, L.
Gisborough, L.	Moyola, L.
Gray, L.	Munster, E.
Gray of Contin, L.	Napier and Ettrick, L.
Greenway, L.	Nelson, E.
Gridley, L.	Norfolk, D.
Hailsham of Saint Marylebone, L.	Nugent of Guildford, L
	Orkney, E.
Hanson, L.	Orr-Ewing, L.
Harmar-Nicholls, L.	Oxfuird, V.
Havers, L.	Pender, L.
Henley, L.	Platt of Writtle, B.
Hesketh, L.	Polwarth, L.
Hives, L.	Pym, L.
Holderness, L.	Rankeillour, L.
Home of the Hirsel, L.	Reay, L.
Hooper, B.	Renton, L.
Hunter of Newington, L.	Russell of Liverpool, L.
Hylton-Foster, B.	St. Germans, E.
Jenkin of Roding, L.	Sanderson of Bowden, L.
Johnston of Rockport, L.	Shannon, E.
Joseph, L.	Skelmersdale, L.
Kimball, L.	Somers, L.
Kimberley, E.	Stockton, E.
Kinnoull, E.	Stodart of Leaston, L.
Lauderdale, E.	Strange, B.
Layton, L.	Strathcarron, L.
Lindsay, E.	Sudeley, L.
Long, V.	Swinfen, L.
Lucas of Chilworth, L.	Swinton, E.
Lyell, L.	Terrington, L.
McFadzean, L.	Thomas of Gwydir, L.
Mackay of Clashfern, L.	Thorneycroft, L.
Macleod of Borve, B.	Trafford, L.
Mancroft, L.	Trefgarne, L.
Manton, L.	Trumpington, B.
Margadale, L.	Ullswater, V.
Marley, L.	Westbury, L.
Merrivale, L.	Wynford, L.
Middleton, L.	Young, B.
Milverton, L.	Zouche of Haryngworth, L
Monk Bretton, L.

Resolved in the negative and amendment disagreed to accordingly.

6 p.m.

Lord McIntosh of Haringey moved Amendment No. 98:

Before Clause 46, insert the following new clause:

("Affordable rents

.—(1) Where a landlord has granted a Housing Association tenancy in accordance with this Part. it shall be the duty of the landlord to apply to the rent officer on the commencement of that tenancy and on every second anniversary of the commencement of that tenancy for a determination of an affordable rent as set out in subsection (3) below.

(2) The rent officer shall determine an affordable rent for the tenancy and shall indicate to the landlord the amount by which he considers the rent should rise on each anniversary of the tenancy up to the date of the next determination of rent.

(3) In determining an affordable rent, the rent officer shall have regard to

1. (i) the lower quartile of the average male manual workers' earnings for that part of the country and shall ensure that at no time shall the affordable rent exceed 20 per cent of this figure.
2. (ii) the age, size, location and state of repair of the property.").

The noble Lord said: Amendment No. 98 stands on its own. However, it is related to the issues which we have been considering. It refers specifically to the concept of an affordable rent. That concept is framed in the spirit of the Government's intentions for the housing association movement which have been mentioned a number of times in the past hour. We are concerned that the housing association movement should provide mainly for those with lower incomes and special housing needs. The question is how that intention can be secured if new tenancies—in other words, an increasing proportion of housing association tenancies as the years go by—are not subject to the fair rent provision but are subject to the provisions for rents in the private rented sector.

In that respect, as in respect of security, housing associations will progressively become more and more like the private rented sector and less and less concerned with the type of service they provide at the moment. That must be a fact. I do not think that the Government will seek to deny that, because the law is framed in that way. The process may be delayed by tenants' guarantees. However, there is no assurance that it will be delayed in that way because the power to enforce those matters rests not in the hands of Parliament or the courts (except in cases of breach of contract) but in the hands of a quango and a very large number of housing associations which will be dragged in a direction in which they do not wish to go.

The deregulation of housing associations regarding security of tenure has been discussed. The deregulation as regards rent is an extremely important matter. Therefore, we have put down Amendment No. 98 which seeks to ensure that there is, in new housing association tenancies, an affordable rent which will ensure that the Government's intention of looking after those with low incomes is achieved.

We have defined low incomes in terms of the lower quartile of the average male manual worker's earnings for that part of the country. We have suggested that the rent should not exceed more than 20 per cent. of that figure. We have also recognised that rent ought to reflect the age, size, location and state of repair of the property. That is common sense. This is a housing market, even if it is one which must be regulated to some extent.

We may be wrong in our definition. I shall be interested to see whether the Government have a better alternative. It seems to make good sense. However, I do not hold to every word and comma of the definition that we have come to. I think the objective is clear. It is one which we retain so far as rents are concerned, and it is the single most important aspect so far as most tenants are concerned. We must maintain housing associations in the public sector where they will continue to provide the distinctive service which they provide now.

In April of this year, there was an extended and well-publicised debate about housing benefit. The National Federation of Housing Associations put to the Government at that time a number of proposals for rethinking housing benefit in order to ensure that even under existing law we would not have a significant number of people suffering as a result of the new housing benefit regulations. They were particularly concerned, not with those who get 100 per cent. of the rent paid, but with the next category who are subject to a taper and who get a proportion of their rent paid.

The argument was not won by the National Federation of Housing Associations. The Government resisted the amendments. As a result, a large number of people receiving substantially below the average manual worker's wage and up to that average wage are paying considerably more than 20 per cent. of their net income on rent. I shall not weary the House with examples. However, they are available in publications of the federation. They show that, for example, a single qualified nurse at the age of 23 and living in a one-bedroomed flat in London may well be paying 40 per cent. of her income on rent under the housing benefit regulations.

It is possible to produce many examples to show that far too many people are paying far more of their net income in rent than should be permitted and is consistent with a decent standard of living. They must provide for all the other necessities of life. Housing is a necessity and it is something on which people choose to spend a significant part of their income if they can afford it. However, for those in the greatest need there must be a restriction on the proportion of net income paid on rent. Our concept of affordable rent, with all the defects which may be found in drafting, is the right way to approach the matter. I hope that it will commend itself to the Committee. I beg to move.

Lord Ross of Newport

I rise to support the amendment. Housing associations will be faced yet again with two regimes. Existing tenants will have rents fixed by agreement with a rent officer. However, new tenants will pay what is loosely called "an affordable rent". That will be based on a market rent. We are already seeing what some of those rents are likely to be. Figures have been published recently by the National Federation of Housing Associations. I believe that the Department of the Environment might well agree those figures.

Such figures depend on the amount of housing association grant. However, if we take as an example a family with two children under the age of 11 living in a newly-built flat in Cambridgeshire with a HAG grant limited to 65 per cent. and with a net household income including child benefit of £151.59, the weekly rent would be£661.

For some reason, the Isle of Wight is included in the West of England federation area. At a recent meeting of the federation held in Bath, I was given figures which showed that single adults in the West of England were facing increases of up to £10 per week on rent. That was based on a HAG grant of about 70 per cent. I gave statistics to the House at Second Reading and I do not wish to bore your Lordships unduly. However, the average wage in the West of England is below the average wage in the North-East. It is one of the lowest wage areas in the country. In a recent survey, out of 750 returns 99 per cent. of the incomes recorded were below the national average. The average income of housing association tenants as a whole in the West of England was £74 per week. The replies to the survey came mainly from the large housing associations. Vast numbers of those tenants were on benefit of one sort or another.

I believe that the Government began by speaking of a HAG grant of 30 per cent. The figure then went to 50 per cent. We have ended up with a figure of between 60 and 70 per cent. For some reason which I do not understand, even if the HAG grant drops a bit, rents do not necessarily go up that much. Perhaps the Minister can explain that. However, he has only had one day in the job and I shall not expect him to do so. Nevertheless, the housing association movement is very worried. People who are ill-able to afford them may well face substantial increases. At the end of the day, the whole matter will depend on the amount of housing benefit. That is the crucial issue.

The role of the rent officer has been a good one. The noble Lord, Lord Goodman, made an excellent speech on that subject at Second Reading. The rent officer is on the spot and he has facts and figures at his disposal. Rents have been coming up to much more sensible levels than was previously the case. In many places people are paying between 20 and 25 per cent. of their income on housing. Why are we not to be allowed to use the knowledge and resources of the rent officer for all new tenancies under the housing association movement? It beats me. I do not understand it. That is why I very much support the amendment.

Lord Brabazon of Tara

We have already debated the proposal that there should be a separate housing association tenancy, and this amendment is related to that earlier proposal. The purpose of noble Lords who have moved the amendment is quite clear. They would like us to provide explicitly on the face of the Bill that rents should be affordable by the client groups for which housing associations have traditionally catered. Indeed, the purpose of the amendment is to supplant the concept of the fair rent which at present applies to housing association tenancies with the concept of an "affordable rent". In character, as I read their amendment, an affordable rent would be very similar to a fair rent inasmuch as both seek to keep rents below market level.

As I said in the earlier debate, and as I expect I shall say in the debate on later amendments, the Government's position is that we intend rents for housing association tenants to be within the means of those for whom the associations have traditionally provided. There is nothing between myself and the noble Lords in that respect and it is an object which I am sure that all Members of the Committee will share. Housing associations exist for a purpose. That purpose is to provide good quality housing for those in various groups who could not obtain access to such housing without assistance. That is why we shall continue to pay housing association grant.

However, the fair rent system, around which the whole edifice of housing association finance is at present constructed, is no longer credible. Its operation for housing associations is to produce rents unrelated to development costs below the level which many tenants could afford and wholly dependent on decisions by a rent officer whose decisions are taken without reference to their implications for the financing of the scheme in question.

Our approach is different. We say that rents should be determined by housing associations, subject to the terms of the tenancy agreements with their tenants and supervision of the Housing Corporation (through the tenants' guarantee) as to the terms which those tenancy agreements contain. Setting rents is part of the managerial responsibility of housing associations and it is right that they should deal directly with tenants on that issue. In doing so one of the factors they must take into account is the wording of the housing benefit system. But registered housing associations—and this is the most important point—will still receive very substantial government grants towards the cost of their schemes. For mixed funded public and private sector schemes (on which I shall say a little more in a moment) in the current year the grants range from 50 per cent. to 75 per cent. Those grant levels are intended to enable the associations to provide housing for their traditional client groups. That is what housing associations—exist to do and are keen to do.

Therefore noble Lords need have no fear that associations will try to put up rents beyond the level which their tenants can afford. Even if an association tried to do that—which would be quite contrary to the purpose for which it existed—it would be circumscribed by the terms of its tenancy agreement, and if it went outside those terms it coud be taken to court. The tenants' guarantee, policed by the Housing Corporation, will make it clear that rents must remain within reach of lower paid workers.

Nevertheless, as I said earlier, we believe there is a case for rents to rise somewhat above present levels. This will not affect existing tenants, since they will retain their right to a fair rent even if they move to another property owned by the same association. But for new tenants we accept that some increase makes sense. There is no reason why public subsidy should be greater than it needs to be. Besides that, however, we are looking to housing associations to expand their role in future by greater use of mixed funding, in other words from public and private sectors. There is a later amendment on this subject which we shall no doubt debate. Suffice it to say now that mixed funding at a 60 per cent. average grant rate—which is what we are applying in the current year—enables two-thirds again as many new or rehabilitated dwellings to be provided for the same input of government grant as is possible where grant at 100 per cent. is available.

To make mixed funding work, it is necessary to give associations more control over their rents than they have under the fair rent system. I do not believe that the support of private investors could seriously be expected if the setting of rents where left to the rent officer. What certainty could there be that associations could service their debts?

In case Members of the Committee think that housing associations will have great difficulty in operating under mixed funding—and I know that this is sometimes alleged—let me say that the early signs from a pilot programme last year, and a larger programme being run in the current year, are that there is a great deal of interest in mixed funding from within the housing association world. These are not associations which are aiming to charge unrealistic rents. On the contrary, they know that with the current grant regime they have no need to do anything of the kind. With the tenants' guarantee, they know that they could not do so even if they wanted to.

I therefore believe that this amendment is fundamentally misconceived. It would return us to a situation very like the present, where housing association grant would bear all the strain of housing association costs and associations would be left with very little managerial discretion as regards their rents. This is inimical to proper accountability for public funds and to the great expansion of housing association activity which we expect through the mixed funded programmes. Above all, it is quite unnecessary to protect tenants' interests. I therefore urge the noble Lord to withdraw the amendment.

6.15 p.m.

Baroness Fisher of Rednal

Can the Minister give the Committee more information regarding mixed funding and the housing associations which are most likely to take it up? As my noble friend and others have said, most housing associations are small organisations which make accommodation available to meet specific needs. One would expect that even under this Bill most housing associations catering for such needs will not want to expand to become large housing associations.

Therefore one concludes that the mixed funding is more likely to be applicable to the larger housing associations. If my premise is correct, would that mean that in the long run the scheme will apply not so much to the lower income or disabled groups for whom housing associations cater at present but will be more of an upmarket housing association scheme?

Lord Brabazon of Tara

We shall be discussing mixed funding in more detail when we come to Amendment No. 108. I shall be delighted to answer the noble Baroness's question then. However, we do not expect all housing associations to opt for mixed funding, but certainly a great many of them.

Lord Hylton

At Second Reading the noble Earl, Lord Caithness, when replying to the debate (at col. 676 of Hansard for llth July) and speaking about the proposed tenants' guarantee, said: Rents must remain within the reach of those in lower paid employment". I was very glad to hear the noble Lord say words to that effect when replying to the amendment.

If that is the Government's intention I believe that they must pay attention to the amendment even though its wording may be defective and even though it may be a mistake to involve the rent officer in considering, for example, the precise levels of manual workers' earnings. I believe that the amendment draws our attention to a situation which requires further thought.

Perhaps I may explain that a little further. We have on the one hand the Department of the Environment and the Housing Corporation which are concerned about rent levels. As the noble Lord has explained, they are very concerned about the impact of rent levels on the future development of the housing association movement and on new building, rehabilitation and all that goes with it. On the other hand we have another group of government departments which are concerned with housing benefit, namely the Departments of Health and of Social Security. Then there are all the complications of tapers and how one withdraws housing benefit as people's income rises. There are the injustices, the poverty trap, the disincentive to earn a little more, and matters of that kind. So there is not always perfect liaison between those two areas of government departments.

Then there is a third ingredient; namely, financial control, which is normally exercised through the Treasury. It only requires a small change in economic and financial circumstances for a severe clamp to be put on the amount of money that is allowed to be paid over in the form of housing benefit.

At the present time we are in the fortunate position of having a considerable gap left between the Committee stage and the next stages of this Bill. I suggest that the time could fruitfully be employed in harmonising the different and conflicting interests within the Government—let alone within the different sectors of the voluntary housing movement—so that at the next stage we can have spelt out on the face of the Bill a much better system for the future of housing association rents.

Lord McIntosh of Haringey

The Government say it and the tenants' guarantee says it: housing associations are expected to set and maintain their rents at levels within the reach of those in low paid employment". So far so good; but do they mean it? Do the Government mean it and can the housing associations, with the tenants' guarantee, in fact enforce that requirement? Perhaps we should look at what the tenants' guarantee further states: In addition they are expected to take account of the size, amenities, situation and condition of the accommodation"— fine; that is what we seek in our amendment— and the need to cover the costs after subsidy of loan charges, and management and maintenance, including the requirement to make prudent provision for future repairs". There is one respect in which the housing association movement is not and cannot be different from any other part of the housing market. If a housing association has a portfolio consisting almost entirely of new properties built at very high costs and with high debt charges, its return on capital for a given level of rent will be very much lower than if it has a portfolio of older properties built at lower costs with debt charges either much lower or already amortised. The concept of the economic rent in terms of a return on capital employed, whether in the housing association sector, the local authority sector or the private rented sector, is a nonsense. It depends on when one built and at what cost; or when and at what cost one buys.

Therefore, there will be very powerful pressure on housing associations, as on the private rented sector, to seek to set rents at the replacement level; in other words, at the highest possible level, which is the level at which they would have to expend in order to build new property. Unfortunately, that is reflected in the tenants' guarantee. It is what gives the lie to the Government's intention in making provision for that as a part of the rent structure for housing associations.

If the Government were to accept our amendments there would be a clear choice and judgment to be made by housing associations: they must link their rents to the needs of those who will live in their houses and they must make the judgment between one property and another on the basis of the age, condition and location of those properties. That seems to us to be common sense, but to seek to bring the rent regime of housing associations into the same situation as the private housing sector on the grounds that there must be an adequate return on capital (which is implied by the mixed funding requirement) does not make economic sense, cannot be supported and will not ensure the survival of the housing association movement as a distinctive sector of the housing market.

I regret to say that the Government's arguments against this amendment are as weak as the arguments which they put against the preceding amendment, and the Committee ought to decide on them.

6.25 p.m.

On Question, Whether the said amendment (No. 98) shall be agreed to?

Their Lordships divided: Contents, 82; Not-Contents, 121.

DIVISION NO. 2
CONTENTS
Addington, L.	Irving of Dartford, L.
Airedale, L.	Jeger, B.
Ardwick, L.	Jenkins of Hillhead, L.
Aylestone, L.	John-Mackie, L.
Banks, L.	Kirkhill, L.
Birk, B.	Listowel, E.
Blease, L.	Lloyd of Hampstead, L.
Bonham-Carter, L.	Lockwood, B.
Boston of Faversham, L.	McGregor of Durris, L.
Brooks of Tremorfa, L.	McIntosh of Haringey, L.
Buckmaster, V.	Mackie of Benshie, L.
Carmichael of Kelvingrove, L	McNair, L.
Carter, L.	Milverton, L.
Cledwyn of Penrhos, L.	Molloy, L.
Cocks of Hartcliffe, L.	Morton of Shuna, L.
David, B.	Mountevans, L.
Dean of Beswick, L. [Teller.]	Nicol, B.
Diamond, L.	Ogmore, L.
Dormand of Easington, L.	Oram, L.
Elwyn-Jones, L.	Pitt of Hampstead, L.
Ennals, L.	Ponsonby of Shulbrede, L
Ewart-Biggs, B.	Ritchie of Dundee, L.
Ezra, L.	Rochester, L.
Falkland, V.	Ross of Newport, L.
Fisher of Rednal, B.	Seear, B.
Gallacher, L.	Seebohm, L.
Galpern, L.	Serota, B.
Graham of Edmonton, L. [Teller.]	Somers, L.
	Stallard, L.
Gregson, L.	Stewart of Fulham, L.
Grey, E.	Stoddart of Swindon, L.
Grimond, L.	Taylor of Blackburn, L.
Hanworth, V.	Taylor of Gryfe, L.
Harris of Greenwich, L.	Taylor of Mansfield, L.
Hart of South Lanark, B.	Tordoff, L.
Hatch of Lusby, L.	Underhill, L.
Houghton of Sowerby, L.	Wallace of Coslany, L.
Hughes, L.	Walston, L.

Wells-Pestell, L.	Winstanley, L.
Whaddon, L.	Winterbottom, L.
Willis, L.	Young of Dartington, L.
Winchilsea and Nottingham, E.

NOT-CONTENTS
Alexander of Tunis, E.	Jenkin of Roding, L.
Allenby of Megiddo, V.	Johnston of Rockport, L.
Allerton, L.	Joseph, L.
Ampthill L	Killearn, L.
Arran, E.	Kimball, L.
Beaverbrook, L.	Kimberley, E.
Belhaven and Stenton, L.	Lauderdale, E.
Beloff, L.	Layton, L.
Bedstead, L.	Lindsay, E.
Bessborough, E.	Long, V. [Teller.]
Blatch, B.	Lucas of Chilworth, L.
Borthwick, L.	Lyell, L.
Boyd-Carpenter, L.	McFadzean, L.
Brabazon of Tara, L.	Mackay of Clashfern, L.
Brougham and Vaux, L.	Macleod of Borve, B.
Broxbourne, L.	Margadale, L.
Bruce-Gardyne, L.	Marley, L.
Butterworth, L.	Merrivale, L.
Caithness, E.	Mersey, V.
Cameron of Lochbroom, L.	Monk Bretton, L.
Campbell of Croy, L.	Mottistone, L.
Carnegy of Lour, B.	Mowbray and Stourton, L.
Carnock, L.	Munster, E.
Coleraine, L.	Napier and Ettrick, L.
Colnbrook, L.	Nelson, E.
Colwyn, L.	Norfolk, D.
Constantine of Stanmore, L.	Orkney, E.
Cork and Orrery, E.	Orr-Ewing, L.
Cottesloe, L.	Pender, L.
Cox, B.	Platt of Writtle, B.
Craigavon, V.	Polwarth, L.
Crathorne, L.	Radnor, E.
Davidson, V. [Teller.]	Rankeillour, L.
Denham, L.	Reay, L.
Dilhorne, V.	Renton, L.
Dundee, E.	Renwick, L.
Eden of Winton, L.	St. Germans, E.
Elibank, L.	St. John of Bletso, L.
Elles, B.	Sanderson of Bowden, L.
Elliott of Morpeth, L.	Shannon, E.
Fanshawe of Richmond, L.	Skelmersdale, L.
Ferrers, E.	Stockton, E.
Fortescue, E.	Stodart of Leaston, L.
Gisborough, L.	Strathcarron, L.
Gray, L.	Strathclyde, L.
Gray of Contin, L.	Sudeley, L.
Gridley, L.	Swinfen, L.
Hailsham of Saint Marylebone, L.	Swinton, E.
	Terrington, L.
Hanson, L.	Thomas of Gwydir, L.
Harmar-Nicholls, L.	Thomas of Swynnerton, L.
Havers, L.	Thorneycroft, L.
Hayter, L.	Trafford, L.
Headfort, M.	Trefgarne, L.
Henley, L.	Trumpington, B.
Hesketh, L.	Ullswater, V.
Hives, L.	Vinson, L.
Holderness, L.	Westbury, L.
Home of the Hirsel, L.	Wynford, L.
Hylton-Foster, B.	Young, B.
Ironside, L.	Zouche of Haryngworth, L

Resolved in the negative, and amendment disagreed to accordingly.

6.33 p.m.

[Amendment No. 99 not moved.]

Clause 46 [Housing for Wales]:

Lord Brabazon of Tara moved Amendment No. 100: Page 34, line 39, after ("1985") insert ("(in this Part referred to as the 1985 Act")").

The noble Lord said: With the leave of the Committee I should like to speak also to Amendments Nos. 101, 103, 104, 109 and 171.

Amendments Nos. 100, 101, 103, 104 are quite simply drafting amendments to tidy up references to the Housing Associations Act 1985 in Part II of the Bill. I trust that the Committee will find them wholly unobjectionable.

Amendment No. 109 is a consequential amendment to repeal Clause 52(4) when the Land Registration Act 1988 is enacted. Clause 52 replaces Section 52 of the Housing Associations Act 1985. It transfers to the Housing Corporation powers to reduce, suspend or recover certain grants paid to registered housing associations. The grants concerned are capital and revenue deficit grants paid under Clauses 50 and 51 and housing association grant paid under Section 41 of the 1985 Act or any enactment replaced by that section.

Clause 52(1) empowers the corporation to determine the relevant events in which its powers of recovery may be exercised. Such determinations will be subject to consultation with bodies representing housing assocations and to the approval of the Secretary of State as required under Clause 53. However, in order to exercise its powers, the corporation must be able to ascertain that a relevant event has occurred. Clause 52(3) requires housing associations in receipt of grant to notify the corporation of any relevant event giving rise to the exercise of this power.

There may be circumstances where the corporation needs information from the Land Registry in order to establish whether a relevant event, such as the disposal of grant-aided property, has occurred. Under the current legislation it is necessary for the Chief Land Registrar to have statutory authority in order to provide information to another body. Clause 52(4) provides this authority. However, Section 3 of the Land Registration Act 1988 provides for an open registry and, when this provision comes into force, the registrar will no longer need this specific authority. Amendment No. 109 therefore provides for the repeal of Clause 52(4) from the date Section 3 of the Land Registration Act comes into force.

Finally Amendment No. 171 is simply a drafting amendment to correct a defective reference to the Housing Associations Act 1985 in the schedule of minor and consequential amendments. I beg to move.

On Question, amendment agreed to.

Clause 46, as amended, agreed to.

Schedule 5 agreed to.

Clause 47 [Transfer to Housing for Wales of regulation etc. of housing associations based in Wales]:

Lord Brabazon of Tara moved Amendment No. 101: Page 35, line 8. leave out ("Housing Associations Act 1985") and insert ("1985 Act").

On Question, amendment agreed to.

Clause 47, as amended, agreed to.

Lord McIntosh of Haringey moved Amendment No. 102:

After Clause 47, insert the following new clause:

("Composition of Housing Corporation and Housing for Wales.

.—(1) Not later than one year after the commencement of this Part of the Act, the Secretary of State shall bring forward regulations for changing the composition of the Boards of the Housing Corporation and Housing for Wales.

(2) Such proposals shall include—

1. (a) provision for the Board to consist of a majority of respresentative members, who shall be representative of housing associations and their tenants' local authorities; community groups, and other voluntary organisations;
2. (b) provisions for the inclusion of an equitable proportion of women and respresentatives of minority ethnic groups; and
3. (c) provision for the Board to appoint its Chair and Chief Executive without reference to the Secretary of State.").

The noble Lord said: I have already made threatening noises about the Housing Corporation. The Housing Corporation is itself threatening to become the biggest and least accountable quango in British public life. Perhaps I may remind the Committee that at the moment there are about 4 to 5 million local authority tenancies and about 500,000 housing association tenancies. It will be seen that the potential for the expansion of the Housing Corporation in terms of the number of dwellings for which it has responsibility is enormous. If the remainder of the Bill, which provides for the transfer of local authority properties over to housing associations, is achieved, the potential for increased responsibilities for the Housing Corporation, simply because of the rise in the number of dwellings for which it is responsible is enormous.

Over a period of 10 years, the housing corporation could easily become 10 times its present size for that reason alone. However, the Bill is not only extending the number of tenancies for which the Housing Corporation is responsible. It is also changing its role and increasing its responsibilities very dramatically. The fact that is is being broken down into an English Housing Corporation and Housing for Wales is a bit of minor tinkering compared with the other changes that are taking place.

The existing functions of the Housing Corporation are set out in Section 75 of the Housing Associations Act. The Housing Corporation is responsible for promoting registered housing associations, facilitating their functions, publicising their aims, maintaining a register of and supervising housing associations—note the word "supervising"—and acting as agent for the Secretary of State in the payment of grant. This function will certainly not decrease. It will probably increase because the conditions of grant will change and become more complex. The final power is not used very much. It is providing dwellings for sale and rent.

The Bill as originally drafted provided for substantially increased powers for the Housing Corporation. It is said that capital grant decisions and payments should be taken away from local authorities and that the Housing Corporation should act as agent for the Secretary of State in housing association schemes; and that the Housing Corporation should be responsible for revenue deficit grant decisions and for payments. Of course the Bill provided for the approval of landlords for Part IV of the Bill under the so-called tenants' choice, where estates and properties are taken away from local authorities and given to applicants, who will very largely be housing associations. That also comes under the responsibility of the Housing Corporation.

As the Bill has proceeded through Parliament, additional powers have been given to the Housing Corporation of which perhaps the most important is Clause 49. That is why we have proposed the amendment at this place in the Bill. The corporation is now enabled to give guidance on the management of accommodation by registered housing associations. We referred to this matter when considering the tenants' guarantee so that, for example, the assessment of housing demand and the means of meeting that demand can become and will become part of the responsibility of the Housing Corporation.

Allocations policy, which has been dealt with largely by local authorities, now becomes the responsibility of the Housing Corporation. The terms of tenancy and the principles on which rent levels should be determined under the tenants' guarantee become the responsibility of the Housing Corporation. Standards of maintenance and repair become the responsibility of the Housing Corporation. The whole issue of consultation and communication with tenants which one would have thought would be far better done by people much closer to those tenants—the housing associations themselves—than by some national quango based in London all become the responsibility of the Housing Corporation, or rather guidance and control of housing associations in respect of these functions.

We have the prospect of the Housing Corporation being not just 10 times the present size, but probably 20 or even 30 times the present size when all the provisions of the Bill have been implemented. I say again without fear of contradiction that we have the prospect of the biggest and the most unaccountable quango this Government have ever produced, taking away from local democracy and parliamentary control most of the important decisions in our housing policy—not just in development but in management of public housing. This is a quite unacceptable degree of expansion for a body which is simply nominated by the Secretary of State with no control outside Whitehall or Marsham Street of its membership, detailed powers or staffing. Our aim through Amendment No. 102—I am also speaking to Amendment No. 111A in the name of the noble Lord, Lord Ross of Newport—is to find some way of bringing a semblance of democratic representation, not necessarily democratic control, into the Housing Corporation before it runs away with us and takes over not just Tottenham Court Road but housing throughout the whole of the country.

The amendment provides that a majority of the board should consist of members representative of housing associations and their tenants, local authorities, community groups and other voluntary organisations. There should be an equitable proportion of women and representatives of minority ethnic groups. The board itself, not the Secretary of State, should appoint the chair and the chief executive. What we do not say is that the Secretary of State shall be deprived of any ability to make appointments to the Housing Corporation. That would clearly be quite wrong. The Secretary of State has in the past appointed people—I pay tribute to them—of considerable distinction in the housing field to the Housing Corporation. It is correct that he should continue to have the power to do so. But it is not acceptable that that body, which will grow to such an extent with so little control, should not be to a substantial extent representative of the housing associations, tenants, local authorities, community groups and other voluntary organisations with whose work it will be so intimately concerned.

We cannot believe that the Government seriously want to have the Housing Corporation growing in this way without recognising the role that it has to play and its responsibilities to the people whom it is designed to serve. We are in serious danger of having housing management in this country and a good part of housing development out of the hands of Parliament and out of the hands of the people who will be using and providing services. That cannot be right. I beg to move.

6.45 p.m

Lord Ross of Newport

My Lords, once again I rise to support what has been said by the noble Lord, Lord McIntosh. I suppose that if he were thinking of some comparable body, the London Residuary Body might come to mind. It has an enormous financial responsibility that does not seem ever to be coming to an end. However, I agree with everything he said. There is a massive increase in the Bill of the powers of the Housing Corporation. It must be democratised to a reasonable degree.

I should like to pay my tribute to the work in housing associations in my area of Lady Benson who is a member of the existing board. It is rumoured that Lady Benson may not remain. We hope that that is not true because she has been assiduous, very hard working and popular. Anything I say is not meant to reflect on her at all.

Amendment No. 111A which is grouped with Amendment No. 102 takes the democratisation of the Housing Corporation a step further by suggesting it be set up on a regional basis. In fact it already operates on a regional basis to a large extent. There are eight regions within the English area of the Housing Corporation operating from Exeter, Leicester, Wolverhampton, Liverpool, Manchester and Leeds and it would be simple for it to structure itself properly on a regional basis to give much more power at regional level. As the noble Lord, Lord McIntosh, has said, let us have local people on the board of the Housing Corporation from local housing associations, nominated, elected and appointed thereto. For the first time the Housing Corporation in its annual report has reported on a regional basis; so let us follow it down that path and make it efficient. That is the purpose of Amendment No. 111A.

The national federation is also organised on a regional basis. So it would be proper for the housing associations and the Housing Corporation to work together within the regions. I truly believe that this ought to have the support of the Government because they are giving the corporation quite staggering powers with a budget of something like £1 billion which will clearly grow much higher. The housing association movement is set to increase substantially as well; so let us do the natural thing. Let us widen the responsibilities and widen the democratisation of the corporation so that local people have a much closer liaison with it.

I totally support what the Government have done in Wales. I feel sure that the Secretary of State had some part in that. To have hived off the corporation's work in Wales to its own Welsh housing movement is quite correct. But let us also do something for the regions in England. Why do we not do it? I support the amendment.

Lord Moyne

My Lords, I believe it is entirely logical to discuss the Housing Corporation which, as the noble Lord, Lord McIntosh, pointed out, has such a vital part to play. I can speak only of the excellent work that I have seen. I doubt whether I can vote for the amendment. I hope that my noble friend will say a little about what the Minister has borne in mind and will bear in mind in making appointments. I feel that the amendment is too rigid. It might lead to the appointment of "statutory women" who are not as good as ordinary women. I hope that my noble friend will be able to tell us a little of what the Minister is thinking along these lines, although maybe not wishing to have his hands tied exactly to the letter of the new constitution.

Lord Hylton

My Lords, the Housing Corporation has come a long way since it was first set up in the 1960s by the noble Lord, Lord Joseph. By and large, I believe everyone would agree that it has done a pretty good job. Indeed its current annual report is an impressive document. It is a pity that the Government have not seized the opportunity of the Bill to consider how the Housing Corporation should be constituted. Therefore I am personally grateful to the proposers of the two amendments.

I prefer Amendment No. 111A with its emphasis on regionalism to which the noble Lord, Lord Ross of Newport, has already referred. He explained how the corporation works through regions and has a considerable measure of administrative devolution to them. We welcome that but it needs to be taken a step further beyond merely the devolution of scrutiny, office work and the adminstration of funds and paper. Therefore, I should welcome separate boards in the eight regions.

I conclude by pointing out that the Housing Corporation expects the committees of registered housing associations to be both representative and accountable. It likes to see on the committees representatives of local authorities or parish councils. It likes to see tenants represented. It likes to see community and voluntary bodies playing a full part in the decisions which a housing association committee must take. If the corporation is insisting on that kind of accountability and local community responsibility at the level where new building, improvement and maintenance of houses is taking place, the same principles should apply within the funding and administrative body—-that is to say, the Housing Corporation. Surely, what is sauce for the goose is also sauce for the gander.

Lord Swinfen

While I appreciate the need for representation on the board of the Housing Corporation by the housing associations (which are using the money being given to them by the corporation), we ought not to lose sight of the fact that the corporation is spending taxpayers' money. Therefore it needs to be under ministerial and government control. Regarding both amendments, I cannot agree with the appointment of a chair. A chairman is the leader of the board. As far as I can see the movers of both amendments wish to appoint an inanimate object for the board to perch upon.

Lord Brabazon of Tara

My noble friend Lord Swinfen put the last point extremely well. I was going to say something along similar lines, but I do not think that I need now do so. I am sure that Amendment No. 102 has the best interests of the housing association movement at heart. The Government also have those interests at heart. Indeed, they would not be seeking so actively to increase the role of the housing associations if they did not have such a commitment. I am afraid that it is to misunderstand the role of the Housing Corporation and Housing for Wales to suppose that the amendment could help to secure the effects which we want.

It is of course an important function of the corporation to promote development and activity by housing associations. But that is only a part of its role. The corporation is also responsible for the management of a very large capital programme, worth £737 million in England in the current year. It must take detailed investment decisions, within the policy priorities indicated by the Government, about where and how that money is spent, a point made by my noble friend. The corporation also acts on the Government's behalf as banker to the housing association movement, making loans to associations from advances drawn down from the National Loans Fund. The amount outstanding at the beginning of this financial year stood at nearly £2,000 million for England and Wales. Then the corporation has the role of supervising and monitoring the activities and behaviour of individual housing associations, to ensure that the highest standards are set and maintained. This is a vital function, bearing in mind the large amounts of taxpayers' money involved in supporting housing association development through Exchequer grant: over £750 million of grant was approved by the corporation last financial year.

In order to maintain its confidence in the proper regulation of the corporation's functions, the Government could not accept, therefore, that they should not have the power to appoint the chairman of the corporation, or to approve the appointment of the chief executive. In the same way, it would also be wrong, in the Government's view, for the discretion of the Secretary of State to appoint board members to be constrained in such a way that a majority of the board had to be composed of representatives from specified interest groups. It is precisely because of the desirability of avoiding conflicts of interest that the Secretary of State is required by the 1985 Act to satisfy himself, before appointing a member of the board, that he or she has no financial or other interest likely to have a prejudical effect on their role as a member.

In practice I think that the discretion of the Secretary of State over appointments has been exercised most wisely. Members of the Committee who have spoken this evening have complimented some of the members of the present board. There is nothing about the composition of the present board of the housing corporation, for example, which points to any shortage of experience of the housing association world. A majority of the members are, or have been, actively involved in running an association. And yet the board is still rich in many other skills and fields of experience important to the work of the corporation: architecture, the law, housing finance and public administration. And fields of experience such as financial expertise will be of vital importance in the move to expand housing association activity by attracting sources of funding in the private sector. That might give an indication to my noble friend Lord Moyne. The corporation is fully aware of the need to consult with representative bodies and does so effectively at present. This Bill will add further obligations to consult representative bodies where appropriate.

The amendment also seeks to limit the discretion of the Secretary of State by providing that a proportion of board members be of a certain gender or ethnic origin. In practice again the Secretary of State is very much aware of the need to act equitably in the making of public appointments and will do his utmost to continue so to act. But it would be unnecessarily restrictive of his discretion to legislate in the way proposed. It could also mean in practice that, at any particular time when a vacancy arose, he might be prevented from appointing a person who otherwise had precisely the skills or experience most suited to fill the vacancy. For all these reasons the Government cannot accept Amendment No. 102.

Turning to Amendment No. 111A, I have again to say that the proposals contained in it would not have effects which were in the best interests of the housing association movement. The main effect of the amendment would be to do away with the Housing Corporation as the central co-ordinating and regulatory body in England. It would be divided into eight or more regional bodies. This cumbersome structure would result in a great deal of extra administration and duplicated effort, without any obvious potential for any compensating gains in terms of greater efficiency or a better end-product. It would also mean that functions such as planning for investment priorities nationally, and the regulation and supervision of housing associations generally, would have to be shifted to central government. One of the purposes of Part II of this Bill is to delegate more of the functions of the Department of the Environment to the Housing Corporation. The reverse of this would happen under this amendment, with many more functions ending up in the Department of the Environment. I do not believe that the noble Lord, Lord Ross of Newport, wants that.

Again, in practice it is a fact that the Housing Corporation is most sensitive to the needs of different regions. It delegates much of its executive work to its existing network of regional offices and its regional managers frequently consult with interested parties locally. The corporation would in fact like to delegate more decision-making to its regional managers. This process will not be improved upon by the approach advocated in the amendment.

I hope that I can give some reassurance to Members who have expressed concern at the potential growth of the Housing Corporation, particularly to the noble Lord, Lord McIntosh. It is true that it will take on important new functions under the Bill. However, many of those are only a natural extension of the activities which the corporation is already carrying out as the agent of the Secretary of State, or as the body responsible for ensuring high standards of probity in the housing association movement. There is emphatically no danger of the corporation being expanded to 10 or 20 times its size, as has been alleged.

Perhaps I may turn to the main point of the noble Lord, Lord McIntosh of Haringey, namely, that it is an undemocratic and unelected body. At the end of the day the Secretary of State is responsible to Parliament and has to answer in another place for what goes on. Therefore, democratic accountability is there.

7 p.m.

Lord McIntosh of Haringey

I listened with great interest to the response of the Minister. On the growth of the Housing Corporation he has made an assertion and has not given any evidence to indicate that it will do anything less than grow in proportion to the number of properties with which it deals. He has not given me any indication that it will not grow more because of additional responsibilities placed upon it.

The Minister's speech was interesting because it concentrated on some aspects of the amendments rather than the principle of accountability. In particular he criticised a provision in the amendments that a majority of the members of the board would be appointed as representative of the various bodies specified in the amendment. Therefore, is he prepared to take the proposal away and look again at the prospect of a minority of the members of the board being appointed as representative of those interests and the remainder being appointed by the Secretary of State?

Before the noble Lord responds to that, perhaps I may ask him whether he would be encouraged to think again about that if we withdrew the suggestion that the chairman and the chief executive should be appointed by the board rather than by the Secretary of State. I am reluctant to do that because I believe that the appointment by the board of the chief executive in particular is of great importance. But if we could make progress in the representativeness of at least a minority of the members of the corporation we might be willing to moderate the suggestions put forward in this amendment. I do not know whether he feels able to respond in any way to those suggestions.

Lord Brabazon of Tara

At this moment I am not able to respond very positively to the suggestion. If the noble Lord tables what I would call a slightly less draconian amendment, we should have to look at it on its merits. But I cannot give any assurance that we would look at it particularly favourably.

Lord McIntosh of Haringey

I did not expect any more than that. The noble Earl, Lord Caithness, will no doubt read what has been said. I believe that he is the Minster responsible for housing, and he may be in a position to be more positive. Although the detail may be questionable, I believe that the thrust of the amendment is still valid.

Similarly, as regards the amendment of the noble Lord, Lord Ross of Newport, which I said I was speaking to and failed to commend adequately, it does not seem to me that the objections made by the Minister have great force. For example, it would be perfectly possible for these regional housing corporations in England to set themselves up with a chairman and committee which could cover the whole of England and which would fulfil the coordinating functions by which the Minister sets such great store. None of those regions would be significantly smaller than Wales; and were it not for the difference between the Principality and the regions of England, which on this Bench in particular I dare not minimise, it would be equally good sense for the regions of England to have their own housing corporations, in the same way as the Principality of Wales. I do not believe that that question was adequately answered, and I am sure that the noble Lord, Lord Ross, will feel free to come back to this at a later stage if necessary.

Lord Ross of Newport

I should like to comment on the noble Lord's suggestion. I have no objection to the Secretary of State appointing the chairman of the Housing Corporation, but I believe that it should be up to the board to appoint the chief executive. The hoard should appoint its chief executive and the regional boards should appoint their chief executives. I should like to put that on record.

Lord McIntosh of Haringey

We are faced with a body which will grow very substantially despite the Minister's denial. We are faced with a body which, quite unlike the Training Commission, which is an analogy that we must make, does not have any representation from outside interests except by the goodwill of the Secretary of State. After all, the Training Commission, and the Manpower Services Commission before it, is the prime example in this country of the tripartite composition of public bodies which is such a strong feature of the European Community, in which we are becoming increasingly involved as 1992 approaches very quickly.

The analogy of the composition of the Manpower Services Commission and the Training Commission, with employer and union representatives as well as government representatives, is not threatening to the Government. This tripartite membership has led to conflict on occasion but has enabled the Manpower Services Commission to do a more effective job in securing the co-operation of employers and trade unions in its work.

I seriously suggest to the Minister that the Housing Corporation will be stronger if those who live under its sway, are dependent on its finance and need to influence its policy have a statutory right of membership on the body. It is not something which is outside the existing experience of the Government or government policy in other departments in other spheres. I strongly commend this view to the Committee. I hope that at a later stage it will be possible to come back with amendments which put at rest some of the fears expressed from the Government Front Bench. However, because there are a number of matters which need to be thought about again in detail on the ideal composition of the Housing Corporation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 48 [Permissible purposes, objects or powers]:

Lord Brabazon of Tara moved Amendment No. 103: Page 35, line 41, leave out ("Housing Associations Act 1985 ("the 1985 Act")") and insert ("1985 Act").

On Question, amendment agreed to.

Clause 48, as amended, agreed to.

Clause 49 [Guidance as to management of accommodation by registered housing associations]:

Lord Brabazon of Tara moved Amendment No.104: Page 37, line 21, leave out ("Housing Associations Act 1985") and insert ("1985 Act").

On Question, amendment agreed to.

Clause 49, as amended, agreed to.

Clause 50 [Housing association grants]:

[Amendment No. 105 had been withdrawn from the Marshalled List.]

Lord McIntosh of Haringey moved Amendment No. 106: Page 38, line 31, at end insert ("Such determination shall specify the manner in which housing association grant shall be paid in connection with housing activities where a local authority has provided promotion and assistance in accordance with section 58 of the Housing Associations Act 1985.").

The noble Lord said: I should like to express my gratitude for the support of the noble Baroness, Lady Faithfull, and the noble Lord, Lord Seebohm, who had tabled an identical amendment to Amendment No. 105. Since my amendment and that of the noble Lord, Lord Ross of Newport, was tabled after theirs, I believe we should have withdrawn our amendment and appended our names to theirs, but they were good enough to do it the other way round, which is why I move the amendment.

I believe that everybody is agreed that the ability of local authorities to continue to provide loan finance for grant-aided housing association projects is important. The Government have indicated that they wish that to continue, and housing associations like to think that there is more than one source of funding for new projects. In that way they are not simply dependent on a single source and not threatened if for any reason they fall out with one particular funding body.

It is also true that local authorities have an understanding of local housing needs because of their much greater involvement with housing in the area. Therefore they are able to put the money at their disposal into housing association projects which are more likely to fulfil local housing needs. I think it would be generally agreed that it is a good thing that that should continue. Sections 41 and 46 of the Housing Associations Act 1985 provide that both local authorities and the housing associations can act as agents for the Secretary of State in passing on housing association grant.

In this Bill Clause 50 takes over and gives the Housing Corporation the sole power to make housing association grants. It must be admitted that there have been difficulties in the 1985 Act. When the local authorities are proposing to make grants the Department of the Environment insists on carrying out its own double scrutiny and on looking at schemes in Marsham Street which have already been looked at by the local authority. Whatever the reasons for that may be— I do not think it is appropriate to go into them now—the fact is that the approval procedure for local authority grants to housing associations has been slower and more cumbersome than for the Housing Corporation, because principally the Government have been more willing to give latitude to the Housing Corporation than to local authorities. Therefore, schemes which are funded by the Housing Corporation tend to go through more quickly than local authority funded schemes.

Clause 50 is certainly wide enough to allow the corporation to pay housing association grant, because only the corporation can pay housing association grant on local authority funded schemes as well as on housing corporation funded schemes. In May the Government said that that was the intention and that it was their policy that housing association grant would continue to be paid on local authority funded schemes as well as on Housing Corporation funded schemes. But it is not good enough for that to be a statement of intent for the Government, because the Government could very well reverse the statement of intent and change quite dramatically the situation which now exists and which would continue under the statement of intent.

In this amendment we are giving statutory effect to the statement which the Government made in May about restoring to local authorities the statutory ability to provide funding to grant-aided housing association schemes, which it is now proposed to replace by a statement of intent.

I think the noble Lord will be able to say in reply that our objectives are the same as those of the Government. I hope he will recognise that to have it on the face of the Bill is a real improvement, a real protection. Undoubtedly, we shall have to do something about the speed of approval of local authority schemes, but to maintain a diversity of funding is a very sound principle. Such a principle, which increases the ability of housing associations to respond effectively to local needs, is of real benefit to housing associations and is recognised by the housing association movement as being of real benefit. I believe that the amendment will therefore commend itself to the Committee. I beg to move.

Lord Seebohm

I wish to support the amendment. It is the result of long conversations which we have had with the National Federation of Housing Associations, and it seems to me that it is in accordance with that which the Government want. It is more in the nature of a tidying-up amendment than anything else. Otherwise, there is nothing fundamental about it.

Lord Ross of Newport

Obviously I also speak in support of this amendment. I know from the housing association movement that relations with local authorities have been close and good. Certainly, in days gone by local authority funding was probably regarded rather more highly than that from the Housing Corporation. That has changed as years have gone by, as money has become very tight within local authorities.

I understood from a statement made by the Minister in another place recently that it was not the intention of the Government totally to freeze out local authority funding. I very much hope that we shall hear more on that from the Minister now.

7.15 p.m.

Lord Brabazon of Tara

I hope that I shall be able to say rather more. There has been a long tradition of local authority support for housing associations, which we greatly value. However, it is widely recognised that the present arrangements for paying housing association grant (HAG) on local authority sponsored schemes are very unsatisfactory, involving much delay and confusion of accountability. The noble Lord, Lord McIntosh, referred to the difficulties that were encountered.

Because of those problems we had indeed wondered whether it would not be better to discontinue entirely the availability of HAG on such schemes under the new regime. However, my honourable friend the then Minister for Housing and Planning announced on 23rd May our decision to authorise the Housing Corporation to pay grant on schemes which local authorities decide to support with loans. The idea is that the local authority alone should be responsible for deciding whether public resources should be committed to a scheme while the corporation alone should be responsible for vetting it for grant. This should get us away from the problems of overbureaucratic scrutiny which have dogged the present arrangements.

The details of the system are being thoroughly discussed with the local authority associations, representatives of the housing associations, and the Housing Corporation; and if the proposed amendment has been prompted by any particular worries about how the new arrangements will work these can be looked at in the discussions.

Clause 50 as it stands enables the corporation to pay HAG on schemes supported by local authorities, as by any other lender. I hope I can dispel any concern there may be that the corporation would not be evenhanded in its treatment of local authority sponsored schemes. First, there will be no question of the corporation seeking to ration the schemes. HAG on schemes assisted by local authorities will be outside the corporation's cash-limited programme. While the grant will actually come from the corporation, the entire cost of the scheme, including the grant, will be a charge on the local authority capital allocation. So it will be for the local authority to decide what schemes should go forward, and any scheme which satisfies the HAG rules will automatically attract HAG. The HAG rules themselves will be for the corporation to specify, but they will be in accordance with principles which have to be approved by the Secretary of State and the Treasury and on which the housing association movement has to be consulted. So the corporation would certainly not be allowed—even if it had any inclination—to put bias on the working of the system against local authority sponsored schemes.

The amendment would require the arrangements for payment of housing association grant for local authority sponsored housing schemes to be specified in the corporation's determinations.

I can, however, assure noble Lords that such an amendment is not necessary. Clauses 50 and 53 already provide for the corporation to specify such matters as the grant procedures and the method for calculating and paying grant for the full range of eligible schemes, including those sponsored by local authorities. This will be done in accordance with such principles as the corporation may determine with the consent of my right honourable friend the Secretary of State for the Environment, and in most cases the Treasury.

More importantly, I do not think it desirable that Clause 50 should make specific reference to local authority sponsored schemes in this way. There are numerous categories of schemes and arrangements for funding that will need to be covered in the determinations. Indeed, the corporation's determinations will need to be very comprehensive in their coverage. They will need to spell out not only the procedures that will be necessary for schemes using different manners of financing but also those required for each type of scheme, of which there is a wide variety. For instance, the arrangements for schemes for rent developed as part of a programme by a large, financially strong housing association will be different from those for similar schemes developed on a one-off basis by a small, relatively weak association. The arrangements for home ownership schemes will be different again.

To mention just local authority sponsored schemes when there are so many other matters, many of them no less important, would be to unbalance the clause and make it very difficulty to work. However, with the explanations and assurances I have given, in particular that we see a considerable future role for local authorities to promote and fund housing association projects, I hope that the noble Lord will feel able to withdraw the amendment.

Lord McIntosh of Haringey

I fear that the Minister has done little more than repeat the assurances given by his colleagues in May. We never doubted that it was the Government's intent as of May or July 1988 to continue to have local authorities playing an important role in the funding of new housing association projects. That is not the issue in question. We are saying that, while intent can change, more effort is required to change statutes. We think that the intent should be enshrined in statute rather than left to the whim of governments, who may be less favourably inclined to local authorities than the present Government—if that were possible.

I am intrigued by the concept that the local authority will provide the basic funding and the Housing Corporation will be responsible for the allocation of housing association grant. I do not think that that concept has got through to all those who have been consulted. It certainly has not been put to me as the pattern to be implemented in the future.

The Minister has said much that demands serious attention before we consider what to do at a later stage. I therefore beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Ross of Newport moved Amendment No. 107: Page 38, line 34, at end insert ("except that no condition, whether imposed by the Corporation or by the Secretary of State under this Chapter, may specify that any surplus remaining after the payment of grant and incurring of expenditure on it shall be paid to any source").

The noble Lord said: This is intended as a paving amendment to Clause 55. If it is agreed to, I suppose that it would make something of a nonsense of Clause 55. Clause 55 allows the Secretary of State to direct housing associations to set up rent surplus funds, from which he can then claw back surpluses accruing from higher rents. As the Minister knows well, the National Federation of Housing Associations has for long felt that this should be dropped.

As to what the amendment adds to the Bill, it is proposed that there should be no restrictions on a grant made by a housing association, which should not be made subject to repayments of any kind. Housing associations will increasingly face problems as the years go by because for housing stock—particularly that requiring rehabilitation—maintenance and repairs will become more costly and grants will be reduced from 90 per cent. to 70 per cent. so that fewer funds will come from the Housing Corporation. It is doubtful whether it will be possible to get much out of the private sector. I know the Government say that they wish to see more funding from the private sector. However, the private sector is not likely to be very enamoured of housing associations that have little cash in the bank. Therefore, it will be necessary to build up the surpluses.

My own association wrote to the Minister in May. It wanted to use the grant redemption fund (which is now to be known as the rent surplus fund) to build up its reserves. It suggested also that the rent surplus fund might be used to alleviate what it regards as excessive rent increases in order to establish a more equitable rent system. That met with little favour from the Minister. We were told that how the rent surplus fund would work was still a matter of discussion between the Department of the Environment, the Housing Corporation and the National Federation of Housing Associations. It remains the wish of the NFHA to persuade the Government to abolish it.

As I said, this is a paving amendment to Clause 55, and proposes that grants should not have particular requirements tied to them. When a grant is made, it should be used for a particular purpose and the rent surplus fund should remain in the vaults of the housing associations to use as they think fit. If the Government want the housing association movement to thrive, they should not threaten that money will be claimed back, sometimes with interest—that is what Clause 55 says. While it is true that the Government claim that money clawed back in fact goes back into the housing association movement, the housing associations would much prefer to run their own affairs and be allowed to build up their own surpluses. It is necessary—the Government have accepted this—for the housing associations to set up sinking funds for repairs. If they do not know whether they will be allowed to retain their surpluses as they build up slowly—and indeed, not many have a great deal in the way of surplus, so let us get that straight—how on earth can they plan ahead sensibly a sinking fund for repairs? I beg to move.

Lord Graham of Edmonton

I support the amendment. It asks the Government to trust housing associations. There is no disguising that the national federation, representing all its members, has had a dislike of the previous arrangements. What the Government propose is a similar arrangement but under a different name. I ask the Minister to be serious about putting into effect the Government's expressed wish to expand the housing association movement. I do not dispute that the Government wish to expand and strengthen housing associations because they have for a long time recognised the value of this third arm in housing—municipally-owned housing, the owner-occupied sector and housing association and co-operative forms of management and ownership. Nor do I dispute their integrity or question their motives, but we are talking of hard practicalities.

Housing associations are responsible bodies. They too wish to have some independence. By good management and skill—and often by luck—they build up surplus funds. However, if the Government can call these in at will, the desire of the housing associations to be more enterprising than they might otherwise be will be sapped. Housing associations must be able to build up their money reserves and, when they want to be enterprising and undertake a major programme of renovation and repair, have some funds of their own. We all want some independence. The Minister, his family, his wife and his friends surely like to feel that they are free from interference. We plead with the Government not to perpetuate what has been a bone of contention in the past between the housing association movement, the Minister and his advisers and the Housing Corporation.

Many risks are involved. With the best managed housing associations in the world, not all will be best managed. Some are feckless and some are poorly managed professionally. It is a broad church. Given that they seriously want to expand and provide the opportunity for participation and modest ownership, we ask that these groups of people, some of whom are professional and some of whom are volunteers, be given a little confidence.

We want the Government also to inject a little certainty for housing corporations about the future. It is not good for them always to be beholden to the whim of government or a housing corporation. What about bureaucracy and the costs involved? What about the need for small housing associations to maintain financial control and be able to evaluate profit and loss and aggregated profit on properties in order to put the surplus into a fund, with all the paperwork that is involved? In the end the Government will be taking away money from those who have made it, they will make the money go round so that, in the fullness of time, the money taken from the housing association will come back and go round yet again.

The Government might fairly say that their job and that of the Housing Corporation is to manage the whole of the movement. The Minister should listen, and this Minister might, to the people at the sharp end—those concerned with the housing associations. They are saying "Goodness gracious, give us a little freedom and the opportunity to manage our own affairs." The Government may wish to see some private finance injected into the housing associations, but that will be inhibited unless they are allowed to build up, retain and use the surpluses that they make from managing their business.

We believe that the Government have an opportunity under the new arrangements to demonstrate that they have confidence, as we have on this side of the Chamber, in the housing association movement. The sums involved are modest. I do not have precise figures but I am told by the national federation that they are modest in the totality of the scheme. The Minister mentioned a figure earlier of £730 million which is managed and recycled by the Housing Corporation. Here we are talking about a few thousand pounds. We are not talking about a few thousand pounds to waste; it can be circumscribed in a number of ways. I very much hope that the Minister will say kind words which might enable the noble Lord, Lord Ross, to withdraw his amendment.

7.30 p.m.

Lord Moyne

I shall speak to Amendment No. 107 and the Motion to omit Clause 55 from the Bill at the same time. I am not clear as to the effect of missing out Clause 55 or of truncating it by Amendment No. 107. I am not clear whether the old grant redemption fund would still apply and whether the whole of the surpluses would have to be handed back as at present.

On Second Reading I asked my noble friend for an assurance that he would at least allow part of the rent surplus funds to be retained as sinking funds for major repairs. That assurance was generously given, though without commitment as to the proportion. I felt that half a loaf was better than no bread, if it was to be a half, but I was asking for a whole loaf.

My noble friend was kind enough to say that I had not yet persuaded the Government that the whole surplus should be retained. I venture to hope that my argument that those who have made talents fructify should be allowed to retain the results for further fruition, combined with the persuasive arguments expressed today, may induce the Government to consider introducing an amendment of their own on Report by which proportions will be fixed. Let us say that it should be half for the sinking fund and half for further investment in bricks and mortar. A slice for the Housing Corporation, to which the movement owes so much, would not be unreasonable but would confuse the existing pattern by which the corporation is financed by central government.

I believe that it will he best to fix proportions in the Bill rather than to leave them for endless discussion and negotiation. On the assurance that such an amendment will be considered by the Government, I hope that these amendments might be withdrawn.

Lord Brabazon of Tara

I am not entirely clear whether the noble Lords, Lord Ross of Newport and Lord Graham of Edmonton, were speaking to Clause 55 stand part.

Lord Ross of Newport

I was speaking to the amendment and I pointed out that the inevitable result of passing this amendment means that Clause 55 will have to be drastically rewritten.

Lord Brabazon of Tara

If I may, I shall answer both debates and include Clause 55 stand part at the same time. I must tell the noble Lord that I do not believe that his amendment would have the effect that he wishes. It seems that it is intended to emasculate Clause 55 by preventing the Housing Corporation from making payments of grant conditional on the later repayment of surpluses. Clause 55 is self-contained and the duties that it imposes on associations are not dependent on conditions having been made on the payment of grant. Therefore, the amendment would have no effect on the operation of the rent surplus fund arrangements in Clause 55.

Turning to Clause 55 itself, which I believe to be the main point of the debate, in order to understand its purpose it is necessary to go back some way into history and also to delve into the technical details of the current method of financing housing association development. Since 1974 the greater part of the cost of an approved housing association project (typically 85 per cent. of it) has been met by housing association grant. HAG is paid as a lump sum when the project has been completed. and its amount is calculated so as to bridge the gap that would otherwise arise between the associations' reasonable expenditure on the project and its estimated income—that is, chiefly the income it can obtain from rents, which, as we have seen, are at present pegged to the fair rent level determined by the rent officer.

The important point to note is that this is a single calculation, based on the associations' estimated costs and income at a particular point in time. But unfortunately both of these things will tend to change over the years. If costs and income rise broadly in line with each other, there is no difficulty. But all past experience is that they tend not to, for one very simple reason. The 15 per cent. or so of the project cost which is not paid by HAG is normally financed by a loan. That loan normally takes the form of a conventional mortgage.

It is characteristic of the conventional mortgage that annual repayments stay constant in cash terms over the years (leaving aside the effect of fluctuations in interest rates) and many housing association loans were in any event taken out at fixed interest rates, whatever is happening to the general level of prices and earnings in the economy. Loan charges are an important element of associations' costs. Since prices and earnings continue to rise, though mercifully no longer at the tremendous rate we experienced in the 1970s, and since this rise is reflected in the level of fair rents, it follows that associations' costs arising from a particular project tend to grow less fast than their rent income.

The Public Accounts Committee of another place drew attention some years ago to the uncovenanted bonus which associations were receiving in this way over and above the very generous grant they were given towards the capital cost of their schemes. On its recommendation a corrective mechanism, called the grant redemption fund or GRF, was introduced in 1980. This is designed to recover any surplus rental income which accrues on grant-aided projects as rents rise faster than costs. It is often, and quite unfairly, represented as a tax on the housing association movement. It is of course nothing of the kind. It is there merely to ensure that an association is not put in a more favourable position than was intended when the grant was first paid to it. Nor is this merely a one-way street. There is separate provision for revenue deficit grant to be paid to associations which for some reason outside of their control incur an overall deficit on their operations.

The GRF is a complicated arrangement, deeply and understandably unpopular with associations. Nor has it been very succesful. By a variety of accounting procedures, associations have managed to minimise their GRF liability. One of our objectives in designing the financing arrangements for new housing association schemes under the Bill and under the current pilot programme of schemes funded by a mixture of public and private finance has therefore been to tackle at source the problem the GRF was brought into force to deal with. The key to this is the nature of the loan involved. Our troubles arise, as I have explained, from the use of conventional mortgages. If instead associations raise the money for the balance of the scheme cost through one or more of the available sources of low-start money, index-linked loans, deferred interest loans, deep discounted stock issues or whatever, the burden of loan charges will be less formidable in the early years and will broadly keep pace with their other costs and their rental income thereafter. Initial input of grant can therefore be lower than it would otherwise need to be, and no corrective machinery will be required thereafter.

However, the greater part of the associations' stock was funded under the present grant regime, and the problem has not gone away. Indeed in one respect it is more significant than before. Associations will no longer be constrained by fair rent controls on re-lettings to new tenants of their existing stock. We would expect them to take the opportunity to increase their rents on those dwellings to levels comparable with those they will be charging on schemes funded under the new grant regime. Their capacity to generate surplus rental income will therefore be increased.

At the same time, however, new uses for associations' rental income will arise. Two are particularly important. First, we think it right that associations should increasingly look to their own resources to fund major repairs to their stock. At present 100 per cent. grant is available for this purpose. But the supply of course has to be rationed and inevitably a fair amount of bureaucracy is entailed. It would be far better for associations to set aside a proportion of their rental income each year to provide for their future repair needs. Secondly, many associations have little or nothing in the way of reserves to draw upon in the event of unexpected costs arising. It is desirable that they should build up rather more of a cushion for themselves in future, not least as the new grant arrangements will require associations to accept a greater responsibility for the cost of their schemes, and of the financial consequences of these, than they do today. A healthy reserves position will also be encouraging to potential private lenders.

These new demands on associations' rental income, particularly as regards major repairs, will be substantial in the early years and any successor arrangement of the GRF must take proper account of them. But they will affect different associations to different degrees. Those most fortunately placed may well before long find themselves with surplus rental capacity significantly exceeding their needs, whereas for many others it will be many years before they can fund all their major repair requirements for themselves. It is necessary therefore to ensure that the taxpayer continues to enjoy the protection which the Public Accounts Committee called for, though equally necessary to devise new machinery to fit the new situation and to remedy the difficulties of the existing GRF arrangements.

Clause 55 therefore provides for a rent surplus fund, or RSF, which will replace the GRF. This gives the Secretary of State far greater flexibility in determining the rules under which recoverable surpluses will be computed than exists under the GRF provisions, and my department is already discussing intensively with the Housing Corporation and the National Federation of Housing Associations how the RSF might operate. Among other things, it is intended that new schemes funded with low-start loans should be excluded from the RSF altogether; that generous allowance should be made in the calculation for the funding of future major repairs; and that associations should also be able to retain a proportion of their additional income in order, for example, to strengthen their reserves.

It is only to be expected that the housing association movement would press for Clause 55 to be removed altogether. A number of associations have indeed worked themselves into a great lather of indignation over this issue. Any recipient of grant would of course prefer to retain the money indefinitely, even if circumstances changed greatly for the better.

The noble Lord, Lord Graham, said that only a few thousands pounds were involved in the grant redemption fund. I fear that he has been misinformed. Receipts from the grant redemption fund amount not to a mere few thousand pounds but to many millions.

Lord Graham of Edmonton

Per association.

Lord Brabazon of Tara

I readily concede that it is a modest sum in comparison with the total resources available for grants and loans to associations from——

Lord Graham of Edmonton

When I was talking about a few thousand pounds, the figure was per association. I was making the point that the administrative costs and the bureaucracy involved could well be disproportionate. Of course millions of pounds are involved globally but I was referring to the figure per association.

Lord Brabazon of Tara

I apologise if I misunderstood the noble Lord.

My noble friend Lord Moyne made the point that the proportion of rent surplus which associations can retain should be fixed on the face of the Bill. I can understand his preference for a bird in the hand rather than two, or perhaps merely a half, in the bush. I have to say, however, that our first thoughts in this matter might not turn out to be our last thoughts. Were we to provide for a specific percentage in the Bill we might all too soon conclude that it was the wrong percentage—either too generous or too mean. We would then have to await a suitable opportunity for amending legislation.

I have given a rather lengthy explanation of why we believe Clause 55 should stay in the Bill. I hope that, with what I have said, the noble Lord, Lord Ross of Newport, will feel able to withdraw Amendment No. 107 and that Members of the Committee will not feel it necessary to press for the exclusion of Clause 55 from the Bill when we get to that stage.

Lord Moyne

I accept what my noble friend said about flexibility in the future, but I was puzzled by him saying that certain things might be in excess of needs. A charitable housing association "needs" to build as many houses as possible. I cannot see how anything can be in excess of their needs.

Lord Graham of Edmonton

Answer that one.

Lord Ross of Newport

We have had a lengthy reply and many of us will want to study it because it was given at a fair old pace. I am an auctioneer and I speak far too quickly. When I left the other place the Hansard writers said "Thank God". That is entirely right because I spoke at 260 words a minute. The Minister was not very bad.

He gave us some hope in that negotiations are still going on and he appreciates that at least some of the funding should remain in the hands of the housing associations both to build up sinking funds and to build up their own reserves so that they can perhaps attract more finance from the private sector.

I know that many housing associations would say that there is far too much bureaucracy from the corporation when they are buying land and in regard to when they can actually build on it. They buy the land one year and perhaps build on it two years later. If only they could build up sufficient funds they might be able to get some of these schemes off the ground much earlier. There is definitely a great loss of money in that respect when land is lying idle and one cannot put bricks and mortar on it.

However, I recognise that the matter is still continuing. It is two months or so before we come back at Report stage. Perhaps we may reconsider it and get a more up-to-date report from the Minister on that occasion. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

7.45 p.m.

Lord Dean of Beswick moved Amendment No. 108: Page 39, line 10, at end insert— ("(6) In exercising the powers under this section, the Corporation shall commit no more than one quarter of its Approved Development Programme to housing association housing activities partly funded by loans from the private sector until three years after the commencement of this Act.").

The noble Lord said: This amendment seeks to limit the speed at which housing association funding is moved to mixed funding—part private sector money—by limiting the proportion of the Housing Corporation's funds which can be used for these types of scheme. Such a limit would enable the move to be genuinely experimental and a proper assessment to be made of the impact on rents and the financial risks to associations. I take the view that as it stands the Bill would in some way inhibit the housing associations from fulfilling their traditional role.

The National Federation of Housing Associations, while being willing to work with the Government and the Housing Corporation to draw private sector money into housing association funding, has expressed concern at particular aspects, which can be summarised as follows. Rents: these should remain at a level affordable for the existing low income groups housed by housing associations. This matter is dealt with more fully in the amendment on rents. However, I make the point now that the role adopted over a number of years by the National Federation of Housing Associations in caring for people at the lower end of the scale could be jeopardised quite severely by the proposals in the Bill. On risks, the payment of housing association grant up front at the beginning of a scheme means that housing associations would bear all the risks of an overspend because of unforeseen costs.

The Government have now responded to that by introducing a form of risk sharing between associations and the corporation for associations which are unable to bear the full risk. Small associations, including black and ethnic minority associations and co-ops, are unlikely to have an asset base which would attract private investment. They are a continuing substantial part of the approved development programme remaining for full public funding. Those associations will either never get off the ground or their future development will be thwarted. In some areas that type of association has started to fill a vacuum which we believe no one else would have been able to pick up or even have attempted to pick up.

As regards the speed of change, the National Federation of Housing Associations is concerned that change should be gradual. The effects on rents and small associations need to be carefully assessed, as does the ability of housing associations to attract private finance on reasonable terms and to bear the risk that the Government are asking them to take. Of course for private finance there must be an attraction, and there will have to be some underpinning before private finance will be attracted. That is why I think that the situation as it stands at present in the Bill would have the opposite effect to this idea. I believe it could irreparably damage, in some respects beyond recovery, the role of some of the associations.

However, the amendment concerns itself with the speed of change. In another place the Minister of State for Housing always referred to the mixed funding scheme as experimental, indicating that the approach must be a careful one and the effects of mixed funding closely monitored. Further, the noble Earl, Lord Caithness, referred to this year's pilot mixed funding programme on 11th July (at col. 675 of Hansard). However, the indications are that despite such assurances the DoE and the Housing Corporation are pressing ahead at speed with the mixed funding scheme, without waiting for its effects to be properly assessed.

There are dangers as well as opportunities for housing associations in working with private finance. At present there is too little experience available, especially for smaller organisations, for the change to mixed funding to be other than the experimental approach indicated in both places.

As a former chairman of a large municipal housing authority, I recall that when the housing associations first started to appear—I am talking about the housing associations as we see them today—there was a great deal of suspicion, and to some extent resentment, among some of the local authorities concerned with housing about their role. However, time has shown that housing associations, as I and my colleagues believe, are fulfilling a vital role which is complementary to the public sector. We believe that it should be on an expanding basis because it can certainly be more trusted by virtue of historical events than some of the bad practices which have gone on in the private sector. I think that it should be receiving all the encouragement that the Government can give it if they are really serious about providing housing for rent for people at the lower end of the scale.

From what the Minister said last night in reply to some of the amendments, there will be very little housing in the private rented sector which will be available to the bottom end of the social scale when the Bill becomes enacted. I am not using exactly the same words but I am explaining the sentiments behind what the Minister said to the Committee last night. He conceded that the lower end of the scale—namely, the homeless—would not to any substantial extent be affected by what is before us.

I am making the case on behalf of my colleagues and other Members of the Committee on this side of the Chamber, and perhaps some noble Lords on the Government Benches, that the housing associations have a proven record. They are delivering the goods. We believe that the Bill as it is presently structured will inhibit them in doing a job which is welcomed by the community and we think they should be allowed to get on with that job without any such inhibition. On that basis, I beg to move.

Lord Brabazon of Tara

An important underlying objective this Bill is to make it easier for housing associations to co-operate with the private sector in the development of new housing schemes. The reason for that is quite clear. If public and private sectors can co-operate, where up to now only the public sector has been involved, we will be able to make our public sector resources stretch further, and get far more homes for the same money. Let me briefly explain the background.

At present it is housing association grant which bears nearly all the burden of the Housing Corporation's approved development programme. Where a new scheme is developed, a very large proportion of the capital costs is met by grant, and a residual public sector loan is left, to be serviced by rental income calculated by the rent officer under the fair rent system. So there is no private sector financial involvement. And yet housing is pre-eminently a field in which the private sector has always been well prepared to invest. This has not, it is true, been the case in recent decades in the field of housing for rent for the reasons that we have already discussed in relation to Part I of the Bill and I do not wish to repeat those arguments. They are to do with the notorious complexity of landlord and tenant law, and not least the unrealistic nature of the current fair rent system.

However, with a more rational tenancy and rental regime there is no reason why the private sector should not be prepared to invest in rented housing. This does not just mean private sector provision of new accommodation at market rents. Important though that is, we fully recognise the continuing need for substantial public sector input to provide accommodation within the means of the less well off. We will continue to provide for this through the housing associations. But the mere fact that there is an input of grant is no reason to suppose that the private sector will be unable or unwilling to invest.

On the contrary, we have seen in the last year or so the first steps towards a mixed funded programme of private sector loan and public sector grant run by the Housing Corporation. Under last year's initial programme, £30 million was made available and housing associations were able to bid for mixed funded projects to make use of those resources. I am pleased to say that this £30 million was fully committed before the end of the financial year.

In the current year the corporation has set aside £58 million of its approved development programme for a continuance and enlargement of mixed funding. New and more generous rates of grant are now available, ranging from 50 per cent. in low cost areas to 75 per cent. in high cost areas. The corporation received no less than £700 million of bids to take up these resources, and it has in fact committed over £100 million to help ensure a complete spend. That is all very encouraging. What is more, it is all happening in advance of this legislation, which will ensure that new lettings are granted on assured tenancy terms. Once the legislation has received Royal Assent, we are confident that there will be further interest from housing associations in the mixed funded programme.

At the levels of grant we have announced for this year we are confident that associations will be able to provide accommodation well within the means of their traditional client groups. We are not contemplating market rents or anything like that. Mixed funded schemes will be a continuance of existing programmes providing for those who need subsidised housing. We will monitor the grant rates to ensure that that is what is being achieved. I hope that will give some reassurance to the noble Lord.

I turn now to the noble Lord's amendment. It seeks to limit the scope for mixed funding to a maximum of one-quarter of the Housing Corporation's total investment programme for the next three years. Why should one do that? At an average grant rate of 60 per cent., which is the average applying this year, mixed funding delivers two-thirds more dwellings for the same input of grant as 100 per cent. public sector funding. That is a major prize for the housing associations to grasp, and many of them are trying to grasp it with enthusiasm. We wish to give them all the encouragement we can to go further down that path as rapidly as possible. I see no case for imposing any artificial restrictions of the kind the amendment seeks to impose.

Members of the Committee are concerned that a shift in emphasis towards mixed funding may mean that there is no place in future for traditionally funded schemes. That is not so. We recognise, and have always recognised, that there are certain kinds of schemes, and also certain associations, which for a variety of reasons will find it difficult to attract mixed funding. That may apply, for example, to some types of special needs schemes. And in some cases associations will he too new or will lack the resources to participate in mixed funding. They will need to be able to offer some security to private lenders. At the present stage in their development, they may just not have any to offer. For such reasons, I repeat, we accept the continuing need for public sector loans as well as grant to be available. In some cases, schemes will continue to be wholly dependent—or almost—upon government grant.

We should expect the Housing Corporation to continue to provide a substantial level of assistance to schemes, or to associations in the categories I have just described. However, I repeat the point I made earlier. It would be an artificial restriction on the Housing Corporation to limit its contribution to mixed funding to just one quarter of its approved development programme. It would be wrong to suppose that the build-up towards higher levels of mixed funding must be as slow as the amendment proposes. We cannot at this stage be certain of the level of mixed funding which can be achieved or how quickly. We should like it to be the most which is compatible with the corporation continuing to fulfil its basic role; that is, to provide, through the housing associations, good quality housing for a variety of groups which could not afford it without subsidy.

With those assurances and for those reasons, I hope that the noble Lord will feel able to withdraw the amendment.

8 p.m.

Lord McIntosh of Haringey

Before my noble friend responds, I am bound to say that that was an extraordinarily sanguine response to the amendment. It reminds me of the bursar of the Oxford college who wanted to criticise the college's investment policy on the grounds that the previous 200 years had been totally exceptional in economic policy. When the Minister says that there has been plenty of money for investment in housing except in the past few decades, he seems to be whistling in the dark. During the past few decades, in particular, the whole climate of investment in housing has been changed because we have subsidised private ownership on a large scale through tax relief on mortgages. The Minister did not even refer to that major consideration in housing investment in his response to my noble friend.

Lord Brabazon of Tara

I did however refer to figures for the past year and the current year and how it looked as though investment was coming in for the programme.

Lord Dean of Beswick

I wish that I could receive what the Minister said with some gratitude. I wish that what he said would help reach the Government's objective. I am certain that it will not do so. This part of the Bill is based upon attracting private funding. It may have gone over the Minister's head, although it did not go over mine because I have been involved in large and medium scale housing development in the past, but what one can build and fund often depends on the interest that one pays. I do not know how housing associations can plan when we have the bank rate yo-yo-ing.

The Government believe that private money will be made available to housing associations at an interest rate that will enable them to fund developments and redevelopments at only reasonably increased rents. I consider that the Government are whistling in the dark. I do not believe that there is any possibility of that happening because private funding, whatever the Minister says, is not a charitable institution. I do not have any money to invest, but if I were to place some money with a financial institution—a bank or unit trust—it would not suddenly decide that I had given it for charitable purposes and start to make it available to housing associations at such a low interest rate that it almost guaranteed protection to housing association tenants.

I have attended a number of conferences; I do not know whether Ministers have. How to attract private capital into the market for houses to rent is an involved and important subject. It is so unattractive that there are few examples of financial institutions becoming involved. The rents that would have to be charged would be outside the reach of the families that the Government are supposed to be dedicated to assisting. The Minister's response gave me about as much hope as the lancers had during the Charge of the Light Brigade. They did not achieve their objective. It was a noble charge, but few returned. That is the type of thing that will happen with housing associations. They have a tremendous role to play. They are a proven success which should be built upon. We must almost discount the idea that the private sector will play a large part in funding housing associations for the type of people whom the Opposition, and the Government through their Ministers, profess continually to want to help most—the people at the bottom of the social market who have a variety of problems.

Local authorities have almost stopped building council houses because of the huge cut in funding. There is almost a stalemate. Some of the slack may have been taken up by housing association programmes. I hope that the Government will reconsider the effects of what they say the Bill will do. I believe that it will do the opposite. It will be a discouragement. It will retard the further substantial development of the housing association movement that we should all like to see. I should like to read what the Minister has said. I am sure that I have drawn the correct conclusion that the proposals contained in the Bill will do nothing to help that worthwhile and charitable movement expand the role that it has established to help the people who need the type of housing that it can produce.

I should like to read the Minister's long answer and perhaps discuss it with my colleagues and people from the housing associations to see whether I or the Minister have drawn the wrong conclusion. On that basis I beg leave to withdraw the amendment and perhaps come back at a later stage.

Amendment, by leave, withdrawn.

Clause 50 agreed to.

Clause 51 agreed to.

Clause 52 [Recovery etc. of grants]:

Lord Brabazon of Tara moved Amendment No. 109: Page 40, line 9, at end insert ("but this subsection shall cease to have effect on the day appointed under section 3(2) of the Land Registration Act 1988 for the coming into force of that Act.").

The noble Lord said: I spoke to the amendment with Amendment No. 100. I beg to move.

Question, amendment agreed to.

Clause 52, as amended, agreed to. Clauses 53 to 55 agreed to.

Clause 56 [Duty of Housing Corporation and Housing for Wales in relation to racial discrimination]:

Lord Graham of Edmonton moved Amendment No. 110. Page 44, line 22, after ("Corporation") insert ("and to a registered housing association").

The noble Lord said: I move the amendment on behalf of my noble friend Lord McIntosh of Haringey. Clause 56 applies Section 71 of the Race Relations Act to the Housing Corporation. The amendment seeks to extend it to registered housing associations. I think it will be for the benefit of the Committee and those outside the House who read the debate if I gave a little background. Section 71 states that: it shall be the duty of every local authority to make appropriate arrangements with a view to securing that their various functions are carried out with due regard to the need—

1. (a) to eliminate unlawful racial discrimination; and
2. (b) to promote equality of opportunity, and good relations, between persons of different racial groups".

We are seeking in Amendment No. 110 to add on page 44 at line 22 that the subsection shall apply to the corporation and to a registered housing association just as it applies to a local authority. We ask the Government to take into account that many of the housing associations which will be formed according to the Government's intention and desire are likely to be formed from housing authority stock. In other words, it is council housing. Under the law councils are obliged to refer to and uphold Section 71 of the Race Relations Act. We are saying that in those circumstances a comparable duty ought to be laid on housing associations to undertake the duty I read out earlier, to eliminate unlawful racial discrimination and to promote equality of opportunity and good relations among persons of different racial groups.

The Minister and the Committee are well aware that many housing associations in areas of inner city stress have high ethnic minority populations. I confess that the performance of some of those housing associations on equal opportunities is patchy, not just in regard to housing but also to employment, management committee representation and racial harassment.

We wish to lay down the duties. To be fair, the Minister is pushing at an open door if he consults the National Federation of Housing Associations. It has taken initiatives, which I applaud, as the Minister might very well do. The NFHA has issued guidance to member associations through its race and housing publications, which have been accepted by the Housing Corporation. This complements the Section 71 duties in that it advises associations operating in areas where the black community exceeds 2 per cent. to establish and monitor ethnic minority records for housing allocations, to establish and monitor ethnic minority records for employment, to ensure that ethnic minorities have fair access to their housing, to have regard to the need for translated material for tenants, to establish links with ethnic minority communities, to ensure that their management committee representation reflects the ethnic make-up of the community and to adopt a policy on racial harassment.

We are saying to the Government that there is a need in the area of race to be positive. The national federation has gone as far as it can. We make no pretence. The power of the law, the power of the Government and of what is said in this Chamber could very well do a great deal more than that. We want to see the elimination of discrimination. If the Government are serious, housing associations, whether existing ones or those established by local authorities for the purpose, should be the main vehicles for diversifying existing council housing. It is only logical that similar duties for promoting good race relations should apply to the successor landlords as to the local authority.

I invite the Minister to answer some questions. The Government feel that it is right that councils should have laid upon them the duty to follow the 1976 Race Relations Act, in particular Section 71. If the Government ask their tenants, "Do you want to change your landlord?" and the tenants say yes, is it not right, fair and logical that the obligations to observe the duties under Section 71 of the 1976 Race Relations Act should be passed to the new landlord? In this instance we are talking about a new landlord who could very well be a housing association. We want to see that housing associations are brought into that provision.

If the Government see housing associations as the main providers of social rented housing in the future, it is logical that the Section 71 duties should apply to those housing associations first as they apply to local authorities at present. I am sure that the Minister understands what I am saying, will tell me that he sympathises, that the matter is already being taken care of and there is no need for this amendment. This suggestion has the full support of the national federation, which is doing its best. It wants the Government to match the efforts of the federation. I beg to move.

8.15 p.m.

Lord Brabazon of Tara

The noble Lord has rightly drawn our attention to the importance of the ethnic dimension in housing provision. We believe that this Bill will do much to remedy some of the problems of discrimination which have been referred to, partly by extending the scope of Section 71 of the Race Relations Act 1976 to the Housing Corporation and housing action trusts. I ought at once to mention that Clause 56 was introduced by the Government in another place following moderately and persuasively argued representations by the Opposition. We were most grateful for their constructive suggestions, even though we felt unable at the time, as we still do, to go quite as far as we were asked to do.

We are not, however, persuaded that it would be appropriate further to extend the scope of Section 71 by accepting this amendment. There is a strong promotional flavour to Section 71, so that bodies to which it applies have a duty not only to perform their functions in a non-discriminatory way but to take wider steps to secure good race relations and equal opportunities. This is not something we think it is right to impose on bodies which are voluntary in constitution, often small in size, and with a relatively narrow range of activities.

That is not of course to say that we consider it unimportant for associations, or other smaller landlords, to conduct their affairs in a just and nondiscriminatory fashion They are already subject to provisions in the 1976 Act which make it unlawful to discriminate in the provision of services and accommodation and the granting of membership. They will also be subject to monitoring by the Housing Corporation, which will be operating with the strengthened responsibility for ensuring nondiscriminatory behaviour given to it by Clause 56.

Nor is that all. In a new clause which we have tabled and which the Committee will be considering in due course we are proposing to give the Commission for Racial Equality a power under which it could produce a code of practice on rented housing. The code would give guidance on the implications of the Race Relations Act for rented housing and, as we see it, would have wide application to those concerned with the provision of such housing in both the private and public sectors. Registered housing associations would of course be covered, and it would be a requirement of the tenants' guarantee that they observed the code.

In the light of what I have said, I hope the noble Lord will accept that the behaviour of associations in the race relations field will be quite adequately controlled without the needto apply the very wide-ranging provisions of Section 71.

Lord Graham of Edmonton

I have just told my noble friend Lord McIntosh that that was a fair offer. It is certainly the best that I shall get tonight. The Minister said that he recognised the problems that existed and that steps were being taken to produce a code of practice. In those circumstances, it would be churlish if we did not wait to see whether the code achieved our objectives.

I shall repeat here what I have said in other places. The record as regards seeking to eliminate discrimination and racial harassment is infinitely better in housing associations and local authorities than in great wedges of the private sector. One has only to have attended previous debates on the Bill to recognise that. I appreciate that the Minister who is replying to the debate this evening may not have attended all of the previous debates, but he is aware of the situation. Some horrendous cases have come to light which are due not only to bigotry and prejudice, but also to racial harassment.

I accept the Government's bona fides in this matter. Anything that they feel will improve the situation and provide people in wretched housing circumstances with the feeling that the Government care and want to take some action or provide the weapons to take some action is welcome. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 56 to 58 agreed to.

Clause 59 [Interpretation of Part II and amendments of Housing Associations Act 1985]:

Lord Graham of Edmonton moved Amendment No. 111: Page 45, line 39, at end insert— ("(aa) amending the provision in Part I of the 1985 Act concerning payments and benefits to committee members, etc").

The noble Lord said: I beg to move Amendment No. 111 standing in the name of my noble friend Lord McIntosh of Haringey and the noble Lord, Lord Ross of Newport. It may be for the convenience of the Committee if I also speak to Amendments Nos. 113 and 114. However, other Members of the Committee will be taking part in the debate on those amendments.

Amendment No. 111 seeks to amend Section 15 of the Housing Associations Act 1985 as regards payments and benefits to committee members and others so that housing association employees and their close relatives, and tenant representative committee members and their close relatives, are not barred from receiving payments and benefits. The disqualification would still apply to non-tenant representative committee members and officers of the association who may be employees.

In putting forward this amendment I must say that the intention behind the original provision was to prevent any abuse of position by committee members, officers or employees of housing associations. In particular, it was designed to prevent consultants and contractors who carried out work for a particular association serving on its committee and, in effect, awarding themselves commissions and contracts. As a tenancy is held to be a benefit within the terms of Section 15, it was also intended to prevent tenancies being allocated incorrectly. I think the word "incorrectly" is a euphemism. I am sure that Members of the Committee will understand what is meant by that.

The wide scope of Section 15 has, however, claimed some unfortunate victims. That was probably never envisaged when the provisions were drafted. For example, a recent case was recorded by the NFHA of the aged mother of a housing manager of a national housing association being unable to accept the tenancy of a sheltered unit owned by the same association to which she was nominated by her local authority. That was despite the fact that the tenancy was in a different part of the country from where the housing manager operated. So the proscription within Section 15 would catch such a circumstance. I am sure that kind of circumstance was never intended to arise.

Another case detailed a receptionist of an association who married one of its contractors and had to choose between resigning or her husband being unable to continue working for the association. Again I am certain that the true intention of Section 15 was not designed to lead to such cases. I am told by the national federation that other similar examples can be illustrated. The problem is unlikely to abate if housing associations, either new or existing, see an increase in their stock. That is what the Government want and what we want. So the dilemma will increase.

The problem of encouraging tenant participation is made more difficult by Section 15. Few tenants are likely to want to serve on a management committee, particularly if the association has any sizeable stock in the area, if they know their membership of the committee will ban any close relative from becoming a tenant of the association. While no one would wish to return to the unregulated situation which existed prior to 1974, the rapid growth of housing associations in the years since then and the possibility of future expansion has meant that the provisions of Section 15 have affected many more people than could have been anticipated earlier.

If the Government will not agree to the amendment as it stands, it would be helpful if they would address themselves to the problem and invite us to consult the housing federation with them in order to produce a better amendment. The Government should bear in mind the growing dilemma for which they will, in part, be responsible. The Minister may however have some other way of satisfying what is, I think, a genuine non-partisan problem. It is a dilemma which is born out of the success of the housing association movement. I beg to move.

Lord Brabazon of Tara

This is an important issue. I wish to speak to the Government's Amendment No. 113 in response to some of the points which the noble Lord, Lord Graham of Edmonton, made. We believe that our amendment responds to a number of the respresentations which the Government have received from the housing association movement. It extends to England, Wales and Scotland. In so far as it extends to Scotland, it reproduces an amendment to the Housing (Scotland) Bill to which the Chamber has already given its approval.

The amendment relaxes the restrictions set out in Section 15 of the Housing Associations Act 1985. That section prohibits housing associations from making any payment or granting any benefit to their committee members, officers or employees, present or recent; their close relatives, or businesses run by people in these categories. There are a few exceptions, the most important being ordinary salaries and expenses of members and staff, and tenancies granted by co-operative housing associations, but Section 15, as the noble Lord has said, is essentially a blanket provision.

The purpose of Section 15 is to prevent abuse. It was first introduced in 1980, following a concern by the Public Accounts Committee that a number of associations were operating unfairly, not to say corruptly. I could give examples, but I do not wish to take up the time of the Committee. I am sure that the noble Lord is aware that there were examples of abuse. The safeguards in Section 15 have worked very effectively to control abuse and it is essential that we maintain that effectiveness. The Government are determined that housing associations should continue to have a reputation for probity and sound management, and for fairness in their letting procedures. But the blanket nature of Section 15 has been shown to inhibit some perfectly legitimate activities by associations, and I know that concern has been expressed that it conflicts with the move towards tenants' participation in the management of their own homes.

The current position in Scotland is in fact slightly different from that in the rest of Great Britain, as some changes were introduced there in 1986. These changes, which are now embodied in paragraph 9 of Schedule 6, allow the granting of tenancies to committee members of designated community-based associations, and to their close relatives. This power to designate has hitherto been exercised by the Housing Corporation in Scotland and will pass to Scottish Homes in due course.

That is the background against which we have to consider how the controls over the making of payments and the granting of tenancies and other benefits should be most usefully and prudently amended. Opposition Amendment No. 114, in the Government's view, goes too far by removing all restrictions on the granting of tenancies and other benefits to housing association employees, and to committee members who are also tenants and who represent tenants. I do not wish to impugn the integrity of the movement or of any of the individuals working within it, many of them in a voluntary capacity; but we do need to learn from the experience of the past, and tread very cautiously in this area.

The government amendment before the Committee seeks to strike a balance between the need for caution on the one hand and the need for flexibility on the other; and it recognises that experience in Scotland has been different from that in the rest of Great Britain. I know that my Scottish colleagues believe that the amendments in the Housing (Scotland) Act 1986, which I mentioned a few moments ago, do not go far enough. The amendment therefore enables Scottish Homes to designate classes of case in which the restrictions in Section 15 of the 1985 Act will not apply and associations will be able to make payments or grant benefits which would not otherwise be permitted. The power it gives to Scottish Homes is essentially a development of that which has been available to the Housing Corporation in Scotland since 1986, and it will enable Scottish Homes to balance the case for relaxation of existing controls against the continuing need for safeguards against abuse.

The amendment gives essentially the same power to the Housing Corporation and Housing for Wales. But it is not the Government's experience that Section 15 has been as troublesome in England and Wales as in Scotland, and it was only in relation to Scotland, where community-based associations are more common, that it was amended in 1986. We therefore intend that the Housing Corporation and Housing for Wales should be required to consult the movement before determining the classes of case to which relaxation of Section 15 is to apply; and that such determinations should be subject to the Secretary of State's approval. I believe that this somewhat more cautious approach in England and Wales is justified by the historical background to Section 15 and by our lack of experience in administering relaxations.

I believe that government Amendment No. 113 meets the concerns which have been expressed about the restrictiveness of Section 15. I hope that the noble Lord will withdraw his amendment and accept Amendment No. 113 in due course.

Lord Ross of Newport

I recognise that we are in a very tricky area and that mistakes can easily be made. I hope that the Official Opposition will accept Amendment No. 113, which seems to me to go a long way to meet the concerns expressed.

Lord Graham of Edmonton

The Minister has been helpful in acknowledging the problem which we have brought before the Committee. I believe that he appreciates the way that oppositions work. We are told that there is a problem. We do not bring it forward before studying and understanding it. Part of the exercise is to get on the record and into the public domain matters which may have been amicably discussed and negotiated between the advisers of Ministers and those outside. The ante is higher, as it were, so that we must be more careful.

I am grateful to the Minister for Amendment No. 113. As he said, it does not go as far as our amendment. Amendment No. 113 says: Except in the case of housing associations registered in the register maintained by Scottish Homes, payments made or benefits granted by an association in such class or classes of case as may be specified in a determination made by the Corporation with the approval of the Secretary of State". Will consultations take place with, for instance, the National Federation of Housing Associations so that when the cases are codified under the Act there will be some common ground and they will include the matters which we believe are causing problems? We are not asking the Minister for a commitment. We are asking for consultations to make sure that he has it right.

Lord Brabazon of Tara

I said in my speech that the Housing Corporation would be required to consult the movement before determining the classes of case to which Section 15 is to apply. I can assure the noble Lord that those consultations will take place.

Lord Graham of Edmonton

On that basis, I am perfectly satisfied. We cannot ask for more. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 59 agreed to.

[Amendment No. 111A not moved.]

Schedule 6 [Amendments of Housing Associations Act 1985]:

Lord Brabazon of Tara moved Amendment No. 112: Page 110, line 31, leave out ("under section 2(2)(a)") and insert ("or a loan under section 2(2)").

The noble Lord said: I beg to move Amendment No. 112 and I shall speak also to Amendment No. 115. They are technical amendments. I beg to move.

On Question, amendment agreed to.

Lord Brabazon of Tara moved Amendment No.113:

Page 111, line 34, at end insert—

("8A.—(1) In section 15 (payments and benefits to committee members, etc.) at the end of subsection (2) there shall be inserted the following paragraphs— (f) except in the case of housing associations registered in the register maintained by Scottish Homes, payments made or benefits granted by an association in such class or classes of case as may be specified in a determination made by the Corporation with the approval of the Secretary of State; (g) in the case of housing associations registered in the register maintained by Scottish Homes, payments made or benefits granted by such an association with the approval of Scottish Homes (which approval may be given only in relation to a class or classes of case).

(2) After subsection (2) there shall be inserted the following subsection— (3) The Housing Corporation and Housing for Wales may make different determinations for the purposes of subsection (2)(f) above and, before making such a determination, the Corporation shall consult such bodies appearing to it to be representative of housing associations as it considers appropriate; and after making such a determination the Corporation shall publish the determination in such manner as it considers appropriate for bringing it to the notice of the associations concerned." ").

On Question, amendment agreed to.

[Amendment No. 114 not moved.]

Lord Brabazon of Tara moved Amendment No. 115: Page 111, line 46, leave out from ("dwellings") to ("and") in line 48.

The noble Lord said: I spoke to the amendment in speaking to Amendment No. 112. I beg to move.

On Question, amendment agreed to.

Lord Brabazon of Tara moved Amendment No. 116:

Page 115, line 21, at end insert— ("22A. After section 33 there shall be inserted the following section— Provision of services between the Corporations. 33A. Any of the Corporations may enter into an agreement with the others or either of them for the provision of services of any description by the one to the other or others on such terms, as to payment or otherwise, as the parties to the agreement consider appropriate." ").

The noble Lord said: I believe that noble Lords will agree that Amendment No. 116 is self-explanatory. I beg to move.

Lord McIntosh of Haringey

For once, I agree with the noble Lord. The amendment does not require explanation. I congratulate the noble Lord and the draftsman for doing something which is visible to the naked eye.

On Question, amendment agreed to.

Schedule 6, as amended, agreed to.

Lord Hesketh

I beg to move that the House do now resume.

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

House resumed.