Extension of Power of Local Authorities to Make Advances

Local Government Bill – in the House of Commons at 12:00 am on 22nd January 1974.

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(1) Section 43 of the Housing (Financial Provisions) Act 1958 (power of local authorities to make advances for certain housing purposes) shall be amended in accordance with the provisions of this section. (2) At the end of paragraph (d) of subsection (1) there shall be added the words "or

  1. (e) subject to subsection (2A) below, facilitating the repayment by means of the advance of the amount outstanding on a previous loan made for any of the purposes specified in paragraphs (a) to (d) above".
(3) After subsection (2) there shall be inserted the following subsection:—
  1. "(2A) An advance shall not be made for the purpose specified in paragraph (e) of subsection (1) above unless the local authority or county council satisfy themselves that the primary effect of the advance will be to meet the housing needs of the applicant by enabling him either to retain an interest in the house concerned or to carry out such works in relation to that house as would be eligible for an advance by virtue of paragraph (c) or paragraph (d) of that subsection."
(4) In paragraph (c) of subsection (3) of that section for the words "may provide for repayment being made either by instalments of principal or by annuity of principal and interest combined" there shall be substituted the words "shall provide for repayment of the principal:—
  1. (i) by instalments (of equal or unequal amounts) beginning either on the date of the advance or at a later date, or
  2. (ii) at the end of a fixed period (with or without a provision allowing the local authority or county council to extend that period) or on the happening of a specified event before the end of that period.
and for the payment of instalments of interest throughout the period beginning on the date of the advance and ending when the whole of the principal is repaid".(5) At the end of the section there shall be added the following subsection:—
  1. (5) If it appears to a local authority or count council that the principal effect of the making of an advance under subsection (1) above in respect of any premises would be to meet the housing needs of the applicant, they may make the advance notwithstanding that it is intended that some part of the premises will be used or, as the case may be, will continue to be used, otherwise than as a dwelling: and accordingly where, by virtue of this subsection, a local authority or county council propose to make an advance in respect of any premises, the premises shall be treated for the purposes of subsections (1) to (4) above as, or as a building to be converted into, a house or houses".
(6) On the coming into operation of this section, no further advances shall be made by local authorities in England and Wales under section 74 of the Housing Act 1969 or section 41 of the Land Compensation Act 1973 '.—[Mr. Rossi.]

Brought up, and read the First time.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Hornsey

I beg to move, That the clause be read a Second time.

No. 46, in Schedule 8, page 71, line 45, at end insert—

'1969 c. 33.The Housing Act 1969.Section 74'.

No. 52, in Title, line 3, after ' borrowing ', insert ' and lending '.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Hornsey

The amendments are consequential to Schedule 8 and to the Title. In Committee the hon. Member for Widnes (Mr. Oakes) moved a new clause seeking to give local authorities unfettered freedom to enter into the mortgage market to assist inhabitants to buy their own homes".—[OFFICIAL REPORT, Standing Committee A, 11th December, 1973; c 394.] He gave three examples of the situation where such freedom would be helpful. He cited the case where a mortgagor found that he could not meet the interest charges on his current mortgage and faced foreclosure by his mortgagee. He urged that power should be given to local authorities to re-mortgage the property at more acceptable rates of interest.

The second example was where, following separation or divorce, a wife obtains possession of a matrimonial home under the Matrimonial Homes Act but then finds it necessary to buy out her former husband's interest. She would need a mortgage to do this. The hon. Member felt that local authorities should be enabled to make the necessary advance in such a case.

The third case he gave was of a power which would enable local authorities to give young married couples on low incomes the same kind of deferred terms as the Government have encouraged building societies to give others to help them with their mortgages. Such power does not exist currently for local authorities. My right hon. Friend the Minister for Local Government and Development was sympathetic to the proposals but felt that the drafting of the clause was too loose. He gave an undertaking to bring forward an amendment covering the matters raised by the hon. Member at a later stage and to give the hon. Member full credit for having raised this matter.

Photo of Mr Oscar Murton Mr Oscar Murton , Poole

With this it will be convenient if we discuss the following amendments: No. 22, in Clause 40, page 39, line 6, after ' 34 ', insert', Extension of power of local authorities to make advances,'. I am happy to discharge that undertaking on behalf of my right hon. Friend. I do not know whether the House wants me to go through the new clause and to explain its meaning. I see hon. Members opposite shaking their heads, and as we have a lot of business before us I shall leave the matter there.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

I thank the Minister for this new clause and for what he said. I am certain that it will be welcomed by local authorities throughout the country. The new clause which I tabled in Committee was to meet suggestions from local authorities who had found that their powers of granting mortgages were unduly restricted. I readily accept that my new clause would have gone further than giving authorities unfettered freedom to enter into the mortgage market to assist inhabitants to buy their own homes."—[OFFICIAL REPORT, Standing Committee A. 11th December 1973; c. 394.] That, however, is what I wanted to do.

My new clause would have allowed them to buy commercial properties and so on, which was not the intention. This clause does all of the things I wanted in Committee. I want to dwell for a moment on the increasing difficulties in which many local authorities find themselves with regard to the Matrimonial Homes Act, and the perilous position of many divorced or separated wives who find that, although the court has given them possession of their own homes, that possession is rendered useless because they cannot find the money for a mortgage.

Increasingly local authorities, in their own interests, will have to provide a mortgage for separated or divorced wives. If they fail to do so then, apart from the distress and misery caused to the wife and her family, they will incur an obligation to rehouse that family in Part 3 accommodation. It is nonsensical, when the wife and children could remain in the home which the court has allotted them and when the local authority could advance the mortgage. There are many instances in which a local authority could be of great service in this way.

The other example I cited is a local case, of a widow whose interest on her mortgage is paid by the Department of Health and Social Security. Although that is secure, the house obviously gets in a state of disrepair over the years and requires money to be spent upon repairs. It does not qualify for an improvement grant because these are not improvements but repairs. Under this clause the local authority could step in and either make an advance for that specific purpose, knowing that its interest was secure, or allow the original mortgage to be called in and readvance on the property to assist that person.