House of Commons Hansard Debates for 6 Mar 1992

Mr. Baker : My hon. Friends have showed their contempt for the hon. Gentleman's usual display of spleen and venom. As I understand it, he is about to fight an election and there is a commitment, I believe, in the Labour party manifesto to introduce a national lottery. I trust that he will be able to support the Labour party.

Mr. John Bowis (Battersea) : I welcome my right hon. Friend's statement and his commitment to speak to the pools companies. Will he bear it in mind that most people, if they had to choose, would rather the proceeds of their flutter went to good causes than into the extremely deep pockets of the pools millionaires, where they have gone in the past? Will he confirm that, although there may be some genuine concerns about jobs in the pools companies, there are good prospects for jobs in the arts, in welfare, in sport and in the environment, directly or indirectly, from the lottery?

Mr. Baker : Estimates have been made. The interests that promote a national lottery have talked of very high figures in terms of job creation. I am sure that it will have that effect. I believe that as a result there will be much greater activity in the arts and in sport, including building projects, and across a range of charities, and in preserving our heritage. I hear what my hon. Friend says about the pools. As I have said, we shall discuss with the companies the arrangements that may be necessary.

Mr. Harry Greenway (Ealing, North) : I wish to speak up for urban post offices. Are they not just as important as rural post offices? I have had to fight to save five in my constituency.

Is my right hon. Friend aware that many churches, of all denominations, and other places of worship involving many faiths, organise raffles, lucky dips and the rest? So we already have the principle of a little flutter--perhaps concealed--by bodies that are committed to promoting morality of the most proper kind. There can be no moral objection to what my right hon. Friend is doing--just a warm welcome for it.

Mr. Baker : We all know that many church activities are supported by a mild flutter. Therefore, I hope that there will not be any great objection on those grounds. One of the beneficiaries should be the great clerical architectural heritage of our country. The cathedrals and the medieval churches will benefit.

If post offices are to be used--and the Post Office is a useful network for establishing contact with a large number of people--urban as well as rural post offices will be considered.

Mr. Dickens : Does my right hon. Friend agree that the greatest excitment in doing the football pools is checking the results over the weekend, and that that will continue? People in the United Kingdom are compassionate and they will still want to give to other charities in their own way, so those other charities would not be harmed.

Can my right hon. Friend explain why the Liberal Democrat spokesman, the hon. Member for Caithness and Sutherland (Mr. Maclennan), introduced the gambling argument? I do not know what his experience is, but mine is that the first person to be asked to buy a raffle ticket in

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a constituency is either the mayor or the Member of Parliament. For many years I have given most generously to so many causes that it is unbelievable. Either the Liberal Democrat spokesman is a mean man or he has a short memory. I am sure that he has bought raffle tickets.

Mr. Baker : The Liberal Democrat spokesman must struggle with his conscience-- [Interruption.] I do not know who would win. As my hon. Friend rightly said, all politicians will be buying raffle tickets this weekend and supporting, in one way or another, a mild form of gambling. I agree with my hon. Friend that there is a strong vein of compassion in our country. One of the endearing characteristics of the British nation is its willingness to give to charitable causes. The flows of money are very substantial, and I do not think that they will be choked by a national lottery.

Mr. Stuart Randall (Kingston upon Hull, West) : The right hon. Gentleman's statement will be viewed as utterly reckless and ill considered. It has been presented entirely for electoral purposes. That is shown by the Home Secretary's wild departure today from the Government's statement on this very subject on 17 January. The forthcoming election has caused that.

There have been no consultations with the pools companies. We spoke to them this morning and they are annoyed that the Government have reneged on the promises made by the Under-Secretary of State, who is in his place, on 17 January.

The nature of gambling in Britain is such that none of us here today even knows whether a national lottery is viable--

[Interruption.] We do not know. For example, we do not know what form of regulation would be used vis a vis the pools. We do not know what the taxation will be. Will it be 37.5 per cent. as it is for the pools? It would be irresponsible of hon. Members on either side of the House to talk about £1 billion in prizes for good causes when none of us knows what the figure will be.

From his experience of other EC countries, is the right hon. Gentleman aware that the probability of two long odds gambling regimes co-existing is very doubtful? There are serious risks. The Belgian experience, to which he referred, was that the pools were wiped out within three weeks. In Britain, that would mean the loss of one third of a billion pounds to the Exchequer. The Government are not bothered about that any more. They are spending money like water--borrowing, borrowing, borrowing.

There are 6,500 full-time jobs on Merseyside and 70,000 collectors' jobs that need to be considered. The right hon. Gentleman had little to say about that. We are also worried--and I cannot underline this enough--about the effect that the lottery could have on charities, especially small charities. It could undermine a great deal of good work in this country. The Labour party wants to ensure that the charities are properly protected.

Labour party policy is to review the fund-raising arrangements for sport, the arts, charities and other bodies, and we will do so when we form the Government in the next few weeks. As we said in September 1991, we shall sympathetically consider the question of a national lottery while ensuring that the football pools and charities are properly protected.

Mr. Baker : That is not much of a commitment. The hon. Gentleman will have happier appearances at the

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Dispatch Box than he has had in the past five minutes. The best advice to the Labour party is, "If you are in a hole, stop digging." The Government have made a clear commitment to introducing a national lottery, and we shall do so. We will get on with it ; we will not have reviews. We shall hold discussions immediately with the pools companies and charities to resolve any problems and difficulties. We are convinced that a national lottery will be of great benefit to the nation and to many good causes.

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Royal Assent

Mr. Speaker : I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts :

Bingo Act 1992.

Aggravated Vehicle-Taking Act 1992.

Taxation of Chargeable Gains Act 1992.

Further and Higher Education Act 1992.

Local Government Finance Act 1992.

Offshore Safety Act 1992.

Nurses, Midwives and Health Visitors Act 1992.

Coal Industry Act 1992.

Licensing (Amendment) (Scotland) Act 1992.

Local Government Act 1992.

Aberdeen Harbour Order Confirmation Act 1992.

And to the following Measure, passed under the provisions of the Church of England Assembly (Powers) Act 1919 :

Church of England (Miscellaneous Provisions) Measure 1992.

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Commonhold and Leasehold Reform

Question again proposed.

Mr. George Howarth : Before the statement, I was saying that the Government have had 13 years to do something about leasehold reform, but they have shown a lamentable lack of inclination to do so--with the exception of the Lord Chancellor's consultative paper on commonhold.

Mr. Summerson : Will the hon. Gentleman give way?

Mr. Howarth : I have only just begun. I shall give way in a moment because I know that the hon. Gentleman has spoken in these debates previously. I want to get a little way into my argument before giving way.

I again congratulate the hon. Member for Dulwich on introducing the motion. He made a cogent and well-argued case for reform. However, if the past 13 years are anything to go by, the prospects of the Government doing anything if they are returned to power are pretty dismal. I do not want to go back over the whole of those 13 years, so I shall just itemise a few opportunities during the past two years that the Government have had to do something about the problem, but which they have failed to take.

The hon. Member for Kensington (Mr. Fishburn) has raised the matter frequently in the House. He is not in his place, although he was previously. He introduced the Leasehold Reform Bill on 3 April 1990. It is interesting that one of the sponsors of the Bill was the hon. Member for Ealing, Acton (Sir G. Young), now the Minister for Housing and Planning-- who has been somewhat reticent in following up the promise that he made at the time. There was another opportunity to make some sort of announcement on 8 March 1991, when a suitable motion was before the House. The Minister and I took part in that debate and the hon. Members for Kensington and for Dulwich also spoke. The opportunities have been there, but they have not been taken.

Mr. Summerson : I am sure that the hon. Gentleman will give the Government credit for passing the Landlord and Tenant Act 1985 and 1987.

Mr. Howarth : I do so, but I will mention later the inadequacies of that legislation.

A letter dated February 1992 from Joan South of the Leasehold Enfranchisement Association, which was widely circulated, states : "We have now received a positive commitment from the Labour party a less than satisfactory one from the Liberal Democrats but as yet have received nothing from the Government or the Conservative Party."

Earlier this week, perhaps because of fears in many

Conservative-held marginal constituencies, particularly in London, the Department of the Environment issued a press release on which the Minister will no doubt comment in more detail. That suggests some panic in the Government. There are fears in a number of London constituencies about the inadequacy of the Government's past and proposed action.

When Labour comes to power in the next few weeks, it will put into effect a document, "Commonhold and other new rights for leaseholders" which I launched at Kensington town hall earlier this month in the company of that constituency's excellent Labour candidate, Ann Holmes. It suggests extending a new right to buy,

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including one relating to commonhold, along the lines previously considered for all leaseholders of houses. It deals also with lease expiry. A Labour Government will consider introducing and co-operating in the introduction of holding legislation.

Other key points in that document include the right for existing leaseholders to choose their managing agents, to help to ensure that agents are efficient and that reasonable service charges are levied. Existing leaseholders will be given the right to extend their leases and to have the freeholder's accounts examined by an auditor of the leaseholder's own choosing.

There will be a right to covenants that will clearly stipulate the freeholder's responsibility to repair and to improve the block. We shall also introduce the concept of an arbitration panel with the remit of settling disputes between leaseholder and freeholder over, for example, the price of a freehold or the level of service charges. We will also repeal the legislation that makes the original lessee liable for payment when the lease is sold on--an anomaly which exists in respect of commercial and residential leases.

The Government's proposals made even at this late hour are inadequate. I quote from a letter sent to my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) earlier this week from Miss Jude Goffe of 68 Cloudesley road, north London. She makes the reasonable point that

"The Leasehold Reform Act 1967 entitled the leaseholder to acquire freehold or to extend the lease by 50 years if certain conditions were met. These have been subsequently amended and the two most important are : 1. for leases issued pre-1 April 1990--the tenancy was at a "low" rent, i.e. at rent of less than two-thirds of the 1965 rateable value or the rateable value on the first day of the term, if later than March 1965. For leases post-April 1990--rents may not be more than £1,000 in central London or £250 elsewhere. 2. The rateable value on 23rd March 1965 was not more than £400 (increased in 1974 to £1,500) in London, and £200 (increased in 1974 to £750) elsewhere." Miss Goffe makes the point that most houses in Islington and Hackney are excluded because of condition 1, whereas houses in Kensington, Mayfair, and Belgravia are mainly excluded because of condition 2--and that due to insufficient details in the Government's announcement,

"we are not sure whether it is proposed to remove both conditions."

Miss Goffe adds :

"We suspect that the Government is seeking to keep votes in key marginals, including Kensington. It would therefore not surprise us if only condition 2 were removed."

I understsand that that is precisely the Government's intention. That is all being done because in a few weeks' time, the country will go to the polls, and the Government are anxious to save the hides of a few Conservative Members in London constituencies.

The situation that I described does not exclusively affect London. In the previous debate, my hon. Friend the Member for Worsley (Mr. Lewis) spoke at length about the problems of long leaseholders in the north-west of England. It exists also in south Wales, parts of Yorkshire, and the north of England.

My hon. Friend proposed a four-point plan. He suggested establishing the right to sell the ground lease to the owner-occupier ; limiting by statute the level of on-costs in any transaction, because some organisations have been ripping off long leaseholders, who have been charged for all manner of items, including extensions, modifications and improvements ; the removal from a

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given date of the imposition of retrospective permission ; and, until the owner-occupier purchases, and for the benefit of those who do not choose--even at an affordable cost--to enfranchise, reasonable charges for current permissions to alter. I should be happy to incorporate those four provisions in legislation.

The Consumers Association also makes a number of important points. In a letter to me dated 4 March, it outlines five reservations that it has about the Government's proposals, and states :

"enfranchisement and commonhold alone will not be sufficient to address the problems of the long leasehold system. They should be conjoined with a right to extend leases, available to all residents, and an overhaul of landlord and tenant law to improve the lot of those unable to convert to commonhold ;

too many leaseholders in mixed' blocks containing rented flats or commercial units will be excluded from the enfranchisement provisions, and too many resident landlords' in converted properties will be able to escape them ;

a statutory formula for valuation may be preferable to open market valuation : either way, the process must be clearly explained, and an inexpensive appeals procedure established ;

an early announcement is needed to persuade freeholders that they will not benefit from carrying out extensive works at the expense of flatowners in the run up to enfranchisement ; a commonhold and enfranchisement commission should be set up to provide advice and informal resolution of disputes."

Broadly speaking, the association is proposing a similar strategy to that set out in the Labour party's policy document published earlier this month. We can happily go along with that approach, which I welcome.

In conclusion, I repeat an offer that I made earlier to the Under- Secretary. I said :

"My offer is that, if the Government take up one, two, three or all of those demands, made in our policy statement ... the Opposition will co- operate in every way to ensure that the legislation--which we hope will be proposed by the Government--gets on to the statute book. We would do nothing to detain or delay such legislation and would co-operate as fully as possible."--[ Official Report, 8 March 1991 ; Vol. 187, c. 610.]

Even in the dying days of this Parliament if the Government, even over the weekend, come forward with some draft legislation, unlikely though it is, we would co-operate with them to get it on to the statute book.

The Government have dithered and delayed for 13 years. I have no confidence and I suspect that those affected have no confidence in this last-minute conversion. The Government's attitude has everything to do with the imminence of an election and nothing whatever to do with the fact that something needs to be done about this thorny problem. In the unlikely event of the Government holding their majority at the election, I suspect that nothing will be done thereafter. My pledge is that within the first year of a Labour Government we will introduce legislation to resolve these problems and the longstanding problem of leasehold reform, which this Government have evaded and avoided for the past 13 years.

12.1 pm

The Parliamentary Under-Secretary of State for the Environment (Mr. Tim Yeo) : As the hon. Member for Knowsley, North (Mr. Howarth) is likely to remain in opposition for some time, I thank him for his offer to co- operate with the Government in getting legislation on to the statute book as quickly as possible. I look forward to taking up that offer later this year.

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I declare an interest as the owner of a long leasehold flat in a rather well-managed block which, I am glad to say, as the Whip is present, is within the Division bell area. This has been an extremely high-quality debate. No speech exceeded in quality that of my hon. Friend the Member for Dulwich (Mr. Bowden) when he opened the debate. I congratulate him on winning first place in the ballot, on choosing this particular topic so timeously and on the excellence of his speech.

I agree with my hon. Friend the Member for Hampstead and Highgate (Sir G. Finsberg) that the fact that no Liberal Democratic Member has been present at any stage in our proceedings is a sign of the low priority that that party attaches to this subject. I know that it is customary to congratulate hon. Members when they make their maiden speech. This morning my hon. Friend made what he mentioned could be his valedictory speech to the House. I should like to take the opportunity of saying what an excellent speech it was. I hope to be able to deal with some of the points that he raised.

I am sorry that the hon. Member for Tooting (Mr. Cox), who asked for answers on a range of subjects when he spoke before the Home Secretary's statement, has not bothered to remain to hear the answers that I shall now try to give.

As the hon. Member for Knowsley, North said, it is just a year since we last debated this subject. A great deal has happened since then. The Government have made progress at a vigorous pace. Last July my hon. Friend the Minister for Housing and Planning announced the Government's firm intention to proceed with the introduction of commonhold as an entirely new scheme of freehold ownership and communal management of flats and other interdependent buildings. He made a further commitment of our intention to give long leaseholders of flats the right to enfranchise and collectively to purchase at market value the freehold interest of their block. The Department of the Environment then issued a leaflet and sought comments on those proposals.

Only this week my hon. Friend confirmed our commitments to the policy of enfranchisement. On Wednesday in answer to a question from my hon. Friend the Member for Westminster, North (Sir J. Wheeler) he announced two important additional measures : the right to a lease extension and the extension of the right to enfranchise to householders who were previously excluded because of the high rateable value of their property.

Mr. Harry Greenway (Ealing, North) : Can my hon. Friend say whether this warmly welcomed announcement will extend to individuals in a block of former council tenants where others have not bought or where some have bought not at all? He will be aware of the various problems that that causes.

Mr. Yeo : Yes, I shall try to explain in more detail exactly to whom this will apply. The fact that the landlord is a local authority rather than a private landlord will not make any difference. There will still be a threshold in that two thirds of the properties in a block will have to qualify. In other words, they will have to be sold on long leases. That means that a number of flat dwellers who have exercised the right to buy will find at this stage that they are in too small a minority within their block to qualify. In

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smaller blocks it is perfectly possible that more than two thirds of the flats will have been sold under the right to buy, so will qualify.

Mr. Greenway : As my hon. Friend will know, this is extremely important to the people whom I have described. Can he give them some hope that the Government will consider the case of those who find themselves in a block where there are fewer than two thirds qualifying? They are almost always former council tenants. Can my hon. Friend give them some hope that they will be able to buy before too long?

Mr. Yeo : We shall have to consider that point in Committee when we reach that stage. The Government will continue to promote the right to buy. I hope, and I am sure that my hon. Friend hopes, that in blocks where a relatively small number of people have bought their leases the fact that this opportunity to enfranchise will exist when they get beyond the two thirds may attract more buyers. Therefore my hon. Friend's concerns will be met in that way.

Our proposed extension of the rights of leaseholders will go a long way towards resolving many of the bad management problems, about which many hon. Members on both sides are concerned. It has been apparent from the responses during consultation last year that there is still some confusion about the important differences between commonhold and leasehold enfranchisement. Indeed, that confusion has spilt over into this morning's debate, so I shall briefly clarify the Government's intentions.

Commonhold, as a new form of land tenure, is intended as a means of overcoming the present inadequacy of the law which does not provide for the satisfactory ownership of individual flats on a freehold basis. It is not intended to replace leasehold as a form of tenure, because in many instances, particularly in the commercial sector, leasehold works perfectly well. Commonhold will provide an alternative form of tenure.

There are some freehold flats in England and Wales, but the owners of those interests are in a far from satisfactory position. Their interest is generally not mortgageable, so is difficult to sell. The commonhold Bill will introduce a new system of positive and restrictive land obligations which, in effect, will enable positive covenants to be enforced upon successors to a freehold title. Commonhold will also establish standardised arrangements and fair rules for the democratic management of individual flats and other relevant properties. All commonhold unit owners will automatically belong to a commonhold association which will have responsibility for the fabric of the building and its common parts. A commonhold unit owner will have the additional responsibilities and liabilities that freehold ownership brings, but he will also have a mortgageable asset instead of a diminishing leasehold. The Government do not feel that it would be right to enforce those additional liabilities of commonhold ownership on anyone who does not wish to take on such responsibilities. In answer, then, to a point raised by my hon. Friend the Member for Dulwich, commonhold will not include any element of compulsion.

By contrast, our proposals on leasehold enfranchisement have an element of compulsion. The qualifying leaseholders of flats in wholly or mainly residential blocks will be given a right to purchase collectively the freehold of

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those blocks. That right forms a separate part in the package of measures that will be exerciseable by qualifying leaseholders, regardless of whether they subsequently wish to convert to commonhold.

We have placed in the Vote Office a leaflet that explains the proposals on the enfranchisement of leaseholds. It will go a long way towards answering the points raised by the hon. Member for Tooting, who I see is now back in his place. In outline, two thirds of the flats in the block concerned must be let on long leases--that is, leases originally granted for a term of more than 21 years. If two thirds of the flats are in that form, a further test is applied : two thirds of the people who have the long leasehold flats must vote in favour, if enfranchisement is to take place. There are a number of other more detailed conditions explained in the document, but I shall not weary the House with them now.

The process of leasehold enfranchisement will go a long way to ending management problems with freeholders, because enfranchisement transfers management to the people who own the flats.

Mr. Steve Norris (Epping Forest) : I must declare an interest as chairman of Haven Services Limited which manages more than 4,000 units of sheltered accommodation for the parent company Anglia Secure Homes and for many other outside developers. May I draw the Minister's attention to what I consider to be the most crucial element in what he has said so far. The only justification for leasehold enfranchisement is as a response to poor management by freeholders. Why does he believe that such a profoundly undemocratic and un-Conservative measure as the enforced sale of assets by an individual can be justified where there is no evidence of poor management? Does not he realise that there is justification for restricting the availability of leasehold enfranchisement only in those cases where there is proven poor management, perhaps by serving a notice on a recalcitrant landlord?

Mr. Yeo : It would be difficult to put into legislation a definition of what was or was not poor management. I have no doubt that the company of which my hon. Friend is chairman would never fall into the category of poor managers. That being the case, I strongly suspect that the leaseholders of properties that his company and other well-known companies own will not be in the forefront, demanding the purchase of the freehold. They will not be seeking to enfranchise because, as I am about to explain, the process of enfranchisement carries a considerable cost. It is not a free option, so I believe that landlords with well-managed properties have nothing to fear from the principle of compulsion. Indeed, negotiations may take place between landlords and leaseholders about lease extensions and other matters, which will largely satisfy the concerns of leaseholders in well- managed properties.

The other advantage of enfranchisement is that it eliminates the problem of an unsaleable asset in the form of a lease which is too short to be mortgageable, as has been said. We are also concerned about the freeholder. I am glad that my hon. Friend the Member for Epping Forest (Mr. Norris) intervened, and my hon. Friend the Member for Hampstead and Highgate made the same point. There is no question of expropriating the freeholder's asset. The price that the leaseholder must pay

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to enfranchise must be a fair market value. We do not intend that through this legislation leaseholders should be able to acquire assets at a discount.

The valuation process will be complex. The price must include not only the open market value for the freehold but a share of the marriage value. The marriage value is a concept familiar to those in the property world. It represents the latent value released by the merger of two or more interests in land or property. The combination of those interests may be worth more if it is in the same ownership than the sum of the individual values in separate ownerships. Our aim in acquiring the marriage value to be shared is to be fair to the leaseholder and the freeholder. The document in the Vote Office explains that the freeholder will always receive at least half of the total marriage values of the individual flats.

Where there are disputes over facts, they will be referred to the county court. Where there are disputes over valuation, they will be referred to the local leasehold valuation tribunals.

Mr. Cox : I take the Minister's point that it is a complex issue, but, as I and other hon. Members have said, one of the on-going criticisms is the condition in which properties are left. Can the Minister say that the condition of a property will also be included in the market value that the owner is seeking to obtain?

Mr. Yeo : Inevitably, the condition and the location of a property will be reflected in the valuation.

I said that qualifying leaseholders in wholly or mainly residential blocks could enfranchise. Although we wish to spread the benefits of enfranchisement as widely as we can, our proposals will not apply to properties of which more than 10 per cent. of the internal floor area is used or intended for use for non-residential purposes. We have no evidence of widespread demand in the property market for leaseholders of commercial units to have the same rights as people living in flats to purchase the freehold. I believe that the introduction of such a right for commercial leaseholders to enfranchise could undermine the effective working of the property market and would threaten the position of investors and developers. The 10 per cent. threshold has been chosen carefully in the light of consultation, but, as my hon. Friend the Member for Hampstead and Highgate said, it is a difficult balance to strike and there will no doubt be further debate about that in due course.

Relatively few leaseholders of flats will be excluded by that provision. We have also tried to minimise the other exclusions so that leaseholders such as local authorities and other public sector landlords will also qualify, as will leaseholders of housing association properties and of sheltered housing properties.

Sir Geoffrey Finsberg : Will my hon. Friend at least examine the point that I made about a council property that is at least partly commercial--for example, a garage with residential accommodation upstairs? Can his Department's long-standing objection in that respect be overcome?

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