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Mr. John McAllion (Dundee, East) : The Minister has already admitted this afternoon that the two thirds of tenants who wish to stay with the new towns are to be denied that choice and instead, are to be transferred forcibly to Scottish Homes on wind-up.
Another Minister has admitted that Scottish Homes will be set targets, including the target of disposing of 60 per cent. of any houses acquired within three years. Given that the tenants are to have no choice about staying with the new towns, about being transferred to Scottish Homes on wind-up and about being moved on by Scottish Homes into the private sector, how can the Minister continue to defend the idea that the Government's policies are about increasing choice to tenants?
Mr. Lang : Many tenants of new towns have exercised the choice in favour of private ownership, which has risen from 8 per cent. a decade ago to over 50 per cent. now over the five new towns and to over 50 per cent. in four of the five new towns. Forty per cent. of the remaining tenants have expressed interest in buying their homes. That is an exercise of choice which is highly desirable.
The hon. Gentleman asked me about tenants being forced to leave the development corporation. When the development corporation is finally dissolved, they will not, of course, be able to remain tenants of the development corporation and we have, therefore, provided for Scottish Homes to take over the remaining tenants who have not exercised other options by that time.
Mrs. Maria Fyfe (Glasgow, Maryhill) : Will the Minister describe a little more fully what he means by an appropriate valuation for the assets that are to be sold off? Will it have any resemblance to Lady Porter's valuation of a Westminster cemetery? Will he also describe what impact the proposals may have on the rent that tenants in the new towns have to pay? What impact will the proposals have on the job conditions and pay of those who work at places such as sports centres? The Opposition feel that the proposals lack rigour and seem to provide great dangers for the future existence of many of those facilities.
Mr. Lang : I see no reason why the job conditions should be affected by the change. Rent levels are covered by existing leases and will not be affected directly by the proposals affecting the new town. There will be a value of assets that the market will be able to sustain. I cannot tell the hon. Lady what that market value will be. That realistic appraisal of the value of the property will guide the sale price at the time.
"I know that the corporation staff are anxious to press ahead with these programmes."
Which staff? How does he know? Has any ballot been taken? People working in Livingston are gravely worried about the future. The Minister also said :
"At wind-up, when stage two is reached, the option of a partial transfer to district councils is not ruled out."
Will he answer the question of my hon. Friend the Member for Livingston (Mr. Cook) about whether each individual tenant has a right to an option?
Mr. Lang : The hon. Gentleman will know that I and my Department have close and continuing contact with the new towns. It is clear that they are anxious to complete the development profiles. We are seeking to enable them to do that by phasing the wind-up processes as we have arranged. We have made it clear that we are not ruling out the district council as an option for tenants, but we are equally taking the view that now is not the time when there is the need or the desire to take a decision one way or the other.
That leave be given to bring in a Bill to abolish discrimination against elderly persons in access to the "right to buy" provisions of the Housing and Planning Act 1986 by providing elderly persons with full rights to buy their own homes in local authority or housing association rental schemes, except where the accommodation has been specifically adapted or designed for elderly persons and where no such accommodation has been allocated to persons below pensionable age ; further to provide no-fee arbitration by reference to the Housing Corporation in England and Tai Cymru in Wales in the case of any dispute between tenant and public sector landlord on the applicability of the exclusion of accommodation defined as specially suitable for elderly persons.
Especially in the context of the preceding debate, it may seem strange for a Labour Member to seek to introduce a Bill to extend the right to buy. Let me explain what my Bill is intended to do. The purpose of the Bill is to remove discrimination against elderly persons who are excluded by law from purchasing accommodation that is especially suitable for them whole young persons who are allocated identical accommodation can exercise the right to buy although that accommodation was not designed specifi-cally for them. That is illogical, and the Government must face the fact that they have created an anomaly in the Housing and Planning Act 1986. My Bill represents a modest attempt to put that right and to introduce some logic into the right-to-buy legislation.
I hope that the Bill will encourage the Government to face up to the implications of the right to buy in general and to the legislation that contains it in particular. We all have to face the fact that there is an increasing number of elderly people in our society ; it is sometimes called "grey power". The size of the elderly population will be doubled and trebled in the next decade. We also need to consider our view of the exact purpose of property ownership and to ask ourselves whether we consider it as particularly suited to young people and as something from which elderly people should be excluded. We must try to avoid the division of our society into a two thirds-one third society, of which we have seen serious signs in the United States and, in the past decade, increasing signs in this country, too. We must avoid at all costs introducing any legislation that would do anything to encourage that.
We must work towards the sustainability of the social housing stock and fluidity of the boundary between that social housing stock and the people who occupy it and the so-called private housing stock, albeit subsidised in a social fashion through the mortgage payment subsidy.
Accommodation for elderly persons poses particular problems. An elderly person's concept of private ownership is no longer necessarily the concept of 100 per cent. equity ownership. The elderly person's sub-group of the National Federation of Housing Associations recently did some excellent work on the problems of the 25 per cent.--75 per cent. equity stake, which is particularly suitable for the elderly. Problems also arise in the exact definition of service charges for elderly persons' accommodation, given that elderly people require many more services than others. They may seek greater security and they may have problems with additional heating bills.
Column 822All those factors mean that housing for the elderly will not necessarily be identical to the accommodation that is most appropriate for younger people.
The problem will grow and grow. In addition to the increasing number of elderly persons, we have an increasing number of elderly persons surviving for about 25 years after their retirement--about the same time as the term of most people's mortgage. It is not unusual for the elderly to be alive and kicking 25 years after their pension starts to be paid. That means that, in terms of time, at least, they are perfectly capable of paying off a mortgage. Ten years ago, people would have said, "What is the point of a woman of 60 or a man of 65 taking out a mortgage?" But, subject to the person's income, that is now a perfectly sensible proposition.
Most important of all is the increasing concentration of local authority and housing association activity on housing for the elderly. That is the direction in which the Government want their efforts to go. That being so, they must also think through the implications of the right to buy in this area of increasing effort. An additional consideration is that there are now many people in areas such as mine who cannot get on the housing ladder. One of the ways in which they can do so is if their elderly parents acquire an asset through exercising their right to buy, pay a mortgage and pass it on. Nobody on an industrial wage in my area can start on the housing ladder because there are no houses left at under £30,000. My Bill attempts to solve some of the incompatible and irreconcilable objectives of the present law. All are perfectly valid bits of social engineering, but they do not add up. My Bill attempts to make them add up.
There are charitable housing associations and local authorities who want to build for the elderly. The Government want to support them, but the market does not. Housing associations and local authorities do not necessarily want to create ghettoes for the elderly. That is another important aspect of social engineering. Flats in blocks built for the elderly are occasionally let to young persons. Immediately that happens, one gets into difficulty. If a local authority nominates a young person into an elderly persons' block of flats, that young person can normally exercise the right to buy, but the elderly people for whom the flats were designed cannot. Jealousy and social discord arise in what was previously a happy community. Elderly people then ask why they cannot have the same right as the young person. The answer may be to refuse to allocate elderly persons' flats to young people. That is covered in my Bill. It restricts local authorities' or housing associations' ability to mix the young and the elderly.
Local authorities and housing associations may say, "We want to build enough accommodation of this kind so that even though some of it is allocated under the right to buy there is sufficient left over that can be rented."
It is now time for the Government to accept that they must consider the consequences of their attitude to the right to buy. There must be a sustainable housing stock. That has to be the first priority. The right to buy, if it is to be a genuine benefit, must be sustainable and not a one- off phenomenon of the 1980s to shrink local authorities down to size-- euthanasia for the municipal housing sector. We must avoid creating massive homelessness.
Column 823If we extend the right to buy, we have also to extend the right to build, or there will not be any social housing. Homelessness and an inability to accommodate the elderly will be the inevitable consequences.
If the right to buy is not to be exercised as a political benefit that is just available to the first in the queue in the 1980s, we cannot exclude the elderly. We had the right to buy mark one--simply the right to buy a local authority house regardless of what the local authority thought. Mark two extended the right to a discount. Mark three extended the provisions to housing associations, prison officers and some disabled people. We have not faced the logic of mark four--why should it be restricted at all? It has to be restricted only because we do not have the right to build. The right to buy and the right to build should exist side by side. I hope that this Bill will force the Government to think through the consequences of the right to buy.
If we are to cease to exclude the elderly from the right to buy, we have to accept that there must be a comparable right to build so that there is a sustainable housing stock. There should be an ability to rent, an ability to rent with a view to eventual purchase, and an ability to rent and continue to rent.
This is a modest amendment to the Housing and Planning Act 1986. It will bring some equity and justice into the provision of housing for the elderly. It removes discrimination in the provision of accommodation for young and elderly people, removes the present nonsensical state of affairs, and raises the issue of whether we are building enough social accommodation or whether the right to buy was simply a temporary political benefit intended to achieve the re-election of the Conservative Government.
Question put and agreed to.
Bill ordered to be brought in by Mr. Rhodri Morgan, Mr. Paul Flynn and Mr. Frank Field.
Mr. Rhodri Morgan accordingly presented a Bill to abolish discrimination against elderly persons in access to the "right to buy" provisions of the Housing and Planning Act 1986 by providing elderly persons with full rights to buy their own homes in local authority or housing association rental schemes, except where the accommodation has been specifically adapted or designed for elderly persons and where no such accommodation has been allocated to persons below pensionable age ; further to provide no-fee arbitration by reference to the Housing Corporation in England and Tai Cymru in Wales in the case of any dispute between tenant and public sector landlord on the applicability of the exclusion of accommodation defined as specially suitable for elderly persons : And the same was read the First time ; and ordered to be read a Second time upon Friday 21 July and to be printed. [Bill 180.]
Not amended in the Committee (and as amended in the Standing Committee), considered.
(1) Paragraph 1 of Schedule 18 to the Taxes Act 1988 (which contains definitions relating to group relief) shall be amended in accordance with this section.
(2) For sub-paragraph (3)(b) there shall be substituted-- "(b) do not carry any right either to conversion into shares or securities of any other description except--
(i) shares to which sub-paragraph (5A) below applies,
(ii) securities to which sub-paragraph (5B) below applies, or (iii) shares or securities in the company's quoted parent company, or to the acquisition of any additional shares or securities ;" (3) For sub-paragraph (5)(a) there shall be substituted-- "(a) which does not carry any right either to conversion into shares or securities of any other description except--
(i) shares to which sub-paragraph (5A) below applies,
(ii) securities to which sub-paragraph (5B) below applies, or (iii) shares or securities in the company's quoted parent company, or to the acquisition of any additional shares or securities ;" (4) After sub-paragraph (5) there shall be inserted--
"(5A) This sub-paragraph applies to any shares which
(a) satisfy the requirements of sub-paragraph (3)(a), (c) and (d) above, and
(b) do not carry any rights either to conversion into shares or securities of any other description, except shares or securities in the company's quoted parent company, or to the acquisition of any additional shares or securities.
(5B) This sub-paragraph applies to any securities representing a loan of or including new consideration and
(a) which satisfies the requirements of sub-paragraph (5)(b) and (c) above, and
(b) which does not carry any such rights as are mentioned in sub-paragraph (5A)(b) above.
(5C) For the purposes of sub-paragraphs (3) and (5) to (5B) above a company ("the parent company") is another company's "quoted parent company" if and only if--
(a) the other company is a 75 per cent. subsidiary of the parent company,
(b) the parent company is not a 75 per cent. subsidiary of any company, and
(c) the parent company's ordinary shares (or, if its ordinary share capital is divided into two or more classes, its ordinary shares of each class) are quoted on a recognised stock exchange or dealt in on the Unlisted Securities Market ;
and in this sub-paragraph "ordinary shares" means shares forming part of ordinary share capital.
(5D) In the application of sub-paragraphs (3) and (5) to (5B) above in determining for the purposes of sub-paragraph (5C)(a) above who are the equity holders of the other company (and, accordingly, whether section 413(7) prevents the other company from being treated as a 75 per cent. subsidiary of the parent company for the purposes of sub-paragraph (5C)(a), it shall be assumed that the parent company is for the purposes of sub- paragraphs (3) and (5) to (5B) above the other company's quoted parent company."
Column 825(5) In sub-paragraph (6) for the words "to (5)" there shall be substituted the words "to (5D)".
(6) This section, so far as relating to Schedule 18 of the Taxes Act 1988 in its application (by virtue of section 137 below) for the purposes of subsections (ID) and (IE) of section 272 of the Taxes Act 1970, shall be deemed to have come into force on 14th March 1989.'.-- [Mr. Norman Lamont.]
Brought up, and read the First time.
The purpose of this new clause is to help groups of companies raise finance through subsidiary companies, either by issuing fixed-rate preference shares or by raising normal commercial loans. If those shares or loans carry a right to conversion into other shares or securities, at present the subsidiary company may not be entitled to the normal tax reliefs available to a group of companies. For example, it may not be able to claim group relief, which allows the trading losses of one company to be set against the taxable profits of another member of the group.
In some cases it is right that these tax reliefs should not be available. For example, if the conversion right is into ordinary shares of the company, the economic ownership of the company may lie largely outside the group. In other words, the holder of the preference shares or the lenders may have a large stake in the performance of the company, so, if the company does well, its right to convert into ordinary shares in the company will become more valuable. If the tax reliefs for groups of companies were available in such cases, it would be possible to devise arrangements which would abuse the reliefs to avoid tax. The new clause does not affect such cases.
However, in other cases, the conversion rights do not give the shareholder or the lender a stake in the performance of the company. For example, a loan may be convertible into fixed-rate preference shares, or the conversion right may be into shares or securities in the parent company of the group. In such cases there is no reason why the normal tax reliefs for groups of companies should not be available. The new clause therefore provides for conversion rights like those to be disregarded when establishing the economic ownership of a company for the purposes of group relief. The group relief ownership rules are applied for the purposes of some other tax provisions, and the change will therefore affect them as well. The other provisions concern the surrender of advance corporation tax by a company to a subsidiary company, the payment of dividends or interest between members of a group, and the definition of a group for capital gains tax purposes.
This change is highly technical. It will not have a major impact on the operation of the tax system. The new clause builds on the changes that we made in clause 99. If the hon. Member for Islington, South and Finsbury (Mr. Smith) recalls, we restricted group relief to avoid a number of artificial devices and circumstances by which the economic control of a group was not where it might have been thought to be. There were artificial devices to create groups of companies to get group relief. In framing clause 99, we introduced some provisions that could harm certain perfectly legitimate operations.
The new clause simply relieves the provisions that we made in clause 99 so that we will not damage genuine
Column 826commercial fund-raising operations of the type that I have described in my examples. The provision will not damage companies in that situation. It is because we have received a number of representations detailing examples where genuine commercial operations might be affected adversely that we have made these modest changes. However, the new clause will not have a major impact on the operation of the corporation tax system.
Mr. Chris Smith (Islington, South and Finsbury) : I have examined the new clause with considerable care. As the Financial Secretary has stated, it represents a small loosening of the fairly tight provisions of clause 99, which passed its Standing Committee stage with flying colours.
The provisions of the new clause are relatively unexceptionable. However, I have one question. The Financial Secretary stated that he did not expect the provisions to make much difference to the corporation tax regime. Have the Government made any estimates of the possible lost revenue to the Exchequer as a result of this provision?
Mr. Lamont : The cost of the change is likely to be negligible. Both the new system introduced here and in clause 99 will produce approximately the same yield as the old system, but the timing of receipts might be different in individual cases.
Clause read a Second time, and added to the Bill.
No regulation made under the National Debt Act 1972 relating to premium bonds shall be valid unless :
(1) it contains no prohibition on the smallest number of bond units which can be purchased unless that number is less than eleven, or (2) it has been the subject of an affirmative resolution of the House of Commons.'.-- [Mr. Chris Smith.]
Brought up, and read the First time.
From 1 July this year, the minimum purchase of premium bonds for savers aged 16 or over increased from £10 to £100. The new clause seeks to reverse that change, which was made by statutory instrument under the National Debt Act 1972, and to ensure, by means of primary legislation, that such a restriction on premium bond purchase can never be so easily introduced again.
Premium bonds were first introduced in 1956. The minimum purchase required then was £1, which in today's prices was the equivalent of £8.43. The minimum purchase was raised to £10 in July 1985, worth £11.79 at today's prices. The original top prize was £1,000. It is now £250,000. However, the structure of the prize system of the premium bond programme is such that overwhelmingly the bulk of the prizes still tend to be in relatively small amounts. A key point about the threshold that the Government are now seeking to establish is that many of the prizes tend to be reinvested as further purchases of premium bonds.
The premium bond system has an absurdly low underlying interest rate of about 6.5 per cent. It is absurdly low in current circumstances, when the base rate is so high.
Column 827The rate has not changed in recent months and in a recent written answer the Government have refused to consider changing the underlying interest rate for premium bonds.
It is worth reminding ourselves that premium bonds are a mass appeal product with a large customer base. About 24 million people in this country hold them, and there are about 2.5 billion holdings. There are about 2 billion transactions in any one year and the investment totals about £2.25 billion. The product is clearly extremely popular.
It is also worth pointing out that most purchases of premium bonds tend to be small. The Government have tried to disguise that fact in recent answers, statements and press releases, but the truth was revealed in a parliamentary answer to the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) on 26 May, who had asked
"what proportion of the actual numbers of all purchases of premium bonds are currently made under the value of £100."--[ Official Report, 26 May 1989 ; Vol. 153, c. 808 .]
The answer was about 80 per cent. So 80 per cent. of purchases of premium bonds under the old rules, which will no longer apply from 1 July, will no longer be possible.
Figures supplied by the Department for National Savings to its trade union side are similarly revealing about the numbers sold in the first three months of this year. In January, the number of purchases under £100 was 169,000 and the percentage of the total 81.1 per cent. In February the number was 135,000, a percentage of 80.5. In March this year the corresponding figures were 140,000 and 81.4 per cent. It is clear that an overwhelming number of purchases of premium bonds are consistently lower than £100.
The Government have presented their case for raising the threshold to £100 somewhat disingenuously. In their press statements and parliamentary answers they have focused on the value of the bonds issued, not on the number of purchases. In an answer on 5 May, the Chancellor of the Exchequer said :
"Sales of less than £100 represent only 12 per cent. of the total value of purchases."--[ Official Report, 5 May 1989 ; Vol. 152, c. 255 .]
That is the story that the Government have been trying to put across--that this is not important because it affects only 12 per cent. By that they mean only 12 per cent. of the value of purchases ; it is 80 per cent. of the number of purchases. Thousands of small savers throughout the country will be profoundly affected by the change that the Government are bringing in.
The Government will claim that they have included a protection for people under the age of 16 or people buying on their behalf. The Department for National Savings admits that it is difficult to judge what proportion of purchases have hitherto been of this type, but the best figures it has been able to supply show that about 5 per cent. of total purchases are made on behalf of people under the age of 16. So the Government's concession for minors is relevant to only a small percentage of purchases of premium bonds in any year.
We advance a number of reasons why we believe the Government are wrong to raise the minimum purchase threshold in this way. First, there is a desperate need to raise the personal savings ratio in the economy. We know that net personal savings are at their lowest since records
Column 828began. We know that saving has a counter- inflationary effect. We also know that the only method of encouraging personal savings that the Government have so far adopted in the Budget of this year, in instruments brought forward since the Budget and in the Finance Bill, is the massive boost they have given to personal equity plans. The measures that they have brought in for premium bonds restrict the possibilities of saving at a time when it is crucial, for inflationary and macro-economic reasons, to encourage saving.
Mr. Tim Smith (Beaconsfield) : The hon. Gentleman keeps on talking about savings and investment in the context of premium bonds. Does he really regard premium bonds as an investment, given that whether one receives a return is a total lottery, and the smaller the holding, the more of a lottery they become?
Mr. Smith : I shall come to that point in a moment. It is the only argument that the Government have hitherto advanced for this measure, and the simple answer to it is that a premium bond holding is undoubtedly a form of saving and as such it counts in the overall savings profile of the economy. Of course it is not a guaranteed investment. It is a form of saving that involves taking a chance, not an assumption of guaranteed return, but it is saving none the less and we need to promote saving rather than over-consumption. Our second reason is that there is a need to boost the facilities for and prospects of the small saver. By definition, a £100 threshold rules out the chances of thousands of small savers and investors. I urge the Government to listen to what some of them have to say. The first letter was sent to my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) by a gentleman in County Down in Northern Ireland, who writes :
"My main concern is the new rules for premium bond purchases which gave hope to the worse off or small investor like myself of maybe some day winning a few thousand, not necessarily the jackpot, but this is now being turned into a club for the rich, or the elite." In a letter to the Chancellor copied to my right hon. Friend the Leader of the Opposition, a lady in Bromley writes :
"The only reason for doing this obviously is to penalise the poorer members of our society who cannot hope to buy bonds when they are such a price. My husband and I are from the so called Thatcherite' generation for whom things are now meant to be so good. We will not be able to buy one of your bonds from 1st July."
That is the voice of small savers up and down the country. By placing the threshold for a premium bond purchase at £100 rather than £10, the Government are making available opportunities for the better-off at the expense of the small saver--the person who puts aside £1 a week ; the investor who wins £50 and then reinvests it ; and those who live with the dream that one day they may strike lucky with only a small holding of premium bonds to their name. Our second major argument is that the change will not only harm the profile of savings in the economy as a whole, but it will especially harm the small savers within the economy.
Mr. James Arbuthnot (Wanstead and Woodford) : I apologise to the hon. Gentleman for not having been here for the whole of his speech. I accept that there is some point in what he has said. However, does he not also
Column 829believe that the change to £100 may turn a small saver into a larger saver? Those who might have been previously intending to invest, say, £30 in premium bonds will find that they must and, therefore, do invest £100 in premium bonds.
Mr. Smith : There is always some hope when Conservative Members begin to see that there might be some justification in the arguments which are consistently and powerfully mounted from the Opposition Dispatch Box.
In suggesting that the limit of £100 will mean that everyone who perhaps has £20 or £30 to invest will now rush out and invest £100, the hon. Member for Wanstead and Woodford (Mr. Arbuthnot) is assuming that everyone is in a position to do precisely that--but they are not. Many thousands of people want to participate in the premium bonds system in the hope that they will win something at the end of the day, but they are unable even to conceive of investing £100 or anything like it, as the hon. Gentleman suggests that they may be encouraged to do by the new rules.
Thirdly, we are deeply concerned about the whole trend of national savings administration under the Government. Already--about three months ago--rules have been brought in for a minimum £5 deposit in national savings accounts. At the end of last month national savings gifts tokens were withdrawn from sale. It is perhaps worth noting that some two thirds of national savings gift tokens have tended to be used for subsequent premium bond purchases. The whole tenor of Government premium bond advertising in the last year and a half, including by direct mail, has been based on a marketing strategy appealing to large-scale holders of bonds--one suggesting that they have a better than average chance of winning
"a good run of tax-free prizes".
The Government are turning bonds into a lucrative lottery for the upwardly mobile. They are in danger of turning other aspects of national savings into a similar vein. The character and the purpose of premium bonds as an attractive option for the small saver without very much money to invest are being lost in the process.
The Government claim that they have reasons for what they are doing and a number of those were advanced in a brief debate in Standing Committee. The Government's first reason concerned the high administrative cost for small amounts of savings. They say that it costs £2 per person to administer a premium bond application, no matter what its value. Of course, such a statement ignores the statistical probability of winning, which becomes greater the higher the value of the premium bond. Therefore, the likely cost of administering the winnings will increase, too. That statement ignores the massive profit that the Exchequer makes out of premium bonds. The 6.5 per cent. rate of underlying interest gives the Exchequer a healthy profit. It ignores also the cost-effectiveness of the administration of the scheme. There are 1,300 staff employed to administer the premium bond scheme, with its 24 million bond holders. Management costs are 1.1 per cent., which I should have thought was somewhat favourable by comparison, for example, with unit trust costs. Therefore, the Government's argument about the administrative costs of the small investor in premium bonds does not hold water and ignores the key point, which is that, whatever the method of saving adopted, small savings will always be