HL Deb 11 July 1996 vol 574 cc445-507

3.38 p.m.

The Minister of State, Department of the Environment (Earl Ferrers)

My Lords, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Earl Ferrers.)

On Question, Motion agreed to.

Baroness Park of Monmouth moved Amendment No. 196: Before Clause 1, insert the following new clause— ("PART A 1 THE MARRIED QUARTERS ESTATE DISPOSAL OF THE MARRIED QUARTERS ESTATE .—(1) The Secretary of State shall not give effect to his proposals announced on 28th November 1995 to dispose of the Married Quarters Estate save in accordance with this section. (2) Before disposing of any property to which subsection (1) applies the Secretary of State shall consult the occupants of the property to which the proposal relates. (3) No proposal mentioned in subsection (1) shall have effect unless it is confirmed by order made by statutory instrument and subject to approval by resolution of both Houses of Parliament. (4) Together with any order made under subsection (3) the Secretary of State shall lay before Parliament a statement giving details of—

  1. (a) the consultation under subsection (2); and
  2. (b) the changes (if any) which, in the light of the consultation, the Secretary of State has made to his proposals.
(5) In this section "disposal" means sale, lease, mortgage, charge or any other disposition.").

The noble Baroness said: My Lords, in moving Amendment No. 196, I shall speak also to Clauses 212 and 213. I am pleased to find myself here since I was assured by the press this morning that I had withdrawn my amendment and that nothing would happen.

The Government propose to sell the entire married quarters estate in England and Wales—around 60,000 houses and flats—on 800 sites to a private international developer, initially on a 25-year lease-back basis. The MoD will pay an aggregate market-based rent, reviewed every five years, or a guaranteed payment—whichever is the higher—but will manage and maintain the properties through the new Defence Housing Executive. The sites include the regimental patches which are a vital part of the support system for service families. I shall leave it to other noble Lords to discuss the financial and legal provisions. I shall identify the features of the scheme which have caused deep anxiety and threaten the already fragile stability of service morale.

One is the site exchange scheme under which the developer has the option to exchange units or sites occupied by MoD families for "comparable substitute accommodation". An arbitrator, not the MoD, will decide whether that meets certain criteria and is "comparable". Another feature is the requirement for the MoD to release a number of occupied properties annually—probably 600 to 700—over 25 years. That adds up to roughly 17,500 houses. A third is the right of the developer, after 25 years, to vacant possession or redevelopment, not necessarily providing a comparable alternative, and to dispose of sites or parts of sites. The only way the MoD can resist this repossession is to use, on grounds of operational necessity, a ministerial certificate whose legal status on judicial review must be very doubtful. Finally, the families fear that as rents rise the MoD will be moved to relinquish the most expensive sites under the site exchange option.

The project has been presented as an excellent piece of privatisation which will save the taxpayer money by disposing of empty houses and benefit service families because it will make possible long overdue repairs to a disgracefully run-down military estate and better management. The Secretary of State, when he wrote to the families, said what a good deal it was and that his key priority was the interest and well-being of service families.

I have nothing against privatisation, but the Government have, not for the first time, utterly failed to take account of something which cannot be bought and can all too easily be lost: the confidence of men in their leaders. The services feel punch drunk; they have taken so many cuts and been asked to do the impossible so often; this is the last straw. The families feel threatened and anxious wives make anxious husbands, who will probably leave the services when recruitment is at rock bottom and retention a serious problem.

Why do noble Lords think that we have brought this amendment to the House? It is because within the services there has been no two-way consultation of the kind that was used for the Bett Report or indeed for the homosexuality issue: there has only been one-way traffic. They have been told what will happen and their legitimate concerns, expressed over many months and their irrational anxieties alike have not been addressed. The fact that the new proposal has coincided, though in no way connected, with the decision of the Armed Forces Pay Review Board to increase rents by 10 per cent. to 25 per cent. has not helped.

The families fear, with some reason, that the developer will be able to pick off regimental patches or parts of them. Privatising service homes is not like privatising British Gas nor is an army quarter like a house with a mortgage. Service people have only a licence to occupy a quarter. They have no security of tenure. Some wives may move 39 times during their husband's career—think of the effect of that on the children. But at least so far they knew that the environment would be safe, stable and familiar and their men, many of whom may not have been home three Christmases running thanks to several tours in Bosnia and Northern Ireland, knew it, too. When two Welsh fusiliers were taken hostage in Bosnia some years' ago, the press rushed to see the young wives, demanding to know what counselling they and their children were receiving. They were told proudly that the regiment and the regimental wives did that. They knew the score. That is what the regimental patch is.

Those who live there now feel threatened and that is a serious failure of communication and man-management. Organisations like the Federation of Army Wives and the British Legion have tried to secure two-way consultation and have got nowhere and the anxieties have grown. We believe that there would be very great benefits—if the scheme is indeed so much in the interests of the forces—if a proper consultation exercise took place. It would not only be good PR—a very scarce commodity these days—but also it would be proof that we have not actually forgotten how to listen.

We have been told that the great prize to be won for the services in return for putting the security of future generations at the mercy of an international developer is the £100 million which the Treasury is prepared to release over five years and ring-fence for use to improve property. (The MoD is already spending £40 million annually on upgrading, anyway). How much of that £100 million, one wonders, will be used to improve houses to be handed over to the developer. Is £100 million a prize out of the £1.5 billion at least which the Treasury is expecting from the sale?

Widespread loss of morale and widespread anxiety, which because of the strong tradition of silence and loyalty can find a voice only through this House and the other place, are a high price to pay for a paltry £100 million. I have to add that, as other noble Lords will show, the deal is a wonderful one for the developer but full of pitfalls and black holes for the country, both in the short and the long term.

Perhaps I may ask my noble friend the Minister, incidentally—and I gave him warning of this question—to tell the House what connection, if any, a Mr. David Hart has with the project? Is he a consultant? What is his status in this matter? My concern is that this project appears to be driven far more by the philosophy of the market than by any concern for, or understanding of, service needs.

Many noble Lords will feel that the Chiefs of Staff themselves have now endorsed this project publicly and therefore that should be the end of the matter, and that to continue to press the matter is possibly arrogant and certainly unnecessary. I suspect that the Chiefs of Staff, for reasons of pragmatism as well as loyalty, have no alternative. A threat to £1.5 billion that the Treasury is counting on could only result in the MoD having to find that money in some other vital area.

But we are not asking for the scheme to be given up. Once it has been sold properly to the forces and once Parliament has had the opportunity, for the first time, to debate it in the light of that consultation and to test the safeguards, there is no reason why a good scheme should not go forward in October with due modification. The Secretary of State stated in the preliminary bids documents that he may, at his discretion, amend the timetable, alter the basis of the transaction or decide not to proceed with it at any time.

We are asking for delay to allow full debate in Parliament on the basis of consultation and a decision by affirmative resolution. I have never approached any issue in this House as a gender issue, but I feel considerable anger, shared by other noble Lords with service contacts, over the determined efforts being made to suppress adverse comment even within the services. Wives cannot speak (I am not here referring to the official bodies) without risking harm to their husbands' careers or, at the least, acquiring a reputation as a troublemaker. The RAF News has apparently been forbidden to publish critical letters about the scheme. It seems that service wives have duties but no rights. We expect their votes as citizens, but we give them no voice on an issue so closely affecting their lives. In a free country that is disgraceful when the issue concerns neither security nor operational duties.

This project is a national decision with potentially far-reaching consequences, capable of a serious adverse impact on the morale and effectiveness of our fighting services. It deserves to be fully tested by due parliamentary process. Perhaps some indication of its importance is the fact that the noble and gallant Lord, Lord Bramall, who speaks after me and who should have been at the 75th anniversary celebrations of the British Legion, has come here expressly to support this amendment. I beg to move.

3.45 p.m.

Lord Bramall

My Lords, I would be the very last person to want to obstruct any administrative arrangements which were truly in the interests of the Armed Forces. I appreciate that by their insistent and somewhat unusual revelation that the Chiefs of Staff have accepted this comprehensive sale and, even more unusually, their approval of a Chiefs of Staff press conference on it, Ministers are claiming that these measures are exactly that. Indeed, I accept that the very real anxieties felt by families may be largely the result of a failure of communication and of consultation, which has been minimal, and that clearly this has to be put right.

But there are a couple of other points that I must raise. First, no one, by any stretch of imagination, can claim that this sale was devised with service families uppermost in mind. It was to be introduced primarily to satisfy the Treasury's urgent demand, for whatever reason, for £1.5 billion or £1.6 billion. It was from that starting point that Ministers have been pressed, by the Chiefs of Staff and others, to conjure up certain safeguards designed to see that service families will not be too disadvantaged and may even, with some initial improvements in standards, seem to benefit.

In the short term I recognise that the policy may well be successful, particularly if the chain of command keeps a weather eye open to see that families are not exploited, although what the developers will say about apparent further restraints being imposed on them and how much it will encourage them to manipulate the estates at a later stage remains to be seen. It is about the longer term and the possibility of service families being squeezed into inferior and less appropriate accommodation through a combination of inevitably rising rents and the right of developers to offer alternative accommodation while developing selected estates for their own advantage that those closest to the problem still need to be reassured.

I ask noble Lords to remember that these anxieties, some of them very strongly held, come on top of so much continuous upheaval over the last five to six years which has brought the Armed Forces, although well equipped, to a state of acute undermanning—a fate, I notice, that is not shared by the Conservative Benches today—and overstretched. There is a general feeling of alarm and uncertainty in many military communities. Indeed, there is a feeling among some families that they are being almost disenfranchised, husbands having been told, in no uncertain terms, that not only they but their families must do what they are told, lump it and stop bellyaching.

I know that it is Whitehall practice to consider major departmental assets as belonging to the Treasury, or the nation. But £100 million over five years, about which so much play is being made as an indication of Treasury generosity, seems to me a measly rebate from the potential proceeds of this particular piece of asset stripping. Quite apart from the fact that if this amount was so badly needed to maintain the estate it should have been provided before—during this Government's lengthy responsibility for such conditions—much of it will be spent on bringing up to the developers satisfaction even those quarters which are surplus.

Set against the £40 million or so spent yearly by the Defence Housing Executive, only recently established and praised to the skies in the last White Paper for excellent administration, the £100 million does not constitute such a very big deal. And, of course, the money could easily have been provided by the executive selling off those quarters which truly are not needed. If a much larger rebate could have been negotiated by the Ministry of Defence with the Treasury, that really would have been a great boon to the hard pressed Armed Forces and indirectly to their families. It seems a good thing occasionally to remind the Treasury that it cannot always ride rough-shod over everyone.

I am as concerned as anyone to see that surplus quarters are not left empty. I believe that the arrangements merit some continuing reflection and especially consultation, with particular emphasis—if morale is not to be affected—on the longer term when decent quarters may still be needed in specific areas and, who knows, perhaps in larger quantities than they are now. For that reason I am in full sympathy with the amendment of the noble Baroness which I know, and as every noble Lord in your Lordships' House must know, is put forward only with the most honourable and public spirited motives in mind.

Lord Trefgarne

My Lords, I claim some qualification to speak because I was for three-and-a-half years the Minister responsible for looking after the married quarters estate in the Ministry of Defence. If my memory serves me right, the noble and gallant Lord, Lord Bramall, was Chief of the Defence Staff at that time. I am sorry to have to tell my noble friend that we made a complete hash of it. At that time, at least, large numbers of married quarters stood empty. Large numbers of the empty ones, and, indeed, large numbers of those that were occupied were in a quite disgraceful state.

I remember visiting several RAF stations over which the noble and gallant Lord, Lord Craig, was then presiding as commander in chief, I think, where the water was coming through the roof, the window frames were all rotten and the doors were falling out of their frames. I was ashamed to be the Minister responsible for such a scandalous situation. I did my very best to get it right but inevitably there was not enough money to do the job properly. I do not think therefore that I have any right to complain to the Government about a change in the policy that I presided over with such conspicuous lack of success.

I have to say to the noble and gallant Lord, Lord Bramall, that the chiefs of staff were just as responsible as I for the policy at that time. I was told that the surplus married quarters could not be sold because they were needed, perhaps for some future deployment of troops yet to be decided upon. But the truth was also that many of the married quarters were unsaleable. All, for example, had the same heating system. No individual would buy a married quarter where the heating was part of some communal system. The electrical system, I believe, was common in many cases. Many quarters were, as I said, in a quite deplorable state. The best I could do was to call for the bulldozer at every possible opportunity and flatten them so that new ones could perhaps be built in due course.

Other surplus quarters that we wanted to sell were located in remote or distant spots. The RAF had many married quarters in distant parts of Scotland which naturally could not be sold in any numbers because not many people wanted to buy them. I therefore have no difficulty with the proposition that the married quarters should be transferred to the private sector. The result, I believe, will be better managed, better maintained married quarters—all very much in the interests of our servicemen and women.

The amendment we are considering seeks to interfere—quite respectably, but nonetheless interfere—with the executive actions of the Ministry of Defence and of my right honourable friend the Secretary of State. It is highly unusual—to put it no more strongly—to have amendments of the kind we see on the Order Paper today to a public Bill going through your Lordships' House. By her own confession, my noble friend, Lady Park, does not apparently intend to change the policy, simply to have my noble friend consult and bring forward a report to your Lordships in due course. That is not, in my view, the right subject for an amendment. If Ministers want to give assurances that they will do as my noble friend asks, that would be entirely proper. But it would be entirely inappropriate to include the proposed amendment on the face of the Bill.

I turn to some of the difficulties that have been advanced to support the amendment. I have heard much complaint, for example, that there is likely to be a Japanese owner of a number, if not all, of the married quarters to be disposed of. I do not know whether that is true or not. I am not sure it is particularly relevant.

Your Lordships may know that No. 1 Victoria Street, the headquarters of the Department of Trade and Industry is, believe it or not, owned by the Japanese and rented from them by the department. I happen to think that that is an advantage because I had the misfortune to serve in that building just before the Japanese acquired it and it was in a deplorable condition. I do not know whether any of your Lordships have visited the DTI at No. 1 Victoria Street recently, but it is a rather fine building now. It has been much refurbished at the cost, I believe, of the landlords.

Finally, I should like to deal with the principle—I address my remarks now to noble Lords on this side of the House—of moving such an amendment to upset a major piece of policy being advanced by the Ministry of Defence at a time when our political majority in the other place is so slim—

Noble Lords


Lord Trefgarne

My Lords, I do not expect noble Lords opposite to be swayed by those arguments—they would no doubt find them appealing—but perhaps I may advise my noble friends that this is an important piece of government policy and I do not think that it would be right for a Conservative majority in this House, about which noble Lords opposite never cease to complain, to move in the way proposed by the amendment.

I very much regret that for the practical reasons that I have advanced, as well as for the political reasons to which I have alluded, I cannot support the amendment. I hope that my noble friend will not press it.

4 p.m.

Lord Chalfont

My Lords, I am somewhat surprised by the arguments put forward by the noble Lord, Lord Trefgarne, who has suggested that in some way the amendment is improper. I shall return to that point later.

I rise to support very strongly the amendment moved by the noble Baroness, Lady Park of Monmouth. Before doing so, I should declare, as I did in the House of Lords Register of Lords' Interests, that I am a consultant to a company which has put forward certain suggestions for the sale of the married quarters which it claims would benefit service personnel. In declaring that interest I must emphasise that that company would not benefit from any cancellation or postponement of the sale which might result from the amendment.

Perhaps I may begin by saying what, at least in my view, the amendment is not intended to do. It is not a wrecking amendment, as was implied by the noble Lord, Lord Trefgarne. It is not designed to affect any other part of the Bill. It is certainly not intended as ammunition for any faction engaged in internal political manoeuvring. I have no wish to intrude upon private grief whether it is being suffered by the Government or by the Opposition. And I can give the House a categorical assurance that I am not seeking the leadership of the Right-wing of the Cross Benches.

Finally, it is not my intention in supporting this amendment to oppose the transfer of the married quarters estate to the private sector. I repeat that that is not my intention. There are a number of very strong arguments for doing that. Indeed, the Government argue persuasively that the current plan for the sale is being negotiated on terms which satisfy the interests of the Services and at a price which properly reflects the public interest". It is therefore pertinent to ask, as I gather that some noble Lords are asking, what exactly is the intention of the amendment. My position in supporting it derives from my conviction—unfortunately, now shared by fewer and fewer people—that the Armed Forces are a very special part of our society, that they deserve special treatment, and that it is not always possible to base our attitude to their welfare and conditions on arguments which are valid for the rest of society.

The first point to be made is that there is a widespread feeling that the project for the sale, as put forward by the Ministry of Defence, has not been thoroughly thought through, especially with regard to the long-term implications. Noble Lords who have had the time and the good sense to read The Times this morning will have noticed a powerful argument examining some of the long-term implications and pointing out some of the dangers, not only for the Armed Forces, but for the national economy, of pursuing the sale. It can be argued—it is rightly being argued—that there are legal, financial and operational aspects of the deal which are open to question and which, in my opinion, need closer examination. Like the noble Baroness, Lady Park, I am content to leave these aspects of the problem to other noble Lords who are more qualified than I am to speak on legal and financial matters.

My own main concern about the project is that there appears to have been inadequate consultation, if any, with those most closely affected—namely; those who occupy the married quarters which are now to be sold into private ownership. There is widespread evidence from a number of sources, including the Royal British Legion and the Federation of Army Wives among others, that servicemen and women and their families are worried about the long-term effects of this sale on the security of tenure of their homes. I repeat the word "worried". If you have worried soldiers and worried families, you have a danger at the heart of the Army. I can confirm that to be so from my own contacts in the Armed Forces, and especially in the Army in which I had the pleasure and the honour to serve for so many years.

In that context, I have a feeling—I do not make this criticism in any polemical way—that the Ministry of Defence has paid insufficient attention to one of the less tangible but nevertheless very important aspects of the problem. As anyone who has served in any of the Armed Forces knows, the married quarters of a military unit are an integral and important part of the structured military system in which soldiers and their families are accustomed to live. Apart from the general social importance of close proximity between servicemen and their families when they are serving at home, the existence of the "patch", as it is called—we are all getting used to that expression for the married quarters estate adjoining a barracks—reassures the serviceman that when he is serving at home his family is nearby and well looked after, but, more importantly, when he is away on active service he knows that his wife and family are secure within the structured military system. That is at the root of one of the most important aspects of morale in the Armed Forces. There is a very real feeling that the current plan for the sale will erode that system. I repeat the phrase, "There is a very real feeling" because that is what I mean and that is what lies at the heart of my concern.

It may well be that those concerns are misplaced, but that is not the point; they exist and they are having a significant effect upon morale at a time when the Armed Forces need, and have indeed been promised by the Government, a period of security and stability after the turbulence and uncertainty caused by the defence reviews such as Options for Change and Frontline First.

The public intervention in this matter of the Chiefs of Staff has already been referred to by the noble and gallant Lord, Lord Bramall. If the Ministry of Defence and the Chiefs of Staff claim that they have engaged in a process of consultation, I can only observe that it has not been very successful because the proposal is still causing real concern to servicemen and their families.

I concede that Ministers and service chiefs have displayed great courtesy and patience in trying to explain the deal to me, to some of my colleagues and to others. They have converted many people to their view—they have gone some way towards converting me to their view—but they have apparently not convinced the people who really matter, those who are most directly concerned.

As I commented at the beginning of my remarks, I have no quarrel in principle with the proposal to privatise the married quarters estate. In principle it sounds a good idea, but there must be ways of doing it which would allay some of the concerns of those who live in quarters which are to be sold. As the noble Baroness, Lady Park, said, the important point is that before a change in military policy as important as this is implemented, those most directly involved should be fully and effectively consulted, and the result of that consultation should be the subject of debate in Parliament.

This is where I return to my quarrel with the noble Lord, Lord Trefgarne. The amendment seeks a period of reflection over what is not an executive decision of minor importance. It is not a piece of housekeeping for the Ministry of Defence to deal with in an executive way; it is an important change of military policy and to military culture in this country.

The noble Lord, Lord Trefgarne, has complained that this matter should not be the subject of an amendment to the Housing Bill. Very well. There is no need for an amendment of the Housing Bill. If the Government undertake to engage in the process of consultation and place the results of that consultation before Parliament the reasons for this amendment will fall away. I have no doubt that the noble Baroness, Lady Park, will be strongly in favour of withdrawing it.

Finally, it has been suggested that to embark on a consultation process of this kind will, in some mysterious way, undermine the Army's normal chain of command. I have discussed this matter with some of my noble and gallant friends in this House. Speaking as someone who has experience in these matters, I find that an extraordinary claim. All that is required is that the problem should be passed down the chain of command to commanding officers. All that commanding officers are required to do—as I was required to do on many occasions when I was in the Army—is to speak to their officers and men. Whatever else has changed in the Army, I hope that that has not changed. All they need do is to report the views of soldiers and their families upwards through the normal chain of command. Far from undermining or circumventing the normal chain of command, it seems to me that a consultation process of this kind can be carried out in the Armed Forces more quickly and effectively than in any other part of our society—because of the chain of command.

Before I sit down, I should like to refer to an unworthy suspicion that has been hovering in the minds of some of us and is openly expressed in the current issue of the Economist. This matter has been referred to by the noble and gallant Lord, Lord Bramall. I should like to quote a few sentences: Should the Government be forced to withdraw the privatisation. Mr. Portillo would be hard pushed to stop the Treasury deducting the missing money from his budget. That would mean cancelling programmes for new weapons—which is why the generals, unlike the men and women they command, want the privatisation". I ask the Minister in his reply to tell the House whether there is any substance in that. Is it true that if the married quarters estate were not privatised the Treasury would demand corresponding cuts in the equipment programmes of the Ministry of Defence? I believe that we are entitled to a plain answer to that question. If it is true, it is perhaps not surprising that the Chiefs of Staff—men who I know have the national interest very much at heart—support the sale of the married quarters rather than contemplate cuts elsewhere in their equipment budgets. If this is so, it is a curious approach to what must be the first duty of any government—the effective deployment of resources for national security or (as it used to be referred to in the good old days) the defence of the realm.

I hope that the Government will agree to a period of reflection, reconsideration and consultation and bring the results back to Parliament. I can think of no argument against a brief delay in this sale which is not totally outweighed by the need to ensure not only that it is the best deal that can be achieved in the public interest but, more importantly, that it is fully understood and accepted throughout the Armed Forces.

4.15 p.m.

Lord Callaghan of Cardiff

My Lords, when I entered the Chamber this afternoon I had no intention to speak, but I have been driven to it by the noble Lord, Lord Trefgarne. I remind the Government of Napoleon's dictum that morale is to the material as three is to one. It seems to me that in this matter it is only the bottom line that counts, whatever the Treasury may feel is necessary in the way of money. The Conservative Party appears to have forgotten the importance of other considerations which in the past it always upheld. I very much regret that one of the great parties in the country has disregarded the considerations advanced by the noble Lord, Lord Chalfont. That is not worthy of it.

I confess that I have received very few representations. I have made one or two inquiries. As I entered the Chamber I was informed by one noble Lord, who often speaks for the Army, that on the whole he believed the system and safeguards would work, although he was not ready to commit himself on some of the broader considerations. That may well be true, but that is not the whole of this argument. We are not concerned solely with what safeguards can be introduced in order to satisfy service wives and their men. We are also concerned with what the Government are destroying by failing to carry the Armed Forces with them before they do it. It is not sufficient to carry the Chiefs of Staff. I have had some dealings with Chiefs of Staff. I have at all times and in all circumstances respected them very much, but I know the pressures under which they are placed by Ministers of Defence, past or present. The Chiefs of Staff have the very difficult task of weighing in the balance the needs of and consequences for their forces and their loyalty to the government of the day, which they have to express in some way. They face a dilemma which has existed under both Labour governments and the present Government. I venture the opinion—without any evidence, and I am open to challenge at all times—that if the Chiefs of Staff were asked, free of any other constraints, whether they preferred this system to the old one the answer would be that they would prefer to continue as they are.

Finally, I should like to deal with the comments of the noble Lord, Lord Trefgarne. My only difference with the noble Lord, Lord Chalfont, relates to his statement that we must not be polemical about this. Why on earth not? I listened to the speech of the noble Lord, Lord Trefgarne, with the utmost incredulity. It appeared to me that the Government's defence amounted to the following. In the 1980s the Government preferred to cut taxes rather than look after the living conditions of the Armed Forces. They preferred to win a general election, even if it meant that water poured through the roofs and ceilings of homes in which service personnel were living. His second defence of the Government was that they found it quite impossible to look after their own estate, that when the noble Lord was a Minister the office in which he worked was a disgrace and it was far better that the Japanese should handle it. If that is the defence of the Government, the sooner they are ejected neck and crop the better.

Lord Trefgarne

My Lords, the noble Lord, Lord Callaghan, has chosen to respond directly to my words. I hope that I may be permitted a moment to reply to his remarks.

Earl Ferrers

My Lords, perhaps I may be permitted to interrupt my noble friend. This is Report stage. He may be extending the limits further than may be appropriate.

Baroness Cox

My Lords, I rise to endorse this amendment with reluctance. It gives me no pleasure to withhold support from the Government on this very important issue. However, I cannot in all conscience refrain from commending my noble friend Lady Park and other noble Lords who have put this issue before the House. Nor can I desist from strongly supporting the case that they have made. I particularly highlight the effects of the Government's proposals on the morale of servicemen's families. I regret not having spoken at previous stages of the Bill. I have been absent for unavoidable reasons.

The Government claim to be one that affirms family values and promotes policies which support family life. The proposals under discussion have caused profound anxiety and dismay to the families of many servicemen. The life of these families is never easy. They are prepared to make many sacrifices out of loyalty and a commitment to the demands of service life. However, the spectre now looming before them brings new fears as well as anger at the lack of consultation. Servicemen and women have votes but not a voice. Equally, their families are deprived of a voice to express their needs and concerns. However, some wives have voiced their concerns, inevitably anonymously. I should like to quote two of them briefly because they speak with the authority of first-hand knowledge and the authenticity of personal experience.

I quote the first service wife: If the terms of the proposed sale are so good, so favourable to the Armed Services, why is the MoD not telling us what they are? Why indeed? I suspect the reason is because the terms favour the government and those who have approved the deal will not be those who suffer its long-term effects. Those whose lives will undoubtedly be disrupted have simply not been consulted. I think this is wrong. Our Armed Services are the envy of the world: dedicated, loyal and hardworking. Their wives also make sacrifices: at least once every two years they must make a new home, find new friends, new schools, doctors and dentists for their children. They must also face the enhanced possibility of early widowhood. They will certainly have long periods of single parenthood. All these sacrifices they make willingly as part of being a serviceman's wife. But it is now, when they feel their homes may be threatened, together with the mutual support systems of their communities, that they are beginning to wonder whether the sacrifice is actually worthwhile and whether this is not a betrayal too far by a government which has already so drastically reduced manpower within the Army that there simply are not enough soldiers left to fulfil all the responsibilities required of them". I quote briefly a second service wife: I feel the loyalty of the services is being exploited. If our married quarters were to become subject to sale I can see my husband being torn between his family and his service to the country. He might face the prospect of a sale of property taking his family away, tearing the family apart". It may be that such fears are unwarranted and groundless, as the noble and gallant Lord has indicated. It may be that the Government's proposals will work for the benefit of servicemen, women and their families. But perhaps I may ask my noble friend the Minister, why such fears have been allowed to become so widespread? What consultation has there been with all those concerned? What information has been made available concerning the details of the impact of these proposals on wives and families? Why do so many feel like this wife, who claims: We, the wives, also contribute to this country's security and yet we have been treated with contempt and our legitimate worries dismissed as `scaremongering'."? Wives have been treated with contempt. I understand that members of the MoD housing panel were not given details of the proposals concerning the sale of homes because they were "commercially confidential" matters. Subsequently they were accused of incomprehensible obduracy. Will my noble friend the Minister give an undertaking that all the facts will be made available and that full consultation will be ensured on the basis of those facts?

Finally, before I sit down, perhaps I may point out that such concerns may have wider repercussions. For example, if families fear that the proposed developments will lead to even more moves, or to moving families away from husbands and fathers so that family life becomes even more disrupted, morale will be damaged. Such fears may also encourage families to take out mortgages to buy their own homes in order to provide at least some stability. But that will be at the cost of even more separation from the husband and father of the family, and may lead to more stressful and broken marriages. Also, morale may be so damaged that retention of servicemen may be adversely affected and that in turn will affect recruitment and the defence of the realm.

It cannot be said too often that this country has Armed Forces of which we should be proud and to which we should be grateful. I am deeply saddened to learn of these developments which have caused such hurt and anxiety to servicemen and women and their families. They deserve better treatment than this, especially from a Government who purport to place defence and family life high among their priorities. I hope very much that my noble friend the Minister will be able to promise the thorough and wide-ranging consultation needed to gain the confidence of all those who will be affected by proposals which have already caused such widespread anxiety, hurt and dismay.

Unless my noble friend the Minister can convince my noble friend Lady Park on this matter, I hope that your Lordships will support the amendment standing in her name. If he can give those undertakings he will be doing a service to the Armed Forces and their families, to whom we and the country owe so much and who deserve all the support which we can give them.

Baroness Strange

My Lords, I wish briefly to support my noble friend's amendment and apologise that I was not present to hear her speak. I was in Westminster Abbey for the Royal British Legion's service for its 75th anniversary. I only just tore off my hat as I came dashing in. As others of your Lordships who were there will be aware, it was a very moving service. The former Dean of Windsor, the very Reverend Dr. Michael Mann, said that we were surrounded by clouds of witnesses of servicemen who had served their country and were not now with us. So we are here.

I deeply honour and respect my noble friend the Minister and I am Conservative through and through—to my backbone and beyond. But I cannot help feeling that the whole of this proposition is paved with good intentions like the way to Hell!

My parents once had a milk round. When they were hit by financial necessity, as everyone is from time to time, they sold it to someone else. Of course, there were bits of the milk round which were very profitable (such as delivering in the villages) but there were also bits which were not (such as delivering milk to the outlying farms and cottages in the hills). When my parents sold the milk round they extracted guarantees from the buyers that they would still supply milk to those from whom they made a loss. As soon as the sale was completed the guarantees were dropped and the service was stopped. Guarantees have a strange way of vanishing.

Twenty-five years may seem a long time. It is a short time in the life of a tree. It is a short time in the life of a nation. Some of us may not be here in 25 years' time. We owe much to our Armed Forces. We are all supported by their service and their sacrifice. Let us now support them and not throw away the substance for the shadow.

Viscount Mountgarret

My Lords, I am sure that the proposals announced on 28th November have a great deal of merit. I am also sure that those who believe otherwise have a strong argument, too, not least the noble and gallant Lord, Lord Bramall. He is in the fortunate position of being able to speak from personal and present circumstances with freedom, unlike some of his colleagues who, as the noble Lord, Lord Callaghan, rightly pointed out, have difficulty in reconciling their positions as politicians and servicemen.

I am concerned not so much with the merits of the case because I frankly admit that I am not qualified to comment upon them. I do not have the necessary experience. However, I am concerned about the constitutional position. I expect that I shall be corrected, but I do not remember during the 30 years in which I have had the privilege of being a Member of your Lordships' House more than one occasion on which extra strong government requests for assistance have been made in respect of a matter which has never been considered by the elected Chamber.

Only a week ago we debated firmly and interestingly the constitutional position of your Lordships' House. Quite rightly, more than one speaker defended the position of the hereditary peerage and the contribution that it can make to your Lordships' House and to the country as a whole. However, there were those—and if Hansard is read your Lordships will see that I was one—who regretted the position whereby it is possible for a Conservative Government to call on the unqualified support of many Members of this House who for very good reasons, I am sure, are often absent from our debates. Therefore, one questions whether or not a privilege is being abused. That is a matter which gives me great concern and I should like to see it reformed.

That is the constitutional matter and perhaps I may now return to the matter before us. I believe that it is wrong for the Government to ask your Lordships' House to take a decision which would deny another place from considering this most important and, I can understand, contentious matter. I ask your Lordships to consider what would happen if we rejected the noble Baroness's amendment. The provisions announced and proposed by my right honourable friend the Secretary of State would presumably go through, and the other place would not have another opportunity practically to do anything about it. Let us suppose that difficulties were encountered and families were put in invidious positions or were upset. I sincerely hope that that would not happen but I do not have a crystal ball. The might and fury of those families and the Ministry of Defence would be directed at your Lordships' House, not at another place. We would be seen as the unelected Chamber that pontificated upon and directed the plight of the service families.

This is the wrong position for your Lordships' House to be in. I believe that the correct course is to give another place the opportunity of considering, by way of consideration of Lords' amendments, the proposal of my noble friend. If there is agreement in another place with my right honourable friend the Secretary of State's proposals, then, when the matter again comes before your Lordships' House and there seems to be a considerable amount of public concern—opinions in the tabloid press, and so on—it will be right and proper for the Government at that time to encourage maximum support. In that way we ensure that government business goes ahead; we are not frustrating it unreasonably.

I am very concerned about the constitutional position. I shall listen with the greatest interest to my noble friend's reply but unless I can be satisfied I shall have the greatest difficulty in supporting the Government.

4.30 p.m.

Earl Russell

My Lords, I have heard the case for the amendment and I agree with it. I do not intend to repeat it. I rise only to welcome the interesting point made by the noble Viscount, Lord Mountgarret.

This House has been warmly praised from the Conservative Benches in the last few months for its ability to check the Executive. I am not sure that we should be flattered. It makes me feel a little like the cat that is praised by the mice. It is all very well to check the Executive when the Executive does not mind. What is really important is to check the Executive when the Executive does mind. When we fail to do that, it is quoted against us—not by me, I hasten to say—as a reason for arguing that we do not earn our keep. I do not want this amendment to be such an occasion, and I am grateful to the noble Viscount for saying what he said.

Earl Attlee

My Lords, during the Committee stage of the Bill the noble Earl the Minister said that, legitimate concerns seem to have been overlaid with some fundamental misapprehensions."—[Official Report, 25/6/96; col. 898.] He is quite right. I admit that I was labouring under a fundamental misapprehension and had not quite grasped what was going on. I thought that the management of the married quarters estate, the MQE, was being put into the hands of a trust or a defence agency. That should have brought in private sector expertise instead of civil service managers with only a short term involvement and little experience. I naïvely thought that we were at the stage where the management of the MQE was moving into the private sector.

Unfortunately, I was not aware of the events which occurred last year while I was working overseas. Apparently, the scheme collapsed for various reasons, among them the fact that the MoD felt unable to relinquish the freeholds. Since the Committee stage the penny has dropped for me. I have now realised what it is all about: pound notes or, rather, coins, and quite a lot of them; in fact, £1.2 billion worth.

My difficulties are threefold. First, the Government want to conduct a sale and leaseback of a very long term asset, the married quarters estate. I suggest that it is an unwise course of action as it will create problems for the future in order to make a short term gain. Will the noble Earl the Minister say what the difference is between the sale and leaseback of the married quarters estate and the sale and leaseback of the MoD main building, for example? Where does all this sale and leaseback business stop?

The main building would be much more attractive to a developer or a financier as there would be less risk and it would not be so complicated a matter to administer. There is no question of the requirement not continuing for government buildings near Parliament.

My second difficulty is that the proposal will do precisely nothing to improve the management of the estate. In fact, the Minister for Defence Procurement in another place wrote, in The Times, I think: Any change in housing arrangements is bound to cause concern, but service interests are being fully protected throughout the transaction. I could almost say that individual occupants will not notice any difference. In other words, the management of the estate will remain exactly the same. The Minister for Defence Procurement then described how the £100 million would enable the estate to be brought up to scratch. I will address that point in a moment.

The Defence Housing Executive will still be the old MoD weighted down and hampered by archaic procurement and management procedures. The Minister also said that despite all this money it would still take five to seven years to get the married quarters estate up to the required standard. The Government have always extolled the virtues of private management, and I strongly support that policy. But the proposed arrangement will not introduce any private management or maintenance of the married quarters estate.

The figure of £100 million sounds an awful lot of money but it is allocated over five years and spread over possibly 40,000 houses. That works out at an average of just £500 per house. I am sure that the noble Earl the Minister will point out that it is additional money. Even so, it is not a lot of additional money.

My final difficulty centres on the economics of the sale and leaseback. I am not an expert on high finance nor have I read the article in The Times today, but when the figures are analysed they do not look very attractive. If I make a ghastly error I shall be grateful if noble Lords point it out. I have made no attempt to discount the net present values. Of the 60,000 houses making up the married quarters estate a maximum of 12,000 may not be required. If the MoD sells the married quarters estate for £1.24 billion, and the average value of the surplus houses is taken as £20,000 each, the MoD will still be renting houses with a value of about £1 billion.

Financial institutions do not give out rather large cheques without charging interest and obtaining a return on their investments. If we consider an exceedingly modest rate of return of 8 per cent., the MoD will still have to pay £50 million per annum or £250 million over the first five years of the scheme. However, we must not forget that the MoD will still receive £100 million over the same five years in order to upgrade the estate.

There is one financial merit for the Government. They will effectively be able to borrow more than £1 billion without it appearing on the public sector borrowing requirement. But there is real scope for leasing wasting assets such as vehicles and plant and the MoD already does so to an extent. That avoids tying up large amounts of capital. Fortunately, I have no intention of wearying your Lordships with that point as I intend to deal with it during tomorrow's debate.

It is not good enough to oppose a policy which is designed to address well understood problems without suggesting an alternative policy. My guess is that the rent paid by the services goes direct to our dear friends at the Treasury. If the rental income was paid directly to a defence housing agency, it would probably have an income of at least £48 million per annum. On top of that, it would be able to sell redundant properties so that in fact it could quite likely remit funds back to the Treasury after having made satisfactory progress against agreed targets for upgrading the estate.

If the MoD police force can become a defence agency—and I have misgivings about that—why can we not have a defence housing agency? The Minister may quote legal difficulties but this Bill provides him with an ideal vehicle for making any changes required. I urge your Lordships to support the amendment and to allow the other place to have another look at the matter.

Baroness Hogg

My Lords, I should like to start by craving your Lordships' indulgence because this is the first time that I have spoken at this stage of a Bill and I apologise in advance for any failures of etiquette which I may commit. I wish to apologise immediately for not being here at the start of the debate, owing to traffic.

Nevertheless, I have the courage to rise because in the four years that I spent in Whitehall, I watched officials and Ministers wrestling with, and failing to come to a resolution on, this particular problem. They started from the premise, as we all do, that the present situation is not at all satisfactory. It contains insufficient incentives to proper, good management of the housing stock, leading to an excessive carriage on the estate of empty properties, which is not only economically inefficient but unpleasant for those living in the area.

Moreover, service housing is inevitably squeezed to a low position on the list of priorities for defence spending when the Ministry of Defence comes to review its priorities in its annual battle with the Treasury; and I saw that happen time and time again. The inevitable result has been under-investment in the housing for service families, as anyone who visits such housing will have seen. It is not in the interests of service families to fall behind the improvement in the standard of housing in this country which we have seen in the past 25 years. Therefore, I urge your Lordships to support the Secretary of State because he is to be congratulated on arriving at a resolution and putting forward a proposal for dealing with this very difficult problem.

It is a complicated scheme. Of course, that enables a number of your Lordships to quarrel with particular elements within it. However, one of the reasons that it is complicated is precisely to provide extra reassurance to service families who are inevitably concerned to follow through all the possible implications of the change.

As I say, I believe that the Secretary of State is to be congratulated on arriving at a resolution and securing from the Treasury a sum of money for the improvement of service housing. I say with the very greatest respect—I use that phrase with more genuine honesty than I have often heard it used in your Lordships' House—to the noble and gallant Lord, Lord Bramall, that if one really considers that securing £100 million from the Treasury is small beer, one might just possibly reinforce some of the Treasury's opposite prejudices about the attitudes of the Ministry of Defence to money. Therefore, I hope to persuade at least some of your Lordships to support the Secretary of State and this scheme.

4.45 p.m.

Lord Swinfen

My Lords, my name is to the amendment and therefore I shall speak in its favour. I shall declare an interest, as I did in Committee. Two of my daughters are married to serving officers and one is a serving officer herself. They occupy MoD service property. But I have no interest of my own.

As I understand it, the position is that the MoD will continue to be responsible for the maintenance of the properties and their upgrading. It will not be undertaken by the purchaser of the estate. Therefore, the position in relation to maintenance and upgrading will basically remain the same and in the same hands.

This is a matter which concerns the quality of that maintenance and upgrading and the quality of the management. I know that the Defence Housing Executive has been set up recently but I believe that it involves the same people who were dealing with those matters before. It is a case of more change, staying in the same place.

I understand that the MoD will rent the property from the purchaser at open market rents. I do not know whether or not the figures in The Times today which are suggested for the years ahead are accurate. None of us has any way of knowing that. But as sure as eggs are eggs, the rent will rise.

The amount paid for their quarters is determined by the Armed Forces Pay Review body. That will probably be below market rents. Therefore, if there is no improved management, there will be a gap that the MoD will have to continue to fund. It may be that it will have to fund an increasing amount as the years go by from the beginning of a rent review to the next rent review in five years' time. That is not unusual.

I should like to take up one point made by my noble friend Lord Trefgarne. He said that no one buys properties with communal heating systems. I am afraid that that is not correct. Properties have been sold on the open market which have communal heating systems and other communal facilities also. Any decent solicitor should be able to draw up a workable agreement by which all the purchasers can abide.

What concerns me is that the purchaser of the estate will have the right to take back on notice to the Ministry of Defence pieces of the estate that he would like to develop or redevelop. When taking advice on that, he will hire experts from the property market. Why let the purchaser do that? Why does not the MoD hire exactly the same experts and make a profit for the MoD and for the country? If you have an opportunity to make money on your property, why do you give that away at a lower figure to someone else who will not pay you funds which will leave them out of pocket at the end of the day? They will not give everyone a Christmas present. They are in it for purely commercial reasons and will wish to make a profit. The bigger the profit the better. Not all sites will be ripe for redevelopment now. Some may be suitable in two years, five years or 20 years. But the MoD will have lost the opportunity.

Along with the agreement for sale, which is normally very simple, I understand that there will be side agreements designed for the protection of the services. But I have not heard anything which prevents the original purchaser selling on the estate as a whole or parts of that estate. It is at that stage that the side agreements get left behind and the services are without protection. I say that because the MoD would not be party to the agreement of that sell-on and, therefore, would not be able to play a part.

In Committee, my noble friend Lord Howe was asked a question about the time when the lease comes to an end; namely, would the services, if they needed the property at that stage, be able to keep it on? He said yes, and that he was relying on the Landlord and Tenant Act. I am not a lawyer but, as I understand it, that Act gives residential occupiers of tenanted property the right to extend their lease. The MoD will not be the residential occupier in such circumstances; the servicemen are the residential occupiers.

Moreover, in commercial property the Landlord and Tenant Act gives tenants the right to extend their lease when it comes to an end. But, again, the MoD is not a commercial tenant in the meaning of the Act as I understand it. I feel that we should send this to the Commons and let them have a look at it again.

Baroness Hamwee

My Lords, the comments made by the noble Baroness, Lady Hogg, about complications as regards the difficult history of the matter are not points of which I should like to make light. However, I suggest to your Lordships that it is those very complications—the history and the problems over such a period—that make it all the more important fully to consult and reassure the families who will be affected.

Much could be made of the MoD's failure to use empty properties in areas of housing stress; of its appalling failure to manage and maintain the properties which have quite extraordinarily been turned into an argument for the scheme, on the basis that the private sector can do better than the public sector; and of its failure to construct a strategy and stick to it over a period. However, the amendment is not about that. I have no wish to look for political differences: this is not a party political matter. Those noble Lords who know me will know that that is something which I rarely say.

I found the description of the noble Baroness, Lady Park, regarding the human aspects involved both today and in Committee to be very moving. Her description of the strains on service families struck a real chord; so, too, did her description of the management reasons for ensuring that the families support the proposals and that they are not left with feelings of confusion, of apprehension, of low morale and, possibly, even of betrayal.

In other housing sectors the Government make much of tenant involvement, and rightly so. Indeed, last night when this Chamber was somewhat emptier than it is now, we debated the role of tenants in decisions about the management of their own housing. We were told that amendments which were put forward from these Benches and from the Labour Benches to strengthen the position of tenants were unnecessary because they were involved throughout the process.

In Committee, when the amendment of the noble Baroness was debated, the Minister said: We have already consulted and communicated extensively". He told the House that the Secretary of State for Defence wrote, to the occupants of all married quarters in England and Wales to explain the position last autumn"; and, indeed, that: A parallel communication went to all personnel worldwide".— [Official Report, 25/6/96; col. 899.] That is not consultation; consultation is a two-way process. If the benefits to the families are such as we are told as regards better conditions, and so on, what do the Government have to fear from consultation?

In modern jargon: those who are affected should own the decision. This seems to be more a case of disowning. We on these Benches are most grateful to the noble Baroness for so cogently and energetically putting her case in the early hours of the morning in Committee and, again, this afternoon. We warmly support the amendment.

Lord Clifford of Chudleigh

My Lords, I am most grateful to the noble Baroness for repeating what she said in Committee as regards the amendment that she moved this afternoon. I am also grateful to the other speakers who have taken part in the debate—for example, the noble and gallant Lord on these Benches and, indeed, many others who I believe support the noble Baroness.

As a result of the two or three schemes drafted to confront and best manage the recognised presence of empty and void married quarters, the MoD established the Defence Housing Executive about which noble Lords have already heard. Indeed, I shall be repeating various points and I hope that your Lordships will excuse me for doing so. That executive was given three years to fulfill its role, to dispose of the excess, costly and empty assets.

Before any move is made by Parliament in line with this Housing Bill, the Defence Housing Executive should be given time to act as managers of the housing stock. It should be allowed to present a "Plan of Operation Table" and give estimates for sales and the purchases of quarters. It should be allowed to carry out a policy of selective rationalisation, choosing the areas to be retained and those to be sold. If areas were to be sold, they should be complete estates—and noble Lords have heard this argued before—or patches, and sold with vacant possession.

The evicted servicemen—and I emphasise the word "evicted"—and their families should be helped financially to move into a new patch—quartersselected by the Defence Housing Executive. In the same way, certain areas may be chosen by the executive or the MoD which would be available for redevelopment and sold. The proceeds should be used to improve the remaining stock of houses, to put the quarters in good order and a reserve fund set up to be available to purchase new houses if required in the future. If there were such a fund, the number of houses kept in reserve, vacant and void could be reduced.

Sadly, the life of this recently spawned housing executive is likely to be short; indeed, even shorter than the three years. Does the Minister honestly believe that the executive will enjoy the same remit that it now possesses when a private company, a merchant bank, steers the married quarters ship? I fear that we are in danger of putting financial interests before families.

It is recognised that there are 12,000 married quarters which are vacant or void at present. Of that number, 4,000 void quarters are reserved by the MoD for reasons such as: families posted abroad; unaccompanied tours where the wife and children may prefer, may select, to "live with mother" or a relation. It is clear that there are 5,000 to 6,000 properties that are available for sale; ready for grabs on the open market. That would leave a balance of about 2,000, some of which belong to the Royal Air Force, some of which are undergoing repair, restoration and redecoration; and, indeed, some of which are classified as "handover/takeover quarters" or related to short six-month tours.

Two to three years ago the MoD was encouraged by the Government to give this "married quarters streamlining scheme" a fair wind. The Chief Executive of the Cardiff Housing Trust was given the responsibility of showing how the streamlining could be done. He produced his report in 11 months. But it did not meet the Treasury criteria. That chief executive was given a £200,000 golden handshake for the efforts that he expended over that time. I wonder, would the Minister care to tell the House how much a warrant officer with 22 years' experience, some on operational duty, would be rewarded with after that length of service. Would it be £25,000?

The Bett Report was compiled under the direction of a personnel manager qualified in business—but not in war and not in the arena of counter terrorism, not a man experienced in the beneficial counselling and consolation delivered and witnessed in the married patch (the quarters) when a sailor, soldier or airman is wounded. The Bett Report is questionable. Mr. Bett's report is not one to be dismissed, but it certainly raised many an eyebrow in the married quarters when it suggested that outside professional counsellors, psychologists, might provide a better shoulder to lean on and to cry on—a logical replacement for the in-house friends next door in the married quarters.

The report raised the matter of stress. Many a serviceman's wife has dismissed the professional help from outside, content to depend on those who "know the form" and who have perhaps been in a situation where their husbands have been injured on duty. These servicemen's wives stick together and help the children in the affected families.

I think that I speak for many of the past as well as the present servicemen and their families when I say that they are "jarred off'—perhaps "fed up" is more politically correct—with politicians, psychologists and psychiatrists nannying them.

People in this Palace of Westminster need to respect the system, well tried over many decades, of family management, man management, in the Armed Forces—tried, tested and, above all, trusted. We need to listen to what the servicemen are saying. They say, "You can post us abroad, let us say to Bosnia, or post us at home, let us say to Northern Ireland, and we will do the job that you ask of us. You, the politicians, don't interfere with us when we execute our duties, suffer death, incur casualties. We are trained to handle these situations when in the front line or on the patch, in the married quarters." They say, "Sir, we don't interfere when you suffer political casualties or lose by-elections or general elections."

This short-notice attack by the Government on the essential self-help structure of the married quarters deserves to be sunk without a lifeboat, all hands lost.

5 p.m.

The Earl of Arran

My Lords, perhaps I may—

Lord Williams of Elvel

My Lords, I believe that the House wishes to hear the Minister fairly soon. I think that we have come to the end of a fairly long debate. I am sorry to cut out the noble Earl, Lord Arran, who, I am sure, has many things to say, but I think it is time, if the House will agree, that we move on and listen to what the Minister has to say.

I, too, speak to the same group of amendments as the noble Baroness, Lady Park. Those of your Lordships who attended the Committee stage rather late at night may be aware that I did not put my name to the noble Baroness's amendment. I do so now with a certain amount of reluctance because my view is that the Government should scrap the scheme altogether. However, as I said, the poet Hesiod was right: and half a loaf is better than no loaf at all, so I have put my name to the noble Baroness's amendment.

I accept all the apologies that the noble Earl in Committee and now the noble Lord, Lord Trefgarne, made about the MoD management of the married quarters estate. It has been a disaster. Ministers have to accept that it has been a disaster. It is not the responsibility of civil servants. The noble Baroness, Lady Blatch, shakes her head, but I am afraid that the noble Lord, Lord Trefgarne, admitted that he had been deficient in his responsibilities as a Minister in managing the married quarters estate. I cannot disagree with the noble Lord, Lord Trefgarne; who am I to do that?

I hope that your Lordships listened carefully to what the noble Baroness, Lady Park, had to say, although I understand that there have been certain diversions in another part of this House between four and five o'clock this afternoon. I hope also that your Lordships have listened very carefully—I know the noble Baroness, Lady Hogg, does not listen very carefully—to the noble and gallant Lord, Lord Bramall. I have listened to the noble and gallant Lord, Lord Bramall, for 40 years. Forty years ago I was a subaltern in "A" Company of the First Battalion, 60th Rifles, the Company Commander of which was Major Bramall. I have listened to the noble and gallant Lord expressing great wisdom ever since.

When I was, I accept, a rather unruly subaltern in that battalion, the noble and gallant Lord taught me two very important things. He said: "The first thing you have to remember, as a humble platoon commander, is that the important part of your command is the morale of your riflemen. The second thing is that your riflemen will never have good morale unless their families are happy." I had to go through many rather painful experiences with some of the riflemen under my command who were unhappy about their families for one reason or another, good or bad. Nevertheless, the noble and gallant Lord, Major Bramall, persuaded me that that was the right thing to do and I think he was right.

I agree with the noble Baroness, Lady Hamwee, that this was not at the outset a major party political issue. It did not start as a major party political issue; it started, as the noble Baroness, Lady Hogg, pointed out, as an important policy initiative, announced as a Written Answer in the House of Commons in November 1995. I imagine that when the Minister comes to reply he will explain why it was put in that form and not put in a proper Statement to both Houses of Parliament.

There is no doubt that the measure is unpopular. It is unpopular with Army wives, Air Force wives and others. Indeed, I have a letter in front of me from one of the consortia who are bidding for this married quarters estate saying: The reaction to this privatisation from within the Armed Forces has unfortunately generally been hostile. Nobody could express a greater truth than that, and that comes from one of the bidders.

I have also had many letters, as I am sure your Lordships have, from those who have been connected with the Armed Forces in one way or another. Most touching to me was a letter from a former member of the staff of your Lordships' House who had been a quartermaster in the 2nd Battalion, Coldstream Guards, during a company tour in Northern Ireland. He expressed in very moving terms how it was most important to have the married quarters estate blended in with the serving people, not only in Northern Ireland but elsewhere. I am slightly fastidious on the matter and will not mention the name of the former member of your Lordships' staff, but I know that if I were to do so noble Lords would appreciate the service that he has rendered to this House.

I said that I agreed with the noble Baroness, Lady Hamwee, that at the outset this was not a party political issue. However, it has been elevated to a party political issue—witness the number of noble Lords opposite who have come to listen, attentively I hope, to this debate. Indeed, the Conservative Whip for the week of 4th July 1996, a distinguished document—apart from certain blotches on the heavy lines—from the noble Lord, Lord Strathclyde, says: Amendments have been tabled. Your attendance is essential unless for reasons of ill health. I am so glad to see that the noble Lords opposite are in the best of health for a Division which is of the utmost importance to Her Majesty's Government.

The noble Viscount, Lord Mountgarret, raised this point. Is this really of the utmost importance to Her Majesty's Government? I wish to make three comments. First, it is a modest amendment. The noble Baroness is not trying to shake the earth. All that the amendment demands is a period of consultation with the people who are really affected; that that consultation should be produced to your Lordships and another place; and an order produced which we can then debate. I cannot think that if the amendment is passed it will bring down the Government. It is not a matter of confidence in the Government as the Whip seems to claim.

My second point is that the Armed Forces are not the property of the Government. The Armed Forces are the Armed Forces of the Crown. They are not the property of any government be it Conservative, Liberal, Labour or any other party. We are here to defend the Armed Forces of the Crown, and any government which seeks to lay claim to be proprietor of the Armed Forces of the Crown is, I believe, constitutionally at fault.

My third comment picks up a remark made by my noble friend Lord Callaghan of Cardiff. I confess to your Lordships that I was brought up to believe in my innocent youth that the Conservative Party had the reputation of being the patriotic party. I was told that by my uncle. My uncle, my mother's brother, was a battalion commander in the Coldstream Guards. He led the battalion in the retreat at Dunkirk. He was awarded the DSO for his gallantry and honour in doing so. He always brought me up to think that the Conservative Party was the party that would defend the Armed Forces. He was one of the last to get on the boats at Dunkirk. When he arrived at Dover he finally got to a telephone. As your Lordships will understand, in those days telephones were not easy to find. He rang my grandmother, his mother, and said, "Mother, it's all right, I'm back". My grandmother, I must admit, was not in full possession of all her faculties at the time and the reply came down the crackly line of the telephone of those days, "My dear boy, have you deserted?"

I put the question that my noble friend Lord Callaghan put to noble Lords opposite. Are they really no longer prepared to stand up for the Armed Forces of the Crown? Are they prepared, without proper consultation with those affected, to let this go through as is? Are they prepared to have families shuffled about without promises of alternative comparable education, and all the rest that the noble Earl will say? Despite the fact that the Japanese own the DTI building in Victoria Street, are noble Lords opposite prepared to have the Japanese owning the married quarters estate in the Armed Services? Are they prepared for all that just to gain £1.4 billion or £1.5 billion for the Treasury, even if that is achieved?

I have been on the Front Bench of my party in this House for 10 years. I find myself for the first time in total agreement with the noble Baroness, Lady Cox. I congratulate her; it is an unusual experience for me. Nevertheless, I believe that this is a cross-party issue. It is not an issue of one political party or another. I believe that your Lordships have a chance today to strike a modest blow for the Armed Forces who have suffered quite a lot over the past few years. They serve us well. They deserve our support. I believe that we should give it to them.

5.15 p.m.

The Parliamentary Under-Secretary of State, Ministry of Defence (Earl Howe)

My Lords, I defer to no one in my respect and admiration for my noble friend Lady Park. She has advanced her case today, as is no surprise to me, in a persuasive manner. I shall demonstrate, I hope conclusively, that your Lordships should not be persuaded or even tempted by her arguments. Indeed, I believe them to be wholly misconceived.

But before I do so I should like to invite your Lordships to step back for a moment and look at what the Government are proposing. The Ministry of Defence has a married quarters estate consisting of tens of thousands of properties. There are two problems with this estate. One is that while many of the houses provide modern and comfortable living accommodation, too many of them do not. There are many hundreds of houses which might have been acceptable when they were built in the 1960s and 1970s but which, frankly, nowadays are sub-standard. We spend money every year upgrading a proportion of this accommodation but we need to bring all the properties up to a proper standard and to do it quickly.

The second problem is that too many of our properties are standing empty. A proportion of them need to be kept empty because service families tend to move house a lot and often at short notice. But far too many homes are genuinely surplus. Over the years the Ministry of Defence and the services have taken a rather haphazard and piecemeal approach to selling off such housing. It has not worked. A large part of the stock is difficult to sell by virtue either of its location or its condition; but perhaps more fundamentally the MoD tends to have other things on its mind than selling houses. There are many skills possessed by the Ministry to enable it to defend the realm: estate agency has not been one of them.

So the Government's idea is a simple one. It is to sell the married quarters estate and lease back the part of it that we want. We have a duty to house entitled service families in the right place and at the right time; but the houses themselves are an asset which the Ministry does not need to own. In all the debate on this question I have not heard a single argument to undermine that premise.

In passing, my noble friend asked about the role of David Hart in all this. Mr. Hart is one of a whole raft of independent advisers who have contributed at various times to our work on the future arrangements for the married quarters estate. He is unpaid and has no financial interest in the outcome of the sale.

From the sale proceeds we shall have an extra £100,000,000 (ring-fenced) to enable us to get on with the upgrading exercise as we would wish to do. We are not talking here of luxury; but rather the installation of central heating and double glazing, modern kitchens and bathrooms to ordinary modest houses. Our servicemen will then get the accommodation they deserve.

The sale will also provide both the incentive and the means to solve the problem of empty homes—the incentive, because we will in future pay rent for the properties we keep; and the means, because we will be able to dispose of houses by simply terminating the relevant lease of six months' notice. That will save the MoD from wasting money maintaining and securing properties we do not need and allow us to concentrate on those we do need. And the private sector will undoubtedly be more efficient at returning surplus quarters to productive use, with potential benefits to both the private and social housing sectors.

Meanwhile the newly created Defence Housing Executive will continue the task of day-to-day management. Already the DHE is bringing about better more efficient management and maintenance of the estate and that represents significant progress.

The suggestion by the noble and gallant Lord, Lord Bramall, that we could achieve those aims simply by selling off our surplus stock misses the point. It is precisely because we have found extreme difficulty in selling our surplus stock that a sale of the whole estate, with the surplus wrapped up in it, recommends itself.

But if we were to wave a magic wand the 2,500 surplus quarters in the sale package are not worth £40,000 each even if a buyer could be found for them all. The proceeds of routine disposals for surplus properties have never been sufficient to fund the upgrade programme we want, nor would they be in the future.

But in a plan such as this Ministers must ensure that while ownership of the estate may pass to another, control of it does not. Let me make a number of points quite clear. Nothing in these proposals will affect the level of rents paid by service families. Rents will continue to be set independently by the Armed Forces Pay Review Body. There will be no change to a serviceman's entitlement to housing in the right place and at the right time. Much has been made of the need to protect the married quarters patch, a view with which Ministers strongly agree. That is why it will be ourselves, not the new owner, who will decide which houses are given up and which are kept for service occupation. That is a management function, which the DHE would need to exercise whether or not there were a sale of the estate. Service families will continue to deal with the DHE on a day-to-day basis. They will have no relationship at all with the new owner. The purchaser will have no right or power to break up or cherry pick or in-fill sites we occupy. My noble friend Lord Swinfen suggested that the safeguards might be lost when bits of the estate are sold. He is quite wrong. Safeguards will be incorporated in our leases. It is the MoD that is the tenant, and the leases last 200 years. I touched on the principal concerns of service families. They are perfectly understandable concerns. They are not, however, well-founded ones.

But the recurrent theme in our debate today has been consultation—the suggestion that we have failed to consult and inform. I can understand why this charge has been levelled against us; but I genuinely believe it to be misplaced. We have really done a very great deal to keep everyone in the picture. My right honourable friend the Secretary of State wrote to all married quarters occupants in England and Wales when the sale was announced last autumn, as fully as he was then able; and he has recently written again. My right honourable friend, his other ministerial colleagues and I have all devoted enormous efforts to seek to get our message across, and deal with the concerns that have been raised. There has been a huge quantity of correspondence and meetings, with Members of this House and of another place; with representatives of interested organisations including service families; with the media and with members of the public. We have also disseminated very full information through the chain of command at regular intervals.

And, most important of all, the service staffs have been fully involved as the proposals have developed. Their contribution has of course been indispensable, to ensure that our proposals fully satisfy the interests of the services. Without that, the Chiefs of Staff would obviously not have been able to express their support for our proposals which they reaffirmed only recently. The service chiefs are not in the habit of taking up such positions lightly. Their judgment deserves the fullest weight.

One or two noble Lords asked why the Government cannot be more open about the financial details. We have, of course, been operating under the constraints of a commercial negotiation. In order to get the best possible result for the services and the taxpayer, it is vital that we maintain control of the sale process, and preserve the confidentiality of information which is commercially sensitive at this stage. So we have not been able to lay out every last detail of what is proposed, or publish the full commercial information (which is by any standard voluminous). But I believe that we have been able to give a clear picture of all the essential elements.

Despite all this, my noble friend's amendment invites us to suspend the process and conduct a consultation of all those currently occupying the quarters. I suggest there really has to be a limit to the amount of consulting that we do. We must be able to say, now that the Chiefs of Staff have expressed their support in clear terms, that this is indeed a good plan which ought to proceed.

But there is another reason why I am opposed to further consultation, and that is that occupants will be fundamentally unaffected by the sale. We have said this time and again: the sale involves no change to their entitlement to a quarter, no change to the charges they pay, and no change to the maintenance and management service they receive from the MoD. I say to the noble Lord, Lord Chalfont, that it involves no change to the military culture.

There is another point that I must stress. Although I am perfectly satisfied that this is in no way my noble friend's intention, we must be clear about the effect of her amendment on the sale process. To delay three or four months, as the amendment would entail, would not simply mean that everyone had further time to reflect. It would mean that the sale process would come off the rails. The reason is this. The shortlisted bidders have committed considerable resources, financial and managerial, to meeting the timescale that we have set. Their best and final offers are due at the end of the month. Delaying the transaction until the autumn or beyond would destroy something that is fragile but critically important—the momentum of the sale process. In a deal as unusual as this one, there is real competitive tension between bidders, tension which we have painstakingly built up and which must not on any account be undermined. To give time for reflection would be to invite the renegotiation of key aspects of our proposals, including the many important safeguards we have incorporated. We cannot now take an indefinite "time out" and then expect to be able to secure the best outcome for the services and the taxpayer on resumption of bargaining. That, more than any other reason, is why this amendment, beguiling as it may seem, would be fatal to our plans.

My noble friend Lord Mountgarret made a constitutional point. He said that we should give a chance to another place to debate the issue. It is very interesting that the Opposition in another place had two chances in the past fortnight to raise this issue for debate. Both times they chose to debate other issues such as water metering and family-friendly employment.

I understand that they have also decided to focus elsewhere on an Opposition day next week. One must ask why they have chosen to do so.

We heard a very interesting speech from the noble Lord, Lord Williams. I did not think it was possible for him to rise any further in my estimation. But this afternoon has proved me wrong. The noble Lord gave us a masterly performance, for which I am sure many of us are truly thankful. But a performance is precisely what it was. It really is extraordinary to hear the noble Lord, whose party all week has been parading its heart on its sleeve in the cause of homeless people, trying now to entice your Lordships down a path which would prevent thousands of empty homes being brought back, efficiently and speedily, into productive use. The truth of the matter is that the Labour Party has been wholly opportunistic in the stance it has taken on this issue. All of a sudden to profess to champion the cause of the service family makes the noble Lord, Lord Williams, about as credible as a man who has murdered both his parents and who then pleads for clemency on the grounds that he is an orphan. It does not convince me for a moment.

I acknowledge that there are residual worries. Once the sale has been completed, I believe that the doubts and fears that have been expressed will be removed as service families realise that the sale has really made very little difference to them—very little, that is, apart from an improved standard of housing. The sale of the estate represents a prime opportunity to rectify past under-investment and finally get our housing provision right. We have a manifesto commitment to improve the quality and management of service housing. It really would be a tragedy if we were to let this opportunity slip through our fingers at this late stage which, I emphasise, is what my noble friend's amendment would mean.

It would also be a tragedy to miss this chance to resolve our long-standing empty homes problem. That, too, is the subject of a manifesto commitment. Having 20 per cent. or more of the stock standing empty hurts us all. It hurts the services, and it hurts the taxpayer because it costs money which could be better spent on something more productive.

To sum up, may I say again that I know my noble friend's amendment proceeds from the best of motives. But it is wholly wrong. It is based on a misunderstanding of our proposals and their implications; and it would destroy any chance of getting the best outcome for both the services and the taxpayer. The best way to demonstrate our support for our service personnel and their families is now to allow the Government the chance to give them the housing they need and deserve. That is why I urge the House to support the Government.

Baroness Park of Monmouth

My Lords, may I begin by saying a particular thank you to the noble Lord, Lord Williams of Elvel. He has treated this issue as a national one, as it should be. I also express my deep gratitude to noble Lords on all sides of the House who have supported the amendment. It is not a wrecking amendment but, I repeat, a national issue.

The co-sponsors, the noble Lords, Lord Chalfont, Lord Swinfen and Lord Williams of Elvel all made powerful contributions which served to emphasise that the proposed sale as it has been presented by the Government is not only a grave threat to the morale and well-being of service families at a time of great turbulence, but a remarkably poor business deal for the country. It is like selling the family silver in exchange for a post-dated cheque just large enough to pay for some plastic kitchenware.

The magnificent intervention of the noble and gallant Lord, Lord Bramall, was all the more weighty because he withdrew from the 75th anniversary of the British Legion celebrations expressly to come and speak, and vote. He, more than any of us, must surely have made noble Lords stop and think.

Not least I must thank not only the many noble Lords whom time does not allow me to list individually but the army of faceless women and men who let us know that we speak for them as they are not free to speak. One of the splendid men who work in this House told me today that he had been able to be a good soldier because he knew that his family was safe. That is what it is all about. We ignore it at our peril.

Most of your Lordships were in Westminster Hall today and heard my noble and learned friend the Lord Chancellor speak of our proud traditions. The fighting services and their families are a part of that tradition. We owe them a special duty. They are not an industry or a business; and we are not talking about bricks and mortar but about homes. The wives have a right and even the duty to defend the patch where their families live. If their husbands overseas cannot rely on the support structure of the patch for vulnerable families, their fighting effectiveness as well as their morale will be damaged. Noble Lords may have noted that we have even fewer soldiers at the same tasks, including in Northern Ireland.

Decent housing ought to be part of the nation's provision for service families, an absolute right on the same level as health or education, or as the weapons of war. Money to pay for that should not rest on an unusual piece of manna from heaven graciously bestowed by a munificent Treasury as an exceptional favour and, incidentally, coming from the money that the ministry itself is getting. The project of sale will have major effects for future generations. If we reject it, we do so at our peril. It needs to be judged in full debate in both Houses. That is why this amendment was brought forward—not because I wished to prevent it happening but because I felt that it needed proper ventilation and proper consideration. It has not had that.

I thank my noble friend the Minister for his invariable courtesy. I must also acknowledge that my right honourable friend the Secretary of State gave me and the noble Lord, Lord Chalfont, a courteous hearing, but it seems that we have not persuaded him to our point of view. I was agreeably surprised to find myself on my feet today, since, as I told your Lordships, I was assured by a succession of journalists and other Peers, first, that the noble and gallant Lord, Lord Bramall, was undoubtedly and adamantly opposed to me, then that the noble Lord, Lord Chalfont, had withdrawn his support and, finally, today, that I intended to withdraw my amendment.

I have listened in vain to hear whether I had any concession whatever from my noble friend the Minister. I had none. Therefore, I fear that I have no choice but to test the opinion of the House.

5.32 p.m.

On Question, Whether the said amendment (No. 196) shall be agreed to?

Their Lordships divided: Contents, 176; Not-Contents, 256.

Division No. 1
Acton, L. Falkland, V.
Addington, L. Farrington of Ribbleton, B.
Alport, L. Freyberg, L.
Archer of Sandwell, L. Gallacher, L.
Ashley of Stoke, L. Geraint, L.
Attlee, E. Gladwin of Clee, L.
Avebury, L. Gladwyn, L.
Bancroft, L. Graham of Edmonton, L. [Teller.]
Barnett, L. Greene of Harrow Weald, L.
Beaumont of Whitley, L. Gregson, L.
Belhaven and Stenton, L. Grenfell, L.
Berkeley, L. Hamwee, B.
Birk, B. Harris of Greenwich, L.
Blackstone, B. Harrowby, E.
Blease, L. Haskel, L.
Bledisloe, V. Hayman, B.
Borrie, L. Healey, L.
Bramall, L. Henniker, L.
Braybrooke, L. Hilton of Eggardon, B.
Bruce of Donington, L. Holme of Cheltenham, L.
Caldecote, V. Howell, L.
Callaghan of Cardiff, L. Hughes, L.
Carlisle, Bp. Hunt, L.
Carlisle, E. Hutchinson of Lullington, L.
Carmichael of Kelvingrove, L. Hylton, L.
Carter, L. Hylton-Foster, B.
Castle of Blackburn, B. Ilchester, E.
Chalfont, L. Irvine of Lairg, L.
Clancarty, E. Jay of Paddington, B.
Cledwyn of Penrhos, L. Jeger, B.
Clifford of Chudleigh, L. Jellicoe, E.
Clinton-Davis, L. Jenkins of Hillhead, L.
Cochrane of Cults, L. Jenkins of Putney, L.
Coleridge, L. Kennet, L.
Congleton, L. Kilbracken, L.
Cox, B. Kilmarnock, L.
Craigavon, V. Lawrence, L.
Cross, V. Lester of Herne Hill, L.
Cudlipp, L. Listowel, E.
Dacre of Glanton, L. Longford, E.
Dahrendorf, L. Lovell-Davis, L.
Darcy (de Knayth), B. Lytton, E.
David, B. MacAndrew, L.
Dean of Beswick, L. Macaulay of Bragar, L.
Dean of Thornton-le-Fylde, B. McCarthy, L.
Desai, L. McConnell, L.
Diamond, L. McGregor of Durris, L.
Donaldson of Kingsbridge, L. McIntosh of Haringey, L.
Dormand of Easington, L. Mackie of Benshie, L.
Dubs, L. McNair, L.
Eatwell, L. Mallalieu, B.
Exmouth, V. Mar and Kellie, E.
Ezra, L. Masham of Ilton, B.
Falkender, B. Mason of Barnsley, L.
Mayhew, L. Seear, B.
Merlyn-Rees, L. Serota, B.
Methuen, L. Sewel, L.
Milner of Leeds, L. Shaughnessy, L.
Mishcon, L. Shepherd, L.
Molloy, L. Slim, V.
Monkswell, L. Smith of Gilmorehill, B.
Monson, L. Stallard, L.
Moore of Wolvercote, L. Stoddart of Swindon, L.
Morris of Castle Morris, L. Strabolgi, L.
Murray of Epping Forest, L. Strafford, E.
Nelson, E. Strange, B.
Nicol, B. Swinfen, L.
Northboume, L. Taveme, L.
Norton, L. Taylor of Blackburn, L.
Ogmore, L. Tenby, V.
Park of Monmouth, B. [Teller.] Thomas of Walliswood, B.
Peston, L. Thomson of Monifieth, L.
Pike, B. Tope, L.
Plant of Highfield, L. Tordoff, L.
Ponsonby of Shulbrede, L. Turner of Camden, B.
Prys-Davies, L. Wallace of Saltaire, L.
Quinton, L. Westmorland, E.
Radnor, E. Whaddon, L.
Rea, L. Wharton, B.
Richard, L. White, B.
Robertson of Oakridge, L. Wigoder, L.
Robson of Kiddington, B. Wigram, L.
Rochester, L. Williams of Crosby, B.
Rodgers of Quarry Bank, L. Williams of Elvel, L.
Russell, E. Williams of Mostyn, L.
Sainsbury, L. Winchilsea and Nottingham, E.
St. John of Bletso, L. Winston, L.
Scanlon, L. Young of Dartington, L.
Abercorn, D. Cadman, L.
Aberdare, L. Caithness, E.
Abinger, L. Campbell of Alloway, L.
Ackner, L. Campbell of Croy, L.
Addison, V. Carlisle of Bucklow, L.
Ailsa, M. Carnegy of Lour, B.
Aldington, L. Carnock, L.
Alexander of Tunis, E. Carr of Hadley, L.
Allenby of Megiddo, V. Cayzer, L.
Ampthill, L. Chalker of Wallasey, B.
Annaly, L. Chelmsford, V.
Archer of Weston-Super-Mare, L. Chesham, L. [Teller.]
Arran, E. Clanwilliam, E.
Astor of Hever, L. Clark of Kempston, L.
Balfour, E. Clinton, L.
Banbury of Southam, L. Colwyn, L.
Barber, L. Constantine of Stanmore, L.
Barber of Tewkesbury, L. Courtown, E.
Bauer, L. Coventry, E.
Belstead,L. Cranborne, V. [Lord Privy Seal.]
Bemers, B. Cranbrook, E.
Bethell, L. Crathorne, L.
Biddulph, L. Crawshaw, L.
Birdwood, L. Cromer, E.
Blake, L. Cuckney, L.
Blaker, L. Cumberlege, B.
Blatch, B. Daventry, V.
Blyth, L. Davidson, V.
Boardman, L. De Freyne, L.
Bowness, L. Dean of Harptree, L.
Boyd-Carpenter, L. Deedes, L.
Brabazon of Tara, L. Denham, L.
Braine of Wheatley, L. Denton of Wakefield, B.
Brentford, V. Derwent, L.
Brightman, L. Digby, L.
Brigstocke, B. Dilhorne, V.
Brougham and Vaux, L. Donegall, M.
Bruntisfield, L. Donoughmore, E.
Burnham, L. Downshire, M.
Dudley, E McColl of Dulwich, L.
Dunrossil, V. MacFarlane of Bearsden, L.
Eccles, V. Mackay of Ardbrecknish, L
Eden of Winton, L. Mackay of Clashfem, L. [Lord Chancellor.]
Ellenborough, L.
Elton, L. Mackay of Drumadoon, L.
Erne, E. Macleod of Borve, B.
Erroll, E. Mancroft, L.
Fairhaven, L. Marlborough, D.
Falmouth, V. Marlesford, L.
Feldman, L. Marsh, L.
Ferrers, E Massereene and Ferrard, V.
Flather, B. May, L.
Fortescue, E. Merrivale, L.
Gage, V. Mersey, V.
Gainford, L. Middleton, L.
Gardner of Parkes, B. Miller of Hendon, B.
Geddes, L. Mills, V.
Gisborough, L. Monk Bretton, L.
Glenarthur, L. Montagu of Beaulieu, L.
Goold, L. Moore of Lower Marsh, L.
Gormanston, V. Mottistone, L.
Goschen, V. Mountevans, L.
Gray of Contin, L. Mowbray and Stourton, L.
Grimston of Westbury, L. Munster, E.
Hailsharn of Saint Marylebone, L. Murton of Lindisfame, L.
Hambleden, V. Newton, L.
Hambro, L. Norrie, L.
Harding of Petherton, L. Northesk, E
Hardinge of Penshurst, L. O'Cathain, B.
Hardwicke, E. Onslow, E
Harmar-Nicholls, L. Oppenheim-Barnes, B.
Harmsworth, L. Orr-Ewing, L.
Harris of Peckham, L. Oxfuird, V.
Haslam, L. Parkinson, L.
Hastings, L. Peel, E.
Hayhoe, L. Pender, L.
Henley, L. Perry of Southwark, B.
Hertford, M. Pilkington of Oxenford, L.
Hesketh, L. Platt of Writtle, B.
Hindlip, L. Plummer of St. Marylebone, L.
Hogg, B. Prentice, L.
Holderness, L. Prior, L.
HolmPatrick, L. Pym, L.
Hood, V. Rankeillour, L.
Hooper, B. Rawlings, B.
Hothfield, L. Reay, L.
Howe, E. Rees, L.
Huntly, M. Renton, L.
Inchyra,L. Renwick, L.
Inglewood, L. Rodney, L.
Ironside, L. Romney, E.
James of Holland Park, B. Sackville, L.
Jeffreys, L. Sainsbury of Preston Candover, L
Jenkin of Roding, L. Saint Albans, D.
Johnston of Rockport, L. St John of Fawsley, L.
Keith of Castleacre, L. Sanderson of Bowden, L.
Kemsley, V. Sandford, L.
Kenyon, L. Sandys, L.
Keyes, L. Savile, L.
Kimball, L. Seccombe, B.
Kindersley, L. Selsdon, L.
Kingsland, L. Shaw of Northstead, L.
Kinnoull, E. Sheppard of Didgemere, L.
Kitchener, E. Sherfield, L.
Knollys, V. Shuttleworth, L.
Knutsford, V. Simon of Glaisdale, L.
Lane of Horsell, L. Skelmersdale, L.
Lauderdale, E Stevens of Ludgate, L.
Leigh, L. Stockton, E
Lindsay, E. Strathcarron, L.
Liverpool, E. Strathclyde, L. [Teller.]
Long, V. Sudeley, L.
Lucas, L. Suffield, L.
Lucas of Chilworth, L. Swansea, L.
Luke, L. Swinton, E.
Teviot, L. Weatherill, L.
Teynham, L. Weinstock, L.
Thomas of Gwydir, L. Westbury, L.
Thomas of Swynnerton, L. Whitelaw, V.
Tollemache, L. Wilberforce, L.
Torphichen, L. Wilcox, B.
Torrington, V. Windlesham, L.
Wolfson, L.
Townshend, M.
Wolfson of Sunningdale, L
Trefgame, L. Wyatt of Weeford, L.
Trumpington, B. Wynford, L.
Tugendhat, L. Young, B.
Ullswater, V. Young of Graffham, L.
Vivian, L. Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.47 p.m.

Clause 2 [Eligibility for registration]:

Lord Lucas moved Amendment No. 197: Page 1, line 17, at end insert ("which is a housing association").

The noble Lord said: My Lords, during Committee the noble Baroness, Lady Hamwee, asked why registered charities were not required to satisfy the same conditions for registration as industrial and provident societies or companies. The noble Baroness withdrew amendments on the understanding that we would come back with our own proposals.

The Bill as currently drafted would in fact enable any registered charity to become a registered social landlord, regardless of whether it had been established for, or had among its objects or purposes, the provision of housing. Registered charities have an excellent record in providing social housing and we want to encourage others to come forward. But it was not our intention that a registered charity should be automatically eligible for registration. I am grateful to the noble Baroness for pointing that out.

The noble Baroness suggested we might apply to registered charities the same conditions under Clause 2 as other bodies must satisfy. That would limit the additional permissible purposes such bodies might have in the way we debated in Committee. That is perfectly reasonable for bodies set up specifically to be housing associations or housing companies. But many registered charities provide housing as a logical extension of their primary objects. A number of charities (such as the YWCA) already operate successfully in that way. It would not be appropriate to seek to limit their objects or purposes to those listed in subsections (4) and (5). The objects of charities are already constrained by the very fact that they are charities.

Amendment No. 197 will require a charity to be a housing association. Clause 211 of this Bill (minor definitions) defines a housing association by reference back to Section 1 of the Housing Associations Act 1985 which is being retained. That Act defines a housing association as: a society, body of trustees or company—which is established for the purpose of, or amongst whose objects or powers are included those of, providing, constructing, improving or managing, or facilitating or encouraging the construction or improvement of, housing accommodation". It is also required to be non-profit making using a definition which is the same as Clause 2(2). That latter requirement is axiomatic for a charity. I hope that satisfies the point raised by the noble Baroness in Committee. I beg to move.

Baroness Hamwee

My Lords, I thank the Minister for his response to my amendment at the last stage. I confess that I would prefer to have won the last vote than to have gained this point on the drafting. Nevertheless, I am grateful to him for picking up the point. I support the amendment.

Lord Lucas

My Lords, I, too, would have preferred not to have had the effect of emptying the House in such a dramatic manner.

On Question, amendment agreed to.

Lord Williams of Elvel moved Amendment No. 198: Page 1, line 21, at end insert ("and is properly capitalised").

The noble Lord said: My Lords, I have raised this matter in formal conversations with the Government. I am not clear about the capitalisation of local housing companies. As I understood it, from certain correspondence which I have received from the noble Lord, Lord Lucas, the Government propose that local housing companies should be, in normal words, "thinly capitalised"—in other words, there should be nominal capital put up by those who wish to participate in the shareholding. That is certainly justified if it is the Government's intention to ensure that tenants can be shareholders. There may be rich and poor tenants, but by definition I believe that tenants do not have sufficient assets to put large sums of money into companies. It may also be true that financial institutions themselves do not wish to put up large sums of equity. They prefer to make their money by lending on top of the equity.

That raises a problem which I have tried to discuss with the noble Lord, Lord Lucas, as I am sure he will remember. The problem is that if local housing companies are to work they will need money. If it is to be provided almost entirely in the form of debt, that debt will have a charge on the properties owned by the local housing company. That is inevitable because no financial institution will put up money without taking a charge on the property. That will give rise to a series of rather difficult problems because the directors of the company will be required under the Companies Act to act for the benefit of their shareholders and also for their creditors. I understand the point.

The creditors, who have a charge on the properties in a local housing company, will act in the interests of their own shareholders—in other words, they will wish to realise their security if and when they feel that the company itself is threatened. For instance, if there is a default on the loan agreement and one interest payment is missed, it will almost certainly be the right of the lending institution to put in a receiver. In that case the whole concept of local housing companies will come to a complete standstill. It does not seem to me that the Government have to date thought this through properly. That is why I move this amendment, having warned the noble Lord, Lord Lucas, that I was going to do so, in the hope that the Government have now given this matter consideration and that they can give a proper response to the problems that I have raised. I beg to move.

Lord Lucas

My Lords, indeed the noble Lord, Lord Williams, has raised an important problem. I hope that he and the House will forgive me if I answer him at rather greater length than he asked the question because I believe it is important that we set our views on this matter on the record to give noble Lords the opportunity to criticise them if they feel that that is appropriate.

The appropriate level of funding required by a company will differ from case to case. It is not something which could readily be put in legislation: nor is it necessary. Naturally, the criteria which the Housing Corporation will use to judge the suitability of companies for registration will cover their funding proposals. But to include a formal provision in the Bill is at best unnecessary, and might even be dangerous since it might be argued that the corporation had some liability if the company at some time became insolvent.

Housing companies will be set up either as companies limited by guarantee or as companies limited by shares. The companies will not be permitted to distribute profits, nor will they finance their activities by raising equity capital. We do not see that that will create any particularly new problems. Housing companies limited by shares will have some share capital, but it will be limited. It will be nominal or "thin", to use the word of the noble Lord, Lord Williams. I do not believe that £100 would be unusual. In this respect they will be no different from a large number of private companies which only have a very small issued share capital. This is not to imply that generally companies are under-capitalised. Capital other than equity—for example loans—must also be taken into account. Loan finance frequently provides a major source of capital. Housing companies can also be expected to rely heavily on loan capital to finance their activities.

We expect most housing companies to take transfers of stock from the public sector. They will hold assets in the form of bricks and mortar giving rise to income virtually from day one. These assets will be financed through debt raised to meet a purchase price reflecting the value of the assets, which will in turn reflect anticipated cash flow from rents and service charges. With the right business plans, there should be no problems getting such companies off the ground.

Housing companies which undertake the development of housing from scratch are in a somewhat different position. They may need to proceed more cautiously at first. But in addition to their ability to raise loans, they will be eligible for grants from the corporation, a significant part of which is payable at an early stage to help cover the purchase of land and provide working capital for fees and costs and to enable development to start. We agree that such companies may need to borrow initially to get themselves established, but reliance on such loans, or indeed on grant, will not mean that they automatically fall foul of the insolvency rules, which, of course, only come into play in the event of a formal insolvency. The test is generally whether a company can meet its liabilities as they fall due, not that debts could be met in full at any time. We think it highly unlikely that directors would commit their company to repayment of debts before it had established its income.

Clearly, in every case the company will need to manage its affairs correctly to ensure that it is in a position to meet its liabilities as they fall due. But it will receive grant as and when necessary to help meet development costs. We expect it will also take out loans over that period. In practice, therefore, capital, by way of loan and grants, will be available when required to meet its development liabilities. Future liabilities in relation to its loan debt will be met from rents and service charges and be backed by the sale value of the assets. I would add that because of the quite proper concerns of the noble Lord, Lord Williams, about the potential implications of insolvency provisions, my officials have been in contact with their counterparts in the Insolvency Service and, as regards the Companies Act aspect, with their counterparts in the Department of Trade and Industry. I understand that they take the view that there does not appear to be anything so intrinsically different about a housing company that would put it at greater risk of falling foul of the insolvency legislation than other companies.

We believe that housing companies will build on the experience of housing associations. There may in fact be little difference between them. We are comforted by the way in which housing associations, including Companies Act charities, have operated in this way for some years.

There is one aspect of the matter which concerned me personally and that is the question of whether one can rightfully advise someone to become a director of a housing company as a Companies Act company, given that it might be trading fairly close to the wind. There is no way in which we would wish to try to put a curb on the sort of advice which should be quite properly offered to someone who was considering becoming a director of such a company. Someone wishing to undertake that might seek advice from an accountant as to whether, in view of the company's business plan and the way in which it was set up, it carried an undue risk of personal liability in the event of insolvency or when things go wrong. That is something which would have to be taken into account. With a company which is taking on local authority housing there should be little difficulty because of the established nature of the business and the income that will be generated. The company would not be likely to get into difficulties so fast that it would run out of share capital. One can control the way in which one incurs liabilities to ensure that the income is coming in rather faster than that, one would hope.

If, there was such a danger—particularly, in the case of a housing company which was setting out to make new developments where there would be considerable danger of trading while insolvent (or at least infringing the Companies Act)—it would clearly be necessary for the company to seek capital, but not capital in the form of shares. We would expect it to have capital in the form of either land donated to it or of guarantees given by third parties so that the people who were directors of it and running it could be sure that they were able to pay their properly incurred liabilities, particularly to creditors.

I understand the spectre which the noble Lord, Lord Williams, raises about the way in which the Companies Act might bite on people operating a housing company. We agree that that is a real problem. Potential directors of the company, as well as directors, would have to ensure that the company had addressed those problems and had as a back-up access to finance by way of guarantee. That would give the directors the comfort they required which, in other companies, would be provided by share capital.

I hope that that gives the noble Lord an understanding of the way in which we see the system developing. We do not have any difficulty comprehending the concerns he has. We think that they are well placed concerns. They are concerns which should be shared by people who are putting a housing company together. However, we believe that in practice they will be overcome.

6 p.m.

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord for his response. Since we are at Report stage I am unable to interrogate the noble Lord, as I would in Committee, and have responses to questions. I can have only one shot at answering what the noble Lord said.

Firstly, I would say that if I were asked advice from anybody who was thinking of becoming a director of a local housing company, I would certainly advise them against taking that position. The noble Lord said that somebody would ask accountants for expert advice. I would certainly advise—and I am sure my noble friend Lord Berkeley who is sitting with me on the Front Bench would equally advise—that nobody should become a director of such a company, not because it is a bad company, but simply because the structure of the company is such that any director of such a company will be permanently at risk.

The noble Lord, as I understood him, said that the income stream for the company would come from the assets which had been transferred against borrowings at the market value of the assets, say from local authorities, to give one example. That may be fine in terms of income stream but let us take the situation where the housing market falls away. It has happened in the past. It could happen again.

Let us say that Bank X has lent a large sum of money against the value of the assets that had been transferred to the local housing company. Bank X has lent at full value because there is no capital in the local housing company to pay for the assets that it is acquiring. So it has to borrow the whole sum of money from Bank X. It is, in effect, a 100 per cent. mortgage. If house prices deteriorate, any bank is certain to take a very close look at what is happening in that company. If there is any problem in that company, it will trigger its charge very quickly. It is only right to do so. As a banker, I should say, that is the way banks operate.

I find this whole concept a little difficult to accept. I find it difficult to live with the idea that a thinly capitalised housing company may purchase its assets from whoever it is on the back of a loan which has a charge at 100 per cent. of those assets and may trade as such, even for non-profit. As I say, I would not become a director, and I would not advise anybody else to become one.

However, this is Report stage. If the noble Lord has any further thoughts, no doubt he will reconsider the matter at Third Reading. But it has been a useful debate in determining where the Government stand on the issue. I am not entirely satisfied that the Government—even with the benefit of advice from the insolvency service and the Department of Trade and Industry—have got it quite right yet. I believe that any company that operates under the Companies Act in the way that the noble Lord has described is in potential serious danger. However, in the light of the fact we are on Report, unless the noble Lord has anything else he wishes to say, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 198A had been withdrawn from the Marshalled List.]

Schedule 1 [Registered social landlords: regulation]:

Lord Williams of Elvel moved Amendment No. 199: Page 126, line 6, at end insert— ("( ) Any payment of remuneration under paragraph (2)(b) above shall be the level of remuneration payable to a person undertaking jury service in accordance with the Juries Act 1974.").

The noble Lord said: My Lords, this amendment is designed to make it clear that payments to board members of registered social landlords will be at the same level paid to jury members as compensation for loss of earnings. At the Report stage of the Bill in another place, the Government amended the Bill to allow the remuneration of voluntary board members of registered social landlords. The Minister said: we are not trying to change the ethos of the housing association movement".

He added that the Government's amendment was, not expected to change the modus operandi "—

if I can quote the Minister's Latin expression— of a valuable movement that is based on voluntary service — [Official Report, Commons, 29/4/96; cols. 816–17.]

This amendment reinforces the express wishes of both the Government and the voluntary housing movement that the voluntary ethos of housing associations is not lost; that they do not become commercial organisations hiring their directors or council members on a commercial basis. The effect of the amendment will be that any remuneration paid to a board member of a housing association or registered social landlord will be no more than the level of compensation for loss of earnings that is available to a person serving on a jury. I think the case is made. I beg to move.

Lord Lucas

My Lords, I quite agree with the noble Lord, Lord Williams, that the housing association sector has a long tradition of voluntary service. There are in England and Wales more than 25,000 people freely giving of their time, serving on the committees of housing associations. Many more contribute to the running of registered social landlords as members of local, area and tenant committees.

The question of payment has received much attention during the last year. The National Federation of Housing Associations recommended that consideration be given to the introduction of a loss of earnings regime linked to the jury service scheme. That is very much what the noble Lord, Lord Williams, is proposing in the amendment.

As I explained when the matter was debated in Committee we are not advocating the introduction of payment to board members. But there is a continuing demand for new people to come forward and we need to be able to attract people from a wide cross-section. We have to recognise that not everyone is able to give their time freely but will incur expenses and should be suitably compensated. However, we must also recognise that for some their involvement may have other costs, including having to forgo some paid employment. Employment practices are changing. For many there is no standard working day. Some work flexible hours; other fixed shifts involving both early and late hours. Attendance at evening meetings could be inconvenient, especially if much travelling is involved. If we are to continue to be able to draw on people from a wide cross-section of backgrounds then it may be necessary in the future to make some payment or compensation for loss of earnings. We have consequently taken the opportunity of this Bill to enable payment over and above existing expenses, but still subject to corporation control over maxima.

The noble Lord, Lord Williams of Elvel, proposes that any remuneration to board members be at the level payable to a person undertaking jury service in accordance with the Juries Act 1974. If payments for more than expenses are to be introduced, there would be benefits to be gained from limiting payment to loss of earnings and from using an existing scheme which is well established. However, the hours involved in board membership are not precisely equivalent to jury service. Jury service tends to be in the day, but board membership would involve evening attendance.

It would be necessary to consider also the position of such groups as the self-employed, the low paid and the unemployed. People who are released for jury service find, if they have a good employer, that they continue to be paid as well as receiving the jury supplement. Obviously, that is not the case for the self-employed—and it applies even less to the unemployed. We want to ensure that the payment regime that is put together can take account of the particular circumstances of the people it is thought necessary to attract onto housing association boards.

Furthermore, the amendment would require payment at jury service levels, while the Bill at present allows the corporation to set a maximum. It would be up to the individual organisation to decide whether to introduce a system and, if so, whether to make payments below the maximum. The Housing Corporation and, we understand, many others in the industry want the payments to be set at below jury service levels—or to have the ability to make payments at below that level.

The corporation has been giving thought to the question of payment and is considering whether to publish a consultation paper to seek views on possible options. This would explore the possibilities of a loss of earnings regime, based on public service models, such as the justices allowances (for JPs) or jury service. If any payment ceiling were to be introduced, it would be for an individual registered social landlord to decide whether to make use of it as many will probably wish to retain fully their voluntary service ethos.

The noble Lord has indicated that one reason for proposing this amendment is to establish clearly on the statute the maximum level of payment rather than leaving it to the discretion of the corporation as the regulator. We consider that there are good grounds for leaving decisions on the maximum level of payments to the corporation and do not see any need to impose any separate limit. The corporation will consult before using its powers under Schedule 1(3), so enabling any limit set to reflect the views of all interested parties. Should the balance favour a lower figure than that available under the jury service scheme, including perhaps a nominal sum, the corporation will be able to impose such a limit.

We prefer the flexibility which the Bill provides at present. Other than that, we are thinking along very much the same lines as the noble Lord, Lord Williams, and I hope that he considers that sufficient comfort to enable him to withdraw his amendment.

Lord Williams of Elvel

My Lords, I am most grateful to the noble Lord. We are, indeed, thinking along the same lines on a subject that we have now given a good airing. Having had that statement from the noble Lord, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lucas moved Amendment No. 200: Page 128, leave out lines 9 to 15 and insert— ("( ) A person appointed under this paragraph as director or trustee of a registered charity is entitled—

  1. (a) to attend, speak and vote at any general meeting of the charity and to receive all notices of and other communications relating to any such meeting which a member is entitled to receive,
  2. (b) to move a resolution at any general meeting of the charity, and
  3. (c) to require a general meeting of the charity to be convened within 21 days of a request to that effect made in writing to the directors or trustees.").

The noble Lord said: My Lords, in moving this amendment, I should like to speak also to Amendments Nos. 202, 204, 205 and 207.

I undertook in Committee to look again at certain provisions in Schedule 1 to the Bill to see whether the arrangements for regulating registered social landlords worked satisfactorily and unambiguously for Companies Act companies. We are satisfied that they do, but we have concluded there are one or two areas where the provisions can be improved. That is a disingenuous way of saying that we are extremely grateful to the noble Lord, Lord Williams of Elvel, for having pointed out the fact that we needed to look carefully at the way in which the Bill had been drafted. We have managed to convince ourselves that we can get round most of the problems raised and we are most grateful for having been given that opportunity. This amendment is the first fruit of that investigation.

First, as the noble Lord pointed out in Committee, while the Bill allows the Housing Corporation in certain circumstances to appoint a person to be a director, a trustee or a committee member and allows them to attend, speak and vote at a general meeting, it does not allow them to move a resolution at such a meeting. We agree that that is a weak link, since without such a power the appointee has no effective way of getting the meeting to address issues of concern. Amendments Nos. 200, 202 and 204 rectify that.

Secondly, in looking at the provisions under which appointed persons may act in certain circumstances, it has become clear that paragraph 6 of Schedule 1 which deals with registered charities, differs from the provisions of the Housing Associations Act 1985 and from those in paragraphs 7 and 8 in that it allows an appointed person to attend, speak and vote at a meeting of the directors and trustees: a right which they should have in any case. What is required is a right to attend, speak and vote at any general meeting of the charity, which Amendment No. 200 achieves.

Thirdly, we have concluded that the provisions of paragraph 13(2) of Schedule 1 dealing with orders of the court under Sections 425 and 427 of the Companies Act 1985 are not adequate and could be difficult to apply. Orders under these sections deal respectively with compromises and arrangements with creditors or members, and with the transfer of undertakings or property for the purposes of reconstruction or amalgamation of a company. Amendment No. 205 rectifies this by providing that any such order is not effective unless the corporation has given its consent. It further provides that a copy of the consent shall be sent to the registrar of companies along with the copy of the order.

Finally, Amendment No. 207 deals with an oversight in paragraph 24 of the schedule. It was always intended that failure to comply with an order of the corporation in respect of the holding of money or securities should be a summary offence, to be heard by a magistrates' court, rather than an offence to be heard by a Crown Court. This amendment rectifies that oversight. I beg to move.

6.15 p.m.

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord for paying attention to what I said in Committee and for realising that to a large extent the Government's original suggestions were defective. I am also grateful to him for tabling some amendments which in some cases seem to rectify some of my problems with these provisions.

The first difficulty that I see with Amendment No. 202 to which the noble Lord spoke—this difficulty follows through into Amendment No. 204—is the question of what happens if, at any general meeting of the company, the shareholders (or anybody else who is entitled to move a resolution) move a resolution to remove the director appointed by the corporation before he has been able to move his own resolution. It is up to the board to determine the agenda of the general meeting. The director is then removed if the shareholders vote in favour of the original measure and cannot then move his own resolution.

Secondly, what happens if the director appointed by the corporation moves his resolution and it is defeated by the shareholders? It may be a resolution to remove a certain director or a number of directors from the board of that local housing company. The shareholders have a right to vote on that and to reject the motion. What happens then? In my view, the authority of the corporation which appointed that director to engage in such an odd arrangement is thereby seriously damaged.

The corporation does not have any power to do anything. As I see it, it has a power only to appoint a director who may at some point early in the general meeting be removed. If the director is not removed, he may move a resolution which may then be defeated. What happens in those circumstances? Although I recognise that the noble Lord has moved a little in my direction, I am not entirely clear about how the provision might work in practice.

Lord Lucas

My Lords, I think that the noble Lord has a very clear appreciation of how it might work in practice. The Companies Act and all its provisions have primacy and the situation that he described is entirely in accordance with those provisions.

The purpose of these provisions is to provide the corporation with the ability to transfer discussion from the board of a company to the shareholders. In general, they will be different bodies, differently constituted, although one has appointed the other. That will give the Housing Corporation an opportunity to move its disagreements with the company into the forum of the shareholders' meeting. If that shareholders' meeting disagrees with the actions that the corporation is taking and so votes, that is its right. It will result in the corporation's actions at that level being ineffective. If the corporation so decides, it then has the option of moving further to its much more considerable back-up powers, a full inquiry and such panoply, but it is not intended that the procedure of moving matters into the realm of the shareholders should provide an answer. We are merely suggesting that that is the forum in which such matters should be discussed before the corporation takes the full-scale action of holding an inquiry involving, as it would, the corporation's assumption of a lot of powers over the housing association. I recognise the comic aspect that may ensue if there is a rebellion by the shareholders against the Housing Corporation. We do not believe that we can do anything about that without fear of getting into serious trouble with the operation of the Companies Act. In most cases we prefer to rely on good sense to make sure that these matters operate properly. Where they do not, the corporation will have available to it greater backup powers to solve the problem, if required.

On Question, amendment agreed to.

[Amendment No. 201 not moved.]

Lord Lucas moved Amendment No. 202: Page 128, line 36, after ("receive,") insert— ("( ) to move a resolution at any general meeting of the company,").

The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Lord Williams of Elvel moved Amendment No. 203: Page 128, line 39, at end insert— ("Company: special share —(1) The memorandum and articles of association of Companies registered under the Companies Act 1985, shall be approved by the Corporation before any such Company is registered as a social landlord. (2) A condition of such approved shall be that the Corporation will have an absolute right at any time to subscribe for a nominal sum to a special share. (3) The special share will allow the Corporation to prevent any acquisition which is not approved by the Corporation and to remove directors of the Company who in the Corporation's view are not managing the company's affairs in a proper manner. (4) The Secretary of State may by order specify other powers to be given to the holder of the special share.").

The noble Lord said: My Lords, I beg to move Amendment No. 203. In Committee I suggested to your Lordships that it might be useful if the corporation maintained a golden share in local housing companies. The formal description of such a share is a special share. That is the normal procedure. I believe that by allowing this the Government will obviate all of the difficulties that we discussed in the context of the last amendment. The special share would give the corporation the right to do more or less what it wanted when it subscribed to the share. As the corporation stands behind the local housing company and as a last resort has the panoply of powers described by the noble Lord, it is much simpler to allow the corporation to take a special share and give that special share such powers as to obviate the difficulties that we have discussed. I beg to move.

Lord Lucas

My Lords, it may assist the House if I outline the safeguards already in the Bill. In order to become a registered social landlord in the first place, a company will have to meet the various statutory requirements. These include requirements not to trade for profit and to meet a series of published criteria. Paragraph 1 of Schedule 1 prohibits the distribution of dividends with powers of recovery. This is backed up by the company's memorandum and articles, which will be approved initially by the corporation as part of the registration process. The Bill provides that any subsequent changes would similarly need to be approved.

In the case of a company with share capital, its memorandum and articles will be required to include provisions prohibiting or restricting the transfer of shares. Thus, a company which is a registered social landlord cannot be, and could not convert itself into, a profit-distributing company; nor could its shares be transferred in a way which threatened the objective of an independent provider of social housing. No disposal of land including housing would be permitted unless it met corporation requirements or had express approval. Thus, a company could not divest itself of its assets without explicit consent. Even if it did divest itself, the resulting income could not be distributed to shareholders. Finally, the company may not de-register without the corporation's permission and without meeting published criteria. Thus, a company could not dispose of its assets and take itself and the resulting income out of the sector at will. The corporation's permission would not be granted for anything which constituted asset stripping.

This represents a formidable set of hurdles. In the event of a company misbehaving, the corporation would have a series of sanctions, including the powers in Schedule 1 to appoint a director, hold an inquiry and to follow that up by directing the transfer of land, including housing. All in all, a registered social landlord is effectively constrained.

Given the extent of these safeguards, we do not believe that a golden share is necessary or desirable. The golden share has generally been used as a transitional device, for example, while privatisation arrangements are bedding down in large companies. We do not want to put the corporation in a position whereby it is involved in running a number of small social landlords. The provisions of this schedule enable the corporation to appoint one or more individuals to try to help a company in difficulties. The corporation does this now with housing associations, almost always by agreement rather than by imposition. The individuals are chosen for their experience and good sense, but they are not there to represent the corporation at the expense of shareholders; they are there to help the -association get back on the rails.

We prefer the arrangements in the Bill under which the corporation is one step further back in its dealings with housing associations than we feel would be the case with a golden share. If there were a golden share the corporation might be tempted to get its hands dirty and become more intimately involved on a greater number of occasions.

I hope that what I have said about the safeguards already in place will enable the noble Lord to overcome his clear preference for the golden share and agree that, even if he does not like our way of doing it, it is none the less effective.

Lord Williams of Elvel

My Lords, to be frank I do not like the noble Lord's way and I do not believe that it will be effective. I believe that the golden share, which is well known in practice and in company law, is a much better way of doing it and will ensure that the corporation has control over local housing companies as I believe it should. To have to go back through the whole panoply of powers that the noble Lord has recited is much more difficult under the Bill as presently drafted. Nevertheless, I recognise that the Government have looked at the problem. I do not agree with their solution. We have had a good debate on the subject. I do not wish to push the matter further. I beg leave to withdraw the amendment.

Amendment, by leave withdrawn.

Lord Lucas moved Amendments Nos. 204 and 205: Page 129, line 15, after ("receive,") insert— ("( ) to move a resolution at any general meeting of the society,"). Page 130, leave out lines 43 to 50 and insert— ("( ) An order of the court given for the purposes of section 425 of the Companies Act 1985 (compromise or arrangement with creditors or members) is not effective unless the Corporation has given its consent. A copy of the consent shall be sent to the registrar of companies along with the office copy of the order delivered to him under that section. ( ) An order of the court given for the purposes of section 427 of the Companies Act 1985 (transfer of undertaking or property for purposes of reconstruction or amalgamation) is not effective unless the Corporation has given its consent. A copy of the consent shall be sent to the registrar of companies along with the office copy of the order delivered to him under that section.").

The noble Lord said: My Lords, I beg to move Amendments Nos. 204 and 205 en bloc. I spoke to these amendments with Amendment No. 200.

On Question, amendments agreed to.

Lord Williams of Elvel moved Amendment No. 206: Page 132, line 43, at end insert— ("(6) Notwithstanding any provision of this paragraph, no director or auditor shall be required to sign two or more sets of accounts, each or all of which purport to give a true and fair view of the Company's state of affairs.").

The noble Lord said: My Lords, I beg to move Amendment No. 206 standing in my name and that of my noble friend Lord Dubs. It appeared from our discussion in Committee on this topic that there might be circumstances in which the corporation insisted on a certain number of accounting principles which a local housing company had to adopt and the law under the Companies Act, as amended, insisted on certain other principles, and both sets of principles were intended to represent a true and fair view. I believe that I pointed out to the noble Lord, Lord Lucas, that this was something of a nonsense. It is another reason why no one should become a director of a local housing company. No director can properly sign two sets of accounts both of which purport to represent a true and fair view. Having raised the matter with the noble Lord I hope that he has an elegant solution to offer to obviate what I perceive to be a complex difficulty. I beg to move.

Lord Lucas

My Lords, I agree entirely with the noble Lord, Lord Williams, that the problem he imagines existed in our minds when this matter was discussed in Committee did exist. Since that time we have had the opportunity to make a thorough review of the wording of the Bill as it now stands. If I go through the Government's interpretation of the wording I hope he will accept that it avoids the problem that we mutually raised at Committee.

Paragraph 16 or Schedule 1 gives the corporation power to determine accounting requirements for registered social landlords with a view to ensuring, first, that they are prepared in a proper form and, secondly, that they give a true and fair view of the landlord's housing activities and the disposition of funds and assets held by it in connection with such activities. Before determining such requirements the corporation must consult representatives of registered social landlords. In practice, it also consults others, such as the Accounting Standards Board, the Auditing Practices Board and the other regulators with an interest in the sector, including Companies House. Once it has done that it must obtain approval for what it proposes from the Secretary of State.

The provisions of paragraph 16 bite only on the accounts relating to an organisation's housing activities. Our legal advice is that the requirement that such accounts are prepared in a proper form must mean, in the case of a Companies Act company, accounts which comply with the requirements of that Act. That provision appears at line 28 of paragraph 132.

The corporation may well, for reasons connected with its regulatory role, require information which is additional to that required by the Companies Act or by the legislation relating to charities and industrial and provident societies. But in such cases it should be capable of being supplied as a supplement to the accounts. We do not believe that directors or auditors will face difficulty in complying with these requirements.

On consideration, we are convinced that there is no need for separate accounts and no need for conflict in providing this supplementary information. When I spoke in Committee I thought that ultimately there might be two sets of accounts. However, there will be one set of accounts; that demanded by the statute which forms the basis of whatever the entity is. It will be the Companies Act in the case of a company. The corporation may require supplementary information which the auditors will report as an addition, not as an alternative, to what is required by the Companies Act.

I hope that in providing that carefully revised interpretation of what is in the Bill the noble Lord will be satisfied that the problem which we both imagined existed does not exist.

6.30 p.m.

Lord Williams of Elvel

My Lords, I am grateful to the Minister for the carefully revised interpretation. It will be studied with interest by the Institute of Chartered Accountants of England and Wales. It may well be that it has objections to the idea that a supplementary set of accounts in addition to those required by the Companies Acts may be produced by the corporation, in accordance with the instructions of the corporation, on more detailed matters or different aspects of the company's business, which also give a true and fair view.

For the moment, I agree that the Government have studied the problem. I am sure that departments other than the Department of the Environment have studied the matter too. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lucas moved Amendment No. 207: Page 137, line 17, after first ("on") insert ("summary").

The noble Lord said: My Lords, I spoke to Amendment No. 207 with Amendment No. 200. I beg to move.

On Question, amendment agreed to.

Clause 15 [Relevant and exempted disposals]:

Lord Lucas moved Amendments Nos. 208 and 209: Page 10, line 9, leave out from third ("of") to end of line 14 and insert ("any such order as is mentioned in subsection (5A);"). Page 10, line 25, at end insert— ("(5A) The orders referred to in subsection (4)(b) are orders under—

  1. (a) section 24 or 24A of the Matrimonial Causes Act 1973 (property adjustment orders or orders for the sale of property in connection with matrimonial proceedings);
  2. (b) section 2 of the Inheritance (Provision for Family and Dependants) Act 1975 (orders as to financial provision to be made from estate);
  3. (c) section 17 of the Matrimonial and Family Proceedings Act 1984 (property adjustment orders or orders for the sale of property after overseas divorce, &c.); or
  4. (d) paragraph 1 of Schedule 1 to the Children Act 1989 (orders for financial relief against parents).").

The noble Lord said: My Lords, I spoke to these amendments with Amendment No. 5. I beg to move.

On Question, amendments agreed to.

Clause 16 [Right of tenant to acquire dwelling]:

Lord Berkeley moved Amendment No. 210: Page 11, line 18, after ("dwelling") insert (", which shall include any community facilities or amenities provided in support of, and at the same time as, the dwelling,").

The noble Lord said: My Lords, in moving Amendment No. 210 I shall speak also to Amendment No. 214. I thank the noble Lord, Lord Mackay of Ardbrecknish, for his letter to me explaining about the repair costs and service charges for housing. It was most helpful.

We discussed similar amendments in Committee, but I remain concerned that the Bill provides a disincentive to housing associations to build in future to high standards of construction, insulation, low operating costs, community facilities and so forth. Furthermore, I am concerned that it provides a disincentive to build in certain locations.

In Committee the noble Lord, Lord Mackay, said that he thought I was talking about sheltered accommodation. I wish to confirm that that is not the case. The amendment refers to ordinary social housing perhaps with high standards and community facilities. The noble Lord, Lord Mackay, commented that if housing was to be sold the value of the community facilities and the high cost of the extra insulation and so forth would be reflected in the sale price. I refer your Lordships to col. 1459. That may or may not be the case. My concern is that we need to refer to the market or to the purchase price of houses built in the future and compare that with the cost of building.

I consulted again the William Sutton Trust, which is the sixth largest housing trust in this country. It raised four serious concerns which it believed should be reconsidered. The trust builds to high standards and low maintenance, but it believes that if that is not to be reflected in the sale price either it will make a loss or it will decide to build all its houses to a lower cost. Of course, when it builds houses it cannot know which ones will be sold and which will not. If it keeps the houses for a long period it will opt for low operating and maintenance costs, but if it sells them at a loss it will have less money for the construction of new houses.

Secondly, the trust pointed out that it and possibly other trusts may stop building new flats as a result of the complex legal arrangements which will arise not only under this Bill but in connection with other legislation relating to owner occupiers of flats. The trust thought that there was a real likelihood that it would stop building flats.

It also expressed concern that if house prices fall they will lose, as my noble friend Lord Williams said in our debate on Amendment No. 197. However, that applies to anyone. Its greatest concern, which I share, is that in locations where the market price is below the building costs trusts might stop building completely. Where are those areas? Not surprisingly, they are areas such as Liverpool, Stoke-on-Trent and the North East where such housing is probably required most.

All those problems and concerns arise because housing associations are no longer to be in control of their complete housing stock. I believe that they accept the change, but if they must carry on building and replacing what has been sold I strongly believe that wording such as that in my Amendment No. 204 is highly desirable. We run the risk of housing trusts completely stopping building flats or houses in areas where they are most required. If there were a floor market price related to the cost that problem could be mitigated and there would be a continuation of social housing in those areas where it is most required. I beg to move.

Lord Selsdon

My Lords, the noble Lord has a point but, unfortunately, the market economy has an impact on the situation. I am fully aware that often housing associations have a simple formula. They know how much per square foot they can afford to spend on building, they know how many square feet they have for a flat or a house and they know roughly the market price. Often it is a combination of yields and interest rates. It can be the combination of a sudden rise in the cost of building materials due to a sudden demand and of contractors, if they have sufficient work, quoting higher prices in more difficult areas.

One of the objectives of associations is to build houses in the lower cost areas. However, I do not see how one can arrive at a particular floor as regards building costs because without heavy subsidy they would be influenced by the outside market.

Earl Ferrers

My Lords, I am sorry that the noble Lord, Lord Berkeley, is still worried about this. I certainly do not think that the Bill should result in houses being built to a lesser standard than they are at the moment; nor do I see that it will stop flats being built. Of course, if you have any change there is always anxiety, and I understand that. Those who are involved are naturally apprehensive and wonder what is going to happen. I shall do my best to try to assuage the noble Lord's anxiety.

The statutory purchase grant scheme has been introduced so that, in future, certain tenants of registered social landlords will have the right to buy their home. On the whole, we believe that is a good thing. Something similar to the amendment of the noble Lord, Lord Berkeley, was discussed in Committee.

Let me tell the noble Lord what the position is. Landlords will receive the full market value of any properties which they sell. Where a property has certain amenities, such as a playground or something like that, the market value would be expected to increase accordingly. I do not think it would be appropriate to enshrine in legislation the requirement that the value of a property must reflect the fact that it enjoys access to communal facilities. We should rely on the market to determine the value of any particular property. If the noble Lord is selling his house it has a certain value attached to it. If the house has a garden three-quarters of an acre in size which goes with the house, then the chances are that the house will have a greater value.

That is why we think we ought to rely on the market to determine the value of the property. If a tenant purchases his home, which shares facilities or amenities with other properties, such as a communal garden, he will normally have to pay service charges for his contribution to the maintenance of those facilities. Of course, if a tenant buys, that does not deprive the other tenants of the full use of those facilities.

Amendment No. 214, in the name of the noble Lord, Lord Berkeley, would exclude properties where the sale price to the tenant was less than the original cost to the landlord. I would like to assuage the noble Lord's worries. Under the purchase grant scheme landlords will always receive the full market value of any property which they sell.

The noble Lord was concerned whether the property might have gone up or fallen in value since it was built. Mortgage rates and interest rates also go up and down. The point is that if the landlord receives the full market value of any property which he sells then of course he will be able to recycle that money, and if he wishes to purchase another property then the replacement property should reflect the same market value, whether it has gone up or down.

Even if the landlord were to make a financial loss he would at least be cushioned by the grant which he had received earlier, and he should have the option of buying a similar property on the open market. Perhaps I can explain that a little further. When the flat or the house was built it attracted a certain grant which, of course, lowered the net cost to the builder. When the landlord sells that property, of course the total price might have gone down, but that will be reflected in the fact that he will be able to use that lesser price to buy a house also of a lesser price because of the position of the market.

The traditional right to buy a council house does not allow a local authority to refuse to sell a property where its market value is below what it actually cost the local authority. The local authority may have spent a lot of money doing up the property just before it was decided that it should be sold. In this case, because the tenant would, in effect, be getting a considerable benefit, and a benefit of almost total renovation of his house or flat, the discount which he normally would have received may be waived or reduced.

I hope I have been able to persuade the noble Lord, Lord Berkeley, that the position is not quite as frightening as he thought it was and that it is based on the market value. If the market value goes up then the landlord is relatively advantaged, but he will have to spend more when he purchases a replacement property, and if it goes down he will be relatively disadvantaged but he will pay less for a replacement.

6.45 p.m.

Lord Berkeley

My Lords, I am grateful to the noble Earl, Lord Ferrers, for that explanation. My concern has always been to see a continuing stock of social housing. I believe he has explained the position very clearly. We have debated the matter at length, both now and at Committee stage, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hamwee moved Amendment Nos. 211: Page 11, line 21, at end insert— ("(5) The right granted by subsection (1) of this section shall not apply where the tenant is a tenant of a dwelling subject either to a planning obligation as defined by section 106 of the Town and Country Planning Act 1990 or to a planning condition in the planning permission authorising the existing use of the dwelling, which obligation or condition has the substantive effect however expressed of restricting the use of the dwelling to occupation by persons who cannot afford to occupy houses generally available on the open market.").

The noble Baroness said: My Lords, my name has been added to this amendment. The Marshalled List was a little eccentric today, but my name appears on the supplement. I spoke on this matter at the previous stage. The amendment argues for so-called Section 106 properties to be excluded from the right to buy. In moving this amendment I speak also to Amendments Nos. 216, 221A and 221B.

The amendment has been revised since the last stage to take account of concerns raised by the Government about defining such an exclusion in law. The Government said at Committee stage that Section 106 agreements can involve a wide range of planning conditions which have nothing to do with affordable housing, and that has been taken into account in that the amendment excludes only homes covered by a Section 106 agreement concerned with that provision.

Secondly, it was said that the issue of tenure was not a part of the planning process, and this amendment does not refer to tenure. Instead it adopts the Department of the Environment's own definition of affordable housing, as used in its draft circular of last February. The Government's policy of increasing affordable housing outlined in the draft circular would be undermined, I believe, unless an exclusion, similar to the one which I am proposing, were provided. A home built specifically for people who could not afford to buy on the open market would be resold and taken out of that provision.

That is why I was keen to see the matter reconsidered. In particular, the Government's draft circular provides that there should not be commuted payments, in other words, payments in lieu of actual housing. At the last stage the Minister said that he believed that the Government's endorsement of this use of Section 106 agreements was fully consistent with extending home ownership through the new right to buy, and with landlords recycling the sale proceeds for the continued benefit of the local community. That was at col. 1475 of Hansard of 6th June.

If Section 106 homes are sold, or are available for sale, the local housing authority, or the local planning authority wearing that hat, might just as well take commuted payments, payments in lieu of an actual building, but that is what the Government now frown upon and outlaw in their recent circular. It does seem to be inconsistent. With a view to ensuring that this particular provision relating to affordable housing should not fall between two stools as a result of the changes to the planning guidance, and because of the Bill, I beg to move.

Earl Ferrers

My Lords, I was looking round because I thought that my noble friend Lord Kinnoull might wish to speak to his Amendments Nos. 221A and 221B. However, as he seems to have vaporised, I assume that he does not wish to do so.

This group of amendments seeks to impose a series of further exemptions to the new tenant's right to acquire in Clause 16. In the early stages of the Bill's progress through Parliament, the right to acquire was welcomed generally. But at each stage we find that amendments are tabled which seek to limit that right. We have provided a series of reasonable exclusions which are based on rural areas of particular special needs. However, I do not believe that it would be sensible to keep chipping away further at the right to acquire, not least because each new item introduces further complexity. We have introduced legislation to give housing association tenants the right to buy their homes and we want as many of them as possible to do so.

Amendment No. 211 seeks to exclude from the right to acquire any properties which are subject to a planning obligation or condition which has the effect of restricting the use and occupancy to people who cannot afford to occupy houses which are generally available on the open market.

Planning obligations and conditions may cover a very wide range of requirements, not just related to affordable housing. I believe that that could cause particular problems of definition for any exclusion from the right to acquire. The noble Baroness's amendment acknowledges that difficulty in its very broad wording. In fact, that may cause considerable uncertainty and argument about just what are the "substantive" effects of obligations and conditions. I wondered what that meant because I am not quite certain what "substantive" means when describing an effect. I do not know whether it means a substantial effect or whether the qualification of the word "effect" means something more sinister. That would be a point of argument. I do not make great play on that; it is just that personally, I do not understand it.

Planning obligations may be either agreements between the local planning authority and relevant landowners or offered voluntarily by a landowner. Planning authorities have wide discretion in the use of planning obligations and conditions. The exemption suggested by this amendment could apply widely, to the detriment of the many tenants who would be at risk of being deprived of their right to acquire.

Affordable housing may be for rent, for purchase on shared ownership terms or for outright ownership. Paragraph 40 of our Policy Planning Guidance Note 3 indicates that planning obligations cannot be used normally to control which of those three options should be used. They commonly limit occupancy to people with a local connection. But a family which occupies a property as tenants is likely to be equally qualified to continue to occupy it as an owner.

For those reasons, I hope that the noble Baroness will not seek to press the amendment because I believe that it would cause further complications.

Baroness Hamwee

My Lords, I am very disappointed by that answer because it did not deal with the substance, whether substantial or substantive, of the matter. My point is that there is a planning procedure in place which is quite well known which provides alternative mechanisms for achieving greater stock: agreements with developers either to build housing or to make available some units of a total development to those who might otherwise not be able to afford either to rent or to buy. Tenure is not an issue in this amendment. That is one way of approaching, through planning, the problem of the shortage of stock when a local planning authority is making an agreement with a developer.

Frequently, a developer will be looking at a site which may not be suitable for the number of houses that he is prepared to negotiate around. It may be a particularly good site, perhaps a riverside site—and I have known that when I was chairing a planning authority some years ago—where the housing to be built was likely to achieve a very high price on the open market. The negotiations would go forward on the basis that while the developer may not be prepared to give up the good site for affordable housing, he would be prepared to make a contribution to the funds that the local planning authority/housing authority had available. Those funds then go into a pot in order to enable building elsewhere. That is a very important mechanism for minor but cumulatively important increases in stock.

The draft guidance is saying no to commuted payments because of that. It seemed really important to address the issue as part of this Bill.

Earl Ferrers

My Lords, with the leave of the House, the noble Baroness has made an important point. It is a point of detail which I should like to consider. I cannot give any guarantee but I should like to consider what we should do or whether it is right to do anything. Perhaps the noble Baroness will allow me to write to her on this issue.

Baroness Hamwee

My Lords, I am grateful for that and I shall certainly be happy to pursue the matter outside the Chamber if that were to be useful. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 17 [Right of tenant to acquire dwelling: supplementary provisions]:

Lord Stanley of Alderley moved Amendment No. 212: Page 11, line 22, leave out ("may").

The noble Lord said: My Lords, on behalf of my noble friend Lord Peyton of Yeovil, I move the amendment so that the Minister will have an opportunity to comment on it, if he so wishes. I gather that nine other amendments are grouped with this amendment. Perhaps it may be for the convenience of the House if the noble Lord, Lord Carter, speaks to Amendments Nos. 217, 218, 221 and 221C. I beg to move.

Lord Carter

My Lords, Amendments Nos. 212, 213, 215, 219 and 220 stood in the name of the noble Lord, Lord Peyton, in Committee and were moved by the noble Lord, Lord Stanley of Alderley.

We covered the ground on them fairly thoroughly then so that there is no need to repeat that. In Committee we wondered about the definition which the noble Lord had used in his amendments. He is on to quite a good idea if the Government were so minded to accept the amendments, although I have a feeling that they will not. However, I shall be interested to see whether the Government have changed their minds since Committee stage.

This whole group of amendments concerns Clause 17. Our main concern is to ensure that the areas where right to buy for new tenants of social landlords would not apply should be properly defined and that there should be proper procedures for consultation before designation of areas. As noble Lords will know, in Committee we achieved a number of government undertakings on the record which we welcomed, and we thank the Government for that.

The Government propose to use the negative procedure to lay all the regulations listing the settlements where right to buy will not apply and we have undertakings by letter and in Hansard that once the areas are designated, the removal from designation will be a very rare event. If that is the case, it seems to us to be reasonable that such removal of the exemption, which we were told by the Government on a number of occasions in Committee would be very rare, should be subject to the affirmative resolution procedure and justified to Parliament. Our Amendments Nos. 221 and 221 C deal with that aspect of the matter. I shall return to them later.

In order to head us off on the point, so to speak, the Government have tabled Amendment No. 217A which requires consultation only before the removal of the designation. Obviously we cannot oppose consultation—indeed, we welcome it—but, on its own, it is not enough. The Government can consult as much as they like, but there is no guarantee that they will take any notice of the consultation.

I turn now to Amendment No. 217A which is the consultation amendment tabled in the name of the noble Earl, Lord Ferrers. It is, so to speak, the consultation olive branch as regards the change in designation. As I said, we welcome the amendment as far as it goes; but, unfortunately, it does not go far enough. We certainly support the amendment, but we also hope to persuade the Government to accept either Amendment No. 221 or, more particularly, Amendment No. 221C.

The effect of the Government's amendment would oblige the Secretary of State to consult with local housing authorities and registered social landlords before they make the subsequent orders which would cause rural areas previously designated as exempt to cease to be so. It places a statutory duty on the Secretary of State to carry out the consultations required before making amending orders. However, we believe that it is a weak duty to require the Secretary of State to consult and then completely ignore the representations that might be made to him by the consultees. We note that the amendment does not even oblige the Secretary of State to have regard to what the consultees say.

Staying with the point of consultation, I should point out that the situation is a little ironic. I am just trying to recall the number of Bills with which I have been involved where I have attempted to put a consultation amendment on the face of the legislation. Such attempts have always been resisted by the Government. However, on this occasion we are delighted that the Government have accepted the argument and, indeed, have tabled an amendment.

I move on now to our Amendments Nos. 221 and 221C which are tabled in my name and that of the noble Lord, Lord Stanley of Alderley. In fact, Amendment No. 218 is a paving amendment to these amendments. Before the Minister replies and points it out, perhaps I may say that, on further reflection, we tend to consider the drafting of Amendment No. 221 as probably being flawed. It would only give the Government six months after Royal Assent to lay the regulations which would designate all the areas where the right to buy will not apply. We do not know what the timetable is in that respect. Therefore, we have left the amendment on the Marshalled List so that the Government can tell us whether they believe they will be able to lay all the regulations which designate such areas within six months, or whether in fact it will take longer.

The amendment that we hope the Government will accept is Amendment No. 221C. It simply says that once an area or a settlement has been designated using the negative procedure—with which we have agreed—then removal of that designation should be subject to the affirmative resolution procedure. In Committee, we were told endlessly that the removal of the designation would be a very rare occurrence; that is, according to the Government. Therefore, I hope that the Minister will not argue that we will be taking up parliamentary time by the use of that affirmative procedure.

As I said, the consultation proposed by the Government in Amendment No. 217A is all very fine and well—indeed, we believe that the Government should consult in any event—but it is not really enough. The outcome of such consultation resulting in the removal of those exemptions should be debated in both Houses. In conclusion, we welcome and support Amendment No. 217A and will be particularly interested to hear whether the Government will accept Amendment No. 221C which deals with the change to the affirmative resolution procedure.

7. p.m.

Lord Stanley of Alderley

My Lords, with the leave of the House, perhaps I may speak now rather than speak to each amendment as it is called. I believe that that will make the process quicker and simpler. We should all remember what the noble Lord said; namely, that the purpose of the amendments is to ensure the confidence of landowners to offer land for exempt rural housing developments. The encouraging aspect is that all parties accept that fact, especially the Government, as evidenced by their tabling of Amendment No. 217A. That amendment makes it a duty to consult before making an exempt area non-exempt.

Without wishing to look a gift horse in the mouth—which, of course, I am doing—there are snags to the Government's amendment. In particular, what happens if no agreement is reached? If that were to be the case, it would surely be in everyone's interest, especially the Government's, to have the matter discussed in the open by Parliament. Hence the need for our Amendment No. 221 which would require an affirmative order.

I shall be most interested to hear the reply of my noble friend the Minister as to whether he likes or dislikes our amendments. Perhaps I may remind my noble friend that such a change would not take up much parliamentary time because, as my noble friend Lord Mackay said in Committee: For the great majority of settlements the exemptions are never likely to change".—[Official Report, 11/6/96; col. 1584.] Like the noble Lord, Lord Carter, perhaps I may go further and apologise for the tabling of Amendment No. 221. I fully understand that that would have meant that all changes after six months would have to be dealt with by affirmative order. That is not what we desire. We are really only interested in the second amendment which was tabled yesterday. Indeed, I will understand if my noble friend Lord Ferrers feels that he needs to take a little time to consider the amendment. I believe that we have rather sprung the matter upon him. I very much regret that fact.

As regards Amendment No. 217, I am afraid that I failed to notice in Committee that my noble friend Lord Mackay did not give me a complete answer regarding what happens to the money when a house which was exempt becomes non-exempt and is sold. However, my noble friend also said in Committee (at col. 1584 of Hansard) that, where they [the landowners] have donated land and the tenant subsequently buys, the benefit of their generosity is simply rolled over into replacement housing". That is absolutely fine: but where? Will the replacement housing still be in the landowner's ownership, parish or district? I fear that I may well be far more parochial than my noble friend on the Front Bench as I would wish that money to replace something fairly locally.

Perhaps my noble friend would also care to look with care at the points made by my noble friend Lord Dundonald in Committee (at col. 1590 of Hansard). He pointed out that such houses will be undervalued when they are sold for various reasons, so that the money raised will not be enough to buy a replacement house. I hope that my noble friend will be able to be positive as regards the affirmative order.

Earl Peel

My Lords, unfortunately, I was unable to be present in the Chamber during the Committee stage. However, I should just like to say how much I welcome the positive steps that the Government are taking in implementing the commitments that they made under the rural White Paper. It seems to me that identifying settlements in the countryside where the right to buy will be restricted is a sensible move. Indeed, I know that it has wide-spread support.

However, I have a degree of concern in that respect which has already been addressed by my noble friend Lord Stanley of Alderley. I just wonder whether the Government are prepared further to consider the matter. Clearly, low-cost housing depends to a degree on the willingness of owners to allow land to be sold at rates below market value. I am quite certain that it would cause very considerably grievance if such properties were later exempted from the exclusion of the right to buy, without those involved being properly consulted and the matter fully debated.

I appreciate that the Government have introduced the amendment. However, I doubt whether it goes quite as far as it ought to. I am a little confused with these amendments. I must admit that I do not understand how they all fit in together. Nevertheless, I understand the principles behind them. I realise that they seek to find ways of ensuring that we can proceed in the best possible way, given the excellent lead that the Government have already set.

Personally speaking, I am not particularly attracted by the idea that, once settlements have been designated, they should be so for all time. After all, as we all know and appreciate, the countryside is a dynamic place. There will inevitably be times in the future when the Government will see fit to allow changes to be made. Moreover, I have to say that I am really not a believer in the insistence that any proceeds derived from such a sale should necessarily be reinvested in the same source. I believe that that can lead to imprudence and I am quite certain that my noble friends on the Front Bench will resist it rigorously, and they would have my support.

Amendment No. 221C, concerning approval by resolution of Parliament, is something which we ought to look at very carefully indeed. I am certain that, if dwellings are to be redesignated, the resolution should be subject to approval of both Houses of Parliament. I feel certain that that will be welcomed not just by local communities but also by local councils and indeed by those owners who have allowed land to go forward at a cheaper rate than it might otherwise have done. I hope, therefore, that my noble friends will consider this issue very seriously indeed. The Government have gone so far in this matter—and I congratulate them on that—that I think it would be a pity to spoil it for a ha'p'orth of tar.

Baroness Hamwee

My Lords, our concern from these Benches is that the rural exemption should be as good and effective an exemption as it can be. I will not say more, given the hour.

Earl Ferrers

My Lords, my noble friend Lord Peel may find this a little complicated because of all the amendments—I dare say he is not alone—but we are dealing with one subject.

I apologise to your Lordships for the fact that it was not possible for me to put down Amendment No. 217A earlier. My right honourable friend the Minister for Housing had already written to my noble friend Lord Shuttleworth telling him of our intentions. My noble friend is, of course, the chairman of the Rural Development Commission, and the letter was copied to those noble Lords who had expressed an interest in the matter.

I hope that the amendment deals with most of the concerns that your Lordships have expressed and that your Lordships will consider it a better amendment than those which your Lordships have been kind enough graciously to put down.

Perhaps I may say what we have tried to do. Clause 17 allows the Secretary of State to designate rural areas where the new right to acquire will not be allowed to operate. We have published a consultation paper explaining the general approach which we propose to take in England, using a settlement population of 3,000 as our guideline. We are now consulting on the details for all the counties of England, and on the proposals for Wales. We shall listen carefully to the special cases for the exclusion of larger settlements with equally good claim.

I recognise the concerns about the arrangements for changing our rural exemptions. That is why we are proposing Amendment No. 217A which will require the Secretary of State to consult the local authorities which are affected as well as the representatives of social landlords before any designation is removed. Local interests will be warned of any proposed changes before an order is laid before Parliament.

As my noble friend Lord Mackay of Ardbrecknish made clear in Committee, if a settlement's population goes over the 3,000 population mark, tenants will not suddenly gain the new right to buy. That would only happen if the rural designations were changed. It would be quite absurd if all of a sudden when five more people came into a village, taking the population to over 3,000, everyone suddenly acquired the right to buy. Once the designation is there, it is reckoned to be there for some time. We cannot rule out the possibility that a revision may be necessary where a small village grows into a new town over the years or where mistakes have been made. Obviously, if that happens, it must be remedied. Clearly the situation is grossly changed if a Milton Keynes is suddenly made to grow up around a small village. Once the rural exemptions are made, we do not intend continually to revisit them. For the great majority of settlements the exemptions are never likely to change. My amendment ensures that any changes will now also have to be consulted on before an order is laid before Parliament.

The noble Lord, Lord Carter, wondered what the timetable was for designation of rural areas. The position is that the consultation process will finish at the end of the month and we shall then need to consider the responses. We hope to lay the orders shortly afterwards.

Taken together, Amendments Nos. 212, 213, 215, 219 and 220 in the name of my noble friend Lord Peyton would remove the Secretary of State's discretionary powers to designate rural areas and make it a requirement to designate. This obligation implies that rural designations will have to be continually reviewed and updated, which is obviously undesirable.

In our consultations we are using a 3,000 population guideline. I do not think that it should be written on the face of the Bill, as Amendment No. 220 in the name of my noble friend Lord Peyton suggests. That would prevent our having the flexibility we need in order to deal, for example, with the different circumstances in Wales, where a different approach is needed. The 10,000 population limit in the noble Lord's amendment, Amendment No. 219, would also cause the same difficulty and would limit the scope to correct any errors.

In our consultation exercise we invited comments on special cases. Amendment No. 220 in the name of my noble friend Lord Peyton, allows special cases where the Secretary of State is satisfied that there is likely to be particular difficulty in securing land for replacement properties. Replacement properties do not only have to be newly-built properties. Sale proceeds can be used to buy existing properties on the open market. My noble friend's amendment would limit our discretion to deal with special cases, on whatever grounds they may be made.

Our proposals for the rural exemption will protect small rural villages where replacement could be particularly difficult. Our method will allow a certain degree of flexibility to take account of the specific problems of certain areas. In my Amendment No. 217A we are proposing that the Secretary of State must consult before a designation is removed.

Amendments Nos. 218 and 221 standing in the name of the noble Lord, Lord Carter, and my noble friend Lord Stanley of Alderley, and Amendment No. 221C, which stands in the name of the noble Lord, Lord Carter, propose in slightly different ways that any subsequent changes to the rural designations would be by affirmative resolution. We always have this argument. Whenever anyone suggests that something should be done by a negative resolution everyone jumps up and says that it ought to be done by an affirmative resolution. The fact is that a negative resolution is as debatable as an affirmative resolution. If everything is put into an affirmative resolution, not only does it take up the time of Parliament but it also makes having a negative resolution rather absurd. Obviously, certain things have to be done by affirmative resolution. However, I do not think that is so in this particular case because it is not expected that there will be many alterations. In any case, if it were a negative resolution procedure, it could still be debated. The nature of these provisions is consistent with the use of negative resolutions and it has been endorsed by the Delegated Powers Scrutiny Committee.

If we were to use a positive resolution, it could raise the curious spectre of hybridity. Your Lordships may think that that is curious, and up to a point so do I, but apparently that is a fact. Hybrid procedures apply only to affirmative orders. They mean that one person who is affected can pray against the order. One merely looks back a few years to the Aircraft and Shipbuilding Industries Bill. That was of a slightly different character, I agree, but it involved the hybridity issue and we all got into a muddle—we did not get into a muddle; the noble Lords opposite did so. They were the Government, and they walked into the mud. I suggest that we do not do so over this issue.

Amendment No. 217, also in the name of the noble Lord, Lord Carter, and my noble friend Lord Stanley is concerned with the use of sale proceeds. The noble Lord said that my noble friend Lord Mackay had failed to address the point on the last occasion. I am sure that, if he failed to address it, it was merely because he was anxious to address all the other points so copiously and correctly that that one happened to escape him.

Perhaps I may explain how we envisage the Housing Corporation using its power to determine the use of the disposals proceeds fund, because it is an important point.

My noble friend Lord Peel said that he did not want the sales recycled necessarily in the same place. I think I know what he means; and I think that I agree with him if by "the same place" one means physically, almost in juxtaposition with the existing sale. We expect that sale proceeds will normally be recycled in the same local authority area. But there needs to be some flexibility in order to take account of circumstances where more social housing is not a local requirement. Replacements will have to meet local priority needs. Associations will have to inform local authorities of all sales and they will be obliged to consult the local authority when deciding on the type, location and nomination arrangements for replacements. If the agreed need is for replacements in a particular area, whether that is a rural or urban area, that is where the sale proceeds should be directed.

I hope that my noble friends will understand that. For instance, a piece of land might have been given by a forebear many years ago. If the housing associations were to sell some of those flats, it might be imprudent, unnecessary and actually wrong to provide the replacement right next door. The point is that this system will allow people to purchase their houses and to become owner occupiers. The system then allows that money to be recycled again into social housing where that social housing is most appropriately required.

I hope that with that explanation noble Lords will come to the conclusion that on the whole my Amendment No. 217A is a smashing amendment and will resolve the problems that noble Lords have expressed. We have to be careful not to confuse the matter with too many straitjackets and legalities.

The Earl of Kinnoull

My Lords, before my noble friend sits down, I understand that I missed my opportunity to speak to an amendment within the grouping. I do not intend to waste the time of the House. However, perhaps I may ask my noble friend about Amendment No. 217A. On redesignating an area, the Secretary of State naturally and rightly consults the local authority and bodies appearing to him to be representative of registered social landlords but not the landed charity bodies which provide land. In many cases they provide land under a Rule 106 agreement, with the intention of providing land for social purposes. I hope that he will consider including a paragraph (c): that the Secretary of State would consult those bodies. Those bodies feel aggrieved. On many occasions they have stretched their duties, and provided land at a much cheaper rate than a charity normally should. A charity has a duty to sell its assets at the best possible price. However, through a Rule 106 agreement those bodies have been allowed to act in that way. If the Rule 106 agreements do not stand up in future, charitable bodies will have a more difficult task. There is a strong case for a paragraph (c). It would make my noble friend's amendment even more "smashing" than at present.

Earl Ferrers

My Lords, I am delighted to see the reappearance of my noble friend. I thought that, having gone through the Division Lobby, he had become so excited that he had gone home. I am delighted that that is not the case.

My noble friend asks why we do not consult with those who have given the land. The principle is fairly simple although I accept that some people do not take too readily to it. The principle is this. Where you have some form of social housing, people ought to be able to buy their house or flat. The money can then be recycled to provide other social housing, and those people then become owner occupiers. That is the principle; that can happen anywhere.

We then say that it must not occur in small areas. If one has a village of, say, only 3,000 people and people have the right to buy one runs out of social housing, and almost certainly it would be difficult to find other land in that small village in which to create new social housing. That is the reason that one excludes those villages.

However, if in time those villages were to become bigger with, say, 10,000 people—in that case it would be well over the limit—those people ought to be allowed the right to buy. I do not see that consultation with those who have provided the land is any more necessary in that case than in towns which are not excluded. Because charitable institutions may have bought the land, and may have owned the land, they will then have the finance to buy more new land and provide other houses.

I hope that my noble friend realises that the paragraph (c) which he suggests, attractive though it may be, is an irrelevance in this case, if I may so say with respect. Once a village is over the 3,000 limit, it is in a non-designated area and is in exactly the same position as any other non-designated area.

The Earl of Kinnoull

My Lords, if my noble friend was confused about negative and affirmative orders, and hybridity, he has confused me, even though he gave me and other noble Lords some amusement. Before Third Reading I shall ask noble Lords whether they are similarly confused, in which case we may have to return to the issue again.

Amendment, by leave, withdrawn.

[Amendments Nos. 213 to 217 not moved.]

Earl Ferrers moved Amendment No. 217A: Page 12, line 10, at end insert— ("( ) Before making an order which would have the effect that an area ceased to be designated under subsection (1)(b), the Secretary of State shall consult—

  1. (a) the local housing authority or authorities in whose district the area or any part of it is situated or, if the order is general in its effect, local housing authorities in general, and
  2. (b) such bodies appearing to him to be representative of registered social landlords as he considers appropriate.").

On Question, amendment agreed to.

[Amendments Nos. 218 to 221 not moved.]

The Earl of Kinnoull moved Amendment No. 221A: Page 12, line 13, at end insert— ("( ) Any dwelling shall be exempt from the right conferred by section 16 if it is located on land subject to a long lease which includes conditions which stipulate eligibility for occupancy of the housing and its tenure.").

The noble Earl said: My Lords, Amendment No. 221A is a probing amendment. Would landed bodies be able to help their case as regards discretion by the use of long leases that are in force at present? I beg to move.

Earl Ferrers

My Lords, if my noble friend Lord Stanley thought that I had confused him, my noble friend Lord Kinnoull has confused me by jumping back to a grouping for which he had inadvertently absented himself from the debate.

The provision seeks to exclude properties which are on land subject to a long lease which includes conditions covering tenure and occupancy. There is no such exclusion from the traditional right to buy from a local authority where the conveyance of a freehold or the grant of a lease may include provisions which may ensure that the tenant is bound by some restrictive conditions which are attached to the long lease.

The reason that we do not particularly want to include the provision here is because the right to buy and the right to acquire are not dissimilar. We think that the conditions ought to be the same.

The Earl of Kinnoull

My Lords, I am grateful to my noble friend. I apologise if I am keeping my noble friend and the House from the dinner hour. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 221B and 221C not moved.]

Lord Lucas

My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion, perhaps I may suggest that the Report stage begin again not before half past eight.

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