Housing and Urban Development Bill

HL Deb 29 March 1993 vol 544 cc600-63

3.10 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Strathclyde)

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 Strathclyde.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 93 agreed to.

Clause 94 [Tenant's notice of intention etc.]:

Lord Monk Bretton moved Amendment No. 176A: Page 96, line 13, at end insert: ("() In Schedule 5 to the 1985 Act, paragraph 10 (certain dwelling houses for persons of pensionable age), sub paragraph (2) (b), for the words from "a system" to "a group of dwelling houses" there shall be substituted "or other designated responsible person and a system for calling him provided that the system was in operation either on 1st January 1993 or, if the tenancy was granted after that date, at the inception of the tenancy."").

The noble Lord said: The history of this amendment goes back a long way. In order not to empty the Chamber too quickly, I shall try not to go back further than I can help. But I fear that I have to go back to the Local Government and Housing Act 1989. At a late stage in the passage of that Bill, in fact the Committee stage in this House, the Government decided to repeal paragraph 1 I of Schedule 5 to the Housing Act 1985. That repeal would have permitted enfranchisement in small groups of council housing designed for the aged, but where, inter alia, no common room facilities existed. That had particular implications for the provision for the elderly in small groups and in smaller villages in rural areas.

This House was not satisfied with the position then and hence passed by 94 votes to 36 a somewhat hastily composed amendment which relied upon each application for enfranchisement in those cases being determined by the Minister. It was hastily proposed by the noble Lord, Lord McIntosh of Haringey. I am sure that he would not mind my saying that it had to be done hastily and it may not have been as perfect as all that. However, on the whole the House felt that he had done a good job. That amendment constitutes the present paragraph II of Schedule 5 to the 1985 Act, and that is the present position.

At that time there was some doubt as to whether the proposal was ideal. To begin with, it is a pretty cumbersome procedure. My noble friend Lord Vinson and I had put amendments down which would have reduced the number of cases which the Minister needed to determine. Our amendments were with-drawn pending discussion before Third Reading with the Minister, who was then my noble friend Lord Hesketh. My recollection is that we got within an ace of success in the discussions, but at that time there were great pressures on the parliamentary timetable at the end of the Session. There was a strong desire not to amend the Bill further and it was therefore concluded that perhaps the best thing we could do on that occasion was to await a further legislative opportunity. So, although amendments were put down on Third Reading, they were not moved.

Amendment No. 176A was one of the amendments put down on that occasion. In effect, it amends paragraph 10(2) (b) of Schedule 5 to the 1985 Act. That paragraph lists the cases where enfranchisement does not apply. The amendment simply takes out the requirement for the common room, leaving the other provisions as they are in paragraph 10. The rest of the amendment proposes to prevent the later addition of a calling system, which might be some form of abuse to which authorities might possibly resort.

Today, looking at the matter again, we have the advantage of hindsight. Since 1989 a large number of applications have been made to the Minister, I believe almost 4,000. There have been complaints about uncertainty and delay. Local authorities have 28 days in which to apply. They have found that a pretty tight schedule and in a number of cases they have failed over the deadline.

On the other hand, the Minister is permitted to take as long as he likes, and it is alleged that he has certainly done so. One wonders whether the uncertainty is of much help to anyone, local authorities or potential enfranchisers. There have been complaints on both sides about petty application of the rules and I suppose that that is fairly inevitable. I shall not go into it now.

Then, of course, there is the cost of this lengthy procedure; and another drawback is that the Act in no way enjoins the Minister to take into account the likelihood or otherwise of a dwelling for the elderly being replaced if the original one is enfranchised. Several local authorities are concerned on that score. They see a steady attrition of suitable accommodation available to them which will make it more difficult for them to fulfil their obligations. My anxiety about that is the obligation they have of rehousing under the Rent (Agriculture) Act 1976. It would be interesting to know how the Minister sees the position.

The dangers, in my view, are, first, that as people become older they wish to stay in the same neighbourhood, to continue to live where they have reason to live as long as they can. That is something which might be prevented. I also see increasing difficulty for local authorities in rehousing retired agricultural workers under the 1976 Act.

It seems to me right to propose something that would make for more automatic decisions and less bureaucracy. That is what the Association of District Councils wishes to see. The amendment would reduce the number of applications for the Minister to decide. It would provide, I believe, more certainty. It might result in somewhat fewer enfranchisements of that kind of property. Under the circumstances, that might be to the good; after all, the number of elderly is not decreasing. I beg to move.

Lord Coleraine

I support my noble friend's amendment for most of the reasons that he gave. In particular, there is the position of small groups of houses in rural areas where it would not be reasonable to expect a common room to be attached to the group. Nor would it seem to be reasonable for a council in those circumstances to have to go through the currently cumbersome and capricious procedures involved in paragraph 11. I hope that my noble friend will consider that a case has been made here.

Lord Renton

I too support the amendment moved by my noble friend Lord Monk Bretton. I happen to be an elderly person and live in a rural area, but I have no interest to declare so far in the amendment. It is a fact that a great many people in rural areas seem to live to a great age. Once they have become settled in a cottage, flat or small house, they do not wish for any reason, whether it be a technical reason under the housing law or any other, to have to move against their will. To the extent that my noble friend's amendment would prevent that, I think it requires a great deal of sympathy.

We have reached a stage of the Bill at which I must confess, although I am a lawyer, we enter a realm of a good deal of legislative complexity and some technicality. My noble friend explained with great clarity the reason for the amendment and its result. I find it difficult to understand how my noble friend on the Front Bench could be other than sympathetic towards it.

Baroness Hollis of Heigham

On this side of the Committee we warmly support the amendment so eloquently moved by the noble Lord, Lord Monk Bretton. We have long been concerned at the way the Secretary of State exercises powers under the Housing Act 1985 to exclude elderly persons' dwellings from the right to buy. The significance is that, short of full sheltered housing, there is special housing designed to meet the social and physical needs of the elderly in the last five to 10 years of life which can now be sold. As so many speakers have said, owing to the growing number of the elderly, the demands of care in the community which very shortly will face us all and the particular needs of the rural community to allow elderly people to remain in their villages and small towns, it is essential that elderly persons' bungalows, short of full sheltered housing, should remain part of the socially rented housing stock.

It cannot be sensible that someone of 80 should exercise his or her right to buy an elderly persons' bungalow which has been customised for his needs, and buy at a heavy discount, which does not allow a replacement bungalow to be built, who may then, unfortunately, die within a year or two, so that the elderly persons' bungalow passes to a son or daughter of 40 or 50 who can sell it to somebody else as a second home. That cannot be right. It strips rural areas in particular of their ability to meet the housing needs of the elderly.

The Secretary of State currently exempts sheltered housing where it is clustered round a common room or has a resident warden and high care facilities. But where we deal with elderly persons' bungalows without the full range support of facilities, it is left, as the noble Lord, Lord Monk Bretton, said, to the Secretary of State to decide. The factors he takes into consideration include location, heating systems, design, size and so on. When the delays prove to be bureaucratic and time-consuming, local authorities are required to contest a right-to-buy application on an elderly person's dwelling in 28 days. In my authority it has taken up to 14 months for the Secretary of State to reply—not surprisingly, when one asks the Secretary of State to deal with each individual case on its merits based on the associated paperwork. In consequence, local authorities have to measure to the nearest yard the distance of a bungalow from shops and from bus stops, heights of ceilings and the like. It is simply bureaucratic nonsense. The result is that we have had whimsical, unpredictable and arbitrary decisions flowing from the Secretary of State as to whether an elderly person may or may not buy his or her bungalow or flat.

For example, the local authority was required to sell an old person's ground-floor flat on the basis that that flat was located on a noisy road and therefore, the Secretary of State held, was not suitable for an elderly person. Yet at the same time, if that flat were not on a main road, the Secretary of State would have regarded it as being too far from buses and shops and therefore not suitable for an elderly person.

On another occasion, the local authority was required to sell a dwelling because it was 0.9 miles away from the nearest shop—this being in a rural area where there were no shops for two miles. That meant that, on that formula, that village could have no elderly persons' bungalows at all. In another case, for example, the Secretary of State required the sale of an elderly person's flat because it had high ceilings and the Secretary of State argued that people could not reach to change the light bulbs. Another was sold because it had the wrong catch to a bathroom door; another because, though the bath was fitted with grab rails, it was not properly designed for an elderly person.

On that basis, neither the tenant applicant nor the local authority can predict whether an elderly person's flat, bungalow or dwelling will come within RTB. It is clearly nonsense. What the amendment will do—which is why we support it so warmly—is to exclude from RTB not just sheltered housing which is currently exempt but those elderly persons' dwellings which are connected to a warden system or a control system; in other words, designed for the elderly in the last years of their life who need some degree of support to remain in the community. We believe that that is an appropriate field for socially rented housing, particularly in rural areas. We very much hope that the Government will support the amendment.

Lord Marlesford

I too rise to support strongly the amendment of my noble friend Lord Monk Bretton. I am a great supporter in general of the right to buy. But, as noble Lords know, it has caused very special problems in rural areas. They are problems which have to some extent to be made up for through the reinvention of council housing under another name—through housing associations. Unfortunately, due to a shortage of government funds, it has not been possible to make up the deficit. There are many villages where people are simply unable to afford to live and where the whole social and age mix of the population is changing greatly as the result of that particular scarcity.

If one has legislation of this sort, which is in general good, one should not shrink from producing the necessary amendments to make it more precise in meeting demands. I believe that the amendment of my noble friend would facilitate matters. I believe that all Members of the Committee must agree that where there is housing which has been specially provided in any form for the elderly, at a cost great or small, it is a great pity if there is no simple and non-bureaucratic means whereby the right to buy should not apply to such housing.

Baroness Hamwee

Voices have been raised on all sides of the Chamber in support of the amendment. I hope that the Minister's voice will be added to them. If he accepts the amendment, he need not tell the Committee whether it is merely to avoid bureaucracy or whether he accepts the arguments about right to buy which have been put forward. Perhaps he can avoid embarrassment on that score.

I support all that has been said about keeping a stock of housing which is very much needed. I should like to add one comment in regard to alarm systems (call systems). As technology advances, the use of such systems is the greater and they may be used and installed all the more easily. Anything which discourages that installation must concern us. Any sort of discouragement, and a fear that one needs to provide additional facilities in the form of a common room to meet all the criteria in order to take housing out of the right-to-buy provisions, is of concern. I say quite simply that I hope the Minister will support the widest spread of that sort of system and avoid the bureaucracy that has already been referred to this afternoon.

Lord Campbell of Alloway

I support the amendment for the reasons given by other Members of the Committee. It is obviously the work of a competent draftsman. I compliment my noble friend Lord Monk Bretton on his clarity of exposition in an exceedingly technical and complex area. However, he has made plain the spirit of the amendment. If the drafting does not appeal to my noble friend, perhaps he would take on board the spirit of the amendment and produce his own draft with the assistance of a parliamentary draftsman. The Committee may well think that the essence of the amendment is wholly admirable and right, irrespective of whether one supports the right to buy. I support it, but as the Committee knows, with qualifications as to residency.

Lord Swinfen

I should like to add my support for the amendment moved by my noble friend Lord Monk Bretton. If dwellings in a group are sold off one by one, it will become virtually impossible to find a warden to look after those which remain. Certainly it will he difficult to find back-up wardens. The amount of money that one would be able to pay to wardens will go down and no one will come forward to be of help.

The other point that I want to put to the Minister concerns rural areas. Should that type of accommodation in rural areas become extremely rare and difficult to find, it will mean that elderly people in the last days of their life will be forced out of country areas, away from their families and friends and into an urban and what may be to them a possibly hostile environment. I very much support the amendment.

3.30 p.m.

Lord Strathclyde

My noble friend Lord Renton said that we were legislating in an area of increasing complexity and technicality. He is right and it gives me a problem. I should like to bring some clarity to this area because I suspect that there is confusion in the minds of some of my noble friends as to the current position. Therefore perhaps I may ask the Committee's blessing if my reply is slightly lengthy. I should also like to say to my noble friend Lord Monk Bretton that I am conscious that we are returning to a subject which has been much debated in this Chamber—as he said, most recently in 1989—and which, as has been demonstrated today, arouses strong feelings.

I remind the Committee that following the 1989 legislation we now have two separate statutory regimes under which housing occupied by elderly people may be excluded from the right to buy. First, there is the provision currently in paragraph 10 of Schedule 5 to the Housing Act 1985 which applies to groups of housing particularly suitable for elderly people. The amendment would change that provision. Paragraph 10 applies only if there are special facilities for the benefit of the occupants of a group of dwellings. The special facilities may take the form of a resident warden. Alternatively there may be a non-resident warden and a call system; but in that case there must also be a common room.

I should like to emphasise the point that paragraph 10 applies to an elderly person's bungalow or flat only if it forms part of a group. It does not apply to such properties when they stand alone. The provision is clearly directed, as I agree that it should be, at what might be called the classic sheltered housing scheme. One of the thoughts lying behind the provision is that the scale of individual units in a group which has shared facilities may affect the viability of the whole scheme.

There has not been a lot of controversy about the exclusion of sheltered schemes from the right to buy and the provision which now appears as paragraph 10 is not much changed from when it first appeared in the Housing Act 1980. If the landlord denies the right to buy to a tenant or the ground that his or her home forms part of a sheltered housing scheme, the tenant has no right to challenge. So far as I know, few or no disputes have arisen. No doubt it is quite clear whether or not someone is living in a sheltered housing scheme. The Government and my noble friends have no dispute with that. By contrast, the law relating to individual non-sheltered housing for elderly people has been through several changes, has provoked many disputes and has been debated in this Chamber on a number of occasions. It is one of the subjects on which Members may regard themselves as having some expertise.

The problem is that housing for elderly people, when it takes the form of individual free-standing properties rather than sheltered groups, is not always obviously recognisable. Most elderly tenants live in housing which could be equally appropriate for younger people. It is probably true that housing for elderly people should be on the level and properly heated, because people become less able to climb stairs and less able to cope with the cold as they become older. However, beyond that the suitability for elderly people of a particular property can be very much open to debate. For that reason no doubt the original legislation in 1980 provided that if the landlord did not want to sell elderly persons' housing under the right to buy and that housing did not form part of a sheltered scheme, the Secretary of State had to be asked to determine that the right to buy was not to be exercised.

During the period between the Housing and Planning Act 1986 and the Local Government and Housing Act 1989 the Secretary of State lost that jurisdiction and landlords were free to deny the right to buy on their own authority. The position now is that the Secretary of State has jurisdiction under paragraph 11 of Schedule 5 to the Housing Act in respect of what was, broadly speaking, the existing public housing stock at the end of 1989. A determination may only be made if the property was first let before 1st January 1990. Post-1989 housing for elderly people can only be excluded from the right to buy if it forms part of a sheltered group and falls within paragraph 10 of the schedule.

The amendment tabled by my noble friends would change paragraph 10 so as to widen the definition of a sheltered group. Under the amendment a group of dwellings could fall within paragraph 10 provided that it had the services of a non-resident warden or other designated responsible person and a system for calling that person. There would no longer be any need for a common room. The presence of a system for summoning a designated responsible person might be thought to be strong evidence that the property in which it is installed is rather special. That was certainly the view of the noble Baronesses, Lady Hollis and Lady Hamwee. At one time it might well have been so. But with modern telecommunications it no longer seems to be the case.

That is not just the Government's position. Let me quote from a pamphlet kindly supplied to the department by Stroud District Council explaining its lifeline service. It reads: The lifeline consists of a telephone unit and a body worn radio trigger. An alarm call is raised by simply pressing a red button on the telephone or by pressing the petite radio trigger … Having activated an emergency call your details are displayed on a visual screen at the ambulance headquarters control centre". I am sure the whole Committee will agree that that is an admirable service. Perhaps I may explain to whom it is available. The council's note says: Lifelines are available to anyone living in Stroud District Council's area, for the elderly, the disabled or even the person living on their own who feels the need for reassurance, irrespective of whether you are a house owner or rent your accommodation". The leaflet goes on to explain that all that is needed for the equipment to be installed is a British Telecom telephone line and socket and a power point.

We would not take the view that the residents of Stroud district who take advantage of that excellent facility are therefore to be regarded as living in sheltered housing.

I have a further concern about the amendment tabled by my noble friends. In paragraph 10 the provision which the amendment would modify relates to groups of dwellings and not to individual bungalows and flats. As the law stands there is unlikely to be a problem there because a scheme with a resident warden or a common room will generally be a recognisable entity. However, if there is neither a resident warden nor a common room, what is to count as a group of dwellings? Must they be contiguous or within 50 yards or 500 yards of each other? Why should it make a difference if the properties share no common facilities apart from being connected to a call system such as the one I described provided by Stroud District Council?

I say to my noble friend Lord Campbell of Alloway that this is not just a point of technical detail. As it stands, paragraph 10 applies to recognisable sheltered housing schemes. I suggest that the amendment would dilute the definition of such a scheme to the point where it extended to housing which in reality was free-standing and not sheltered in any real sense. Such housing, if first let before 1st January 1990, can be excluded from the right to buy. But the landlord must first apply for a determination from the Secretary of State.

My noble friend Lord Renton was concerned that as people grow older they do not wish to move away from the homes in which they have been living. Nothing in the legislation in any way obliges people to move away from homes in which they have been living.

Many Members of the Committee suggested that the Secretary of State was reluctant to make determinations when asked to do so. I checked that suggestion, as did the noble Baroness. My facts do not support that contention. Since 1st March 1990 local authorities and other landlords have applied for 4,100 determinations. About 1,700 have been made and 800 refused. That means more than twice as many decisions have gone in the landlord's favour than in the tenant's. I understand that it takes about six months for each determination. I am sure that there are examples where it has taken longer, but that is the average.

My noble friend Lord Monk Bretton asked about the tight deadline for landlords' applications to the Secretary of State for a determination. In applying, the landlord need only tell the department that it wants the property excluded from right to buy and it can put its reasoned case forward later, after the statutory deadline has expired.

Perhaps I can turn briefly to the important question of rural housing. It was raised by many Members of the Committee, including my noble friend Lord Swinfen. It was suggested that the Secretary of State does not make due allowance for rural circumstances. Since 1990 4,700 dwellings have been provided by housing associations in villages of 3,000 people or less. The Housing Corporation's 1993–94 programme provides for 1,850 new dwellings to be approved: that represents 6 per cent. of the whole programme. The Secretary of State's planning guidance—PPG3— encourages planning authorities to consider granting planning permission for low-cost rented housing and shared ownership in rural areas where development would not normally be permitted.

The department's guidance to the landlord says that the property should be located reasonably conveniently for shops and public transport. I know that that has provoked controversy in the case of villages with no shops. Following representations from local authorities, that policy was relaxed in June of last year. The Secretary of State will now consider making a determination in respect of a property in a rural area even though there may be no shop within walking distance provided that there are other reasonable means of obtaining necessities.

At the beginning of my reply I accepted that we were discussing technical and complex issues. I have tried to demonstrate that the Government are at one with my noble friends in that sheltered housing should be excluded from right to buy. I suspect that we also agree that where there is a clear use of housing for elderly people, then the provision should apply there also. But the method of application is by receiving a determination from the Secretary of State. As I hope I have demonstrated, generally speaking the Secretary of State is happy to give that dispensation.

In the light of what I have said I hope that my noble friends will agree that there is a good deal more common ground between us than there might have been when my noble friend moved the amendment.

3.45 p.m.

Lord Swinfen

Before my noble friend sits down, does he agree that if the amendment were accepted it would save considerable expense, both for local authorities and the Government, incurred when local authorities have to apply to the Minister?

Lord Strathclyde

I am not aware that applying for determinations places an onerous burden on local authorities. If the amendment were accepted it would create a great deal of uncertainty and arbitrary differences between the rights of different tenants living in similar housing. I do not wish to see that area more confused than it already is.

Baroness Hollis of Heigham

Before the Minister sits down, perhaps he can help me. As I understand it, his description of the Stroud situation would not be covered by the amendment; therefore it was irrelevant. That concerned a technical appliance which summoned an ambulance service. We are not discussing the means of contact but the fact that the means of contact lock into a responsible person—generally a good neighbour scheme and people monitoring the system—who can give a degree of support. It is a little less than sheltered housing but much more than independent free-standing dwellings.

Therefore, if the Minister is right when he says we all agree that elderly persons' housing occupied by elderly persons with support should be exempt, surely he can accept the amendment.

Lord Strathclyde

There is nothing irrelevant about the scheme I mentioned. The noble Baroness takes an entirely different philosophical point from this side of the Chamber. The noble Baroness and her party believe that right to buy is wrong; they are against it in essence. We believe that right to buy has brought significant benefit to many hundreds of thousands of people; it is something that we wish to extend.

By using the Stroud example I demonstrated that a communication which does not include a common room or resident warden is readily and cheaply available no matter what kind of house one lives in because telecommunications provide it.

Lord Williams of Elvel

I am sorry to press the Minister on the matter but it is important. He brought up the whole question of right to buy. We are not arguing about right to buy or philosophical differences between his party and ours. We are arguing about a specific type of accommodation which, generally speaking, we all want to see treated with sympathy.

The point made by my noble friend Lady Hollis, which the Minister did not answer, concerns who is at the other end of the telephone in Stroud. If it is the leader of the Stroud council, that is no use whatever. If it is a hospital, it is of no use whatever. What is needed is some sort of warden arrangement so that the old person, when he or she wishes to activate the alarm system, does not contact the local hospital, is not involved in high-tech video telephones and so forth, but can pull a string and obtain a warden. That is the point at issue.

Lord Strathclyde

I apologise to the noble Lord and the noble Baroness if I was trying to create philosophical differences where there are none. Perhaps I misunderstood the point of the question of the noble Baroness. I shall explain what happens in Stroud. By pressing a radio trigger the emergency call gets through and details are displayed on a visual screen at the ambulance headquarters control centre. Upon receipt of the information the control room staff will talk to the caller and identify the problem. A decision will then be taken on what course of action is needed either by contacting the caller's doctor, family or a friend, or even dispatching an ambulance to ensure the caller's well-being. During that time the caller will be in constant contact with the control room staff who will be sympathetic, reassuring and professional. I hope that that gives some comfort to Members opposite.

Baroness Hamwee

I apologise for further prolonging the matter but many Members of the Committee will be familiar with the services referred to. They are excellent services. They are extremely responsive. My mother has a service. If she knocks the instrument when dusting it, she immediately receives a call inquiring whether she needs help. If she were calling for help the service would go through a list of telephone numbers of her neighbours until somebody was found who could come in. That is not a designated responsible person in the language of the amendment. In describing the Stroud scheme and asking us to concentrate on that, the Minister appears to have taken that as the overriding consideration and has perhaps become a little distracted from the provisions of paragraph 10(1) of Schedule 5 to the 1985 Act. That starts by describing the type of accommodation and only then goes on to say that there shall be facilities of the type described in the provision which the noble Lord, Lord Monk Bretton, seeks to provide.

Lord Monk Bretton

I should like to ask my noble friend to consider the introduction of tighter definitions in the amendment, such as the definition or a group, or a means of confining the operation of the amendment to predominantly rural areas or parishes If the Minister is to continue to designate in all of these cases it may be necessary to introduce an additional criterion to take into account whether the housing need problems in the immediate area are being considered sufficiently. We have had a considerable debate on this issue today. Perhaps my noble friend will undertake to look at these points. I should be grateful to know whether the matter may he discussed before the next stage of the Bill.

Lord Strathclyde

I believe that my noble friend knows me well enough to realise that naturally I shall be very happy to consider these points. Perhaps he and I, and other of his noble friends who still have concerns on these issues, can discuss them. What I cannot do is give any commitment that the Government will come back with amendments. The Government's feeling is that the points raised by my noble friend have been well dealt with in legislation already, but if my noble friend has evidence to suggest that it is not working I shall be delighted to see it.

Lord Williams of Elvel

It appears to me that the Minister is offering nothing. If he is offering to read the amendment again and merely listen to his noble friend repeating its text, that is of no concern to us. It is only if the Minister can offer something positive —for example, to take it away, study the problems seriously and come back with something—that the commitment means anything at all.

Lord Strathclyde

I may not have been clear to the noble Lord, Lord Williams, but I hope that I have been clear to my noble friend Lord Monk Bretton.

Lord Monk Bretton

I begin by thanking all noble Lords who have supported me in this amendment. I remain most concerned about the degree of attrition that is taking place in relation to this Bill. I am not altogether happy that one-third of the cases dealt with by the Minister have been found in favour of the local authorities and enfranchisement has not taken place. I am not sure that that is really enough. There are a number of areas where the matter does not come forward at all and consideration of a particular case is ruled out on some other ground. For example, I believe that 12 per cent. of cases were out of time. This is a matter of very considerable concern.

A great deal has been said today and we have a lot to think about. I would prefer not to press the amendment at this stage, but I hope that we can have some reasonably meaningful discussions. I beg to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 94 agreed to.

Baroness Hollis of Heigham moved Amendment No. 176B: After Clause 94, insert the following new clause:

("Right to require former landlord to repurchase

1. .—(1) In this section, "former secure tenant" means a secure tenant who has exercised the right to buy or the right to acquire on rent to mortgage terms; and such a tenant has the right to require repurchase.
2. (2) In this section, "the right to require repurchase" means the right, in the circumstances and subject to the conditions stated in this section, to require the former landlord to repurchase the interest acquired by the former secure tenant under the right to buy or right to acquire on rent or mortgage terms.
3. (3) In this section, "the former landlord" is the landlord from whom the dwelling was purchased under the right to buy or the right to acquire on rent to mortgage terms.
4. (4) The right to require repurchase shall cease to apply where the former secure tenant disposes of the interest acquired under the right to buy or right to acquire on rent to mortgage terms, or where he ceases to occupy as his residence the dwelling house in which the interest is held.
5. (5) Where a dwelling house is repurchased under the provisions of this section, the price payable by the former landlord is either—
1. (a) where the dwelling house was purchased under the right to buy, the price for which it was purchased; or
2. (b) where the dwelling house was acquired on rent-to-mortgage terms, the sum of the initial payment and any subsequent payment made in pursuance of such an acquisition, or, such other amount as is agreed between the former landlord and the former secure tenant.
6. (6) Where a local authority makes any payment to a former secure tenant in relation to a repurchase under the provisions of this section, the Secretary of State shall issue to that authority a supplementary credit approval, within the meaning of section 54 of the Local Government and Housing Act 1989 (supplementary credit approvals), in an amount equal to the price payable for, and for the purpose of, repurchasing the dwelling house.").

The noble Baroness said: This amendment is about the right to require the former landlord to repurchase. It is the first of a series of amendments to deal with the problems associated with families on very modest incomes who are seeking to buy their council homes. All the evidence is around us that during the 1980s too many people who could not afford it were encouraged into owner occupation and, as soon as the recession deepened, found themselves struggling to keep up repayments. Worsening unemployment wiped out any gain from lower interest rates. In consequence, last year there were 70,000 to 80,000 repossessions. There are now about 300,000 families in arrears of more than six months. It is estimated that at least half of them will lose their homes. Most of them are unable to sell. Even if they could sell they would experience negative equity and could not even dump the keys on the desks of building societies and walk away.

Council tenants have not been exempt from such problems even when they are exercising the right to buy at extremely large discounts. Obviously, if no one in the family is in work they are eligible for income support after 16 weeks—four payments—but that still leaves half of the costs to be met for the first 16 weeks, together with ongoing insurance, repairs and the like. It also means that very often they face very heavy service charges, especially in flats, for the maintenance of lifts, the concierge, cleaning of communal parts and caretaking which do not attract income support and can easily exceed £20 per week. They also face the likelihood of a major repair.

Far worse is the plight of someone on very low earnings. Perhaps the husband has lost his job, his wife is in part-time work and the family is eligible for family credit but there is no mortgage help at all. All too often such families end up by being repossessed. Even when building societies roll up the arrears it merely adds to the long-term problem of debt and negative equity. Clearly, such families need financial help. Ideally, they would have a mortgage benefit scheme so that those on family credit got such help and reductions in the levels of support through mortgage tax relief would be recycled into such a scheme. But if under the law we cannot give benefit to residents as owners and enable them to afford housing when their incomes fall, we need to allow them to turn into tenants, staying in their homes so that they may draw housing benefit instead.

This amendment will do precisely that for former council tenants and housing association tenants—the one-and-a-quarter million who since 1980 have exercised the right to buy. It will give them the right to require repurchase by the local authority for whom they bought the home at a price no higher than was paid for it, including discount. It also requires the Department of the Environment to give supplementary credit approval so that the local authority can afford to do so without depleting its capital resources.

We do not expect great numbers of people to need this help. After all, most council tenants who buy their homes are older, the property is cheaper and so on. Nonetheless, in a situation where council tenants have exercised the right to buy, their financial circumstances have changed and they cannot afford to maintain their mortgage payments, we suggest that this is a civilised, humane and cost-neutral proposal that will allow such families to remain in their homes and to retain them. I beg to move.

Lord Strathclyde

This amendment would give former secure tenants who had purchased under the right to buy the right to require their landlords to buy back their homes at the price that they had originally paid. I have some sympathy with those purchasers who have problems with resale, but this is a proposal that I cannot support. I am fully aware that former tenants in certain kinds of ex-council flats have experienced difficulty over resale. One of the problems has been the alleged reluctance of building societies to lend on those properties. We have been discussing this problem with the Council of Mortgage Lenders and have received assurances from them that there is no blanket ban on lending on such properties and that each case is considered on its merits. A further problem that has recently arisen is the unwillingness of some mortgage insurance companies to provide cover on certain properties. Without extra security the lenders cannot advance more than 75 per cent. of the purchase price.

In the present state of the housing market lenders and insurers are acting very cautiously, but once the market picks up, right-to-buy purchasers, together with other home owners, will benefit. Meanwhile, we are continuing to work with the building societies to do what we can. That seems to me to be the way forward rather than to place a formal duty on landlords to buy back. However, the noble Baroness will know, I am sure, that the landlord can already buy back a property from a right-to-buy purchaser if it so wishes and if it seems a reasonable and justifiable use of its resources, given other demands and priorities. In that way the responsibility to exercise discretion over whether to re-acquire these dwellings is married to the financial implications of doing so. That is surely right.

The amendment seeks to place a duty on landlords to repurchase and provides for central government to reimburse them for the expenditure incurred. That would in effect be an open-ended call on limited public sector resources. Under our current practices, which are drawn up in consultation with the local authority associations, all resources that are available for housing are allocated to individual local authorities or earmarked for programmes such as Estate Action well in advance of the beginning of the financial year. If the amendment were to become law the Government would have to hold back an amount each year to meet reimbursement costs. Since the amendment places no constraints on the right-to-buy purchaser's right to demand repurchase by the landlord, this could amount to a significant sum. I hardly think that we can justify such use of scarce public resources.

I believe that by stimulating the market in the way that we have and by continuing our consultation with building societies, we can cover this problem. I hope that the noble Baroness will withdraw the amendment.

4 p.m.

Baroness Hollis of Heigham

We obviously welcome any moves that building societies are willing to make to allow people who are unable to maintain mortgage payments to remain in their homes. There is no dispute between us on that. However, the way they are doing it at the moment is to roll up arrears which then add to the negative equity that people currently experience. What is not possible, for the most part, is for people to change their tenure and remain in their own homes. Either they are locked into negative equity and debt or the building society forecloses. We can expect another 70,000 or so foreclosures next year. What then happens? The local authority has to rehouse families in either temporary accommodation or, if they are lucky, in permanent accommodation—and, probably, in the inner cities, in bed and breakfast accommodation.

The amendment seeks to allow the former tenant in such situations to trigger a right to repurchase. The local authority can agree to do so at neutral cost. That avoids a situation which would otherwise occur of a family becoming homeless and possibly going into bed and breakfast accommodation, the children having to move school and all the problems of domestic stress and strain that result. I suspect that the amendment would eliminate the prospect of very real social misery and that there would also be a financial saving when we consider just how much bed and breakfast accommodation is currently costing local government. There is not a cost-free solution. We accept that. But the amendment would be cheaper and certainly more humane than the present system.

The Bill pushes marginal tenants into owner occupation. We are trying to offer them a route back from owner occupation into tenancy without going through the trauma of court procedures, foreclosure, repossession and homelessness. If the noble Lord is not minded to accept the amendment, we feel that we shall need to come back at Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 95 agreed to.

Clause 96 [Right to acquire on rent to mortgage terms]:

Baroness Hollis of Heigham moved Amendment No. 176C: Page 97, line 4, at end insert; ("; or, (c) at any time in the relevant period the arrears of rent owed by the tenant exceeded the equivalent of the rent lawfully due from him for a period of eight weeks.").

The noble Baroness said: This is the first of a series of amendments on the rents to mortgages clause of the Bill. If Members of the Committee were asked to describe the most pressing housing problems facing this country I am sure that they would mention homelessness. They would probably mention the families in bed and breakfast accommodation we have just been discussing. They would probably mention too the long waiting lists within the council rented sector. They might also mention, as we await the English House Condition Survey, the very poor state of repair, which is the consequence of cutbacks in local government investment, given capital controls over the years. They would probably refer, in the private sector, to repossessions and evictions allied to a frozen housing market in which one cannot move, buy or sell on. They might even mention the 400,000 building workers who have lost their jobs and the hundreds of small construction companies that have crashed. We have a housing Bill before us which tackles not one of those problems that Members of the Committee might think are the key housing problems facing us. Instead the Bill introduces an initiative for a problem that does not exist—that of turning very low rent payers into highly vulnerable owner occupiers.

Last year the London boroughs accepted 13,000 more homeless families than they could house. The initiative does nothing to help them. It adds not a single house to the stock and houses not a single family. It merely bribes poor tenants into changing their tenure and possibly putting the long-term security of their homes at risk, particularly as the Government were minded to reject the previous amendment. We have had a decade of right to buy which has allowed tenants to buy at substantial discounts—up to 70 per cent. In the past few years applications to buy have dried up, mainly because of the growth of unemployment but partly because many families now left in council housing are on housing benefit and are therefore ineligible and partly because there is uncertainty in the housing market. In other words, right to buy has probably reached the edge of its natural constituency.

As a consequence the Government introduced another initiative to press owner occupation further down into the ranks of the rather poor. I refer to shared ownership schemes in which tenants bought slices of equity, if they could afford it, and paid rent on the outstanding share of the dwelling. The Government spent vast sums of money advertising it. All of 600 tenants took it up. There were two inquiries in Norwich out of 22,000 tenants and neither was followed through. We warned the Government at the time that this was an initiative for a problem that did not exist. The Government ignored us. We warned them again. We now have a different version of the same scheme—rents to mortgages—in which the existing rent becomes a mortgage payment paid to a building society weekly which amortises it into a lump sum to be paid to the local authority as an initial payment. The outstanding sum, which could be as much as 60 per cent. of the value of the property, is held by the local authority as an equity stake to be redeemed at some unspecified time in the future. Essentially it is a deferred purchase scheme in which the local authority loses the property and gets only a partial capital receipt.

That is deeply undesirable not just in terms of the problems it will present to local government—it is costly, cumbersome and unattractive but we can live with that—but in terms of the problems it will present to the tenants themselves. Britain already has the highest percentage of owner occupation in the western world. It is surpassed only by Bangladesh, which is some test of affluence. The rate is far higher than in Germany, France or Scandinavia. As a result we have the highest level of personal debt—of mortgage debt in ratio to personal income—in Europe. In consequence we have greater financial problems within the housing market as well as within the economy than anywhere in Europe. This scheme will, I believe, in its folly, add to them.

That is not my view alone. It is the view also of the Conservative-controlled Association of District Councils, which doubts whether, at a time of rising homelessness, increasing numbers of homeless families in temporary accommodation, unprecedented levels of mortgage arrears and repossessions, and when there is a continuing need for affordable housing, it is appropriate to introduce a scheme which will result in further erosion of the supply of socially rented dwellings. It is also considered questionable whether it is sensible—this is the Tory-led ADC—to encourage low income households to take on the responsibilities of home ownership at a time of falling house prices and low inflation.

The view is not that of the Tory-led Association of District Councils alone. It is also the view of the Institute of Housing—a professional officers' association, not a Labour authority. It states: We believe that rents to mortgages is the wrong scheme at the wrong time".

There are record levels of mortgage repossessions and record levels of homelessness applications. To propose a scheme which will encourage families who can barely afford it into owning their homes is both unnecessary and unwise.

It is also a bad buy for the tenants themselves who will get a worse deal than they would under the right to buy in terms of lower discounts. The message to tenants should be that if they cannot afford the outright right to buy they should not touch rent to mortgages. It is bad for their financial health. It extends owner occupation to very marginal renters when what we need is the reverse; namely, to extend the option to rent to poor owner occupiers.

Before formally moving the amendment, I ask the Minister to answer some general points about the practical details of the scheme. First, the building society will amortise the rent payment and hand it over to the local authority as an initial payment. If the applicant is over 40 or 50 years of age, what happens if the building society expects higher repayments than the current rent level in order to have the repayments met within a less than 25-year term? How can and will the tenant afford that? Secondly, if the value of the property is, say, £32,000 and the average rent produces an initial payment of £17,000, the local authority landlord is left with an equity share of 45 per cent. before discount. What protection is there for the local authority landlord if the tenant defaults on the mortgage payments to the building society because financial circumstances worsen?

What power does the landlord have, which pertains to half the asset value of the property, to ensure that it is protected by requiring that repairs are done or covenants put on? If the tenant decides only to increase his tranche of equity by taking out stakes, who pays for that and will it occur within a reasonable time? Given that the full redemption of that outstanding share—whether it is 40 per cent. 50 per cent. or 60 per cent.—must occur on the death of the original tenant, and if the property passes to, say, a daughter who is living with them and who is a secure tenant otherwise, she is required to redeem that money. What happens if she cannot find it? Does she become homeless? Who pays?

Fortunately, I do not believe that the scheme will work or be taken up any more than the previous one. It is being piloted at huge expense and publicity in Milton Keynes and Basildon. Of a possible 10,000 tenants only 150 showed any interest. Why? First, given the rules about initial payments, any tenant living in a flat for more than five to eight years, or in a house for more than 20 years, is technically ineligible because of the minimum payment rule. Secondly, those who remain will have problems getting loans from the building society. Thirdly, the Government rightly disqualify anyone on housing benefit, which is 70 per cent. of all remaining council tenants. So it is an expensive scheme which will be extremely cumbersome to administer. It is a scheme for very few tenants and it would almost certainly be financially better for them to go for the right to buy.

There is one final problem which this amendment addresses; namely, that of arrears. If it is right to exclude those on housing benefit from exercising the rent-to-mortgage choice, it must be right to exclude those who currently or recently have been in arrears and cannot even afford to keep up their rent payments. If they cannot afford the upkeep of their rent payments, what hope have they for financing owner occupation? If they are already in debt, it cannot be sensible to add an even larger debt. I assume that the Government simply forgot about that. I beg to move.

Baroness Hamwee

I support a good deal of the analysis which we have just heard from the noble Baroness, Lady Hollis. I agree that the rent-to-mortgage scheme is largely an irrelevance. Clearly it does not begin to address the country's housing problem. I have some difficulty with some of the amendments. If there is to be such a scheme then we risk being a little too paternalistic if we seek to exclude people from it on the basis of judgments that the legislators make rather than as potential purchasers.

However, as regards this amendment, to exclude tenants who are in arrears with rent, looked at from the point of view of the potential lender, must be very sensible and should be included in the legislation. Any normal lender in a normal lending situation will investigate the financial situation of the proposed borrower. If he discovers that the proposed borrower has financial problems then the lender is going to be very circumspect, and probably very reluctant to proceed with a loan, and may well say no. It would be a sensible move to reflect that in the legislation.

4.15 p.m.

Lord Strathclyde

The noble Baroness, Lady Hollis, repeated her Second Reading speech in introducing this amendment and very interesting it was, too. The Committee will be glad to know that I shall not be repeating mine. I am sure that there will be plenty of opportunities during the discussion on the next few amendments to consider rents to mortgages and how that will work. There is one important thing: the right to buy is the major plank on which the Government have sought to extend home ownership. That provision, coming more than 10 years after that initial legislation, is designed to offer just an extra opportunity to a number of people who may feel that they need that extra choice.

The noble Baroness, Lady Hamwee, is right. We must not be overly paternalistic in our view of how arrangements are going to be made between the tenants and the building societies. The noble Baroness, Lady Hollis, asked what would happen if the building society does not grant a 10-year mortgage. The initial payment is the amount which can be borrowed in general on the market, on a 25-year mortgage. It is for the tenant's discretion how to raise that sum. The arrangement between the tenant and the building society cannot be and should not be the concern of the landlord.

If the tenant cannot raise the initial payment, then he will simply refrain from buying and that must be the right way to go ahead. The noble Baroness asked what would happen if the tenant were to default. The landlord's right to a further payment on disposal or debt is set down by a registered charge on the property. That charge has a priority after the building society's mortgage. Therefore, the landlord will have a claim on the residue of the proceeds if there has been a sale. The noble Baroness shakes her head, but I understand that that is the case.

I now come to the amendment. The noble Baroness made a useful contribution at that stage. Perhaps I may first explain that the legislation includes a provision on similar lines to the amendment. It is slightly less severe in its effects. I can forgive the noble Baroness for not spotting it because it is not obvious from a reading of the Bill. The provision in question is in the existing right-to-buy legislation that will apply to rents to mortgages. A landlord is not obliged to complete a sale under the right-to-buy scheme if the tenant is a month or more behind with the rent. The tenant, of course, does not lose the right to buy, but must first clear the arrears. I hope that that explanation will go some way towards meeting the concerns of the noble Baroness.

Baroness Hollis of Heigham

I thank the Minister for his reply. We shall obviously pursue his last point. I was shaking my head about his other point on the security of the landlord's stake in the property should a tenant default. The Minister said that it would take priority over other debts. I feel that that is not so. We have an amendment tabled to that effect which will allow that to be so. But where a tenant spends quite a large sum of money—say £15,000—on major improvements, that can take priority over, and therefore wipe out, the landlord's equity which is reflected in his share of the property. Given what the Minister has just said, I look forward with confidence to the Minister's support for the subsequent amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 176D: Page 97, line 27, at end insert: ("less an amount equal to the landlord's estimate of the average weekly expenditure on repairs to the dwellinghouse for the most recent year for which audited accounts are available.").

The noble Baroness said: In moving this amendment I speak also to Amendments Nos. 176E and 176H. As defined in the amendment, the purpose is that only 80 per cent. of the rent is used in calculating the minimum initial payment. The intention is to take account of the fact that tenants acquiring rent to mortgage terms will take on full responsibility for maintaining the dwellings and need to make financial provision for it. This amendment effectively gives them financial head space for the additional outgoings over and beyond rent payments which they will be forced to undertake when they become owners. The figure has been chosen to reflect, in particular, the cost of keeping a property in repair, which the Minister in another place estimated to be just under £8 per week, to say nothing of the insurance and legal costs.

This is a useful amendment which would ensure that the tenant had enough financial resource not only to pay the rent or the equivalent of a rent through the mortgage payment but also to meet the additional outgoings which he faces. Therefore, we hope that the amendment will meet with the Government's support. I beg to move.

Lord Strathclyde

I, too, will speak to Amendments Nos. 176D, 176E and 176H. Rents to mortgages is designed to offer tenants a low-risk route into home ownership by giving them the opportunity to buy their homes without having to make a significant increase in their regular outgoings. That is why the minimum initial payment is calculated in such a way that a typical purchaser's mortgage payments will be no greater than the current rent. There are, of course, other expenses involved in home ownership, and tenants contemplating buying will have to take them into account when they decide whether or not to buy their homes.

The first two amendments of this group would reduce the amount of the minimum initial payment for house purchasers to take account of repair costs. The noble Baroness who tabled the amendments will no doubt have noticed that purchasers of flats under rents to mortgages can make an initial payment that will result an mortgage payments lower than the rent. That is in recognition of the obligation to pay service charges.

I recognise that tenants buying houses will also have repair and maintenance costs to meet. However, in the case of a house, repairs will not have to be paid for each week or each month. House owners can often decide for themselves what needs doing and when. They may well be able to carry out routine repairs themselves, use friends to help or, if they need to employ professionals, they can shop around for the best offer.

Flat owners do not have that flexibility. It is their landlord who is in control of the management of repairs and improvements to their block, and the service charge bill will not always come at the time when it would best suit the leaseholder. That is why we have taken the view that tenants buying flats should be given the flexibility of being able to make a reduced initial payment but that for house purchasers this is not necessary. Making a lower initial payment would in any case be a mixed blessing. The scheme is structured in such a way that purchasers maximise their discount by making as large an initial payment as they can. And we should bear in mind that any change in the Bill which reduces the initial payment will have public expenditure implications by deferring receipts for local authorities. The noble Baroness has always been very keen on receipts for local authorities.

The third amendment would require the Secretary of State to make orders subject to affirmative resolution by both Houses of Parliament specifying the relevant amount and the multipliers which are to be used for calculating the minimum initial payment. I am all for proper parliamentary oversight of the exercise of delegated powers, but it seems to me that it could be a waste of the time of both Houses if affirmative orders had to be made for this purpose. The Secretary of State's discretion in the matter is already closely circumscribed by the Bill. In arriving at the relevant amount and the multipliers, the Secretary of State will be obliged to make certain assumptions about the applicable interest rate, the type of mortgage and the repayment period. The interest rate used will be the standard national rate which is a weighted average of the rates charged by the top 15 commercial lenders. It will be assumed that the mortgage is a 25-year repayment mortgage in which the monthly payments represent payments of both capital and interest. All this is clearly laid down in the legislation.

The relevant amount will be the rent that, given these assumptions, would finance a mortgage commanding maximum tax relief. The mortgage interest relief at source or MIRAS limit is £30,000 at the moment, and at current interest rates a payment of £45 a week will support a mortgage for £30,000. The first multiplier will be applied to amounts of rent up to the relevant amount and will take account of the effect of MIRAS in increasing the size of the mortgage which can be supported by a given repayment. The second multiplier will be applied to rent over the relevant amount and will make no allowance for MIRAS.

Perhaps it would be useful if I were to give an example. Assuming that a net standard national interest rate of 6.01 per cent. applies throughout the 25-year period of a repayment mortgage, the multiplier would be 664.06 on rents below £45 a week. When applied to a weekly rent of £30, this would give an initial payment of around £20,000 on a house, or £16,000 on a flat. For any part of the rent above £45 a week, tax relief would not apply. For this portion of the rent, a gross interest rate of 8.01 per cent. would be assumed, giving a multiplier of 554.59.

The point of the example is to demonstrate that the Secretary of State has very little discretion when declaring the relevant amount and the multipliers. He will be obliged to follow the rules laid down by the Act. The Bill could have left it to landlords and tenants to work out for themselves what the minimum payment should be, but it seemed more convenient if the Secretary of State were to go through the process and publish the results. Each time interest rates change, or the MIRAS rules are amended, a new relevant amount and new multipliers will need to be fixed quickly. That is why the Bill provides for them simply to be declared by the Secretary of State: in practice, the department will send a circular to landlords. I hope that the noble Baroness will feel reassured and that she will understand that the sanctity of Parliament is not being trodden over by this provision.

Baroness Hollis of Heigham

That was a very interesting reply. However, although the Minister spent some time dealing with the formula which the Secretary of State will operate, he did not deal with the substance, which is the ability of the tenant to pay on the one hand and of the landlord to have his equity stake protected on the other. That was the substance of the major part of this cluster of amendments. I refer to Amendment No. 176H, which relates to the 80 per cent, rule. The Minister said that house owners know perfectly well what to spend on repairs. But it is the case that they often under-estimate the amount. After all, as the Minister himself said, for tenants to acquire the maximum discount, the arrangement needs to be structured so that they pay the maximum initial payment, which will encourage them to over-commit.

The amendment will protect tenant-purchasers' ability to maintain their property in decent repair by considering that as part of the formula on the one hand., while on the other hand it will protect the local authority's equity charge over the property. That depends on the property being kept in good repair, which in turns depends on the tenant being able to afford to do so.

In the light of the leaks about the English House Condition Survey showing the generally poor state of repair of the English property market, nothing that the Minister has said gives me any confidence that this is a sensible way forward. Nonetheless, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 176E not moved.]

Baroness Hollis of Heigham moved Amendment No. 176F: Page 98, line 10, leave out ("25 year").

The noble Baroness said: At pre3ent it is assumed that a rent-to-mortgage purchaser will raise a mortgage over 25 years. The amendment would amend that assumption where the applicant (or the youngest applicant in the case of a joint bid) would reach retirement age within 25 years, subject to a minimum of 10 years. In other words, the amendment seeks to bring the English provisions into line with the Scottish provisions in not having extended mortgages which would run well beyond people's probable financial ability to repay. I beg to move.

Lord Strathclyde

As I said earlier, the idea of rents to mortgages is to offer tenants the opportunity to buy their homes by taking out a mortgage with repayments the same as their rent. They will be able to pay less than the normal right-to-buy price but at a minimum they must pay the amount which can be raised on a 25-year repayment mortgage with repayments the same as their current rent. I say, "the amount which can be raised" rather than "the amount which the particular tenants can raise" because the terms of sale will not be fine tuned to the circumstances of individual purchasers. Typical purchasers will be able to finance the purchase price by taking out mortgages with repayments the same as their current rent, but they may choose to pay more, for reasons which I shall explain in a moment. Even if their mortgage repayments are exactly the same as their rent at the time of purchase, that will cease to be the case if they have taken out an ordinary mortgage with a variable rate of interest and that rate changes. As home owners they will also have to meet other costs such as repairs and insurance, so the current rent is only meant to be a broad guide to what the purchaser can afford.

The amendments seek to introduce a little more fine tuning by enabling older tenants to pay less. It may be helpful if I illustrate the effect of that. Instead of paying the amount which could be raised on a 25-year mortgage with payments the same as their rent—say, £20,000 if their rent were £30 a week—they would be able to make the initial payment which they could finance on a mortgage running up to the age of retirement. If that were in, say, 15 years' time, £30 a week would service a mortgage of £15,000. There would be a minimum assumed payment period of 10 years, which would give an initial payment of about £11,500 for tenants whose rent was £30 a week.

I am afraid that there is a snag. Allowing older tenants to make smaller initial payments would reduce the extent to which they were able to benefit from discount. That is because the initial payment will attract normal right-to-buy discount pro rata to the amount paid. If, for instance, the purchaser qualifies for a 50 per cent. discount under the right to buy, every £1 of the initial rents-to-mortgages payment will attract discount of £1. Putting it another way, every £ I paid will buy a £2 share in the equity in the property. Later, if the purchasers sell up, or after their death, a further payment must be made to buy out the former landlord's share. That payment too will normally attract discount, but only at a fixed rate of 20 per cent. There will thus be an incentive for purchasers to make as big an initial payment as they can afford in order to get as much discount as possible and reduce the payment which has to be made later.

It would, then, be a doubtful blessing if older purchasers were allowed to pay significantly less. They would lose discount, and the landlord's share would be disproportionately high as a result. Purchasers could find that they were locked into their homes, unable to sell because the net proceeds of sale, after paying off the landlord's share, were not enough to buy their next home.

I should say also that the amendment would reduce the receipts realised by landlords in the short term from sales under the rents-to-mortgages scheme. Given that explanation, I hope that the noble Baroness will feel able to withdraw the amendment.

4.30 p.m.

Baroness Hollis of Heigham

I am delighted that the Minister is concerned that local authorities should maximise their capital receipts. That is a welcome move by the Minister. However, I remained baffled. Why is it appropriate to have this restriction in the Scottish clauses and not in the English?

Lord Strathclyde

As the noble Baroness points out, there is indeed a precedent in the Scottish rent-to-loan scheme for allowing older purchasers to pay less. As a general rule, I am very much in favour of good ideas from Scotland being applied elsewhere. However, the English and Welsh version of rents to mortgages in the Bill is structured differently from the rent-to-loan scheme. Under rents to mortgages, as practised south of the Border, the tenant's initial payment will attract normal right-to-buy discount pro rata to the amount paid. Thus, the larger the initial payment, the better the deal the tenant gets. In the Scottish scheme, by contrast, the discount on the initial payment is on a lower scale from that available under the right to buy, but does not vary according to the size of the initial payment. Paying more at the outset, of course, reduces the amount to be paid later, but there is no gearing effect because the discount credited is the same regardless of how much the purchaser pays initially. That means that older purchasers can be allowed to make smaller payments without doing them a disservice.

The noble Baroness will ask me why, if that works in Scotland, it should not work in England and Wales. I have to say that as a result of the pilot schemes and the consultations we had in England, it was felt that the two schemes could differ.

Baroness Hollis of Heigham

We often enjoy the Minister's ability to speak impromptu—bluffing would be the wrong word in the circumstances—but would the Minister like to tell us why he thinks that they should differ?

Lord Strathclyde

As the noble Baroness said earlier, the rent-to-mortgage schemes were piloted throughout England and Scotland. It was because of the results—

Lord Williams of Elvel

Were they piloted in Wales as well?

Baroness Hollis of Heigham

No.

Lord Strathclyde

I am delighted to tell the noble Lord that I understand the schemes were piloted in Wales. They were definitely piloted in England and Scotland. This is an important issue, but it was decided that there are areas of difference between legislation in England and Wales and Scotland—my noble and learned friend Lord Fraser of Carmyllie will be bringing forward amendments that demonstrate that there are differences—and it was due to the results of the consultation and the pilot studies that we decided to do things differently in England. I hope I indicated, during the course of my explanation on the amendment, why we believe that we have it right in England, and why we do not disagree with what is being proposed for Scotland.

Baroness Hollis of Heigham

Will the Minister tell the House what were the differences in the pilot studies that led him to different conclusions for Scotland and England?

Lord Strathclyde

The noble Baroness will realise that I do not have the results of those pilot studies with me. I am happy to look further into the matter, and perhaps I may write to the noble Baroness with the information for which she has asked.

Baroness Hollis of Heigham

In other words, the Minister is saying that he does not know what were the differences in the pilot studies. He does not know upon which basis different recommendations have been made but, nonetheless, asks us to accept it. I do not have much option but to withdraw the amendment, but that is not because the Minister has persuaded the Committee. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 176G to 176J not moved.]

On Question, Whether Clause 96 shall stand part of the Bill.

Lord Williams of Elvel

Before we leave the clause, perhaps I can ask the Minister to clarify one or two points on the famous formula about which he talked at considerable length. In Clause 96 (page 97) as at present drafted there is a multiplier. At first sight it seems that the multiplier is something that the Secretary of State can fix at his will. But, as the Minister rightly pointed out, on page 98 there are some requirements that the Secretary of State has to consider in fixing the famous multiplier.

I understand that if the MIRAS arrangements change clearly that amount has to change to take account of that alteration. What I am unclear about, and what I hope the Minister will be able to clarify in my mind, is what is meant by the "standard national rate" mentioned in subsection (7) (a). I was not aware that there was a standard national rate. I was not aware that there was a standard national rate which apparently is a fixed rate, if I read the Bill correctly, throughout the 25-year term; that is, a fixed mortgage rate for 25 years which is apparently standard throughout the United Kingdom, lacking any evidence to the contrary.

I assume that that rate is in sterling, although again there is no evidence in the Bill that it is sterling. It is possible, as the Minister will be aware, to arrange a mortgage in dollars, where the interest rate would be substantially different, or in ecu, French francs, or other currencies. I imagine that at a later stage the Minister will ensure that we are certain that it is the currency of the United Kingdom, whatever currency that my happen to be at any particular point in time. I suppose one can argue that at certain times the Scottish pound is a different value from the English pound which, alas, we have to use in Wales as well.

I am also concerned, in subsection (7) (b), that the monthly mortgage payments represent payments of capital and interest only. That rules out the consideration by the Secretary of State of the possible cost of endowment mortgages. I do not see why that should be the case, because in many respects endowment mortgages can be advantageous. They can also be disadvantageous. I recognise that there are two sides to the argument. However I cannot see why the Government have chosen one side rather than another. In order words, I find the whole definition of what the Secretary of State has to take into account when fixing his famous factor "M" in Clause 96 to be pretty muddy. I hope that the Minister will be able to clear it up for me.

Lord Peyton of Yeovil

I do not want to take up the time of the Committee. However, I always believe that the avid readers of Hansard should have the opportunity to see for themselves the material which is under discussion. Perhaps I may refer the Committee to Clause 96(6), which states: The relevant amount and multipliers for the time being declared for the purposes of this section shall be such that, in the case of a dwelling-house which is a house, they will produce a minimum initial payment equal to the capital sum which, in the opinion of the Secretary of State, could be raised on a 25 year repayment mortgage in the case of which the net amount of the monthly mortgage payments was equal to the rent at the relevant time calculated on a monthly basis". If there were a competition for obscurantism and horrible drafting, that paragraph would be a fair and proper entry. It has the extraordinary distinction of doing the reverse of shining against the background of a perfectly horrible clause.

Lord Strathclyde

I welcome the opportunity which the noble Lord, Lord Williams, has given me to explain some of the definitions which we use in the clause. The noble Lord asked about the standard rate. That is laid down by local authorities under Schedule 16 to the Housing Act 1985. The interest rate used will be the standard national rate, which is a weighted average of the rates charged by the top 15 commercial lenders. I dare say, therefore, that the currency is not relevant because the rate will be expressed as a percentage rather than a fiscal amount.

Lord Williams of Elvel

Before we go any further, what is the weighting percentage? Which is the most important lender? How does the weighting occur? What is the formula?

Lord Strathclyde

That is a perfectly fair question to ask. I suggest that it is done by consideration of the size of the lenders. I said that the panel, if I may call it that, is made up of the top 15 lenders. Presumably the weighting will be up to the size of the lenders on the panel.

Lord Williams of Elvel

Again, before we go any further, I wish to point out that as a matter of fact, securitised mortgages—I am sure that the noble Lord understands what I mean by that—represent a larger market than some of the 15 major institutional lenders. Is the average rate for the securitised mortgage market included in his weighted average?

Lord Strathclyde

No, because we are looking at standard repayment mortgages. The reason we do that —and this is the reply to another question which the noble Lord asked about why they were not set on endowment mortgages—is that in all cases the tenant is free to use whatever financial instrument he believes is most applicable to his circumstances, depending on whether the lender will lend on those terms. The multiplier that we are discussing in this clause determines the minimum payment. It is up to the tenant to decide how to raise the cash. We must set the minimum payment under this legislation and that is what we have done.

I appreciate that there arc aspects of the clause which are complicated. My noble friend Lord Peyton read out some of the language used in describing the clause and I can understand why he thinks that it is complicated. However, I hope that I have explained how the decision is reached and that that will suffice.

Lord Williams of Elvel

I am sorry to press the noble Lord again but I wish to ask only one question which I asked previously but which he failed to answer. Are we talking about a weighted average fixed-rate mortgage for 25 years or are we talking about a floating-rate mortgage? That appears to me to be an important factor in fixing the multiplier that we were discussing.

Lord Strathclyde

The statute requires the Secretary of State to have regard to the interest rates which are currently being charged by the building societies—

Lord Williams of Elvel

Is that the monthly rate?

Lord Strathclyde

The monthly rate, to the overall rate, to the interest rate charged by the building societies. The Secretary of State must then make a reasonable judgment about what is the prevailing market rate.

Lord Williams of Elvel

The discussion is becoming wearisome and I do not wish to weary the Committee. I do not believe that the Government have thought the matter through at all, let alone having thought through when a dwelling-house is not a house.

Clause 96 agreed to.

Clause 97 agreed to.

4.45 p.m.

Clause 98 [Landlord's notice admitting or denying right]:

Baroness Hollis of Heigham moved Amendment No. 176K: Page 99, line 26, at end insert (", and, where paragraph (a) applies, (c) advising the tenant of any circumstances known to the landlord, including the tenant's financial circumstances or the condition of the property, which may prejudice an application by the tenant to an approved lending institution for a loan towards the acquisition of the dwelling-house on rent to mortgage terms.").

The noble Baroness said: This is a modest probing amendment. We are extremely worried that tenants may be persuaded by publicity into taking out RTM schemes without a full knowledge of and a full briefing on the implications. I refer not only to the rent payments, which can be converted to mortgage payments to a building society, but to the associated costs of, above all, repairs, insurance, legal services and the like. They should be seen in terms of the tenant's financial circumstances. In tabling the amendment we seek to give a steer that local authorities counsel tenants adequately about the financial implications of taking on such a responsibility. If tenants take that on but cannot meet the ongoing responsibilities the local authority's stake in the property is at risk and the tenant is at risk of repossession and homelessness. I beg to move.

Baroness Hamwee

Does the noble Baroness fear that such counselling might have the reverse effect to that which she intends? In general I support the intention but the tenant may rely too heavily on the landlord in judging his own position. The situation is difficult but suggesting that the landlord should advise on matters which include the tenant's own financial circumstances could tip the balance too far the other way.

Baroness Hollis of Heigham

I take the noble Baroness's point. However, the amendment is part of a sequence that we have been moving. In doing so we have tried to make clear that when a tenant takes on an obligation to purchase he is not merely commuting existing rent payments into mortgage payments. He is taking on additional costs. We have moved a series of amendments to that effect—for instance, the 80 per cent. and the arrears—which the Government have dismissed as not being particularly significant or, alternatively, as being outweighed by other considerations. Therefore, we are extremely worried that this group of marginal tenants will become even more marginal owner occupiers without adequate proper financial counselling. That is the purpose which the amendment is designed to achieve.

Lord Strathclyde

I am conscious that the noble Baroness, Lady Hamwee, said at the beginning that we should not be overly paternalistic—at least, I think that that is what she said—and I believe that she is right. I understand and welcome the anxieties of Members of the Committee opposite that we are dealing with a potentially vulnerable group of people who may believe that they are being forced into buying their properties. That is not the case; we are not forcing anyone to buy their property. We do not want people to be forced to buy their property. What we want is the ability for certain tenants who do not feel that they have quite enough to come under the right to buy legislation but feel that they want to own their properties. There may be people who fall into that class. The legislation before us gives them that ability.

Of course there are safeguards; for example, before a tenant reaches the point of claiming to buy under the rent-to-mortgage scheme, the landlord will already have served notice setting out the terms under the ordinary right to buy. The notice is required to include a description of any structural defects known to the landlord. If the property is one that is designated under housing and defects legislation, the landlord must say so.

It is possible that some prospective purchasers under rents to mortgages will be able to raise the purchase price without borrowing from a mortgage lender. For example, they may be able to use savings or buy with help from members of their family. Anyone who does so is well advised to make inquiries to ensure that the property is mortgageable so that they do not run into difficulties if they want to sell later. We have always advised tenants to have a survey carried out to warn them of potential problems. But in the large majority of cases where I would expect tenants to take out a mortgage, they will find out from the horse's mouth whether or not there is a potential problem because they will be applying for a mortgage from a private lender.

As I said earlier, I understand the noble Baroness's concerns. But with all the publicity that there has recently been on home ownership, on mortgages, on defaulting and on repossessions, I regard it as very unlikely that anyone would go down the route of turning their rent into a mortgage without looking very carefully at the financial implications involved.

Baroness Hollis of Heigham

I, too, share the Government's concern not to be over-paternalistic. I hope, therefore, that when we deal with CCT we can expect the Minister to take the same approach on CCT and paternalism as he does here. We shall return to that point later.

I should like to remind the Minister that there is a fear behind the proposal. I believe—and I think my figures are correct—that 154,000 families presented themselves as homeless last year. A proportion of those were former council tenants who had exercised their right to buy. Had they known the full implications of taking on that liability, they might have been spared the problems of repossession and homelessness. The amendment seeks to ensure that proper counselling is available. That has not always been the case. But, given the present situation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 98 agreed to.

Clauses 99 to 103 agreed to.

5 p.m.

Clause 104 [Terms and effect of conveyance or grant: general]:

Baroness Hollis of Heigham moved Amendment No. 176L: Page 103, leave out lines 23 to 42.

The noble Baroness said: The amendment would remove the provision that a rent-to-mortgage purchaser of a flat should pay a lower service charge than a right-to-buy purchaser. The Government have inserted the provision because they say that the local authority will benefit, in proportion to its share of the equity, from any appreciation in the value of the property.

We are concerned that expenditure on repairs, for example, is rarely reflected pound for pound in increased value. If indeed that has occurred, it is more appropriate that that should be reimbursed when the purchaser redeems part or all of the equity mortgage and that subsequent valuation of the dwelling should exclude any major contribution for repairs or improvements to which the subsection applies. In other words, because a rent-to-mortgage purchaser would pay only a proportion of the service charge when we feel that they should pay the full amount —and, as I say, some offsetting, if appropriate at the point of redemption—we believe that it is basically inequitable. It means that other tenants in the housing revenue account will be picking up some of the costs of repairs that should properly be met in the full by the leaseholder. Why should some tenants who are not on housing benefit and paying a full rent cross-subsidise the repair bills of other former tenants who have become owner occupiers? I beg to move.

Lord Strathclyde

We all know that service charges can be a very significant problem for owners of flats. The standard arrangement in the private sector is that the freeholder undertakes in the lease to keep the structure and exterior of the building in repair and the leaseholder covenants to make appropriate contributions to the costs incurred by the freeholder. That practice applies equally to sales under the right to buy, and it will apply to sales under rents to mortgages.

All leaseholders of flats have protections against unreasonable service charges. Under the right to buy, purchasers also have the benefit of binding estimates, given to them before the sale, of the charges that they may have to pay for repairs and improvements over the first five years of the lease. That, too, will apply to rents to mortgages. The intention is that tenants who consider buying should have reliable warning of the charges they will face before deciding whether to proceed.

The five-year estimates to which I have referred were introduced by the Housing and Planning Act 1986. Some tenants who bought with the benefit of those estimates have, nevertheless, reported having difficulty with their service charges. The five-year estimates are not, of course, designed to give permanent protection. The department is in discussion with representatives of right-to-buy leaseholders and with the local authority associations to get a clearer picture of the problems and see what can be done.

The trouble with service charges for major repairs, such as the renewal of a roof, is that they often come as a demand for a large lump sum. Raising the purchase price to buy a flat under the right to buy is usually much easier than in the case of a house because the market value will generally be lower and the discount scale is more generous. The purchase price will normally be financed by a mortgage, which spreads the burden of repayments and attracts tax relief. By contrast, a demand for a service charge can require the leaseholder to find a large amount of cash. We have introduced a right to a loan from the landlord in respect of particularly large service charges in order to help spread payment, but the leaseholder must still find the cash sooner or later.

The rent-to-mortgage scheme is designed to offer a route into home ownership for tenants who cannot afford to pay the normal right-to-buy price. Knowing that service charges can be a problem for people who have exercised the right to buy, we were concerned to make realistic provision for tenants buying flats under rents to mortgages.

A precedent was available in the right to shared ownership. That right was introduced in 1984 for tenants who had the right to buy but could not afford to exercise it. The rules were rather complex and, as the noble Baroness said earlier, very few people took advantage of it: that is why the Bill repeals it and puts rents to mortgages in its place. The two schemes are, however, designed for the same category of purchasers. Service charges on flats were potentially a problem for people exercising the right to shared ownership. The legislation therefore provided for the Secretary of State to make an order adjusting the responsibilities of the shared owner in respect of repairs and maintenance. The order provided that any amount payable by the leaseholder of a flat for repairs, maintenance and insurance would normally be adjusted so that the amount payable was reduced pro rata to the leaseholder's current share.

The amendment would delete the counterpart to that rule in the rent-to-mortgage scheme. The Bill provides that if the leaseholder's share is, say, 60 per cent., only 60 per cent. of the service charges which would otherwise be payable for repairs and improvements will be recoverable.

I have explained the practical considerations which led us to this. There is also another argument of principle. A landlord which, as in the example I have quoted, retains a share of 40 per cent. in the equity in a flat has an interest in ensuring that its value is maintained. By keeping the rest of the building in good repair it is preserving and perhaps increasing the value of its stake in the flat. If leaseholder and landlord share the equity in the flat between them it seems reasonable that they should equally share between them the costs of looking after the building, to the extent that those costs are for the benefit of the flat.

If the question is asked, how is the landlord to pay for its share of those costs, I can answer with another question: how would the landlord pay for mending the roof and the lifts if the flat in question was not sold? It would not be able to recover any specific contribution from the tenant of the flat and the tenant's rent would not go far to cover the costs of major repairs.

I am aware that that is not necessarily a precise answer. It is difficult to give one because the combined effects of the rule on rent-to-mortgage service charges and the rules of the financial regimes which govern local authority and housing association expenditure are extremely complex. I know that there have been discussions with the National Federation of Housing Associations, and the department will of course be very willing to discuss this also with the local authority associations if they have a serious concern on this point.

However, I hope we shall not become too engrossed with the mechanics. I invite the Committee to consider the substance of the matter. If the tenant of a flat cannot afford to exercise the right to buy and remains a tenant, he or she will continue to look to the landlord to keep not only the common parts but the interior of the flat in repair, and will be paying a rent which assuredly does not cover the landlord's full costs. If instead the tenant buys under rents to mortgages, the landlord will realise an immediate receipt; will cease to be responsible for looking after the interior of the flat; will be able to recover part of the costs of looking after the common parts; and will have the prospect of a further payment in due course on disposal or death. And, perhaps most important of all, the flat will be owned by someone who has a personal interest in looking after it and seeing that the building is a good place to live. I suggest that those are benefits well worth having. I apologise for that rather lengthy explanation. I hope the noble Baroness can now withdraw her amendment.

5 p.m.

Baroness Hollis of Heigham

As far as I can see, the Minister has given three different answers as reasons for rejecting this amendment. The first is a practical consideration; that is, bluntly, that the tenant cannot afford the bill if he wishes to take on full responsibility for the property. The implication of that is that other tenants will therefore have to take on the bill. It is not a question of the landlord taking on the bill, but rather that other tenants, through their rents, pay for the person buying to have a reduced obligation for financing the repairs the Minister mentioned. The Minister's first answer therefore, which concerns the practical problems of presenting a tenant with a full bill, is to be met by making other tenants, who may be poorer than the tenant in question and therefore not able to buy, pick up the bill through increased rents. That does not seem to me a legitimate answer.

The second answer the Minister gave was that the landlord retains an equity stake in the property. That is fine but, first, the equity stake may not be redeemed for 40 to 50 years, at which stage the notion of capital receipts is fairly nebulous. Secondly, there is no way for the landlord to ensure that repairs are carried out, thus protecting the landlord's equity stake. Will the Minister give an assurance that he will allow landlords to impose covenants to ensure that their equity stake is protected to give backing to the point he has just made, which is that if the landlord is protected by his equity stake, the landlord in return must be protected by his right to impose repairs?

Thirdly, the Minister gave an analogy with shared ownership. He was right to say that that scheme was a non-starter. That also applies to the scheme that we are discussing. But the important difference is that under shared ownership purchasers paid rent on the proportion of equity that remained with the local authority, and therefore through their rent they contributed to the cost of the repairs that would fall on the landlord. That does not apply here. The analogy is not exact. I await the Minister's response, but I suggest to him that none of the arguments he has adduced is valid. I invite the Minister to reply to those points.

Lord Strathclyde

The noble Baroness did not answer the final point that I made, which is that the landlord retains a share of the ownership of the flat, or indeed the block of flats. He will receive some more money at some stage in the future. It must be in his interest to make sure that the flat is reasonably maintained. It must be in the interests of the new purchaser—the new owner—to make sure that the building is kept in good repair. That is why we have introduced this provision. The tenant will certainly be required to keep the flat in repair but it will be up to the landlord to mend the roof and the external parts of the block of flats. I think that that is perfectly reasonable. I do not share the concerns of the noble Baroness. I accept that the analogy with shared ownership is slightly flawed because in that case a degree of rental was maintained, but, as the noble Baroness pointed out, shared ownership did not work very well. We hope that rents to mortgages will be far superior.

Baroness Hollis of Heigham

If the Committee is persuaded by that, I shall be surprised. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 104 agreed to.

Clause 105 agreed to.

Schedule 15 [Schedule inserted after Schedule 6 to the Housing Act 1985]:

Baroness Hollis of Heigham moved Amendment No. 176M: Page 215, line 20, after ("occurs") insert ("and in any event not exceeding 30 years in cases of disposal)").

The noble Baroness said: The aim of this amendment is similar to that of a later amendment on Scotland which is to be moved by my noble friend. This amendment seeks to ensure that the remaining landlord's share, or deferred financial commitment, is redeemed in a reasonable period of time. At the moment the matter is open ended until the tenant's death. As I have said, this may constitute a period of 40 to 50 years. During that time the landlord has to forgo his capital receipt. It does not seem to us unreasonable to bring that to an end and to limit the period to perhaps 30 years. That allows for an average mortgage period of 25 years, together with an additional extension, if necessary, for, for example, loans for improvements. I beg to move.

Lord Strathclyde

I can well understand the object of this amendment. When tenants buy their homes under rents to mortgages they pay less than the normal right-to-buy price. In return, the landlord retains a right to be paid part of the value of the property if it is later sold, or after the death of the purchasers. The payment will be based on what the property is worth at that time so that the former landlord retains a stake in any future growth in its value. The share must be bought out eventually, but the timing of that event, from the landlord's point of view, is uncertain. The purchasers may sell their home sooner or later or they may stay in it for the rest of their lives, which may be, as the noble Baroness said, 40 to 50 years.

The only snag is that the former landlord may have to wait a long time for his share in the value of the property. Hence the proposal the noble Baroness has made that there should be a 30-year time limit. Having said that I understand the object of this amendment, I do not think we can impose a limit. The difficulty is simple. If the purchasers are alive and well and are living in the house and have not sold it, how are they to raise the money to buy out the landlord's share? Anyone who takes out an ordinary mortgage must of course redeem it by a set date, but the arrangements for repayment are worked out so as to enable the borrower to do this whether by spreading repayments over the period of the mortgage or by taking out an endowment policy which will produce the necessary sum.

I do not think that we can put people in a position where they may have to find a substantial sum of money, representing perhaps a quarter of the value of their home, at a time when they have no plans to sell up. They may not have the means to repay a loan and be forced to sell to raise capital. They might not be able to rehouse themselves out of the net proceeds of the sale. While I have some sympathy and understanding with the point the noble Baroness has made, I believe the provision is impractical and probably unnecessary.

Baroness Hollis of Heigham

I accept that we are between two alternative problems as it were. The Minister has put the position fairly. I do not know whether he would like to take this measure away and consider whether it is possible that, where a tenant in the situation we have been discussing is under the age of 65, that tenant may reasonably go on to take out an additional and further mortgage based on a capacity to continue to pay rent which may be compounded by the building society to offset the outstanding equity stake. That would seem to me to be reasonable where the 30 or 40 years still comes to a term that is well under the 65 years of age of a pensioner whose income may then be expected to fall.

I take the Minister's point, but I hope he can reconsider this matter because it is no kindness to a local authority to have 40 or 50 year-old debts outstanding which it is unable to realise. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 15 agreed to.

Clause 106 [Mortgage for securing redemption of landlord's share]:

Baroness Hollis of Heigham moved Amendment No. 176N: Page 104, line 27, leave out ("so give") and insert ("not unreasonably withhold").

The noble Baroness said: The amendment relates to a point on which we had a brief skirmish earlier this afternoon. The amendment would give local authorities a limited discretion to prevent a further loan being taken out by a rent-to-mortgage purchaser having priority over the landlord's mortgage.

The background to the amendment is the growth in debt and arrears across the country. We find, for example, from the Rowntree Trust, which has studied such arrears, that in 45 per cent. of cases of substantial arrears people have extended their mortgage. That was often associated with multiple arrears in respect of fuel, water and credit companies. In more than half of the cases such arrears were associated with worsening unemployment, lower wages, loss of overtime and so on. The Rowntree Trust also found that those who were in arrears were not the better off with higher mortgages but the worse off with lower mortgages, in other words the most vulnerable. The background to the amendment is an arrears problem which is becoming worse and a problem of increased indebtedness.

In that context, if people exercise a right to buy or take advantage of a rent-to-mortgage scheme the first thing that those purchasers do is to show that they have bought their homes and are different from other council tenants. As a result, they have new doors, windows, porches, garages, conservatories and even extensions. Anyone who visits a council estate can pick out the houses which have been bought by the alterations and the extensions which have been made to those properties. In many cases that is to be welcomed.

However, to finance those improvements the tenant purchaser usually takes out a loan or second mortgage, sometimes well in excess of the discounted purchase price. In the case of a flat costing perhaps £15,000 or £18,000, it is not unusual for major improvements to exceed that discounted purchase price. That is fine if the purchaser can afford it. However, if purchasers fail to keep up their mortgage payments to their lenders and therefore the building society decides to foreclose, there is—as we know, because the noble Lord rejected our amendment—no provision for the local authority to have first refusal to purchase at a nil cost implication through supplementary credit approval. Homelessness results.

Given that it is the case that many right-to-buy purchasers have borrowed large sums which are not covered by sufficient residual equity in the property, the noble Lord will share our concern to protect the local authority's position in its fiduciary responsibility to other tenants and other rate and rent payers. Essentially, we say that further loans from lenders should be restricted to no more than the equity share left in the property until such time as full equity has been acquired by the purchaser. Otherwise the tenant is at risk of foreclosure and the local authority as landlord is at risk.

As the Bill stands the landlord must agree that a loan for approved purposes, as defined in subsection (6), will always have a higher priority than the landlord's share, contrary to what the noble Lord said earlier this afternoon. The amendment would allow the landlord to refuse to give it a higher priority if there were good reasons for doing so, and that consent must not be unreasonably withheld.

The amendment seems to me to be of unimpeachable virtue, so I hope that the noble Lord will support it. I beg to move.

5.15 p.m.

Lord Strathclyde

I certainly indicated earlier that the landlord came second. However, I did not go on to say, as I clearly should have done, that there are exceptions. This is one of the exceptions.

When a tenant buys his or her home on rent-to-mortgage terms the proportion of the right-to-buy price which is not met by the initial payment is covered by an equity mortgage from the landlord. That is to say, the landlord has a right to be paid a proportion of the value of the property on disposal or death. That right is protected by a registered charge.

The landlord's mortgage will have priority immediately after a mortgage taken out by the tenant to finance the purchase. That is to ensure that the landlord has good security for his loan. In some circumstances, however, the purchaser will wish to borrow an additional sum, either at the time of purchase or later, perhaps, as the noble Baroness pointed out, to carry out repairs or improvements to the property. The lender will want security for that loan and the money will be used to ensure that the value of the property is maintained or even enhanced. That is why we have provided that if a further advance is made for purposes connected with the purchase, maintenance or improvement of the property, the landlord should be required to consent in writing to the postponement of its charge.

The amendment framed by the noble Baroness would give the landlord discretion in granting that consent. I can understand that there might well be concern that the purchaser would be able to borrow large sums which could undermine the security of the landlord's mortgage. However, the purposes for which the loan could be used would be strictly limited and would be in the long-term interests of the former landlord in protecting the value of the property. If the landlord were given discretion over whether to grant postponement in those situations it would create uncertainty and be liable to give rise to a substantial amount of dispute. It might also have the effect of discouraging lenders from making loans to tenants wishing to purchase on rent-to-mortgage terms since they might fear that any further advances which they made, even if they were for legitimate purposes connected with the property, might not be protected.

We have included in the Bill detailed rules to ensure fair play between the former landlord and the mortgage lenders. I do not believe that it would be virtuous to complicate the position further by giving landlords a discretion. The requirement to give consent where it was reasonable to do so would be a fertile source of dispute. The legislation as it stands gives sufficiently secure protection to the landlord's mortgage.

For those reasons I hope that the noble Baroness will withdraw her amendment.

Baroness Hollis of Heigham

I believe that the Minister is wrong in this. I believe that his position is foolhardy. If a proposed improvement adds to the value of the property and therefore protects the landlord's interest, assent would surely be given. If a £10,000 garage adds broadly £10,000, or even £8,000, to the value of the property then of course the landlord's equity interest is protected. There is no problem there. There is an array of improvements, ranging from double glazing or conservatories to work on kitchens, which may be desirable but whose cost is not reflected in additional value to the property. They may also be acceptable if the tenant proposing to make those improvements can afford to pay for them. However, if the tenant cannot afford to pay and if those loans are not secured by the residual value in the property, what is the landlord's position?

What is the local authority supposed to do when somebody defaults because he has taken out more than he can afford to spend and that is a first charge on the property over and above the landlord's own share? It is not the landlord that is hurt, but other council tenants are denied their rightful return because consent has been unreasonably given when it should reasonably have been withheld in those circumstances. I ask the Minister to comment further.

Baroness Hamwee

Before the Minister does so, is it not normally the case in the commercial market that there would always be the opportunity for the first mortgagee to give or withhold consent? One hopes that he would do so on a reasonable basis. I do not see the difference.

Lord Strathclyde

The noble Baroness, Lady Hamwee, makes a very valuable point reflecting what happens in normal market practice.

Perhaps one of the aspects which the noble Baroness, Lady Hollis, has missed is the approved list. Money cannot be borrowed for any purpose such as a Caribbean holiday, a boat or a car. It has to be borrowed for approved purposes. It is only on that basis that the landlord is obliged to give his consent. The approved purposes are to enable the tenant to make an interim or final payment to redeem a landlord's mortgage, to pay for insurance, works to the property or service charges for works or to defray so much in advance as is outstanding, any arrears of interest, costs or expenses of enforcement. That is what we refer to. We do not refer to the opportunity for new owners to involve themselves in fast living. We assume that the extra loan will be used to enhance the property. That is clearly in the interests of the landlord.

I understand the point that the noble Baroness makes. However, if we were to agree the amendment, not only would it create disputes but bureaucracy. Every time a new owner wished to extend his loan for approved purposes, he would have to request discretionary permission from the landlord. That could be cumbersome.

Baroness Hollis of Heigham

I am sorry to press the Minister. Perhaps he will help me with the sums because I am somewhat baffled. Let us suppose that the property is valued at £35,000; that the tenant's initial mortgage payment covers £20,000 of that; and that the equity stake represents the £15,000 to the landlord. There are therefore effectively two mortgages in place: one to the building society for the original £20,000; and one to the local authority for £15,000 as an outstanding charge. The tenant can afford the payment. The tenant wishes to do £15,000 worth of approved work. The local authority is concerned about it. The approved works may be desirable but they may add only £5,000 to £8,000 to the value of the property. The landlord is worried about the tenant's financial circumstances. The tenant finds that he is unable to maintain his £20,000 payments to the building society and the £15,000 to a second company for the improvement works. The tenant defaults.

The charge on those works applies ahead of the landlord's stake. Effectively it would wipe out all but £5,000 of the landlord's equity. The landlord finds that instead of having a charge on the property worth about £15,000 he has a charge of only £5,000. In other words, the local authority tenants have lost £10,000 on that deal because the landlord's mortgage could not take precedence over improvement works. That is what we refer to. How does the Minister propose to compensate council tenants for that loss of £10,000?

Lord Strathclyde

The noble Baroness began by making a good point. However, she is now making a meal of it. I accept the example that she gave proves that there is a substantial loss to the local authority. But even the noble Baroness will accept that that case is unlikely to arise.

The rules that we have introduced have been generally much welcomed by the local authority associations because they represent a considerable tightening up of the old right-to-buy rules. Under the old rules any further advance by the same lender had priority. In this case we have introduced the system of approved purposes. I believe that that is a substantial improvement. I hope that the noble Baroness envisages it as a considerable and worthwhile improvement.

Baroness Hollis of Heigham

I believe that the Government's position is foolhardy. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 106 agreed to.

Clauses 107 and 108 agreed to.

Clauses 119 and 120 agreed to.

Clause 126 agreed to.

Clause 127 [The rent to loan scheme]:

Lord Carmichael of Kelvingrove had given notice of his intention to move Amendment No. 176P: Page 131, line 14, leave out lines 14 to 21 and insert: ("(3) Payment of he deferred financial commitment to the original seller of the house—

1. (a) shall be made at a date no later than 30 years after the original purchase, or
2. (b) subject to section 73D(1), be made—
1. (i) on the sale or other disposal of the house by the rent to loan purchaser, or
2. (ii) if the rent to loan purchaser does not sell or dispose of the house, on his death, whichever first occurs.").

The noble Lord said: The amendment has already been spoken to by my noble friend. There was an error in the grouping which caused certain confusion. I shall not move the amendment.

[Amendment No. 176P not moved.]

Lord Carmichael of Kelvingrove moved Amendment No. 176PA: Page 133, line 16, after ("of") insert ("testate or intestate").

The noble Lord said: The amendment seeks to ensure that the provision of the Bill refers to succession only without indicating whether or not it is restricted to testate or intestate succession. In normal circumstances a reference to succession alone indicates intestate succession. The amendment clarifies that the law of succession covers inheritance to estate whether intestate or where a will has been made. I believe that it is a helpful small amendment. I beg to move.

The Minister of State, Scottish Office (Lord Fraser of Carmyllie)

Although I understand the reasons why the noble Lord does not wish to move Amendment No. 176P—the noble Baroness moved the amendment which applies to England—perhaps I may advise the Committee on a brief item of fact. We have had a pilot scheme in Scotland. It may be of interest that the average age of those purchasing under the scheme in Scotland is about 46 years. Accordingly, if one were to put a limitation of 30 years on the provision, it might be inappropriate to require a sale at a time when one could have a widow or widower at the age of 76 or 80 having to find that very substantial sum.

The noble Lord seeks to ensure that the reference to the law of succession in new Section 73D(1) includes both testate and intestate succession. I assure the noble Lord that there is nothing between us. It is our intention that the provision, which is about the circumstances in which the deferred financial commitment need not be repaid, should apply when the house passes to another joint purchaser whether by the law of testate or intestate succession.

In his Institutions of The Law of Scotland, Lord Stair dealt with both testate and intestate succession under the heading of "Succession". A recent definition of the law of succession is given by the Emeritus Professor of Scots law at Glasgow University, David Walker, as, the branch of law which deals with the devolution of a person's property to others on his death". He recognises it as covering both testate and intestate succession.

As the wording of the law of succession embraces both testate and intestate succession, I see no reason to change it. Indeed, to specify in the Bill that the term means both testate and intestate succession could cast doubt on references in other legislation where there is no such separate specification. I hope that with the reassurance that there is nothing between us the noble Lord will feel able to withdraw the amendment.

Lord Carmichael of Kelvingrove

I must accept the opinion of the former Lord Advocate. I was merely advised that it made matters absolutely clear. However, I understand the point that if the reference were included in this Bill only it could cause confusion in other legislation and that there would be debate as to why it was not included. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 127 agreed to.

Clause 128 agreed to.

Clause 129 [Abatement of purchase price]:

Lord Carmichael of Kelvingrove moved Amendment No. 176PB: Page 136, line 35, after ("sale") insert ("or where the provisions of the Land Registration (Scotland) Act 1979 apply, a Land Certificate with no exclusion from the Keeper's indemnity is delivered").

The noble Lord said: I speak also to Amendments Nos. 176PC to 176 PE. The amendments are highly technical to me and to others. The provision of the Bill refers to a date upon which a good and marketable title would have been granted by the seller. The phrase "a good and marketable title" is a term of art which has a special significance under the system of registration of deeds known as the Sasine system. The amendment clarifies that where the provisions of the Bill apply the new system of registration of title (as opposed to deeds) applies. The system of registration of title was introduced by the Land Registration (Scotland) Act 1979 and ensures that a person who obtains an entry in the land register, certified by the Keeper of Registers to be without exclusion of indemnity, obtains the equivalent entry of a "good and marketable title" under the Sasine system. The amendment is designed to ensure that the effect of the new system is recognised.

I find that a particularly difficult part of a difficult Bill. Reading through some of the Second Reading speeches such as that by my noble friend Lord Macaulay of Bragar, I was struck by the fact that he complained about a small part of a very large Bill being applicable only to Scotland. I find myself wondering what happens: does every lawyer's office in Scotland need to obtain the Bill and have it on the shelves? Obviously, the subject comes up frequently and it seems an incredibly clumsy way of dealing with it. We know the difficulties of the Scottish Standing Committee, but it seems an incredibly cumbersome method. The Bill itself is also obtuse. I received from a friend a copy of a letter from a senior partner of a firm of Scottish solicitors. He ends the letter by saying: Apart from these main points, I must say that I found the provisions in relation to the rents to mortgage scheme fiendishly complicated. I cannot believe that any ordinary Local Authority tenant would, have any chance of understanding them at all". In fairness to local authority tenants, I think that many people in this House will not understand them either. I beg to move.

Lord Fraser of Carmyllie

While I certainly accept that many of the provisions relating to the rent-to-mortgage scheme are necessarily complicated, I do not believe that the basic scheme itself is particularly difficult to understand. Indeed, council tenants in Scotland will not only be able to understand it but will, as the pilot scheme indicates, take advantage of it.

The matter raised by the noble Lord is certainly highly technical. According to the authorities, one of the meanings of the words "good and marketable title" is that the seller undertakes that he is in a position to confer ownership onto the buyer. He further undertakes that the buyer's title will be free from challenge; that is, that it will be absolutely good and invulnerable to reduction.

What I should explain to the noble Lord is that this applies equally in the register of Sasines transactions and in the land register transactions. In the case of land registered or to be registered in the land register, the view of one of the main authorities on conveyancing in Scotland—and so far as I am aware, his view has not been contradicted—is that the words "good and marketable title" cover the point that there will be no exclusion of indemnity.

In addition, it is the practice of the legal profession in Scotland, as recommended in what is known as the Practice Book: Registration of Title, to provide in missives a clause that the keeper issue a land certificate in the name of the purchaser as the registered proprietor of the whole subjects of offer and containing no exclusion of indemnity in terms of Section 12 (2) of the Land Registration (Scotland) Act 1979. The Practice Book also recommends that there be an addition to the effect that, notwithstanding the delivery of the disposition, the clause shall remain in full force and effect and may be founded upon. It would also be unsatisfactory to single out exclusion from the keeper's indemnity because not only is the concept of exclusion from indemnity covered by the words "good and marketable title", but other aspects too.

The idea of a good title may be said to involve four different aspects: first, that the buyer is to be made owner; secondly, that there are no heritable securities; thirdly, that there are no unusual conditions of title; and, lastly, that there are no leases. It would therefore be unsatisfactory to single out exclusion from the keeper's indemnity.

I am not sure whether that will make any sense at all to the noble Lord, but I am sure that he sees it now as clearly as ever. Noble Lords may have felt that a point was not covered but I hope that from what I have said they will be reassured and accept that the amendment is unnecessary. We wish to leave the terminology as "good and marketable title". It covers the point that vexed either the noble Lord or those who first raised the matter with him. With that explanation, I hope that the noble Lord will withdraw the amendment.

Lord Carmichael of Kelvingrove

I thank the Minister for that explanation. I think that all I can do is to compare it with the original wording and see whether I can understand it. If not, then perhaps I shall have an opportunity of taking advice and bringing the matter back on Report. Meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.30 p.m.

[Amendments Nos. 176PC, 176PD and 176PE not moved]

Clause 129 agreed to.

Clause 130 agreed to.

Clause 109 [Right to have repairs carried out]:

Lord Williams of Elvel moved Amendment No. 176Q: Page 108, line 13, leave out from ("(1)") to ("(to)") in line 16, and insert: ("A landlord of secure tenants shall operate a repair default scheme in accordance with the provisions of this section, for entitling secure tenants").

The noble Lord said: In moving this amendment, it may be convenient for the Committee if I speak also to Amendments Nos. 176R to 176V and Amendment No. 176W. It is odd that all amendments in this part of the Bill start with the number 176, so we have to play a game of "Scrabble".

We come to the tenant's right to have repairs carried out, which is in the rubric of Clause 109. The Government have taken the view—in our opinion, correctly—that the existing scheme which was in the 1984 Act was bureaucratic, legalistic, complex and difficult to understand. In its place, they have attempted in the Bill to put something which is bureaucratic, legalistic, complex and difficult to understand. Our amendments try to make it slightly less bureaucratic, legalistic, complex and easier to understand. In particular, with Amendment No. 176Q, we are not satisfied that it is really the job of the Secretary of State to operate a blanket scheme. Although the proposed new national scheme is something of an improvement on the existing scheme, we argue that local authorities within it must have a great deal of flexibility due to the different conditions in different parts of the country.

Our view is that landlords must have flexibility to decide what repairs qualify under the scheme and what response times are appropriate, to decide how and when a back-up contractor should be called in, and to decide locally on compensation arrangements. Those three thoughts are the subject of Amendments Nos. 176Q, 176R, 176U, and 176W. Of those, the most important is Amendment No. 176Q, which lays on the landlord of secure tenants the operation of a repair default scheme in accordance with the provisions of the section and removes the burden from the Secretary of State. We believe that that is the right way to go about it. It would restrict the Secretary of State's power to prescribe a scheme to where a majority of tenants object to the local scheme.

The other amendments in the group are of a slightly different kind, but are all concerned with the repair default schemes about which I have been talking. Therefore, I accepted the grouping in the interests of trying to get a move on with the Bill.

Amendment No. 176S is designed to ensure that the first contractor has the opportunity to complete the work by the end of the last day before the tenant is eligible to call in the second contractor. Without that, it would be possible for the first and second contractors to arrive to do the same job on the last day, which seems an undesirable event, leaving the tenant in the rather difficult situation of having to mediate between the two contractors and possibly giving rise to legal challenge.

The purpose of Amendment No. 176T is to enable the local authority to decide which back-up contractor should be called out. We believe that there should not necessarily be two back-up contractors. It should be the local authority that decides. That is the purpose of the amendment. The amendments are slightly complex but we thought it appropriate to group them together because they deal with rent default schemes. Amendment No. 176Q is the central one. I beg to move.

Baroness Hamwee

I support this group of amendments. Compliments have been paid by the Government Front Bench to local authorities along the lines of their diversity and so on. Local authorities are diverse. There are different circumstances, different types of housing and different types of tenancy agreement. To allow that diversity to be reflected in the landlord's own decision on those matters would be appropriate.

On a more detailed point, I fear that if a long list of contractors has to be involved, no one contractor will have any particular loyalty or enthusiasm in providing a scheme which is properly priced and under which he could respond energetically. There is a point beyond competition where too many cooks spoil the broth. To reduce the list of contractors would not only reduce administrative complexity and the cost of operating the scheme; it would also be a practical approach. Finally, I add to the list of adjectives used by the noble Lord, Lord Williams. He left out "obscure" and possibly "obscurantist".

5.45 p.m.

Lord Strathclyde

The noble Lord, Lord Williams, introduced the amendments to deal with the Government's new right-to-repair scheme. He began by criticising the old scheme. I accept that the old scheme was not the great success for which we had initially hoped. But it is wrong to write off the low take-up as a sign of failure. In the first three years, 71 claims were worth £7,300. It is also to ignore some of the very positive things that the scheme achieved. It changed attitudes among tenants and authorities; it enabled tenants to use the threat of the scheme to get repairs done—largely hidden from view, thus negating the need to exercise the right. The noble Lord accused the Government of introducing something that was bureaucratic, legalistic and complex. However, these amendments, although they change the fundamental nature of the proposed new right to repair, are a recipe for a mixture of schemes and a mixture of rights. If they are accepted, I fear that many tenants will end up with second-rate schemes and second-rate rights.

No doubt the proposals are well intentioned. But in seeking to have the best of both worlds—a locally-agreed scheme and the fall-back statutory scheme—tenants will not get a right to repair but a right to negotiate for a right to repair. The scheme proposed by the amendments would undermine the very scheme that the Government propose. It removes from tenants the opportunity to take control for themselves when things go wrong and puts the design and detailed operation of the scheme back into the hands of the local authority. Where the local authority is a good and effective manager, no doubt that would work well enough. But since too many authorities have poor and ineffective management and repair services, what guarantee do we and the tenants have that the schemes devised by the worst authorities will be up to scratch? By putting the control of the right to repair in the hands of those authorities, there will be little or no incentive for the authority to do better. It is the tenants in the poorest performing authorities who need the right to repair most of all. It is those tenants whom the Government's scheme is designed to help. If the Committee accepts the amendments, it will provide the worst authorities with the escape route that they seek and deny tenants the opportunity to get urgent repairs done to their homes.

After long and perhaps frustrating negotiation with an unco-operative authority, tenants could, under the proposals, provided that a majority of tenants can be mobilised to submit requests to the council, insist on a scheme described in regulation under this part. But how long will all that take? When will the tenants get the right to repair and when will they get their repairs done? That is why I say to Members opposite: surely it will be quicker and easier for all concerned, and ultimately more acceptable to tenants, if, as we propose, authorities are required from the outset to deliver a basic statutory scheme. After consulting their tenants, local authorities will be free to enhance that statutory scheme by extending the range of repairs or shortening repair times. That way, tenants can be assured that they will have a right to repair, a right compatible with that of their fellow tenants and, most importantly of all, that repairs will be done quickly. That is our main aim.

The noble Lord, Lord Williams, said that there could be the confusion of contractors arriving on the same day. But the regulation-making power allows government to specify in the regulation the precise time by which work should be completed. Therefore the problem envisaged by the noble Lord—a totally fair problem—will not occur because the second contractor will arrive only after the first contractor has patently failed to turn up to complete the repairs.

I am sure that many questions arise about how we envisage our scheme operating. We have consulted widely on the principles of the new scheme (during late 1991) and we are currently consulting on its detailed operation. The consultation period closes on 2nd April. We are listening to the views of all parties and will describe the new right in regulations later this year. When we say that we are listening to all parties, that includes the points made today by the noble Lord, Lord Williams. In the light of that, I commend to the Committee the Government's proposals for a basic statutory scheme which local authorities can improve upon. It offers the best way forward for tenants and also for local authorities, which will have a clear framework and timetable against which to operate. I acknowledge that some authorities will have to rethink how they deliver their repair services and whether current structures best serve the needs of tenants. But that is surely a small price to pay for improved repairs services. The Government's proposal offers the best way forward for all concerned. Therefore I ask the noble Lord, Lord Williams, whether, in the light of what I have said, he might withdraw his amendment.

Lord Williams of Elvel

Perhaps the noble Lord could kindly direct me to the paragraph in the regulation which deals with the point I made about the end of the last day when responding to that amendment. He said that I had made an error by not seeing something that I should have seen. If so, that would he an error of the Institute of Housing which did not see something which it should have seen.

Lord Strathclyde

The noble Lord asked where it said in the regulation-making power that the Government can specify in the regulation the precise time by which the work can be completed. I am advised that it is in the proposed Section 96(2) (b).

Lord Williams of Elvel

I am most grateful to the noble Lord for pointing us to the right clause. That is the regulation-making power, but it does not say that the regulations that the Secretary of State may make will in fact do what this amendment says they should do. If that is not the case, why not have it on the face of the Bill? I cannot understand it. Perhaps we can decide this point before we continue.

Lord Strathclyde

I am turning up the specific page in the Bill. I am quite happy to look up the regulation. On advice that I have received from my officials, I understand that there is no problem here. However, in the light of what the noble Lord said—I certainly do not wish to try the patience of the Committee—I am quite happy to take away this point and make sure that what I said to the noble Lord was appropriate.

Lord Williams of Elvel

I should be grateful if the noble Lord could take it away and respond to the question of why it should not appear on the face of the Bill rather than be in some kind of regulation-making powers, the substance and contents of which we do not know. Would the noble Lord care to intervene?

Lord Strathclyde

My eye is drawn to Clause 109 —the proposed new Section 96(2) (b)—which states that: provision that, if the contractor specified in a repair notice fails to carry out the repair within a prescribed period, the landlord shall issue a further repair notice". The point I want to make is that in the regulations we shall prescribe the period. I am sorry if I have caused any confusion. I hope that that explanation is sufficient.

Lord Williams of Elvel

I am grateful to the noble Lord. It does not say what the amendment says. Nevertheless, it gives power to the Secretary of State to make that provision. I fully understand that. I also fully understand when the Minister gives an undertaking which is, as I understood him, that the regulation shall contain the amendment that I have proposed.

Lord Strathclyde

If the noble Lord understood that, he must have misheard me. Certainly that is not what I said. I said that the regulations would include what I said they would include. That may or may not include the wording of the noble Lord, Lord Williams.

The point is that I have nothing against the wording used by the noble Lord, Lord Williams, and it may be appropriate to include something like that in the regulation when it comes to be made. I said that we were consulting on this matter. This is clearly part of the consultation. If it is appropriate, I shall be very happy to take it on.

Lord Williams of Elvel

It seems that we have gone as far as we can go on this point. I hope that the regulations do not include all that the Minister said. Some of it, to say the least, was a little eccentric.

Let me move on to the main basis of the Minister's criticism. He claims that our amendments would undermine the scheme that the Government have put forward. He is right. That is the purpose of the amendment; namely, to undermine the scheme. We consider that the scheme as put forward will give rise to a great deal of bureaucracy and complexity which people will not understand.

As always when dealing with local authorities, the noble Lord assumes that the Government know best and the local authority knows worst. That is a characteristic of this Government with which we have learnt to live. It seems that the local authority does not understand what it is doing, whereas the Government, in some magic way that we have not yet found, know what they are doing.

In our view, the tenants should have a majority right to appeal to the Secretary of State to prescribe a scheme along the lines that the Government have in mind. That does not mean that the tenants will have to suffer from some poor old inefficient and ineffective Conservative local authority which has got the whole thing wrong and manages its affairs in a terrible way. If it wants to do so, it can opt out. That is the expression that the Government seem to wish to use. But yet again, we have an example of the Government refusing to delegate powers to local authorities and insisting on centralising still more than they have done in the past. This is a matter on which we ought to take the opinion of the Committee.

5.55 p.m.

On Question, Whether the said amendment (No. 176Q) shall be agreed to?

Their Lordships divided: Contents, 62; Not-Contents, 133.

Division No. 1
CONTENTS
Allenby of Megiddo, V.	Jeger, B.
Ardwick, L.	Kilbracken, L.
Attlee, E.	Kirkhill, L.
Banks, L.	Lincoln, Bp.
Birk, B.	Llewelyn-Davies of Hastoe, B.
Blease, L.	Lockwood, B.
Bonham-Carter, L.	Macaulay of Bragar, L.
Boston of Faversham, L.	McGregor of Durris, L.
Bottomley, L.	Mackie of Benshie, L.
Broadbridge, L.	McNair, L.
Bruce of Donington, L.	Merlyn-Rees, L.
Callaghan of Cardiff, L.	Morris of Castle Morris, L.
Carmichael of Kelvingrove, L.	Mulley, L.
Castle of Blackburn, B.	Murray of Epping Forest, L.
Cledwyn of Penrhos, L.	Nicol, B.
Cocks of Hartcliffe, L.	Pitt of Hampstead, L.
David, B.	Rea, L.
Dean of Beswick, L.	Richard, L.
Dormand of Easington, L.	Robson of Kiddington, B.
Ennals, L.	Seear, B.
Falkland, V.	Sefton of Garston, L.
Galpern, L.	Serota, B.
Gladwyn, L.	Shackleton, L.
Graham of Edmonton, L. [Teller.]	Stedman, B.
	Stoddart of Swindon, L.
Hampton, L.	Taylor of Blackburn, L.
Hamwee, B.	Taylor of Gryfe, L.
Harris of Greenwich, L.	Tordoff, L.
Hilton of Eggardon, B.	White, B.
Hollis of Heigham, B.	Williams of Elvel, L.
Hooson, L.	Winchilsea and Nottingham, E.
Jay of Paddington, B. [Teller.]

NOT-CONTENTS
Aberdare, L.	Lane of Horsell, L.
Ailesbury, M.	Lindsay, E.
Aldenham, L.	Lindsey and Abingdon, E.
Archer of Weston-Super-Mare, L.	Liverpool, E.
	Long, V.
Ashbourne, L.	Lucas of Chilworth, L.
Astor, V.	Lyell, L.
Astor of Hever, L.	McAlpine of West Green, L.
Birdwood, L.	Mackay of Clashfern, L. [Lord Chancellor.]
Blatch, B.
Blyth, L.	Macleod of Borve, B.
Boardman, L.	Margadale, L.
Borthwick, L.	Marlesford, L.
Boyd-Carpenter, L.	Marsh, L.
Brabazon of Tara, L.	Merrivale, L.
Braine of Wheatley, L.	Mersey, V.
Butterworth, L.	Milverton, L.
Cadman, L.	Monk Bretton, L.
Campbell of Alloway, L.	Montgomery of Alamein, V.
Campbell of Croy, L.	Mottistone, L.
Carnegy of Lour, B.	Mountevans, L.
Carnock, L.	Mowbray and Stourton, L.
Carr of Hadley, L.	Moyne, L.
Chalker of Wallasey, B.	Munster, E.
Charteris of Amisfield, L.	Murton of Lindisfarne, L.
Chelmsford, V.	Napier and Ettrick, L.
Clark of Kempston, L	Nelson, E.
Colnbrook, L.	Norrie, L.
Colwyn, L.	Orkney, E.
Craigavon, V.	Orr-Ewing, L.
Cranborne, V.	Park of Monmouth, B.
Cumberlege, B.	Pearson of Rannoch, L.
Davidson, V.	Pender, L.
Denham, L.	Perry of Southwark, B.
Denton of Wakefield, B.	Peyton of Yeovil, L.
Derwent, L.	Prentice, L.
Dundonald, E.	Rankeillour, L.
Elles, B.	Rees, L.
Elliott of Morpeth, L.	Rennell, L.
Elphinstone, L.	Renton, L.
Elton, L.	Renwick, L.
Faithfull, B.	Rodger of Earlsferry, L.
Ferrers, E.	Saint Albans, D.
Flather, B.	St. Davids, V.
Fraser of Carmyllie, L.	Seccombe, B.
Fraser of Kilmorack, L.	Selborne, E.
Gardner of Parkes, B.	Shannon, E.
Gilmour of Craigmillar, L.	Sharples, B.
Gisborough, L.	Stewartby, L.
Goschen, V.	Strange, B.
Greenway, L.	Strathclyde, L.
Gridley, L.	Strathcona and Mount Royal, L.
Halsbury, E.
Harmar-Nicholls, L.	Strathmore and Kinghorne, E. [Teller.]
Harmsworth, L.
Harvington, L.	Swinfen, L.
Hayhoe, L.	Teviot, L.
Henley, L.	Thomas of Gwydir, L.
Hertford, M.	Trumpington, B.
Hesketh, L. [Teller.]	Ullswater, V.
Hives, L.	Vaux of Harrowden, L.
Holderness, L.	Vivian, L.
HolmPatrick, L.	Wade of Chorlton, L.
Hooper, B.	Wakeham, L. [Lord Privy Seal]
Hothfield, L.
Howe, E.	Whitelaw, V.
Hylton-Foster, B.	Wise, L.
Johnston of Rockport, L.	Wynford, L.
Kimball, L.	Younger of Prestwick, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.4 p.m.

[Amendments Nos. 1761? to 176V not moved.]

Lord Strathclyde moved Amendment No. 176VA: Page 109, line 9, leave out ("and").

The noble Lord said: Amendment No. 176VA is a simple and sensible procedural amendment. It allows the Secretary of State to make regulation to allow the landlord to set off any payments for compensation under the right of repair against moneys owed to it by the tenant. I beg to move.

On Question, amendment agreed to.

Lord Strathclyde moved Amendment No. 176VB: Page 109, line 12, at end insert ("and (e) enable the landlord to set off against any compensation payable under the regulations any sums owed to it by the tenant.").

On Question, amendment agreed to.

[Amendment No. 176W not moved.]

On Question, Whether Clause 109, as amended, shall stand part of the Bill?

Lord Peyton of Yeovil

Before we part with Clause 109 perhaps I may take the opportunity of explaining that I have just voted for the Government on Amendment No. 176Q. However, I regard the clause as a fairly horrible provision in a fairly horrible Bill. It is difficult to understand. It is particularly messy.

I managed to persuade myself, aided by my regard for my noble friend, and drag myself into the Government Lobby because I had something of a suspicion that the amendment proposed by the noble Lord, Lord Williams of Elvel, would make a nasty situation much worse. That is my excuse for doing what I did. I do not feel at all proud; in fact, I feel slightly ashamed. I only hope that my noble friend feels something of the shame which I feel in regard to that measure.

Lord Strathclyde

I am at a loss for words. It grieves me that my noble friend is so upset by the Bill and particularly by this aspect of it. We went through it in some detail at Second Reading. I made two speeches and my noble friend made a speech on other aspects of the Bill. I should have thought that my noble friend could accept the clause as being an important step in giving rights to council tenants to improve the quality of their homes.

Lord Peyton of Yeovil

There was a time when I greatly admired the Secretary of State, but I do not believe that the present or any other Secretary of State will have an easy road in making the kind of regulation which this clause and others call for. It is an enormous obligation. To take one part at random, if the contractor specified in a repair notice fails to carry out the repair within a prescribed period, the landlord shall pay to the tenant such sum by way of compensation as may be determined by or under the regulations". That will be an exceedingly complex regulation. It will take more than a genius to implement it and carry it into effect. I believe that the intention of the clause is to make life easier and more comfortable for tenants. One wonders whether it will.

Clause 109, as amended, agreed to.

Clause 131 [Right to have repairs carried out]:

Lord Carmichael of Kelvingrove moved Amendment No. 176X: Page 138, line 43, after first ("the") insert ("end of the").

The noble Lord said: When Amendment No. 176X was tabled, I did not appreciate that a similar amendment had been tabled in Committee in another place and in response the Minister had tabled an amendment which was slightly different but which he maintained covered the points made by the original amendment. Perhaps the Minister can clarify the situation. I beg to move.

Lord Strathclyde

An identical amendment to the same effect was tabled by the noble Lord's honourable friends in another place. That led to a government amendment which sought to clarify that very point by substituting the word "by" for "before" in new Section 60(3) (b), to make clear that the tenant would not be able to call in an alternative contractor unless the original contractor had failed to start the repair work before the end of the specified period. I hope I am able to assure the noble Lord that the clause as currently drafted achieves exactly what his amendment seeks to do. If that is the assurance that he seeks I hope the noble Lord will be able to withdraw his amendment.

Lord Carmichael of Kelvingrove

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 131 agreed to.

Clause 110 [Right to compensation for improvements]:

Lord Strathclyde moved Amendment No. 176XA: Page 110, line 5, leave out from beginning to ("and") in line 7.

The noble Lord said: These amendments make a number of changes to the enabling provisions in Clause 10 which allow for the establishment, by regulation, of the new scheme whereby secure tenants of local authorities will be able to receive compensation from their landlords for certain home improvements which they have made, once their tenancies end. In moving this amendment I speak also to Amendments Nos. 176YA to 176YC. They reflect a number of sensible suggestions put forward by local authorities, and others, during the recent consultation exercise on the general operation of the compensation scheme. They will improve the operation of the scheme, and I commend them to the Committee.

On Question, amendment agreed to.

6.15 p.m.

Lord Williams of Elvel moved Amendment No. 176Y: Page 110, line 36, after ("amount") insert ("which shall not exceed a reasonable estimated cost of the works had the improvement been made by the landlord,").

The noble Lord said: This amendment stands in my name and that of my noble friend Lady Hollis. The whole question of compensation is a difficult one. Almost by definition the scale and timing of any take up of the scheme is unpredictable. It is possible that authorities will find themselves unable to meet claims within the capital resources available to them. Quite how that is to be handled in the regulations that the Secretary of State is to make I know not, but the amendment that I propose tries to quantify an upper limit that the compensation shall achieve. The words used in the amendment are: which shall not exceed a reasonable estimated cost of the works had the improvement been made by the landlord".

That is an upper limit which, I understand from a news release from Mr. Baldry that the noble Lord was kind enough to send me, is in the mind of government. In the terms of that news release there will be both upper and lower limits in relation to the amount payable in respect of improvements, and the Government are proposing to make minor amendments to the enabling powers to reflect a number of suggestions from consultees. I am not sure whether those minor amendments have now passed us or whether there are more minor amendments setting upper and lower limits to come. In the circumstances, it seems wise to stick to real life; that is, a reasonable estimated cost of the works had the improvement been made by the landlord and not unreal life as might be imagined by the Secretary of State. I beg to move.

Lord Strathclyde

I hope that the Committee will not be surprised if I confess to having some sympathy with what the noble Lord has said. Why should a local authority pay more in compensation to a tenant for an improvement than the reasonably estimated cost to it had it undertaken or arranged for the work to be carried out? We should have value for money for public expenditure, but let me explain why the amendment is not acceptable. We should begin by remembering the fundamental principle behind the proposed scheme. Council tenants should be able to receive some recompense towards the cost of home improvements they have made should they leave within the expected lifetime of the improvement. Part of the value of the scheme is in the encouragement it gives to tenants to develop a stake in their homes, and a commitment to making them better places in which to live. There are wide benefits here.

Let us also note that when we make the regulations we do not propose to include in the calculation of the compensation any element in respect of the costs of the labour provided by the tenant. In the case of such DIY improvements compensation will be based solely on the cost of the materials. In those cases, of which we expect there to be a significant number, it is highly unlikely that a council would be able to undertake the work at less than the materials cost to the tenant. That is one situation where the concerns expressed by the noble Lord will not arise.

As for other cases, where there is a paid labour cost, it is technically possible for an authority to pay out more in compensation than the cost to them of carrying out the improvement themselves. But I do not believe that that is likely to occur often, due to the method of assessing the compensation payable. Let me explain why.

First, we propose that in the regulations the amount of compensation will be based on the original cost of the improvement discounted over time. Realistically, that means that unless the tenancy ends quite soon after the completion of the improvement the amount of compensation payable will have reduced significantly. Secondly, local authorities will have an element of discretion in determining the amount of compensation payable. Therefore, in circumstances where they believe that the original cost of the improvement on which the compensation is based is unacceptably high, the council can reduce, within reason, the amount of compensation offered to the tenant. The tenant will be able to appeal if he or she is not satisfied with the council's offer. Thirdly, and finally, the amount of compensation payable on any one improvement will be restricted by an upper limit. This will ensure that councils are not faced with excessive claims for compensation. We propose to consult further on the proposed upper limits and the content of the draft regulations, providing authorities with an opportunity to put forward suggestions on what they believe are reasonable maximum levels for each type of improvement, and other aspects of the scheme.

In conclusion, I believe that the amendment is unnecessary because of the features 'which are to be built into the provisions, and that, in any event, the circumstances mentioned by the noble Lord, Lord Williams, are seldom likely to occur.

I hope that given the commitment to consult on the regulations and on the upper limits, the noble Lord, Lord Williams, in retrospect will feel that his amendment is unnecessary but will join in the consultation when it comes forward.

Lord Williams of Elvel

I am grateful to the Minister. We will join in the consultations, and we accept that the amendment as it stands is not necessary. We look forward to that consultation being completed in time for an amendment to be made to the Bill rather than by regulation. The Minister appears to be making faces that express some doubt about that procedure.

The Minister will be aware that the consultation document issued by his department said that the calculation of the compensation payable could be based on the increase in the capital or rental value of the dwelling resulting from the improvement at the time that the tenancy ended. That seems to me to be a very odd concept. One of the reasons for tabling the amendment was, to make sure that the Government did not take their own consultation paper too seriously. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Strathclyde moved Amendments Nos. 176YA to 176YC: Page 110, line 36, after ("be") and insert ("determined by the landlord, or"). Page 110, line 50, leave out ("and"). Page 111, line 3, at end insert ("and (d) enable the landlord to set off against any compensation payable under the regulations any sums owed to it by the qualifying person or persons.").

On Question, amendments agreed to.

Clause 110, as amended, agreed to.

Clause 132 agreed to.

Clause 111 [Existing rights with respect to disposals by housing action trusts]

Baroness Hollis of Heigham moved Amendment No. 176YD: Page 112, line 48, at end insert: ("() In section 94 of that Act, there shall be added at the beginning of subsection (1) the words "Except where subsection (8) applies". () After subsection (7) of the same section, the following new subsection shall be added— (8) In respect of a housing action trust, the right conferred by this part may be exercised by the local housing authority or authorities in whose area the trust is located, but not until the dwellings concerned have been owned by the housing action trust for at least two years".").

The noble Baroness said: Amendment No. 176YD and the subsequent tranches of amendments refer to housing action trusts. The trusts were introduced by the Housing Act 1988 to serve rather like a UDC and target large but rundown council estates starved of investment and modernisation moneys and transfer them to an action team made up of government and local authority nominees. The teams could then draw on specific funding for a defined period of between five and 10 years to turn those estates around. Their intent was therefore not only to target and modernise stock but to diversify their ownership.

As originally proposed in HATs, tenants would have had no say in the matter. They were to be transferred if they lived on such an estate to a housing action trust whether they liked it or not. But when the 1988 Housing Bill came to this House we inserted, quite rightly, a tenants' right to a ballot and therefore to a veto. We inserted into HATs a tenants' choice, which was respected subsequently by the Government.

The six areas that the Government had at the time in mind for HATs—Lambeth, Southwark, Sunderland, Sandwell, Leeds and Tower Hamlets—were balloted in the light of your Lordships' amendment and the tenants declined the proposals fearing that they could end up both with private landlords and the loss of their right to buy. Since that time—we certainly welcome the move that the Government have made on this—housing action trusts have become, so to speak, more user friendly, involving stronger local authority and tenant participation in management. In return for a promise, which so far the Government have proposed to honour but which has not yet come about, that the tenants should have the right to return to a local authority when the work of the housing action trust is complete and that they should not be propelled against their wishes into the control of an alternative landlord, we very much welcomed them. In consequence, in 1991 the Minister was able to announce a HAT with tenants' support in Hull and a second one in Waltham Forest. A third is due in Liverpool. Ballots are shortly due—I know that the Minister is concerned about their outcome—in Tower Hamlets, and I understand that Birmingham and Sheffield may also be considered for HATs.

Although Clauses 111 and 112 give statutory force to the undertakings offered by the Minister, the tenants, especially of Tower Hamlets who are due to ballot soon, seek assurances on some further issues which we bring before the Committee today and which are the subject of these amendments. I refer to the financial terms of the transfer—Amendments Nos. 176YE to 176YG; secondly, the right for the minority of tenants in a block of flats where the majority may have voted to go to a private landlord to stay with the local authority—Amendment No. 176YH; and, thirdly, the extension of the tenants' choice that the process should be initiated by the tenants themselves and that they should not have to wait until the end of the HAT's first term.

In Committee in another place the Minister gave the undertaking that there would be a transfer of improved properties back to the local authority at the tenants' request at nil cost rather than by purchase and then offset by the much more cumbersome route of supplementary credit approvals. We welcome that —and we think that the Minister was being exceedingly helpful—but we believe that it needs to be on the face of the Bill just in case subsequent Ministers, or concurrent or subsequent Treasury officers, should change their mind or have it changed for them. It is clearly unreasonable, nonetheless, that that initiation back to a local authority should occur within a few months of a HAT being initiated. That is why in Amendment No. 176YD we say that there should not be initiated a tenants' right to transfer back to the local authority until a HAT has been in existence for at least two years. The bite of the amendment is that the tenants should be able to initiate that right to return. I beg to move.

Baroness Hamwee

I wish briefly to put on record our support for the amendments and for the attempt to plug loopholes, if that is the appropriate word, to fill the gaps and make sure that the provisions of the Bill entirely fulfil the assurances given by the Minister in another place.

Lord Strathclyde

As the noble Baroness pointed out, this is the first amendment concerning housing action trusts. It may be useful to the Committee if I say a few words about the policy background and the provisions in the Bill to which this amendment and subsequent amendments refer.

The housing action trust policy was introduced some five years ago to address one of the most intractable problems of housing provision. I refer to local authority estates, some built before the war but many more recently, which exhibit a complex combination of physical, management and social problems. These estates are often very large with an overwhelming sense of monotony and uniformity. They are often riddled with vandalism and crime. They generally house some of the poorest members of society in a pervasive sense of isolation and insecurity. Management of the estates is often near to breakdown and not infrequently many of the ordinary services on which local communities depend have come to an end.

As Members of the Committee know, the fundamental proposition on, which trusts are based is the need for a special public body able to act comprehensively and independently. Over the years the policy has been open to debate, but it is founded on three basic justifications which I believe remain relevant today. The first is the overwhelming severity and complexity of the problems which will often require a special ad hoc agency capable of concentrating and focusing the necessary effort. The second is the fact that such estates are often themselves located within broader local authority areas where there is a wide range of other problems. In many cases the local authority is already overstretched and relieving it of this particular and most severe problem can be the key to its beginning to get on top of its other difficulties. Finally, the problems and failings of local authorities over many years have often bred a deep alienation of tenants from the authority, which means that a new start under a new organisation is an essential basis for regeneration.

That is the background and a little of the history. I believe that we have now reached a point where HATs can offer a real partnership of government, local authorities and tenants. That partnership can bring a strength to tackling these problems which we have not previously had and which the severity of the problems requires. The overwhelming support in tenant ballots for HATs in Hull, Waltham Forest and Liverpool shows that the approach has now found strong support among tenants themselves.

As it has developed in the past two years, a cardinal feature of the HATs policy has been a right for tenants to choose, when the redevelopment or renovation of their estate is complete, to which landlord they should move—whether to the local authority, a housing association, a co-operative or whatever. It is the Government's firm policy that their wishes in this matter should be respected. It was on that basis that Clauses I 111 and 112 were inserted in the Bill to give statutory effect to a right for tenants to move to the local housing authority if that is their wish at the end of a HAT's work.

These clauses set out a clear and effective procedure for tenants to exercise this right closely tailored to the specific circumstances of housing action trusts. Its principles have found widespread support. However, Amendment No. 176YD would now import on top of that a different tenants' choice procedure under the 1988 Act that would allow local authorities to initiate these different procedures after two years regardless of the circumstances of the trust or the impact on its development programme and the interests of its tenants. It would be wholly inappropriate and perverse to have yet another regime for the transfer of HAT properties to the local housing authority. Given the extensive rights already set out in the Bill, that would add nothing but confusion and potential disruption.

There is a further perversity. The tenants' choice legislation in Part IV of the 1988 Act (all 20 sections) is drafted for tenants moving from public sector landlords. To stand the provisions on their head and try to use them where tenants may opt to move to the local housing authority would be perverse and a violence to the original legislation. It is much better to rely on the tailor-made provisions in the Bill which give tenants a secure right to transfer to local authorities, which reflect the particular circumstances of HATs and which allow transfers to follow a timetable compatible with HATs programmes.

HATs have an enormous and difficult task dealing with renovation and redevelopment of some of the most rundown housing areas in the country. They need a clear basis on which to work. Their tenants also need to know where they stand. The existing clauses of the Bill give them full rights to exercise their own choice of landlord at an appropriate time. To bring in a wholly different procedure and allow local authorities to initiate tenants' choice transfers of property through trusts to themselves, even while large-scale redevelopment programmes were in progress, would undermine the work of trusts and contribute nothing to the effective rights of tenants. Therefore I urge the noble Baroness to withdraw her amendment.

6.30 p.m.

Baroness Hollis of Heigham

I thank the Minister for that reply. I agree with a considerable amount of what he said. I accept entirely that, not the original HATs, but HATs Mark II, have gained a high degree of tenants' acceptance and, in co-operation with local authorities, may very well be doing an important job.

Let us remind ourselves why that job is necessary to some degree. The rundown condition of estates is in no small part due to the squeeze on capital spending by local government. The noble Lord pulls a face. I have been checking figures. I remind the noble Lord that my own local authority had an investment programme for 1989–90 of £17.5 million. That was cut by the Government for 1991–92 to £8.5 million or less than half in real terms. In such a situation it is not that local authorities are unwilling to remedy conditions on the estates but that the Government have deprived them of the resources to do so. Central government should not easily pass the buck in the way that the Minister indicated. Having said that, I take into account what the Minister said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 111 agreed to.

Clause 112 [New rights with respect to such disposals]:

Baroness Hollis of Heigham moved Amendment No. 176YE: Page 115, line 1, at beginning insert ("Subject to subsection (4A)").

The noble Baroness said: In moving this amendment I should like to speak also to Amendments Nos. 176YF, 176YG and 176YH. The first three amendments simply seek to get on the face of the Bill an undertaking given by the Minister in another place at Committee stage that HAT properties are transferred to the local authority at nil cost. It is something which we very much welcome and would like to see in the Bill. That is the point of the first three amendments.

Amendment No. 176YH covers a rather different issue. Its purpose is to ensure that where the majority of tenants in a block of flats vote to transfer to a private landlord—perhaps to a housing association—that will allow the minority of tenants to become council tenants again by requiring the local authority to take a lease on the relevant dwellings. That has been demanded, for example, by the Tower Hamlets tenants as a consideration that will affect the way in which they will vote on the new HAT ballot. The procedure we are asking for is analogous to that already exercised by tenants under the tenants' choice.

What it means is a lease back. It is not unlike the enfranchisement of flats. It is essentially a minority right that where the majority exercise their right, the minority may have a right to return to the local authority. Why may they want to do that? There are two very obvious reasons. First, tenants may actively prefer local authority management with its democratic accountability, possibly over a housing association and almost certainly over some of the private landlords whose reputations are not always immaculate. Secondly, if a majority of tenants are going over to a housing association or a private landlord, they go with the loss as secure tenants of the right to buy. By having a right to return on lease-back arrangements to the local authority, that would protect such tenants, as I understand it, and their right to buy. Otherwise they would lose it.

It is certainly true that they could have exercised that right while they were tenants within the HAT procedure but that may not have been financially possible for them at the time. It seems unreasonable to us that they should be required to lose it were they a minority of tenants who preferred to remain with the local authority. For that reason in particular we wish to press the Minister on Amendment No. 176YH. I beg to move.

Lord Strathclyde

I join with the noble Baroness in speaking to Amendments Nos. 176YE to 176YH. These amendments provide two small but significant changes to the arrangements introduced by the Bill to allow HAT tenants to become tenants of the local housing authority when the work of the trust is complete. The first would include in the statute the requirement to transfer back to the local authority at nil cost. Let me make it clear that that is, as a matter of policy, the Government's intention in respect of all those trusts now established or proposed. However, it is not possible to anticipate the valuations or financial circumstances of estates that in due course might pass to trusts.

The clause as drafted therefore gives the Secretary of State discretion to set the transfer terms. That is a flexibility we should preserve for the future. I urge the Committee to preserve it. I readily understand, however, the motives of those who have put forward the amendment. They fear that at some point the Secretary of State might reverse his nil cost transfer policy and, by onerous financial conditions, frustrate the right of tenants to return to the council. That is not a risk which need concern tenants.

The fact is that the local authority will be under a duty to take tenants back. I believe that the Secretary of State would be acting outside his statutory duties if he used his current flexibility to impose onerous financial conditions which would negate the right of return which Parliament will have given. For those reasons I see no justification for the amendment and invite the Committee to leave the clause as drafted.

Amendment No. 176YH would alter our present proposals that blocks of flats should transfer to a single landlord on the basis of a majority tenant vote. I recognise that the Bill provides for individual choice of landlord in the case of renovated or new houses. But there are two reasons why that is not sensible or practicable in the case of blocks of flats, and why I must therefore urge the Committee to resist the amendment. The first consideration is that such a statutory scheme would paradoxically undermine real diversity of choice for tenants. The fact is that landlords would be discouraged from coming forward to take over blocks of flats from HATs where they had no control over the proportion of flats they might end up owning in any block. For instance, it might be difficult for them to raise private finance for the purchase of a block in which they might own anything from 51 per cent. to 100 per cent. of the flats. The danger is that even the sociable landlords would simply consider it too much trouble.

The second consideration is that we must preserve as far as practicable the improved management arrangements which HATs are designed to deliver. That will be far easier where each block is under a single landlord. I accept that the right to buy may diversify tenure in a block, but that is quite different from having different landlords managing the properties. There should be nothing to prevent a HAT negotiating with prospective landlords lease-back arrangements where that is sensible, practical and acceptable to the landlords. That would mean that tenants could take into account the position on those flats when expressing their preferences but would not be bound, as they would in this amendment, to their initial choice. Existing and proposed trusts are sympathetic to that approach, but to impose a rigid statutory scheme would, in our view, go too far,

I submit that this amendment would result in a more onerous restriction of opportunity and choice for tenants than the arrangement for the transfer of blocks by majority ballot which we are proposing. Therefore, I hope that the noble Baroness will withdraw her amendment.

Baroness Hollis of Heigham

The Minister's case in response to these amendments seems to rest on two arguments. The first relates to practicalities and the second to the problem of diverse ownership and the possible limitation on choice for the majority. On the point about practicalities and the view that it is not reasonable to have mixed landlord arrangements within a block, I have to say that the Government have already conceded that pass on enfranchisement on the one hand (where there will often be mixed tenures) and on the right to buy on the other hand, in which some tenants will have bought, some tenants will have bought and enfranchised, and some tenants will remain renters. That situation will exist in previously local authority owned blocks where there will be three different sorts of tenure arrangements in order to respect the rights and wishes of individual tenants. There will be the right to buy on leasehold, the right to buy and to enfranchise, and the right to remain a tenant.

If that can be done under the right to buy plus leasehold enfranchisement, I suggest that it can certainly be done in the much simpler situation in which there is a transfer back of housing action trusts. So much, therefore, for the practicalities. The Government have already conceded that such arrangements can be made to work where they want them to work. We are now asking that they should be made to work where the tenants want them to work.

The second point relates to the democratic rights of tenants which the Minister did not address at all. Clearly, where two-thirds of the tenants want to enfranchise under the leasehold arrangements, one-third may be overruled, but that one-third have the right not to enfranchise. Under this arrangement, a majority of tenants may seek to go to a private landlord or a housing association. However, that would deprive the remaining 49 per cent., or whatever, of their right to buy at some future date. If the Minister is serious, as he was professing today, in saying that we on this side are restricting the right to buy while he and his side are pushing for the right to buy, what is he doing restricting tenants' rights to buy once a HAT is transferred out of HAT ownership into the private sector?

Lord Strathclyde

I am sorry to interrupt the noble Baroness. I understand that tenants transferring to a housing association would retain a preserved right to buy.

Baroness Hollis of Heigham

And if they transferred to a private landlord?

Lord Strathclyde

That, too, would be the case.

Baroness Hollis of Heigham

In that case, I have been misbriefed and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 176YF, 176YG and 176YH not moved.]

Clause 112 agreed to.

6.45 p.m.

Clause 113 [Provision of housing welfare services]:

Baroness Hollis of Heigham moved Amendment No. 176Z: Page 115, line 42, leave out from ("services' ") to end of line 44 and insert ("includes, in relation to accommodation occupied by elderly, sick or disabled persons—

1. (a) counselling, monitoring and support in connection with tenants' well being and health, and their personal needs other than those directly related to housing;
2. (b) the provision of monitoring and alarm schemes to reflect increased personal dependency and frailty of tenants;
3. (c) cleaning tenants' rooms and windows and their laundry services, to the extent that this reflects their reduced abiliy to do so themselves;
4. (d) organising social and leisure activities and functions;
5. (e) liaising with medical and social services staff and GPs about tenants' health needs;
6. (f) providing and supervising restaurants, meals and ancillary services thereto;
7. (g) counselling and liaising with relatives;
8. (h) running regular errands because tenants are unable to do so themselves;
9. (i) administering first aid;
10. (j) responding to out of hours calls by tenants;
658
11. (k) helping tenants into and out of bed;
12. (l) toiletting, dressing, feeding, bathing and shaving tenants;
13. (m) administering tenants' medication;
14. (n) nursing care.").

The noble Baroness said: We now move to a cluster of amendments dealing with housing welfare services. If I may, I should like to speak to the amendments more generally first and then deal briefly with the detail. The amendments deal with two sets of issues. The first relates to the powers of the local authority (as housing authority) in the field of housing welfare. Secondly, I have a set of questions about how such welfare activities can properly be funded.

One of the most significant housing developments of the past 20 years or so has been the establishment of sheltered or "good neighbour" housing whereby elderly residents move into suitable and adapted housing clustered around common room facilities, with the support of wardens, good neighbours and alarm systems. That has meant care in the community in the best possible sense. For example, no old people's home has been built in Norwich since the early 1970s because elderly people have been enabled to enjoy richer and more independent lives, with support, in their own neighbourhoods. However, outside the metropolitan authorities housing is a district council function while the provision of social services is a county council provision. Sheltered housing has always been a district function to which county social services occasionally made a modest contribution which, in most cases, dried up during the 1980s. In their turn, at district level, the local authorities have increasingly regarded welfare as part of a broader housing management role, providing, for example, furniture for young people corning out of care into an empty flat; debt counselling for families in arrears or support through the "good neighbour" schemes. How much of such welfare activity was funded through the housing revenue account and how much from the general funds (and therefore from the ratepayers) has always been a matter for local discretion.

That brings me to the second issue—the question of finance, as opposed to powers, and to the council house account. Because the Government contributed subsidies to the housing revenue account, they determined—rightly, in my view—that it should be a landlord's account only; in other words, that it should be ring-fenced to fund only those items pertaining to council tenants, and that those items which should be financed from all of us should be offset by matching general rate fund contributions or excluded from the HRA altogether.

Under that system, local authorities have proceeded perfectly reasonably and with due regard to local circumstances over the past 10 or 15 years. As a consequence of it, in 1991–92, for example, local authorities spent about £174 million on warden services. However, into that situation came the Ealing judgment. A council tenant in Ealing appealed to the courts that the rent on his council house was artificially high because he was paying in his rent for items such as sheltered housing which should properly be borne by the general rate fund. The courts agreed that, in their words, housing management should not go beyond, the ordinary and natural meaning of the term". That meant that the personal care part of the welfare element should be funded by the only body, apparently, with the powers to do so—that is, by the social services. What does the Ealing judgment potentially mean? It would mean closing down sheltered housing, or stripping out its welfare functions, or seeking to persuade cash-starved county councils (in the midst of their desperately trying to mount care in the community) that they should make a hefty contribution to district councils' housing revenue accounts. None of those three outcomes is desirable or feasible; hence the need to legislate (which we welcome) and to reconstruct by law the situation that pre-existed the Ealing judgment.

Therefore, Clause 113 gives local housing authorities explicit power to provide welfare services in connection with housing accommodation. Clause 114 gives local housing authorities the discretion to charge that to the HRA and to finance that either from rents or from a contribution from general funds. However, Clause 115 gives the Secretary of State the power to repeal any of those provisions. That is why we have tabled a series of amendments to test a number of issues. They are probing amendments.

The first set of issues associated with Amendment No. 176Z and with the group comprising Amendments Nos. 176BZ to 176QZ relates to the question: what counts as housing management when tenants are frail, elderly, disabled or mentally handicapped? We on this side want to argue that all good, sensitive housing management is, to a degree, customised (if I can use that ugly word) according to the needs of particular groups of residents. In other words, it is part of the full range of housing management services that need to be provided, but only some of those services will be drawn on at particular times by particular groups of residents. That may range from housing advice on the right to buy, where only council tenants wanting to buy will draw on that welfare service, to counselling on housing and benefits which, again, only those needing housing benefit will draw on, and "good neighbour" services, on which only the elderly will draw. It follows —this is the key part of our argument—that housing welfare is a proper and necessary part of a comprehensive housing management service, especially as council housing increasingly houses those who are too poor, too frail or too handicapped to have an alternative tenure.

If that is right and if housing welfare is part of housing management and therefore part of the local authority's housing powers, there is a second set of questions relating to how that should be funded. First, should the funding come from the housing revenue account and tenants' rents on the grounds that all tenants may need to use those services at some point or, secondly, should it be placed within the housing revenue account but cross-funded from other local authority residents on the grounds that all should contribute as many will enter sheltered housing direct from owner occupation? Thirdly, should it be financed by specific contributions from social service authorities which, in the shire counties, are the county councils? Given the county councils' current concern with funding care in the community and their fears that their funding will be something like £200 million short, it is clear that funding the existing local authority warden services will come low down their priority list.

It is clearly not practicable to split responsibility and funding for sheltered housing. Indeed, the counties have already argued that, if they should be required to contribute to housing revenue accounts to cover the cost of the welfare element in sheltered housing, they would need transferred to them the housing authority money and the housing benefit money for them to transfer it back again to local housing authorities. That is a silly circular movement.

In practice, most authorities fund from within the housing revenue account, but there is a mixture of practice reflecting local needs, the degree of support offered by schemes and the like. We obviously want that discretion to continue, and hence Amendment No. 176Z, because we suspect that that discretion may disappear after April 1994. We want to move an amendment to defer that until April 1998 when we shall see the knock-on consequences of local government reorganisation and whether splintered housing and social service authorities are brought together in a single unitary authority.

Finally, the proposal has implications for housing benefit, because housing benefit at the moment clearly covers a considerable part of housing management costs, including the welfare dimension. If it should be funded from outside the local authority housing service but from the county council, it would have to be recycled back through the SSAs, which is much less precisely targeted. The implications of course for that and for housing provided by local housing associations are significant.

There is then a series of amendments covering the wider issues of housing welfare services and a cluster of amendments on the powers that housing authorities may have to offer those welfare services, properly understood, we believe, as the natural extension of a comprehensive housing role. Secondly, there is a series of amendments on the funding of that provision, whether from council tenants' rents, district council ratepayers or county social services. Amendment No. 176Z is the first of the amendments, and I move it on behalf of myself and my noble friend Lord Williams of Elvel. It provides that we should have a common definition of "welfare services" so that when we come to debate the Secretary of State's power to repeal we shall know to what he might refer. I beg to move.

Baroness Hamwee

The noble Baroness has introduced an interesting area which reflects the fast-changing role of housing authorities' provision of specialist housing rather than normal housing. The list set out in Amendment No. 176Z is an interesting and comprehensive one, but I wonder whether it is wise, other than for the purposes of tonight's debate. It changes the definition of "welfare services" as set out in Section 11A(3) inserted by Clause 113 from an exclusive definition, 'welfare services' does not include the repair, maintenance supervision or management of houses", to a list which I shall describe as inclusive. At the very least, it would be sensible to retain subsection (3), to which I referred, which provides that welfare services do not include certain matters.

I wonder whether the list is appropriate. I understand and fully support the argument that, because, as we know, the Government do not like local discretion, it may be necessary to spell out what a local authority may do. One might find that the Secretary of State has a more restricted view of welfare than the local authority directly providing the services. My fear is that if we list the services in such detail, clients—local authority tenants are fast changing their status from tenants to clients, as their need for services from social services as well as housing grows—may begin to regard them as mandatory. To that extent, the amendment may have the effect of limiting a local authority's discretion in a way that may not be intended. However, as I say, for the purposes of this debate it is useful to have the list.

Lord Strathclyde

I am grateful to the noble Baroness, Lady Hollis, for explaining so clearly what lies behind the amendments. It is useful for that to be laid out. We proposed initially that the amendment should be grouped with other amendments because they relate to the central issue of how welfare services to local authority tenants should be provided and paid for. But doing it this way gives us an opportunity to deal with each matter separately.

Like the noble Baroness, perhaps I could discuss the background briefly. The background to Clauses 113 and 115 is the Court of Appeal judgment against the London Borough of Ealing last year. The Court of Appeal found that housing authorities could not debit to their housing revenue account the cost of welfare services provided by wardens in sheltered accommodation. The judgment also highlighted the limited powers available to housing authorities to provide welfare services to their tenants. To avoid uncertainty and disruption to those important services, Clause 113 will give housing authorities powers to provide welfare services to their tenants.

As the noble Baroness, Lady Hamwee, noticed, the term "welfare" was used to ensure that all the care services which wardens carry out and the provision of group monitoring and alarm schemes that do not necessarily depend upon wardens would be covered. The amendment specifies a list of services which, I am glad to say, the term "welfare" already includes.

The noble Baroness asked about funding arrangements. The consultation paper suggests that adjustments to the housing revenue account subsidy and the revenue support grant intend that the overall effect on local government finance is to be neutral. Of course I look forward to comments on the consultations. I hope that that is reason enough for the noble Baroness to withdraw her amendment.

Baroness Hollis of Heigham

The amendment was meant to be a probing one to provide a basis for the other amendments. In the light of the Minister's reply, I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 113 agreed to.

Clause 114 agreed to.

Clause 115 [Power to repeal provisions made by sections 113 and 114]:

Baroness Hollis of Heigham moved Amendment No. 176AZ: Page 116, line 24, after ("time") insert ("after 31st March 1998").

The noble Baroness said: The purpose of the amendment is to prevent the exercise of powers to repeal Sections 113 and 114 until the process of local government reorganisation is substantially complete. In other words, one of the problems facing the appropriate funding of housing welfare services is that housing is a district council function and social services a county council function. It is the expectation, is it not, that following the review of local government there may well be unitary authorities with integrated housing and social services powers? It therefore seems foolish to proceed according to the Government's timetable when we do not yet know the outcome of that local government reorganisation. Therefore all such procedures will have to be re-assessed in the light of possible unitary authorities. I therefore move what we believe to be a helpful, modest amendment that such proposals should be deferred until after the local government reorganisation. Our best guess is that that is 31st March 1998.

Baroness Hamwee

Clause 115 is an extraordinary clause, is it not? It follows two new provisions which give discretion to local authorities, but then it says that the Secretary of State may decide that he does not like what they are doing and so he can repeal the provision. Is that the way to go about legislation or have I misunderstood the clause?

7 p.m.

Lord Strathclyde

The amendment will delay the withdrawal of the powers of the housing authorities to provide welfare services and account for their costs; in the HRA until 31st March 1998. We are currently consulting local authorities and others on the future funding and provision of welfare services for local authority tenants. We have said that we will take no decision on whether or when to withdraw those powers until we have considered what consultees have to say.

Clause 115, which would enable my right honourable friend the Secretary of State to withdraw those powers, has been drafted with flexibility in mind. The amendment would remove that flexibility and pre-empt the outcome of the consultation exercise. I hope that the noble Baroness is content with that explanation.

Baroness Hollis of Heigham

Am I right to understand that the Minister has undertaken that the right to appeal will not be brought into effect until after the completion of the reorganisation?

Lord Strathclyde

We are consulting on future funding and on the provision of welfare services. I said that we shall do nothing until we have completed that consultation and have seen what has been stated. That may take some time.

Baroness Hollis of Heigham

But does not the Minister agree that to try to fund across two local authorities is infinitely more difficult than being able to fund by virement between two committees of the same tier of local government?

Lord Strathclyde

No. I can see the point which the noble Baroness makes but I believe that we need to preserve flexibility in the matter. That is why we have drafted the Bill in the way we have.

Baroness Hollis of Heigham

I am unimpressed by the argument of flexibility in respect of a situation in which local authorities may find themselves with extremely bureaucratic arrangements. Nonetheless, given the hour, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Viscount Goschen

I beg to move that the House do now resume. Perhaps I may suggest that the Committee stage begins again at eight o'clock.

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

House resumed.