This has been an illuminating debate because of the different attitudes on housing that have been exposed from both sides of the Chamber. My hon. Friend the Member for Birmingham, Erdington (Mr. Silverman) said that at least the Opposition had not returned to putting forward the Housing Finance Act. It seems to me, listening to the Opposition's contributions this afternoon, that that is precisely what they have done. The whole sense of the amendment is a return to the principles of the Housing Finance Act. Because of the attitude which has been displayed, the choice before us is much simpler than it would otherwise have been.
When we go into the Lobby the question we shall decide is whether at the end of the current rent freeze there should be a return to the provisions of the Housing Finance Act, or whether we should adopt the proposals laid down in the Housing Rents and Subsidies Bill. It is difficult for any of us to make a detailed comparison of the proposals in the Housing Finance Act with those contained in the present Bill. The measures start from different premises and adopt a different approach to the problem of housing finance.
I am pleased that my right hon. Friend the Secretary of State for the Environment is returning to the idea of local democracy in respect of housing and rents. It is essential for the future survival of local government that local representatives should have some say in this vital services, but it is equally necessary that the tenant should have access to somebody who is accountable to him. I am sure that no Labour Member, and, I presume, few people in local government, will shed any tears over the demise of the faceless men in the rent scrutiny boards, or over the departure of the housing commissioner for every waiting in the wings to enforce Whitehall's policy where local authorities could not be bludgeoned into so doing. I believe that the Bill not only marks a big step forward in housing finance but strikes a long overdue blow for local democracy.
In the present parliamentary Session we should judge every measure that comes before us in terms of the effect it will have on our economic problems. The Bill is highly relevant in that regard. It will end the inflationary yearly increases imposed by central Government on local authority tenants. It will stop the inevitable rise of local authority rents to a level beyond the means of the average tenant, with the consequent means-testing on a fantastic scale which such a rise would involve. Few measures can have played a greater rôle in stoking the fires of inflation or of making impossible the achievement of a voluntary pay restraint policy than the provisions of the Housing Finance Act. The present Bill now gives a chance to return to a logical system of housing finance and to a realistic approach to the problems of fixing rents.
The last two years have shown how right were Labour Members in their predictions of rent levels consequent upon the Housing Finance Act. I well recall Conservative statements in this House at the time refuting those accusations. Those two years have also shown how farcical is the concept of fair rents and how ludicrous it is to try to apply to the public sector the commercial principles which apply to the private sector. Those in the House who would seek to pretend that there can be a comparison between local authority housing and private sector housing will have to take on their shoulders the impossible task of determining the rent of 5 million council tenants by reference to a tiny, dwindling private sector. That system has brought about the ludicrous situation in many towns that rents in many thousands of council homes have been determined by reference to two or three comparable houses in the private sector. We all know instances where such a process has taken place.
It has become clear in this debate that the main aim of the Conservative Housing Finance Act was to reduce the amount of Government aid to housing. However strenuously that was denied at the time it has become evident from almost every Conservative speech in this debate. The Housing Finance Act reduced the basic subsidy of £20 a house for each year of the first two years and from then on we were to have a £10 reduction per house. Even the seemingly attractive subsidies and rate fund contributions were to be totally dependent on rent incomes of local authorities. Those subsidies and rate fund contributions to housing would be made only if it proved impossible to squeeze high enough rents out of tenants. Wherever and whenever possible the task of financing new housebuilding and of assisting poorer tenants was to be placed on the shoulders of those council tenants just outside the range of rent rebates or who qualified for only small rent rebates.
We Labour Members believe that this problem is a responsibility of the community as a whole. The Bill guarantees that the contributions towards those activities will be made before rents are determined, and not after.
I am amazed to hear many Conservative Members still advocating that, where possible, council housing should be turned into a profit-making service. The Housing Finance Act not only envisaged that but, in many areas appeared to regard it as the norm. Subsidies were to be eliminated, and profits accruing to housing revenue account were to be used to assist local and central Government and also to subsidise landlords in the private sector. The amount of refund made to a local authority from the housing revenue surplus was to be reduced by the amount of money paid in that area towards private tenants.
I believe that we face a deep and worsening housing crisis, but not worsening for the reasons which have been given by some Conservative speakers, namely, that we are spending too much money on solving the problem. The crisis is deepening because we as a nation are not prepared, and have not been prepared, to devote a sufficient proportion of gross national product to the housing sector.
We have been told by Conservative Members that if only we give the necessary boost to the private sector the problem can be solved. They ignore the facts of the present situation. The housing crisis has become worse in the last few years and housing lists have lengthened because of one main factor—namely, the inactivity of the Conservative Government which led to house prices being allowed to double. Millions of young people who only a few years ago were able to afford their own houses now cannot afford to buy. Many people have registered their names on council waiting lists because it has become impossible for them to buy their own houses. I would have more sympathy for the Conservative view of the situation if it were not expressed at the end of a period of Conservative Government during which mortgage rates rose from 8½ to 11 per cent., and at the end of whose period of office mortgage rates were on the brink of rising to 13 per cent.
The Bill provides a good basis for tackling the housing problem. It gives the necessary incentive to local authorities to increase and sustain the level of building. I appreciate the problems mentioned by my hon. Friend the Member for Leeds, West (Mr. Dean) in regard to the costs accruing to local authorities, but I hope that in his reply the Minister will make clear how he envisages the new high-cost element of the subsidy assisting in these cases.
It was said by the hon. Member for the Isle of Wight (Mr. Ross) that the contribution towards new capital costs was not high enough. We ought to take account of one other weapon in the Government's armoury which, I hope sincerely, will come before this House shortly. It is the public ownership of building land, which will present enormous relief to local authorities and lift from their shoulders a very heavy burden in financing their future housing programmes. We must look at the 66 per cent. in that light. If there is a case for a higher figure—and there may be in the interim, before public ownership of land becomes effective—I hope that my hon. Friend will consider it.
One effect of these proposals is to remove the uncertainties under the Housing Finance Act about future finance for new building. The threat was there in the Housing Finance Act that the system to assist with rising costs could be reassessed at any time with a view to reducing the subsidy paid to local authorities. It was also made clear in the Act that the contribution towards rising costs could be limited to a period of five years. That was no guarantee on which to expect local authorities to embark on increased building programmes. This Bill provides much longer-term and stronger guarantees of support for local authorities.
As for the provisions affecting the private sector, there was always a danger that we would underestimate the effect of the Housing Finance Act on the private sector. When we were involved in our arguments about its effect on council tenants we tended to forget that the effect on private tenants could be even worse. I welcome the clause in the Bill which will prevent the further decontrol of houses which are not up to modern standards of amenity. I also applaud my right hon. Friend's action earlier this year in deferring the passing of houses out of control. It was due to have taken place on 1st July. These two actions ensure that the landlords of substandard property will be prevented from cashing in on the present housing shortage.
I support my hon. Friend the Member for Salford, East (Mr. Allaun) in asking the Minister to look again very closely at the phasing provisions contained in the Bill. I ask him to look especially at the effects on those tenants for whom the election of a Labour Government came just too late and whose houses were taken out of control on 1st January of this year. At the end of the rent freeze they face significant rises in three steps in both real terms and percentage terms. I ask my hon. Friend to pay attention to the problems of these people.
Although it is slightly outside the scope of the Bill, I hope that at some time in the future we can have another look at the process of determining rents in the private sector. No one seeks to deny landlords the necessary funds to keep their houses in a decent state of repair, but we would resent and oppose the idea that landlords in some way should be allowed to profiteer out of the rise in property values.
There is much truth in what my hon. Friend the Member for Salford, East said about the level of investment in housing by private landlords, with many private landlords owning property which they bought at very low cost in the distant past. It is quite unacceptable that the rents allowed for that type of property should be based upon today's inflated values. I know of no other form of investment where that type of approach is justified. We must also remember that many landlords who bought controlled housing, even in the immediate past, did so on the understanding that it was controlled property, and that the price that they paid for it reflected the controlled status of the rent. We must not be deluded into being too generous to private landlords. Perhaps my hon. Friend will consider that aspect.
I should like my hon. Friend also to look at the present procedure for determining rents. Many Government supporters believe that this procedure is stacked far too strongly on the side of the landlord, who can afford the benefit of professional advice, and that it is stacked very strongly against the tenant. It becomes even more strongly stacked when we take account of the necessity for a tenant to put forward a fair rent of his own in rebuttal of the landlord's claim of a fair rent. It makes it quite impossible for the tenant to know precisely what action he should take in these circumstances. It makes it very likely that he will settle for the rent proposed by the landlord, in the knowledge that the rent officer can well establish a rent above that figure. We want to look at this system and to make sure that it is fair to both sides.
We have a clear choice before us about the methods by which we should finance housing in the public sector. I hope that that choice will be clear to every hon. Member. I say to the Minister that even those Government supporters who have criticised some of the details of the Bill still applaud the measure as a major step forward from the Housing Finance Act.