Lords Sitting of 13 June 1996

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers— Read by the Lord Bishop of Worcester.

London Underground Limited
Lord Berkeley Lord Berkeley asked Her Majesty's Government:
Whether they intend to privatise London Underground Limited.
The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): My Lords, we have no plans to privatise London Underground Ltd.
Lord Berkeley: My Lords, I am grateful to the Minister for that definite reply. I have talked to London Underground, and it gives me great pleasure that it has had such excellent success with private investment in certain infrastructure projects on specific lines. Do the Government have any plans for widening the private sector involvement in the operation of certain lines? What proportion of London Underground's turnover is spent on privately contracted supplies and services?
Viscount Goschen: My Lords, the noble Lord is right to congratulate London Underground on the work it has done using the PFI. Some good partnerships have developed there. That partnership will be increased when the London Regional Transport Bill becomes law. It will widen the scope for PFIs in this field.
Lord Clark of Kempston: My Lords, does my noble friend agree that the Labour Party has consistently opposed any privatisation which has been carried out by the Government? Does he further agree that the privatisation programme that has been carried out has meant that instead of British taxpayers paying over £50 million per week in subsidy, British taxpayers are now receiving £50 million per week in taxation?
Viscount Goschen: My Lords, I agree with my noble friend on both counts.
Lord Ezra: My Lords, to come back to the London Underground, is the Minister satisfied that the current level of investment—that is, taking into account private sector involvement, funds generated by the Underground itself, and government contributions— is adequate for the needs of the Underground to enable it to become one of the leading Underground systems of any capital city in the world?
Viscount Goschen: My Lords, yes, I believe that the levels of investment are appropriate. All transport infrastructure systems would like to see more investment, but it is worth noting that core investment
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in the Underground in the 1990s is twice as high in real terms as in the 1980s and three times higher than in the 1970s.
Lord Clinton-Davis: My Lords, for the benefit of the noble Lord, Lord Clark, I ask: is it not a fact that it is not just the Labour Party that is not in favour of the privatisation of London Underground, but, from the Minister's own reply, the Government? Is it true, as was reported in reliable newspapers, or sober newspapers at least, that the Deputy Prime Minister was urging the Government strongly to give a commitment to the privatisation of the London Underground while more restrained Conservatives— there are not too many of them, I suppose— believe that there are no votes in that for the Conservative Party so far as concerns London?
Viscount Goschen: My Lords, our policies are designed to give Londoners the best transport system that can possibly be provided. That has always been our policy. My noble friend was drawing my attention, and that of the House, to the considerable achievements of privatisation in the transport sector— a subject which was fully covered last night.
Baroness Gardner of Parkes: My Lords, does the House agree that we, as Londoners, are fortunate to have someone like Denis Tunnicliffe running London Underground, because he has such a great understanding of transport in London and has done such a good job in expanding London transport; for example, with the new Jubilee Line extension?
Viscount Goschen: My Lords, I join with my noble friend in congratulating the management of London Underground. It has done a good job, and I am sure that it will continue to do so.
Lord Gisborough: My Lords, is my noble friend satisfied with the investment in the Piccadilly Line in view of the fact that those people who wish to catch an aeroplane at Heathrow now have to leave at least half an hour to an hour earlier in case no train comes along in the evening?
Viscount Goschen: My Lords, the Piccadilly Line is an interesting line. It provides a good service for those who use it, but of course we are always interested in new transport infrastructure developments. That is of course why there is the current project to provide a new line to Heathrow.
Lord Clinton-Davis: My Lords, as the Minister's noble friend, the noble Lord, Lord Clark, chose to propagate the views that are currently contained in all Conservative Party propaganda sheets, does the Minister believe that a bit of balance should be brought into the issue, and does he recognise that there have been £22 billion in debt write-offs since the privatisation programme began? That is the taxpayers' money.
Viscount Goschen: My Lords, the balance comes from the fact that these days no serious commentators want to turn the clock back and return to the bad old

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days. They recognise the benefits which privatisation and private finance has brought to the transport system. They accept that and I believe that even the Labour Party has come to that view.
Lord Hylton: My Lords, as regards the Piccadilly Line, has any consideration been given to running non-stop express trains to Heathrow?
Viscount Goschen: My Lords, Heathrow will be covered fully by the new express line which is being built. In the future, that will be the way to travel to Heathrow if you are in a hurry.
Lord Harmsworth: My Lords, does the Minister agree that the Jubilee Line extension works, which some of your Lordships, including myself, had the privilege of visiting some two days ago and which are on time and largely within budget, are a tribute not only to British engineering but to the management of London Underground and fully justify confidence in London Underground, whatever form that is in?
Viscount Goschen: My Lords, my noble friend is right to draw attention to the management of London Underground and to the considerable achievement of the Jubilee Line extension.

Legal Aid Expenditure
3.14 p.m.
Lord Boyd-Carpenter Lord Boyd-Carpenter asked Her Majesty's Government:
What has been the total cost of legal aid in the last year; what was the largest total payment to any individual; and whether it is expected that the total cost will rise or fall this year.
The Lord Chancellor (Lord Mackay of Clashfern): My Lords, net expenditure on legal aid in 1995–96 was £1.387 billion. The largest total payment from the legal aid fund in respect of a single client amounted to £2.946 million, which was paid to lawyers representing a defendant involved in a serious fraud trial. Expenditure is expected to rise this year to around £1.476 billion.
Lord Boyd-Carpenter: My Lords, I thank my noble and learned friend for that Answer and express appreciation for the efforts which I know he has made to restrain the growth of this expenditure. However, can he not hold out a little extra hope that it may be possible by drastic measures to secure that only modest increases are made in the payment of legal aid, and that people are not given great quantities of taxpayers' money in order to help them to indulge in litigation?
The Lord Chancellor: My Lords, I have put out for consultation proposals for a considerable alteration in the legal aid system to enable cases and matters to be given priority. I believe that that will help to ensure more direct control of the amount paid in legal aid and,
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as important, that the money available will be put to the best use for as many people as possible in the range covered by legal aid.
Lord Annan: My Lords, does the noble and learned Lord agree that it is not the individual litigant who is in receipt of the money, as often seems to be inferred by the way in which the noble Lord, Lord Boyd-Carpenter, puts his question, but it is the legal profession which benefits from the enormous expenditure on legal aid? I am sure that the noble and learned Lord will understand that there are many in this Chamber who greatly appreciate his efforts to reduce the amount of money which the legal profession earns in this way.
The Lord Chancellor: My Lords, it is correct that the payments referred to in this Question and previous similar Questions are made to lawyers and not directly to the client. The payments also include outlays; for example, in respect of experts' fees. Therefore, the payments may not be only for members of the legal profession because members of one or two other professions sometimes appear in court to give evidence. Accordingly, some other professions may well be involved as well as the legal profession, which is of course an extremely honourable profession.
Lord Irvine of Lairg: My Lords, does the noble and learned Lord agree that the actual outturn for legal aid expenditure in 1995–96 was £74 million less than the supply estimates' figure of £1.46 billion, and that the supply estimates were £67 million less than the original estimates? For this year the supply estimates are £156 million less than the original estimates. I do not expect the noble and learned Lord to confirm those figures precisely, but does he agree that the general picture is the opposite of a budget out of control? Does that not further show that his 1993 eligibility cuts exceeded what was necessary to enable the Government to achieve their spending targets?
The Lord Chancellor: My Lords, it is important to notice that the actual figures are going up. For example, the figure in respect of 1995–96, which is £1.387 million, is some £70 million below provision, as the noble Lord said. However, that represents an increase of £88 million over last year. Therefore, the amounts spent net are going up.
I do not accept that the alterations made in eligibility three years ago were in any way shown to be unnecessary. I believe that we need to change the system in order that proper priorities can be assigned to this type of expenditure.
Lord Dixon-Smith: My Lords, would my noble and learned friend care to comment on the extraordinary judgment of the European Court that a poll tax payer who should have payed his poll tax should none the less be compensated from the legal aid fund because he did not receive legal aid? Has it been possible to make any assessment of the cost of that judgment?
The Lord Chancellor: My Lords, my noble friend refers to the judgment of the European Court of

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Human Rights in the case of Benham. It is worth pointing out, in case it may have escaped any of your Lordships' notice, that the court was in favour of the United Kingdom on two out of the three points at issue. The point on which the court held the Government to be wrong was in not granting legal aid in a situation in which the defendant was liable to imprisonment. Of course, the ordinary rule is that in civil proceedings, legal aid is not usually granted. But the court held that the human rights convention would require that it was in a case where the defendant was liable to imprisonment and it gave quite full reasons for reaching that judgment.
I have not been able to obtain, as yet, a detailed assessment of the costs but I think that it would cost something in the order of £3 million if we were to change the rules to accord with that judgment.
Lord Cledwyn of Penrhos: My Lords, the noble and learned Lord referred to consultation and to a possible change in the system. In view of the experience that we have as regards the working of legal aid, is there not a strong case for an inquiry?
The Lord Chancellor: My Lords, I cannot think of a better way of inquiring than by putting out proposals in a Green Paper for all those who know about such matters to respond. That has been done and we have received extremely wide responses from a great many people. Included in that are very full responses from the leading professional organisations. I believe that it is possible to make progress. Obviously, I wish to make progress carefully with pilot studies and incremental change.
Lord Boyd-Carpenter: My Lords, will my noble and learned friend explain to the noble Lord opposite that many people are relieved of expenditure which otherwise they would have to undertake by the grant to them of legal aid?
The Lord Chancellor: My Lords, I think that the answer to that is, yes.

OECD Development Assistance Targets
3.22 p.m.
Lord Judd Lord Judd asked Her Majesty's Government:
What specific action they are taking to meet the targets for overseas development assistance set out in the recent OECD Development Assistance Committee report entitled Shaping the 21st Century: the Contribution of Development Co-operation.
Lord Chesham: My Lords, the Government were closely involved in the drafting of the Development Assistance Committee's report and we welcome its emphasis on measurable results. The committee has begun work to follow up the indicators of progress set out in it. Britain's development programme is already heavily focused on poverty reduction, improvement of health and education, particularly for women, environmental
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protection and the promotion of sustainable development, all of which are highlighted in the report. We shall continue to develop our activities in these areas further.
Lord Judd: My Lords, I thank the Minister for that reply. Does he not agree that the real importance of the report is that it sets specific target dates; for example, for halving the number of people living in extreme poverty in the world? Therefore, does he agree that if the Government are committed to the targets set in the report which they helped to draft, they must commit themselves to meeting those target dates? Will the Minister assure the House that the next Budget, if the Government survive to produce it, will guarantee the necessary funds for the programme?
Lord Chesham: My Lords, I am sure that the noble Lord, Lord Judd, would not expect me to make a guarantee on behalf of the Treasury. It would be slightly out of the ordinary if I were to do so. We are working out, and the Development Assistance Committee is working out, how to achieve the targets. We are working extremely hard with the committee. We shall listen to what it says and do the best that we can to achieve those targets.
Lord Clark of Kempston: My Lords, does my noble friend not agree that the latest report from the OECD is extremely complimentary about the British economy? The meeting of those targets depends on a sound economy. Does the Minister agree that the latest OECD report confirms that the United Kingdom's economic policy is highly successful?
Lord Chesham: My Lords, I thank my noble friend. I agree with him about the state of the economy. However, there is one other important point. Aid is only one of the many ways in which the United Kingdom is helping developing countries. The Government have taken the lead in debt relief initiatives and those are the third largest source of private capital to the developing world. We estimate that in 1994 Britain's overall performance was above the 1 per cent. of GNP benchmark for total aid flows which is used internationally.
Lord Rea: My Lords, following that answer, will the Minister say how the private direct investment to which he alluded can be increased so that more of it reaches the poorest countries of the world, particularly in sub-Saharan Africa? How can private investors be encouraged to take a long-term view and assist in the development of the infrastructure and human capital, particularly the literacy and health of the people of those countries, in order to form the basis for further investment?
Lord Chesham: My Lords, that is something which we are indeed encouraging. Perhaps the noble Lord will wait until the debate on the CDC tomorrow when he will hear about the details in relation to encouraging private financing, particularly in sub-Saharan Africa.
The Lord Bishop of Worcester: My Lords, will the noble Lord tell us whether the Government plan to make

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the millennium the time at which to cancel certain third world debts in view of the fact that they will not be paid? Secondly, does he not agree that if we can activate third world markets we shall be doing a favour for international trade?
Lord Chesham: My Lords, I thank the right reverend Prelate for that question. I do not think that it is appropriate for us to target the millennium for the cancellation of third world debts. We are doing that all the time. We should not wait for the millennium to do so. A major part of development assistance is helping countries to develop their own industries, businesses, employment and education. That is a prime target in our development aid programme.
Lord Prentice: My Lords, does my noble friend agree that the analysis of the OECD receives powerful support this week from the report of UNICEF into development problems affecting the world's children, which draws attention to fairly dramatic success stories in parts of the developing world but also to the vast problems which remain? Against that background, should not every OECD country, including Britain, think of revising its development assistance upwards in the years ahead?
Lord Chesham: My Lords, I wish that I could promise that we would always be able to revise the aid upwards. However, we have a very important policy, which is to make our aid work more efficiently. Efficiency rather than volume of aid may be much more important.
Lord Stoddart of Swindon: My Lords, will the noble Lord say what proportion of the total direct aid budget is administered through the European Union? Will he say also whether the Government are satisfied that the administration of that aid through the EU is better and better directed than it would be if it continued to be administered directly by the ODA?
Lord Chesham: My Lords, perhaps we should wait until Monday when figures for aid through the EU, the ODA and other countries will be published. It would be wrong for me to pre-empt the publication of those figures.
With regard to efficiency we are not satisfied. I do not think that anyone can ever be satisfied that everything is working at its ultimate efficiency. However, we are striving to improve efficiency both within the EU and the ODA.
Lord Stoddart of Swindon: My Lords, I am certainly prepared to wait until Monday for the up-to-date figures but is the noble Lord able to give us the figures which he already has?
Lord Chesham: My Lords, were the noble Lord to wait until Monday, he would have the up-to-date figures. The previous figures have no relevance to what will be published on Monday.
Lord Judd: My Lords, does the Minister agree that this very searching report by the OECD addresses the problem of suffering and deprivation on an almost indescribable scale? Does he further agree that the
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Government, by being co-drafters of the report, have committed themselves to halving the number of people living in extreme poverty by the year 2015? If they have committed themselves to doing that, how are they going to generate the funds to make that possible?
Lord Chesham: My Lords, that is a target, an aim, and one which we intend to do our very best to meet, with all other countries which also provide aid. Indeed, it is an aim that we are very determined to try to achieve. As to how it will be paid for, I must point out that we are talking about 20 years ahead. I do not believe that it will be sensible to attempt to talk about funding 20 years ahead at this stage.
Lord Judd: My Lords, would the Minister agree that this is seen by the poor of the world as, potentially, cynicism on an immense scale?
Lord Chesham: No, my Lords; I would not.

British Energy plc: Flotation
3.30 p.m.
Lord Dubs Lord Dubs asked Her Majesty's Government:
What is their assessment of the full value of British Energy plc, and what was the total original cost of the company's eight power stations.
Viscount Goschen: My Lords, the value of British Energy plc will be determined by the market on flotation on 15th July. As will be shown in the prospectus to be published on 26th June, the historic cost of the company's power stations is £9.3 billion.
Lord Dubs: My Lords, I thank the Minister for that interesting, although not totally informative, Answer. Does the Minister agree that the likely value of the company, as tested by the market, will be something in the region of £2 billion and that Sizewell B power station— one of the eight the company has— opened only two months ago and cost £3 billion to build? Is there not something the matter with the arithmetic? Further, are we not giving away a valuable asset in a desperate rush by the Government to privatise the industry before they lose office?
Viscount Goschen: No, my Lords, we are not giving it away. No, I shall not speculate on what might be raised by the flotation. No, the value of the assets is what the market is prepared to pay for them. They must be viewed in the light of the current electricity market. That is what the market will do.
The Earl of Lauderdale: My Lords, can my noble friend the Minister say whether the figure that he gave earlier includes provision for decommissioning?
Viscount Goschen: My Lords, the figure I gave was for the historic cost of the company's power stations. The figure for the liabilities, including decommissioning

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and the cost of dealing with the spent fuel, is £3.7 billion. British Energy will take those liabilities with it, so the liabilities will follow the assets.
Lord Bruce of Donington: My Lords, although the ultimate value will be determined by market forces in some form or other, will the Minister give the House an undertaking that proper accounts will be presented to Parliament, drawn up in accordance with the resource accounting measures already agreed by the Government, as per Commands 2626 and 2929 of July 1995 and 1996 respectively? Will the Minister also confirm that figures will be presented which show a true and fair view according to the basic tenets of resource accounting to which the Government are supposed to be adhering?
Viscount Goschen: My Lords, I cannot quibble with the noble Lord on his accountancy skills, or on Commands 2626 or 2929. The Government will use the proper accounting rules as appropriate. As we have always done with privatisations, we shall be as open as we possibly can.
Lord Bruce of Donington: My Lords, is the Minister aware that there is no scope for the Government to present those figures in accordance with what he considers to be appropriate rules? The Government themselves laid down the rules. I am asking that the Government keep to them as regards the presentation of figures. Can the noble Viscount give an undertaking that a true and fair view will be presented to Parliament?
Viscount Goschen: My Lords, I have already given the Government's position on the matter. There is no difference between the noble Lord and myself. He says that we cannot vary the appropriate rules; I am saying that we will follow the appropriate rules.
Earl Russell: My Lords, can the noble Viscount say whether the Government will undertake to study the report of the inquiry into the 1979 accident on Three Mile Island? Are the Government aware that the principal finding of that inquiry was that the accident happened because the plant opened before it was properly ready in order to secure a multi-million dollar tax rebate? Does the Minister agree that that illustrates that there can be safety risks inherent in the commercial operation of nuclear power?
Viscount Goschen: My Lords, the nuclear industry in this country has an excellent safety record. Privatisation will in no way change that. Indeed, it is a heavily regulated industry, and it is firmly in the commercial interests of the company to produce the best safety record that can possibly be achieved. The view of those who run the company is that if the power stations are not safe they will not run. That is also the view of the regulators.
Lord Peston: My Lords, I believe the Minister said that the historic cost of the stations is about £9 billion.
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I suppose that the replacement cost would be about twice that amount, say, about £18 billion on a rough estimate. As I understand it, the Government are not even remotely thinking they will receive anything like that sum of money from the privatisation. Does that not throw an appalling light on the whole nuclear power programme from the time that it started to the present day, having put in those vast assets? I am not being terribly critical of the Government; indeed, I was a supporter— and remain so to a considerable extent— of nuclear power. However, does the Minister not agree that we will have paid an enormous cost for our nuclear programme if the net value to be realised is only to be a few billion?
Viscount Goschen: My Lords, various different governments over the years have taken decisions about the funding of nuclear power stations. The fact is that we have a nuclear industry at present. The Government firmly believe that the power stations which are being floated with British Energy will be better off in the private sector and that it will be to the benefit of the economy and to the country as a whole. On a wider issue, there are the proceeds from the sale and also the sale of some £600 million worth of debt. Moreover, there is the consideration that some £3.7 billion of liabilities are following the assets. All those factors must be taken into consideration.
Lord Avebury: My Lords, as regards the £3.7 billion decommissioning costs which are to be loaded on to British Energy, can the Minister tell the House what margin of error that estimate is subject to? If, by any chance, the £3.7 billion proves to be grossly inadequate, can the noble Viscount guarantee that the Government will not pick up the difference?
Viscount Goschen: My Lords, we are fully confident that the £3.7 billion figure is an accurate and an appropriate one. Indeed, it has been generated using a conservative discount rate of some 3 per cent. It is widely accepted in the industry that £3.7 billion is a proper figure. Of course, there is also the segregated fund which has been set up.

Petition: Berkshire County Council
3.39 p.m.
Lord Renwick: My Lords, I beg to present a petition from Berkshire County Council which prays that this House will call upon the Secretary of State for the Environment to withdraw his current proposal for the abolition of Berkshire County Council and announce that he will not be pursuing further the question of structural change in the Royal County.
The petition also prays that this House will vote down any order placed before it which seeks to implement the Secretary of State's current, flawed proposal for the reorganisation of local government in Berkshire.
Petition presented.

Belfast Charitable Society Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
City of London (Approved Premises for Marriage) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Deer (Scotland) Bill [H.L.]
The Lord Advocate (Lord Mackay of Drumadoon): My Lords, I beg to move that this Bill be now read a second time.
The Bill is a consolidation measure which seeks to consolidate the legislation relating to deer in Scotland. The Bill is not intended to make any change in the existing law. If your Lordships approve, it will be referred to the Joint Committee on Consolidation Bills which will consider the Bill and make its report to the House in due course.
Moved, That the Bill be now read a second time.—(Lord Mackay of Drumadoon.)
Lord Carmichael of Kelvingrove: My Lords, I am most grateful to the noble and learned Lord the Lord Advocate for bringing this Bill before us today. As he knows, we tried an experiment and spent two days in Edinburgh discussing the Bill. That was a valuable experience for those of us who were not totally familiar with the subject of deer. I hope that we have now resolved the matter. Genuine problems have arisen in Scotland as a result of deer overpopulation; these are longstanding problems. I hope that there will not be another deer Bill until perhaps there is another government.
On Question, Bill read a second time, and referred to the Joint Committee on Consolidation Bills.

Housing Bill
3.41 p.m.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, on behalf of my noble friend Lord Ferrers I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.— (Lord Mackay of Ardbrecknish.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Lord Dubs Lord Dubs moved Amendment No. 242C:
Before Clause 89, insert the following new clause—
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RETALIATORY EVICTION
("—(1) After section 9 of the Housing Act 1988 there shall be inserted—
"Discretion of court not to make an order for possession.
9A.— (1) Notwithstanding section 9(6) above, the court may refuse to make an order for possession if it is satisfied that not earlier than six months prior to the notice of possession proceedings—

(a) the tenant has applied or proposed to apply to the Rent Assessment Committee for a determination of rent; or

(b) the tenant had initiated or proposed to initiate legal proceedings or some other action to secure or enforce his rights as a tenant; or

(c) the tenant had complained to a local housing authority or the local housing authority initiated or proposed to initiate enforcement action; and

(d) the landlord was motivated to seek possession wholly or party by reason of any of the circumstances mentioned in paragraphs (a) to (c) above."

(2) After section 21 of the Housing Act 1988 there shall be inserted—
"Discretion of court not to make an order for possession.
21A.— (1) Notwithstanding section 21 above, the court may refuse to make an order for possession if it is satisfied that not earlier than six months prior to the notice of possession proceedings—

(a) the tenant has applied or proposed to apply to the Rent Assessment Committee for a determination of rent; or

(b) the tenant had initiated or proposed to initiate legal proceedings or some other action to secure or enforce his rights as a tenant; or

(c) the tenant had complained to a local housing authority or the local housing authority initiated or proposed to initiate enforcement action; and

(d) that the landlord was motivated to seek possession wholly or partially by reason of any of the circumstances mentioned in paragraphs (a) to (c) above.".").

The noble Lord said: There are good landlords and there are bad landlords but it is only proper that tenants should have a proper basis for their tenancies and that tenants should have certain rights which they can exercise without landlords being able to retaliate or evict them. The purpose of this amendment is to prevent landlords from evicting tenants because the tenants have tried to stop their landlords harassing them, or have exercised their rights under discrimination law to get repairs done, or to get unreasonably high rents lowered.
The difficulty with the Government's proposals on tenure is that an increasing number of tenants will have even less security than is the case at present. Even under the present system there are many instances where tenants have made perfectly reasonable complaints to landlords and landlords have used their powers to evict the tenants. As I said, there are good and bad landlords. I am sure that I am talking about a minority of landlords but nevertheless it seems to me proper that tenants should have a measure of protection. This amendment would extend the discretion of the courts in not granting possession to a landlord in cases where the courts judged that the eviction was an act of retaliation following a perfectly proper and lawful complaint by a tenant.
It seems to me that under the shorthold scheme there is a limited period of security. This has weakened the bargaining power of tenants. They cannot always with safety negotiate with their landlords for repairs or

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maintenance to be carried out. Tenants may have to pay excessive rents or suffer major disrepairs or harassment, because tackling the problem may have the grave consequence that they lose their homes.
There is another problem. Responsible landlords keep their properties in a decent condition and respond to the views and representations of tenants. However, those responsible landlords will face unfair competition from unscrupulous landlords. When local authority environmental health enforcement teams receive a complaint from a tenant they have to act discreetly in order not inadvertently to disclose the fact that they are responding to the complaint of a particular tenant. They have to adopt a generalised approach. This is a simple amendment. It would simply give the individual tenant a little more protection than he has under the Government's policies. I beg to move.
Lord Meston: I support this amendment. It seems to be based on elementary fairness. It would prevent the victimisation of tenants by means of retaliatory action when a tenant has exercised, or has proposed to exercise, his rights and the landlord is shown to have been motivated by the very fact that the tenant has done so. The evidence suggests that this happens all too often. It strikes me that this amendment in some ways replicates the law relating to victimisation in the field of employment. There is, of course, protection from victimisation if an employee asserts his or her rights, for example against discrimination. This amendment seems to me to provide a good way of ensuring that tenants are not unfairly inhibited by fear of possession proceedings when they reasonably assert their legal rights. It therefore provides a useful deterrent against unscrupulous or vindictive landlords. That is not to say that the landlord automatically loses his rights. The court retains the discretion to order possession in appropriate cases.
Baroness Gardner of Parkes: I declare an interest in that I occasionally let property on the basis of shorthold tenancies. I hope that when my noble friend replies he will clarify the position— or perhaps the noble Lord, Lord Dubs, will do so. Could a tenant receive legal aid in this situation? The amendment poses a frightening prospect for a small landlord who perhaps just lets one part of his own property. We have all heard of cases where people who receive legal aid sue business enterprises. The business enterprise in question is in a no-win situation because even if it wins the case it cannot recover its costs. It is important to know the financial implications of this measure. I have sympathy with the point that the noble Lord, Lord Dubs, has made. It is wrong for landlords to be vindictive. I do not know how often that happens but it is a most unfortunate occurrence. However, it would be equally unfortunate if we killed off the assured shorthold tenancy system simply because small landlords in particular could not afford to let their property because of the risk of someone being granted legal aid and therefore being able to take action against them.
The Earl of Balfour: I am concerned about the measure for the following reason. From what I can
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gather of this amendment, a case has to go to court. Courts seldom grant an immediate eviction. They almost invariably delay that for at least six months to give the tenant the opportunity to obtain other accommodation. That occurs almost regardless of the circumstances in which the tenancy is proposed to be terminated. I fear that this measure would place an unnecessary burden on the landlord who happens to have an objectionable tenant. Unfortunately such tenants exist.
Lord Hamilton of Dalzell: I, too, take that view. I also let houses on assured shorthold tenancies. They are becoming the only form of rented accommodation available in the country. I always thought that the Government's object in producing the assured shorthold tenancy was to encourage people to let their houses in the short term. I can see a situation arising where a landlord wants his house back and a tenant at once raises some spurious reason to take the matter to court and object to the landlord having his house back when he requires it.
Lord Monkswell: I support my noble friend's amendment. However, it is worth while pointing out to Members of the Committee on the other side of the Chamber who seem to raise objections that the situation will already be before the court. There is, too, motivation by the landlord. If a good landlord is doing nothing wrong but wishes to gain possession of the property in the normal way, as a result of the amendment there should be no bar, let or hindrance to his doing so.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): The noble Lord, Lord Dubs, explained that the purpose of the new clause is to deal with retaliatory evictions. He has put forward the view that where tenants have little security of tenure, it is difficult for them to use any of their legal rights because if they take action against the landlord they risk losing their homes. He has therefore proposed that where a landlord is seeking possession shortly after a tenant has complained or exercised some legal right, the court should have discretion not to allow possession even though normally it would have no option.
Before dealing with the detail of the new clause it may be helpful if I put the situation in context. The survey of English housing found that most tenants are on good terms with their landlords. Seventy-five per cent. of assured shorthold tenants say they are on good terms with their landlord and only 4 per cent. say they are on bad terms. The balance say they are on neither good nor poor terms. So in only a minority of cases— 4 per cent.— is there friction. Similarly, over three-quarters of tenants are either satisfied or very satisfied with their accommodation. Nine per cent. are slightly dissatisfied, and 6 per cent. very dissatisfied. I would not wish to suggest that these are grounds for complacency but it does put the private rented sector as a whole in context. For the most part, people are satisfied with what they get.

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The new clause deals with the situation where a tenant may have complained and subsequently feels that the landlord is seeking to end the tenancy because of that. I have some difficulty with what the noble Lords, Lord Dubs and Lord Meston, are proposing.
The new clause will undoubtedly create enormous scope for dispute, delay, and confusion. By introducing an element of discretion into the grounds, which are otherwise mandatory, or the automatic procedure at the end of a shorthold tenancy, it opens up scope for arguments. There are bound to be court cases. And those cases will turn on the question of motivation. Why is the landlord seeking to end the tenancy? Is it due to the tenant exercising some right, or to some other circumstances? It is extremely difficult to establish what someone's motive may be for acting in a particular way. I understand that those who draft laws in this country seek to avoid using the word "motive" for that very reason. Often people act out of mixed motives. The new clause would allow a court to consider any mixed motive. It would put landlords in a very difficulty position, especially if their tenants were apt to complain.
To go down that route would mean not only that we were presented with those practical difficulties; it would also create uncertainty in the minds of landlords. They would be deterred from letting their property. My noble friend Lady Gardner of Parkes rightly raised the question of a tenant on legal aid. It is a fair point. Fear of the cost of gaining possession is one of the major reasons that people with empty properties are reluctant to let them. My noble friends Lord Balfour and Lord Hamilton of Dalzell echoed that point. The new clause might give a difficult tenant a way of retaining possession when the landlord wishes to cease the tenancy and the possession.
I believe that we should not seek to put any obstacles in the way of people with empty property letting them, especially people with one empty piece of property who do not let it as a business as such. Such people are even more put off if they feel that once a tenant gets into the property the legal structure is designed to be almost entirely in the tenant's, and not in the landlord's, favour.
For those reasons, I do not believe that the fears expressed are justified. On the evidence we have, I believe that they are largely unjustified. The new clause would introduce for landlords the fear of another step to be overcome if they wanted repossession. That could inhibit the growth of the private rented sector which we on this side are keen to see.
It is interesting that there are 14,000 successful actions a year on proceedings for possession out of some 2 million tenancies. The picture painted of the country populated by rapacious landlords who take this difficult view of their tenants is quite false. If they have a good tenant, most landlords would wish to keep him, as the bother of finding another tenant is great. I believe therefore that the new clause and the procedures that the
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noble Lord, Lord Dubs, proposes are not necessary. With that explanation, I hope that the noble Lord will feel that he can withdraw the amendment.
Lord Stallard: Before the noble Lord sits down perhaps I may ask this question. Is not the landlord already safeguarded? He has an agreement signed by himself and the tenant for six months. What other safeguards does he need?
Lord Mackay of Ardbrecknish: I understand that the noble Lord's amendment provides that if the tenant decided not to move at the end of six months and if, as my noble friend Lord Hamilton of Dalzell, mentioned, just before the end of the six months the tenant tries to exercise one of his rights of complaint and the landlord does what he had always intended to do and asks for possession and the tenant refuses to go, when he goes to court the new clause allows the tenant to say, "I am being chucked out because I complained against this landlord." That is the point.
Lord Dubs: I listened with interest to what the Minister said. At the outset I made it clear that only a minority of landlords were bad landlords. I do not suggest that in most instances there would be any need for the provisions of the amendment to be brought into effect. But the fact is that there are not only difficult tenants but also difficult landlords. It was argued that the provision would impose a burden on landlords. Any landlord— he may not make a lot of money— is letting as a business. However, for the tenant it is his home. In those circumstances, it does not seem unreasonable to have at least a balance between the rights of the two parties. My contention is that government policy in the Bill is tipping the balance very much to the disadvantage to tenants and to the advantage of landlords.
If I understood his figures correctly, the Minister said that 15 per cent. of tenants were dissatisfied with their landlords to a greater or lesser extent. He referred to very dissatisfied and partly dissatisfied. Fifteen per cent. means that more than one in seven of all tenants are dissatisfied. That seems a fairly large number of individuals who are in danger of losing their homes if they have the temerity to complain.
I agree with the Minister that motive may sometimes be hard to assess. Perhaps I may cite a few instances. For example, I understand that in one part of the London borough of Camden the environmental health department started a programme of improvement works in HMOs. The department's assessment was that many landlords had evicted shorthold tenants to avoid doing essential improvement work to make the property safe and fit for human habitation. It believes that this led to a 15 per cent. loss of accommodation.
In Bristol, the environmental health department estimates that 10 per cent. to 13 per cent. of private accommodation is lost because of retaliatory evictions after notices have been served. Other local authorities make the same point. Those examples may not represent the majority of tenants. But they present sufficiently clear evidence to make one believe that doing nothing about the problem is unfair and will become increasingly so. In support of my amendment, perhaps

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I may refer to the position in one or two places overseas. I understand that in New South Wales, Australia, provision has had to be made for legal measures to protect tenants in such situations. The same has happened in some states in the United States, so it is not just in this country that the problem of retaliatory action by landlords exists. I hope that it happens to a small extent, but it happens in other countries as well as here. I am not at all happy with what the Minister said. Perhaps he could give me more comfort.
Lord Mackay of Ardbrecknish: It is difficult to do so. The noble Lord neatly added 9 per cent. to 6 per cent. and reached 15 per cent. of tenants dissatisfied. However, I remind him of what I said: 9 per cent. were slightly dissatisfied, 6 per cent. were very dissatisfied. It is not fair to add the 9 per cent. and the 6 per cent., although the noble Lord managed to do so and then prayed it in aid. If he wishes to pray the figures in aid, then perhaps the 6 per cent. is the better figure.
We believe that tenants are protected to a reasonable extent, but so also must landlords be protected. Many landlords do not let as a business; they let their homes while they are working away, they let a retirement home that they might have bought and where they hope to live in two or three years' time. Meanwhile, they receive income from letting the property. They are vitally concerned about regaining possession when necessary. One must guard against landlords fearing that the law has swung against them and if the day comes when they need possession of their property, the tenant will be able to use the law to remain in situ, to the landlord's great inconvenience.
The noble Lord, Lord Dubs, made a point about enforcement notices and a house not being habitable. I find it odd that a tenant should want to stay in a house if he has asked the local authority to judge it to be not habitable. If the landlord wishes to repair that house, he may need vacant possession, and a tenant insisting on staying would make a nonsense of the reason for the enforcement notice. I am afraid that I cannot give the noble Lord, Lord Dubs, any more comfort on this. I believe that he is asking for something that is unnecessary and, more important, that would lead to landlords being more reluctant to go into the business of letting their properties, especially with the important single property lettings. Many people, not only landlords but also tenants, find them extremely useful and the last thing we wish to do is to create difficulty. By lifting the bureaucracy from the sector we have increased the private rented sector considerably. We still have a long way to go if we consider what our continental colleagues have in the private rented sector. Taking the full package, we believe that the balance is fair and that the new clause would begin to tilt it back against the landlord.
4 p.m.
Lord Monkswell: Will the Minister reflect on the arguments that he used when he prayed in aid that apparently only a small proportion of tenants are dissatisfied and would presumably like to obtain redress from landlords? The Minister suggested that
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that is an argument for not ensuring that tenants should adequately obtain their rights. If we extend that argument to other areas of society we could suggest that only a small percentage of the population is subjected to violent assaults. The argument could be used that people subjected to violent assaults should have no redress for their difficulties. Is the Minister saying that? I suspect that he would say no. On that basis, I hope that he will reflect on his use of a small percentage of tenants being dissatisfied as an argument for not ensuring that they obtain their rights. That is not a satisfactory way of defending the Minister's position.
Baroness Gardner of Parkes: The noble Lord, Lord Stallard, said that he did not understand what we were talking about because if one has an assured shorthold one has a fixed term which is assured. That is right, but the amendment suggests removing that assurance on the landlord's side. If I am a tenant in a place where I know that I have a fixed six months, one month before it is time to give up possession I can immediately complain because I can keep the fixed tenancy for much longer. The landlord will then consider the position and say: "This is a real hazard, if my vacant possession is never to be vacant".
I remind the noble Lord, Lord Dubs, that we go back to the days when he and I served on the same local authority in London and the subject was a long-running political argument. The Francis Committee report removed the right of the landlord to regain possession of his furnished property. I remember one day travelling in a car with the then Labour leader of the London Boroughs Association. I told him that the proposal would have a damaging effect and that the supply of furnished tenancies would dry up in the way that the supply of unfurnished tenancies had dried up. He said: "No, I am sure that that won't be so". Noble Lords will remember that the Labour Government implemented the minority report on the Francis Committee which took away any right of the landlord to recover his property. What happened is that all furnished property became almost non-existent. People went to the trouble and financial loss of keeping their properties empty rather than letting them. If a member of their family was about to get married or if they themselves wanted to retire to a property, whatever the reason, they kept the property empty because the one thing they wanted was to be able to regain possession. The assured shorthold process came in after that and suddenly properties were available to tenants.
If we accept the fixed term to which the noble Lord, Lord Stallard, referred, and plenty of other people provide fixed term accommodation with shorthold tenancies and a large supply of accommodation becomes available because landlords are willing and able to let their properties, there will be somewhere for people to live. The amendment is dangerous and threatens the whole assured shorthold process.
Lord Meston: I wish to correct the impression which the noble Baroness has gained that the amendment would mean that merely by complaining before the end of the tenancy a tenant could automatically prolong it. That is not correct. Surely, all the amendment means is that if the motivation of the landlord can be proved to the satisfaction of the court, the court will have a discretion. It is nothing more than that.
Baroness Gardner of Parkes: The amendment would slow the whole process down and extend it possibly to great length, instead of the tenancy terminating on the appropriate day of the fixed term to which the noble Lord, Lord Stallard, referred. I speak as an Australian and we are all pretty devious. We, as tenants, particularly those who are devious, would go to the trouble of complaining at the appropriate moment to be certain of ensuring our continuing interest. It is a delaying process. It is also risky in that if the tenant succeeds— as he might in a few cases— there is a parallel with the present Asylum and Immigration Bill and whether one wishes to draw things out for a long time. If we do so because of the introduction of court proceedings, we risk damaging the whole assured shorthold process.
Baroness Fisher of Rednal: I wish to ask the noble Baroness whether we are talking about devious tenants but perfect landlords. To me, it is one-sided, as though all tenants are out for what they can get and all landlords are willing to be the benefactors of those who suffer homelessness.
Baroness Gardner of Parkes: I am not saying that at all. The noble Lord, Lord Dubs, has already suggested that there is a small minority of bad landlords, so there is probably a small minority of bad tenants. The question is whether the clause would be of benefit to the letting and availability of properties in this country or whether it would be damaging. Those are the grounds on which I oppose the amendment.
Lord Dubs: I listened with interest to the noble Baroness's remarks. She reminded the Committee of the days when she and I faced each other across the political divide on Westminster City Council. I know that the noble Baroness has a lot of experience of the housing situation in our cities. But I am bound to say that on this particular occasion I differ from her assessment as to the effectiveness of this amendment. I believe it would help to tip the balance just a little more towards tenants and away from landlords, thereby giving them a little more of a level playing field. The amendment would give people living in such tenancies a little more security. That is desirable. In the circumstances, I wish to take the opinion of the Committee.
4.11 p.m.
On Question, Whether the said amendment (No. 242C) shall be agreed to?
Their Lordships divided: Contents, 71; Not-Contents, 135.

Division No. 1

CONTENTS

Addington, L.

Judd, L.

Annan, L.

Kennet, L.

Archer of Sandwell, L.

Kirkhill, L.

Avebury, L.

Lockwood, B.

Berkeley, L.

Longford, E.

Birk, B.

McNally, L.

Blease, L.

Mar and Kellie, E.

Borrie, L.

Meston, L.

Bruce of Donington, L

Methuen, L.

Carter, L.

Milner of Leeds, L.

Castle of Blackburn, B.

Monkswell, L.

Cledwyn of Penrhos, L.

Morris of Castle Morris, L. [Teller.]

Clinton-Davis, L.

Cocks of Hartcliffe, L.

Murray of Epping Forest, L

Dahrendorf, L.

Nicol, B.

David, B.

Prys-Davies, L.

Donaldson of Kingsbridge, L.

Rea, L.

Dormand of Easington, L.

Redesdale, L.

Dubs, L.

Richard, L.

Ezra, L.

Robson of Kiddington, B.

Fisher of Rednal, B.

Russell, E.

Fitt, L.

Sainsbury, L.

Gallacher, L.

Sandwich, E.

Geraint, L.

Seear, B.

Gladwin of Clee, L.

Shaughnessy, L.

Graham of Edmonton, L. [Teller.]

Stallard, L.

Greene of Harrow Weald, L.

Stoddart of Swindon, L.

Hamwee, B.

Strabolgi, L.

Harris of Greenwich, L.

Taverne, L.

Hayman, B.

Thomas of Walliswood, B.

Hilton of Eggardon, B.

Thomson of Monifieth, L.

Hollis of Heigham, B.

Tordoff, L.

Hooson, L.

Turner of Camden, B.

Howie of Troon, L.

Wallace of Coslany, L.

Jay of Paddington, B.

Williams of Elvel, L.

Jenkins of Putney, L.

Winston, L.

NOT-CONTENTS

Aberdare, L.

Courtown, E.

Addison, V.

Cranborne, V. [Lord Privy Seal.]

Ailesbury, M.

Ailsa, M.

Crickhowell, L.

Alexander of Tunis, E.

Cross, V.

Alport, L.

Cuckney, L.

Astor of Hever, L.

Cullen of Ashbourne, L.

Balfour, E.

Cumberlege, B.

Belhaven and Stenton, L.

Davidson, V.

Berners, B.

Dean of Harptree, L.

Birdwood, L.

Denton of Wakefield, B.

Blaker, L.

Dixon-Smith, L.

Blatch, B.

Eccles of Moulton, B.

Boardman, L.

Elliott of Morpeth, L.

Boyd-Carpenter, L.

Elton, L.

Brabazon of Tara, L.

Ferrers, E.

Braine of Wheatley, L.

Fraser of Kilmorack, L.

Brentford, V.

Gainford, L.

Bridge of Harwich, L.

Gardner of Parkes, B.

Brigstocke, B.

Gisborough, L.

Burnham, L.

Goschen, V.

Caldecote, V.

Hailsham of Saint Marylebone, L.

Campbell of Alloway, L.

Halsbury, E.

Campbell of Croy, L.

Hamilton of Dalzell, L.

Carnegy of Lour, B.

Harding of Petherton, L.

Carnock, L.

Harmsworth, L.

Charteris of Amisfield, L.

Harris of Peckham, L.

Chelmsford, V.

Harrowby, E.

Chesham, L. [Teller.]

Henley, L.

Clanwilliam, E.

Holderness, L.

Clark of Kempston, L.

HolmPatrick, L.

Coleraine, L.

Howe, E.

Colwyn, L.

Hylton-Foster, B.

1849

Ilchester, E.

Plummer of St. Marylebone, L.

Inglewood, L.

Prentice, L.

Kinloss, Ly.

Quinton, L.

Knollys, V.

Rathcavan, L.

Lauderdale, E.

Rawlings, B.

Layton, L.

Rees, L.

Liverpool, E.

Renwick, L.

Long, V.

Rodney, L.

Lucas, L.

Romney, E.

McColl of Dulwich, L.

St. Davids, V.

McConnell, L.

Saltoun of Abernethy, Ly.

Mackay of Anibrecknish, L.

Seccombe, B.

Mackay of Clashfern, L. [Lord Chancellor.]

Selsdon, L.

Shannon, E.

Mackay of Drumadoon, L.

Shaw of Northstead, L.

Macleod of Borve, B.

Skidelsky, L.

Merrivale, L.

Soulsby of Swaffham Prior, L.

Mersey, V.

Strafford, E.

Miller of Hendon, B.

Strathcarron, L.

Milverton, L.

Strathclyde, L. [Teller.]

Montgomery of Alamein, V.

Sudeley, L.

Mottistone, L.

Suffolk and Berkshire, E.

Mountevans, L.

Swansea, L.

Mowbray and Stourton, L.

Swinfen, L.

Munster, E.

Tenby, V.

Murton of lindisfame, L.

Terrington, L.

Newall, L.

Teviot, L.

Nickson, L.

Thomas of Gwydir, L.

Northesk, E.

Thurlow, L.

O'Cathain, B.

Wade of Chorlton, L.

Orkney, E.

Westbury, L.

Orr-Ewing, L.

Wilcox, B.

Oxfuird, V.

Willoughby de Broke, L.

Pender, L.

Wise, L.

Pilkington of Oxenford, L.

Wynford, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
4.19 p.m.
Clause 89 [Tenancies which are assured shorthold tenancies]:
Lord Dubs Lord Dubs moved Amendment No. 242D:
Page 61, line 6, after ("tenancy") insert (", subject to a written tenancy agreement,").
The noble Lord said: When we come to debate the Question that Clause 89 stand part of the Bill, that will be the better occasion on which to discuss all the principles as regards shorthold being the default tenancy. It would make more sense if we left that point until then. Therefore in speaking to this amendment I shall simply confine myself to the narrower point, which is that the shorthold should not automatically be the default tenancy where there is a written and signed tenancy agreement. The danger is that landlords who do not care very much and are not very effective will not bother to give written tenancy agreements. But they provide some protection for the tenant. Under the Government's scheme the default tenancy will automatically be the shorthold tenancy and the landlord would not even give proper notice that that had happened.
The effect of the amendment would be to ensure that the tenancy would not become a shorthold tenancy unless there was a written and signed agreement to that effect. So the landlord would have to take some steps to ensure that the tenant was properly informed of the
1850
situation. That provides a small safeguard because it means that the landlord has to do the minimum to give effect to achieving the tenancy— which the landlord may or may not want— in the default position. Therefore, it provides something of a safeguard. However, I should like to keep my main arguments on this matter for the debate on the clause as a whole. I beg to move.
Lord Mackay of Ardbrecknish: I shall try to do the same and keep our arguments on the main points of principle in this clause until the debate on whether the clause shall stand part of the Bill. That is quite difficult to do because the amendment now before the Committee is almost the equivalent of voting against the whole clause. So I shall attempt to shorten the argument, knowing that we shall have the same discussion again in a few minutes.
The amendment seeks to exclude tenancies from being assured shorthold tenancies where there is no written agreement. A prudent landlord would, of course, want to have a written agreement. It provides a clear statement of who is responsible for what. It can also put the landlord in a much stronger legal position if anything should go wrong or he needs to seek possession. A landlord can only recover his property using the accelerated possession procedure if he has a written agreement with the tenant.
However, my difficulty with the amendment is that it would create exactly the same procedural trap for landlords as the clause itself proposes to remove. There is no reason why a landlord should face the disproportionate penalty of having a shorthold tenancy converted into a fully assured tenancy simply because he has not provided a written tenancy agreement.
We do believe, however, that tenants with oral agreements with their landlords should have a right to evidence of the main terms of the tenancy in writing if they want it. It is for that reason that we listened to concerns raised in another place and introduced Clause 90, which places a duty on the landlord to provide the tenant, on request, with written details about the important terms of the tenancy relating to rent and security of tenure. That will provide a safeguard against the minority of landlords who might seek to exploit the rights of their tenants. Where a landlord fails to comply with his tenant's request within a period of 28 days, and there is no reasonable excuse for his failure, he will be liable on summary conviction to a fine.
With the explanation that Clause 90 gives tenants the right to ask for a written agreement and puts on the landlord the obligation to provide that written agreement, perhaps we can delay the main argument on the whole principle of Clause 89 until later.
Lord Monkswell: I am sorry to hear that my intervention seems to concern a couple of Members on the Government Benches. However, as I understand the Minister, if a landlord lets premises to a tenant and says to him, "You can be my tenant for as long as you like and I shall charge you rent as and when I feel like it", it effectively puts the landlord in a very powerful position. He can subject the tenant to all kinds of different conditions or demands for rent. As soon as the

1851
tenant says, "Hold on a moment. This is not terribly satisfactory. Can you give me something in writing to say that I have a long lease on these premises and my rent is fixed at a certain figure?", the landlord can, by default, convert what the tenant thought was a long tenancy into an assured shorthold tenancy. That means that the landlord can then get the tenant out at very short notice.
I am sure that that is not the Government's intention. One of the difficulties when dealing with this whole subject is that the Government start off with the presupposition that the problem is difficult tenants for good landlords, whereas there is a tendency on this side of the Chamber, I suspect, to feel that the problem is bad landlords for good tenants. We should be seeking a solution which protects everybody and does not put any particular party, whether landlord or tenant, in a situation in which he can be exploited.
Lord Mackay of Ardbrecknish: I always try to be helpful to the noble Lord, Lord Monkswell, because he takes a great deal of interest in all the matters which come before the Chamber and he always brings interesting points to our debates. Indeed, such is his workload on the Bills for which I have been responsible that I wonder that the Party opposite should ever think of abolishing hereditary peerages— it gets so much work out of the noble Lord. It seems a reasonably good advertisement for the hereditary peerage. I am surprised that the Opposition Front Bench is so determined to remove his right to sit in this Chamber and ask questions of Ministers.
Baroness Hollis of Heigham: Does the noble Lord also endorse with equal enthusiasm the efforts of the hereditary peerage on his own Benches?
Lord Mackay of Ardbrecknish: Of course, hereditary peers play a very important part in this Chamber and bring to it a wide range of views. But I am not in the position of wishing to abolish my noble friends' right to sit here and take an active part in proceedings. It is the party opposite which wishes to do that.
In reply to the noble Lord, Lord Monkswell, and without attempting to duck out of this debate, the point that he raised relates to the whole principle of Clause 89. I do not want to make a speech at this point and in a few minutes' time by and large repeat the same speech when his noble friend Lord Dubs moves that the clause should not stand part of the Bill. I wonder whether the noble Lord can contain himself a little until we come to that point, when we can perhaps address the wider issues.
If a landlord and tenant decide that they should enter into an agreement which is a full assured tenancy, the tenant right from the very outset must have a properly written document to show that it is a full assured tenancy. However, if there is just a casual arrangement and, once the tenant gets in, he feels that he would like to know where he stands, then Clause 90, as I explained, can be triggered by the tenant. He can go to the landlord and say, "I know that we made an oral agreement but
1852
I should like to see it in print. Would you kindly send it to me." The landlord is then under an obligation within the time to do so.
So from the point of view of the kind of case hypothesised by the noble Lord, the tenant has the right to have that clear statement. But the general question of whether, in the absence of a strictly drawn up piece of paper, a tenancy should be considered a fully assured tenancy, as it is now, or a shorthold tenancy, to which we propose to move, is a subject for the debate on whether the clause shall stand part of the Bill.
4.30 p.m.
Lord Dubs: There is one weakness in the Minister's argument. He says that under Clause 90 the tenant can ask the landlord for the necessary documentation or agreement. The difficulty is that the tenant may not be as well versed in the law as is the Minister; he may simply not know what his rights are. He will find, by default, that his tenure has been altered. It is that point which the amendment seeks to address.
If all tenants were well informed, there would be no need for the amendment. They would know what right they had to obtain an agreement from the landlord and that would be fine. The problem is that tenants do not necessarily know that. They are not aware and therefore a little protection would not come amiss. After all, it is not onerous to produce a written agreement— shops do it all the time for hire purchase. It is common for shops to have agreements available, and the onus is not on the purchaser to demand the document for a hire purchase agreement; the onus is on the shop selling the goods to provide it. I should have thought that in relation to something as important as a person's home, that is not an unreasonable position.
I hoped to tempt the Minister into saying a little more. I shall leave my arguments for the next debate. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 89 shall stand part of the Bill?
Lord Dubs: I hope that this will give the Committee an opportunity to hear the Government justify what is a fairly significant change in the conditions of housing tenure brought about by Clause 89. It is my contention that this clause completely changes the nature of the private rented sector into a predominantly insecure form of housing and forces that situation even when there is no express intention to do so. As has been said on a number of occasions, it is the default tenancy which then becomes the more important one.
When the Housing Act 1988 was passed, the Government claimed that the deregulation of rents was needed to encourage private landlords to extend the private rented sector. But when the Government developed their forms of tenure under the 1988 Act, there was no suggestion that within a few years we would have the significant change now being introduced— a change which goes against what the Government suggested at the time.

1853
At the time the Government were clear that shorthold tenancies were not expected to become the norm. Now they certainly will become the norm. I am unhappy with Clause 89. The conditions for many tenants in our country would be better if the clause did not exist and I therefore ask the Committee not to accept it.
Lord Strabolgi: As another hereditary Peer, perhaps I too may attempt to intervene. I support the arguments of my noble friend Lord Dubs. This is yet another erosion of the security of private tenants which we have seen occurring ever since 1988.
The so-called "assured shorthold tenancy" is a complete euphemism. It means very little. There is no assurance in it at all. If the tenant asks for a written agreement, there is no proof that he asked for it. The landlord may say, "I am not going to give you one because I would rather you did not have the flat. There are a lot of people after it and I shall give it to someone else". If the tenants complain about the lack of repairs and so forth, they often face eviction.
The case arose of a married couple who rented a flat in Fulham which they moved into in 1993. They had a 12-month shorthold tenancy. Before they moved in the landlord promised to carry out some repairs, including the fixing of a loose, dangerous cooker socket. For almost a year they asked their landlord to carry out the repairs and his reply was simply that they should leave if they were unhappy with the situation. Eventually the couple got fed up and called in the Environmental Health Department after a December night when British Gas had to come in the middle of the night and disconnect their boiler because it was too dangerous to use. The couple took legal advice and instigated proceedings against their landlord to get repairs carried out and to claim damages. What happened? The landlord immediately issued a notice to quit and followed that with possession proceedings. That is what happens in the real world.
The 1988 Housing Act allows tenants with shorthold agreements to refer their rents to a rent assessment committee if they consider it to be unreasonably high and the landlord will not agree to a lower rate. That is all very well in theory. But very often a referral of that kind in the real world leads to eviction. So there is little security of tenure for tenants and the landlords can now do exactly what they like.
The Minister claimed that according to a survey there were only 4 per cent. of so-called "rogue" landlords. That may well be true. But surely legislation of this kind is introduced to protect tenants against rogue landlords. I do not know whether noble Lords on the Front Bench opposite read the evening papers; the Evening Standard particularly has printed some horrifying stories. It seems that the ghosts of Rachman are still abroad. I hope that the Government will realise that and think again regarding further protection to the tenants.
Lord Monkswell: Can the Government say what is the standing of a verbal agreement under Clause 89? As I attempted to mention earlier, a situation could arise where a tenant and landlord come to a verbal agreement
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that it will be a long-term let. It may be that the tenant cannot read or write and therefore the only agreement to which they can sensibly come is a verbal one.
If, during the course of the tenancy, the tenant complains— similar complaints to those mentioned by my noble friend Lord Strabolgi— what is the situation? Does the tenant have any security at all? If the tenant takes advice and through advisers asks the landlord to provide a written agreement to confirm the verbal agreement that he thought they had, the landlord can effectively institute a shorthold tenancy in the absence of a written agreement. My understanding of English law is that a verbal agreement can be upheld in court. Presumably the wording of the Bill destroys that ability. Perhaps the Minister can explain how a verbal agreement for an assured tenancy can be protected.
Lord Mackay of Ardbrecknish: Obviously, my earlier remarks have brought two hereditary Peers opposite to their feet and I welcome the points that they make. Before entering the general discussion on the clause, perhaps I may say to the noble Lord, Lord Monkswell, that if the landlord offers a verbal fixed term, that is binding; if it is periodic, then that will be a shorthold. A verbal fixed term is indeed binding.
The clause changes the basis for creating assured shorthold tenancies defined in Section 20 of the 1988 Housing Act. It provides that any new assured tenancy created on or after the day the provision comes into force, will automatically be an assured shorthold tenancy unless it meets the conditions in Schedule 6 to the Bill. Schedule 6 lists those tenancies which cannot be assured shorthold tenancies. Landlords who wish to do so will be able to continue to let property on full assured terms by serving a simple notice to that effect or by including a simple declaration in the tenancy agreement itself. Where the tenant has existing rights of security of tenure, those rights will be preserved.
The noble Lord, Lord Dubs, seeks to give greater security to the private sector tenant. I am sure we would agree in principle that security for the tenant is wholly desirable. It would be nice if tenants could live where they wanted for as long as they wanted to. But, frankly, the great majority of landlords are unlikely to let property on that basis, and it was excessive regulation of the private rented sector by successive governments that led it to decline to an all-time low in 1988 when only 1.7 million households were in that sector.
The introduction of assured shorthold tenancies has been a major factor in the recent revival of private renting. Landlords need the flexibility that is available from the assured shorthold tenancy. For example, anyone with a mortgage on a property is unlikely to get the agreement of a building society or a bank to let the property unless the tenancy is on shorthold terms. That is why more than 70 per cent. of tenancies are on shorthold terms, and the number is increasing. If the noble Lord, Lord Dubs, is keen to see a healthy private sector, I put it to him that his desire to give tenants greater security than is given in the Bill currently before us and in current legislation which is not being amended by the Bill is unrealistic. It would reverse the revival we

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have seen since 1988. It would lead to fewer landlords letting their properties, more properties being left empty and, of course, less choice for tenants.
We do not propose to remove the existing right of shorthold tenants to a minimum of six months' security of tenure; nor is there any reason why a landlord who intends to continue letting his property should want the existing tenant to leave after six months, provided he pays his rent and complies with the terms of the tenancy agreement. Indeed, the average completed length of residence of a shorthold tenant is well over two years.
When shorthold tenancies were first introduced, tenants were accustomed to regulated tenancies which gave long-term security of tenure. In 1988 we felt it appropriate to require the landlord to give prior notice on a special form that the tenancy was to be on shorthold terms and would not provide long-term security of tenure. However, we need to consider what purpose the notice procedure now serves. Shorthold tenancies have been around for more than seven years. Most private tenants— the figure is now 70 per cent.— expect to be offered a shorthold tenancy and know that it will not give security of tenure. If we were setting up a shorthold system from scratch today, we would not invent a special procedure requiring the landlord to say, "If you agree to a one-year tenancy I will give you a separate form, served in a special way, confirming that we have agreed to a one-year tenancy".
Furthermore, the notice procedure can be a trap for the unwary landlord because through a simple administrative error, such as failing to sign the form or even misspelling the landlord's name, the form can be ruled invalid. As a consequence, landlords can accidentally create a full assured tenancy, giving the tenant long-term security of tenure. That puts people off letting property all together. Instead, they may leave it empty, which is liable to lead to disrepair and means that there is one fewer house on the private rented market. What Clause 89 will do is dispense with the prior notice requirement, making it easy to create a shorthold tenancy. That will give more confidence to the landlord and encourage owners of empty property to let it.
When the Bill is enacted, unless the landlord actually gives specific notice in writing that he is creating with the tenant an assured tenancy, the tenancy will be assumed to be a shorthold tenancy. That reverses the current position. As the years have rolled on since the advent of shorthold tenancies— it is seven years now— we believe that it is now reasonable to reverse the procedure we introduced in 1988 which was designed against the background that this was a new procedure and people did not know about it. Now, as I have already said, 70 per cent. of tenancies are on an assured shorthold basis. We believe now is the time to reverse the position so that landlords, who may be deciding to rent a house as a one-off piece of business, will not be put off by the idea that all they have to do is make one mistake and they will suddenly find themselves landed with a fully assured tenancy. This will prevent that
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happening. We believe that it is now sensible to take this decision and reverse the position that has held since 1988.
4.45 p.m.
Lord Stallard: As I listened to the noble Lord, I could not help thinking that he is solely intent on fixing the Bill so that it safeguards the landlord at every stage. We know that shorthold tenancies are being used as an excuse to get rid of a tenant or to say that a landlord will get rid of a tenant at the end of six months unless the rent is increased for the following six months. That is what the Bill says to me. Landlords are determined that they will only have to have the tenant for six months before they can increase the rent. That is what the Bill is about. There is no safeguard for the tenant. Landlords will now be assured, without anything in writing or any legal papers, that at the end of six months they can say to the tenant, "You can carry on for another six months but I shall have to double your rent", or whatever the process is. That is what is happening and that is what I think is wrong with the Bill. It is one-sided.
Lord Mackay of Ardbrecknish: I do not believe it is one-sided. As I said, 70 per cent. of new tenancies are assured shorthold tenancies. The normal position now is for assured shorthold tenancies. We believe that it is the advent of those tenancies which has given rise to the welcome increase in the private rented sector.
Lord Stallard: The noble Lord mentions the figure of 70 per cent. Is that an overall United Kingdom figure, or does it take account of the special circumstances of the inner cities? The position in the inner cities is quite different. I live in an inner city area where tenants are in and out. It is like shelling peanuts. They are in and out, rents go up and landlords seem to be doing what they like. Where does this figure of 70 per cent. overall come from?
Lord Mackay of Ardbrecknish: I think the 70 per cent. will be for England and Wales. It includes inner cities, outer cities, country areas and so on. It is 70 per cent. of new tenancies, just as I said. I think the noble Lord has got the wrong end of the picture. In fact, the 70 per cent. is England only. I included Wales but the statistic is for England, although the legislation applies to England and Wales. However, I do not suppose the figure will be much different for England and Wales.
The noble Lord seems to think that at the end of every six months the landlord will decide to get the tenant out and hike up the rent. I do not believe that getting the tenant out does help to hike up the rent because tenancies are already at market rents. If the landlord tries to double the rent to an amount above the market level he may well find that there is little market for his property.
Baroness Gardner of Parkes: It is unrealistic to think that landlords will try to double the rent. Tenants simply would not accept that. It has become a highly competitive market. My experience is that rents are

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reviewed annually rather than every six months and assured shortholds are regularly replaced with another assured shorthold, a continuation, an extension, or whatever is the term decided at the time. Many tenants even argue about an increase in line with inflation. Therefore, it is unrealistic to think that landlords will try to double the rent. If you have an adequate supply of assured shorthold tenancies, the tenants have plenty of choice to find somewhere else. At the moment, there is quite a supply available.
Lord Stallard: I do not think I said double the rent. I said increase the rent.
Lord Monkswell: What are the Government's wishes for the private rented sector? Do they wish that the private rented sector should provide just temporary accommodation for people, or do they envisage that the private rented sector should provide permanent homes for people? There is a difference. If 70 per cent.— probably that figure will rise— of private rented accommodation is under assured shorthold tenancies, effectively that means it is temporary accommodation. There is no assurance that people can be certain that their home can become their permanent home.
If that is what the Government want the difficulty is that we shall have the private rented sector categorised as being only for temporary accommodation. I am not sure that even the Government would like the private rented sector to be stigmatised in that way. If that is going to be the predominant form of tenancy then that is the reality for people living in that kind of accommodation. They will not have long-term security where they can say, "This place is my home". It will only be temporary accommodation. If that is the way the Government want the private rented sector to be seen, that is fine, but we shall have to say to the people of this country, "If you want a home which you can call your own and which you can live in permanently, don't rent privately". I am not sure that even the Government would like that to be the situation that the people of this country have to face.
Lord Selsdon: I have listened to Members of the Committee opposite, both hereditary and non-hereditary, and I have listened to my noble friends on this side of the Committee. I have tried to sit back and view the matter dispassionately. But I believe that Members of the Committee are all looking backwards over their shoulders. We must be all agreed that we want more property to rent. We have forgotten the impact of inflation and the return that landlords look for. The Committee will know that many people have accommodation that they would have liked to have let, but were too frightened to do so because of the impossibility of being assured that they could get rid of a tenant when they needed the accommodation for their own family in the future. If we reject this particular clause it will effectively reduce the number of people who will want to let their houses or flats, or indeed invest their pensions or savings in rented accommodation. That will be the impact of rejecting this clause. I cannot understand why Members of the Committee opposite say that they want a larger
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availability of accommodation in the country at relatively fair and reasonable rents because rents are fairer and more reasonable now when inflation has gone and indexation no longer necessarily applies. The yield expected by an investor is perhaps only 5 per cent., which is not a large amount. I cannot agree with Members of the Committee opposite.
Baroness Fisher of Rednal: Further on in the Bill we shall be discussing the situation of people who have been declared homeless where the local authorities say that they cannot help very much in providing accommodation but that they can provide a list of properties which the prospective tenant should see and then negotiate the rent. That means that we might not be giving any help at all to homeless people, who will not understand all the rules and regulations of this Bill. They will be completely distraught that they are homeless and that the local authority cannot help. In those circumstances the shorthold tenancy may be a very precarious way of trying to help a family to get back into secure accommodation. What concerns me most is that that kind of accommodation will be offered to homeless people.
Lord Dubs: I hope that I have understood the Minister's arguments. He said that one must make the market for housing attractive for landlords so that more properties are brought forward. That is reasonable. He further said that over the past few years, since the 1988 Act, the Government have taken certain steps which have resulted in more properties being available for letting. That is fair and good. The Minister is now saying that that is not good enough and that the Government have to do something different. In that last step of the argument I was hoping that the Minister would put more of a case for this particular clause. We are not talking about the effect of deleting the clause because, after all, that will leave us with the status quo and the position that has been maintained for the past six to eight years when the number of properties available has increased.
We are talking about what difference this particular clause will make to that situation. We have not heard very much from the Minister to the effect that this change is necessary. I concede that in years gone by there was not enough property available and landlords were not making properties available in the numbers required, but that is water under the bridge. Changes have already taken place. I am looking for an argument as to why we need this further change.
Perhaps I may set that in context. I disagree with the noble Baroness when she says that there is plenty of choice. For people in our inner cities who are not well off there is very little housing choice. I know that from people who are looking for accommodation. It is very hard indeed to find tolerable accommodation unless one has a great deal of money. Of course, at the top end of the market there is plenty of property available, but for poorer people there is very little.
Baroness Gardner of Parkes: The noble Lord is overlooking the housing benefit situation, which allows people to take accommodation at very high rents in some parts of London.
Lord Monson: Perhaps I may point out to the noble Lord, Lord Dubs, that the Business Expansion Scheme, which provided a good deal of housing to let at reasonable rents, has now been wound up. I suspect that that is one of the reasons for the changes proposed in this Bill.
Lord Dubs: I am not sure how much that scheme produced by way of accommodation, but that is not an argument that the Minister has used so far. It is not one that I have heard. I am simply commenting on the fact that some of the changes in the housing market that have been necessary over the past 10 to 20 years have had some beneficial results. But to my mind there is no need for this particular clause, or, if there is, a case has not been made out for it. Would the Minister like to elaborate on that?
5 p.m.
Lord Mackay of Ardbrecknish: First, perhaps I may go back to 1988. When we introduced assured shorthold tenancies it was felt by the Government at the time that many people might not be acquainted with the concept and therefore it was fair that the procedure should be that unless the landlord specifically entered into an assured shorthold tenancy the tenancy should be considered a full assured tenancy. As I have explained, we now have a situation in England where about 70 per cent. of new tenancies use the assured shorthold tenancy system.
I do not take the rather negative view put forward by the noble Baroness, Lady Fisher, about the ability of people to understand these things. By and large, people can understand matters which concern their daily lives and the questions they have to address. I am not a subscriber to the view that the great majority of the public are unable to look after themselves and that the paternalistic state has to look after them and watch every move they make. I believe people are able to make these decisions for themselves and, given the change over the past seven years, they are certainly well aware that shorthold tenancies now form the majority of the market. I do not agree with the noble Baroness.
I believe that my noble friend Lord Selsdon made the point absolutely clear. We are doing a great deal of looking back over our shoulders. We want to see the progress that we have made improved on and more property coming forward to be let. Now is the time to shift the problem around and to come at it from the opposite direction. If a landlord wants a full assured tenancy that is what he says. If he does not say that explicitly it is assumed to be an assured shorthold tenancy.
The noble Lord, Lord Monkswell, asked me to try to explain why we have a private rented housing market. Private rented housing serves many needs. Some landlords look on it as a long-term investment, as my noble friend Lord Selsdon mentioned. Other landlords
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may want to rent out a property because they have gone abroad for a year or two. I have had the privilege of being the tenant of another sort of landlord. That gentleman bought a house for his retirement, but he was not ready to retire and wanted to let it out for a couple of years. I was the lucky beneficiary of that decision. I can assure the Committee that that gentleman certainly did not want a full assured tenancy— and rightly so.
Therefore, different landlords approach matters from different angles and have different motivations. Just as a landlord may be interested in the short term or the long term, some tenants may want to be in the private rented sector for a long time while others are interested only in a short-term tenancy while, say, they are working away from their normal home or because they know that they are not going to settle in a certain town but need to live there for a while before moving on. Therefore, both landlords and tenants may want to use the private rented sector for a number of different reasons.
As I said earlier, the interesting point is that the average stay in an assured shorthold tenancy is greater than two years. It is actually about two-and-a-half years, so I would not like the Committee to get the impression, which seems to be being portrayed by the Benches opposite (but perhaps not deliberately), that such tenancies last for only six months and then come to an end, leaving the tenant to look for somewhere else. That is not true. Obviously, many wise landlords who rent out property as a long-term business interest will want to continue the tenancy of a good tenant, but they may prefer to do so on a shorthold basis so that if circumstances change they can have some certainty of regaining the property.
The noble Lord, Lord Dubs, asked whether I thought that there might be an increase in the number of houses coming forward for rent. I have with me a copy of a letter sent to my honourable friend Mr. David Curry, the Minister for Local Government, Housing and Urban Regeneration, from the Empty Homes Agency, which clearly states that that organisation welcomes the changes proposed in the Bill, adding:
"Anything which helps to make private letting simpler and more certain has our support. In particular, it seems to us to be crucial to the expansion of private letting that small Landlords can be certain that they will not give Tenants security of tenure by mistake".
That is a point that I made earlier. We believe that this clause removes that danger and makes it quite clear that if a landlord and a tenant want to have a full assured tenancy they enter into that form of tenancy.
As I said earlier, we encourage tenants and landlords to have written agreements about the tenancy. However, if there is no such written agreement— if the agreement is verbal— it is assumed to be an assured shorthold tenancy. Although we think that that is wise, I fear that I may not have persuaded the noble Lord, Lord Dubs, of that. However, I believe that that is the right way to improve the supply of houses in the private rented sector.
Lord Dubs: I thank the Minister for what he has said although I am not persuaded by it. The Minister said that the average stay in an assured shorthold tenancy

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was between two and two-and-a-half years, but that average begs a number of questions. One needs to know the range of lengths of tenancy. I put it to the Minister that in inner-city areas it is extremely likely that the average length of a tenancy is shorter than may be the case in other parts of the country. Although I am not persuaded by the Minister's argument, we have had a lengthy debate on the clause and we may return to it on Report.
Clause 89 agreed to.
Schedule 6 agreed to.
Clause 90 [Duty of landlord to provide statement of terms of assured shorthold tenancy]:
Lord Dubs Lord Dubs moved Amendment No. 242E:
Page 62, line 8, at end insert—
("() A landlord who seeks to rely on terms set out in a notice provided under subsection (1) above, which were not agreed by the parties, in order to gain possession under any ground, shall be guilty of an offence of illegal eviction under the Protection from Eviction Act 1977.").
The noble Lord said: In moving this amendment, I should like to speak also to Amendment No. 242F. We now reach Clause 90, to which the Minister referred on a number of occasions in earlier debates. The purpose of the amendment is to protect tenants from landlords who might attempt to use the clause to change the terms of a tenancy, which could enable them to gain possession or to achieve some other end. The amendment is a safeguard for tenants against the minority of landlords who might seek to exploit their tenants.
We are seeking to build onto Clause 90, which was introduced by the Government as a response to the likelihood that landlords will increasingly fail to provide written tenancy agreements once shorthold tenancies become the default tenancy. This is a simple proposition. It provides an additional safeguard for tenants against that small minority of landlords who might wish to abuse their position by changing the nature of the tenancy in a way that was not agreed originally between the landlord and the tenant. I beg to move.
Lord Meston: I should like briefly to support the amendment which stands in my name also. As the noble Lord, Lord Dubs, said, Clause 90 is of value but it is open to some abuse as the landlord may try to slip into a written statement a unilateral variation of the oral terms of the original tenancy. There is a sanction within Clause 90 for failure to comply with the requirement to provide a written statement, but it seems that there is no specific sanction or remedy for giving an incorrect or an incomplete statement.
Perhaps I may draw another analogy to the employment field where there is a requirement— indeed, a more stringent requirement— on employers to provide a written statement of the terms of employment. In that area, a dispute as to what was or was not a term of the original contract of employment can be referred to an industrial tribunal. There does not seem to be any equivalent provision in this clause to deal with disputes over terms which the landlord may put into the written
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statement when called upon to do so. The amendments would provide a valuable reinforcement of the provisions of Clause 90.
Lord Strabolgi: I support the proposed amendments which stand in the names of my noble friend Lord Dubs and the noble Lord, Lord Meston. Without the amendments, tenants who have no written contracts may well find themselves subject to tenancy clauses which they did not originally agree. In the worst scenario, they may find themselves facing eviction based on terms which the landlord has provided but to which the tenant did not agree or on incorrect information. When tenants take up occupation, landlords frequently agree to vary the rent level if the housing benefit is set at below the rent level that is asked. However, at the end of the tenancy landlords often claim arrears of rent based on the original agreement. More often than not, that results in a tenant being unable to get back the deposit.
The introduction of the notices will provide an opportunity for unscrupulous landlords to claim rents which were never originally agreed and to claim possession on the ground of arrears— and they can do that if there is no security. Also, there have been cases where deposits have been given to third parties such as house agents, some of which are fly-by-nights and disappear or go bankrupt. If the deposit is then not forthcoming, the tenant gets the blame and is thrown out. I support the amendments.
Lord Swinfen: I understand what the amendment is intended to do, but if the original agreement was oral, how on earth does the tenant prove that a notice is changing the terms of that agreement?
Lord Mackay of Ardbrecknish: It might be worth starting by saying that it is sensible both from the tenant's point of view and the landlord's point of view that there is a written statement of terms and conditions before the tenancy is even taken up. That is a sensible precaution for both to take.
Clause 90 was introduced on Report in another place. It acts as a safeguard for shorthold tenants whose landlords do not provide a written tenancy agreement under the new arrangements. The clause would require the landlord to provide the tenant, on request, with the most important terms of the tenancy relating to rent and security of tenure. A landlord who failed to provide the information on request would be liable to a fine on summary conviction.
It may not be prudent, as I have said, for a landlord not to have an agreement in writing. Nevertheless, an oral contract is every bit as binding on both parties as a written agreement. I understand the concerns of the noble Lord, Lord Dubs, that a minority of landlords may seek to exploit their tenants' rights by changing the terms of the tenancy in a subsequent written statement in order to gain possession. However, let me reassure the noble Lord that there are safeguards in the system to prevent a landlord from succeeding in such action.
The noble Lord, Lord Meston, said that there was no provision for resolving disputes. I do not agree with him. Under existing legislation a landlord cannot

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repossess his property without a court order if the tenant is unwilling to leave. If he evicts a tenant without a court order, he is likely to be found guilty of illegal eviction under the Protection from Eviction Act 1977. That is an important safeguard for tenants which the Government are committed to retain.
To recover his property, the landlord will have to persuade the court that he has grounds for doing so under the Housing Act 1988. In coming to its decision on whether to grant a possession order, the court will take into account all the facts of the case, including the views of both the landlord and the tenant on the nature and terms of the tenancy. The tenant will have an opportunity to put his views at the court hearing. The court would need to satisfy itself that, where a landlord has supplied a written statement under Clause 90, the terms contained in it are an accurate reflection of what both parties had originally agreed.
In order to reinforce the court's discretion in that area, the Government included subsection (5) in Clause 90. That makes it clear that the written statement provided by the landlord
"shall not be regarded as conclusive evidence of what was agreed by the parties".
In other words, the court is not obliged to regard the written statement as a binding document.
If the court is in any doubt about the nature and terms of the tenancy agreement, that would be reflected in its decision on whether to grant a court order. If the court is not certain that the landlord has a right to repossession, it will not grant an order. If the reverse is true, it will. In neither circumstance would the tenant be evicted illegally.
Amendment No. 242F would impose a criminal sanction on landlords seeking to use the written statement as a means of changing or introducing terms which had not previously been agreed by both parties. As I have already explained, Clause 90(5) provides the tenant with reassurance that the written statement cannot be deemed conclusive evidence of the original oral agreement. If the tenant disagrees with any of the written terms, he is free to pursue that with the landlord and to express his view in a court hearing if the landlord subsequently seeks a possession order. As I have already explained to the Committee, the landlord would have to persuade a court that the statement was a bona fide record of the original tenancy agreement.
I hope that I have explained the situation, and that the noble Lords, Lord Dubs, Lord Meston and Lord Strabolgi can be assured that there are protections against the kind of scenario that they described. Clause 90 provides adequate reassurance for the minority of tenants— it is a minority— whose agreements are made orally. I hope that with those assurances and explanations the noble Lord, Lord Dubs, will feel able to withdraw his amendment.
5.15 p.m.
Lord Dubs: I take some pleasure from a statement that the Minister slipped in at the beginning of his last remarks; namely, that it would be prudent and sensible,
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when beginning a tenancy, for there to be a written agreement. The implication of that is that it would also be prudent for there to be a written statement on a change in the agreement, but that was the subject of an earlier amendment. I note that the Minister is conceding the argument after we have left that amendment. As regards this amendment, I hear what the Minister has to say. I am not totally convinced by the arguments, but I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 242F not moved.]
Clause 90 agreed to.
Clause 91 [Form of notices under section 21 of the Housing Act 1988]:
Lord Dubs Lord Dubs moved Amendment No. 242G:
Page 62, line 29, after ("possession"),) insert—
("(a) for "two", substitute "six"; and
(b)").
The noble Lord said: I shall speak at the same time to Amendment No. 242H. The purpose of the amendment is to increase from two to six months the period of notice that would have to be given under the shorthold arrangements. Why is that important? It would give some protection against short eviction notice times, and therefore give some stability to the lives of tenants who are being evicted. It would also give tenants more time to find alternative accommodation, thereby preventing them from becoming homeless.
This is a modest proposal. We are merely seeking to give a little more notice time, realising how difficult it is to find alternative accommodation. That of course is where the landlord relies upon the tenancy being a shorthold tenancy and where the landlord can gain possession when a tenant has done nothing wrong. However, in cases where the landlord requires possession on other specified grounds, the length of notice remains unaltered. So we are talking only of the situation where the landlord wants to gain possession under the shorthold arrangements without having to give any reason for it. It is merely that the landlord wants to have the property. In that instance it seems reasonable that the length of notice that needs to be given should be a little longer than two months. The amendment suggests six months. I beg to move.
Lord Strabolgi: I support the amendment. It will give the Government an opportunity to explain why the period is as short as two months. That does not seem to be long enough to give tenants some protection against counter-action by their landlords where they pursue their legitimate right to remedy disrepair or apply for rent assessment.
Also surely two months will increase the number of homeless families presenting themselves to the local authority as homeless, who will be required to be housed. That cannot be in the interests of the nation as a whole. I should have thought that the Government would look favourably on this amendment. Surely a landlord can wait six months, can he not? Two months is no time at all for a family to have to move, arrange for removers, find other accommodation, and so on. In

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many cases they will of course become homeless. That cannot be in the national interest or indeed even in the Government's interest. I support the amendment.
Baroness Gardner of Parkes: I oppose the amendment, because if a tenancy is for six months and there is then a notice period of six months, the length of the tenancy is being doubled. The whole purpose of an assured shorthold is that it is agreed at the outset that the tenancy is for a fixed term. As I understand it, that has to be a minimum of six months, but it can be a year in the first instance.
If a tenant has taken a property knowing that it is available for six months, surely long before the end of the six months was reached that tenant would have inquired from the landlord whether a further period was likely to be granted.
Most landlords are happy to have a tenant carry on, because it means that there is no process of re-letting and perhaps having a void period. Those are all factors to be considered from a landlord's point of view, as any small increase in rent is rapidly counterbalanced by a void period. It is not in the landlords' interests to wish to have people out of their properties. They want good tenants in their properties. But as has been brought out again and again during the debate, landlords have various reasons for wishing to let their property. It might be that they have a posting somewhere else for six months, and at the end they wish to return to occupy the property themselves.
The noble Lord, Lord Strabolgi, mentioned families being made homeless. However, we are talking not only about families but also about single people and couples. An assured shorthold can be given to any tenant, not just to a family with small children. The noble Lord introduces a slightly emotional element that does not necessarily exist. I believe that an extension from two to six months on what might be only a six month tenancy is disproportionately long and I oppose the amendment.
Lord Monson: The noble Baroness has said everything that I would have wished to say, albeit much better. However, there is a further fact that the noble Lord, Lord Strabolgi, has failed to consider. The landlord may wish to sell the property because he may be in desperate need of cash. To force him to wait for six months before he can get the tenants out and refurbish the property to make it suitable for sale would impose a great hardship upon him.
Lord Selsdon: I wonder whether there may be a conflict of interests. I understand what the noble Lord, Lord Dubs, is trying to do and perhaps he has an idea of how to overcome a situation to which I shall draw attention. When I worked in the banking world many people were often sent abroad and they let their property during that time. Other people to whom the bank had given mortgages would let part of their house perhaps in the basement area while their children were at university or were in the Army.
I am not an expert on the mater but I recall that people may try to let a property for a year and know that they would have to let it for at least six months. There was
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then a two month period on both sides after the six months letting, or two months at the end of the year. Usually the people who rented the accommodation wanted it for the period of time involved, otherwise they would not have taken up that particular tenancy. Often there would be good will. Sometimes the tenancy would be rolled over or sometimes the owner wanted to sell the house. In those days it was difficult to sell a property if there was a tenant in a part of it.
Perhaps we are talking about two different types of situation. Perhaps the noble Lord, Lord Dubs, has a way of overcoming the situation that I have described. Many people let accommodation on a short-term basis and there is a two month notice period after the six months. I am not sure how we achieve one without jeopardising or penalising the other.
Lord Mackay of Ardbrecknish: I am grateful to Members of the Committee who have taken part in the short debate. My noble friends Lord Selsdon and Lady Gardner of Parkes put forward a convincing argument and I should be dotting the "i"s and crossing the "t"s of their argument if I spoke at length.
Perhaps I may set out what Clause 91 achieves and therefore what the amendment seeks to change. It amends Section 21 of the Housing Act 1988 which requires a landlord to give an assured shorthold tenant with either a fixed-term or a periodic tenancy at least two months' notice if he requires possession of the property. Clause 91 makes it clear that the notices must be in writing; it is two months' notice in writing. If we are carrying out a balancing act I would have thought that that would have been something that I was doing in favour of the tenant.
The noble Lord, Lord Dubs, has chosen Clause 91, which makes that small change of adding a qualification in writing, as a vehicle to increase the period of notice which a landlord must give a tenant before he can seek possession of his property from two to six months, thereby, I believe, undermining the landlord's position which has existed since 1988.
My noble friend Lady Gardner rightly pointed out that if the tenancy is an assured shorthold tenancy which must run for six months and at the end the landlord decides he wants repossession, he must give notice in writing of another six months. That takes the period up to a year and, adding in the time that it takes the landlord to go to court to obtain possession, a six months' tenancy rapidly begins to approach 18 months.
I do not believe that the noble Lord, Lord Dubs, is serious about wanting such a change. I believe that it would act against what we are all trying to achieve, which is to encourage landlords to come forward with properties to let. In particular, it would discourage those people who want only short-term tenants because they are going abroad, or to another part of the country, or whatever. They may want to rent out the house only for a short time and will want to be sure that when they return they can return to their own house.
I believe that the noble Lord's proposal would go a long way towards discouraging the owners of empty properties making them available. It would significantly

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damage the landlord's right to possession. We have tried to go in the other direction in order to make sure that the landlord believes that if he lets out his property there will be a reasonable balance between himself and the tenant when he wants repossession. It is important that the landlord has that knowledge. I believe that two months gives the tenant a reasonable time to find alternative accommodation, especially if the tenant originally knows that the tenancy is for six months. He will know that at the end of that time it must be in his interest to make some inquiry of the landlord about whether the tenancy will continue and will take steps to find other accommodation. I believe that two months' notice is reasonable. If a tenant believes that he has the right to retain the tenancy, within that two months he can begin action to contest the landlord's right to possession. In any event, as I have already said today, the landlord cannot require the tenant to leave without a court order for possession. There is no question of a tenant being thrown out on to the street without a reasonable period in which to find accommodation.
I repeat that we wish to sustain the recent growth in the private-rented sector and not to reverse it. That is why the Bill includes measures to make it easier and less risky to let property. Landlords have a real fear about not being able to gain possession of their property when they need to. I believe that the amendments would bolster that fear and reduce the supply of private-rented accommodation. I cannot believe that that would be in anyone's interest.
I hope that with that explanation of the clause and of what I believe the noble Lord's amendment would achieve he will feel able to withdraw his amendment.
Lord Dubs: Having heard the Minister's explanation, but not saying that I am totally convinced by his arguments, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 242H not moved.]
Clause 91 agreed to.
Clause 92 [Restriction on recovery of possession on expiry or termination]:
Lord Meston Lord Meston moved Amendment No. 242HA:
Page 62, line 42, leave out ("original") and insert ("replacement").
The noble Lord said: In moving the amendment I do not wish to pre-empt a wider debate on the question of whether Clause 92 shall stand part of the Bill. I wish to move the amendment briefly.
As today's debate has already revealed, private-sector housing will be further deregulated by the combined effect of Clauses 89 and 92. Assured tenancies entered into on or after the day on which the Act comes into force will be shorthold tenancies unless the landlord serves a notice on the tenant stating that the tenancy is to be a full, assured tenancy instead. Some exceptions are contained in Schedule 4.
Clause 92 is complex to say the least. As drafted, it raises the possibility that shortholds may in future be periodic from the outset rather than commencing with a fixed term of at least six months, as at present. That is
1868
because the clause adds to Section 1 of the Housing Act 1988 the provision that possession orders made in relation to new shorthold tenancies may not take effect between six months from the beginning of the tenancy.
Where the shorthold is followed by a replacement tenancy— one in which the landlord and tenant are the same as under the original tenancy— a possession order may not take effect earlier than six months after the beginning of the original tenancy. Thus, landlords, if they wish, may recover possession by means of the accelerated possession procedure at any time after six months from the grant of a shorthold tenancy, even though there is a so-called "replacement" tenancy.
I suggest that that allows for too prompt repossession and the amendment is designed to ensure that possession orders cannot take effect earlier than six months after the beginning of each tenancy, whether that be an original tenancy or a replacement tenancy. I beg to move.
5.30 p.m.
Lord Mackay of Ardbrecknish: It may be helpful once again if I set out the background to Clause 92 which the amendment moved by the noble Lord, Lord Meston, seeks to change. The noble Lord and I certainly agree about one thing; that is, that Clause 92 is complex. It amends Section 21 of the Housing Act 1988. Section 21 sets out the procedures for a landlord to recover possession when a shorthold tenancy expires at the end of the initial fixed term. The initial fixed term must currently be for a period of at least six months. An amendment is required because Clause 89 of the Bill will remove the requirement for a new shorthold tenancy to have an initial fixed term.
Clause 92 will prevent a court from making an order under Section 21 for possession of a new assured shorthold tenancy until six months after the beginning of the tenancy at the earliest. Where the tenancy is a replacement tenancy, the possession order may not be made so as to take effect until six months after the beginning of the original tenancy. This will ensure that shorthold tenants retain their existing right to a minimum of six months' security of tenure even if their tenancy agreement has no initial fixed term— for example, because it is simply a periodic tenancy— or the initial fixed term is for less than six months.
The amendment of the noble Lord, Lord Meston, intends to provide tenants with greater security by offering a minimum of six months' security at a time for each replacement tenancy. Clause 92 as it stands seeks to replicate tenants' existing security of tenure. It offers a minimum six months' security. Many landlords currently negotiate longer fixed term tenancies. The average completed length of residence of an assured shorthold tenant is about two-and-a-half years. This has advantages for both parties. The tenant has longer security and the landlord retains a good tenant. The last thing a sensible landlord would want to do is to evict a good tenant and incur the hassle and expense of finding a new one who may turn out to be not as good.
Indeed, when a fixed term tenancy comes to an end it is often the case that the landlord will offer a further fixed term rather than a periodic tenancy. Conversely, it

1869
may be convenient to both parties to extend the tenancy beyond the fixed term by only a relatively short period; for example, two or three months. The amendment would prevent such flexible arrangements taking place because the six-month period would bite immediately.
Many landlords have very real fears about not being able to gain possession of their property when they need to. The amendment would compound those fears. It is right that tenants should have a minimum period of security from the beginning of their original tenancy and we consider six months strikes the right balance. However, it would not be right to say that if a replacement tenancy is created, a further six months' security is warranted. This would deter a landlord from creating a replacement tenancy if there is the slightest chance he will need to repossess his property before six months have expired.
With that explanation of the clause and the negative impact of the amendment, I hope that the noble Lord will withdraw the amendment.
Lord Meston: I am grateful to the Minister for his explanation. I need to think quite hard about this matter because, in my mind, it begs the question as regards what is the point of a replacement tenancy. It is a complex area. I wish to reflect and reserve the right to come back at a later stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 92 agreed to.
Clause 93 [Applications for determination of rent: time limit]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 242J:
Page 63, line 15, leave out subsections (2) and (3) and insert—
("(2) In subsection (1) after "may" insert "at any time during the original tenancy or any replacement tenancy until such time as the landlord serves a notice under section 13(2)."
(3) In subsection (4) (a) after "application" insert "and, provided there is no change of circumstances, the determined rent shall remain for such period between one and two years as the rent assessment committee shall direct, regardless of any change of tenant or landlord.".").
The noble Baroness said: All opposition amendments are important but we judge this to be among the more important. It seeks to protect from eviction tenants who are trying to reduce their rent to a figure regarded as a fair market rent by the rent officer. The Bill provides tenants with powers to bring down the rent. However, if they exercised those powers, they could be penalised by the landlord and would not be protected.
Perhaps I may give some background. In the late 1980s, Sir George Young decontrolled private rents saying that housing benefit would take the strain. As a result, as we know, housing benefit increased by something like 200 to 300 per cent. The Treasury then kicked in and sought to control housing benefit, despite the fact that it is supposed to be taking the strain, by limiting it to what the rent officer regarded as the fair market rent, given the needs of the family. If the rent was excessive or the tenant was in over-costly or
1870
over-large accommodation, the rent officer would certify only a proportion of that rent as being legitimate for housing benefit.
The position was toughened by further housing regulation changes which further cap the amount of housing benefit that a tenant may receive after reference to the rent officer. As a result, at present in 40 per cent. of all cases referred to the rent officer, housing benefit covers less than the full rent. On average in London, it is by just less than £20 per week. If someone living in London who is receiving income support wishes to keep his home he must take that £19 and top-slice it off an income support of £45 if he is a single person. That leaves him with something like £26 per week on which to live, even though £45 is regarded as the appropriate figure, as indicated by the amount of income support. Therefore, he has a choice of home and poverty or no home and a little less poverty.
In consequence, local authorities have been encouraging shorthold tenants who find themselves in that position to apply to the rent assessment committee to bring down the rent so that it is closer to what the rent officer said was appropriate. But they dare do that only if they know they will not be visited by eviction as a result; hence this amendment.
The amendment achieves two things. First, it allows shorthold tenants greater flexibility when they seek a determination of the rent. It means that they are not permitted to seek a determination only at the beginning of the tenancy but are able to do so if their circumstances change. For example, they may become unemployed and have to claim housing benefit. They may then find that housing benefit does not cover the full cost of the rent because the rent officer has said that the rent is excessive and well above market value. In the circumstances in which the tenants' conditions have changed they should have the flexibility of being able to seek a rent assessment in the course of that tenancy. That seems only reasonable because circumstances may change and the issue of rent may become more significant.
Secondly, once the rent has been determined by the rent assessment committee, it should not last just for six months because, if so, the tenant will be evicted. It should apply for between one and two years, as the rent assessment committee determines. That is not excessive. It still means that the landlord can raise the rent probably after a year, and at worst two years, in line with inflation. He need be no worse off. But it means that there can be no incentive for the landlord to evict the tenant who has tried to bring down the rent because he knows that the next tenant coming in will still enjoy that same rent. Therefore, the landlord will lose the incentive to evict when the tenant has sought to bring down the rent to what the rent officer has said was a fair rent for housing benefit purposes.
I use a phrase much favoured by the Minister when I say that we believe that this achieves a fair balance. The landlord still receives a fair rent and will know that after a year to two years he can raise the rent in line with inflation and will be no worse off. But it prevents his having the power, first, to exploit the tenant, and,

1871
secondly, if the tenant uses his legal remedies, to victimise him for doing so. That is the purpose of the amendment. I beg to move.
Lord Meston: I should like to express my support for the amendment on the simple basis that Clause 93, as I understand it, simply introduces an arbitrary limitation on the right to apply to a rent assessment committee. It limits the ability of a tenant with a new assured shorthold tenancy being able to refer an excessive rent to the committee under Section 22 of the Housing Act 1988. The limited security of tenure afforded by an assured shorthold tenancy will be further eroded by that loss of right to refer to the rent assessment committee. Some tenants will be vulnerable to the threat that, as a result of attempting to bargain for a more affordable rent, their shorthold tenancy agreement will not be renewed.
The opposition to Clause 93 is supported by the Law Society which responded to the White Paper produced by the Government by pointing out, quite correctly, that tenants are, broadly speaking, in the economically weaker position and tend to be less commercially aware, and are therefore more vulnerable. They are in greater need of protection, not only in terms of being aware of their position but also in terms of protection against demands for unreasonable rents by landlords who seek to benefit in areas of housing shortage.
There are already hurdles within Section 22(3)(a) and (b) of the 1988 Act which serve to limit the number of cases in which application to a rent assessment committee can be made. In the White Paper, the Government, as I understand it, sought to justify that provision by saying, "Well, the existing rent assessment committee regime is little used". However, the other hurdles which already exist must be taken into account when drawing inferences from the limited number of applications to the rent assessment committee. I suggest that the clause as it stands will do a great deal of harm and, potentially, very little to assist tenants or, indeed, landlords. I suggest the tenant's right to refer an excessive rent to a rent assessment committee should be preserved.
Lord Mackay of Ardbrecknish: I am now back in my more customary position of addressing amendments proposed by the noble Baroness, Lady Hollis. When I read the amendment before us, I have to say that it seemed to me that she still hankers after the days of rent regulation, as indeed, according to a recent survey by the Roof magazine, do 93 per cent. of her colleagues in local government.
I have to confess that I have some difficulty in reconciling the amendment with the belief that I thought, throughout the time we have run in Committee this afternoon, was shared by us all; namely, that we need to sustain a healthy private rented sector.
De-regulation of the private rented sector since 1988 has allowed landlords to earn a reasonable return on their investment. Research shows that the average gross return from a shorthold tenancy is now about 9 per cent. From that, management and maintenance costs and rent
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lost from arrears and voids must be deducted. I do not regard that as excessive. Indeed, research shows that only about two-fifths of lettings have been acquired mainly for investment purposes.
Assured shorthold tenants were given the right in 1988 to refer to a rent assessment committee to provide a safeguard against unreasonably high rents as the shorthold tenancy and market rents were introduced. As Members of the Committee are no doubt aware, the Government originally proposed in the housing White Paper to remove that right on the grounds that it was little used. In 1990 there were just over 400 referrals from 140,000 assured tenancies—less than 1 per cent. Referrals are still running at the same level; that is, about 1,600 a year from over 800,000 assured tenancies. However, in the light of responses to that proposal, we decided to maintain shorthold tenants' right of referral during the first six months of the original tenancy. Six months provides a reasonable opportunity for the tenant to make an application while giving the landlord the certainty that an appeal cannot be made after the deadline has passed.
I believe that the noble Baroness suggested that extending the role of rent assessment committees would save the Government substantial amounts in housing benefit expenditure. However, I should point out that, since last October, rent assessment committee determinations have not been binding for housing benefit purposes. Housing benefit is calculated on the basis of rent officers' determinations, even where a committee has made a determination. The rent agreed by the rent officer for benefit cases may be below the contractual rent for various reasons—for example, the property may be too large or it may be too expensive, despite the fact that it is the market rent for that property. So even if a fixed, contractual rent at market level is there, there is no guarantee that housing benefit will meet it.
The legislation was changed last October in the light of evidence that landlords and local authorities were encouraging tenants to refer the rent to a rent assessment committee in the hope of obtaining a higher rent for housing benefit purposes. We have therefore already dealt with one of the issues which the amendment seeks to address.
Similarly, I cannot accept the proposal that a committee should set a rent for a period of more than a year. The landlord must have the certainty that he can increase the rent in line with market movements. It is unlikely that a landlord would be able to get a rent above the market rent from a new tenant. If he puts up the rent and gets a tenant out, he is unlikely to find a new tenant if that rent is way above the market level. Indeed, he is unlikely to find a new tenant who will take on that tenancy.
Therefore, I do not believe that there is an incentive here to evict as suggested by the noble Baroness. The tenant will have the opportunity to negotiate with the landlord the new rent for any replacement tenancy. He will be able to take account of any determination by the committee during the original tenancy.

1873
If the original tenancy lapses into a periodic tenancy, the tenant will have another opportunity to apply to the committee for a determination if the landlord serves a notice of a rent increase under Section 13 of the Housing Act 1988. Any such determination will have effect for a year. If the landlord serves a further notice after a year, the tenant can apply to the committee again.
I believe that our proposal in Clause 93 provides adequate protection for the tenant while giving the landlord the confidence to let the property in the knowledge that he can at least cover the costs of letting and perhaps also make a small return on his asset. With that explanation, I hope that the noble Baroness will feel able to withdraw the amendment.
5.45 p.m.
Baroness Hollis of Heigham: I am most disappointed by the Minister's reply. I really feel that he failed to engage with what it is like "out there". Because he calls something a market rent, the noble Lord assumes that any rent that follows represents a fair, negotiated balance of power, if you like, between landlord and tenant. That is not the situation. For the most part, it is a landlord's market out there. It is tenants who find it difficult to get reasonable, clean and relatively salubrious accommodation, especially if they have children or are regarded as "DSS".
The same research to which the Minister referred earlier shows that the two biggest groups to which private landlords will not let are, on the one hand, young people, people with children and, on the other hand, "DSS" families. Most landlords will not let to those groups. But they are precisely the groups that are most at risk of falling into arrears if housing benefit does not cover the rent; most at risk of eviction if they fall into arrears; and, therefore, are most likely to add to the growing pressure of homelessness on local authority stock. That is the world out there. It is not the world as the Minister wishes it to be, with markets being somehow a matter of fair negotiation; it is the world of supply and demand where the landlord has most of the cards, and certainly the trump cards.
I do not recognise the response the Minister gave to those two arguments. We argued that it was not unreasonable that because a tenant's situation may change he may appeal to a rent assessment committee. The Minister did not answer my next point. The tenant may suddenly become unemployed and therefore need to apply for housing benefit. He may find that housing benefit will not cover his rent. We need to protect a tenant in that situation; otherwise he may be evicted.
The Minister made much of the point that landlords should be in a position to raise their rents after six months. He said that they were in a market situation and would only attract tenants if their rents were reasonable. That is not the case. People may well accept such accommodation because the alternative is to sleep rough, sleep in a car or go to a hostel. The Minister simply does not know what housing stress is like out there. Once a tenant has accepted accommodation he may hope to negotiate a lower rent but he may find that he cannot do so.
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The other argument the Minister offered was that the landlord needed to have the right to raise his rent after six months. Why is that? I thought this was the Government of low inflation and that we had inflation of 2.5 per cent. Why is it that landlords, peculiarly, have to have the right to impose two price increases in a year, even when the rent assessment committee says that it is not reasonable?
This is a simple amendment. It allows the tenant to have the rent reviewed, not just at the beginning of the tenancy, but also later. If the rent is fair, the landlord has nothing to worry about. It is only if the rent is excessive that the landlord has something to worry about. Are the Government really on the side of landlords who charge excessive rents, because that is what the Minister is saying? The amendment provides that if the rent assessment committee so judges it, the rent should be stable for a year to two years, thus protecting the tenant from being evicted for trying to exercise his rights under the law. Is the Minister saying he is on the side of the landlord who evicts the tenant for exercising his rights under the law? Is that what the Minister is saying? I wish to test the opinion of the Committee.
5.52 p.m.
On Question, Whether the said amendment (No. 242J) shall be agreed to?
Their Lordships divided: Contents, 43; Not-Contents, 109.

Division No. 2

CONTENTS

Addington, L.

Methuen, L.

Archer of Sandwell, L.

Milner of Leeds, L.

Beaumont of Whitley, L.

MLshcon, L.

Berkeley, L.

Monkswell, L.

Ciffori of Chudleigh, L.

Morris of Castle Morris, L.[Teller.]

Dahrendorf, L.

Dormand of Easington, L.

NicoI, B.

Dubs, L.

Plant of Highfield, L.

Geraint, L.

Redesdale, L.

Gladwin of Clee, L.

Richard, L.

Graham of Edmonton, L.[Teller.]

Russell, E

Seear, B.

Shannon, E.

Hamwee, B.

Stoddart of Swindon, L.

Harris of Greenwich, L.

Strabolgi, L.

Haskel, L.

Strafford, E.

Hollis of Heigham, B.

Thurso, V.

Howie of Troon, L

Tordoff, L

Jeger, B.

Turner of Camden, B.

Jenkins of Putney, L.

Wallace of Coslany, L

Lawrence, L.

White, B.

McNally, L.

Williams of Elvel, L.

Meston, L.

Winston, L

NOT-CONTENTS

Addison, V.

Blatch, B.

Ailsa, M.

Boardman, L.

Ashbourne, L.

Boyd-Carpenter, L.

Balfour, E.

Brabazon of Tata, L.

Belhaven and Stenton, L.

Braine of Wheatley, L.

Berners, B.

Bridgeman, V.

Birdwood, L.

Brigstocke, B.

Blaker, L.

Burnham, L.

1875

Cadrnan, L.

Mersey, V.

Caithness, E

Miller of Hendon, B.

Caldecote, V.

Milverton, L.

Carnpbell of Croy, L.

Monson, L.

Carmegy of Lour, B.

Monteagle of Brandon, L.

Carnock, L.

Montgomery of Alamein, V.

Carr of Hadley, L

Mottistone, L

Chesham, L. [Teller.]

Mountevans, L.

Clanwilliam, E.

Mowbray and Stourton, L.

Clark of Kempston, L.

Munster, E.

CoJwyn, L.

Murton of lindisfame, L.

Courtown, E.

Nelson, E.

Craigavon, V.

Nickson, L.

Cranborne, V. [Lord Privy Seal.]

Norrie, L.

Cranbrook, E.

Northesk, E.

Cumberiege, B.

O'Cathain, B.

Dixon-Srnith, L.

Orr-Ewing, L.

Dudley, E.

Oxfuird, V.

Eccles of Moulton, B.

Pearson of Rannoch, L.

Elliott of Morpeth, L.

Pender, L.

Elton, L.

Prentice, L.

Feldman, L.

Rawlings, B.

Gardner of Parkes, B.

Rees, L.

Geddes, L.

Renton, L.

Gisborough, L.

Romney, E.

Hamilton of Dalzell, L.

St Davids, V.

Harding of Petherton, L.

Sanderson of Bowden, L.

Harrowby, E.

Seccombe, B.

Haslam, L.

Selsdon, L.

Henky, L.

Shaw of Northstead, L.

Holderness, L.

Shrewsbury, E.

HolmPatrick, L.

Soulsby of Swaffliam Prior, L.

Howe, E

Stewartby, L.

Inglewood, L.

Strathclyde, L. [Teller.]

Kinnoull, E.

Sudeley, L.

Layton, L.

Swinfen, L.

Lindsey and Abingdon, E.

Thomas of Gwydir, L.

Long, V.

Thomas of Swynnerton, L.

Lucas, L.

Tollemache, L

McColl of Dulwich, L.

Trefgarne, L.

Mackay of Ardbrecknish, L.

Trumpington, B.

Mackay of Clashfem, L. [Lord Chancellor.]

Tugendhat, L.

Wakeham, L.

Mackay of Drumadoon, L.

Wilcox, B.

Macleod of Borve, B.

Willoughby de Broke, L.

Massereene and Ferrard, V.

Wise, L

Merrivale, L.

Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.1 p.m.
Clause 93 agreed to.
Clause 94 [Mandatory possession for non-payment of rent: reduction in arrears required]:
Lord Meston Lord Meston moved Amendment No. 242JA:
Page 63, line 31, at end insert ("; and
(c) at the end of the Ground there shall be inserted—
"provided that no order for possession shall be made under this ground if a court is satisfied that—

(i) prior to the date of hearing the tenant has made a claim for housing benefit in respect of the period to which the arrears relate in whole or in part and which has not been finally determined by the local housing authority to which it was made; or

(ii) the tenant has an arguable set-off against the unpaid rent of an amount of liquidated or unliquidated damages capable of reducing the rent outstanding to below the amounts claimed.".").

The noble Lord said: Clause 94 deals with the grounds for making a possession order and amends the mandatory rent arrears ground (Ground 8) to enable landlords to take action when the level of rent outstanding is eight weeks in the case of weekly or fortnightly tenancies, and two months for monthly tenancies. It is a reduction of five weeks in the case of weekly or fortnightly tenancies, and of one month in the case of monthly tenancies.
One wonders what is the case for the amendments brought about by Clause 94. Having read the debates in another place, I have been unable to find a clear justification for Clause 94. If there were clear evidence of substantial difficulties experienced by landlords one might understand the case for Clause 94; but I am not aware of such evidence. All the clause does is to put an increased number of tenants at risk. That is not to say that one does not sympathise with landlords whose tenants will not or cannot pay.
However, there are in practice two problems which the amendment seeks to address. First, delay in obtaining housing benefit is the basis of the first limb of the amendment which I propose. If a proper claim to benefit which would help to meet some or all of the arrears is still pending when a possession claim comes to court, surely it is right that the courts should have a discretion not to order possession. Likewise, if there is an arguable set-off. That is the second problem in practice.
The amendment ensures that landlords are not able to recover possession where the tenant has claimed compensation by way of a counter-claim—for example, for disrepair, harassment or any other breach of the tenancy agreement. An amendment in similar terms was discussed at Report stage in another place. The Government's response at that stage was that there was a potential for the amendment to lead to long and protracted disputes about the cause and extent of the counter-claim; and, further, that the existing state of the law catered sufficiently well for the question. It is that latter proposition which I challenge. Without the amendment it will remain uncertain whether a tenant with a counter-claim for damages can resist a Ground 8 possession claim. The question was specifically left open by the Court of Appeal in a case reported in 1993, Mountain v. Hastings. The landlord will still have available to him the discretionary ground on which possession can be claimed under Ground 10 of the legislation. That would provide for any amount of arrears to be the basis for a claim for possession.
I suggest that mandatory orders for possession should be made only where there is clearly a substantial breach of the tenancy agreement. If there is any doubt about there being a substantial breach, or about the ability of the tenant to rectify that breach wholly or in part—for example, by way of housing benefit when it arrives; or by having a good, arguable counter-claim or set-off—the tenant quite properly should have the benefit of the doubt. I beg to move.
Baroness Hollis of Heigham: I support the amendment. One of the increasing causes of homelessness, as we know, is eviction from the private

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rented sector, usually, though not always, associated with failure to pay rent. Increasingly that failure to pay rent may be due to local authority errors or delays, for good and bad reasons, in processing housing benefit. A good reason, for example, is where the local authority needs quite detailed information and the employer refuses to co-operate.
Those delays mount up. The Minister may say that payment may be made on account. Nonetheless, anyone who has had to handle housing benefit will know that that is not a satisfactory way forward, in particular if there is doubt about the nature of employment. If a payment on account is made, one cannot subsequently recover it. The local authority is then in difficulties with its district auditor. I would counsel the Minister against encouraging local authorities to go down that route as an easy option.
What are we now seeing? Perhaps we shall cover the issue more fully during the debate on clause stand part. First, we are seeing increased risks of delay in paying housing benefit in particular as local authorities are being asked, rightly, by the Government to investigate more thoroughly to eradicate fraud. Secondly, we are seeing payment of housing benefit four weeks in arrears. Thirdly—it is a point that I do not believe has been mentioned—the Government propose to send out to compulsory competitive tendering the payment of housing benefit. If the tender is successfully won by a private firm it will introduce temporary chaos into the system, thus increasing the likelihood that housing benefit will be delayed and the tenant will risk eviction through arrears. Yet at the same time that that is happening, the Government seek to allow landlords to evict tenants after eight weeks instead of 13.
We all agree, surely, that tenants need protection from eviction where the cause of that eviction—for example the non-payment of rent—is through no fault of their own. The amendment goes some way towards that protection. It allows a tenant to have his eviction delayed where there is a prospect of housing benefit being paid to cover arrears in rent; or where he may expect other payments, such as compensation, to have the same effect.
We need this amendment because at present even if the courts believed that that eviction is unfair they cannot stop it. They have to grant possession. It is mandatory. The amendment allows that mandatory provision to become discretionary in the light of the circumstances: that is, that there is a reasonable possibility for the tenant to pay. I warmly support the amendment.
Lord Strabolgi: I should like to support everything that has been said. There is even more cause for concern since I understand, as my noble friend Lady Hollis said, that there is a proposal to pay housing benefit under the Housing Benefit (General) Amendment Regulations four weeks in arrears. That will mean even greater risk to tenants since under most tenants' contractual obligations rent is almost always required in advance. With some tenants permanently four weeks in arrears, even a short-term unexpected change could result in a claimant being eight weeks in arrears. If the
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Government intend to press ahead with the payment of housing benefit in arrears, it is surely essential that the mandatory possession ground is not simultaneously reduced from three months to two months. I support what has been said.
Lord Mackay of Ardbrecknish: I shall deal first with the part of the amendment of the noble Lord, Lord Meston, concerning housing benefit. I imagine that he fears that tenants who have made an as yet undetermined claim for housing benefit may be evicted through no fault of their own. I wish to assure the noble Lord that his fears are misplaced. Even under the new limits proposed in Clause 94, a tenant is unlikely to be evicted until at least three to four months have elapsed since he first started to get into arrears. Perhaps I may explain why.
First, the tenant will have to be at least eight weeks in arrears before the landlord can start any action. The landlord must give the tenant two weeks' notice of proceedings. It will then take at least a month for the case to reach court. A court order can only be made if eight weeks' arrears still exist at the time of the hearing. The whole process will take at least three or four months, which I submit is a reasonable period for a responsible tenant to sort out his financial affairs.
I heard the concerns about the implications of change for tenants whose housing benefit claims are subject to delay. However, under social security legislation, housing benefit claims should be processed within the statutory 14 days of all the required information being received. Department of Social Security statistics show that over 80 per cent. of claims are now processed within this deadline and performance is steadily improving.
Baroness Hollis of Heigham: I wonder whether that is the correct statistic. The Minister has used it several times. I may be working on last year's figures, but my information is that the target is for 80 per cent. of housing benefit payments to be made within 14 days and that 70 per cent. of local authorities meet it. It is not as the Minister suggested.
Lord Mackay of Ardbrecknish: I repeat what I said. The statistics we have show that over 80 per cent. of claims are now processed within the deadline of 14 days. The noble Baroness mentioned in her contribution that if the deadline is not met local authorities have a statutory duty to make payments on account where the delay is not the fault of the tenant. Although the noble Baroness warned me against using that argument, I still believe that it is valid. If the local authorities are fearful of using that responsibility because they fear that the district auditor may challenge them, it gives them a motive for ensuring that they meet the target of the statutory 14 days.
The Department of Social Security has strengthened its guidance as recently as April, to remind local authorities of their legal duties to make payments on account. Housing benefit claimants should therefore not be affected by the change.

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The noble Lord, Lord Strabolgi, raised the question of new claimants and claimants who move having their housing benefit paid wholly in arrears from this October. The change will not affect their entitlement to housing benefit or the frequency of benefit payments. Most people coming on to benefit will have already received some kind of income, such as final wages, which they can use to pay their rent before they are due any benefit. Eighty per cent. of housing benefit applications are delivered within 14 days and I cannot see the situation beginning to get near the eight weeks, let alone the eight weeks plus the two weeks and the month it takes to get to court before matters can be sorted out.
Local authorities must also ensure that the method and frequency of payments suit the reasonable needs of the tenant. They have wide powers to pay housing benefit direct to the landlord. They have discretion to make direct payments if the tenant requests it or if it would be in the best interests of the tenant. They must make payments direct if the tenant is eight weeks in arrears. Recent guidance from my department recommends them to give serious consideration to direct payments if there are about six weeks' arrears. We would therefore expect that where the tenant is receiving benefit and is in arrears with his rent, benefit will be paid direct to the landlord long before the case gets to court. A recent sample survey suggests that some 70 per cent. of payments are made direct to the landlord.
The landlord is contractually entitled to his rent. Furthermore, his lender will not consider his monthly loan or mortgage repayments to have been repaid just because his tenant's housing benefit may be in the pipeline. The amendment would enable a tenant to avoid a possession order by making an application for housing benefit before the court hearing, even though he knew that he would not be eligible for benefit. That cannot be right.
Perhaps I may turn to the other part of the amendment, which seeks to prevent the court from making an order for possession if it is satisfied that the tenant has an arguable set-off against the unpaid rent of an amount of liquidated or unliquidated damages capable of reducing the rent outstanding to below the amounts claimed. The noble Lord, Lord Meston, is concerned about cases where a landlord fails to meet his repairing obligations. But tenants have a common law right to undertake repairs to the property where the landlord is in breach of his repairing obligations and to recover the costs by deduction from the rent, unless there is an express term in the tenancy agreement to prevent that. The court would be able to take this into account as a defence where the landlord is seeking possession under Ground 8 and may decide that no or insufficient rent arrears exist to grant an order for possession.
Tenants also have an equitable right to set off against rent due any damages, whether liquidated or unliquidated, for breach by the landlord resulting from disrepair, provided the damages relate to the property on which the rent is due and there is no express term in
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the tenancy agreement to prevent that. The court would be able to take into account such a counterclaim by the tenant in deciding whether to grant the landlord a possession order under Ground 8. But requiring the court to offset liquidated or unliquidated damages against rent arrears would encourage tenants to counter-claim for damages due to disrepair in all Ground 8 cases. That would lead to long and protracted disputes and create so much uncertainty that landlords would be deterred from letting property.
The Committee will be aware of the recent Law Commission report on the landlord's responsibility for the state and condition of property. We are considering it carefully and will publish our response in due course. It will cover some of the ground which concerns the noble Lord, Lord Meston. On the basis of what I have said about the housing benefit system and Ground 8, I hope that he will withdraw his amendment.
6.15 p.m.
Lord Monkswell: I wish to question the Minister on one point raised by the noble Baroness, Lady Hollis. He gave a glowing account of how admirably administered housing benefit was and how quickly it was paid. As I understand it, the statistics he quoted were on the basis of all the relevant information being available to assess the benefit claim. One of the questions which my noble friend Lady Hollis raised concerned the situation where the tenant had provided all the information but the local authority was not in a position to complete the assessment because of other information which was required from employers.
Can the Minister advise the Committee whether there is any legal duty on employers to provide such information, which the tenant may not have? It must come from the employer. Is there a legal duty on the employer to provide that information? Also, is there a time limit on the delay which the employer could cause in providing the information required?
Lord Mackay of Ardbrecknish: The noble Lord is right that the provision is for 14 days after all the required information has been received. It could be no other than that. I am sure that he agrees that the tenant has therefore an obligation to ensure that all the relevant information is received. We now turn to the employer. In the case postulated by the noble Baroness, if the employer were responsible for the delay, what would the situation be? For most of the afternoon the landlord has been the wicked fairy, but we appear to have moved on and now the employer is the wicked fairy. There is not much change in the historic position of the Labour Party on wicked fairies.
In the case of housing benefit, most of the information comes from the tenant. If a tenant has given all the information that he or she can give, the question of payment on account immediately arises. That is the position. I noticed the noble Baroness throwing her hands up in the air. If a tenant has given accurate information about his employment, and even if the employer is dilatory in backing that up, I cannot believe that the employer will do other than present evidence that will simply back up the information that the tenant

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has already given. In those circumstances, I cannot believe that the district auditor would find that the local authority had given a wrong payment.
Lord Meston: I shall resist the temptation to identify the good and bad fairies in this debate. I am grateful for the support I received from the noble Baroness, Lady Hollis, and from the noble Lord, Lord Strabolgi.
My hope was that the Minister would make clear at this stage the underlying case for Clause 94. We may have to wait for the debate immediately following. Whether or not housing benefit delays happen, or should not happen, is by the way. In practice there are delays in providing housing benefit. I have evidence of that from practitioners in this field. At a later stage I wish to reinforce that evidence by introducing an amendment along similar lines.
So far as the second part of the proposed new clause is concerned, I remember sufficient landlord and tenant law to know the common law right and equitable rights to which the Minister referred. However, there still appears to be an uncertainty in the law in that, as I said in opening, the Court of Appeal has apparently left open the question as to whether a tenant with a counterclaim for damages can resist a Ground 8 possession claim. That again is something I wish to research further.
I certainly challenge the Minister's suggestion that this amendment would tempt a tenant to raise a specious set-off when confronted with a claim for rent arrears and a Ground 8 possession claim. To avoid that, it may be that I should return at a later stage and, instead of using the expression, "an arguable set-off", use an expression such as, "a reasonably arguable set-off'.
My remaining concern is that Clause 94 relates to mandatory orders for possession. Some care must be taken on the face of the Bill before abbreviating the period of arrears that must arise before a mandatory order can be made. These amendments are designed to mitigate—and only to mitigate to some extent—the otherwise drastic effect of Clause 94. I reserve the right to come back on this matter. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 94 shall stand part of the Bill?
Baroness Hollis of Heigham: I wish to oppose the Question that Clause 94 stand part of the Bill, as indicated in the names of my noble friend Lord Dubs and the noble Lord, Lord Meston.
I remind the Committee of the cumulative pressures surrounding housing benefit that we now see building up. I should like to bring together a whole series of different issues, some in different departments, all of which bear on the issue. I ask the Minister: do the Government really understand the effect that all these interlocking and cumulative decisions have on the housing market?
First, the Bill reduces the mandatory grounds for possession from three months to two months (from 13 weeks to eight). The court has no discretion; it must grant possession. Therefore, tenant insecurity is being
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increased. Secondly, however, the Government are introducing this measure at the very time when poorer tenants are experiencing real cuts in housing benefit, partly because of the new regulations. We are likely to find a growing percentage, beyond the existing 40 per cent., of those who now find that housing benefit does not cover their rent. The percentage is increasing.
In addition to cuts in housing benefit, we shall also see further delays in payment of housing benefit. I accept that in some cases that may be due to the inefficiency of local authorities. But before the 14-day clock can start ticking, all the information has to be collected.
The Minister was baffled as to why any tenant should not be able to produce identical information to an employer. The Minister does not seem to appreciate that something like 40 per cent. of all workers are now in part-time, casual, contract or shift work, and the percentage is growing. Those are precisely the sorts of low-paid occupations in which people are likely, while in work, to claim housing benefit. The man or woman in a 38-hour or 40-hour full-time job will almost certainly be earning enough to float him or her off housing benefit levels. That is not always the case, but it is usually so. It is precisely the poorer worker in the part-time, casual, low-paid or irregular job who is likely to be claiming housing benefit and is least likely therefore to be able to produce the information for the statement of earnings for the four prior weeks, and where the local authority will rightly need corroboration from the employer as to average earnings. That is what it is like out there when you are seeking work. This week a person may receive £60; in another week it may be £80, and in another £72. The local authority has to make a judgment in order to assess housing benefit. Of course the information has to be corroborated by the employer. In any case, the employee may very well not have all the appropriate records. So delays arise as a result of the need to collect information.
Another reason why delays occur is that local authorities have, quite rightly, been made aware of the extent of landlord fraud. Mr. Lilley seems to think that housing benefit fraud presently accounts for some £1 billion a year. The latest information to the Select Committee on Social Security suggests a figure of nearer £2 billion a year. Almost all that is landlord fraud—claiming, for example, for 35 tenants, nine rooms and the like. Local authorities agree with the Government that such fraud should be stamped out, because a penny mis-spent is a penny denied somewhere else. But investigation of fraud takes time; and the more it is investigated the more delays will occur. Already, some London boroughs are refusing to pay tenants housing benefit while the landlord is being investigated for fraud.
What would the Government have the local authority do—particularly when the cheques are being paid direct to the landlord? Would they have tenants stop the cheques and risk eviction, or pay the cheques and let the taxpayer risk fraud? What choice would the Government have us make? They have to answer that question in dealing with this clause.

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We see cuts and delays in housing benefit; we are to see housing benefit paid four weeks in arrears; and by the time the Bill becomes law another measure will have made the administration of housing benefit catastrophic—namely, the exposure of this service to compulsory competitive tendering. Private companies which may gain the tender, will have no experience and will be in a learning curve. We shall see error, fraud and problems of take-up all being magnified in the process of handover.
So tenants can be evicted more quickly; housing benefit is to be paid in arrears; we see increased delays in the ability of local authorities to be sure that they are paying the right sum; and we see cuts in the amount of housing benefit being paid. Taken together, those factors increase the risk of tenants being evicted by landlords for non-payment of rent.
We are seeing increased insecurity in the private rented sector; increased evictions from that sector; a growth in homelessness coming out of the private rented sector; and added pressure on the ability of local authorities to meet the needs of the homeless. None of that is necessary. This clause is not necessary. There is no evidence at all that we need Clause 94 in the Bill. If we removed it, we might produce a fraction more security in the housing benefit system. I move that the clause do not stand part of the Bill.
6.30 p.m.
Lord Mackay of Ardbrecknish: We have already gone over some of this ground and I apologise if I do so again. Clause 88 amends Ground 8 of the Housing Act 1988 which requires a court to grant an order for possession of a property let on an assured tenancy when a specified level of rent arrears has accrued. The current level is at least 13 weeks or three months' rent, depending on whether the rent is payable weekly or monthly. That level of rent must be unpaid, both when the landlord serves notice of possession proceedings under Section 8 of the 1988 Act and at the date of the court hearing. Clause 88 will reduce that level to eight weeks or two months' rent.
The vast majority of tenants pay their rent on time and in full. However, our research shows that landlords are concerned that, although the Housing Act 1988 made it easier to recover possession of their property, they continue to have problems regaining possession when the tenant is in rent arrears. The noble Baroness argues the case from the point of view of the tenant. I ask her to consider for a minute what having a tenant in rent arrears, with no prospect of recovering the arrears, means for the landlord. One quarter of lettings are owned by a landlord with only one property. For those landlords, having a tenant who withholds the rent will be very difficult, particularly if they have a mortgage or loan to repay. Small landlords will only let property if they are confident that they can cover their loan or mortgage. They need the certainty that when a specific amount of rent arrears has accrued, they can get their property back.
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Even under the proposal in Clause 88, the tenant is unlikely to be evicted until at least three or four months have elapsed since he first started to get into arrears. Perhaps I may just explain the procedure "out there", about which, of course, I know nothing and where the noble Baroness is continually inviting me to look. Under the new proposal the tenant will have to be at least eight weeks (it was 13 weeks) in arrears before the landlord can start any action. The landlord must then give the tenant two weeks' notice of possession proceedings, so 10 weeks will now have elapsed. It will then take at least a month for the case to reach court. In fact, the average time is nearer three months. So should I be kind or unkind in this calculation? I shall be kind and take the month—just four weeks—though I point out to the Committee that it could easily take 12 weeks. Indeed, it is more likely to be nearer 12 weeks before the landlord and tenant have their day in court.
A court order can only be made if, at that point, eight weeks' arrears still exist. The whole process will take at least three or four months, if not more. I should have thought that that is a reasonable period for a responsible tenant to sort out his financial affairs.
I know that there are concerns about the implications of the change for tenants whose housing benefit claims are subject to delays. I have already covered that ground and have no desire to go over it again. But I do not believe that the noble Baroness has proved her case about the difficulties that might arise in regard to housing benefit. We all know that there is a certain amount of fraud in housing benefit. The Secretary of State, Mr. Peter Lilley, has spoken about it. We believe that it amounts to about £1 billion. The noble Baroness has quoted £2 billion, which is the figure now favoured by her party. That figure comes from the Select Committee of another place and is based on the evidence of one person extrapolating from the experience of one London borough. We do not believe that that is a fair and proper calculation. Our calculation is much more detailed. A great deal more work has been put into it. We reckon that the figure is £1 billion. But we are certainly happy to have on board the party opposite in our pursuit of fraud in the benefits system—in housing benefit and anywhere else. One landlord fraud is that there is no tenant. There cannot be an eviction if there is not a tenant to evict, so I do not feel that there is a huge problem so far as concerns that particular fraud.
This clause, reducing the period to eight weeks from 13 weeks and to two months from three months, provides a better balance between the interests of the landlord and tenant than do the current requirements, especially when account is taken of the two weeks' notice and the time taken to get to court. Then the tenant will usually ask the court for four weeks in which to find a new house. "Out there" the court usually grants the additional four weeks. At the end of the four weeks, if the tenant has not moved and still has not paid anything, the landlord has to apply for a bailiff's warrant. That may take another two or three weeks. So perhaps 36 weeks may elapse from the day the tenant stops paying rent. At any time during that period the

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tenant can deal with the problem of arrears. I should have thought that that is a fair and reasonable balance between the tenant and the landlord.
As I said, the small reduction helps the balance. It will give confidence to those people who currently have property they would like to let but who are fearful about letting it. We believe that, along with the other steps—this has to be looked at as a package—it will encourage further development of the private rented sector. The more properties in the private rented sector, the less may be the market rents in that sector. That is the way market forces work. I should have thought that the noble Baroness would welcome any step that we take to free up the market and get more houses on the market. That way we might see a reduction in the levels of rents which can be charged in certain areas, because shortage—supply and demand—is, of course, a major factor in the market.
I hope that the noble Baroness will withdraw her suggestion that the clause should not stand part of the Bill. If she does not do so and divides the Committee, I trust that those who support me—I am sure, the majority—will accompany me into the Lobby.
Baroness Hollis of Heigham: Perhaps I may take up that last point. The Minister tries to put all the arguments in the one direction. He says that the Government's primary concern is to continue to strengthen the private rented sector. He points to the success of the past few years. What, of course, he should admit to the Committee (but he will not do so) is the reason for the success of the private rented sector. When we combine that fact with the information that the Minister continues to give—namely, that most houses that are rented are single houses owned by people who do not let anything other than one house—one realises that those houses are let because they cannot be sold. Why cannot those people sell the houses? It is because the Government's policies have wrecked the housing market for owner occupiers.
Lord Mackay of Ardbrecknish: Perhaps the noble Baroness can tell the Committee where those people who want to sell their house will live while they rent the house to someone else?
Baroness Hollis of Heigham: They may be in the situation in which I have been. My parents died and I have one house which is shared with my brother and sister. In the past I have let it simply because I am unable to sell it in a housing market that has been destroyed by the Government. The moment that the housing market picks up, that house will come on the market for sale. That is the situation in which hundreds and thousands of people—hundreds and thousands—currently find themselves.
All the evidence shows that something like one-third or so of the new lettings that have come on the market in the past three years are the result of people's inability to sell. They have therefore gone on somewhere else and rented and, in turn, have let out their own home. That is what has been happening to the private rented sector. If the Minister had read the research on the matter, he would realise that the private rented sector will shrink
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as and when any confidence is restored in the market for purchase. I am sure that he is aware of that. His point that most people have only one house to rent is precisely evidence of the point I make.
The broader point is that in this Bill, in regulations, and in changes to housing benefit and the like, we have seen blow upon blow—those words are not in any way over the top—to the situation of the tenant in the private rented sector. We have seen something like seven or eight shifts in housing benefit regulations and the grounds for possession, every one of which is on the side of the landlord. That undermines the security of the tenant. Indeed the Minister's remarks earlier today seemed to suggest that, even when the landlord is fraudulent, the Government are willing to be soft on the landlord rather than deny him access to the flow of rental income from which he has to pay his mortgage.
There is a huge gulf between us. The Government are interested only in the landlord for whom the property is his income and not at all in the tenant for whom the property is his home. That is why the next government will reverse much of this legislation.
Clause 94 agreed to.
Clauses 95 and 96 agreed to.
Lord Meston Lord Meston moved Amendment No. 242JB:
After Clause 96, insert the following new clause—
AMENDMENT OF DATE WHEN SECURE AND ASSURED TENANCIES END
(" .—(1) In section 82(2) of the Housing Act 1985 (security of tenure) for "the tenant is to give up possession" substitute "possession is delivered up to the landlord".
(2) In section 7 of the Housing Act 1988 (orders for possession)—
(a) after subsection (6) insert—
"(6A) Where the court makes an order for possession under this section the periodical tenancy ends on the date when possession is delivered up to the landlord in pursuance of the order."; and
(b) in subsection (7) for "date on which the order takes effect" substitute "date possession is delivered up to the landlord in pursuance of the order".").
The noble Lord said: The purpose of Amendment No. 242JB is to redefine the statutory ending of a tenancy. Under Section 82(2) of the Housing Act 1985 it is provided that,
"Where the landlord obtains an order for the possession of the dwelling-house, the tenancy ends on the date on which the tenant is to give up possession in pursuance of the order".
In reality—I know that we all claim to occupy the real world out there somewhere—possession proceedings are often used for rent collection. The landlord may obtain an order for possession for arrears of rent or for a breach of the tenancy agreement, but the tenant may then pay up and remedy the breach. Peace, if not harmony, is then restored. The tenant is allowed to stay and, by agreement, stays beyond the date stipulated under the possession order.
Under Section 82(2) of the Housing Act 1985, the tenant will lose the rights he held under his original tenancy agreement after the date the tenancy is deemed to end, and thereupon his status inevitably becomes uncertain until it is redefined either by agreement or by court proceedings. This amendment

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proposes that the tenancy should not be treated as having come to an end unless and until his actual departure delivering up the premises to the landlord. That would accord with practical reality and avoid the sort of artificial situation which can arise when a tenant stays on by agreement with his landlord. I beg to move.
Lord Mackay of Ardbrecknish: The proposed new clause tabled in the name of the noble Lord, Lord Meston, would extend the length of a secure or assured tenancy when a court has granted the landlord an order for possession until the tenant gives up the tenancy. Under existing legislation, the tenancy ends on the day the court order takes effect, or in the case of a suspended possession order, when the conditions of the suspended order are breached.
Court procedures will leave a tenant who is subject to a suspended possession order in no doubt about the seriousness of his position. The tenant will already have had an opportunity to make his case in court, and will know that if he breaches the condition of the suspended order, he will lose his home.
Where a court has determined that the landlord has a right to possession, I do not believe that it is right for the tenant to expect to enjoy the rights conferred by the tenancy beyond the date when the possession order comes into effect. Where the landlord is prepared to give the tenant another chance he may offer the tenant a new tenancy.
I understand from research—Rent Arrears in Local Authorities and Housing Associations in England (1994)—that almost without exception social landlords in arrears cases ask for suspended possession and, where agreements for payment are ratified in the court, those cases are monitored carefully for default. Only where arrangements break down irretrievably do the landlords consider using the final deterrent of eviction.
It cannot be right that if somebody is in arrears, has been taken to court and, for example, asked for time to pay the arrears, and the court agreed that the tenant should have that time and stipulated it, that from that point on the tenant should continue to have the rights of a tenancy. The tenancy should not carry on until the tenant leaves as a result, presumably, of not paying arrears. He forfeits his right to a tenancy until he makes good the rent arrears due. The amendment therefore is not sensible and I hope that the noble Lord will withdraw it.
Lord Meston: Having heard the Minister's reply—for which I am grateful—I cannot help feeling that perhaps we are not as far apart as his reply suggests. I am not talking of non-compliance with suspended orders; I am talking of orders where the statute provides the date on which the order takes effect and that determines the end of the tenancy. Nevertheless, the relationship between the landlord and tenant may continue for months, or even years. An artificial situation is created by the provisions of Section 82.
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I shall need to consider this matter further and consult with those more expert than myself. I reserve the right, therefore, to come back to it and in the meantime beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.45 p.m.
Lord Meston Lord Meston moved Amendment No. 242JC:
After Clause 96, insert the following new clause—
SUSPENDED POSSESSION ORDER NOT TO BE ENFORCED WITHOUT LEAVE OF THE COURT
(". In section 85 of the Housing Act 1985 and in section 9 of the Housing Act 1988, in each case after subsection (4) there shall be inserted—
"(4A) Where an order for possession is suspended on conditions in accordance with subsections (2) and (3) and the order ceases to be suspended by reason of the conditions not being complied with, the order shall not be enforced more than two years after the order was made, without leave of the court.".").
The noble Lord said: This is a similar amendment to Amendment No. 242JB on an analogous point. The simple point, which I hope is self-explanatory, is that a suspended possession order should not be enforced without the leave of the court if it has lasted for more than two years. That would avoid the tenant finding himself in a sort of limbo with a suspended order hanging over him for an indefinite period of time with the risk of the landlord choosing, for good reason or bad, to activate stale orders.
The amendment does not prevent enforcement of orders which have been outstanding for more than two years; it simply requires that the court be asked to reconsider the matter before giving its leave to enforce. On such reconsideration the court can look at any fresh circumstances which have arisen on either side in the period of two years or more which must have elapsed. I beg to move.
Lord Mackay of Ardbrecknish: The new clause tabled by the noble Lord, Lord Meston, is concerned with protecting the interests of those who fail to comply with a suspended possession order from the courts.
The new clause appears to be designed to allow secure and assured tenants another opportunity to make their case to the courts when they have breached the conditions of a suspended order for possession under either Section 85 of the Housing Act 1985 or Section 9 of the Housing Act 1988.
Where a landlord has sought possession of a tenancy under any one of the various grounds where reasonableness has to be proved—for example, certain rent arrears grounds—the county court can decide to suspend the possession order so long as certain conditions are met. In the case of rent arrears, where the landlord's primary interest is in getting the arrears paid and the tenant back into regular rent payment, rather than in evicting him, the condition of the suspension may be that the tenant pays his current rent plus so much per week towards the arrears.
If payments are kept up, the possession order is never enforced; if not, the landlord may apply in writing to the court for the bailiffs to take possession of the

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property. The new clause would build in an extra procedural step at this stage in cases where two years had elapsed since the court had made the order, giving the tenant an opportunity for a further court hearing.
Therefore, if the rate at which the rent arrears are being repaid is such or the monthly rate is such that it is still ongoing after two years, the noble Lord's amendment would build in at that stage another procedural step for the landlord if the tenant decided to stop paying those arrears.
The amendment is unnecessary. The tenant will have had an opportunity to make his case. He will be aware of the position he is in; he will be aware of the agreement that was decided upon in order to suspend possession. The court already has the discretion, under the Housing Acts of 1985 and 1988, to suspend an order for a period which it considers fit, and if the tenant's circumstances change and he finds he is no longer able to comply with the terms of the suspension, he may apply to the court for the terms of the suspension to be varied. But the noble Lord's amendment would actually impose a further burden on landlords, requiring them to seek another court hearing in cases where a tenant breaches the condition of a suspended order just, say, two years and a day after the order has been made.
There must come a point at which a tenancy has come to an end, either when a possession order takes effect or where a suspended order is breached. It is up to the tenant, who has the rights under the tenancy, to ensure that he does not put himself in danger of losing his rights through the possession order taking effect or the suspended order being breached. The tenant will have ample opportunity at the court hearing to explain his position and to put his house in order in order to avoid these consequences. It is almost worth pointing out that if the landlord seeks a warrant of possession it is because the terms of a suspended order have been breached. In those cases the court still has the power to entertain an application by the tenant to suspend the warrant for possession.
It would not be sensible to accept the noble Lord's amendment. We should stay with the position we have at the present time. Perhaps it is worth saying as a postscript on this general subject that I understand that the forthcoming report of the noble and learned Lord, Lord Woolf, on access to justice will include proposals for the handling of housing possession cases through the courts. Perhaps it would be sensible to await publication of that report so that the Government and others have a chance to reflect carefully on its findings rather than to legislate in the way proposed by the noble Lord.
Lord Monkswell: I am not a legal expert but there seems to be one situation which the Minister did not mention. Perhaps I may put it to him in order to get a response. If the landlord has a suspended order of possession and the tenant breaches that order, which would enable the landlord to take possession, but the landlord does not take possession, does the right of the landlord to take possession at the time of his choosing remain available to him? It would seem to be rather unfair if a tenant inadvertently or almost by agreement with the landlord technically breached the order but the
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landlord did not seek to obtain possession but held it over the tenant in some form of threat, that he would use it at a later stage. Could the landlord hold over the tenant that kind of threat, or, if the suspended order was breached, would he have to take possession?
Lord Mackay of Ardbrecknish: I am in a little difficulty with the noble Lord's hypothetical question. Perhaps I may make sure that I understand it. He asks about the position where a landlord has a suspended possession. Let us say, for the sake of argument, that it involves paying rent arrears at so much a week or so much a month. Then, before the rent arrears are paid off, the tenant stops paying them. I think I am asked: must the landlord act immediately; and if he does not act immediately—if he lets a week or two elapse—what would happen? Could he let a week or two elapse and then decide to enact his possession? Perhaps he just wants to be sure that the tenant has really meant to stop paying the arrears.
I always find hypothetical questions about legal matters a little difficult. It is the case that if the landlord then decided to activate the situation but the tenant could not respond and the landlord had to get an order for the bailiffs, the court would still have the power to entertain an application by the tenant to suspend the warrant for possession. So before a warrant for possession was granted to the bailiffs, there could at least be an argument in court to allow the tenant to argue the case.
However, I think that much of this depends on the case before the court, if it comes to the court, and the intentions of the parties. There is no doubt that a tenancy can be revived—for example, if the arrears are paid. The situation then continues with the tenancy simply revived. Case law shows that it can revive.
I hope that I have answered the noble Lord's question. I shall read in Hansard what he asked and ensure that I have not misunderstood the question and that I have given him a reasonable answer to the situation he hypothecated.
Lord Monkswell: I think the Minister has reassured me. However, perhaps I may clarify my example so that he may find it easier to read in Hansard tomorrow. The situation I envisaged was where a tenant was in arrears with rent and the suspended possession order was given on the basis that the tenant would start paying his rent on a particular date, which would have left some arrears. However, the tenant does not start on that date but starts perhaps a week or two later. The landlord then says, "Okay, I'll let it ride", and then at a future stage the landlord activates the suspended possession order—perhaps quite some time down the road—just because the landlord wants to obtain possession when in fact the tenant would have been an assured tenant if the suspended possession order was not available. That may help the Minister when he is considering tomorrow whether the exchanges we have just had resolve the problem.
Lord Meston: I was not particularly reassured by the Minister's answer and it may be that I shall need to come back at a later stage rather than wait for the

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valuable reforms which are to be introduced on the recommendation of the noble and learned Lord, Lord Woolf.
The amendment is designed to prevent a possession order limping on for years and being held over a tenant, rather in the way described by the noble Lord, Lord Monkswell, or in other circumstances. The Minister criticised it for requiring an extra procedural step. I would prefer to describe it as a safety net. The amendment presupposes that the tenant has complied with the terms of the suspension for at least two years, and it is only in those circumstances that I suggest by the amendment that a landlord should not thereafter be enabled to go straight in and enforce the order without at least going back to the court for the court's sanction to enforce. The Minister said that the tenant is aware of the position. The tenant is, of course, aware of the original position but the court may not be aware of any change of circumstances. The amendment proposes a revision at least by the court of the circumstances of the original order and any developments since then.
I would wish to come back at a later stage with an amendment along these lines. Meanwhile, I beg leave to withdraw this amendment.
Amendment, by leave, withdrawn.
Clause 97 agreed to.
Schedule 7 agreed to.
Lord Lucas: I beg to move that the House do now resume. In moving this Motion, perhaps I may suggest that the Committee stage resumes not before eight o' clock.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

In-Work Training
7 p.m.
The Earl of Dundee The Earl of Dundee rose to ask Her Majesty's Government what plans they have to encourage in-work training.
The noble Earl said: My Lords, all those of your Lordships about to speak are very well informed on employment matters and on the subject of in-work training. I am particularly grateful, therefore, for that support.
Once launched, yet before they had taken effect, a large measure of confidence had already been placed in the commitments given to full employment in the 1944 Government White Paper. Equally, there was conviction from the start that the Beveridge social insurance system would work well. As with all new schemes, it was also expected to improve with use and to mature through time. The planners did not therefore forecast that the results would be much better over the first 20 years than over the following 30 years. The opposite, in fact, occurred regarding both the control of unemployment
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and the connected operation of the social insurance system. The first 20-year period proved much better than the following 30 years.
While unemployment is now in decline and the proportion of unemployed people who have been out of work for more than six months is also decreasing, there can be no strong assurance of returning to the lower levels that prevailed before the mid-1970s. One reason is that in recent years new technology has changed the kind of jobs, skills and flexibility required in advanced countries. Another factor is the different attitude which has developed within families towards work since Beveridge's day. Clearly, a job is now seen far less as a career for life. And the man in the family is no longer assumed to be the only breadwinner.
If jobs themselves and attitudes towards them have altered, no doubt a principal task of government is to facilitate training in order to match work which is in demand. This is exactly what the TECs have set out to do. Many of us will agree that they have proved to be both effective and adaptable. As your Lordships are aware, a merger has been proposed between the Scottish qualifications authority and SCOTVEC. This should improve the scope within the Scottish education system for matching teaching and training to jobs in the labour market.
As regards in-work training itself, the current Workstart pilot schemes have undoubtedly alleviated long-term unemployment. Viewed in terms of current national statistics, that is encouraging. Such national figures suggest that of those who have reached two years of unemployment only about 50 per cent. leave within the next year. Your Lordships will be acquainted with the various tests used to assist with the evaluation of pilot projects and to arrive at a judgment on their relative merits. I shall not detain the House with the technicalities. Suffice it to say that, as regards the Workstart pilot projects, if they can be shown to have benefited the long-term unemployed, for that reason alone they must have proved their worth and thus deserve to be a model for further extension.
That brings me to the Government's future plans for in-work training. What modification of the current workstart projects may now be called for in order to improve employment prospects? Given the difficulties, as we know them to be, the Government have surely been wise to proceed cautiously and through pilot projects instead of imposing schemes nationwide too soon and without supporting evidence. Even within pilot projects themselves there is still a need to balance and restrict government intervention in order to obtain a true picture of cause and effect. However, if within a pilot scheme the Government choose to act as employer of last resort they can do so perfectly well without having to compete with other sectors. That was a central recommendation of the recent Employment Committee report of another place. In particular the committee recommended that the Government should experiment with combinations of the Workstart job subsidy programme and the WISE group's intermediate labour market to achieve the delivery of a nationwide

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programme of government-subsidised and government-funded employment for unemployed individuals with a high training element.
In view of that, can my noble friend the Minister say whether the Government are prepared to extend the existing pilot projects in this way and thus facilitate a right to work for the individual and social cohesion for his community?
7.6 p.m.
Lord Haskel: My Lords, this week's national skills audit confirms that there is a tough training job to be done if we are to catch up with our competitors. With excellent timing the noble Earl, Lord Dundee, asks the Government what they are doing to help with in-company training. He is right to concentrate on in-company training because, as numerous people have pointed out, large companies have the facilities to provide it, but small and medium-sized companies rarely do. Your Lordships are all well aware of the importance of encouraging and improving the performance of our small and medium-sized enterprises.
Every manager knows that to remain in business today companies have continuously to improve their products, services and understanding of their market. This same ethos of continuous improvement also applies to staff. The reason is simple. As business becomes more competitive so the demands on employees become greater. Nowadays shop-floor workers are expected to work without supervisors, and so they must learn some of the skills and attitudes needed to supervise themselves. They need to learn the skills of working in teams. There is now less clerical back-up, and so employees must become more numerate and better at record keeping.
These skills, which are necessary to work in a modern business, have to be acquired by training. The major contribution which the Government have made to in-company training in recent years has been the establishment of national vocational qualifications. These NVQs cover all aspects of work; manufacturing and services. Indeed, qualifications are available for some 85 per cent. of people at work.
However, the actual take-up has been disappointing. By the end of 1993 some half a million NVQs had been awarded. By the spring of 1996 this figure had reached 1 million, but this only represents about 5 per cent. of the working population. This seems to be confirmed by a survey carried out by the Institute of Manpower Studies in 1994, and reported in the CBI document Quality Assessed. I quote from page 14,
"only 5% of employers are using NVQs. This rises to 6% if organisations using only the underpinning occupational standards are also added."
By any measure that take-up is disappointing. What are the reasons for the low take-up and what can we do about it? First and foremost, it is because NVQs are simply a standard to be achieved. They do nothing about the means of achieving that standard. The emphasis is on the outcome and not the means of achieving the outcome. What employers are interested in is not only the standard, but how to achieve it and how to encourage
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staff to lift themselves to even higher standards of NVQ. However, it is expensive for employers to buy in this training, or to provide the day release for staff to go on courses. No doubt the Minister will tell us that it is the task of the local Training and Enterprise Councils to provide this training, but the figures show that the Government and the TECs have a tough selling job to do.
Away from large companies there is little understanding by employers and employees of the way the system works. A survey in March this year by the Institute of Directors reported that almost half the directors of SMEs do not even know what an NVQ is—and most of those who did, did not think the system was working well.
Among those who do know what an NVQ is, the consultancy services and training projects are not perceived as a partnership between government and business, but are rather perceived to be a compliance system which people have to go through in order to get the grant. It is a hoop through which a company has to jump. The Government must apply themselves to the task of changing that attitude towards training because training has to be far more spontaneous and perceived to be of mutual interest.
A further problem with the TECs is that they are variable. Certainly, some produce excellent training, but others do not. So the quality of training is a lottery depending on where you live. Because there is also inequality between the training provided by large companies and small and medium-sized companies, access to training becomes even more of a lottery. Equality of access is not only socially just, it is essential if we are to improve our nation's industrial performance.
One of Labour's main proposals to even out this inequality of access and to raise the level and quality of training is the university for industry. Broadly, this is the provision of learning and training material using modern, interactive, on-line information technology or CD-Roms. All the elements are available. BT and the cable companies are ready to provide the broadband network, and many colleges, universities and professional organisations are anxious to provide the software. Companies of all sizes wish to participate because the university for industry will provide training and learning in the employers' time or in the employees' time, thereby reducing costs and the need to attend courses off-site—and there is the additional benefit that it will encourage and enable firms to develop their own information technology skills. All the pieces of this jigsaw are there—what is needed is the will to fit them together.
Another task for the Government is to persuade companies of the financial benefits of training. The existing benefits and tax system helps employers to operate old equipment which requires low skill and little organisation. Low pay subsidised by the benefits system and long hours can make that profitable. It is competition which forces employers to invest in new equipment and better organisation and better management which demands more skill and versatility from the staff.

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I look forward to hearing from the Minister how he would alter the tax and benefits system to encourage investment in training; how he will break down the barriers of perceptions so that the various schemes will be seen as partnerships and not as compliance; and how he will deliver the in-company training and learning necessary to upgrade our workforce and encourage people to take up NVQs from the present rather pathetic low level.
7.14 p.m.
Viscount Thurso: My Lords, I too congratulate the noble Earl upon providing this opportunity to debate such an important subject. All training, particularly on-the-job or in-work training, is absolutely vital for all industries, but in my own industry, the hospitality industry, it is particularly important. In my current business, the payroll cost is in excess of 40 per cent. of turnover on an annualised basis and is therefore by far the largest cost we bear. Training is vital both for ensuring a continuous quality of product and for achieving maximum efficiency of operation.
I should like to touch briefly on three points. I turn first to a success. Without doubt, Investors in People, although not in itself a training mechanism, has been a great success. It relies heavily on training to achieve its objectives and consequently promotes it. Investors in People has been warmly embraced by the hospitality industry and is now established as a hallmark of businesses which genuinely believe in the importance of the human resource.
The first requirement of successful training is for the management of any business to have a clear understanding of its training needs so that it can develop a training plan. Investors in People, requiring as it does the establishment of objectives and a plan for the business, ensures that the business has a well-thought-through training plan.
Investors in People also requires management to establish effective communication with all levels in the workplace, which is another key ingredient for ensuring the success of training. Investors in People has therefore been extremely successful in the hospitality industry, and both the British Hospitality Association and the Hotel, Catering and Institutional Management Association, which represent respectively the establishments and the people within the industry, support it fully. The decision by many TECs throughout the country to use much of their funds in promoting Investors in People has been an extremely cost-effective method of maximising the training resource in work. I sincerely hope that they will continue to receive every encouragement from the Government to continue that.
Turning now to NVQs, the picture is less rosy, as the noble Lord, Lord Haskel, said. Without doubt, the concept of providing a qualification to a nationally recognised standard through testing competence in the workplace is an extremely good one. Indeed, it enjoys support from both the CBI and the TUC, as well as many industry bodies. Colleges offer NVQs with great success. However, in the academic situation it should be
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noted that NVQs have only replaced other qualifications such as the old City and Guilds and, although the label has changed, the product is pretty much the same.
The concept of NVQs was to extend the ability to earn qualifications into the workplace and, as I have already said, it is a laudable concept. However, in practice in the workplace NVQs are simply not working. In our industry—I believe that this is the case in other industries also—they are too complicated, too bureaucratic and too expensive. Consequently, the very businesses which would benefit most from them, small businesses, are turned off by the work complexity and the cost of attempting to implement them. I can testify to that because that is exactly the decision that we have taken in my own business, although we have gone in for Investors in People.
That fundamental flaw has meant that the take-up of NVQs by businesses has been nowhere near what one would need for it to be counted as successful. I understand that the Beaumont Committee has suggested simplifications, but it is still the view of our industry that NVQs are fundamentally too complicated. I stress, however, that there is absolute support for the concept and objective, but a smoother and less costly mechanism is required for NVQs to become the success that they deserve to be.
I should like to make one final point on a slightly more general note. It is, I think, fairly well recognised—it is certainly alleged by many people—that the strongest influence in senior management in the United Kingdom comes from the accountancy profession. A great many of our chief executives in this country began their career by qualifying as accountants and have reached the top job having been finance director. That is in sharp contrast to what happens in other countries and other cultures, most notably the United States, where the predominant influence in achieving the role of chief executive officer is through a more general business education, such as an MBA.
As a result, there is quite a wide difference in management culture, since we tend to take a narrower cost control and return approach rather than a wider strategic planning and investment approach to the profitability of our businesses. Too often, training is seen as an easy line to cut in the budget when times are tough or the return has to be improved. Without doubt in the short term a cut in training can achieve that, but it also lowers the profitability of the business in the long term.
I greatly regretted it when the training levy was abolished in our industry, because it worked successfully in ensuring that there was continuity of training in businesses. Certainly in the hospitality industry I am constantly struck by the low overall management skills of middle and senior management. They are good at everything we teach them in terms of production, but in overall management and administration we are weak.
To try to help combat that in a small way, the Master Innholders, of which I am chairman, has created a scholarship for people in our industry to attend management colleges. I recently visited both Ashridge and Cranfield as part of that exercise.

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More than anything else, if we could find a method by which we could encourage companies, particularly those who would not normally consider training their senior and middle management, to invest in management education, then we would, I believe, make an enormous impact on levels of training undertaken in the workplace, as those managers would, first, understand the need and relevance of in-work training; and, secondly, have the knowledge and skill to implement it. It is always said:
"There is no such thing as a bad soldier, only bad officers".
One could well say the same for managers. Management education is fundamental to the economic success of all industries, and hence of the country. I very much hope the Government will look hard at what they can do in that area.
7.22 p.m.
Lord Trefgarne: My Lords, I, too, am grateful to my noble friend Lord Dundee for raising this important issue.
Before I begin my remarks, I must declare an interest as chairman of the Engineering Training Authority, the successor body to the Engineering Industry Training Board, which is now an independent employer-led charitable trust, and also as president of Metcom, the Mechanical and Metal Trades Confederation, which has a strong and active interest in work-based training. I receive a salary and a fee respectively from those appointments.
Many of us have read with great interest the conclusions of the recently published report by Sir Ron Dearing and his committee which reviewed the qualifications framework for 16 to 19 year-olds. Of particular relevance to this debate is the emphasis that Sir Ron gives to creating parity of esteem to bridge the perceived gap between academic and vocational qualifications, principally by ensuring parity of quality for the different qualification routes.
I listened with interest, and some surprise I must say, to the speech of the noble Lord, Lord Haskel. I do not agree with him that NVQs are the failure that he seems to think. In the engineering industry at least—I confess that my experience is confined to that area—the take up is increasingly encouraging. Nor do I agree, I must confess, with the noble Viscount, Lord Thurso, about the inadequacy of the qualifications provided. They may be too difficult and too complicated for some industries, but the engineering industry, at least, facing as it does competition from competitors from around the world, has to ensure that its employees are of world standard. Reducing or keeping low the standard available through NVQs will not achieve that.
The timing of our debate this afternoon means that none of us has yet had a chance to study the Government's third competitiveness White Paper, which was published today and which we know contains some valuable information on international skills benchmarking. It was however very clear from the earlier competitiveness White Papers that training, and in particular work-based training, is one of the 10 critical key areas to which our industries must pay
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attention if we are to improve the underlying performance and competitiveness of United Kingdom industry.
Engineering is, of course, an industry with a proud tradition in work-based training stretching back at least to the late 18th century, but over the past 20 years or so, the industry has undergone some profound structural changes which have had an inevitable influence on the work-based training scene.
Overall, the number of people employed in engineering manufacturing has almost halved since 1980 from about 3 million to close on 1.6 million. But overall output is about the same as it was in 1980. In essence, large productivity gains have been made, which have closed the productivity gap between the UK and our main competitors but have not yet eliminated it.
Much of the contraction is the result of voluntary redundancy at the upper end of the age profile, and we have seen the average age of the workforce in engineering fall from about 51 years to 39 years or thereabouts.
Technological changes have also altered the skills needs of employers, who nowadays need a workforce which is at once flexible, responsive and multiskilled.
With the significant rise in young people staying on in full-time education past 16, we have seen the expectations of some employers change. Many have been tempted to turn away from the traditional work-based apprenticeship and instead to recruit young people directly from the further education colleges. That trend has, in part, been driven by funding considerations.
The public funding provided to companies via the training and enterprise councils varies from place to place, but is on average just under half that provided for similar training leading to an identical NVQ level 3 qualification via an FEFC-funded establishment.
To train an engineering apprentice costs an employer anything from £26,000 to, say, £40,000, depending upon the type of training provided. The maximum funding available from the local TEC to help with that training would be about £7,000 and can often be much less.
The largest cost of engineering apprentice training comes during the foundation period at the beginning of the training, but most of the TEC funding is output related and therefore comes at the end. Thus, if a trainee discontinues his training before he qualifies, the training provider may receive only a tiny fraction of the costs incurred. I must say plainly to my noble friend that that is a major barrier when trying to convince engineering employers to commit to work-based training.
That is not to say that there are not some bright spots. The engineering modern apprenticeship, which has been developed by employers for employers, is finding increasing acceptance and is fulfilling a real need by encouraging talented young people into the profession via a work-based route.
Early next month I shall be speaking in Cardiff at one of a series of regional conferences that are being organised under the auspices of the Action For

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Engineering initiative which was established by my right honourable friend, the then President of the Board of Trade, Michael Heseltine, in 1994.
My right honourable friend set up six specialist task forces to spearhead the initiative and one of those, Task Force 3, was charged with improving the skills and numbers of employees in the engineering industry qualifying at intermediate levels as technicians, craftsmen/women, team leaders and supervisors.
Study of best practice by the task force in engineering enterprises of all sizes has confirmed that those enterprises which are prepared to commit resources and to invest in work-based training are more successful than others in their peer group and also that they are more competitive internationally.
Most of the successful enterprises have made a commitment to the Investors in People national standard, to which reference has been made. This sets a level of good practice for the continuous development of people in the workforce throughout their whole working life to improve the performance of the business.
The main output of the Action for Engineering Task Force 3, which I shall be supporting in Cardiff, will be to throw down a challenge to engineering employers to invest in certain minimum levels of commitment for the training of their new recruits and for the continuous development of their adult workforce.
Companies in all sectors in the United Kingdom are facing an increasingly competitive environment. Emerging nations are achieving rapid growth rates. Advances in technology are opening new markets and transforming existing industries. Those challenges present opportunities to those who seize them and threats to those who do not.
Work-based training is only one of the factors which needs to be addressed within this overall picture, but it is an important one and one which will, if tackled properly, provide a focus for improving the competitiveness and productivity of our workforce, our industry and our country.
7.30 p.m.
Baroness Seear: My Lords, I too declare an interest in that I am chairman of the lead body for administration. Like the noble Lord, Lord Trefgarne, I am not prepared to say that the development of NVQs has been so unsuccessful, as suggested by other speakers. The administration lead body has sold a large number of standards. We have been approached, for example, by overseas countries which want to find out more about our standards and to buy them.
I do not believe that anyone will accuse me of being inclined to load praise on the Government Front Bench. I find that a very unusual position to be in. However, the Government must be congratulated on their attempt to tackle the fundamental weakness in the British economy; that is, the gross under-training of people throughout the economy. The imagination in setting up the whole NVQ scheme and supporting it is to be praised, as is the Government's introduction of the new
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apprenticeship scheme. That is linked in many interesting ways with the work of the NVQs; the two are closely related.
I suspect that the public as a whole, even Members of your Lordships' House, have not realised what a vast undertaking it is. Is it really understood that the proposal under the NVQ scheme is that every single job in this country should have an accepted standard as a qualification and that that should be done at five levels, starting from the lowest to the professional qualifications. That is a huge and ambitious scheme. It is entirely satisfactory and the Government are to be much admired for taking it on.
However, we must not believe that it will be easily fulfilled. Those of us who are close to the work are most anxious that the Government should continue to back the scheme until the good work that has already been done reaches fulfilment. It is not in the least surprising that there are many understandable and correct criticisms about the way in which NVQs have been developed and the standards that have been produced. The Beaumont Report, while approving of NVQs, pointed out a number of deficiencies. Those deficiencies require a great deal of work if they are to be overcome. Although a certain stage in the NVQ development has been reached, I hope that the Government will not limit their support. That would be an extremely foolish economy because a great deal of money has been given to the development of the scheme. That money has been well spent but the job is not finished. To cut back on resources would be a folly of the first order.
There are a number of things which need to be done. Of considerable importance is the fact, as Beaumont pointed out, that the way in which we are to achieve the proper understanding and knowledge which must underlie the acquisition of skills has not yet been worked out. How can that be introduced into the NVQ scheme and how can it be assessed? It is vital that that knowledge and understanding should be a totally satisfactory part of the NVQ scheme, not just because knowledge and understanding are good things, which obviously they are, but because in the modern labour market and in the modern economy few jobs remain stationary.
Jobs are no longer cast in concrete, if they ever were. A particular job in respect of which someone will be tested for an NVQ will in all probability no longer exist in two or three years' time. The person carrying out the job will have to move on to something else. That may be closely related to what he has been doing but he will not be able to make the transfer, which is an essential part of operating a modern economy, unless he has adequate knowledge and understanding. Without that a great deal of money that is being spent on the NVQ scheme will be wasted because of the speed with which jobs change.
Other weaknesses have also been identified. I agree that there is too much jargon. Every occupation has its jargon; everyone uses it but accuses other people of using jargon and not taking the trouble to use the proper language in which things are described. However, I believe that there could be a great deal of simplification.

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The standards are and have been expensive to produce. The Government have put a great deal of money into the scheme. There is no reason why, as it is raising the level of skills and knowledge inside industry to the benefit of employers, someone should not pay a reasonable amount for the use of the standards which have been so laboriously, expertly and expensively developed. There is a danger that the Government will believe that they have spent a great deal of money and that it is about time the scheme paid for itself. There is a fear that there will be cutbacks which will undermine the good work that has already been done.
I wish to make a point that is unconnected with NVQs, although there are problems at the higher levels. A benefit of the NVQs is that they are forcing the jungle of professional qualifications at the middle and higher levels in industry to be sorted out and to become better related one to the other. That is highly desirable, but the process is by no means complete. We need more time and resources to ensure that that is properly carried out.
I turn to a point that I have made in your Lordships' House on previous occasions and one which I put to Sir Ron Dearing who was not uninterested. We are deeply troubled about youth unemployment; about the large number of youngsters between 16 and 18 who have no jobs. Because they have no jobs they have no training. I shall not recite the gloomy tale of what happens to so many of those unemployed, untrained youngsters. The recommendation increasingly in the political programmes of all parties is that there should be daytime release for youngsters to receive education and training.
A few years ago I operated a scheme which was so simple that perhaps people did not realise how easy and beneficial it was. It was done in the company for which I worked. For each job carried out by a school-leaver two were taken on. Half the day was spent at work and the other half in training and education. As 16 to 18 year-olds receive no benefit, the fact that they would not be earning high wages should not be a disincentive. However, if one takes on two school-leavers for each job one makes a sizeable contribution towards reducing the number of school-leavers out of work. One also ensures that by spending half the time at work—many youngsters learn better when they are in work—and half in training one is developing people who have the right kind of training related to work. That means something to them during the crucial years when they should be learning but when a great many of them are not. I should like the opportunity to talk to the Minister about the matter, but I beg the Government to consider such schemes. They would not be expensive and I believe that they would make a great deal of difference.
Finally, I wish to revert to another aspect of NVQs. As I have said, I do not often find myself singing hymns in praise of government departments. However, as regards the development of NVQs I believe that the collaboration between the Department for Education and Employment and the headquarters of NVQs has been extremely beneficial. It is a difficult area to develop and all of us are feeling our way. We do not know the answers; we are experimenting. The advantage of having two authoritative bodies which can rub their
1902
minds together and can check one another is of the greatest importance. I hope that the department will keep its interest in and control over the developments.
7.40 p.m.
Baroness Turner of Camden: My Lords, I am sure that the House is grateful to the noble Earl for introducing a debate on this important subject of on-the-job training and I should like to express my appreciation to him.
Britain's record in skills training is not a good one. The OECD says that Britain has a skills deficit with other developed countries. Seven million working people in Britain today have no qualifications at all and those with fewer formal educational qualifications are much less likely to receive training than those who already have qualifications. People in small firms, in particular, have fewer opportunities for training than those working in larger companies, and several noble Lords referred to that.
We have seen over the last 20 years the decline of the old apprenticeship training. The noble Lord, Lord Trefgarne, referred to that. That has disappeared, along with much of heavy manufacturing industry and it was at one time the main route to the acquisition of skills for many people from poorer backgrounds—mainly young men, of course, about whom there is now much concern, since so many are without employment or the prospect of it.
The Engineering Construction Industry Training Board has maintained apprenticeship schemes and, indeed, it and the Construction Industry Training Board are much to be commended for the work they have done and continue to do in the training field.
I was for many years a supporter of ITBs. I still believe that the CITB and the ECITB do a very good job—supported by both employers and trade unions—and I have argued, whenever regulations concerning them come before this House, for their retention. The Government have so far agreed to this, although there is still not a commitment to their continued existence.
The grant and levy system by which they are sustained nevertheless does have some flaws. There are exemptions for small firms. I am quite prepared to accept that the ITB system may no longer be adequate in the light of the changing shape of industry and of working patterns, but certainly those two boards should be retained. My union—the MSF—recently undertook a survey, jointly with the University of Leeds, among its own members to ascertain their experience of vocational training. It must be remembered that this was a survey among white-collar employees of a reasonable educational standard. Nevertheless, some deficiencies were revealed. Although the majority of the respondents had received some form of training since joining their present employer, only about 22 per cent. were currently receiving training. Where training was received, it was typically of very short duration; that is, fewer than three days. Only in a relatively small number of cases-30 per cent.—had the training resulted in the award of a recognised qualification, and while 66 per cent. of the

1903
respondents had heard of national vocational qualifications, only 6 per cent. had been given the chance to train for an NVQ.
It is clear that ways must be found to encourage employers who do not provide training to do so, or who do not participate in TEC schemes to do so and to provide the necessary training themselves. It is no longer acceptable that firms who do not train should get by through poaching employees from firms who do train. This is important, not only for the general success of industry and commerce in this country, but also as an attack upon the problem of unemployment.
Individuals also must be motivated to improve the skills they already have. As everyone knows, we now live in an economy which is increasingly globalised. We have no hope of competing with newly developing countries in the Far East on the basis of a low-wage economy. We cannot hope to undercut them by developing a sweated labour force nor should we wish to do so. We have to become and remain a high wage, high tech, high quality economy and the development of a highly skilled workforce is a part of this. We have to equip people to cope with change. Only if we do so can we hope to overcome the deep sense of insecurity which affects large parts of the workforce—in industry and commerce and services.
This lack of security is the cause of the "feel bad" factor since even those in employment wonder just how secure that employment is and whether they will have it next year. This undoubtedly leads to stress with all that can mean in terms of sickness, lack of consumer confidence and even marriage breakdown.
Running an economy on these lines may produce some short-term advantages but they are essentially ephemeral. The "flexibility" which the Government advocate and which has been adopted by so many firms tends to militate against good on-the-job training, since what is the point of an employer bothering to train someone who is on a short-term contract? Neglect of long-term perspectives has led to our present situation, which is far less happy than government spokespersons would have us believe. In fact, we continue to have a serious employment problem, particularly among men, and particularly in areas where there was once heavy industry and most of the new employment created has been part-time, among women, and low-paid.
There have however been a number of government initiatives which have been worth while and upon which we should build. There is the NVQ system under which people may attain continually improving levels of skills and the Investors-in-People initiative. However, far too few small employers participate and the NVQ system needs to be developed so that participants have the opportunity to develop portable skills.
Small enterprises are important wealth creators and employers of labour. There ought to be a suitable statutory framework to encourage them to provide both on the job and off the job training. Six out of 10 small firms have no contact at all with their local TEC. Somehow they have to be persuaded that training is in their interest: it produces greater staff commitment, and
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therefore less absenteeism, less wastage and fewer accidents. I do not know whether the possibility of encouragement through the tax or national insurance system has been considered, but it might be an idea. My noble friend Lord Haskel mentioned that. In larger firms, where there is trade union recognition, there have been a number of innovative schemes in which unions have participated. Some unions, including my own, have been entering into training agreements with managements because they rightly see that this is just as important, perhaps even more so, to their members as the next wage round. Pilot schemes have also been introduced by some TECs to promote individual training.
My own party is developing the idea of individual learning accounts from which employees could pay for accredited courses to develop portable skills. In this way the Government could encourage individuals to take charge of their own career development and employers could be encouraged to participate and perhaps to contribute.
It is clear that it is in all our interests to develop innovatory ways of persuading both employers and employees to undertake and maintain continuous skills training. I thank the noble Earl for giving us the opportunity this evening to debate this important topic and await with interest the response of the Government.
7.49 p.m.
The Minister of State, Department for Education and Employment (Lord Henley): My Lords, like other noble Lords, I am grateful to my noble friend for initiating this debate. I hope that in the short time available, I shall be able to deal with some of the points which have been raised and assure the House of the Government's commitment to a well-educated and well-trained workforce, which we believe is absolutely crucial to this country's competitiveness.
I referred to a well-educated and well-trained workforce. I make no apology for mentioning education and training because that is very much the reality behind the merger of the former Department of Employment and the Department for Education to form the new department. I believe that that merger has brought a whole new coherence to the concept of lifetime learning from nursery education, which we shall discuss on Monday, right through to adult education.
As I said, we believe very strongly in training, and I intend to deal with that in due course. But it may help if I start with the point made by my noble friend about the Workstart project and the pilot schemes in that field. I am grateful to my noble friend for reminding the House that the Employment Committee in another place thought very highly of that initiative, as does my noble friend.
The Government have operated Workstart pilots to see whether such a selective approach can help the very long-term unemployed into work without inefficiency and the distortionary effect associated with the more general employment subsidies, which I suspect would be welcomed by the party opposite. It remains the Government's view that employment subsidies may

1905
have a place in whole menu of opportunities, particularly for the long-term unemployed. We shall make a decision on the future of the workstart project based on the evaluation of the pilot schemes.
My noble friend asked whether we would consider other pilots. Obviously, I have to say yes. That is the point behind the experiment and why we would like to continue to try other methods as appropriate. Certainly the noble Baroness, Lady Seear, made some most interesting suggestions. Indeed, I would be most happy to look at them in due course should she wish me to do so. However, I am sure the noble Baroness understands that, with the constraints of time which apply this evening, it will be very difficult for me to deal with them more fully at present.
As I said, we believe strongly in the importance of training and, particularly, in-work training. However, the employers must have the lead responsibility. It is they who very much know what their skill needs are; it is they who know their business needs; and, indeed, it is they who know their competitive needs.
The Government will continue to invest in training, as they always have done. But their prime role must be to give leadership and strategic direction and guidance. That is what I believe we have done. At a national level we have put in place the qualifications framework about which many noble Lords spoke. I am especially grateful for the welcome that my noble friend Lord Trefgarne gave to NVQs and even more grateful for the welcome—even if I was somewhat surprised by it—from the noble Baroness, Lady Seear. With NVQs I believe that we have benchmarks against which we can measure performance—that is, national targets. However, we do need to involve business, as I believe the noble Baroness, will accept, at all stages. Again, I believe that we have done so.
We fully support the national education and training targets devised by the CBI. We have supported the setting up of NVQs and we have encouraged the Investors in People initiative, mentioned by the noble Viscount, Lord Thurso, to which I shall refer in due course. I accept that the targets are tough, but I believe that they need to be tough if we are to compete in the future.
Again, as other speakers mentioned, today we published the skills audit results which highlighted areas where, obviously, further improvement is needed. The targets help us to know where we are. However, for the targets to be meaningful, we need measurements. For education we have the examination results and for training we have both the NVQs and the GNVQs that fit somewhere between the more academic qualifications and the NVQs.
I accept that a number of criticisms have been made of NVQs. That is why we believe that their reform is central to our whole United Kingdom training strategy. I believe that that reform is working. Something over 1 million NVQs have now been awarded, as I believe the noble Lord, Lord Haskel, made clear. There are now 840 NVQs—possibly too many in some areas because I believe that there is a good deal of overlap—which cover about 88 per cent., not 85 per cent., if I may
1906
correct the noble Lord, Lord Haskel, of the workforce. As I believe many speakers made clear, employers like them and are using them. Overseen by the National Council for Vocational Qualifications, a business led organisation, I believe that they have cut through the jungle of myriads of qualifications that we had before.
As the noble Baroness, Lady Seear, made quite clear, we have reviewed the most frequently used NVQs. That was the Beaumont Review of what we initially called the top 100 NVQs. That is a major strand of the measures to improve the quality, rigour and take-up of NVQs. I am most grateful for the work that Gordon Beaumont undertook in that review. I believe that we could have a whole debate—indeed, a whole day's debate—on what Gordon Beaumont reported and what the likely responses ought to be.
Despite the wide approach adopted and the diversity of perspectives, the findings are remarkably consistent. There is widespread support for NVQs generally and the specific benefits that have resulted. I believe that the findings—and, indeed, the review does highlight a number of weaknesses, as many speakers made clear; and I accept that there are those weaknesses—will help us to strengthen their effectiveness, particularly through simplification (much was made of excessive bureaucracy and jargon) and clearer specifications. In due course, I hope that that will lead to increased coverage and take up.
Obviously I should like to say a great deal more about the success of NVQs; indeed, I could recite a whole number of different cases from different companies in different sectors to show just how much they have done to improve the motivation of their workforce by improved productivity, and so on. However, I am short of time tonight and cannot go into that aspect of the matter. But, as I said, that might be the subject for another debate.
I move on to the training and enterprise councils. I believe that they have been a great success. It is hard to believe that the first one was set up only five years ago. They are now fully accepted, fully efficient private sector organisations that actually do deliver, as I believe my noble friend Lord Trefgarne made clear. Overseen by the TEC National Council and led by top local businessmen, they are the Government's key private sector partners in delivering training in the regions. They are critical to the regeneration and economic development of the community. Sensible but effective financial controls and licensing mean that the TECs provide value for money. I think that I can say that they are very much the Government's training champion at a local level.
The Government are keen to ensure that the resources they devote to training are well spent. That is why they target assistance. They target the long-term unemployed through Training for Work which helps about 200,000 people annually, and they target young people. Again, I accept what the noble Baroness, Lady Seear, said about the importance of improving the levels of unemployment among young people. I accept that they are high; indeed, the figures stand at some 15 per cent. However, I must make the brief political point that, if

1907
we went down the line suggested by the party opposite of signing up to the social chapter and a minimum wage, as likely as not we would see those figures rising to levels that we see in France of some 27 per cent., in Italy of some 36 per cent. and, indeed, in Spain of 39 per cent. I am just reminding the noble Baroness of those figures—
Baroness Turner of Camden: There is no time to interrupt!
Lord Henley: My Lords, noble Lords may think that I am going on too long, but I believe that I do indeed have 12 minutes and I shall continue as I wish.
As I made quite clear, we believe that employers have the lead responsibility for in-work training, but we also believe that we should encourage this—that is what I want to get across to the noble Lord, Lord Haskel—through the Investors in People initiative. It is logical that a company's most important assets are its people. It is logical that we should properly develop those people. It is logical that such people will contribute more fully to the company if they are committed. If they are committed, it is because the company cares. In that type of environment the business prospers.
That culture, which after all is only common sense, has produced tangible results, such as greater customer satisfaction, increased profits and generally more effective working of a company's staff and its business. That is why the Government spend about £50 million per annum. I believe that the results are very good indeed. We now have about 21,000 organisations employing 5 million employees who are committed to that very exacting standard.
I believe that that should apply to all businesses, whether large or small. The noble Lord, Lord Haskel, mentioned small businesses. We know that small businesses need extra help to develop their workforce. Obviously training can be very expensive in terms of time. A simple equation used by some is that time for training equals production time lost. I believe that to be a mistake, short-sighted and wrong. But the competitiveness White Papers have very much addressed that problem. That is why we introduced the Skills for Small Businesses initiative. That is why we conceived the Skills Challenge—a fund for small businesses; and, indeed, why we have small firms training loans.
Many thousands of small businesses have been helped to develop in-work training in that way. Only today, as I am sure the noble Lord is aware, the Government published their response to the points raised from the "Your Business Matters" regional conferences, organised and facilitated by the Government, where small businesses were able to articulate their concerns. We have listened to those concerns and we will certainly act upon the points that were made.
As I said at the beginning of my remarks, we also believe in the culture of life-long learning. It sees vocational training as an equally valued route for young people into the world of work. A learning culture inculcated in young people will, I believe, last into
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adulthood. Training is a means for the individual to reach full potential and for a business to prosper. Again, that is why we have looked critically at the education and training needs of our young people. That is also why we have asked Sir Ron Dearing to look at the routes to the world of work and the qualification structure for the 14 to 19 age group. Indeed, that was also mentioned by my noble friend, and, again, that is why we have introduced modern apprenticeships, which were praised by my noble friend Lord Trefgarne and the noble Baroness, Lady Seear. We have committed much money to that and I believe we are making a great deal of progress. We already expect to see the number of young people gaining NVQs at level 3 to increase to over 60,000 a year through the modern apprenticeship movement.
Today is a significant day. We have seen the publication of our third competitiveness White Paper. We have seen the skills audit and the Government response to the "Your Business Matters" conferences. All of those had one thing in common—the need to make the best use of our most valuable resource, our people. I believe that the economy is healthy and the country is healthy and that we are now competing with our global rivals. The Government know that to maintain our position we must have a well-educated and well-trained workforce. We are fostering the reality of lifetime learning—as I said at the beginning—from nursery vouchers into adulthood. A key component of that will always be in-work training—a component recognised, encouraged and acted upon by this Government.

Housing Bill
8.1 p.m.
House again in Committee.
Clause 78 [Restriction on termination of tenancy for failure to pay service charge]:
Lord Lucas Lord Lucas moved Amendment No. 242K:
Page 50, line 37, at end insert—
("() The reference in subsection (1) to premises let as a dwelling does not include premises let on—

(a) a tenancy to which Part II of the Landlord and Tenant Act 1954 applies (business tenancies),

(b) a tenancy of an agricultural holding within the meaning of the Agricultural Holdings Act 1986 in relation to which that Act applies, or

(c) a farm business tenancy within the meaning of the Agricultural Tenancies Act 1995.").

The noble Lord said: In moving Amendment No. 242K I wish to speak also to Amendments Nos. 242L and 242M. At last we come to some amendments on which we are totally in agreement. These measures are designed to improve tenants' rights to challenge unreasonable service charges. Many Members of the Committee will be aware of the increasing concern over recent months about a minority of landlords who exploit

1909
their position to levy excessive service charges. The measures in Chapter I of Part III are designed to curb these abuses.
One of the techniques used by these landlords is to exercise the right of forfeiture as soon as any dispute arises. This intimidates leaseholders into paying service charges even when they are excessive. Forfeiture is an important weapon of last resort for landlords to make sure that service charge contributions can be collected and buildings can therefore be insured and maintained. But it should be a last resort. Unfortunately, some landlords use this weapon even while a leaseholder may be seeking to challenge whether a service charge is reasonable.
In practice landlords very rarely obtain forfeiture. If the leaseholder is properly advised, it is possible to resist forfeiture and also to dispute service charges. But many leaseholders may be intimidated into paying up by the mere thought that they may lose their home to the landlord, even though in practice that is unlikely. Clause 78 therefore provides a new arrangement. Landlords will only be able to proceed to forfeiture once it has been established that a service charge is lawfully due. That may be done either by the leaseholder admitting that the sum is due or by the landlord obtaining a court judgment that it is due. So if the leaseholder wishes to fight, he will be able to do so before the court or before the leasehold valuation tribunal purely on the basis of a dispute about the service charge rather than one on the basis of a forfeiture action.
It is the Government's intention that the procedure should apply to residential flats and houses. Although the clause refers to, "premises let as a dwelling", there is some concern that that may not be sufficiently precise. Amendment No. 242K therefore makes it clear that the change applies only to residential tenancies and not to business or agricultural lettings. Those regimes have always been separate and distinctive from the regime applying to residential tenancies, and it is important to clarify that the provisions in the Bill have no impact in those sectors.
Subsection (5) of Clause 78 requires that any landlord serving the statutory notice often required before seeking forfeiture—known colloquially as a Section 146 notice—should make clear that the landlord cannot begin forfeiture until the liability to pay the service charge has been established. Otherwise some landlords might seek to intimidate leaseholders with Section 146 notices implying that forfeiture is imminent. Unless the tenants know better, they might be paying up even where they have a legitimate case. But there was some concern in another place that landlords might do this in obscure or legalistic language. The Government are therefore taking a power for the Secretary of State to prescribe a form of words to be used if that proves necessary or if it seems there would be advantage in having a standard form of words. Amendments Nos. 242L and 242M achieve this. I beg to move.
Lord Dubs: In principle I support any amendments which safeguard the rights of tenants; that is, people occupying their flats. However, I wish to raise a specific issue on Amendment No. 242M. The amendment states:
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"The Secretary of State may by regulations prescribe a form of words"
in order that proper notice is given. That provision is quite reasonable but I am concerned about subsection (4) of the proposed new clause which states:
"The information or words required must be in characters not less conspicuous than those used in any other part of the notice".
I appreciate that we do not normally obtain such detail in legislation as regards pieces of paper. However, there is a certain ambiguity here in that we could be talking about a small footnote printed in a small typeface. Therefore the information or words might not be more conspicuous in a footnote. I wonder whether the Minister can find some way to tighten up the wording so as to achieve fully the laudable aim he described.
Lord Lucas: I am delighted that the noble Lord supports the aim of these amendments. I shall certainly examine the point he made about Amendment No. 242M. I shall look at the wording, if I may, at leisure to see whether I can either give some comfort that the words mean what the noble Lord and I think they should mean, or, if an amendment is necessary, bring that forward on Report.
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 242L:
Page 51, line 1, leave out subsection (5).
On Question, amendment agreed to.
Clause 78, as amended, agreed to.
Lord Lucas Lord Lucas moved Amendment No. 242M:
After Clause 78, insert the following new clause—
NOTICE UNDER s.146 OF THE LAW OF PROPERTY ACT 1925
(".—(1) Nothing in section 78 (restriction on termination of tenancy for failure to pay service charge) affects the power of a landlord to serve a notice under section 146(1) of the Law of Property Act 1925 (restrictions on and relief against forfeiture: notice of breach of covenant or condition).
(2) But such a notice in respect of premises let as a dwelling and failure to pay a service charge is ineffective unless it complies with the following requirements.
(3) It must state that section 78 applies and set out the effect of subsection (1) of that section.
The Secretary of State may by regulations prescribe a form of words to be used for that purpose.
(4) The information or words required must be in characters not less conspicuous than those used in any other part of the notice.
(5) In this section "premises let as a dwelling" and "service charge" have the same meaning as in section 78.
(6) Regulations under this section—

(a) shall be made by statutory instrument, and

(b) may make different provision for different cases or classes of case including different areas.").

On Question, amendment agreed to.
Clause 79 [Determination of reasonableness of service charges]:
Lord Lucas Lord Lucas moved Amendment No. 243:
Page 52, leave out lines 32 to 47 and insert—
("() The power to make regulations under section 74(1)(b) of the Rent Act 1977 (procedure of rent assessment committees) extends to prescribing the procedure to be followed in connection with any proceedings before a leasehold valuation tribunal under this Act.

1911
() Such regulations may, in particular, make provision—

(a) for securing consistency where numerous applications under this Act are or may be brought in respect of the same or substantially the same matters; and

(b) empowering a leasehold valuation tribunal to dismiss an application, in whole or in part, on the ground that it is frivolous or vexatious or otherwise an abuse of the process of the tribunal.'"').

The noble Lord said: In moving Amendment No. 243 I wish to speak also to Amendments Nos. 244, 245, 246ZA, 247 and 248. This group of amendments is concerned with establishing procedures which leasehold valuation tribunals (LVTs) should follow when dealing with service charge disputes and applications for the appointment of a manager. Amendment No. 243 will allow the procedural rules for LVTs to secure consistency in handling separate cases about the same issue. For example, if a number of tenants in a block challenge the same service charge it may be convenient to join the separate cases or to select one as representative of the class. If a case has previously been decided on the same point and no new evidence is available, the LVT will want to give a summary judgment.
The second element of Amendment No. 243 will allow LVTs to strike out frivolous or vexatious cases or those which are an abuse of process. The provision is aimed equally at landlords and tenants. The Committee will be familiar with the chronically litigious person who is out of step with all his neighbours. On the other hand, the unscrupulous landlords at which our reforms are aimed are quite capable of attempting to wear down their tenants by taking all disputes to adjudication. The LVTs will be able to throw out such cases if they are an abuse of process.
Clause 79 already allows LVTs to order that one party to an action must reimburse the fee to the other. Amendment No. 245 allows the LVT to order that only part of the fee should be reimbursed. For example, there may be a dispute where the landlord has asked for service charges of, say, £5,000, prompting the tenants to apply for a determination, maintaining that only £3,000 is reasonable.
If the LVT decides that the correct figure is £4,000, it may well wish to order that half the fee should be reimbursed to the tenants. Without this amendment it would be all or nothing.
Amendments Nos. 247 and 248 parallel the provisions of Amendments Nos. 243 and 245 for the application to the LVT for the appointment of a manager under Clause 81.
I now turn to Amendment No. 246ZA, and its consequential amendment, Amendment No. 244. Service charge disputes are likely to arise both in the county court as well as the LVT. A common scenario may be that the tenants dispute their service charges as part of a wider dispute with their landlord. The landlord, unable, because of the provisions of Clause 78, to threaten them with forfeiture for their alleged breach of covenant, starts a county court action for the recovery of the debt. The court can remit the determination of the reasonableness of the service charge to the LVT, but it
1912
may be that only part of the service charge is in dispute. It is possible that the painting of the window frames is agreed but the roof repairs are contentious.
Amendment No. 246ZA will allow the court to refer the contentious items to the LVT and to dispose of the rest, enforcing the tenants' obligation to pay the amount which is not in dispute to the landlord. This means that one contentious item will not hold up a decision on the rest. The LVT's determination may then be enforced by the court as if it were its own order. I beg to move.
Baroness Gardner of Parkes: I particularly welcome Amendment No. 243 regarding the right to dismiss a frivolous or vexatious application. I sit on industrial tribunals. We did not have that power until the last employment Act. It was quite remarkable how many vexatious people turned up. I was told that it involved probably only about half a dozen people in the whole country, but that had a remarkable effect. I am, therefore, pleased about that provision.
I understand that under paragraph (c) of new section (2A) of Clause 79, an application may be made to the tribunal as to,
"whether an amount payable before costs are incurred is reasonable".
Under that provision could a landlord apply to set up a sinking fund for a building? In Australia that is a very common process. A block of flats may have what is called a sinking fund. Every year people pay a small amount into that fund. When a roof or a major repair is suddenly sprung upon the tenant, there are at least already some funds earning interest in hand for the tenants' benefit. That is rather better than suddenly finding oneself faced with an enormous Bill.
If the Minister cannot answer now, I shall be pleased to have the answer to this question in a letter. If the lease does not so specify, can a landlord still go to a tribunal to make such an application? I am not clear whether there is any power in the Bill for that application. It is an interesting point to consider.
Lord Monkswell: Perhaps I may inquire of the Minister about the frivolous and vexatious applicant. Presumably the leasehold valuation tribunal will itself determine that issue. The applicant may think that it is an important issue. It may be a matter of judgment. Does the applicant have any right of appeal against that decision of the LVT? I presume that he would. It would be nice if the Minister will confirm that point.
Baroness Gardner of Parkes: In the case of an industrial tribunal, the applicant can apply to the court. Even if he has been ruled a vexatious litigant, that does not prevent him bringing a genuine case. He can make an application to the court in order to have the right to go to the tribunal. But he cannot routinely put in dozens of applications to the tribunal. I shall be interested to hear from the Minister whether the position is the same under the Bill.
Lord Lucas: Some things the Minister would be interested to hear too!

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As regards my noble friend's question about the sinking fund, that will be only if the lease allows it, and then only to the extent that the amounts are reasonable.
As regards the question posed by the noble Lord, Lord Monkswell, so far as I know my noble friend is right. There is always a right of appeal from LVTs to the court. It is the normal appeal mechanism that one would expect from such tribunals. We would expect the LVT to hear the tenant before ruling on whether or not he was a vexatious litigant.
Lord Dubs: I would have asked a question on the same point. However, the Minister more or less answered it. I fully understand that there is merit in not wasting time on frivolous or vexatious applications. On the other hand, there is always a danger once in a while that an application which seems on the face of it to be frivolous or vexatious has substance to it. However, the person putting forward the application may not express it so fluently that it seems a sound application. One has to be careful that there are safeguards. One does not want more work for the courts because the LVT has declared the litigant to be vexatious. The courts then have to do more work than the tribunal. That would not be the best way forward.
Having said that, I should like to study in Hansard tomorrow what the Minister said. If necessary, we shall have the possibility to return to the matter on Report.
On Question, amendment agreed to.
8.15 p.m.
Lord Lucas Lord Lucas moved Amendment No. 244:
Page 53, line 3, leave out from ("court") to end of line 5.
On Question, amendment agreed to.
Lord Selsdon Lord Selsdon moved Amendment No. 244A:
Page 53, line 5, at end insert ("except as provided in section 31D").
The noble Lord said: In moving the amendment perhaps I may speak to Amendments Nos. 244B and 246A which also stand in my name.
The amendments are designed to prevent vexation. They refer to Clause 79 which provides that leasehold valuation tribunals will have a power to settle service charge disputes. Service charges are the bane of everyone's life—landlords and tenants. They are not perfect. There is so much room for misunderstanding. Those charges cause tremendous fear and aggravation if they are not planned in advance and suddenly on the desk or at the home of a tenant appears a large bill for decoration.
This means that where a lessee believes that his service charge is excessive, as the Government have already declared, he may challenge it through the tribunal without the threat that his lease will be forfeited. That is good. This new procedure was introduced by the Government in response to the actions of a small number of landlords who had been levying inflated service charges, pursuing the collection of those charges aggressively through the courts, all the while threatening
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forfeiture of the lessee's lease. Under the Government's amendments I hope that this will not be possible in the future.
However, the aggravation does not necessarily end there. There are problems in the general trend. My amendments relate to the landlord's costs under the new procedure. A landlord is not necessarily a titled lord with large land. Essentially "landlord" means whoever is responsible for collecting the service charge. I believe that we all agree that the right to manage, the freedom to manage, the right to be nearer to the decision-making process in relation to one's own house or flat, is good. But that brings with it certain problems.
The term "landlord" essentially involves those who collect the service charge. It may cover, for example, the traditional freeholder, whom to some extent we have been attacking today as a landlord. It may cover the head lessee of a long leasehold property. It could also encompass a management company which may be set up by tenants in a building to manage and run their own block, where the lessees themselves own the freehold.
Finally, if commonhold is introduced—the noble Lord, Lord Dubs, referred to it in Second Reading; I support him; and the Minister said that we all believe in it—then commonhold and the management of it would also be covered. Under the new procedures it is not simply a question of collecting the service charges. The noble Lord, Lord Dubs, pointed out that there are good and bad landlords. Under my definition of "landlord" there will still be good and bad landlords. But there are also good and bad tenants. There are absentee tenants. For example, under a head lease there may be a requirement to paint a building every four years to keep things up to standard.
I speak more of London than of anywhere else. We all know that one of the benefits of London is that there have been good managers where buildings have been painted and maintained on time. If the management falls down, there is a major problem. Often management can fall down when there is a shortage of money. Arguments arise in blocks of flats where six or eight people live, two of them abroad. A requirement to repaint that building every four years may exist but someone says that it does not need painting, "It took a long time to paint it and we are not prepared to repaint it". Someone else may say: "I live on the ground floor. Why should I pay for the lift to be maintained or the entry phone?" Often people who are ill-informed cannot understand the justice of service charges where they are required to pay for things that they think are not correct.
There is inefficient management but my worry is where there is a shortage of money. Under the new procedure, there are two elements of cost. First, the applicant to the tribunal must pay an application fee. Secondly, the parties to the hearing may need to employ solicitors or expert witnesses to present their case. In respect of the first cost, the application fee, the tribunal will have discretion and may make an award.
However, with regard to the other costs, the legal costs, the tribunal is specifically prohibited by the Bill from making an award. Therefore, if the lease does not allow legal costs to be collected through the service

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charge—and I gather that almost half the leases say that legal fees can be collected through service charges and the other half say that they cannot—the majority of the costs will be unrecoverable. That could cause problems for landlords of all types in collecting properly due service charges, particularly if the landlord as manager lacks resources and has to rely on the cash flow paid under service charges, many of which are late, and if he does not have a sinking fund.
There is a certain unfairness on the other side. When a lease requires that all costs are borne by the service charges if the freehold or head lessor takes action against a particular tenant for not paying his bills, it is extremely unfair that if there are six or eight tenants in a block and two have defaulted, the costs that those tenants incur in terms of legal fees should be spread across the rest of the tenants. When they took on their lease they might not have understood or appreciated that.
When people feel someone else is paying the legal bills, they do not worry, they let the lawyers get on with it. The lawyers are relatively slow because they know they will be paid in the end. As we know, legal fees can make an enormous dent in service charges if there is litigation due to one tenant who has behaved badly. That is the case for the other side.
My amendments deal with the landlord. It may well be that they should deal with the tenant as well, but I am in an embarrassing situation. I declared my interests on Second Reading and perhaps I should declare them again. I am a landlord, reluctantly, because when we got together to buy a head lease, I ended up holding the head lease. I have to manage the apartment and I cannot tell the Committee the problems when Mrs. So-and-so's washing machine leaks and causes damage on floors below and someone says that the insurance should pay. It is illuminating. However, at the other end of the scale, I am a tenant and own a lease of one of the great estates in London. If I put down an amendment to the effect that if I were to take action against that great estate, my legal costs should be recoverable, it would probably be immoral. Members of the Committee from the other Benches might suggest that, they seem to support the tenant more often than the landlord and I would support them.
The problem would be particularly acute for lessee-owned management companies which have no significant independent resources on which to draw. It is difficult to see, therefore, how they can manage their blocks efficiently in the future—I am not talking about today—using the Government's new procedures as drafted. For example, they might run out of money. Also, one must accept that some may not be efficient but, with the best will in the world, they will try to do what they can. If they are short of money, they will not be able to meet certain costs.
Amendment No. 246A seeks to address the problem by giving the tribunal discretion to make an award for legal costs. Under my amendment, the tribunal would have three options. First, it could make no award, in which case the costs would not be recoverable. Secondly, where a lessee in challenging a service charge
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has acted without the support of the residents' association or other lessees in the block, the tribunal could—I stress could—make an award against that individual. That should deter spurious or vexatious non-payment of service charges. Thirdly, where a lessee has the support of the residents' association, or where the lessees challenge the service charge collectively, in those circumstances the tribunal will have discretion to allow the costs to be recovered through the service charge, if it feels that the lessees collectively have behaved unreasonably.
My amendment does not give the landlord carte blanche to recover costs. That would clearly be undesirable. But if the landlord—and I remind the Committee that the landlord could be small groups of people—had patently acted unreasonably, I should expect the tribunal to use its discretion and make no award for costs. The lessees will also have the safeguard of new Section 20C of the Landlord and Tenant Act 1985 which permits them to apply for the landlord's costs to be disregarded for service charge purposes.
Amendment No. 244B is intended as a saving provision, to ensure that where the lease allows for legal costs to be recovered through the service charge, the new provisions of the Bill will not override that. As some concern has been expressed on the issue by leading counsel, it is important that we put the matter beyond doubt.
I did not draft the amendments, not being a great draftsman, and I gather that the Government are short of parliamentary draftsmen at the moment. The amendments were drafted by professionals and in this world I am an amateur. Perhaps I am not an amateur because an amateur is someone who loves the subject. I do not love the responsibility of having to manage a building. I am told that the amendments are approved by the Federation of Private Residents' Associations, the Royal Institute of Chartered Surveyors and the Association of Residential Managing Agents, as well as a number of managing agents to whom I spoke. Advice was also taken from the Leasehold Enfranchisement Advisory Service.
If costs are incurred by a landlord in the pursuit of something legal, correct and proper, he ought to be able to recover the costs. I must not put my own causes, but I feel that that should apply equally to the tenant. I beg to move.
The Earl of Lytton: I declare an interest in that I am chairman of the Leasehold Enfranchisement Advisory Service and I wish to speak in support of the gist of what the noble Lord, Lord Selsdon, moved, for the reasons he gave. With regard to tenants' own management companies, which I believe is the real point, if they do not keep reserve funds—and I cannot see how logically they could insist on building up a reserve fund for the purposes of covering otherwise uncovered costs—they would end up with a deficit. They would not be able to satisfy their obligations under the Companies Act. It

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seems to me that the noble Lord suggests a neat way of providing that proper discretion is exercised. I should be interested to know what the Minister has to say about it.
Lord Coleraine: I have not spoken before on the Bill so it falls to me to declare my interests. In 1993, when the previous Bill was enacted, I was the tenant of a flat under a long lease at a low rent. The lease had eight years to run, so it was collectively enfranchisable. I am now a lessee under a lease of 999 years of the same flat. I am also the owner of one share in the company which owns the freehold. I changed my status and those in my block changed theirs without any need to resort to the provisions for collective enfranchisement in the 1993 Act.
I have a further interest and I am embarrassed that I am declaring it at this stage because I am an honorary consultant to the Federation of Private Residents' Associations. As my noble friend stated, the federation generally approved the provisions of his amendment.
I have grave doubts about the amendment. The principal one is that provided it is in the case of a sole tenant who goes to the valuation tribunal that the cost provisions arise, it sanctifies in some way the position of the majority of the tenants in a building or of the residents' association. We must all recognise that there is in fact no such sanctity, that disputes arise between lessees within a building and that there is no reason why we should assume that it will always be the majority who are in the right and the minority who are in the wrong. As my noble friend said, the provisions of his amendment are one-sided. He would agree that that should be rectified.
If it were the case that a sole lessee who went to a leasehold valuation tribunal were to bear the costs of his application, it should also be the case that, were he to be successful, the landlord should bear the costs. My noble friend clearly agrees with that.
A further point has been made that where the lessees of a building take over the freehold, they will not have the resources to go to a leasehold valuation tribunal under the provisions of the Bill. That is correct and applies to any landlord. The landlord must have resources. I suggest that the proper management of a tenants' buy-out should include some form of agreement whereby it is made clear that, should the situation arise, those who participate in the buy-out must make funds available to enable the costs of an application to the LVT to be paid.
In the long run, however, I think the answer to my noble friend's amendment is that there is probably enough in the Bill to get round the very real difficulties that the decoupling of forfeiture from the collection of service charges has created. That is ultimately where the problem arises.
We have just passed an amendment to provide that frivolous and vexatious applications can be dealt with summarily by the LVT. I feel sure that that is one way in which single tenants acting unmeritoriously will be seriously deterred from going to a tribunal.
An existing provision in the Bill also enables the valuation tribunal to charge "reasonable" fees for the first time. I have no idea what those "reasonable" fees
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are. Perhaps, in replying, my noble friend will help me. It is very difficult to envisage an application to an LVT going forward at a cost of less than £500 per day in LVT fees. Those fees could fall on a tenant who has made an unsuccessful application.
Those two provisions are enough to safeguard landlords from the difficulties my noble friend sees. I hope that he will not press his amendment.
8.30 p.m.
Lord Lucas: My noble friend Lord Selsdon has raised some important points. I believe I can reassure him on some of them, and I shall reflect on some of the others. I deal first with Amendment No. 244B, which is aimed at making it clear that nothing in the Bill undermines any provision in a lease which allows a landlord to recover his costs as part of the service charge. Claude 79 does contain a provision—the new Section 20C of the Landlord and Tenant Act 1985 on page 54 of the Bill—which allows a leasehold valuation tribunal to order that such cost should not be recoverable. That provision, which largely repeats the existing Section 20C of the Act but extends it to LVTs as well as the court, is to deal with the case where the landlord has behaved unreasonably in some way in defending a case.
For instance, if a landlord has used a legal team of disproportionate weight—a QC, duly instructed by a solicitor, with a Fellow of the Royal Institution of Chartered Surveyors and perhaps an accountant in attendance to argue a minor point about whether maintenance work has been done—the leaseholders could challenge whether the costs have been "reasonably incurred". The LVT would no doubt take a commonsense view.
But if the LVT does not exercise that power, the necessary implication is that the cost of defending an action is recoverable if the lease allows for this type of expenditure to be recovered in the service charge. That is certainly the Government's intention and understanding of what the Bill achieves. I am pleased to place that on the record. I hope that on that basis my noble friend will not press Amendment No. 244B.
My noble friend's other amendments, Amendments Nos. 244A and 246A, deal with responsibility for paying for costs more generally. The effect is to give the LVT a jurisdiction to make a single tenant pay the landlord's costs if he has acted individually or to order that the landlord may recover them as part of his service charge if the case is on behalf of the tenants collectively. In that case all leaseholders would have to pay. I am not sure that Amendment No. 246A quite achieves that because making the costs "relevant costs" does not itself make them recoverable if the lease does not provide for that.
I am not sure it would be right to put individual tenants at risk of having to meet their landlord's costs in this way. Part of the point of giving the leasehold valuation tribunals jurisdiction to settle service charge disputes is to reduce the risk that tenants might have to meet the legal fees of their landlord, which, in the case of some of the less scrupulous landlords, may be

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significant—often unreasonably so. There are cases where a minority of tenants, or even one tenant, may have a legitimate case but where the majority are uninterested. I think the amendment goes too far. To that extent I am of one mind with my noble friend Lord Coleraine.
But that leaves the question of how the landlord's legitimate costs are to be met. Many leases, particularly the more modern ones, will include a broad-ranging provision allowing the landlord to include within his management expenses the costs of proceedings of this type. Collecting service charges is part of the job of managing a block of flats. In those circumstances the landlord will be able to recover his costs unless the tribunal makes a ruling under Section 20C which I mentioned earlier.
But some older leases may not make sufficiently broad provision. They may not have anticipated tribunal proceedings. In those cases, unless some new provision is made, the landlord will have to bear the costs himself. I can imagine many cases in which that may not be unreasonable, or may even be richly deserved. But there may be cases where it does pose a problem. For example, at Second Reading my noble friend Lord Gisborough raised a point concerning blocks where the leaseholders themselves own the freehold, and there is simply no source of money other than service charges to pay for a surveyor, for example, to present their side of the argument before a tribunal.
I do not think it would be right to introduce a general provision about awarding costs into LVT proceedings. Tribunals generally, not just leasehold valuation tribunals, do not award costs against a losing party in the way a court does. They are less formal and more accessible. Legal representation, for example, is not necessary. If costs could be awarded, the notorious landlords would no doubt continue to intimidate their leaseholders from bringing even well-founded cases for fear of the potentially ruinous consequences of losing.
The better course might be to empower the tribunal to give a ruling (if the landlord asks for it) that his reasonable costs in defending the case should be recoverable as service charges, even if the lease does not provide for that. It is, of course, important that Parliament should not lightly give the LVT a power which amounts to imputing into leases new terms which place new obligations on leaseholders. The LVT should perhaps be allowed to do so only where convinced that it is fair, given all the circumstances of the case, and only to the extent that the landlord's costs are reasonable. In some ways this would mirror the current provisions which allow the tribunal to rule that the landlord's costs should not be recoverable, even where the lease would allow it, if the landlord had acted unreasonably.
My noble friend Lord Coleraine asked what level of fees we might expect from LVTs. He has the right idea. We think that £500 would be about the standard minimum; for longer cases £2,000 a day is about the
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level we are thinking of. With those words, I think, of considerable comfort, I hope that my noble friend Lord Selsdon will be able to withdraw his amendment.
Baroness Gardner of Parkes: On the question of legal costs, at an industrial tribunal people regularly defend themselves and therefore expenses are not high. We hardly ever award costs. Even if the applicants are represented legally on both sides, each party has to bear their own costs.
We recently had a case, the first in over 20 years, in which we awarded costs of £1,000. Everyone in the tribunal building considered that a very high amount. The circumstances were exceptional. They involved someone who had pursued the case, had had it deferred several times, and who in the end did not turn up. Costs were awarded against that person. I doubt whether they will ever be recovered since I believe he has absconded or left the country. So it may only be theoretical.
It is worrying if the "reasonable costs" referred to can be awarded and possibly then come back as part of a service charge. When we talk of legal expenses, the sky is the limit. I should be very concerned about any high costs being added on to service charges, which most tenants find quite worrying to meet now. I hope that the Minister and my noble friend Lord Selsdon will look carefully at the particular point of the type of costs involved and perhaps put a ceiling on what could be awarded.
Lord Meston: Perhaps I may follow up the noble Baroness's point. Her analogy with industrial tribunals is a valuable one. In those tribunals the power to award costs can be a disincentive, which is useful in itself; but the knowledge that in normal cases costs will not be awarded either way is also a disincentive of some value, because the parties know that it is much to their advantage to settle. Win, lose or draw, they are unlikely to get costs against the other side. I feel that the analogy that the noble Baroness drew is very valuable.
Lord Monkswell: I was rather concerned by one of the Minister's remarks. If I did not hear him aright, no doubt he will correct me. He said that the majority of leases granted nowadays contain the requirement that any costs incurred will be added to the service charge. If that is so, it is rather disturbing.
There may be a situation in which the landlord effectively makes excessive service charges, which are being challenged. If the landlord has the right to increase the service charges by any amount because he has incurred costs in defending those excessively high service charges, the poor leaseholder is on a hiding to nothing and the protection that the Government and we all are seeking against excessive service charges will be nullified. It should be borne in mind that, if money is no object and the costs will simply be passed on in service charges, all kinds of experts may be brought in—legal experts, surveyors and so on, some of whom are very expensive—and the person bringing the argument against the excessive service charges may be completely swamped.
I hope that the Minister will look at this matter very carefully and ask whether it is what we seek.
8.45 p.m.
Lord Strabolgi: I should like to support my noble friend. Service charges can become quite a racket. Some years ago there was a block of flats near the Albert Hall where the service charges were allowed to be used for some refurbishment to the building. In fact, they were being used to do up other flats, putting in extra bathrooms and so on, which the owners of the block were then going to sell on long leases and the tenants were receiving the most enormous bills. There have been cases recently too in which people have been able to buy freeholds at auction for a couple of thousand pounds and then do what they liked with the building and the tenants. The so-called accountants who are supposed to assess the service charges are in league with the freeholder, as are the decorators who do up the places. The freeholder is getting a cut all along the line. It is a major scandal.
I remember the old days in the 1950s when many of the flats in central London were owned by old-established companies—key flats and so on—and everybody was very happy. The rents were low and went up normally every year or so. There was a nice porter in the hall with a coal fire and so on. It was a very satisfactory way of living and many people preferred it to living in a house. Then one or two speculators realised that they could make a large fortune by buying up the blocks of flats. They threatened the people with eviction—at that time the Government had taken off all controls—and the unfortunate tenants, in order to remain in their homes, had to agree to buy long leases from the new owners. The owner would then recover in service charges what he had lost in rent. Such people made very large fortunes. However, one or two of them went bankrupt, I am glad to say. It was quite a racket.
I am afraid that the Conservatives taking away security of tenure had absolutely unforeseen repercussions and distorted the whole of the housing market in central London and other big cities. We have never recovered from it. Attempts by the Government to try to control the situation with the 1988 Act and the present Act have all stemmed from that mistake, when they allowed speculators and crooks to take over blocks of flats and distort the market.
The Earl of Lytton: I apologise for rising to speak again on this matter. However, it seems to me that, speculators and racketeers apart, there still remains a problem which I should like to illustrate for the benefit of the Committee. Some years ago I worked in Brighton and I remember a large block of flats in Kemp Town. Part of it had had a bomb dropped on it during the last war, with the result that it had been reconstructed. Part of it was brand spanking new, relatively speaking and the rest was old and—to use common parlance—clapped out. That produced a significant differential in running costs between the two halves. I remember that the method of apportioning service charges was a constant source of problems to the residents.
Returning to the point about the tenants' own management systems, tenants are not a consistent breed. From my personal experience I know of several cases in which one group of tenants has radically disagreed
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with what another group of tenants has done in the name of the block as a whole. I referred to those problems at Second Reading when I mentioned the different aims of different tenants. For example, the elderly may want one particular service while the young and fit want another type of service.
There has to be a method of reconciling those views some way or other. It may be rough justice or a little like the Judgment of Solomon, but reconciled they have to be. I feel that what the Minister said about leaving discretion with the tribunal is probably the best that we can hope for in the circumstances. I do not believe that either side should be penalised. I do not feel that a deficit should be left in the hands of the tenants' own management company which will cause it severe legal problems about—apart from anything else—how the unsatisfied debt that it has accumulated will be expunged. Those people may have acted for what they genuinely felt was the benefit of the majority, taking an overall view of the block—perhaps a strategic forward view, based on doing more repairs at the present moment, taking the stitch-in-time rather than the sticking plaster approach. This matter will probably always be a source of contention. I want to see this Bill go forward with the opportunities for contention diminished.
I support what the noble Lord, Lord Selsdon, said. Maybe his formula is not quite perfect, as the Minister suggested. Perhaps the Minister's solution—if that is what it is—is a good one. If there is anything that it does not cover, perhaps that could be looked at and considered at a later stage.
Lord Coleraine: I should not like the strictures made by the noble Lord, Lord Strabolgi, against Conservative policies to go unanswered when this Bill leaves the Committee. The reason why we have the present dreadful long leasehold system in central London, with all the opportunities for bad dealing, is basically old Labour Party rent controls, which made it quite impossible for landlords to let their flats on short leases. They made it inevitable that they would seek to take premiums and get rid of the flats on long leases. That to a large extent is why we have the situation today.
Lord Lucas: I should perhaps steer clear of that particular controversy. Perhaps I can say two things to the noble Lord, Lord Strabolgi. First, if one buys a leasehold, one had better read the lease. Secondly, most of the problems he described I hope will be effectively dealt with by the Bill.
To the noble Lord, Lord Monkswell, I say that there are two ends of the spectrum. At one end we have a block owned effectively by the people who live there, where the company owning the back end of a 999-year lease will effectively have no assets and no income other than the service charges which it levies on the people who live there. If one tenant does not pay the service charge, there must be a mechanism by which the company can levy charges on all the other tenants to fund the action it needs to take against the defaulting tenant. That is why that is a common mechanism in that sort of lease and indeed in other leases.

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To deal with people who try to abuse that system, we have given the leasehold valuation tribunal the duty to make sure that the actions by the landlord are reasonable. The proposed new Section 20C of the Landlord and Tenant Act 1985—appearing on page 54 of the Bill—is a provision to deny the landlord the right to recover his legal and other costs through the service charge if he has acted unreasonably.
That provision places a great weight on the wording of the Bill. I would be happy to hear, perhaps on another occasion or through letter, from Members of the Committee who think we may be able to improve the wording to achieve what we all wish to achieve; that is, to make sure the leasehold valuation tribunal deals in a commonsense and effective way with landlords who abuse their position to try and terrorise the tenants. But we have perhaps come to an end of this conversation for now.
Lord Monkswell: One way of reducing the cost for both landlord and tenant in disputes involving the leasehold valuation tribunal is to ensure that in front of the tribunal the parties shall not be represented and shall not call experts. They shall argue for themselves.
Lord Selsdon: I am grateful to Members of the Committee for commenting for 35 minutes on something I hoped would take a brief moment. I am reassured by one thing. I believe for the first time today that the adversarial attitude of both sides of the Chamber appears to have disappeared. I do not know why in the Leasehold Reform Act I had the opinion that those on the other side of the Chamber were permanently in favour of the tenant and those on this side appeared to be permanently in favour of some rich landlord. That attitude did not do your Lordships' House any good.
The noble Lord, Lord Strabolgi, made the point that there have been some bad things in the past. The objective of this legislation is to improve matters. I still have a hang-up that too many people in this business try to talk through lawyers. When one has an expensive lawyer with a triple-barrelled name on one side and a barrack-room lawyer on the other, one ends up with enormous costs and increased aggravation, particularly for the bulk of people who do not know what "litigation" means and do not understand it.
In this part of the world, in England, I believe property law to be rubbish. Frankly, I prefer it in Scotland. I hope there will be an element of goodwill here. If the Minister had said, "Leave it to the Secretary of State", I would have panicked; but when he says, "Leave it to a nice organisation called a tribunal", I am comforted. My noble friend Lord Coleraine, who knows so much about these matters and who is so much wiser than I am, tells me not to worry. I shall make a note of his remark and if he proves to be wrong, perhaps someone will take action against him. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 244B not moved.]
Lord Lucas Lord Lucas moved Amendment No. 245:
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Page 53, line 33, leave out ("amount") and insert ("whole or part").
The noble Lord said: I spoke to Amendment No. 245 with Amendment No. 243. I beg to move.
On Question, amendment agreed to.
Lord Archer of Sandwell Lord Archer of Sandwell moved Amendment No. 245A:
Page 54, line 4, at end insert—
("() Notwithstanding the generality of subsections (5) and (6), an order under this section requiring the payment of fees shall provide that no fee shall be paid or reimbursed by a person whose financial resources are such as to make him eligible for representation under Part IV of the Legal Aid Act 1988 (Civil Legal Aid) without being liable to make a contribution in respect of the costs of that representation.").
The noble and learned Lord said: I too begin by declaring an interest. Much of my motivation in tabling this amendment and much of what I propose to say reflects the deep anxiety of the Council on Tribunals which I am privileged to chair.
As the noble Lord, Lord Lucas, reminded us a few moments ago, this part of the Bill addresses a problem which acquired notoriety some time ago. A property company buys the reversion to a block of flats. It increases service charges to an unreasonable degree and then, when the tenants fail to pay, it brings forfeiture proceedings. Of course, it is open to a tenant to challenge the reasonableness of the service charges in the county court under Section 19 of the Landlord and Tenant Act 1985. That is sometimes done, as a number of Members of the Committee said, in the course of forfeiture proceedings. The proposal in this clause is to detach that issue from the forfeiture proceedings and transfer the jurisdiction to local valuation tribunals. That is a sensible proposal and has a number of advantages.
The leasehold valuation tribunals have expertise in these matters which no court, exercising a general jurisdiction, could hope to emulate. Furthermore, the proceedings are likely to be less costly and will probably be more expeditious. But there are two items of bad news to which some Members of the Committee have already referred.
First, unlike proceedings in the county court, legal aid is not available for proceedings before the LVT, at least in respect of representation. That may be a source of injustice. The landlords to whom we are now referring are usually property companies and will normally engage the services of experts. They will bring in people who are professionals. Sometimes that is sensible. Sometimes there are issues which require preparation and usually presentation by professionals. They, on their side, will have that advantage.
We know from the researches of Professor Hazel Genn that those who are represented before tribunals have a much greater prospect of success than those who appear unrepresented. As the noble Lord, Lord Selsdon, said, those who have never been to a tribunal in their lives are at a disadvantage when trying to elicit their case.
I say at once in the presence of the noble Baroness, Lady Gardner, that she took me to task in a different context some time ago for what I obviously expressed

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badly and which she interpreted as a criticism of tribunals. It is not intended in any way as a reflection on tribunals; it arises from the fact that it is difficult to combine the judicial function with trying to elicit everything that can be said on the side of one of the parties. I say at once that it need not be representation by lawyers. Sometimes representation by a surveyor before the LVTs or even by an accountant may be more advantageous than bringing in a lawyer. But to leave the tenant wholly unrepresented against professional people on the other side can make for injustice.
That is not the subject of the amendment, but it is part of the background against which it must be considered. I said that there were two items of bad news. The second is the one to which some Members of the Committee referred a few moments ago. It is to be found in new Section 31B which Clause 79 seeks to insert into the 1985 Act. It is the provision for the fixing and paying of the court fees by the parties to proceedings before the LVT.
I share the anxieties of the noble Lord, Lord Coleraine. When the noble Lord, Lord Lucas, quoted a few moments ago the kind of figures the Government had in mind in this context—if I understood him correctly—and claimed that that was comforting news, I must say that I missed the comforting part. It seemed to me somewhat alarming news.
As I understand it, the intention is that the parties will pay the whole of the judicial costs in relation to this service, and new Section 31B(3) makes it clear that overall the fees are to meet the full costs of providing that service. That is bad news indeed. I am aware that the Government are at present considering proposals for introducing in the courts a system of charging fees to litigants on a full costs recovery basis, which means that anyone availing himself of our system of adjudication would be required to pay for that system. I say at once, speaking for myself, that I find that very troubling. I believe that there are some services provided by the community which ought to be paid for by the community generally and not simply by those who have occasion to avail themselves of the services. I hope we never reach the point when every road in the country is maintained at the expense not of the community but of those who have occasion to drive over the road, so that at the entrance to every road we have to pay a toll. That is a difference of political ethics between the Government and those who share my views. This amendment does not seek to change that policy. In fact, it would not be appropriate in this Bill. But I hope that we would hold the line on any application of that policy to tribunals. In saying that, I do speak for the Council on Tribunals.
As long ago as the Franks Committee, and even further back with Donoughmore in 1929, it was said that one of the great advantages which tribunals contribute to the legal system is that they are inexpensive, so that people—landlords, tenants or whoever—are not deterred from pursuing their rights by the fear of the financial consequences. If that line is to be breached, it should not be in the course of a Bill on a totally different
1926
subject dealing with the part of the jurisdiction of one tribunal. It should be after careful consideration, careful consultation and full debate in Parliament.
But it is not even that principle which this amendment seeks to uphold. It really is a very modest amendment. It is designed to meet what I believe to be a gap in subsections (5) and (6). The Government have recognised that the consequences of these provisions may be financial hardship for those with limited resources. The Bill gives power to the Secretary of State to reduce or waive fees by reference to a party's financial resources and to empower the tribunal to make an order that one party should reimburse the other for the fees he has to pay. The council welcomes that. In fact, we take comfort from the fact that the Government have obviously addressed their minds to some of the consequences of this problem. However, I believe the proposal falls short of what is necessary in two respects.
If a potential party is told that, with luck, he may find at the termination of the process that he does not have to bear the burden of fees, that may not be sufficient to set his mind at rest. Unless he can be sure, he may be deterred from taking the risk of seeking to enforce his rights. People should not be at risk of a possible order. Those of us who spend our lives trying to predict the outcome of proceedings, either in courts or tribunals, know how notoriously difficult that is. No one can ever have an assurance of what the outcome will be. People should not be at risk of an order which could mean a severe financial disaster for them. People will be deterred from availing themselves of a provision which the Government have very sensibly included in the Bill. Unless they can be assured not that their tribunal fees may be waived or that they may be paid by the other side but that, if they meet the financial conditions, they can be certain that they will not be subject to those fees, I believe they will not take the risk.
The effect of the amendment would be that someone whose means were such that he would qualify for legal aid if he were in civil proceedings in the courts and in accordance with the Government's own rules could be assured that he would not be liable for fees or liable to recompense the other party for an outlay on fees. By definition, it relates to those who cannot afford to pay.
The noble Lord may be able to assure us that any order made under this section will include that provision. If he does that, it will go some way towards meeting our anxieties. But that provision falls short. To go the whole way, I believe that that safeguard should be written into the Bill. Legislation by undertaking leads to difficulties which many of us in our parliamentary careers have written on our hearts. I am sure that, if the noble Lord is persuaded of the necessity of the burden of the amendment, he will have no difficulty in writing it into the Bill. I hope that he will feel able to accept the amendment. I beg to move.
9 p.m.
Lord Meston: I support the amendment and in doing so suggest that much of the need for it derives from the really rather curious wording of the proposed new Section 31B(6), which is quite difficult to understand. It

1927
is drafted in a curious way. It refers to "the latter case", which I think must refer back to one of the alternatives in the proposed subsection (5), and then goes on to say,
"the order may apply, subject to such modifications as may be specified in the order, any other statutory means-testing regime as it has effect from time to time".
I find that remarkably unclear. Even if it were clarified, I would suggest that there is a strong case for the amendment moved by the noble and learned Lord, Lord Archer.
Baroness Gardner of Parkes: I am somewhat concerned by this amendment because of the point that I have made at other stages in the debate. People tell me that if one is sued or taken on in any proceedings by someone who is legally aided—and this situation is equivalent because of the exemption provision—one has a "no-win" situation. Even if one wins the case the other person cannot lose a penny or be endangered in any way.
As regards the tribunals, I believe that their chairmen go to great trouble to assist unrepresented people. I rarely agree with the noble Lord, Lord Monkswell, but he made a very interesting point when he said that the only way to be sure was for no one to be represented at the valuation tribunals.
Lord Lucas: We have had the pleasure of listening to a very powerful presentation by the noble and learned Lord, Lord Archer of Sandwell on a subject on which he is a great authority. I am sure that we shall ponder everything he said. Perhaps I may be allowed to concentrate on the substance of this particular amendment. As the noble and learned Lord said, in subsections (5) and (6) we have provided ourselves with the power to make arrangements for a leasehold valuation tribunal to waive fees depending on the financial resources of the party by whom they are to be met. We have also provided that statutory means-testing regimes may be used, but we have deliberately not specified which regimes these are as they are subject to frequent change.
At this stage we feel that it is unnecessary to require any order made under this power to reflect a specific means-testing regime such as that proposed in this amendment, to be put on the face of the Bill. We need to give further consideration to the detail of how to operate this scheme flexibly. There is a great deal of work for us yet to do. We need to consider such matters as passporting connected with other benefits.
I believe that the core of the point made by the noble and learned Lord, Lord Archer of Sandwell, is this. If some poor person is considering going to a LVT and he can see by then—we shall have the order in place—that he is eligible for a remission of fees, how does he know that he will get that remission without having to go through the whole process and take the risk of not getting that remission at the end? We plan that the rules shall be clear enough for that to be settled at the very outset of the application by the clerks to the LVT. We also hope that the rules will be clear enough to enable the tenant to work out for himself whether or not he
1928
will qualify for fee remission. Therefore, in practice, we believe that this is a problem that will not arise because it will be settled at the outset before the fee has been incurred.
Lord Archer of Sandwell: I am grateful to those who have participated in this debate. In particular I am grateful for the point made by the noble Lord, Lord Meston. Perhaps that is something we should reflect on before Report stage. As regards the two comments made by the noble Baroness, perhaps it was my fault for introducing something which was not directly relevant to this amendment. I accept her comment that legal aid can be unfair in reverse. It does not seem to me that the answer to that is to withhold legal aid; still less to ensure that no one has the benefit of professional advice and representation which both sides so obviously need. That is perhaps an issue which we can join at a later stage.
I am grateful to the noble Lord, Lord Lucas, for at least the assurance which he has given that it is intended to frame the order in a way which will ensure that someone knows at the outset and before committing himself, whether he will be liable for fees. I am not sure whether that includes liability to reimburse the other side for outlays on fees. I invite the Government to consider that.
The Minister's reply does not wholly meet the point which we had in mind because, as I said, legislation by undertaking or even by, "what we intend to put in the order" gives rise to difficulties. I am not wholly clear why it should not be stated in the Bill because this is a principle which is not liable to change. As the noble Lord himself implied, it is the opposite of flexibility which we are seeking here. The problem with flexibility is that it is unpredictable. However, perhaps we should all reflect after this preliminary canter. I give no promises about my future good conduct, but at this stage I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees (The Viscount of Oxfuird): Amendment No. 246ZA has been substituted for Amendment No. 246.
Lord Lucas Lord Lucas moved Amendment No. 246ZA:
Page 54, line 9, at end insert—
("Transfer of cases from county court.
31C.—(1) Where in any proceedings before a court there falls for determination a question falling within the jurisdiction of a leasehold valuation tribunal under this Act, the court—

(a) may by order transfer to such a tribunal so much of the proceedings as relate to the determination of that question, and

(b) may then dispose of all or any remaining proceedings, or adjourn the disposal of all or any of such proceedings, pending the determination of that question by the tribunal, as it thinks fit.

(2) When the tribunal has determined the question, the court may give effect to the determination in an order of the court
(3) Any such order shall be treated as a determination by the court for the purposes of section 78 of the Housing Act 1996 (restriction on termination of tenancy for failure to pay service charge).

1929
(4) Rules of court may prescribe the procedure to be followed in the court in connection with or in consequence of a transfer under this section.").
The noble Lord said: I spoke to this amendment with Amendment No. 243. I beg to move.
On Question, amendment agreed to.
[Amendment No. 246A not moved.]
Lord Meston Lord Meston moved Amendment No. 246AA:
Page 54, line 12, after ("tenant") insert ("or recognised tenants' association").
The noble Lord said: I hope the intention of this amendment is obvious. It suggests that it will be useful if a recognised tenants' association, as defined in Clause 86 of the Bill, can make an application under the proposed new section, especially as a recognised tenants' association can appoint a surveyor for the purposes of Clause 81. I beg to move.
Lord Lucas: We would expect that most applications would be made by the tenants during the course of proceedings. It would be odd if a tenants' association needed to make a separate application at a later date. We have provided in the clause that one tenant can apply on behalf of everyone, so we do not see what advantage there would be in a recognised tenants' association also having this right. We therefore feel that this amendment is unnecessary as we have provided for its effect in Clause 79.
Lord Meston: I am grateful for the Minister's response to the amendment. I shall need to think about this but, in the meantime, I beg leave to withdraw the amendment
Amendment, by leave, withdrawn.
Clause 79, as amended, agreed to.
Clause 80 agreed to.
Schedule 4 agreed to.
[Amendment No. 246B not moved.]
9.15 p.m.
Clause 81 [Appointment of manager by the court]:
Lord Lucas Lord Lucas moved Amendment No. 246C:
Page 55, line 29, after ("made)") insert (", in paragraph (a) (breach of obligation by landlord), omit sub-paragraph (ii) (requirement that circumstances likely to continue).
() In that subsection,").
The noble Lord said: In moving Amendment No. 246C, I should like to speak also to Amendments Nos. 246D to 246G, 247A, 248A to 248G, and 275A, and to refer in passing to Amendment No. 247B.
These amendments make a number of changes to Clauses 81, 82 and Schedule 5 to the Bill which establish the right of a tenant of a flat to apply to a leasehold valuation tribunal for the appointment of a manager on the grounds that the landlord is in some way failing in his management responsibilities. There are two changes of substance.
Amendments Nos. 246C, 248B and 275A concern the grounds for appointing a manager set out in the existing legislation; namely, that the landlord is in breach of his
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obligations under the lease and that this breach is likely to continue. The amendment deletes the second part of this condition which has been widely criticised by members of the Opposition in another place-and probably would have been criticised here if we had not removed it—and tenants' groups. This is because it allows the landlord to give assurances to the court that although he may have failed in the past, he will mend his ways and not do so in future. It is further suggested that the courts have often felt obliged to accept these assurances, such that there are very few cases of tenants ever succeeding in exercising this right.
The Government have considered those criticisms carefully. As my right honourable friend the Secretary of State for the Environment said at Report stage in another place, we have to consider the case where the freeholder was for some genuine reason not able to deliver a service in the past but can demonstrate that he will be able to do so in the future. He may therefore have genuine reasons for a temporary breach of his obligations. However, on reflection we believe that the tribunal will be in a position to take all such factors into account, particularly as the provisions in Part II of the Landlord and Tenant Act 1987 also require the tribunal to satisfy itself that it is just and convenient to make the order in all the circumstances of the case.
Also under the two additional grounds introduced by Clause 81, there is no such requirement for the tribunal to take account of the likely future behaviour of the landlord. This amendment therefore ensures a degree of consistency between the three grounds which the tribunal will have to consider, and should improve the chances of tenants succeeding in cases where a history of bad management can be demonstrated.
Amendments Nos. 247A and 248G will restrict the right of appeal in the cases from a leasehold valuation tribunal to a Lands Tribunal. An appeal will only be possible with the approval of either tribunal. This parallels the appeal procedures that we have introduced in relation to the new jurisdiction contained in Clause 79 of the Bill for leasehold valuation tribunals to determine the reasonableness of service charges. It is designed to deal with the possibility of the quite unacceptable intimidation of leaseholders by unscrupulous freeholders. It is well known that one of the means of intimidation used by some freeholders is to threaten their tenants that they will take every case to appeal, no matter what the strength of their argument, in the hope that the potential costs involved will deter the leaseholders from pursuing their case.
I note that the noble Lord, Lord Dubs, has tabled a similar amendment, Amendment No. 247B. I hope that he feels that our amendment, Amendment No. 247A, achieves the desired effect.
Finally, Amendments Nos. 246D to 246G, 248A, and 248C to 248F are minor drafting amendments to these provisions of the Bill, in relation to the application to a leasehold valuation tribunal for the appointment of a manager. I beg to move.
Lord Dubs: The noble Lord has put the case for Amendment No. 247B which stands in my name very well. He said that it is similar to Amendment No. 247A. My inspection of the two amendments suggests that it is identical, so the noble Lord could just as well accept my amendment as the government amendment. I am delighted that the noble Lord has put the case for the amendment and I suppose that he is at liberty to accept either of them.
On Question, amendment agreed to.
Lord Dubs Lord Dubs moved Amendment No. 246CA:
Page 56, line 13, at end insert—
("() In subsection (9) (applications to vary or discharge a management order) at beginning insert the words "Subject to subsection (9A)".
() After subsection (9) insert—
"(9A) An order made under this section shall not be varied or discharged (whether conditionally or unconditionally) by the court on the application of the landlord unless the court is satisfied that the conduct of the manager appointed by the court under this section would have satisfied the conditions for the appointment of a manager contained in subsection (2) had the manager been the landlord.".").
The noble Lord said: The basic point of the amendment is not all that different from what the Minister said in relation to the previous amendment. When there is an order regarding management, in order that that should be discharged, it seems to me that it would be proper that the onus of proof should be somewhat different from the way it is in the Bill. That is to say, if it is right for fault to be established before the management can change, then that should apply equally to freehold landlords and leaseholders so that, if a landlord wishes the order to be discharged, there should be some onus of proof on him as to why the management was not proving effective. That makes it equal as between the situation before there was an order and when there is a request to have the order discharged.I hope that I have made that clear. The Minister looks rather puzzled. I beg to move.
Lord Lucas: On considering the amendment in detail, and, in particular, after listening to the eloquent words of the noble Lord, Lord Dubs, we are clear that the wording currently in the Bill needs looking at, particularly, as the noble Lord said, in relation to the amendments I have just moved, and to the arguments we accepted in that case, and to the potential which the wording in the Bill at the moment might give for an unscrupulous landlord merely to replace managers in never-ending succession, forcing tenants to start the whole procedure again. We do not feel comfortable with the amendment as drafted by the noble Lord, but we shall look at the matter again and write to him or take some suitable action before Report.
Lord Dubs: I thank the Minister for that. I am happy about that. I look forward to his eventual response when he has had a chance to consider the matter further. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas Lord Lucas moved Amendments Nos. 246D and 246E:
1932
Page 56, line 14, leave out ("made") and insert ("for an order").
Page 56, line 15, after ("1987") insert ("which are made").
The noble Lord said: I spoke to both amendments with Amendment No. 246C. I beg to move.
On Question, amendments agreed to.
Clause 81, as amended, agreed to.
Clause 82 [Appointment of manager: transfer of jurisdiction to leasehold valuation tribunal]:
Lord Lucas Lord Lucas moved Amendments Nos. 246F, 246G, 247 and 247A:
Page 56, line 25, after ("context") insert ("in those sections").
Page 56, line 31, at end insert (", and
(b) in paragraph (a), for "rules" substitute "regulations".").
Page 56, line 45, at end insert—
("() Procedure regulations may, in particular, make provision—

(a) for securing consistency where numerous applications under this Part are or may be brought in respect of the same or substantially the same matters; and

(b) empowering a leasehold valuation tribunal to dismiss an application, in whole or in part, on the ground that it is frivolous or vexatious or otherwise an abuse of the process of the tribunal.").

Page 57, line 11, at end insert—
("() No appeal shall lie to the Lands Tribunal from a decision of a leasehold valuation tribunal under this Part without the leave of the leasehold valuation tribunal concerned or the Lands Tribunal.").
The noble Lord said: I spoke to these amendments with Amendments Nos. 246C and 243. I beg to move.
On Question, amendments agreed to.
[Amendment No. 247B not moved.]
Lord Lucas Lord Lucas moved Amendment No. 248:
Page 57, line 31, leave out ("amount") and insert ("whole or part").
The noble Lord said: I spoke to this amendment with Amendment No. 243. I beg to move.
On Question, amendment agreed to.
Clause 82, as amended, agreed to.
Clause 83 agreed to.
Schedule 5 [Text of Part II of the Landlord and Tenant Act 1987, as amended]:
Lord Lucas Lord Lucas moved Amendments Nos. 248A, 248B, 248C, 248D, 248E, 248F and 248G:
Page 142, line 22, leave out ("rules") and insert ("regulations").
Page 142, leave out lines 40 and 41.
Page 142, line 44, leave out ("court") and insert ("tribunal").
Page 142, line 49, leave out ("court") and insert ("tribunal").
Page 143, line 3, leave out ("court") and insert ("tribunal").
Page 143, line 37, leave out ("court") and insert ("tribunal").
Page 144, line 25, at end insert—
("() No appeal shall lie to the Lands Tribunal from a decision of a leasehold valuation tribunal under this Part without the leave of the leasehold valuation tribunal concerned or the Lands Tribunal.").
The noble Lord said: I spoke to these amendments with Amendment No. 246C. I beg to move.
On Question, amendments agreed to.
Schedule 5, as amended, agreed to.
Clause 84 agreed to.
Clause 85 [Notice required to be given by landlord making disposal]:
Viscount Caldecote Viscount Caldecote moved Amendment No. 248H:
Page 58, line 20, leave out ("two") and insert ("five").
The noble Viscount said: Before speaking to the amendment, I must declare an interest, in that I am a long leaseholder in a London flat and involvement in negotiations with the head lessor and the freeholder has brought home to me the chaotic state of the law in this area. The outcome of the amendments will not affect me in any way since the pass has already been sold under existing legislation.
In general, Government policy has been and still is to bring a more fair and sensible balance between long leaseholders and their superior landlords. Although during the past 10 years several Acts have made progress in that direction there are still loopholes in the law which seem to me to frustrate the broad intentions of Parliament.
A basic principle of this part of the Bill is that long leaseholders have a close interest in the property which is often his or her home and that interest is just as important as that of any superior landlord. In the case in which the superior landlord has made a relevant disposal of his interest in the property occupied by a long leaseholder, as defined in Section 11 of the Landlord and Tenant Act 1987, the latter is given certain rights, in particular the right of first refusal to buy the interest being sold.
In that connection I welcome the provisions of Clause 85(1), which go some way to closing a loophole in the existing law. Until now that has enabled a superior landlord to avoid his obligations by taking a share in the buying company and so making it an associated company as provided for in Section 4(1)(1) of the Landlord and Tenant Act 1987. However, the amendment to that section, which is contained in Clause 85 of the Bill, requires the interest in the associated company to have been held for two years. For a competent property company, planning two years ahead presents no difficulty but this could seriously jeopardise the exercise of the rights of the long leaseholder, who is often relatively inexperienced in these matters. Amendment No. 248H increases the period from two to five years, which will make it much more difficult for the superior landlord to avoid his obligations and will provide a fairer balance between the two parties involved.
I submit that only a slick property owner wanting to take advantage of the relative inexperience of long leaseholders can logically object to the amendment. It more accurately reflects the intentions of Parliament.
I hope that the Government will accept it. I beg to move.
Lord Coleraine: I support the amendment because on 20th May 1993 I moved an amendment to the
1934
Leasehold Reform, Housing and Urban Development Bill at the request of the residents of Harley House in the Marylebone Road. I pointed out the very same loopholes to which my noble friend has drawn attention. My noble friend Lord Strathclyde, on behalf of the Government, accepted that in five years they had not found a way to fill them in. He said that he would like to do what he could to continue to examine the issue until a solution was found. The solution provided in the Bill by the Government goes a little way, but only a very little way, towards solving the problem of those loopholes. Nevertheless, it must be accepted in good faith and, if my noble friend's amendment can be accepted, that will be a further step forward.
9.30 p.m.
Lord Lucas: I very much appreciate what my two extremely experienced noble friends have said on this matter. This is clearly a problematic area and it is also clearly an area which is likely to remain problematic, since, if one were to go the whole hog in preventing such activities, one would freeze up the entire structure of property companies which own leasehold properties and might go so far as to prevent trading in the shares of a public company which happened to own a leasehold property somewhere in its tentacles.
It is necessary for us to strike a practical balance between doing the best that we can as regards the protection of leaseholders without hindering genuine corporate restructuring activity. Although I sympathise with my noble friend's desire to make things more difficult for people who wish to avoid the provisions of the 1987 Act, we believe that Amendment No. 248H would go too far in inhibiting the commercial freedom of bona fide associated companies. I appreciate that this is a matter of fine judgment but I hope that my noble friend will withdraw the amendment.
Viscount Caldecote: I understand what my noble friend says. As he says, it is a fine balance. My view is that the balance is tipped too far in the direction of an experienced property owner but, as he says, it is a fine distinction. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 248J to 250 had been withdrawn from the Marshalled List.]
Clause 85 agreed to.
Lord Lucas Lord Lucas moved Amendment No. 251:
After Clause 85, insert the following new clause—
PART I OF THE LANDLORD AND TENANT ACT 1987: PROCEDURAL CHANGES
(".—(1) In section 5 of the Landlord and Tenant Act 1987, after subsection (2) insert—
"(2A) Where a landlord has, in accordance with this section, served an offer notice on the qualifying tenants of the constituent flats, he shall not during—

(a) the period specified in the offer notice under subsection (2)(c), or

(b) such longer period beginning with the date of service of that notice as may be agreed between him and the requisite majority of such tenants,

1935
dispose of the protected interest except to a person or persons nominated for the purposes of section 6 by the requisite majority of such tenants."
(2) In section 6 of that Act (acceptance of landlord's offer)—
(a) for subsection (2) substitute—
"(2) In this section "the relevant period" means—

(a) the period beginning with the date of service of the acceptance notice and ending with the end of the period specified in the offer notice under section 5(2)(d), or

(b) such longer period beginning with that date as may be agreed between the landlord and the requisite majority of qualifying tenants of constituent flats."; and.

(b) in subsection (3), for "the period so specified" substitute "the relevant period".
(3) For sections 7 and 8 of that Act substitute—
"Rejection of landlord's offer.
7. Where—

(a) a landlord has, in accordance with section 5, served an offer notice on the qualifying tenants of the constituent flats, and

(b) an acceptance notice is not served on the landlord by the requisite majority of qualifying tenants of the constituent flats within—

(i) the period specified in the offer notice under section 5(2)(c), or

(ii) such longer period beginning with the date of service of that notice as may be agreed between the landlord and that majority of such tenants,

the landlord may, during the period of 12 months beginning with the end of that period, dispose of the protected interest to such person as he thinks fit, but subject to the restrictions mentioned in section 6(3)(a) and (b).
Landlord's response to notice of nomination.
8.—(1) This section applies where—

(a) section 6(1) applies to a landlord, and

(b) any person has been nominated for the purposes of section 6 by the requisite majority of qualifying tenants of the constituent flats within the period specified by the landlord in his offer notice under section 5(2)(d).

(2) The landlord shall, within the period of one month beginning with the date of service of notice of the nomination, either—

(a) serve notice on the nominated person indicating an intention no longer to proceed with the disposal of the protected interest, or

(b) send to that person the requisite contract, that is to say, a form of contract for the acquisition of that interest which includes the principal terms particulars of which were contained in the landlord's offer notice under section 5(2)(a).

(3) If the landlord—

(a) serves notice in pursuance of paragraph (a) of subsection (2), or

(b) fails to send the requisite contract to the nominated person within the period specified in that subsection,

sections 6(8) and 9(4) to (6) shall apply as if the notice were served in pursuance of section 9(4) or, as the case may require, a notice in pursuance of section 9(4) were served at the end of that period.
(4) If the landlord sends the requisite contract to the nominated person within the period specified in subsection (2), that person shall, within the period of two months beginning with the date on which it is sent or such longer period beginning with that date as may be agreed between the landlord and that person, either—

(a) serve notice on the landlord indicating an intention no longer to proceed with the acquisition of the protected interest, or

1936

(b) offer an exchange of contracts, that is to say, sign the contract and send it to the landlord, together with his remittance for the requisite deposit;

and in this subsection "the requisite deposit" means a deposit of an amount determined by or under the contract or an amount equal to 10 per cent of the consideration, whichever is the less.
(5) If the nominated person—

(a) serves notice in pursuance of paragraph (a) of subsection (4), or

(b) fails to offer an exchange of contracts within the period specified in that subsection,

sections 6(8) and 9(1), (5) and (6) shall apply as if the notice were served in pursuance of section 9(1) or, as the case may require, a notice in pursuance of section 9(1) were served at the end of that period.
(6) If—

(a) the nominated person offers an exchange of contracts within the period specified in subsection (4), but

(b) the landlord fails to complete the exchange within the period of 7 days of beginning with the day on which he received that person's contract,

sections 6(8) and 9(4) to (6) shall apply as if a notice in pursuance of section 9(4) were served at the end of that period.
(7) Except in a case falling within subsection (5) or section 9(1) or 10, the landlord shall not dispose of the protected interest except to the nominated person.
(8) Nothing in subsection (7) shall be taken as prejudicing the application of this Part in any case where, in accordance with the provisions of section 5, the landlord serves a subsequent offer notice on the qualifying tenants of the constituent flats.
(9) Nothing in this section applies where a binding contract for the disposal of the protected interest has been entered into by the landlord and the nominated person."
(4) In consequence of subsection (3)—

(a) in section 6(9) of that Act (acceptance of landlord's offer), in the definition of "the protected interest", omit "(subject to section 9(9))";

(b) in subsection (1)(a) of section 9 of that Act (withdrawal of either party from transaction), omit "by virtue of any provision of sections 6 to 8";

(c) in subsection (1)(b) of that section, omit the words in parentheses;

(d) in subsection (9) of that section, omit the definition of "the protected interest";

(e) in section 10 of that Act (lapse of landlord's offer), for subsection (4) substitute—

"(4) Where—

(a) in the case of a landlord to whom section 6(7) applies—

(i) the landlord has discharged any duty imposed on him by that provision, and

(ii) any such consent as is there mentioned has been withheld, and

(iii) no such declaration as is there mentioned has been made, and

(b) the landlord serves a notice on the nominated person stating that paragraph (a) above applies,

the landlord may, during the period of 12 months beginning with the date of service of the notice, dispose of the protected interest to such person as he thinks fit, but subject to the restrictions mentioned in section 9(2).";
(f) in section 11(1)(b) (duty of new landlord to furnish particulars etc.), for "sections 6 to 10" substitute "sections 5 to 10"; and
(g) in section 20(1) (construction of Part I etc.), in the definition of "the protected interest", omit "(subject to section 9(9))".").
The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 252, 253, 254, 275 and 277. These are extensive and important amendments and I make no apology for the fact that I shall take some time to describe them. I do that to enable noble Lords who do not wish to stay too late this evening to be able to read a full description of our intention in Hansard with a view to returning to us with critical eyes on Report.
These amendments concern the right of first refusal, which is set out in Part I of the Landlord and Tenant Act 1987. Some of these amendments have been drafted to fulfil commitments given in another place, and others have been inspired by responses to the Department of the Environment's consultation exercise.
It may help the Committee if I describe the right of first refusal and how our proposals to curb abuses of this right fit into the rest of Chapter I of Part III. The right of first refusal requires that a landlord wishing to sell his interest in a block of flats must first offer it to the qualifying tenants, which includes both leaseholders and regulated tenants. If he fails to do this, the tenants have a right to buy that interest from the purchaser at the price he paid. I should clarify here that the relevant interest is the one immediately superior to that of the residents of the flats: this will often be the freehold, but is sometimes a headlease.
The Committee may recall that Part I of the 1987 Act arose from the work of the Nugee Committee, which reported in 1985. Although it constrained the previous rights of landlords to sell freely, the principle was accepted in many quarters: the British Property Federation, for example, had already given guidance to its members suggesting that they should offer the residents first refusal when disposing of blocks of flats.
The assumption was, no doubt, that as the price was the same, the freeholder would be as happy to sell to the tenants as to a third party. In the Act's passage through Parliament, no one suggested that landlords might not fulfil their obligations: the right to buy from the purchaser was perhaps thought to be a sufficient safeguard. In this context, penalties for failing to offer the right might be considered superfluous.
The Committee will have noted that the Government have withdrawn Amendments Nos. 249 and 250. The reason is that we need to give further thought to how they are drafted. Clause 85 of the Bill creates a criminal offence if a landlord makes a relevant disposal without first having served notices on the qualifying tenants under Section 5 of the Landlord and Tenant Act 1987 offering them his interest in their blocks of flats.
Amendment No. 249 defines the moment when the offence introduced by Clause 85 is crystallised as exchange of contracts. The drafting of that amendment also implied that a relevant disposal itself took place on the conveyance of the landlord's interest. The 1987 Act itself does not define at which stage in the transfer of a property the relevant disposal is made: but the introduction of the criminal offence makes it essential that we do so now, at least for the purposes of determining when the offence is committed.
The Department of the Environment will be considering whether to define a relevant disposal as exchange of contracts (when equity is transferred) or conveyance (when the legal interest is transferred). We should be grateful for views on that point should any spring immediately to the minds of Members of the Committee. If not, noble Lords may care to write to us. We shall return to the matter on Report.
I turn now to Amendment No. 251 which makes changes to the procedures to be followed once the right of first refusal process has been set in motion. Subsection (1) closes a loophole which might become attractive to unscrupulous landlords once failure to serve notices becomes a criminal offence. Without that provision a landlord could serve the notices required to offer the right, thus staying within the law, but frustrate the Act by selling to his preferred purchaser before the tenants have had a chance to reply.
Subsection (2) is consequential to subsection (3) and also allows the "relevant period" between the service of the tenants' acceptance notice and the end of the time allowed for the tenants to nominate a purchaser to be extended by agreement. Subsection (3) itself introduces new procedures to be followed after the service of notices by the landlord. New Sections 7 and 8 are substituted into the 1987 Act by Amendment No. 251. The existing Sections 7 and 8 provide for the tenants to reject the landlord's offer and make a counter-offer, and for the landlord to make a fresh offer and conduct further negotiations. That procedure in the 1987 Act appears reasonable but is a trap for tenants.
The nature of the trap is that even if the tenants make a counter-offer, their landlord can treat the rejection of his original offer as final and may then sell his interest elsewhere, although on no better terms than were offered to the tenants. Our new procedure in new Sections 7 and 8, as set out in Amendment No. 251, works on the principle of advance or withdraw. Once the tenants have nominated their purchaser, the procedures in new Section 8 require contracts to be offered and exchanged, any deposit to be paid, and the transaction completed, within certain time limits. If the parties wish to negotiate, the time limits can be extended by agreement. The alternative is for the party whose turn it is to respond to withdraw. If either the landlord or the tenants' nominee withdraws, that party is liable for certain of the costs incurred by the other. The costs incurred are those which have accrued subsequent to the date which is four weeks after the tenants have nominated their purchaser.
The system to be introduced by Amendment No. 251 eliminates, in consequence, other provisions in the 1987 Act which allow the process to lapse without requiring the parties to enter into a contract. The misuse of Section 10(4)(b), for example, has been a source of great frustration for tenants. A landlord can engineer the lapse of the process by failing to enter into a binding contract within three months of the end of the period for nominating a purchaser. I therefore believe that the new procedures set out in Amendment No. 251 will both simplify the process of the right of first refusal and bring certainty to the outcome.
I turn now to deal with Amendment No. 252. Members of the Committee will be aware that if the landlord sells his interest without first offering to the tenants, the tenants have a right to buy from the new landlord at the price he paid, using the provisions in Sections 11 to 17 of the 1987 Act. Amendment No. 252 will assist tenants by extending the time limits which apply when they wish to exercise their right to buy from a new landlord or respond to notices served by a prospective new landlord under Section 18 of the 1987 Act.
There is a statutory requirement under Section 3 of the Landlord and Tenant Act 1985 for any new landlord to inform his tenants that the vendor's interest has been assigned to him. At present, Section 11 of the 1987 Act says that after the service of a Section 3 notice, or some other notice if Section 3 does not apply, the tenants have either two months to ask the new landlord for information about the terms of the disposal or three months to serve a purchase notice on the new landlord.
Under our new proposals, which are set out in Clause 86, the new landlord must also serve a notice under new Section 3A of the Landlord and Tenant Act 1985 on all qualifying tenants if the sale was within the scope of the 1987 Act. The time limits for serving a Section 3A notice are the same as for serving a Section 3 notice; in practice, we would expect them to be served simultaneously. It is already an offence to fail to serve a Section 3 notice, and it will also be an offence to fail to serve a Section 3A notice.
The Section 3A notice must say that the disposal was one to which the 1987 Act applied; that the tenant may have rights to obtain information and to acquire the new landlord's interest; and that the time limits for action start once a requisite majority of tenants have received the notice. And it must say what those time limits are.
Amendment No. 252 doubles the limits to four months for the tenants to serve notice and six months for the tenants to serve a notice of purchase on the new landlord. The clock will now start running from the service of a Section 3A notice which, as I said, will set out the tenants' rights. We believe that it is entirely reasonable to give tenants extra time to exercise their rights.
I should remind Members of the Committee that the new landlord has only obtained the property because the sale to him was in contravention of the principal provisions of Part I of the 1987 Act. We do not think that he is therefore in a position to complain if we give the tenants further rights against him.
The Committee will be aware of the problem that arose when the Henry Smith charity sold properties to the Wellcome Foundation. We hope that Amendment No. 252 will curtail the abuses that followed on that occasion. Amendment No. 254 is consequential to Amendment No. 252. Amendment No. 253 applies the right of first refusal in three special cases. These are disposals by auction, disposals for non-monetary consideration, and disposals in pursuance of options or rights of pre-emption. These have all been the subject of abuse and I hope that the Committee will agree, on
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studying the wording of this amendment, which I think is fairly self-explanatory, that we have dealt with these three cases in a reasonable way.
As regards the remaining amendments in this group, Amendment No. 275 makes consequential changes in Schedule 16. Amendment No. 277 changes the commencement because we will require transitional provisions which will be more conveniently made by order. This package amounts to a considerable strengthening of the right of first refusal. We have taken account of the experience of those who have been used to the existing legislation. Where there appear to have been gaps in the earlier scheme, we have brought forward changes. I hope that the clarification and tightening-up will be helpful to both landlords and tenants. It will be more difficult for landlords to ignore their obligations, and more difficult for them to defeat a tenant's bid by finding a loophole. I beg to move.
Lord Dubs: I listened carefully to the Minister's detailed exposition. He will appreciate that I think most of us will need to look at his words in Hansard before we can reach a full assessment of the position. My instincts tell me that these amendments represent a change for the better. However, I should like to reach a final conclusion when I have had a chance to consider in detail what the Minister said this evening.
Lord Coleraine: I found the amendments on the Marshalled List extremely difficult to understand. I look forward with great interest to reading my noble friend's contributions. I have one question to ask him. The consultation papers from the Department of the Environment were issued at a late stage. As far as I recollect, what was envisaged at the time was that only the parts of the amendments which needed to be dealt with by legislation would be dealt with; that is to say, the penal sanctions. At that time the proposal was that the remaining amendments to Part I of the 1985 Act would be dealt with under a Henry VIII clause contained in that part. I am, of course, delighted to find that so much of what was envisaged at that time is already contained in the amendments before us today. Are there any further amendments arising out of the consultation papers which remain to be dealt with under the Henry VIII provisions, or have the Government done in these amendments all that they thought needed to be done?
Lord Lucas: Indeed, there are no further amendments to be made under that heading. These days Henry VIII clauses are only allowed in Opposition amendments.
Lord Strabolgi: I wish to congratulate the Government on Amendment No. 252 which the noble Lord, Lord Lucas, said was to tighten up the matter involved in the Smith charity's sale to the Wellcome Foundation. If I remember rightly, it got round the situation by serving notice over the weekend when it knew that it would not be delivered. I am sure that what the Government have done will tighten up the position. Let us hope that the landlords' too clever by half lawyers will not be working on the legislation to find

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further loopholes. At present it looks to me satisfactory. I am very glad that the Government have taken the issue in hand and recognised the scandal, for scandal it was.
Lord Monkswell: I thank the Minister for his detailed explanation. It may be pertinent to point out that this Bill has been through another place. It has been through quite a lot of parliamentary business already. An amendment of this complexity at this stage of the Bill's procedures seems a little tardy. It would assist parliamentary consideration if such an amendment could be included within the Bill at an earlier stage.
Lord Lucas: High as our opinion may be of our own deliberations, we must allow that occasionally another place will have good ideas and will impress them upon the Government. In that case, as in this instance, the Government will have to bring forward amendments when the Bill reaches this House.
On Question, amendment agreed to.
9.45 p.m.
Lord Lucas Lord Lucas moved Amendment No. 252:
After Clause 85, insert the following new clause—
PART I OF THE LANDLORD AND TENANT ACT 1987: OTHER AMENDMENTS
(".—(1) In section 11 of the Landlord and Tenant Act 1987 (duty of new landlord to furnish particulars of disposal), for subsection (2) substitute—
"(2) The period referred to in subsection (1) is the period of four months beginning with the date by which—

(a) notices under section 3A of the Landlord and Tenant Act 1985 (in this Act referred to as "the 1985 Act") relating to the original disposal, or

(b) where that section does not apply, documents of any other description indicating that the original disposal has taken place,

have been served on the requisite majority of qualifying tenants of the constituent flats."
(2) In section 12 of that Act (right of qualifying tenants to compel sale etc)—

(a) in subsection (2)(a) and (b), for "three months" substitute "six months"; and

(b) after subsection (3) insert—

"(3A) Without prejudice to the generality of subsection (3), a purchase notice—

(a) shall require so much of the consideration for the original disposal as did not consist of money to be treated as such amount in money as was equivalent to its value in the hands of the landlord; and

(b) may provide for any such amount in money to be determined by a rent assessment committee in accordance with section 13."

(3) In section 13(1)(b) of that Act (determination by rent assessment committees of questions relating to purchase notices), after "section 12(3)(b)" insert "or (3A)(b)".
(4) In section 18(3)(a) of that Act (notices served by prospective purchaser), for "28 days" substitute "two months".
(5) Before section 19 of that Act under the heading "Supplementary" insert—
"Application of Part Ito special cases.
18A. Schedule 1A (which provides for the application of this Part to special cases) shall have effect."
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(6) After Schedule 1 to that Act insert, as Schedule 1A, the provisions set out in Schedule (Schedule 1A to the Landlord and Tenant Act 1987) to this Act.").
On Question, amendment agreed to.
Lord Lucas Lord Lucas moved Amendment No. 253:
After Schedule 5, insert the following new schedule—
("SCHEDULE SCHEDULE 1A TO THE LANDLORD AND TENANT ACT 1987
"SCHEDULE 1A APPLICATION OF PART I TO SPECIAL CASES
Disposals by auction
1.—(1) This paragraph applies where, in any case to which section 5 applies, the landlord proposes to make the relevant disposal by means of a sale at a public auction held in England and Wales.
(2) Section 5 shall have effect as if, in subsection (2)—
(a) for paragraphs (a) and (b) there were substituted—
"(a) contain particulars of the principal terms of the disposal proposed by the landlord, including in particular the property to which it relates and the estate or interest in that property proposed to be disposed of;
(aa) state that the disposal is proposed to be made by means of a sale at a public auction;
(ab) state the effect of paragraph 1 of Schedule 1A and of any election made under that paragraph;
(b) state that, accordingly, the notice constitutes an offer by the landlord, which may be accepted by the requisite majority of qualifying tenants of the constituent flats, for the contract (if any) entered into by the landlord at the auction to have effect as if a person or persons nominated by them, and not the purchaser, had entered into it;"; and.
(b) in paragraph (d), for "two months" there were substituted "28 days".
(3) The notice under section 5 must be served not less than four months, nor more than six months, before the date of the auction and—

(a) the period specified in the notice under section 5(2)(c) must end not less than two months before that date; and

(b) the period specified in the notice under section 5(2)(d) must end not less than 28 days before that date.

(4) Unless the time and place of the auction and the name of the auctioneers are stated in the notice under section 5, the landlord shall, not less than 28 days before the date of the auction, serve on the requisite majority of qualifying tenants of the constituent flats a further notice stating those particulars.
(5) Section 6 shall have effect as if, in subsection (3), for paragraph (a) there were substituted—
"(a) that the disposal is made by means of a sale at a public auction;".
(6) Section 8 shall have effect as if subsections (2) to (6) and (9) and, in subsection (7), "subsection (5) or" were omitted.
(7) Section 9 shall have effect as if, in subsection (2), for paragraphs (a) and (b) there were substituted—

"(a) that the disposal is made by means of a sale at a public auction, and

(b) that the other terms on which the disposal is made must correspond to those specified in the offer notice."

(8) A person nominated for the purposes of section 6 by the requisite majority of qualifying tenants of the constituent flats may, by notice served on the landlord not less than 28 days before the

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date of the auction, elect that sub-paragraphs (9) to (12) shall apply; and if such an election is made, those sub-paragraphs shall apply accordingly.
(9) If a contract for the disposal is entered into at the auction, the landlord shall, within the period of 7 days beginning with the date of the auction, send a copy of the contract to the nominated person.
(10) If, within the period of 28 days beginning with date on which such a copy is so sent, the nominated person—

(a) serves notice on the landlord accepting the terms of the contract; and

(b) fulfils any conditions falling to be fulfilled by the purchaser on entering into the contract,

the contract shall have effect as if the nominated person, and not the purchaser, had entered into the contract.
(11) Nothing in the contract as it has effect by virtue of sub-paragraph (10) shall require the nominated person to complete the purchase before the end of the period of 28 days beginning with the day on which he is deemed to have entered into the contract.
(12) Sections 11 to 17 shall have effect as if the reference in section 11(1)(b) to any provision of sections 6 to 10 included a reference to any provision of this paragraph.
(13) If a person nominated for the purposes of section 6 by the requisite majority of qualifying tenants of the constituent flats—

(a) does not serve notice on the landlord under sub-paragraph (8) within the period there mentioned; or

(b) does not satisfy the requirements of sub-paragraph (10) within the period there mentioned,

sections 6(8) and 9(1) shall apply as if a notice in pursuance of section 9(1) were served at the end of that period.
Disposals for non-monetary consideration
2.—(l) This paragraph applies where, in any case to which section 5 applies, the consideration required by the landlord for making the disposal does not consist, or does not wholly consist, of money.
(2) Section 5 shall have effect as if, in subsection (2)—
(a) after paragraph (b) there were inserted—
"(bb) state the effect of paragraph 2 of Schedule 1A and of any election made under that paragraph;
(be) state that, accordingly, the notice also constitutes an offer by the landlord, which may be accepted by the requisite majority of qualifying tenants of the constituent flats, for a person or persons nominated by them to acquire the property in pursuance of sections 11 to 17;";
(b) in paragraph (c), for "that offer" there were substituted "either offer"; and
(c) in paragraph (d), after "which", in the first place where it occurs, there were inserted "(where the offer stated under paragraph (b) is accepted)".
(3) Section 6 shall have effect as if, in subsection (1)(b), for "the offer contained in his notice" there were substituted "the offer stated in his notice under section 5(2)(b)".
(4) If, within the section 5(2)(c) period, the requisite majority of qualifying tenants of the constituent flats accept the offer stated in that notice under section 5(2)(bc)—

(a) section 8 shall not have effect, and

(b) that majority of such tenants may, by notice served on the landlord within the section 5(2)(d) period, elect that sub-paragraph (6) shall apply;

and if such an election is made, that sub-paragraph shall apply accordingly.
(5) In sub-paragraph (4)—
"the section 5(2)(c) period" means—

(a) the period specified in the offer notice under section 5(2)(c), or

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(b) such longer period beginning with the date of service of that notice as may be agreed between the landlord and the requisite majority of qualifying tenants of the constituent flats;

"the section 5(2)(d) period" means—

(a) the period beginning with the date of service of the acceptance notice and ending with the end of the period specified in the offer notice under section 5(2)(d), or

(b) such longer period beginning with that date as may be so agreed.

(6) If the landlord disposes of the protected interest without contravening section 6(3)(a) and (b), sections 11 to 17 shall also have effect as if—

(a) no notice under section 5 had been served;

(b) in section 11(2), the reference to four months were a reference to 28 days;

(c) in section 12(2), each reference to six months were a reference to two months.

Disposals in pursuance of options or rights of pre-emption
3. Where—

(a) paragraphs (a) and (b) of section 11(1) apply to a relevant disposal affecting any premises to which at the time of the disposal this Part applied ("the original disposal"), and

(b) those premises are still premises to which this Part applies, and

(c) the original disposal was the grant of an option or right of pre-emption, and

(d) in pursuance of the option or right, the landlord makes another disposal affecting the premises ("the later disposal") before the end of the period specified in section 12(2),

sections 11 to 17 shall have effect as if the later disposal, and not the original disposal, were the relevant disposal."").
On Question, amendment agreed to.
Clause 86 [Duty of new landlord to inform tenant of rights]:
The Deputy Chairman of Committees (The Viscount of Oxfuird): In calling Amendment No. 254 I have to advise the Committee that should this amendment be agreed to, I cannot call Amendment No. 254ZA due to pre-emption.
Lord Lucas Lord Lucas moved Amendment No. 254:
Page 59, line 44, leave out subsection (2).
The noble Lord said: I spoke to this amendment when moving Amendment No. 251. However, I am conscious that I shall pre-empt an amendment in the name of my noble friend Lord Caldecote. If he wishes to say something on his amendment, perhaps that will be convenient.
Viscount Caldecote: I, too, found the amendments proposed by my noble friend complex and difficult to follow. In his excellent explanation he covered a lot of ground in a relatively short time. I am not quite clear now whether the amendment in my name is necessary. However, the point I wish to make is that the period of two months specified in Section 11(2) of the Landlord and Tenant Act, now incorporated in Clause 86 of the Bill, is far too short a period for notice of disposal.

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Perhaps I may give one example. Let us suppose that that notice is served in mid-July or mid-December. It is quite impossible in practice to inform all the tenants involved in time for them to take legal advice on the course of action they wish to take.
I may not quite have understood the amendments my noble friend moved and which have been passed. My amendment may not be necessary. However, I should be grateful for an explanation.
Lord Lucas: I can give my noble friend the comfort that the effect of his amendment is subsumed in Part I of Amendment No. 252. Therefore, effectively we have accepted his amendment by proposing ours. I beg to move.
On Question, amendment agreed to.
[Amendment No. 254ZA not moved.]
Clause 86, as amended, agreed to.
Lord Meston Lord Meston moved Amendment No. 254ZAA:
After Clause 86, insert the following new clause—
PROTECTION FROM EVICTION: INVESTIGATION OF OFFENCES
(" . After section 6 of the Protection from Eviction Act 1977 there shall be inserted—
"Investigation of offences.
6A. It shall be the duty of every local housing authority to investigate alleged offences contrary to this act within their administrative area.".").
The noble Lord said: In moving this amendment, perhaps I may speak also to Amendments Nos. 254ZAB and 254ZAC. The amendments seek to reinforce the Protection from Eviction Act 1977. Under Section 6 of that Act a local authority has the power to prosecute persons for offences of harassment and/or illegal eviction. However, it is only a power. The fact is that some local authorities do nothing and the reinforcement which the first of the three amendments seeks to introduce is to provide that local authorities should have a duty to investigate potential offences under the Act.
In the third of the group of amendments, Amendment No. 254ZAC seeks to add to the category of persons on whom notice may be served under Section 7(1)(b) of the Protection from Eviction Act 1977:
"any person presently or previously authorised to arrange for the letting of the premises; or … any person currently engaged in the management of the premises".
It is designed to deal with the problem of shifting landlords. As drafted, Section 7(1) of the 1977 Act enables a local authority to demand from the agent or persons named in the receipt of rent to supply information relating to the name and address of the landlord.
The amendment proposes that the requirement should be extended to cover any persons engaged in the arrangements for letting or managing a property. Of course, there is a sanction within the 1977 Act for non-compliance with a notice, but that sanction does not apply if the person upon whom the notice is served can show to the satisfaction of the court that he did not know and could not, with reasonable diligence, have ascertained the facts required by the notice to be
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disclosed. I suggest that this is a sensible amendment adding to the range of powers under the 1977 legislation.
Finally, Amendment No. 254ZAB seeks to give additional powers of entry to enable tenancy relations officers to make inquiries to establish whether an offence has been committed within the terms of the 1977 Act. At present, officers are frustrated in their duties by their limited powers of entry. I suggest that even outside the provisions of this Bill, the improvements—which I believe they are—to the 1977 Act have considerable merit. In the context of the Bill and the deregulation which it proposes, it is essential that tenants' remaining rights should be protected as much as possible by conferring on local authorities the necessary statutory powers to make appropriate inquiries. I beg to move.
Lord Dubs: I am very much in sympathy with what the noble Lord, Lord Meston, seeks to do in the amendments. Perhaps I may put to him some questions about Amendment No. 254ZAB and the powers of entry. I am concerned that we should have adequate safeguards for homes which officials might want to enter, no matter how good the motive. Are these likely to be residential premises as well as business premises? What would be reasonable grounds for suspecting that an offence under the Act had been committed? How much evidence would the local authority official have to have to indicate that there were reasonable grounds for suspicion and therefore for obtaining entry into someone's home? The right is not something that we should give away too lightly. Although I am aware that many officials have rights of entry to people's homes, I wish to be satisfied that there are sufficient safeguards of the power.
Lord Mackay of Ardbrecknish: The noble Lord's Amendment No. 254ZAA would impose a new duty on local authorities to investigate alleged offences under the Protection from Eviction Act 1977. I start by assuring the Committee that the Government agree that landlords who harass or illegally evict their tenants should be dealt with severely by the law. That is why we introduced tough new sanctions against bad landlords in the Housing Act 1988.
However, in considering the noble Lord's proposals it is important to put the problem in context. The survey of English housing reports that three-quarters of tenants say they are on good terms with their landlords; one-fifth are on neither good nor bad terms; and only 4 per cent. say they are on bad terms with their landlords. It does not follow that just because the tenant is on indifferent or bad terms with the landlord he or she is at risk of harassment or illegal eviction.
I am aware of a report published by the Campaign for Bedsit Rights in 1994 which states that 9 per cent. of all privately renting tenants face harassment. However, it is important to put this statistic in its proper context. The figure comes from the OPCS survey of private renters in 1990. Seven per cent. of tenants had simply reported that their landlord had made them feel uncomfortable at some time and want to leave. But this does not

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necessarily indicate that the landlord was guilty of harassment. There may just have been a poor personal relationship between them or the tenant may have felt uncomfortable when asked for the rent or approached about some other aspect of the tenancy agreement.
These statistics indicate that it is only a very small minority of landlords who are likely to harass their tenants or take illegal action to get them to move. However, I can assure the Committee that I do not underestimate the distress that such behaviour must cause to tenants who are subjected to it.
Local authorities already have a power under Section 6 of the Protection from Eviction Act 1977 to institute proceedings where an alleged offence under the Act has taken place. I have difficulty with the noble Lord's amendment, which would require local authorities to investigate every allegation of harassment. Local authorities' current powers allow them to take action where they believe that an offence may have taken place but do not require them to get involved where, for example, the tenant is alleging harassment simply because the landlord has repeatedly asked for rent arrears to be paid or where the tenant is known to be a trouble-maker. We believe that it is essential that local authorities should retain their existing discretion to act. The noble Lord's amendment would place an unacceptable burden on local authority staff and budgets.
The noble Lord's Amendment No. 254ZAB would give local authorities specific powers of entry to the property where the alleged offence had taken place and to the landlord or managing agents' business premises to collect evidence in connection with the alleged offence. It also provides for entry by force. Local authorities do, of course, have powers to enter premises for specific inspection purposes in connection with their duties to enforce environmental health and fitness standards. However, I share the reservations expressed by the noble Lord, Lord Dubs, that the noble Lord's amendment would represent a pretty substantial extension of those powers. Such powers are generally available only to the police to investigate criminal offences, and even then strict rules and checks are applied before entry is authorised.
Proposals to give new powers of entry are scrutinised carefully by the Home Office. A new power of entry is approved only if it is clear that it is a vital element in enforcing the law and that the consequences to the public of not having that power would be serious. I do not believe that is the case for the type of offences we are talking about where there is unlikely to be much documentary evidence that an offence has been committed. I do not underestimate the seriousness of the offences we are talking about. However, I do not believe that the situation calls for the very striking extension of local authority powers that is proposed.
The noble Lord's Amendment No. 254ZAC would extend the existing notice requirement in Section 7 of the Protection from Eviction Act 1977 for disclosure of the landlord's name and address to cover anyone arranging the letting of the property or managing the property. I do, of course, accept that the tenant, or
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someone acting on the tenant's behalf, should have the right to know who the landlord is and how he can be contacted. The law already requires whoever is collecting the rent, where it is not the landlord himself, to disclose the name and address of the landlord if a notice under Section 7 is served on him or her to do so. I think we can confidently assume that a landlord will appoint someone to collect the rent if he cannot do so himself. This amendment would therefore seem to me to be unnecessary.
In view of the difficulties I have outlined and the assurances I have given in relation to the existing position, I hope that the noble Lord will feel able to withdraw his amendments.
10 p.m.
Lord Meston: I do not intend to press any of the amendments at this stage but I wish to comment on some of the points made by the Minister. I do not dispute that the great majority of tenants would neither need nor want to invoke the powers which presently exist under the 1977 Act or which are proposed by way of extension in these amendments. But, as I believe he recognises, the problem is a few hard cases involving elusive landlords who may move on, move away or hide away and who need to be tracked down. It is principally for that purpose that we seek to extend the net slightly by Amendment No. 254ZAC.
With regard to the point raised by the noble Lord, Lord Dubs, I accept his instinctive concern about extending any power of entry into private premises, whether they be business or domestic premises, and I must accept that in some circumstances a place of business can also be a place of residence. That is inescapable. The fact is that concern about powers of entry—I remember that they were discussed at length during the passage through this House of the Child Support Act—always emerges when a provision of this kind is suggested. Usually the reassurance has to be given that the power will only be exercisable when there are reasonable grounds to believe that an offence has been committed—that is covered by this amendment—and, of course, that only responsible officers of the local authority or the authority which happens to be invested with the powers provided will be entitled to exercise those powers. But the necessity for these powers, I maintain, is still apparent. I suggest that they are a necessity to give some further teeth to the Protection from Eviction Act to enable local authorities to glean information as to the identity of elusive landlords and the way in which they conduct their business.
As I said, I do not propose to press any of the amendments at this stage. I reserve the right to come back at a later stage. Meanwhile I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 254ZAB and 254ZAC not moved.]
Clause 87 [Provision of general legal advice about residential tenancies]:
Lord Dubs Lord Dubs moved Amendment No. 254A:
Page 60, line 16, at end insert (", or

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(c) any aspect of good management practices to be adopted in the running of flat management companies").
The noble Lord said: The purpose of this amendment, tabled in my name and the name of the noble Lord, Lord Meston, is to extend the scope of the Department of the Environment's existing commitment to providing information on enfranchisement and estate management schemes to include advice for self-managed blocks of flats on good management practice.
It is clear that flat management is not an easy task. It requires people to accept wide responsibilities, show a sense of commitment and expend a lot of energy in order to carry out the management function. I say that not from personal experience but having heard it from friends who are in that situation.
The commitment given under the 1993 Act to co-fund the Leasehold Enfranchisement Advisory Service was expanded to provide general legal advice about residential tenancies including estate management schemes. However, no commitment is given to providing general advice and assistance on good management practice to groups of leaseholders once they have bought their freehold. Those are the people who have the responsibility to oversee the management.
It has been demonstrated on a number of occasions that the willingness of the residents to get involved and not the nature of the building itself is the key factor in the success of a flat management company. The ability and motivation of the members is therefore crucial, and in order that that can happen effectively there needs to be access to impartial advice. After all, many of the residents in flats find themselves with a management responsibility possibly for the first time. It is not something for which they can plan in advance. Once they achieve the position of being able to exercise management, they must move quickly because it usually happens in circumstances when there has not previously been good management. It is for those reasons that I hope the Government will be sympathetic to the amendment. I beg to move.
The Earl of Lytton: This amendment gives me an opportunity to sing the praises of the Leasehold Enfranchisement Advisory Service—not, I hasten to add, on my own account, but to pay tribute to the extremely hard work put in by the chief executive and his staff, for which I am enormously grateful.
The Leasehold Enfranchisement Advisory Service welcomes the clause in the Bill because there have recently been more inquiries on the subject of management. Unless I misread the provision, I did not understand Clause 87 as it stands, and in particular subsection (1)(a), to be exclusive of the management provision. It seemed to me that it was not prescriptive as currently drafted.
Bearing in mind that LEAS is a jointly co-funded operation, it seemed to me that the nature of the advice should follow the funding, the source and the remit from that. As an advisory service giving impartial advice, we at the LEAS want to stick to giving advice on what the legal rights and legal remedies might be. The legal
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position therefore is a baseline that flows from both the legislative provisions on the one hand and the landlord/tenant relationship under a lease on the other.
I would be a little concerned if the wording of the amendment led us on to the practical application of day-to-day management matters. It would be extremely difficult to be impartial with that degree of detail. On a purely practical note, it could add substantially to the burdens, at any rate on the LEAS, regardless of what may happen to any other advisory service. I may have mistaken the extent of what the noble Lord intended and I appreciate his reasons for tabling the amendment. However, I felt that the Committee should know what my thoughts are on the matter.
Lord Strabolgi: I support the amendment moved by my noble friend Lord Dubs. Flat management carries with it communal responsibilities. Although self-management is demonstrably better than management by remote freeholders—the kind of people we were discussing earlier—it can suffer from problems of apathy among the majority of residents, particularly in larger blocks of flats such as those in the central metropolitan area of London. Service charge arrears can also be a problem when some tenants do not pay their "whack" on time. There may be a lack of planning for management and maintenance, especially in the older blocks, and a lack of clarity about maintenance responsibilities in leases causes difficulty with planning, particularly in the smaller and older converted blocks.
It seems to me that the provision of good advice on aspects of management will become crucial when the Government deliver their commitment—now a longstanding commitment—to introduce a system of commonhold and when flat owners are offered the benefits of self-management and freehold title. Unless an advisory agency exists to promote good practice and practical advice it is difficult to see how some problems inherent in human beings dealing with other human beings will be resolved.
The noble Lord, Lord Mackay of Ardbrecknish, mentioned earlier the state of affairs on the Continent which is so much more satisfactory than what we have here, with the system of leasehold and large freehold landlords. Perhaps the Government could also consult our colleagues in the Community, particularly in France, where they have a very satisfactory system of freeholds of apartments, and perhaps get some useful practical knowledge from them. In the meantime, I hope the Government will institute some sort of scheme as suggested in the amendment.
Lord Meston: My name is associated with the amendment and I speak briefly to support it since it seems to me to focus on practical assistance rather than merely the provision of legal advice, and would go a

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considerable way to prevention rather than cure of the problems which can arise in the situations which have been described by previous speakers.
Lord Lucas: I have listened with great interest to what noble Lords have said but I think I can boil down my speaking note to, "We don't want to do it".
Lord Strabolgi: The noble Lord must say rather more than that and give some explanation. The noble Lord has been most thorough and courteous the whole way through this Committee stage. I am very surprised at what the noble Lord has just said. I know it is getting late and perhaps we are all getting tired, but I think the noble Lord should give some explanation. He must have a brief. If he has not, perhaps the Box could help.
Lord Lucas: Indeed I do have a brief. I can say in two pages exactly what I have said in one sentence. If noble Lords would like me to do that, I shall now do it.
The noble Lord, Lord Dubs, has suggested that an agency funded under Clause 87, such as the Leasehold Enfranchisement Advisory Service, should also be able to advise on any aspect of good management practices to be adopted in the running of flat management companies.
Clause 87(1)(a), as presently drafted, allows the person or agency funded by the Secretary of State to give advice on any aspect of the law of landlord and tenant so far as relates to residential tenancies. This is a very wide remit indeed. It would include giving advice on matters covered by any code of practice approved by the Secretary of State under Section 87 of the Leasehold Reform, Housing and Urban Development Act 1993. Noble Lords will be aware that, under Section 87, such codes are admissible in court or tribunal proceedings and may be taken into account in determining any question arising in the proceedings. The result is that, so far as Clause 87 of this Bill is concerned, such approved codes and their application to individual disputes are to be treated as part of residential landlord and tenant law: and a person or agency funded under Clause 87 will be able to advise freely on such questions.
However, the amendment moved by the noble Lord, Lord Dubs, would go somewhat further than this, in a way which we think would be undesirable. For example, we do not think it would be appropriate for the Government to fund an agency providing general advice on aspects of property management. In particular, this would cut across the Secretary of State's powers to approve codes of practice relating to these matters.
Given my assurances as to the wide scope of the existing powers in Clause 87, I therefore hope that the noble Lord, Lord Dubs, is willing to withdraw his amendment.
Perhaps I may also point out that grouped with the amendment is Amendment No. 278, which is a minor measure which commences Clause 87 automatically two months after Royal Assent. As it is an enabling power, with no transitional implications, there is no need to trouble Parliament with a commencement order.
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Automatic commencement also has the benefit of having the legislative cover in place before Parliament will be asked to vote any money.
I see nothing in that which adds to my brief reply to the noble Lord, Lord Dubs. I am sorry if I offended the noble Lord, Lord Strabolgi, and others by attempting to speed up proceedings by being summary in my execution. But if the noble Lord has found something extra in what I have just said that I did not say originally, he is a better man than I. But I suspect he is anyway.
10.15 p.m.
Lord Dubs: I listened to both speeches of the Minister with equal attention, but I was not persuaded by either of them. I can understand his reservations about the particular model that would follow from this amendment. I am a little concerned that the Minister has not accepted that there is a problem. If tenants are going to exercise effective self-management, then some help is necessary. It may be that he believes that the existing help is there in sufficient quantity for any further help not to be necessary. I believe that that was part of the point that he made. There is a problem here. Some tenants, in exercising management, may need some help and support for the system to work well. It is the wish to have that problem recognised that motivated me in tabling this amendment rather more than the thought that the Minister might accept it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 87 agreed to.
Baroness Gardner of Parkes Baroness Gardner of Parkes moved Amendment No. 254B:
After Clause 87, insert the following new clause—
CUSTODIAL DEPOSIT SCHEMES
(" .—(1) A local housing authority may make and submit to the Secretary of State for confirmation by him a scheme (in this section referred to as a "custodial deposit scheme") authorising the authority or another body to register and hold all rental deposit monies charged by landlords letting properties within the authority's area.
(2) A custodial deposit scheme may—

(a) specify the information to be kept on the register;

(b) specify the person required to notify the local authority of deposits charged and to lodge deposit monies with the authority;

(c) make it a duty of such persons as may be specified by the scheme to notify the authority of the payment of a deposit;

(d) make it a duty of such persons as may be specified by the scheme to lodge deposit monies with the authority;

(e) specify the time limit within which the deposit should be lodged with the authority;

(f) make provision for the funding of the scheme through interest raised from deposits held;

(g) set down criteria for the use of interest raised for the benefit of private tenants in the local authority's area;

(h) specify the method by which tenants are to be notified of the lodging of the deposit;

(i) specify the methods by which disputes over the return of deposits are to be resolved.

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(3) A custodial deposit scheme shall not come into force before it has been confirmed but subject to that comes into force on such date as may he fixed by the scheme or, if no date is so fixed, at the expiration of one month after it is confirmed.
(4) A person who contravenes or fails to comply with a provision of the deposit scheme commits a summary offence and is liable to a fine not exceeding level 3 on the standard scale and if the contravention or failure continues, he commits a further summary offence and is liable on conviction to a fine not exceeding one-tenth of the amount corresponding to that level for every day or part of a day during which the contravention or failure continues.").
The noble Baroness said: At Second Reading I made the point that I thought that it was very desirable to have some formal place where tenants' deposits can be held. I quoted the New South Wales system as being an example where this works very well. Following that, the citizens advice bureaux approached me and asked whether I would accept this amendment which it has worded. I have accepted it and I put it forward tonight as a probing amendment. I have reservations as regards the very first line which refers to, "A local housing authority". I am not sure that such a housing authority will be the appropriate body to deal with this matter.
In New South Wales there is a specific authority called the Rental Bond Board of New South Wales which covers the whole state and which is very much bigger than a local authority here covering a much smaller number of people. I believe that a local authority would be given a great deal of additional work as the proposal is set out in this amendment.
Since I raised this matter and having tabled the amendment, I have received communication from the Small Landlords Association. I am impressed by the fact that it researched the New South Wales scheme, which I knew little about. It made the point that out of all the cases there only 0.8 per cent. were disputed. The consumer claims tribunal for settlement, which resolves who is to get the refund, awarded 16 per cent. of claims to the tenants and another 16 per cent. were fully awarded to the landlords. In the rest of the cases some kind of compromise position was taken.
I am not sure whether my amendment is of the right type or whether it would be preferable to have some kind of insurance or bonding system on behalf of letting agents. A number of them already operate such systems. My concern is about cases where no one is responsible for the money. Someone may well vanish with it. The argument about dilapidation is usually settled through inventory clerks who check in and check out and determine the exact position of a property. I do not believe that that is such a difficult issue.
It is important for people to feel that their money is safely held somewhere. Whereas in the past agents used to give tenants the benefit of the interest on the money, they now say that the cost of administration is so high that they can no longer give tenants the benefit of any interest. I note that quite heavy costs attach to the New South Wales scheme, and that has been pointed out by the Small Landlords Association. It is a disadvantage if the tenants' deposits are going to be eroded by the cost of the scheme, so there are snags to it. I have put
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forward this amendment because the principle is a good one. I shall be very interested to hear the Minister's comments on it. I beg to move.
Lord Strabolgi: I listened with great interest to what the noble Baroness said about the situation in New South Wales. In contrast to that, the citizens advice bureaux have told me that, so far as they are concerned, disputes over the return of rental deposits are one of the commonest forms of landlord/tenant disputes with which they have to deal. Those disputes are not only distressing and disturbing for their clients, but they also distort the housing market. They reduce flexibility and choice for the tenant and are a disincentive to renting out property, particularly for inexperienced landlords, and thus act to restrict the revival of the private rented sector.
Since January 1989, as we know, almost all new private tenancies have been either assured or assured shorthold. In future, they will mostly be shorthold. Many tenants pay their landlords security deposits—sums of money held as security against rent arrears, damage to property or removal of furniture. Over here there is no legal obligation for security deposits to be kept in separate accounts or to be returned with interest at the end of the tenancy—although both conditions are, of course, common practice among good landlords. It is with the landlords who are not so good that we are dealing.
Every year the citizens advice bureaux deal with three-quarters of a million housing problems. They tell me that one of the most common forms of dispute in the private rented sector relates to the return of rental deposits. Sometimes the deposits are held by an agency, as I mentioned earlier. I understand that a client in London rented a flat via an agent and paid a deposit of £750. The agency subsequently went into receivership and the client was anxious to recover the deposit. The bureau reported that the local council was concerned about the number of agents going into receivership and the number of deposits being lost.
The amendment would build on initiative by giving local authorities new powers to establish an independent custodial service for rental deposits which could be run by local authorities or other organisations. That would surely provide a value-for-money service for both landlords—good landlords—and tenants, and create greater security in the private rented sector. I therefore hope that the Government will take account of the amendment, which would be a useful innovation.
We are dealing here—this is why we are legislating—not with the good landlords, but with the very murky world of verbal agreements and all that kind of thing, where, at the end of the tenancy when the tenant is evicted because the landlord wants to try to get more rent from somebody else, although the tenant may have paid a deposit, the landlord may deny that he has ever received it or may say that furniture has been damaged when it has not been damaged. We have to deal with such cases. It would be a great advantage if such

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deposits could be held by an outside body, preferably by somebody officially appointed by the local authority. I support the amendment.
Lord Meston: I, too, wish to support the amendment—or something like it. It seems to have the potential for considerable practical value. It is encouraging to see that it is based on the considerable experience of the citizens advice bureaux. I agree with what the CAB says about the disproportionate amount of time and effort which is spent on disputes about relatively small amounts of money originally provided by way of deposit.
Turning to the point raised by the noble Baroness about the appropriateness of having the local housing authority as the custodian of the deposit scheme, it seems to me that it might be possible for local housing authorities to make joint arrangements with other bodies. Subject to those remarks, I support the amendment.
The Earl of Lytton: I support the principle that the noble Baroness raises with the amendment. However, I do not believe that what she has set out here is the right way forward. What we are talking about is landlords taking pecuniary advantage—I can put it no more kindly than that—of tenants. But the scheme must not be something that is bureaucratic or disproportionate in terms of its running costs compared to the amount being held.
I support the comments of the noble Lord, Lord Strabolgi, because I, too, am aware of circumstances where landlord management companies have gone into liquidation holding the stake, not just in connection with rental deposits, but money due for repairs and such things. There are not the proper accounting methods. The matter should be addressed, but it must be looked at in the context of the resources necessary to provide it. I should say that the Leasehold Enfranchisement Advisory Service is not looking for that task.
Lord Dubs: I have looked at this amendment with interest. Obviously I feel sympathetic towards its aim. I congratulate the noble Baroness on having put it forward. Something of this sort is desirable, but I have some difficulties with some of the detail as suggested within the amendment. We do not, after all, want to impose upon local authorities something so cumbersome and complicated that it will be very time-consuming. I should look for something that was a bit simpler than the scheme proposed. I wonder whether that could be devised.
I worry a little also about one of the points in the amendment which provides:
"set down criteria for the use of interest raised for the benefit of private tenants in the local authority's area".
If I were a tenant and I had deposited my money with the landlord, which I would expect to get back on leaving the property, I would regard that as my money, and I would regard the interest as my money in the same
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way as if a solicitor held money on my behalf when I would receive interest from the solicitor for the money that he had on deposit.
I am not happy that money which belongs properly to one tenant should be used for general purposes in an area, no matter how laudable they may be. I am worried that some of the earlier points are very detailed. We have something which is worthy and has a great deal of merit to it, but I am worried about some of the details as they are stated in the amendment.
Lord Mackay of Ardbrecknish: My noble friend's new clause would allow a local authority or an authorised body to set up a scheme to register and hold all rental deposit moneys charged by local landlords in its area. As we have heard, the scheme, which would have to be submitted to the Secretary of State for confirmation, would be able to specify a number of duties and conditions on the person receiving the deposit. Failure to comply with those would carry the sanction of a fine not exceeding level 3 on the standard scale.
In cases where there is no dispute, involving the local authority or a body authorised by the authority to register and hold deposits is likely to complicate and slow down arrangements which are already working satisfactorily.
My noble friend's amendment would also allow the authority or body operating the scheme to specify the methods to be used to resolve disputes. I recognise the very real difficulty that disputes can cause to both landlords and tenants. In those cases where there is a dispute, the key problem is finding a speedy and effective means of resolving who has the best claim to the deposit moneys. There will be cases where the landlord has a legitimate claim to some or all of the deposit to cover theft or damage. In other cases, the tenant will have every reason to expect the full deposit back.
In the light of what I have said, it is perhaps not surprising that my noble friend's proposal that the schemes could decide for themselves how they would handle disputes causes me some concern. That concern is, of course, that we might be asking the schemes to act in lieu of the courts. I cannot see how that would be appropriate. If I am not right about that, I am not clear what benefits these schemes would bring.
The small claims court already offers a cheap and relatively simple way of dealing with such disputes. If the claim is not contested there is no need for a court hearing. If it is, the amount in dispute is likely to be sufficiently small for the hearing to be dealt with under the informal, small claims arbitration procedure.
I do not want to appear dismissive of my noble friend's proposal. I should like to reassure her, like other noble Lords who have spoken, that I fully understand and share her concern that a small minority of landlords or agents should not be allowed to misappropriate their tenants' deposits. I am sympathetic to my noble friend's suggestion that we should look at schemes in other countries to see whether they have any advantages for our own situation. My noble friend, not surprisingly,

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drew our attention to the scheme in New South Wales. If this is a temptation to find me a reason to go to Australia this summer to examine that scheme, perhaps I might indeed welcome her amendment. But I do not think that we should rush to legislate in the matter. I know that the National Association of Citizens Advice Bureaux is keen to promote such a scheme. However, other options have also been put forward. The Association of Residential Letting Agents favours bonded schemes run by recognised letting organisations.
As I explained, the issue of handling disputes needs to be thought out very carefully. In that context perhaps I may suggest again that we should wait and take account of the forthcoming report of the noble and learned Lord, Lord Woolf, on access to justice, which I understand will recommend ways of speeding up cases through the small claims court.
While my noble friend has made an attempt to bring forward a possible framework for resolving some very difficult and unpleasant problems which may be occurring, we ought to be careful before we embark on what could turn out to be a fairly complex and bureaucratic system. Perhaps we should study systems in other parts of the world, as we are prepared to do, and wait on the report I mentioned before we come to any decisions on whether we ought to move and whether there is a reasonable scheme we could move to.
Baroness Gardner of Parkes: I thank those who have supported the amendment in principle. I feel that I must respond to one point made by the noble Lord, Lord Strabolgi. He referred to the tenant being evicted. I am not talking about cases of eviction. I am talking about cases where the tenant leaves and the same situation arises. I say to my noble friend the Minister that I am not really speaking entirely about cases where there is a dispute about how much money one should get back. I am more concerned about the type of case referred to by the noble Earl, Lord Lytton, where someone goes into liquidation or someone vanishes with all the money rather than an argument between the landlord and tenant. Perhaps the bonded scheme suggested by the letting agents is a good answer. However, the small property people make a point which I think is very important. Many unscrupulous tenants send out the advice through leaflets not to pay the last month's rent and in that way ensure that they will not be looking for their deposit. That seems equally unfair to the landlord because the deposit is there to cover dilapidation and any damage. I hope that we will be able to consider the principle further. I beg leave to withdraw the amendment.
The Deputy Chairman of Committees (Lord Cocks of Hartcliffe): Is it your Lordships' pleasure that the amendment be withdrawn?
Lord Williams of Elvel: No.
The Deputy Chairman of Committees: The Question is that the amendment be agreed do. As many as are of that opinion will say "Content"; to the contrary "Not-Content". I think the "Not-Contents" have it. Clear the Bar.
Division called.
The Deputy Chairman of Committees: Tellers for the "Contents" having not been appointed, pursuant to Standing Order No. 51, a Division therefore cannot take place. I declare that the "Not-Contents" have it.
Amendment negatived.
10.37 p.m.
On Question, Whether Clause 88 shall stand part of the Bill?
Their Lordships divided: Contents, 28; Not-Contents, 8.

Division No. 3

CONTENTS

Annaly, L.

Howe, E.

Blatch, B.

Inglewood, L.

Boardman, L.

Long, V. [Teller.]

Caldecote, V.

Lucas, L.

Carnock, L.

Mackay of Ardbrecknish, L.

Chesham, L. [Teller.]

Mackay of Drumadoon, L.

Clanwilliam, E.

McNair, L.

Coleraine, L.

Meston, L.

Courtown, E.

Mountevans, L.

Cumberlege, B.

Rankeillour, L.

Denton of Wakefield, B.

Shrewsbury, E.

Gardner of Parkes, B.

Trumpington, B.

Hamwee, B.

Wilcox, B.

Henley, L.

Wynford, L.

NOT-CONTENTS

Cocks of Hartcliffe, L.

Graham of Edmonton, L. [Teller.]

Desai, L.

Hollis of Heigham, B.

Dubs, L.

Strabolgi, L.

Gladwin of Clee, L. [Teller.]

Williams of Elvel, L.

Resolved in the affirmative, and clause agreed to accordingly.
Lord Lucas Lord Lucas: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Criminal Procedure and Investigations Bill [H.L.]
Returned from the Commons agreed to with amendments and with a privilege amendment. The Commons amendments ordered to be printed.

Northern Ireland (Emergency Provisions) Bill
Returned from the Commons with the amendments agreed to.
House adjourned at thirteen minutes before eleven o'clock.