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Limitation Of Rent Increases Under Rent Agreement Where No Rent Is Registered For Dwelling-House Under Regulated Tenancy

Volume 885: debated on Wednesday 5 February 1975

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' .—(1) Where no rent is registered for a dwelling-house under a regulated tenancy (whether granted before or after the commencement of this Act), the rent payable in any contractual period beginning after such commencement may not be increased, by virtue of any rent agreement (whether made before or after such commencement), above the appropriate maximum amount specified in this section.

(2) In the case of any rent agreement which took effect before the commencement of this Act, the maximum amount to which the rent may be increased in terms of subsection (1) above is, for a rental period which begins—

  • (a) during the year beginning with the commencement of this Act, or
  • (b) during a subsequent year beginning with an anniversary of such commencement,
  • the amount which, for the last rental period beginning before the relevant year referred to in head ( a) or ( b) above, was payable by way of rent, having regard to the provisions of any enactment, plus £1·50 per week.

    (3) In the case of any rent agreement which takes effect on or after the commencement of this Act, the maximum amount to which the rent may be increased in terms of subsection (1) above is, for a rental period which begins—

  • (a) during the first year of the period beginning with the date when the rent agreement takes effect, or
  • (b) during a subsequent year beginning with an anniversary of that date,
  • the amount which, for the last rental period beginning before the relevant year referred to in head ( a) or ( b) above, was payable by way of rent, having regard to the provisions of any enactment, plus £1·50 per week.

    (4) There shall be disregarded for the purposes of this section such part of any increase of rent (in a case where any rates in respect of the dwelling-house are borne by the landlord) as corresponds to any increase in the rates so borne, ascertained in accordance with Schedule 4 to the 1971 Act.

    (5) Any rent agreement made before or after the commencement of this Act which purports to increase the rent payable thereunder at any time above that permitted at that time under this section shall have effect to increase the rent to the extent so permitted but no further.

    (6) Paragraph 6A of Schedule 2 to this Act shall apply for the purposes of this section as it applies for the purposes of that Schedule.

    (7) The Secretary of State may by order substitute, for the sum of £1·50 mentioned in subsections (2) and (3) above, a sum other than that sum.

    (8) An order under subsection (7) above shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament, and may be varied or revoked by a subsequent order made under that subsection.

    (9) In this section, "rent agreement" means a rent agreement with a tenant having security of tenure within the meaning of section 42(1) of the 1972 Act, and, unless the context otherwise requires, any expression used in this section which is also used in Part III or IV of the 1971 Act shall have the same meaning as in those Parts.'.—[ Mr. Hugh D. Brown.]

    Brought up, and read the First time.

    4.51 p.m.

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

    It will be convenient, I think, to discuss at the same time Government Amendments Nos. 14, 15, 16, 17, 25 and 27.

    Now that we have ensured that the aristocracy can sleep easy tonight, perhaps we can get on with this important business.

    The new clause is lengthy, but it sets out a simple proposition. It and the amendments grouped with it are connected by the principle that rents in the private sector should not be permitted to rise by more than £1·50 per week in any year. The new clause applies this limit to rent agreements and the new sub-paragraph (4) which Amendment No. 17 would add to paragraph 3 of Schedule 2 applies it to registered rents which are being phased. There is one small difference between the two categories—where a registered rent is being paid, the service element is not to count as part of the increase, in the same way that it is discounted when the amount of each phased increase is calculated. This cannot be applied to rent agreements because no such separate amount is identified in their case.

    The amendments also give the Secretary of State power to vary the amount of the maximum increase. It is clearly possible that inflation over the next few years might make it necessary to alter the present figure of £1·50 to keep it in line with changing money values.

    There are two issues involved in this group of amendments—the need for a maximum limit on rent increases; and the level at which that maximum should be set. We need a maximum limit because, as a result of the automatic decontrol programme begun by the 1972 Act, several thousand controlled tenancies have had fair rents registered. It is inevitable that fair rents will in some cases be very much higher than rents which may not have changed very much since as long ago as 1914. It is only a fairly small percentage of rents—about 10 per cent. of registrations—which are increased by more than 75p per week with phasing applied but it is a problem which we cannot ignore.

    Housing is a basic living cost and counter-inflationary measures must bite particularly hard on such unavoidable expenditure. The whole purpose of the phasing provisions of this Bill is to make sure that necessary rent increases take place as gradually as possible so that inflation is restrained as far as it can be. In most cases division of rent increases into three phased stages reduces them to a size which is compatible with this principle but we must have a second line of defence against inflation for the small percentage of cases which do face very substantial increases. The maximum increase proposed in these amendments is the most effective way of doing this.

    5.0 p.m.

    Rents will still be able to be reregistered after three years even if the previous registered rent had not been reached because of the maximum increase and a new round of phasing would allow the rent to move gradually to a fair rent without, in all probability, involving the maximum increase. Such cases would be likely only where overall increases of the order of £300 are due to be made.

    Obviously, the level at which the maximum should be fixed is something on which everyone will have their own ideas and there can be no monopoly of right in such a situation. A figure of £1·50 is indeed a high figure, but there are good reasons for its being so. It is designed to confer very real benefits on those tenants who—with or without stautory phasing operating—are faced with very large increases in rent; these increases are undoubtedly a counter-inflation concern. At the same time, it is pitched high enough not to make inroads into the progression of any significant numbers of rents towards fair rent levels; they therefore are consistent with our aim to move away from historic low rents and all their attendant problems.

    As these amendments stand at present we are laying the ground for the gradual rise to a fair rents level for all regulated tenancies at the same time as conferring a very real benefit on those tenants who would otherwise face completely unacceptable rent increases. I hope therefore that the House will support me in proposing this new clause and associated amendments.

    Although the Minister has said that this is a simple point, he will accept that the amendments are rather complex. It is unfortunate that we did not have the opportunity of discussing them in Committee. We could have gone into them more thoroughly with more notice. However, I have a few questions about them.

    First, the Minister mentioned that this is a clause which should bring some benefits to tenants. He mentioned that it covered both agreements and new registrations of rent. Will he indicate how many tenants might be affected by the new clause? I think that the number will probably be small, because obviously only where there is an increase over three years of £225 will this have any effect.

    Second, why has the Minister introduced this provision in this Bill, when I understand that there has been no similar move in the Bill that relates to England and Wales? My understanding is that registrations in England and Wales tend to be higher than they have been in Scotland, although it is difficult to make any general comparison. There has been no indication that English rents have been registered at any lower level. Why was the move made here?

    My third general question is whether the Minister does not feel that this new clause might undermine the principle of the rent assessment committees' work and of fair rents, because the rent assessment committees, when meeting to determine rents, bear in mind what would be a fair return for landlords after a period of three years. It would appear that this would interfere with that.

    As I have said, we have had little time to consider this proposal. Will the Minister give an undertaking—without commitment, of course—that between now and the next stage of the Bill, which will be its consideration by the House of Lords, he will give consideration to anomalies which might arise from the new clause? I say this because although it may sound fair and reasonable to impose a £1·50 per week limit on rent increases, much depends on where one starts from. If one starts from a rent of, say, £5 or £6 a week, that is obviously different from the case of starting from, say, 50p a week. Between now and the next stage of the Bill, will the Government consider whether there might not be a case for saying that the new clause should apply only to cases in which the fair rent or a reasonable percentage thereof has been established, or cases in which the rent paid was, say, £1 a week or £2 a week?

    I think that there is a danger that the clause may produce a number of anomalies in our Scottish scene, where we have some rents at a relatively high level and some at a low level. Is the Minister willing to consider the anomalies which may arise as a result of the clause?

    I quite accept that this is a small group with which we are dealing. I should not like to put precise figures on it, but it is certainly about 100. Therefore, it is not a major problem but is confined to one group, of which we know, and possibly some of the higher rented houses in fairly good areas. So I am not over-stressing the value of it. Nevertheless, we do know that it will be helpful to a small group, and we think that it is an element of justice to put a maximum limit when we have set one in the council sector, albeit it is a different sum.

    It is true, as the hon. Gentleman says, that there is no comparable provision in the Bill that relates to England and Wales. It is to our credit that we have produced something that meets a prob- lem in Scotland. I do not think that it is any less significant because of that.

    I have had personal discussions, informally, with various people involved in operating rent assessment committees. I can give the hon. Gentleman a categorical assurance that it will not upset the fair rents principle. We are not changing that in any way. The hon. Gentleman can take that as a firm assurance.

    The hon. Gentleman specifically asked me about an undertaking. I do not think that any Government or draftsman are ever completely confident that what they are trying to do does not produce anomalies or some effects that were not foreseen. I am reasonably confident that we have got this about right, but it would be totally wrong of me to suggest that we are always perfect. I do not say that. The hon. Gentleman may have a point. I am not saying that he has, because I have not examined his suggestion in any detail. If the hon. Gentleman would care to submit any details to me, I should certainly be willing to study them with interest. But I should not like to commit myself, because I am reasonably confident that we have got it about right. I do not undertake to give the hon. Gentleman any specific assurance that we intend to alter it at the House of Lords stage.

    I urge my hon. Friend the Minister to resist giving any assurance, as has been suggested, that the maximum limit should be greater where the current rent is smaller. It may, indeed, be a valid point that there is a long way for a 50p rent to go before it reaches the fair rent level, but it is in precisely these cases that a tenant is faced with much greater percentage increases in the weekly rent.

    We also have to remember that any tenant paying this kind of rent—by implication, still under rent control—is a tenant who has not changed his tenancy for the last 20 years or so, say, since 1957. The vast majority, therefore, are pensioners. Irrespective of any consideration of income, they are the very people who find it most difficult to adjust quickly to a sudden change in their rent payment, particularly when it reflects percentage increases of 300 per cent., 400 per cent., or 500 per cent. Therefore, I hope that my hon. Friend will not—I am sure that he will not—give any ground here towards setting a higher maximum figure where the rent is lower.

    My hon. Friend the Minister mentioned that the figure was rather high. He indicated that there can be no consensus on the figure because every hon. Member will have his own idea of what the appropriate figure should be. He will, however, I am sure, concede that the figure he has chosen of £78 per annum is precisely double the figure of £39 per annum that is suggested in the Bill for the council or public sector.

    How was it that the Government fixed on a figure so markedly different from that for the public sector? What equity is it that the private tenant should be faced with a maximum figure which is double that applicable to the council tenant, especially when there is a body of evidence before us which shows consistently that private tenants have significantly lower incomes than council tenants, as hon. Members opposite are fond of stressing?

    I was also distressed to hear my hon. Friend say that the Government wanted to get away from the historic rent basis in the private sector. That is a little unfortunate, as we appear elsewhere in the Bill to be placing the council sector firmly on the historic rent basis. It will be difficult for those like myself who represent very few council tenants but a very large number of private tenants to explain to our constituents why the legal maximum figure in their case is double that for the council sector and why the figure for the council sector has been fixed on an historic rents basis whereas in their case it is thought fair and proper that we should as quickly as possible get away from that very basis.

    This is the other side of the argument. I did not say that I would give ground on the point that was raised. If I were to say now that I am flexible, that would be a mistake. As I am never too dogmatic, I said that if somebody suggests to me that we have done something which can stand being looked at again because it may give rise to anomalies, and if I were given evidence for that, I would look at it. I gave no assurance that I would take any action in another place.

    The point that my hon. Friend the Member for Edinburgh, Central (Mr. Cook) has made is quite a good one. A maximum increase of £1·50 is a lot if we are talking in terms of a rent of £1 a week. However, the level could have been anything. Some might argue that it might have been £50 per year, some might say £100, some even less. It is just what we think, on balance, is reasonable.

    I know that it is tempting to make a comparison between the private sector and the council sector, but there are so many factors that tend to make comparisons difficult. I referred to historic low rents and all their attendant problems. That is different from the phrase which tends to be used in terms of council tenants. I do not think that my hon. Friend should make too much of that phrase. In arriving at this figure we have borne in mind that rent allowances are available.

    This is usually what happens when one tries to arrive at a fair figure. I am criticised by both sides. That encourages me in my belief that we have the figure about right. I hope that the House will accept the new clause and the related amendments.

    We should be grateful for small mercies. The Under-Secretary has made it clear that he is not giving a specific assurance but that, if there are any anomalies, he is willing to look at them before the Bill goes to the House of Lords. On that basis, I am happy to recommend my hon. Friends to support the clause.

    Question put and agreed to.

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