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11.44 pm

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Beverley Hughes): I congratulate my hon. Friend the Member for Manchester, Central (Mr. Lloyd) and thank him for raising with the Government the difficult circumstances faced by some of his constituents in Lower Beswick as a result of a compulsory purchase order. My ministerial colleagues and I are aware of the specific problems as my hon. Friend and some of his constituents have written to us about them.

The general issue of the compensation payable to owners of low value housing subject to a compulsory purchase order has also been considered in the context of the compulsory purchase policy review to which I shall return later in my speech.

On the surface, this is a valuation dispute between an acquiring authority and some claimants. I understand that in this case the acquiring authority is offering about £7,000 for the properties, but the claimants want some £28,000. They point out, as my hon. Friend has done on their behalf tonight, that their houses are well maintained and have been for many years, so it is wrong for them to be offered the same compensation as that for empty or rundown properties. Their valuations are based on those for similar houses in adjacent districts.

My hon. Friend will know that the compensation regime is based on the principle of equivalence--the system is supposed to ensure that a claimant

In normal circumstances--and this is the problem--the open market value for the interest in the property, disregarding the effects of the scheme, taken with the rest of the compensation package will achieve that. However, difficulties arise where there is no proper market and no evidence of recent transactions.

Valuers make valuations based on the age, character and location of a property. These are in effect the elements of demand for a property and the weight given to each element will vary from case to case. In areas of low demand, valuers may give a great deal of weight to location which would lead them to give similar values to properties of different character. However, like doctors and lawyers, valuers may disagree with each other.

In terms of the immediate action open to my hon. Friend's constituents--although it is not a guaranteed remedy--I advise them, if they have not done so, to engage experienced valuers who can negotiate with the council on their behalf. If they cannot reach agreement, it is open to them to apply to the Lands Tribunal for a determination of the compensation payable. These cases may be suitable for the new simplified procedure available at the tribunal which is much quicker and cheaper than a full hearing. I urge them to consider that course of action, certainly as a first step, if they have not done so.

There are problems with compulsory purchase in these circumstances, and I have no difficulty acknowledging that to my hon. Friend. The problem of compulsory

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purchase of low value properties, which he has so clearly described, is not unique to Lower Beswick. It was brought to the attention of the compulsory purchase policy review advisory group, which I think is the body to which my hon. Friend referred, which has been looking closely at how to make recommendations on making the compulsory purchase and compensation system more efficient, effective and, above all, fairer to all parties. That was the remit given to them by my right hon. Friend the Member for Sheffield, Central (Mr. Caborn), when he was the Minister for the Regions, Regeneration and Planning.

Although people may be living in an area where there is no effective market, which may mean that they have negative equity, that may not matter very much if they do not intend to move, and have the means to pay the mortgage. Obviously, the problems arise only when an authority comes along with a scheme, possibly for very good reasons, and compulsorily purchases their properties. That crystallises their loss and if a low valuation is upheld, it can catapult people, as my hon. Friend anticipates, from proud owner-occupation to understandably resentful council tenancy in some circumstances, without making much of a dent in their debt. No one ever thinks, and certainly I do not, that that is a satisfactory situation, especially as it has been precipitated by an outside agency and is no fault of the resident. However, the current compensation code does not make provision for overcoming it.

The compulsory purchase policy review advisory group has produced its report for us, and we will publish it very shortly. While I cannot anticipate any announcement that my hon. Friend the Minister for Housing and Planning will make, the options that it has considered have included giving compensation on a like-for-like basis. That would allow claimants sufficient compensation to purchase an equivalent property elsewhere--an option mentioned by my hon. Friend--even if the open market value of the property taken was insufficient to do so. The Government's policy paper, which we hope to publish in the autumn, will contain proposals to overcome such problems.

Clearly, in order to change the system, we need primary legislation. Framing legislation to overhaul the compulsory purchase and compensation system will be a not inconsiderable job. It is something for the medium term when parliamentary time permits.

I would not like my hon. Friend to think that there is nothing that can be done to help his constituents in the short term. He may know that I visited the area not too long ago. The city council told me about a scheme devised to solve an aspect of the problem that he has described, which enabled a group of owner-occupiers to retain their status and move into newly refurbished premises. Without going into great detail, the scheme involved a registered social landlord buying a property that required refurbishment, Manchester city council using its discretion to give an improvement grant and the registered social landlord granting a new mortgage to the claimant, the previous one having been paid off by the compensation package.

Variations on the scheme were made to take account of differing circumstances. The council has emphasised that the mechanism was successful for a small scheme. There may be difficulty applying it to a large number of

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claimants, although I do not think that a large number is involved in my hon. Friend's case. The scheme shows that solutions can be found with sufficient good will and imagination by the acquiring authority, other housing agencies and mortgage lenders, working with the claimants rather than against them.

My hon. Friend also mentioned relocation grants. That was a new power that we gave to local authorities in 1997 to help people affected by clearance to buy other houses nearby. The grants are additional to the compensation that people receive through the compulsory purchase process, and are designed to bridge the gap between the value of the property cleared and the cost of a similar home nearby. They are often particularly useful in areas such as Lower Beswick, where market values have dropped sharply in relation to neighbouring areas.

I am pleased that Manchester city council is making use of its powers to give relocation grants in Lower Beswick. Although I know that the grants have worked well in some instances, I understand that some of my hon. Friend's constituents are unhappy with the amount that they are entitled to receive because they have found that the grants do not close the funding gap

I have a great deal of sympathy with the difficulties faced by my hon. Friend's constituents, and with those of other households that have become trapped in low value housing. As he has said, because of the criteria wrapped round relocation grants, they help those in greatest need--those on the lowest incomes--but do not offer so much help to those who are not wealthy but are earning a bit of money. The system is not perfect, and we have acknowledged those shortcomings in the current system. For that reason, we proposed in the housing Green Paper in April to give local authorities wider powers to tackle the problems of low demand housing. In particular, we want to allow greater discretion over where and how to give relocation grants. Consultation on the Green Paper is still open, and we are seeking views.

My hon. Friend raised three specific points this evening, which he has taken up with me in correspondence. I shall reply shortly. However, I shall make a couple of points on some of the issues to which he referred in the debate.

My hon. Friend referred to negative equity. The compulsory purchase review advisory group has considered the problem, and has acknowledged that it can result in people receiving insignificant and insufficient compensation to acquire an equivalent replacement property. As part of our response to the report, we shall consider carefully ways in which we can achieve what my hon. Friend seeks. We hope that mortgage lenders more generally will be able to adopt the sympathetic approach that one or two have offered in the past, to enable people to overcome the problem of negative equity at that point in the process.

My hon. Friend referred to the disturbance payment and asked whether the Government could finance a test case. I have considered the matter carefully and I am advised that it is not an easy option for the Government to make a test case. However, it would be open to the local authority to do so, and that is something that we shall discuss with it.

On rule 6 and the advice that my hon. Friend has received from a professional with knowledge in the field, those are matters that I shall look into and write to him about. Finally, my hon. Friend asked whether existing

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owners could benefit from the increased value of their own proportion of a compulsorily purchased site. That is anticipating, perhaps hypothetically, increased value of the whole site as a result of redevelopment. It is an interesting question and I think that my hon. Friend acknowledged that it raised some important issues of principle. Currently it would involve an unprecedented use of public funds to apply new deal for the community money to bridge the gap. However, we are prepared to consider the matter.

Such a scheme would favour only those properties that lie within new deal communities. It would not necessarily represent an option for other areas that did not have new deal for the community funding or some similar central Government funding initiative. I am prepared to explore the matter further.

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My hon. Friend has raised with great clarity the problems for people in Lower Beswick as a result of current deficiencies in the CPO system and the relocation grant system. I regret that I cannot offer him, short of the innovatory schemes that Manchester city council has already explored and I hope will continue to explore for his constituents, an immediate remedy. I can assure my hon. Friend that we are well aware of the serious issues that he has raised. We want to find a remedy as soon as we can to help his constituents and other people in similar situations.

Question put and agreed to.

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