Cost Floor Limit on Discount on Price of House Purchased by Secure Tenant

Orders of the Day — Housing (Scotland) Bill – in the House of Commons at 5:27 pm on 29th March 1988.

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".—(1) In subsection (1) of section 62 of the Housing (Scotland) Act 1987 (purchase price of house being purchased in pursuance of tenant's right) for the words 'subsections (7) and (8)' there shall be substituted the words 'subsection (6A)'.

(2) For subsections (7) to (9) of that section there shall be substituted the following subsections— `(6A) Except where the Secretary of State so determines, the discount for the purpose of subsection (1) shall not reduce the price below the amount which, in accordance with a determination made by him, is to be taken as representing so much of the costs incurred in respect of the house as, in accordance with the determination, is to be treated as—

  1. (a) incurred in the period commencing with the beginning of the financial year of the landlord which was current 5 years prior to the date of service of the application to purchase the house or such other period as the Secretary of State may by order provide; and
  2. (b) relevant for the purposes of this subsection, and, if the price before discount is below that amount, there shall be no discount.
(6B) An order under subsection (6A) shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament and may make different different provision in relation to different cases or circumstances or different areas.'.

(3) In subsection (10) of that section, for '(9)' there shall be substituted '(6A)'.

(4) Subsections (11) to (13) of that section shall cease to have effect.

(5) In section 76 of the Housing (Scotland) Act 1987 (duty of landlords to provide information to secure tenants) in subsection (1), for paragraph (c) there shall be substitued the following paragraph (c) section 62(6A) may affect any price fixed as regards the house under section 62(1),".'.

(6) The said sections 62 and 76 shall, however, continue to apply as originally enacted in relation to the price of a house in respect of which the offer to sell (within the meaning of section 63 of the Housing (Scotland) Act 1987) was served on the tenant prior to the commencement of this section; but nothing in this subsection restricts the power of the tenant to withdraw his application to purchase or prejudices the effect of such withdrawal."—[Lord James Douglas-Hamilton]

Brought up, and read the First time.

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

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

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

With this it will be convenient to take Government amendments Nos. 102 and 103.

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

I would not wish to shrink from responsibility for the fact— indeed, I very much welcome the fact — that housing is regarded as such a supreme priority in Scotland that a considerable number of civil servants do, indeed, attend housing debates. It is a measure of the importance that we attribute to the matter.

Photo of Mr Norman Hogg Mr Norman Hogg , Cumbernauld and Kilsyth

The Under-Secretary raises an important point in referring to the fact that so many civil servants have been brought to the House to support him on this important matter. Can he tell the House how many civil servants have been brought from Scotland today to support him at the Dispatch Box?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

I cannot give the exact number. However, we regard future housing provision in Scotland as of supreme importance. Some of the amendments that we shall be debating are very complex, and it is vital to get them right and ensure that they are in a form that stands the test of time.

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

The hon. Gentleman will have his chance later.

The amendments seek to give effect to the Government's decision, as announced on 1 March, and as I explained in Committee, on the right-to-buy cost floor rule. The new clause and the two amendments seek to repeal the present arrangement under which the discount available to tenants wishing to exercise their right to buy can be restricted, if the sale would otherwise take place at a price less than the debt outstanding on the house. We suggest instead that discount should not bring the price of the house in terms of the right-to-buy provisions below the historic costs incurred by the landlord in providing or improving the house since the relevant date, or the undiscounted market value if that is lower. The relevant date will be the beginning of the financial year five years before the right-to-buy application is made.

So if a local authority tenant applies to buy his house in November 1988, the cost floor will be the total costs incurred by the authority on that house since 1 April 1983. The price that the tenant has to pay for his house will fall below that figure only if the market value, as determined by the district value, is less than those costs. We propose that the relevant date should roll forward each year. So if a tenant applies in November 1989, the cost floor will be the costs incurred on the house since April 1984.

Hon. Members will recall that our White Paper last November suggested that the discount restrictions involved in the outstanding debt test should be abolished completely. We have, however, taken note of the many representations received from local authorities and other interested parties that difficulties could arise — on building and modernisation programmes and on house allocation—if we were not to keep in place some kind of discount restriction on new or newly modernised houses. The proposals we are bringing forward in these amendments reflect the care with which we considered these representations.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

I was not a member of the Standing Committee, so my colleagues on both sides of the House who worked hard in that Committee will forgive me if I ask a question. In the areas that the Minister and I represent — Queensferry and Linlithgow — there have been problems with the definition of "newly modernised". What is the definition of "newly modernised"?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

I cannot give a technical definition, but I can give a general off-the-cuff definition. Houses that have been modernised by the district council will be taken into account in the five-year period. If the house has been modernised in the five-year period, the costs will be added to the historic cost of the House and it will be taken into account.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

In the five-year period?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

In the five-year period; that is absolutely right. I think that this is a matter of common sense. I do not think that the hon. Member for Linlithgow (Mr. Dalyell) would disagree about what constitutes a modernisation programme or what a local authority might define as a modernisation programme.

Photo of John McAllion John McAllion , Dundee East

Will the Minister confirm that the price must not fall below the historic cost involved in the previous five years but that if the tenant waited six years, the price could fall as low as that tenant's discount enabled it to fall? The tenant can get the full discount after six years even though the council may have spent £20,000 on modernising the house six years before. Is that right?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

The hon. Gentleman is right, but I should make it clear, as I did in Committee, that housing support grant would be increased if there was an adverse impact on the figures for the authority concerned, given that that authority was receiving housing support grant; some authorities just outside housing support grant might be brought back into it as a result.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

There is a problem here. I have some sympathy with the Minister when he says that the question whether a house is newly modernised is a matter of common sense, but I am clear that in two cases the matter has gone to lawyers. There needs to be some kind of legal definition. What the Minister and I might think is common sense might not be accepted by people's solicitors.

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

I shall be delighted to look into the hon. Gentleman's constituency cases. Indeed, I should be grateful if he would send me the details because it is very important that these matters should be properly resolved.

I believe that the proposals will meet the general points of concern raised—for example, by local authorities—while at the same time allowing more tenants to purchase their houses without a restriction of the discount to which they are entitled on the strength of their public sector tenancy records.

The new clause refers to a determination which the Secretary of State will make on the costs that should be taken into account in calculating the new cost floor. We intend that the determination applying in Scotland should be broadly similar to that which applies at present in England and Wales under section 131 of the Housing Act 1985.

Photo of Andrew Welsh Andrew Welsh , Angus East

Is the Minister saying that under his proposal it is still possible to sell a council house below its outstanding debt? Will he clarify that point?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

In certain circumstances, yes, but we have to bear in mind that a house increases in value considerably in the five-year period—perhaps by as much as 10 per cent. a year. The new clause represents a compromise that will meet the aspirations of tenants who wish to purchase with a discount while not disadvantaging local authorities. That is why, after careful thought, we proposed the new clause in this form.

The provisions in the new clause and the consequential technical amendments represent a fair compromise between the interests of tenants and the interests of public sector landlords. Authorities will be able to adopt sensible building, modernisation and allocation policies without the distorting effect that the absence of any cost floor might have introduced, and more tenants will be able to exercise their right to buy without having their discount entitlement reduced. I commend the new clause and the amendments to the House.

Photo of John Home Robertson John Home Robertson , East Lothian

The civil servants referred to by my hon. Friend the Member for Cumbernauld and Kilsyth (Mr. Hogg) were not much help to the Minister when he was bowled a difficult one by my hon. Friend the Member for Linlithgow (Mr. Dalyell). I understand why he brought those civil servants here; he has no Scottish Back Benchers, although I see the seventh cavalry arriving in the form of the hon. Member for Tayside, North (Mr. Walker).

What we need in housing in Scotland is not civil servants but brickies. We seek from the Government some indication that they will ensure that houses are built and improved to cater for the needs of people in Scotland. The Government are simply trying to redistribute existing housing stock in an ill-considered manner. I stress that the Labour party strongly supports the development of home ownership in Scotland, but we should be encouraging home owners and private developers to invest in housebuilding and in the improvement of housing stock rather than simply raiding the public sector housing stock as has happened in recent years.

We object to the way in which the Government approach this question, which is reckless in a number of ways. Sadly, we are already discovering that it is reckless from the point of view of some home buyers, because people who have bought their council houses are finding that they cannot afford the real costs of home ownership, and a disturbingly large number are becoming homeless as their homes are repossessed by building societies. In my constituency, 5 per cent. of the allocation for council houses last year went to people whose homes were repossessed because of mortgage default. Therefore, owner-occupation is not the best answer for everybody, and the policy of encouraging owner-occupation regardless of the consequences does not always make sense.

That policy is also tragically harmful to the prospects of homeless people and for those who are stuck on housing waiting lists. Every time another council house is sold—although that may be very nice for the people who buy it— it means that there is less council housing stock, a slower turnover of that housing stock and a longer wait for those who are waiting for housing. Obviously, the policy represents reckless interference in the finances of local housing authorities.

We are all increasingly weary of reading Scottish Office press statements that give the impression that the Government are giving local authorities money to spend on housing. The Minister issued another only yesterday. The fact is that the Government are allowing Scottish district councils to borrow £58 million less than they were allowed to borrow last year, while the Government cheerfully anticipate a massive increase of £93 million in the profits from council house sales. That projected figure is 60 per cent. more than the figure for last year. Whether all that will come to pass, goodness knows, but it seems a particularly haphazard way of budgeting for capital expenditure on housing in Scotland.

This "policy" of cut-price council house sales is not a housing policy; it is simply a device for redistributing the ownership of some houses from the community to individuals who may be fortunate enough to qualify for the discounts on offer. There is no question but that that is popular among those who are in a position to take advantage of it. I fully acknowledge that. However, equally, there is no doubt that it has made life more difficult, for the reasons that I have already given, for people who are waiting to rent homes. There is increasing and distressing evidence that owner-occupation is not always the best form of tenure. I have given an example of the situation that is developing in my constituency which, I suspect, will be mirrored elsewhere in Scotland, where people are getting into difficulties after having bought their council houses.

The new clause seriously undermines the cost floor which at least ensured that district councils were not required to sell houses for less than the outstanding debt on those properties. Under the new clause, the cost floor will cave in after only five years. Incidentally, there is an interesting difference and disparity between that figure and the figure for England and Wales, where there will be an eight-year holding period for the cost floor. Perhaps the Minister will explain that difference.

Under the new clause, it will be possible for a district council to build a house for, say, £35,000 and if a tenant transfers into the house and qualifies for the full 60 per cent. discount, he might be able to buy the house for as little as £15,000 only five years after it has been built. Therefore, the district council would sustain a loss of £20,000 on that property. Only a small fraction of the 50-year loan charges will have been paid off during that period. Therefore, the district council's remaining tenants will have to pay the cost of that compulsory sale for, perhaps, another 40 years. It is the other tenants who have to pay the costs that the Government are building up for local housing authorities under this scheme.

There might be a case for that practice if the Government were to make up the shortfall that the district councils will sustain as a result of such sales, but, of course, the Government are not prepared to do that. The Government are saddling district councils with yet another serious financial hardship.

We know, that the district council house building programme in Scotland has seldom been smaller than at present. In the second quarter of 1987, only 316 houses were started by district councils in Scotland. That figure is only one quarter of the number that were built when the Government came to power nine years ago. Therefore, there has been a disturbing tail-off in the amount of council house building in Scotland. The Bill will make matters substantially worse. District councils will still have to cope with the growing needs of homeless people, but with a diminishing stock of houses to let because of the increasing rate of sales. That is generating particular problems in rural areas in Scotland, but the problem is reflected in other parts of Scotland also.

I seek one particular assurance from the Minister on new clause 7. Will the Government ensure that no district council runs into trouble with the district auditors for investing in new building while under the threat of compulsory cut-price sales after only five years, as would be possible under the new clause? District councils could be criticised for investing in urgently needed new housing if there is a prospect of those houses being sold within as little as five years for a fraction of what they have actually cost. If the Government cannot give an assurance on that, they will have to accept responsibility for halting the building of homes to let by local authorities in Scotland.

Finally, I repeat this question to the Minister. Why is the cut-off period for the cost floor being set at five years in Scotland, when the equivalent figure in England is eight years?

Photo of Andrew Welsh Andrew Welsh , Angus East 5:45 pm, 29th March 1988

Although I am supposed to be reassured by the Minister, I have certainly not been reassured by his comments on the new clause which, in its potential effects on local authorities and therefore on the provision of housing in Scotland, is one of the most serious parts of the Bill.

By tinkering with time limits, the Government's proposal makes only a slight modification and in no way meets the problems that it will create for local authorities throughout Scotland.

I regret that amendment No. 165, which I tabled, was not selected, because it would have reversed the present proposed financial unfairness and given local authorities, and the public purse, a greater chance to survive and contribute to Scotland's housing.

District councils should never be asked, unless as a major exception, to sell houses at less than the outstanding debt on them. The outstanding debt must be the minimum acceptable or the remaining tenants will carry debt for a lost public asset. If less than the outstanding debt is taken, the consequence must be that the poorer tenants will simply carry that loss, due to the Government's council house sales policy. District councils will carry out considerable administrative and legal inquiries on receipt of an application. Those costs also will be unfairly borne, at no benefit, by the remaining council house tenants.

The new clause merely tinkers with the time limit and fails to address the real and dangerous problems that the Bill poses for local authorities. In one local authority, a house built in a prize-winning council estate at a cost of £34,000 is now likely to be sold for £23,000—in other words, at an immediate loss of £11,000, which is almost equivalent to taking £1 from every council tenant. If that happens due to the sale of only one house, the consequences of a housing sales drive are potentially catastrophic to that district council.

The new clause will not change that situation. Without any protection for existing local authorities and existing public authority tenants, such sales will be a massive burden on rent payers and will virtually stop all new public sector house building. Is that really what the Government want? The problem strikes at the heart of the public housing system and will lead to the poorest tenants directly subsidising the wealthiest ex-tenants and the best houses.

Such catastrophic financial losses would also stop modernisations, because the value of a house does not rise proportionately to the money that is invested in modernising it. A £10,000 modernisation, for example, might hardly affect the price arrived at by the district valuers. It would certainly be nothing like the public money that had been invested. Therefore, local authorities would have a disincentive to modernise and to create a capital debt for no return.

I fear that, unless it is amended, this part of the Bill will lead to the downgrading of public housing to such an extent that it will cease to be a dynamic, progressive and innovative system, due purely to the kind of financial penalties that have been created by legally enforced sales of assets at massive subsidies. That would be bad news for Scotland's homeless people and for those in damp or overcrowded housing, and it would be major blunder by the Government.

Under the new clause, housing sales can take place at prices below the outstanding debt but without added discount—but going back for only five years on new properties or modernisations. Councils should never be forced to sell houses at vastly less than the outstanding debt. The Government are failing adequately to address this core problem.

Photo of John McAllion John McAllion , Dundee East

It is always wise to approach any initiative taken by the Government with considerable circumspection.

I was recently visited by two constituents who looked to benefit from the provision, and were pleased to find that, if they put off buying their house for another couple of years, they would he able to gain substantially. The Government's intention, of course, has been to direct their legislation towards particular groups of tenants, hoping to win them across politically — but to do so at the expense of other tenants who are bound to lose from such measures.

It is important to place the new clause in the context of the existing housing position in Scotland. The position outlined in the glossy document, "New Life for Urban Scotland", is entirely fictitious. In reality, 30,000 families in Scotland are homeless, and that number is continuing to rise. More than 1·25 million Scots live in overcrowded conditions, and millions of pounds need to be spent to eradicate the damp and condensation that make far too many lives a misery.

I am especially concerned about the effect of the new clause on the public sector housing authorities, the district councils and the Scottish Special Housing Association—shortly to be replaced by the new agency Scottish Homes. Those are the very authorities many of whose houses badly need modernisation programmes, but their capital budgets make it impossible for them to carry out modernisation and rehabilitation to meet the needs of the tenants to whom they are responsible. The district councils and the SSHA must therefore be selective about which houses they pick for modernisation — so many in the current financial year, and so many in the next. But for the majority of houses in need, there is no prospect of modernisation or rehabilitation in the short or medium term.

My constituents in the Craigiebank area draw my attention again and again to the state of their windows. As the hon. Member for Tayside, North (Mr. Walker) knows, the housing scheme is one of the most desirable under the control of Dundee district council.

Photo of Mr Bill Walker Mr Bill Walker , North Tayside

Does the hon. Gentleman remember the capital costs of building the Craigiebank houses? If he does not know the answer, I do, and I shall be delighted to give it to him.

Photo of John McAllion John McAllion , Dundee East

I am a much younger man than the hon. Member for Tayside, North, so I do not remember. The houses were built pre-war, when the hon. Gentleman assures me that he was fighting the Japs—although, as he is only 50, I doubt that very much. I am making a serious point. My constituents come to me complaining that their windows need replacing. No one would deny that, but the sad reality is that, owing to the restrictions placed on Dundee district council's capital spend programme, the houses are not included in the five-year programme for that council, and there is no immediate prospect of their being accepted for modernisation.

Photo of Mr Bill Walker Mr Bill Walker , North Tayside

My intervention was meant to be helpful rather than disruptive. The hon. Gentleman does not seem to have understood that. The very desirable Craigiebank houses were built for a few hundred pounds, which is interesting in the light of the impression given by the hon. Member for Angus, East (Mr. Welsh), that all houses will be valued at less than their historic costs.

Photo of John McAllion John McAllion , Dundee East

That point is not really relevant to my concern. I am talking about modernisation programmes, and the district council's responsibility for selecting groups of houses for those programmes. Many of the tenants have been there for a very long time, and therefore qualify for the maximum discounts—up to 60 or 70 per cent. of the market price. As each house can cost the district council up to £20,000 to modernise, the new clause will add a new factor to local authorities' considerations when they decide which houses and flats to include in modernisation programmes: they will now have to take into account how long tenants have been in the houses.

Surely it is better to decide to spend up to £20,000 on a house in the knowledge that the tenant has not been in the house for long, and that when, after six years —under the new clause—he applies to buy the house, it will represent a much smaller loss than the council would incur if he had been there for 25 or 30 years, and qualified for the maximum discount. When tenants of houses such as those in Craigiebank, who have been in their houses for a considerable time and qualify for the maximum discount, apply to buy their houses under the new clause, the council—which spent £20,000 only six years earlier—will experience a much more serious loss than if it had modernised a house whose tenants have been there for only a short period.

The new clause contains an in-built bias against two groups of tenants: those who have been in their houses for a long time, and those who are in a position—and the council knows it — to buy their council houses The council will have other considerations. It must consider the important group of tenants who live in damp houses, houses with condensation, overcrowded houses —properties that are unsuitable for one reason or another. Tenants on low incomes or social security benefit will never be in a position to buy their houses.

Surely the council will say to itself, "Is it not better to spend what money we have for modernisation programmes on those who we know will be our tenants for the next 20 or 25 years, so that the money is spent for the benefit of our tenants, rather than for those who will buy their houses from us in five or six years?" To spend the money on houses that will be transferred from council stock will represent a loss not only to the council but to all the tenants who live in unsuitable housing, and who will never be able to buy their houses and take advantage of new clause 5.

The Minister has given an incentive to district councils to choose for their modernisation programmes only the houses that they know will remain in the housing stock for a long time, and on which it will therefore be in their financial interests to spend money. Why should they spend £20,000 on a house that they know they will lose in six years' time? District councils are not fools, and they will act accordingly.

The Minister assured me that there would be a readjustment of housing support grant for authorities that are still in housing support grant, or just out of it. Dundee district council lost all housing support grant in 1983. It has been many years since it received any such grant, and there will be no readjustment or compensation for it. Every time that it spends money, it will take into consideration how long the house is likely to remain in its ownership. The new clause contains a bias against tenants in a position to buy their houses, as opposed to those who have been in their houses for a long time.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

On one matter I do not share the views expressed by some of my colleagues. I happen to think that extremely good advice from civil servants in the Scottish Office has been available to Scottish Ministers for a long time. I can speak only for myself, but whenever I have had occasion to approach civil servants I have always received courteous and helpful responses. I do not go along with what too many politicians are doing—casting a slur on the Civil Service. That, I feel, is quite unacceptable. To be able to criticise civil servants, it is necessary to be very specific with dates and facts.

In the light of that, I think that the Minister has probably received good advice on two matters, on which I should like to ask questions. Some of my hon. Friends, including Front Benchers, raised the issue of slow turnover. Necessarily, evidence is anecdotal, and I do not believe that any of us, without statistics, can form a very good idea of how bad the position has become. In parts of my constituency, however, it seems to have reached very sad proportions. In areas such as Queensferry, where there is a high demand for housing, it is extremely difficult for those who were born and bred there to obtain it. That is also true in other parts of the Linlithgow constituency. My first question is: has any statistical work been done recently in the Scottish Office to try to give an overall impression of whether turnover is markedly slower than it was before?

My second question is about modernisation. I think that my constituent, Robert Lee, of the Convention of Scottish Local Authorities and chairman of the West Lothian housing committee, is well known to Ministers. He prompts questions about the rate of modernisation that is possible even for authorities about which the Scottish Office cannot, in all conscience, complain. The anecdotal evidence is that, because of the financial inability to carry out modernisation that is desperately necessary, great injury is being done to the housing stock.

From the Front Bench, my hon. Friend the Member for East Lothian (Mr. Home Robertson) talked about windows. We all see windows rotting away in our constituencies. The excuse of "no money" is used far more often than it ever was before. Of course, there were always problems, but my anecdotal view is that the problems are becoming greater. What statistical evidence on modernisation problems and the stitch in time saving nine is available to the Minister?

6 pm

Photo of Mr Archy Kirkwood Mr Archy Kirkwood , Roxburgh and Berwickshire

I rise belatedly just to ask one or two questions which are more technical than anything else. I preface my remarks by saying that the list of amendments that the Government have tabled on Report, after the long and arduous Committee stage, will make it difficult for the House properly to digest what the Government are bringing forward.

Of course I understand that some of the amendments are concessions and, in so far as they are concessions, they are welcome. Some are for the purposes of clarification, but this highlights the claims that were made by hon. Members on both sides of the Committee that the consultation procedure that preceded this piece of legislation was inadequate in time and depth. We are seeing the fruits of that. It makes it difficult for hon. Members on both sides of the House to follow the implications of some parts of the Bill.

I am referring particularly to new clause 7 and the two related amendments. It is the first time that I have seen the Government amend the long title of a Bill on Report. Surely some standards must be sacred. If the Government are tackling new areas of legislation that are not envisaged in the original Long Title of the Bill, surely it is incumbent upon them to think again and bring forward a new measure. There will be further housing measures. The procedure of consultation on this aspect of the Bill, which was intimated to the Committee only in the latter stages, suggests that the local authorities, which will be left to pick up the pieces of this sort of change, have not been properly consulted.

Against that background, the first question that I want to ask the Minister is what consultations he has had recently with local authorities about the problems that moving to the new historic cost floor system of limiting discounts will have for them It is incumbent upon the House to consider carefully the Minister's answer to that question when forming its judgment on the new clause.

I assume that there is a typographical error in subsection (6B), because the word "different" is used twice in the phrase: may make different different provision in relation to different cases". Even I do not think that the parliamentary draftsmen would seek to pass that off as anything other than a typographical error. Perhaps the Minister will clarify that.

An earlier part of the clause uses the phrase: Except where the Secretary of State so determines". I have not had time to check this in its entirety, but I do not think that the equivalent provision in the Housing (Scotland) Act 1987, dealing with restriction of discounts, puts that phrase into operation. If that is the case, I shall be happy to be so reassured. However, if that is a new phrase that has crept into the legislation, what does it mean, and in what circumstances will it be used? What exceptions will the Secretary of State consider before he determines the content in the rest of the clause?

When looking at the new clause 7 provisions side by side with the provisions that they replace, the definition of the word "costs" is important, and we have heard little about that. I am not satisfied that there is legal clarity in terms of what is meant by "costs". Tenants were able to find out quite easily what the discount was, and the formula and calculation could be made and checked by tenants who were prospective purchasers. Using words such as "costs" in the body of the new clause will lead to many difficulties, not just for tenants who are prospective purchasers, but for the local authorities. What does "costs" mean, and where is the definition of it? How will that be decided by individual prospective purchasers when they try to take advantage of the new clause?

I keep making this point, and I risk being boring on the subject. In the new clause it seems that we are again using the negative procedure. When the Secretary of State brings forward statutory instruments that are subject to annulment, it is sensible on every possible occasion to have them subject to the affirmative procedure, not the negative procedure. The Minister may simply be slavishly following the provisions in the 1987 Act and he may be hiding behind that measure as a precedent. I have heard all that before, but I make the point again. If we are considering the provisions afresh, and if we are starting to introduce words such as "costs" that have no legal definition, the orders should be subject to statutory scrutiny under the affirmative procedure.

I ask for clarification of the phrase—I referred to it earlier when I mentioned the typographical error —which states, inter alia: may make different provision in relation to different cases or circumstances or different areas. From memory, I think that the 1987 Act provisions talk about varying cases and varying circumstances in different areas. However, what exactly does that mean? Have there been any cases under the 1987 Act where different provisions have been made in different areas? What is that phrase intended to embrace in terms of the position on the ground?

Those are important questions. I would risk being boring and incurring the wrath of the House if I went on in a legal vein such as this. However, I simply make the point that I have given four examples of vagueness and difficulties that can be created and can creep into pieces of legislation that are as ill-digested as this clause.

The Government are wrong to seek to impose this sort of legislation on local authorities, and it makes it difficult for them to work out exactly what provisions they are to make for new and modernised housing stock. If the Minister wants to be even-handed to prospective purchasers, he should make sure that local authorities are indemnified financially for the costs that they will lose over a long period by having to pay the loan charges, and so on.

I am opposed to the clause, and if Opposition Front Bench Members seek to press it to a Division, I shall have great pleasure in supporting them.

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

I want to deal with some of the detailed points that have been raised. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is a highly qualified lawyer and he raised many technical problems. He worked hard in Committee on behalf of Age Concern and other bodies.

The hon. Gentleman raised the question about the clarification of the phrase relating to different provisions in different areas. That allows for the different time periods to be set for the cost floor in different parts of the country. The hon. Gentleman asked whether the repetition of the word "different" was a printing error. It is, but that will be cleared up later. The hon. Gentleman referred to the Bill's long title. It is not unusual for a Bill's long title to be amended. I cannot readily give a precedent, but I am sure that there are many precedents I could cite if I had time to look them up.

The White Paper clearly stated that the outstanding debt was to be abolished. We considered a considerable number of representations very thoroughly. As I said earlier, we changed our policy as a result of those representations and that represents a compromise between the interests of local authorities and those of tenants.

Historic costs are total costs and therefore easy to calculate. The hon. Member for Roxburgh and Berwickshire also referred to the negative statutory instrument procedure. That is a regular procedure and is used quite often.

The hon. Member for Linlithgow (Mr. Dalyell) raised a number of points on behalf of his constituents. He was correct to state that the Scottish Office has carried out research which has revealed that in the vast majority of cases where tenants purchase their homes, they stay in the same houses that they purchased. There is no evidence of a marked change in the turnover. Obviously, research has taken place over many years.

The hon. Member for Linlithgow also referred to the rate of possible modernisation. West Lothian's allocation is £8 million on the housing revenue account. That is 6 per cent. higher than last year's allocation. The council must determine its own priorities within the framework of the available resources.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

Does the Scottish Office research reveal that there has been no marked increase in the rate of turnover? If so, that is a very odd conclusion.

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

I will have to check upon that. The information that I gave a moment ago was correct: there has been no marked increase. However, I will check that. I said that there has been no evidence of marked change in the turnover. I will check that, and if there is any additional evidence I will reassure the hon. Gentleman.

Photo of John Home Robertson John Home Robertson , East Lothian

Is the Minister seriously suggesting that, if there has been a reduction in the Scottish local authorities' housing stock of more than 100,000 since the scheme was initiated, there has been no change in the rate of turnover of re-lets in housing? The Minister must accept that in due course there will be a significant change.

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

I said that in the vast majority of cases, once the tenants became owners, they stayed in the same houses.

The hon. Member for East Lothian (Mr. Home Robertson) referred to public expenditure in Scotland. Taking account of the increased allocations to local authorities announced yesterday, total capital provision for housing through public sector agencies in 1988–89 now amounts to £825 million. That is £44 million, or 5·6 per cent., up on the equivalent figure for 1987–88. I stress to Opposition Members including the hon. Member for Dundee, East (Mr. McAllion) that the amount to be spent on housing next year will increase. I am glad to say that yesterday Dundee, like the other authorities, received a substantial additional allocation. Dundee received an extra allocation of £3,550,000.

Photo of John Home Robertson John Home Robertson , East Lothian

Will the Minister acknowledge that the money which he refers to as allocations is not grant from the Government to local authorities, but authority for local authorities to spend their own money?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

The bulk of the money came from extra receipts. Estimates are made by the Scottish Office in co-operation with local authorities, and we take a cautious view of the receipts. The authorities can keep the additional receipts.

Photo of Mr Bill Walker Mr Bill Walker , North Tayside

Will my hon. Friend confirm that not all the receipts received from the sale of council houses go to the authority which sold the houses? The Scottish Office determines the priorities and gives the money to the area where it judges the priority is greatest. For example, Perth and Kinross district, which has a fine record of selling houses, has not had all the money which it has made from the sales.

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

Yes, I can confirm that allocations are made strictly on the basis of need throughout Scotland, in terms of the authorities with the most pressing housing problems.

With regard to resources, this year the Housing Corporation will receive about £158 million. That is a record figure, and well up on last year's allocation.

Photo of John McAllion John McAllion , Dundee East

The Minister said that more than an extra £3 million will be allocated to Dundee district council this year. Will he confirm that all that money comes from the receipts from the sale of council houses? Will he also confirm that it comes from the sale of council houses in Dundee?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West 6:15 pm, 29th March 1988

I would not be able to confirm the latter part of the hon. Gentleman's question without looking carefully at the figures. However, I can confirm that the money comes from receipts.

The hon. Member for East Lothian referred to the auditors. There will be no problem with the auditors, because the requirement to sell is a legal requirement. He also asked why the position is different in England. There always was a difference in this area, even before we introduced new clause 7. The cost floor in England refers back to 1974, and in Scotland the outstanding debt floor relates back to 1978. The difference has always existed. The system of housing finance is not the same in Scotland as the system prevailing in England.

Photo of Mr Archy Kirkwood Mr Archy Kirkwood , Roxburgh and Berwickshire

I want to revert to a reply which the Minister gave me earlier. I think that he said that the phrase different provision in relation to different cases or circumstances or different areas could mean that the time limit could be changed in different areas at the discretion of the Secretary of State. Is that correct?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

If the hon. Gentleman studies what I said in Hansard tomorrow he will see exactly what I said. I will check what I said. I am reasonably certain that it was absolutely accurate.

The hon. Member for East Lothian referred to the £35,000 house which was sold for £15,000 five years later, with a loss of £20,000. The chances are that the value of the house will have increased at the rate of 10 per cent. each year. It is reasonable to assume that that rate of increase would take the value of the house after five years to more than £55,000. The discounted price would be £22,000, not the £15,000 which was suggested. Therefore, the loss would be restricted.

Photo of John Home Robertson John Home Robertson , East Lothian

Is the Minister suggesting that it is Government policy that the value should increase by 10 per cent. a year?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

That is obviously a matter for the market and depends entirely on market circumstances. I cannot determine house prices. However, as a matter of practical realities, house prices tend to rise considerably, and it is fair to take that into account.

The constituency of the hon. Member for Angus, East (Mr. Welsh) offers a different example of housing problems. I understand that Angus district council is having to sell houses in Montrose at less than the construction price. However, that has little connection with the rules applying now or in future in the new clause to the right-to-buy sales. The situation is a direct consequence of house prices in the area generally.

At the beginning of the month, Angus district council wrote to the Scottish Office seeking guidance on whether my right hon. and learned Friend the Secretary of State might be prepared to make an order under section 62(7) of the Housing (Scotland) Act 1987. The council suggested that that should require the selling price of houses on the Caledonian Station development in Montrose to be sold at not less than the debt outstanding on those houses, even though the market price of the houses had fallen below the debt level.

At my request, the Department replied in a letter informing the council that my right hon. and learned Friend is unlikely to be willing to make such an order because we do not believe that it would be equitable to expect any tenant exercising the right to buy to pay more than the current market value of the property in question. I should emphasise that under the current rules, and those which will apply if the new clause is agreed, the tenant will have to pay the full market value without discount.

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

I believe that I have covered that point, and I want to get on.

Photo of Andrew Welsh Andrew Welsh , Angus East

I want to refer to the general problem of councils paying out less than the outstanding debt and bearing that burden. If that happens, as I fear it will in general, the Minister said that the Government would recompense through the housing support grant system. As the Minister is aware, the minority of councils receive housing support grant now. If the Government's policy continues, no council will receive that grant. Will he give an undertaking that if this becomes a problem for councils, the Government will restore housing support grant to meet that problem?

Photo of Lord James Douglas-Hamilton Lord James Douglas-Hamilton , Edinburgh West

I am not going that far. I am making it clear that in the context of this case it would not be fair or proper not to set a figure at the market value, which is what has been arranged. We have arrived at a compromise between the interests of local authorities and tenants. I commend the new clause to the House.

Question put and agreed to.

Clause read a Second time, and added to the Bill.