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Insolvency (Employees' Rights)

3.30 pm

The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Michael Heseltine) : With permission, Madam Speaker, I should like to make a statement on the Insolvency Act provisions relating to employees' rights as regards administrators, administrative receivers and, in Scotland, receivers. The need for this statement arises out of a recent judgment by the Court of Appeal in the administration of Paramount Airways Ltd. For the House to appreciate the importance of this, let me first set out the legal background.

Under the Insolvency Act 1986, an administrator may be appointed to manage the affairs, business and property of a company in financial difficulties with a view to the survival of the company or its business, the approval of a voluntary arrangement or the sanctioning of a compromise or arrangement with its creditors.

The administrator has to consider the basis of continuing the business and, in particular, the position of the employees. Under the Act, he has 14 days from his appointment to decide whether to adopt contracts of employment. Where the business is continued with a view to its successful disposal, it hasbeen the practice of administrators formally to notify employees that, while they would continue to be employed by the company and to be paid their wages and so on, their contracts of employment would not be adopted by the administrator. In the event of the survival of the company or a successful sale of its business, employees would continue with the company or the purchaser and their contracts would be maintained. If, however, the administrator concluded that survival or sale was not possible, he would, as was done in the Paramount case, have no alternative but to dismiss employees. The administrator would, of course, expect to pay employees' wages or salaries for the period of their employment under the administration. But, before the Paramount judgment, it was not thought that other payments, such as pay in lieu of notice and redundancy pay, would have priority.

The result of the Paramount judgment, subject to the outcome of any appeal by the administrators to the House of Lords, is that the entitlements arising out of dismissal would rank on the cessation of the administration as a first charge against the assets in the administrator's possession. This would place them in priority to all other claims against those assets.

At first sight, this may be thought to have advantages for employees. In practice, however, administrators will feel that they have little alternative but to dismiss the company's work force within the first 14 days and either close down the business or look to new terms of contract. Employees' rights in such circumstances in relation to termination entitlements will rank only as a claim with other creditors.

Indeed, the real position may be far bleaker. Because of the weight of the claims that would arise on dismissal and which would be a first charge against the assets, companies considering administration may conclude that it does not offer a rescue route and may simply move to liquidation, termination of the business, dismissal of employees and a break-up sale of the assets which will not be in the interests of anybody.

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It is also necessary to deal with the position of administrative receivers. There are 3,000 receiverships in this country every year. In almost half of them, it has proved possible to save all or part of the business. This practice will be placed in jeopardy, with all that that means for jobs, commercial activity and business confidence. We must, therefore, remove this uncertainty as a matter of urgency. Accordingly, I intend to introduce legislation at the earliest opportunity that will enable an administrator or a receiver to adopt a contract of employment with more restricted effects than at present. The change will allow him to adopt the contract with the effect that only wages, salaries and pension contributions falling to be paid thereafter will qualify as expenses of the procedure. Other liabilities arising from the contract of employment will remain, but will be treated as an unsecured claim against the company. As regards administrative receivers, in addition to the need to limit the extent of the expenses that have priority, it is intended to restrict the receiver's personal liability to the same expenses as for administrators. What that means in practice is that the administrator or receiver will not have to renegotiate contracts of employment within 14 days from the date of appointment.

The proposed change will have only the limited effects that I have described. It will not affect the employee's position under employment law.

In view of the immediacy of the need for this legislation, I propose that, when enacted, it will have effect in relation to any contract of employment adopted after today. I am sure that the House will recognise the need for the measures that I have proposed and that right hon. and hon. Members on both sides of the House will wish to see them brought in at the earliest opportunity.

Mr. Robin Cook (Livingston) : I welcome the fact that the President of the Board of Trade has made a statement on a ruling that has caused alarm to receivers and to some of the unions that represent the work forces most at risk. We accept that it is plainly impossible for receivers to provide a business plan to rescue an enterprise within 14 days, and that the effect of the ruling will be to oblige them to close the business rather than to try to trade out of bankruptcy.

Does the right hon. Gentleman accept that it is perhaps particularly important for the Government to remove the threat to receivers as total bankruptcies are still running at the rate of one every 90 seconds of the working day and no longer show any signs of reducing, despite all the promises of recovery ?

In the circumstances, we will not resist the proposed legislation, but will the President clarify three points that arise from it ? First, for the avoidance of doubt, will he confirm that any legislation that takes effect from today's date will not remove the legal rights of Paramount Airways' employees or of any other company put into receivership before today's date ?

Secondly, does the right hon. Gentleman recognise that there is genuine bitterness among workers who, after many years of loyal service, are made redundant by a company in receivership and who receive only statutory redundancy, despite an entitlement to much more under their contracts ? Before introducing legislation, will he therefore review the limit on statutory redundancy pay, which is still based on a maximum wage of £205 per week ? Is he aware that last

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year was the first for a decade in which that statutory limit was not uprated and that it now sets a maximum that is well below the average wage of industry ?

Finally, will the right hon. Gentleman circulate his warm words about the success of receivers, which I endorse, to his ministerial colleagues, particularly those with responsibility for the Inland Revenue and Customs and Excise, which in the past five years have achieved a staggering fourfold increase in the number of companies that they have put into bankruptcy ? Almost always, those companies were wound up straight away ; they rarely went into receivership. Now that the President has rescued the function of receivers, will he remind the tax authorities that it is in everyone's interest, including their own, that businesses should be kept as trading enterprises rather than put out of business by the Government ?

Mr. Heseltine : I am grateful for the way in which the hon. Member for Livingston (Mr. Cook) welcomed my proposals and for his assurance that the official Opposition will in no way obstruct the rapid progress of legislation through the House.

I can give the hon. Gentleman the answer that he sought in response to his first question : there will be no change in the legal position before today's date. From midnight tonight, my proposals will affect new arrangements, but will not upset previous ones as we are not indulging in any sort of retrospective legislation.

The hon. Gentleman raised a number of much wider issues. My right hon. Friends in the Department of Employment and in the Treasury will no doubt read with interest what he said. I think that it would be wrong for me to widen the narrow suggestion that I have put to the House.

Sir Anthony Grant (Cambridgeshire, South-West) : Is my right hon. Friend aware that he is to be congratulated on taking such speedy action but for which a large number of firms that might have survived would have undoubtedly gone to the wall and have been abandoned and many thousands of employees would have lost their jobs ? Therefore, does he agree that it is essential that hon. Members on both sides of the House who believe in maintaining employment and helping firms to survive allow the Bill the speediest passage through the House ?

Mr. Heseltine : I am extremely grateful to my hon. Friend and to the officials of my Department and a number of other Departments who have worked through the weekend to bring us to the point at which we could make the statement today.

Mr. Malcolm Bruce (Gordon) : Does the President of the Board of Trade accept that I, on behalf of the Liberal Democrats, very much welcome his prompt statement today ? There have already been announcements in the past week and during the weekend of receiverships that would have been banded into liquidation and jobs would have been lost. I must echo the view of the hon. Member for Cambridgeshire, South-West (Sir A. Grant) that it is vital that the Bill goes through quickly and urgently and that all hon. Members support it and recognise that it is an issue of jobs. Nevertheless, will he confirm that, when he brings forward the legislative proposals, he can guarantee that where a receivership is successful in bringing a business to its ultimate sale the rights of employees will be fully

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safeguarded ? That assurance is necessary as people would want to know that, if the receiver is successful, they have the right to share the net benefits of the receiver's success. How many receiverships in administrations lead to a successful onward sale ? We still have far too high a level of bankruptcies and not enough successful rescues.

Mr. Heseltine : I am most grateful to the hon. Gentleman for his words of support. Of course, he is right : the proposal has behind it the real chance of saving many more jobs. In answer specifically to the question about the number of receiverships that are, in practice, likely to be successful, may I say that it appears to be approaching half which lead to on-going opportunities for companies concerned. The existing rights, under the Transfer of Undertakings (Protection of Employment) Regulations 1981, for example, would not be affected by what I have said today. I am dealing specifically with the narrow aspect which I outlined in the statement.

Mr. Spencer Batiste (Elmet) : The speed with which my right hon. Friend has acted is welcome and will save many jobs in the future when receiverships occur from today's date. Does he agree that one of the problems of judge-made law is that it is retrospective ? Will he give some indication of what the situation will be for companies for which receivers have been in place for more than 14 days already, and for receiverships over the past few years that have been concluded on the basis of the law as it stood before the Paramount judgment was the one with which they complied ?

Mr. Heseltine : My hon. Friend raises a most important point. I must consider the principle of retrospection and, as I have made clear to the hon. Member for Livingston (Mr. Cook), the changes that I am proposing will come into effect only from midnight tonight, if Parliament legislates in the way in which I hope that it will. The specific answer to my hon. Friend is that the law will remain what it is until the process of change comes into effect at 12 o' clock tonight.

Mr. Terry Davis (Birmingham, Hodge Hill) : Given the importance, not only of saving as many jobs as possible but of providing as much compensation as possible to people who lose their jobs after years of loyal service to companies that go into receivership, does not the President agree that it is a good opportunity to improve compensation rights for redundancy ?

Mr. Heseltine : It would be an abuse if I were to try to use the expedited processes which I am asking the House to consider for anything other than the most narrow of purposes which justify asking Parliament to move at such speed. There are plenty of other opportunities for my hon. Friends to consider the wider issues in a timely way.

Mr. John Marshall (Hendon, South) : I congratulate my right hon. Friend on seeking to preserve the system of receivership, which has saved tens, if not hundreds, of thousands of jobs in high-profile cases such as Leyland DAF and Rolls-Royce plc, as well as in many smaller receiverships. Does he agree that 14 days would be too short for any potential purchaser to carry out a duly diligent investigation when he is thinking of buying a business from the receiver and that liquidation and jobs losses would be much speedier if he had not acted this afternoon ?

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Mr. Heseltine : I am most grateful for my hon. Friend's support. I join him in paying tribute to the work of extremely professional receivers in finding ways to keep businesses going and seeking negotiations which, as we have said, happily are successful in a high proportion of cases. There have been some very well-publicised events recently, perhaps most significantly that of Leyland DAF, but there are others. We are all in the debt of the very skilled men and women who carry out that work.

Mr. Dennis Skinner (Bolsover) : It is a bit rich for a Minister who has just sacked 31,000 miners to be telling us that he is concerned about employees' jobs after 15 years of Tory rule and when 4 million casualties are looking for work. Will he answer this question ? If the Major Government go into receivership this summer through lack of support, will he act as administrator ?

Mr. Heseltine : The hon. Gentleman, on reflection, will realise that the people who lost their jobs in the coal industry received very generous redundancy terms which were far in excess of those available to the vast majority of people. The hon. Gentleman will welcome, as I do, the fact that unemployment is now falling.

Mr. Julian Brazier (Canterbury) : In welcoming my right hon. Friend's very prompt statement, may I put it to him that it is important that, in the medium term, we have a thorough review of insolvency law because the present bias towards the banks and away from trade creditors, much of which is built on case law, provides a very strong disincentive for unscrupulous bankers to put companies into receivership and instead to place them straight into liquidation ?

Mr. Heseltine : I am grateful to my hon. Friend, who I know has a particular interest in the subject. We are consulting at the moment on the wider issues that he raises. The consultation period is due to end on 31 March and we will then be able to reach what decisions are appropriate.

Mr. John Gunnell (Morley and Leeds, South) : Having asked for a statement during business questions last Thursday, I thank the President for making it today. I hope that any questions that I put to the Leader of the House in future will receive such a speedy response.

Does not the judgment of the Court of Appeal reveal that the drafting of the insolvency legislation was inadequate ?

The right hon. Gentleman will be aware that several important receiverships are on-going. The present situation covers half the receivership and the Court of Appeal judgment, which one hopes will be appealed against in the House of Lords, while the other half will come into effect

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at midnight tonight. What will happen in the case of constructive receiverships, such as that at RFS Doncaster, which are on-going at the moment and in respect of which vital jobs are at stake ?

Mr. Heseltine : The hon. Gentleman will have heard my earlier reply when I said that I am not seeking to change the law retrospectively. The law is the law and receivers will have to make up their own minds, in the light of their best judgment and best professional advice, how they continue the receiverships in which they are already engaged. As for the hon. Gentleman's second point about the inadequate original drafting, I could not for a moment consider the possibility that anything that this Government had done was in any way inadequate. Nevertheless, on mature reflection, we have decided to have another look at it.

Mr. Michael Fabricant (Mid-Staffordshire) : I congratulate my right hon. Friend on bringing legislation forward and on not being tempted to wait until the House of Lords gave its judgment. However, will he now give a very clear signal to receivers currently investigating companies that it is the will of the whole House that the legislation should go through and therefore their actions should not in any way be influenced by the Paramount case ?

Mr. Heseltine : My hon. Friend raises a most important point. I am aware that there is one case--there are probably others--in which receivers are under pressure to reach judgments because of the near expiry of the 14 days. I have asked officials to consider how we can draw the attention of such receivers to the statement that I have made this afternoon.

Mr. Andrew Miller (Ellesmere Port and Neston) : In view of the stress and strain that is put on families and workers by receiverships, and of course the inadequate drafting that has been referred to, can the President of the Board of Trade assure the House that he will consult widely as a matter of urgency, and especially consult the Trades Union Congress, prior to publishing the Bill ? Can he tell the House when he intends to publish the Bill ?

Mr. Heseltine : The House realises that there is a dilemma about consulting widely on such a matter where urgency seems to be so important. There is bound to be an opportunity for people to make representations. We will publish the Bill and the House will then be invited to consider it speedily. We will do our best to take account of representations from any sources where people wish to make them. I do not have a specific date because that is a matter for my right hon. Friend the Leader of the House. However, I have given the clearest indication I can that the Government consider this to be a matter of great urgency.

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Points of Order

3.50 pm

Mr. Frank Dobson (Holborn and St. Pancras) : On a point of order, Madam Speaker, of which I have given you notice. I should like your ruling on a matter arising from the private Bill being promoted by the London Docklands development corporation.

The main purpose of the private Bill is to enable the development corporation to make byelaws covering the use of the former docks and the areas surrounding them. The Bill would give additional powers to the Secretary of State for the Environment relating to those byelaws, and they may seem appropriate for inclusion in a private Bill. However, clause 22 of the Bill would, I think extraordinarily, empower the Secretary of State to dispose of all or part of the assets of the London Docklands development corporation without any further reference to the House.

The most recent published accounts of the London Docklands development corporation show that the value of its assets exceeds £1, 200 million. That is an enormous sum of public money which was put into the hands of the London Docklands development corporation under a general public Bill. Surely the power to give away those assets, which belong to the taxpayer, should not be smuggled through in a private Bill. This is not a private matter--it concerns a huge sum of public money.

I want to know why the Secretary of State for the Environment was allowed to include this public matter in a private Bill and how the House can safeguard the interests of the taxpayer.

Madam Speaker : The hon. Gentleman has raised the question whether clause 22 of the Bill is a proper provision to be included in a private Bill. In the past, the Speaker has ruled that certain private Bills presented to the House should not proceed to a Second Reading because their principal provisions involved matters of public policy or conflicted with the general law. That ruling can be found at pages 804-805 of Erskine May .

However, there are precedents for provisions in private Bills giving the Secretary of State powers relating to the transfer of the property and functions of the promoting body--for example, section 10 of the British Waterways Act 1983. I cannot therefore rule that clause 22 of this Bill is not proper to be included. Of course, it is open to hon. Members to argue on Second Reading that the powers are too wide or that the relevant orders should come before the House. There are no petitions against the Bill, and the Bill has completed its passage in the House of Lords. It will be for the Committee on Unopposed Bills now to consider what amendments may be necessary.

Mr. Dobson : Further to that point of order, Madam Speaker. Obviously, I accept your ruling and bear in mind the precedents. However, I am led to believe that the precedent that you quoted did not involve such an enormous sum of money or the possible gratuitous disposal of assets totalling as much as £1,200 million.

I should like to know your views on this matter, Madam Speaker. I understand that the authorities of this House, including the Speaker's Counsel, and those of the House of Lords look at such Bills to see whether their provisions are appropriate. It seems strange to me and to many of my hon. Friends that your advisers and those of the Lord Chancellor

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did not suggest to the promoters of the Bill that, at the very least, they might have provided in the Bill as originally drafted that such transfers could not take place without the prior consent of the House by a debatable order.

Mr. Nigel Spearing (Newham, South) Further to that point of order, Madam Speaker. I thank you for your ruling. You may have expected that some hon. Members would refer to the matter during the debate, and it may be that something will emerge from that. Whatever may emerge in terms of the procedures in the House for which the Bill at the moment does not provide, is it your ruling that the Committee on Unopposed Bills can also consider whether, even with the safeguards, such a provision in a private Bill affecting the powers of a Secretary of State who has established the corporation and who has the power to dissolve it is in order in terms of the relationship between private and public legislation ?

Mr. Simon Hughes (Southwark and Bermondsey) rose

Several hon. Members rose--

Madam Speaker : The hon. Member who is in charge of the Bill wishes to make a point.

Mr. Hughes : I am sorry that I was not here when you began to deal with the point of order, Madam Speaker. I was alerted by your Secretary and by the hon. Member for Newham, South (Mr. Spearing). I am the hon. Member who is promoting the Bill. This is a point which has emerged late in the day. Advice has been taken, and will be available to the hon. Member for Holborn and St. Pancras (Mr. Dobson) and other colleagues at 7 o'clock when the Bill is due to have its Second Reading. The advice that you have given already will be taken into account, Madam Speaker, and there may be further information available later. I ask hon. Members to be patient. I understand that the issue is important, but the point was neither raised nor spotted earlier. The purpose of the procedure is to give the House a chance to see whether such issues arise.

Madam Speaker : I am grateful to the hon. Gentleman for his remarks. In reply to the latter point raised by the hon. Member for Newham, South, the answer, of course, is yes. The matter can come before the Committee on Unopposed Bills.

Mr. Terry Dicks (Hayes and Harlington) : On a point of order, Madam Speaker. I am raising a point of order similar to that which I raised on Friday. There have now been three mortar bomb attacks at Heathrow airport, which is, more or less, in my constituency, and yet I still cannot get an opportunity to get the Home Secretary to appear in the Chamber to make a statement. I understand and respect your decision with regard to my previous point of order. It seems strange that the whole country is talking about the busiest international airport in the world being under threat. Discussions are taking place in the press and among Opposition Members on the lack of security--I do not believe that to be the case--and yet I, the hon. Member who has the airport in his constituency, have no way of raising the matter in the House. I find that deplorable.

Madam Speaker : I believe that the hon. Member for Spelthorne (Mr. Wilshire) wishes to make a similar point.

Mr. David Wilshire (Spelthorne) : Further to that point of order, Madam Speaker. May I preface my remarks by

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saying that I totally understand and fully support your ruling on my request for an emergency debate ? I seek your guidance. Sunday's mortar took off from and landed in my constituency, and my constituents therefore rightly expect me to inform the House that the last thing that they want is a knee-jerk over-reaction. The other thing that they would want the House to know is that they have absolutely no intention of being bombed into submission by evil psychopaths. How on earth can they make that view known to the House ? Perhaps you will give me some guidance, Madam Speaker.

Madam Speaker : I am grateful to hon. Members for the way in which they have raised their points of order and for the support which they have given to the Chair. Right hon. Members on the Treasury Bench have no doubt heard the strength of feeling which has been expressed today. I think that we had better leave it at that for the moment.

Mr. Llew Smith (Blaenau Gwent) : On a point of order, Madam Speaker. I informed you that I wished to raise a point of order because I am being treated differently from other hon. Members

Madam Speaker : Order. The hon. Gentleman must resume his seat. I have exchanged correspondence with the hon. Gentleman, and I asked him to see me. He did so, and I hoped to be able to explain the procedures of the House to him. I asked also a senior Officer of the House to try to help him to understand the way in which our procedures operate. I received a letter from him on Friday which I am now reading and to which I shall be replying. The hon. Gentleman cannot raise points of order on those matters. I have taken weeks to try to help him with the procedures of the House.

The hon. Gentleman wrote to me on Friday. He must give me an opportunity to read his letter and reply to it. The matter does not constitute a point of order. I explained that this morning to the hon. Gentleman. Officers of the House have also tried to be helpful. I have given him a good deal of time. My door is open to the hon. Gentleman if wants to see me again. However, unless he understands the procedures of the House, it will be extremely difficult. He is still unfamiliar with them. If he wants to come and see me again, my door is open and I will willingly go through them all with him again.

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Mr. William Cash (Stafford) : On a point of order, Madam Speaker.

Mr. Llew Smith : Further to that point of order, Madam Speaker.

Madam Speaker : Order. I have dealt with the point of order. I am moving on to the point of order from the hon. Member for Stafford (Mr. Cash).

Mr. Smith : It is because of the discussions that I have had with you, Madam Speaker, and the assistance from your colleagues that I am raising the point of order. I am discriminated against

Madam Speaker : Order. There is no discrimination against the hon. Gentleman. I have attempted personally to explain to him the procedures and to do everything that I can to help him. I am still willing to help him if he does not understand. He is unfamiliar with the way in which we proceed in the House. The hon. Gentleman can take up my time as Speaker at any time that he wishes, but he cannot abuse the procedures of the House by raising points of order which are not points of order.

Mr. Cash : On a point of order, Madam Speaker. Last Monday, I raised with you a question about the then imminent decision of the Government on the blocking minority rights which arise under article O of the Maastricht treaty. You said that you would consider the matter. I am grateful to you for that. However, the matter is still under consideration. As there has been no debate in the House because of the nature of the instruments in question, will you consider taking a private notice question for tomorrow on the matter ? Apparently, the decision has not yet been taken. The decision so vitally affects the interests not only of the House but of the country that we deserve at the least an opportunity to put questions on a statement and to have a debate on the matter.

Madam Speaker : As the hon. Gentleman has already explained, I looked into the matter after he first raised it. If he wishes to put in a private notice question to me tomorrow, of course I shall consider it seriously, as I always do. However, proposals for changes in voting procedures in the Council of Ministers are not founded on European Community documents of the type that are subject automatically to our procedures. Nothing out of order has occurred. If the hon. Gentleman is anxious to secure a debate on the issue, as well as putting in a PNQ to me, he should make his request known in the usual way.

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2nd Allotted Day


Class VII, Vote 1 --

Housing Corporation

[Relevant documents : second report from the Environment Committee of Session 1992-93 on the Housing Corporation (House of Commons Paper No. 466- I and II) and the Government's response thereto (Cm 2363)] Motion made, and Question proposed,

That a further supplementary sum not exceeding £213,686,000 be granted to Her Majesty out of the Consolidated Fund to complete or defray the charges which will come in course of payment during the year ending on 31st March 1994 for expenditure by the Department of the Environment on subsidies, improvements and investments, payments to the Housing Corporation, payments to commute loan charges on grants to local authorities including the urban programme and urban development grant, and other sundry services.--[ Sir George Young.] 4.2 pm

Mr. Robert B. Jones (Hertfordshire, West) : I know that estimates debates are not necessarily the most gripping of the matters that come before the House, Madam Speaker, but you will know as a student of political history that they are key to the powers and privileges of the House because the scrutiny of Government policies and expenditure is the heart of the House of Commons. I take seriously the Select Committee's responsibilities with regard to that function.

We have devoted two or three evidence sessions every year to hearings on the Department of the Environment estimates and annual reports. We have produced a report on each of the subjects. By that means, the Committee has tracked the progress of the Housing Corporation for several years, noting its triumphs and difficulties and following its development as the funding and regulatory body for non-local authority social housing in England. About 15 months ago, my colleagues on the Committee and I judged that the time was right to launch a full-scale inquiry into the activities of the corporation. The Committee's predecessors had resolved to do that, but, for one reason or another, it did not seem right to have a full investigation at that time.

The inquiry that we held and the report that came out of it marked something of a return to housing as a subject for the first time for some years, although, of course, we looked at some aspects in our annual estimates hearings. At least those in the Department's environmental and countryside divisions, who had had the focus of our spotlight on them for some 10 years, were able to retire, albeit temporarily, into the darkness while we looked at housing. The key is for a Select Committee to consider a balanced range of issues. I pay tribute to my colleagues on the Committee for their non-partisan, consensus approach to the inquiry. If a Committee is effectively to bring issues to the attention of the public and the House it can best be done by co-operation. Together, we were able to agree conclusions that did not lack bite or duck the issues, as I am sure that my right hon. Friend the Minister for Housing, Inner Cities and Construction will agree. Apart from the work that the Select Committee put into the report, I must

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also pay tribute to the two men who advised us during the inquiry--Richard Best and Peter Chapman--who gave us sterling guidance, which was most helpful.

During its inquiry, which lasted from February to April last year, the Select Committee questioned 16 groups of witnesses, visited housing association developments in Leeds, rural Yorkshire and east London, and considered 140 written submissions. Since I read every page of those submissions, I can confirm that they contained much high-quality evidence, not merely from housing associations and interested bodies but, in some cases, in movingly written notes from members of the public and tenants. We did not need to travel overseas because the Housing Corporation is a peculiarly British animal--a public sector body which funds and regulates a disparate collection of private sector organisations.

I hope that it will be helpful to the House if I proceed by summarising the main proposals in the Committee's report and in each case comment on the responses from the Government and the corporation.

We began by considering the relationship between the corporation and its sponsoring Department--the Department of the Environment. The Housing Corporation is a quango and is therefore quasi-autonomous, whatever that means. Some people told us that the corporation was a creature--usually a poodle--of Government. No one told us that it was too autonomous.

The Committee's view is that under the out-going chairman, Sir Christopher Benson, to whom I pay tribute, the corporation behaved in a correct but unpoodle-like manner. The Committee was given a copy of the corporation's top secret corporate plan. Frankly, we were surprised at its tone. Sir Christopher and his colleagues did not shrink from giving strong advice, whether it was welcome or not. The Committee felt that the relationship between the corporation and the Department was about right. The corporation spends a lot of public money and is rightly closely supervised in that. As a non-governmental organisation, however, it must remain free to express its views on policy matters--but only in private.

When people first learn that the Housing Corporation's corporate plan is not published they are surprised, given the huge sums of public money involved. The frank advice to which I referred is partly the reason why it remains a private document. The Committee felt strongly that the plan should be published, as a contribution to the continuing public debate on social housing. The Government did not feel able to accept the Committee's recommendations, for reasons that I understand, but the corporation has at least been able to produce its first three-year statement of plans and priorities.

That statement is effectively an agreed version of the corporate plan, without the discussion of alternatives that characterises the latter, but retaining an encouraging tone of frankness. The statement is certainly more useful than the annual report, which has not been terribly useful to anyone who has taken a close interest in the corporation's work. The Housing Corporation should be congratulated on producing its new document. There can be no doubt that future editions could be improved by greater openness and more discussion of the relative merits of policy options.

Openness is also required in the appointment of the corporation's board which, in the Committee's view, did not fully reflect the breadth of experience desirable in such an organisation. I therefore welcome the recent

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appointment of new members with experience of housing--in one case, a local authority housing manager and in another, a housing association tenant. The fresh perspectives that those new board members will bring will be of great value to the corporation and to the Government.

The announcement last Tuesday that Sir Brian Pearse, the chief executive of the Midland bank, is to succeed Sir Christopher Benson as chairman, is also to be welcomed. I trust that Sir Brian will continue his predecessor's robust approach to his work. I think that my right hon. Friend has brought off a considerable coup in managing to secure the appointment of Sir Brian Pearse. There is absolutely no doubt that the relationship between housing associations and those who are increasingly financing them will be of key importance in coming years.

The Committee gained the impression both at first and at second hand that, at regional level, the corporation works effectively as a partner of housing associations. Like many partners, the corporation can at some times be a little interfering and bossy and at others less helpful than some would wish. In most respects, however, it is supportive and effective. We suggested some improvements, such as aligning the corporation's regional structure with that of the Department and seeking feedback, through a consultative process, with local interests. In each case, the Government responded positively, for which I am grateful. I hope that my right hon. Friend will be able to inform us of progress on realignment, especially as it affects London and the home counties, and on the twice-yearly consultative meetings, which I understand may start as early as next month.

Important as it is to get the structures and personalities right, there are other, more important issues that the Committee identified. The first is the question of housing association grant rates, together with affordability of rents and availability of private finance. The Committee recognised, as do most observers and those more closely involved, that those apparently separate considerations are in fact interwoven and interdependent. As the Government quite properly seek to contain public expenditure and attract a higher proportion of private capital into the development of social housing, so they must face the likelihood that housing associations will find it increasingly difficult to secure their loans, that many of them will find it necessary to increase their rents and that, at the end of the chain, increasing numbers of tenants will find it ever more difficult to escape the protective embrace of housing benefit. Whether we term that state of affairs somewhat emotively "the poverty trap" or whether we characterise it as housing benefit dependency, the effect is the same. The Exchequer necessarily spends vast amounts of public money on housing benefit, yet

everyone--including those in receipt of the benefit--wishes that it were otherwise. The Committee did not pretend to know how to resolve the dilemma of how to provide an affordable safety net without, at the same time, creating a disincentive to work, but all Members were as one in calling on the Government to get on with tackling the problem. It is surely in no one's interest that we should continue to subsidise that powerful deterrent to self-betterment.

Therefore, I was disappointed that, in their response, the Government were apparently content to refer to the

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existence of an inter-departmental working group that discusses such issues "on a regular basis". Having heard nothing since of the discussions of the group, may I ask my right hon. Friend the Minister what is being done to counter housing benefit dependency and, in particular, to investigate the relationship between HAG rates, rent levels and benefit entitlement ?

Mr. Den Dover (Chorley) : I have read the report with much interest, and note its concentration on tenants and their importance in housing associations. Did the Committee consider secured, as opposed to assured, tenancies, and what direct measures can be taken to bring down tenants' rents to a more manageable level ?

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