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Lord Williams of Elvel: My Lords, I am grateful to the noble Lord, Lord Lucas, for moving Amendment No. 27. It responds to our concerns at Committee. As we pointed out, the power was unlikely to be used and in responding at Committee the noble Lord affirmed that the Government had no intention of using the power. Therefore, it is reasonable for us to accept the noble Lord's amendment. It is also reasonable that local authorities should be left with discretion to decide their own strategies.

I am grateful to the noble Lord for introducing the amendment, which responds to concerns voiced at Committee. He is quite right, he has pre-empted my amendment, Amendment No. 28, and I shall not move it when the time comes.

On Question, amendment agreed to.

Clause 28 [HMO grants: prior qualifying period]:

[Amendment No. 28 not moved.]

Lord Lucas moved Amendment No. 29:

Leave out Clause 28.

On Question, amendment agreed to.

Clause 31 [Power to restrict certain landlord's applications]:

Lord Lucas moved Amendment No. 30:

Leave out Clause 31.

The noble Lord said: My Lords, we discussed the purpose of Clause 31 at some length in Committee, as the noble Lord, Lord Williams, had suggested a number

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of amendments with the intention of clarifying the clause. That gave us the opportunity to consider further the need to retain Clause 31.

We believe that the maintenance of a property in the private rented sector is the responsibility of the owner. That led to our initial decision in the White Paper to restrict landlords' access to grants. With the move in this Bill to a discretionary grant system accessible by all landlords we were keen that the message of owners' responsibility to maintain their property was not lost.

Clause 31 was included in case experience showed that, rather than maintain properties to a good standard, landlords waited for a local authority to take enforcement action or offer grant assistance. Were this pattern of activity to emerge, we would have wished to take steps to restrict grant availability.

However, the comments that we have received from local authorities about how they expect to use the power to give discretionary grant assistance to landlords has reassured us that the power will be used for strategic purposes and that we are unlikely ever to need the power in Clause 31 to restrict grant availability. Bearing in mind the concerns expressed in Committee, we have concluded that the clause should be removed. I beg to move.

Lord Williams of Elvel: My Lords, I am again grateful to the noble Lord for moving the amendment. I can only repeat what I said earlier. In our view it is right that this clause should be out of the Bill. The noble Lord kindly took due note of the arguments that we put forward in Committee. It is again right that local authorities should be allowed maximum discretion in deciding their own strategies. Therefore, I am very happy to support the Government in their Amendment No. 30.

Lord Lucas: My Lords, I am delighted again to give pleasure the noble Lord, Lord Williams of Elvel.

On Question, amendment agreed to.

Clause 33 [Means testing in case of application by owner-occupier or tenant]:

Lord Williams of Elvel moved Amendment No. 31:

Page 19, line 46, at end insert--
("( ) make provision for the deduction of--
(i) the gross amount of any sums paid as interest (including interest on a mortgage) in respect of which relief is given under the Income and Corporation Taxes Act 1988 ("the Taxes Act") in respect of a loan to the person, his spouse or partner;
(ii) half of the gross amount of any premium payable under a policy of life insurance in respect of which relief is given under section 266 of the Taxes Act (life policy and certain other premiums) in the relevant year; and
(iii) the gross amount of any other premium or sum in respect of which relief is given under sections 266, 273, 619 or 639 of the Taxes Act in the relevant year;
from the gross income of the person or his spouse or partner for the purposes of determining income under this section.").

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The noble Lord said: My Lords, this amendment is tabled in my name coupled with that of the noble Lord, Lord Dubs. In Committee we had quite an involved discussion about means testing. The purpose of the amendment, which was said of the amendment that we moved in Committee, is to ensure that the means test calculation takes into account mortgage interest payments and payments on other sums on which relief is in fact given under the income tax Acts. We are trying to match up the provision with the income tax Acts.

Anyone who has a mortgage will realise that it is an important outgoing from the household. In Committee the Government argued:

    "Our view is that the amount of mortgage an individual takes out, or the amount he pays towards life insurance or other premiums for which he can reclaim tax paid, is a matter of personal choice, and as such we see no case for those amounts to feature in the renovation grant means test"--[Official Report, 26/3/96; col. 1651.]
The Government went on to say that the inclusion of such amounts would encourage individuals to take up larger mortgages. However, they slid a little during the argument in Committee in giving an undertaking to reply in detail at a later stage when they realised that the wording of the amendment took up wording in the education grants means test. The purpose of tabling the amendment at Report stage is, first, to give the Minister an opportunity to clarify, if that is possible, the response given in Committee and, secondly, to answer those points made by the Government in debate.

Our view is that mortgage interest payments are an important household outgoing and, when we come to renovation grants, it is important that those things should be taken into account. I can elaborate on the effect of disregarding such mortgage interest payments if the noble Lord wishes me to; I have a great deal of material which will allow me to demonstrate the problem.

In our view it is unlikely that the changes we are suggesting to the grant means test will alter the operation of the housing market in any meaningful sense. A decision to purchase a house is usually taken without taking into account changes to personal income and changes to the housing market, which, as we all know, are impossible to predict.

The assumption on which we should work is that most people purchasing a house will have taken into account its maintenance needs. It is not true to say--the second argument advanced by the Government--that the allowances included in the means test are an adequate provision for housing costs. As the allowances are, by their nature, applied uniformly to all applicants, they will not take into account differences in the housing costs of individuals and the anomaly will remain.

The amendment is intended to probe the Government's view on the matter. It is something that has not been fully considered by the Government. We believe that there is virtue in making sure that any means test for renovation grants takes into account the essential outgoings of those who are owners of property,

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and that includes mortgage interest payments and other consequential outgoings such as insurance. In that probing spirit, I beg to move.

Lord Monkswell: My Lords, in supporting my noble friend's amendment, the most powerful argument is that it would give a common base with the other grants that he mentioned such as the education grant. To have two different measures of income for disbursement of public money in terms of grants will appear illogical and nonsensical to the ordinary householder. Therefore, from the point of view of what may be described as public regard for the law and the criteria on which public bodies make their judgments, it would be sensible to adopt the same criteria when it comes to assessment of income for grants.

6.45 p.m.

Lord Lucas: My Lords, the noble Lord, Lord Williams, has again moved an amendment requiring an applicant's mortgage interest, life insurance premiums and other tax deductible payments to be disregarded in the means test regulations under this clause. All means tests have their imperfections and different forms. Perhaps I may help the House by explaining the principles behind the present means test for renovation grants and explaining why the amendment would discriminate against certain applicants.

The purpose of the present means test is to ensure that help given towards the cost of essential repairs and adaptations goes to those in greatest need, whether they own their own home, have a mortgage or are renting. The test follows housing benefit rules and seeks to assess household needs in the same way as for those claiming help through the social security system. It is a framework for determining what an applicant can reasonably afford to contribute, if anything, to the cost of works. It establishes how much money a household needs to meet reasonable weekly expenditure, including reasonable housing costs. It does that by a system of awarding personal allowances and premiums which take account of the specific circumstances of the family.

We recognise that there are demands on a person's income, including mortgage payments and rents. The test therefore provides for an additional premium of £40 per week over and above housing benefit levels to ensure that allowance has been made in the test for housing costs such as mortgages and rent. The system treats all those seeking grants fairly and equally, or at least as fairly and equally as a means test is likely to do. Because it makes allowance for reasonable housing costs to be taken into account, it does not penalise those without mortgages or those who pay similar amounts in rent, as I believe the noble Lord's amendment would do.

I share the concern of the noble Lord, Lord Williams, in tabling the amendment that we should provide all the help we can within available resources so that people can remain in homes in a good state of repair. However, his amendment does not treat all housing costs equally and those people, particularly the elderly, who may have no mortgage or who have either paid it off or are close to doing so and therefore have small amounts of interest to pay would be unfairly treated. Furthermore, those

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living in private rented accommodation paying equivalent amounts of rent would also be disadvantaged under his proposals. In my view, it would also risk resources going to those who can afford to take out higher mortgages at the expense of those who perhaps cannot borrow so much but who are nevertheless equally deserving of grant aid. Some people, especially younger applicants, may be encouraged to borrow more to move up market in the knowledge that they will receive more grant.

The amendment would also require certain tax deductible payments of widows' and children's annuities and personal pensions to be disregarded. We see no case for disregarding those payments which are purely a matter of personal choice.

We share the anxiety of the noble Lord, Lord Williams, that people seeking grant to adapt or improve their property are given the fairest treatment in determining their ability to contribute to the cost of works. We believe that the means test that we have chosen is the best practical way of doing that. I would like to think that I might have persuaded the noble Lord of our argument, but I take leave to doubt that.

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