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Clause 7—(Maxima For Rental Compensation)

Volume 446: debated on Wednesday 28 January 1948

The text on this page has been created from Hansard archive content, it may contain typographical errors.

4.12 p.m.

I beg to move, in page 6, line 13, to leave out from "tenancy)," to first "the," in line 18, and to insert:

"in the case of which they following conditions are fulfilled, that is to say—
  • (a) that immediately before the time when possession was taken of the property or part thereof in question the property or part was being used for residential purposes or if it was not then being used that it had been used for residential purposes when last used before that time, and
  • (b) that if an unfurnished tenancy of the property had been granted immediately before the said time."
  • The second and third Amendments on the Order Paper—in page 6, line 16, leave out from "that" to first "the" in line 18; and in line 19, leave out "would have been," and insert s" was "—are not being called. Therefore, we will discuss the first, fourth and sixth Amendments.

    These and two Amendments that come a little later on the Order Paper do hang together. The Amendment is designed to amend certain flaws which, on further consideration of this Bill, have revealed themselves in the definition of rent restricted property in Clause 7. The intention of the Government, as I indicated last night when we were dealing with another Amendment, so far as rent restricted property is concerned, is that the owner should not be in a position to receive a greater rental compensation from the Government than he would have received from an ordinary tenant if the property had not been requisitioned. It does follow from that, I think, that if he could legally have obtained a higher rent if the premises had not been requisitioned, he should be allowed to have the correspondingly higher compensation, subject of course to the ceiling laid down.

    The question always is what property does the Rent Restriction Acts operate on when it comes to a letting? It depends on a variety of factors. The first is whether the property is residential or not. If it is not, it does not come within the four corners of the Rent Restriction Acts. It also depends in what part of the country the property is situated, because on its rateable value and its situation, either in the provinces, the Metropolitan area or Scotland, depends whether it comes within the Rent Restriction Acts or not. Its past history has to be taken into account. If the house was never previously let, obviously it is outside the Rent Restriction Acts. Looking at the definition given in the Bill, we found that, as it stands, it leaves uncertain the question as to what are or are not to be recognised as rent restricted properties. In our view, the definition is too vague. For example, it is silent as to whether the notional tenancy which is there referred to was a letting for residential purposes. It is also silent as to whether the notional letting should be considered as an unfurnished or a furnished letting.

    We, therefore, propose to leave out certain words and to insert those on the Order Paper in order to resolve the difficulties and make plain the intention of this particular definition and the kind of property we wish to catch. When the changes are embodied in the new definition it will avoid the difficulties to which I have referred, and a property will be treated under the new definition as rent restricted only if its use or its last use before requisitioning was residential. That would be a question of fact easily determinable, and then it will be treated as rent restricted, even though it could have been let furnished. We are going to assume that its notional letting was unfurnished. I wish to make it clear, as I tried to do when we were discussing an earlier Amendment last night, that this change of phrasing, this tightening up of the wording of the definition, does not make any alteration to the law as it stands so far as what does or does not come within the Rent Restriction Acts. Houses which have yet to be let for the first time will not be caught by this new definition, and where the rateable value of a house takes it, according to its location, outside the Rent Restriction Acts it will continue to be outside. As the intention here is to clarify rather than alter, I hope the Committee will agree with us in this Amendment and accept it.

    We on this side of the Committee do not object to the intention of the Government by this Amendment to achieve the desirable purpose of clarification. The words proposed are clearer than those in the printed text of the Bill. Indeed, they could not very well be more obscure than those first put before us. However, some objection still remains to the draft which the right hon. Gentleman has put before the Committee. In the first place, the alteration of the definition leaves in the words:

    "… property (whether or not the subject of a tenancy) …."
    His alteration starts after the word "tenancy." Many of us feel that one characteristic of a really rent restricted property is that a tenancy must be subsisting. We should have preferred to see these words omitted. There is a wider question about the whole treatment of rent restricted property which I hope that the right hon. Gentleman and his advisers will consider between now and Report stage. I do not propose to ask the Committee to divide upon this Amendment.

    The argument which I submit is that the principle from which comes the whole treatment of rent restricted property for the purpose of this Bill is wrong. Earlier in our deliberations the right hon. Gentleman and the hon. and learned Member for North Hammersmith (Mr. Pritt), have said that the principle of compensation for compulsory acquisition of rent restricted property should be that the owner should get no more than he would get from a private tenant. At first sight, that has a spurious resemblance to the principle of fair market value—the price that would be agreed upon by a willing seller and a willing buyer. But in reality it is not as fair as it looks, because in the case of rent restricted property the true market value has been distorted by the operation of an Act of Parliament.

    In my constituency in the parish in which I live, council houses of timber have recently been erected for which the rent is 16s. 6d. a week. In the same village we find stone-built Cotswold cottages for which the rent is from 3s. to 4s. a week. That gives rise to great disparity of expenditure between two persons exactly similarly situated as far as occupation and emoluments are concerned. That shows that the rent restricted value of a property is not its true value. If it were, then the county council should not have to charge 16s. 6d. for a property when, for its equivalent, a private owner is only allowed by Act of Parliament to charge 3s. or 4s. a week. What the owner can get under the Rent Restriction Acts is not a fair measure of the market value. It is a measure which has been distorted by the action of this House.

    When we reach that state of affairs, we must ask ourselves the question: how far should that distortion be carried? The purpose of the Rent Restriction Acts is to protect the tenant. The general argument I adopt is that, once that main purpose is frustrated, there is no longer any ground for the operation of those Acts. In this case, we are considering the compulsory acquisition of property, its requisition by force by the Government. It is clear that the protection of the tenant is no longer a consideration. Before one can imagine this Clause with its new definition coming into effect, one must envisage the tenant not only not protected but forcibly ejected by a Government Department.

    We ought to give more consideration to the whole problem. I am not now debating the merits or demerits of the Rent Restriction Acts. They are a code for which many parties have been responsible. Their purpose was the protection of tenants. Once the protection of tenants is removed from practical application, if property is requisitioned or acquired compulsorily, the owner should receive its true value and not a value distorted by reference to a purpose which is now no longer possible.

    As far as I understand it, if these words:
    "… whether or not the subject of a tenancy …."
    are left in, there is no longer any criterion left of what is a proper subject for rent restriction and what is not, except merely the rateable value dependent upon whether the property is in the Metropolis, the provinces, or in Scotland. The result is that for the big houses above those limits, as the right hon. Gentleman said last night, the sky is the limit for compensation—

    I understood the right hon. Gentleman to say that if a house had never before been subject to a tenancy and it was requisitioned, then its rental compensation would be determined at that time and would be independent of any Rent Restriction Acts.

    What the right hon. Gentleman said is so. I should not have used the phrase, "the sky is the limit." It is open to misunderstanding. What I meant—and what I am sure that he and the Committee understood me to mean—was that where a house is now first let it begins outside the Rent Restriction Acts, and, therefore, its first letting can be for any sum which the owner is fortunate to get a tenant to give for a tenancy when he rents the house. In that sense there is no limit.

    I thank the right hon. Gentleman for his explanation. I was under no misapprehension about his meaning. The position still remains that if a house is outside the Rent Restriction Acts, by the only criterion which now remains—namely its rateable value—it can receive as a rental compensation any sum that is judged adequate. On the other hand, by the mere criterion of being a small house and, therefore, below the rateable value maximum to bring it within the Rent Restriction Acts, the compensation is artificially distorted downwards.

    There is a very much lower ceiling, indeed, there is a basement, in the case of the small dwelling.

    The consideration I urge upon the Committee is that we should beware of placing deterrents in the way of the construction of small houses. It is a fact that the people are suffering from a lack of housing at present. I do not want to go into that question. Many things have been done to make it a very unremunerative and difficult business for the small house to be produced. I do not want to widen the argument further than is necessary. In this matter of compensation, if one builds a big enough house with a rateable value above a certain amount—and that is the only criterion—then, if it is requisitioned, one can get a high compensation; but if one builds a small house, so that its rateable value brings it within the definition, there will be no sort of upward movement. Consequently, that is a deterrent.

    4.30 p.m.

    I think it is well worthy of consideration, and I would like the point seriously considered by the Government whether, in this matter of compensation for requisition, we should not take the broad line of giving the property owner—the small man with one cottage in which he lives himself, or the man or widow who has been left two cottages, which is very common in the countryside—the value of the property free from the artificial distortion of the Rent Restriction Acts, which no longer apply because the purpose for which the Acts were introduced—the protection of the tenant—has been destroyed by the act of requisitioning. In other words, I do not think that the principle of compensation should be to secure that an owner gets no more than he would get in the open market if, in fact, the open market is distorted by Acts of Parliament for another purpose.

    I believe that, where we defeat the purpose of the Rent Restriction Acts by requisitioning property and ousting the tenant, we should give the market value free from this restriction. Perhaps I have introduced this principle at a late stage of these discussions, but not too late for it to be considered. I believe that the consequences that would flow from the adoption of my suggestion might be that we should get, if not a great stimulus to, at least the removal of one deterrent from, the provision by private agencies of small houses for the people, and I ask the right hon. Gentleman seriously to ponder whether his Amendment contains a proper principle, or whether it should not be what we have tried to secure throughout the discussion on this Bill—the payment of fair compensation for property seized.

    May I put two points to the Financial Secretary? Is he not making a mistake in this Amendment by inserting these words after "tenancy"? Surely, they ought to operate after the word" property"? The question of vacant houses that are requisitioned, with which we were dealing last night, is really dealt with as part of the suggested Amendment, which reads:

    "or if it was not then being used that it had been used for residential purposes."
    That seems to me to cover adequately the whole of the argument on the vacant house. Nobody wants an owner to gain because, at the time when requisitioning happened, his house was vacant, and, therefore, I should have thought that it was no longer necessary to have those misleading words "whether or not subject to a tenancy." I hope the Financial Secretary will give careful attention to this point, which is properly a drafting point.

    Concerning the second point of the Amendment, I should like to support what has been said by my right hon. Friend. I am quite certain that in this Amendment we are making a mistake in our treatment of the owner-occupier who has had his property requisitioned. Let me take the position of the owner of a house which is a rent restricted property. When the Government Department took over this property, he was merely losing that rent which he used to obtain from a tenant, but the owner-occupier is being put to much greater loss. He is, in fact, losing the roof over his own head, and he has to go out into the open market in order to obtain another roof. He has had to do that during all this war period, and is, in fact, having to pay a great deal more than 160 per cent. of the 1939 rental of his house. I ask that this Amendment should make it clear that that owner-occupier should get the 160 per cent. over the 1939 value, but, as the right hon. Gentleman has drawn his Amendment, he would be limited to the permitted rent.

    The right hon. Gentleman says that the owner-occupier is in a different position, because, not having a standard rent for his house, he can judge what that standard rent should be by what was the rent prevailing at the time of requisition. If that is true, if the house was requisitioned in 1940, at the beginning of the war, he is tied to a rental value that is indeed less than the 1939 value. If we take a householder who was in a coastal resort in 1940, when the Army moved in and he moved out, his compensation rental, under this suggestion by the right hon. Gentleman, will, in fact, be on a lower level than that of 1939.

    It is perfectly true that, if it was not requisitioned then, but was requisitioned after V.E.-Day, his limit for his permitted rent is a great deal higher, and is probably on the level of the 160 per cent. above the 1939 level. I am much more concerned with those owner-occupiers who have been moved out of their houses all through the war and who, on this basis, will get only a permitted rent on the 1939 level, and who will see the wealthier people, who are the owners of non-rent restricted property, being given the 160 per cent. over the 1939 value.

    That is an anomaly which nobody on any side of the Committee would wish to see perpetuated by this Act of Parliament. I ask the right hon. Gentleman to look again at his Amendment and to cut out those words "whether or not subject to a tenancy," which are not really necessary, and also to deal with this problem of the owner-occupier, with which his Amendment does not deal. I think that last night there was not sufficient recognition by the right hon. Gentleman of that difficulty of the permitted rent of an owner-occupier in 1940 being entirely different from the permitted rent in 1945. The hon. and learned Member for North Hammersmith (Mr. Pritt) put it quite clearly, and I was very sorry that the learned Solicitor-General had another engagement and could not be with us at that time to guide us on that question of the permitted rent under the Rent Restriction Acts. Because of that anomaly, I think the Committee should deal with it now, or, if that is not possible, that the House should deal with it on the Report stage.

    I regret that I was not able to hear the early part of this discussion, and I do not want to cover the ground which has been covered by my right hon. Friend the Member for Cirencester (Mr. Morrison). But I want to add my plea for more consideration to be given to this matter, and to put forward an argument which I do not think has been covered already.

    The whole object of this Clause as drafted, is to fix a ceiling for rent-restricted property for the purpose of rental compensation. I think the right hon. Gentleman will agree with that. It is, of course, quite easy, where the property is not subject to the Rent Restriction Acts. The difficulty arises where we have a property of such a rateable value that it is within the scope of the Rent Restriction Acts, but not coming under that Act because it had never been let. That is where the real problem arises, and I think I am right in stating that. Supposing a requisitioned property is vacant and has never been the subject of a tenancy, then the question arises of what should be the rental compensation for that requisition.

    The right hon. Gentleman said that there would be no limit for the first letting, but, of course, the case I am putting is a case where there has been no letting before the requisition. How then, are we going to calculate, under the wording of this Clause, the ceiling rent for such a property? The permissible rent for such a property would be the rent at which it was first let. The property I have in mind for the purpose of my argument has not been let. It is requisitioned before being let. There may a great deal of argument between the requisitioning authority and the owner of the property as to what the compensation should be, and they will have to look at this Clause to see that it must not exceed the permissible rent under the Rent Restriction Acts. As this particular property has never been let, how will the permissible rent be calculated? The ceiling which purports to exist is impracticable, and I do not think the permissible rent can be worked out at all. I would ask the right hon. Gentleman to give careful consideration to this point, because the Subsection is badly drafted and will, I think, lead to a great deal of trouble and expense.

    We are always willing to look at the phrasing of a Bill to see whether it can be improved, particularly a Bill like this, which is of an extremely complicated and technical character. I do not pretend that in every case we have the best possible words, although I think it will be agreed that we have some competent draftsmen and officials at the Treasury, who know this matter from A to Z. We must, how- ever, retain the words in the brackets. If a tenancy is subsisting, most of the queries are often answered in advance. It will be known what is the standard rent and the rateable value, whether the property has been let as a residence, furnished or, unfurnished, and so on. But many of the queries which would arise would not answer themselves if the house were empty or unlet. The words must be inserted because the definition applies to both, although I agree that if the house was let to a tenant, many of the questions could often be answered at the time the place was requisitioned. Many of these requisitionings take place when the property is empty, when it is impossible to know what the owner was about to do with the property or would have done had he had the opportunity.

    We are setting up certain notional facts which may or may not concur with what the owner intended at the time the house was requisitioned. Criticisms have been directed by the Opposition against the anomalies and—I hesitate to use the word, but it will have to do—against the injustices which are inherent when there is rent restriction legislation on the statute book. Because a house comes above the rateable value the owner can extort or ask any rent he likes; if it comes just below he is bound by the law, and all he can ask, without putting himself info the county court at any rate, is the standard rent applicable to the house. The small house to which the hon. and learned Member for Daventry (Mr. ManningharnBuller) referred would be let at such a rent as it would command. It would be outside the scope of the Rent Restriction Acts, because no standard rent, as I understand it, had been fixed for the new small house which he visualises somebody might build. I am grateful to the Opposition for the way in which they have accepted this Amendment. We will look at these words again, and see if it is necessary to make any changes. If it is, we shall be happy to do so.

    4.45 p.m.

    We accept the right hon. Gentleman's assurance that he will give further consideration to this matter, but I hope he will not be under any misapprehension that my points about the provision of small houses were adequately covered by his reply. Under the Bill, if the small house is requisi- tioned, whether or not the tenancy is subsisting, it will be deemed to come under the Rent Restriction Acts.

    Only if it has at some time been let. If it has never been let it does not come in. Unless a standard rent has been fixed, we do not bring it within the definition.

    I hope the right hon. Gentleman will look at this matter again, and give effect—which I do not think the words of the Clause do—to what he has just said.

    Amendment agreed to.

    Further Amendment made: In page 6, line 26, leave out "a tenancy granted as aforesaid," and insert:

    "the tenancy referred to in paragraph (b) of the last foregoing definition."—[Mr. Glenvil Hall.]

    I beg to move, in page 6, line 28, after "usual," to insert "tenant's."

    I need only say, on this Amendment, that it seeks to bring the Clause into line with Section 2 (1, a) of the 1939 Act, in which this phrasing is used. In Scotland the rates are divided, I understand, into two sections—for tenant and landlord—and we think it better to make this change here so as to avoid the need for an Amendment when we come to the Scottish Clause later in the Bill.

    Amendment agreed to.

    Further Amendment made: In page 6, line 34, at end, add:

    "'unfurnished tenancy' means a tenancy under which a property is let for residential purposes, not being a tenancy where the application of the said Acts of 1920 to 1939 is excluded by reason of the property, being let at a rent including payments in respect of board, attendance or use of furniture."—[Mr. Glenvil Hall.]

    Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

    Before we part with this Clause. I would like the Financial Secretary to tell the Committee in what form, or to whom, the rental compensation is to be paid? Under the Compensation (Defence) Act, 1939, it is possible for land to be requisitioned either from the tenant or from the owner, or from both. The rental compensation can be paid to one or the other. In the Bill the position does not appear to be very clear. I am wondering whether it is proposed that the 160 per cent. compensation is to be paid to the owner or to the tenant, who may have to leave the requisitioned land for some time and then return to it. If the 160 per cent. is paid, can the Financial Secretary tell me whether the extra 60 per cent. is a compensation payment made to the owner or to the outgoing tenant?

    The answer will be found in Section 2 (2) of the Act of 1939. Briefly, the answer is that the compensation goes to the occupier.

    Attention should at once be called to the fact that we have on the other side of the House an expert in these matters, who, despite his great knowledge, has not the haziest idea to whom this money is to be paid. That matter is worth commenting on. We have before us a longish Clause, and I do suggest that at some stage words should be put into it to determine who is to draw this money. It should not be left as a matter to be decided by referring back to an Act of 1939. The Financial Secretary has just told us that the money will go to the occupier. I assumed that that was the case, but I did not like to raise that point myself. I thought it would be absolutely obvious. When a real expert in these matters has the great courtesy to help us and to explain the difficulties, I feel sure that we all owe him our gratitude. He has tried to clear the matter up where there is an obvious blemish in the Measure. Instead of putting the matter right in the Clause, we shall leave it, apparently, in such a state that it will always be necessary to say, "I refer you to the statement made on the matter by the Financial Secretary in 1948." It is very unfortunate that we should be legislating in such a manner.

    Question put; and agreed to.

    Clause, as amended, ordered to stand part of the Bill.