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back into public ownership under compulsory purchase. Assuming that the properties were bought at £20,000 apiece, which is a modest assessment, the hon. Gentleman has just developed a new Labour party policy that would cost £15 billion. No wonder he did not have the backing of the hon. Member for Dunfermline, East (Mr. Brown). It is a barmy, barking mad idea and one which is fundamentally hostile to all the principles of freedom to which Conservative Members adhere. Why do Labour Members come up with every excuse in the book when considering why properties owned by Labour local authorities are empty, yet wish to introduce the most draconian powers that they can think of to tackle the empty properties in the private sector ? If one is an incompetent local authority, one has the backing of the Labour party, but if one is an individual exercising one's freedom, one does not. The message is, "Do not let your granny die without selling her house first." The little politburo people from the Labour party will come round and say, "The house is empty. The old lady is dying. We had better buy it under compulsory purchase."

We can bet one more thing for certain. Under the new policy suggested by the hon. Member for Newham, North-West, people would not get a market purchase price. They would get the least favourable price at which it was possible to buy the property. Then we would be looking forward to another Conservative Government at the earliest possible time to allow those properties to be bought back by the people to whom they rightfully belong.

Mr. Jim Cunningham (Coventry, South-East) : Does the hon. Gentleman agree that in the acquisition of council property the district valuer decides the price level, which could affect either the owner-occupier or the tenant ? Does he not understand that ?

Mr. Hendry : I do not think that the hon. Gentleman was in the Chamber when the hon. Member for Newham, North-West outlined his new policy involving compulsory purchase of empty properties in the private sector, although he did not elaborate on how his policy would work. Valuation may be done by the district valuer or it may simply be based on whatever price the hon. Gentleman cares to work out on the back of an envelope. Unless the hon. Member for Newham, North-West is willing to elaborate on his policy-- sadly he is not in the Chamber now--we cannot know how it would work.

Mr. Robert B. Jones : In view of the confusion on the Opposition Benches about the compulsory purchase option canvassed by Opposition Members, does my hon. Friend agree that it is incumbent on the Labour Front -Bench spokesman to make clear how the policy would operate in practice or to say that the policy is not a policy of the official Opposition ?

Mr. Hendry : I am sure that it is not merely incumbent on the Front- Bench spokesman. I am sure that the hon. Member for Leeds, West (Mr. Battle) will wish to outline his approach and that of the Front-Bench team to that policy development. I hope that he has the backing of the hon. Member for Dunfermline, East and will be able to say from where the £15 billion to which the hon. Member for Newham, North-West has just committed the Labour party will come.

Mr. Rendel : The hon. Gentleman mentioned the large number of empty houses in the private sector. He accepted

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that it was too large and that he would like to do something about it. Does he also accept that some of the houses remain empty because the owners want to sell them but cannot find a buyer and that, therefore, one of the quickest ways of bringing those houses back into occupation is for the Government to continue to give money to the housing associations to purchase second-hand homes and put them back into the cheap rented sector ?

Mr. Hendry : Clearly, we have a competition on the Opposition Benches for who can spend the most public money in the shortest possible time. Several initiatives designed to bring back into use empty houses in the private sector have already been introduced. To name just one, under the housing associations as managing agents--HAMA--initiative, housing associations can take over the letting and management of houses. So if people are worried about letting their property themselves, they can let it in a much more constructive and safe way than might otherwise have been the case. A huge amount of money--the best part of £1 billion--went into the housing market package. Although I broadly welcome the package, one element that worried me was that too often housing associations went to a local builder and bought up all the houses on a newly built estate. The hon. Member for Newbury (Mr. Rendel) spoke of a desire to see those houses bought around the community. I welcome that, but it has not always happened. Too often, an entire estate is bought up, with the result that anxieties about the same sort of people living in estates can materialise.

I urge the hon. Member for Newbury to go back to Liberal authorities-- particularly Tower Hamlets, which is one of the worst offenders in terms of sitting on empty local authority housing--with the same imagination and suggest that they do more to bring their empty properties back into use. Perhaps he could suggest some measures as draconian as those proposed by the hon. Member for Newham, North-West. For example, if people see local authority housing left empty too long, perhaps they should be allowed to buy it back from the local authority.

Mr. Rendel : Does the hon. Gentleman accept that although Tower Hamlets council is desperately trying to bring back into use empty properties owned by the council, as a result of the Government's housing policies, the lack of finance coming through and the capping of local authority finances, it is impossible for the council to do so faster than it is now ?

Mr. Hendry : The hon. Gentleman is overlooking some basic facts. If Tower Hamlets were slightly better at collecting rents and the council tax it would not have that problem. If the council had not achieved an indebtedness to which some third-world countries can only aspire, it would be paying far less in interest rates and could spend that money on services for the community instead.

Mr. Robert B. Jones : My hon. Friend is being too generous to Tower Hamlets borough council. He has not mentioned its shambolic organisation of local services. Bureaucracy between the centre and the community, via all those neighbourhood councils, is slowing down lettings and administration and causing much of the problem.

Mr. Hendry : I understand my hon. Friend's argument. We know the sort of election tactics that the Liberal Democrats have had to resort to in Tower Hamlets to

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ensure that they continue to get their constituents' vote in spite of the way in which they are running the local authority. In recent years, housing in my constituency has improved significantly. The housing condition survey shows that people in the country as a whole are living in better housing than ever before. I was delighted that my right hon. Friend the Minister was able to visit my constituency last week to see the improvements being made on the Fairfield estate, where, under the estate action programme, money has been used radically to improve living conditions in nearly 200 houses. The estate was built in one of the coldest parts of my constituency, which is one of the coldest parts of the country. Even a duffle coat was scarcely enough to protect the Minister from the elements. Houses on the estate have been radically improved with better insulation and new windows and that has been possible only because of the money made available to the local authority under the estate action programme.

I was especially pleased that my right hon. Friend the Minister used his visit to encourage people to take part in the

rent-to-mortgage scheme, whereby they can change their rents into mortgages without paying a penny more. Their aspirations for home ownership can thus be met and it is an imaginative policy, for which my right hon. Friend should take much credit. People who aspire to ownership but are worried about the commitment involved in taking on a mortgage can gradually take over ownership of their property. I hope that my constituents will take that policy to heart. I welcome the tenants incentive scheme to encourage people who live in local authority housing and housing association properties to take a cash sum to buy a property elsewhere. As the hon. Member for Newbury will appreciate, that is a boost to the private sector, as it will enable some private houses to be bought and will immediately make available additional houses in the social rented sector. If we are to debate the subject sensibly--today's debate has been sensible--the distortions must be removed. It saddens me greatly that no organisation has done more to damage sensible discussion than the charity Shelter. I have been in regular contact with Shelter for some years, especially as chairman of the all-party group on homelessness and have built up a great respect for its work. However, the publicity material that Shelter is publishing now is in breach of its charitable status. There are clear guidelines on what it is acceptable for a charity to do and it is regrettable that Shelter has passed beyond that barrier. As that organisation receives £1 million a year in public funds, it has a direct duty

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

Mr. Hendry : No. Shelter has a duty to ensure that it does not distort deliberately the facts and continually exaggerate. I have therefore written to the Charity Commissioners to ask

Mr. Deputy Speaker : Order. I am not aware that Shelter is a housing association.

Mr. Hendry : Indeed it is not, but affordable housing is one of the issues that Shelter has been discussing most and it is also a core issue in the debate. If we want a sensible debate on affordable housing we must do without the distortions that Shelter has put about in its packs for

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schools and letters to subscribers. It is important that we draw those distortions to the attention of the relevant authorities. In view of your comments, Mr. Deputy Speaker, I shall not pursue the matter, but it is crucial that Shelter should be aware that its campaign has been rumbled and will not be further tolerated. We must be aware of the amount of money that has been put into the Housing Corporation and housing associations. That money has enabled many more of our people than ever before to live in better conditions. It is a record of which the Government can be proud and I hope that it will encourage hon. Members to endorse the Select Committee's report.

5.54 pm

Mr. Andrew F. Bennett (Denton and Reddish) : I am disappointed by the contribution of the hon. Member for High Peak (Mr. Hendry) and especially by his attack on Shelter. It is pretty despicable to attack an organisation for exercising its right to free speech, which I thought was a fundamental principle in this country. His attack is appalling and I am certain that the hon. Gentleman's predecessors, who represented High Peak with such distinction, would not have sunk to such an activity. It was unfortunate that the hon. Gentleman introduced such a note into the debate, as it had been useful and constructive.

I hope that the Minister will take rather more notice of the contributions made by my hon. Friend the Member for Norwood (Mr. Fraser) and the hon. Member for Altrincham and Sale (Sir F. Montgomery). I would not normally agree with the views of the hon. Gentleman, but his contribution was a clear warning to the Government that major problems will result if they insist on pushing housing association grant down.

I must pay tribute to the Select Committee's advisers, who served us extremely well, and to its officials. I join the hon. Member for Isle of Wight (Mr. Field) in also paying tribute to the Chairman of the Committee, the hon. Member for Hertfordshire, West (Mr. Jones), who demonstrated that a Select Committee can deal with a politically controversial issue effectively without getting into the yah-boo of party politics. The Committee's report is a valuable contribution to the housing debate and the Chairman should take credit for that. Although I do not like praising Conservative Members, on this occasion I do so warmly.

In my constituency, the housing shortage is a fundamental problem. When I was first elected as the Member for the old constituency of Stockport, North, about 4,000 people were on the housing waiting list in the metropolitan borough of Stockport, but more than 8,000 people are on the waiting list now and the authority has fewer properties at its command because some have been sold. There are fewer homes to rent. Homeless people on the waiting list in Stockport spend far more time in hostels and bed-and -breakfast accommodation than they did for almost the whole time that I represented the constituency. In Tameside, the situation is not as bad, because it has a larger stock of council dwellings and there is more private rented accommodation. During the years that I have represented that area, however, the position has got steadily worse.

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One of the key facts in the report is that we are producing between 70,000 and 80,000 fewer dwellings than are necessary to meet the need. It does not matter how much the Government want to change their approach to homelessness ; unless they deal with our failure to build sufficient houses, they will merely be changing the statistics and not the underlying reality. If, by the turn of the century, we are about 500,000 houses short, however much we change the definition of homelessness the position will get worse. It is essential that we build those houses.

The hon. Member for Altrincham and Sale explained to the Government how crazy it is to add so many building workers to the numbers of unemployed, rather than giving them the opportunity to produce the houses that we so desperately need. I do not mind how the Government do it and whether they use housing associations or council building programmes, but I plead with them to deal with the shortage of dwellings, because until they do so, they will not solve the problem of homelessness.

I should prefer the Government to go for an approach that involves both housing associations and local authorities in doing some of the building. In both Tameside and Stockport, the local authority and the housing association have developed some very good partnership schemes whereby the local authority provides the land and the housing association does the building. That is clearly appropriate for some of the bigger sites.

In respect of three areas of my constituency, however, I do not believe that that is the right approach. The first area is Haughton Green, which has a substantial Manchester overspill estate. It is an extremely well-run estate, built in the 1960s and consisting of high-quality dwellings that are extremely well looked after. A couple of the tower blocks have problems, but the rest of the houses are much appreciated by the tenants. That estate was built on a plan that involved a great deal of open space. Some of that open space is useful for young people to play on, but some of it is not really usable. It would be possible for Manchester to build a small number of dwellings to infill some of those spaces. Whereas it would be complicated to set things up so that housing associations could put two houses here and two small bungalows there, it would be very easy for Manchester to do that infilling. I only wish that the Government would allow it to get on and do it.

The same applies to the Yew Tree estate in Tameside. Admittedly, that estate was built over old pit workings and some of the open spaces on the estate are probably necessary because of what is underneath them. But much of the open space on that 1970s estate is not necessary, and a substantial number of infill dwellings could be accommodated. Again, that would be a complicated process for a housing association to undertake. It would be far more logical to let the local authority build.

The third area of my constituency is in the Stockport part of my constituency at Brinnington, where several blocks of flats have been pulled down. Again, it would be far more logical to allow the council to build replacement dwellings of the type that people want than to insist on the task going to housing associations.

When the Committee started its inquiry, one of the big issues was whether the Housing Corporation would insist on a super-league consisting of a small number of housing associations, not showing much enthusiasm for small housing associations. It appeared during the inquiry that the idea of a super-league had disappeared. In a sense,

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however, the Government are bringing the idea back by the way in which they are changing the grant levels. As they bring the grant level down, they make life difficult for all housing associations. But at least the big housing associations--those with a lot of existing stock--can share out the problem by increasing the rents of some of their older properties to cross-subsidise newer developments. But many of the small housing associations--especially those that I thought that the Government wanted to encourage, to deal with the problems of ethnic minority groups and people with learning difficulties, for example-- will be disadvantaged.

Small associations designed to specialise in providing accommodation for those particular groups do not have the big stock necessary for cross- subsidisation. For those specialist housing associations, the reduction in the grant level is particularly harsh. The Government are returning to the idea of the super-league by insisting that grant levels come down. Moreover, as grant levels come down, so the poverty trap gets worse.

The Government have been chided about family values. On one or two of the housing association properties in my constituency, the Government, by the way in which they are setting the rules, are doing everything to destroy the family and to make it difficult for people to create new families. When the housing association offers dwellings to the local authority as agreed lettings, the local authority tends to offer those dwellings to people who are on benefits, because it does not believe that in my constituency people who are in work can afford the rents. The dwellings therefore go to people on benefits--more often than not, to women on their own with one or two small children, probably following a failed marriage or liaison. The woman may quickly become involved with someone else, but there is absolutely no chance that that man will move into the house because the rent that he would then have to pay is so high as to make such a move prohibitive. The man may visit on a pretty regular basis and in some cases may take a considerable amount of responsibility for the children, but it is not a state of affairs which anyone should be encouraging and it has been created solely as a result of the existing benefits system.

If the Government are concerned to encourage people to establish new households, they must examine that problem. They must recognise that major difficulties exist in relation to the present level of dependency on benefits of people in those circumstances.

I want to refer briefly to the role of the ombudsman. I do not believe that the ombudsman can have any credibility as long as he functions within the Housing Corporation set-up. I think that it is a mistake to go on setting up ombudsmen for insurance, for banking and so on. It would be far better to increase the powers of the national ombudsman to cover all those areas.

Certainly as regards the Housing Corporation, it would be far better for the powers of the national ombudsman to take in the Housing Corporation and the housing associations rather than keeping them separate. I have received a considerable number of complaints about housing association property provided for the elderly and about the promises that were made about housing associations managing such property, especially in shared ownership schemes, to take away the worry. In many cases, the charges for providing the services have caused a great deal of concern.

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I do not want to trade questions about empty properties across the Floor of the House today. I do, however, want to make a plea to the Government about empty properties. On three or four of the council estates that I know well, individual properties have been empty for six months and, in one case, for over 12 months. Those properties were bought by tenants under the right-to-buy provisions. Relatively soon afterwards, the buyers got into mortgage difficulties and the properties were repossessed by the building society. They have remained empty ever since. They are proving virtually impossible to sell.

The building societies are extremely reluctant to go on knocking the price down to dispose of them ; they are hanging on in the hope that, at some stage, they will get the asking price. Some of those houses are pretty dilapidated. One of them was more or less vandalised by the owner before he moved out. They are detracting from the appearance of the estate and are making the council the subject of criticism, as many people think that they belong to the council and that it is leaving them empty, not realising that the estate agent's board, long ago knocked down, is lying in the garden. It would be a simple matter for the Government to give local authorities permission to buy back properties on council estates and put them back into use. That would not involve a great change of policy and it would make a lot of sense. I should like the Government to allow local authorities much more freedom over their capital receipts. If they cannot give them that general freedom, however, I plead with the Minister to let the council buy properties back--especially the very small number of houses that were bought from the council and which cannot now be sold--and put them quickly back into use.

The hon. Member for Newbury (Mr. Rendel) mentioned the question of living over the shop. I advise him not to get too enthusiastic about it because some of the worst property to let in my constituency is over shops. It is often pretty appalling accommodation. If one is to live over the shop, the accommodation must be properly renovated to a high standard.

6.9 pm

Mr. Peter Thurnham (Bolton, North-East) : I congratulate my hon. Friend the Member for Hertfordshire, West (Mr. Jones) on his chairmanship of the Committee and on his report, which gives us the opportunity for the debate.

I should like to consider a number of paragraphs in the Government's response to that report, starting with paragraphs 31 to 34, on the role of the private rented sector. The report states : "The Government is keen to see a revival of the private rented sector . . . the Government will consider the case for further assistance to increase the supply of private rented accommodation". When my hon. Friend the Minister replies, I hope that he will give some idea of the Government's further thinking on exactly what is being proposed. He will be aware of the proposals in my pamphlet. He might consider that the Deregulation and Contracting Out Bill, which is currently in Committee, represents a convenient opportunity to table new clauses to allow tenants to select a new landlord without that landlord necessarily having to be approved by the Housing Corporation. That approval denies choice to tenants who wish to opt for a new landlord. Why can they

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not choose their own landlords ? Why should they have to seek the approval of the Housing Corporation or anyone else ? That restriction should be removed.

If new lettings of council houses were offered on the basis of the Housing Act 1988, under assured tenancies, councils' ability to sell rented accommodation, if they so wished, would not be restricted. The Labour party's current document on housing states that the private rented sector

"badly needs a boost."

Exactly what the Opposition mean by that and what they intend to suggest has not been made clear. Although the hon. Member for Denton and Reddish (Mr. Bennett) said that he did not mind how the shortage of housing was addressed, he did not suggest any positive ideas on how the private rented sector could contribute.

The size of the British private rented sector is well below that of other countries ; it is half the average size in the OECD countries and under one quarter of that in west Germany. In Switzerland, the private rented sector accounts for 56 per cent. of all housing. The average useful floor space per head in Britain is 32 sq m in comparison with 36 sq m in the other 11 member states of the European Community. It is possible that the greater contribution made by the private rented sector in other countries in comparison with that in Britain has made it possible for those countries to provide more floor space per head.

Dr. Lynne Jones (Birmingham, Selly Oak) : Will the hon. Gentleman give way ?

Mr. Thurnham : We are short of time, so I will not give way. Paragraphs 39 and 40 of the Government's response to the Committee's report refer to housing benefit. I notice that a working group has been established by the Departments of the Environment and of Social Security to discuss that matter regularly. I should be grateful if my hon. Friend the Minister could tell me whether that working group is producing a report and whether, under the provisions of open government, mentioned elsewhere in the Government's report, its work might be made more available. It would be interesting to see exactly what is proposed for housing benefit. Would it be possible to consider it in a different way so that the growth of that benefit can be controlled ?

Paragraphs 66 and 69 of the Government's response refer to special needs. I understand that some friendly societies would be interested in investing in housing for people with disabilities. It would be worth exploring that possibility further because of the current restrictions in financing such projects.

The hon. Member for Newham, North-West (Mr. Banks) has departed, but he made a strong attack on Tower Hamlets, which probably stems from the fact that it was subject to 30 years of uninterrupted, complacent Labour rule, before electoral change. If Tower Hamlets was under a Conservative administration, some of the recent developments would be worth considering. It is interesting to note that the local authority has been broken down into seven neighbourhood units. Considerable savings have been made by the business services unit, which I visited last week. I was extremely impressed by the savings that have been made by breaking down centralised services and

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running them on a decentralised basis. Lessons could be learnt and it was suggested that the Government should set up an inquiry to consider what has happened in Tower Hamlets. I dare say that there would be much to consider on the political side, but we could learn positive lessons from the way in which the authority is run now that services have been decentralised.

Mr. Robert B. Jones : As a resident and council tax payer in Tower Hamlets, I do not share my hon. Friend's perception of Tower Hamlets as an efficient devolved administration.

Mr. Thurnham : As he is a resident of Tower Hamlets, I bow to my hon. Friend's greater knowledge, but I believe that lessons could be learnt about the way in which the business services unit is run. I would enjoy discussing with my hon. Friend some of the points that were made to me during my visit. I am grateful for that intervention, and I feel that I should now give the hon. Member for Birmingham, Selly Oak (Dr. Jones) the opportunity to intervene.

Dr. Lynne Jones : The moment has passed by, but I wanted to intervene when the hon. Member made a comparison between our rented sector, including the private sector, and that of other countries, which is so much stronger. Perhaps that is due to the fact that in those countries renting is given parity of esteem with

owner-occupation. Conservative Members give the game away when they talk about aspiring to owner-occupation as if that was somehow superior to renting. Until that argument is dropped, we will not be free of the ghettoisation of rented and social housing. Conservative Members should address that important issue.

Mr. Thurnham : The hon. Lady is looking at the matter from the wrong angle, because the issue is whether property is privately or publicly owned. The advantage enjoyed by the countries that I mentioned is that they have a large privately owned sector--whether it is privately rented or owner-occupied is subsidiary to the advantage gained by the size of that sector. What distinguishes our country is that we have a high level of socially rented accommodation. I accept that the national figure for such accommodation has come down to 21 per cent., but in my constituency in Bolton the number of council houses has only fallen from 26,000 in 1983 to 23,000 today. Council houses represent part of the enormous assets of councils. I asked Bolton council officials for the total value of its assets. Although they did not have an up-to-date valuation, they estimated that, on the basis of insurance values, its total assets were worth £600 million. I estimate that housing may account for half of that figure. Substantial assets are held in public ownership and the issue should be how to get those assets transferred into private ownership.

The Mail on Sunday listed the debts of local authorities and compared them with those of third world countries. The hon. Member for Denton and Reddish might be interested to learn that Manchester's debt, which currently stands at £1.3 billion, is second only to that of El Salvador. I advocate that more council houses should be sold to reduce that debt. The total amount of all local authority debt is £37.5 billion.

Mr. Raynsford : That has nothing to do with the debate.

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Mr. Thurnham : It has everything to do with it, because the private sector represents the way in which to solve our housing problems.

Dr. Lynne Jones : Will the hon. Gentleman give way ?

Mr. Thurnham : No. I have given way to the hon. Lady once. The private sector has played a great role in Switzerland, for example, which has a socially rented accommodation sector of just 14 per cent., according to the latest figures that I have seen. Why do we have a social rented sector twice that level ? I am satisfied that resources could be made available far more efficiently through the private rented sector than through the public sector.

6.18 pm

Mr. John Battle (Leeds, West) : I welcome the opportunity to debate the report on the Housing Corporation by the Select Committee on the Environment. Some hon. Members on that Committee may recall that in December 1991 I asked whether the previous Chairman, Sir Hugh Rossi, would lead the Committee's debate on housing associations, with particular reference to their affordability and the impact of housing benefit. Therefore, I am especially pleased that a substantial piece of work on the Housing Corporation has been undertaken by the Committee under the chairmanship of the hon. Member for Hertfordshire, West (Mr. Jones), and I hope that it will not be another decade before the Environment Select Committee finds time to consider housing issues again.

Since the publication of the Committee's report, time has moved on for all of us. I add a word of welcome to the newly appointed chairman of the Housing Corporation, Sir Brian Pearse. Although we welcome the Committee's report and its unanimous consensus in its recommendations and compliment the Committee on its work, I must register disappointment at the thinness of the Government's official response. That response, published in October last year, seems to have deliberately played down, if not side-stepped, the thrust and urgency of the Select Committee report's recommendations--the need to tackle the problem of affordability of housing association properties, squeezed between reducing grant rates on the one hand and inevitably high and increasing rents on the other, caught between housing association grant cuts and now the threatened housing benefit cuts. Although Ministers have tried to reassure us and suggested that people on no or low incomes have no reason to worry because, in the words of the Housing Minister,

"housing benefit will take the strain",

in recent weeks the threatening noises off from the Secretary of State for Social Security suggest that housing benefit may now prove to be the strands of a fraying rope. Housing benefit represents £8.7 billion of public expenditure and the Secretary of State for Social Security has made it clear, in articles that appeared in the newspapers on 3 March this year, that it is now to be targeted by his Department.

It is also appropriate that the debate takes place in the context of the estimates, because that supportive arithmetic is crucial to the survival of housing associations as well as to the ability of tenants to pay their rent. In other words, the funding arrangements are at the core of the discussion. I hope that the Minister will not give us that new evasive expression, "I hear what you say" but mutter under his breath, "but I shall not do anything about it".

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Recently, the Housing Corporation published the report "The Next 3 Years : The Housing Corporation's Plans and Priorities 1994-1997", partly in response to the Select Committee's recommendations. That welcome document takes on board the need for regional development, with the newly established regional consultative meetings, the improvement of the tenants' guarantee and tenants' rights, continued support for tenant participation and the setting up of the housing associations ombudsman service--all positive responses, and all warmly welcomed by Opposition Members. The report also, encouragingly, says that this year's focus will be on care in the community provision. That is welcome, too.

However, I suspect, thinking of the ombudsman's service, that already many housing associations' tenants are writing to the ombudsman--as they are doing to Members of Parliament--complaining about their rent increases. Rapidly increasing rents are the main bone of contention, increasing at well above the inflation rate and pricing out those people who are not on middle incomes or who depend entirely on housing benefit. As the Select Committee report succinctly put it in paragraph 5,

"In considering housing association grant rates the Government will have to bear in mind the likely consequences of its decisions in terms of affordability, availability of private finance and benefit dependency".

The Minister will have to take seriously the words and reported comments of the Secretary of State for Social Security because he has been reported as saying that he wants measures to

"discourage local authorities from paying housing benefit for unnecessarily expensive property".

That is precisely the problem which confronts many housing associations, because their properties are proving expensive. Notably, in his chairman's foreword to "The Next 3 Years", Sir Christopher Benson remarked :

"There are occasions when given the nature of our relationship with the Department of Environment it is inappropriate for us to enter into open debate. These occasions are in the main in the period prior to annual decisions being announced on public expenditure." Although it is easy to understand the difficulty that the Housing Corporation faces in publicly challenging the Government on setting housing association grant rates, it is not so easy to understand why the Housing Minister, in paragraph 2 of the Government's response, simply says :

"Many of the recommendations are primarily addressed to the Housing Corporation. The Government's response takes account of the Corporation's views."

If the corporation cannot take a public view on the arithmetic, I suggest that it is unacceptable for the Minister to push the Select Committee report back in the Housing Corporation's direction, thus fobbing off the key recommendations that the Select Committee spelt out--again I quote from the report :

"Unless the poverty trap consequences of the Housing Benefit tapers are addressed, or procurement costs fall, proposals to make further reductions in HAG rates should be dropped."

That is a strong statement. Although Sir Christopher Benson feels that he cannot comment publicly, the Minister cannot dismiss the recommendations as being primarily addressed to the Housing Corporation. The core recommendations of that consensus report are primarily addressed to the Government and to the Housing Minister and perhaps to that most powerful background voice of all in this connection--that of the Chief Secretary to the Treasury.

In spite of the Select Committee's unanimous and strong call for further HAG rate reductions to be dropped,

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on 4 August last year the Housing Minister went ahead and announced a HAG level for 1994-95 fixed at a national rate ceiling of 62 per cent. Either he did not hear or did not want to respond to the thrust of the Select Committee report, or he ignored it because he was overruled by the Treasury. He cannot simply pass on Treasury cuts and hope that the housing associations survive.

The Government plan to reduce HAG to 55 per cent. by 1995-96. That will again massively increase rents and in turn increase the housing benefit bill.

Last week, the Department of Social Security's annual report was published. It showed that rent allowances for private and housing association tenants are increasing by an average of 6.5 per cent. in real terms compared with 14.3 per cent. during the past four years. Yet figures from the National Federation of Housing Associations show rents increasing between 17 and 20 per cent. in 1993-94. As a result of rent increases of that nature, people will be priced out of housing associations and housing associations will be priced out of development entirely. They will be forced to cease to build and will have to live off their seed corn.

It is important that the question of the so-called benefit trap, poverty trap or work disincentives is clearly understood. The Select Committee report recommended

"that the Government instruct a Cabinet Committee or

inter-Departmental working group to review the relationship between HAG rates and benefit entitlements and to develop a strategy for easing the problems faced by housing association tenants and others caught in the poverty trap."

In the Government response, the Minister stated :

"The Government maintains that in general it is a more efficient use of public resources to target subsidy on individuals through the benefits system, rather than on bricks and mortar through HAG." We have heard echoes of that policy from Conservative Members today.

Although the Minister claimed, in his response to the report, that

"The Department of the Environment, Department of Social Security and the Treasury work closely together to ensure that the interaction between the different subsidy systems is understood and appreciated",

that is not what comes through. We believe that that approach is economic nonsense in the long term. Bricks and mortar are more efficient in the long term, and in housing we need to reinstate subsidies that go in the direction of bricks and mortar. I would rather direct towards the language of future investment. It is also difficult to believe that the Government have done the arithmetic. I recall that, at the time of the deregulation of the private rented sector, the Housing Bill of l988 was passing through the House. In Committee, I asked the Minister what impact he thought that high market rents would have on the Department of Social Security budget. He replied that he did not expect them to have any impact. At that time, some of us were having to serve on two Committees simultaneously. The Social Security Bill was in Committee just along the Corridor, and I went to ask the Minister involved whether he knew that subsidised high rents in the private rented sector would absorb most of the social security budget, because they would absorb housing benefit.

Column 668

Last week, the Downing street press office was telephoned about information in the newspapers concerning the intention of the Department of Social Security to target and cut housing benefit. Apparently, the press office responded to that serious inquiry by saying that housing benefit was solely a matter for local authorities, and was increasing because of high council rents. It did not spell out the fact that local authority rented properties are less expensive than housing association properties, which in turn are much less expensive than properties in the private rented sector. There seems to be great confusion at the heart of Government--a difficulty in understanding the link between housing benefit and rents across the board.

The real problem is not experienced by the pensioner on full state pension, without the £2 supplementary occupational pension that floats such people out of housing benefit ; nor is it experienced by the unemployed person on full housing benefit who takes on a housing association flat. Let us suppose that an unemployed person on full housing benefit visits a jobcentre and is offered a job at £140 a week--such offers are still a reality. If that person's rent is £65 a week once housing benefit has been discounted, he may well feel that he must turn down the job because he will lose his benefit. Many people are now describing that position as a work disincentive. The Social Security Bill Committee to which I referred earlier--the Committee that was sitting at the same time as the Committee considering the Housing Bill of 1988--spelt out that anyone who turned down a job offer would lose all entitlement to benefit. That is worse than being asked to choose between job and home : unless the matter is sorted out, people may well lose both. They are being caught between high rents and the difficulties involved in having to depend on benefit to cover those rents. That is because we have a Government who are addicted to a policy of high rents, and are unable to understand that that does not square with high unemployment and low wages unless a huge housing benefit bill is to be created. This year's bill is £8.7 billion, the projected figure for next year is £10 billion, and that for the year after is £12 billion.

According to the Secretary of State for Social Security, the only way out is for the Treasury to cut housing benefit. In practice, that means that people will be unable to make up the difference to pay their high rents, and will have to move out of their homes. Interestingly, the Minister has revealed that the Government's own affordability formula assumes that working households without any housing benefit can afford to spend 35 per cent. of their net incomes on rent. That is contradicted by the work of the National Federation of Housing Associations, which recently adopted the following policy :

"Rents are affordable if the majority of working households taking up new tenancies are not caught in the poverty trap (because of dependency on housing benefit) or paying more than 25 per cent. of their net income on rent."

In other words, rents are not affordable when more than 50 per cent. of working tenants are caught in the benefit trap through dependency on housing benefit, or--if they do not receive such benefit--spend more than 25 per cent. of their incomes on rent. Yet an increasing proportion of housing association rents in new lettings exceed that crucial criterion.

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