Local Government and Housing Bill

HL Deb 09 October 1989 vol 511 cc11-129

3.8 p.m.

Lord Reay

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—(Lord Reay.)

Lord McIntosh of Haringey

My Lords, I do not believe that we should allow this procedural Motion to pass without registering the strongest possible disapproval of the behaviour of the Government in recent weeks regarding their plans for this Bill, and indeed the plans for legislation in the department over a number of years.

Last Wednesday 22 extra government amendments appeared in print. Last Thursday 44 new government amendments appeared in print. Last Friday 192 new government amendments, one of them 17 pages long, appeared for the first time in print. The Government have had the entire Summer Recess in which to prepare themselves for the remaining stages of the Bill. There has been plenty of opportunity for Ministers and civil servants to give the Opposition, the House and everyone concerned with the reasonable consideration of legislation the opportunity which they ought to have had in order to do their job properly. It is virtually impossible for us to do our job properly in the circumstances.

I seriously question whether the Government are in control of their own civil servants or their own legislative programme. Not only is this Bill being amended on the run, but previous legislation—including in particular the poll tax Bill of last year —is being amended on a very large scale at the very last minute in the second Chamber of Parliament. As a result, proper democratic controls are no longer available to the people of this country. I am sorry to say that it is necessary to protest in the strongest terms against this abuse of government power.

Lord Harris of Greenwich

My Lords, with the greatest respect to the noble Lord, Lord Hesketh, I wish to make it quite clear that my noble friends and I agree entirely with everything that the noble Lord, Lord McIntosh, said. I very much hope that the noble Lord the Leader of the House will take a close personal interest in the matter. He has a role in protecting the interests of individual Members of the House.

It seems to me to be wholly outrageous that scores of amendments are tabled at the last possible moment, thereby making it impossible for Members on both sides of the House to give proper consideration to them before the Committee stage is recommenced.

Lord Simon of Glaisdale

My Lords, the noble Lord, Lord McIntosh of Haringey, drew attention to this matter as part of a major, wider question. The truth is that this is merely symptomatic: we have far too much legislation and what we have is of a deplorable quality. When the Renton Committee on the preparation of legislation was set up the statute book consisted of about two volumes a year; now it is four or five, in spite of the recommendations of that committee. Moreover, there are fewer statutes and each one is longer, more prolix and more complicated.

As regards quantity, what are we to do? The answer to that question lies in the government machinery. It is the job of the future legislation committee to moderate the ambitions of Ministers and their civil servants constantly to tinker with legislation and, if possible, also to have some major legislative achievement each Session. As regards quality, we have many examples of this and the present example is quite extraordinary.

Members of this House will call to mind the extraordinary experience we had a few years ago with a child abduction Bill. It was based upon an international convention and conveniently the convention was set out in the schedule, which is usual. But, absurdly, one article was omitted. It was omitted because it was framed in simple language which was understandable by anyone, instead of being framed in the highly technical style which the parliamentary draftsmen still insist upon, despite the Renton recommendations. That provision was simply contained in a schedule to omit an article because it did not conform with our style of drafting. Could anything be more absurd?

Your Lordships may call to mind another more recent example of that procedure. It concerned the family law reform Bill. A long amendment was put forward to amend a previous statute. The noble Lord, Lord Kilbracken, reframed the wording in, I think, four lines as against 12. From all parts of the House Members rose to express the view that the proposal made the wording mean exactly the same as the wording contained in the government amendment and that it was far preferable.

I am quite sure that my noble and learned friend Lord Hailsham resisted the amendment explicitly on the grounds that, as framed by the noble Lord, Lord Kilbracken, it did not accord with the style of drafting of the statute sought to be amended. Your Lordships accepted that explanation at the time. However, it was quite obvious that my noble and learned friend then went back and banged many heads together. I say that because, sure enough, when the Report stage arrived the "Kilbracken" style of amendment was accepted. That is yet another example.

When the noble Lord the Leader of the House comes to answer the point made by the noble Lord, Lord McIntosh, and others I hope that he will deal first with the question of control by the future legislation committee as to quantity and quality. Further, I hope that the legislation committee will ensure that no legislation is brought forward which is not immediately comprehensible to those affected by it.

With those observations, I venture to support what has been said from the Opposition Benches.

The Earl of Halsbury

My Lords, in an attempt to pour oil on troubled waters perhaps I may remind the House that this is not a new situation. I recall the Patents Act of 1977. The noble and learned Lord, Lord Elwyn-Jones, was then on the Woolsack. On the first day of Committee 250 government amendments were tabled. On the second there were more than 100 and, thereafter, government amendments descended upon this House like autumnal leaves in Vallombrosa.

As I said, this is not a new situation. I entirely agree with the remarks made by my noble and learned friend that the legislation committee should take the matter under review. However, it should not be made an issue between the parties because every party is equally guilty in this respect.

The Lord Privy Seal (Lord Belstead)

My Lords, I should like to apologise to your Lordships for the number of amendments which were put forward last week and especially for the number of amendments which were tabled last Thursday. I shall certainly endeavour to see that this situation does not arise again.

However, I must say that some of the amendments—indeed, quite a large number of them—have been put forward as a result of consultation between the parties. For instance, I think I am right in saying that as late as 29th September there was a meeting between the noble Lord, Lord McIntosh, and the noble Lord, Lord Dean of Beswick, for the Opposition and my noble friends Lord Caithness and Lord Hesketh as regards houses in multiple occupation, which we shall be debating when we reach Parts VIII and IX of the Bill. That accounts for about 100 amendments. Although I feel sure that when we reach that stage the noble Lord, Lord McIntosh, may have some well directed criticisms, I hope he will feel that the Government have tried by way of the large number of amendments to move in the right direction.

There was also a group of about 40 amendments put forward concerning grants to blocks of flats which once again I hope that the noble Lord, Lord McIntosh, will feel is a move in the right direction. However, having said that about those two very large slices of amendments, I must stress that I am not in any way trying to excuse the fact that many of the government amendments were tabled later than they should have been. I wish to apologise to the House for that fact.

Lord McIntosh of Haringey

My Lords, it would be churlish of me not to accept the apologies of the noble Lord the Leader of the House and, indeed, the apologies expressed by the noble Lord, Lord Hesketh, in a letter which he wrote to me last Friday. The noble Lord is certainly right. We have sought and have been given an opportunity to consult about many matters as regards this Bill—as indeed we always are. However, that does not go far enough in dealing with the prime issue with which I am concerned; namely, that this large number of amendments was not only put down very late—I say this to the noble Earl, Lord Halsbury, who I do not think was referring to the first Committee day after two months of Summer Recess—but it was also put down after two months in which the Government had had the opportunity to consider their position.

We realised on Friday of last week that amendments of considerable significance—for example, amendments affecting the right to buy as regards sheltered accommodation for the elderly—were being put down without any notice, despite inquiries on our part as to what else was intended, and without any particular reference to the Bill. The legislation is being used in effect as a dustbin to deal with all the matters which the department wishes to get out of the way. Of course the apologies are welcome, but they do not overturn or effectively diminish the main thrust of our complaints.

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 71 [Duty to keep Housing Revenue Account]:

Lord McIntosh of Haringey moved Amendment No. 134YA:

Page 77, line 41, at beginning insert— ('( ) The section shall have effect for the purposes of securing that in any determination under this part in which the Secretary of State has regard to the capital value of housing accommodation, the said value shall be fixed with reference to the formula set out in section 99(2) of the Housing Act 1988').

The noble Lord said: In moving Amendment No. 134YA, I should like to speak also to Amendments Nos. 134YB, 135KC and 135KD.

With this amendment we come straight to the heart of the matter on the provisions of council housing at a rent that is affordable by those who expect to live in public sector housing. I remind the Committee that no later than 1988, in their consultation paper on the financial structure for public housing, from which I quote, the Government gave an undertaking that rents would not rise so as to be out of the reach of those in low paid employment.

Under persistent questioning by my colleagues in another place, Ministers refused to define what was meant by "out of reach of those in low paid employment" or indeed what was meant by "low paid employment". In other words, they refused to give any meaningful definition to the concept of "affordable rents", which I should have thought was well established in our housing policy. Instead, the Government are proposing a move towards a new machinery for the calculation of rents for the purpose of subsidy.

Let me make it clear that I am not claiming for one moment that the Government are proposing forcibly to put up rents to the rental equivalent of capital values. What they are proposing to do is so to adjust the housing subsidy that local authorities which find themselves with rent levels lower than that which would be arrived at by calculating capital values will have either to put up their rents or to reduce their service in some other way—for example, by reducing the level of expenditure on repairs; or there could be other ways of reducing expenditure.

I want to persuade the Committee that this policy of moving toward capital value rents by itself without any consideration of affordability of rents for those who will have to pay the rents is not an immediate but an inevitable move toward a system of calculating rents for subsidy purposes which will prove absurd. It is moving toward it at a deliberate pace perhaps but at a pace which will cause a great deal of hardship to council tenants. Worst of all, I think, it is putting forward a dramatic change in real government housing policy under the guise of simply changing the machinery.

We have been told that these government proposals for fixing rents for subsidy purpose are no more than a more rational method of calcuation for subsidy purposes and that they do not have to affect the rents in themselves. If that were the case it would be perfectly possible for the Government to give an assurance that because of the change in the method of calcuation there will be no significant increase in rent levels either overall or in any particular circumstances. They have not given that assurance and, as I understand it, they are not willing to give that assurance. If they are not willing to give that assurance, we must draw the conclusion that the change in machinery is being used as an occasion, if not as an excuse, for a general increase in the level of council house rents.

In social policy terms that is a very grave retrograde step. I remind the Committee that two-thirds of those who live in council dwellings at present need some form of housing benefit. In other words, they are among the poorest in our society. That situation of course has become worse in proportional terms since many of the better-off council tenants have exercised the right to buy. We are already at risk of having a council house system, a public housing structure, which is a ghetto for those most in need. It is virtually impossible for them to pay the rents that are being demanded; it forces them into dependency and makes it almost impossible to get out of the trap in which they find themselves. No wonder there is so much despair in so many of our council estates. No wonder so much of the worst deprivation is to be found there.

So there is a series of proposals from this Government which is first of all masking a real increase in rents and secondly forcing a very considerable and increasing proportion of council house tenants into a situation of dependency on the state. That is something to which I always thought Conservative governments were opposed in principle.

However, it is not only that the system will be unfair in its application. As I said, it is moving toward an absurdity on the basis of calculation. If local authorities pass on the loss of subsidy, the immediate effect will be, for example, that rents in Camden will go up by 84 per cent. and in Hackney by 107 per cent. In Kensington and Chelsea, which already charges the highest council rents in the country, rents would still go up by 20 per cent. I have chosen three London examples. However, it may interest Members of the Committee who sit opposite to know that because of high capital values of housing in the rural South, in very large parts of rural England—the shire counties—which elect Conservative Members of Parliament there will be dramatic increases in the theoretical rent which would have to be charged if local housing authorities are not to cut their services.

If one looks at the contrast between North and South, because of the economic pattern of our country the target rent for Burnley would be something under £10, whereas the target rent for Croydon would be just under £33. Even as a long-term objective that does not make sense as a basis on which we should be calculating the rents that people pay. It is not reflected in their income as it is not reflected in their necessary expenditure. Nor is the anomaly in any way diminished by the proposal which the Government have been forced to introduce to damp down the particular increases that may take place.

After all, council house rents, to 5.5 million households in this country, if not to Members of this Chamber, are a major element in the quality of life and standard of living. When I tell the Committee that rents within housing associations, which in effect are in the forefront of government housing policy, have increased by 24 per cent. over the past year, it is evident that if the Government succeed in their intention to force council rents in the same direction, we shall see on a dramatic scale in our country the poor getting poorer and an increase in poverty and deprivation of a kind which even this Government have never openly admitted or recognised as being a social evil.

It is not as if council tenants were being treated on all fours with owner occupiers. After all, owner occupiers pay mortgages on an historic cost basis and on the basis of the price which they had to pay when they took out the mortgage. No one is suggesting that, because an owner occupier's house five or 10 years later is worth twice or even four times as much as it was when he bought it, somehow his mortgage repayment should go up in proportion. However, that is exactly what is being proposed for council house tenants. It is proposed for the basis of subsidy that council house rents should go up in line with any changes that take place in the capital value of the properties.

I almost forgot to mention the extra little absurdity referred to in Amendment No. 134YA—that the Government cannot calculate the capital value of those properties on a rational basis. They are having to calculate the capital value on the basis of properties which have been sold under the right to buy provisions. In other words, it is not comparable with the rents of the dwellings which remain in public ownership because inevitably those which have been sold are the better properties having the higher capital value. Even taking the proposed device at face value it is defective. The Government are failing to use the provision under Section 99(2) of the 1988 Act which would enable them, if they thought fit, to use a valuation based on rental values instead of what is now proposed.

The Government's proposal which we seek to amend is not only an administrative absurdity and an injustice between one set of council tenants and another and between one part of the country and another. It is, in disguise, an attempt to increase rents and to reduce the standard of living of those most in need in our community. I hope that the Committee will straightforwardly accept these amendments and reject the Government's proposal. I beg to move.

3.30 p.m.

Lord Ross of Newport

I very much support this amendment. I hope that the Minister will explain to the Committee the Government's exact intention when they talk about interlining council tenants' rents with the capital market values. What basis will they take as being the market value? Will it be the price at which, for instance, properties of the former GLC have been sold in large blocks to various housing associations? Will it be the basis on which sales are taking place in some areas to housing associations? Will account be taken of the enormous variations that have arisen through house prices being slashed? In Shropshire only the other day a builder slashed £20,000 off two-bedroomed bungalows reducing their price from £69,950 to £49,950.

Enormous variations are taking place. The noble Lord, Lord McIntosh, has given examples of house prices in the North West and North East compared with those in the South and South West. My colleague, the noble Lord, Lord Evans, has doubts about the probable effect on rents in his part of the world. The proposal is a nonsense.

We need far greater explanation of what the Government have in mind. Why do they dodge the question of affordability? They dodged it in the Housing Act 1988. They have dodged it in this Bill. They ought to take on board the fact that between 20 per cent. and 25 per cent. of a person's income is the absolute limit which should go on housing. That used to be the case in New York. Rents for social housing used to be based on 25 per cent. of the net income of the tenant. Perhaps we cannot go in that direction; perhaps we have to stay within the housing benefit scheme. But the Government ought to have that factor in mind; otherwise the provision does not work.

I do not know whether the noble Earl or the noble Lord, Lord Hesketh, will reply. However, they know that I have some sympathy with the idea of trying at some time in the future to return to market rents and to a private rented sector. But this will not happen immediately. It may happen in 10 to 15 years' time when perhaps the law of supply and demand may be in proper order. It occurred in the 1930s; it has not happened since. More houses may be built and more properties will come on the market. Perhaps the number of people who wish to rent will increase.

I believe that there is a movement in this country of people from the south to the north. People of a more advanced age, such as myself, find it rather pleasant to live in parts north of London. It is away from too much traffic and congestion, and away from the horrible Underground and all the problems of London. People up there are rather nice. One is able to buy property more cheaply. I find that many people are following me. A number of people are choosing to leave this country and to buy properties in France and Spain. I do not believe this figure of 600,000 new houses which are wanted in the South East. It is a nonsense. I believe that the new Secretary of State put some doubt on it himself.

It will take time for these matters to bear out. If the Government try to rush their hurdles and to do everything in one go it will not work. It will put many people into jeopardy. It will not only affect people now. Members of my family face further increases in their mortgages on properties bought recently. People are wondering whether those values will remain or go down because of the latest hike. The same applies to council tenants. Many find that they are spending between 30 per cent. and 35 per cent. of income on housing. Not all are on housing benefit. We know that about 60 per cent. are. What about the other 40 per cent. who are finding life very hard indeed?

We need more information from the Government on exactly what they have in mind. Unless they are prepared to come forward with some proposal that makes sense I believe very strongly that the Committee should support this amendment.

Baroness Gardner of Parkes

I do not support the amendment moved by the noble Lord, Lord McIntosh. However, I find this concept of the capital values a very strange basis on which to determine the rents. It will be extremely complicated to assess the capital value of a block. Will it be based on historic value upgraded? Is the condition of the repair of blocks to be taken into account? There are blocks of flats quite close to us here where, if the whole block is to be sold to the sitting tenants—which apparently is a likelihood—a huge dowry will have to accompany the sale. Would that mean that the capital value of that block was that much less and therefore the rents were less because of the repair? It is extremely complicated. The capital value can also go up and down.

I remind the Committee of the Act which was thrown out by the Labour Government. I believe that it was called the Housing Finance Act. It was an Act by which each property had a rent determined for it and any subsidy attached to the person rather than to the dwelling. That was an extremely good Act; I thought it was a tragedy that it was thrown out. When people had high incomes and did not need support they paid more rent up to the market value of the property. When they fell on hard times, or retired and had less income, then the rent went down accordingly for them. I thought that it was better than the housing benefit scheme. But the housing benefit scheme should assist these people.

In trying to resist a rise of any type in council house rents, the noble Lord, Lord McIntosh, is not being wise. In my knowledge, when rents were frozen—not only for council tenants but for everyone—under a former Labour Government, one had a great hike afterwards. It is far better to assess the rents on an independent basis. I cannot agree with the concept of keeping people who happen to be in local authority accommodation as a poor section of the community. That is what the noble Lord, Lord McIntosh, is condemning them to. I favour a system whereby the person is helped according to need but where the rents set for the block are fair. In the past all the burdens—in boroughs such as Southwark, which barely collects its rent and has millions of pounds in bad debts—have been borne by the other people in that borough, the ratepayers. Under the community charge system the structure, will change again. Who will bear the burden then? Will it be the community charge payers?

It is not fair that all the people—some of whom are not in council accommodation and who are just as poor as some in council accommodation—should be subsidising others better off than themselves who happen to be in local authority accommodation because at the time they had little but whose circumstances have changed.

The housing issue is extremely complex. I do not believe, however, that the amendment put down by the noble Lord, Lord McIntosh, answers the problem and I cannot support it.

Lord Jenkin of Boding

Perhaps I may add a word in support of the line which I suspect my noble friend on the Front Bench will take. Nearly 30 years ago when I became the chairman of the housing committee of the then Hornsey Borough Council, the first question which I asked the borough treasurer was: "What are the objectives for our housing revenue account?" I gained the impression that he was not quite sure what the question meant because he proceeded to explain to me how the housing revenue account worked. I asked, "What are we trying to do? How far, through the housing revenue account, are we able to make provision for the rebuilding of our estate when the existing estate wears out and needs to be rebuilt?" His immediate answer was to say that we did not do any of those things, that the debt would be written off and we would start again by raising new money. I said I thought that that was a very funny way to run the housing business but under the legislation there was not very much that we could do about it.

However, that is what these clauses are about, because for the first time, by linking the subsidy to the housing revenue account with the capital values of the house, that opens up the possibility of a local authority running its estate in such a way that it can make provision for the amortisation of its premises so that they can be replaced when they wear out and they do not have to go back to the authorities for more loans.

The question is: will that impose unfair rent increases on the tenants? One point which I have argued consistently throughout my public life in politics is that it does no one any good if people do not know what it costs to keep a roof over their heads. By all means let us help those who cannot afford it. When I was Secretary of State for Social Services I launched the whole movement which eventually led to the housing benefits scheme. It seemed to me that, in trying to deal with the complications of individual subsidies and what was then the supplementary benefit, help for housing, it was better to concentrate the subsidy, as my noble friend Lady Gardner of Parkes has said, on the individual. That is a very important part of our means of protection, but it does not stop there.

As I read the Bill, when my right honourable friend fixes the revenue subsidies for the housing revenue account he has an immense amount of flexibility. He will be able to make sure that the target rents in different areas are not unreasonable and that they reflect the conditions in particular areas. If we were to add to that the provision which the noble Lord, Lord McIntosh, wants us to include by his amendment to Clause 77 and to add a new criterion as to affordability, what would that mean? Affordability by whom? The range of tenants in any area must be enormous. As my noble friend has said, there must be plenty who can afford to pay an economic rent. There will be many who cannot. It is quite unreal to imagine that there is some kind of national pattern of affordability on the basis of which that could be introduced as a criterion for the housing revenue account.

I hope that my noble friend will stand firm on this. As everybody has said, it is a very complex matter as anyone who has tried to live with it can well understand. But in two or three respects—I shall not repeat them again—the Bill makes some welcome and positive advances which will improve the administration of our public housing sector. I hope that if it comes to a Division the Committee will reject the amendment of the noble Lord, Lord McIntosh.

3.45 p.m.

Lord Dean of Beswick

I should like to deal briefly with a couple of the points made by the noble Baroness, Lady Gardner, and by the noble Lord, Lord Jenkin of Roding. I do not believe that they have their history quite correct on local authority housing. I was deeply involved in the Housing Finance Act which was piloted through the other House at the time by Mr. Peter Walker, but was implemented by the gentleman who is now Lord Rippon. We met on a number of occasions to discuss points concerning that housing Act.

The Housing Finance Act sought to increase rents. The argument again concerned government dictation to local authorities. It was based on an initial increase of 50 pence per year, if it was levied in the April of the first year, or £1 if authorities held out and did not levy their first increase until the September of that year. The unfairness of that Act was that it treated everybody with the same brush. It compelled some local authorities, which had run their housing accounts so that they were in surplus, to surrender that money to the Treasury. That was the intention of the Bill. In fact the council of which my noble friend Lady Fisher was chairman suffered to the tune of £3 million that it had in excess of what was needed. It had built up a reserve fund. We do not need to talk too much about history unless we get it wrong.

I am a little perplexed. I still visit some council estates and have relations who live in some of them. I have found it very difficult to find the type of person who has been mentioned by government speakers. Well-heeled people living in council houses? That is a total myth that has more than lived out its useful time to the Government and they really ought to find something better.

The noble Baroness told us that this has gone on over the years. But I would suspect that anybody who was living in a council house during the time of the Housing Finance Act now has retired. He will be on the retirement list full stop. Nobody can accuse anybody who is living on a retirement pension, even if it is supplemented by a generous employer, of being in that league. The Government have persistently come back every year and increased the discounts on council houses so that they can sell more properties when the market is flagging. That is all right. If the Government achieve capital value rents, might these not be some justification for asking the following question? Would a tenant who has lived in a house for the same period as the next door neighbour and who has bought his house with a 60 per cent. discount and who, by force of circumstances perhaps beyond his control, has had to stay in his house, be allowed a 60 per cent. discount on the identifiable rent? Otherwise why are we treating the municipal tenant differently from those people who wish to buy their own homes? I ask the Minister to consider this.

That may be a subject to which we have to return—just that facet of it—at Report stage. To me it is grossly unfair that somebody can buy his house with a 60 per cent. discount and the next door neighbour who had been in his house as long can have his rent suddenly explode upwards without any discounts whatever. Where are the principles of fair play of the Conservative Party for everybody? That is not fair play. If the Minister has time I hope he will refer to that point.

Lord Evans of Claughton

Whenever we discuss local government finance, whether it be at local council level or at parliamentary level, always an awful feeling of bewilderment comes over me as we seem to be in an Alice-in-Wonderland world. We have here an amendment moved by the Labour Benches, supported by the Conservative London Boroughs Association opposing the reduction of rents in the north of England, which the Labour Party is alleged to be much in love with and the Tory Party is alleged much to neglect. On the face of it we have a bizarre and perhaps ironic situation in that we are discussing local government finance and the financing of housing for council tenants in this context.

Like my noble friend Lord Ross of Newport I do not have any basic philosphical rejection of the concept of capital value rating provided that there is a basis upon which it can be set, as with owner-occupied property. But it is difficult to assess when generally the properties that one is dealing with do not have known capital values because overwhelmingly they are in the rented sector.

However, somewhere in my guts I feel that there must be something wrong. A measure which will result in a bonanza for the residents of Blackburn, with a 44 per cent. drop in their rents, is being put forward by this Government and is opposed by the Labour Party. This underlines a fact which has existed since the 19th century and the legislation relating to the housing of the working classes. We have not come to terms with what vie intend to do with council house rents. Is council housing meant to be a subsidised service for the less well off? Is it meant to be a means of supporting people who do not wish to buy their own house but merely to live in rented accommodation? What is its role to be? The proposal put forward by the Government and its inherent absurdity is not the answer. I hope that they will use this amendment as an opportunity to rethink their philosophy.

The Earl of Caithness

First, I wash to say how nice it is to see the noble Lord, Lord Evans of Claughton, back in his place. It is good to be debating with him again; we have missed him.

During the Report stage of the Bill in another place my right honourable friend the then Secretary of State announced our policy on council house rents. It may help the Committee to set these amendments in context if I say a little more about our aims, as the noble Lord, Lord Ross of Newport, has asked. Indeed, as the noble Lord, Lord McIntosh, said, that is the heart of the matter. I apologise in advance for the length of time that I shall take but it may be helpful to take time now because other amendments are affected.

Every year when we come to assess how much of the new housing revenue account subsidy each authority will need, we shall have to reach an assumption about the amount by which they will increase their rents in the coming year. We do the same thing now under the present housing subsidy system. We start off by deciding what size of increase we should assume nationally. We then convert that into a flat-rate national increase. This year the subsidy assumption is an increase of £1.95 per week. But it is in fact nonsense to assume that every authority should increase its rents by the same amount.

Council rents currently vary around the country in an illogical and unjustifiable way. Within a single county the rents charged by one particular district might be considerably lower than in the rest of the county for reasons that have nothing to do with variations in the cost or standard of levels of efficiency. Rather, the reason behind the variation may be that the property in one authority is slightly older and so has a lower historic cost, or that the council has been able to use the benefit of interest on the receipts from selling council houses to hold rents down, or more simply it may be that the council has chosen to subsidise rents with ratepayers' money.

None of these is a fair reason for rents to vary between authorities. The variation does not reflect the relative benefit to tenants of council accommodation in different authorities. In other words, it does not reflect the relative value of housing. Instead, artificially low rents distort accountability and lock people in those authorities into an unnatural dependence on over-subsidised housing.

The primary aim of the new system is therefore to encourage authorities to set rents which come to reflect the real pattern of the value of housing around the country rather than the pattern determined by historical chance or political choice. This means that when setting entitlement to subsidy we should no longer assume that every authority puts up its rents by the same amount, which would merely preserve the present illogical pattern of rents. Instead, once we have decided on the assumed national total of rent income for the coming year, we shall distribute it among authorities according to a local assessment of the value of their housing stock.

A good ready measure of variations in the value of council housing can be found in the prices paid under right to buy and other council house sales. So in our assessment of local circumstances we would take the average, undiscounted valuation for each authority of its right to buy and other sales of individual properties and apply this average price across the whole of the council's remaining housing stock. We would thus arrive at a proxy for the total value of each authority's stock. Although by no means a precise measure of the value of a council's stock, it does give us what we need: an indication of the variation in the value of housing between different authorities, based on the council's own houses. We would then distribute the assumed new national rent bill pro rata to those local values. If, for example, an authority was seen to have one three-hundredth of the national value of council houses, we could reasonably assume that it should raise one three-hundredth of all the rent that is raised nationally.

We would thus reach a new assumption each year about the new total rent bill for each authority which we would use in setting its rent increase guideline. Where the present total rental income of an authority was so far behind the new assumption that a large increase would be implied, we would damp the increase so that no authority was assumed to increase its rents by more than a reasonable amount. These damping factors are something that we would decide each year in the light of prevailing circumstances. Equally, we could damp the effect of this policy so that in fact no rents were assumed to be reduced.

I must stress again that the proposed mechanism does not require us to take a view on the absolute level to which rents should come to rise. Indeed, I think that it would be foolish to do so. The mechanism simply allows us, when we have reached our annual assumption about the national increase in rents, to apportion that increase in a fair and logical way. We do not have a long-term target for rents and I make that perfectly clear. Therefore, much of what was said by the noble Lord, Lord McIntosh, was based on a totally false assumption. We are simply introducing a mechanism which will encourage a fairer pattern in rents around the country. It is also important to stress that the assessment is only a notional assumption for the purposes of setting entitlement to subsidy. It is not an instruction to councils to set their rents at particular levels. Authorities will have to make their own decisions on the basis of the other income available to them and of their plans for spending when they come to set their rents.

Again I stress that it is the relative values, the pattern of values, in which we are interested more than the absolute values of council houses. We do not therefore need a terribly precise valuation of each authority's stock. The great virtue of using councils' own right to buy figures is that they provide a quick, straightforward and perfectly justifiable method of looking at the pattern of values. We are looking at ways in which it can be improved without losing this simplicity. We might, for example, take the values of flats and houses separately and arrive at an aggregate valuation that way. But whatever route we choose, it will not involve great upheaval, expense or onerous duties on individual authorities. It will be perfectly sufficient for our needs.

Having set the framework, I turn to the amendments in detail. Amendment No. 134YA would take us down a different road completely. It would require any such valuation to take the form of that provided for in Section 99 of the Housing Act 1988; that is, a valuation for the purposes of a transfer under tenants' choice. I find this completely unacceptable. I recognise the argument that the value of the stock remaining in an HRA ought to be assessed by reference to tenanted market value rather than the price of dwellings sold to their own tenants. However, tenanted market value of the property will give us no advantage over the open market value. I have already said that the absolute values are not so important as the indication of the variation. The proposal is chiefly objectionable because it would be horrendously and quite unnecessarily complex. It would potentially entail the individual valuation of the whole of every authority's stock: a mammoth task, certainly not envisaged either under this Bill or under the tenants' choice provisions. Whereas in using right-to-buy, the source of data would be constantly updated, and we could employ a rolling average in the valuation, under the noble Lord's proposals this huge valuation exercise would have to be carried out frequently—ideally every year. Therefore, we would be resurrecting the domestic rating system, which I hoped we had laid to rest last Session. And for what purpose? For a little more precision where precision quite patently is not needed.

I should like to say a few words about Amendment No. 134YB. However, the fact is that I just do not see the point of this amendment. It seems to add words for no reason. Clause 71 sets out the types of property which are to be treated as within an authority's housing revenue account. Schedule 4 contains a detailed list of the credits and debits in relation to those properties which are to be made in the HRA. Two of the items in that list—Part I, Item 3, and Part I, Item 4—are the two items which the noble Lord wishes to add in at this stage: receipts of subsidy and the transfer of sums out of the HRA which the Secretary of State may require under the subsidy calculation.

I turn now to Amendments Nos. 135KC and 135KD which affect affordability. The effect of these amendments would be to incorporate a specific affordability factor into the rent formula. I hope to persuade the Committee that this would be quite unnecessary, and indeed quite wrong. The Government's objective is to ensure that rents remain within the reach of people in low paid employment. That can be achieved by the Government's present proposals. The amendment would not help, and in fact would seriously undermine other objectives of the new system.

In the first place, it would be double-counting. We believe it is right and sensible that rents should reflect a market-like pattern, and earnings are already one of the factors which the operation of the market takes into account automatically. Therefore, we do not need to make separate provision for an earnings factor. Indeed, if we were to do so, it would distort the market comparison which we are seeking to establish.

Besides, the theory of the separate affordability factor starts to break down when it is examined in detail. It is a myth that there is some kind of fixed relationship between people's earnings and how much they are prepared to devote to housing. In fact the proportion varies from household to household; from region to region; and from year to year. The assumption that this relationship can be neatly nailed down and embedded in a formula is wrong. Indeed, it is a dangerous distortion of reality.

But of course this logic does not really appeal to the advocates of the affordability factor. There is a reason for that. The truth is that affordability is really just a device. The real argument, as my noble friend Lady Gardner of Parkes said, is about holding council rents down.

I understand that. It is more pleasant, and more popular, to appear to be generous. But there is another side to the coin. It is all very well to offer low unrebated rents to council tenants who could perfectly well afford to contribute more towards their housing costs. However, this generosity itself has a cost and that cost is that we are not making the best use of public assets. Members of the Committee opposite have argued, very properly, that we should protect those in our society who are unable to provide for their own housing needs. The trouble is that if we extend this benefit to those who do not actually need it we shall at the same time be reducing our ability to help those in need. That seems to me to be the reverse of generous.

Perhaps I may put the point another way. Over the years, taxpayers and ratepayers have invested a great deal of money in council housing. I do not think it is unreasonable that, in return, the occupants of that housing should be expected to make a proper contribution towards the cost when they can do so. On the contrary: it is our duty to ensure that we have a system in which this long-term public investment is used for the benefit of those who most need it.

Incidentally, there is a fallacy in basing an affordability factor on the average earnings of tenants in employment. Some two-thirds of all council tenants have part or all of their rents rebated. This means that any increase in their rent will be offset in full by a corresponding increase in their rebate. So, for this large group of tenants, an affordability factor would be irrelevant. If an earnings-related factor was to make any kind of sense at all, it would have to be related to the average earnings of tenants whose rents are not rebated.

This does not mean that it is our policy to push rents up to market levels either now or in the long term. It reflects little credit—perhaps not on the noble Lord opposite but at any rate on some of his party colleagues—that they have indulged in the grossest scaremongering on this point. In fact—and I repeat this—we have no long-term target for rents at all.

As we have made clear, the Secretary of State will reach a judgment each year about the annual rent guidelines. The judgment will be taken in the light of prevailing circumstances. If government Amendment No. 135LA is accepted, he will be required by this new statute to have regard among other things to past and expected movements in incomes, costs and prices.

Of course that requirement has been a feature of the existing subisdy system too: but it will be much better achieved by the flexibility of our new approach. That will be a big improvement over the present system in which a single flat-rate guideline rent increase is fixed for all authorities, regardless of local circumstances. The Secretary of State will be able both to limit the national average increase and to hold down the size of increases for individual authorities.

Therefore rent guidelines will in future actually be related to the existing level of rents, to the value of housing and indeed to what tenants can reasonably be expected to pay. Of course, I stress that there will continue to be rent rebates for those who need them. In short, the whole mechanism will be far more flexible than some arbitrary affordability factor, built rigidly into the formula, could ever be.

Lord Ross of Newport

Before the noble Earl sits down, perhaps he can tell me what is the difference between reasonably expected to pay and affordable. They do not seem to me to be very different. I also beg him to simplify the forms on which people have to apply for housing benefit. I tried to help someone to complete one the other day and I nearly gave up because it was so complicated. I wonder whether that is understood in government circles.

I do not believe that either my colleague or I want to keep rents unnecessarily low. We believe that people should pay a fair rent for property but some rents are going through the roof, particularly regarding housing associations. In addition, next year there will be increased water rates and the poll tax. I believe that the Government must take those matters on board. Some of the noble Earl's response has been helpful. However, one is talking about ability to pay and what is reasonable and I do not see why he objects so strongly to the words affordable rents.

Lord McIntosh of Haringey

I should dearly love to follow the noble Lord, Lord Jenkin, and the noble Baroness, Lady Gardner, into the history and philosophy of the economics of public housing. The noble Baroness, Lady Gardner, raised the very fundamental issue—and I am glad that she did—about whether one should subsidise the property or the person in public policy.

It has been a tradition—and not a party tradition but a tradition of housing policy since the 19th century—that there has been a combination of the two. Subsidies to the property as opposed to subsidies to the individual were predominant in housing policy for two very good reasons which I believe still apply. First, subsidising the property is the only way of making sure that replacements, management and repairs are kept up to a level which provide the quality and quantity of housing stock which our society needs and which it will continue to need in the public sector. Secondly, to subsidise the property rather than the person, as I said in moving the amendment, is to avoid the dependency culture which is supposed to be anathema to the Conservative Party.

The proposal of the noble Baroness and the noble Lord, Lord Jenkin, would lead to a very considerable increase in the number of people in a situation of income dependency on government. The noble Lord, Lord Jenkin, was proud that he had introduced the housing benefit scheme but I do not believe that he would see that as a socially desirable way of dealing with inequalities in our society. That was an administrative device which had some benefits and some disadvantages. However, I do not believe that we would wish to see for all time a situation in which a very large number of people in work, in jobs which are probably too lowly paid, are dependent on the state for a means-tested benefit in order to live at a minimum acceptable level.

The noble Lord, Lord Jenkin, had the privilege, as I did for a time, to serve on Hornsey Borough Council, and he seems to think that the idea of setting rents at such a level as to progressively amortise the debt on the housing stock is a significant part of present government policy. I can assure him that it is not. Indeed, in his reply the Paymaster General made no such suggestion. It is and always has been in so far as there is to be any public housing financed by borrowing. The noble Lord's philosophical flight does not take us very much closer to the issue which we are debating today.

Having acknowledged with thanks the contributions of noble Lords on the Liberal Benches and my noble friend Lord Dean I turn now to the Government's arguments, which appear to have collapsed before they even started. The noble Earl said that the Government have no view on the absolute level of rents. Indeed, his words were to the effect that it would be foolish to do so. Indeed, it would be foolish for this Government because any target which they openly expressed would make clear that they intend significant (and possibly even worse than that) increases in the average level of rents. If that were not so, in all common humanity council tenants ought to be assured that it is not so and that the Government, although they may not have an ultimate target rent, on the contrary do not intend to use this change in mechanism as an occasion for a general increase in council house rents in real terms.

If the Minister is willing to give us an assurance that it is not the intention as a result of this mechanism to have a real increase in council house rents I will with pleasure withdraw this amendment and sit down. However, in the absence of that assurance—which I sought and failed to get during a private meeting with the Minister only 10 days ago—I must draw the conclusion that at the very least council tenants are under threat of significant real increases in rents and that, much more likely, the Government have positive plans.

We know that, if not the Government, the Department of the Environment has positive plans because we have seen them. We have seen the way in which, before even introducing the capital value rent basis, the department is exploring different options for damping down the system, which has not yet been introduced. We were able to give some figures. My honourable friend Mr. Clive Soley was able to give figures from option 1 of the DoE draft paper on damping by simple floor and ceiling methods. There are other options and there are other devices which the department are preparing. There can be no doubt that, even if the matter has not reached Cabinet Committee or Cabinet level, the Government are working towards a new system of council house rents which will be seriously to the detriment of a large number of council house tenants, including those most in need.

The noble Lord, Lord Evans, referred to the fact that our proposals are those of the Conservative controlled London Boroughs Association. I am sorry that I neglected to make that point first. However, it makes clear that even Conservatives who are closer to the ground in local government are extremely concerned, with good reason, about the inequity, injustice and hardship proposed by the Government with these new provisions.

We are grateful to the Minister for repeating the explanation given by the then Secretary of State at Report stage in another place. It is significant that none of the proposals for council house rents saw the light of day in the first draft of the Bill and therefore they were not debated in Committee in another place. This is our opportunity in Committee here to show that we believe that these new proposals by the Government for changing the machinery and in posse changing the level of council house rents are not acceptable and that they would be inequitable, unjust and damaging to the fabric of our society. I commend the amendment.

4.14 p.m.

On Question, Whether the said amendment (No. 134YA) shall be agreed to?

Their Lordships divided: Contents, 92; Not-Contents 128.

DIVISION NO. 1
CONTENTS
Airedale, L.	Leatherland, L.
Allen of Abbeydale, L.	Listowel, E.
Amherst, E.	Llewelyn-Davies of Hastoe, B.
Attlee, E.
Aylestone, L.	Lloyd of Kilgerran, L.
Bonham-Carter, L.	Lockwood, B.
Bottomley, L.	Longford, E.
Broadbridge, L.	Lovell-Davis, L.
Bruce of Donington, L.	McIntosh of Haringey, L.
Callaghan of Cardiff, L.	Mackie of Benshie, L.
Carmichael of Kelvingrove, L.	Mais, L.
	Mason of Barnsley, L.
Carter, L.	Mayhew, L.
Cledwyn of Penrhos, L.	Milner of Leeds, L.
Cocks of Hartcliffe, L.	Molloy, L.
David, B.	Nicol, B.
Dean of Beswick, L.	Northfield, L.
Donaldson of Kingsbridge, L.	Oram, L.
Donoughue, L.	Peston, L.
Dormand of Easington, L.	Ponsonby of Shulbrede, L.[Teller.]
Evans of Claughton, L.
Ewart-Biggs, B.	Rea, L.
Ezra, L.	Ritchie of Dundee, L.
Falkender, B.	Rochester, L.
Fisher of Rednal, B.	Ross of Newport, L.
Foot, L.	Rugby, L.
Gallacher, L.	Sainsbury, L.
Gladwyn, L.	Scanlon, L.
Graham of Edmonton, L.[Teller.]	Seear, B.
	Serota, B.
Grey, E.	Shaughnessy, L.
Grimond, L.	Shepherd, L.
Hampton, L.	Simon, V.
Hanworth, V.	Southwark, Bp.
Harris of Greenwich, L.	Stallard, L.
Hatch of Lusby, L.	Stedman, B.
Hayter, L.	Stewart of Fulham, L.
Headfort, M.	Stoddart of Swindon, L.
Hunt, L.	Strabolgi, L.
Irvine of Lairg, L.	Taylor of Gryfe, L.
Jay, L.	Taylor of Mansfield, L.
Jeger, B.	Tordoff, L.
Jenkins of Hillhead, L.	Turner of Camden, B.
Jenkins of Putney, L.	Underhill, L.
John-Mackie, L.	Wallace of Coslany, L.
Kearton, L.	White, B.
Kennet, L.	Williams of Elvel, L.
Kilbracken, L.	Young of Dartington, L.

NOT-CONTENTS
Ailesbury, M.	Ampthill, L.
Airey of Abingdon, B.	Annaly, L.
Alexander of Tunis, E.	Arran, E.
Allerton, L.	Auckland, L.
Alport, L.	Balfour, E.

Barber, L.	Macleod of Borve, B.
Bauer, L.	Margadale, L.
Belstead, L.	Marley, L.
Blatch, B.	Merrivale, L
Borthwick, L.	Mersey, V.
Boyd-Carpenter, L.	Milverton, L.
Brougham and Vaux, L.	Montgomery of Alamein, V.
Butterworth, L.	Morris, L.
Caccia, L.	Mostyn, L.
Caithness, E.	Mountgarret, V.
Campbell of Alloway, L.	Munster, E.
Campbell of Croy, L.	Nelson, E.
Carnock, L.	Nugent of Guildford, L.
Cockfield, L.	O'Brien of Lothbury, L.
Coleraine, L.	Onslow, E.
Cowley, E.	Orkney, E.
Craigavon, V.	Orr-Ewing, L.
Craigmyle, L.	Oxfuird, V.
Cross, V.	Pender, L.
Cullen of Ashbourne, L.	Penrhyn, L.
Davidson, V. [Teller.]	Piatt of Writlle, B.
De Freyne, L.	Radnor, E.
Denham, L. [Teller.]	Reay, L.
Derwent, L.	Renton, L.
Eden of Winton, L.	Renwick, L.
Effingham, E.	Rippon of Hexham, L.
Elibank, L.	Rochdale, V.
Ellenborough, L.	Romney, E.
Elliot of Harwood, B.	St. Davids, V.
Ferrers, E.	St. John of Bletso, L.
Fraser of Kilmorack, L.	Saltoun of Abernethy, Ly.
Gardner of Parkes, B.	Sanderson of Bowden, L.
Gisborough, L.	Savile, L.
Greenway, L.	Seebohm, L.
Gridley, L.	Selkirk, E.
Hailsham of Saint Marylebone, L.	Shannon, E.
	Sharples, B.
Havers, L.	Skelmersdale, L.
Henderson of Brompton, L.	Somers, L.
Henley, L.	Southborough, L.
Hesketh, L.	Stevens of Ludgate, L.
Hives, L.	Strange, B.
Holderness, L.	Strathclyde, L.
Hood, V.	Strathcona and Mount Royal, L.
Hooper, B.
Hylton-Foster, B.	Strathmore and Kinghorne, E.
Ingrow, L.
Jenkin of Roding, L.	Swinfen, L.
Johnston of Rockport, L.	Thomas of Gwydir, L.
Kaberry of Adel, L.	Thorneycroft, L.
Killearn, L.	Tranmire, L.
Kinloss, Ly.	Trefgarne, L.
Kitchener, E.	Trumpington, B.
Lauderdale, E.	Tryon, L.
Layton, L.	Ullswater, V.
Lindsey and Abingdon, E.	Vaux of Harrowden, L.
Long, V.	Westbury, L.
Lovat, L.	Wise, L.
Luke, L.	Wyatt of Weeford, L.
Lyell, L.	Yarborough, E.
Mackay of Clashfern, L.

Resolved in the negative, and amendment disagreed to accordingly.

4.23 p.m.

[Amendment No. 134YB not moved.]

Lord Hesketh moved Amendment No. 134Z:

Page 78, line 8, after ("1926") insert— ("(dd) any property which—

1. (a) with the consent of the Secretary of State given under section 417(1) of the Housing Act 1985;
2. (b) with the consent of a Minister given under section 50(1)(e) of the Housing (Financial Provisions) Act 1958; or
3. (c) by virtue of section 50(2) of gnat Act (houses vesting in local authority on default of another person)

was brought within the corresponding account kept under Part XIII of the Housing Act 1985 for years beginning before 1st April 1990;").

The noble Lord said: In moving this amendment I propose to speak to Amendments Nos. 134ZZ, 134ZZA, 134ZZB, 134ZZC, 134ZZD, 134ZZE, 135D, 135E and 135K. I apologise for the fact that this is such a large group of amendments. Although a large group, its twin purposes are very simple. First, Clause 71(3) allows the Secretary of State to make directions whereby land, houses or other buildings which would otherwise fall within the HRA are excluded from the account. This is the useful small power to permit us to deal with the occasional anomalies that inevitably arise within any system.

However, the Bill as drafted only extends this power to properties brought within the account by Clause 71(1) and not those brought within the account by Clause 71(5). Amendments Nos. 134Z, 134ZZ, 134ZZD and 134ZZE rearrange the material in the clause so that the power contained in Clause 71(3) applies to all HRA properties.

Secondly, Amendments Nos. 134ZZA to 134ZZE and 135E all combine to ensure that once a local authority has disposed of a dwelling, or transferred it to a different use, that dwelling no longer counts as an HRA dwelling. If we retained the wording of the Bill as it is currently drafted, its effect might be summarised as once an HRA dwelling, always an HRA dwelling. But that seems rather illogical. This batch of amendments simply reflects the commonsense view that dwellings which have been disposed of are no longer covered by the account.

To complete the picture, Amendments Nos. 135D and 135K insert references to houses or other property which are or have been within the account. Even after disposal has taken place, there will be some residual effects in the HRA. There may be loan charges outstanding on the amount that was borrowed to finance the construction or the acquisition of the dwelling and there will be interest earned on the capital receipt from the disposal itself. These amendments ensure that the HRA can continue to be credited or debited for these purposes. I beg to move.

On Question, amendment agreed to.

Lord Hesketh moved Amendments Nos. 134ZZ, 134ZZA, 134ZZB, 134ZZC and 134ZZD.

Page 78, line 24, leave out ("(d)") and insert ("(dd)").

Page 78, line 25, after ("(a)") insert ("land, houses or other buildings disposed of by the authority;

(aa)").

Page 78, line 25, leave out ("making a relevant disposal") and insert ("disposing").

Page 78, line 27, leave out ("making such a disposal") and insert ("disposing").

Page 78, line 34, leave out subsections (4) and (5).

The noble Lord said: I beg to move these amendments en bloc.

On Question, amendments agreed to.

Lord Dean of Beswick moved Amendment No. 134ZZDA: Page 79, line 3, leave out from ("Account") to the end of line 5.

The noble Lord said: The reason or explanation for moving this amendment is that, as currently drafted, the clause allows local housing authorities to dispose of their housing stock and to dispense with their housing revenue accounts subject to the consent of the Secretary of State which may be conditional. This amendment seeks to ensure that all local authorities will be required to maintain a housing revenue account even when they have disposed of their housing stock.

The amendment is designed primarily to provoke debate about the inability of the Government's housing policy to deal with the unprecedented levels of homelessness and to provide an opportunity to highlight the problems of the homeless and the local authorities as regards stock transfer and the closure of the housing revenue accounts. The following points can be made. The Government's aim of changing the role of local authorities from direct providers and managers of housing to strategic co-ordinated agencies comes at a time of unprecedented homelessness.

Unlike other housing providers, local authorities have statutory responsibility for the homeless. They will continue to have this responsibility even if they transfer the whole of their housing stock and close their housing revenue accounts. Even districts and non-metropolitan councils are now facing problems as regards housing the homeless due to the restriction in the number of lettings available. In London alone there are over 25,000 homeless households in temporary accommodation because even local authorities do not have permanent homes for them. The numbers of people in temporary housing are growing at the staggering rate of 15 per cent. per year. That is despite increased efficiency in using council housing. For example, there is now a reduced number of council properties that are empty. There is a gradual reduction in their numbers. There is also the leasing of empty private sector property as an alternative to bed and breakfast accommodation.

How can the Government consider allowing local authorities to transfer their housing and to close their housing revenue accounts in the face of such appalling human housing needs? Perhaps the intention is to take away the statutory responsibility altogether. This matter has been dealt with on a number of occasions by Ministers in the Chamber in answer to questions. Several months ago the Government announced a review of the homeless legislation. As far as we are aware that review has not yet emerged. Perhaps we may ponder for a moment some of the questions that have been answered in this Chamber over the past couple of years on the question of homelessness.

I and other Members of the Committee have made the point on other occasions; namely, that the last two winters have been extremely mild by most normal standards. We have just experienced one of the nicest summers in living memory. Very often nice summers are followed by severe winters. In the recent past I and other noble Lords have quoted responsible agencies which consider that by the turn of the century, which is not very long away, the problem in London of homeless people sleeping on the streets will be of New York proportions. It is calculated that 10,000 people of both sexes and a variety of ages are sleeping on the streets of London. It is further calculated by these non-political responsible agencies that by the turn of the century the figure will rise to 30,000.

The only bodies with statutory duties to cater for homeless people across the board are the local authorities. The problem is of no concern to the private landlord. I do not say this in a derogatory sense but private landords do not cater for that type of person. Housing associations cater for some, but on a much smaller scale than local authority housing departments. We are awaiting the report on homelessness. I do not know whether anything in the Bill will deal with the scale of the problem. It is incumbent on the Government to make sure that local authorities have an account in order that they can deal with the problem. I beg to move.

4.30 p.m.

Lord Hesketh

Clause 71(6) simply provides that should an authority dispose of all its housing stock it may, with the consent of the Secretary of State, close the housing revenue account. Wholesale disposals of stock are becoming more than a theoretical possibility. Clause 145, which we will discuss later in Part IX, recognises the fact that a growing number of authorities believe that the needs of the public can be served better by transferring council housing to another landlord. Subsection (6) merely reflects the situation as it is. Once an authority has disposed of its houses there would in most cases be little point in keeping a housing revenue account. This amendment, however, would require the council—come what may—to keep the account for evermore, even though there may be no remaining income or expenditure. I would not want to be accused of placing an unnecessary duty on councils which have decided to take a different approach to their legal housing responsibilities. That is why we resist the amendment.

Lord Ross of Newport

I want to put a question to the Minister. Under Part IV of the Housing Act 1988 tenants who do not wish to transfer to a new authority—I remember debating this point—can have their properties leased back to the council and remain as tenants. In that instance, where the local authority still has some responsibility, can I assume that it would not be the judgment of the Secretary of State to allow the housing revenue account to be wound up? They may have sold the stock but local authorities lease back housing where tenants have not voted in favour of a transfer. Does that remain a requirement for a housing revenue account?

Baroness Fisher of Rednal

I have a similar question. Later in the Bill we shall come to the housing action trusts. We understand that tenants will be able to keep a secure tenancy in a housing action trust. What will happen to people in housing action trusts if there is not a housing revenue account?

My noble friend referred to the homeless. Who will pay the agency which houses them? Somebody must house them. If the housing stock has been sold off, who will pay for housing the homeless? Which department of a local authority will pay the agency?

Lord Hesketh

We are slightly confusing housing as such and the housing revenue account. I can confirm to the noble Lord, Lord Ross, that his assumption is entirely correct. There would still be a housing revenue account in the circumstances which he described. As the noble Baroness, Lady Fisher, pointed out, we shall come to housing action trusts later in the Bill.

Baroness Fisher of Rednal

It all comes out of the housing revenue account. What a local authority does with public housing comes out of the housing revenue account. I was chairman of a local authority for a long time so I know how the accounts are drawn up. The housing revenue account is related to the council twice a year. The money must come from somewhere. It comes from rents, from selling off properties and from government subsidies, but it makes up an account in a local authority.

Lord Hesketh

It is perfectly possible for a council to have other housing expenditure which is not in a housing revenue account. Subsection (6) does not refer to the promotion of the ending of the housing revenue account but relates to where a local authority has taken a decision to have a different approach to housing. It will not have made that decision without carefully looking at its obligations now and into the future and it will have to go to the Secretary of State for his approval.

Lord Dean of Beswick

The Minister is saying in effect that the Government, through the action of certain authorities, can abrogate their responsibilities under present homelessness legislation. Perhaps I may draw the Committee's attention to what is happening in the London borough of Westminster. I have quoted figures for the number of people sleeping rough in London. Many of those people are sleeping rough in the borough of Westminster. If Members of the Committee want to see it they have only to walk through the side streets between Dolphin Square and the Palace of Westminster. They will see people sleeping in doorways. Under its notorious lady leader, Westminster council has deliberately emptied and boarded up flats which it is preparing to sell. They are being put on the market instead of being made available to the people sleeping in the doorways and in the nooks and crannies of the City of Westminster.

God forbid that Westminster City Council should be controlled in perpetuity by a person who will flog off all local authority housing.

Which agency will then deal with the homeless in the centre of London? I hope that the Government are not stone-walling. In view of the seriousness of the situation and the fact that winter is upon us, can the Minister say that the report on homelessness and the Government's proposals which are being formulated will be made available before the winter sets in and, if possible, before the Bill concludes its passage through this place? In my opinion and that of many other people involved in housing, if the clause goes through as it is it will have a tremendously detrimental effect upon the homeless, whose condition is already a disgrace to us all.

Lord Hesketh

We are labouring under a slight misunderstanding. Certain local authorities see their role as enablers of housing and have said that they wish to look at an alternative way of carrying out their duties. They have in law a duty to the homeless, of which I am sure the noble Lord, Lord Dean, is only too well aware. They will not be coming to the Secretary of State to ask to wind up their HRAs if they have not made good and fast plans for the future so as to fulfil their legal responsibilities. The legal responsibility is the protection.

Lord Dean of Beswick

I am sorry to rise once again, but it is already happening. The Conservative-controlled City of Westminster is abandoning its responsibility. It is putting homelessness so far down its list of priorities that it is disposing of accommodation which could be made available to the homeless. In other words, one can only draw the conclusion that its policy is to opt out of local authority housing. It cannot be anything else. What can the Secretary of State do under the Bill about an authority such as the City of Westminster which is opting out of local authority housing?

Lord Hesketh

I hold no brief for the City of Westminster. That will come as no surprise to the noble Lord. Westminster will have, does have and has had a legal responsibility. It may be a matter that will have to be resolved by the law.

Lord Dean of Beswick

When I first came to the Dispatch Box to move the amendment I shortened the debate on the basis that I had made out the main part of the case. If I had had the slightest of sympathetic responses from the Minister I should have been prepared to withdraw it; but having heard his totally inadequate reply, and although there may not be enough of us to carry the day, I have no alternative but to test the wishes of the Committee and to record the fact that we are not in favour of the provision.

4.44 p.m.

On Question, Whether the said amendment (No. 134ZZDA) shall be agreed to?

Their Lordships divided: Contents, 82; Not-Contents 123.

DIVISION NO. 2
CONTENTS
Airedale, L.	Evans of Claughton, L.
Attlee, E.	Ewart-Biggs, B.
Aylestone, L.	Ezra, L.
Bonham-Carter, L.	Falkender, B.
Bottomley, L.	Fisher of Rednal, B.
Broadbridge, L.	Fitt, L.
Bruce of Donington, L.	Foot, L.
Callaghan of Cardiff, L.	Gallacher, L.
Carmichael of Kelvingrove, L.	Gladwyn, L.
	Graham of Edmonton, L.[Teller.]
Carter, L.
Cledwyn of Penrhos, L.	Grey, E.
Cocks of Hartcliffe, L.	Hampton, L.
David, B.	Hanworth, V.
Dean of Beswick, L.	Harris of Greenwich, L.
Donaldson of Kingsbridge, L.	Hatch of Lusby, L.
Dormand of Easington, L.	Hunt, L.

Irvine of Lairg, L.	Oram, L.
Jay, L.	Peston, L.
Jeger, B.	Pitt of Hampstead, L.
Jenkins of Hillhead, L.	Ponsonby of Shulbrede, L.[Teller.]
Jenkins of Putney, L.
John-Mackie, L.	Ritchie of Dundee, L.
Kilbracken, L.	Rochester, L.
Leatherland, L.	Ross of Newport, L.
Listowel, E.	Sainsbury, L.
Llewelyn-Davies of Hastoe, B.	Scanlon, L.
	Seear, B.
Lloyd of Kilgerran, L.	Shepherd, L.
Lockwood, B.	Simon, V.
Longford, E.	Stedman, B.
Lovell-Davis, L.	Stewart of Fulham, L.
McIntosh of Haringey, L.	Stoddart of Swindon, L.
Mackie of Benshie, L.	Strabolgi, L.
Mais, L.	Taylor of Gryfe, L.
Mason of Barnsley, L.	Taylor of Mansfield, L.
Mayhew, L.	Tordoff, L.
Mellish, L.	Turner of Camden, B.
Milner of Leeds, L.	Underhill, L.
Molloy, L.	Wallace of Coslany, L.
Mulley, L.	White, B.
Nicol, B.	Williams of Elvel, L.
Northfield, L.	Young of Dartington, L.

NOT-CONTENTS
Airey of Abingdon, B.	Hooper, B.
Alexander of Tunis, E.	Hylton-Foster, B.
Alexander of Weedon, L.	Ingrow, L.
Allerton, L.	Jenkin of Roding, L.
Ampthill, L.	Johnston of Rockport, L.
Annaly, L.	Kabery of Adel, L.
Arran, E.	Kinloss, Ly.
Auckland, L.	Kitchener, E.
Balfour, E.	Lauderdale, E.
Barber, L.	Layton, L.
Bauer, L.	Lindsey and Abingdon, E.
Belstead, L.	Long, V.
Benson, L.	Luke, L.
Blatch, B.	Lyell, L.
Borthwick, L.	Mackay of Clashfern, L.
Boyd-Carpenter, L.	Malmesbury, E.
Brougham and Vaux, L.	Marley, L.
Butterworth, L.	Merrivale, L.
Caccia, L.	Mersey, V.
Caithness, E.	Milverton, L.
Campbell of Alloway, L.	Montgomery of Alamein, V.
Campbell of Croy, L.	Morris, L.
Carnock, L.	Mostyn, L.
Cockfield, L.	Mountgarret, V.
Coleraine, L.	Munster, E.
Cowley, E.	Nelson, E.
Craigavon, V.	Nugent of Guildford, L.
Craigmyle, L.	O'Brien of Lothbury, L.
Cross, V.	Onslow, E.
Cullen of Ashbourne, L.	Orkney, E.
Davidson, V. [Teller.]	Oxfuird, V.
Denham, L. [Teller.]	Pender, L.
Eden of Winton, L.	Pennock, L.
Elibank, L.	Penrhyn, L.
Ellenborough, L.	Piatt of Writtle, B.
Elliot of Harwood, B.	Radnor, E.
Faithfull, B.	Reay, L.
Ferrers, E.	Renton, L.
Fraser of Kilmorack, L.	Renwick, L.
Gainford, L.	Rippon of Hexham, L.
Gardner of Parkes, B.	Rochdale, V.
Gisborough, L.	Rodney, L.
Gridley, L.	Romney, E.
Hailsham of Saint Marylebone, L.	Rugby, L.
	Saltoun of Abernethy, Ly.
Halsbury, E.	Sanderson of Bowden, L.
Havers, L.	Savile, L.
Henderson of Brompton, L.	Seebohm, L.
Henley, L.	Selkirk, E.
Hesketh, L.	Shannon, E.
Hives, L.	Sharples, B.
Holderness, L.	Shaughnessy, L.
Hood, V.	Somers, L.

Southborough, L.	Thomas of Gwydir, L.
Stevens of Ludgate, L.	Tranmire, L.
Strange, B.	Trefgarne, L.
Strathclyde, L.	Trumpington, B.
Strathcona and Mount Royal, L.	Tryon, L.
	Ullswater, V.
Strathmore and Kinghorne, E.	Vaux of Harrowden, L.
	Westbury, L.
Swinfen, L.	Wise, L.
Terrington, L.	Yarborough, E.

Resolved in the negative, and amendment disagreed to accordingly.

4.52 p.m.

Lord Hesketh moved Amendment No. 134ZZE:

Page 79, line 5, at end insert— ("(6A) In this Part—

1. (a) references to the houses or other property of an authority within the authority's Housing Revenue Account are references to the houses, dwellings or other property to which subsection (1) above for the time being applies; and
2. (b) references (however expressed) to a disposal are references to a conveyance of the freehold, or a grant or assignment of a lease (other than a shared ownership lease) which is a long tenancy within the meaning given by section 115 of the Housing Act 1985.").

On Question, amendment agreed to.

Clause 71, as amended, agreed to.

Clause 72 agreed to.

Lord McIntosh of Haringey moved Amendment No. 134ZZF: After Clause 72, insert the following new clause:

("Restrictions on items in Housing Revenue Account.

—(1) No later than 1st April 1993, the Secretary of State shall make regulations in respect to Schedule 4 of this Act to restrict any credits and debits to the Housing Revenue Account to those items mentioned in paragraph (2) below.

(2) The items referred to in paragraph (1) above shall be those that, in the opinion of the Secretary of State following consultation with the local authority associations, he considers are consistent with the provision of housing services provided principally or solely for the benefit to tenants of an authority.

(3) The regulations referred to in paragraph (1) above shall amend Schedule 4 to this Act such that the Housing Revenue Account shall be known from that date as the 'Local Authority Landlord Account'.

(4) In making any regulations under paragraph (1) above, the Secretary of State shall ensure that those items previously credited or debited to the Housing Revenue Account, but not incorporated into the Local Authority Landlord Accounts shall be fully taken into account in the distribution of Revenue Support Grant to authorities.").

The noble Lord said: This is an attempt to obtain a little more precision from the Government, both in terms of the nature of their intentions about what is called the "landlord account" and also about when the landlord account is to be introduced. I remind the Committee that in July 1988 the Government published a consultation document, to which I have already referred in debate this afternoon, called New Financial Regime for Local Authority Housing. In that document the Government said that they were looking for a more tightly defined housing revenue account which would; reinforce the distinction between the provision of housing and other local authority services".

The intention of that, in turn, is that the housing revenue account should be limited in such a way as to make council landlords more accountable to their customers. We are in favour of that objective, we support the establishment of the landlord account. In particular we support anything which can be done to ensure that council landlords are fully accountable to their customers, in other words to council tenants.

However, the Government seem to be a good deal less confident now than they were in July 1988 that they know how to achieve this desirable objective. There are a number of amendments to the Bill and provisions in the Bill which concern transitional provisions rather than the final objective of establishing a landlord account.

So in the amendment we propose that there should be a timetable for these provisions and that at the end of this date—and we propose no later than April 1993—the landlord account should be in place and the expenditure in the account should relate directly to the services that benefit tenants rather than the community at large.

There are quite a considerable number of grey areas in terms of what services benefit council tenants and what services benefit the community at large. In another place, the Minister, Mr. Trippier, tried to help the Committee on the definition of the responsibility of an authority to a housing landlord and the responsibility of the authority to residents at large. He said that if it was a welfare matter it came out of the housing revenue account, but if it was a mainline function of the local authority as housing landlord, then it could be in. He said that a number of examples might be in the grey area. Those at the margins were play areas, gardens, open spaces, grounds, district heating systems, community alarms, etc.

So what we need now is not just speculation by a Minister speaking at the Dispatch Box in another place. We need a little more precision about what the higher housing revenue account will be; when it will be introduced; whether our proposed date of 1993 is acceptable; and what it will constitute. Do the Government recognise that it will be necessary to continue to subsidise the service, whether or not it falls into the housing revenue account?

There are a number of specific questions which I can put to Ministers as to what is to be included in the account: the cost of keeping the waiting lists; expenditure on tenants' choice; expenditure on mobility schemes. Can we take it that those will be included in the account? Can we take it that a number of other items such as estate shops, hostels, warden services, housing advice and homelessness will be excluded from the account?

This is not an amendment on which we propose to divide the Committee. It is an amendment which seeks information and precision from the Government. We wish to know what the account is to include and when it is to be applied. I hope that the Minister will be able to help us, in order to enable us to withdraw the amendment. I beg to move.

5 p.m.

The Earl of Caithness

As the noble Lord, Lord McIntosh, said when introducing the amendment, this new clause is concerned with the nature of the housing revenue account itself. The question of what items of income and expenditure should be recorded within the account is of course an important one, particularly now that we are saying that authorities' HRAs should be ring-fenced from their other accounts. I therefore appreciate the intention behind this new clause, and I hope I can go in response almost as far as the noble Lord would want me to.

Clause 71 provides for the categories of property which are to be treated as within the HRA. The Secretary of State has powers under that clause to direct that certain other properties should be brought into the HRA, or that certain properties should be excluded. That is, so to speak, the first tier of the ring fence. The second tier is set out in Schedule 4. The schedule lists the credits and debits in relation to HRA property which are to be made in the HRA. Again the Secretary of State has powers to clarify the list, to include or exclude individual items of expenditure. The third tier of the ring fence is in Clause 75, which allows the Secretary of State to direct the accounting practice which should be followed in keeping the HRA.

Local authorities were obviously very interested in how we were going to use these powers in the Bill to define the ring fence. However, we were also urged by the local authority associations not to try to define the HRA too closely in 1990. The problem is that although all 366 local housing authorities keep an HRA at present, their practice in including various items in the HRA or other accounts varies widely. To attempt to achieve instant uniformity of approach in the first year would inevitably require changes of practice in local authority housing departments up and down the country.

We were rather persuaded by this view. The present Bill in itself does little to change the definition of the HRA. It places the account within a ring fence but implies no real change in the nature of the HRA itself. We became strongly inclined to leave things as they are for the first year of the new system. That would mean that authorities would, within the broad rules in the Bill, be able to continue to follow their existing practice in keeping the HRA.

My honourable friend the then Parliamentary Under-Secretary of State announced this view during Report stage in another place. He also said that consultation would continue. That consultation, between officials and the local authority associations, centred on a questionnaire issued by the Department of the Environment to all local housing authorities, asking for details of how they treated certain items within their accounts. We wanted to see just what the variation in practice was around the country, and what effect the hands-off approach in 1990 might have. The results of that exercise are being considered in the official working party on the regime. We shall very shortly now be able to make a final decision on the definition for 1990.

Even if we do, as seems very likely, let present practices continue in 1990 to 1991, that does not mean that we have no longer-term view of what the HRA should cover. My honourable and right honourable friends have made it clear on a number of occasions in another place that the HRA should eventually come to relate only to those services which are provided by the housing authority as a direct consequence of its role as a landlord. It is to this assertion that the Member of the Committee opposite is trying to tie us down. The proposed new Clause would require the Secretary of State to make formal regulations to redefine the HRA in this way by 1st April 1993.

I am pleased that there is so much measure of agreement between us about just what the HRA should contain. The aim must be to ensure that local authorities are fully accountable to their tenants for the way in which they provide the housing service. That aim will only be achieved if the housing accounts provide the right financial structure. That said, I do not think that we need to go so far as to accept the new Clause. The issue is one of a technical definition which, important as it is, should not be put into primary legislation. There are countless definitional problems in defining what are housing services. DoE officials have undertaken to carry on with formal consultation into the new year and beyond. The Secretary of State is, incidentally, bound in this case by the general requirement in Clause 84 to consult local authorities before making directions. Until the outcome of that consultation I would not want to risk defining further parameters, however broad, on the face of the Bill. Clause 71 and Schedule 4 set out the broad rules as I have described. Clause 84 provides for consultation. We have made no secret of our ultimate aims. I think that that should be sufficient to meet the noble Lord's aims in the main part of this new Clause.

One new thing the new clause would do is to specify a date by which such regulations should be made. I do not know why the noble Lord chose 1st April 1993. He did not make that particularly clear when he expanded on the amendment. It seems, if I dare say it, rather generous. I would have expected that we would be ready with new proposals before then. But I do not see the definition of the HRA as a one-off action. Rather it is a question of making adjustments to the ring fence gradually over a period of years. Our provisions are flexible enough to allow that. Furthermore, I think we will also want to be able to respond to issues as they arise, perhaps a decade from now. We all know how much the local authority housing service has changed over the past 10 years. I would not recommend to the Committee the idea of a single set of rules in 1993 trying to prejudge what the HRA should be like in the year 2000.

The proposed new clause also draws attention, quite rightly, to the issue of support for services removed from the HRA. It provides that if the redefinition excludes services from the HRA then those services should be taken into account in revenue support grant. I of course accept that when we come round to making changes to the HRA, this will have to be reflected in discussions about the rest of the authority's finances. One cannot separate the two.

The new clause would do one last thing. It would require the Secretary of State to rename the housing revenue account as the local authority landlord account. This might be the one point on which I beg to differ with the noble Lord. For obvious reasons I am rather attached to HRA, which has something of a ring to it. LALA, on the other hand, sounds as if it might be a cabaret song about a city on the west coast of America. We will have to think about whether we want to sing the noble Lord's song. But in sum, I hope the noble Lord will accept that we are in tune with each other on these issues.

Baroness Fisher of Rednal

Will the noble Earl give serious consideration to street lighting? Many of the more recent developments in local authority housing are not constructed along the lines of streets or roads but in closes so that one has to walk through them in order to get from one place to another. Therefore, the street lamps must be set much closer together than the authorised number of yards that is the case on public roads. That factor is extremely important in these new developments where greenery in the form of bushes and other vegetation is being established. If less provision is made for lighting in the future because it does not come out of the housing account, I feel women and children who have to walk through such areas during periods of darkness may face more danger.

The Earl of Caithness

I hear what the noble Baroness has said. Unfortunately, I regret that I cannot give the matter the consideration I might have done three months ago. However, I know that my noble friend Lord Hesketh has taken careful note of that point.

Lord McIntosh of Haringey

I am always glad to know that there are issues on which we are generally in agreement with the Government, or on which they are generally in agreement with us. I am a little unnerved by some of the metaphors of the noble Earl. He talked about us being in tune. We may be in tune, but that rather depends on what song is being sung. When the noble Earl talked about tiers of a ring fence, I wondered whether he was thinking about something from showjumping or about a fence which has some effective meaning as regards excluding or including. The noble Earl did not respond to my detailed questions about what should be included in the housing revenue account. He did not answer the particular examples that I gave of things which could be included and things which should be excluded. Will the noble Earl write to me about the Government's thinking on those matters?

The Earl of Caithness

The noble Lord is quite right. I did not respond to the detailed points he raised because of the discussions which are taking place. I do not wish to pre-empt those discussions. If I can be of any further help, I shall write to the noble Lord. It is right that he should be made aware of the result of the discussions and I shall ensure that that happens.

Lord McIntosh of Haringey

I am most grateful for that. I am aware that consultation is going on and that final decisions cannot be taken until it is complete. However, it is always helpful to have from the Dispatch Box as much of the Government thinking as possible in order that we, the local authorities and the local authority associations can respond realistically. The Minister did not care for my choice of 1993. He will recall that in another Bill this year we successfully persuaded the Chamber that 1993 was a good year for us to comply with European directives on water quality. I shall gladly withdraw 1993 from this Bill, particularly if it is more generous, if the noble Earl will think again about the deadline for compliance with European directives on drinking water quality. However, I rather think that the Paymaster General is the last Minister to be able to agree to a deal of that kind. However, we are in substantial agreement and we have made a certain amount of progress in achieving a clearer understanding of Government intentions. I think it is appropriate that I should beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 4 [The Keeping of the Housing Revenue Account]:

Lord Ross of Newport moved Amendment No. 135: Page 156, line 36, at end insert—

("Item 1: percentage of collectable rent.

A sum from some other revenue account not greater than 1.5 per cent. of the authority's gross annual collectable rent.").

The noble Lord said: In the debate on the previous amendment the noble Earl talked about flexibility in ring fences. This is a deliberate attempt to break the ring fence that the Government have put around the housing revenue account. There is another amendment in the name of the noble Lord, Lord McIntosh, which seeks the same effect. However, it does not put a limit on the amount involved. The percentage figure is a notional one, but it would provide a modest sum for sensible authorities to have some degree of flexibility in the management of their housing stock. The beauty of the amendment is that it would decrease to extinction as the housing stock is disposed of or managed by others. It is therefore both cash-limited and limited by the size of the stock.

We on this side of the Chamber, and I include Labour Members, believe that it is vital that local authorities should have the power to transfer funds from the general rate or poll tax fund to the HRA to tackle the problem of the poor subsidising the very poor. That is a well rehearsed point. What has not been so widely publicised is the fact that those who are in rent arrears will also be subsidised by those who are not. Since last year's housing benefit changes—or cuts, as they were in reality—all round the country rent arrears are soaring, even in so-called efficient Tory boroughs. That increasing burden is to fall on the rest. The potential size of that burden is enormous and almost unlimited. That is why we believe that there should be this degree of flexibility. I beg to move.

The Earl of Caithness

Perhaps the noble Lord, Lord McIntosh, would like to speak to his amendment, Amendment No. 135DB, at this stage. As the noble Lord, Lord Ross, said, it covers much the same ground. Alternatively he may wish to take it separately.

Lord McIntosh of Haringey

It does not matter which way we deal with it. By all means I shall introduce the amendment which, as the noble Earl and the noble Lord, Lord Ross, said, has very much the same effect as Amendment No. 135. Although the amendment of the noble Lord, Lord Ross, is more precise, he has himself admitted in introducing the amendment that the figure of 1.5 per cent. that he proposes is notional.

The intention of both amendments is similar. It is to give a greater degree of flexibility to the authority where housing revenue account subsidy is not payable for a particular year. The government proposals as they stand impose on a local authority which is not in receipt of central government subsidy, and in which the Government therefore have no financial or economic interest, an obligation to a particular division between housing revenue account and more general accounts. In other words, even though the Government are not concerned financially they deny the local authority the freedom to balance the interests of community charge payers and tenants as it see fit.

If a strict landlord account were properly set up the amendment would not be necessary. However, we have heard that a landlord account—or the new housing revenue account as the Minister prefers to call it—will not be available for some time and possibly not until as late as 1993. Therefore, we believe that it is desirable, at least in the short and medium term, to have a clearer idea of what is of wider community benefit and which costs could therefore legitimately be shared between the poll tax payers and council house tenants. As I said, the amendment has very much the same effect as that of the noble Lord, Lord Ross, although the emphasis is slightly different.

5.15 p.m.

The Earl of Caithness

The Committee will be grateful to the noble Lord, Lord McIntosh of Haringey, for kindly speaking to his amendment now. That will make discussion on the common point easier.

During consideration of the Bill in another place a number of amendments were tabled whose object was to remove or water down a key element in the new financial regime, namely, the ring fence which this part would place around the housing revenue account. The effect would have been to subvert one of the basic principles which underpin the new regime, namely, the principle that there is no justification for allowing discretionary contributions from the rate fund to the housing revenue account. At present a number of local authorities make very free use indeed of ratepayers' money to hold down rents artificially or to hide the cost of inefficiency. We believe that this is indefensible. It is an abuse which the new regime is specifically designed to prevent.

However, as the noble Lord, Lord Ross, has explained, Amendment No. 135 is not concerned with large rate fund contributions. Rather, it would allow a contribution of not more than 1.5 per cent. of an authority's gross collectable rent. Although the noble Lord was not wedded to his figure of 1.5 per cent., his figure was very much at the low end of the scale. I put it to him that this amendment would also breach the ring fenceߞbut it would only breach it a little bit.

I do not see what difference this is supposed to make. Under the new regime housing revenue account subsidy will be set at a level which will enable efficient housing departments to provide a good service at reasonable levels of rent and still balance the ring-fenced HRA. Against that background I fail to see any convincing argument why we should allow any size of discretionary rate fund contribution to the HRA. There is no convincing argument. If it is wrong—and I should hope that we can agree on this—that ratepayers or community charge payers who do not benefit from the housing service should make huge additional subsidies to council tenants, why should it be right for them to make small subsidies?

The truth is that any further contribution—of whatever size—from the community charge payer is completely unjustifiable. It could only be an additional, arbitrary and unnecessary subsidy to council housing. It would undermine our aims of improving the financial discipline and accountability of the council landlord.

The noble Lord, Lord McIntosh of Haringey, was right to say that some services provided under the HRA have a wider social benefit than to council house tenants alone and that the council is required to make a contribution from its general fund towards the cost under paragraph 3 of Part III of Schedule 4. That issue is already taken care of and the concerns of the noble Lord have been met. Any costs which should rightly be shared with the community at large will be so shared. I can think of such items as footpaths, roads, lighting—which the noble Baroness mentioned in relation to the previous amendment—district heating systems, open spaces and community alarms.

I turn now to the amendment of the noble Lord, Lord McIntosh. This represents another way through, or perhaps over, the ring fence. The argument is that authorities which are no longer in receipt of housing revenue account subsidy—which we shall be discussing under Clause 77—should not be subject to the disciplines of ring-fencing. They should be allowed to make contributions to the HRA from other accounts. But that argument is founded on the mistaken premise that ring-fencing is simply a subsidy issue. Ring-fencing is an important part of our strategy to target Exchequer resources more carefully on authorities who need them. It will prevent housing subsidies leaking out of the HRA; it will end the anomaly of part of the Exchequer support for housing being paid not to the HRA but to the rate fund through rate support grant; and it will mean that Exchequer subsidies are not paid to authorities which can balance the HRA without them.

That is not all that ring-fencing is about. It is above all about fairness. It is simply not fair that ratepayers should be made to give hefty subsidies to the housing service. Amendment No. 135DB would have the effect of saying that once the Government had assessed that an authority needed no further help in keeping the HRA in balance the council could then turn around and start milking the ratepayer or community charge payer all over again. Where should we then be? We would be back where we started.

The ring fence is an essential element of the new regime. It is as essential in the case of the authority which needs no Exchequer support as it is for the authority which cannot balance the HRA on its own.

Lord McIntosh of Haringey

I am sorry to come back to the point, but the Minister's reply raises more doubts in my mind than I had expected because it goes very wide of the way in which the amendments have been drafted and moved. I must therefore express my concern about some of the Government's thinking. The Minister challenged me, not to say whether or not we supported subventions from the general rate fund for the housing revenue account but to say whether we supported huge subventions. That is a very curious way of putting even a rhetorical question.

I have served on councils where the level of rents was not sufficient even to cover the management and maintenance. I do not support that kind of subvention. However, the degree to which housing revenue account can stand on its own feet—in which the ring fence can be impregnable—depends very much not only on the political views of the local authority concerned or its profligacy or efficiency or otherwise; it depends on the age of the housing stock, its control, whether that housing stock or a significant part of it has been amortised, and therefore on the debt charges.

I do not think that there is a general rule which says that housing revenue account can, in all circumstances, be isolated from the general rate fund. There may be many occasions when perhaps it would be a proper social policy for the ratepayers as a whole to contribute to the better housing of the worst-housed part of their community. I do not think that that principle is wrong; it is not something that we should abandon. Further, it was not part of our amendment and I did not argue the case when the amendment was moved. However, now I see the Government's thinking more clearly and the more I think about the matter, the more it worries me.

In my view we are going far too far in treating public sector housing as very much a second or even third best provision for people who are not able to look after themselves in other ways. It seems to me that public sector housing has for well over 100 years been to some extent a glory of our society. Indeed, it has been a glory of the way in which we have taken collective responsibility for all of our people. It is the way in which we have collectively improved the quality of our housing stock in this country. We have done so in a way which private landlords would never have done.

I am deeply unhappy with the Minister's response. However, I do not expect the noble Lord, Lord Ross, or myself, to pursue these particular small amendments to this question. But I hope that the noble Earl will understand that the Government's position is not one which is held by the Opposition.

The Earl of Caithness

Perhaps I may have made a mistake in inviting the noble Lord to speak on the amendment. However, it has been most helpful to have the discussion. I take on board the reservations which he has made. I hope that I shall be able to calm his fears on many of them as we continue to discuss the rest of the amendments which he has tabled because they appertain to this matter. Indeed, the more we discuss the HRA, the clearer both sides will be as to what is the position.

I certainly agree with the noble Lord that some of the local authority housing which has been developed, especially since the war when a great housing explosion took place, has been of enormous benefit. However, we must not look back; we must look forward. There are some extremely good local authority housing departments around the country which, I would be the first to say, have done an excellent job. But, on the other hand, some of them have let us down extraordinarily badly in this respect.

As I said, I hope that we shall solve many of the noble Lord's queries in our further discussions. It is certainly not our intention to have local authority housing as a second or third best provision.

Lord McIntosh of Haringey

I should like to correct any possible implication that I was attacking housing associations. The relative size of housing associations compared with council housing needs to be taken into account. Housing associations have half a million dwellings whereas local authorities have over 5 million. My defence of local housing authorities should not be taken as any criticism of housing associations.

The Earl of Caithness

I am afraid that I misled the noble Lord; I did not mean to go on to mention housing associations. I was referring to local housing authorities.

Lord Ross of Newport

Well, we have managed to deal with the tit for tat. Because of his agricultural experience, I am sure the noble Earl will agree with me that the term ring fence actually meant an asset: it was an asset to have the land ring fenced. I do not think it is necessary for local authorities to have such an asset. I may be that the Government are being too rigid on the matter; but, as the noble Earl rightly said, there are other amendments to be discussed, and we shall listen to the Government's further explanations with interest. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 135A: Page 156, line 40, leave out ("does not include") and insert ("includes").

The noble Earl said: In moving this amendment, I should like to speak also to Amendment No. 135G. In general, we should like the new arrangements introduced by the Bill to cause as little disruption as possible to authorities' accounting practices, as I have already said. However, there are some changes which will be required. These two amendments cover one of those changes.

The Bill as drafted repeats the provisions of the Housing Act 1985 (Schedule 14 Part I item 1), which requires the HRA to be credited with rent income net of rent rebates. This means that the account would not show either the gross rents due to the HRA for the year, or the cost of granting rent rebates for the year. We think that, for a full picture to be given, both these amounts should be shown. Amendment No. 135A therefore provides that the HRA should be credited with the gross rents receivable, whether or not they are rebated; and Amendment No. 135G provides for the cost of rent rebates granted for the year to be debited to the account.

Amendment No. 135G also has a second purpose. We took the view when drafting the Bill that the cost of administering the rent rebate system should be shown separately in the HRA. A contribution would then have to be made from the authority's other revenue accounts to cover this cost. But the more we looked at this, the more we thought it was an unnecessary complication. Authorities not only administer rent rebates to their own tenants, but rent allowances to private tenants and rate rebates to the general public. In the future they will also operate community charge rebates. The costs of running these separate strands of housing benefit are often inseparably intermingled. It seemed unreasonable to expect authorities to make a rough apportionment of these costs, carry it to the HRA, and then make an equal matching credit to the HRA from some other revenue account. The amendment therefore removes the obligation to debit these costs to the HRA, and Amendment No. 135Q—when we come on to it—will remove the obligation to make the matching transfer into the account. I beg to move.

On Question, amendment agreed to.

Lord Reay moved Amendment No. 135B: Page 157, line 17, after second ("the") insert ("authority's").

The noble Lord said: In moving this amendment, I should like to speak also to Amendment No. 135H. These are two small technical amendments. Their sole purpose is to make clear that Schedule 4 provides for transfers between the housing revenue account and the housing repairs account of the same authority, and not of any other authority. I beg to move.

Lord McIntosh of Haringey

I intervene only to welcome the noble Lord, Lord Reay, to the Government Dispatch Box. I hope that there will be more meatier amendments which we can debate with him in subsequent proceedings of this Committee.

On Question, amendment agreed to.

5.30 p.m.

The Deputy Chairman of Committees (Lord Strabolgi)

Amendment No. 135C has been replaced by Amendment No. 135CA.

The Earl of Caithness moved Amendment No. 135CA: Page 157, line 18, at end insert—

("Item 6A: reduced provision for bad or doubtful debts

The following, namely—

1. (a) any sums debited to the account for a previous year under paragraph (a) of item 5A of Part II of this Schedule which have been recovered by the authority during the year; and
2. (b) any amount by which, in the opinion of the authority, any provision debited to the account for a previous year under paragraph (b) of that item should be reduced.

If the Secretary of State so directs, no sums shall be credited under paragraph (a) above, and no amount shall be credited under paragraph (b) above, except (in either case) in such circumstances and to such extent as may be specified in the direction.").

The noble Earl said: In moving Amendment No. 135CA, I should like, with leave of the Committee, to speak also to Amendment No. 135JA. I hope that the noble Lord, Lord McIntosh of Haringey, will give a general welcome to the amendments because they have been introduced following discussions with the local authority associations. The amendments concern the way local authorities will account for bad and doubtful debts in respect of uncollected rents after 1st April 1990.

The amendments give effect to the proposed treatment of rent arrears which I announced in July. Members of the Committee will recall that we are proposing that housing rent arrears should be dealt with inside the housing revenue account. We also proposed that housing rent arrears outstanding at 31st March 1990 should be dealt with outside the ring-fenced HRA, and hence if not collected would be a charge on community charge payers generally. However, we also recognised that if these arrangements applied in full to those few authorities which have irresponsibly allowed their arrears to escalate to very high levels, this could put very great burdens on their charge payers. Accordingly, we proposed that an authority with high arrears at 31st March 1990 might apply to my right honourable friend the Secretary of State to enable it to spread over three to five years any budgetary provision for writing off these arrears. Since the announcement officials have had a most productive dialogue with both the local authorities and CIPFA about the detailed accounting arrangements that we will need to give effect to the policy.

The amendments that we are now considering will enable old arrears to be dealt with outside the HRA and new arrears, that is those arising after March 1990, to be dealt with inside the HRA. The amendment necessary to give effect to our proposal allowing the write-off of arrears to be spread over several years has already been approved by the Committee when it considered Part IV of the Bill. I beg to move.

Lord McIntosh of Haringey

The Minister asked me to welcome these amendments on the ground that they had been amended in consultation with the local authority associations. It is indeed my understanding .that they have been amended in consultation with the local authority associations, but it is not my understanding that they are satisfied with the result.

As I understand it, the amendments write off from the point of view of the housing revenue account any arrears which were outstanding at 31st March 1989 but, even though there may appear to be a concession, they immediately create an anomaly. Why should it be the case that arrears which existed on 31st March 1989 should be a charge, and properly a charge, on the ratepayer whereas subsequent arrears are a charge on only those tenants who are up to date with their payments? It seems to me that we raise here one of the most primaeval prejudices that Conservative activists in particular tend to have about local authorities and local authority tenants.

The noble Earl, I am sorry to say, used the word "profligate" about local authorities which have a high level of arrears of council rents. I am not in any way defending high levels of council rent arrears and I do not deny that there may well be councils, probably both Conservative and Labour, possibly even Liberal Democrat or hung councils, which have unacceptably high levels of arrears. But to make the immediate jump to saying that that shows profligacy on the part of those councils, without recognising the part that government policy has played in the level of arrears, seems to me quite unjustified. It is going much too far in the direction of a platform speech at a Conservative Party conference and is too far away from the kind of level-headed consideration that we should be giving to legislation.

The fundamental question must be asked: why should ratepayers be asked to support the cost of writing off arrears now but only tenants be expected to meet the cost in the future, or rather after 31st March 1989? The level of arrears in council house rents bears a very direct relationship not so much to the efficiency of the councils in collecting rents but to the levels of rents which they are expected to collect and the level of housing benefit which is available to enable those tenants in most need to meet as much of their housing costs as they can but no more.

It is a fact the Minister will not deny that it was after the April 1988 changes in housing benefit levels that arrears of rents grew to particularly unacceptable proportions, not just in Labour authorities or left-wing authorities but all over the country. So these arrears are the direct result of government policy on housing benefits and rent levels and they cannot be attributed either to the local authorities' inefficiency or, still worse, in the future to the ability of those tenants who keep up to date with their rent to subsidise them.

The increase in housing benefit was a one-off event in April 1988 but its effect goes on and it continues after March 1989. Therefore the imposition which the Government have made on the finances of public housing still continues and it is still wrong that tenants who can pay should alone be forced to pay for those who find themselves in arrears.

The question that we have to ask the Minister is this: what is he doing to help local authorities cope with the rise in rent arrears which arose from the £650 million cut in housing benefit that this Government put forward in April 1988? This is a matter for which the Government cannot simply shuffle the responsibility on to local authorities; still less can they shuffle it on to the better off council tenants. This is a matter of public responsibility and I hope that the Committee will reject these reactionary and damaging amendments.

Lord Evans of Claughton

I agree wholeheartedly with the remarks of the noble Lord, Lord McIntosh. I do not believe that he couched his remarks in any way too strongly. It has always worried me that the Conservative Party seems to have an obsessive desire to pick on people who are tenants in the public sector. When I was a councillor we used to have rows over what the housing revenue account should include—for example, whether payment for the cutting of borders and hedges should come from the housing revenue account. I do not think we ever debated whether other tenants should be responsible for the arrears of those tenants who got into difficulties.

It seems to me to be an entirely wrong, principle. If a town, borough or local authority area has problems, which have certainly not been brought about by the tenants but very often by government action or sometimes by the local authority, it is hardly fair that the tenants who are in employment or who skimp, save and do without in order to pay the rent should subsidise those who, for one reason or another, are unable to pay their rent.

I come from an area in which there is very high unemployment and where the cuts in housing benefit and social security changes have brought considerable hardship to many unemployed families, single parent families and a whole host of the disadvantaged. If, as this amendment seeks to do, we impose the cost of subsidising their problems on other council tenants who, generally speaking, are among the less well paid, rather than on the whole body of ratepayers or preferably the body of taxpayers, it would be outrageous. I hope that the Committee will reject this amendment contumaciously.

The Earl of Caithness

Perhaps it would benefit the Committee if I were to spend just a short time going into the principles underlying these proposals. I believe that it may be of assistance.

Everything that we are aiming to do on the HRA is designed to ensure that local authorities meet the proper cost of their housing from income generated by their housing business supported by subsidy. This puts an authority when acting as landlord into a similar position as other landlords. Our proposals on rent arrears are simply part of the package of measures establishing the new HRA. Without these proposals the authority would, in relation to the collection of rents, be out of step with other landlords.

If an authority is inefficient, its housing costs will be higher, so like any other landlord or business it will be unable to provide as good a standard of service or it will have to charge more. This applies equally whether the inefficiency relates to the collection of rents or, say, to the management of the repairs programme.

Authorities should now recognise that council tenants are no longer captive customers. As well as the right to buy, the new tenants choice system gives them a chance to transfer their custom elsewhere if they are dissatisfied with the service which their authority is providing. At this point I would remind the Committee that through the housing benefit system tenants on low incomes will receive generous assistance towards their rents. The problem of arrears is not that tenants cannot pay but rather that not all authorities are equally efficient at collecting the rents due.

As I have said, the purpose underlying the new ring-fenced HRA is to put authorities as landlords into a similar position as other such landlords. Contrary to what the noble Lord, Lord McIntosh, intimated, we do not wish to do this for any doctrinaire or ideological reason. We are doing this because we believe that this is the way to make authorities more efficient in their housing management and more sensitive to their tenants' needs.

Looking specifically at rent arrears, I am sure we can all agree that it is the responsibility of each local authority to collect efficiently the rents due to it, and the majority have done just this. But a few authorities have been less assiduous in collecting rents, no doubt influenced by the availability of ratepayers' money to make good any shortfalls. Our proposals for the ring fence, including any proposals on arrears, will bring to an end the possibility of such open-ended subsidy and hence impose greater financial discipline on authorities to collect the rents due to them.

Before I summarise our proposals, it is worth reminding the Committee of the problems that face us on this. The latest figures on rent arrears that I have are as at the end of March 1988. English authorities were owed a total of £226 million in rent, which was 5.7 per cent. of the rent roll for 1987–88. Thirty eight per cent. of the total arrears and 6 per cent. of the increase in that year are accounted for by the top 10 authorities. All but one of these are in London; the other is in Liverpool. All but one are Labour controlled; and in the other one Labour is the largest group. Their arrears range from 15 per cent. of their current rent roll in Greenwich and Camden to 47 per cent. in Brent. Elsewhere more than half of all authorities had arrears of less than 2.5 per cent. One can see, therefore, that some authorities are doing an excellent job on this, whereas others are not tackling the problem with the same efficiency and responsible management as they should.

However, I would add before the noble Lord, Lord McIntosh of Haringey, is tempted to get to his feet that the rent arrears in the authorities that I have mentioned are high not just because the authorities are Labour controlled nor because they are in London. For instance, Barking and Dagenham is a Labour-controlled London authority but its arrears in percentage terms are less than one-tenth of Brent's. It therefore comes back to the point that the difference lies in the commitment and competence of local authority members and officers alike to face up to the problem of arrears and to tackle it.

Lord Tordoff

Will the noble Earl give way? It seems to me that that is not what we are arguing about. It has been agreed on all sides that there are authorities which are not tackling this problem as well as they should. There are certainly authorities which find the issue extremely difficult, however hard they try. But the question at the root of this amendment is whether the responsibility for that should be put on to the rest of the tenants and not on to the ratepayers as a whole.

We heard much during the discussions on the community charge about how the pressure from the electorate was going to make local authorities face up to their responsibilities because of this new community charge. That was spread across the whole of the electorate. Here we are talking about the responsibility being put on to a small section of the total electorate. I do not understand why the Government are making this distinction with regard to housing.

The Earl of Caithness

Perhaps I may try to explain a little further. We are trying to put the local authority in the same position as any other landlord because that is the best way to achieve the efficiency and management competence that we seek. I was purely illustrating that there was a big problem with a small number; many were doing a very good job.

There will be later amendments that we shall be discussing. However, when we consider what goes into the HRA, the question of collection of rents and voids and such matters will be taken into account in the management and maintenance part so that there will be no excuse for any local authority to be anything other than efficient.

The noble Lord would seek to permit an escape route for the local authority so that it does not need to become efficient because it can always turn to the ratepayer to take care of the burden. I give way to the noble Lord, Lord Dean.

Lord Dean of Beswick

I apologise to the noble Earl. I was called from the Chamber and therefore missed the Minister's first remarks. However, I am sure that the Government are proceeding on a completely wrong premise.

The noble Earl has asserted that local authorities are being given the same treatment as the private sector. Nothing is further from the truth. The private landlord cannot increase the rent of a person who has paid his rent to pay the rent of somebody else who is in default. He can go to court but he cannot increase the rent. Where do we get the idea that we can load on to someone who is complying totally with his responsibilities within the law the debts of someone who is not?

The noble Lord, Lord Tordoff, was right. We are not debating the question of the bad authorities. Some authorities could obviously have done more to collect their rents. However, the Minister quoted figures for areas in some of the big cities, and that is where the main pressures are. The last figure that I saw was that 80 per cent. of the tenants were receiving some form of housing benefit and assistance. The Government are saying that in those areas where only 20 per cent. of the tenants are paying the full accredited rent, the debts of the 80 per cent. will fall on that 20 per cent. when this Bill becomes an Act. Can the Committee think of a more monstrous perversion of justice than to inflict that on a section of the community which is carrying out its responsibilities?

The Minister said that they are there by choice. I have to tell the Minister that the overwhelming number of people who are council house tenants have nowhere else to go except to sleep in the streets of London and the big cities in increasing numbers. This is the most monstrous proposal. I hope the Committee will give it the treatment that it deserves.

5.45 p.m.

Baroness Fisher of Rednal

We know what the private landlord ultimately does when he cannot obtain the rent. He evicts. Therefore it becomes the responsibility of the local authority to rehouse. The local authority with tenants with rent arrears is in a very difficult position. It knows very well that it has nowhere to turn them out to. If it evicts them and takes them through the court they are homeless. They therefore have to come back again into local authority properties.

I am a member of a housing association. More often than not we are housing those people who have been declared homeless. Every month that we meet we are appalled at the arrears that we have. I do not believe that the Minister always understands the difficulties that arise when one is moving from one form of state benefit to another. A husband may have been serving a term of imprisonment. He comes out and therefore the number of people in the house goes up. The benefits which the family is receiving have to be rejigged. It is not a case of going in on the Friday afternoon, explaining it all, and of being told "That is fine. It will all be done for next week". It normally takes about six or seven weeks to alter the various state benefits on which, for a variety of reasons, so many people have to live these days. When the man in the family goes on what we call "ET" and receives his £48 for his training, all the benefits for the family have to be reassessed because he comes off the unemployment register. All these factors make people get into debt.

It is amazing that we are saying to a certain class of people "You have to take over the burden". No owner occupier who is purchasing through a bank or a building society receives a letter saying, "We are terribly sorry but we have x number of people with mortgages who are in serious arrears and we have no alternative but to ask you to help us to pay those off."

I am glad that the noble Lord, Lord Carr, is present because he did such excellent work for the Birmingham Settlement. He was so helpful there. Perhaps the Minister is not aware of the money advice centres run by the CABs, where all kinds of people go when they are in debt. Perhaps the first thing they fall into arrears with is the rent or the mortgage. For us to inflict that debt upon a few other people is contrary to human justice and to what we hear about the caring Tory Government.

Lord McIntosh of Haringey

I hope it is only because we are in Conservative Party Conference week that we have had the most disgraceful reply I have heard from a government Front Bench speaker in the course of this Bill. We have heard a most disgraceful proposition from the Government and a most disgraceful defence of it. The Minister seems to delight in picking out a small number of local authorities which he claims to be in default. He attacks not only their efficiency but their motivation as well. He says that their arrears arise because, "They are no doubt influenced by the availability of ratepayers' money to make good any shortfall". He is accusing them not only of being incompetent but, in effect, of being crooked. I do not think that that is acceptable in this Committee. I do not think that we should conduct our debates in such a way.

The facts are that council house tenants who are able to pay their arrears and do pay their arrears are in future to shoulder the responsibility for those who are unable to pay and do not pay their arrears. In every other respect, as the noble Lord, Lord Tordoff, pointed out, the claim of the Government in their approach to local authority finance is that there should be accountability for the actions of the council to as many people as possible, the community charge payers or the ratepayers. In this respect, because of the insane desire of the Government to victimise local authorities in the poorer parts of our country and those under Labour control, that principle is being totally abandoned. Council house tenants are being asked to carry the entire responsibility for the defaults of their neighbours.

My noble friend Lady Fisher put the point absolutely clearly. When a mortgage payer defaults on his mortgage, the mortgage company repossesses and the other mortgage payers do not pay the cost of the arrears. When a private tenant fails to pay, he is evicted: the other private tenants do not pay the cost of that eviction. Because it is the local authorities who in the end have to pick up the pieces after repossession and eviction of private tenants, the analogy does not apply to council housing and ought not to be applied to council tenants.

What is happening here is worse than just the poor being asked to pay for the difficulties of the poorest in our society, although that is the case. What we have here is a straightforward piece oaf f political victimisation and political spite. I hope that the Committee will oppose it.

The Earl of Caithness

We have gone off at a slight tangent to the main discussion by mixing up arrears and write-offs. Arrears are not the same as write-offs. Authorities will still have plenty of flexibility to help people who have temporary difficulty with paying rents. These temporary difficulties do not affect the HRA at all. The costs only fall on the HRA when the authority thinks that arrears may be uncollectable.

The position that we are putting the local authorities in is exactly the same as that of the landlord or any other business. They do put up charges to the people who pay in order to cover the cost of bad debts. That is exactly what is done whether it be mortgages or payments to private landlords. That is exactly what happens now.

Lord McIntosh of Haringey

They are able to deal with the bad debts by repossession and by eviction. That option is not open to local authorities. That is the fundamental difference.

The Earl of Caithness

They also provide for bad debts. That is normal business practice and that is what we hope local authorities will be doing. Most authorities already do write off rent arrears to the HRA just like a business writing off its bad debts. A few—

Lord McIntosh of Haringey

Has the Minister ever seen a profit and loss account or a balance sheet? Provision for bad debt is not the same thing. Of course, people make provision for bad debts as a business precaution. That is not the same position as the local authorities in their housing revenue accounts, and above all the council tenants who are paying, will find themselves in if these amendments are agreed to. They will suffer and they will suffer directly. That is quite different from provision in the accounts.

The Earl of Caithness

Of course I have seen accounts, but we are putting local authorities into the same position as other landlords and the building societies, because the costs are passed on. I agree with the noble Baroness that we do not receive a letter explaining why the service charge or whatever has gone up, but the costs are passed on.

Baroness Fisher of Rednal

Can the Minister tell the House how one can pass on from the private landlord the cost of arrears when fair rents are fixed on properties?

The Earl of Caithness

There are a number of ways in which it happens. The new incoming tenant often has to take on that extra cost. But the cost is passed on. What we are seeking to do in future is to ensure that those few local authorities which have not carried out the work with the efficiency that we expect of them will no longer be able to carry on the pretence that the built-up arrears are collectable. They will be forced to make an appropriate write-off. If they do so before 1st April 1990, the cost can go either to the HRA or to the rate fund. That is the current system. If they wait until after 1st April 1990 they will not be allowed to charge the cost to the HRA. That ensures that the ring-fenced account starts with a clean sheet. Thereafter the build-up of arrears is a cost of inefficiency and just like any other inefficiency it has to be paid for out of the HRA.

Lord Tordoff

I am grateful to the noble Earl for giving way. It has to be paid for, yes, but why do the Government insist on targeting the cost of that on to the tenants who are paying their proper share of housing costs? That is what the Government are seeking to do by their amendment. They are seeking to make people who are in no way responsible for the inefficiency of the councils we are talking about responsible for the cost of that inefficiency. That is the injustice.

The Earl of Caithness

I can only apologise to the noble Lord, Lord Tordoff, for not having made myself clear. I thought I had clarified that we were putting the local authorities in the same position as other landlords or other businesses.

Lord Dean of Beswick

I briefly illustrated the situation that might be created in some of the larger authorities to which the Minister has referred. I have figures which I believe show quite clearly that, if a local housing authority had not cleared its decks for action by the appropriate date in the Bill, even if only 50 per cent. of the tenants were not paying their rent, that could mean a surcharge on each remaining tenant of £20,000.

That is what the Bill is all about.

I am talking about a local authority which is listed. I am not saying that it has done its job and I shall not criticise or condemn. I believe that its deficit should have been much lower but the fact is that on its housing current account it has a deficit of £22 million. It has just over 90,000 houses. Let us assume that 50,000 tenants can pay their rents. Unless the remainder can clear their debts by the date given in the Bill—and there is no possiblity of that—they are each being loaded with a bill of £20,000 upwards. If that is fairness I have never seen it before.

The Earl of Caithness

I believe that the noble Lord, Lord Dean, has misunderstood the situation. We are saying that if a council wishes to write off as a bad debt the arrears that it has not collected, and does so before 1st April next year, the costs go either to the HRA or to the rate fund. Therefore they can be written off. We are saying that in future under a ringed-fenced HRA that should not be permitted.

Lord Dean of Beswick

Why? Perhaps the Minister does not know that in the average large city £22 million is a tremendous rate poundage increase even with the poll tax. In my opinion there is no way in which such a commitment can be met while carrying out the functions across the board which the Government expect.

6.2 p.m.

On Question, Whether the said amendment (No. 135CA) shall be agreed to?

Their Lordships divided: Contents, 106; Not-Contents, 77.

DIVISION NO. 3
CONTENTS
Alexander of Tunis, E.	Campbell of Croy, L.
Allerton, L.	Carnegy of Lour, B.
Ampthill, L.	Carnock, L.
Arran, E.	Colwyn, L.
Auckland, L.	Cowley, E.
Balfour, E.	Craigmyle, L.
Barber, L.	Cranbrook, E.
Bauer, L.	Davidson, V. [Teller.]
Belstead, L.	Denham, L.
Blatch,B.	Eden of Winton, L.
Borthwick, L.	Elibank, L.
Boyd-Carpenter, L.	Elliot of Harwood, B.
Brougham and Vaux, L.	Faithfull, B.
Butterworth, L.	Fanshawe of Richmond, L.
Caithness, E.	Ferrers, E.

Gainford, L.	Mountevans, L.
Gardner of Parkes, B.	Munster, E.
Gisborough, L.	Nelson, E.
Glenarthur, L.	Nugent of Guildford, L.
Gridley, L.	Onslow, E.
Hailsham of Saint Marylebone, L.	Orkney, E.
	Orr-Ewing, L.
Halsbury, E.	Oxfuird, V.
Harrowby, E.	Pender, L.
Havers, L.	Penrhyn, L.
Henley, L.	Platt of Writtle, B.
Hesketh, L.	Reay, L.
Hives, L.	Renton, L.
Holderness, L.	Rochdale, V.
Hooper, B.	Rodney, L.
Hylton-Foster, B.	Rugby, L.
Ingrow, L.	Saint Albans, D.
Jenkin of Roding, L.	St. John of Fawsley, L.
Johnston of Rockport, L.	Saltoun of Abernethy, Ly.
Kaberry of Adel, L.	Sanderson of Bowden, L.
Killearn, L.	Savile, L.
King of Wartnaby, L.	Selkirk, E.
Kitchener, E.	Sharples, B.
Lauderdale, E.	Somers, L.
Layton, L.	Southborough, L.
Lindsey and Abingdon, E.	Strange, B.
Long, V. [Teller.]	Strathclyde, L.
Lyell, L.	Strathcona and Mount Royal, L.
McColl of Dulwich, L.
Mackay of Clashfern, L.	Strathmore and Kinghorne, E.
Macleod of Borve, B.
Malmesbury, E.	Swinfen, L.
Margadale, L.	Thomas of Gwydir, L.
Marley, L.	Tranmire, L.
Marshall of Leeds, L.	Trefgarne, L.
Merrivale, L.	Trumpington, B.
Mersey, V.	Ullswater, V.
Milverton, L.	Vaux of Harrowden, L.
Montgomery of Alamein, V.	Westbury, L.
Morris, L.

NOT-CONTENTS
Airedale, L.	Llewelyn-Davies of Hastoe, B.
Aylestone, L.
Barnett, L.	Lockwood, B.
Blyth, L.	Longford, E.
Bonham-Carter, L.	Macaulay of Bragar, L.
Bottomley, L.	McIntosh of Haringey, L.
Callaghan of Cardiff, L.	Mackie of Benshie, L.
Carmichael of Kelvingrove, L.	Mais, L.
	Masham of Ilton, B.
Carter, L.	Mason of Barnsley, L.
Cledwyn of Penrhos, L.	Mayhew, L.
Cobbold, L.	Milner of Leeds, L.
Cocks of Hartcliffe, L.	Mulley, L.
Craigavon, V.	Nicol, B.
David, B.	Oram, L.
Dean of Beswick, L.	Peston L.
Dormand of Easington, L.	Pitt of Hampstead, L.
Evans of Claughton, L.	Ponsonby of Shulbrede, L.
Ewart-Biggs, B.	Rochester, L.
Ezra, L.	Ross of Newport, L.
Feversham, L.	St. John of Bletso, L.
Fisher of Rednal, B	Seear, B.
Gallacher, L. [Teller.]	Seebohm, L.
Gladwyn, L.	Shepherd, L.
Graham of Edmonton, L.	Stedman, B.
Greenway, L.	Stewart of Fulham, L.
Grey, E.	Stoddart of Swindon, L.
Hampton, L.	Strabolgi, L.
Hanworth, V.	Taylor of Blackburn, L.
Harris of Greenwich, L.	Taylor of Gryfe, L.
Hatch of Lusby, L.	Taylor of Mansfield, L.
Howie of Troon, L.	Tordoff, L. [Teller.]
Irvine of Lairg, L.	Turner of Camden, B.
Jay, L.	Underhill, L.
Jeger, B.	Wallace of Coslany, L.
Jenkins of Hillhead, L.	Whaddon, L.
John-Mackie, L.	White, B.
Kilmarnock, L.	Williams of Elvel, L.
Kinloss, Ly.	Young of Dartington, L.
Listowel, E.

Resolved in the affirmative, and amendment agreed to accordingly.

6.10 p.m.

Lord Hesketh moved Amendment No. 135D: Page 157, line 25, ("property") insert ("which are or have been").

On Question, amendment agreed to.

Lord Dean of Beswick moved Amendment No. 135DA: Page 157, line 25 at end insert— ("In determining any sums for the purposes of this item, the Secretary of State shall make provisions to cover any sum paid by a local authority to redeem outstanding debt under the provisions of Clause 58(4) when land held by the authority is disposed of to a housing association for the purpose of providing rented or low cost home ownership housing and the authority as part of that disposal receives in return the right to nominate persons for all or a part of such housing as is provided.").

The noble Lord said: The purpose of this amendment is to ensure that there is a debate, clarification and I hope a positive response to a significant problem which has now emerged. Ideally the debate belongs to Part IV of the Bill since that deals with capital and the application of capital receipts. Nevertheless, the amendment strikes at the heart of the matter and gives notice of our intention to return to the issue if necessary on Report.

Briefly, the impact of the provisions of Clause 58 could, if unamended, seriously jeopardise the relationship between local authorities and housing associations. In particular, authorities have sought to develop genuinely affordable low cost home ownership and rented schemes via associations through the disposal of land at less than market value in return for nomination to resultant vacancies. That lower disposal cost is advantageous to all concerned. The authority brings land into use and the associations, by not paying full market value, can produce a scheme with affordable rents or payments. Those in housing need or those wishing to have a foot on the first rung of the home ownership ladder thereby obtain a decent home at a price which they can afford.

I should like to ask the Minister whether he supports those objectives and whether he is willing to consider an exemption in Clause 58 to address that problem. If so, what does he have in mind and when will any measure be brought forward? If he does not support those objectives, the provisions of Clause 58(4) will apply such that when a local authority takes up any nomination it will need to set aside a sum equivalent to the 75 per cent. or unusable part of the capital receipt that it will be deemed to have received on disposal of the land in respect of that nomination had it not been for the disposal price having been set below market value. That means that the local authorities—their tenants and poll tax payers—will have to pay for each nomination and all the advantages of an otherwise beneficial arrangement will then be lost.

Are the Government seriously interested in local authorities and housing associations working in partnership to provide affordable housing? If so, what is the logic behind the provision in Clause 58(4) in respect of such partnerships? Do the Government not realise that, if unamended, the Bill will curtail immediately both existing and future partnerships, and these partnerships have benefited housing generally and those people concerned with housing. I beg to move.

The Earl of Balfour

When the noble Lord spoke to this amendment I noticed that he referred to Clause 58(4). I think he should have referred to Section 58(4).

Lord Dean of Beswick

I accept that correction.

The Earl of Caithness

The Committee may recall the argument deployed by the noble Lord, Lord Dean of Beswick, because this amendment harks back to a debate in Committee some weeks ago on Part IV of this Bill and in particular Clause 58. In that debate the noble Lord, Lord Graham, argued that the effect of the Bill as drafted would be to discourage local authorities from disposing of housing land to housing associations at an abated price in return for nomination rights. The noble Lord, Lord Dean of Beswick, has followed the same sort of argument this evening. I am pleased to tell him that we have thought over this matter and we now propose to introduce an amendment to Part IV at Report stage empowering the Secretary of State to make regulations by which he may, among other things, relax the debt redemption requirements in respect of certain non-monetary considerations received by authorities. The relaxation could be applied generally by regulations or in specific cases requiring his consent by direction.

We are now considering how we might use this power to help certain types of transaction that fall within Clause 58. I am afraid that since we have not yet reached final decisions, I cannot be more specific about this today. However, I assure the noble Lord that I hope to be able to be more forthcoming on this when we discuss the Part IV amendment on Report. I hope the Committee will wait until then.

Lord Dean of Beswick

I am grateful to the Minister for offering some hope. I should like to read more closely what he said, and on that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.15 p.m.

Lord Dean of Beswick had given notice of his intention to move Amendment No. 135DB:

Page 157, line 33, at end insert— ("Item 10: contributions from other accounts. Contributions of any description payable from some other revenue account of the authority if Housing Revenue Account subsidy is not payable for the year.").

The noble Lord said: I should like to hear the Government's response to this amendment to see whether they have any particular reasons for opposing it.

The Earl of Caithness

I have spoken to this amendment with Amendment No. 135 moved by the noble Lord, Lord Ross of Newport. I am not sure that I can add much to what I said then. If there is anything specific which he seeks, I shall try to answer him.

Lord Dean of Beswick

In the circumstances, I shall not move this amendment. I shall read what the Minister said and perhaps come back at a later stage.

[Amendment No. 135DB not moved.]

Lord Dean of Beswick moved Amendment No. 135DC:

Page 157, line 33, at end insert— ("Item 10: interest on balances. Any interest on balances held in the account. Item 11: interest on the reserved part of Capital Receipts. Any interest derived from the reserved part of a capital receipt where that receipt is in respect of the disposal of a dwelling house or houses held for the purposes of Part II of the Housing Act 1985.").

The noble Lord said: The purpose of this amendment is to allow local authority tenants and not the Treasury to benefit from the efficient management of the HRA by allowing any interest on balances in the account or earned on the 75 per cent. or reserved part of capital receipts to be credited to the HRA with no consequent subsidy loss.

Any private landlord would manage his or her assets such that the benefits of good financial management accrue to the landlord. As the Bill is drafted, the Government are not prepared to allow local authority landlords to do that.

Briefly, it is currently proposed that when a local authority earns interest on any balances in the housing revenue account or through the temporary investment of the reserved part of housing capital receipts this interest is credited to the housing revenue account. There would then be a subsequent adjustment of the subsidy so that the subsidy would be withdrawn on a pound for pound basis. Therefore, the benefits of good management would not accrue to the local authority, which we believe is grossly unfair.

We press the Government to accept the spirit if not the wording of this amendment which would address that anomaly and would allow interest earned to be a genuine credit of benefit to the tenant. Without these amendments what do the Government think will be the incentives to efficiency in financial management when the end result is simply a loss of subsidy?

This amendment also allows, if required, for a wide debate on two associated issues. I do not wish to go into this any further; but from what I have said it is apparent that there is an unfair anomaly. If local authorities are successful in managing their housing revenue accounts and go into surplus then an equivalent amount—as I said, pound for pound—can be deducted from their subsidies. That is not the way to encourage efficiency, and it is not fair minded. I beg to move.

The Earl of Caithness

I understand that we are dealing with Amendments Nos. 135DC and 135LE.

Lord Dean of Beswick

That is correct.

The Earl of Caithness

Amendment No. 135DC would include certain extra items or credits in the housing revenue account. Amendment No. 135LE would then exclude those items from the calculation of subsidy. I should repeat that we intend Schedule 4 to provide a comprehensive list of the credits and debits in the HRA. In fact, we intend it to be an exclusive list. Anything which is not provided for in the schedule will not be allowed to be credited or debited to the account. Against this background I can quite understand the reasons for Amendment No. I 35DC. The noble Lord, Lord Dean, wishes to be quite sure that interest on cash balances, and on the reserved part of receipts, can be credited to the account.

I can reassure the noble Lord. We have not forgotten about these items, but we believe that they can be provided for in another way. We intend—we have always intended—that the interest on the reserved part of receipts should be covered by Item 7 of Part I of the schedule. As regards the interest on cash balances, we have not yet reached a decision; but if we do decide that this also should be credited to the account then Item 7 of Part I will ensure that this can be done.

Amendment No. 135LE provides that interest from these sources should not be taken into account in the calculation of HRA subsidy. As I have indicated, we have not yet reached a view on the interest on cash balances; but for the purposes of argument I shall accept that if this interest is credited to the HRA it should be excluded from the subsidy calculation.

However, the interest on the reserved part of receipts is quite another matter. The new capital finance system requires a proportion of receipts to be set aside to reduce net indebtedness. But unless and until external borrowing is actually paid off—which is not required by the new capital finance system—the interest charges on that borrowing still have to be paid; though of course the interest earned by the receipts set aside provides the wherewithal to do so. The cost of borrowing is an entirely proper charge to the HRA and is reflected 100 per cent. in subsidy from the Exchequer. By the same token, it must be right for the interest earned on receipts set aside to reduce net borrowing also to be reflected in the subsidy calculation; otherwise, the Exchequer's liability to take account of borrowings 100 per cent. in its subsidy would carry on without any help from the part of receipts that is intended to meet outstanding debts.

Lord Harris of Greenwich

I should like to ask the noble Earl one question. He indicated that the Government have not yet made up their mind on interest on balances. Notwithstanding that, he said that if they do make up their mind there are provisions in the Bill to deal with this issue. When are the Government going to make up their mind? Is it likely that the decision will be made in the near future?

The Earl of Caithness

I understand that the decision will be made in the near future. I hope the noble Lord will wait on tenterhooks until then.

Lord Dean of Beswick

I am grateful to the noble Lord, Lord Harris, for his intervention and to the Minister for his reply. It is an important point. Do I take it from the Minister's answer to the noble Lord, Lord Harris, that the decision will be made before the Bill completes its passage through this House?

The Earl of Caithness

I understand that is the case.

Lord Dean of Beswick

On that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Hesketh moved Amendment No. 135E: Page 158, line 4, leave out from ("including") to ("expenditure") in line 7.

On Question, amendment agreed to.

Lord Hesketh moved Amendment No. 135F: Page 158, line 10, at end insert:—

("Item 1A: expenditure for capital purposes

Any expenditure of the authority in respect of houses and other property within the account which—

1. (a) is capital expenditure (other than excluded expenditure) for the year; or
2. (b) is excluded expenditure for the year, or any previous or subsequent year, which the authority decide should be charged to a revenue account for the year.

In this item "capital expenditure" means expenditure for capital purpose within the meaning of Part IV of this Act and "excluded expenditure" means expenditure excluded from the obligation in section 39(1) of this Act.").

The noble Lord said: This amendment adds one more to the list of items an authority is allowed to debit to the housing revenue account. In most cases authorities will no doubt meet the cost of capital works either from capital receipts or by the exercise of credit approvals; but they will also be free, just as they are now, to fund capital expenditure directly out of revenue. However, there is no item in Part II of the schedule under which direct revenue: expenditure for capital works could be entered in the account. Item 1 of Part II—expenditure on repairs, maintenance and management—is not wide enough to cover works of this sort.

We therefore need a new item specifically for revenue spending on capital works and that is the purpose of this amendment. The new item covers two possible cases: subparagraph (a) provides for capital expenditure which the authority is obliged to charge to a revenue account; and subparagraph (b) provides for expenditure which the authority may at its discretion charge to revenue. This amendment will thus ensure that the provisions of the schedule correspond to earlier provisions in the Bill. I beg to move.

Lord Dean of Beswick

I shall be brief. I am grateful to the Minister for his detailed explanation of what this part of the Bill does. However, I ask him to bear with me for a few moments and to tell the Committee what it means in regard to repairs. Does it cover repairs? Wide concern has been expressed about this type of activity, not only by people involved in politics and housing in general but also by the building industry in the private and public sectors who would like some indication of whether, in forward-looking programmes, money will be made available. What does this insertion into the Bill mean?

Lord Hesketh

Clearly the object is, as I said earlier, to widen the area covered in Part II of the schedule. Whether that covers capital works and whether those capital works are repairs depends on the occasions when they are, and on other occasions when they are not. I believe I am correct in saying that it will cover certain repairs.

Lord Dean of Beswick

I should like to give more detail. During my travels I have noticed some authorities are in the process of extensive upgrading of estates by installing UPV windows and other improvements thus bringing reasonable properties up to a good standard. We all want to see that. Do I therefore take it that that type of full estate upmarket improvement—termed in some quarters as "enveloping"—would qualify as capital work? It is clear that such work is more than just repair. The Government should view it sympathetically so that that type of activity can be considered as capital work.

Lord Hesketh

The last example given by the noble Lord, Lord Dean, extended the definition of "repairs". He was referring to a specific type of development. However, we will take account of past spending on capitalised repairs in the subsidy.

Lord Harris of Greenwich

Does that mean that they are included or excluded? I am not clear on that point from the noble Lord's answer.

Lord Hesketh

They are included.

Lord Dean of Beswick

I am sorry to return to this point but that is where the difficulty starts. One does not refurbish an estate twice in a lifetime. Something that has never been done cannot be taken into account. The expenditure may be completely new. An authority may be commencing an upgrading programme that has never been done before. It may be a particular facet like reroofing or it may involve total central heating of a more modern and acceptable type with double glazing. This may bring a difficult estate on stream and enable people to accept it. The matter cannot be judged by the yardstick of what has been done in the past because such measures have never been taken before. When this Bill becomes an Act will authorities be able to say that such measures will qualify as capital works, as understood by the Government and the Minister?

6.30 p.m.

Lord Hesketh

As I said earlier, there is a change in the new definitions. We shall return to this matter when we reach Amendment No. 135PB later this evening.

On Question, amendment agreed to.

Lord Hesketh moved Amendments Nos. 135G and 135H: Page 158, leave out lines 14 to 16 and insert—

("Item 3: rent rebates

The rent rebates granted for the year to tenants of houses and other property within the account.".

Page 158, line 22, after second ("the") insert ("authority's").

The noble Lord said: I beg to move these amendments en bloc.

On Question, amendments agreed to.

[Amendment No. 135J had been withdrawn from the Marshalled List.]

Lord Hesketh moved Amendments Nos. 135JA and 135K: Page 158, line 22, at end insert—

("Item 5A: provision for bad or doubtful debts

The following, namely—

1. (a) any sums credited to the account for the year or any previous year under item 1 or 2 of Part I of this Schedule which, in the opinion of the authority, are bad debts which should be written off; and
2. (b) any provision for doubtful debts which, in their opinion, should be made in respect of sums so credited.

If the Secretary of State so directs, no sums shall be debited under paragraph (a) above, and no provision shall be debited under paragraph (b) above, except (in either case) in such circumstances and to such extent as may be specified in the direction.").

Page 158, line 29, after ("property") insert ("which are or have been").

The noble Lord said: I beg to move these amendments en bloc.

On Question, amendments agreed to.

On Question, Whether Schedule 4, as amended, shall be agreed to.

The Earl of Balfour

I refer the Committee to Part IV at page 161. The heading above paragraph 2 is: Directions excluding or modifying statutory provisions". Paragraph 2(1) states: The Secretary of State may, as respects any houses or other property within the Housing Revenue Account, direct that all or any of the provisions of this Part of this Act … Those are the words that I shall refer to again— relating to the account shall not apply, or shall apply subject to such modifications as may specified in the direction". Are we there referring to Part VI of the Bill or Part IV of the Schedule?

Lord Hesketh

We are referring to the part of the Bill referred to as Part VI which includes Schedule 4.

The Earl of Balfour

I am most grateful. The matter was a little uncertain. It should have stated Part VI if that is the case.

Schedule 4, as amended, agreed to.

Clause 73 [Duty to prevent debit balance on Housing Revenue Account]:

Lord Graham of Edmonton moved Amendment No. 135KA: Page 79, line 16, after ("authority") insert ("to whom Housing Revenue Account subsidy will be payable and").

The noble Lord said: I beg to move this amendment standing in the name of my noble friend Lord McIntosh of Haringey. In wishing to be helpful to the Committee perhaps I may remind it that we are dealing with a clause, the heading of which makes no bones as to its purpose. The heading in the margin states: Duty to prevent debit balance on Housing Revenue Account". We are dealing with subsection (1) of the clause which states: This section applies where for any year ('the relevant year') a local housing authority … and we are inserting the words, ('to whom Housing Revenue Account subsidy will be payable and')".

The Minister and his advisers will note that the amendment will allow a local authority to go into deficit on its housing revenue account as long as it is not in receipt of housing revenue account subsidy from central government. Going into a budget deficit can be of assistance where a large project is planned over a couple of years and taking more than one year's allocation for a certain area. Where the Exchequer makes no contribution to local authority spending in the form of an HRA subsidy, in our view it is inappropriate for it to control spending to this degree.

Local authorities already operate careful control of expenditure with the help of accountants and auditors. Their efficiency will be hindered by the unnecessary and pedantic procedures introduced by this clause. In a series of amendments to this clause we are raising with the Minister the extent to which the Government are really determined to grab hold of all room for manoeuvre and flexibility in the management of housing at the local level by writing on the face of the Bill proscriptions which will inhibit or make absolutely impossible what the Minister and his colleagues are constantly saying; namely, that local people should be able to judge what is in the best interests of the ratepayers, the community charge payers and those involved with housing.

We believe that this is a modest improvement from the point of view of local government. It takes away a little of the power that the Government are taking not only in the whole of this Bill and this particular section, but as regards this particular clause. I cannot believe that if the Government are serious about trusting local government to some extent that they will cavil at this modest amendment. I beg to move.

The Earl of Caithness

The noble Lord, Lord Graham of Edmonton, is more than his usual persuasive self. Until I had thought about it carefully I was almost tempted to agree with his so-called modest improvement. However, if the amendment is looked at in another way it will be seen that it undermines one of the foundation stones of the new financial regime; namely, the ring fence around the HRA. It is not such a modest improvement as he would lead us to believe.

Clause 73 provides that local authorities should budget in advance of the financial year with the aim of avoiding a deficit on the HRA. During the year they are to take all practical steps to avoid a deficit; and they must do this without relying on contributions from the rate fund. Amendment No. 135KA would disapply this requirement from authorities which are not receiving ERA subsidy from the Government. The effect would be to remove all obligation on authorities not to run into deficit; such a deficit would have to be made up by community chargepayers.

But as we have said before, ring-fencing is about more that just subsidy. It is about fairness between tenants and ratepayers. It is also about financial discipline and accountability to tenants. This amendment would mean that once a measure of financial discipline and accountability had been ensured and the HRA was running in a healthy and business-like way without unnecessary subsidies, the council could suddenly throw off all its obligations. There would be no continuing incentive on the authority to provide an efficient accountable service. That is the effect of Amendment No. 135KA and that is why I cannot accept it.

Lord Graham of Edmonton

That is a disappointing reply. All that the Minister said in the last 20 seconds could happen. There will be opportunities for local authorities to act recklessly if not fecklessly in managing an element of local finance. The Minister and his collegues have gone bananas. They are saying to local government that if it is possible to tie authorities down they will do it. Local authorities of different political persuasions will recognise that the Government's macro-economic imperatives apparently rest on ensuring that a local housing revenue account does not go into deficit. The Minister and his advisers are going overboard in saying that they do not trust local government. If a local authority acts irresponsibly it will be seen by the local electorate. Local authorities are accountable. If they mismanage, misappropriate or misdirect their resources they will be taken to task. The Minister has not made out a good case. He has confirmed our fear that they want to prevent good people in local government acting as they see fairly. In the light of what the Minister has said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 73 agreed to.

Clause 74 [Power to keep Housing Repairs Account]:

Lord Graham of Edmonton moved Amendment No. 135KB:

Page 81, Line 6, at end insert— ("( ) For the year ending 31st March 1991, an authority may carry to the debit of the account any expenditure incurred by them during the year ending 31st March 1990 and debited to the Housing Revenue Account during that year, notwithstanding the effect of subsection (3) above. (5) In calculating Housing Revenue Account subsidy under section 77(3)(a) below, the Secretary of State shall have regard to the provisions of subsection (4) above.").

The noble Lord said: Clause 74 deals with the power to keep a housing repairs account. The amendment relates to subsection (3), which deals with the management of the account. It says: The authority shall carry to the debit of the account for any year".

It then sets out the matters that can be carried to the debit of the account. We have submitted additional subsections. For the benefit of the Committee, we say: For the year ending 31st March 1991, an authority may carry to the debit of the account any expenditure incurred by them during the year ending 31st March 1990 and debited to the Housing Revenue Account during that year, notwithstanding the effect of subsection (3) above".

Subsection (3) above relates to:

1. "(a) all expenditure incured by them for the year in connection with the repair or maintenance of houses or other property within their Housing Revenue Account;
2. (b) such expenditure incurred by them for the year in connection with the improvement or replacement of houses or other property within their Housing Revenue Account as may from time to time be determined by the Secretary of State; and
3. (c) sums transferred for the year to the Housing Revenue Account in accordance with subsection (5) below".

We seek to add a subsection as follows: In calculating Housing Revenue Account subsidy under section 77(3)(a) below, the Secretary of State shall have regard to the provisions of subsection (4) above".

The amendment seeks to ensure that in allowing flexibility to local authorities on the management of their HRAs in 1991 (because the Government have been unable, due to insufficient time being allowed, fully to introduce their proposals) any practice they adopt between now and April 1991 will not be penalised, either retrospectively or in advance. We are concerned about the timetable. There are arguments about the clause and the subsections but we are concerned about the timetable. The noble Earl understands that much of what we say from this Front Bench is given to us properly and appropriately by the local authority associations. We are telling the Minister that local authority associations are concerned.

The obvious option that the Government could have pursued would have been to defer their proposals. By their own admission they will be unable to introduce them as planned in April 1990. They have no accurate data on management and maintenance, their capital value rents formula is flawed and is totally inappropriate and the information they have on current local authority practice is woefully inadequate. The local authority associations have been willing to co-operate with officials in working towards a workable solution but they no longer have any faith in the system being introduced. The Government's determination to introduce changes in April 1990 means that not enough time has been allowed for a satisfactory system to be devised.

It is important that the Minister should give a strong reassurance to all authorities that in calculating subsidy entitlement for 1991 he is willing to use as a starting point current local authority practice on the HRA, as uncovered by his officials' own survey of local authorities. It concluded that the Government, would be leaving the boundary fairly loosely drawn". It also said that, the responses to the questionnaire do not appear to suggest any pressing need for new definitions to be in place for 1990/91". However, this would mean the Government continuing to allow the local authority discretion as to what is in or out of its HRA, including the discretion to include and to be eligible for subsidy items which it is widely believed would be excluded under the so-called "tighter" definitions—for example, estate shops and wardens. If the subsidy is not available, the cost of these community services will fall entirely on the tenants, and, as with capitalised repairs, will cast doubt on the Government's sincerity in wanting to achieve a soft landing. If I may quote the July 1989 consultation paper: The introduction of the new system should not of itself introduce any sharp change in the level of rents".

I hope that the Minister will accept the amendment or will say something helpful to those outside the Chamber who follow these matters and understand the nuances of ministerial statements. The present position is woefully inadequate. According to my advisers, it is crucial that the Minister should ease the position at this point. I beg to move.

6.45 p.m.

The Earl of Caithness

I think I can see the point of the noble Lord's amendment. It appears to be concerned with providing that authorities are able in 1990–91 to charge to the repairs account items which they had previously charged to the housing revenue account. We have of course already discussed at some length our intentions of the definition of the HRA. As I said earlier, our strong inclination is to leave authorities' present practices in place for 1990–91 and make clearer rules for future years. We are not quite ready yet to make a final decision on this.

Consultations and discussions are still taking place and officials are considering the results of the survey into present practice—but we should be ready very shortly. I can assure the noble Lord that any rules on the keeping of the HRA and the calculation of subsidy would treat the HRA and the repairs account as interchangeable. The repairs account is subsidiary to the HRA. It is up to the authorities whether or not they keep a repairs account. Thus there will be no restriction on the movement between the two accounts and no impact on subsidy.

Lord Harris of Greenwich

Again the Minister has indicated that the Government are considering their position on this matter. Perhaps I may ask him the same question as I did on the last occasion; namely, will they come to a decision on the matter before the Bill leaves this place?

The Earl of Caithness

Yes, I think that is what I said earlier. If I am wrong in thinking that is what I said earlier, I shall come back to the noble Lord.

Lord Graham of Edmonton

I think we have this one on the nod. I hear laughter from the Benches opposite. What the Minister has said appears to be satisfactory in the light of the genuine concerns of local authorities. I accept his integrity absolutely. We shall study carefully what he said and we may seek an opportunity to bring back the amendment. I am grateful to the Minister for what he said and for the intervention of the noble Lord, Lord Harris of Greenwich, who has been helpful in this matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 74 agreed to.

Clauses 75 and 76 agreed to.

Clause 77 [Calculation of Housing Revenue Account subsidy]:

[Amendments Nos. 135KC and 135KD not moved.]

The Deputy Chairman of Committees (Lord Nugent of Guildford)

Before I call Amendment No. 135KE I should explain that if it is carried I cannot call Amendment No. 135KF before the Committee.

Lord Graham of Edmonton moved Amendment No. 135KE:

Page 81, line 36, at end insert— ("(2) The formula referred to in subsection (1) above shall contain within it the Secretary of State's estimate based on such information as is available of a local authority's need to incur expenditure on the management and maintenance of houses or on the property within its Housing Revenue Account. (3) The Secretary of State shall prepare his estimate of a local authority's need to incur expenditure on management and maintenance following consultation with the local authority associations and the Audit Commission.").

The noble Lord said: With the leave of the Committee I shall speak also to Amendment No. 135LC. The amendments relate to Clause 77, which is described as "Calculation of Housing Revenue Account subsidy". Subsection (1) provides: The amount of Housing Revenue Account subsidy (if any) payable to a local housing authority for a year shall be calculated in accordance with such formulae as the Secretary of State may from time to time determine; and for any year the first such determination shall be made before the 25th December immediately preceding that year". We wish to insert two new subsections which provide: ('(2) The formula referred to in subsection (1) above shall contain within it the Secretary of State's estimate based on such information as is available of a local authority's need to incur expenditure on the management and maintenance of houses or on the property within its Housing Revenue Account. (3) The Secretary of State shall prepare his estimate of a local authority's need to incur expenditure on management and maintenance following consultation with the local authority associations and the Audit Commission.')". Together with an earlier amendment this amendment seeks to ensure that the Secretary of State in arriving at a subsidy formula will look at objective evidence on the need to spend on management and maintenance. For this and the previous amendment I rest heavily on the evidence produced on the need to spend by no less an authoritative body than the Audit Commission. It produced a survey in 1986 Improving Council House Maintenance and it went to considerable lengths to explain its importance.

Will the Minister give an assurance that, as promised in the July 1988 consultation paper, the Government are still committed to the view then expressed that: The introduction of the new system should not itself introduce any sharp changes in the level of rents or management and maintenance expenditure"? The Audit Commission report of 1986 said, among other things: If maintenance expenditure continues at its present level, the backlog of repairs will increase by an average of £900 million a year over the next 15 years". That is £900 million every year. If we continue at the present level, for whatever reason, we are adding to the backlog, by that tremendous amount. The National Housing Forum in Housing Needs in the 1990s identified 3.8 million local authority homes needing a total expenditure of £18.8 billion. The bulk of that expenditure is needed in the traditionally built stock.

The Audit Commission of course has criticised the DoE's figures on estimated repairs costs. The DoE funded reasearch on the nature and effectiveness of housing management in England. That was the so-called Maclennan Report, which found that more locally based management should be actively considered by smaller as well as larger councils.

We are moving quickly towards an hour to which many of us are looking forward when the Committee adjourns for pleasure. I do not wish to detain the Committee for long. I am sure that the Minister understands the thrust of the two amendments which are considered to be important by local authorities. They are also considered to be important in many parts of this place.

The Minister should not only consult local authorities; he should read and subscribe to the views of the sensible people, whom I know the Minister respects, who say that we need' to do more not only to maintain but to increase the amounts of money allowed to be spent and to be taken into account in the HRA to maintain and improve our housing stock. The position is desperate. It need not be. The Government have a major responsibility to give a lead. I beg to move.

The Earl of Caithness

These two amendments relate to the allowance which is to be made in the subsidy formula for local authorities' expenditure on the management and maintenance of their housing.

I think that I can go at least part of the way towards meeting the points made by the noble Lord, Lord Graham of Edmonton. It is our firm intention that the formula should reflect the differing needs of different authorities. This will be done in three stages. First, we shall determine a national total allowance for authorities' expenditure on management and maintenance of their housing stocks. In doing so we shall take account of part and expected movements in costs and prices. This is all contained in Government Amendment No. 135LA. That determination, like all the directions and determinations made under Part VI of the Bill, will be subject to annual consultation with local authority representatives and relevant professional bodies, which might very well include the Audit Commission.

Secondly, we shall distribute the total allowance in accordance with a formula which reflects the different needs of different authorities. The assessment of needs will take account of the age, size and type of housing owned by such authority and of variations in costs around the country. The local authority associations have argued that management factors should also be reflected in the formula; as yet we have found that suitable management factors are somewhat elusive but we certainly have no objection in principle to extending the formula in that way. In fact the associations have argued that we should delay the introduction of the needs-based formula for a year to allow more time for its development. We are still considering that but at any rate it is our firm intention to have the formula in place by 1991.

Thirdly, we shall adjust the allowance for individual authorities by reference to their allowance for the previous year. (In the first year that will work slightly differently: the comparison will be with average actual spending, uprated for inflation, over three recent years, and a further allowance will be built in to reflect authorities' past practice in capitalising repairs expenditure.)

Clearly we have to strike a balance between distributing the national total in accordance with needs and adjusting the distribution to reflect previous years. There is a danger, which I am sure the noble Lord will recognise, in laying too much weight on the adjustment in respect of previous years: if we are not careful, we may end up with resources going to high spending authorities regardless of real needs. But I recognise too that authorities have a legitimate interest in avoiding sudden change. I expect that this is a point which the local authority associations will continue to make in our discussions of the subsidy formula.

Lord Graham of Edmonton

I am grateful to the Minister, but I am not satisfied. Perhaps I may pursue this point. The Minister has quite fairly dealt with the formula which will be used to allocate or distribute the global sums which the Government consider it appropriate to spend under this heading. But he has failed to take into account that that formula, as part of its raison d'être, is likely to involve a need to spend far more money on maintenance and repairs in the future, than was the case in the past.

If the formula will rest very heavily on what I think the Minister said was average actual expenditure for the past three or four years, updated, then historically we know that that will do nothing to eradicate the major problem. He was absolutely right that the concern of the local authorities is not only that the formula should be fair. I take on board that fairness does not mean that somebody receives far more of the money available or is allowed to spend far more of the money available simply because he has a major problem. Fairness has many facets and sides. However, I am anxious that the Minister should tell us that in the discussions and consultations he has in mind substantially to increase and improve the money that will be available to improve the housing stock.

The Earl of Caithness

I am grateful to the noble Lord for reiterating that point. There are two aspects here: the capital side and the maintenance side. I think that the noble Lord, Lord Graham of Edmonton, was talking mainly about capital allocations in what he was discussing. There will always be annual discussions on this. The Bill and what we are considering at the moment concern the revenue expenditure, the annual maintenance. Our objective here is certainly a smooth transition in the level of subsidy for revenue expenditure.

Lord Graham of Edmonton

The Minister has failed to deal with my point. I understand the difference between capital and revenue and that what we are dealing with here and certainly what the Audit Commission was dealing with is not the need for capital expenditure in that sense but the need for revenue expenditure. Although one may capitalise one's repairs, the cost of doing so appears in one's revenue accounts.

Perhaps I may use a simple point from the notes which I read. If we continue to spend at the same level on repairs and maintenance—and capital building works—we shall be adding up to a further £9 million to the total money that needs to be spent in order to bring our housing up to a satisfactory level.

The Minister used a rather glib phrase in his last few words which might have been designed to persuade me to accept the sense of what he said. I wish him to tell us that when the formula is worked out, as the amendment says, in consultation with the local authorities and the Audit Commission, it will take fully into account the imperative that the Commission feels will need to be addressed; namely that much more money should be spent on repair and maintenance of council housing stock.

The Earl of Caithness

I can confirm to the noble Lord that the total allowance will reflect the different needs of diferent authorities. Therefore that would overcome some of the problems that we have at the moment. As to a firm commitment to an increased level of resources, I think it would be rash of any Minister in any government of whatever political complexion to give a firm commitment on that, and particularly a Treasury Minister. However, I hear what the noble Lord has to say.

Lord Graham of Edmonton

And I hear what the Minister has to say. He has done his best, but it is not good enough and I intend to press the matter to a Division.

7.5 p.m.

On Question, Whether the said amendment (No. 1351(E) shall be agreed to?

Their Lordships divided: Contents, 47; Not-Contents 94.

DIVISION NO. 4
CONTENTS
Airedale, L.	David, B.
Blackstone, B.	Dean of Beswick, L.
Callaghan of Cardiff, L.	Dormand of Easington, L.
Carmichael of Kelvingrove, L.	Evans of Claughton, L.
	Ezra, L.
Carter, L. [Teller.]	Feversham, L.
Cledwyn of Penrhos, L.	Fisher of Rednal, B.

Gallacher, L.	Oram, L.
Graham of Edmonton, L.	Pitt of Hampstead, L.
Grey, E.	Ponsonby of Shulbrede, L. [Teller.]
Hampton, L.
Harris of Greenwich, L.	Rochester, L.
Hatch of Lusby, L.	Ross of Newport, L.
Jay, L.	Seear, B.
Kirkhill, L.	Stedman, B.
Llewelyn-Davies of Hastoe, B.	Stewart of Fulham, L.
	Stoddart of Swindon, L.
Lockwood, B.	Taylor of Gryfe, L.
Macaulay of Bragar, L.	Tordoff, L.
McIntosh of Haringey, L.	Turner of Camden, B.
Mackie of Benshie, L.	Underhill, L.
Mason of Barnsley, L.	Whaddon, L.
Mayhew, L.	White, B.
Milner of Leeds, L.	Williams of Elvel, L.
Nicol, B.	Winterbottom, L.

NOT-CONTENTS
Allerton, L.	Lyell, L.
Arran, E.	McColl of Dulwich, L.
Balfour, E.	Mackay of Clashfern, L.
Barber, L.	Macleod of Borve, B.
Bauer, L.	Malmesbury, E.
Belstead, L.	Margadale, L.
Blatch, B.	Marshall of Leeds, L.
Blyth, L.	Masham of Ilton, B.
Borthwick, L.	Merrivale, L.
Boyd-Carpenter, L.	Mersey, V.
Brougham and Vaux, L.	Milverton, L.
Caithness, E.	Montgomery of Alamein, V.
Campbell of Alloway, L.	Morris, L.
Carnegy of Lour, B.	Munster, E.
Carnock, L.	Napier and Ettrick, L.
Carr of Hadley, L.	Nelson, E.
Clitheroe, L.	Nugent of Guildford, L.
Coleraine, L.	Onslow, E.
Colwyn, L.	Orkney, E.
Cranbrook, E.	Orr-Ewing, L.
Davidson, V. [Teller.]	Oxfuird, V.
Denham, L.	Penrhyn, L.
Dilhorne, V.	Reay, L.
Dunrossil, V.	Renton, L.
Eden of Winton, L.	Rochdale, V.
Elliot of Harwood, B.	Rodney, L.
Faithfull, B.	St. John of Fawsley, L.
Ferrers, E.	Saltoun of Abernethy, Ly.
Gainford, L.	Sanderson of Bowden, L.
Gisborough, L.	Savile, L.
Glenarthur, L.	Selkirk, E.
Granville of Eye, L.	Shannon, E.
Gray of Contin, L.	Sharples, B.
Greenway, L.	Southborough, L.
Gridley, L.	Strange, B.
Hailsham of Saint Marylebone, L.	Strathclyde, L.
	Strathcona and Mount Royal, L.
Henley, L.
Hesketh, L.	Strathmore and Kinghorne, E.
Hives, L.
Holderness, L.	Swinfen, L.
Hooper, B.	Thomas of Gwydir, L.
Jenkin of Roding, L.	Tranmire, L.
Johnston of Rockport, L.	Trefgarne, L.
Kenilworth, L.	Trumpington, B.
Kitchener, E.	Ullswater, V.
Lauderdale, E.	Vaux of Harrowden, L.
Lindsey and Abingdon, E.	Vinson, L.
Long, V. [Teller.]

Resolved in the negative, and amendment disagreed to accordingly.

7.12 p.m.

Lord Reay

I think this would be a convenient moment for the Committee to adjourn. I suggest that the Committee stage begins again at 8.15 p.m.

[The Sitting was suspended from 7.13 to 8.15 p.m.]

Lord McIntosh of Haringey moved Amendment No. 135KF:

Page 81, line 36, at end insert— ("(2) The formula referred to in subsection (1) above shall not make reference to any reasonable expenditure incurred by an authority that is financed by that authority out of the usable balance of any capital receipt in respect of the disposal of a dwelling house or houses held for the purposes of Part II of the Housing Act 1985 or through the application of any resources of the authority held in the Housing Revenue Account that are not included in the formula by virtue of subsection (3)(a) below.").

The noble Lord said: The amendment is another of those that seek to ensure that the Government honour commitments made in the consultation paper issued on 3rd July 1988. In local government the understanding has always been that the formula adopted some years ago would be continued. Under that formula a local authority should have responsibility for spending its own money and there should be no interference by the Secretary of State when the Secretary of State has no financial interest in the matter. It has always been understood that there would be no controls on capital expenditure financed through local authorities' own revenue or the usable 25 per cent. of capital receipts which is all that is left to local authorities from the use of the right-to-buy provisions.

That is the theory. There is nothing in the Bill on the point and as I understand it, that is still the case. What we are afraid of and what we should like to remove by the adoption of the amendment, is the possibility of back-door controls on the way in which local authorities spend their own money, controls which might be exercised through the use of the housing subsidy system.

We understand that officials are saying to local authorities in particular that, when Ministers look at value for money for subsidy purposes, they will want to look at the cost of all schemes operated by local authorities. That will be so regardless of whether the schemes are financed through the subsidy system, from local authorities' own revenue or from the usable receipts from the right-to-buy scheme. While we accept reluctantly that the Government have the right to control projects financed out of their own controlled borrowing limits, that is not the case when schemes are funded from revenue expenditure or receipts from right to buy.

Local authorities may well want to provide better housing or to finance higher cost schemes with their own money—something which they had always thought that they could do. It therefore seems wrong that there should be any intention to incorporate the cost of such schemes into the average value-for-money calculation which will be the basis of the housing subsidy entitlement. In putting this amendment forward we are seeking a once and for all assurance that the Government have no intention of interfering further than has already been provided for in the expenditure by local authorities of their own money on their own schemes. I beg to move.

The Earl of Caithness

Before I turn to deal with the details of the amendment, perhaps it would be useful to the Committee if I were to say a few words about Clause 77. The existing law spells out in some detail how the subsidy formula is to work. There are to be a base amount, a housing costs differential and a local contribution differential. The relationship between these terms is defined, and there is also a separate definition of each term, stating broadly what it represents and how it is to be calculated. This has proved to be a very inflexible structure; and it has led to complications which we want to avoid in future. Clause 77 is therefore cast in more general terms, and we hope that it will give us more flexibility to take account of changing circumstances.

I turn now specifically to Amendment No. 135KF. In the existing subsidy system, the payment of subsidy depends in part on whether capital programmes fall within admissible cost limits. These limits are in effect a yardstick against which programmes can be measured: they ensure that subsidy is not paid out on extravagant capital programmes. The Department of the Environment is currently reviewing the admissible cost limits to see how, and in what form, they should be carried forward into the new system.

The effect of this amendment would be that in future authorities would divide their capital programmes into two parts. Certain projects would be deemed to be funded from borrowing, and the admissible cost limits would apply to the combined costs of these projects. Other projects would be deemed to be funded out of usable receipts, or directly from revenue. Spending from usable receipts, and actual revenue spending on capital works, do not affect an authority's subsidy entitlement; and so it is argued that the admissible cost limits should not apply.

I can say to the noble Lord, Lord McIntosh of Haringey, that I am sorry I cannot at this stage give a more definite answer on this point. I am not convinced that it is realistic to specify a distinction between projects funded from borrowing and projects funded out of receipts. In general authorities do not earmark particular sources of finance for particular projects or programmes; it is much more usual for resources to be pooled. However, I do not want to prejudice the outcome of the review of admissible cost limits, and so on this one I fear I must ask the noble Lord to be patient. Discussions are continuing between the Department of the Environment and the local authority associations, and we expect to announce definite proposals within the next three or four weeks.

Lord McIntosh of Haringey

I hope that I have misunderstood the Minister and that he is not saying that we shall see another example of this departure from reality towards notional figures and notional concepts which is so much a feature of the Bill. He used the phrase, "projects would be deemed to be funded from borrowing". Well, either a project has been funded from borrowing or it has not. Therefore to talk about, "deemed to be funded from borrowing" simply leaves the Secretary of State in a position where he can say what he thinks regardless of the reality.

I hope that the Minister will recognise the distinction which should be made between projects which are funded from borrowing and projects which are funded from revenue or which are funded from usable capital receipts. I also hope that he will withdraw the phrase, "deemed to be funded from borrowing". I say that because not only will it cause alarm and despondency among local authority associations which will never know whether their actions will be deemed by the Minister to be what he thinks has happened, but they will also never have any sound basis upon which to calculate what receipts and revenue expenditure they can use on their own projects with their own ratepayers' money on the votes of their own ratepayers.

My concern is deepened by the fact that in his reply to the amendment the noble Earl referred to "extravagant programmes". Surely "extravagant" is a value judgment. Indeed, what the noble Earl may call an "extravagant project" may well be what someone else will call a necessary project, regarding what happens on a difficult site which happens to have a particular purpose. For example, providing accommodation for people with particular needs—such as the elderly, the disabled, and so on—which by normal cost-yardstick standards may be more expensive than others, but which would only be described as "extravagant" by someone who is determined to lay down regulations about every aspect of a local authority's housing policy.

The conclusion I have come to is this: I am not reassured by what the Minister has told us; neither am I reassured, as regards the realities of the situation, that the right to expend a local authority's and ratepayers' own money is not being taken away. I fear from the phrase "deemed to be funded from borrowing" that this means that it will be taken away. Further, I am not persuaded that the overwhelming empire building passion of Marsham Street to take over all aspects of local authority decision-making is not rampant in this part of the Bill in Clause 77, as it has been in so many other items of legislation, and indeed in the provisions of the legislation now before us. If the Minister can enlighten the Committee as to what is meant by, "deemed to be funded from borrowing", I should be most grateful.

The Earl of Caithness

"Deemed" is what a council would do if the amendment were accepted. Again, given his experience, I must bow to the noble Lord's knowledge on the detailed questions of a local authority. However, as I understand it, in general resources are pooled; that is the reality of the situation. But, as I said, discussions are taking place and I do not wish to prejudice the outcome of the review. Nevertheless, I shall take careful note of the remarks made by the noble Lord.

Lord McIntosh of Haringey

I am grateful for that conciliatory reply. Of course the amendment does not refer to, "deemed to be funded". It is true that the expenditure from revenue and expenditure from usable receipts will be a part, which ought not to be hypothecated, of the council's permitted expenditure. It certainly ought not to be the case that that aspect is put to one side and—I understand we have to say "ring fenced" here—treated differently from other parts of expenditure. There ought to be an element in a council's housing budget which reflects its willingness to spend on capital from revenue and its own decisions about the use of usable capital receipts.

However, I recognise the fact that negotiations are continuing and although I am not encouraged by what I have heard, I do not wish to prejudice such negotiations by pressing the matter to a Division. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 135L and 135M had been withdrawn from the Marshalled List.]

The Deputy Chairman of Committees (Baroness Lockwood)

I should point out to Members of the Committee that if Amendment No. 135LA is agreed to, I cannot call Amendments Nos. 135LB to 135LE.

The Earl of Caithness moved Amendment No. 135LA. Page 81, line 44, leave out from beginning to end of line 9 on page 82 and insert—

1. ("(a) any amounts which fall to be or were credited or debited to the authority's Housing Revenue Account for that year or any previous year;
2. (b) any amounts which, on such assumptions as the Secretary of State may determine (whether or not borne out or likely to be borne out by events), would fall to be or would have been so credited or debited; and
3. (c) such other matters relating to the authority, or to (or to tenants of) houses and other property which are or have been within the account, as he thinks fit;

and the Secretary of State may make any determination falling to be made for the purpose of a formula on the basis of information received by him on or before such date as he thinks fit. (4) Without prejudice to the generality of subsection (3) above, a formula may require it to be assumed that the amount for any year of the rental income or housing expenditure of each authority (or each authority in England or in Wales) is to be determined—

1. (a) by taking the amount which the Secretary of State considers (having regard, amongst other things, to past and expected movements in incomes, costs and prices) should be or should have been the aggregate amount for that year of the rental incomes or, as the case may be, the housing expenditure of all of the authorities (or all of the authorities in England or Wales) taken together; and
2. (b) by apportioning that amount between them in such manner as the Secretary of State considers appropriate (which may involve, if he thinks fit, inferring the aggregate values of the houses and other property within their respective Housing Revenue Accounts from the average values of any of the houses and other property which they have disposed of);

and in this subsection "rental income" means income falling within item 1 of Part I of Schedule 4 to this Act and "housing expenditure" means expenditure falling within item 1 of Part II of that Schedule or falling to be debited to the authorities' Housing Repairs Accounts.").

The noble Earl said: This amendment is meant to ensure that the provisions dealing with the calculation of subsidy are in line with our stated policy on the rent assumptions and the other elements of subsidy. The first part concerns the Secretary of State's powers to make assumptions for subsidy purposes about credits or debits to be made in the housing revenue account. HRA subsidy is to be paid to enable an authority to balance its housing revenue account, on certain assumptions about its expenditure and income. The main such assumptions concern the level of its rents and its expenditure on management and maintenance of the housing stock. These assumptions may be independent of the actual credits and debits made in the account; so the actual rents, and the actual spending on management and maintenance, may have no effect on subsidy.

The amendment aims to make clear the fact that these assumptions may in effect be based upon policy considerations which do not have to be borne out, rather than a prediction of what will happen in an authority's HRA. The new subsection (4) concerns the assessments we shall make when setting subsidy entitlements. As I have explained, we intend to distribute the national assumption of rental income pro rata to the assessment of the value of individual councils' housing stock, based on housing sales.

Paragraph (a) ensures that the terms of the Bill would allow us first of all to make an assumption of the notional total of rental income for any year, either for England and Wales separately or together. It also requires the Secretary of State, in reaching this assumption, to have regard among other things to past and expected movements in incomes, costs and prices. So there is no question of us using this mechanism to expect unreasonable increases in rents.

Paragraph (b) ensures that we are able to apportion the notional assumption in the way I have already outlined, by reference to the relative 'value of local authorities' houses. The amendment would in fact allow the Secretary of State to make the apportionment in any appropriate manner, but refers particularly to the use of house sales figures to arrive at a proxy for the value of stock. The tailpiece of the clause defines the terms used.

This is one of the amendments tabled in the name of my noble friend that has come about as a result of consultation with the local authorities. That is why it is in substitution for four previous amendments. I beg to move.

8.30 p.m.

Lord Graham of Edmonton

Not for the first time the Minister tells the Committee that the amendments that we are discussing have come before us after consultations with the local authority associations. He implies that consultation equals agreement. It does nothing of the kind.

As in many other measures from the Department of the Environment, the history of this matter is that whenever it is dragged into consultation the outcome may very well be eminently suitable to the Minister but wholly unsatisfactory to the other parties. It is the same now. In subsection (3)(b) of the revised clause the idea is introduced of a notional rather than an actual HRA by allowing the Secretary of State to make assumptions whether or not they are borne out in reality. I should like to ask the Minister this question: if the assumptions upon which these matters have been predicated are not borne out, will there be adjustments in future years? Otherwise, the notional HRA will quickly drift away from reality and it will become as discredited as the other system. Will the Minister help the Committee and others outside it by telling us what he has in mind to do in order to correct notional figures based on assumptions if, in the event, those figures turn out to be incorrect?

I am certain that, should they turn out to the detriment of the Exchequer, there will be some correcting mechanism capable of being applied. What happens when the notional figures turn out in reality to be to the detriment of the local authorities? That is the thrust of my request to the Minister at this stage. What measures has he in mind when assumptions do not turn out to have been properly drafted or forecast?

The Earl of Caithness

The noble Lord has raised an important point. But before I come to it I should refer to his statement that consultation does not mean agreement. Of course I appreciate that point. However, as I have argued on many occasions and answered the noble Lord, I hope that there will be consultation. I had hoped that he and the noble Lord, Lord McIntosh, would have been delighted when I reported that consultation had taken place as he had envisaged and that this was the result, that our minds were flexible and that we were prepared to adapt to consider any points made by the local authority associations.

Dealing specifically with the point raised by the noble Lord, Lord Graham, at this moment I am unable to reply to him because the consultations to which I have just alluded still continue. However, I hope to let him have a definite answer by the next stage of the Bill.

Lord McIntosh of Haringey

I have a quite different question to put to the Minister. It refers to the first amendments that we debated this afternoon. At that time we were told that the concept of affordability was an unreal one and that it was not capable of precise definition. We were told by the noble Lord, Lord Jenkin—and this was echoed from the Front Bench—that we could not put affordability into the basis of calculation of housing subsidy because it was such an imprecise question and because in any case the Government were moving ideologically away from that concept in order to deal with poverty by housing benefit rather than by the overall level of rents.

The amendment that is now before us is very interesting. I first noticed in subsection (4)(a) that: it [is] to be assumed that the amount for any year of the rental income or housing expenditure of each authority … is to be determined [among other things]— (a) by taking the amount which the Secretary of State considers (having regard, amongst other things, to past and expected movements in incomes, costs and prices) should be or should have been the aggregate amount for that year of the rental incomes". That surely is affordability; incomes, costs and prices are exactly what affordability is about. The Government, in a rather clumsy way, are reflecting the arguments that we put in the first amendment this afternoon. Our amendment is better, not only because it is more elegantly, openly and honestly expressed as being affordability rather than movements in incomes, costs and prices; it is also preferable because it reflects the Government's own consultation document of July 1988 whereas this amendment does not do that.

In the interests of consistency, clarity of speech and political probity, I suggest that the Government accept that what we have done has proved the case for affordability being a proper element in rents and that they ought to withdraw this amendment and think again about it.

The Earl of Caithness

That is a very enticing argument. However, I am sure the noble Lord will recall that when we discussed the first amendment, which was in his name, I said that we intended to introduce Amendment No. 135LA and that it was quite proper for these things to be taken into account. Not surprisingly I take a wholly different view from that of the noble Lord about the question of affordability in his amendments. I commend our amendment to the Committee.

On Question, amendment agreed to.

[Amendments Nos. 135LB to 135LE not moved.]

[Amendments Nos. 135N and 135P had been withdrawn from the Marshalled List.]

Lord McIntosh of Haringey moved Amendment No. 135PA: Page 82, line 9, at end insert— ("(5) The formula or the calculation of the aggregate amount of Housing Revenue Account subsidy payable to local authorities shall not include or make reference to any contributions paid by the Secretary of State under Part VIII of this Act.").

The noble Lord said: We have moved on beyond the other amendments. This amendment is further evidence of our concern with the elements of rent that are to be used in the calculation of the formula for housing subsidy. In particular we are concerned in advance of Part VIII of the Bill—and perhaps this is not the right place to resolve the matter although it is certainly the right place to raise it—about housing improvement grants and how the mandatory improvement grants will be financed. In all the debates that we have had about the condition of our housing stock, the mandatory improvement grants are proving more and more significant. Indeed, in Parts VIII and IX of this Bill they will be shown to be of very great significance.

Our problem, which in honour we have to raise now, even before we start on Part VIII, is that if improvement grants are to be mandatory—and there are many pressures to make them mandatory, some of which we are very much in favour of as will be evidenced by our own amendments—they would in effect be demand-led. In other words, in setting a budget for the year a local housing authority cannot determine its expenditure. It will have to spend money to the extent that there are applications put to it for mandatory grant.

The difficulty that we have is that if these applications come in—as indeed in many ways they ought to do because the improvement of our housing stock depends on them—there is a serious risk of the mandatory improvement grants taking up not only too high a proportion of a local authority's available expenditure on housing but possibly even all of that capital programme. That means that the entitlement to housing subsidy would be put very much at risk. There is therefore a fear that on the subsidy side, even though local authorities will be paid by grant rather than in this housing subsidy, the overall level of payments to an authority towards its housing programme will depend on its expenditure on mandatory grants.

We want confirmation from the Minister that for mandatory improvement grants there should be an entirely separate programme of capital and revenue which is not cash limited to support the cost of the mandatory grants; and that, if there is an increased take up of grants, it does not threaten in any way the availability of money for other areas of housing. If the Minister can give an assurance on those lines —which I believe ought to be consistent with government thinking —it will make life much easier when we consider Part VIII in detail tomorrow. I beg to move.

The Earl of Caithness

I understand the difficulty of the noble Lord, Lord McIntosh, when referring forward to Part VIII. There are a number of amendments standing in his name which would change the proposal as set out in the Bill. Perhaps it would be to the advantage of the Committee if we deferred detailed discussion of the substance of those amendments until we reached that part of the Bill. Perhaps I may therefore keep to policy for the purposes of the argument. I am quite willing to agree that, if the grants were payable in respect of local authorities' own housing, it would be nonsensical then to make a corresponding reduction in HRA subsidy, and the subsidy formula would need to reflect this.

Perhaps I may suggest to the Committee that it would be better to wait until we come to Part VIII, when we start discussing these matters in detail, before taking this further tonight.

Lord McIntosh of Haringey

I am content to leave the substantive discussion until another day. However, the Minister has answered only part of my point. He said that it would be wrong for that part of the mandatory grant system which related to the council's own property to detract from its ability to carry out its housing programme in other areas and we are grateful for that. But surely the same argument applies with equal force to mandatory improvement grants which are not on the council's own property. Can the Minister give us any further indication on that point before I withdraw the amendment?

The Earl of Caithness

It is true that improvement grants for the local authority are demand led, as the noble Lord said. In principle this could mean that an authority's capital resources are used up too much by private sector demands. But we shall be giving spearate allocations to authorities to help them meet their obligations to the private sector. None of these questions—which are important, I agree with the noble Lord—affects the HRA subsidy.

Lord McIntosh of Haringey

I have listened carefully to what the Minister said. I am interested in the phrase "separate allocations" for demand led money required from the private sector. I have listened to what he said about not affecting the HRA subsidy level. If it means what on the face of it I think it means, I am moderately encouraged. I shall read very carefully what the noble Earl has said before we come back to our more detailed amendments next time without any commitment that I am satisfied. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.45 p.m.

Lord McIntosh of Haringey moved Amendment No. 135PB:

Page 82, line 9, at end insert — ("(5) Notwithstanding the preceding provisions of this section, in determining a formula for the purposes of this section for any year, the Secretary of State shall have regard in particular to the level of expenditure by local housing authorities on repair and maintenance of housing held for housing purposes prior to 1st April 1990 which was not prescribed expenditure for the purposes of Part VIII of the Local Government, Planning and Land Act 1980 and which was not funded from the Housing Revenue Account of the authority.").

The noble Lord said: With this amendment we come to one of the most arcane subjects in this rather arcane Bill. Indeed when journalists earlier this afternoon were asking me to explain the matters which we considered to be important and I said, "capitalised repairs", I could see their eyes glaze over, as indeed my eyes glazed over from time to time.

The issue behind it is I hope relatively simple and comprehensible, although whether I can succeed in explaining it in the way that I ought to be able to is quite another matter.

As things stand, local housing authorities can use all their capital receipts from sales for carrying out repairs on their own housing stock. This is not prescribed expenditure—to use the classic phrase—under the 1980 Act. It therefore comes outside the capital control system as long as it is funded from capital receipts. What has happened over the years is that local authorities of all political persuasions—I do not think that it is a particular party point—have been using capital receipts to fund quite substantial repair programmes. This has been true in our cities and towns in those areas above all which have suffered from cuts in the housing investment programme. It is not that suddenly the demand for repairs has grown out of hand; it is not that suddenly these local authorities have become more extravagant in their repair programmes. It is that the Government have taken away the direct subsidy that in the past had provided the money for essential repair programmes and local authorities—with some degree of enterprise and responsibility, I would argue—have used these capital receipts to fund the repair programmes. Up until now the funding of repair programmes from usable capital receipts has been accepted as entirely legitimate.

Now the concept of usable capital receipts is no longer 100 per cent. but will be reduced to 25 per cent. The local authorities have to pay off debt with the rest. We have already had enough fun with the peculiar economic theories of the Chancellor of the Exchequer trying to pay off the national debt through the public sector drawing requirement.

I shall not embarrass any Members of the Government in this week of debacle for the Chancellor of the Exchequer, when all his other economic theories appear to be exploding in his face. It clearly was a particularly bad economic nonsense—despite what the noble Lord, Lord Jenkin, said earlier this afternoon—for local authorities and housing investment programmes. No private business would dream of delaying capital expenditure until the last bit of capital expenditure had or had not been amortised. It would make a decision about capital expenditure on the expected return on the investment, on the borrowing and on the need in business or in social terms for what was being produced by the investment. Therefore the concepts which Mr. Lawson and the noble Lord, Lord Jenkin, have about investment in the public sector are quite peculiarly far from reality.

With the drop from 100 per cent. to 25 per cent., and the new definition of expenditure for capital purposes which will limit the types of expenditure that are available for capital approval, unless the Government find some way of compensating the authorities which have been using capital repairs programmes, they will either have to slash their repair programmes or increase their rents to cover the gap.

We discussed this matter from the point of view of rents at the beginning of this afternoon. However, the implication of the drastic reduction in the repairs programme has both economic and social significance. The economic significance is evidenced by the representations which have been made to us and undoubtedly have been made to the Government by the Building Employers Confederation and by the building industry as a whole. They see this reduction in availability of capital for public housing as absolutely disastrous.

Some parts of the building and civil engineering industry are still flourishing. The market for large civil engineering projects in South-East England is still booming and there are still jobs for people in that industry. But for the large part of the country and for the large part of the house building industry the combination of high interest rates and these drastic restrictions in availability of capital for public housing will have an appalling effect on the private building industry, not just on building works departments and direct labour organisations. I know that the Government do not give a damn about them, but they ought to give a damn about the private building industry, the concerns of which are very real and immediate and are reflected in what it is saying to us about these aspects of the legislation. That is from the economic point of view.

From the social point of view the situation is even more serious. One has only to consider the spread of age of our housing stock to realise that a combination of age and, I am sorry to say, of misdirection by Labour Governments just as much as by Conservative Governments in the 1960s towards industrialised building means that the demands for extensive repair and renewal programmes for our existing council housing stock are as high or higher than they have ever been. Anything which cuts the capital available for major programmes of repair which have been carried out with the aid of capital receipts will be a disaster in terms of the quality of our housing stock and the quality of the life of the people who live in the houses.

Between the higher rents—which we have already indicated will be a disaster for those among the poorest in our society—and the physical quality of our housing stock, whichever way one looks at the problem, there will be damage to our society and to our housing structure. The question we must ask in putting this amendment forward is what will the Government do about it?

We do not have very long to think about it. In the Commons Mr. Trippier has already accepted that there is a problem, although he did not give any detail about what he thought he could do about it. But to what extent—with the threat of an economic recession, brought about in part, if not largely, by the mismanagement of this Government—are the Government prepared now to take remedial action to protect the quality of life of our citizens and the economic health of our country? I beg to move.

The Earl of Caithness

As the noble Lord indicated, this is an important amendment of concern not only to local authorities but to many people involved in the housing sector. At present local authorities are prevented from spending more than the so-called "prescribed proportion" of their capital receipts on new capital projects in any year. However, there is an important exception to this rule. As the noble Lord explained, expenditure on repairs and maintenance does not count as prescribed expenditure so it is not subject to the prescribed expenditure limit. This means that an authority may use up to 100 per cent. of its capital receipts to finance any expenditure on repairs and maintenance which qualifies as capital spending. Any such expenditure does not of course then count as revenue expenditure and it does not score in the housing revenue account.

From 1st April next year, two things will change. First, the old concept of prescribed and non-prescribed expenditure will disappear. There will no longer be the same advantage for authorities in capitalising their repairs expenditure. Secondly the definition of capital works will be tightened up. It is possible that some items which authorities have capitalised in the past will be excluded by the new definition.

The effects of these changes will be that some authorities suddenly find that expenditure programmes which were funded from capital receipts in the past now have to be met directly out of housing revenue account. The purpose of the amendment is to ensure that this change is reflected in the subsidy formula.

I have some sympathy with this aim. But it presents us with a difficulty. We have some information on the volume of capitalised repairs expenditure by authorities in the past. But there is no way of knowing how much of this expenditure would still count as capital spending in the new system and how much would in future count as revenue spending. A subsidy adjustment would of course be required only in the second case. All we can do is to make an educated guess, and this has been the subject of discussion between the Department of the Environment and the local authority associations.

I am sure that the noble Lord, Lord McIntosh, would urge us to make a generous guess. But I am afraid that the matter is not quite as simple as that. Let us assume that a high percentage of past capitalised repairs expenditure will in future have to come from the housing revenue account and adjust the subsidy formula to reflect this. Some authorities will certainly benefit, but at the same time other authorities, which may have significant needs but have not capitalised much repairs expenditure in the past, will lose out. They may well be the authorities which were short of capital receipts, in which case they will suffer twice over: once from lacking the receipts and a second time through the new subsidy formula. I put it to the Committee that that would not be very satisfactory. We have to find a balance and this we are seeking to do in consultation with the local authority associations. I assure the Committee that we shall try to strike the best balance we can in the circumstances.

Baroness Fisher of Rednal

I have listened carefully to what the Minister said. The large local authorities have been capitalising. That is obvious, because a tremendous amount of repair work needs to be done to keep up the standard of those properties in occupation. The Minister will agree that if substantial repairs are not carried out—I am thinking particularly of Birmingham—empty properties will fall into complete decay. The capitalisation of repairs has been going on. Do I understand that that will continue for those local authorities that have been capitalising? We have to find some means to help other authorities that have not been able to find the necessary capital receipts to enable repairs to be done. Or does it mean that those authorities that have been spending will be prevented from spending as much as they need to spend to help out other authorities that do not have the money to spend?

The Earl of Caithness

The situation is perhaps a little more complicated than the noble Baroness believes. We need to know whether it was capital in the first place and where it came from under the new definition. That is the first matter. The second point is that, when we assess the management and maintenance allowances, we need to take into account the kind of matters that the noble Baroness has just mentioned. In particular I referred earlier to the age and condition of the property as some of the items that we shall need to take into account. At this stage I cannot give the noble Baroness the answer to her question because we are still in discussion and trying to sort out the criteria under which this would operate.

Lord Ezra

This is clearly a highly complex and technical issue. Nonetheless I believe that the noble Lord, Lord McIntosh, put his finger on it. What is involved is the state of repair, the maintenance and the quality of the housing stock. This is becoming more urgent as time goes on. What I am unclear about is whether the outcome of these evidently very complicated negotiations will mean that there will be an increase in the effort put in to the repair of the housing stock, a maintenance of the effort or a diminution of the effort.

The Earl of Caithness

We hope that the local authorities will continue the good work in maintaining and improving the stock, but it very much depends on whether it is revenue or capital, which I am sure the noble Lord will understand. Authorities have been spending some £900 million on capitalised repairs. That is not the question that we are concerned about. We know how much the local authorities have spent. At the moment what is difficult to determine is whether the money was spent mostly on repairs of a capital nature or on maintenance of a revenue kind. In principle we shall try to take account of the transitional problems of authorities in two ways: for capital works via the HIP allocations and for revenue works via the HRA subsidy. On each side of the coin there is a difficulty. The more we give to help local authorities that have been capitalising repairs a great deal, the less can be allocated by assessment of future needs. We shall try to get the exercise right and the discussions will continue.

9 p.m.

Lord McIntosh of Haringey

Nobody wants the discussions to come to a halt but I fear that the Minister and the Government are getting themselves into what is becoming a theological trap between capital and revenue expenditure. After all, in many spheres of business life the decision about whether to capitalise what could be revenue expenditure or to revenuise what could be capital expenditure is a matter of judgment from time to time. I should hate to think that the Government were digging themselves into a trap by trying to set up a hard and fast distinction between the two at all times.

What worries me about the Government's response is not that negotiations are continuing—of course, that must be the case—but that now all the indications are that the Government's new proposal will make things worse rather than better.

We all know that the existing situation cannot continue. Even if we had not said so—and I wish that the Minister had not given the impression that we were satisfied with the existing situation because we are not—the Audit Comission, in its report dated 27th July 1989, made quite clear the fact that the present situation cannot continue because it is leading to a distortion in the allocation of resources towards housing by the Department of the Environment. In their findings and conclusions it stated: the department have sharply reduced the basic Housing Investment Programme allocations, but at present they cannot take account of individual authorities' spending power from receipts when making the allocations. However, the proposed new capital regime, which is what we are talking about in the Bill, is planned to enable them to do so and thus avoid present distortions whilst leaving a financial incentive for sales". Conclusion 3(g) states: The decline in Housing Investment Programme allocations particularly affects authorities which have serious housing problems but disproportionately low receipts from asset sales including those under tenants' "right to buy" legislation. This skewing of capital receipts has sharply reduced the Department's ability to allocate resources according to need, and this situation will persist until the implementation of the new system for controlling local authorities' borrowing planned to take effect from April 1990". I believe that the Audit Commission is being too kind. Everyone has recognised the difficulty of those who do not have adequate capital receipts for their repairs and maintenance programme. However, with the reduction in the availability of capital receipts the resources of those who have had the advantage of them will be brought down to the level of those less well off. In other words, there will be progressive immiserisation based upon the situation of those already most in need. However, we are looking for something quite different. We are looking for a remedy for the inadequate resources available to those who do not have the capital receipts and a continuation of those resources to local authorities which have capital receipts.

The most modest comment that I can make is that if things are going to become worse—and under the Government's housing policy things always become worse—at least let us have a soft landing. Let us have an indication that there will be a transitional provision to ensure that those local authorities which have necessary repairs programmes based on capital receipts and their own revenue resources shall at least be let down lightly over a period of years.

I do not know whether the Minister is able to comment on that point. I do not believe that it solves the problem in the long term but it will provide some reassurance for local authorities who are not peering into the abyss.

The Earl of Caithness

I understand the point made by the noble Lord but it is difficult for me to comment because of the discussions which are taking place. I hope that we shall be able to crystallise our thoughts in the near future thus enabling the discussion to take a more focused view. I hope that the noble Lord will understand the concerns that I have put forward. I understand his concerns. Perhaps we can wait until another stage when we shall have further details which will crystallise the matter.

Lord McIntosh of Haringey

I am grateful. I take the phrase "another stage" to mean that we shall have something more definite on Report.

The Earl of Caithness

Hopefully.

Lord McIntosh of Haringey

It had better be more than hopefully otherwise there will be hell to pay. The matter is causing concern not only to local authorities and their tenants but to the whole construction industry. I more than hope—it must be a demand—that we have something concrete to debate by the next stage of the Bill.

Apologies were graciously given by the Leader of the House when speaking about the amendments. I assure him that if they arise for consideration on Report, even at the last minute, we shall not complain about them being delayed. However, we shall certainly complain if they are delayed so that we are unable to consider the matter appropriately on Report. It is appropriate therefore that I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 77, as amended, agreed to.

Clause 78 [Consequential adjustment of rent rebate subsidy]:

Lord Hesketh moved Amendment No. 135Q: Page 82, leave out lines 26 to 32 and insert —

1. ("(a) so much of each Housing Revenue Account rebate granted by them during the year as was granted in the exercise of a discretion conferred by the housing benefit scheme or in pursuance of such modifications of that scheme as are mentioned in paragraph (b) of subsection (6) of section 28 above (general modifications); and;
2. (b) unless the authority otherwise determine, so much of each such rebate as was granted in pursuance of such modifications of that scheme as are mentioned in paragraph (a) of that subsection (modifications for disregarding war disablement pensions or war widows' pensions).").

The noble Lord said: The amendment relates to a technical drafting point and a minor change of policy. The drafting point concerns the costs which arise when authorities choose to operate a more favourable housing benefit scheme than the statutory national scheme. These costs are met locally and we intend that, although recorded in the HRA, they will in fact be met by a mandatory transfer across the ring fence so the cost is spread across the whole community, and is not borne by the council tenants alone. The one exception is the case of war disablement and war widows pensions where, under the terms of the clause as amended at Committee stage in another place, the cost will at the authority's discretion be borne either on the HRA or by community chargepayers.

The problem with the clause as drafted, however, is that it does not cover all the possible eventualities. Extensions of the benefit scheme sometimes take the form of a discretion under the terms of social security legislation, and sometimes the form of a modification of the scheme. The clause as it stands refers only to the first of these possibilities. The amendment ensures that both are covered.

The minor change of policy concerns the cost of administering rent rebates. As my noble friend Lord Caithness explained earlier, Amendment No. 135G removed the requirement to charge these costs to the HRA. Amendment No. 135Q correspondingly removes the need to transfer an equal amount into the account to cover the cost. I beg to move.

On Question, amendment agreed to.

On Question, Whether Clause 78, as amended, shall stand part of the Bill?

Lord McIntosh of Haringey

Clause 78, even as amended, is described in the weasel words of the side heading as: Consequential adjustment of rent rebate subsidy". Those affected by the housing benefit system will not readily recognise: Consequential adjustment of rent rebate subsidy". It is proposed that there will be a worsening of conditions, even a worsening of the bad conditions of the Social Security Act 1986 on housing benefit finance and consequently a reduction in the real standard of living.

At present council tenants who are unemployed or on low incomes can apply for and receive housing benefit in the form of a rent rebate. Therefore, this subsidy goes to individuals rather than to property—to go back to the debate which we had earlier this afternoon. Of course, that is an absolutely critical subsidy because for many people not only is it an important part of their essential income but it makes the difference for them as to whether it is worth while for them to seek low paid work at all. If there were no housing benefit it could very well be that their marginal income from obtaining work would be negatived. Certainly even under the present system there are cases of it constituting up to 90 per cent. or more of their income. That is not much of an incentive to people to go out and do badly paid and boring work. The principle has always been that central government should meet the cost of paying benefit to those who need it through the rent rebate subsidy. Although that subsidy is operated by the local authorities it has always been the responsibility of central government.

We have already argued this point in dealing with the housing Act last year. Fundamentally, the Government have reneged on their responsibility. They are reducing their obligations and are passing some of them on to local authorities, which are almost by definition in no position to shoulder part of the social security expenditure which has been accepted, until now, as being part of the responsibility of central government.

I said that housing benefit is an important part of people's incomes. The average weekly payment for rent rebates in the financial year 1988–89 will be £15.37. It is estimated that 60 per cent. of council tenants receive some form of housing benefit. That means that nearly 3.5 million council tenants will receive some sort of rent rebate and most of them—that is, almost 2 million—are pensioners. They are means tested and entitlement is assessed according to resources and needs. Therefore, it is not a blanket provision. As the levels of rents increase, so the cost of benefits increases, provided that the Government keep up with those levels.

The sort of rent increases provided for under the present system—that is just under £2 per week—will be covered by housing benefit for those who qualify for it. Therefore, their dependence on the state will increase to that extent. The fact that housing benefit is demand led and is led by the level of rents which has to be supplemented or covered entirely by housing benefit has been a threat to the Treasury because the Treasury does not like demand-led benefits and always wants to reduce them. Since it started in April 1983 there have been no fewer than seven cuts in housing benefit. The worst, which we have already referred to, was in April 1988, when 1 million claimants lost all their entitlement and 4 million claimants had their benefits reduced. The theory was that the Department of Social Security would save £640 million through those cuts. That was even after Tory Members of Parliament revolted against them. In fact the cuts were more severe and the result has been a loss of benefit of approximately £1,000 million.

The proposal in the Bill is that the cost of the rent rebate will be transferred to local authorities. Of course the implication is that the nice sums of central government expenditure which are produced by the Treasury will benefit to that extent. However, that means that, instead of coming from central government, where it is the responsibility of us all when it is financed by progressive income tax and other forms of taxation, the burden of financing housing benefit will fall on local authorities. Admittedly, now local authorities have lost so much of their independence, only 25 per cent. of their expenditure will come from the community charge but that will come from a tax which is not only neutral but deeply regressive: the flat rate poll tax.

Therefore, we again have the combination which is peculiar to this Government of benefits being reduced and what benefits are left being paid on behalf of the poorest by the poor in our society. In other words, we have a complete departure from the basic principle of taxation; that the burden of taxation should be borne by those most able to bear it. That is the burden of our complaint about the so-called consequential adjustment of rent rebate subsidy contained in Clause 78. We believe that it is socially and economically regressive and that the Government should not press this clause.

9.15 p.m.

The Earl of Caithness

I understand some of the concerns expressed tonight in Committee and outside the Chamber. It might help the Committee if I put the subject into context because I believe that some of the concern arises from a misunderstanding.

At the moment, almost the full cost of local rent rebates to council tenants is met by a specific government subsidy; but that has not always been the case. Until 1972, authorities funded their own rebate schemes. The government paid general subsidies to councils to provide additional help with the provision of housing at a reasonable cost, whether through meeting general costs or providing rebates. When the national rent rebate scheme was introduced, most authorities still qualified in addition for general housing subsidy to help with so-called bricks and mortar costs. But, over time, as authorities' historic costs were eaten away by inflation; as their role as providers of new housing diminished; and as receipts from right-to-buy brought more benefits, fewer and fewer authorities needed government help with housing costs. Today, only about 70 authorities—less than one fifth—claim main housing subsidy. Instead, authorities have been able to generate surpluses, which they have used either to hold rents down, to underwrite inefficiency or to subsidise rates.

While this change was occurring, the government—or be more precise, the national taxpayer—continued to pick up the whole of the local rebates bill. What had started off before the national rebates scheme as a subsidy directed to authorities which needed help—then, the majority—became an additional, unnecessary subsidy to authorities which would be perfectly capable of meeting the whole or part of the local rebates bill without it.

That is bad use of taxpayers' money. The new housing revenue account subsidy will enable better targeting of the available resources by combining the present forms of subsidy. It will redirect the subsidy system away from indiscriminate subsidy back to a sensible combined system. That does not mean that the cost of rebates is being added to the rents of those not on rebates. It simply means that where the revenue to the HRA from the rents determmined by the subsidy calculation is more than enough to cover the general housing costs, then the first call on the surplus should be to relieve the national taxpayer of some of the cost of rebates. The alternatives would be to allow the surplus to depress rents or subsidise other council services while the taxpayer still foots the rebates bill. That surely cannot be right, but that is what happens now.

The national taxpayer would not thank us if we kept these arrangements. Nor, incidentally, would those authorities with genuine needs who know that government resources do not come out of a bottomless pocket. By retargeting resources we are better able to provide the help those authorities need.

The noble Lord's efforts to delete this clause would prevent us from achieving that aim. The result would be to keep a specific subsidy where none was needed. I might add that deleting Clause 78 would also remove the special provision dealing with the cost of the more favourable treatment of war widows for housing benefit which the noble Lord's right honourable and honourable friends took pains to have added to the Bill in Committee in another place and which the noble Lord has just accepted without so much as a comment.

Lord McIntosh of Haringey

We can easily deal with that point. If we take out Clause 78—and for a wild moment I thought the noble Earl understood the argument for doing that—of course we should have to replace the provision for war disablement pensions or war widows' pensions. That is not the problem. No, what we have here is a deep misunderstanding both of social conditions and of the facts of economic life.

It is clear that the Government do not understand that, as regards social conditions, these subsidies and this payment of housing benefit are not, as the Minister described it, a subsidy to authorities which need help. It happens to be made through the local authorities but it is not a subsidy to the authorities themselves. The subsidy is for individuals who need help. That is what the whole argument is about and why it is wrong for it to be withdrawn.

The fact that a local authority happens to be in a different financial situation with respect to its housing revenue account should not be allowed to affect the payment of housing benefit. The Minister is implying that those authorities deemed by government not to need help, but which may have severe financial problems for other reasons, will be put in the position of having to restrict housing benefit or other elements of their housing programme. That cannot be acceptable. Economically it is nonsense because the measure ignores both the origin and the destination of the housing benefit programme. Housing benefits have been separated from other social security payments because it was convenient for government to do so. The Department of Social Security still takes the responsibility for other elements of social security payments. Over many years rents' policies have been in some confusion and it was convenient for housing benefit to be taken separately and paid through a different route.

As regards the people concerned, both housing benefit and other elements of social security payments are essential parts of their income. Social security payments do not depend on where they live or how rich or poor is their local authority. Nor should the housing benefit depend on that. It is a misunderstanding of the principles of taxation as much as a misunderstanding of the principles of compassion and responsibility for those who are less well off in our society. Those factors lead us to the conclusion that Clause 78 is a step backwards in social and economic terms and it should be opposed. I propose to seek the view of the Committee as to whether Clause 78 should stand part of the Bill.

9.22 p.m.

On Question, Whether Clause 78, as amended, shall stand part of the Bill?

Their Lordships divided: Contents, 48; Not-Contents, 16.

DIVISION NO. 5
CONTENTS
Airedale, L.	Ferrers, E.
Allerton, L.	Fraser of Carmyllie, L.
Ampthill, L.	Gisborough, L.
Arran, E.	Glenarthur, L.
Balfour, E.	Henley, L.
Bauer, L.	Hesketh, L.
Belstead, L.	Hives, L.
Borthwick, L.	Hooper, B.
Brougham and Vaux, L.	Jenkin of Roding, L.
Caithness, E.	Johnston of Rockport, L.
Carnegy of Lour, B.	Long, V.
Clitheroe, L.	Mackay of Clashfern, L.
Coleraine, L.	Monk Bretton, L.
Craigmyle, L.	Montgomery of Alamein, V.
Cranbrook, E.	Morris, L.
Davidson, V. [Teller.]	Mountgarret, V.
Denham, L. [Teller.]	Reay, L.

Renton, L.	Swinfen, L.
Rochdale, V.	Thomas of Gwydir, L.
Saint Levan, L.	Trefgarne, L.
Saltoun of Abernethy, Ly.	Trumpington, B.
Sanderson of Bowden, L.	Ullswater, V.
Southborough, L.	Winchilsea and Nottingham, E.
Strange, B.
Strathclyde, L.

NOT-CONTENTS
Dean of Beswick, L.	Macaulay of Bragar, L.
Donoughue, L.	McIntosh of Haringey, L.
Ezra L.	Ogmore, L. [Teller.]
Fisher of Rednal, B.	Ponsonby of Shulbrede, L. [Teller.]
Graham of Edmonton, L.	Seear, B.
Grey, E.	Taylor of Blackburn, L.
Harris of Greenwich, L.	Underhill, L.
Houghton of Sowerby, L.	White, B.

Resolved in the affirmative, and Clause 78, as amended, agreed to accordingly.

9.30 p.m.

Clause 79 [Residual debt subsidy]:

Lord Hesketh moved Amendment No. 135QA: Page 82, line 39, leave out from ("Where") to ("to") in line 41 and insert (", in the case of any local housing authorities to whom no housing subsidy is payable for the year beginning 1st April 1989, houses or other property within their respective Housing Revenue Accounts —

1. (a) are disposed of in that year; or
2. (b) are in that year the subject of such other transactions as the Secretary of State may determine,

residual debt subsidy shall be payable for that year").

The noble Lord said: I propose to speak also to Amendments Nos. 135S and 135T. The amendments to Clause 79 are necessary in order to introduce the changes to residual debt subsidy announced by the Parliamentary Under-Secretary of State in another place on 14th June.

The effect of these amendments is to limit the payment of RDS to the 1989–90 financial year only and to those authorities which are not entitled to main housing subsidy in that year. Although we decided that there is no longer any need for a residual debt subsidy from 1st April 1990 since from then loan charges will be taken 100 per cent. into the calculation of HRA subsidy, there is still a need for RDS in 1989–90. Under the present system those local authorities not entitled to main housing subsidy could be left with debts greater than receipts and no Exchequer assistance to meet the loan charges on those debts. RDS in 1989–90 will prevent an additional financial burden from falling on an authority's remaining rent and ratepayers.

Amendment No. 135QA also enables the Secretary of State to pay RDS in respect of property transactions other than disposals, such as transfers to a Housing Action Trust under Part III of the Housing Act 1988. I beg to move.

Lord McIntosh of Haringey

I do not think that the Minister sounded very convinced about what he has just said.

Lord Hesketh

I was very convinced but perhaps slightly less filled with the vim and vigour of a springtime day and rather more with that of an autumnal evening.

On Question, amendment agreed to.

[Amendment No. 135R had been withdrawn from the Marshalled List.]

The Deputy Chairman of Committees (Lord Ampthill)

I should point out to the Committee that there is a printing error in the Marshalled List and that the word "following" should be deleted in Amendment No. 135S.

Lord Hesketh moved Amendment No. 135S: Page 83, line 4, leave out ("for the year beginning 1st April 1989").

On Question, amendment agreed to.

Lord Hesketh moved Amendment No 135T: Page 83, line 6, leave out ("that year") and insert ("the year beginning 1st April 1989").

On Question, amendment agreed to. Clause 79, as amended, agreed to.

Clause 80 [Calculation of residual debt subsidy]:

Lord Hesketh moved Amendment No.135U: Page 83, line 10, leave out ("for any year").

The noble Lord said: I shall speak also to Amendments Nos. 135V and 135W. These government amendments to Clause 80 are simply consequential to the amendments made to Clause 79. Amendments Nos. 135U and 135V ensure that RDS will apply only to the 1989–90 financial year and not to any subsequent years. Amendment No. 135W is needed to enable the Secretary of State to include transfers of dwellings as well as disposals, as defined in Clause 71(6A) of the Bill, in the calculation of RDS. I beg to move.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 135UA: Page 83, leave out lines 11 and 12 and insert— ("(a) in accordance with such formulae as the Secretary of State may from time to time determine so as to ensure that the amount of the said subsidy is equal to that part of the disposal cost arising from a disposal under Parts III or IV of the Housing Act 1988 or an amount payable by the authority as a result of a disposal under sections 32 or 43 of the Housing Act 1985 which is not met by credit approvals issued to the authority under sections 51 or 52 of this Act.").

The noble Lord said: We are still on the subject of residual debt subsidy, which I readily concede is not the most dramatic or sexy of subjects covered by this not particularly sexy or dramatic Bill.

I almost apologise for bringing forward this amendment because it is embarrassing for the Government to have to consider the matter, We are referring back to the tenants' choice provision of the Housing Act 1988. The Minister will well recall that at that time we expressed the views of many thousands of tenants that the so-called tenants' choice, with the rigged voting system which was implicit in it, was not going to work and that even with that rigged system they would not get a significant number of tenants choosing to be transferred from a local authority landlord.

The tenants' choice provisions of the 1988 Act have been in force now for six months and so far there has been only one formal application to acquire property under that legislation, and that is on the Walterton and Elgin estates in Westminster. Although there is only one application—and so far the Bill is virtually a dead letter—the Government are already having to amend the law because the provision for what happens when property is disposed of at a negative value is still unclear. It is still having to be amended by the Government as the Bill proceeds through Parliament.

The particular case of Westminster, to which I referred, is that the negative valuation left —the "dowry" as it is called in technical terms—is likely to be between£15 and£50 million. Even Westminster, which is not the poorest of all local authorities, does not have that sort of money available. It will have to borrow the money and it cannot do so unless the Government allow it. That means that the Government will have to give extra credit approval for the dowry which has been necessary to approve or give effect to the transfer of the Walterton and Elgin Estates.

So the question I ask is: will the Government give Westminster the necessary credit approval for the Walterton and Elgin dowries? How much money are they setting aside in this and the next financial year for dowries of that sort? In other words, do the Government expect the tenants' choice procedures to have any significant effect on housing policy, or was it all a great sham, as we said at the time and as we now know to be the case? If the Government have not set money aside then they are admitting that it is a sham. If they have set money aside then it is obvious that they did not think through the implications of residual debt subsidy when they put the 1988 Act through Parliament. Will any credit approvals which they allow and provide for automatically come off the national total for housing borrowing? In other words, will it be at the expense of other parts of the necessary housing programme?

Another example which is even more interesting is Waltham Forest. Waltham Forest has been trying to get under way a voluntary transfer of several estates where the only proper solution is to redevelop them. The bill for that is about £175 million which is way out of the reach of Waltham Forest, which is one of the poorer boroughs in outer London. So it would have to transfer the property to tenant-controlled companies. The only way in which it could deliver reasonable rents would be if the council paid the new companies a dowry of between £80 and £100 million. That could only go through if the Department of the Environment agreed to fund it.

At the time of the Housing Act 1988, councils like Waltham Forest were led to believe that there would be extra borrowing approval. Is that still the case? Are the Government prepared to lend Waltham Forest between £80 and £100 million for the transfer of the estates, in line with the provisions of the Housing Act 1988? If that is not the case and if the Government are pulling the plug on Waltham Forest—which is what we suspect—then the Government are left with these estates in a dangerous condition. The council does not have the money to do the work itself, yet when it tries to do what the Government want—to transfer the property—the Government appear to be turning that down as well. Why have the Government failed to give effect to the Waltham Forest deal? Why have they failed, so far at any rate, to give credit approval for the dowry which will be necessary? If no firm decision has been taken, when will a decision be taken and what is that decision likely to be?

In the meantime, what do the Government advise Waltham Forest to do? Should it let these estates crumble around the tenants' heads? Because "crumble" is literally the case. Concrete slabs are falling off the sides of the buildings. If the solution is, as the Government claimed last year, to sell off the property, why are they not giving effect to the financial provisions which would be necessary in order to make that possible?

I think that this is the classic example of bad legislation in the Housing Act 1988 now meeting its come-uppance in less than a year. The good intentions or the proclaimed good intentions of the Government are now being tested and found wanting. What assurances can the Government give us that the tenants' choice provisions can be made to work but not at the expense of other parts of the housing programme? I beg to move.

Lord Hesketh

The effect of this amendment is to require the Secretary of State to ensure, when making his determination of the formulae under which residual debt subsidy is to be paid, that the subsidy covers any costs associated with disposal which are not covered by a credit approval issued to the authority. The types of disposal affected would be to a housing action trust, under tenants' choice, or on a voluntary basis. The disposal costs we are talking about could include those which are commonly called dowries—the noble Lord, Lord McIntosh, pointed that out—referring to payments an authority may have to make if the property sold has a negative value.

As I have already explained, our intention is that RDS should now be payable only in respect of disposals in the current financial year, and at a rate of 100 per cent. of the loan charges on any residual outstanding debt. The amendment we are now considering fails to recognise that this is the sole basis on which RDS would be payable. It would not be a top-up for capital costs related to a disposal that were not being met from capital allocations.

I think however there may be a misunderstanding to be cleared up. We have been asked by some local authorities if we would guarantee them additional resource allocations to help them meet a dowry. We do not believe that this will always be necessary. We have proposed a system of phasing dowries over several years, which should help authorities in most cases. We have also said we would consider requests for additional resources on their merits. Wherever additional resources are in fact given, housing revenue account subsidy will follow. Where a dowry is met within an authority's existing resources, then HRA subsidy will take the dowry into account along with other new borrowings up to the limit of those resources. So if the intention behind this amendment is to ensure that subsidy is paid in support of dowries, I would say that our HRA subsidy will do all that is necessary. There is no need for a separate residual debt subsidy.

The noble Lord, Lord McIntosh, referred both to the Walterton and Elgin estates and to Waltham Forest. There may well be a strain on the resources of some authorities for which we cannot guarantee extra credit approvals. However, we will consider that as part of the 1990 to 1991 HIP round. There will always be in housing, as in any major section of undertakings in our country, the matter of control of resources. However, I hope I have outlined that we shall be positive about this matter. I hope we shall have a successful outcome.

Lord McIntosh of Haringey

If I had been on the Government Front Bench I should be ashamed to make that response. The Government proclaimed the tenants' choice procedures only a year ago as being the great solution to the housing problems which they claimed were the responsibility particularly of Labour local authorities. They said that it was Labour local authorities who dragooned their tenants, were unpopular with their tenants and treated their tenants badly. They claimed that Labour local authorities were responsible for so much of the misery in our housing policy and in our housing situation. They proposed this dramatic and brave new world of tenants' choice where tenants would have the ability to go out and find new landlords or new landlords would put themselves forward and somehow all would be well. Within 12 months that has all fallen apart. It is not just a case of concrete slabs falling off the sides of buildings, but of the whole policy falling apart. It is not working in the sense that even with their rigged ballots tenants' choice is not taking place. The Government are not prepared to apply it to the properties which are most in need of repair; in other words, those which would need dowries.

The Government have said that the credit approval procedure will only be available for 1989 to 1990 and not for any year subsequent to that. Then the Minister said that sympathetic consideration would be given in the housing investment programme and that the Government would look carefully at any applications to spread expenditure over a number of years. That is a far cry from the proclamations of housing reform which were made from that Dispatch Box only a year ago. The truth of the matter is that this element of housing policy along with so many other elements of housing policy is a shambles. The Government do not know what they are doing, and they do not even know what the implications are of the very small things they are succeeding in doing as a result of these grand policies.

The Minister has said a number of things which are supposed to reassure me as to the future. I can do no other than say that I shall read very carefully what he said and reserve the right to come back at a later stage if, as I fully expect, I am not satisfied. It is a pretty poor look out if we are reduced to the mouthing of grandiose policies one year and ignominious retreats the next year. We have had an ignominious retreat on this aspect of housing policy. I am glad that I am not the Minister charged with responsibility for putting it before Parliament. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

9.45 p.m.

Lord Hesketh moved Amendment No. 135V: Page 83, line 13, leave out from ("property") to end of line 14.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendment No. 135VA: Page 83, line 15, at end insert— ('and (c) having regard in particular to the principle that any Residual Debt subsidy payable shall not result in a reduction of the total amount available for Housing Revenue Account subsidy.').

The noble Lord said: With this amendment we come to the crunch with the series of amendments proposed to the principle of residual debt subsidy. It may be that the Minister can expand on what he said a few moments ago and give me an absolute assurance that will enable me to withdraw the amendment without further ado. It seems so obvious that residual debt subsidy payable should be for the specific purpose of the disposal of properties which have given rise to the residual debt. In other words the principle should be that local authorities should not be forced to continue to pay for properties which they do not own and which are not under their control. That seems a fairly obvious principle.

Those who have lost a limb and have the sensation of pain in the limb they no longer possess will know what is meant. Unless the amendment is accepted local authorities—and their tenants—which have obeyed the Government and followed the Government's policy and the tenants' choice procedure and as a result have a residual debt will find themselves paying out for properties they do not own, to which they have no nomination rights and over which they have no control.

The original intention was that residual debt subsidy would not be paid to the housing revenue account but to a specific account set up for a particular transfer. That was the case that we made on the preceding amendment. Any deficit would be met from the general rates rather than from the housing revenue account. That is not an ideal system, because a policy imposed by government ought to be paid for by government, but it is better than what is now proposed. The Government now say that it will apply only to the current financial year and that after April 1990 any outstanding loan debts will be treated for subsidy purposes alongside normal loan debts. In other words, the debts for properties which are not in the ownership and control 01' the council will be treated alongside debts for properties which are in their ownership and control.

We do not know how much effect that will have and how many transfers there will be. We have been too polite to ask the Government what their forecast is. Let us not be too polite; let us ask the Government for their forecast of transfers in this and the next two financial years. They are in a trap. If they believe that their policy under the 1988 Act will succeed they will have to make very substantial special provision along the lines indicated by the Minister a few minutes ago. If they do not think that it will be substantial they are admitting the defeat of the grand policy of the 1988 Act.

If—and the Government clearly intend that that should be the case—there are significant transfers of stock, and if the transfers leave outstanding loans or create new loan obligations, which seems likely, it will be the remaining council tenants who will suffer. The money will not be available in the housing revenue account for repairs and maintenance and the other services which council tenants require. I cannot imagine a greater injustice than that the Government should make a policy gesture of that kind and then leave existing council tenants to pick up the pieces by picking up the debts for properties that they do not live in and which are not available for them or for other people.

We require an assurance from the Minister that the cost of subsidising disposals of property will not fall upon existing council tenants. We demand that assurance in the light of the fact that all housing subsidies are being reduced, except the mortgage interest tax relief. In other words, housing subsidy is increasingly falling into the perverse pattern where the more one has and the less one needs, the more subsidy one will receive from mortgage interest tax relief. Yet, all the cuts and economies which take place in government expenditure on housing take place at the expense of those most in need rather than those least in need. Put neutrally, it is a paradoxical situation; but in political and social terms it is a disgrace. I beg to move

Lord Hesketh

This amendment would place a duty on the Secretary of State, when determining the basis for the payment of residual debt subsidy, to ensure that there was no reduction in the total amount available for housing revenue account subsidy. We do not, as I said earlier, intend RDS to be payable as a separate subsidy under the new financial regime from next April, when HRA subsidy will be introduced. Instead, any costs which could have been eligible for RDS will instead be taken 100 per cent. into the calculation of HRA subsidy, without reducing the amount payable to other authorities.

In the new regime from next April, the main subsidy will take account of all the debts from properties which have been disposed of and therefore there will be no need for further RDS. We cannot forecast how many stock transfers there will be, but the new HRA subsidy will meet the cost of any loan charges remaining after disposals. Tenants will not meet those costs. That is the answer to the last question put to me by the noble Lord, Lord McIntosh.

Lord McIntosh of Haringey

That reply is slightly less equivocal than the answer given by the Minister a minute or two ago. To that extent I am grateful for his response. I am fascinated to see that, a year after the enactment of the 1988 Housing Act and six months after the implementation of this part of the Act, the Minister can give no forecast regarding the number of transfers which will take place. I should have thought that if there had been any significant movement in that area many applications would now be in the pipeline and that such information would be available to his department, at least concerning what will happen this year and next even if he cannot give any forecast as to the future. I can perhaps be forgiven for thinking that this inability to give any indication of what is likely to happen is a confession that this part of the 1988 Housing Act has been a dismal and deserved failure, despite the rigging of the electoral system.

The Minister has told us that any subsequent obligation after 1st April of next year will be provided for in the housing revenue account. I take it that he means it will be "provided for" in the housing revenue account subsidy; in other words, provided for by central government. I hope that I am right in that assumption and perhaps I may put that specific question to the Minister.

Lord Hesketh

The answer to the noble Lord's question is yes.

Lord McIntosh of Haringey

I am grateful for that assurance. In procedural terms it is not as satisfactory as having a separate provision; but if, as I understand it, the Minister is saying that central government will meet all the costs, then clearly he has gone some way towards meeting some of the anxieties which we have expressed. I look forward to further amplification of what he said because it is certainly not to be found on the face of the Bill. I assume he means that the Government will have to bring forward further amendments on Report in order to give effect to the undertaking just given. I look forward to seeing such amendments. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Hesketh moved Amendment No. 135W: Page 83, line 17, after ("disposals" insert ("or other transactions").

On Question, amendment agreed to.

Clause 80, as amended, agreed to.

Clause 81 [Adjustment of housing subsidy for year 1989–90]:

Lord Hesketh moved Amendment No. 135X: Page 83, line 18, leave out subsection (1).

The noble Lord said: As I mentioned earlier, our intention is to pay RDS only to those authorities which are not in receipt of main housing subsidy in 1989–90. RDS will not therefore affect authorities that are in subsidy and will not have any bearing on their housing subsidy entitlement. There is thus no need to make any adjustments to main housing subsidy in 1989–90. The government amendment, Amendment No. 135X, removes the references to the adjustments which were to be made to main housing subsidy on account of any RDS which may have been payable under our original proposals. I beg to move.

On Question, amendment agreed to.

Lord Graham of Edmonton moved Amendment No. 135XA: Page 83, line 33, leave out subsection (2).

The noble Lord said: This amendment in the name of my noble friend Lord McIntosh of Haringey deals with Clause 81 which relates to the adjustment of housing subsidy for the year 1989–90. The amendment seeks to delete subsection (2).

I remind the Committee that subsection (2) deals with the payment of subsidy and refers to the manner in which it would be reduced when there is a transfer from the authority to a housing action trust of housing land or other property, as mentioned in Section 74 of the Housing Act. In putting down this amendment, our intention is to understand from the Minister exactly where we stand in the light of the events of the past 12 months. What are the Government's intentions in view of the fact that moneys appear to have been allocated in this regard?

At present the Secretary of State has to take into account a range of factors when calculating housing subsidy, one factor being the units of property that the authorities manage. Subsection (2) gives powers to the Secretary of State to reduce housing subsidy as a result of a HAT board taking over estates in the area. Broad reference has been made to the situation of the HATs in question. On 16th March of this year the DoE announced the publication of the consultants' reports on the six proposed areas for HATs; namely, Lambeth, Southwark, Leeds, Sunderland, Sandwell and Tower Hamlets. At that time Mr. Nicholas Ridley decided to drop Tower Hamlets from the proposed HATs programmes. The consultants' reports estimated the cost of improvements in each of the HAT areas spread over a 10-year period: Lambeth would be £93.5 million, Southwark £112 million, Leeds £135 million, Sandwell £23 million and Sunderland £75 million.

In his speech at the press conference, Mr. Ridley quoted a figure of £354 million to be spent on the five HAT areas over 11 years. The latest government expenditure plans for 1989–90 to 1991–92 show a proposed expenditure of £248 million. Of the moneys to be spent, £68 million would go in the first year (1989–90) and £90 million in the second and third years.

I should like the Minister to answer a number of questions. First, will he tell the Committee what he thinks the consultants have been up to in bringing forward a report of this kind? When will the ballots that are an intrinsic but very offensive part of these proposals take place? Should the Government forget the ballot in the light of the Lambeth. MORI poll? I remind the Minister and the Committee that the poll showed that 72 per cent. of all those answering the survey were against a HAT and that while tenants would like to see improvements and more representation in estate management, the majority of them (66 per cent.) preferred the council as a landlord to any other option.

The results of that survey did not surprise Members on this side of the Committee because we had been advised by not only the councils and councillors but the representatives of tenant estates who came to this Chamber and were willing to see any Member or Minister to tell him of their views. In the light of that expression of local democracy—the Government shift their ground on taking notice of such a matter—can the Minister tell us what they will do when they have clear evidence that HATs are disliked? Unless they have the backing of the tenants, the Minister and his colleagues are wasting their time.

Can the Minister tell us how much of the £68 million which appears in the government expenditure plans for this year the DoE will be able to spend this year? In the light of the fact that the money was going to be spent on improving the fabric of the estates, why does not the Minister consider allocating that money, or making it available, to the councils involved?

If the Government are honest and wish to see the estates improved but believe that they will not be improved by the councils—and that is the whole raison d'être for the HATs —why does not the Minister reconsider making special provision for the councils involved to have those moneys so that they can spend them on such improvement? If the DoE is unable to spend the money —as it cannot because it will not proceed with the authority of the tenants —can the Minister tell the Committee what it intends to do with the money? What will happen to it? Why cannot the five HATs involved, for instance, be given £13.5 million each to undertake what the housing action trusts would have done but which plans will never see the light of day? If the Government do not wish to give the money to the HAT authorities, can the money not go back to the housing investment programme so that it can be spent on the homeless, for instance?

We do not have simply a lame duck but a dead duck on an aspect of the councils' housing policy. It concerns transferring the powers of a local authority to maintain the fabric of its estates to a scheme which was the brainchild of the now unlamented departed Secretary of State, Mr. Nicholas Ridley.

I know that the Minister is serious and honest. If the policy has now collapsed around his shoulders, why can he not try to redress the balance by giving the moneys to authorities which under his guidance will be required to do exactly what the HATs would have done? That is why we seek to delete this clause. I beg to move.

10 p.m.

Lord Hesketh

The effect of this amendment would be to remove the powers of the Secretary of State to provide a safety net for authorities in which a transfer of housing took place to a housing action trust.

The Government have given clear undertakings that remaining tenants and ratepayers in such authorities will not be affected financially by the creation of a HAT and Clause 81(2) provides the means by which the Secretary of State can ensure that this promise is kept. The Opposition have put down an amendment which could result in increases in rents or community charge payments in certain circumstances. The Government, however, do not intend going back on their word.

On some of the points that the noble Lord raised, I can assure him that the department's policies are not ruled by MORI polls. With regard to the situation over HATs, at present, as he rightly pointed out, the consultants are working, and we shall be moving to a position where there may or may not be HATS. As he is well aware, it is dependent in the final analysis on a decision made by the people who live on the estates themselves.

The final point is one that the noble Lord will appreciate. Seductive as his argument was, if instead of having HATs we selected five authorities and suddenly gave them a huge extra increase in funding with no further reason, there would be an enormous outcry from the vast majority of remaining English local authorities which would be quite understandable. That is why we resist the amendment.

Lord Graham of Edmonton

I took careful note of the Minister's statement that the Government were not prepared to go back on their word. The Minister could have fooled me. The proceedings are riddled with illustrations of where Ministers have gone back on their words on a number of occasions and have justified it. We are not asking the Minister suddenly to give five authorities a gift. These are the five authorities which the Minister had decided were in urgent need of two things. One was to be deprived of their power to carry out repairs, and secondly, the estates were so bad that they needed to be dealt with by what the Minister at the time said was a better management tool.

The Minister has still not answered the question of what will happen if, as we predicted last year, and which has been confirmed now, HATS do not get off the ground. What will happen to the money which the Government have shown in the government expenditure plans for the next three years? If that money was allocated to improve estates, surely the Minister will not be so churlish and dog-in-the manger-ish as to say that a HAT, which the Government believe is the best tool, will not be set up. What about the fabric of the buildings? What about the comfort of the tenants? Their need for money to be spent on their estates has not changed. Two years ago the Minister and his advisers presented their plans and said "We believe that there is an urgent need for estates to be improved. We believe that the management ability of the local authorities is so bad that we are prepared to consider a new aspect to be included in the Bill".

In the light of what has transpired surely the Minister and his advisers will be big enough to reflect that if they made a mistake on the method, they certainly have not made a mistake concerning the need. Can the Minister give me more information on the money that will be available? The Minister said slightingly that the Government do not intend to take any notice of MORI polls. In the light of what the polls are showing concerning the standing of his Government in the last few months he is entitled to say "We do not believe them". But I have news for the Minister. They are just as sound on what they are telling the Government about their general standing in the country as what the tenants of the estates think about a HAT scheme.

Lord Hesketh

That is not what I said about the MORI poll. I said that the department's policy would not be directed by a MORI poll. I am quite sure that if the noble Lord, Lord Graham, were standing where I am standing now he would say exactly the same to me if I made a similar suggestion. At this stage we cannot be more specific about the cost of HATs next year because we are essentially in a transitory period. Because of that it would be very difficult to be specific concerning the sums of money that will be required or be available. However, unlike the noble Lord, Lord Graham, we are confident that we shall see success in our policy and that is why we believe it is important that the money should be there to carry out the special and important tasks.

Lord Graham of Edmonton

Before I withdraw the amendment do I understand from the Minister that he and his colleagues genuinely believe that one day a HAT will be created which will be able to call upon the Treasury for money? Does he really believe that in the light of all that has transpired during the past 12 months one day a HAT will be created?

Lord Hesketh

There has been a tremendous investment in trying not to let them happen, led in many ways by the Benches opposite. However, my personal view and that of the department is that there will be a HAT. Once one is seen and is seen to be a success many more will follow.

Lord Graham of Edmonton

If that hat fits, I suggest that the Minister wears it. I believe that the Minister has made the best of a very bad case. All the evidence shows that, as in other instances, in this one the Government have been misguided in producing a policy which is not acceptable. They cannot see the sense of deciding how best to look after the needs of those tenants. I am grateful to the Minister for what he has told the Committee. What he has said on the record I believe will be used very effectively by people like myself who intensely dislike the concept. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 81, as amended, agreed to.

Clause 82 agreed to.

Clause 83 [Recoupment of subsidy in certain cases]:

Lord Graham of Edmonton moved Amendment No. 135XB:

Page 84, line 25, at end insert— ("(3) Sums must be recovered within one year of the date on which they were paid.").

The noble Lord said: The amendment relates to Clause 83. In the margin there appears the title "Recoupment of subsidy in certain cases" and we seek to add the provisions that sums must be recovered within one year within the date on which they were paid. I remind the Committee that the current Bill allows the Secretary of State to recover subsidy paid to a local authority indefinitely. The amendment introduces a time limit of one year on that ability.

We on this side of the Committee take no exception to the powers of the Secretary of State in being able to recover public moneys paid to an authority if his department makes a mistake or if the local authority misinterprets the complicated and difficult rules for claiming subsidy. However, at the present time, that provision is open ended and the authority will be placed in a position of never quite knowing whether it will receive the full subsidy to which it is entitled in any one year. The implications of that for the rent levels could be severe because the authority's budget will properly be based on an expectation of a certain amount of Exchequer support.

However, under the Bill as drafted, the Secretary of State can penalise an authority for a mistake made by the department five or 10 years ago. The amendment gives greater security to the council while allowing a reasonable period for the department to ensure that payment has been made correctly. In essence, it introduces a statute of limitations on subsidy payment. Once a year has elapsed an authority and its tenants can be sure that they will not be subject to the unhappy and unexpected shock of subsidy being withdrawn because of past events over which they may have had little control.

This is a modest request. It is sensible and satisfactory to both the Ministry and local authorities but more importantly to their tenants. I beg to move.

Lord Hesketh

In opening my remarks about Amendment No. 135XB, I should make it clear that Clause 83 is concerned not with the recovery of subsidy resulting from mistakes by the Secretary of State, but with the recoupment of subsidy where the basis on which it was paid turns out to be wrong. This most frequently takes place when land has been acquired for housing purposes but is then used for other purposes or is disposed of. In the interim subsidy will have been calculated including the loan charges on the purchase cost of the land. That will have been a mistake and we would therefore need to recover the subsidy that was paid.

Recoupment of housing subsidy is triggered by events as reported by local authorities and depends on details supplied by them. I hope that Members will therefore agree that it would be wrong for the Secretary of State to be limited to acting within a set period when at the same time he relies on local authorities providing timely information. It would also be wrong to restrict recoupment to one year's subsidy when some cases only come to light (not always the fault of local authorities) several years after the event.

Of course, this sort of restriction cuts both ways: local authorities would not like to be told that money owing to them could not be paid in respect of more than one year's arrears. I hope that en the basis of that argument the noble Lord will understand why we shall resist his amendment.

10.15 p.m.

Baroness Seear

Speaking as a Lambeth ratepayer and knowing the difficulty in getting Lambeth to reply to any letters at all, I can say that one year is much too short a time to complete any dealings with such an authority.

Lord Graham of Edmonton

There is the voice of a genuinely aggrieved Lambeth ratepayer. The Minister has said that the local authorities could very well find that they are the losers from this proposal. However, this amendment is put forward by a number of representatives of the local authority associations. They recognise that genuine mistakes can come to light. On the basis that they are genuine mistakes or miscalculations, they could have been committed by either the department or an authority. There is no dispute about that. However, the authorities would like a greater degree of certainty than merely at some time in the future.

The Minister said that if a mistake came to light six or seven years later, it would be wrong for the Government to be unable to recoup that loss. The authorities are also saying that. They are saying that if something which is to their benefit emerges five or six years later, they would have to say, "Hard lines". They are asking for a degree of certainty.

Of course, the more certainty there is, the more imperative it is that the people who make the calculations get their sums right in the first place. The Minister is not prepared to accede o this modest request by the local authority associations. I am certain that they will be very disappointed by what he has said. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 83 agreed to.

Clause 84 [Determinations and directions]:

The Deputy Chairman of Committees (Lord Ampthill)

Before calling Amendment No. 135XC, I should point out to the Committee that the line references in Clause 84 as it appears in the Bill are wrong but that those in the Marshalled List in Amendments Nos. 135XC, 135XD and 135XE are correct.

Lord Graham of Edmonton moved Amendment No. 135XC:

Page 84, line 35, at end insert— ("(d) shall contain the detailed reasons for the making of the determination or direction.").

The noble Lord said: On page 84 there are two line 5s, two line 10s, two line 15s and two line 20s. This is a simple point. The heading of Clause 84 is: Determinations and directions". The amendment states: shall contain the detailed reasons for the making of the determination or direction". We come here to a point which we on this side labour quite often; that is, that no discussions in which the Minister is involved can be left on the basis that he has lost the argument —none at all. He never loses an argument because the results and outcome of consultation from the point of view of the Government will be satisfactory to the Government. However, very often consultation with the other party is not concluded satisfactorily even though that other party has been involved in the consultation.

The clause speaks of: A determination made or direction given by the Secretary of State". In other words, it is the man or the office who will give the determination. There then follows a list of what should be included. We are saying that there should be detailed reasons given for the determination. At present, there is no obligation to provide any explanation for a particular decision, and our amendment is designed to remedy that.

The authorities are concerned and uncertain about the operation and consequences of the new system of housing finance. The Bill gives many new powers to the Secretary of State and, if the system is to work efficiently and effectively, it must be understood by local authorities and must have credibility in their eyes. However, that must be in question where vital decisions can be made without explanation.

If councils are unaware of the reasons for a decision, they will be unable to assess whether the Government are acting on proper information and, if incorrect data is used, a decision may be wrong. It is in the interests of both the Secretary of State and local councils that that be rectified.

If the Secretary of State's decision can be explained to the local authorities, they in turn will be able to explain more fully what it is that the Secretary of State has decided to do. In this instance, where it has a detrimental effect upon the finances of tenants, authorities will be better able to understand that and of course give the views of the Secretary of State a fair hearing.

Therefore, again in line with many of our amendments, local authorities are asking for these improvements in the Bill so that when it becomes an Act, as inevitably it will, it will be more workable from the local authorities' point of view. I honestly cannot see any reason why the Secretary of State would not be willing to be precise on why the determinations and decisions have been made. I beg to move.

Lord Hesketh

Clause 84 contains general rules which will govern the making of directions and determinations by the Secretary of State. These direction-making powers are necessary since the definition of the ring fence and the operation of the subsidy system need to be set out in rules which are both detailed and flexible. This is not possible if we rely on the statute book alone, and indeed there is a long tradition of administrative instruments for rules of this kind. That is why it is important that the Secretary of State should have wide enough scope to make directions covering the very wide range of circumstances that may arise.

However, it is also understandable that local authorities—and noble Lords—should want safeguards. Those safeguards are provided by the general requirement contained in this clause for all determinations and directions to be the subject of consultation. Anyone who doubts the effectiveness of the consultation process should consider the ways in which our proposals on the new subsidy and the housing revenue account have developed and changed since our consultation paper was published 14 months ago.

I fear that Amendment No. 135XC would add nothing helpful and could in fact be counter-productive. By adding detailed reasons to the book of rules, as it were, it would create unnecessary confusion. Rules need to be justified, and that is the purpose of the consultation process. But starting the justification as part of the rule—which is what the effect of this amendment would be —would lead to greater uncertainty about what the rule was actually supposed to be. Imagine, say, what the laws of cricket would be like if they tried to explain not only when a man is out leg-before-wicket but also why. We believe that the Bill goes far enough in that direction and that the amendment is therefore not necessary. That is why we resist it.

Lord Graham of Edmonton

I am disappointed with the Minister's reply. He alludes of course to the general contents of the Bill for consultation to take place. However, subsection (2) states that, the Secretary of State shall consult such representatives of local government and relevant professional bodies as appear to him to be appropriate". There is nothing mandatory that he shall consult the local authority associations and professional bodies. He is to consult those who, appear to him to be appropriate". The subsection continues: before making a determination or giving a direction relating to a particular local housing authority, he shall consult that authority". To that extent the authorities that are to be subject to that determination will, I assume, have an opportunity to discuss the matter generally, but the precise content of the determination and decision will be wholly in the gift of the Secretary of State. It can be as bold, as blunt or as bleak as he likes.

The Minister must understand that these are the fears voiced by those at the sharp end of local government. They are not all Labour controlled local government organisations. Some are controlled by a majority of Conservative members. They are asking for this genuine opportunity better to understand—whether or not they appreciate it—what is in the mind of the Secretary of State.

I am disappointed at what the Minister has had to say. In my view these are very modest requests; but, as in the case of so many of these modest requests, the Minister is determined not to give those at the sharp end the feeling that he is prepared to listen to them meaningfully. I am not saying that he does not listen, because I think that he does. It is very sad. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 135XD: Page 84, line 38, leave out ("such representatives of local government") and insert ("the local authority associations").

The noble Lord said: To paraphrase the words of my noble friend, this again is a modest proposal though not in the Swiftian but in the literal sense. The Bill as originally drafted provided that the Secretary of State should consult such representatives of local government as appeared to him to be appropriate. Pressure from my right honourable and honourable friends in another place secured that the Government amended that provision to include relevant professional bodies. I am sorry, I take that back. It was pressure from professional bodies in another place which led the Government to include professional bodies. We in the Opposition were concerned about the precision of professional bodies and the lack of precision as regards representatives of local government.

After all, professional bodies, though they are accountable to their own members, are not in any way accountable to the public at large whereas indirectly the local authority associations are. If the Government are going to give way to pressure from professional bodies to be consulted—I am not suggesting that we should go back to that—then at least the Government should recognise that there have been established for many years local authority associations, most of which, as my noble friend Lord Graham has already made clear, are controlled by the Conservative Party. All the local authority associations feel that the Bill while in this Chamber should be tightened up in order to secure that it is the local authority associations who are consulted rather than the more vague phrase of such representatives of local government as appear to him to be appropriate.

It is in line with much of the consultation that is taking place at the moment. There is nothing revolutionary or outlandish about it. I hope that this amendment will receive ready acceptance by the Government as a tidying up of the wording of the Bill. I beg to move.

Lord Hesketh

Under the provisions of Clause 84, where directions and determinations have a general application, the Secretary of State will be required to consult representatives of local authorities. Amendment No. 135XD would specifically identify the local authority associations as the bodies to be consulted. I agree that there is a small change here from the words in the existing statute, namely, the Housing Act 1985. But there is nothing sinister about this. The traditional formula, if I might put it that way, requires consultation with such associations of local authorities as appear to be concerned and with any individual local authority with whom consultation appears to be desirable.

But in fact there have been substantial changes in the structure of local authority associations and there may well be further change in the future. The wording adopted here therefore leaves it open to the Secretary of State to exercise his discretion to consult with whoever in his view are appropriate representatives of local government for the purposes of the consultation process in question. I can assure the Committee that we are not seeking to remove the local authority associations from their rightful role. The new words are consistent as a matter of fact with the words that now appear elsewhere in local government legislation. That is the reason why we resist this amendment.

Lord McIntosh of Haringey

The Minister's quotation from the Bill was inaccurate. He spoke as if the Bill said such associations representative of local government as appeared to the Secretary of State to be appropriate. The Bill does not say that. It refers to such representatives of local government and does not make any reference to associations. I am not saying that this is a major point on which we shall go to the stake. Certainly I do not believe that the form of consultation should always be laid down with enormous precision because it would make it difficult to keep up with changes.

There have been no changes in the existence of local authority associations for the whole of this century. Local government has changed; the practice of local authorities banding themselves into associations has not changed. There will be no change required in legislation as a result of the alterations that have taken place. As the text of the Bill now stands, a Secretary of State could say that he considers that the Conservative local government conference meeting each year is representative of local government and that he proposes to consult it and nobody else. That is what the Bill provides. Only by relying on the good will of the Secretary of State and the word of the Minister at the Dispatch Box, which I personally respect although I do not know who will be his successor, could we be confident that the wording of the Bill is not, as the noble Lord said, sinister. However, it is not a matter on which I would go to the stake. I make the point that the Minister's reply was at variance with the wording of the Bill. I leave it at that.

Lord Hesketh

Before the noble Lord sits down, perhaps I may apologise and correct myself. It was my error and the noble Lord is entirely correct.

Lord McIntosh of Haringey

I am grateful to the Minister for that. Perhaps he would like to read his speech, both in the original version and in the revised version. He might then consider whether the defence he made of his misquotation of the Bill is appropriate to the Bill as it stands; whether "such representatives" is an adequate definition and whether there is an adequate precedent for it. I do not wish to push the noble Lord now. I ask him to think about it further and perhaps write to me if he has any further thoughts. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

10.30 p.m.

Lord McIntosh of Haringey moved Amendment No. 135XE:

Page 84, line 45, at end insert— ("(4) In making any determinations or directions under this section, the Secretary of State shall have regard to his estimate of the likely impact on the level of unrebated rents in different areas or different local housing authorities. (5) If, on the basis of the estimate referred to in subsection (4) above, the likely increase will exceed the estimated level of inflation for the year in question, any determination or direction shall be adjusted such that the actual increase in the average unrebated rent does not exceed that level.").

The noble Lord said: It is unavoidable that with Clause 84, "Determinations and directions", we are in a sense going back over some of the issues that were discussed at previous stages. After all, in a Bill that is so often an enabling Bill—not enabling local authorities to do anything but enabling the Secretary of State to do things—the real meaning of the Bill becomes clear only when we come to the determination or directions made by the Secretary of State. Directions by the Secretary of State can seriously affect the health of local authorities in regard to their powers and determinations made by the Secretary of State can seriously affect their health as far as financial resources are available to them. This is what we are faced with when we look at the position with council house rents.

We have already had a full debate on capital value rents and their impact in the longer term. It became clear from the Minister's reply that, even though capital value rents are intended as a machinery for establishing the basis of subsidy—I accept that it is relative and not absolute—and even before the introduction of capital value rent determination, the Government have felt it necessary to do what they call damping to lessen the effects of any changes in a particular year. I understood the Minister to say that rent increases over the next year would be not greater than £3.95 a week, which is roughly twice the increase that took place this year.

We have already had a denial from the Minister that the Government intend to use capital value rents as a target. If there is to be a limitation next year in any increases in rents as a result of the new system, how long will the damping effect or soft landing take place? How long will it take? For how long will it be available? What will the relationship be between rents and affordability in the medium term? What protection will there be during this transitional period for tenants against dramatic increases in rents?

We know that the data on maintenance which are necessary when we are dealing with capitalised affairs are inaccurate. We know that the current proposals on capital and revenue will not cover all the current expenditure. What does that mean? If rents will not rise by more than £3.95 will the shortfall be made up in other ways? In other words, will there be a genuine soft landing?

We talked about rent collection. The noble Lord, Lord Ross, raised that issue and we had a somewhat necessarily acrimonious debate, I am afraid, about who should bear the responsibility for it. The Government's view is clearly that it should be borne by existing council tenants who pay their rents on time. I am not going over that argument again. I am merely saying that that is another example of proposals which the Government put in theory for the long term for which they have to find ways to ensure that the immediate effect will not be too drastic.

The London Boroughs Association, which I remind the Committee is Conservative controlled, took the DoE figures and calculated that 49 authorities, 48 of which will be in the South East, will face the maximum rent increases anyway for the next 10 years and beyond if they are ever to reach capital value rents. Again, the question which I must ask, and which the amendment asks, is: over how long a period and with what degree of cushioning will the soft landing be provided? What is meant by the traditional damping provisions about which the Minister has talked when discussing the transition to a new basis for the calculation of rent subsidy? I beg to move.

The Earl of Caithness

As the noble Lord, Lord McIntosh of Haringey, has reminded the Committee, the amendment reopens the issue of council house rents and the Government's policy which we have discussed at some length under earlier clauses.

The amendment would specifically provide that, in making determinations of HRA subsidy, the Government should ensure that the impact of the determination should not cause unrebated rents in any area to rise by more than the level of inflation. To put it another way, there should be no real-terms increases in council house rents, not just in the first year (they are not content with that), but for all time. That is the effect of the noble Lord's amendment.

There must be an assumption underlying the amendment. I wonder what it is. That assumption is that council rents are high enough now, not just generally, but in each and every local authority. Nowhere could rents be reasonably expected to increase. A corollary of that is that the present pattern of council rents, the way they vary between authorities, is perfectly acceptable and should be preserved (unless of course we choose to allow rents to fall where they are relatively high). Nowhere, the noble Lord is implying, do rents need to increase to catch up with those in comparable authorities. The present levels of subsidy—including the extra subsidies which the ratepayer in some areas is expected to make—should be maintained. Rents should stay at their present subsidised levels everywhere.

I cannot accept the amendment, and I cannot accept the arguments on which it is based. It is patently ridiculous to suppose that no rents could be allowed to rise. Rents vary widely now, and not always for very commendable reasons. One particular reason is the levels of additional subsidy of housing which some authorities make from the rate fund, to the extent that in some authorities rents are insufficient even to cover the basic management and maintenance costs of the housing stock. There is no question in my mind that rents in some areas are over-subsidised. The purpose of ring fencing, and of the new, more carefully targeted subsidy system, is gradually to encourage rents in those areas to move to more realistic levels. As we have already discussed today, for council rents as a whole, we want to see a fairer pattern between authorities reflecting variation in the real value of houses to the tenants who live in them.

We have also made it clear, however, that we will not expect rents to rise too quickly or too far. The damping mechanism in the subsidy calculation is a flexible tool which will enable the Secretary of State to limit the impact of the determinations in individual authorities. We stand by that assurance. But the noble Lord's amendment goes too far. It would preserve the present over-subsidised rent levels and would prevent us from targeting subsidy where it is really needed. For that reason we have to advise the Committee to reject this amendment. However, it disappoints me that the noble Lord, Lord McIntosh, does not see the need to target subsidy in a more effective way than at present and that the present system is nothing to write home about or to use as a model for the future.

The noble Lord went on to say that we had already agreed a rental limit—I think I wrote this down correctly—of £3.95 a week. Again, he is wrong to use such a figure. This was a hypothetical figure given in an example to the local authorities' association. I have to say to the noble Lord that in a genuine mistake, I believe, he has taken it out of context for the purpose of trying to prove a point. There is no target level for rents; damping can take place every year. The situation will be very much as it is at present. Let me repeat, we have to assess what the notional rent will be. At the moment we apportion it on a pro rata basis over every local authority. That is a very out-of-date and unfair system, and it is time we moved from it.

Lord McIntosh of Haringey

Ministers have been at pains to assure us on more than one occasion today that there is nothing sinister behind the wording of the Bill as we see it. I cannot think that, in his response to this amendment, the Minister has been properly advised if he thinks that there is anything as sinister as he claims in the wording of the amendment. Nothing in it says that no council house rent shall ever change. Nobody says that the relationship between council house rents in different parts of the country under different local authorities of all different political complexions is necessarily a rational network. Indeed, if that were so, any element of local choice in setting council house rents would already have been abandoned. Clearly, to some extent that is what Ministers want. They want to impose a pattern of council house rents on all local authorities, regardless of their wishes, regardless of the opinions of the electors and regardless of political priorities which may be thought appropriate to local conditions.

The fact that there are differences in council house rents between one local authority and another is no criticism of the system for setting council house rents. But at the same time it does not justify the Government's proposals for future increases, which they still refuse, under severe pressure, to spell out in more detail.

The Minister asks me to say why we think that rents should not increase in real terms. I shall ask him the question in other terms. Why does he think that rents should necessarily rise faster than inflation? Does he think that rents are conspicuously lower than those which tenants can afford? I suggest to him that that is patently not the case. Does he suggest that rents are not enough over the country as a whole to meet the costs of housing? There are of course cases where they are not, but there are cases where they are more than adequate. In any case, the ring-fencing proposals will make sure that the rents are enough to meet the costs of housing. I remind him that when he goes from the aggregate for the national picture, which is covered by ring-fencing, to the individual pattern, he is trying to compare like with unlike. Local authorities differ not only in their political complexion and in their housing needs and resources, some of which—though probably inadequate—are reflected by the government subsidy; they also differ in the age and original cost of their housing stock. One cannot make comparisons between one authority and another to lead to any rational imposed structure of council house rents such as this Government seem to require.

The examples which we have been given of the likely increases in rents to achieve the target are not produced by Labour local authorities but by the Conservative London Boroughs Association. I suggest that if Ministers want to go on denying that there is a target they had better convince the LBA first. I have a list which the LBA has produced of 22 authorities which are likely to have increases of more than 100 per cent. in their rates if the targets are to be met or if other forms of housing expenditure are not to be cut. They are in the South-East and I can only see three or four which are under Labour control. Many of the others with increases ranging from 100 per cent. to as much as 117 per cent. are firmly under Conservative control and probably always will be. These are estimates about Conservative local authorities produced by a Conservative local authority association.

It is no good the Minister continuing to deny that there are such things as targets. They are inescapable conclusions of the policy which the Government are setting in train. If indeed the Minister is claiming that this is a result of local authorities undercharging rents, perhaps he will name for us the local authorities which are setting rents at too low a level. That would be an interesting exercise and it would be interesting to see whether it confirms the political prejudice which lies behind this element of policy.

It is not only that the objective is irrational and unreachable, but that the means of getting there, despite the most persistent pressure, not so much by us in Parliament but by those who are directly affected, has failed to reveal any significant or useful details of the steps which will take place over the next few years. The Minister said that there would probably be damping in each of the next five years. Unless he says by how much and on what basis the damping will be carried out and what effect that will have on real levels of rent, he must expect that there will be the gravest suspicions both of the impulse behind the Government's new proposals and of the way in which they propose to carry them out. This is clearly not a matter which we should carry to a Division now, but we should register our deep disquiet and discontent at the failure of the Government to come clean about the measures which are proposed. It is a matter to which we may have to return on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 84 agreed to.

Clause 85 [Construction and application of Part VI]:

10.45 p.m.

Lord Hesketh moved Amendment No. 135Y: Page 85, line 16, leave out ("years beginning on or after") and insert ("the year beginning on").

The noble Lord said: This Government amendment is again consequential to our intention that RDS will apply only to the current financial year and not to any subsequent years. I beg to move.

On Question, amendment agreed to.

Clause 85, as amended, agreed to.

Clause 86 [Declaration of renewal area]:

Lord McIntosh of Haringey moved Amendment No. 135YA:

Page 86, line 24, leave out paragraph (f) and insert— ("(f) the level of financial resources that are required to be made available:

1. (i) by the authority; and
2. (ii) by the Secretary of State to carry out its proposals").

The noble Lord said: We are now moving into Part VII of the Bill which is concerned with housing renewal areas. Is it the Government's intention that we should deal with part of this matter tonight or all of it?

Noble Lords

All of it!

Lord McIntosh of Haringey

It does not make a great deal of difference to us. Let me say at the outset that in general we are in agreement with the proposals for housing renewal areas. Organisations representing public housing throughout the country have recognised the value of the housing renewal area proposals. It is fair to say that the proposals would not be possible if it had not been for the planning work carried out by local authorities throughout the country.

There are two key tests of whether the housing renewal area proposals will work. One is whether there will be sufficient government funding for them, and that is the thrust behind Amendment No. 135YA. The second is whether they are adequately directed at the housing conditions of the nation as we find them. We want to be assured that the housing renewal area proposals are not simply policy gestures of the kind that we saw far too much of in the 1988 Housing Act.

I could deal with Amendments Nos. 135YA and 135YC together, but since they have been put down separately it is preferable to deal with them separately, with a general introduction as to why we are still concerned about the implementation of proposals with which we generally agree.

Clause 86 as drafted states that a report looking at the declaration of a housing renewal area: shall include particulars of … (f) the financial resources available, or likely to be available". In the amendment we propose not that the report should include particulars of the resources available or likely to be available but that it should identify resources that are required to be made available by both the local authority and the Secretary of State. It is not good enough just to identify inadequate resources. If the housing renewal areas are to go through it must be a requirement that the necessary resources are made available by the local authorities and by the Secretary of State.

In the government response to the amendments, which are not adversarial, we hope for an indication of the level of expenditure that they believe will be necessary throughout the country in order to give effect to the housing renewal areas, the assumptions that the Government are making in planning their financial estimates and any research that they have carried out to establish what the levels of financial resources available are likely to be.

I ask the direct questions: what total programme of expenditure, whether from local authorities or the Secretary of State, or both, do the Government believe is necessary to tackle the poor housing conditions in an identifiable and reasonable timescale? What level of expenditure is necessary to be devoted to the successful introduction of the housing renewal areas? I beg to move.

Lord Hesketh

The effect of the amendment would be to delete the existing requirement for the report which an authority must prepare before considering the declaration of a renewal area to contain details of the financial resources available or likely to be available to it to put into effect the proposed programme of work within that area. It would substitute the narrower duty to include details of the financial resources required of the authority and Secretary of State to carry out its proposals.

There are two points at issue here. First, it will be critical to the success of the renewal areas that they secure funding from a wide variety of sources, including the private sector. I do not doubt that in many of the areas likely to be considered by authorities it may prove difficult to attract sufficient private capital, particularly at the outset. Neither do I doubt that with the right set of proposals and the close involvement of private sector interests such areas present opportunities for private investment. I am glad to say that there are already such examples under existing private sector area renewal initiatives, and I am surprised that the noble Lord ignores that potential.

The second issue is that of central government involvement in the declaration and implementation of area renewal. We seek to strike a balance. Local authorities must be free to consider declaration as part of their policy towards private sector housing and to devote their own resources to declared areas as they see fit. In distributing capital guidelines for housing each year under the provisions in Part IV of the Bill, the Government will take account of the condition of the housing stock in the different areas; they will also take into account the level of capital receipts that an authority has available to it. In addition, the new capital control arrangements provide for some indication to be given to an authority of future guidelines in the second and third years.

The Bill also provides a facility which will allow an authority, having considered the likely level of resources available to it within these arrangements, to submit a case to the Secretary of State in respect of a higher rate of Exchequer support in respect of the programme it wishes to carry out. It would not be possible—as this amendment apparently seeks—to give notification of a higher rate to an authority in advance of proposing its case. That would nullify the whole point of requiring authorities to tailor proposals to likely resources. Nevertheless, the Secretary of State is prepared to consider an authority's need for additional resources during the life of a proposed renewal area, and if he is satisfied that these are required he will make the necessary allowance both in future annual capital guidelines and in supplementary credit approvals. The balance between these different routes will vary in each case.

These measures demonstrate the careful consideration which the Government are prepared to give to well-agreed proposals for renewal areas, and the mechanisms which are available to provide additional financial support where this can be justified. I believe that these steps should reassure Members of the Committee and I hope that they will persuade the noble Lord, Lord McIntosh, to withdraw the amendment.

Lord McIntosh of Haringey

I am sure that it cannot be deliberate, but the Minister has seriously misrepresented the case I put forward. He suggested that, by requiring in the amendment that the report should identify the resources which are required to be made available by both the local authority and the Secretary of State, we are implying that those are all the resources which are going to be available for housing renewal areas and that the private sector has no part. That is not what we said and it is not what the amendment says. We have no objection to the injection of private capital into housing renewal areas; but we insist that the public provision from local authorities and from the Secretary of State should be adequate, taken together with any other resources, to meet the needs of such housing renewal areas.

Unless we receive more assurances from the Government and the Minister about the public resources which will be available, then we are bound to say that the detail which has been given as regards housing renewal areas is not reassuring. We are not alone in saying this; indeed, many of the professionals most involved in housing have been expressing such concerns for some time, but it is as if they are bouncing them off a brick wall so far as concerns the Government.

The Institute of Environmental Health Officers held its conference at the end of last month. It issued a policy statement which criticised tile Part VII provisions as not going far enough and not going into sufficient detail as regards housing renewal areas in the future. The institute stated that it was clear the Government intended to reduce the subsidies available in group repair schemes, cormpared with enveloping, and that any reduction in subsidy must not act as a disincentive.

The Government are aware of those views and I am sure that they have read the reports on the conference of the Institute of Environmental Health Officers—which, after all, does know what it is talking about. I am also sure that there must be some reply to what has been said. However, the Minister has not given such a reply nor has he indicated what the level of subsidies will be.

The Association of District Councils, which is controlled by Conservative councillors, has published a report entitled, Time to Take Stock—Looking at the Government's Proposals. The association had concluded that the success of this policy could founder without considerably more public finance being made available. I made a similar point, but I was making it on my own behalf and not on behalf of the Tory-controlled Association of District Councils. If the Government will not listen to me, will they listen to their own colleagues in local government who know a great deal about what is happening?

The 1986 English House Condition survey showed that the need for action in renewal areas is very great. I am sorry that my noble friend Lady Fisher is no longer in the Chamber because there is particular evidence from the West Midlands Regional Forum which shows the very desperate needs of public housing in the West Midlands.

In summary—if I may put this case from authority rather than from straightforward reasoning—the National Housing Forum carried out an assessment of housing needs in the 1990s and commented that: Significant housing needs are apparent stemming from the condition of the stock … some replacement building seems essential. And continuing investment in improvements and repairs is clearly needed. If real progress is to be made and further deterioration avoided, such expenditure is needed at levels higher than those achieved in the 1980s". That is the challenge. It is not that we need new structures so much for local authority expenditure. As those who are most concerned with these issues on the ground have recognised, we need higher expenditure in order to make real progress. In my view the Minister has totally failed to answer the anxieties that not only I but professionals and those engaged in the field have expressed very clearly. Is he able to give us any further help about levels of expenditure which they believe are necessary and which the Government will have to provide if the housing renewals area policy is to be effective?

Lord Hesketh

I think that the noble Lord, Lord McIntosh, will accept that the object of the Bill is to provide the framework for this to happen. As he is well aware, the fact of the matter is that resources will be allocated in the public expenditure round each year and allocated to local authorities. What we have here is the framework which allows the Secretary of State to review cases in which he feels that there is a contribution that can be made by not one but two routes.

I know that the noble Lord, Lord McIntosh, would like me to make a commitment; but he knows that he will not get a commitment because it will have to come out of the public expenditure round at the end of the day.

Lord McIntosh of Haringey

I am fed up to the teeth with frameworks and with the Government proposing changes in the structure of subsidy policy rather than providing any money. We had all that last year. We had that with housing action trusts and with the tenants' choice proposals. All of them were proposals to change the framework and not the reality. What about a picture inside the frame for a change? In particular, what about a picture of a few bank notes? That is what is in fact required.

I am not reassured by what the Minister has said. I do not think that he is setting off on the right foot the housing renewal areas, which we want to succeed. For the moment however I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 135YB: Page 86, line 26, at end insert— ("(g) the proper management and effective use of the accommodation.").

The noble Lord said: This amendment is tabled on somewhat similar grounds. Section 239 of the Housing Act 1985 outlines the grounds on which a housing action area can be declared and contains the wording in this amendment. It includes the words: the proper management and effective use of the accommodation".

That is something which I should have thought it would be impossible to do without. Should the amendment not be accepted, mismanagement by landlords will not be a factor in deciding whether a housing renewal area is the right course of action. I should have thought it obvious to any objective observer that one of the most common reasons for defective housing giving rise to the need for some such action as a housing renewal area is when a landlord is guilty of mismanagement. So why is this change being made, and why are housing renewal areas to be different in this respect from housing action areas?

What evidence is there to support the case for this change? Why should not mismanagement of properties be a consideration in deciding whether there should be a housing renewal area? I do not think that I put a particularly complex argument. It is one that has plenty of precedent in the legislation undertaken by this Government, not by a government of any other political complexion. The omission of those words seems to fly in the face of the facts, in the face of the Government's original intentions, and in the face of the experience of those most active and knowledgable in the field. Why is this change being proposed and why cannot these words be put back?

Lord Hesketh

The amendment would require the report which must be considered by local authorities before declaring a renewal area to contain information on an additional matter: the proper and effective use of accommodation.

One of the aims behind the provisions of Part VII is to provide local authorities with a firm basis from which to develop area strategies so that they focus on the overall needs of an area rather than approaching the question of renovation, or indeed clearance, on a piecemeal basis. It follows from this that I agree that one consideration in assessing the options for an area is how to make the best use of existing accommodation or possibly how to increase the accommodation potential for an area. I question however whether this amendment is necessary.

In particular, Clause 86(3)(a) requires the report to contain information on living conditions in the area and (3)(b) requires information about the ways in which those conditions may be improved. To my mind, this suggests that an authority must consider the way in which accommodation is being used and its possible future uses since a report can hardly contain information about living conditions and possible improvements if it does not cover these matters.

Furthermore, subsection 3(d) requires detailed proposals as to the exercise of an authority's renewal area powers. Those powers include the purchase of premises in order to secure the proper and effective management and the use of housing accommodation—Clause 90(2) and (3)(b). Clearly, a report cannot give detailed proposals in this respect if it does not contain information on what is proposed by way of management and effective use.

Because of that, we believe that this amendment would weaken rather than strengthen Clause 86(3) because it suggests a restrictive interpretation of the matters required to be included in the report. We do not believe that this would be particularly helpful. That is why I urge the Committee to resist the amendment of the noble Lord, Lord McIntosh.

Lord McIntosh of Haringey

That is a very eloquent attack on the 1985 Housing Act. In defending the wording of the present Bill, the Minister has given no indication as to why the 1985 Housing Act used different words. He has given no indication as to why it should be thought that mismanagement of housing stock is not one of the major reasons why special measures such as the establishment of a housing renewal area may be required.

I am afraid that this is all of a piece with the Minister's previous answer. I do not find it satisfactory. It is one to which we may have to return again. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 135YC: Page 86, line 31, at end insert— ("(5) In issuing any guidance under subsection (4) above, the Secretary of State shall have regard to such information as is available on housing conditions in the proposed area.").

The noble Lord said: I am becoming a little despondent about this series of amendments. I thought that they were so reasonable and part of a subject which ought not to be a matter of party political dispute. I begin to wonder whether this—the most reasonable of all the amendments—will receive the same dusty answer that we have had on previous amendments.

Amendment No. 135YC provides that when the Secretary of State is making a decision as to what guidance he gives to local authorities on housing renewal areas, the Secretary of State shall have regard to information on housing conditions. Undoubtedly Clause 86(3) includes reference to the report which is to be produced on a proposal for housing renewal area. It refers to the living conditions in the area concerned, and the ways in which those conditions may be improved. But subsection (4), with which we are concerned here, simply says that the local housing authority shall have regard to such guidance as may from time to time be given by the Secretary of State. The Government have refused to give adequate assurance about the resources. Surely they must be willing to give assurances that any guidance issued by the Secretary of State shall be based on objective evidence about the housing conditions in the area concerned and whether the proposal for a housing renewal area is appropriate to deal with those problems.

I referred, in speaking to Amendment No. 135YA, to some of the concerns expressed by professionals in the area. Those concerns were not lightly expressed. They were based on considerable research, which must have been made available to the Government, about changes in housing conditions. I refer, without going through all of them, to the 1986 English House Condition Survey which was concerned with changes over a period of five years since 1980–81. That reports a slight decrease in the number of unfit properties, but in 1986 the absolute number of unsatisfactory dwellings still stood at 2.9 million; that is 15 per cent. of the housing stock. There has been little change in the number of properties in serious disrepair. The report says: Future Government policy must be geared to reducing the number of properties in serious disrepair".

What I want to ask the Government is what notice have they taken, or what account have they taken, of the evidence which is so widely available about the deficiencies of our housing stocK, and what evidence is there that they propose to take this into account in the formulation of detailed policy on housing renewal areas? I beg to move.

Lord Hesketh

The amendment would require the Secretary of State to have regard to information on housing conditions in a particular area in issuing any guidance under Clause 86(4). I understand that its purpose is to ensure that the varying needs of individual areas are taken into account. The amendment assumes that guidance will be directed at individual areas. This is not our intention. Instead, we propose that the guidance should be of general application and, rather than addressing itself to detailed criteria such as those in Clause 87, should deal with the process of preparing the report which must be considered before declaration of an area.

We have run a number of pilot studies to test the matters which the guidance should cover and have evolved an appraisal system which we believe will be relevant in all the potential renewal areas. We propose that any assessment should begin with the definition of the boundary to be considered and the determination of the aims and objectives for its revitalisation. This will be followed by the collection of information on the condition of housing and local residents' preferences and the views of commercial and other non-residential occupiers in the area, together with an environmental assessment. On this basis, an authority would be able to develop various options and appraise them on economic, social and environmental grounds. This process will lead to the production of the report after a comprehensive programme of events which are conduiited through the local authority.

It will be evident from this that the whole purpose of the guidance which we intend to issue is to encourage a proper consideration of housing conditions in a possible renewal area and a full information-seeking process. The effect of the amendment is to put an emphasis on the Secretary of State intervening in the declaration of individual areas—something from which the provisions of Part VII move away.

With regard to the housing stock condition, it is an important matter and authorities can use the information from the English House Condition Survey of 1986, but, better still, they should carry out their own local surveys, particularly with regard to the establishment on the basis of producing a report as we intend and hope to see on the provisions of Part VII. For the reasons I gave earlier, I resist the amendment of the noble Lord, Lord McIntosh.

Lord McIntosh of Haringey

I shall not resist the idea that local authorities should take the initiative in carrying out their own surveys to complement and update the English House Condition Survey of 1986. I welcome the scraps of indication that the Government have an interest in evidence. I still believe that they are standing too far back from the responsibility that they ought to have in securing that the evidence on which the policies are based is correctly and adequately obtained; above all, with reference to Amendment No. 145A, that the resources are available.

We must read the responses to all the amendments together in order to decide what to do. It is not appropriate to insist that the Committee takes a decision at this stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 86 agreed to.

Clause 87 [Conditions for declaration of renewal area]:

11.15 p.m.

Lord Reay moved Amendment No. 136: Page 87, line 14, at end insert ("or").

The noble Lord said: In moving Amendment No. 136 I would also like to speak to Amendments Nos. 137, 143 and 144 because they are closely linked and concern the treatment of certain Crown interests for the purpose of renewal areas under this part of the Bill and grant under Part VIII.

Amendments Nos. 136 and 137 concern Clause 87. As that clause is drafted it has the effect of treating dwellings owned by the Crown as public sector dwellings. Such properties could not therefore be counted when assessing the number of privately-owned dwellings necessary to meet the criterion for the declaration of renewal areas specified in subsection (1)(b). The effect of Amendments Nos. 136 and 137 is to delete the reference to the Crown, the Duchy of Lancaster and the Duchy of Cornwall so that properties owned by the Crown fall within the definition of a privately-owned dwelling and can be included within the specified proportion of privately-owned dwellings.

Amendments Nos. 143 and 144 concern Clause 101. It provides that an authority may not entertain an application for grant unless the applicant has an interest in the property concerned, as owner or tenant, or has the intention of acquiring such an interest. An owner's interest is defined in such a way as to exclude Crown interest. This is an interest which belongs to Her Majesty in right of the Crown; or to the Duchies of Lancaster and Cornwall; or to a government department; or which is held in trust for Her Majesty for the purposes of a government department. Grant could not therefore be paid in respect of dwellings where the owner's interest was a Crown interest. Amendments Nos. 143 and 144 remove the reference to Crown interest and its definition so as to leave an authority free to entertain applications in respect of such dwellings.

The Committee will appreciate that dwellings owned by Her Majesty in right of the Crown or the two Duchies are not public sector dwellings in the sense that those owned by a local authority are. In terms of the relationship between landlord and tenant and the sources of funding available for repair they are more akin to properties owned by a private sector company or private individual with large property holdings.

The new grant system does not rule out the possibility of making an application purely on the grounds of the size of the potential applicant's property holding. It would therefore be unreasonable to exclude the Crown on this basis alone. Similarly, by specifically excluding certain Crown properties from grant aid, there is the implication that the Crown is in some way analogous to the public sector bodies listed in Clause 98(3) which are not eligible for grant. This was not our intention and indeed might be held to set an undesirable precedent. The existence of the exclusion simply reflected the fact that applications for grant in respect of this type of property would be made very rarely and that the effect of the test of resources originally proposed was such that grant was unlikely to be payable.

These amendments in no way imply that the Crown would be entitled to financial assistance as of right. Where renovation grants are concerned, for example, the normal test of resources will apply in the same way as it does to other private landlords. The effect of the amendments is simply to restore, in so far as is the case at present, the long established convention of treating properties in which the Crown has an interest as privately owned dwellings and to treat the Crown in the same way as any other private landlord. I beg to move.

On Question, amendment agreed to.

Lord Hesketh moved Amendment No. 137: Page 87, leave out lines 16 and 17.

On Question, amendment agreed to.

Clause 87, as amended, agreed to.

Clause 88 agreed to.

Clause 89 [Duty to publish information]:

Lord Ezra moved Amendment No. 138: Page 88, line 12, after ("shall") insert ("provide information, advice and assistance to individual householders and shall").

The noble Lord said: The purpose of this amendment is to ensure that, where a local housing authority has declared an area to be a renewal area, among other matters it will provide information, advice and assistance to individual householders.

I should here declare an interest in these matters because I happen to be closely associated with the National Home Improvement Council which is at present organising a large number of neighbourhood revitalisation schemes in renewal areas. Its experience of these schemes is that it is of great importance to provide free information, advice and assistance to local residents, whether they are among the least well off or whether they are ineligible for financial assistance.

When this matter was discussed in another place, Mr. Trippier for the Government said that he was prepared to look again at the amendment, it having been previously introduced, and he found little with which to quarrel as regards its wording. However, he said that he preferred to provide guidance to local authorities on this matter rather than to have it on the face of the Bill. I suggest that it would be far better to have it on the face of the Bill. This matter has proved to be such an important ingredient in making these renewal areas a success that I think it should not just be left to be included in DoE circulars.

In these neighbourhood schemes we have found that simply producing leaflets and booklets or lodging plans at the town hall or library is not enough. What is needed is face-to-face contact on a daily basis with those concerned in the area and for those providing the information to be on hand and readily accessible to the residents. I beg to move.

Lord Hesketh

As we have heard, the purpose of Amendment No. 138 is to give local authorities a statutory duty to provide advisory services for people living in renewal areas.

I fully agree that the provision of information and advice will be a vital ingredient in the success of renewal areas, and indeed Clause 89 already requires authorities to publish information about their proposals, any action which has been undertaken and the assistance available to those who wish to carry out renovation work. I also appreciate that the noble Lord, Lord Ezra, is concerned that authorities will not provide the right kind of forum for discussions about renewal areas unless there is specific provision for a free advisory service. The amendment proposed, however, goes somewhat beyond the intention described. As it stands, it could be construed as making mandatory the type of assistance provided for in Clause 90(5)(b), which includes financial assistance. It would mean, for example, that an authority had to give a grant under Part VIII irrespective of the means of the applicant. That is not acceptable. It also prejudges decisions which the Government have yet to make about the future funding of agency services, which would undoubtedly play an important part in advising residents.

I understand that representatives of the National Home Improvement Council have in any case arranged to discuss with Ministers in the department their particular concern over the provision of information. We shall wish to discuss at that meeting the various alternative ways in which such information might be provided and by whom. The provisions in Clause 89(2) enable the Secretary of State to require local authorities to comply with any directions he might issue on these matters. I therefore doubt the need for a specific provision which might not have the flexibility that we and the NHIC might be looking for.

Nevertheless, I can assure the noble Lord, Lord Ezra, that we shall take steps to ensure that the right information is provided at the right time to those living and working in the new renewal areas. On that basis I invite the noble Lord to withdraw his amendment.

Lord Ezra

I have listened carefully to the Minister but I believe there is a slight misunderstanding about the wording. The word "assistance" is not intended to mean financial assistance. It is the sort of assistance given to people who wish to improve their homes and receive the best advice they can get. I therefore hope that, on the basis of my explanation of what the word means, when these further discussions take place they will do so on the correct understanding.

I am sorry that this simple amendment cannot immediately be accepted because I feel that, having struggled manfully for all these hours today, with many positive amendments—the noble Lord, Lord McIntosh, has done more than his bit—it is a pity that we could not get even one accepted without further discussion. I hope that the discussions to which the noble Lord referred will be fruitful and perhaps at a later stage of the Bill he will be able to endorse this proposition on that basis. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 89 agreed to.

Clauses 90 and 91 agreed to.

Clause 92 [Exclusion of land from, or termination of renewal area]:

Lord Hesketh moved Amendment No. 138A: Page 90, line 11, leave out ("require") and insert ("specify").

The noble Lord said: This is a technical amendment. Only a power for the Secretary of State for Wales to specify, rather than require, information from local authorities in respect of the exclusion of land from or termination of a renewal area under Clause 92 is required in the light of a new clause containing more comprehensive powers already tabled for the Committee's consideration. I beg to move.

On Question, amendment agreed to.

Clause 92, as amended, agreed to.

Clause 93 [Contributions by the Secretary of State]:

Lord McIntosh of Haringey moved Amendment No. 138B: Page 90, line 40, after ("Treasury") insert ("following consultation with the local authority associations, and the rate or rates of contribution shall not be less than 75 per cent. of the expenditure to which the contributions relate").

The noble Lord said: I suppose one could describe this as a final, despairing plea for sanity and responsibility in dealing with housing renewal areas. In this amendment we ask that the Government should put their money where their mouth is.

When the matter was debated in another place the amendment was slightly different. It proposed that the Government should be responsible for 100 per cent. of the costs of setting up housing renewal areas. I have much sympathy with that view because I believe that establishing decent housing conditions for the population of this country is properly a national concern. Although local authorities may be used as agents, if national government are making political play with new frameworks, as the Minister puts it, for housing renewal then national government should take the financial responsibility as well.

In response to those amendments, the then Minister of State, Mr. Gummer, talked as if there were authorities which were rolling in money. He said in Committee in another place: I would (not) like to say that a Government should have to give 50 per cent. to authorities with plenty of money… We must not prevent authorities that could cope… with less than the current contributions". I do not know of any local housing authorities which are rolling in money in the way that Mr. Gummer suggested. Perhaps the Minister would care to name some of them for us when he replies to this amendment. This is a government responsibility. They are going to claim credit for any success that they may have. The only right thing is for the Government to provide a minimum. It seems to me that 75 per cent. is a modest minimum percentage of the costs of work that is going to be carried out on their behalf by local authorities.

If the Government are not going to give that agreement then what we are turning to is a new form of means testing except that the means test is being applied to local authorities rather than to individual dwellings or tenants. How will the Government decide the level of Treasury and local authority contribution? How will they estimate the grant take-up and therefore the consequent actual expenditure? It is not only for reasons of natural justice but for reasons of administrative propriety that the Government should explain now, in order to put it into public expenditure White Papers, what are their intentions and how they are going to meet their responsibilities. I beg to move.

Lord Hesketh

The effect of this amendment would be twofold. First, it would require the Secretary of State to consult the local authority associations on the rate or rates of Exchequer contribution which he is minded to determine in respect of expenditure incurred by local authorities under this part of the Bill. Secondly, it would set a minimum rate of contribution of 75 per cent.

The rate of Exchequer contributions is determined by the broad factors: the level of resources which the Government believe should be devoted to housing in the annual public expenditure round and a judgment about what an authority needs by way of support for its expenditure in order to ensure that it gives sufficient weight to the relevant expenditure programme; in this case, environmental works in renewal areas.

In practice of course the rate of contribution remains reasonably constant over time to enable authorities to plan ahead with reasonable confidence. Though the Government are prepared to listen carefully to what the local authority associations have to say on these matters, I do not think it appropriate to insert a formal requirement for consultation.

As regards the rate of contribution towards works under Part VII, we do not believe that a case has been made for a 75 per cent. minimum rate. Instead we propose to continue with the 50 per cent. rate of contribution which is currently that for environmental works in housing action and general improvement areas. We do not believe that there is evidence that a higher general rate is required in the new renewal areas. However, as I explained in responding to Amendment No. 135YA, local authorities will be free to seek a higher rate of contribution in respect of all expenditure programmes covered by Parts VII and VIII of the Bill incurred by authorities in a potential renewal area. This may be, for example, 75 per cent. or it may be higher. The higher the general rate of contribution, of course, the less flexibility there will be to consider such higher rates in the areas that most need them.

The noble Lord, Lord McIntosh of Haringey, has asked a question not for the first time this evening and no doubt not for the last in days to come; namely, whether I can be specific about the amount of resources that will be committed to this measure. He must understand that, particularly in the absence of my noble friend the Paymaster General from the Government Front Bench it would be very brave of me to take such an audacious step. The fact is that the matter will have to be reviewed within the overall sphere of the autumn public expenditure round.

Lord McIntosh of Haringey

I really did not want to pour cold water on the whole idea of housing renewal areas. As I have said, it is very largely a local authority initiative and that of professionals in the field which the Government have taken up. The answers that the Government have given to all the amendments we have tabled have aroused in me the greatest misgiving that the Government are not treating this matter as anything other than a policy gesture. I do not believe that they really want to devote additional resources to it.

The Government do not recognise the nature of the need which gives rise to proposals for housing renewal areas. I was confirmed in that view by the very last remarks of the Minister when he said that neither he nor any other Ministers would commit themselves to any particular level of expenditure. They are making submissions to the Treasury and to Cabinet committees about expenditure under this Bill. Unless they make submissions which cover substantially increased central government funding, the whole of this part of the Bill will be a dead letter. We shall see in due course, as usual after the passage of the Bill, whether the Government really mean what they say about housing renewal. We shall see whether this is simply a meaningless gesture and a public relations exercise on the part of the Government or a serious element in housing policy.

I was particularly discouraged by the Minister's comment to the effect that any money which goes to housing renewal areas would come out of other housing expenditure. This is similar to the answer which he gave me in relation to amendments on Clause 80 on residual debt and residual debt subsidy. I confess that for a moment I was taken in by his assurance that residual debt subsidy would be provided as a specific addition to the housing revenue account subsidy. He said—and I was too slow to pick it up—that, although it would be counted towards the housing revenue account subsidy, it would not form an additional amount and therefore would not increase the total amount available for housing purposes but would have to come out of other housing subsidies. To that extent, in the classic phrase, it was not "new money". I fear that that is the case here. I fear that no new money is available for housing renewal areas. Under those circumstances I fear that the proposals in this part of the Bill have no real substance and that the hopes which have been raised in the minds of housing authorities and of their tenants and of housing professionals are due to be dashed at the public expenditure round. I hope I am wrong but I fear that I am right. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 93 agreed to.

Clauses 94 to 97 agreed to.

Lord Reay

I beg to move that the House do now resume.

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

House resumed.