§ Mr. Donald Dewar (Glasgow, Garscadden)
I beg to move,That an humble Address be presented to Her Majesty, praying that the Increase of Rent Restriction (Housing Associations) (Scotland) Order 1980 (S.I., 1980, No. 1668), dated 30 October 1980, a copy of which was laid before this House on 11 November 1980 in the last Session of Parliament, be revoked.The two orders that we are praying against—
Mr. Deputy Speaker (Mr. Bryant Godman Irvine)
Order. I take it that the hon. Gentleman is suggesting that we debate at the same time the following motion:That an humble Address be presented to Her Majesty, praying that the Increase of Rent Restriction (Scotland) Order 1980 (S.I., 1980, No. 1664), dated 30 October 1980, a copy of which was laid before this House on II November 1980 in the last Session of Parliament, be revoked.
§ Mr. Dewar
I doubt whether anyone would shout "Nay" to that suggestion, Mr. Deputy speaker, as it will shorten the proceedings considerably.
We are dealing with rents in the private sector and with housing association rents. Both orders were spawned, if that is the right word, by the Tenants' Rights, Etc. (Scotland) Act. Private sector rents are a matter on which we are perhaps apt to give rather short measure. There is on occasion so much publicity and anxiety about what is happening in the public sector, under this Government's vicious policies, that we forget how important the private rented sector is and how many people are at risk if the Government get their policies wrong, as we believe they have.
I should have expected the Minister to approach the subject with a great deal of confidence, because there is an old myth that those in the private sector, whether owner-occupiers or people who rent, are more likely to be 730 politically favourable to the Conservative Party. It is an old Tory principle to look after the lads. All that I can say is that that myth is no longer believed. Whether there ever was such a political allegiance, I imagine that it has been heavily eroded for many people who buy or rent in the private sector, in terms of the short tenancy and the fate of those who are marginal home owners with mortgages. The agony and recrimination about Conservative housing policy must be real.
This is a limited debate, but it allows us to draw attention to what I believe are very unsatisfactory provisions introduced by the Government—provisions that will lead to some difficulty for many people who already have enough problems to face.
On the surface—no doubt the Minister will make this sound as plausible as he can—the raising of the limit on private sector rents, the maxima by which a rent can be raised, from £78 to £104 in any one year, does not sound desperate. After all, the Minister will argue, and we are all aware, that the figure of £78 was set as far back as 1975. Bearing in mind inflation and what has happened to the value of money since then, one may say that an increase of about one-third is perhaps not a matter to become overheated about. But that is a simplistic view. There are a number of good reasons why the House should give careful scrutiny, perhaps with a somewhat cynical eye, to what is being done.
I shall return in a moment to the two principal arguments that lie behind this short debate, but, first, there are one or two points of detail that I should like to raise, which no doubt the Minister will be glad to deal with when he replies. In both orders there are references to traditional arrangements, and I hope that the Minister will say a word or two about the details. As I understand—I had it from a reasonably good source—there are particular arrangements for housing associations, in that originally the maximum increase for any one year was £39. It is the Government's intention to raise that amount to £104, but there is some sort of tapering or staging arrangement that allows the system to rest at £78 for an intermediate period. Will the Minister clarify that and put it on record? It would be useful to have the information in an easily accessible form.
At the same time, on the housing association side, perhaps the Minister will say a word or two about the phasing of rent increases for housing association properties. I raise that matter because, as we are all aware, these orders derive from section 37 of the Tenants' Rights, Etc. (Scotland) Act 1980, and they specifically repeal sections 7 to 9 of the Housing Rents and Subsidies (Scotland) Act 1975. But section 7(3) exempts the housing association properties, which are covered by a completely different statute. Will the Minister say under which statute the phasing is abolished?
As I understand it, charges for variable services—I think particularly of sheltered housing built by housing associations, which are the principal supplier, or almost the principal agents, of local authorities—are not included in the rent control that is embodied in these orders. Again, I should be grateful if the Minister would say a word or two about that, and whether he sees it as a problem. It may not apply in a large number of cases, but, by coincidence, I looked today at rents for fully sheltered housing built by a housing association and saw that the monthly rent was about £75, and that in addition there was a variable payment of over £35—about 50 per cent.—for various 731 services. There was also a heating element, over and above that. In that respect we may find ourselves in a position where the rent limitations do not apply to a high percentage of the monthly outgoings on fully sheltered housing that appear to be covered by this order.
I should like to mention one technical point—technical in the sense that it involves the minutiae of calculation. As I understand it, when a registered rent has been fixed it will exist for a period of three years. We are all familiar with the fact that under the old system, because of phasing, as well as the £78 maximum, at the end of the three-year period we had fallen short in terms of tenant payments on the registered rent. Let us assume that that is the position and that under the new machinery a landlord registers a new rent, the maximum that will apply is either £104 or 25 per cent. of the previous rent limit, whichever is the higher.
Will that 25 per cent. be calculated on the old registered rent, which had never been paid, or on the final step of the phasing, which might be considerably below the old registered rent? I am sure that the Minister follows that fairly self-evident point. However, when he was discussing hypothetically the arrival of the order under the Tenants' Rights, Etc. (Scotland) Act, I do not think that he dealt with that point. It would be helpful also if he would take the opportunity to make clear that any phasing arrangements presently in operation that will be abolished in future under this machinery will be allowed to run their course and will not be interrupted and put at hazard by any of the provisions of these orders.
Perhaps the Minister will also say something about rent agreements, which I understand are exempt. This was the subject of amendment during proceedings on the Tenants' Rights, Etc. (Scotland) Bill and was pressed very hard by, among others, my right hon. Friend the Member for Glasgow, Craigton (Mr. Millan). I appreciate that a rent agreement, even if exempt, does not preclude a dissatisfied tenant from going to the rent officer and asking for a registered rent. That often does not happen. I hope that the Minister will reconsider the possibility of including rent agreements under the cover of the general rent restriction machinery.
Having raised these detailed points, I turn briefly to the matter of principle and go back to the conundrum that I set myself on the question why we should object to this machinery when an increase from £78 to £104 in the maxima is not out of line and is perhaps generous in terms of the inflationary pattern in the years since 1975.
The first point will come as no surprise to the Minister.
The £104 is now qualified by the vital phraseone-quarter of the existing rent, whichever is the greater".That means that many tenants, subject to the upper limit set by the registered rent—I accept that point—may face substantial increases.
I asked a parliamentary question—to which I got the answer today—about registered rents in Scotland. I asked how many fell into bandings, how many were less than £100, how many were between £100 and £200, between £200 and £300, and so on. It is clear to anyone who looks only superficially at the housing statistics that rents are now escalating very fast in the private sector. It may be that the £104 will become an academic consideration in the practical application of these orders.
732 For example, houses of the cottage-type four in a block owned by Western Heritable, about which my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) knows, and in Edinburgh those that are of particular interest to the East Pilton Ratepayers' Association, owned by McTaggart and Meikle or the Cockburn Building Company, are modest, not in any sense palatial, properties have registered rents of £550. The last increase was from £370 to £500 for a three-apartment house. That is an increase of about 30 per cent.
§ Mr. John Maxton (Glasgow, Cathcart)
In general, I accept what my hon. Friend said about Western Heritable rents. However, one small group has been victimised during the past five years by Western Heritable. The people concerned are now having to pay an increase in rent from £370 up to £900 a year. It is a small group, but there are some in that group.
§ Mr. Dewar
My hon. Friend obviously knows his constituency and its problems very well. I take his word for that. Taking an extreme example underlines my general proposition that many people living very modestly face substantial increases in private sector rents. The result is that the £104 becomes unimportant and what rules the roost is the 25 per cent. That 25 per cent. can be a substantial sum, which escallates very quickly. On a modest rent of £500, 25 per cent. represents an annual possible increase of £125, leading up towards the maxima. In the second year, of course, it becomes 25 per cent. not of £500 but of £625, and so it goes on. The Minister, of course, will say that the rent officer puts an end to it by setting the ceiling of the registered rent. But in this day and age, as I am sure that he will accept, rents are rising very fast. Very substantial increases are therefore occurring which I believe will affect a large number of people.
The simple point has been put to me, by a number of people who will be affected, that 25 per cent. on their basic housing rent costs is not a very generous or acceptable matter in the current economic situation, even given the Minister's claims about the Government's likely record on inflation over the next two or three years. I accept that if, through economic mismanagement, the country is plunged into an ever-deepening recession, it is likely that inflation will ultimately be slowed up. If one assumes that inflation will continue at its present rate, however, the 25 per cent. provision clearly means that these people will be paying considerably over the odds during the period when they are catching up with their registered rent. I believe that that situation will, understandably, lead to a good deal of frustration and heart searching.
It is not just the 25 per cent. or £104, whichever is the greater. It is the new maxima combined with the abolition of phasing. That will also have a very considerable effect. Phasing is abolished under section 37 of the Tenants' Rights, Etc. (Scotland) Act 1980, with the repeal of sections 7 to 9 of 1975 Act. I am not thirled to schedule 2 of the Act, which set out the details of the way in which the phasing was managed. It is all too mathematical for me. There are too many equations and other formidable thickets of figures. But the effect at the end of the day was clear enough, and it was an important safeguard for many people at the lower end of the scale.
I have referred to the way in which private rents have escalated and registered rents have risen. Referring back to the parliamentary question that I mentioned earlier, it 733 is still fair to say that between October 1979 and September 1980 there were 3,884 registered rents of between £200 and £300 for unfurnished tenancies. Those tenants are at the bottom end of the scale and almost certainly would have benefited from the retention of phasing. To take a simple mathematical example, under the old system an increase of £150 was phased over three years at £50 per year and the £78 maximum became academic. Now that phasing is out of the way, the increase would be from £50 to £104, not just £78. I could cite many other examples to demonstrate that phasing was important because it lengthened the period over which the increase was staged. On a rent of £300 rising to £500, for example, under the new arrangements the increase in the first year would be £104, and in the second year £95. Under the old system it would have meant three rises of £67. The climb would have been far more gentle and the graph more acceptable to the tenant.
I know that the Under-Secretary will say that these are comparatively small sums of money and that the rent allowance system should mop up any hardship. As he knows, however, the take-up of rent allowances is very poor, particularly in the private sector where—perhaps unfortunately, perhaps misguidedly—through mistaken pride, people do not like asking for rent allowances. I suspect that a significant number of tenants—I put it no higher, but the House should be concerned about significant numbers of people, not just people in the mass—will be faced with an imposition as a result of the abolition of phasing, and will not know or will not wish, or for one reason or another will not be in a position, to claim the kind of allowance that would meet this addition to their monthly budget.
I am not trying to pretend that these are matters of enormous importance measured against the whole complexity of the housing system or the private sector rent structure, but for significant groups who have often in the past been victimised or overlooked they represent a considerable deterioration in the safeguards that our housing legislation provides. It is wrong to let that go unchallenged, and it should be tested and reconsidered by the Minister, because it would not cost a great deal in terms of ingenuity, parliamentary time or finance, and it would not seriously erode the position of landlords if at least some action were taken to remedy these anomalies, which I fear will be allowed to slip into our system. It is on that basis that I draw the attention of the House to and pray against these orders.
§ Mr. Gordon Wilson (Dundee, East)
I shall be brief. I congratulate the hon. Member for Glasgow, Garscadden (Mr. Dewar) on the way in which he has managed to tease out a lot of the detail in the orders, brief as they are. I think that he is correct in saying that although these do not affect a large number of people, or involve large sums—it is well known that the numbers of private sector tenants have been declining for a number of years—to individals this is an important matter.
As Members of Parliament we all get visits from constituents who are private tenants and who complain about the substantial rent increases with which they are faced at the instigation of the landlord through the rent officer or the rent assessment committee. It was a matter 734 of regret that under the tenants' rights legislation the Minister did not accept my amendment making it mandatory for certain repair work to be done.
One of the greatest complaints by tenants who have been through the rents system is that they pay the increases in rents but they do not seem to get anything back. The rotten sash cords are not replaced. The whole object of the legislation, however, in relaxing the regulations and restrictions placed on rents from the First World War onwards was to enable more money to be spent on the improvement of property.
Good landlords most certainly do a lot of work to improve their properties, but many others do not. They merely pocket the rents. Many tenants will find the increases suggested here going straight into the pockets of their landlords, with no return on them in terms of improvements to amenities. The 25 per cent. maximum increase that may well apply is swingeing. Will the Minister say what the real limit will be if the abolition of phasing is taken into account? Undoubtedly private sector rents are about to be sent rocketing at a rate far in excess of the rate of inflation. We are given very little ground for confidence in the Government's economic policies when they are prepared to consider 25 per cent. increases in rents while they are trying to force down wages and salaries. They claim that they now have wage rises in the public sector limited to under 10 per cent., and that they will be limited to 6 per cent. The people who might be affected by that limit will find they have to pay 25 per cent. more in rents.
The order relating to the housing associations contains a reference in the explanatory note which states:It also provides that there shall be no limitation on increases in any charges included in the rent for services provided by the landlord if such charges are registered by the Rent Officer as variable.Is that an entirely new provision? Will the Minister explain why the limitations placed on rents are not applied to those charges? It seens anomalous that such charges have been singled out for decontrolling while there is still to be some vestigial control over the size of rent increases.
A 25 per cent. increase is an excessive sum. It puts the smaller figure of £104 into perspective. The Minister may have to apply both a fixed sum and a percentage, but the percentage seems far in excess of any reasonable sum that could be imposed by a Government who claim to be bringing down the rate of inflation. Do the Government believe that the rate of inflation will keep going down, rather than, as many of us believe, be inclined to go up in a year or two, when the Government start pumping money into the economy in a despairing effort to be re-elected?
§ Mr. Robin F. Cook (Edinburgh, Central)
There may be only a small number of people affected by the orders, but they include a large number of my constituents. I represent significantly more private tenants than council tenants, and I am grateful to the Opposition Front Bench for having prayed against the orders and given us the opportunity to debate them.
I am particularly grateful to my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) for having nailed at the outset the falsity of any attempt to compare the £104 in the orders with the £78 set by the 1975 statute. Any attempt to pretend that all that we are confronted with 735 is a modest uprating of the £78 in line with inflation would be misleading. Such a comparison is meaningless, because the phasing to which the £78 referred has been abolished.
In Committee on the Bill from which the pernicious orders stem we established that the average increase in regulated rents in Scotland last year was £113. The effect of rent phasing was to cut that figure into three, giving an average increase per annum of only £38. Under the orders, the £38 in the first year would soar immediately to £104. Only at that level does any protection enter into the consideration of the rent to be paid by tenants. That is not a 25 per cent. or 33 per cent. increase, but a threefold increase.
What matters to the tenant is not what was the theoretical maximum before the orders and what will be the theoretical maximum after them, but what he was likely to have paid before the orders and what he is likely to pay after them. That is the difference between £38 and £104.
It was pretended to us in Committee, and will no doubt be pretended again tonight, that the orders are intended to give the Scottish tenant equivalent protection to that given in the law for England and Wales, where rent phasing has been preserved, though admittedly concertinaed into two years instead of three.
No doubt it will be put to us that the orders represent compensation to tenants in Scotland for the abolition of rent phasing in its entirety, but if it were intended that the maximum set by the orders should give the same protection to the tenent in Scotland as is given to the tenants in England by the preservation of phasing over two years it would have been necessary for the figures set by the orders to be half the average increase. That would have the effect of spreading the increase over two years rather than one. Bearing in mind the figures that I have quoted, half the average increase would be £55. In practice, we are confronted not with a figure of £55 but with a figure that is well-nigh double, rendering nugatory any protection to the tenant of the restriction on rent under the orders.
The order prescribes that the increase shall not be £104 in every case but £104, or 25 per cent. of the existing rent, whichever is higher. That means, for a number of tenants, a considerable increase in excess of £104. Since we debated the matter in Committee during the passage of the Bill, I have had a public meeting in my constituency at which I met a number of private tenants to explain the provisions of the Tenants' Rights, Etc. (Scotland) Act 1980, or as we prefer to know it within my constituency, the Landlords Rights, Etc. Act.
One private tenant has been to see me several times at my surgeries to complain that his landlord will not carry out modernisation and repairs. The last time he was before the rent assessment committee a rent of £452 was struck for him. He faces an increase in rent, in the first year, of £113, an increase in the second year—because the 25 per cent. is compounded—of £141, and an increase in the third year of £176, at the end of which he will have had a total increase up to £882, nearly double the figure from which he started only three years before—all in payment to a landlord who, consistently over the years, has refused to spend a penny on the property and who has no obligation under the statute or the orders to spend a penny of the increase on repairs.
736 The Minister may object that it is not known what rent the rent assessment committee will strike for this property. It may not fix on a figure of £882. In that objection is exposed the whole hypocrisy of the orders. The Minister would essentially be saying that the only protection for the tenant against such an increase is at the discretion of the rent assessment committee and should it choose to impose a rent of £882 there is nothing in the orders to protect the tenant against the increases that I have described.
§ The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind)
I am sure that the hon. Gentleman will appreciate that the purpose of phasing, as introduced by the previous Government, was never intended to be a protection against unfair or unjustifiable decisions by rent assessment committees.
§ Mr. Cook
Indeed, it was not. It was intended to spread the increase evenly over the period concerned. If the rent assessment committee had decided on £882 before the Act that we considered last year and before the orders before us, the maximum increase that the landlord could have recovered would have been one of £78 in any one year, which is substantially less than he will be able to claim under these orders. In the last year he will be able to claim an increase of £176, which is well over double the level that he would have been able to claim before the Minister altered the law.
My hon. Friend—I may extend that courtesy at this late hour—the Member for Dundee, East (Mr. Wilson) has already put this point to the House. The Minister is, in effect, telling my constituent that annual increases of 25 per cent. a year for three years are acceptable to the Government at the very same time when the Government are asking my constituent to settle for a single-figure increase in his wages and, if he is a teacher, to settle for an increase of only 4 per cent. for all we know, for the next three years. The harsh reality is that the bulk of the private tenants who will find themselves in this position are not employed at all. Most of them probably are pensioners.
The Government have already declared that those pensioners, this year, will face a cut in their real standard of living as a result of the failure fully to index their pensions. They will face a further cut as a result of the increases in their rent under the orders. I cannot do better than refer the Minister to the sterling words of the East Pilton and District Ratepayers' Association, to which many references were made in Committee. The Minister will be aware that the association wrote to him on 11 November. I should like to quote the words of the association's secretary on this matter:I would also point out that the increase in Old Age Pensions will be delayed by two weeks this year. The Prime Minister stated that pensioners would have to share in the cuts in Government expenditure. Commercial landlords should surely be able to afford to participate in the cuts that have been imposed on all sections of the population.I believe that that states the position precisely and succinctly. As a result of the Act and these orders we are seeing a deliberate step that will increase the money received by commercial landlords and increase the payments to them from their tenants.
The explanatory and financial memorandum to the parent statute to these orders estimated that there would be an increased expenditure of £1 million in rent allowances as a result of the increase in private rents following from these orders. That is a substantial increase in public expenditure. But underlying that substantial increase in 737 public expenditure is a much greater increase in the payments that will be made by private tenants to their landlords. In answer to parliamentary questions from me, the Minister confirmed that for every 60p increase in rent allowance there will be a 40p increase in rent. Therefore, even among those claiming rent allowance there will be an increased payment of £400,000 to match the £1 million increase in rent allowances.
We know, pathetically and tragically, that uptake of rent allowances is one of the lowest of any benefit that is available, largely because some elderly people do not wish to take up that form of allowance and would rather be independent. Only half of all those eligible for rent allowance claim it. In other words, if there is an increased expenditure of £1.4 million by those who claim rent allowance there will be another increase in expenditure of £1.4 million by tenants eligible for rent allowance who will not claim it. In total, we can conclude that £1.8 million will flow from the pockets of tenants who are eligible for rent allowance to their landlords as a result of the statute and these orders.
One can only conclude that these orders embody, more precisely than many other measures that we have seen go through this House in recent months, the new text of the Conservative Party that "From those who have not shall be taken even that which they have."
The Minister is not an unreasonable man. On occasion he has shown himself flexible, sensible and open to reasoned argument. Therefore I beg him, even at this stage, to withdraw these orders and not ask the House to pass measures that mock those whose rents they purport to restrict.
§ Mr. John Maxton (Glasgow, Cathcart)
I am a fair-minded man, so, before getting to the main tenor of my remarks, I say that we should be at least partially grateful to the Minister for laying these orders. During our debates on the Tenants' Rights, Etc. (Scotland) Bill in Committee, Opposition Members said that the legislation provided that the Secretary of State "may"—and not "shall"—introduce orders imposing this sort of restriction. We should be grateful that the Minister has not left the matter open. As I read the Act—I am not sure that I do not disagree with my hon. Friend the Member for Edinburgh, Central (Mr. Cook)—if these orders had not been introduced, even though the increases in them are far too large those increases would not have been restrained at all and landlords could have pushed much faster.
I am a little surprised that the hon. Member for Renfrewshire, East (Mr. Stewart) has remained silent in this debate. Even though the Opposition object because these rises are far too high, I expected the hon. Gentleman, as the defender of free enterprise and of landlords' rights to increase their rents as much as they like, to be on his feet attacking the Minister for introducing these orders at all. In Committee the hon. Gentleman suggested that there should be no rent controls on landlords.
§ Mr. Maxton
Even now, the hon. Gentleman says "Hear, hear". Perhaps he will seek to catch your eye, Mr, Deputy Speaker, so that he can make his points and attack the Minister for introducing the orders.
Like my hon. Friend the Member for Edinburgh, Central, I have a great deal of private rented property in 738 my constituency—property of two basic types. The first is that owned by the Western Heritable Insurance Society, referred to by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar). That is the four-in-a-block type of property, which is reasonably modern, although the necessary modernisation has not always been done by the landlords. The second consists of the tenemental old red sandstone blocks, most of which are now decaying. The second largest group of people who come to my surgery with complaints are tenants of these properties, complaining about landlords' failure to carry out repairs, despite the fact that many of their rents have risen and, under the order, will rise even more.
It is a myth that in the past the private landlord in Scotland has not received enough rent to ensure that he keeps his buildings in proper repair and that if the order and the rent increases go through he will do so in future, so that more property will become available to rent. The figures suggest that when private landlords raise their rents, and rent control is at least slackened or abolished, the reverse happens—the number of properties available for rent declines. As the rents rise, so tenants, who do not take up rent rebates in the proportion that other social benefits are taken up, cannot afford the rents and are forced out of the properties. Local authorities must then try to house them. Only a few people will be able to afford the rents of the properties that they have left, so the number of houses available could fall into disuse.
But the local authorities to whom these people must turn because of the Government's action can no longer build new houses, and may have fewer houses available because of the sale of council houses. So those tenants will be in a very difficult position.
Many of us opposed, and still oppose, the sale of council houses, but at least if a council tenant faces huge rent rises he may calculate that buying will cost the same as renting. But the private tenant does not have that option. If this Government are so keen on home ownership, it has always seemed grossly unfair that the private tenant did not have that same right to buy.
The Minister will probably reply that these are private properties and that the State cannot insist that people sell them, but the Western Heritable houses in my constituency were built with public money, with State subsidy under the Housing Act 1924—not by private builders—and rents had to be controlled for a period. They are, in a sense, public housing from which private landlords now get enormous benefit.
Many other tenants are in privately rented properties that have received local authority grants for redevelopment—for instance, for new plumbing and wiring. There has been a large input of public money to the privately rented sector. The Minister could at least perhaps introduce, even at this late stage, an amendment to the Tenants' Rights, Etc. (Scotland) Act to ensure that if there is to be a right to buy, private tenants will have the same right to purchase their property, with the same or perhaps even larger discounts. The houses built by Western Heritable originally cost £350. The company now gets well over 200 per cent. per annum on that investment, with rents of over £700 a year.
The rent increases may not affect a large number of people but they affect the poorer people, including the proud old-age pensioners, who do not willingly claim State benefits, which they consider to be charity. They struggle. Their lives will be made harder as a result of the 739 orders. I appeal to the Minister to withdraw the orders and introduce new ones, containing considerably smaller increases.
§ 11.1 pm
§ The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind)
I agree with the hon. Member for Glasgow, Cathcart (Mr. Maxton) that if I were to accede to the request of his hon. Friend the Member for Edinburgh, Central (Mr. Cook) to withdraw the orders there would be no limit on the amount of rent increase implemented at any one time. I know that that was not the consequence sought by the hon. Gentleman.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) asked about the transitional arrangements for housing associations. The advice that he has received is correct. The limit of £104 that applies to other private sector tenancies will ultimately apply to housing association tenancies. However, because we were starting from a base of £39 it was considered appropriate that there should be a transitional arrangement whereby for the first rent increase a maximum of £78 should apply. Only thereafter would the full figure of £104 apply.
§ Mr. Rifkind
The hon. Gentleman's first proposition was correct. The increase of £78 applies only on the first occasion. Once a maximum of £104 had been in operation for two years it would be absurd to revert to an increase of £78 simply because three years had expired. That would be a curious form of logic, which I do not believe the hon. Gentleman would wish to pursue with any great ardour. It would take him into somewhat uncharted territory.
The hon. Gentleman went on to ask on what basis the arrangements regarding housing associations were reached. He said that he could not find that in the Tenants' Rights, Etc. (Scotland) Act. That is correct. It is not there. The provisions are in the housing association order made under section 14 of the Housing (Financial Provisions) (Scotland) Act 1978, which inserted a new section—section 63—in the Housing (Financial Provisions) (Scotland) Act 1972. I should mention in passing that there is a minor drafting error in the order, which will require to be amended.
The hon. Gentleman's next question related to phasing for housing associations. He asked me to confirm that as with the private rented sector it is the effect of the tenants' rights legislation and other legislation that for both housing associations and houses in the private rented sector that phasing will come to an end and will be replaced by a maximum rent increase in any one year. I am happy to confirm that observation.
The hon. Gentleman and the hon. Member for Dundee, East (Mr. Wilson)—I am not sure whether the hon. Member for Dundee, East is the hon. Gentleman's hon. Friend now—asked about services charges and variable charges as provided for by the orders. These charges do not come within the limits that the orders provide. This is not a new principle. It was the previous Labour Government who provided that services charges should not be included in the maximum rents that can be paid in 740 any one year, for the simple reason that these charges represent direct outlays by the landlord, whether it is a housing association or a private landlord, and that service charges and other comparable charges are sums that the landlord has had to expend in a given year. It seems reasonable that whatever restrictions are placed on rents the landlord should be entitled to cover costs such as those reflected in service charges. We are following the practice of the previous Labour Government in excluding them.
Opposition Members made great play of the 25 per cent. provision, which is alternative to £104. The hon. Gentleman asked me specifically whether the 25 per cent. relates to the actual rent that the tenant has paid or to the fair rent that has been indicated by the rent officer or rent assessment committee. I refer the hon. Gentleman to the terms of the order. I am sure that these apply to both orders, but I refer him to the Increase of Rent Restriction (Scotland) Order, which deals with the private rented sector. Under article 2—the interpretation article—the previous rent limit is specifically defined. It states:where the increase is the first to be made since the date of registration of the rent, the amount payable by way of rent on that date or in all other cases, the amount payable by way of rent on the relevant anniversary of that date.It is the amount that the tenant is required to pay. It is the actual figure that is covered by the order.
As for the general principle of 25 per cent., I urge strongly on Opposition Members that the purpose of the law is to ensure that there is a fair balance between landlord and tenant. The previous Labour Government acknowledged that landlords, including the vast majority of responsible landlords who are seeking to maintain their property and to get a reasonable return on their investment—Opposition Members rarely make any reference to the reasonable landlords or to the housing associations that are covered by the orders, which need these reasonable incomes if they are to continue much of the good work that they do—should receive a fair return. The 25 per cent. and £104 provisions seem perfectly sensible, as there is a rent allowance system.
Conservatives take great pride in the fact that it was a Conservative Government who first introduced rent allowances. That was done in the teeth of opposition from Labour Members. That was a regrettable opposition on their part, and one that they have never adequately explained to private tenants in Scotland or elsewhere in the United Kingdom. When tenants were given the opportunity to claim from the State significant sums to help pay the rent, the Labour Party fought that proposal tooth and nail and opposed it in a rather disgraceful fashion, which I am sure it now regrets for good reasons.
The hon. Member for Edinburgh, Central commented on the comparison between Scottish provisions and those south of the border. He suggested that when the Bill, which is now an Act, was in Committee I pretended—these are the hon. Gentleman's words—that the Scottish and English provisions were the same. I pretended no such thing. I indicated that there were differences between the two sets of provisions and indicated the reasons for those differences. I am happy briefly to comment on them. There are two basic differences. In the Scottish provisions phasing is abolished and replaced by a maximum limit, in any one year, of £104, as the House is aware. In England the phasing is 741 limited to two years rather than three. Indeed, the rent can be reviewed after two years, whereas in Scotland the three-year minimum is maintained.
It is difficult to draw conclusions as to which system is preferable for the tenant or the landlord, but the Scottish provisions ensure that while a tenant whose rent increase may be relatively small will pay it all at once, whereas in England it will be paid over two years. If the increase is large the maximum that he will be required to pay in any one year will be £104, or 25 per cent. In England the increase, however large, will have to be paid in full, at least over two years. That does not apply in Scotland. It is for hon. Members to come to a conclusion about which system they prefer on balance, but they should be aware of these distinctions between the two systems.
§ Mr. Cook
I am happy to withdraw anything that I may have said to suggest that the Minister said that the systems were the same. I tried to say that the Minister suggested that this was a balancing provision to give protection equivalent to that provided for England and Wales. If he reads his speech, as I did earlier today, he will find that this is so.
Under the statute as drafted for England and Wales, the tenant with the average increase will pay half that increase in the first year and half in the second year. If an equivalent protection were extended under this procedure to the Scottish tenant, the maximum increase would require to be half the average increase, which would give a figure of £55 per annum, and not £104.
§ Mr. Rifkind
The hon. Gentleman is correct in saying that if we are talking about average rent increases it could be argued that the tenant in England will be slightly better off than the tenant in Scotland. However, the whole tenor of the hon. Gentleman's argument was not on the question of average rent increases, which are relatively low, but on the spectacular examples that he gave of dramatic increases. The hon. Gentleman even speculated on rent increases that had never been agreed by the rent assessment committee but were simply being proposed by the landlord. The only reason for introducing them into the debate was to suggest that there might be occasions on which rent increases were very large.
If there is a good case for protecting the tenant, it is to protect him not from the average rent increase but from the large one. The hon. Gentleman must concede that if there were a large increase the tenant in Scotland would be considerably better off than the tenant south of the border. Instead of having to pay the increase altogether, in two years, in two lots, he would have a strict maximum for the total increase that could be paid in any one year, however long it took to reach the figure laid down. Therefore, if the hon. Gentleman's prime concern is, as his original remarks indicated, with above-average rent increases, he should concede that these Scottish provisions are considerably to the tenant's benefit.
I am sure that the Opposition, appreciating as they now do what would be the effect of revocation of the orders, will not, if they wish to act logically, divide the House. The orders carry out an undertaking that I gave in the Committee, as the hon. Member for Glasgow, Cathcart (Mr. Maxton) was good enough to recognise, that we would introduce orders to ensure a maximum rent increase in any one year.
The figure that I mentioned in Committee, some months ago, is the figure now to be found in the orders, 742 although it could be argued that the passage of time might justify a slightly larger figure. We have not suggested that. The £104 is a modest increase, even taking into account all the qualifications of the hon. Member for Edinburgh, Central, compared with the £78 fixed six years ago. It is on that basis that I have not the slightest doubt that the orders are defensible and fair, and reasonable to tenant and landlord alike.
§ Mr. Dewar
I am always amused by the way in which the Under-Secretary tries to draw virtue from the most unlikely circumstances. I suppose that we should be grateful that he has introduced orders at all, but that does not put us under any moral obligation to endorse their contents, and we do not do so.
The hon. Gentleman slid past most of the arguments about the 25 per cent. It was clear from my remarks and those of my hon. Friends that what worried us was not the £104 written into the order. If it were merely a question of that figure I think chat the hon. Gentleman would have the better of the argument. Indeed, he would not have to advance an argument on that point, although he probably would still have to do so on phasing.
We have only to examine the Scottish housing statistics in the most cursory fashion to see that the sort of figures that my hon. Friend he Member for Edinburgh, Central (Mr. Cook) was advancing are in no way exceptional and unfair, but are now the norm for undramatic and rather unromantic property, inhabited by people of ordinary means who will be caught by the 25 per cent. provision, and will suffer as a result. The Under-Secretary of State made great play—I have heard him doing so before—of his surprise at the opposition that was originally put up to the introduction of rent allowances.
In a sense, I well understand the suspicion, and I am sure that those who were listening to the debate had it in the back of their minds that rent allowances would be used as a cover for all sorts of strategies and mechanisms that would drive up rents in the private sector. We are seeing an example of that tonight, and we do not welcome it in any way. I accept, as the Under-Secretary of State said, that if there were no order there would be no maxima, and if that were permanent it would be totally unsatisfactory and we would be in great difficulty, but he has already conceded that there will have to be a minor amendment to the drafting of the order.
We suggest that the Under-Secretary should consider the possibilty of doing something a little more radical and sensible. It will always be a matter of balance between rent restriction and a fair return for the landlord but, given the present economic climate and the particular category of tenants with whom we are dealing and all the circumstances of the case, the Minister has typically managed to get the balance a little wrong. It is not unreasonable to ask him to reconsider the possibility of using the amendment to put right a real, but not glaring or dramatic injustice.
I shall not recommend my hon. Friends to divide the House on this matter, but it was important that it was ventilated and brought to the attention of the House. I hope that even at this late date, given that the matter is not closed and that the Minister will have to return to it, he will turn to the arguments and recognise, in the privacy of 743 his Department, in a way that he was a little blate to do on the Floor of the House, that he has got it wrong, and act accordingly.
§ Question put and negatived.