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Lords Chamber

Volume 565: debated on Wednesday 21 June 1995

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House Of Lords

Wednesday, 21st June 1995.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers—Read by
the Lord Bishop of Portsmouth.

Privatised Industries: Consumer Safeguards

Whether they consider that the safeguards against the abuse of the monopoly or near monopoly of the privatised public utilities are adequate.

My Lords, yes. The Government believe that their approach of promoting competition where possible and regulating utility prices elsewhere has protected the consumer. It has also benefited both consumers and the wider economy, as shown by price reductions and service improvements.

My Lords, does the Minister agree that many consumers do not believe that they have been adequately protected by the present regime covering, in particular, water, electricity and gas? Consumers feel that, although some prices may not have gone up, they should have gone down more than they have. The activities of the management of those industries and their sheer corporate greed make one wonder whether a bit of competition is not what is needed in those industries.

My Lords, first, I welcome anybody from the party opposite to the ranks of those of us who believe in competition. The noble Lord said that prices may have come down. That is an interesting use of the word "may", because prices in two of the three industries mentioned have come down. That is in stark contrast to the warnings given by the party opposite at each and every privatisation when it said that prices would go up. For example, the price of gas has fallen by 23 per cent. in real terms, and the real industrial price of electricity has come down by 14.5 per cent. in the past five years. Of course in the water industry prices have had to increase, but that is because it has had to invest a vast amount of money to ensure that we have clean waters around our shores and in our rivers. That is what has been done—£15 billion has been spent on that over the past five years. I should have thought that noble Lords would welcome that.

My Lords, is my noble friend aware that, if we are to judge by results, it is worth bearing in mind that before we started to privatise nationalised industries, they were losing collectively £50 million per week? According to the latest privatised industries accounts which are available, they have been making £50 million to the benefit of the Treasury.

My Lords, my noble friend is absolutely right to draw attention to those facts. British Airways is now the leading international airline in private hands. Companies like British Steel are now making a profit. Yesterday I read a report that it is among one of the most profitable steel companies in the world. What a change that is from 15 years ago.

My Lords, since this matter was last raised in the House, I commended to the Minister a statement by the regulator of Ofgas, Clare Spottiswoode, who said that she did not know her terms of reference, and her annual report to Parliament was not worth the paper that it was written on. The lady concerned has since received a substantial increase in salary as a result of that confession. Can the Minister comment on that?

My Lords, as to the second part of the noble Lord's question, the lady has received an increase in salary but nothing like the increase which the Labour Party predicted that she would receive. It was wrong about that as it is wrong about so many other matters when it comes to speculation. But the noble Lord should recognise—and I am sure that he does—that the pay increase reflects the fact that her job has changed since she was appointed. Since then, the Gas Bill has given her extra functions and the Government have brought forward the opening up of the domestic gas market to competition.

My Lords, does my noble friend agree that the continual carping against the privatisation of this Government is extremely stupid in view of the fact that, as my noble friend Lord Renton pointed out, the amount of money going to the Exchequer, rather than subsidies being paid by the taxpayer, has proved that that economic policy is absolutely right? Does my noble friend also agree that the dead hand of nationalisation from which we suffered in the past is so well behind us?

My Lords, my noble friend is absolutely right, although he is unkind to use the word "stupid". I believe that "misguided" would perhaps be a better word to use. Of course, when one goes through the history of the past 15 years, one realises that the opposition of the parties opposite to each and every privatisation was even more misguided. To each and every one there was the promise of renationalisation. Where is that promise now? Is it dead, with the old Labour Party?

My Lords, has the Minister, like the rest of us, received the latest report from the Post Office which paints a glowing picture of how well it is doing under public ownership; how great are the profits; how it is improving; and how much it is contributing every year to the Treasury? I sincerely hope that the Government have no plans to privatise the Post Office. I seek his assurance on that.

My Lords, some noble Lords will appreciate that I have not had much time to read some of the contents of my mailbag. I have not read that report, but I have read in the press that the Post Office is improving its service and doing better than it was. That is to be widely welcomed, and my right honourable friend Mr. Michael Hesel tine has made clear our position in regard to the Post Office.

Of course, the success of a related firm, British Telecom, has been quite astronomical. Do your Lordships remember the predictions made by the party opposite that on privatisation there would be no phone boxes working in the country? There are now 50 per cent. more phone boxes and almost all of them work, in stark contrast to the situation in the days of the dead hand of state control.

My Lords, does my noble friend the Minister agree that there are also better things ahead, inasmuch as the privatisation of the grid will be of great benefit in cash terms to domestic consumers of electricity?

Yes, my Lords; I agree with my noble friend. I believe that there is considerably more good news to come for electricity consumers. New distribution controls will lead to further falls in domestic prices this year. Of course, the early abolition of the nuclear element of the fossil fuel levy ought to lead to a reduction of something like 8 per cent. for all customers during 1996.

My Lords, is the Minister aware that one of the abuses that has most disturbed members of the public is the extraordinary increase in salaries and share options which the directors of privatised industries have awarded themselves? I am sure that the noble Lord is aware—although some of his colleagues do not seem to be—that the Prime Minister has denounced those practices; indeed, he called them distasteful. However, why has he said so much and done nothing?

My Lords, I believe that my noble friends were expressing their surprise at the noble Lord's line of questioning. Perhaps they expected him to join us in praising the success of the privatised industries or to explain why the Labour Party was not going to renationalise them if they think that they are so awful. The last time that I appeared at the Dispatch Box answering such a question I underlined the point that the Government condemn excessive and unjustified salary increases at any level. My right honourable friend the Prime Minister has made those points on a number of occasions in response to the Leader of the Opposition in another place. We are awaiting the outcome of the Greenbury Committee and, as my right honourable friend the Prime Minister said, we shall consider any proposals that require legislation.

My Lords, as a matter of interest, can my noble friend say how an industry when privatised can make £50 million a week and yet, when nationalised, it seems to lose £50 million a week? Is it something to do with management?

My Lords, as experience all over the world has shown, the point that my noble friend makes is absolutely right: industries when privatised are markedly more successful than they were when nationalised. That is why both this country and many other countries in the world—including, interestingly, ones which appear to have governments of the Left—have gone down exactly the same road. I would need much more time to explain the matter. However, the fact is that industries work much better when privatised. I believe that that is why the party opposite is no longer pledging to renationalise.

Churches: Vat On Repairs

2.46 p.m.

Whether they will withdraw the charge of VAT on work done on the maintenance and repair of listed buildings, including churches.

My Lords, the Government have no intention of withdrawing or reducing VAT charges on the repair and maintenance of listed buildings and churches.

My Lords, to begin with, perhaps I may disclose an interest as I am church warden of a very small and beautiful church in Hampshire. With great difficulty we raised sufficient funds to cover necessary repairs to the building but then found an additional heavy load of VAT was imposed. Is it not outrageous that such transactions should be subjected to heavy taxation of a wholly unmeritorious and unnecessary character?

My Lords, I am slightly surprised that my noble friend, who was a distinguished Chief Secretary to the Treasury, should think in such terms about taxation. The Government believe that it is wisest to have as broadly based a tax system as possible. In general terms, we are opposed to reduced rates in principle. They erode the revenue yield and lead other people to ask, "Well. if them, why not us?"

My Lords, does the Minister agree that church buildings have a significance for our society which amounts to far more than being places of worship, providing, as they do, a sense of stability, security and history in a volatile society, especially in those communities where the church is the only remaining public institutional building? Further, does the Minister recognise that, for the small congregation without assured access to outside funding, the difference made to the cost of the restoration of its church by the requirement to pay VAT can determine whether or not the building survives as a facility for the community in the future?

My Lords, of course I recognise that fact. The right reverend Prelate is outlining the importance not only of the church buildings but also, I would hope, the importance of the Church in a community, quite separate from the church building. I equally appreciate the difficulties in raising funds. That difficulty is shared by other organisations and institutions looking after buildings which require work to he carried out on them.

However, I am afraid that my position remains what it was when we debated the subject at the end of January. We believe it is sensible that repairs and maintenance should be subject to standard rating and that there should he no exceptions on the kinds of buildings on which the standard rating is imposed. The right way to help churches and other such buildings is through the grants paid by organisations like English Heritage.

My Lords, surely it is not the case that exceptions are impossible. After all, there are (are there not?) already exceptions to VAT. Is it not the position that the Government cannot make the exception proposed without breaching European laws?

My Lords, I was not resting on that case. However, the noble Lord is right. Under the directive on value added tax there is a list of those items which can be dealt with in that way. Historic buildings and churches are not part of that list. However, I would not make that my defence. My defence is that the Government do not believe that we should make exceptions in the case of repair and maintenance to buildings.

My Lords, can my noble friend explain the apparent illogicality of additions to listed buildings being free of VAT while repairs necessary to preserve listed buildings attract VAT?

My Lords, it is a longstanding feature of value added tax and buildings that new build and new construction is zero rated and that alterations are zero rated but that repair and maintenance, which can cover a wide range of items in a building, are not zero rated. My noble friend will remember that these difficult decisions have to be made in every tax system based on expenditure. I think that we do best if we make as few exceptions as we possibly can, and that is why I am not attracted to making another one in this case.

My Lords, I express an interest in this matter as secretary of a parish in Oxfordshire. Most parishes have managed to keep their church buildings going, despite the VAT, by raising money. Is there not now the opportunity to remove VAT when every parish is expected to pay for its incumbent as well in the future?

My Lords, that takes us down a slightly different avenue. If I have understood the noble Baroness correctly, I should say that I do not believe that money should be rebated from the tax system so that stipends can be paid. There is already an extensive range of direct tax reliefs which help churches and other charities; for example, covenants. I am sure that every church, including the one I belong to in Glasgow, is keen to encourage people to take out covenants. There is also payroll giving for some charities.

My Lords, is not the real trouble that the rate of VAT at 17.5 per cent. is much too high? When the VAT was introduced it was levied at a rate of 10 per cent. Is it not the case that every time you jack up the rate you create problems of this kind?

My Lords, my noble friend makes a wider point on the subject of VAT. One has to balance a number of factors; for example, the amount of money the Government need to raise in order to meet the commitments that this House and the other place ask us to undertake. That is one factor. There is also the balance between direct and indirect taxation. It is important to try to have as few rates of value added tax as possible. I should point out to the noble Lord—if I need to—that many of our friends in the rest of the European Union have much higher rates of value added tax than we do.

My Lords, in answering this Question the noble Lord has stated with considerable confidence that the scope of VAT is not to be reduced in this case. Can he say with equal confidence that the scope of VAT will not be increased?

My Lords, is my noble friend aware that his Answer is a great disappointment to those of us who are struggling to keep churches going? Is he aware that there are exceptions to VAT and that there is no moral or logical reason why care, particularly of churches and ancient buildings, should not be included in the exceptions?

My Lords, I understand the problems that my noble friend has raised. I appreciate that they are absolutely real and difficult problems to deal with, especially for churches in the countryside with diminishing congregations. I repeat what I said. There are other ways to seek money, for example, from English Heritage. It may rather depend on the view of his church but perhaps I dare say to my noble friend that there is the National Lottery which can come into play in these matters.

Personal Protective Equipment

2.56 p.m.

What measures they will take to ensure that farmers observe the amended Personal Protective Equipment (EC Directive) Regulations 1992 (S.I. 1992/3139) when they come into force on 1st July 1995.

My Lords, these regulations apply to manufacturers of personal protective equipment (PPE). Other regulations apply to the use of such equipment, including by farmers. Inspectors from the Health and Safety Executive will always be happy to advise on the use of personal protective equipment.

My Lords, I thank the noble Lord for that reply. Does he accept that under the COSHH regulations a farmer is expected to ensure that both he and his employees are protected from any perceived injuries or other damage to themselves? Does the noble Lord also accept that it is now recognised that OP sheep dips are dangerous to use? Is he aware that I and a number of other people have contacted the Health and Safety Executive and the manufacturers of personal protective equipment? One manufacturer provides equipment with a CE mark, but he will give no guarantee that if it is used for sheep dipping it will protect anyone who is wearing it. Will the noble Lord please say what the legal position is both for the farmer and for an employee if they subsequently suffer ill health from dipping?

My Lords, the noble Countess has asked an extremely complicated question which is essentially hypothetical. She has described in general terms, with which I would agree, the nature of the system which circumscribes the use of such sheep dips. However, I cannot make any comment on a particular analysis of what might or might not happen in the event of some injury being incurred. It would entirely depend on the circumstances of the case.

My Lords, has the Minister's attention been drawn to the recent report in the Sunday Telegraph which pointed out that it is almost impossible, if not impossible, to get hold of protective clothing with the correct CE mark because the correct CE mark cannot have been tested in the way that the regulations say that it should be?

My Lords, I believe that the article to which the noble Lord refers is one that appeared in the Sunday Telegraph written by Mr. Booker. The position as described in that article is not correct. The background and research have not resulted in an accurate analysis of the position, and as a result that has caused considerable concern and distress. It is possible to obtain equipment with the CE mark. What is equally important is that, under the law as it now stands, from 1st July this year it will be unlawful for manufacturers to place PPE on the market—that is, into the supply chain—unless it has a CE mark. But any materials of this sort which are already in the supply chain can perfectly lawfully be acquired and used for as long as they are safe.

My Lords, as Ministers of the Crown are not averse to making contributions by means of letters to the leading newspapers, will the noble Lord bear in mind the necessity, in view of the accusations that have been made against Mr. Booker, for a letter to be sent to the Telegraph explaining precisely where he was wrong?

My Lords, it is not the practice of the Government to respond to every casual article in any particular newspaper, whether it is a weekly or a Sunday newspaper. Over the years we have taken a great deal of time and trouble endeavouring to make quite sure that the position as regards sheep dipping is entirely understood. We shall continue to do that. I understand that even "The Archers" programme has been involved in describing the position.

My Lords, would it not be better, in view of the criticisms that have frequently been made, if the use of this substance were outlawed altogether? Incidentally, we should thank the noble Countess, Lady Mar, for the diligence with which she has pursued this issue on behalf of those who work in farming. Is the Minister confident that, if it is not outlawed, the Health and Safety Executive has a sufficiently strong inspectorate to ensure that the use of this substance is properly monitored?

My Lords, the noble Baroness is quite right to point out the service that the noble Countess has done in drawing this matter to our attention. There are certain circumstances where OP dips are the best and probably the only form of dip which can he used. In those circumstances we believe, as we have always believed, that provided they are used properly, both in accordance with the law and in accordance with the principles of common sense, there is absolutely no case for outlawing them.

I have every confidence in the ability of the HSE inspectorate to monitor the situation properly. It makes something of the order of 30,000 visits to farms every year, although obviously all of those are not sheep farms. In addition, the inspectorate is currently carrying out a survey, which follows up a survey carried out in 1992–93, on sheep farms to examine sheep dipping practice in the field.

My Lords, the noble Lord said that personal protective equipment in the pipeline need not carry the CE mark. Is he aware that all the instructions for the use of OP sheep dips say that protective clothing must be in tip-top condition and that it must be destroyed if there are any faults in it? Therefore, farmers will be checking their equipment now for the autumn dipping and may want to replace it. What is their position if no manufacturer will guarantee their personal protective equipment for use with OP sheep dips? Is a farmer acting against the law if he compels his workers to wear protective clothing which is supposedly sub-standard when he dips his sheep?

My Lords, the crucial point that I should like to emphasise is that the presence or otherwise of the CE mark has no direct bearing on whether a particular item is sound and suitable for the circumstances in which it is used. That is the test under the COSHH regulations at present.

As I explained, any item which is in the retail chain before 1st July this year can be sold and used lawfully by anybody engaged in this activity. I hope that that makes the position absolutely clear. In individual circumstances, it is for the people in charge of sheep dipping to make sure that they are not acting in breach of the COSHH regulations. Advice is provided in the leaflet, Sheep Dipping, sent out by the Ministry of Agriculture.

Swinden Quarry: Planning Application

3.1 p.m.

Why they decided not to call in the planning application for further mineral extraction at Swinden Quarry in the Yorkshire Dales National Park.

My Lords, our approach is not to interfere with the jurisdiction of local planning authorities unless it is necessary to do so. The Secretary of State for the Environment will therefore be selective about calling in applications for his determination and will, in general, take that step only if planning issues of more than local importance are involved.

I can assure your Lordships that the decision on whether to call in the application to extend Swindon Quarry, given the site's location in a national park, was taken only after the most careful scrutiny. It was decided on the basis of the information before us that the application did not raise issues of more than local importance.

My Lords, I thank the Minister for his reply. Does he recall that during our debates on the Environment Bill I tabled amendments with cross-party support to incorporate a statutory test? That test would ensure that major development would not be allowed in national parks unless there was either an overriding national need or there was no suitable alternative location. Does he also recall that my noble friend Lord Ullswater assured me that a statutory test was not necessary as the issue of national need and alternative location was covered by Planning Policy Guidance Note No. 7? Therefore, can the Minister confirm that that government policy still stands? If so, can he elaborate on why the Secretary of State did not call in this particular application?

My Lords, the most important point to make to my noble friend is that my right honourable friend the Secretary of State did not call in the application because in his view the proposal, which was the extension of an existing site—by deepening rather than widening the site—did not constitute a major development. Nor did my right honourable friend consider that the application raised issues of regional or national significance. I stress to my noble friend that the Government's policy remains, as set out in PPG 7, that major development should not take place in national parks save in exceptional circumstances.

My noble friend also asked whether the statutory test that he proposed during our debates on the Environment Bill might be considered further. We do not accept that the policy for major developments in national parks is so special as to justify policy duplication in statute. Planning decisions involve judgment. Putting a planning test in statute will not make it any more or less likely that some people will disagree with particular decisions.

My Lords, is the Minister aware that a 100-metre deep hole is being dug in a national park in order to produce high quality limestone, 96 per cent. of which is merely going into aggregate? Is that worth while? Is it not a real abuse of the procedures, and will the Government do something about it?

My Lords, there has been a quarry on the site for the best part of 100 years. Therefore, the proposal—for the quarry to be deepened rather than widened—is not quite as controversial as the noble Lord suggests. The aggregate from the quarry can be manufactured to a very high quality aggregate suitable for high specifications. It is also appropriate for local use.

My Lords, is it not seriously wrong to suggest that a development that will lead to another 26 years of excavation in a national park which is of national importance, involving something like 37 million tones of aggregate, is a local matter?

My Lords, national parks in themselves arc a national matter, but not all activities in national parks become national matters. I point out to the noble Baroness that the new proposal before the national park authority will lead to significant benefits. There will be a reduction in road traffic, an increase in the amount of material sent out by rail, a ban on night road haulage movements and relocation of unsightly buildings.

My Lords, will my noble friend continue to keep in mind the importance of industry and employment in the countryside, which are just as important as anywhere else? Secondly, since the quarry is already open, will he bear in mind that the standard of restoration is now very high and enables what would have been an eyesore to be transformed into good restored countryside in the end?

Housing And Construction

3.7 p.m.

rose to call attention to the housing needs of the nation and the ability of financial institutions and of the construction industry in general to meet these needs; and to move for Papers.

The noble Lord said: My Lords, I hope that as a result of the debate we shall have some indication of measures that may be taken to deal with the present situation. There is no doubt that all the figures produced on any aspect of housing show a deteriorating situation.

The first part of my Motion calls attention to the housing needs of the nation. The second part deals with the building industry. Noble Lords will know that over the years I have from time to time asked questions as to why in the past few years we have had half a million building operatives on the dole, building firms across the spectrum working below capacity, and huge sums of money which belong to local authorities locked up and subject to restrictions which prevent those authorities from building at the rate they would like. I do not know what the Government are waiting for.

It is not as if a bolt from the blue has suddenly caused a housing crisis—and it is a crisis. It is the result of deliberate government policy, introduced under the present President of the Board of Trade, the Right Honourable Michael Heseltine, when he took office as Secretary of State in 1979. The first thing he did was to set about removing government subsidy for council house building. The Government compounded that by making the insane decision—and I still think it is insane—to stop local authorities building housing for rent. Historically, since the early 1920s they were the biggest provider of low rent housing. I do not say that they were perfect, but they were far and away the best landlords in the country.

It is about time that the Government ceased their vendetta against local authorities and their council houses and started giving authorities the facilities and finance to enable them to eat into the problem regarding the appalling current housing situation.

Over the years the Conservative Party has claimed to he the party of the owner-occupier. Literally every owner occupier in the country has been hit by what has occurred in the house purchase industry. An enormous number of people are now trapped in negative equity. From an item on the news this lunch time, I understand that the problem of negative equity is not reducing; it is increasing. Approximately 1,000 houses a week are still being repossessed. Those of us who are fortunate enough to own our own homes have a diminishing asset because of the Government's policy. It was rather naughty of the Prime Minister to suggest in a speech a few weeks ago that the problem of negative equity was people's own fault for daring to buy their houses.

Ministers always fall back on the success of the sale of council houses. That policy was a success based on enormous cuts in prices through the goodwill that the Government were able to engender and trade on. However, I have figures which indicate that in some areas of London some people received as much as a £50,000 cut in the price of their council house so they could purchase it. Yet in the same area young couples purchasing a similar type of house were being dispossessed because they owed a far smaller sum than the figure to which I referred. That does not seem to me to be equal treatment of people of the same nation.

I understand the situation now is that, if one deducts council houses from the number of houses being purchased, for the first time for many years in this country the figure is on the downturn.

What has happened over the years regarding provision of council housing or housing for rent? A number of reports have been instigated by prominent people in this country. They were not from political parties. We can go back to the Duke of Edinburgh and his commission. A group of people with expertise across the board on housing—it was in no way politically motivated—put forward proposals to assist housing in this country. Did the Government take action? There were some comments about parts of the reports with which they did not agree, but no action was taken.

We then had the report of the commission of the former Archbishop of Canterbury, the noble Lord, Lord Runcie, Faith in the City. It was a superb report for anyone to read in depth. It pointed the way forward. Once again the report was not politically inspired. But nothing happened; it just gathered dust.

The reports were supported by reports from other people—not from a political background—who took the same view. Those reports indicated, sadly, that deterioration in the housing stock of the owner-occupier section of the country is reaching alarming proportions. Between £8 million and £10 million will be required to bring those houses up to standard for the public sector. But nothing has happened and those houses just deteriorate.

I referred to costs that were first commenced by Mr. Heseltine. Figures have proved conclusively that had the Government continued with housing finance and allowed the councils to continue to build we would have gained between half a million and a million more houses available for rent in this country. There is no point in saying that an accident happened. That accident was a result of deliberate government policy. I have said this before in this Chamber, and I say it again: it was the Government's fault and no one else's.

It is about time that the Government turned away from some of their political ideology now that the number of homeless people, and those in bed and breakfast accommodation, is increasing. If the money spent on providing bed and breakfast facilities were spent on building houses it would create a considerable number of houses for occupation. That is the current situation.

I have gone through most of the major points with regard to housing problems as we see them today. I now turn to the building industry. The Government, rightly, set up a committee under a former Member of another place, Sir Michael Latham, to consider the question of reorganising the building industry. He produced a very fine document which, I believe, in the main was accepted by the overwhelming majority of people involved in the building industry—certainly the builders themselves. There were some areas of disagreement, but, basically, it was accepted that a package was available which should be in the legislation to benefit the building industry.

What has happened? Yet again, we are going sideways, not forward. It seems strange to me that a major piece of legislation dealing with the building industry has now been handed to a Parliamentary Under-Secretary in the Department of the Environment. I make no criticism of that junior Minister, but that does not give a high profile to a building industry which is in serious trouble. In the circulars and correspondence from building organisations and suppliers to the building and civil engineering industry there are no projections regarding an expanding workload in this country. Having said that, there are some outstanding successes in the export field—building abroad—which I commend.

I attended a working lunch a few weeks ago to discuss the Latham Report. We were disappointed to hear the Minister state that there can be no action in the current parliamentary Session. From the way he spoke, it appears that there will be none in the next Session because the matter has now gone back for further consultation.

The Government ought to take this strong point on board—it has been raised in your Lordships' House by noble Lords on all sides of the Chamber—regarding the reluctance of some of the large building companies to pay their bills on time to the smaller builders and suppliers. Because of cash flow problems that reluctance often results in the smaller builders going to the wall. I should like to see the Government giving attention to that factor because it is a very real worry to people.

The debate gives us the opportunity to discuss the present housing situation in this country. Members of your Lordships' House will know that over the years I have led several debates in your Lordships' Chamber on housing. I have always found that the Government take not a bit of notice if they do not agree with what someone says, irrespective of party, even if the logic of the argument is pointed out. If the Government had listened a little more instead of hiding behind their political dogma on housing, many of the problems that we now face would not exist. In my opinion, enormous sums of money will be necessary to put right the errors that have accrued over the years.

We are going backwards in the housing of our people. When I was a chairman of housing in Manchester we were almost out of the tunnel. We were building houses so fast that keys were going out by the hundred each week. It was the same in all areas. Then suddenly someone in the Conservative Party thought, "We can't have local authorities doing this", and it was stopped. It is the first government ever to have stopped such building. As regards previous Conservative Governments, one has only to remember Harold Macmillan when he was in charge of the housing programme. He produced 300,000 council houses a year. I wonder what he would have thought if he had seen the shambles which the present Government are observing today. About 2,000 council houses will be built this year. A few weeks ago, when I questioned the Minister, I said that we were always told that, under the Housing Corporation, the HATs were the Government's answer once they had stopped councils building houses. We were promised that housing associations would have a yearly target of 60,000 houses. What is the Government's answer? That we will be lucky if there are 30,000 this year because of the enormous cuts created knowingly and intentionally by the Government in the allocation of cash to the Housing Corporation for general distribution. Those are the actions of a Government who are supposedly interested in dealing with a situation in which housing is greatly deteriorating.

I mentioned homelessness and other speakers will refer to the details; I have had to give a broad sweep. In conclusion, I believe that your Lordships' House should send out a message in regard to a situation which will not improve. I hope that for once the Government will listen to and not ignore that message. I beg to move for Papers.

3.25 p.m.

My Lords, I am grateful to the noble Lord, Lord Dean, for initiating the debate. I wish first to answer the point made by him that it was deliberate government policy to reduce council house building. I do not deny that; I do not believe that councils are the best people to build houses. The noble Lord, Lord Dean, referred to Harold Macmillan's building programme. It was no fault of Harold Macmillan's, but that programme included many high-rise flats which have since had to be bulldozed.

The rapid fall in house prices which started in 1989 and continued for two years to the level we have today is affecting many people. As this period also corresponded with a great increase in unemployment, especially among people with high mortgages, it has caused a lot of hardship. I feel very sorry for all those people who have had their houses repossessed or who are unable to move because of negative equity. Thousands of construction workers have been thrown out of work.

In the late 1980s, the housing market became a gigantic bubble which eventually burst. The absurd situation arose when a cupboard in Kensington was sold for an astronomical price. House prices were rising by incredible amounts each year and everyone who was able to scrambled to get on the ladder. The government of the day—I am ashamed to say that it was a Conservative one—allowed that to happen.

It is absurd, however, to say that my right honourable friend the Prime Minister was party to the policy of neglect in high economic decisions made at that time. As Financial Secretary to the Treasury, he took no part in interest rate policy, but he was quite right to point out the other day, as the noble Lord, Lord Dean, mentioned, what happened in the late 1980s. He was not blaming house buyers or building societies; he was merely stating what happened then and that it must not happen again.

Anyway, it is no good looking back. We must address the situation today and look at the future. We now have low inflation with house prices lower in relation to average earnings than has been the case for possibly 20 years. It is a good time to buy houses for those who can afford to. Unfortunately, although many are doing so, it is not enough to keep the housing market moving. This is due mainly to the feeling of job insecurity. Different patterns of employment must also be a factor. In the past few years, whole rafts of long-term jobs have gone; part-time working and short-term contracts have become more common.

Of course, the Government's reductions in mortgage tax relief—or MIRAS—have not helped. However, MIRAS, even at the level of £30,000, created a huge distortion of resources towards housing, besides costing the Exchequer millions of pounds in lost revenue. It is no answer to turn the clock back and try to kick-start the housing market by reversing the reductions. I doubt anyway whether it would have much effect. Because of low interest rates, mortgages are much cheaper anyway than they were when MIRAS was at a higher rate in real terms than it is now.

I turn to protection for mortgage interest on income support. The current system is highly unsatisfactory. It leaves 70 per cent. of people with mortgages without any help if they lose their jobs. People with working spouses, redundancy money or savings, or who have part-time or early retirement income, do not qualify. As a result, about 150,000 people on unemployment benefit receive no income support for their mortgages and 50,000 people a year have their homes repossessed. The cost of income support for mortgage interest has risen from £30 million to over £1 billion in 15 years.

The availability of government support and a belief among home buyers that it is all-embracing have discouraged the growth of comprehensive private mortgage insurance. The Government have rightly said that private insurance should ensure that everyone taking out a new mortgage has proper protection, by insurance or otherwise, against the threat of a spell of unemployment.

There have been screams from the Society of Mortgage Lenders which, in my view, is entirely self-interested; the society would much rather that the Government should bear the burden. Surely, though, if someone satisfies a lender that he qualifies for a mortgage he should also be a good insurance risk. Spreading the insurance cover over many people, as all insurance companies do, would mean that the premium should be at a reasonable level.

The private lending sector must also he encouraged by the Government. Many people seem to think that renting is in conflict with home ownership. That is not the case. Many people, especially the young, do not have the resources to get a mortgage and buy a house. The Government went some way to freeing the private renting sector by passing the 1988 Act. Before that Act was passed, it was almost impossible to find a privately rented house or flat. I know that from personal experience. When my daughter left university to work in London she wanted to rent a small flat. The letting agent would not countenance a rental agreement with her; it had to be with a company. The reason was that there could be no certainty that she would not become a permanent tenant because of the rent Acts. Luckily, my family had a small private company, which had been set up by my parents to buy the village post office and some other property where we live. At that time, the company owned only six garages. I was therefore able to get the company to rent the property on her behalf. The majority of people would not have been able to do that.

The rent Acts first appeared in the First World War. Labour governments in the 1960s and 1970s made them even more restrictive and included furnished lettings. That means that Britain alone among industrial nations has a tiny private rented sector. The 1988 Act improved the situation. Only recently, however, have owners of houses taken advantage of the terms of the Act. I have recently seen for the first time I can remember houses with "To Let" signs outside them. In Yeovil and Taunton, near where I live, I have recently seen construction sites with advertisement boards showing that houses or flats are being built to let. That is very good news.

However, the 1988 Act did not go far enough. Obviously, there has to be some protection for tenants. Landlord and tenant relationships are often not easy. The law is still far too biased against the landlord. Thousands of privately owned buildings across the country are empty. Because of the existence of the rent Acts for 70 years, many have been allowed to go derelict. Owners will still not go to the expense of doing them up for fear of getting a tenant whom they cannot remove and being stuck with an uneconomic rent. Even when a tenant does not pay the rent for a time, there are tremendous legal difficulties in getting the tenant out. The Government have promised a White Paper on housing in the near future. I hope that it will address the problem.

There are a great many people who cannot afford an economic rent, even if houses and flats were available. By setting up housing associations, the Government have introduced private capital to social housing needs. Council estates are often badly run. I have dealt with that matter previously.

My main message is that the present situation is not as bad as it is painted. It is true that thousands of people have had their houses repossessed, and this year many more will suffer the same fate. That is very sad, but it cannot be avoided. The best prospect for housing in Britain is offered by sustainable, non-inflationary growth. The rising prosperity that the Government's policies will bring is the best hope for restoring confidence in the housing market and the construction industry. As in so many other aspects of policy, there arc no quick fixes. Politicians arc being dishonest when they try to persuade the public that there are.

3.31 p.m.

My Lords, the noble Lord, Lord Dean of Beswick, has effectively introduced a debate on an issue of fundamental and topical importance which covers many aspects. Obviously in the short time available speakers cannot cover more than one or two aspects. I propose to concentrate on the need to improve the condition of the nation's existing housing stock. I should point out that for many years I have been president of the National Home Improvement Council.

Bearing in mind the relatively small contribution that new building can make to overall housing requirements, the maintenance of as many existing homes as possible in a reasonable state of repair is essential, especially in view of the Government's own forecasts of a 23 per cent. increase in the number of homes needed in the next 20 years.

The last major surveys into the quality of housing stock were made in 1991 and 1992. It emerged from the English House Conditions Survey that there were 24 million houses, or over 13 per cent. of the housing stock, in need of urgent repair. These are the homes of nearly 6 million people.

The official survey is now four years old. A survey undertaken recently by the National Home Improvement Council, which involved detailed responses from some 75 local authorities, showed that an increasing number of homes failed to meet the fitness standards. The situation appears to be deteriorating.

A relatively high proportion of sub-standard properties represents older stock. They tend to be inhabited by people on low incomes, and particularly by older people. So there is quite a social problem. The situation has serious health and safety implications. Britain has noticeably higher relative rates of winter mortality than other European countries, much of which is attributable to inadequate living conditions. There are also safety risks, particularly where faulty heating systems and wiring could be involved.

The present structure for providing grants for improving property remains as set out in the 1989 Local Government and Housing Act. The Act defined the circumstances under which grants could be made and introduced means testing for the major grant categories. Grants to achieve basic fitness standards became mandatory for those meeting the means test criteria, and provision was made for discretionary grants in special circumstances in addition.

In spite of those clearly stated intentions, I regret to say that the Act has failed to deliver—and for the simple reason that there has been a steady reduction in central government funding towards the grants from a peak of £1.3 billion in 1985–86 to the current level of no more than £260 million. As a result, many of the grants agreed under the means test arrangements have not been met. Furthermore, there has been virtually no scope for discretionary grants.

The Government are currently considering a reform of the grant system, and are concentrating on removing mandatory requirements and increasing the emphasis on area renewal projects. I quite agree that an area approach, which was tried before, is well worth attempting.

However, it still leaves the question of the major backlog of people who were promised grants but have not received them and who could get into an even worse situation as a result of the proposed reforms.

Apart from the review of the grant system and measures to deal with the backlog of applications, other measures are needed if a serious attempt is to be made to deal with the progressive deterioration of the nation's housing stock. Three measures in particular require serious attention. The presence of the noble Lord, Lord Mackay, on the opposite Bench makes me hesitant to mention my first proposal in view of his reaction to a Question earlier today. It is a reduction of the VAT rate to 8 per cent. on housing renovation and repair work. I hope that the noble Lord's colleague who will reply may not have quite so closed a mind as he had on the subject. My researches show that this would be permissible under European Union regulations. Householders would be encouraged to undertake repairs and improvements to their property; and it could be made much more cost-effective for owners of vacant properties to undertake the necessary repairs. The reduced fiscal proceeds could be offset by increased activity in the construction industry, which, as the noble Lord, Lord Dean, pointed out, is sorely needed.

One of the most serious weaknesses in existing homes is the lack of adequate standards of insulation and other ways of using energy efficiently. Much is already being done by Neighbourhood Energy Action, an organisation with which I have been connected for some years, to insulate the homes of people on low incomes, particularly those of the elderly. I am glad to say that government support for this scheme was recently increased. The scheme has already improved the homes of nearly 2 million people on low incomes. It needs to be further extended and made more flexible to cope with changing circumstances. The Home Energy Conservation Bill, introduced by my noble friend Lady Hamwee and passed in this House on 8th June, should go a long way to identifying where further action will be required to improve energy efficiency in the home. Electricity and gas undertakings could play a larger part in stimulating energy efficiency by their domestic consumers. This could be done, for example, by the provision of loans on favourable terms to install energy-efficient equipment.

The use by local authorities of capital receipts from house sales for housing investment has long been a bone of contention. A suggestion which the Government might be prepared to consider is that the proceeds of future receipts (leaving aside past receipts) might be put into improving the condition of local authorities' existing housing stock. This was attempted in a limited way in the 1992 Budget but there was not enough time for it to bear fruit. The reintroduction of such a measure in the next Budget could have a positive effect.

To conclude, my Lords, there is no doubt that the condition of the nation's housing stock presents a serious problem. The fact that over 13 per cent. of the total stock, involving nearly 6 million people, requires urgent repair can no longer he ignored. But unless concerted action is Quickly taken. further deterioration will undoubtedly set in. That could add immeasurably to the many other problems that beset the housing market.

3.39 p.m.

My Lords, I am grateful to the noble Lord, Lord Dean of Beswick, for the opportunity of debating a subject of such fundamental importance. The Church of England has a long history of concern for housing provision both in a practical way and as a matter of public policy. Parish priests throughout the country know that poor housing conditions are related to so many of the other ills of our society. Conversely, adequate, affordable housing provides a sound base from which children can develop as they ought. Without the basic security of a home, the sense of belonging and rootedness needed for personal growth is virtually unattainable.

The noble Lord, Lord Dean, referred to Faith in the City. That major report produced by the Archbishop's Commission in 1985 concluded that the structure of housing in urban priority areas was "totally inadequate". The authors continued:
"It is clear to us that the prevalent housing situation of UPAs is quite unacceptable".
Five years later, in 1990, a follow-up report, Living Faith in the City, reported:
"Sadly the analysis of housing issues presented in Faith in the City remains accurate. The number of homeless people has increased, more dwellings have become unfit for habitation"—
as was emphasised by the noble Lord, Lord Ezra—
"and new legislation has, for many people, rendered their continuing occupation of their current accommodation uncertain".

The housing shortage in rural areas for those on low incomes has also given rise to concern. Faith in the Countryside, the report of the Archbishop's Commission on rural areas, also published in 1990, said this:
"One issue above all others—housing—has been at the centre of the evidence which we have received, especially on our regional and diocesan visits".

The figures we have already heard and will hear again in this debate show starkly that the position since then has worsened further. There is still a desperate need for more and better affordable housing. Recent research commissioned by the Joseph Rowntree Foundation emphasises in particular the need for more rented accommodation. I was pleased to hear the noble Lord, Lord Harding, emphasise that.

Home ownership is certainly a desirable option for those who can afford it. But many millions cannot and it may not be suitable for the growing number of people in insecure employment and those who need the flexibility to move for job reasons. Among young people in particular there is much less confidence in the prospect of home ownership than there was 10 years ago. Renting for many is the only option and for a good many more the only realistic one. Yet today there are 1,609,000 fewer council and housing association properties to rent than there were in 1979—a 50-year low. In the past two years the Government have cut funding to housing associations by more than £600 million. Local authority constructions arc now minimal.

I have the honour to be president of the National Federation of Housing Associations, which represents 1,600 housing associations, which together provide low-cost rented housing for more than 2 million people. They are the only major providers of new social housing in England today. The NFHA considers that between 130,000 and 150,000 new social rented homes are needed each year between the present day and the year 2001 if the extra demand created by demographic and unemployment changes is to be met. Yet on present funding levels only 51,000 new tenants will be provided with social rented homes in 1996–97. That is well below even the Government's own projection of housing needs, which ranges from 60,000 to 100,000.

I have a table of the investment in social housing from 1979 to the present day and it looks extremely dismal. There has been a year-on-year decline, even taking into account the private finance which is available to housing associations to match grants. The cutting of grants to housing associations means that the number of new rented homes started by housing associations in the current year will fall from an original plan of 40,000 to the very disappointing figure of 17,000.

Housing associations, which have all-party support, remain the key players in the provision of rented housing. But the need is so great that only a combination of private, local authority and housing association initiatives can begin to provide the response required. I emphasise again that the millions of people on low incomes, unemployed or with little job security cannot afford to own their own homes. In 1994 37 per cent. of households in Britain earned less than the Council of Europe's "decency" threshold, compared with 28 per cent. in 1979. And the increase in low paid, part-time work, self-employment and job insecurity all highlight the need for substantial investment in the rented sector at this time.

I know that other noble Lords will stress the relationship between that investment, the decrease in unemployment and the promotion of national prosperity, all of which have been urged in recent reports and are the subject of the last part of this Motion. I want simply to stress the human need and the necessity, one way or another, for all the agencies involved to tackle this problem and to make the provision of rented accommodation in particular a high priority for government over the next five years.

3.45 p.m.

My Lords, I start by expressing appreciation to my noble friend Lord Dean of Beswick for raising this matter. I totally agree too with the speeches of the right reverend Prelate the Bishop of Oxford and the noble Lord, Lord Ezra.

I had intended to begin by talking about mandatory housing grants, but yesterday the Prime Minister made some comments in that connection in regard to the city of Birmingham which I regard as quite disgraceful and I feel called upon to raise them here. I gave notice to the Government's spokesman that I intended to do so.

Yesterday the Prime Minister decided to libel Birmingham City Council and the members of that body. He was referring to the report on Monklands and in a throw-away line he said that the Monkland council had created,
"jobs for the boys and jobs for their families".—[Official Report, Commons, 20/6/95; col. 149.]
He went on to say, referring to wrongdoing and corruption, that it was not an isolated example. He said that Birmingham was another such city; it was on the list. That is a disgraceful slur not only upon the city council but also on the good people of Birmingham. If the Prime Minister had made that statement outside, they would be able to take libel action against him.

At the moment he was speaking the city itself was releasing the results—I am sorry that the Government's spokesman seems to think this amusing—of its internal inquiry into allegations in relation to house improvement mandatory grants. It was an internal audit conducted by the chief executive and the auditors in consultation with the district auditor. It found no evidence whatever of corruption in Birmingham but it found that it was inevitable that Birmingham had to ration mandatory renovation grants to meet the insufficient resources provided by the Government.

The time has come therefore to ask the Prime Minister to put up or shut up. If he possesses any evidence of wrongdoing in Birmingham he should publish it or refer it to the appropriate authorities, who could investigate it. The problem with housing improvement grants in Birmingham is not malpractice by the city council; it is total ineptitude and disarray on the part of the Government. The law states that applications for mandatory improvement grants must be dealt with in six months. Ten thousand such applications now await Birmingham City Council's attention—10,000—and that requires £100 million of allocation to deal with them, as required by the law. The Government are making £14 million available to Birmingham. They refuse to provide the funds that will enable the city to meet the requirements of the law. That is a duplicity or fraud on the householders of Birmingham, and I have no doubt that similar things happen in other parts of the country.

I must ask the Minister when he comes to reply—if I may have his attention again—to tell us whether the Government will provide the funds for Birmingham to meet the legal obligations imposed on it by the Government, or how they expect it to deal with the outstanding millions of pounds when it does not have the resources.

The housing situation in Birmingham mirrors the position described by the noble Lord, Lord Ezra, and the right reverend Prelate the Bishop of Oxford. The city council's housing stock now stands at 99,500, a decline of 20 per cent. in the past 10 years. There are 16,000 applicants on the waiting list for council housing. Nearly 23,000 council tenants want to transfer to another property. Nearly 10,000 households approached the city as homeless in 1994. Almost two-thirds of those were in priority need, meaning that the city had an legal obligation to house them.

So far as concerns the housing stock, we estimate that we require around £1.3 billion to remedy the problems in the council's own housing stock. More than half of the city's 377 high-rise blocks of flats require urgent attention to the external structure. We have 15,000 inter-war council dwellings which need to be modernised. In the private sector there are 47,000 unfit homes. A further 80,000 are considered to be on the borderline of unfitness. Fifty-seven per cent. of private properties in the city need comprehensive repairs, costing £370 million, but the HIP allocation to Birmingham this year is £20 million. The 27,000 privately rented dwellings in the city have an unfitness rate of 24 per cent. Many houses in multiple occupation are both squalid and dangerous. As I have said, the financial resources available to the city are totally inadequate.

We have been allowed this year to build only 40 houses. The great city of Birmingham has that problem. The housing associations have seen their financial allocation fall from £58.2 million in 1993–94 to £22.4 million in 1995–96, a reduction of 60 per cent. in two years. I could give further examples but I want to make my final point about the future of the construction industry.

I was brought up in the belief that when the construction industry was in good heart the country was in good health. That is certainly not the case today. I mention particularly apprenticeships, on which the whole future of the building industry must depend. The number of apprenticeships has dwindled from the 1988 figure of 90,000 to 1,200 over the past 12 months. In other words, even if the housing market picked up, the skilled labour necessary to build the houses would not be available. The Construction Industry Training Board hopes to get between 12,000 to 15,000 new entrants next year, but it wants to know where the money will come from to provide the jobs for the apprentices if it trains them.

I conclude by asking some questions. First, what are the Government doing to sustain confidence among employers and employees in the construction industry? Are they ensuring a stable workload for the years ahead? Secondly, what are the Government doing to encourage the take-up of modern apprenticeships? Will the TECs and the Construction Industry Training Board have sufficient funds available to them to deal with the matter? Thirdly, what are the Government doing to ensure that our construction industry workforce are properly trained and qualified?

On every front of housing finance and construction we face a disaster. I hope that the debate will provide some answers from the Government to the searching questions being asked on all sides of the House.

3.54 p.m.

My Lords, first I should like to deal with the Latham Report because current news about London disturbs me greatly. One of the claims in the Latham Report—the Government have accepted the report—is that there could be savings of 30 to 40 per cent. in the building industry if certain steps are taken. That claim was made 12 months ago and the report has been in abeyance ever since. The Labour Party has accepted the report completely and says that it will implement Latham as soon as it gets control. Unfortunately, it will not get control that quickly. This Government may hang on. So it is very pertinent to ask the Government what they intend to do about Latham.

It will not take long to put the legislation through. There is the question of the resolving of disputes between contractors and sub-contractors. There is the question of the savings in administration and the question of employing project managers in order to ensure that the job the building industry is starting on behalf of a client goes on in an efficient manner. I should like to ask several more questions but I am sure that the Minister is fully aware of all the questions that Latham poses and the solutions the report suggests.

What do the Government intend to do about Latham? They know what the problems are. They have had the report for 12 months. There is no reason to delay implementing it any further. I ask the Government to implement it now because we have a wonderful example of what happens when we let the private trade, without any restrictions or suggestions by the Government, go ahead and do whatever it wants. The problem is right here at home. The National Audit Office has stated that the London Docklands Development Corporation put pressure on the Treasury because Olympia & York, the developers of Canary Wharf, needed the scheme to regenerate the area. What am I talking about? I am talking about a large site. There was the Jubilee Line extension, the London Docklands railway and the road that has now cost £450 million a mile to build. That is what I am talking about. And we are talking about possible savings of 30 to 40 per cent. inside the building industry with the Government as the client. It was a scandalous state of affairs and it was the reason why at 10.30 p.m. in this Chamber I tried to stop the Government from going ahead with these proposals, especially with the proposal for the Docklands Light Railway, in order that we should give them some further consideration. That consideration was not given and now the consequences are coming home to roost.

I talk like this because I want to see the building industry become more efficient. I came into the building industry at the age of 14 and started to serve my time to be a plumber. I then found that I could not get a job. Why could I not get a job? I could not get a job because the building industry sub-contractors were going out of business because of the big boys. That was 70 years ago but it is still going on. So I am interested in the building industry and I am interested in ensuring that people like me who spent years on a pittance learning a trade and trying to contribute to the building industry at least get a job when they finish. The point has been well put by my noble friend Lord Howell. It is important that we do that, but we do not have too much time.

I do not want to sit down before I have dealt with the issue that really concerns me. I hear people say that home ownership is a good thing. The Motion itself refers to the "needs of the nation". At the moment I am not very interested in the needs of the nation with regard to housing because the needs of the nation seem to be getting served by the decisions of the money institutions. That even applies to housing associations. I am concerned about the people mentioned by the right reverend Prelate the Bishop of Oxford—the people who cannot afford home ownership. Why should someone on a margin of about £2 or £3 a week be compelled, in order to get a shelter, to invest in a property which he or she will never experience as an owner? We have to recognise that there are, and always will be, such people. They have been persuaded by the Government's propaganda to buy their own home.

The working classes knew that the great deterrent to buying your own home was the tremendous commitment. There was the commitment to repair and to the regular payment which was based, more or less, on interest being paid over a period of 30 years. That was all right while there was a residue from the employment market that was left behind by the Labour Government, who had a considerably better record than this one. While some people were still working they could manage home ownership. Now it has been proved.

When I hear the opposition today boasting about the success of privatisation it makes me think about where that success came from. Let us be honest: it came through the application of efficiency measures in order to improve profitability. What were they? Does one believe that the managers of these wonderful privatised industries work harder? Their only contribution is in giving themselves bigger salaries.

Where did the efficiencies come from? They came from 2.5 million people who were deliberately made unemployed in order to make profits. That is the lesson to be learnt. That caused more growth in the number of people who could not afford home ownership. That is the consequence. We cannot look at this matter unless we consider the whole economy. That is why I say that if we are going to waste millions of pounds on one mile of road and if we are to persuade ourselves to build other projects just to get Olympia & York out of a financial embarrassment (in which they involved themselves by not planning properly in the first place) then we had better look at the economy as a whole. We need to establish its relationship to ordinary people and then do something about it.

The solution is Liverpool. Because of the nature of the town itself, before the war it had one of the worst slum problems in the world. It got out of that and had reached a situation in 1960 where that problem had been solved—I do not need telling from the Front Bench that I ought to shut up. I have not taken half as long as the noble Lord opposite and I have one minute to go.

I finish on this note. One reason why we were able to get out of that problem was the assistance given by the Public Works Loan Board. Some noble Lords on the Government Front Bench and in this Chamber will not remember it. It ironed out all the fluctuations which took place in interest rates over a certain period. But that does not happen now. Local government has been made a slave to the interest rates of the financial markets in Great Britain and that is why we are not getting sufficient money to solve the housing problem. We need to go back to the Public Works Loan Board and allow local authorities to do the job which they do best—that is, to provide houses for people in need.

4.3 p.m.

Follow that, my Lords. I too wish to congratulate the noble Lord, Lord Dean, on introducing this extremely important debate. If it finished now I believe that a case is established by all that previous speakers have said. Following the noble Lord, Lord Sefton, with his usually robust but accurate assessment of the situation, I shall try to flesh out some figures to make the subject a little more realistic. It has been proved in the past hour or so that this country has a crying need for affordable, rented housing. I would like a pound for every time I have raised that matter both here and in the other place in the past 25-odd years.

The cost of housing need in terms of homelessness, overcrowding, family breakdown and alienation is immense in social and economic terms and far too great even to contemplate, let alone examine, in terms of figures. We all know that. The right reverend Prelate and others mentioned Faith in the City—a tremendous document. We had great hopes for it, but it went the way of all flesh and was destroyed in this Government's hands in the same way as everything else.

There is a need for affordable, rented housing. Every voluntary organisation in the country knows what that means and knows that there is not any. It is not just a question of a shortage; there is none at all. In the district where I live there are scores, perhaps hundreds, of flats and apartments for rent. But the minimum rent for a two-bedroomed flat is between £150 and £200 per week. It goes up to between £350 to £375, and even higher, in some places; for example, Hampstead. No one can say in any language that that is affordable. There are thousands of people waiting for houses, but none of the properties I have mentioned is available to them. Therefore, there is a shortage of available, affordable rented accommodation.

The right reverend Prelate rightly quoted the Government's own figure of a need for between 60,000 and 100,000 homes. The higher figure would be the more accurate. According to the voluntary organisations it is clearly in excess of 60,000. The Housing Corporation has also recognised the need for at least that number of houses—that is to say, between 60,000 and 100,000 affordable, new homes.

But the Government have been systematically under-investing in affordable housing. In 1975 almost 175,000 new homes were started in the social rented sector: by 1980 that figure was just over 56,000. The past decade has seen an annual average of under 34,000 social homes for rent being started. It is estimated that for the current year 1995–96 the figures are the lowest for 50 years with fewer than 20,000 affordable homes likely to be built.

That is just a rough summary of the situation in terms of the numbers needed. When we consider the people who are looking for such homes, we see the gross distortion. The Department of the Environment's projection is between 60,000 and 100,000. If the Government stand by those figures they will have to concede at least two points.

They will have to say that the independent bodies and the housing charities are correct in calling for the provision of 100,000 affordable homes in new build and renovation, as the noble Lord, Lord Ezra, mentioned, and that the Government have been wrong in ignoring the warnings they have had from all those organisations.

Even now the Government would have to concede that they recognise the level of need put forward by their own department and that the Government's investment is failing to meet it. This year only around one-fifth of the new homes needed will be built. That is a dramatic problem as regards the needs of everyone concerned.

The historic shortfall in affordable homes has resulted in massive increases in homelessness. In 1978, 53,100 households were accepted as homeless by local authorities in England. Last year there were 122,660 acceptances. In other words, the figure is now running at an average of 2,500 households a week in England alone being accepted as homeless. They have fulfilled all the terms of acceptability outlined in the legislation. The number of households qualifying for the term "homeless" is now 2,500 a week. As the numbers grow, so the number of homes available has declined, and the problem of homelessness continues.

In their consultation document of January 1994 the Government had some proposals to change the homelessness legislation. One of their arguments was that the current system operates in favour of the homeless at the expense of those on the local authority waiting list. People on local authority waiting lists are just as much victims of the Government's policy of cutting back the building of affordable houses as homeless people are. Instead of setting two vulnerable groups against each other in competition for scarce resources the Government should recognise the desperate need for more affordable houses all round. The idea of "divide and rule" as a means of solving problems is no longer valid.

There is now a greater need than ever for affordable housing. It has been argued that home ownership is likely to reach its maximum level by the turn of the century. Therefore, further expansion of the rented sector will be needed. Trends in the labour market were mentioned by the noble Lord, Lord Harding. We have moved away from people having a secure, lifetime job with a pension at the end of it, and a secure home. That has now gone. The Government have completely destroyed it. We now have insecure employment with part-time working and no security whatever. That means that people need to be more mobile, whether they like it or not. That in turn means that they will be even less willing, or able, to take on mortgage commitments. That is especially true at this time of loss of confidence in the housing market. So the needs of the economy demand far more rented and affordable homes to enable people fully to participate in the labour market.

A knock-on effect is that the disabled are suffering greatly because of a lack of adequate housing for them. There is also a lack of residential accommodation for elderly people who are in real difficulties.

As I said, there is a great need for more investment in affordable houses. The benefits of such investment are only too clear. I do not have time to explain them, but the need is for a dramatic increase in the amount of investment. Economic models show that if £1 billion were invested in social housing, 30,000 new jobs would be created over two years and that between one-third and one-half of the original outlay would be recovered through increased tax receipts and a decreased benefits bill. Now that the Government have begun to recognise that, I hope that they will follow their recognition with some real investment to help solve the problem.

4.11 p.m.

My Lords, one would not expect the noble Lord, Lord Dean of Beswick, sitting as he does on the other side of the House, to give undue credit to the Government for their policies or undue praise for the results of those policies. Therefore, perhaps it will be in order for me to start by mentioning one or two of the products of those policies which he did not. I refer to the facts that 2.4 million extra houses have been produced; that owner-occupation has risen from 56 to 70 per cent; and that 1.6 million council tenants have been able to buy their homes.

It will no doubt be rejoined to the last two points that the cost of owning a home is now excessive. We have already visited the field of negative equity—and a very tragic field it is. However, it is perhaps worth mentioning that, as my noble friend Lord Harding said, the cost of a mortgage has fallen dramatically. The cost of an average mortgage of £33,000 is now £130 a month less than it was at its peak in 1990. Indeed, surveys have shown that home ownership continues to be popular in spite of the risks and that houses are now at their most affordable level in relation to incomes since 1985.

However, that does not remove the problems to which the noble Lord, Lord Stallard, the right reverend Prelate the Bishop of Oxford and other noble Lords referred. That brings me to the central problem. I agree entirely with the noble Lord, Lord Sefton of Garston, that we must consider housing in relation to the economy as a whole. We cannot look at it on its own. I believe that I am right in saying that the result of noble Lords opposite doing that is that they stick to their belief that the way to stimulate and improve the housing market and make it more affordable, and the way to stimulate the building trade, would be to release local authority capital balances acquired by the sale of council houses. I can see the considerable intellectual and political attraction of that. However, if that were to be done on any scale, which would have an acceptable effect, it would have a further effect on the other half of the economic equation. I refer to the rate of inflation. The conundrum with which all governments are faced is to pull off a balancing trick between restarting the construction industry without increasing inflation. I agree that the construction industry is, and always has been, the motor of the economy. When you build and sell a house, you also give business to carpet manufacturers, washing machine makers and electric bulb suppliers. Therefore, that is highly to be desired.

There is a great political temptation at any moment of political exposure or risk to restart that engine in order to achieve an improvement in the short-term political position. I think that the Government deserve commendation for resisting that in the knowledge that the medium-term result would be an acceleration of inflation.

The noble Lord, Lord Williams, being an economist, will doubtless destroy my case at the end of the debate and I shall be unable to reply to him, but I might as well make my case so that he can do that. He may find it a little more difficult than he thinks.

The effect of releasing significant sums from reserves in that way would be to accelerate inflation, which would increase the level of both rents and mortgages payable, and so increase the number of people who are unable to find affordable accommodation. That is not the way to break the circle. I believe that in a period of world recession which is almost unprecedented—it is certainly unprecedented since the Second World War—to have achieved a continuous reduction in unemployment for the longest period since the Second World War and to have maintained low levels—

My Lords, the reduction in unemployment has been consistent over a long period. Noble Lords opposite are crowing because the rate of reduction is now slowing down. However, there has been a real achievement. I am glad to have the Opposition talking among themselves about this. No doubt that will enable them to have a uniform reply at the end of the debate.

In the meantime, I want to make the point that the Government have kept their heads in difficult circumstances and have maintained an economy in which it will be possible for the construction industry to return to growth. I declare an interest as a director of a company which runs the biggest building materials and handling exhibition in the English-speaking world, and I have as much interest as anybody in that industry returning swiftly to profit. However, I would not want that at the cost of the national interest. I would not want to prejudice the beating of inflation and of unemployment in the long term.

There are also less central issues. The noble Lord, Lord Ezra, raised one which is close to my heart. I refer to the House Condition Survey. I became interested in this area back in 1986 when there was an earlier House Condition Survey. I remind the noble Lord that we have always had a problem with maintenance. It fluctuates, and the situation is not good now. However, I commend to the Government measures which will enable both the private and public sectors, and housing associations which fall between them, to recover some of the lost ground of maintenance. Anybody who has been responsible for a house knows that if you delay spending £5 for a year, you will find yourself spending £50. Therefore, assistance to those bodies which tackle that problem is money exceedingly well spent. If there are means of assisting the local authorities to improve the maintenance of their housing stock, they should be taken.

That could be done in association with another of the Government's cherished projects. I refer to the activation of the voluntary sector. Your Lordships will have seen the document Make a Difference and the resources being put by the Government into the voluntary sector. There are voluntary agencies working in the maintenance area. I have the honour to be president of the Upkeep Trust, which is a very small body which has a large effect by training housing associations and local authority officials in the diagnosis of maintenance needs and the management of maintenance. It also seeks to educate the private home-owning public in elementary matters such as emptying gutters before you start getting wet rot in the ends of your roof. That sort of effort can, at minimal cost, have a very considerable effect on the cost of maintaining our housing stock. Therefore, it adds to its value and consequently to the resources available for new and refurbished dwellings, which is what this debate is about.

I hope that my noble friend will not be rattled by the attack of the noble Lord, Lord Williams, on the thesis that you have to control capital expenditure from public sources in order to control inflation. I believe the Government have got it right and I hope they continue.

4.21 p.m.

My Lords, as distinct from the noble Lord, Lord Elton, who observed that my noble friend Lord Dean of Beswick, sitting as he is on the Opposition Benches, could not he expected to give the Government undue credit, I fully expected the noble Lord, Lord Elton, to give the Government undue credit. However, if ever a government were not due any credit on housing, it is the present Government. The housing market—housing for people in general—is in crisis in this country. I bring in support of my argument statistics of just yesterday in Scotland and of today in relation to the whole of the United Kingdom. Yesterday, the Scottish Federation of Housing Associations, in conjunction with Shelter, published the findings of a survey carried out on their behalf by Gallup showing that nine out of every 10 respondents put housing higher than health and education on their list of concerns. In other words, housing is now people's greatest concern. That is manifesting itself in all sorts of situations over the length and breadth of Scotland.

In your Lordships' House today we were given a response on the question of the increased number of house owners suffering from the ever-growing disease of negative equity. The number has increased, on the Government's own figures, by 200,000. When I hear the noble Lord, Lord Harding, say, "Well, some people are going to lose their house this year and unfortunately nothing can be done about it" it takes me back to my political roots. Housing is now, as it always has been and always will be, a social question. Therefore it will need a government with a social conscience to deal with the problem. I give one further statistic, published the day before yesterday by the Scottish Council for Single Homeless. Every day of every week five elderly people join the homeless queue. When, at a press conference, it was asked what was meant by elderly people, the age group given was 60 to 80 years of age.

That is a new dimension of homelessness. We have always taken the view that homelessness was a major problem among young to middle-aged people. Yet in Scotland—I do not know the figure for England—five elderly people every day of every week join the homeless queue. That is an absolute scandal: in 1995 no government should try to defend that position. The problem has arisen because the Government do not believe in social housing. Indeed their whole objective since being elected in 1979 has been to remove housing from the control of local authorities. I am sorry that the right reverend Prelate the Bishop of Oxford is not with us now because in many ways that was the wrong reason for setting up the housing associations. The Government are using housing associations—in Scotland, through the vehicle of Scottish Homes—to remove houses from the control of local authorities. The evidence exists. The noble Earl the Minister will know that when Scottish Homes, formerly the Scottish Special Housing Association, comes to dispose of its stock it fights might and main to stop local authorities being on the ballot paper as an option for a tenant transferring a house. There is only one instance that I know of in Scotland where a local authority has been included on the ballot paper as art option.

So we have this major problem. It is easy to identify, but I share with the noble Lord, Lord Ezra, the belief that we have to modernise the existing housing stock. Yes, we need new build. I leave to my economist friend on the Front Bench the job of demolishing the argument of the noble Lord, Lord Elton, regarding the capital sums that local authorities have and how they should be used. We certainly need new build but we also need to modernise the existing housing stock. Some of that housing stock, built in a hurry for perfectly good reasons at the end of the Second World War, is now in a bad state of repair and desperately in need of modernisation and of upgrading.

We need to allow local authorities to be involved in new build. I support the housing associations in what they are doing, although I have one reservation about them. That concerns what I describe as the gap site developments. Some of the sites that housing associations have been given to build houses on are simply not suitable for the building of houses. I see that in Kirkcaldy every day as I pass a development at a busy traffic junction. The only advantage is that you can plug your standard lamp into the traffic lights. It really is not on for housing associations to be given difficult gap sites on which to build houses. That is just storing up problems for the future.

There is a serious shortage of housing for people with disabilities. We need to concentrate much more on barrier-free housing. I know of patients being detained in hospital for week upon week upon week because there is not a house to which that patient can be discharged.

My final point relates to the sale of council houses. I shall say something now that I know will not be popular, not even with some of my noble friends. I have never known anything to be so socially divisive in all my political life as the sale of council houses. I have known families who lived happily together for 40 or 50 years but as soon as one member of that family purchased a house they stopped speaking to each other. A six-foot high fence is built and they are away to the council to claim that the driveway is theirs and theirs alone. Lifelong friendships and the social cohesion of communities have been destroyed on this myth of the sale of council houses. I feel that we are talking among ourselves here, and I do not believe that the Government will attempt to solve the problem. I hope, however, that when we get a change of government we can make a beginning on the massive job that requires to be done in housing.

4.29 p.m.

My Lords, I am extremely glad that my noble friend Lord Dean put down this Motion. Apart from anything else, it gives me the opportunity to congratulate the noble Lord, Lord Elton, on a quite remarkable speech. He knows that I hold him in high regard. With his interest in building materials, he gave us a marvellous demonstration of how to make bricks without straw. It also gives me the opportunity to draw attention to an impending construction disaster. It is that London Underground proposes to line the Thames Tunnel between Wapping and Rotherhithe with concrete. That is unnecessary. It is a desecration of a remarkable historic monument. It was the first underwater tunnel in the world, engineered by Marc Brunel, a British engineer, with his son, Isambard Brunel, as a site engineer. The tunnel has been listed as a Grade 2* monument. In a Written Question I have asked that there should be a public inquiry before the work is permitted to go ahead.

The planning director of the London Dockl ands Development Corporation has justified the passing to the Secretary of State of the application to do the work in the following words:
"The Tunnel requires repair and is potentially unsafe. Furthermore, it leaks. This was confirmed by the panel of independent and eminent engineers appointed by English Heritage".
That was in a letter to the New Civil Engineer, a magazine with which I have been associated for the past 20 years, as many noble Lords will be aware. But it is not true. The tunnel does not leak. What the eminent engineers appointed by English Heritage said was:
"In our opinion the Tunnel is in remarkably good condition for its age of 152–169 years and with considerable reserves of strength, even against accidental damage".
This is the important bit:
"With normal periodical maintenance, we believe that, under present usage, it can be expected to have a further life of comparable length".
That is, the eminent engineers think that the tunnel can last for another 150 years with normal maintenance and without the extravagant lining which London Underground proposes.

I shall say just one more thing about that. I said that I had put down a Written Question. About half an hour ago I received the Answer from the noble Earl, Lord Lindsay, who is sitting listening attentively to me. The Answer is:
"Very careful consideration is currently being given to whether the application should be called in for determination by Her Majesty's Government. It would not, therefore, be appropriate to comment on whether a public inquiry should be held".
I understand that, and I thank the noble Earl for that reply. I sincerely hope that when consideration is given to calling in the application the Secretary of State will decide that it should be called in.

My Lords, in view of the noble Lord's earlier remarks about myself, perhaps I may ask him whether he would regard it as a help or an embarrassment if I were to say that I agree entirely with what he has just said.

My Lords, it would not be an embarrassment to me. As the noble Lord knows, he and I have frequently agreed and we have frequently disagreed, but when we agree, we agree in an amiable manner.

Let me turn to something more general. My noble friends Lord Dean and Lord Sefton mentioned the Latham Report. It was set up some time ago by the Government to inquire into the construction industry, with the hope of making it a more coherent industry. As noble Lords will know, I am a civil engineer. I have spent a lifetime in the construction industry. It is acutely incoherent. It is a preposterous industry. It consists of a vast number of small firms (there are 2,000 firms in the industry) and a few very large firms employing the small firms, often as sub-contractors, with the problems to which my noble friend Lord Sefton drew attention.

The industry nowadays employs about 750,000 people. It used to be considerably more. And it provides something like 10 per cent. of GNP. It is an important part of our economy. But it is incoherent and inefficient. Latham thinks that construction costs could be reduced by about 30 per cent. That is one of the aims which he puts at the end of his report. He bases that on the fact that a good deal of tidying up of contractual arrangements could be made. He makes a number of recommendations as to how that could be done. There are payments, for example. A sub-contractor does a piece of work; he puts in his bill for the work that has been done and he is paid eventually. He is paid eventually—when the main contractor feels that he would like to pay him. But payment should be made when the work is done. That is one of Latham's proposals.

Latham proposes something else which is interesting. He proposes that there should be a register of consultants. As a consulting engineer I applaud that. It was, after all, one of the proposals of the Finniston Committee, of which I was a member, which reported as long ago as 1980. Needless to say, that proposal was abandoned. Latham is now making it again. He suggests a similar register for contractors and specialists. Those registers relate, of course, to public works.

The report also makes another most interesting proposal. It is that public authorities should accept tenders which offer best value for money. That is important. Noble Lords will remember that an important part of the local government Bill we dealt with a year or two ago produced compulsory competitive tendering for architects, engineers and other professional people. We argued throughout the Bill's passage that the criterion should be quality and not cost. That is what Latham recommends. It is essential that Latham's recommendations should be put into practice through legislation.

That brings me back to Finniston, because noble Lords will remember that Finniston's proposal related to the reorganisation of the engineering profession. He proposed that there should be an engineering council set up by statute. The Government left it to the profession to come together voluntarily. This is an area where voluntaryism does not work. It will not work in Latham any more than it worked in Finniston.

4.38 p.m.

My Lords, it is said that confession is good for the soul. I am going to confess something now out of cowardice, because when my noble friend Lord Howie found out, had I not said it now, he would be more than outraged. I must tell him that I was a member of the planning committee which made the decision to which he has taken such great exception. I only wish that I was in such a condition for my age as is the tunnel.

I should like to thank my noble friend Lord Dean for giving us the chance to speak about the housing situation in this country. I hope that it will be recognised by noble Lords that I try to be as assiduous as I can about the conventions of the House, but because it is a three-hour debate I fear that at the end of it I shall have to leave because of other arrangements. I hope that I shall be excused. If it is any expiation, I am going to Docklands to try to improve housing conditions there. So it is not entirely ungermane.

My noble friend Lord Ewing of Kirkford mentioned the problems of an ageing population. There is one thing upon which I should like to touch. It is the growing debate about what happens to elderly people. It seems to me that we are moving away from what I have always regarded as a fundamental obligation—that one should look after one's parents when they become elderly. Indeed, I find it sad that these days there are elaborate articles in the financial press advising people on how they can arrange their affairs so that the cost of looking after their parents falls basically on the taxpayer and they can preserve their own means. We talk a lot about people earning a great deal of money, but bus drivers and people cleaning offices pay taxes. It is not fair for those who are better off in society to expect to off-load what most people would regard as their obligations.

Unlike many, I believe that lobbying is perfectly reasonable when it is done properly. I am sure that, like myself, many other noble Lords have received submissions from various groups about today's debate. That is perfectly legitimate and often extremely useful. But pressure groups and lobbyists sometimes develop a compartmentalised attitude and do not look at the wider picture. They pursue their own interests to the exclusion of everything else.

It would be extremely invidious of me to take an example of what I mean from any of the literature that I have received for this debate. Therefore, perhaps I may illustrate my point by reference to another group on which I have touched before in this House; that is, Charter 88.

In the Guardian of 14th June I saw this advertisement:
"Charter 88 Director Applications are invited for the high profile position of Director of Charter 88. the leading organisation promoting constitutional reform".
Your Lordships may recall that this group believes that we are one of the most down-trodden nations of the world and that the only way in which to regain our rights is to have a written constitution so that we have rights and those rights are protected. Your Lordships may say that that is fair enough, but perhaps I may read the last paragraph of the advertisement:
"We encourage applications from all sections of the community. Unfortunately our 3rd floor office is inaccessible to wheelchairs".
That is really a case of don't do as I do, do as I say; or physician heal thyself.

People may say, "Cocks is being very unfair again" because the charity probably cannot afford to make the office accessible. But noble Lords may feel that that point is overstated when I tell the House that in the past few years Charter 88 has spent well over £½ million on newspaper advertisements.

Some of the literature that I have received has been about the private rented sector. The noble Lord, Lord Harding, mentioned that, as did the right reverend Prelate and others. That is one of the serious aspects of the problem. The Joseph Rowntree Foundation study made a number of points about the private rented sector—that it should be boosted; that most countries subsidise their private rented sectors; and that financial institutions should be encouraged to move into the private sector. Various suggestions are made as to how the situation could be improved.

However, there is a very much simpler way which I have mentioned before in this House; that is, to try to ensure that far more students take courses nearer their homes so that they do not have to move away from home in order to pursue their studies. That happens in Scotland. Most Scottish students live at home; and nobody says that Scottish education is inferior to English education. It is perfectly natural to live. at home. People say that going away to study is all part of the experience of growing up. But if that is so, it is part of the experience of growing up which working-class children are deprived of. I never hear academics and student bodies say how sad it is that working-class people cannot develop properly because they do not have that opportunity. It is a vested interest of the ablest and the wealthier children in our society.

Bristol University has been particularly bad in that regard. For more than 25 years I have pursued it to try to ameliorate its admission policy. At the moment, something like 1 per cent. of its students live at home and the rest are accommodated in the private rented sector or in halls of residence. When I was the Member of Parliament for Bristol, before a majority of my local management committee decided that I was not a fit and proper person to be a public representative, most of the problems with which I had to deal were in relation to housing. The local people were desperate for housing and yet hundreds of units of private rented accommodation were taken up by students who really did not require that luxury.

Coincidentally, this morning I received a letter from a person living in Goldney Road, Clifton asking for my support against the university. The letter refers to:
"the concerns of residents to the gradual encroachment of Bristol university on the grounds of Goldney House Clifton".
Some noble Lords may know that that is a beautiful house with a wonderful grotto in the gardens. The letter goes on to say, referring to the university:
"They have just completed a refurbishment of the Halls of Residence in the paddock, greatly increasing the student population and there are now fears that they intend to apply for further planning on the lower slopes of the ground, as they object to the Deposit Bristol Local Plan—October 1993".

It really is time that establishments of higher education took seriously the problem. They should realise that we do not live in compartments and that their responsibilities extend to helping the least able in society.

4.46 p.m.

My Lords, I too thank the noble Lord, Lord Dean of Beswick, for introducing this subject for debate today. There are so many aspects that one could talk about but I propose to concentrate on two: first, the swing that we have had from housing for rent to housing ownership and the necessity for a swing back; and secondly, the need for proper ecological and environmental housing.

In the memory of many here, we have moved from an era in which housing to rent was almost the rule for all classes to one where it is almost politically incorrect to say that you should ever wish to live in a house which is not your own. As with all swings of the pendulum, we have gone from one undesirable extreme to another.

When my grandfather, who was a younger son, married, he rented a house and lived in it for the rest of his life. It was not a small house: it was a copy of the centre block of Buckingham Palace. He rented that house for 20 years. That ability to live in rented housing went down through the tenant farmers of all the large estates through all ranges of society. It had its drawbacks, difficulties and problems caused by powerful landlords and powerless tenants. But it was still something which was taken for granted.

We reached a stage in the early stages of this Government's regime at which it was considered to be almost not respectable not to try to own your own house. That is not suited to what most people want. It has flourished on the back of propaganda which suggests that the citizens of rich countries are home owners and those in poor countries are not. That is not true. In a list of countries ranked in order of home owning, Bangladesh has 90 per cent. owner-occupancy and Switzerland has 33 per cent. Therefore, that is entirely contrary to what most people believe.

The truth is that neither extreme is desirable and we need to look at what houses are needed for. Your Lordships' House must be one of the few places left where a large proportion of people have houses which they reckon to hand on to their children. Most of us do not and our children would not thank us if we did. But to trap a wide range of the middle classes in a myth which encourages them to borrow money which they do not have on security of jobs which they may not keep in order to own their houses is extremely stupid.

However, having said that we should now go into reverse and encourage a climate of providing houses to let so that families can move easily according to their size at any given moment, I should now like to pass on to discuss what kind of houses they should be. Unfortunately, I do not have time today to go into many of the important points, but I should like to dwell on one of them. It is very simple: they should be healthy for the people who live in them and for the world from which their materials come. That means being choosy with materials, but it does not mean abandoning diversity.

To stray outside of housing for a moment, St. Albans Abbey, which I gather is still in quite good nick, was built 900 years ago with what were already 1,000 year-old bricks from nearby Roman ruins. At the other extreme, many houses in California, on the other hand, are built from "gridcore", which is recycled newspapers, cardboard boxes and timber moulded to maximise strength and minimise weight. Both of those examples have more virtue in their own way than, say, the Fawlty Towers of Marsham Street.

First, we must build to last. It is a fallacy to think that we must build only to last a short time because new technology will make our old houses obsolete. It is the solid buildings which for the most part can be adapted. The standards which we use for building today are unlikely to produce buildings which are acceptable in 30 years' time, let alone 300.

We must build to last and we must build to the highest standards. At present, we do neither. The energy conservation requirements of the latest building regulations just about reach the level adopted in Sweden 60 years ago. If we adopted current Swedish standards we could reduce the amount of domestic heating to a quarter of the current average in this country.

We must concentrate on building in such a way that we can save energy without ruining the poor. Where in northern Europe housing standards are much higher than ours—and where are they not?—energy taxation which is essential if we are to shift taxes from labour to resources (which is essential for a sustainable economy) is feasible without making the poor suffer.

A whole new climate of opinion is needed before those matters can become mainstream in this country, but we have made a start. Among other things, we have made a start with the recent Home Energy Conservation Bill brought through Parliament by people from all parties but chiefly, I am proud to say, by the pertinacity of Alan Beith, Diana Maddock and my noble friend Lady Hamwee, who is to speak shortly. Let us build on that start and move in that direction, remembering that to build cheap and nasty now is to lay up disasters for the future.

4.52 p.m.

My Lords, I too am most grateful to my noble friend Lord Dean for giving us the opportunity to debate housing. My noble friend is a very lucky chap because it is such a topical matter. Indeed, it was very good of him to suggest such a topic at this time. Fifteen years ago home ownership equalled security. It was encouraged because it was right to give people a stake in society. But good things abused become disasters. That is what happened with housing. It became a lottery.

Financial deregulation and the favourable point of the economic cycle allowed households throughout the UK much greater access to credit. This, and tax incentives, fuelled a rapid rise in house prices. With house prices rising inexorably at the beginning, it was a one-way bet. You borrowed from the banks; you bought a house. The value of your house rose without any action on your part. Although it helped, you did not actually have to look after your asset—the value went up faster than it depreciated. Contrary to what the noble Lord, Lord Elton, said, government policy during the 1980s did not ensure that there was more and better housing. What it ensured was that the price of houses went up and up.

Unlike the National Lottery, everyone won or appeared to win at the beginning—home owners, banks, the Government (they won votes), the estate agents, the builders, and the DIY suppliers. Everyone benefited. Many people sold their houses and took profits. Some £20.4 billion of equity was withdrawn at the peak in 1988—certainly a boost to consumption but, I would ask the Minister, what additional resources were being created? Much of the economic boom of the 1980s was based on house price inflation. People withdrew equity on the increasing value of their houses to fuel a spending boom. But what new capital was created? Where is the new wealth now? Where are the new factories, services and infrastructure?

Nothing was created. Prices simply rose and some people won. Now it is the loser's turn in that lottery. As my noble friend Lord Dean said, repossessions are running at nearly 1,000 a week. Moreover, 117,000 plus households are more than 12 months in arrears with their mortgages. Negative equity is estimated at some £8.5 billion and rising.

It does not take much imagination to appreciate the human misery caused by the distress of either losing or being close to losing your home. Homes and jobs are the two pillars on which the lives of most people rest, and repossessions are increasing. There are thought to be nearly 1 million home owners whose houses are worth less than the mortgage taken out on them. Last week we learned that the building societies, insurance companies and banks are adding to the problem by levying extra charges on those in trouble. Measured in human misery, they are very high numbers indeed.

What are the Government doing about it? They seem determined to make a bad situation worse. We have had reductions in mortgage interest tax relief from a high of 40 per cent. to 15 per cent. now but that overlooked the fact that mortgage interest tax relief was built into the price of a house. The reduction in that benefit is reflected in reduced house prices. Added to that is the reduction in income support for mortgage interest payments for those who are unemployed from October. That means that mortgage lenders will be faced with either insuring themselves or making insurance a condition of lending.

The initiative by the Skipton Building Society is helpful but once it ceases to be a competitive advantage and all firms do it it will simply be added to the cost. I can tell the noble Lord, Lord Harding, who called for compulsory insurance, that insurance companies estimate that it will add some £22 a month to the cost of an average mortgage. Even so, the Minister knows as well as I do that insurance for mortgage risks is extremely difficult, if not impossible, to define. I am therefore not surprised that two-thirds of the people who have taken out the insurance found, when they came to claim, that their claim was rejected. Let us not forget also that insurance premium tax has to be added.

I am not criticising those actions. I am criticising the timing. When a company or an industrial sector is in trouble, government should not add to the difficulties. Yet at the very time when we need to sustain housing the Government have chosen to add to the problem. In doing so they have turned a problem into a crisis. The situation is made worse by Ministers, and some noble Lords opposite, giving uninformed or biased opinions about whether now is or is not a good time to buy a house.

It seems to me that the Government could do a number of things. The first is to remember the wise counsel of my noble friend Lord Healey. If you are in a hole, stop digging. They should therefore stop playing around with mortgage interest tax relief. The next thing they could do, which is part of Labour policy, is to allow a phased release of the housing capital receipts in the possession of local authorities. I disagree entirely with the noble Lord, Lord Elton, but I do not have time today to explain my reasons to him. The money could be spent on affordable rented accommodation. Private sector building for rent is not replacing public sector housing which has been discontinued. The resources are available; they simply have to be harvested. A further action the Government could take is to help first time buyers on a limited scale and for a limited time.

I hope that the Minister will not be blinkered to the usefulness of Labour proposals in solving the current problems. Our policies are designed to promote a stable housing market, not a lottery, and a real choice for people in the rented sector. That is what we call social justice.

5 p.m.

My Lords, one of the advantages of being almost the last speaker in a debate is that practically everything one wanted to say has already been said. I am not an expert on any practical matters, unlike many of my noble friends, and therefore I shall stick to theory. Indeed, the housing tragedy that we are currently facing, as my noble friends have pointed out, is very much a sad story of dogma and half-baked economic theory.

I first arrived in this country in 1965. Until then I had lived mainly in rented accommodation, some of it in the public sector and some of it in the private sector. It was only when I arrived in this country that I realised there was a great belief that to own a house was somehow better than to rent it. If one wants housing services, a shelter, comfort and accommodation it should make no difference whether one buys a house or rents it, or whether the house is in the public or private sector. One should have choice in that respect and one should get on with it. But already by the early 1960s the tax structure was being badly manipulated to subsidise ownership relative to renting.

When the noble Baroness, Lady Thatcher, became Prime Minister in 1979 that bias was twisted further and deeper because she was convinced, first, that home ownership was absolutely a sacred goal of public policy, if not a virtue in itself, and, secondly, that in order to aid it interest rates had to be so manipulated that home owners would always feel cushioned and protected.

At the same time, mortgage relief was not seen to be a subsidy to the home owner. Home owners were not considered to be scroungers on the public budget—oh no! However, council tenants were considered to be scroungers on the public purse because it was thought the subsidy to council tenants was a great distortion. That again is a fallacy but we shall deal with many fallacies as we proceed. Through the 1980s the subsidies to council tenants were reduced mercilessly and the subsidies to home owners were increased. Indeed, by the time the noble Lord, Lord Lawson, embarked on his 1987 and 1988 budgets the distortion to home ownership was so exaggerated that double mortgage reliefs were being given.

The double mortgage relief given, I believe, in the budget of 1988, was the single most important case of almost criminal folly in economic policy making because that pressed people into buying when they could not afford to do so. It pressed people to buy property at prices which they could not afford. At that time Government policies were fuelling inflation, regardless of all the talk about monetarism and all that sort of thing at that time. Inflation was accelerating and many people entered contracts which any prudent government would not have let them enter into.

Anyone who really believes in the market would have said long ago that these kind of distortions constitute a major diversion of economic resources away from what not just a country needs but what individuals need. To that was added the sale of council houses. People who had never before been in a position of indebtedness became indebted, little realising that even after concessions the prices they were paying for their council houses were inflated. In the late 1980s after having had two bouts of double digit inflation in 10 years—when finally, and quite prudently, it was decided that the country had to put its economic house in order and join the exchange rate mechanism—it should have been known by anyone (as I said publicly) that what occurred was a great deflationary shock and that the country was not used to deflationary shocks. The negative equity which we are witnessing now is, in a sense, basically the simple consequence of trying to adjust to a much lower level of inflation than we had before.

In a world like we have today, home ownership or renting makes absolutely no difference, or should make no difference. Of course the Government will say, "But that is our current policy" forgetting that all the previous policies were also their policies. The Government will say, "We are going to encourage a private rented sector"; but where is the private rented sector? It has not arrived on the scene. While they have wrecked the public rented sector quite badly by selling off council houses and not allowing the building of new council houses, the private rented sector has not arrived on the scene. People with negative equity cannot sell their property and cannot move. People with incomes which are not rising very fast cannot afford to buy, even while prices are stagnant, because mortgage interest relief—quite rightly in my view—has been severely cut. That is why the problem of homelessness occurs with the old and with the young. The old are becoming homeless because they have negative equity or they cannot service their mortgages as their incomes have fallen. They are being thrown out. The young cannot afford to buy houses because mortgage interest relief has been so drastically cut.

It would be easy in the circumstances—if sense prevailed—to say, "OK, let us build for the time being a sufficient amount of low cost housing, either through the public or the private sector". There is no question of resources. I will not go into the fallacy mentioned by the noble Lord, Lord Elton, as regards the PSBR. Even if it were true that releasing council receipts would add to the total demand, given the excess capacity of the construction industry which many noble Lords have referred to, it would not cause inflation. But let us not go into that. As I said, there is no shortage of resources but there is a shortage of good sense. We ought to be able to say, as my noble friend Lord Ewing said, that housing is somewhat special. It is not like hamburgers; it is a commodity which has special social consequences. It is society's duty to provide decent housing for everyone at a price that people can afford. After that one can discuss choice, variety, the provision of big or small houses, good architecture and other such matters.

The population of this country is by and large stagnant—it is not galloping—and it should not be beyond our imagination to provide housing in sufficient quantity for those who need it. People are living longer and people want more sophisticated housing, but there are not that many extra families to house. What we need is good sense in this matter. Given the record of the present Government, good sense would require a new government.

5.8 p.m.

My Lords, this is the third or fourth time over the past two years that the House has been grateful to the noble Lord, Lord Dean, for having raised this important question. One rather hopes in view of the very factual speeches that have been made on all sides of the House that we can have reasonable replies to the questions that have been raised. It will no longer suffice to be informed that in real terms it is the intention to spend a billion over the next five years or that the position since 1987 has vastly improved. Serious questions have been raised which need rather more than the ambiguous reply that we customarily receive at the end of important debates like this.

Noble Lords opposite were not assisted by the noble Lord, Lord Harding of Petherton, who rather admitted that the Government had been seriously at fault in encouraging home ownership by a sustained campaign in the 1980s. He suggested that we ought to put that behind us and move on to better things. We entirely agree.

As for the noble Lord, Lord Elton, who gave us a dissertation on inflation, he really ought to examine his facts again because he talked complete nonsense about inflation. I am very glad that the noble Lord has now resumed his seat. He was obviously completely unaware that during the period immediately following the war, until 1974 and the quadrupling of the price of oil, the rate of inflation in this country, under all governments, averaged around 2½ per cent. It was the quadrupling of the price of oil that gave the initial boost to inflation. Until that time, despite the great difficulties, every government, including those of the noble Lord, exceeded the miserable record in house construction that has been achieved by this Government over the past 15 years. They have not really tackled the problem at all.

Those are problems that have been dealt with more than adequately by my noble friends. I observe that there are 11 speakers from my own Benches, three from the Government Benches and three from the Liberal Democrat Benches. We have already heard an important speech by the right reverend Prelate, who brought the fundamental issues before the House.

I want to address myself to one matter on which the Government may themselves be able to act now. Even if they had a wholesale reformation of thinking, even if they had a sudden access of intellect and even if they were prepared to abandon their prejudices, the Government could not influence in the next three weeks or so the rate of increase in the construction industry or in housing in the United Kingdom. I have not consulted my noble friends on either Bench on this issue, but there is one thing that they could do if they were so minded. They could deal with the whole question of repossessions.

According to the Department of the Environment's own figures, repossessions are likely to increase over the next few months. Already there have been 300,000 repossessions in the UK, affecting some 700,000 individuals. There is a way of stopping that. The building societies and banks do not have to repossess. Nobody forces them to. They could wait without any great difficulty. Indeed, if they had the same degree of faith in the Government's economic policies as the Government themselves affect to have, they could lay off for a year without any difficulty until the long-promised recovery, if it ever materialises, takes place. It is not as though the banks were forced to seek repossessions: it is in the control of the banks themselves.

Perhaps I may refresh the memories of noble Lords on this subject. Immediately following the oil glut in the Middle East, the banks rushed to compete with one another to lend money to developing countries, followed hard on their heels by arms manufacturers. They were only too pleased to supply those countries. That situation speedily deteriorated to the point where the banks themselves had to write off billions of pounds owed by other countries.

There is nothing stopping any bank writing off loans that are due to them here, or part of them. The Government could lean on them if necessary. It is not as though the banks do not help other people. I see that the banks stepped in to prop up Barings, particularly the directors and shareholders. They will prop up anybody provided they have sufficient funds already or belong to those particular strata of society with which the bankers have something in common. Therefore, there is nothing to stop the banks and building societies holding their own moratorium on all repossessions.

Instead, at the moment where arrears occur, building societies and banks levy what they call administration charges on those who are already suffering negative equity. Those charges may amount to £140 to £112 a year extra. They also charge interest on interest. That was prohibited as long ago as 1927 by the passing of the Moneylenders Act. Therefore, it lies within their own power.

Surely the Government, who are always busy putting forward the value of guidance and codes of conduct, could lay down codes of conduct for banks and building societies indicating how they should behave during what the Government believe will be a temporary period. Surely they could do that. If they do not do even that, they might as well say "Goodbye".

5.16 p.m.

My Lords, I too should like to thank the noble Lord, Lord Dean of Beswick, for introducing this debate on housing needs, and on financial institutions and the construction industry—matters on which we have sometimes touched peripherally.

I was privileged to introduce a debate on housing and homelessness a year ago. I thought that I would remind myself what the Government had to say then on the topic. On that occasion the then Minister said that:
"the broad aim of our housing policies is that a decent home should be within reach of every family. We have taken steps to increase the supply of housing where it is most needed, by securing better value for money in the public rented sector and by promoting the private rented sector".—[Official Report, 8/6/94; col. 1284.]

My noble friend Lord Rodgers of Quarry Bank asked the Minister during the debate whether the Government had a housing agenda and challenged him by suggesting that there was no housing agenda. The Minister's answer was that the Government had such an agenda—they had the Housing Corporation.

The Government may have a vision, but it is not my vision. It is certainly not translated into any kind of agenda or plan to do anything but reduce spending without tackling the causes of the problem. It seems to me that all sectors are suffering at the hands of the Treasury and its short-term thinking—housing associations, local authorities, private landlords, mortgage lenders and all those who occupy their own property. To use current jargon, I suppose it is a level playing field.

A year ago we also considered a report by the National Housing Forum—Papering over the cracks—on housing conditions and the nation's health. It was an excellent report. It reminded us why housing conditions matter, posing a serious problem for society as a whole as well as for individuals. It reminded us that housing is a capital asset which should be preserved and that investment in housing renewal could be an important component of economic recovery, renovation work being labour intensive and the majority of materials used being made in Britain.

The report made a number of recommendations to the Government. It proposed that,
"Within the next twelve months"

—that is the 12 months which have now expired—
"the government should develop a broad strategy for private sector housing renewal and set national targets for tackling the backlog of unfitness and disrepair in the housing stock over the next ten years".
It suggested that,
"Financial institutions…should take on a responsibility for local communities by promoting and stimulating investment in housing renewal in a range of ways".
It also suggested sponsorship of home improvement agencies and the provision of finance to housing associations for renewal projects.

I welcomed that report because housing is not just a numbers game. It raises the question of what has been achieved over the past year. The fact that the forum felt it necessary to report on the connection between housing and economic renewal speaks for itself.

The Joseph Rowntree Foundation—as your Lordships know, it does splendid work in the area of housing—has reported extensively on the connection between housing renewal and construction expenditure. Among other reports, it has made important points about the local connection: that very few local businesses have been created or enhanced; that training programmes are inadequate; and that therefore if there is an amount of work its effect does not last. The work is undertaken but the jobs do not remain.

That is particularly sad given that the physical regeneration of disadvantaged areas, in particular urban areas, involves the expenditure of millions of pounds. This is a major opportunity not only to undertake a specific scheme of work but to invest in the area for generations. It seems that little sustained economic benefit results for local residents.

The Joseph Rowntree Foundation has also reported extensively on a matter which, with other noble Lords, I feel is one of the most urgent: the supply of privately rented accommodation. The study stated that,
"Private renting … is a small business; over half of privately rented housing belongs to small-scale individual landlords; only a quarter is owned by companies".

Your Lordships will recall the Business Expansion Scheme. Through the BES, 903 companies raised £3.4 billion and provided 81,000 dwellings at a cost to the Exchequer of only £1.7 billion of tax foregone. I say "only"; I recognise that these are large sums, but the prizes are large, too.

The Joseph Rowntree Foundation study—it was a study by academics at the Universities of Sheffield and York—asked the financial institutions about private renting. Those institutions responded that the political risk and the image were major deterrents. Pension and life funds said that even if returns were good, political risk and image would deter them.
"If returns were enhanced through subsidy, this would not necessarily induce investment, because subsidies were too subject to change over an investment's lifetime".
In other words, they were asking the Government to consider the whole grant regime.

Banks, too, were cautious. Building societies were more positive. Provided that financial assistance, particularly in the form of grants, was available—I make the point again because it is an important issue for the Government to take up and act upon—they would he willing to lend.

What are the Government doing to develop ideas for stimulating the sector? Organisations such as the Joseph Rowntree Foundation do splendid work, but we cannot leave the whole area of ideas to the private sector. If the Government have no ideas of their own, I am sure that they would be welcome to plagiarise the ideas of the private sector. But they must get on with the work.

Other noble Lords have said that we attach too much importance to ownership. I so much agree with my noble friend Lord Beaumont of Whitley. We attach importance as a society to ownership. The Government certainly do so. But there must be many families in this country which wish that they had not owned their homes. Over a quarter of a million homes have been repossessed since 1988. That gives only the smallest indication of those families which are teetering on the brink, or those people whose jobs have been affected because they cannot move. One has to couple that with the fact that public housing investment has fallen by 37 per cent. in real terms since 1979–80. In the past year total investment in social housing was at its lowest level in real terms for several decades.

I am not just interested in government research. I should also like to know what the various government departments have to say to one another; and in particular what the Department of the Environment has to say to the Department of Social Security regarding plans for housing benefit, the results of which, it seems, we shall experience shortly. I believe that the Department of the Environment must share the concern of many of us that the greatest effect of the changes will be to depress the private rented sector.

We have heard views on the use of capital receipts held by local authorities. The noble Lord, Lord Elton, spoke of the restriction in order to hold down inflation. I doubt that that argument would attract those in housing need. It does not attract me. I confess myself to be of the tendency which thinks that a good use of resources is indeed a motor of the economy. I thought that the restriction was because central government were determined to reduce the capital base of local government.

Finally, we talked of the "motor" of the economy. We know how other motors—new motor cars—drop massively in value the first time that they are driven away. But the purchaser of a car knows that that will happen. The purchaser of a car has options. Many who are buying housing—I refer to buying in the broadest sense—those who are acquiring housing, find that they have paid for a high performance item and are left with something far more modest. I do not suggest that it is at the level of a clapped-out Mini, but it cannot be resold. Those people have no opportunity to acquire on HP or lease purchase. The Government need to explore all the options.

5.27 p.m.

My Lords, the House will be grateful to my noble friend Lord Dean of Beswick for introducing the debate. Perhaps I may say at once, I hope not impertinently, how impressed I was with the speech of the right reverend Prelate the Bishop of Oxford. If I may say so, he put his finger absolutely on the problem.

The facts which have come out of the debate—they are facts to which we have to pay attention—are that home owners have endured about six years of crisis marked by falling house prices, negative equity, mortgage debt and repossessions. The housing market itself is depressed. Housing sales in April, a key month in the house buying season, were the worst ever recorded. New house building has been badly hit. Starts in the latest quarter are 14 per cent. down on 1994. The rented housing programme has been drastically cut. Housing association starts in the latest quarter are 35 per cent. down on 1994, and the output of rented homes is expected to fall below 20,000 this year. That is the worst figure for 50 years.

At the same time, tenants of councils, housing associations and private landlords have been faced with disproportionate rent increases forcing ever larger numbers into dependence on housing benefit which is also now being targeted for cuts. In England alone, 1.5 million homes are unfit for human habitation and a further 3.5 million need urgent repairs. Home renovation programmes have almost ground to a halt. A decade ago over 200,000 grants were being awarded each year. The total is now down to 40,000. Long queues are forming in most areas. One hundred and sixty thousand households were accepted by local authorities in Great Britain as homeless last year and there are many more mainly single and childless people whose needs are not reflected in the official statistics. In terms of national expenditure on housing investment, Britain lags 21st out of 22 OECD nations spending just 2.9 per cent. of gross domestic product at the latest count. That contrasts with Germany spending 6.1 per cent. of GDP; France, 5 per cent.; and Italy, 5.3 per cent. Those are the facts.

As many noble Lords know, the construction industry is flat on its back. Latham has not been implemented and there is no sign that it will. As my noble friend Lord Bruce said, the banks and building societies joined in a chase for assets, jumping into the housing loan market. As he rightly said, they do not have to repossess. They can adopt what my noble friend Lady Hollis suggested when we were debating the ill-fated leasehold enfranchisement Bill. It was not a rents-to-mortgages scheme but a mortgages-to-rents scheme. If my noble friend will forgive me, his idea was not original. It came from my noble friend Lady Hollis some time ago when we debated that Bill.

The Government have gone even further and seem to wish to talk down the whole housing market by the business of removing income support. The point here is not just that they are attacking the most vulnerable people. We know that; it is normal for this Government. It is that by introducing such a measure, they are talking down the house price market and therefore talking up negative equity.

There are a number of wild fantasies about remedies for the situation. As my noble friend Lord Haskel pointed out, mortgage protection insurance is a hopeless idea. According to the Association of British Insurers, no serious insurance company would adopt such a scheme and I personally cannot see a market for it. We have now heard about the Skipton solution. The Skipton Building Society has 0.5 per cent. of the house financing market. It has suddenly apparently come up with a scheme that will cost money, if indeed it works. I doubt very much that it will.

The situation is one of crisis, and we must consider carefully what we do about it. I shall not join in the debate with the noble Lord, Lord Elton, about capital receipts and inflation. I am sorry that he was not in his place when my noble friend Lord Desai seemed to swat that one aside. He was followed by my noble friend Lord Bruce of Donington. Rather like Jonah Lomu running through Tony Underwood last Saturday, my noble friend marched straight through. So I do not believe that I need worry too much about the arguments of the noble Lord, Lord Elton.

If we are to restore any confidence in the housing market, we must insist on the immediate withdrawal of the damaging plans to withdraw the income support safety net. We must insist on a phased release of some £6 billion which councils are currently prevented from reinvesting in housing in one form or another. We must build on a framework of public/private partnership such as local housing companies to attract additional private investment within a framework which ensures local accountability, as the noble Baroness, Lady Hamwee, pointed out.

In those circumstances, we must examine what the government reaction is. We are told that there is to be a housing White Paper. Of course, at the moment we do not know what will be in it, but, as always with government documents, there have been a number of leaks. We must assume that the leaks are genuine and that what appears in the leaks will appear in the White Paper.

The first point which I understand is under consideration is the removal of existing statutory safeguards for homeless people and their replacement with a weaker framework in which local authorities may be able to discharge their responsibilities simply by offering a short-term insecure letting in the private sector. I understand that that will appear in the Government's White Paper. If so, I can assure the noble Earl that he will have a fight on his hands because it is unacceptable.

We also understand that in the White Paper the current framework for home renovation grants, about which the noble Lord, Lord Ezra, spoke, introduced by the Conservatives themselves only six years ago, will be changed in favour of a discretionary scheme with few incentives to achieve an effective renewal policy. The extension of housing association grant, we hear, is to private developers which will spread an already inadequate budget even more thinly and thus risk depressing standards.

There will be a scheme to allow some housing association tenants to buy their homes, to get the Prime Minister off the rather nasty hook he got himself on by insisting on the right to buy for housing association tenants. The measures may include the distortion, if I may put it like that, of a perfectly sensible idea for local housing companies, simply making it a vehicle for privatisation rather than a positive measure to encourage public/private partnership. The introduction of probationary tenancies is another proposal which I understand is under consideration in the White Paper together with a token scheme for tackling fire hazards.

In none of that, apart from the most offensive parts, do we see anything like a long-term strategy. I join the noble Baroness, Lady Hamwee, in saying that the housing crisis cannot be solved by short-term palliative measures. First, we must recognise that housing is a social need; it is not just another market. Secondly, we must recognise that the fundamental problem facing us, which we must solve as quickly as possible, is the problem of the most vulnerable in our population, particularly the homeless. That must be done. Thirdly, as the noble Lord, Lord Beaumont, pointed out, we must recognise that demographic changes are taking place in the population. We must plan for them on the basis of a seriously constructed housing budget.

Instead of that, what we get from the Government is panic. I understand that; I should be in a panic if I were in their situation. However, that is not a proper response to housing policy. It may be a response to the opinion polls, but it should not lead the Government simply to try to stitch together things which they think might tomorrow win them a few marginal seats in this, that and the other part of the country. We need a long-term, properly constructed, sensible policy and strategy to combat our housing crisis. If the Government will not do it, then we shall.

5.37 p.m.

My Lords, I wish to begin by thanking the noble Lord, Lord Dean of Beswick, for bringing to the attention of the House important issues concerning the demand for housing and how it should be met.

I have listened carefully and with great interest to the points made by noble Lords. Many of them spoke with as much experience as perhaps prejudice—I am not sure. The noble Lord, Lord Williams, was so keen to talk down some of the more positive points made by my noble friend Lord Elton that he forgot that his noble friend Lord Bruce apparently does not like the ambiguity of figures being thrown about on how much money is spent, how the figures are decreasing and so on. The noble Lord, Lord Williams, has thrown down that gauntlet and I shall reply with some of the commitments that the Government have and some of our achievements.

Most people find their own home with no help from the Government. The construction industry and financial institutions ensure that demand for new homes can be met. The role of government is, on the one hand, to create the right economic circumstances for the market to operate effectively and, on the other, to ensure that help goes to the people who need it.

Despite what the noble Lords, Lord Ewing and Lord Beaumont, said, most people prefer to own their own homes, and there can be no doubting the success in expanding owner-occupation. It has increased from 56 per cent. in 1979 to 68 per cent. today. Research shows that the overwhelming majority of people are pleased to have bought their own homes under the right to buy.

A number of noble Lords, including the noble Lord, Lord Desai, addressed some of the fundamental issues of home owning. The Government remain committed to promoting sustainable home ownership. Buying a home remains a sensible investment for most families. It is an investment not in a speculative, get-rich-quick sense but an investment in choice, independence and control. It is an investment in security, particularly later on in life when the mortgage has been repaid. As some of my noble friends pointed out, now is the time to buy. House prices are at their lowest in relation to incomes since 1985, which is good news for first-time buyers.

A lot of concern was expressed—it was initiated by my noble friend Lord Harding of Petherton—about those households in negative equity. The Government, of course, share this concern. However, the problem is a direct result of past unsustainable house price inflation and is a painful reminder of the reasons why the Government are determined that there will be no repeat of the late 1980s. The noble Lord, Lord Haskel, referred to that period. Negative equity will decline as house prices edge upwards in line with price movements in the economy as a whole. The number of households affected by negative equity is now significantly lower than it was in 1992.

It is pointless pretending that income support offers an all-encompassing safety net for home owners in difficulty. It does not and it was never intended that it should. There has to be a balance between state and private insurance. What is needed is comprehensive, reasonably priced insurance products for the benefit of all home owners. Despite the cynicism of some, there are signs that a positive and innovative approach is now emerging from the insurance industry and that the services that the industry will be able to offer will provide protection for most home owners. The proof is perhaps in the fact that repossessions are now falling. They have fallen by over 36 per cent. since the 1991 peak. Arrears of six months or more are down 21 per cent. year on year. At the moment, average mortgage repayments are £130 below those that existed in October 1990. A lot of that has to do with the Government's economic policies. The little exposition of my noble friend Lord Elton in this area underpins much of the success.

The right reverend Prelate and others spent much time discussing rented housing concerns. The Government realise that not every household will want, or be able to afford, owner-occupation. The Government are committed to increasing the supply of homes for rent and to providing new opportunities for such households. In particular, the Government are keen to expand the role played by the private rented sector. The noble Baroness, Lady Hamwee, paid particular attention to that area. A healthy private rented sector is a vital partner in promoting sustainable home ownership. Young people should not have to rush to buy a home because no rented homes are available. Private lettings can also provide homes for people who have to move for their job. They can also provide good quality homes for those in particular need.

Apart from the initiatives in this area, I point out to the noble Lords, Lord Ezra and Lord Williams, that the situation in regard to housing renovation grants is not nearly so dire as they stated. I believe that the noble Lord, Lord Williams, gave an inaccurate figure. I know that over 90,000 renovation grants, including disabled facilities grants, were approved in 1994–95, representing £433 million worth of public expenditure. I also point out that the present means tested grants system introduced under the Local Government and Housing Act 1989 was to target resources on the most needy households and on the worst condition housing. If there is any adjustment in the terms and conditions of such grants, it is in order to target those resources that are available in the most efficient manner.

The noble Lords, Lord Ezra and Lord Beaumont, were both concerned about energy efficiency and the general improvement of the condition of housing. Both noble Lords know very well that the Government are committed to improving both those features in housing. The range of programmes and measures in place to improve and promote energy efficiency across public and private housing sectors are numerous. Both noble Lords must be aware of the home energy efficiency scheme, which pays for basic insulation, draught-proofing and so on for housing for low-income, disabled and elderly residents.

The noble Lord, Lord Ezra, painted an unnecessarily gloomy picture about the condition of the housing stock. There have been considerable improvements in the past few years across a wide range of features, with many people being generally better housed than they were in 1986, with improved levels of amenities, a wider use of central heating, more homes with double glazing and less overcrowding.

My Lords, is it not a fact that the resources available for home improvement have fallen very substantially—by three-quarters over the past 10 years? Even though the 1989 Act provides for mandatory and discretionary grants, the resources available to local authorities have fallen to such a low level that very few of those can have effect.

My Lords, the Government continue to commit significant resources to home renovation grants and other improvements in this area. As I have already stressed, even if the width, as it were, and quantity of this stream had been better defined, the accuracy with which we are delivering the benefits is considerably better. In terms of cost-effective delivery, the situation is much better now.

With continuing constraints on public spending, the Government are aware that they must consider carefully how best to use the resources at their disposal to ensure that maximum benefit is being obtained for those in need from every penny of public money spent. That is why, since the mid-1980s, the balance of subsidy has shifted away from "bricks and mortar" to suppliers, and has moved towards personal subsidy of rents in the form of housing benefit. That means that resources are targeted on those individuals who need them most.

Social rented housing, with rents set below market levels, will continue to play a vital part in housing people on low incomes. Affordable rents help people escape from the poverty trap and give them stronger incentives to work and save. They are also the right answer in public expenditure terms. We make resources available to the housing associations, the main providers of new social housing, through the Housing Corporation, which allocates the resources in its capital programme on the basis of the Housing Needs Index and on the value for money offered by individual housing association schemes.

I stress that the budget for the housing association sector is some £1.2 billion in 1995–96. The Housing Corporation confirmed that during the period 1992–93 to 1994–95, housing associations will have provided homes for 178,000 households—that is 25,000 more than the target in our manifesto. Over the next three years, it is expected that Housing Corporation and local authority expenditure together, and the private finance that they will attract, will produce a further 180,000 new lettings.

A number of contributors to today's debate questioned why the Government do not allow local authorities to spend all of their capital receipts. The noble Lords, Lord Williams and Lord Haskel, both suggested that one of the options would be a phased release of capital receipts. However, the Government believe that it is right that when local authorities sell assets they should use part of the proceeds to pay off old debt and so keep their council tax down. With local authority debts totalling some £37 billion at the moment and costing almost £4 billion per annum to service, it is quite right that the Government have that priority. As I said, the Government's long-term policy is that there should be prudent management of debt and optimum targeting of available resources.

I should like to touch on the very interesting observations made by the right reverend Prelate the Bishop of Oxford on the shortage of housing in rural areas. Since 1988, the Housing Corporation has run a special rural housing programme targeted at villages below 3,000 in population; 60 per cent. of the programme is targeted at villages of 1,000 or less; 40 per cent. at villages between 1,000 and 3,000. This programme is working well. Between. 1989 and 1990 and the end of 1994–95, over 10,800 units were approved in rural areas; that is some 1,600 above target. The target for the 1995–96 rural programme will be some 6 per cent. of the Housing Corporation's new development programme.

The construction industry exercised a number of noble Lords, notably the noble Lords, Lord Howie, Lord Sefton, Lord Howell and Lord Dean. The Government recognise that the industry is an important part of the economy, accounting for 10 per cent. of the gross domestic product and also for an increasing share of exports, as was mentioned. It has an essential role to play in the creation of the nation's wealth and, to quote another noble Lord, if it contributes to the nation's wealth, it contributes to its health. Lower levels of investment are naturally of concern to housebuilders as well as other organisations not directly involved. However, no one can seriously question that the best answer for the construction industry in the long term is to deliver steady, sustainable, non-inflationary growth. Reductions in the number of spending programmes have been necessary to help us to achieve that. But we continue to have a substantial programme of housing investment—over £2 billion in England alone—providing work for the construction industry.

The construction output increased by 3 per cent. last year after three-and-a-half years of decline and the fall in employment has halted. New orders held up well after their strong resurgence in 1993, and sustained though modest growth is set to continue. British firms are also doing very well abroad. I would also point out that there have been major boosts for construction from private finance on transport projects. The noble Lord, Lord Howie, covered some of that area. It is now coming through elsewhere, particularly in health and education. Private finance initiative contracts worth up to £5 billion should be signed this year. New rules from 1st April have extended PFI to local authorities, providing over £75 billion worth of opportunities. In addition, the volume of private house building output was 7 per cent. higher in 1994 than in 1993 and the first quarter of 1995 was 2 per cent. higher than a year earlier.

Many noble Lords referred to the Latham Report. Perhaps I may update your Lordships on the progress achieved by it. The construction industry board is chaired by Sir Michael Latham and my right honourable friend the Secretary of State for the Environment is its president. It was established to oversee working groups set up to take forward Latham recommendations and to provide a channel for industry and client comment on any proposed legislation.

The Government have repeatedly said that they are in principle prepared to legislate and support Sir Michael's recommendations. However, legislation is subject to a number of provisos. Briefly, they are that we need to know what is wanted in terms of consensus. We need to know what practical legislative solutions can be devised to achieve what is proposed. A consultation paper on proposals for post-dated legislation in the area of latent defects liability and build insurance was published on 12th April. A second paper on fair construction contracts was published on 17th May. Responses to these are awaited or are being analysed.

There are plenty of initiatives in response to the Latham Report. There is plenty of progress and commitment from all the players involved, not least the Government. But I remind all noble Lords who touched on this matter that the majority of the recommendations contained in the report are directly addressed to the construction industry. I do not accept therefore the inference of the noble Lord, Lord Sefton, that the Government alone are responsible for pursuing the Latham Report.

The noble Lords, Lord Howie and Lord Sefton, touched on training in the construction industry. I remind them that the Latham Report acknowledged the importance of training and indeed the points they raised. The Government agree with that. We work with the industry to help sustain a professional workforce. The general enabling response that the Government are producing to the initiatives required by the sport are helping in that direction.

Homelessness attracted wide and often inaccurate comment from noble Lords taking part in the debate. It is an extremely important topic and most of the Government's housing policies are directed to reducing it. I am pleased to inform noble Lords, particularly the noble Lord, Lord Ewing, that the latest homelessness statistics have reinforced some encouraging trends throughout the UK, not solely in England. The first three months in 1995 were the 12th successive quarter to show a reduction in the number of households accepted by English local authorities as statutory homeless over the same quarter 12 months earlier. The noble Lord, Lord Stallard, suggested the contrary. The statistics also show that there was a fall of 11 per cent. in the number of households placed in temporary accommodation over the previous 12 months. The situation should improve further as more homes are made available through government grants to enable those local authority and housing association tenants who cannot at present afford to do so to move to a home of their own, releasing their existing home for a family in housing need.

The noble Lord, Lord Ewing, painted a dire picture of Scotland which is a long way from the truth. Sheltered housing has quadrupled since 1979; over 300,000 new houses have been built in Scotland since 1979. The total gross capital provision for investment by local authorities, Scottish Homes and Scottish new towns amounts to nearly £1 billion. On current plans, over the next three years a further £2.8 billion will be made available. The Scottish Homes development programme has been maintained at around the same level in cash terms this year as last year, at £320 million. Resources of over £540 million will be provided to local authorities in 1995–96; nearly £424 million will be available for investment in council housing in 1995–96. Scottish Homes attracted some £500 million in private investment over the past five years through its development programme. Its target for 1995–96 is £175 million. I did not recognise the country the noble Lord was talking about, though we both live in the same county up there.

The noble Lord, Lord Williams, was equally misleading about the proposals to reform the homelessness legislation. He admitted that he was picking up fag ends on this point. But, first, I encourage him to be patient for the White Paper to be published shortly; and, secondly, to take note of what I am able to tell him at the moment.

The Government's proposals to reform the homeless legislation are designed to achieve a fairer approach to the allocation of local authority and housing association tenancies. Under the proposals, local authorities would continue to have a duty to secure accommodation for families and other vulnerable people who have nowhere suitable to live through no fault of their own. The then Housing Minister, my right honourable friend Sir George Young, made clear in July 1994 that there is no question of vulnerable people, which includes families with children, not having a home. There is no question of families having to sleep on the streets or children being separated from their parents and taken into care. The Government are clear that the new legislation must continue to provide safety nets for families and other vulnerable people in need of accommodation to tide them through a crisis. The new provisions would ensure that those in real need would have a satisfactory and settled home for a reasonable period. The aim of the proposals is simply to secure fairer access to social housing.

There are no easy answers to many of the issues raised today, whether we are talking of homelessness, rented housing, the private sector, local authority housing or the fabric of housing itself. The Government must decide where the frontier should lie between state initiatives, private sector initiatives, owner initiatives and so forth.

The Government have already achieved a revolution in redefining the role of the state, and housing has been at the heart of that revolution. Four million more households have become home owners. The right to buy has given millions of public sector tenants the chance to become home owners. Local authority tenants enjoy a significantly improved service from landlords, and the private sector has become a major partner in the Government's efforts to ensure that decent homes are available.

The Government do not intend to stop there. They continue to look closely at their policies and programmes. Indeed, many noble Lords will be aware that the Department of the Environment is currently preparing a housing White Paper which will be published before the Summer Recess. What matters most to this Government is that maximum benefit is being obtained for those in need from every penny of public money spent.

My Lords, before the noble Earl sits down, can I take it that he does not intend to say a word upon the matter about which I gave him notice, which was the outrageous attack by the Prime Minister on the city of Birmingham in respect of these matters? Surely we should have an explanation.

My Lords, if the noble Lord feels that what I have to say to him on Birmingham is insufficient, I can always write to him after the debate. I can say that local authorities must comply with the law. The local ombudsman has found that Birmingham is not guilty of maladministration for operating a queue, but he has found maladministration in various aspects of its arrangements. That is a matter for the city council, which I understand it has in hand. I hope that that satisfies the noble Lord.

5.59 p.m.

My Lords, I thank everyone who has spoken in the debate because I think it has possibly been the best housing debate we have had in your Lordships' House for a long time. I thought I would hear from the Minister some transfusion into the housing situation to deal with the legitimate points that have been raised from all points of the Chamber. But the noble Earl has not even produced a tourniquet to stop some of the bleeding taking place.

In fact, I have to do something now that I regret. I am sorry but I have to challenge most of the figures the Minister has given as the Government's achievements. They are in complete contradiction to the figures that we have from such organisations as the National Federation of Housing Associations. The figure the Minister has given of the number of homes that will be built is absolute nonsense. It is nowhere near accurate. The Minister will recall that some weeks ago there were exchanges on the shortfall in the housing associations' programme and he apologised to me after the debate for the fact that he had been given incorrect information. I was in fact right. This is the first time I have had to say it in your Lordships' House but I do not think the figures the Minister has been given are right and fair.

My Lords, the noble Lord does not recollect our conversation accurately. I was summing up a debate initiated by the noble Lord, Lord Williams. The noble Lord was unhappy with the figures I gave him on house build in the previous year and projected home provision in the next three years. I stood by my figures when we spoke outside the Chamber.

My Lords, I think that my noble friend Lord McIntosh received a form of apology by letter from the senior Minister. I do not accept the figures. But, having said that, I hope that the Government will realise that they stand alone on the path they continue to go along. They are not solving the housing problem. The figures we have on homelessness are far higher than the ones the Minister has quoted. Who is giving him the figures? I do not know. I am not accusing him of misleading the House, but someone is providing him with inaccurate briefs. That is to be regretted.

However, having said that, I think enough points have been made by distinguished Members of your Lordships' House on the housing situation that the Government will ignore them at their peril. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

Town And Country Planning (Costs Of Inquiries Etc) Bill

Brought from the Commons; read a first time, and to be printed.

The Labour Market: Casualisation

6.3 p.m.

rose to call attention to the casualisation of the labour market, including all aspects of pay and conditions; and to move for Papers.

The noble Baroness said: My Lords, I believe that this is one of the most important debates that we have had this Session in your Lordships' House and I am very glad to have the opportunity this evening of opening it. The terms of the debate refer to the casualisation of the labour market—but in fact the debate is much wider than one simply concerned with employment, as I hope to show in the course of my remarks. I am sure that that will be followed up by some of my noble friends who are due to speak later.

Everyone now seems to accept that the days of a job for life are over. Indeed, it seems almost indecent for anyone to expect such a thing. The Government, of course, refer to this as labour flexibility. They have been instrumental, both by exhortation and through legislation, in encouraging greater flexibility, which they appear to think is good for both employers and workforces. It is felt that greater flexibility gives the workers more "choice" and it seems that the Government have women particularly in mind, since women make up a large proportion of the workforce which is in part-time employment.

Last July, the official journal of the Department of Employment, the Employment Gazette, published an interesting survey on flexible employment. Its key

findings were that some 9.7 million people—38 per cent. of all UK workers—are working part-time, in temporary employment, are self-employed, or on government training schemes. That is an increase of 1.25 million since 1986. The proportion of men who are part of the flexible workforce has risen from 18 per cent. in 1981 to 27 per cent., whereas among women it has remained relatively stable.

There are, as the Employment Gazette has pointed out, a number of definitions of "flexibility". There is wages or earnings flexibility, which generally speaking involves systems like performance-related pay rather than fixed wage rates. This, with government encouragement, has been introduced practically everywhere, even in sectors where once it was unknown—in public sector enterprises, the NHS and among skilled and professional people. If anyone claims, as the Government may do, that these systems have led to greater efficiency, I must say that from my point of view I do not think that that has always been the case.

Then there is labour mobility, which describes the movement of workers to different jobs, occupations or areas according to changing economic conditions. That has been going on for a very long time, but there are plenty of reasons nowadays which render such movements simply not practicable for large numbers of workers; including, of course, the housing situation which your Lordships have just been discussing.

Then there is functional flexibility, relating to the absence of job demarcations. That used to be talked about a lot years ago and was supposed to be the main reason for the UK's poor economic performance. Well, that has long since disappeared, without the benign effects on economic performance predicted. But mostly, what we are thinking about when we talk about flexibility is what I have described in the title of the debate as "casualisation of the labour market".

Those of us who joined the workforce in the years immediately after the last war were perhaps extremely fortunate. In the main, the fear of unemployment had gone. That was something that had happened in the 1930s—to our fathers and grandfathers. We had jobs. If we lost one job, it was not too difficult to find another one. If we went into public service or one of the service industries, such as insurance or banking, as I did when I left school, we could confidently expect to stay there, if we wanted to, until retirement, when we could in many instances have earned a pension related to our final salary. I am, of course, talking fairly specifically about white-collar employment. Manual work, even skilled manual work, always tended to be less secure, although there was a fairly strong feeling among working class people, at least as far as sons were concerned, that the thing to do was to get the boy an apprenticeship in some skilled trade and that would lead to a reasonable degree of security for the future.

I need hardly say that these expectations no longer exist, either for white-collar, middle-class people or for people who would perhaps have described themselves as skilled working class. The work scene has changed very dramatically and some of the change has been positively due to government encouragement. Until 1979 or thereabouts, even Conservative Administrations accepted that the maintenance of a high level of employment—and high standards in that employment—was a basic government priority. Since 1979, however, there have been a whole series of government initiatives which have had the deliberate effect of loosening up the labour market.

There have been numbers of employment measures designed to undermine the strength of the trade union movement and therefore to rob working people of whatever collective strength they had to oppose measures being put in train which they perceived to be to their disadvantage. In addition, of course, we have had the revolution in information technology, which in an unregulated market has invariably been disadvantageous to a large section of the workforce unable to cope with it.

The Government, however, have boasted to overseas investors that if they come to Britain they will not have to recognise unions, employment protection standards are low or practically non-existent, wages are low and there is plenty of available labour because of unemployment. So, in many ways, what we see now is the result of deliberate policies.

But, as with such ideologically motivated policies, side-effects have happened which I do not think anyone, including the Government, anticipated. The result of what I believe is now known as "down-sizing" by companies—what a previous Prime Minister has described as becoming leaner and fitter—has been that a sense of gross insecurity has now begun to affect not only working-class people, who to some extent have been used to it, but white-collar employees and middle managers as well. Moreover, those who are left in work are themselves beset with anxieties and are often having to work much harder than they should in order to make up for the fact that staff numbers are being reduced.

My own union recently undertook a survey of members working in both private and public sector jobs. Forty-four per cent. of respondents working in financial services, for example, reported that they felt less secure in their jobs than they did a year ago. The survey also showed that stress is now a major problem for those in work, with 60 per cent. of the sample saying that they suffer stress as a result of not enough time to do the work they are given, poor relationships, general lack of security and so on. That survey was conducted among people working in substantial firms where there is union recognition. It is our belief that the situation is a great deal worse where the work is non-unionised and the people concerned have far less security. According to some recently published research, 44 per cent. of British workers arrive home feeling exhausted.

The new post-industrial culture, if effectively managed, could have given people more time off to use for themselves. Instead, we are seeing a great divide between those in jobs who are working themselves into the ground in order to keep them, and those without any jobs at all who are becoming increasingly subjected to pressure from the Government to comply with further requirements in order to qualify for the new jobseeker's allowance which will be less, of course, than unemployment benefit and may carry with it the obligation to take on any sort of job irrespective of rate of pay or qualifications.

In addition, there has been a large development of part-time employment and also of what I believe is known as "zero" employment where individuals commit themselves to be called in at need by a particular company and are paid when needed and not otherwise called for. I remember several years ago in this House we debated the demise of the dock labour scheme. We were unable to prevent its demise, but I well remember the debates we then had when noble Lords with experience of those times explained why the scheme had originally been introduced. I particularly remember the contribution at that time of my noble friend Lord Callaghan.

Before the last war large numbers of men would assemble at the dock gates. The boss would come out and say, "I'll have you, and you, and you, and the rest of you can go". Those not chosen had to go back miserably to their families to say there would be no money that day. It was to prevent that kind of casualisation that the dock labour scheme was first introduced. What we are now seeing is the casualisation of a large segment of the UK labour force.

Moreover, pay and conditions tend to be very poor. The wages councils have disappeared. They did at least set a minimum standard in some services and industries. According to a recent TUC survey, the lowest 10 per cent. of part-time workers, mostly women, earned only £2.49 per hour; the median was £3.98 per hour. The Government believe that many workers choose to work part-time, but often that is all the work that there is available, particularly for women. There has been a growth in the practice of hiring staff, even quite skilled, professionally qualified staff, on short-term contracts with, of course, the lack of employment rights consequent on such arrangements. In many respects, that is a rather short-sighted policy on the part of the employers who do it, since why should there be any loyalty to the company if the employer on his part does not show any commitment to the staff who have been hired?

As I said earlier, these developments had a down side, which I do not believe the Government anticipated. If people have no sense of security they will not take on long-term commitments. The former Prime Minister was anxious that we should all become property owners. Everyone, including council house tenants, should be able to buy their own home. Noble Lords have been debating that earlier this afternoon. But as we know, such decisions have often been disastrously unforunate for some people. Trapped in what is euphemistically called "negative equity", their houses will fetch less on the market than the amount they borrowed to pay for them, and they need to sell because they no longer have jobs which will enable them to meet repayment obligations. The idea that the next generation would inherit their parent's home and thus be better off than their parents has also ceased to have much validity.

Local authorities are expected to shoulder the burden of caring for the elderly and disabled in their areas, but in many instances lack the resources to do so, so the homes of elderly people are increasingly having to be sold in order to meet the costs of residential care. Everyone knows that housing policy is in a mess and at the root of it lies basic insecurity of employment.

I was talking recently to a former colleague in the insurance industry. He told me that life insurance sales are at an all-time low. The reason is not only the scare about personal pensions and what that has meant generally in the insurance market. The main reason has been identified as the refusal of people to make long-term commitments. That is because many of them do not know whether they will be in employment in 12 months' time and will not take on a commitment to pay insurance premiums which they feel they may not be able to afford in the future.

Law and order is a major issue for all political parties. I certainly would not seek to maintain that the cause of it is deprivation alone—of course, the whole matter is much more complicated than that—but the fact that young people, particularly young males, now have such a low expectation of employment and, indeed, doubts about their role in society as a whole, must play some part in the growth of violence among this particular group.

What I am saying is that the general insecurity that clearly exists is undoubtedly the reason for the lack of the "feel-good" factor which Government spokespersons are clearly concerned about and which, in my view, is likely to lose the Government the next election. It is really no use saying that unemployment is going down; that the claimant figure is lower than it has been for some time. Yes, of course, I have seen the figures.

I have to say to the Government that they have a credibility problem. No one believes them any more. It is impossible to open a newspaper without seeing that one or other major institution is about to cut thousands of jobs; whether it is banking, milk marketing or even the Post Office—despite, incidentally, the latter's record profits.

People know that redundancies have been taking place where they work; or their children cannot get jobs and their neighbours are out of work, and so on. Everyone also knows that the claimant count underrates the numbers of those actually without work since the method of calculation has been changed so many times, and will undoubtedly be changed again as a result of the Jobseekers Bill recently debated in this House.

The Government will undoubtedly say that the solution is simply more of the policies we have already had; fewer protections for workers; opposition to the social chapter and to EU directives like, for example, the hours of work directive, which would surely help to create a little more employment throughout Europe.

Frankly, I do not believe the Government's case. We have had these policies now for over 15 years and the results have not been good. There has to be a determined effort by the Government to bring in policies designed to ensure investment in jobs and in the UK economy. I am sure that a number of my noble friends who are to follow me in the debate will elaborate on that point.

I do not deny that there is an international dimension, but our future, and the future of our workforce, should not depend on driving our conditions down to third world level. Steps must be taken to restore a sense of security to the large mass of UK workers who at present do not have it. They lack it directly because of some of the policies initiated by the Government and in particular by policies associated with the name of the previous Prime Minister.

I believe that a Labour Government would indeed have the commitment and zeal to embark on such policies and would use their best efforts to ensure that our European partners joined with us in a concerted attempt to reduce the levels of unemployment throughout Europe and restore a sense of stability and security so much lacking at the present time. I beg to move for Papers.

6.19 p.m.

My Lords, we all owe the noble Baroness, Lady Turner of Camden, a debt of gratitude for having introduced a debate which takes us right to the heart of current problems of employment, of social cohesion and of the welfare state. When about 18 months ago, on 10th January 1994, we debated in your Lordships' House the question of flexible working, I took the opportunity to say:

"We must beware that the notion of flexible working does not become an excuse for a return to casual working on a large scale".—[Official Report, 10/1/94; col. 42.]
Today we have casual working on a large scale and the question is what can we do about it.

Let me start with one basic principle. In my view, a flexible labour market is a necessary condition of competitiveness in a global market-place which can be very cruel. A flexible labour market is one which takes us away from the rigidities which have come about as an exaggerated form of the security for which people are rightly and justly looking. However, flexibility can be taken to an extreme in which its cost is almost higher than its benefit. The noble Baroness, Lady Turner, pointed out some of the costs in terms of insecurity, disorientation, fear, short-termism and even the effect on law and order. We have to find a balance between flexibility and security. It seems to me that that is the key issue with which we are faced in this area and perhaps with regard to employment in general. But the question is: how?

Some of us have a preference for a course which is expensive and which is not likely to be implemented in the near future. I refer to having a basic income guarantee or a citizen's income. I, for one, should not be surprised if my noble friend Lady Seear at least hints at the fact that she and I share that preference, although we have found it hard to persuade even our friends of its immediate implementation.

However, we have to start somewhere. One important idea that I should like to reiterate is that there is a case, in order to provide more reliable employment for more people, for topping up low wages to take them to a decent level. Because this is my main point, I say deliberately "topping up low wages for employees" rather than providing employers with so-called "incentives" to employ more people. The principle behind that is that in a world in which there is an inevitable degree of casualisation, individuals have to be placed in a position in which they can deal with the flexible world in which they are living by having some degree of security.

That leads me to one conclusion. When it comes to the balance between flexibility and security, we must rethink some of the principles and some of the practices of the welfare state. We may even have to rethink the very name "welfare state", which may not be appropriate. By that, I mean that we have to find a method of enabling individuals to get through the insecure world in which they are living with a security that they can carry with them. We have to find methods of making benefits transportable and a new way of relating contributions from individuals, employers and the taxpayer through government.

Perhaps I may give two examples. I shall call the first "individual learning accounts". Looking at all the relevant studies, there is little doubt that the right education and training are still one of the best roads back to the kind of employment which provides at least some steadiness. However, education cannot, and must not, be a one-off. Education must be a lifelong opportunity. In order for it to be a lifelong opportunity, people have to be able at any time in their lives to return to courses of education and training. I think that that can best be achieved by having learning accounts which are attached to individuals and fed by employers, by the individuals themselves and, where the need arises, by the taxpayer. In other words, those learning accounts will not simply take the form of vouchers, but will be something on which a man or a woman in the course of their career can draw when they find it necessary to switch career and when they need some training to improve their job opportunities. Incidentally, such individual learning accounts might well also be fed from redundancy funds whenever people are made redundant. Indeed, redundancy is part and parcel of the problem that we are considering.

I shall have to give my second example far too briefly to be able to do justice to the importance of the issue. I refer to the way in which pensions are financed. They, too, must be transportable. They must be a combination of, on the whole, compulsory contributions from individuals, employers and, where necessary, the taxpayer or the state. I can envisage a compulsory and in many ways private pension system which would provide a certain degree of security to people who would otherwise be left totally exposed as a result of their form of employment.

Those points raise enormous questions with which we shall not be able to deal satisfactorily here. I certainly shall not be able to deal with them satisfactorily now. However, what I am saying is that casual work is just about bearable for quite a few people if there is a safety net. In the decades ahead, the safety net is not likely to be the state. It is likely to be a more complex contributory safety net, to which individuals and employers contribute as much as the taxpayer. There will probably have to be a compulsory element. Unless we rethink what we have come to call "the welfare state" along that dimension, together with losing regular lifetime work, we shall lose a whole set of values which are crucial for a society which is truly wealthy and not just rich.

6.27 p.m.

My Lords, I must first apologise to your Lordships for the fact that I shall have to leave the House just before eight o'clock. That is to fulfil an engagement which made me reluctant to put down my name to speak in the debate although I very much wanted to. I was persuaded to do so only at the last moment this morning.

I, too, thank the noble Baroness, Lady Turner of Camden, for raising this deeply important and interesting subject. However, I thought that she painted a rather black picture. We do have a problem with casualisation, but I am under the impression that this country still has one of the lowest percentages of workers in temporary employment. That does not make us good, but we are not among the worst.

I cannot help but mention that for the first time in my lifetime we have an economy which is highly competitive. We have rising exports, rising productivity, rising employment (although from a low level) and controlled inflation. In my lifetime, whatever the government, I have never known our economy to be so strong and so potentially fruitful. So there is a good side to the present position as well as a bad side. Having said that, I understand what the noble Baroness said and I sympathise with her feelings about the problems being experienced by many of our fellow citizens.

However, I do not agree with the remedies—or at least the implied remedies—which the noble Baroness and her party are putting forward. Twenty years ago—certainly 30 years ago—I might have agreed with a great many of them, but I doubt whether the noble Baroness or her party as a whole have yet fully adjusted their ideas to the degree of economic change that has taken place not only in this country but throughout the world. In the first two or three decades after the war, the labour market was based on a relatively small number of fairly well-defined industries, usually employing relatively large numbers of people on single sites of an average and increasing size, with centralised hierarchical systems of control both on the employer's side and on the union side and with a high percentage of those employed being relatively unskilled production or administrative and clerical workers. All that has changed, and it has changed in a frighteningly short time. Companies as a whole, or in their separate parts, now wax and wane much more quickly and unpredictably than they did in the past.

Decentralisation of decision making, flexibility and innovation of products and processes, as well as methods of management, are now the order of the day. They are in fact essential requirements for survival, let alone for prosperity and success. Above all, of course, from the point of view of our subject tonight, the demand for unskilled and even semi-skilled staff in factory and office has collapsed rapidly and alarmingly. The labour market has thus changed very radicall; indeed. Some, perhaps much, of the change is unwelcome, frightening and unpleasant for large numbers of our population of all classes, and it is not easy to deal with.

So what do we do? I want to be clear that what I require personally of our labour market is that it should function in a way which maximises the number of people we employ. That seems to me the first vital function of a labour market. I have always believed, and still do, that long-term unemployment is a terrible cancer in our society. So how can we go on increasing the number in employment and move back towards what we might once again reasonably call full employment—something which, in our innocence, we believed 20 or 30 years ago we had achieved and could sustain, not foreseeing the nature of the changes which were shortly to hit not only this country but every country in the world?

One cannot go deeply into the matter in an eight-minute speech but I should like to outline what I regard as five vital spheres of action. The first, and most obvious, is education and training. I believe that the new infrastructure for both education and training in Britain is now better than it has ever been. The new structures in both fields still have to be refined. They are still creaking in their early stages. They have to be worked on and become more widely understand. I believe, however, that we now have a far better platform from which to jump forward in education and training in this country. The Government deserve some congratulations on the basic changes that have been made, although much still remains to be done. I urge on the Government and any future government the high priority, in terms of attention and money, that should be given to developing training and education in this country if we want to improve the level and quality of our employment. Money spent here, providing it is well spent, is genuine investment in wealth producing and income producing in the future. It is not expenditure on consumption.

The second need is to tackle the poverty trap in its many forms. This was a point which the noble Lord, Lord Dahrendorf, very interestingly opened up in his speech. The division between benefit and income suddenly has to be changed. It is not easy. However, we have got into the trap of feeling that if you have benefit you must not earn and if you earn you cannot have benefit. One understands that, but one realises the danger and difficulty of changing it. There are some signs, I am glad to say, that the Government are beginning to make that change, but I believe that much more thinking needs to be done in terms of the need for a minimum total family income and less in terms of benefits and minimum individual wages. All this requires a very deep and very difficult re-thinking of the national insurance system and the welfare state in order to meet the needs of a society so very different from 50 years ago when the Beveridge scheme was introduced. I hope, perhaps in my elderly innocence, that it is a problem that we can tackle on a much more all-party basis because there really is some fundamental rethinking to be done and ya-booing at each other frankly gets us nowhere.

The third need is to remove a large number of people from the income tax net. I may be alone in thinking this, although I hope not, because it is closely linked to my last point. In my view, the single most important change required to income tax system is to remove a large number of people from it altogether. That is more important than fiddling about with rates of tax, much as many of us would like that so long as the fiddling was in a downward direction.

The fourth need is to try to keep to a minimum the oncosts of employing people. Let us make sure that as much as possible of the cost of employment actually goes into wages and not into labour oncosts. I fear that this requires the minimum of regulation, and it is probably where I part company most obviously with the party opposite and the noble Baroness. We must remember that regulation is often unenforced and virtually unenforceable just where it is most needed. It is most burdensome and costly where it is least necessary. I doubt very much the validity of more regulation in relieving in practice many of the problems from which we suffer.

That is why I, for one, have opposed the rigidity and cumbersomeness of the European Social Charter. I made my maiden speech in Parliament way back in April 1950 on the subject of joint consultation in industry. I want to see that, but I do not want a rigid system applied to all industries and all companies. Each company, each industry, must develop its own informal methods which are best suited to worker participation and participative styles of management. We cannot have a rigid system.

My last point is that we must not forget something which had a high priority in the 1980s but has rather sunk now—the need for urban regeneration. We must encourage small firms in the old cities, because it is the old cities which have the largest concentration of dangerous poverty and unemployment. I believe that action under those five headings is necessary if we are to tackle the problems that confront us.

6.37 p.m.

My Lords, I, too am grateful to my noble friend Lady Turner for enabling the House to debate this important issue this evening. The Motion implies, and my noble friend has spelt out, that work patterns are changing, that permanent and full-time jobs are giving way to part-time and temporary jobs and that the United Kingdom labour market is becoming more casualised, with unfortunate consequences for working people and disturbing implications for Britain's competitiveness in the world economy.

In many places we have a world of work where fear of losing the job is ever present: a world of peripatetic part-timers, hopping from one job to another, often having two jobs in the same week—a world in which workers, to use one of Professor Galbraith's memorable phrases, are "abundant, redundant and poor". It is a world in which part-time and temporary workers cannot say "no", because to do so would mean risking the wrath of the boss and probably getting the sack.

This view that work is becoming more casualised has recently been called into question by David Shonfield of the independent industrial relations body, Incomes Data Services. No less a figure than the industrial editor of the Financial Times gave Shonfield's challenge an airing in the pink pages. Shonfield makes three points. First, that part-time jobs grew faster in the 1960s than they have done in the 1990s; that the recent rise in temporary work is typical of this stage in the economic cycle; and that the proportion of people who have been with the same employer for 10 or more years is lower now than 25 years ago.

In my view, this analysis is outweighed by three further factors. First, the proportion of people doing part-time work in the 1990s is three times what it was in the 1960s; so part-time working is widespread today, whereas it accounted for fewer than one in 10 jobs 30 years ago. Secondly, a mounting minority is emerging in the secondary sector of the world of work: people are being forced into low paid temporary jobs. Even managers who previously held jobs in the premier league of the labour market are experiencing relegation to the lower divisions, where rewards, status and security are poor when compared with their former positions. That is a kind of 3D world of the middle manager who has been downsized, delayered and devalued.

The third and most compelling of the factors that the FT analysis understated is the experience of redundancy and unemployment, which is much more common today than it was three decades ago. Between a quarter and a third of today's regular workforce may have gone through a period of unemployment in the past few years, and 80 per cent. of people say that they know someone who has lost their job in the past five years. In short, the reassuring message that casual work is still the exception to the general rule rings increasingly false.

Professor Galbraith introduced another phrase into the English language a few years ago. He talked about "the culture of contentment". What we are witnessing today is not a culture of contentment in the labour market, it is a widespread sense of insecurity at work. Human resource management consultants talk about empowering the workers and higher rewards. But very many employees live a life of no say and low pay at work.

The legal changes that the Government introduced in the 1980s had a dramatic effect on employment security. At a stroke they cut from 56 per cent. 20 years ago to only 36 per cent. today the percentage of the population of working age who enjoyed rights to protection against unfair dismissal and to statutory redundancy pay. Casual workers are left with rights at work which are threadbare and limited. They also face the poorest prospects. Not for them the feel-good factor.

In a world in which companies increasingly stand or fall by the quality of the product they sell or the standard of the service they provide, nothing matters as much as the skills and motivation of their workforce. Our skills gap is worrying. In German manufacturing industry, 64 per cent. of foremen hold higher intermediate qualifications—in the UK, the figure is 3 per cent. In Germany, 90 per cent. of supervisors possess formal qualifications—in the UK, it is under 50 per cent. In the USA and Japan, 90 per cent. of managers hold degree qualifications—in the UK the figure is less than 25 per cent.

A well-trained workforce whose morale is high holds the key to competitiveness. Yet the recent CBI report on flexible labour markets sidesteps the question of who will pay to train Britain's increasingly casual labour force. No training means no skills, and that means further downmarket drift. Part-time workers do not lack loyalty to their employers. Many of them have long-service records that would stand comparison with their full-time colleagues, but they get short shrift when it comes to training. That is where they lose out, and industry's failure to invest in its people erodes Britain's competitive base.

The Government passed up the chance to support those important members of Britain's workforce when they opted out of the European Social Chapter. They did so arguing that industry opposed any idea of bringing employment rights in Britain into line with standards elsewhere in the EU. That is an untenable position. It is becoming more and more so as days go by. The evidence is there for all to see. In February this year the Government were obliged to bring UK law into line with EU rules in respect of the employment rights of part-time workers.

Equally significant has been the increasing readiness of British business to enter voluntarily into agreements with the trade unions to create European works councils, despite the UK opt out. Trade unions, including my own, have signed European works council agreements with, for instance, United Biscuits and Coats Viyella. There are many more voluntary agreements in the pipeline. What is happening in British industry is different from the rhetoric that we hear from the Benches opposite.

There is a school of thought, which is articulated mainly by politicians rather than industrialists, that believes in insecurity; that believes—it is called freeing up the labour market—that it keeps people on their toes; it gives employees a sharper edge; it makes companies more competitive, more dynamic.

I do not accept that view. In my experience insecurity creates an inward looking, unproductive environment, where employees are resistant to change, and change—sometimes rapid change—is essential if British industry is to be and remain competitive. Therefore I am glad that some of our major industries and services have recognised the need to train their workforce in modern transferable skills; to guarantee employment for those who want to stay with the company; to achieve manpower reductions by natural wastage, voluntary redundancy and early retirement; and to work with the trade unions rather than shut them out or derecognise them altogether—in other words, to create a secure environment where training, and retraining, are a constant, where ideas and talent can flourish, where change is positive and welcome, and where transparency and co-operation replace secrecy and conflict.

6.46 p.m.

My Lords, I should like to look at two different but overlapping aspects of our discussion. The first concerns the growing participation of women in the labour market, bringing with them their different needs and patterns of work; and the second is the growing casualisation of the labour force as a whole, affecting both men and women. I would remind the House that there are over 10 million women in paid employment, comprising almost 50 per cent. of the labour market, and set to exceed that by the end of the century. Of those, 45 per cent. are part-time workers.

For all sorts of reasons, part-time work has been increasing over the past 30 to 40 years. So it is not a new or temporary phenomenon. Part-time work suits many families with young children. It is mainly mothers who opt to work part time, but not necessarily so. Where parents want to spend more time bringing up their children they should be accommodated in doing so as a recognised feature of the labour market. That is not a one-sided benefit. Companies too are advantaged by part-time employment, because it gives them the flexibility to meet their labour requirements.

What is new in the situation is the growing involuntary part-time work involving largely men. It is important to emphasise that part-time work should be a matter of choice, and should not be forced upon those who are seeking full-time work.

There have always been problems with part-time work. Historically it has been less well paid and is regarded as being more peripheral. That affects not just pay but, with honourable exceptions, it affects also employment opportunities, promotion and access to training.

During the past decade, the gap between full-time and part-time pay, at all levels in companies, has widened, with those at the bottom end of the market suffering most. For example, the 1994 Summer Labour Force Survey found that 2.2 million part-time and 170,000 full-time workers earned less than the national insurance threshold, which is £57 a week; and 2.9 million part-time workers, including 290,000 full-time workers, earn below the tax threshold of £66.50 per week. The price of that is that those not paying national insurance contributions forfeit the right to retirement pension, full maternity pay, redundancy and sick pay. They are the low-paid and insecure of today who become tomorrow's pensionless elderly underclass.

Not all part-time workers are women but the majority are. However, during the past 10 years there have been other changes in the labour force. As my noble friend Lady Turner indicated, in the summer of last year some 38.6 per cent. of workers were so-called non-standard workers. But, taking the analysis further, earlier research published in the Oxford Economic Policy Review, showed that in 1993 only 35.9 per cent. of all in full-time employment qualified for all employment rights.

Given the growth in part-time, temporary and self-employment, the position will not have changed very much in the two intervening years. That is a very serious situation. A number of trends have contributed to those changes in the labour market. A decade ago, in the light of new technologies, we were encouraged to believe that we should have a shorter working life in all its aspects. But somehow that does not seem to have happened. More people are working consistently longer hours and more people are not working at all or are working for a pittance.

Secondly, the Government's policies in relation to the deregulation of the labour market have left workers with less protection. Those two trends have in themselves encouraged more companies to restructure or down-size; in effect, that means to shed labour either through redundancies or splitting jobs. Splitting one job into two part-time jobs can mean savings in relation to national insurance contributions, sickness and holiday pay.

The effect of that has been to bring about a general sense of insecurity and, as my noble friend said, a lack of the feel-good factor about which the Government complain. That psychological effect is not without foundation. Unemployment is still high; redundancies are occurring at all levels; and new jobs that are being created are non-standard jobs.

That is not the way to build a healthy economy capable of meeting the long-term competition created by the new information technology era. For example, I heard on the radio last night that Trusthouse Forte has again begun to Mink of the advantages and savings involved in maintaining a loyal, well-trained and highly motivated workforce. That is significant. The noble Lord, Lord Carr, indicated that some of the problems which we are facing need an all-party approach. I suggest that, first, the Government need to rethink their own labour policies so that we might then begin to build on that.

6.55 p.m.

My Lords, I too welcome the opportunity to have this debate today. In preparation for it, I looked at the debates which have taken place in your Lordships' House. January 1994 was the last occasion on which we had a major debate on this subject and that was on flexible working. Sure enough, in that debate the whole area of the casualisation of the labour market was a key factor.

Of course, casual labour is not new. It has been with us more or less ever since work has been with us; for example, in the agricultural sphere, seasonal work, covering for people who are on holiday and, more recently, covering for women who are on maternity leave. But what is new is that the incidence of casual labour has increased by something like one-third in the decade 1984 to 1994. I suggest that we are now dealing with an area of shifting sands in the structure of employment as we have it in Britain today. I suggest equally that government policies have done very little to help to maintain some kind of stability in the employment field and it is absolutely essential that such stability should be maintained.

Despite the fact that we have seen an increase in casual labour, in that same period we have also seen workers in Britain working longer hours each week than those worked by any other European Union countries. Indeed, we are not only working longer but our hours have increased in that decade rather than decreased compared with the hours worked by individuals in the other member states of the Union.

I do not suggest to your Lordships that all the jobs in the casual labour field have been created as casual jobs because I know that that is not a fact. My experience is that we have seen a shift from full-time employment, permanent employment, into casual employment in the same jobs in companies which previously had a static labour force and whose employees had many years of employment with them.

That has brought with it a shift for individual employees from independence to dependence. I suggest that that is where we start to see the breakdown of an agreed set of values between employer and employee in work and in our society at large in relation to what we regard as the basic rights and responsibilities of our citizens.

Casual workers do not qualify for pensions. Who will pay for those in future? Casual workers do not qualify for holiday or sick pay or for training in most cases. Therefore, to become a casual worker all too often means that it is the seal of fate on your existence and that of your family.

I was extremely concerned to read some figures published by the TUC a short while ago which showed that in the autumn of last year 90 per cent. of the new jobs created were temporary jobs—jobs of a very short duration. I take the point which the noble Lord, Lord Can, made about deregulation. The Government introduced one aspect of deregulation which I suggest has encouraged casual work; namely, to extend to two years the period before which an employee has any kind of protection. Therefore, in industry we now have 23-month contracts. Short-term contracts are brought about deliberately so that the employer does not face employer responsibilities. Of course, that trend means that there is a price to be paid. That is paid not only by individual casual workers but by their families because they suddenly find that they are dependent, whereas previously they were independent. It affects our social cohesion. As my noble friend Lady Turner said, the feel-good factor will never return while we have that pool of workers within our community who feel alienated from the mainstream of society, because that is its effect.

The taxpayer must also pay the price of that. As I said, who will pay the pensions in the years ahead if the individuals cannot contribute, as they cannot if they are casual workers? Who will provide their sickness benefit? Who will provide the support that they would normally generate for themselves? Of course, it is the taxpayer who will have to do so. Moreover, in many instances, the employer will get away with it.

If one looks at successful companies in Britain—and there are many of them—it will be seen that they are successful because they have a good relationship with their employees and usually with their trade unions; that they value their employees; and that in return their employees give loyalty. But what loyalty can any employer who gives only casual labour expect from his workforce? An individual's loyalty cannot be expected and should not be demanded. Such individuals are, therefore, not part of the growth and the wealth creation which are so terribly important to the success of our nation.

In 1994 a survey was carried out in the health service called Workloads, Pay and Morale of Nurses. The figure in 1991 for nurses who felt insecure about the future—I am talking about qualified, trained nurses—was 20 per cent. However, just three years later, in 1994, it had jumped to 53 per cent. I do not believe that we can over-emphasise the insecurity factor which is felt generally because people cannot plan their futures. How can a young couple decide to buy a home if they cannot get a mortgage because they do not have the permanent or regular employment that one would normally have expected them to have?

Dr. Barnardo's published a report only in the last week in which over a thousand adults were questioned. Predominantly, those who said that they did not think that their children in the future could expect full-time permanent jobs were actually in full-time work. Roger Singleton, who is a senior director of Dr. Barnardo's, said:
"The findings of this survey paint a depressing picture of adults' perception of the future for today's children. It is widely believed that children no longer grow up in a secure environment with the prospect of a permanent job if they do well at school. The confidence and optimism of previous generations has been replaced by a feeling of powerlessness".
What an indictment of our society today.

The Royal Society of Arts recently published a booklet entitled Tomorrow's Company. It was refreshing, it was welcome and it called for what all good employers want. It declared that companies which sustain competitive success will focus less exclusively on shareholders and financial measures of success and instead include all stakeholder relationships. It also declared that companies should clearly define their purpose and values and that those which deepened their relationships with their employees would succeed. The debate is important, and I suggest that it is important not just because of the casualisation of labour; it is important for our community as a whole.

7.3 p.m.

My Lords, we are all grateful to the noble Baroness, Lady Turner, for bringing the subject to our attention. It is a most important subject and one which has developed over the years. My own experience has been in manufacturing industry. However, there is one thing that I should like to bury before I go any further—the word "casualisation". It is 75 years old and, please, can we today consign it to the incinerator because, as a word, it is not a compliment to our rich language. In fact, it is a noun which has not derived from a verb and for which we had to find a verb to make it work.

As I said, we are discussing a most important subject—even more so today as we emerge from a recession and are faced with falling unemployment and a demand from industry for skills that at present are not readily available in our labour market. Faced with that reality, it is essential that we should strive to maintain a very high degree of flexibility in responding to market needs. That means that we should welcome part-time working, particularly as regards encouraging women who have taken a break from the labour market to raise families to return to work. We should also encourage adult retraining schemes and programmes of "continuous improvement" within the labour market.

There are many statistics which can be bandied about the Chamber on the subject. Just looking at a couple of them which have already been quoted this evening one sees the suggestion that the average worker in the United Kingdom is working more hours in comparison with EC countries. That is not correct because the average United Kingdom hours were 38.9 and the average EC hours were 39. That is not much of a difference but, nevertheless, I am sure that it is statistically important.

So far as concerns the United Kingdom's comprehensive framework of protection rights, all employees, regardless of their hours of work, have rights which apply from the very first day that they walk in through the factory door or wherever they are going to work. That includes protection against unlawful deductions from wages; discrimination on grounds of sex, race, trade union membership or non-membership; and the right to maternity leave.

There is a question which always appears; that is, the national minimum wage. I believe that it requires rather more thought than it has been given to date. With it goes the roll-on effect of the differential—the differential between the pay demands of the skilled versus the unskilled worker. One man's pay rise is, sadly and frequently, another man's redundancy.

What we must avoid at all costs is over-regulation. It is essential that we fight to retain the opt-out negotiated at Maastricht by my right honourable friend the Prime Minister for the so-called social chapter. The key to success for our country as we approach the next millennium will be the maintenance of the competitiveness of our industries. That will be achieved only by nurturing a well-trained, highly motivated and, above all, flexible workforce. If flexibility leads to an element of casual working, then so be it.

Let us look at practice as it is in some manufacturing companies. Survival of a company in these last years of recession has been vital and it is only through the use of casual labour that many have been able to pull through. Let us look at an industry in which I have had some experience—the manufacture of fork-lift trucks. Much of the componentry is made up of welded sub-assemblies. If such a factory is operating at 50 per cent. of its capacity or less, the use of casual welders is vital as a tool for survival. It is better that we use that casual skill in such a way than risk the jobs of the other employees at the factory, numbering many hundreds, being put in danger.

The overriding necessity is, and will be, to accelerate the growth in our gross national product. We must create wealth and hence build a society in which the standard of living for the whole population can be raised. That will never be achieved by over-regulation; it will only be achieved by flexibility.

If we seek a role model we should look not to continental Europe but to Singapore, which is not really a third world nation as some people tend to describe it but one of the most growing and thriving markets and producers in the Pacific Rim. A visit to Korea might also stimulate views on the subject of energetic and effective work. Our 19th century greatness was achieved by nurturing a flexible labour market and I genuinely believe that we must not forget the lessons of the past, particularly as we have to look to the future.

7.10 p.m.

My Lords, the pressure on time in this debate is an indication that we should have more debates on this and allied subjects. This is not a subject; it is a survey of the national problems, their ills and the dangers and opportunities at this juncture in our long history.

The speech that we have just listened to represents the authentic voice of some points of view about the present state of our economy and conditions of employment. It deserves to be examined, and so do other aspects of this matter. I rise in the short time that is available to raise a question which I doubt whether other noble Lords will bring forward, and that is the problems of the public sector, where the Government, as a matter of deliberate policy, are introducing insecurity, uncertainty, redundancy and lower pay. They are in fact injecting the evils of society and employment into the range of public service.

The Government are still by a long way the biggest employer in the land. Think of the National Health Service, the teachers, local government service, the Civil Service generally and taxation. There is a philosophy with regard to public service which has been long built up as regards the protection of those who work in it from much of the insecurity and devastating distractions that frequently arise in outside employment. What are we to do about the injection into this vast public service of a degree of insecurity which, happily, it has not suffered up till now? This is a deliberate attempt to bring the public sector into line with the private sector and subject it to the infections of private employment and private enterprise with which we are all familiar.

I can do little more than sound an alarm that what is happening in the public sector is creating a state of mind which I think is a danger to the quality of our public services. We do not really need to go to the United States to discover how to introduce new principles into our public services. We have a country of our own and we have standards of our own but the way we are going we shall probably be forced, either willingly or otherwise, to introduce competition and cost-effectiveness into service to the public, into service to patients in hospitals, into service to the public in education and into service to the public in other branches of important service that can come only from the state.

The other day I was talking to a doctor who said, "In our practice we can do very little more than talk about money". Are we soon to talk about cost-effectiveness in the treatment of patients? In the Civil Service one cannot talk about anything now except to ask when people's work will be put up for sale. The Civil Service is going into the slave market because the Government want to reduce the size of it and they want to introduce deliberately a degree of uncertainty in the public service generally which they think will stimulate people to further effort.

Look at the disaster of the Child Support Agency, whose work we have been discussing for the past two days. That has come from a Government who think they have the prescription for a more successful Britain but they fail when it comes to big questions of organisation and management. The Government do not understand the problems of size and what is needed to keep a large body of people under one employer and on diverse tasks in conditions of relative contentment and with a devotion to the work in hand. A discontented public service is a danger to the nation and it is the duty of government to try to bring the public sector into reasonable relationship to conditions generally without subjecting it to the same devastating consequences which, unhappily, are occurring elsewhere.

I think that it will be necessary for your Lordships' House very shortly to give more attention to what is happening in the Civil Service and in the public services generally. What are the principles of public service? What is the ethos of the public sector and what are the standards of service to the public? What I fear is that, in order to save staff, the Government will reduce standards of application and enforcement of the law. Bear in mind that the public services are administering the law and that is where the ethos of the public sector comes in. The law must be administered fairly, with understanding and without bias. Attention must be given to cases which require a good deal of attention but which, from an economic point of view, will be pretty expensive. But that is what the public service is about.

There are signs already that part of the savings which the Government wish to make will have the effect of reducing pressure as regards enforcement of the law. Taxpayers not worth pursuit may not get pursued and the laxity will spread into the system where one pays if one likes or one pays what one wants. Bear in mind that in the immediate offing there is the self-assessment of income tax. The Government are going to shift the work of thousands of tax officials on to the shoulders of the taxpayers themselves. They are all going to sign their own little death warrants and send them in to the Inland Revenue to be told whether or not they have their sums right. But, when it comes to the point, one will find there is mail-fisted enforcement. Penalties will come into it. The spread of automatic penalties in the public sector is disgraceful. The courts are being deprived of the power to administer justice. A code of automatic penalties is growing up in the taxation system. It is dangerous to the ethos of public administration.

That is my warning, my Lords. I hope that before very long your Lordships' House will spend a little time on a subject which we need a Royal Commission to study—namely, the future of the public sector in today's changing society.

7.20 p.m.

My Lords, this debate will have been significant if only for the important contribution of the noble Lord, Lord Houghton of Sowerby. He issues a clarion call which we shall ignore at our peril.

I should like to quote a few examples of the effect of casualisation, touch on some lessons we can learn from history and suggest some ways forward.

My first example is of an 18 year-old man in Manchester who recently got his first job working at McDonalds. He worked first from three o'clock to one o'clock on Saturday night. He then worked from four o'clock to one o'clock on Sunday night. He thought that he would then be working the next Sunday, but on Sunday morning he realised that he should have been working on Saturday. He phoned up and said "I'm sorry I didn't come in". They told him to come in the next Wednesday, Saturday and Sunday. When I heard that story I wondered what kind of lesson that young man was learning. It illustrates exactly what the noble Baroness, Lady Dean of Thornton-le-Fylde, mentioned—the fact that employees feel no responsibility towards their employers nor employers towards their employees in a casual and temporary labour market.

The next example is the case of a highly skilled professional property services manager who works on the basis of a three-month contract. He is on his second three-month contract. He looks after a very complex building, which should have his attention over a long period of time. He should have a long-term perspective, yet he is employed on a three-month contract. How can he be expected to take a long-term perspective on the rational utilisation and maintenance of the building if he has only a three-month contract?

My third example is the Child Support Agency. Other noble Lords have already referred to it. Its record of abysmal administration is appalling. Only last night I heard of the case of a man who received on the same day three different assessments from the same office. That is public administration gone mad. It is the bureaucracy of the anarchist state. I do not know whether it is true, and perhaps the Minister will either confirm or deny it, but I have heard that a third of the Child Support Agency's staff is temporary. If a new bureaucracy is being set up and a third of the staff is temporary, how can you build in the training and achieve the long-term continuity and commitment of your staff that is necessary to work effectively? Whether or not one agrees with it and whether or not one thinks the rules are right, the Child Support Agency does not seem to work effectively. It is a fundamental problem for our society if we cannot set up a new bureaucracy that will work effectively. It is only by a saving grace that our older bureaucracies, such as the income tax and VAT systems and the public administration of our universities and polytechnics, manage to carry on. If we impose too much change on those bureaucracies—and they are suffering change—will they crumble? Serious problems are caused for our society by the process of temporary, casual and short-term employment.

What can we learn from history? I am proud to be a member of my union, which started as the Association of Engineering and Shipbuilding Draughtsmen. That trade union began on Clydeside in the shipbuilding industry because of the casual nature of the employment of draughtsmen. Shipbuilders who had a ship to design and build would hire draughtsmen to draw the necessary drawings, and once the ship was built they would lay off the draughtsmen. That created all sorts of problems for the workers. Through their unionisation they told the employers that they would no longer accept that. They forced shipbuilding managers to run their industry more effectively so that there was continuity of employment. Not only were the shipyards utilised more effectively but, because there was continuity of employment, they could build in the training and other positive attributes that result from continuity.

I was very interested in the contribution by the noble Viscount, Lord Oxfuird. I hope that his noble friend, Lady O'Cathain, will explain to him that it does not make sense to run manufacturing capacity at around 25 per cent. It is nonsense. I hope that she will be able to explain that to him when she next sees him.

Looking at another historical element, the casual dockworkers' employment system gave rise to what is now known as the Transport and General Workers' Union. The union has a proud record of fighting for the rights of dockworkers and the creation of what became the dock labour scheme. That contributed greatly to the stability of employment and was part of the mechanism which ensured the full employment to which the noble Lord, Lord Carr, referred and which we all assumed 20 or 30 years ago was here to stay because it was so beneficial. It was an article of political faith.

I touched on the question of full employment. It is the key. It is only when you have full employment and effective trade unions that you can develop a scheme of employment rights and protections that ensure that casual workforces are not tolerated. Other noble Lords have suggested that we should change the law to encourage decasualisation and give employment rights from day one rather than after two years. That is important. We should also encourage and support trade unions and what they stand for. It is only by working with the representatives of organised labour that we can ensure that the prospects for people in employment in this country are improved to the extent that we lose the detriments and problems for our nation as a whole which result from the casualisation of employment.

7.30 p.m.

My Lords, the term "casualisation" which my noble friend Lady Turner described so well in her impressive opening speech has a much more euphemistic, more polite name—flexibility in the labour market. Under that term it can be held to be the "exploration of new patterns of employment" which allows employers to contain costs and improve productivity. In the face of economic recession, firms have shed workers, but if firms have survived, they have often "downsized", as has been described by a number of noble Lords, leaving a core group of employees, usually full-time, indirectly employing temporary employees. They can take them on or drop them according to demand. Those workers are either part-time or on short-term contracts. Alternatively, they are workers for other firms with which sub-contracts have been made. Often those workers are supplied by agencies which specialise in one or other skilled or professional category of worker. Some of those agencies have become quite prosperous recently.

Perhaps I may give one example of the use of agencies. I refer to the use of agency nurses by the National Health Service. I consider that to be a costly and sad example of flexible working. It is only slightly improved upon by the nurse bank system. Both undermine the continuity of care which both patients and nurses need. To have a continuous job at which they can get to know their patients and to learn their craft in a more satisfactory way gives nurses proper work satisfaction.

The downsized firm, cushioned by the ability to contract to a minimum size in adversity, has been dignified by the title the "flexible firm" by the Institute of Management Studies, for instance. However, that approach is seldom the result of rational planning, as it is often made out to be. It is usually caused by knee-jerk responses—ad hoc responses might be a better term—to short-term changes in demand or workload. After a recession, firms which have had their fingers burnt take on workers whom they can shed without pain. Thus many of the jobs which unemployed people accept are not as secure as jobs which they may have held originally; and those coming in to the labour market for the first time have to take part-time jobs for want of anything else.

As almost every noble Lord has hinted or described, it is perfectly true that the skills required for today's labour market are changing rapidly. A well educated and skilled Workforce will meet those requirements best. I do not think that anyone disagrees with that. But the increasing predominance of part-time and short-term jobs is surely not best calculated to achieve that flexible range of skills which we need.

It is said by too many people that the industrial world now has institutional unemployment. However, as my noble friend said, part-time work for millions of people represents a further tranche of concealed unemployment which is not reflected in the official statistics. It is true that many people, in particular women, welcome the increased availability of part-time work. However, many more would much prefer secure full-time employment if they could achieve it. Many women are in part-time work not because they want it but because their partners who may be unemployed or in low paid work have insufficient income to sustain more than a basic standard of living, which is not acceptable in today's high-tech, high consumer society.

In March of this year we debated the Rowntree Report on income and poverty. It indicated that inequalities in income and wealth are increasing. Many of those in poverty are either unemployed or in the type of low paid work that we are discussing today.

Parallel with the findings of that report is the increasing evidence that people's health status is directly related to their relative income. Those in casual work are doubly disadvantaged; they have low wages as well as low prestige and lack of control over their working conditions. It is hardly surprising that their health is worse.

The United Kingdom has perhaps the lowest labour costs among the major industrial nations. However, I suggest that that is not something to be proud of, as noble Lords opposite sometimes suggest, but something to be worried about. It is perfectly possible to have a successful, high wage, high skill economy. Other noble Lords have pointed to the example of Japan, the United States and Germany, with an educated workforce and an up-to-date industry. The need to retrain and re-equip is recognised by all parties. An under-employed or unemployed workforce should surely act as a stimulus and even provides the opportunity for a much more active training and retraining policy. I believe that the ideas of the noble Lord, Lord Dahrendorf, are well worth following up.

Industry, which includes not only manufacturing but also service industry, must be encouraged or required by a mixture of carrot and stick methods—perhaps regulations but also rewards—to take on a far larger share of responsibility for training. There are good examples, but I suggest that there are not enough of them. Coupled with incentives to industry and to the City to invest in Britain, that concept is the way forward. Casual employment without training and retraining may seem better than unemployment, but it is leading not only workers but the whole country up a blind alley.

7.37 p.m.

My Lords, I thank the noble Baroness most sincerely for the opportunity to debate this important issue. I am probably not the only one among your Lordships to be confused by the terminology that we use. My noble friend Lord Oxfuird has already suggested that we should consign the word "casualisation" to the incinerator. It is a nasty sounding word. However, I believe that there are three categories of non-full-time employment: casual labour; temporary labour; and part-time labour.

No one has mentioned the total number of people employed as casual labour. The noble Baroness, Lady Dean, stated that the number of casual workers had increased by a third in 10 years. But from what base? She also stated that successful companies treat workers well—not as casual labour. We ought to send a message out from this House that all companies must do likewise. A company with which I am involved has almost 130,000 employees, of whom 60 per cent. are part-time and 10 per cent. are temporary—to cover maternity leave, and so on—but there is no casual labour. I believe that that is the way forward.

I suggest that we should also update our views on what the labour market actually is, and how it works now. It is a market in the true sense of the word—buying and selling of labour. What it is not, and should not be, is a slave market. It should not be an arena of confrontation; it should be an arena of co-operation.

There are no jobs for life not because an organisation does not wish to have a long-term employment policy but because no company can honestly and confidently say that it has a long-term future. Takeovers, mergers, management buyouts and company failures all affect the labour market. That is not a uniquely British phenomenon; it is happening worldwide. Employers are also employees now. We are always confused about this. Managing directors and chief executive officers are "hired hands", like the rest of the labour force. There is no great divide, no "them and us". That has largely evaporated. It would be nice if we could drop the term "working class": those of us who have worked all our lives regard ourselves as workers, from whatever class. Let us do away with the term; we are trying to get Britain mobilised to go ahead and be competitive in the international world, not messing about with unnecessary class distinctions.

Most people in the labour market will have several different jobs requiring different (and in some cases very different) skills, which puts the emphasis on continuous training—both on-the-job and specific training modules provided by seminars, training courses or further education projects.

People in the labour market are increasingly demanding interesting jobs; their expectations have been raised and if they do not have them all fulfilled they will move jobs. The labour market exists on the basis of mutual dependence; organisations need employees and employees need and want jobs in organisations. But there is a huge demand for part-time flexible working in most organisations. Ironically, relatively recent legislation such as maternity leave provision has created a demand for part-time and temporary jobs. I do not believe that that is a bad thing.

With increasing international competitiveness, we must ensure that we have flexibility in all the activities of business, not just flexible labour but flexible finance, to mention but two essentials. Not only is there increasing international competitiveness but there is also a tragic world-wide problem of unemployment. How to balance the need for flexibility in the labour market with the genuine, heartfelt wish to reduce unemployment is a problem which no one, no country has yet completely solved. There are schemes to keep people at work, there are measures taken by national governments to keep people at work—only last week I referred to one such, state subsidies in aviation for failing airlines—but in the long term neither works without seriously damaging the competitive position of the country.

Fortunately, new ideas are constantly resulting in new markets, new products. Production processes have been transformed by new technology, resulting in huge increases in productivity. All those require labour, but it must be skilled labour, labour that can command high earnings because the product of that labour has the competitive edge. Refocusing, downsizing and increasing flexibility are now common features of business. We must meet the challenge to employment posed by that trend.

Several noble Lords have referred to education and training, and I too wish to do so. I believe that the greatest challenge lies in skills improvement. I suggest that it should be tackled on a tripartite basis. The organisation should produce the on-the-job training and, even if people are involved in it only as part-time workers, they should have additional skills by the time they leave which can lift them up further into another category in another organisation.

The second partner should be the Government, who should offer training schemes for the unemployed, even training vouchers, or something that I am keen on—expanding further the proposal of the noble Lord, Lord Dahrendorf. On many counts, it is brilliant and we ought to examine it again.

The third party is the individual himself or herself. The onus must be on the individual in some cases to become involved in distance learning, to try to "upskill" himself or herself, to use a horrible expression.

In order to be in the forefront of international business, it is vital that no measures should be taken which affect competitiveness—for example, increased employment costs through the social contract. Interestingly enough, I believe that, if Britain opted for the social contract, the casualisation—and that is the last time I shall mention it—process would increase. The statistics show that Britain has the third lowest share of temporary employment in the European Union (after Luxembourg and Belgium) with 5.7 per cent. in temporary employment. I do not know whether that is casual or temporary labour: I suspect both, according to my definition. However, the European Union average is 10.5 per cent., of which Germany has 10.2 per cent., France 10.7 per cent., and Spain 32 per cent.

My noble friend Lord Carr referred to on-costs. Sometimes we allow our hearts to rule our heads about the legislation we debate here, which results in on-costs. Flexibility in the labour market also demands flexibility in institutions. Institutions such as insurance companies and building societies are aware of the changing nature of employment trends and moves are being made to ensure that people have adequate insurance cover for periods of unemployment. For example, the Association of British Insurers stated recently that new products are likely to be developed quite quickly or existing products refined to provide mortgage protection insurance.

Let us not think that part-time work is a desperate last-ditch choice. People have said how many workers want it. There is a demand for it from employees to keep their minds active, to meet people, to finance extras such as holidays, but also to give proper care to children in out-of-school hours and to be able to be with children during school holidays. It also enables some carers to have other more agreeable activities which are good in getting them out of the house. There is a demand for part-time work from businesses for meeting peaks in customer demand, for meeting employees' wishes, as has already been stated, for protecting full-time employees from future downsizing, for cost effectiveness and for efficiency.

All those are important and unfortunately in the time we have available we cannot really explore them. A minimum wage will add to the costs of industry in some cases, but it will have an even more serious effect—namely, a significant increase in unemployment. Recently, the CBI held a discussion and issued a press release which indicates that:
"hundreds of thousands of current jobs would no longer be economically viable—particularly in the service industries but also in agriculture, textiles and clothing, where job opportunities for part-time women and younger workers would inevitably be adversely affected".
It is such a shame that we are time-limited in the debate. However, the exposure and examination of the subject this evening has done a great service to the imperative for all of us to consider further this most important subject.

7.46 p.m.

My Lords, we are agreed on a number of points: there are full-time jobs, part-time jobs, temporary jobs and permanent jobs. My noble friends on this side talked about casualisation, but they do not mean that the jobs are part-time, nor do they necessarily worry about jobs being temporary. They are worried about whether being in a job—part-time or full-time—on a casual basis somehow gives a worker an abbreviated set of rights compared with someone in a full-time job. That is one issue. I am being a pedagogue and trying to clarify the issues. When people talk about casualisation, they feel that someone who is a casual worker has fewer rights than a permanent employee.

My second point is associated with the first. I agree with the noble Baroness, Lady O'Cathain, that there is no way of finding out about the casual labour because the Labour Force Survey does not give casual labour and non-casual labour. It could be that being employed as a casual labourer either subjects a person to being paid a lower wage for the same job than if the person was not a casual labourer or that the other perks like holidays and pensions do not come into the wage packet as they do for non-casual workers.

Noble Lords opposite say either that casual workers do not exist or that they are a good thing and there should be more of them. I believe that they have not made up their minds about it. If casual workers exist, they are insecure their jobs and they probably receive a lower wage per hour. They feel that they certainly do not get the extras such as pensions and holidays that non-casual workers get. That is the nub of the argument and it is a pity that we have no reliable statistics to sort the matter out. It is in the nature of the behaviour of both employers and employees to hide the fact that a worker is casual.

Some people on the opposite side would like all workers more or less to be casual because it gives more flexibility. There is plenty of evidence about that. I commend to noble Lords on all sides of the Chamber the forthcoming World Bank development report called Workers in an Integrating World. It will be released next week. The World Bank is no friend of ours on this side but it takes a balanced view on matters such as trade union rights, job security and even the minimum wage. The report states that it is not possible conclusively to show that minimum wages lead to a loss of jobs. There is plenty of research on that. We on this side feel that taking the strategy that noble Lords opposite want, namely the casualisation of the whole workforce, flexibility—

My Lords, I thank the noble Lord for allowing me to intervene. That is the second time that he has made the statement that noble Lords on these Benches would like the casualisation of the whole workforce. I have certainly not heard that from anybody here today. I believe that what he says is wrong. None of us wants that. But at the moment it is the reality of the labour market worldwide.

My Lords, perhaps I was too provocative in my words. I shall be more sober in my content. If there is labour market flexibility, there lurks the question of non-wage costs. By pointing to the social chapter and so on, it is implied that such things as holidays, maternity leave, paternity leave etc. are basically just frills. If those "frills" are taken away, and if hours and conditions of work are not necessarily regulated, of course flexibility in the labour market is increased. If you want the labour market to be like the market for bananas, then of course you do not want workers to have any rights at all. A good neo-classical economist would more or less not see the difference: anything that treats workers differently from bananas is an interference with the market; that is not a problem. The issue is: does it help efficiency, productivity and long-run growth if workers are treated well? Some of us feel that it would be a great help if the word "flexibility" and the concept itself were not used in relation to universal casualisation. Perhaps it is not true; but the way in which people continue to attack the social chapter as if it were a great burden on the country, when practically every other country in Europe manages to have the social chapter, leads me to think that there is that sort of desire.

I recognise that the labour—

My Lords, will the noble Lord give way again? There is a misconception that Germany is such a wonderful place for production and the structure of its workforce. Its position is such that I now know of a British company that benefits greatly from the German so-called social chapter in that it has just received a very large contract for the entire engine production to be used in Germany, as opposed to the cost of German engines. Our products are finding great favour, even in Germany.

My Lords, there are always such episodes, and one cannot comment on every one. I have only eight minutes in a time-limited debate. It is not kind to interrupt me several times. However, I see that I have been effective in eliciting a response from the opposite side. That is very good.

I recognise that production conditions are changing. We live in a post-1940s technology. I am sorry that I have not had time to comment on the very interesting remarks made by the noble Lord, Lord Dahrendorf. The noble Lord asked us to suppose that labour market conditions in the world at large will cause us to move more towards what I call episodic employment—it is in fact the feminisation, rather than the casualisation, of work: men having labour experiences similar to those that women are used to having. If that is the case, can we sustain the welfare state on today's basis? That is a very important question that we have not had time to consider. If you complain a lot about the burden on taxation of providing employment, on the one hand, all that happens is that such costs are not borne by wages, and you end up paying in general taxation, through unemployment, sickness or other adversities. In a sense the Government have admitted as much by expanding the role of family credit. If employers are allowed to pay low wages, the taxpayer is asked to make up the difference. It is a matter of choice.

I am an economist. If you want to have the burden of low pay being borne by general taxpayers rather than by employers, that is one kind of income distribution. We do not like it. To the extent that these forces are worldwide and unavoidable, we have to meet the challenge. Our only request is: please do not add to the burden by further worsening the situation.

7.55 p.m.

My Lords, I welcome this debate. I too believe that there are many misunderstandings regarding flexibility and the deregulation of work. As I understand it, the Government argue that more flexibility is required because increasing competitive pressures and accelerating technical change are producing a more uncertain business environment. The Government think that the rational response to such uncertainties is deregulation, increasing the use of part-time labour and placing a greater reliance on short-term contracts, outworkers, home workers and sub-contractors in order to reduce a firm's dependence on full-time labour. Central to this approach are new forms of individualised payments and ways of making hiring and firing easier—all done in the name of flexibility. The attitude was summarised by my noble friend Lady Turner as the casualisation of labour. I too am most grateful to her for the opportunity to discuss the matter.

I should like to examine some of these terms and concepts I have mentioned as they apply to manufacturing. I believe that there is confusion between employers and government over what they mean by flexibility in the labour market. Many noble Lords opposite, I believe, think that industry needs a casualised workforce—which means a pliant workforce—in order to compete with low-cost labour countries.

Faced with international competition, what have the leaders of our manufacturing companies done? They have introduced new products, new equipment and new working methods which have led manufacturing firms towards continuous production. Much of that continuous production increasingly entails shift work. They have committed themselves to continuous improvement and the raising of standards to ever higher levels. They are committed to a programme of quality management. Their customers require them to invest in more and more, and better and better, information technology. They have cut costs by introducing information technology and eliminating layers of management. All this demands more skill, more training, more versatility, more commitment, more education and more initiative from management and from the workforce.

How do industrial managers release these qualities? Certainly not by fear, and certainly not by casualising work. I disagree totally with the noble Viscount, Lord Oxfuird. A strategy of labour flexibility involving the extensive use of casual part-time labour or sub-contractors is quite irrational in manufacturing. The facts do not support his thesis—

No, I will not. This is a timed debate.

Production can be organised efficiently only with the use of full-time permanent shift workers in-house. The cost and managerial effort required to co-ordinate an alternative strategy of casual labour is totally counter-productive. People today recognise that no job is guaranteed for life and that they must continually upgrade their abilities and skills and adapt to new processes and products and the demands of a company. Employers would much rather adapt and train their existing workforce to meet new circumstances than hire a new one. I agree totally with my noble friends Lord Gladwin and Lady Dean that these practices send a positive message to the staff and encourage loyalty so that the best people stay with the company. That is what a business means by "flexibility". It is a kind of internal labour market within the company which adapts to change. What the Government understand as flexibility—easy hiring and firing—is entirely inappropriate and indeed is probably damaging to the ethos of the company. The objective is not to reduce wages to the level of those in China or Indonesia; it is to reduce our unit labour costs to the level of those in Germany and the United States.

An adversarial workforce, cowed by years of deregulation and unemployment and easily hired and fired, is only of value to a company with poor management and low investment. Is that the kind of company the Government are trying to encourage? Such policies may be applicable to service companies like supermarkets, but I am doubtful even of that. Most firms today are committed to a policy of continuous improvement in all sectors of their business. Does one achieve that with a casualised workforce? No. In those circumstances I suspect that flexibility means flexible hours which are adaptable to the lifestyle of the employee, as my noble friend Lady Lockwood explained, and the working of the company but managed with the same rigour needed for continuous production and shift working.

My noble friend Lord Houghton reminded us that the main area where casual employment seems to flourish is in the public sector and in the recently contracted-out sector. Zero-hour contracts, 51-week contracts, year-to-year contracts are now on the increase in those sectors. Because they face little international competition the hourly rate of pay is important and many think that insecurity at work makes for a pliant workforce which will work for low wages. That old-fashioned view only helps poor employers and stands in the way of progress and the introduction of new technology. It does nothing to help the introduction of continuous improvement in those sectors.

Perhaps the Minister will say that the Government's policies are vindicated because of our recent export performance. In response I would say that most of our successful exporters would reject those policies. That has certainly been my experience in industry. As to the example given by the noble Viscount, Lord Oxfuird, of the company in Germany, I am sure that devaluation of the pound had a considerable effect on that transaction.

Leadership in a business encourages best practice to drive the organisation towards ever higher standards. That means creating a workforce which is well educated and adaptable to changes in skills and circumstances. It does not mean a casual workforce which is easily replaced when circumstances change. Like most people in industry, we on these Benches believe that success in a modern economy does not come from a casualised workforce but from a confident, secure, well motivated and loyal workforce.

8.3 p.m.

My Lords, I join other noble Lords in thanking the noble Baroness, Lady Turner, for introducing this subject. I have a considerable amount of sympathy with many of the points she raised, in particular in relation to insecurity and the low rewards given to many part-time workers. I, for my part, accept that there will continue to be a considerable number of part-time workers. Professor Handy may not be entirely right, but there is a good deal in what he says about a future in which a relatively small proportion of people will have traditional careers and a larger number will have what he called "portfolios" made up of part-time work and other ways in which one's income is earned.

To make the situation for part-time workers tolerable they need to have the same rights pro-rata as full-time workers. They need to be treated in all respects as though they were full-time workers, but working under different conditions. That means the same kind of holiday and pension entitlements; the same kinds of opportunity for training and so forth. They should be on all fours with full-time workers.

I do not know if the noble Baroness, Lady Turner, said this, but I am confident that she will agree with me that in an industrial world in which change is happening rapidly and inevitably, as it is at the present time, it is extremely important that the modern reformed trade unionism, which has been so much put forward and helped by John Monks at the TUC, is brought into the discussions of how to handle the changes. We on these Benches agreed with many of the early changes in trade union regulation brought about by this Government. They were needed and overdue. But the Government have gone too far and it is important that trade unions be involved in the discussions on the changes which need to be made and in finding solutions to the difficult problems we are encountering.

However, I fear that that is the point at which I part company, regretfully in many ways, from the noble Baroness. What I felt from her speech and the speeches of nearly everybody else on the Labour Benches until we came to the noble Lord, Lord Haskel, (who greatly cheered me) is that it is all the fault of those wicked people opposite. I go along with a good deal of the criticism of them. It was said that if we went back to how it was in the 1970s, when there was a Labour Government, all would be for the best in the best of all possible worlds.

I remind the noble Baroness, Lady Turner, that there were quite a few flaws in the situation in the 1970s. For instance, 40 per cent. of our school leavers received no training at all. If they had received it, the situation today would be a great deal different than it is at present. It must be remembered that we had a winter of discontent; there was overmanning in industry and a number of other features which were holding us back. Our world trade had fallen to 6 per cent., and if it had gone on further it would have had a devastating effect on this country.

It is not simply a question of turning back the clock. We must look at what we are encountering and how we can meet it. Listening to the speeches from the Labour Benches I felt that they shrank from facing the horrible difficulties we are facing in the global economy of today. We are meeting heavy competition from around the globe. We are facing in the developing countries, with their vastly increasing populations, difficult challenges. We must face those challenges and work out co-operatively the best ways of doing so.

That is why I welcomed the suggestion—I believe it came from the noble Lord, Lord Carr—that we need to deal with what I see as an overwhelmingly difficult problem; that is, how we can maintain and improve our standards in a global economy when we are ill equipped to meet the competition facing us. I wish we could do it on the basis of consensus; that we could have an all-party approach to recognise the dangers and then to work out the changes which need to be made and the way in which they can be brought about.

As many others have said, the real issue is that we can only compete if we have a highly skilled, highly trained labour force which is extremely flexible in the sense that it is capable of turning its hand from one kind of demand to another, meeting the change successfully and confidently. That will be difficult because other industrial countries do not stand still while we are catching up on all that we failed to do in the past. They are advancing at the same time and that increases the competition.

We do not have that workforce; we do not have anything like it. We have an appalling backlog of untrained, under-educated people who are going to find it extremely difficult to fit into the global economy in which it is going to become increasingly more difficult for us to compete. We must put more money into training and re-training. The noble Lord, Lord Dahrendorf, made a useful suggestion as to how people could be financed through that continuous training.

In terms of the way of which we allocate resources in this country, I would put education and training way ahead of everything else because I think everything else depends on them. All the other services that we want depend on our being able to earn our living, and being able to earn our living depends on having the kind of labour force which we simply do not have at present. That is why putting back the clock is no good at all.

On my next point I am not speaking for my party, but, as the noble Lord, Lord Dahrendorf, indicated, he and I are very much at one. The noble Lord, Lord Carr, suggested—we had not in any way discussed this with him—that his mind was moving somewhat in the same direction. Part of the changes we need to face are changes in the whole way in which we run our welfare society or welfare state—"welfare society", as Beveridge once said he preferred to call it. Although I believe that the term has been somewhat besmirched of late, it would indeed be a much better way of expressing what we really want to do. The changes we now encounter mean looking at our system of employment and our system of welfare and social benefits. The two things are tied up very closely, as we saw when we discussed the Pensions Bill which recently passed through your Lordships' House.

I am a strong supporter of introducing something along the lines of a citizen's income, even if it is quite a small one, which gives people some basic fallback on which they can rely absolutely and which does not have the effect of discouraging them from getting into the labour market. I believe that the noble Lord, Lord Desai, would agree with me on that point. Do noble Lords realise how ridiculous our social benefits system is? If a man and wife are both unemployed and they have two children of school age, if they want to increase their family income by £20 they have to earn £170. Which of us in this House would go out and work to get £170 if we would get only £20? People are driven into the black economy. I do not blame them. That is where I would be under those circumstances. But that is what our ridiculous system is undoubtedly doing.

We all know that the income of the bottom 10 per cent.—the money they are supposed to have—has fallen in relation to what they had previously. But, according to figures which have recently been produced their expenditure has gone up. That can only mean one of two things. If their income has fallen but their expenditure has gone up, something very odd has happened. Either they have used their savings—but it is not really to be expected that people in the bottom 10 per cent. have a lot of savings—or else they are earning money somewhere else. That falsifies all the figures that we are quoting. We need a radical change, based on a citizen's income, and we need a radical change in the tax system. The noble Lord, Lord Carr, was surely right in saying that we should take the lower earners right out of taxation.

I would also say that the burden—here I am with the Government: no, I am not, because they are going back on what they themselves have said—of social benefits should not be put onto employers. We as taxpayers should be prepared to pay through taxation for the decent society we want. We are not doing it at the present time. It is ridiculous to lay charges for maternity onto employers. How many employers are responsible for maternity? I suggest a very small percentage. We have to review the whole thing. We have to review our attitude towards training. We have to review our attitude towards employment. We have to review our attitude towards our whole welfare society. And we need to do it on a co-operative, all-party basis.

8.14 p.m.

My Lords, I very much welcome today's debate and thank the noble Baroness, Lady Turner, for initiating this wide-ranging discussion and all other noble Lords who have made such a noteworthy contribution. They will, I am sure, appreciate that I may not be able to cover every detailed point made but I shall endeavour to touch in very general terms on all ground covered and I shall concentrate, perhaps inevitably but not exclusively, on labour market matters.

What we are discussing matters very much to ordinary people. The need to have a job and to have one which gives satisfaction, security and self-esteem is something to which every Member of this House can subscribe. What is at issue is how that is best achieved.

My right honourable friend the Chancellor of the Exchequer, speaking last week at the Mansion House, acknowledged that there is an unease in Middle England about apparent job insecurity which casts a shadow across the land. The world is changing around us, and changing fast. Change engenders uncertainty and concern. That is not unique to Britain. Across the developed world people feel insecure about their jobs.

The pace of change in technology is rapid and shows no sign of easing. It has created vast new industries which even a few years ago would have been undreamt of. Interestingly, countries like the United States and Japan, which have the fullest use of high-tech, have the highest proportion of their populations in work. With these changes in industry and technology the pattern of world trade is changing too.

This year is the 50th anniversary of the end of the Second World War. Since then there has been a growth in prosperity unparalleled in the history of the world—a prosperity built on trade. We welcome this prosperity, not only at home but abroad as well.

When GATT was formed, tariffs averaged 40 per cent. They are now down to 3 per cent. We are now not just in a European but a world market-place. Trade has grown, prosperity has grown, and it has brought new jobs with it. However, two parallel trends have emerged as trade has grown and the pace of technological change has accelerated. First, there has been a massive upsurge in prosperity. Average real earnings for married male full-time workers, for example, are now 46 per cent. higher than in 1979. Real take-home pay has risen for all earnings deciles since 1979. But, secondly, the rapid pace of change has brought about a sense of insecurity. People recognise their growing prosperity but worry about whether it will last.

These worries are very real. We must not dismiss them, and the Government do not do so. Neither should we play on people's fears. It is quite wrong, as some are inclined to do, to make out that insecurity is worse than it really is. But, above all, we should not actually put jobs at risk through policies which really do destroy them—policies such as the national minimum wage in force in France, where unemployment among young people has now reached 28 per cent., and in Spain, where more than 40 per cent. of young people are now out of work. We do not want that here, do we?

Any policy which puts jobs at risk adds to insecurity. It is a cruel deception to pretend that policies such as those flowing from the social chapter and the national minimum wage which would raise the cost of employing people and reduce the competitive position of British firms will not put jobs at risk. As my noble friend Lord Oxfuird said, costs of employment have a major bearing on this. We must not have a system of labour relations and a business environment in which, instead of exporting our goods, we export our jobs which are so much wanted by those out of work here in our country.

There is one way, and one way only, to create security of employment and that is to create in Britain enterprises which thrive and prosper in the world as it is. Firms with the skills and knowledge to compete with the best in the world will win. Britain still has some catching up to do. In the 1970s we came close to terminal decline. Productivity was low, industrial relations were the laughing stock of Europe. That was symbolised across the globe in the Winter of Discontent in 1978–79—an uncompetitive Britain, with unemployment rising rapidly, inflation heading for 20 per cent. and uncollected rubbish piled in the streets of our cities. How much job security was there then? How could our citizens have top-class education, health and welfare services supported by such a gimcrack economy?

Perhaps the most stimulating part of our debate was that which was initiated by the noble Lord, Lord Dahrendorf, on the future of the welfare state. As we all know, we are now 50 years on from the Beveridge Report. What we have as our welfare state now is perhaps not exactly as he anticipated it would be. It is interesting that right across the political spectrum, and indeed completely outside of politics, there is considerable discussion about this very point. On the side of the Benches opposite has been the report of the Commission on Social Justice. From the perspective of the Benches on which I sit we have seen the Mais Lecture by my right honourable friend the Secretary of State for Social Security. I should like for a moment to touch on one or two of the themes that arise from this.

In the context of the remarks of the noble Lord, Lord Dahrendorf, about education, we welcome the comments of my noble friend Lord Carr. We are already seeing from this Government proposals for career development loans and we are considering that learning credits may have attractions.

Reference was made to poverty and supporting families on low incomes. Over recent years we have seen the development of family credit. I accept many of the problems which the noble Baroness, Lady Seear, mentioned, but I wish to make one particular point. As regards the comment of the noble Lord, Lord Desai, in that regard, it seems to us that he has got the cart and the horse the wrong way round. If there was not family credit there would not be the job. The person concerned would be entirely dependent on the state. Let us not forget that the nature of the system of family credit is to focus on the needs of individual families and to run that in parallel with the working of a flexible job market. It is interesting that the European Union has recently commented that the lack of a job is probably the largest single cause of low living standards and that low pay is a relatively minor cause of poverty.

The debate went further. The noble Lord, Lord Dahrendorf, spoke about what the noble Baroness, Lady Dean, referred to as "employer responsibilities". In the future how should we deal with people's pensions? Should individuals have insurance to cover various problems? These are issues which go wider than the perspective from which the noble Baroness, Lady Dean, approached the subject. She described them as employer responsibilities, and I do not gainsay that. But we ought at least to ask ourselves this question: in the world in which we are moving, how should these matters be dealt with? We should look wider than the employer as the source of everything.

I can assure the Benches opposite that we are quite prepared to take a leaf out of their book. If we find any policies emanating from publications on their side of the spectrum, we shall be delighted to incorporate them into our policies.

I was also very grateful to the noble Baroness, Lady Seear, for speaking about education and training. That was a topic, she may recall, which we debated briefly in the Statement on the White Paper regarding competitiveness. As she said then, there is a great deal of work that the Government have to do to catch up with the problems they inherited in the late 1970s. We have made a start. Fifteen years ago only 24 per cent. of our young people obtained five good GCSEs or better. It is now 43.3 per cent. Nearly 90 per cent. of 16 year-olds are now in full-time education. Britain now graduates more of its young people than any other country in Europe. The Government guarantee a youth training place for every 16 and 17 year-old not in further education or employment.

The Government are spending £1.9 billion in England on training and vocational programmes in 1995–96. In parallel, employers are spending about £20 billion. Caring about young people is not enough. There must he an economic framework capable of paying for the first-class education and training which our young people need and deserve. That will provide a first-rate workforce for the future. We have made a start but there will always he more to do.

Britain is steadily getting rid of the legacy of the 1970s. We now have one of the best industrial relations records in the world. Productivity growth is as good as or better than anywhere else in Europe. Unemployment is already lower than the European average and falling. It is down over 650,000 since recovery began. I must firmly refute the suggestion that the figures have been fiddled—a refutation which has been underscored by the Royal Statistical Society. Inflation is once again under control and down to levels last seen over 30 years ago.

We are very well placed to prosper in today's global economy. We export more per head than the Japanese and our exports are rising. Last year Britain exported more than at any other time in our nation's history. Some of our major industries are world players—pharmaceuticals, banking and finance. Sixteen out of the 25 most profitable companies in Europe are British. British Airways is the world's largest international passenger airline; and only yesterday we all read in The Times that British Steel has become the world's most profitable steel company.

We must encourage enterprise and self-employment. In the past 15 years the number of self-employed people—and in discussing the labour market we must not overlook them—has increased by over 1 million. Between 1979 and 1991, 900,000 new businesses were founded. It is from these new enterprises that most of the jobs of the future will come.

It is successful enterprise in our existing large and small companies throughout the kingdom which is the only real source of job security. Efficient, world-beating firms, large and small, create jobs not just in their own industries but, as the income they generate is spent in Britain's high streets, they also create jobs in other activities. On top of that, they pay the taxes which fund the public sector, in which one job out of five in this country is to be found. We must not forget their place in the labour market. I am sorry to disappoint the noble Lord, Lord Houghton of Sowerby: I was going to mention them.

Equally, the taxpayer is entitled to expect his political leaders to insist on quality in the service delivered with his money. That is in accord with the great traditions of our public service. The noble Lord referred to it. It will, of course, continue, as has been underscored in the recent White Paper Continuity and Change which confirms the Government's commitment to maintain the Civil Service as a good employer.

Two-thirds of the industries once in public ownership are now in the private sector. In 1979, those industries cost the taxpayer billions of pounds in subsidies. Instead of receiving subsidies, the privatised companies now pay taxes (£2.5 billion a year) contributing positively towards the cost of our National Health Service, education and the social services.

Of course, productivity changes have led to some reductions in employment. That is part of the necessary evolution for survival. But that is precisely why the Luddite route followed in the 1970s was so misconceived. Billions of pounds of taxpayers' money was poured into uncompetitive industries in order to save jobs. The jobs went anyway and the taxpayers' money was squandered. Subsidies, protectionism, all the artificial ways of keeping jobs and businesses alive in Jurassic Park simply postpone the evil day, as my noble friend Lady O'Cathain pointed out. Privatisation and competition create jobs and businesses which have a future because they are based on selling goods or services which real people want to buy with real money.

Let us for a moment turn to the facts about job security. First, as I said a few moments ago, the worst insecurity of all is the fear of losing a job and not being able to find new work fairly quickly. Rightly, government must help people facing the uncertainty of unemployment. Last year, for example, the Employment Service placed getting on for 2 million unemployed people in new jobs, over million of whom had been out of work for more than six months. I am not pretending that being out of work is easy, but it is worth remembering that, with the help of the Employment Service, two out of three people who lose their jobs leave unemployment within six months.

But the fear of unemployment—and it is a real fear—affects every country in the European Union. About 20 million of our fellow European citizens are out of work, which is 11 per cent. of the working population. The United Kingdom, of course, is not exempt. At over 2 million, unemployment remains high—far too high—but at around 8.5 per cent. it is well below the European average and falling.

The main reason for falling unemployment is, of course, that Britain, with its flexible, deregulated labour market, has been far more successful in creating jobs than any other major European country. That is why the European Community, the OECD, the IMF and the G7 all see a flexible labour market as an essential precondition for significantly reducing unemployment. Let us be clear about it: flexibility is not synonymous with Mr. Gradgrind. I hope that that will reassure the noble Lords, Lord Desai and Lord Haskel.

Here in our country 68 per cent. of the population of working age have jobs, which is more than in Germany, where it is 66 per cent., France, with 60 per cent., or Italy with 51 per cent. Of course, I accept that some of these jobs are temporary and that the number is rising. But surely that is what we would expect in the early years of recovery. Employers, as they always have, tend to look to overtime, part-time staff or temporary contracts until they are more confident that sales and output will continue to rise. Around 7 per cent. of Britain's workforce is in temporary work—not much higher than 20 years ago—and that is one of the lowest figures in Europe.

The noble Baroness, Lady Dean, commented on the recent claim from the TUC that UK workers worked the longest hours in Europe. However, it has elected to make selective use of the figures. It has concentrated on one particular area of full-time employees to make its case. It also tends to restrict its analysis to regulation-bound Europe rather than extending it to Japan and the United States where long hours are more common.

Equally, it is not the case that there is a great deal of dissatisfaction with part-time working—86 per cent. of part-time employees have permanent jobs. Indeed, within the European Union only Belgium and Luxembourg have lower figures. As one would expect, it is the more regulated economies which tend to have the worst figures. After 14 years of Socialist presidency, one French worker in 10 is on a temporary contract, and in Socialist Spain the proportion is nearly one in three, which corroborates the point that my noble friend Lady O'Cathain made. There is an inherent contradiction between the form of excessive rights and the substance of actual well-being.

Choice is important because we are talking in this debate about people, each with his or her own individual personality, ambition and aspirations. It is people who create wealth and achieve things, either as individuals or working together in successful enterprises. It is self-indulgent narcissism to think we can simply give out new rights and forget about the consequences. But excessive regulation and heaping costs on employers deter them from recruiting staff as sales and output rise.

We must get the balance between social protection and job creation right. The Conservative Party has a long and proud tradition of social concern and reform unsurpassed in British politics. We are proud of our history but must not rest on our laurels. No one advocates poor standards of social protection. As my noble friend Lady O'Cathain said, the labour market should not be a slave market.

But where it matters, we have high standards in the United Kingdom. Our health and safety laws are as tough as anywhere—and they will stay that way; so will our legislation on sex discrimination and on equal pay; and, unlike many European countries, Britain has tough laws, enforceable laws, on race discrimination.

What we must do, however, is to balance those bedrock rights with the need to preserve individual choice and let businesses grow. It is only by letting businesses grow that we shall create jobs and a sense of security based on real economic foundations and pay for the public services our fellow citizens expect.

We must not follow the kind of policies that mean that we shall rush like the Gadarene swine towards a world in which we have fewer and fewer jobs as we become less and less competitive, creating an ever-contracting industrial and commercial base. It is seductive to some indiscriminately to apply the maxim that it is more blessed to give than to receive, but it does not add up—and when it does not add up (as it did not in the 1970s), that destroys lasting prosperity and secure jobs.

The purpose of economic policy is to create prosperity and jobs. The test of those policies is whether they help business people to build up their businesses, expand sales and output and recruit more staff. That is the basis of this Government's policies—policies which add up to more jobs and more security for those in work and a greater likelihood of finding it for those without.

My Lords, as this is a timed debate, there is not sufficient time for me to reply to all noble Lords who have contributed, much as I would have liked the opportunity to reply to many of the points made, especially by the Minister. I am sure that the noble Lord will not be surprised to know that we on this side of the House do not agree with many of the claims that he has made for his Government's policy. However, there is not sufficient time for me to do that, and no doubt there will be other opportunities to deal with the subject in a great deal more depth.

It therefore remains for me simply to say to all those who have participated in the debate, "Thank you very much for your contributions". I am glad to note that there is some degree of consensus between us. We accept that there is a problem and that solutions to it will have to be found, although we may differ among ourselves about those solutions. Having said that, I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.

Landlord And Tenant (Covenants) Bill

8.33 p.m.

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—( The Earl of Courtown.)

On Question, Motion agreed to.

House in Committee accordingly.

[The DEPUTY CHAIRMAN OF COMMITTEES (Baroness Nicol) in the Chair.]

Clause 1 [ Tenancies to which the Act applies]:

Page 1, line 6, after ("Sections") insert ("( Transmission of benefit and burden of covenants), ( Transmission of rights of re-entry),").

The noble and learned Lord said: In moving Amendment No. 1, I should like to speak also to Amendments Nos. 10, 13 and 88. Apart from apologising for the fact that I kept your Lordships waiting a little time, perhaps I may begin by asking your forbearance in the face of the large number of amendments which stand in my name, and also to put on record my gratitude, which I am sure your Lordships will share, to the Law Commission and parliamentary counsel for their full and unstinting assistance in the preparation of these amendments. The amendments standing in my name are aimed at ensuring that the Bill gives full and proper effect to the Law Commission's scheme which, notwithstanding the amendments which my noble friend Lord Courtown is to move, forms the backbone of the reforms. The Law Commission's recommendations which the Government accepted for new leases are very full and detailed, and the amendments themselves have also had to be very full and detailed.

Amendment No. 1 has the effect of paving the way for Amendments Nos. 10, 13 and 88, and with your Lordships' leave I should like to speak to those later amendments now. I believe that it would also assist your Lordships if I were at this point to give an outline of the scheme of which these amendments form part. The essence of the scheme recommended by the Law Commission is that all covenants and obligations between lessor and lessee should be enforceable between the landlord and tenant for the time being, with no distinction being drawn between covenants which "touch and concern" the land and other covenants. When the landlord's or tenant's interest is assigned, the assignee should become bound from the assignment by the whole package of rights and obligations as it bound his predecessor (and so including any variations), but should not take on any rights or liabilities in respect of any breach of covenant occurring prior to the assignment.

Concomitantly, the assignor should cease to have any rights and obligations as from the assignment, but should not lose any accrued rights in respect of a breach by the other party prior to the assignment, and should likewise remain liable for any breach on his own part occurring prior to the assignment. This is subject to slightly different provision for landlords, requiring them to go through a notice procedure which gives the tenant the right to object to their ceasing to be bound if that would be unreasonable in the circumstances. This difference was recommended by the Law Commission because, unlike landlords, tenants have no way of vetting the landlord's assignee and preventing the assignment, and the assignee's ability to perform the landlord's obligations might in some cases be very important.

In the case of assignments of part of the landlord's or tenant's interest, the assignee should become bound by the package of rights and obligations only to the extent that it relates to the part assigned, and should not take on any rights or liabilities in respect of any breach of covenant occurring prior to the assignment. The assignor should similarly cease to have prospective rights and obligations in respect of the part assigned, but should retain any accrued rights to the extent that it related to that part, and should also remain liable for any pre-assignment breach of his own in relation to that part. The assignee should remain bound by the package of rights and obligations to the extent that they relate to the part retained by him. Where there are covenants which do not clearly operate separately in respect of separate parts of the interest there is to be special provision for apportionment of the rights and obligations.

The group of amendments to which I am now speaking is necessary in order to avoid potential problems arising from the interface of the new regime with the existing law governing the transmission of the benefit and burden of covenants and their enforcement under privity of estate, which the existing text of the Bill does not do effectively. The existing law is contained in a mixture of statutory provisions and common law rules which are not always consistent, clear or certain. The approach of the amendments is to provide a complete and self-contained framework for new tenancies giving full effect to the principles of the Law Commission's recommendations and simply to disapply the existing law for new tenancies, rather than to attempt the extremely difficult task of amending the existing law consequentially.

Amendment No. 1 is needed as a consequence of Amendment Nos. 10 and 13 because Clause 1 sets out which provisions of the Bill are to apply only to new tenancies and which are to apply to both new and existing tenancies.

Amendment No. 10 inserts a new clause after Clause 2 of the Bill. This is at the heart of the scheme recommended by the Law Commission to ensure that the changes to the rules on privity of contract can be properly integrated into the law on covenants. The amendment is intended to restate and clarify, for new tenancies, the present rules for the transmission of the benefit and burden of leasehold covenants (some of which date back to the 14th century) with a simple statutory code, the basic principle of which is that the benefit and burden of all landlord and tenant covenants of a new tenancy are annexed to the whole and each and every part of the lease and reversion as appropriate, irrespective of whether they "touch and concern" the land.

At the risk of over-extending my speech at this stage, I believe that it might be helpful for me, in the light of the amendments tabled by my noble friend Lord Jenkin of Roding, to give a simple example of how the provisions which my noble friend would amend will work in practice. The provisions in question are purely aimed at assignments of part. In such a case, the basic rule is that the assignee will be bound by all the covenants which bound his assignor, except to the extent that the covenant falls to be compiled with in relation to the part not assigned. Sometimes a covenant may fall to be complied with in relation to one part of the property that has been let, but not in relation to another. For example, there may be a lease of both a house and an adjacent field. Under the lease the tenant covenants to repair the house. If the tenant assigns the lease in so far as it relates to the field, the burden of the repairing covenant will not pass to the assignee because it falls to be complied with in relation to

"demised premises not comprised in the assignment"

in the words of subsection (2) (a) (ii); that is to say, premises which are part of the demise to which the part assigned belongs but which are not themselves being assigned in this particular transaction.

The new clause includes provision presently contained in Clause 7 of the Bill and your Lordships will note that, as a consequence of this, I shall in due course be opposing the Question that Clause 7 stand part of the Bill. The clause also embodies those parts of Sections 78 and 79 of the Law of Property Act 1925 as are to be preserved for tenancies. Together with the clause to be introduced under the next amendment, it replaces Sections 141 and 142 of the 1925 Act, which will not apply to new leases. Amendment No. 88 accordingly carries through the approach by providing for those statutory provisions not to apply to new leases.

Amendment No. 13 introduces a second new clause after Clause 2, corresponding to subsection (1) of the first new clause. This will ensure that, in the same way as the benefit and burden of covenants in new tenancies are to pass on the assignment in whole or part of a lease or reversion, the benefit of any right of re-entry which may be reversed by the landlord will pass on an assignment of the whole or any part of the reversion. I beg to move Amendment No. 1.

8.45 p.m.

I did not seek to oppose the Question that the House should resolve itself into a Committee, but I think it should be recorded that we are embarking on consideration of amendments to this Bill in frankly less than satisfactory circumstances. This Bill has passed through another place and arrives here as a Bill with some 12 pages of print. At Committee stage we are presented with amendments running to some 20 pages. Most of those amendments were printed in the latter part of last week. They are substantial and complex and, frankly, not easy to digest even if more time had been allowed.

The main body of the amendments, those to be moved by the noble Earl, are described as a package of additional changes agreed between the British Property Federation and the British Retail Corporation. The original Bill had the benefit of being the result of widespread consultation by the Law Commission. We understood at Second Reading from the noble and learned Lord the Lord Chancellor that there has been, very properly, further consultation by his department, and furthermore that the Bill passed through another place in the knowledge that there would be alterations and additions in your Lordships' House. But this House cannot do its job properly and those outside the House who can assist its Members, and the Members of this Committee in particular, cannot give that assistance unless they have the ability and the time to consider what the noble and learned Lord has described as full and detailed amendments. I would hope that certainly before Report stage there will indeed be more time allowed for those of your Lordships who are interested in this Bill to take a properly informed view about these very detailed amendments.

Having said that, in the brief time available to me, at any rate, to consider these amendments I thank the noble and learned Lord for his explanation. I have only one specific point to make on one of the amendments he has spoken to; that is, Amendment No. 10, which is to be found on pages 2 and 3 of the Marshalled List. After Amendment No. 10 has been printed, page 3 of the Marshalled List appears to refer to Amendments Nos. 16 and 27. I think those two numbers have to be disregarded. Most of what appears on page 3 is in fact all part of Amendment No. 10.

The question I have concerns the drafting of the proposed new subsection (4) which refers to:
"any waiver or release of the covenant which (in whatever terms) is expressed to be personal to the assignor".
I wonder what that means and whether it is really meant to say that it is simply a personal waiver or release. Surely it could be expressed in that way. A waiver or release is presumably personal, or can be construed as such, and does not need to be described in that somewhat convoluted manner.

I thank my noble and learned friend the Lord Chancellor for having explained the situation and arrangement of his amendments, and I therefore support them.

In answer to the noble Lord, Lord Meston, I would say that there has been considerable debate and agreement between the interested parties. This made the amendments rather late in being tabled but there has been agreement and discussion over a long period and I hope that he will accept the majority, if not all, of the amendments.

I should like to associate myself more or less word for word with the general observations made by the noble Lord, Lord Meston. I believe this Bill was originally the work of my noble and learned friend's department and I find it very difficult to se why it is now before us in the form that it is rather than in the form in which it is now proposed to be amended.

I congratulate my noble friend Lord Courtown on having taken the Bill so far but, with the greatest respect, I do not think that the answer he has given to the noble Lord, Lord Meston, that this Bill has had the approval of two of the participants in debate outside the House is really any answer to the claim that this Bill should not be brought to us in this form tonight.

It is the fact that a very large number of amendments are before us tonight, and indeed at short notice. My particular concern is not with the generality of that, because I think that the overwhelming majority of the amendments, once properly considered, are substantially uncontroversial. However, I would say—and what I am really doing is putting down a marker for points that I will make in relation to Amendment No. 61 in the name of the noble Earl—that my current impression is that Amendment No. 61 is controversial because of the extent of its amendments to Section 19 of the Landlord and Tenant Act 1927. That is something to which we shall obviously come later.

But I would say, as a particular, in relation to the general observations of the noble Lord, Lord Meston, that that amendment is a heavy amendment with broad implications. It was first printed, I understand, on Monday—just two days ago. The noble Earl refers to the industry interest, but there is of course also a tenant interest. It is critical that in this place we are in a position to give full consideration to, and to debate, provisions by way of amendment which are far-reaching and potentially controversial.

Perhaps I may say first to the noble Lord, Lord Meston, and my noble friend Lord Coleraine that we looked again at the Bill which the Law Commission drafted giving effect to the policy intimated by the Government as our policy; namely, that the Law Commission's proposals should apply only to new tenancies and not to existing tenancies. The Committee will remember that the Law Commission report proposed that all this doctrine should be set aside. On consideration of the matter, and in the nature of the property market and its general circumstances, the Government's view was that the doctrine of privity should be innovated upon in respect of new leases only. That was intimated as policy.

The Bill gives effect to that. I think it is agreed on all hands that that is probably the wise policy in the circumstances but it was not accepted by everyone that it was right to go ahead purely on that basis. The Bill which was introduced previously fell because it was not sufficiently agreed. Since then, as I explained, the major elements in the property and tenancy sides of the industry agreed. We then consulted. I put out for consultation the terms of that agreement. The amendments which my noble friend Lord Courtown will move are to give effect to that agreement.

The amendments I am moving are purely technical amendments designed to give proper effect to the Law Commission's proposals as originally put forward and modified as regards policy in the way I have described. I am greatly obliged to the Law Commission for the work that it has done since the Bill came to this place to try to express matters in the most coherent and technically satisfactory form. That has involved a good deal of work. I am sorry that it was not possible to complete it earlier.

The Bill is one that proceeds by consent, and only by consent. Unless we can have consent, it is clear that the Bill cannot go forward to the statute book. So I have tried to put forward amendments which make the Bill technically a good, comprehensive and self-contained provision. I hope that it is reasonably plain in that connection. There will obviously be time between now and Report stage—obviously my door and that of the department is open—for any further consideration. We have had some consideration with others while the amendments were being prepared, but I am happy to see anyone who has any concerns with the parts of the Bill that I am amending tonight.

Perhaps I may take up the point on Amendment No. 10 to which the noble Lord, Lord Meston, referred. Subsection (4) is in effect saying that the covenants that bound the assignor immediately before the assignment are to be the binding covenants, but we have to except from that any purely personal release or waiver. That is said in as short and simple terms as I can devise. In other words, we are saying that the covenants which bound the assignor immediately before the assignment are to be taken as the ones that are binding but any waiver or release which is purely personal is to be disregarded. That is the best that we have so far been able to come up with. I believe it sets out accurately exactly what the noble Lord said. I hope therefore that the Committee will accept the amendment.

On Question, amendment agreed to.

Page 1, line 7, after ("13") insert ("and section ( Restriction of liability of former tenant where tenancy subsequently varied)").

The noble Earl said: With the leave of the Committee I shall speak also to Amendments Nos. 4 and 58. I should like to thank those whose hard work has enabled us to reach this stage and to express the hope that the spirit of compromise which has propelled the Bill as far as this Committee will take it to the statute book. It falls to me to bring forward the amendments to give effect to the property industry agreement, representing a most important compromise which has won support on all sides. I hope that the Committee will forgive me if I take some time to outline the elements of the agreement.

The first element comprises the amendment to Section 19 of the Landlord and Tenant Act 1927 to enable landlords and tenants to agree in advance the terms under which future assignments can be made. That is aimed at ensuring that landlords will be able to preserve covenant strength which underpins an investment folio and will apply only to new commercial leases.

The other three elements of the agreement are aimed at extending further protection to former tenants. They will apply to both new and existing tenancies of all types. The first element will reduce the nine-month period in Clause 13 to six months to give former tenants earlier notice of potential liabilities. The next will stop a former tenant's liability being increased by certain types of changes to the lease. The final component will allow a former tenant who is made to pay for another's default to call for an overriding lease so that he may have some measure of control over his position.

Amendment No. 2 is a simple amendment which makes it clear that the further element of the agreement which I have just outlined dealing with liability in respect of subsequent variations of the lease is to apply both to new and other tenancies; that is to say, existing tenancies. The amendment, in effect, paves the way for one minor amendment and one substantial amendment.

The minor amendment is Amendment No. 4, the purpose of which is to ensure that the verb in subsection (2) agrees with its subject, because more than one provision will apply to both new and other tenancies where at present only one provision so applies.

The substantial amendment is Amendment No. 58. The amendment introduces a new clause immediately after Clause 13. That provides that where a former tenant is under a liability in the same circumstances as described in Clause 13, and the terms of the lease have been varied after he has signed the lease and after commencement of the Act, the former tenant shall not be liable to pay any sum to the extent that is referable to the variation, provided that the variation is one which the landlord had the absolute right to refuse to make when it was made.

The clause covers also the position where a variation of the lease has taken away what was an absolute right to refuse a subsequent variation. In such a case, even though the landlord did not have the absolute right to refuse the subsequent variation, the former tenant shall not be liable to pay any sum referable to it. The landlord's right to refuse to make the variation must be absolute, not only under the lease but also as a matter of law generally so that certain tenant's improvements which the landlord is, by virtue of the Landlord and Tenant Act 1927, unable to refuse to allow, cannot be said to be variations coming within the clause even if the lease absolutely prohibited them. The clause will accordingly cover such matters as variations to the nature of the premises, user, extra space for an increased rent and so on but not the increase of rent on a rent review except to the extent that the increase refers to a variation of the kind covered by the clause.

Taking the new clause subsection by subsection, subsection (1) sets out the circumstances in which a former tenant may find himself liable under a lease which he has assigned. In the case of a new tenancy, that will be because he has entered into an authorised guarantee agreement under Clause 12 or because the assignment was in breach of covenant or by operation of law and therefore, in accordance with the Law Commission's recommendations, he was not released by it.

In the case of an existing tenancy, it will be by reason of privity of contract. Subsection (2) sets out the principle that the former tenant is not to be liable to pay any amount referable to a relevant variation—a term which is defined later. Subsection (3) extends that principle so that any guarantor of a former tenant shall not be so liable either. That subsection also makes it clear that that falls to be considered only when the variation has not already resulted in the guarantor's discharge because of the technical rules relating to guarantees generally.

Subsection (4) defines the relevant variation, which is either that the landlord had an absolute right to refuse or did not have an absolute right to refuse only because that right was removed by an earlier variation made after the former tenant assigned.

Subsection (5) ensures that the landlord's right to refuse must be absolute by reference to the general law as well as to the lease. Subsection (6) makes it clear that the new clause covers only variations made after the Act comes into force, which is an integral part of the industry agreement. Subsection (7) makes it clear that the clause covers informal or implied variations as well as those made by deed. I beg to move.

I support these amendments but I do not believe that they go nearly far enough to protect people who, many years later and after many variations of the lease, find themselves in an invidious position. But, as my noble and learned friend the Lord Chancellor said, the only way that this will become law is by agreement. Therefore, this is a very good first step and I support the principle of the Bill. But I should like to see the amendments go further.

My noble friend has explained the basis of the agreement. As I said on Second Reading, the result of the consultation with the industry generally was that the agreement is supported. I agree with my noble friend Lady Gardner of Parkes that one wants to go forward in this matter as urgently as possible. The only way that that can be done is in accordance with the agreement.

On Question, amendment agreed to.

Page 1, line 7, after ("13") insert ("and sections ( Right of former tenant or guarantor to overriding lease) and ( Overriding leases: supplementary provisions)").

The noble Earl said: Once again, this amendment paves the way for more. It paves the way for one minor amendment, Amendment No. 6, and for two substantial amendments, Amendments Nos. 59 and 60.

With the leave of the Committee, I feel that it would be helpful to speak to all four amendments together. Amendment No. 3 does the same as Amendment No. 2 but in respect of a different element of the property industry agreement. It makes it clear that the element concerning overriding leases is to apply to both new and other tenancies.

Amendment No. 6 is intended to ensure that the provisions for overriding leases do not cut across the agreed policy that privity of contract liability is to be abolished prospectively only. It makes it clear that the definition of a new tenancy is to be subject to the rule which is part of the overriding lease provisions that an overriding lease will not be a new tenancy if the tenancy under which the former tenant finds himself having to pay is not a new tenancy. Without the amendment, Clause 1 and the overriding lease provisions would be inconsistent.

The two substantial amendments are Amendments Nos. 59 and 60. They introduce two new clauses after Clause 13 and immediately after the new clause introduced by Amendment No. 58. The challenge which this part of the property industry agreement set out to meet was to find a way to give a former tenant or guarantor who has had to pay for the breach of a defaulting subsequent tenant a way of regaining control over the situation and, if necessary, the property. That will be achieved by making it possible for the former tenant or guarantor who has had to pay to have an overriding lease granted to him so that he can pursue remedies directly against the defaulting tenant, if he is still in occupation, or to take possession and make use of the property so that he can set off the return against his liability. That will go some way towards addressing the helplessness so often felt by former tenants when they find themselves liable in that way.

Amendment No. 59 introduces the first new clause, which sets out the former tenant's right to an overriding lease, the circumstances in which it arises, its terms and the mechanics of the granting of an overriding lease. Amendment No. 60 introduces the second new clause, which makes supplementary provision covering such matters as whether an overriding lease is a new or existing tenancy; what happens if the landlord is dilatory in granting it; and the effect of mortgages on the landlord's interest and land registration.

Subsection (1) of the new clause sets out the basic principle of entitlement to an overriding lease. Any person, whether former tenant or guarantor, who has paid in full an amount which he has been duly required to pay in accordance with the notice under the provisions of Clause 13 is to be able to call for an overriding lease to be granted to him.

Subsection (2) defines an overriding lease. The essence of the overriding lease is that it is a tenancy of the landlord's reversion which puts the former tenant in the position of the landlord in relation to the defaulting tenant and in the position of the defaulting tenant in relation to the landlord. The former tenant could be said to be slotted into the hierarchy of interests. The overriding lease is accordingly to replicate as far as possible the tenancy of the defaulting tenant, which the new clause calls the "relevant tenancy". It cannot replicate it exactly as to the length of term remaining since it is in reversion to it and must be notionally longer. Subsection (2) (a) requires the term to be fixed as equal to the length of the term remaining plus three days or the longest period less than that which will not entirely displace the landlord's interest.

Subsection (2) (b) provides for the overriding lease otherwise to contain the same covenants as the relevant tenancy, as they have effect immediately before the grant of the overriding lease. That will include all variations to the lease and all sums to be paid which are referable to them, so that the former tenant may well have a choice between not taking up an overriding lease and paying less by virtue of the new clause introduced by Amendment No. 58, and taking up the overriding lease and regarding the extra that he will have to pay as the price for regaining a measure of control. The landlord and former tenant may agree that it would not be appropriate to replicate certain terms, or the particular effect of certain terms, without some modification, and the possibility of agreed modification is preserved.

Subsections (3) and (4) make specific provision for the overriding lease not to reproduce certain terms, or the effect of certain terms, which the property industry bodies were agreed it would not be appropriate to reproduce or reproduce without modification. Subsection (3) provides for any covenants which were purely personal as between the defaulting tenant and the landlord not to be reproduced. Subsection (4) provides for any covenants which were time limited and which have become spent not to be reproduced, and for any matter in the relevant tenancy which operates by reference to the commencement of the tenancy to be reproduced in the overriding lease in such a way that it operates by reference not to the commencement of the overriding lease but to the commencement of the relevant tenancy.

Subsection (5) sets out the procedure for requesting an overriding lease. The former tenant or guarantor must make the request in writing to the landlord, specifying the payment which he has made and which qualifies him to make the request. He may do that by post. He is required to make the request within 12 months of making the payment, which will introduce an element of certainty for both the landlord and the defaulting tenant or any assignees.

Subsection (6) sets out the duties of claimant and landlord following the claim. The landlord must grant and deliver the overriding lease to the claimant within a reasonable time. The claimant must then acknowledge its covenants by delivering a counterpart to the landlord. Sanctions for failure of either party to fulfil the duty are set out in the second new clause. The claimant must also pay the landlord's reasonable costs in connection with the grant and the landlord will be able to sue for these if the claimant does not pay.

Subsection (7) makes it clear that no overriding lease can be granted when the relevant tenancy has come to an end. It and subsection (8) also deal with the position where more than one person has made a payment qualifying him to request an overriding lease. The rule is essentially "first come, first served", so that, where an overriding lease is already in force or another person has already put in a request, no further request can succeed.

Subsection (8) deals with the possibility of simultaneous requests, in which case a former tenant will take priority over a guarantor and an earlier covenantor will take priority over a later. Subsection (9) deals with the possibility that, because the former tenant who takes up the overriding lease takes over the landlord's position, he may be in a position to exercise remedies against others who might, in their turn, make payments which would qualify them to seek an overriding lease. In such a situation, the new clause shall apply between the overriding tenant and the new claimant just as it did between the overriding tenant and the landlord.

The second new clause contains supplementary provisions concerning the effect of the first new clause. Subsection (1), for which Amendment No. 6 paves the way, provides that an overriding lease is to be a new tenancy only if the relevant tenancy was a new tenancy. Because every overriding lease will be granted after the date on which the Act comes into force, this presents the possibility that the overriding lease might be transferred to someone who is unaware that it is not a new tenancy.

Accordingly, subsection (2) makes it a requirement that the overriding lease should state that it is an overriding lease and whether or not it is a new tenancy.

Subsection (3) provides sanctions in the event of a failure by either party to perform the duties in subsection (6) of the first new clause. In the case of a landlord, he may be sued for breach of statutory duty if he is dilatory and, in the case of a tenant, he will not be able to exercise his rights under the overriding lease until he delivers the counterpart.

Subsection (4) covers the position where the landlord's interest has been mortgaged prior to the request for an overriding lease. In such a case, the general law would make the overriding lease subject to the mortgage on the landlord's interest which would bear hardly on the claimant. This subsection provides a special rule which mirrors the provisions of the Leasehold Reform, Housing and Urban Development Act 1993, providing for the overriding lease not to be subject to the mortgage and for the mortgagee to he treated as having consented to its creation.

Subsection (4) also provides for the case where the mortgagee is entitled to possession of the documents of title relating to the landlord's interest. In such a case, the landlord is under a duty to deliver the claimant's counterpart to the mortgagee within a month of executing the lease. If he fails to do so, the mortgagee may treat that failure as contractual as if there were a stipulation to that effect in the mortgage.

Subsection (5) ensures that the fact that the overriding lease is subject to the relevant tenancy is not a breach of any covenant against subletting. Without this provision, some overriding leases would be in a difficult position. This subsection also makes it clear that an overriding lease falls to be treated, for the purposes of Clauses 12, 13 and the new clause introduced by Amendment No. 58, just like any other tenancy.

Subsection (6) provides for the land registration aspects—again mirroring the approach of the 1993 Act. Although a tenancy will effectively confer on the tenant a form of option to take an overriding lease, no lease is thereby to become registrable under the Land Charges Act, nor is the right to an overriding lease following a request to be an overriding interest under the Land Registration Act 1925. Instead, where a request is made for an overriding lease, the request is to be treated for these purposes as if it were an estate contract and to be registrable or the subject of a notice or caution as such.

Finally, subsection (7) of the second new clause provides for expressions used in the second new clause to have the same meaning as when used in the first new clause and for "mortgage" to include "charge" for the avoidance of doubt. I beg to move.

On Question, amendment agreed to.

9.15 p.m.

Page 1, line 7, leave out ("applies") and insert ("apply").

The noble Earl said: I have already spoken to this amendment in relation to Amendment No. 2. I beg to move.

On Question, amendment agreed to.

Page 1, line 8, leave out from ("in to end of line 12 and insert ("it is granted on or after the date on which this Act comes into force otherwise than in pursuance of—

  • (a) an agreement entered into before that date, or
  • (b) an order of a court made before that date.").
  • The noble and learned Lord said: As well as providing which provisions of the Bill are to apply to new tenancies and which to both new and other tenancies, Clause 1 of the Bill defines a new tenancy. Amendments Nos. 5 and 7 revise and refine the definition of a new tenancy presently in the Bill and, with the Committee's leave, I believe that it would be helpful for me to speak to both amendments together since they are very closely linked.

    Amendment No. 5 makes it clear that a new tenancy is one granted on or after the date on which the Act comes into force, unless it was granted in pursuance of an agreement entered into before that date or a court order made before that date. Amendment No. 7 deletes the present subsection (4) of Clause 1 and replaces it with three new subsections which put beyond doubt detailed matters relating to the concept of a new tenancy which the existing draft either does not cover or does not cover satisfactorily. I beg to move.

    On Question, amendment agreed to.

    Page 1, line 12, at end insert:

    ("() Subsection (3) has effect subject to section (Overriding leases: supplementary provisions) (1) in the case of overriding leases granted under section (Right of former tenant or guarantor to overriding lease).").

    On Question, amendment agreed to.

    Page I, line 13, leave out subsection (4) and insert:

    ("(4) Without prejudice to the generality of subsection (3), that subsection applies to the grant of a tenancy where by virtue of any variation of a tenancy there is a deemed surrender and regrant as it applies to any other grant of a tenancy.
    (5) Where a tenancy granted on or after the date on which this Act comes into force is so granted in pursuance of an option granted before that date, the tenancy shall be regarded for the purposes of subsection (3) as granted in pursuance of an agreement entered into before that date (and accordingly is not a new tenancy), whether or not the option was exercised before that date.
    (6) In subsection (5) "option" includes right of first refusal.").

    The noble and learned Lord said: I have already spoken to this with Amendment No. 5. I beg to move.

    On Question, amendment agreed to.

    Clause 1, as amended, agreed to.

    Clause 2 [ Covenants to which the Act applies]:

    Page 2, line 2, after ("disposals);") insert:

    ("() paragraph 1 of Schedule 6A to that Act (covenants requiring redemption of landlord's share);").

    The noble and learned Lord said: Amendments Nos. 8 and 9 are very closely linked and, with the Committee's leave, I feel that it would be helpful for me to speak to both amendments together. Clause 2 ensures that the Act will apply to all covenants of a tenancy, whether they are implied or express and whether they "touch and concern" the land or not. It also, as recommended by the Law Commission, excepts from the Act certain covenants entered into by tenants of local authorities who exercise their right to buy to prevent them making unjustified profits on early sale so that they will continue to be bound by those covenants notwithstanding the new regime. Amendments Nos. 8 and 9 make the necessary provision for excepting from the Act a further such covenant which was not picked up in the first draft of the Bill. I beg to move.

    On Question, amendment agreed to.

    Page 2, line 4, leave out ("similar purposes") and insert ("repayment of discount on early disposals").

    The noble and learned Lord said: I have already spoken to this. I beg to move.

    On Question, amendment agreed to.

    Clause 2, as amended, agreed to.

    After Clause 2, insert the following new clause:

    (" Transmission of covenants

    Transmission of benefit and burden of covenants

    .—(1) The benefit and burden of all landlord and tenant covenants of a tenancy—

  • (a) shall be annexed and incident to the whole, and to each and every part, of the premises demised by the tenancy and of the reversion in them, and
  • (b) shall in accordance with this section pass on an assignment of the whole or any part of those premises or of the reversion in them.
  • (2) Where the assignment is by the tenant under the tenancy, then as from the assignment the assignee—

  • (a) becomes bound by the tenant covenants of the tenancy except to the extent that—
  • (i) immediately before the assignment they did not bind the assignor, or
  • (ii) they fall to be complied with in relation to any demised premises not comprised in the assignment; and
  • (b) becomes entitled to the benefit of the landlord covenants of the tenancy except to the extent that they fall to be complied with in relation to any such premises.
  • (3) Where the assignment is by the landlord under the tenancy, then as from the assignment the assignee—

  • (a) becomes bound by the landlord covenants of the tenancy except to the extent that—
  • (i) immediately before the assignment they did not bind the assignor, or
  • (ii) they fall to be complied with in relation to any demised premises not comprised in the assignment; and
  • (b) becomes entitled to the benefit of the tenant covenants of the tenancy except to the extent that they fall to be complied with in relation to any such premises.
  • (4) In determining for the purposes of subsection (2) or (3) whether any covenant bound the assignor immediately before the assignment, any waiver or release of the covenant which (in whatever terms) is expressed to be personal to the assignor shall be disregarded.

    (5) Any landlord or tenant covenant of a tenancy which is restrictive of the user of land shall, as well as being capable of enforcement against an assignee, be capable of being enforced against any other person who is the owner or occupier of any demised premises to which the covenant relates, even though there is no express provision in the tenancy to that effect.

    (6) Nothing in this section shall operate—

  • (a) in the case of a covenant which (in whatever terms) is expressed to be personal to any person, to make the covenant enforceable by or (as the case may be) against any other person; or
  • (b) to make a covenant enforceable against any person if, apart from this section, it would not be enforceable against him by reason of its not having been registered under the Land Registration Act 1925 or the Land Charges Act 1972.
  • (7) To the extent that there remains in force any rule of law by virtue of which the burden of a covenant whose subject matter is not in existence at the time when it is made does not run with the land affected unless the covenantor covenants on behalf of himself and his assigns, that rule of law is hereby abolished in relation to tenancies.").

    The noble and learned Lord said: I have already spoken to this amendment with Amendment No. 1. I beg to move.

    [ Amendments Nos. 11 and 12, as amendments to Amendment No. 10, not moved.]

    On Question, Amendment No. 10 agreed to.

    After Clause 2, insert the following new clause:

    Transmission of rights of re-entry

    (". The benefit of a landlord's right of re-entry under a tenancy—

  • (a) shall be annexed and incident to the whole, and to each and every part, of the reversion in the premises demised by the tenancy, and
  • (b) shall pass on an assignment of the whole or any part of the reversion in those premises.").
  • The noble and learned Lord said: I spoke to this amendment with Amendment No. 1. I beg to move.

    On Question, amendment agreed to.

    Clauses 3 to 5 agreed to.

    Clause 6 [ Procedure for seeking release from a covenant under s. 4 or 5]:

    Page 3, line 29, leave out ("before") and insert ("either before or within the period of four weeks beginning with the date or').

    The noble and learned Lord said: In moving Amendment No. 14 I shall speak also to Amendments Nos. 15 to 23 and 25 to 28.

    This clause makes provision for the notice procedure for the purposes of Clauses 4 and 5. At present it provides for the landlord to serve a notice on the tenant before the assignment, and for the tenant to have four weeks from the serving of the notice to object to the landlord's being released, and for the landlord to be released, as from the date of the assignment, if there is no objection within four weeks or if there is an objection but the court declares it to be reasonable for the landlord to be released.

    Amendments Nos. 14 to 17 give effect to two changes which are consistent with the Law Commission's policy and are accepted by the Law Commission and which go hand-in-hand with a number of amendments to Clauses 8 and 9 which make provision for apportionment of liability under certain covenants between assignor and assignee to become binding on the other party to the lease if a similar notice procedure is gone through. These amendments are so closely interlinked with two other groups of amendments that, with the leave of the Committee, I consider that it would be appropriate if I to speak to all of them together. Amendments Nos. 25 to 28 to Clause 9 simply carry through, mutatis mutandis, the approach of the amendments to Clause 6, and Amendments Nos. 18 to 23 to Clause 8 pave the way for the amendments to Clause 9.

    Amendment No. 14 removes the requirement that the notice be served before the assignment and allows it to be served before or up to four weeks after it. This is because there are cases where confidentiality is very important to the landlord when he assigns, so he cannot afford to make his negotiations public by serving notices before the assignment. Since the tenant has no control over the assignment and will be interested only in whether the landlord should or should not be released, it will not disadvantage the tenant if notice is not served until after the assignment. Specific provision is also made for the tenant to indicate that he has no objection, and also for him to withdraw an objection rather than have the matter go to court. Amendments Nos. 13 and 15 and Amendments Nos. 18 to 23 follow from those two changes. Clause 9 makes provision for a similar notice procedure to cover cases of assignment of part, where the assignor and assignee reach an agreement as to apportionment and wish to make the agreement binding on the other party; and Amendments Nos. 25 to 28 make the same provision for the procedure in Clause 9 as Amendments Nos. 14 to 17 make for that in Clause 6. I beg to move.

    On Question, amendment agreed to.

    Page 3, line 31, after ("assignment") insert ("or (as the case may be) the fact that the assignment has taken place").

    Page 3, line 35, leave out ("either").

    Page 3, line 42, at end insert (", or

    (c) the tenant serves on the landlord or former landlord a notice in writing consenting to the release and, if he has previously served a notice objecting to it, stating that that notice is withdrawn.").

    The noble and learned Lord said: I spoke to these amendments with Amendment No. 14. I beg to move.

    On Question, amendments agreed to.

    Clause 6, as amended, agreed to.

    Clause 7 [ Covenants binding assignee of tenancy or reversion]:

    On Question, Whether Clause 7 shall stand part of the Bill?

    As I explained in relation to Amendment No. 1, the provisions of Clause 7 are reproduced in the new clause after Clause 2 which was introduced by Amendment No. 10. Accordingly, Clause 7 no longer has a part to play and should not stand part of the Bill. I beg to move that Clause 7 do not stand part of the Bill.

    Clause 7 negatived.

    Clause 8 [ Apportionment of liability under covenants binding both assignor and assignee of tenancy or reversion]:

    Page 4, line 34, leave out ("proposes to assign") and insert ("assigns").

    Page 4, line 36, leave out ("proposed assignee would") and insert ("assignee are to").

    Page 4, line 39, leave out ("proposed assignee agree that on") and insert ("assignee agree that as from").

    Page 4, line 43, leave out ("proposes to assign") and insert ("assigns").

    Page 4, line 45, leave out ("proposed assignee would") and insert ("assignee are to").

    Page 5, line 1, leave out ("proposed assignee agree that on") and insert ("assignee agree that as from").

    The noble and learned Lord said: I spoke to Amendments Nos. 18 to 23 with Amendment No. 14. I beg to move the amendments en bloc.

    On Question, amendments agreed to.

    Page 5, line 9, at end insert:

    ("() In any such case the parties to the agreement may also apply for the apportionment to become binding on any person (other than the appropriate person) who is for the time being entitled to enforce the covenant in question; and section 9 shall apply in relation to such an application as it applies in relation to an application made with respect to the appropriate person.").

    The noble and learned Lord said: In moving Amendment No. 24, I speak also to Amendment No. 30.

    Amendment No. 24 inserts an extra subsection into Clause 8, which provides for an assignee and assignor in the case of an assignment of part to seek to make an apportionment agreed between them binding on the other party to the tenancy. The new subsection makes provision to cover the possibility that there may be another party to the tenancy, other than the landlord and tenant, who is entitled to enforce the covenant in question; generally speaking, a management company. Management companies may be parties to leases in leasehold developments such as business parks, or office developments. The management company covenants with the tenants to perform various functions usually falling to the landlord, such as cleaning, maintenance, and so on. The Bill does not presently make any provision for management companies, but it is necessary to cover them since the use of management companies to undertake functions normally falling to the landlord is not uncommon. Fuller provision for the way in which management companies are to fit into the scheme is made by Amendment No. 30, and with the Committee's leave I shall speak to Amendments Nos. 24 and 30 together.

    Amendment No. 24 simply ensures that the apportionment provisions will apply in such circumstances so as to enable the agreement to become binding against the management company.

    It is necessary to ensure that the burden and benefit of a covenant with a management company will pass to an assignee tenant or landlord and that the assignor tenant or landlord will not retain the benefit of it so as to be able to sue the management company. It is also necessary to ensure that the assignor will be released from the burden of the covenant. The new clause introduced by Amendment No. 30 achieves this by defining a third party in terms which encompass management companies but exclude surety covenants, and by providing for covenants given by or to such a third party to be treated as landlord covenants or tenant covenants as appropriate for the purposes of transmission and release and apportionment.

    I beg to move Amendment No. 24.

    On Question, amendment agreed to.

    Clause 8, as amended, agreed to.

    Clause 9 [ Procedure for making apportionment bind other party to lease]:

    Page 5, line 24, leave out ("before") and insert ("either before or within the period of four weeks beginning with the date of").

    Page 5, line 26, after ("assignment") insert ("or (as the case may be) the fact that the assignment has taken place").

    Page 5, line 32, leave out ("either").

    Page 5, line 39, at end insert (", or

    (c) he serves on the parties to the agreement a notice in writing consenting to the apportionment becoming binding on him and, if he has previously served a notice objecting thereto, stating that that notice is withdrawn.").

    The noble and learned Lord said: I have spoken to Amendment Nos. 25 to 28 inclusive with Amendment No. 14. With the leave of the Committee, I beg to move the amendments en bloc.

    On Question, amendments agreed to.

    Clause 9, as amended, agreed to.

    After Clause 9, insert the following new clause:

    (" Excluded assignments

    Assignments in breach of covenant or by operation of law

    .—(1) This section provides for the operation of sections 3 to 6 and 8 and 9 in relation to assignments in breach of a covenant of a tenancy or assignments by operation of law ("excluded assignments").

    (2) In the case of an excluded assignment subsection (2) or (3) of section 3—

  • (a) shall not have the effect mentioned in that subsection in relation to the tenant as from that assignment, but
  • (b) shall have that effect as from the next assignment (if any) of the premises assigned by him which is not an excluded assignment.
  • (3) In the case of an excluded assignment subsection (2) or (3) of section 4 or 5—

  • (a) shall not enable the landlord or former landlord to apply for such a release as is mentioned in that subsection as from that assignment, but
  • (b) shall apply on the next assignment (if any) of the reversion assigned by the landlord which is not an excluded assignment so as to enable the landlord or former landlord to apply for any such release as from that subsequent assignment.
  • (4) Where subsection (2) or (3) of section 4 or 5 does so apply—

  • (a) any reference in that section to the assignment (except where it relates to the time as from which the release takes effect) is a reference to the excluded assignment; but
  • (b) in that excepted case and in section 6 as it applies in relation to any application under that section made by virtue of subsection (3) above, any reference to the assignment or proposed assignment is a reference to any such subsequent assignment as is mentioned in that subsection.
  • (5) In the case of an excluded assignment section 8—

  • (a) shall not enable the tenant or landlord and his assignee to apply for an agreed apportionment to become binding in accordance with section 9 as from that assignment, but
  • (b) shall apply on the next assignment (if any) of the premises or reversion assigned by the tenant or landlord so as to enable him and his assignee to apply for such an apportionment to become binding in accordance with section 9 as from that subsequent assignment.
  • (6) Where section 8 does so apply—

  • (a) any reference in that section to the assignment or the assignee under it is a reference to the excluded assignment and the assignee under that assignment; but
  • (b) in section 9 as it applies in relation to any application under section 8 made by virtue of subsection (5) above, any reference to the assignment or proposed assignment is a reference to any such subsequent assignment as is mentioned in that subsection.
  • (7) If any such subsequent assignment as is mentioned in subsection (2), (3) or (5) above comprises only part of the premises assigned by tenant or (as the case may be) only part of the premises the reversion in which was assigned by the landlord on the excluded assignment

  • (a) the relevant provision or provisions of section 3, 4, 5 or 8 shall only have the effect mentioned in that subsection to the extent that the covenants or covenant in question fall or falls to be complied with in relation to that part of those premises; and
  • (b) that subsection may accordingly apply on different occasions in relation to different parts of those premises.").
  • The noble and learned Lord said: In moving Amendment No. 29, I speak also to Amendments Nos. 40, 63 and 75.

    Amendment No. 29 introduces a new clause to make effective provision for cases where an assignment is not lawful or voluntary, but takes place in breach of a covenant against assignment or by operation of law (such as passing to personal representatives on death of the landlord or tenant). Consequential on the new clause, Amendment No. 40 rectifies wording in Clause 13, Amendment No. 63 ensures the completeness of Clause 15, and Amendment No. 75 to Clause 19 is to make necessary changes to the definitions in that clause. Once again, with the Committee's leave, I feel that it would be helpful to speak to this group of amendments together.

    In accordance with the Law Commission's recommendations, assignments of the type I have just mentioned are not to have effect to release the person parting with the interest from his rights and obligations under the lease, although they will, as is the case at present, be fully effective to pass the estate and accordingly to bind the assignee. This will be achieved by the new clause introduced by Amendment No. 29 and, as I have said, Amendment No. 75 to Clause 19 is to carry through its effect into the list of definitions in that clause.

    Amendment No. 40 changes the wording of Clause 13(1) to reflect the fact that it is possible for a former tenant under a new lease as well as under an existing one to remain liable other than under an authorised guarantee agreement, because there has been an excluded assignment, and the existing draft of the Bill missed this point. The new subsection to Clause 15, introduced by Amendment No. 63, makes it clear that, consistent with the approach of Clause 15, any such assignment will not .affect any liability of the assignor for breach occurring before the assignment, or any accrued rights of the assignor relating to a breach of the other party occurring before assignment. I beg to move Amendment No. 29.

    On Question, amendment agreed to.

    After Clause 9, insert the following new clause:

    (" Third party covenants

    Covenants with management companies etc

    .—(1) This section applies where—

  • (a) a person other than the landlord or tenant ("the third party") is under a covenant of a tenancy liable (as principal) to discharge any function with respect to all or any of theo demised premises ("the relevant function"); and
  • (b) that liability is not the liability of a guarantor or any other financial liability referable to the performance or otherwise of a covenant of the tenancy by another party to it.
  • (2) To the extent that any covenant of the tenancy confers any rights against the third party with respect to the relevant function, then for the purposes of the transmission of the benefit of the covenant in accordance with this Act it shall be treated as if it were—

  • (a) a tenant covenant of the tenancy to the extent that those rights are exercisable by the landlord; and
  • (b) a landlord covenant of the tenancy to the extent that those rights are exercisable by the tenant.
  • (3) To the extent that any covenant of the tenancy confers any rights exercisable by the third party with respect to the relevant function, then for the purposes mentioned in subsection (4), it shall be treated as if it were—

  • (a) a tenant covenant of the tenancy to the extent that those rights are exercisable against the tenant; and
  • (b) a landlord covenant of the tenancy to the extent that those rights are exercisable against the landlord.
  • (4) The purposes mentioned in subsection (3) are—

  • (a) the transmission of the burden of the covenant in accordance with this Act; and
  • (b) any release from, or apportionment of liability in respect of, the covenant in accordance with this Act.
  • (5) In relation to the release of the landlord from any covenant which is to be treated as a landlord covenant by virtue of subsection (3), section 6 shall apply as if any reference to the tenant were a reference to the third party.").

    The noble and learned Lord said: I spoke to this amendment with Amendment No. 24. I beg to move.

    On Question, amendment agreed to.

    Clauses 10 and 11 agreed to.

    9.30 p.m.

    After Clause 11, insert the following new clause:

    (" Enforcement of covenants

    Enforcement of covenants

    .—(1) Where any tenant covenant of a tenancy, or any right of re-entry contained in a tenancy, is enforceable by the reversioner in respect of any premises demised by the tenancy, it shall also be so enforceable by—

  • (a) any person (other than the reversioner) who, as the holder of the immediate reversion in those premises, is for the time being entitled to the rents and profits under the tenancy in respect of those premises, or
  • (b) any mortgagee in possession of the reversion in those premises who is so entitled.
  • (2) Where any landlord covenant of a tenancy is enforceable against the reversioner in respect of any premises demised by the tenancy, it shall also be so enforceable against any person falling within subsection (1) (a) or (b).

    (3) Where any landlord covenant of a tenancy is enforceable by the tenant in respect of any premises demised by the tenancy, it shall also be so enforceable by any mortgagee in possession of those premises under a mortgage granted by the tenant.

    (4) Where any tenant covenant of a tenancy, or any right of re-entry contained in a tenancy, is enforceable against the tenant in respect of any premises demised by the tenancy, it shall also be so enforceable against any such mortgagee.

    (5) Nothing in this section shall operate—

  • (a) in the case of a covenant which (in whatever terms) is expressed to be personal to any person, to make the covenant enforceable by or (as the case may be) against any other person; or
  • (b) to make a covenant enforceable against any person if, apart from this section, it would not be enforceable against him by reason of its not having been registered under the Land Registration Act 1925 or the Land Charges Act 1972.
  • (6) In this section—

    "mortgagee" and "mortgage" include "chargee" and "charge" respectively;
    "the reversioner", in relation to a tenancy, means the holder for the time being of the interest of the landlord under the tenancy.").

    The noble and learned Lord said: This amendment inserts a new clause which, although of a technical nature, comprises another important element of the Law Commission's scheme which I outlined earlier. The amendment complements the two clauses which were introduced by Amendments Nos. 10 and 13 pursuant to which the benefit and burden of all covenants is to be annexed to and run with the lease or reversion when assigned in whole or in part, and the benefit of a landlord's right of re-entry is similarly to be annexed to the whole and every part of the reversion, by affording concomitant rights to those with derivative interests. I beg to move.

    On Question, amendment agreed to.

    Clause 12 [ Tenant guaranteeing performance of covenant by assignee]:

    Amendment No. 32 has been wrongly marshalled so I propose to call Amendment No. 33 first.

    Page 6, line 25, after first ("a") insert ("tenant").

    The noble and learned Lord said: With Amendment No. 33, I wish to speak to Amendments Nos. 34, 35, 36, 32 (which will be taken in that place), 37 and 38. Clause 12 covers the Law Commission's recommendation that when a tenant under a new tenancy is released on assignment in accordance with Clause 3, it should nevertheless be possible for the landlord, as a condition of licence to assign, to ask him to guarantee performance of the tenant covenants of the tenancy by his immediate assignee, but no more. The possibility of such a guarantee being asked for by the landlord will only arise if the lease gives the landlord any control over assignment either by banning assignment altogether (in which case the landlord will be free to demand such a guarantee as the price for waiving the ban) or by providing for assignment only with the landlord's consent. Subsections (1) to (3) of the clause cover the propositions just stated, and the remainder of the clause makes provision for the limitations on what the landlord can seek to include in the guarantee, which is termed an "authorised guarantee agreement".

    Amendments Nos. 32 to 37 make very important changes to the clause to ensure both that the guarantee is actually effective when the landlord most needs it and that it cannot be used as a device for retaining the effect of privity of contract liability once the assignee has himself assigned. As these amendments form one element in the overall scheme, perhaps the Committee will permit me to speak to them together. In addition, Amendment No. 33 does the same thing for Clause 12 as Amendment No. 38 does for Clause 13.

    Amendment No. 33 inserts the word "tenant" in subsection (1) of Clause 12 to make it absolutely clear that it is only tenant covenants the performance of which may be guaranteed, and Amendment No. 38 does the same in subsection (1) of Clause 13.

    Amendment No. 34 is consequential upon Amendments Nos. 35 and 32 which make it clear that the guarantee will not be effective unless it complies with the new clearer provision setting the time limits and regulating the terms of an authorised guarantee agreement.

    Amendment No. 36 simply introduces words into subsection (3) of Clause 12 making it clear that no question of an authorised guarantee agreement arises unless the lease contains some form of covenant against assignment.

    Amendment No. 37 completes the revision of Clause 12 by introducing two new subsections to cover the position of excluded assignments and the position where a tenant who entered into an authorised guarantee agreement becomes tenant again. In a case where a tenant who made an excluded assignment is released on the next assignment then, if the tenant making the next assignment enters into an authorised guarantee agreement, the landlord is to be able to require the tenant who made the excluded assignment also to enter into an authorised guarantee agreement on terms corresponding to those of the assigning tenant's agreement so that they guarantee the next tenant jointly. In the case where a tenant who entered into an authorised guarantee agreement either takes back the assigned lease on a disclaimer following his assignee's insolvency or enters into a new lease under the authorised guarantee agreement it will be possible to enter into another authorised guarantee agreement. It is considered entirely appropriate for a tenant whose previous assignee was weak to have to guarantee his new assignee since it may have been only the prospect of the authorised guarantee agreement which persuaded the landlord to consent to the assignment. I beg to move Amendment No. 33.

    I thank the noble and learned Lord for his explanation, but I wonder in respect of Clause 12 and new Amendment No. 32, where it is provided that the guarantee agreement may,

    "require the tenant, in the event of the tenancy assigned by him being disclaimed, to enter into a new tenancy of the premises",
    whether it is intended that there should be any specific timetable for that to take place or whether it should be left to the parties themselves to decide how rigid or how flexible they wish to be in the terms of that agreement. The amendment as presently drafted seems to leave it rather unclear. I wonder whether the noble and learned Lord can perhaps give us some indication of what is intended by the Bill.

    Strictly speaking, subsection (4A) which is introduced by Amendment No. 32 is in the nature of a definition of an authorised guarantee agreement. It is saying that an agreement will be an authorised guarantee agreement if it has inter alia the character of paragraph (c); namely, that it requires the tenant,

    "in the event of the tenancy assigned by him being disclaimed, to enter into a new tenancy of the premises comprised in the assignment",
    provided that the conditions in sub-paragraph (i) and (ii) are satisfied. It will be for the parties, assuming that it is an agreement of this character, to provide for the terms of that agreement. So long as the agreement answers the description in this paragraph, it will be an authorised guarantee agreement under the clause.

    On Question, amendment agreed to.

    Page 6, leave out from ("it") in line 45 to end of line 5 on page 7 and insert ("purports—

  • (a) to impose on the tenant any requirement to guarantee in any way the performance of the relevant covenant by any person other than the assignee; or
  • (b) to impose on the tenant any liability, restriction or other requirement (of whatever nature) in relation to any time after the assignee is released from that covenant by virtue of this Act.
  • (4A) Subject to subsection (4), an authorised guarantee agreement may—

  • (a) impose on the tenant any liability as sole or principal debtor in respect of any obligation owed by the assignee under the relevant covenant;
  • (b) impose on the tenant liabilities as guarantor in respect of the assignee's performance of that covenant which are no more onerous than those to which he would be subject in the event of his being liable as sole or principal debtor in respect of any obligation owed by the assignee under that covenant;
  • (c) require the tenant, in the event of the tenancy assigned by him being disclaimed, to enter into a new tenancy of the premises comprised in the assignment—
  • (i) whose term expires not later than the term of the tenancy assigned by the tenant, and
  • (ii) whose tenant covenants are no more onerous than those of that tenancy;
  • (d) make provision incidental or supplementary to any provision made by virtue of any of paragraphs (a) to (c).").
  • On Question, amendment agreed to.

    Page 6, line 32, leave out ("(but not its performance by any later tenant)").

    Page 6, line 34, at end insert ("; and

    (c) its provisions conform with subsections (4) and (4A).").

    Page 6, line 36, at beginning insert ("by virtue of a covenant against assignment (whether absolute or qualified)").

    Page 7, line 5, at end insert:

    ("(4B) Where a person ("the former tenant") is to any extent released from a covenant of a tenancy by virtue of section (Assignments in breach of covenant or by operation of law) (2) as from an assignment and the assignor under the assignment enters into an authorised guarantee agreement with the landlord with respect to the performance of that covenant by the assignee under the assignment
  • (a) the landlord may require the former tenant to enter into an agreement under which he guarantees, on terms corresponding to those of that authorised guarantee agreement, the performance of that covenant by the assignee under the assignment; and
  • (b) if its provisions conform with subsections (4) and (4A), any such agreement shall be an authorised guarantee agreement for the purposes of this section; and
  • (c) in the application of this section in relation to any such agreement—
  • (i) subsections (2) (b) and (c) and (3) shall be omitted, and
  • (ii) any reference to the tenant or to the assignee shall be read as a reference to the former tenant or to the assignee under the assignment.
  • (4C) For the purposes of subsection (1) it is immaterial that—

  • (a) the tenant has already made an authorised guarantee agreement in respect of a previous assignment by him of the tenancy referred to in that subsection, it having been subsequently revested in him following a disclaimer on behalf of the previous assignee, or
  • (b) the tenancy referred to in that subsection is a new tenancy entered into by the tenant in pursuance of an authorised guarantee agreement;
  • and in any such case subsections (2) to (4A) shall apply accordingly.").

    The noble and learned Lord said: I have spoken to Amendments Nos. 34 to 36 and Amendment No. 37. With the leave of the Committee, I should like to move these en bloc. I beg to move.

    On Question, amendments agreed to.

    Clause 12, as amended, agreed to.

    Clause 13 [ Restriction on liability of former tenant for rent or service charge]:

    Page 7, line 14, after first ("a") insert ("tenant").

    The noble and learned Lord said: I spoke to this amendment with Amendment No. 33. I beg to move.

    On Question, amendment agreed to.

    Page 7, line 14, leave out ("to pay rent or a service charge") and insert ("under which any fixed charge is payable").

    The noble and learned Lord said: In moving this amendment I should like to speak to Amendments Nos. 41, 43 to 46, 50, 52, 54, 55 and 57.

    Clause 13 applies to both new and existing leases. It makes provision aimed at ensuring that former tenants who are still under liability in relation to a lease (either because of privity of contract liability, or an excluded assignment, or an authorised guarantee agreement) should be given notice within a fixed period of any arrears which become due and which they may find themselves having to pay. They will thus be able to make provision against the liability, rather than being presented with a bill which might cover a very long period. As drafted, the Bill fixes the period at nine months, but the Committee will have noted that one of the package of amendments in the name of my noble friend Lord Courtown will change that to six months.

    The essence of the provision is that the landlord should serve notice of sums which arise under the lease as fixed or liquidated sums—it being too difficult and onerous to attempt to do this for such matters as dilapidations which are of their nature difficult to quantify as they arise. The existing wording of the clause limits this to rent and service charges; but there are other such liquidated sums whose amount will be fixed as they fall due; for example, specified payments for each fixed period the tenant is in breach of a particular covenant. It is appropriate that the tenant should have notice of such sums as those as well as of rent and service charges, and the approach of the amendments, of which Amendment No. 39 is the first, is to provide that the landlord must give notice of sums payable as "fixed charges". Amendment No. 39 paves the way .for no fewer than 10 further amendments carrying through the approach, and with the Committee's leave, it may be helpful to speak to those amendments now. Amendments Nos. 41, 44, 45, 50, 52, 54, 55 and 57 carry through that approach.

    Amendment No. 54 provides the new definition of "fixed charge", namely rent, service charges corresponding to the well-settled definition in the Landlord and Tenant Act 1985, and sums payable as liquidated amounts in the event of breach of a covenant. Amendment No. 57 accordingly deletes the existing definitions of "rent and service charge"; and the other amendments remove the words "rent and service charge" and substitute "fixed charge" as appropriate.

    Amendment No. 46 deals with interest on a fixed charge of which the former tenant is given notice under Clause 13. It is considered appropriate that the former tenant should be given some warning of the fact that interest is accruing on the sum due, so that he can take that into account in making provision to meet his potential liability. It would be onerous for the landlord to expect him to calculate the interest accrued and keep updating it for the former tenant's benefit, and so this amendment does not require the landlord to calculate interest but only to warn the former tenant in the notice of the fact that interest is accruing, and the terms on which it is accruing. If he does not include that simple warning, he will not be able to recover the interest should he sue the former tenant in due course. I submit that that is a satisfactory way of dealing with that aspect of the matter. I beg to move.

    I wish only to make a short point on the expression "fixed charge". Amendment No. 54 includes, riot surprisingly, rent. But anyone who has the doubtful pleasure of reading a modern lease will realise that the expression "rent" is often used to describe a large number of different types of payment, including things such as insurance. I wonder whether, in drafting the amendment, that was considered and whether an indication can be given as to what sort of construction it is expected should be put upon the word "rent" in the amendment.

    I would have thought that rent would cover any sum payable by the tenant to the landlord as a recurring charge in respect of occupation of the premises. The insurance cover may be of that type and it will be in the interests of the tenant to regard the word "rent" as widely as possible. It is a provision for giving notice. I would say, therefore, that it covers any payment of a recurring nature given in consideration of the occupation of the premises demised by the tenant. If the insurance is payable to the landlord, although it is in the name of the insurers, it would be covered by the definition of "rent" under that explanation.

    Can the noble and learned Lord clarify for me whether service charges are included? In housing benefit cases there is a regulation that if the lease demands that a service charge is paid it can be treated as equal to rent. Would a service charge be the type of charge to which the noble and learned Lord is referring?

    In sub-paragraph (b) of Amendment No. 54 it expressly refers to,

    "any service charge as defined by section 18 of the Landlord and Tenant Act 1985 (the words 'of a dwelling' being disregarded for this purpose)".
    Service charges are therefore expressly covered.

    On Question, amendment agreed to.

    9.45 p.m.

    Page 7, line 16, leave out ("other").

    Page 7, line 19, leave out ("rent or service") and insert ("fixed").

    The noble and learned Lord said: I spoke to Amendments Nos. 40 and 41 with Amendments Nos. 29 and 39 respectively. I beg to move.

    On Question, amendments agreed to.

    Page 7, line 21, leave out ("nine") and insert ("six")

    The noble Earl said: This very short and simple amendment will give effect to an element of the property industry agreement on the basis of which the Bill has succeeded in progressing to this advanced stage. As has been explained by my noble and learned friend the Lord Chancellor, Clause 13 gives protection to former tenants by requiring a landlord who wishes to pursue a former tenant for arrears run up by a subsequent tenant to serve notice of the arrears on the former tenant within a specified period of their becoming due. This amendment increases that protection by reducing the period from nine months to six months, which is still a sufficient period for the landlord to ascertain whether payment might be made by the defaulting tenant, trace the former tenant or his last known address if necessary, and serve a notice if appropriate. I beg to move.

    I am sure the Committee will appreciate that this is a substantial change in favour of the tenant which was consequent on the agreement to which my noble friend referred. I certainly support it.

    On Question, amendment agreed to.

    Page 7, line 21, leave out ("rent or service")

    Page 7, line 24, leave out ("rent or service").

    Page 7, line 25, leave out ("rent or service").

    Page 7, line 27, at end insert ("and (where payable) interest calculated on such basis as is so specified").

    The noble and learned Lord said: I spoke to Amendments Nos. 43, 44, 45 and 46 with Amendment No. 39. With your Lordships' leave, I shall move them en bloc.

    On Question, amendments agreed to.

    Page 7, line 27, at end insert:

    ("(2A) Where a person ("the guarantor") has agreed to guarantee the performance by the former tenant of such a covenant as is mentioned in subsection (1), the guarantor shall not be liable under the agreement to pay any amount in respect of any fixed charge payable under the covenant unless, within the period of six months beginning with the date when the charge becomes due, the landlord serves on the guarantor a notice informing him—
  • (a) that the charge is now due; and
  • (b) that in respect of the charge the landlord intends to recover from the guarantor such amount as is specified in the notice and (where payable) interest calculated on such basis as is so specified.").
  • The noble and learned Lord said: It is a necessary part of the rule for which Clause 13 makes provision that its protection should be extended not only to former tenants, but also to their guarantors, and I understand that this was also accepted as part of the agreement reached between the property industry organisations to which the amendments moved by my noble friend Lord Courtown give effect. The guarantor of a former tenant is just as exposed and likely to suffer from a sudden and unexpected demand for payment covering a very long period of arrears as the former tenant, and it would also be unfair if guarantors were to be open to being sued for payments which the landlord could not recover from the tenant, not because the tenant could not meet the payment but because the landlord simply found it easier to sue the guarantor because no notice was required.

    Amendment No. 47 deals with this by inserting a new subsection (2A) into Clause 13, which makes the same provision for guarantors as subsection (2) makes for former tenants. There are three further amendments which are consequential or build on this change. Amendments Nos. 49 and 51 simply ensure that references in subsection (3) to subsection (2) are amended so that they refer also to the new subsection (2A).

    Amendment No. 48 expressly applies to guarantors as well as former tenants. It makes provision for the possibility that the landlord may in good faith have served on a former tenant under Clause 13 a notice specifying a particular sum, but that, for example, a rent review which was outstanding at the time he served the notice determines the rent to be higher on a backdated basis but this does not occur until more than six months after the rent payment became due.

    It would not be fair for a landlord in such a position, who had not made a mistake through carelessness in specifying the sum, to be unable to recover the difference between the sum in the notice and the higher sum which the determination entitled him to. Therefore, this amendment introduces a new subsection, which enables the landlord to preserve his right to recover the difference by serving a supplementary notice within three months of the final determination. It would equally not be fair on the tenant, who might have made provision on the basis of the lower sum, to be suddenly and unexpectedly presented with a revised notice for the difference; and so the new subsection also provides that the landlord will only be able to recover the difference in the circumstances which I have outlined if he gives warning in the original notice that the liability is subject to the possibility of upward determination. I beg to move.

    On Question, amendment agreed to.

    Page 7, line 27, at end insert:

    ("(2B) Where the landlord has duly served a notice under subsection (2) or (2A), the amount (exclusive of interest) which the former tenant or (as the case may be) the guarantor is liable to pay in respect of the fixed charge in question shall not exceed the amount specified in the notice unless—
  • (a) his liability in respect of the charge is subsequently determined to be for a greater amount,
  • (b) the notice informed him of the possibility that that liability would be so determined, and
  • (c) within the period of three months beginning with the date of the determination, the landlord serves on him a further notice informing him that the landlord intends to recover that greater amount from him (plus interest, where payable).").
  • Page 7, line 28, after ("(2)") insert ("or (2A)").

    Page 7, line 28, leave out ("rent or service") and insert ("fixed").

    Page 7, line 30, leave out ("that subsection does not apply") and insert ("neither of those subsections applies").

    Page 7, line 31, leave out ("rent or service").

    The noble and learned Lord said: I spoke to Amendments Nos. 48 and 49 with Amendment No. 47. I spoke to Amendment No. 50 with Amendment No. 39 and to Amendment No. 51 with Amendment No. 47. I spoke to Amendment No. 52 with Amendment No. 39. I beg to move.

    On Question, amendments agreed to.

    Page 7, leave out lines 35 and 36.

    The noble and learned Lord said: Because of other changes to the Bill which include references to authorised guarantee agreements and new tenancies, it will be necessary for "authorised guarantee agreement" and "new tenancy" which are presently only defined for the purposes of Clause 13, to be defined for the whole Bill. Amendments Nos. 53 and 56 make the necessary provision together with Amendments Nos. 76 and 80. Amendment No. 53 removes the definition of "authorised guarantee agreement" in subsection (4) and Amendment No. 76 reproduces it as a general definition for the whole Bill in Clause 19. Amendments Nos. 56 and 80 do the same for the definition of "new tenancy". I beg to move.

    On Question, amendment agreed to.

    Page 7, line 36, at end insert:

    (""fixed charge", in relation to tenancy, means—
  • (a) rent,
  • (b) any service charge as defined by section 18 of the Landlord and Tenant Act 1985 (the words "of a dwelling" being disregarded for this purpose), and
  • (c) any amount payable under a tenant covenant of the tenancy providing for the payment of a liquidated sum in the event of a failure to comply with any such covenant;").
  • Page 7, line 37, leave out ("service") and insert ("fixed").

    Page 7, leave out lines 39 and 40.

    Page 7, leave out lines 41 to 44.

    The noble and learned Lord said: I spoke to Amendments Nos. 54 and 55 with Amendment No. 39; to Amendment No. 56 with Amendment No. 53; and to Amendment No. 57 with Amendment No. 39. I beg to move.

    On Question, amendments agreed to.

    Clause 13, as amended, agreed to.

    After Clause 13, insert the following new clause:

    Restriction of liability of former tenant where tenancy subsequently
    varied

    (".—(1) This section applies where a person ("the former tenant") is as a result of an assignment no longer a tenant under a tenancy but—

  • (a) (in the case of a new tenancy) he has under an authorised guarantee agreement guaranteed the performance by his assignee of any tenant covenant of the tenancy; or
  • (b) (in the case of any tenancy) he remains bound by such a covenant.
  • (2) The former tenant shall not be liable under the agreement or (as the case may be) the covenant to pay any amount in respect of the covenant to the extent that the amount is referable to any relevant variation of the tenant covenants of the tenancy effected after the assignment.

    (3) Where a person ("the guarantor") has agreed to guarantee the performance by the former tenant of a tenant covenant of the tenancy, the guarantor (where his liability to do so is not wholly discharged by any such variation of the tenant covenants of the tenancy) shall not be liable under the agreement to pay any amount in respect of the covenant to the extent that the amount is referable to any such variation.

    (4) For the purposes of this section a variation of the tenant covenants of a tenancy is a "relevant variation" if either—

  • (a) the landlord has, at the time of the variation, an absolute right to refuse to allow it; or
  • (b) the landlord would have had such a right if the variation had been sought by the former tenant immediately before the assignment by him but, between the time of that assignment and the time of the variation, the tenant covenants of the tenancy have been so varied as to deprive the landlord of such a right.
  • (5) In determining whether the landlord has or would have had such a right at any particular time regard shall be had to all the circumstances (including the effect of any provision made by or under any enactment).

    (6) Nothing in this section applies to any variation of the tenant covenants of a tenancy effected before the date on which this Act comes into force.

    (7) In this section "variation" means a variation whether effected by deed or otherwise.").

    The noble Earl said: I spoke to this amendment with Amendment No. 2. I beg to move.

    On Question, amendment agreed to.

    After Clause 13, insert the following new clause:

    (" Overriding leases

    Right of former tenant or guarantor to overriding lease

    .—(1) Where in respect of any tenancy ("the relevant tenancy") any person ("the claimant") makes full payment of an amount which he has been duly required to pay in accordance with section 13, together with any interest payable, he shall be entitled (subject to and in accordance with this section) to have the landlord under that tenancy grant him an overriding lease of the premises demised by the tenancy.

    (2) For the purposes of this section "overriding lease" means a tenancy of the reversion expectant on the relevant tenancy which—

  • (a) is granted for a term equal to the remainder of the term of the relevant tenancy plus three days or the longest period (less than three days) that will not wholly displace the landlord's reversionary interest expectant on the relevant tenancy, as the case may require; and
  • (b) (subject to subsections (3) and (4) and to any modifications agreed to by the claimant and the landlord) otherwise contains the same covenants as the relevant tenancy, as they have effect immediately before the grant of the lease.
  • (3) An overriding lease shall not be required to reproduce any covenant of the relevant tenancy to the extent that the covenant is (in whatever terms) expressed to be a personal covenant between the landlord and the tenant under that tenancy.

    (4) If any right, liability or other matter arising under a covenant of the relevant tenancy falls to be determined or otherwise operates (whether expressly or otherwise) by reference to the commencement of that tenancy—

  • (a) the corresponding covenant of the overriding lease shall be so framed that that right, liability or matter falls to be determined or otherwise operates by reference to the commencement of that tenancy; but
  • (b) the overriding lease shall not be required to reproduce any covenant of that tenancy to the extent that it has become spent by the time that that lease is granted.
  • (5) A claim to exercise the right to an overriding lease under this section is made by the claimant making a request for such a lease to the landlord; and any such request—

  • (a) must be made to the landlord in writing and specify the payment by virtue of which the claimant claims to be entitled to the lease ("the qualifying payment"); and
  • (b) must be so made at the time of making the qualifying payment or within the period of 12 months beginning with the date of that payment; and
  • (c) may be sent by post.
  • (6) Where the claimant duly makes such a request—

  • (a) the landlord shall (subject to subsection (7)) grant and deliver to the claimant an overriding lease of the demised premises within a reasonable time of the request being received by the landlord; and
  • (b) the claimant—
  • (i) shall thereupon deliver to the landlord a counterpart of the lease duly executed by the claimant, and
  • (ii) shall be liable for the landlord's reasonable costs of and incidental to the grant of the lease.
  • (7) The landlord shall not be under any obligation to grant an overriding lease of the demised premises under this section at a time when the relevant tenancy has been determined; and a claimant shall not be entitled to the grant of such a lease if at the time when he makes his request—

  • (a) the landlord has already granted such a lease and that lease remains in force; or
  • (b) another person has already duly made a request for such a lease to the landlord.
  • (8) Where two or more requests are duly made on the same day, then for the purposes of subsection (7) —

  • (a) a request made by a person who was liable for the qualifying payment as a former tenant shall be treated as made before a request made by a person who was so liable as a guarantor; and
  • (b) a request made by a person whose liability in respect of the covenant in question commenced earlier than any such liability of another person shall be treated as made before a request made by that other person.
  • (9) The preceding provisions of this section shall apply where the landlord is the tenant under an overriding lease granted under this section as they apply where no such lease has been granted; and accordingly there may be two or more such leases interposed between the first such lease and the relevant tenancy.").?

    The noble Earl said: I spoke to this amendment with Amendment No. 3. I beg to move.

    On Question, amendment agreed to.

    After Clause 13, insert the following new clause:

    Overriding leases: supplementary provisions

    (".—(1) For the purposes of section 1 an overriding lease shall be a new tenancy only if the relevant tenancy is a new tenancy.

    (2) Every overriding lease shall state—

  • (a) that it is a lease granted under section (Right of former tenant or guarantor to overriding lease), and
  • (b) whether it is or is not a new tenancy for the purposes of section 1;
  • and any such statement shall comply with such requirements as may be prescribed by rules made in pursuance of section 144 of the Land Registration Act 1925 (power to make general rules).

    (3) A claim that the landlord has failed to comply with subsection (6) (a) of section ( Right of former tenant or guarantor to overriding lease) may be made the subject of civil proceedings in like manner as any other claim in tort for breach of statutory duty; and if the claimant under that section fails to comply with subsection (6) (b) (i) of that section he shall not be entitled to exercise any of the rights otherwise exercisable by him under the overriding lease.

    (4) An overriding lease—

  • (a) shall be deemed to be authorised as against the persons interested in any mortgage of the landlord's interest (however created or arising); and
  • (b) shall be binding on any such persons;
  • and if any such person is by virtue of such a mortgage entitled to possession of the documents of title relating to the landlord's interest—

  • (i) the landlord shall within one month of the execution of the lease deliver to that person the counterpart executed in pursuance of section (Right of former tenant or guarantor to overriding lease) (6) (b) (i); and
  • (ii) if he fails to do so, the instrument creating or evidencing the mortgage shall apply as if the obligation to deliver a counterpart were included in the terms of the mortgage as set out in that instrument.
  • (5) It is hereby declared—

  • (a) that the fact that an overriding lease takes effect subject to the relevant tenancy shall not constitute a breach of any covenant of the lease against subletting or parting with possession of the premises demised by the lease or any part of them; and
  • (b) that each of sections 12, 13 and (Restriction of liability of former tenant where tenancy subsequently varied) applies where the tenancy referred to in subsection (1) of that section is an overriding lease as it applies in other cases falling within that subsection.
  • (6) No tenancy shall be registrable under the Land Charges Act 1972 or be taken to be an estate contract within the meaning of that Act by reason of any right or obligation that may arise under section ( Right of former tenant or guarantor to overriding lease), and any right arising from a request made under that section shall not be an overriding interest within the meaning of the Land Registration Act 1925; but any such request shall be registrable under the Land Charges Act 1972, or may be the subject of a notice or caution under the Land Registration Act 1925, as if it were an estate contract.

    (7) In this section—

  • (a) "mortgage" includes "charge"; and
  • (b) any expression which is also used in section (Right of former tenant or guarantor to overriding lease) has the same meaning as in that section.").
  • The noble Earl said: I spoke to this amendment with Amendment No. 3. I beg to move.

    On Question, amendment agreed to.

    Clause 14 agreed to.

    After Clause 14, insert the following new clause:

    (" Landlord's consent to assignments

    Imposition of conditions regulating giving of landlord's consent to
    assignments

    . After subsection (1) of section 19 of the Landlord and Tenant Act 1927 (provisions as to covenants not to assign etc. without licence or consent) there shall be inserted—

    "(1A) Where the landlord and the tenant under a qualifying lease have entered into an agreement specifying for the purposes of this subsection—

  • (a) any circumstances in which the landlord may withhold his licence or consent to an assignment of the demised premises or any part of them, or
  • (b) any conditions subject to which any such licence or consent may be granted,
  • then the landlord—

  • (i) shall not be regarded as unreasonably withholding his licence or consent to any such assignment if he withholds it on the ground (and it is the case) that any such circumstances exist, and
  • (ii) if he gives any such licence or consent subject to any such conditions, shall not be regarded as giving it subject to unreasonable conditions;
  • and section 1 of the Landlord and Tenant Act 1988 (qualified duty to consent to assignment etc.) shall have effect subject to the provisions of this subsection.

    (1B) Subsection (IA) of this section applies to such an agreement as is mentioned in that subsection—

  • (a) whether it is contained in the lease or not, and
  • (b) whether it is made at the time when the lease is granted or at any other time falling before the application for the landlord's licence or consent is made.
  • (1C) Subsection (1A) shall not, however, apply to any such agreement to the extent that any circumstances or conditions specified in it are framed by reference to any matter falling to be determined by the landlord or by any other person for the purposes of the agreement, unless under the terms of the agreement

  • (a) that person's power to determine that matter is required to be exercised reasonably, or
  • (b) the tenant is given an unrestricted right to have any such determination reviewed by a person independent of both landlord and tenant whose identity is ascertainable by reference to the agreement,
  • and in the latter case the agreement provides for the determination made by any such independent person on the review to be conclusive as to the matter in question.

    (1D) In its application to a qualifying lease, subsection (1) (b) of this section shall not have effect in relation to any assignment of the lease.

    (1E) In subsections (1A) and (1D) of this section—

  • (a) "qualifying lease" means any lease which is a new tenancy for the purposes of section 1 of the Landlord and Tenant (Covenants) Act 1995 other than a residential lease, namely a lease by which a building or part of a building is let wholly or mainly as a single private residence; and
  • (b) references to assignment include parting with possession on assignment.'"').
  • The noble Earl said: This amendment is the most important one which it falls to me to move. It represents the backbone of the compromise which has enabled this Bill to be supported on all sides. As I said at Second Reading, it is the essence of compromise that the results will not please everybody, but I believe that this compromise is proper and realistic and will ensure that the principal aim of privity reform is secured early in order to benefit those in need of relief while ensuring that landlords and investors know that they have the security they need.

    The considerable challenge has been to do as much as necessary to give to landlords the security required to underpin investment and development while aiming not to stray any further from the spirit of Section 19 of the Landlord and Tenant Act 1927 than is needed to secure that objective.

    This amendment introduces a new clause which amends Section 19 of the Landlord and Tenant Act 1927 to increase the possibility of the landlord's control over assignment compared to qualified covenants against assignment under the existing law, but short of allowing sole discretion to the landlord for which absolute covenants against assignment will still be possible for those landlords who require complete control and who are prepared to take the consequences in terms of lower rental values on rent review.

    The changes are intended directly to balance the removal of privity of contract liability and they are to apply to new tenancies only. They are also specifically excluded from applying to residential tenancies and will also not apply to agricultural tenancies, which have always come under a different regime for assignment. 'They will also affect assignment only, leaving the law relating to covenants against underletting, for example, untouched.

    Section 19(1) of the 1927 Act provides for any covenant against assignment, underletting or charging without the landlord's consent, to be deemed, notwithstanding any provisions in the lease to the contrary, to be a covenant which requires the landlord not to withhold his consent unreasonably. That lay at the heart of the opposition to the earlier Bill in another place, for reasons which I shall now summarise.

    Many applications of leases in the commercial field, and much investment in tenanted property and funding of new development, presently depend on the security which privity of contract provides, because a strong original tenant covenant will ensure performance of the lease covenants and a return for the whole term of the lease no matter how many times it may change hands. In the absence of privity of contract, landlords and investors will seek to ensure that covenant strength is similarly maintained throughout new leases notwithstanding assignment. The natural way to do that is to ensure that assignment is only permitted where the assignee is of sufficient status to give the same level of assurance of performance of covenant and return as the original tenant.

    The historic approach of the courts in deciding when a refusal of consent is unreasonable means that there is no confidence at all that such control over assignment would be possible for new leases, even given that the courts might be expected to adjust their approach to take account of the fact that landlords' investments in new leases will no longer be backed by the privity of contract of the original tenant. Authorised guarantee agreements are a help, but do not address the problem sufficiently because, on the next assignment, the original tenant will drop out of the picture and the covenant strength underpinning the investment may become seriously diluted.

    Without change to Section 19 of the 1927 Act, therefore, in the attempt to preserve covenant strength, landlords will seek, where they are able, to impose absolute covenants against assignment and thereby keep complete control over assignment. Where they cannot do that, investment will be harder to attract and the property market will therefore suffer a blow to confidence of the sort which was in the Government's contemplation when they concluded that the Law Commission's recommend-dations could not be implemented for existing leases.

    The solution finally agreed and accepted was that it should be possible for the parties to a lease containing a qualified or fully qualified covenant against assignment to agree between them the criteria which should govern the question of whether or not the landlord would consent to any assignment, and that those criteria should not be susceptible of being overturned by a court on the ground that they, or the landlord's refusal based on the tenant's failure to fulfil them, were unreasonable.

    Much effort has been expended to ensure that the change does only what is necessary to enable the parties to preset the criteria for assignment without fear of their being void for unreasonableness while otherwise retaining the effect of Section 19(1) of the 1988 Act as far as possible. It is not intended that the parties should simply be able to oust Section 19(1) altogether so as to place the decision whether or not to consent to assignment in the landlord's undefined discretion which is to all intents and purposes a disguised absolute covenant against assignment, but one which might be easier to impose than a naked absolute covenant.

    The amendment works by inserting five new subsections after subsection (1) of Section 19 of the 1927 Act. New Subsection (1A) is the main operative provision. It specifically empowers the landlord and tenant to enter into an agreement to cover assignment. In such an agreement, the landlord and tenant are to be able to specify the terms or conditions on which the landlord will grant or withhold consent. Where they do so, the landlord is not to be taken to be refusing consent unreasonably if he does so on the 'ground that the conditions have not been met—which he will have to show to be the case if the matter is disputed, as he has to show at present that he is not withholding consent unreasonably. Furthermore, if he gives consent subject to any such pre-agreed condition, he is not to be taken as giving consent subject to an unreasonable condition.

    To the extent that the conditions are not exhaustive, however, Section 19 and the provisions under the Landlord and Tenant Act 1988 which build on it will continue to have effect as they do at present. Thus, if the tenant meets all the specified conditions but the landlord is still minded to withhold consent, he will have to show that his final refusal notwithstanding the fulfilment of all the pre-agreed conditions is not unreasonable. He will also have to fulfil the duty under the 1988 Act, for example, to consent or to give reasons for withholding consent within a reasonable time. This will enable the landlord to set out the specific requirements in respect of matters such as the assignee's business and financial status which will ensure that the assignee is a sufficiently secure prospect for the landlord's investment to be safeguarded.

    The new subsection (1B) provides that the agreement may be in the lease or in any other instrument and could be at the time of the lease or at any other time. It will most often be the case that the agreement is part and parcel of the lease but there will be cases where it is appropriate for such an agreement to be entered into at another time to reflect changing conditions, provided that it is before the tenant actually applies to the landlord for consent to assign.

    The new subsection (1C) is aimed at those cases in which the landlord will wish to reserve some final discretion or judgment as to the suitability of the assignee notwithstanding that a series of specific conditions are fulfilled. Simply to allow the landlord to agree with the tenant a condition reserving the final determination to the landlord, or indeed to another person who might be the landlord's associate, would produce the effect of an absolute covenant against assignment in a disguised form.

    The new subsection (1C) permits conditions which inherently or expressly depend on the landlord's or any other person's determination, and therefore his discretion, judgment or opinion, rather than being objectively proved. It does so, however, only if the terms of the agreement require the power to determine the matter to be exercised reasonably or provide for the determination to be referred to an independent person if the tenant is not satisfied with the initial determination by the landlord or other person. This will, for example, allow for matters which of their nature require an opinion or judgment to be formed to be capable of conclusive resolution by an independent expert, thus balancing the need in some cases for an element of judgment or discretion against the need for certainty.

    The new subsection (1D) concerns the assignment of new building leases. The present position under Section 19(1) (b) of the 1927 Act is that any covenant against the assignment of a building lease without the landlord's consent cannot stop the tenant from assigning without consent more than seven years before the end of the term. With the removal of privity of contract liability for new leases, this complete lack of control over assignment cannot be justified for building leases, and so the new subsection ensures that, as regards assignment, new building leases are to be no different from new commercial leases generally.

    The new subsection (1E) makes it clear that the changes do not apply to residential leases. It also covers the fact that a covenant against parting with possession may be broken in a number of ways, of which assignment is one; and it ensures that, in the case of such a covenant, assignment, but not the other ways of parting with possession, is covered by the new provisions.

    I am conscious that I have spoken at great length, but I believe this to be justified by the importance of this amendment. I beg to move.

    I am concerned about the width and significance of this amendment, which has been put down so recently. I understand that it first appeared on the list only on Monday, two days ago. It has been put down so recently that we have really had no adequate time to consider it thoroughly in the context of what I might call "the balance of power" between landlord and tenant. That said, it is right that I should acknowledge the courtesy of the noble Earl in seeking to explain this amendment to me shortly before we began our discussions in Committee this evening.

    The amendment is part of the trade package, the BRC-BPF package, and, as I understand the noble Earl, it is regarded as the backbone of the package. Essentially, it would seem to be regarded by the landlord/investor interest as a means of enabling landlords to secure much greater control over assignments once they have lost the benefit of privity of contract liability.

    My concern is that under the Bill, it being generally accepted that privity of contract liability is not defensible, we may be seeing, in the shape of the amendment, an attempt to put into law, with insufficient notice I would suggest, an amendment to Section 19 of the Landlord and Tenant Act 1927, the effect of which is that, in relation to assignments, the balance of power between landlord and tenant is being altered sharply in favour of landlords to an extent which was not specifically anticipated, and which may, on mature consideration, be shown to go further than is necessary.

    The basic effect of Section 19 was that, no matter what was said in a lease, where it provided that the lease could not be assigned without the landlord's consent, that was subject, in effect, to a proviso: "consent not to be unreasonably withheld". The intended effect of the amendment is, I think, ashamedly, to allow landlords a greater ability to control assignments short of imposing an absolute ban on assignment, that being regarded as so blunt an instrument as not to be desired.

    The effect is that the jurisdiction of the court to hold that a consent to assignment has been unreasonably withheld is gone as a result of the amendment in a case where the landlord shows that the pre-agreed grounds for withholding consent have been made out. Then, where the grounds for withholding consent are of a discretionary nature—I would interpose that I would think that the drafting of subsection (1C) calls for further consideration—if the provision requires the landlord to make a reasonable decision, the landlord wins if he can satisfy the court that a reasonable landlord could have decided as he did.

    This, as I say, is a provision which requires careful thought, but certainly at first blush it seems to me that it may alter the balance of power in favour of landlords by contrast to a decision by a court as to whether in the view of the court consent has been unreasonably withheld.

    I have little doubt that that part of the package is designed by the landlord interest to improve its position from what is seen by that interest as the too pro-tenant direction of the decisions of the courts concerning consent not to be unreasonably withheld.

    I would urge the noble Earl to withdraw his amendment and to leave it over to Report. That would allow those of us who are concerned that his amendment goes further than is necessary to make the package viable in the landlord interest to consider more fully our approach to it. I should make it plain that I had hoped—indeed, I still hope—that the Bill can go through as non-controversial. If the noble Earl were to agree to withdraw the amendment and to come back on Report, that would assist in the endeavour of securing the Bill to enter upon the statute book on a non-controversial basis.

    Having said that, I appreciate that the changes embraced in the amendment are to apply to new tenancies only. I appreciate that the relevant terms will be terms which have actually been agreed by the relevant parties. I appreciate also that the amendment cannot apply either to residential or agricultural tenancies. I put that on the record, as it were.

    Nevertheless, I invite the noble Earl to withdraw the amendment and move it at Report stage, essentially on the basis that it merits careful thought. As he says, it is complex and is also the backbone of the package. We have not had sufficient time to address in a considered and critical way that which he informs the Committee is the essential core of the package agreed which is sought to be translated onto the statute book.

    I share the anxieties of the noble Lord, Lord Irvine of Lairg, and I join with him in the invitation that he has just extended to the noble Earl.

    This is an important and substantial amendment which was tabled only very recently and which has been debated in this Committee at a very late hour. I have reservations about the drafting. I should like to think it through in more detail and discuss with others more knowledgeable than myself how it might work in practice and its wider implications, some of which were touched on by the noble Lord, Lord Irvine.

    It may well be that the noble Earl is quite right when he says that this is a realistic proposition but it may be also that there is room for further improvement and adjustment. I hope that the noble Earl will not see the invitation to withdraw the amendment at this stage as in any way hostile. It is merely a plea that those of us who wish to see the Bill pass through in a satisfactory time should have proper time to give the matter thorough thought.

    My understanding of this clause is that it represents the agreement between the property interests and the tenant interests which are represented by the major operators in the field. When we knew of it, we put it out to consultation because I did not wish to support this Private Member's Bill unless there was general agreement, because it is one matter for the large operators in an industry to agree something but quite different in relation to the small operators. However, on consultation, we have secured the views of the industry in general and those views were supportive of that compromise.

    I am sure that my noble friend would not wish to press this forward as something agreed at this juncture. But I venture to suggest to the Committee that for the purposes of considering whether this clause is right in the light of the agreement that has been made, perhaps the noble Lords, Lord Irvine of Lairg and Lord Meston, would take into account the fact that if the clause goes into the Bill this evening as an amendment, the whole Bill will be available for consultation—not only this amendment but the whole proposal. I venture to think that it may be easier to consult people if the whole proposal is in one document rather than trying to fit the amendment, as it were, into some other document. I suggest to the Committee that it may be easier to consult upon the matter if the amendment is agreed within the Bill this evening.

    I have made it clear all along—and I am sure that my noble friend supports this—that the Bill can go forward to the statute book ultimately only by agreement. If the noble Lord, Lord Irvine of Lairg, the noble Lord, Lord Meston, or any other noble Lord wishes to challenge this clause or suggest amendments to it, that will have to be considered very carefully.

    If it is convenient to noble Lords opposite, I think it would be better for the whole clause to be included in the Bill so that one can read the whole thing together. It may be much easier to consult other people than if one has to do it by reference to two documents, because it is intended to hang together as drafted. I fully appreciate that the noble Lords, Lord Meston and Lord Irvine of Lairg, feel that they require more time further to consider the matter. However, that time will certainly be available between now and Report stage, which will be some time off. The minimum period will certainly be available, and my understanding is that more than the minimum period will elapse.

    In the light of those considerations, I wonder whether both noble Lords will feel able to accept that the provision should go into the Bill tonight on the understanding that it is fully open for reconsideration. As I said at the outset, anyone who wishes to raise any questions with me would certainly find an open door. I am equally sure that my noble friend would be most willing to co-operate in any such arrangements. I know that small tenants—if I may call them so—are also very interested in the Bill proceeding because there is substantial protection for them in it, even in regard to existing leases. My observations are intended to try to facilitate a solution to the problem, which might make it easier for the consultations that may be required to take place.

    10.15 p.m.

    I, too, support the amendment simply because I believe that it is part of the deal—if I can so describe it—between the British Property Federation and the Retail Consortium. However, I hope that someone will look at it again. I am slightly concerned about subsection (1C) (b) where it is proposed that the tenant should have an "unrestricted right" to have an independent person reviewing the determination.

    I am not completely happy in regard to small tenants. I know that paragraph (b) says that,
    "identity is ascertainable by reference to the agreement".
    However, as I understand it, that means that in the original agreement the tenant would be agreeing to a particular person being appointed. I believe that a small tenant signing a lease might not realise what power was being put into the hands of that person. I should like to feel quite confident that it would be a completely independent person. However, I hope that noble Lords will accept the suggestion made by my noble and learned friend the Lord Chancellor that we accept the provision tonight and reconsider it on Report.

    I echo the words of my noble friend Lady Gardner of Parkes. It is an extremely important matter. Bearing in mind the fact that the provision has cross-party agreement so far as concerns the industry, both tenants and landlords are essentially in agreement with the amendment as drafted.

    It is a matter for the noble Earl to follow his own course. However, despite the remarks made by the noble and learned Lord the Lord Chancellor, I am disinclined to agree to something in respect of which such short notice was given—indeed, something of such width and significance—and which, by reason of that short notice, has neither enjoyed the mature consideration that it requires nor had the full debate in Committee that it merits. For all those reasons, I believe that it would be a bad precedent just to let a provision go into a Bill on that basis. Therefore, to the extent that my agreement is relevant, I do not agree to that course being followed.

    It appears to me that consultation can perfectly well take place on the basis of the Bill not subject to the amendment and on the Bill plus the amendment. I do not think that there is any particular difficulty in consulting on two pieces of paper rather than on one. It would certainly assist me in considering what has come from the noble and learned Lord if we could have a specific indication, to the extent that he is able to give it, of when the Report stage is likely to take place, because that of course relates to the adequacy of the period for consultation.

    I wish to thank all those who have taken part in this short exchange. The noble Lord pointed out that an important concession has been made in the agreement to change the long-standing and venerated Section 19 of the Landlord and Tenant Act 1927. However, this is not a concession made simply to appease the landlord lobby as a price to extract its support for those parts of the package that are of great importance to the tenant. Rather, tenants are acutely conscious that landlords have the right under Section 19 absolutely to withhold consent to assignments. If landlords were left without a satisfactory ability to approve the assignee, they would, it has been said, in many cases just stop the tenant assigning. This would not get anybody anywhere. Neither am I impressed by the argument that this could be an abuse by landlords to which Parliament would turn its attention by changing the law. It has taken since 1988 to get to this stage this evening and I do not think that Parliament would wish to return to this issue if the Bill is passed. I am in somewhat of a quandary, I must admit, over this matter and I take the lead of my noble and learned friend the Lord Chancellor.

    If my noble friend is taking my lead, just before he finally decides what that lead should be, I should say that my understanding is the following. The Committee will know that, this being a Private Member's Bill, if it is to reach the statute book in this Session it has to return to the House of Commons by 14th July. I think that is the date. My understanding is that the Report stage of this Bill is likely to be on 5th or 6th July. As the Committee will know, the amount of business that occupies this Chamber as we get nearer the end of July gets heavier and heavier. Therefore, this is rather a narrow matter. I am anxious not to prejudice the chance of this Bill reaching the statute book. That is why I felt, apart from anything else, that the solution I was putting forward might help us in that direction. On the other hand, I am most unwilling to seek to force anything on those who have been so accommodating to try to reach a conclusion about this.

    I had rather hoped that what I had proposed might meet with agreement because the Bill will reach the statute book only by agreement. There is no question about that. I thought that what I had proposed might simplify our procedures. For my part, unless the noble Lords, Lord Irvine of Lairg and Lord Meston, were prepared to agree to the course I am suggesting, I would not indicate to my noble friend that he should press too hard this evening.

    I should perhaps make it plain that in the observations I was making I was not necessarily expressing hostility to the amendment, and I was certainly not expressing hostility to the Bill being translated promptly on to the statute book. I was merely suggesting to the noble Earl, whose courtesy prior to this Committee sitting I acknowledge, that the better course, and one which would give more encouragement in all quarters, would be to withdraw the amendment tonight and to move it on Report.

    Amendment, by leave, withdrawn.

    Before Clause 15, insert the following new clause:

    Effects of becoming subject to liability under, or entitled to benefit
    of covenant etc

    (".—(1) Where as a result of an assignment a person becomes, by virtue of this Act, bound by or entitled to the benefit of a covenant, he shall not by virtue of this Act have any liability or rights under the covenant in relation to any time falling before the assignment.

    (2) Subsection (1) does not preclude any such rights being expressly assigned to the person in question.

    (3) Where as a result of an assignment a person becomes, by virtue of this Act, entitled to a right of re-entry contained in a tenancy, that right shall be exercisable in relation to any breach of a covenant of the tenancy occurring before the assignment as in relation to one occurring thereafter, unless by reason of any waiver or release it was not so exercisable immediately before the assignment.").

    The noble and learned Lord said: The amendment introduces a new clause to provide for another element of the framework for the transmission of covenants on assignment, giving full effect to the Law Commission's recommendations for new tenancies which I outlined when speaking to Amendment No. 1.

    Subsection (1) of the new clause makes it clear that an assignee shall have no rights or liabilities under a covenant of the tenancy in relation to anything occurring before the assignment. That is subject to a saving in subsection (2) for cases where the assignor expressly assigns his accrued rights to the assignee to allow for the accrued rights of the assignor to be taken into account as part of the agreement between assignor and assignee as the parties see fit. Subsection (3) preserves the present position in respect of the landlord's right of re-entry, which do not fit in the Law Commission's scheme as landlord and tenant covenants and accordingly require separate provisions, as I mentioned earlier. I beg to move.

    On Question, amendment agreed to.

    Clause 15 [ Effects of release from liability under, or loss of benefit of covenant]:

    Page 8, line 35, at end insert:

    ("() Where a person bound by a landlord or tenant covenant of a tenancy—
  • (a) assigns the whole or part of his interest in the premises demised by the tenancy, but
  • (b) is not released by virtue of this Act from the covenant (with the result that subsection (I) does not apply),
  • the assignment does not affect any liability of his arising from a breach of the covenant occurring before the assignment.").

    The noble and learned Lord said: I spoke to Amendment No. 63 with Amendment No. 29. I beg to move.

    On Question, amendment agreed to.

    Clause 15, as amended, agreed to.

    Clause 16 [ Agreement void if it restricts operation of the Act]:

    Page 8, line 41, leave out ("or modify") and insert (", modify or otherwise frustrate").

    The noble and learned Lord said: Clause 16 is an important clause since it contains anti-avoidance provisions. The principal provision is in subsection (1) and is, as recommended by the Law Commission, in general terms to catch any device aimed at subverting the Act.

    Amendments Nos. 64 to 68 refine the anti-avoidance provisions so as to ensure that they are all-embracing but also to prevent arguments to the effect that they outlaw certain other matters which the Act elsewhere envisages being permitted. They are closely linked, and I believe that it would be helpful if I speak to them together.

    Amendments Nos. 64 and 65 amend the wording of subsection (1) to ensure that it is sufficiently all-embracing to catch the various devices which might be attempted as ways of circumventing the Act. It has been suggested in some quarters that subsection (1) might affect the operation of covenants which are expressed to be of limited duration on the basis that such limitation would "modify" the operation of the provisions providing for an assignor to be released on assignment. I am strongly advised that this is not the case, since time-limited covenants, once the period has expired, will not be covenants which bind the assignor immediately before assignment, and thus the limited duration cannot be said in any way to fall foul of Clause 16.

    Amendment No. 66 deletes the existing subsection (2) of Clause 16, which makes a cross-reference to the provisions for authorised guarantee agreements. The deletion is necessary to make way for revised and refined provision to that effect made by Amendment No. 68, which provides for a new subsection to be inserted after subsection (3). The new subsection makes it clear that the anti-avoidance provision does not outlaw any agreement to the extent that it is an authorised guarantee agreement; but that anything in such an agreement which falls foul of the amended subsection (4) of Clause 12 is void to the extent that it does so.

    Amendment No. 67 deletes the existing subsection (3) of Clause 16 and replaces it with a revised and refined version. The existing subsection reflects concern that it might be argued that absolute or qualified covenants against assignment amounted to provisions which would "modify", and so on, the operation of the provisions of the Act covering release on assignment and that they would therefore be held to be void. The new subsection makes it clear that such a covenant against assignment is not void by reason of the anti-avoidance provision, but also makes it clear, which the existing provision perhaps does not do so well, that any conditions which might be attached to consent or required to be fulfilled before consent is given would not escape the anti-avoidance provisions if they were such as to subvert the operation of the Act. I beg to move.

    On Question, amendment agreed to.

    Page 9, line 5, after ("so") insert ("(whether expressly or otherwise)").

    Page 9, line 7, leave out subsection (2).

    Page 9, line 10, leave out subsection (3) and insert:

    ("(3) To the extent that an agreement relating to a tenancy constitutes a covenant (whether absolute or qualified) against the assignment, or parting with the possession, of the premises demised by the tenancy or any part of them—

  • (a) the agreement is not void by virtue of subsection (1) by reason only of the fact that as such the covenant prohibits or restricts any such assignment or parting with possession; but
  • (b) paragraph (a) above does not otherwise affect the operation of that subsection in relation to the agreement (and in particular does not preclude its application to the agreement to the extent that it purports to regulate the giving of, or the making of any application for, consent to any such assignment or parting with possession).").
  • Page 9, line 13, at end insert:

    ("() In accordance with section 12(1) nothing in this section applies to any agreement to the extent that it is an authorised guarantee agreement; but (without prejudice to the generality of subsection (1) above) an agreement is void to the extent that it is one falling within section 12(4) (a) or (b).")./

    On Question, amendments agreed to.

    Clause 16, as amended, agreed to.

    Clause 17 agreed to.

    Clause 18 [ Notices for the purposes of the Act]:

    Page 9, line 35, at end insert ("and the options available to the person on whom it is served").

    The noble and and learned Lord said: Clause 18 of the Bill makes provision for notices which are required for Clauses 6, 9 and 13. It provides for the form of the notices to be prescribed by regulations made by statutory instrument, specifies certain matters which the form of notices thus prescribed must contain and provides that the sanction for serving a notice which is not substantially in the form prescribed (so that minor departures will not be fatal) is that the notice shall be ineffective for its purpose. Service of notices is to be in accordance with the very well settled provisions of Section 23 of the Landlord and Tenant Act 1927. Amendments Nos. 69 to 73 are consequential on earlier changes made to Clauses 6, 9 and 13, and with the leave of the Committee, perhaps I may now speak to those amendments.

    Amendment No. 69 is consequential on the changes to Clauses 6 and 9 which allow the recipient of the notice more options than was previously the case. The amendment requires the form of notice under those clauses to set out for the recipient's benefit what his options are. The recipient will therefore know that he need not simply stay quiet but can agree to save everyone's time and that he is not committed if he registers an objection but may withdraw the objection to save time and costs if he changes his mind.

    Amendment No. 70 requires a notice under Clause 13 to include an explanation of its significance to the former tenant or guarantor on the same basis as for notices under Clauses 6 and 9. Indeed, it may be even more important for a person receiving a notice under Clause 13 to know what it signifies than it is for the recipient of a notice under Clauses 6 or 9.

    Amendments Nos. 71 and 72 amend subsection (3) of Clause 18 so that the sanction of ineffectiveness applies also to notices under Clause 13 which are not substantially in the prescribed form. Amendment No. 73 removes a limitation in subsection (4) of Clause 18 which has become inappropriate in the light of the amendments to Clause 13. I beg to move Amendment No. 69.

    On Question, amendment agreed to.

    Page 9, line 43, at end insert:

    ("() The regulations shall require any notice served for the purposes of section 13 to include an explanation of the significance of the notice.").

    Page 9, line 45, leave out ("or 9(1)") and insert (", 9(1) or 13").

    Page 9, line 47, leave out ("or section 9") and insert (", section 9 or section 13").

    Page 10, line 2, leave out ("13(2)") and insert ("13").

    The noble and learned Lord said: I spoke to Amendments Nos. 70 to 73 inclusive with Amendment No. 69. With the leave of the Committee I beg to move the amendments en bloc.

    On Question, amendments agreed to.

    Clause 18, as amended, agreed to.

    Clause 19 [ Interpretation]:

    Page 10, line 5, at end insert ("(unless the context otherwise requires)").

    The noble and learned Lord said: Clause 19 sets out definitions and provisions for interpretation of the Bill as a whole. A number of these fall to be revised, and some additional ones added, as a consequence of earlier amendments. I have already spoken to some of them, and with the leave of the Committee I believe that it would be appropriate if I were to speak to the remainder as a group.

    Amendment No. 74 inserts a general provision qualifying the entire list of definitions so that they do not apply if the context otherwise requires. This enables the definitions themselves to be simpler and clearer.

    Amendment No. 77 makes it clear what is meant by "collateral agreement", a term which has an important place in the amendments providing the framework for transmission of covenants to give effect to the Law Commission's recommendations. The definition in particular makes it clear a collateral agreement may be entered into after the creation of the tenancy.

    Amendment No. 78 is to be read with Amendment No. 75. It makes it clear that, in accordance with the Law Commission scheme, the term "covenant" is to encompass matters contained in collateral agreements.

    Amendment No. 79 introduces a definition for the whole Bill, for the avoidance of doubt, of the terms "landlord" and "tenant" which are used throughout the Bill so often that it might be easy to lose sight of the fact that they have a specific meaning.

    Amendment No. 80 restores wording which was originally recommended by the Law Commission: it excludes a mortgage term from the definition of "tenancy" for the purposes of the Bill. The Law Commission's reason for recommending the wording is that it remains possible for there to be a mortgage by demise, and it is inappropriate for there to be any question of the Bill's provisions applying to any such mortgage.

    Amendment No. 83 provides a more specific extension of the definition of "landlord" and "tenant" for the purposes of the Bill to put beyond doubt a point which emerged during revision of the Bill and consideration of Clause 10. It introduces a new subsection into Clause 19 which makes it clear that any reference to the landlord or tenant means, where there are joint landlords or tenants, all those who jointly constitute the landlord or tenant, as the case may be. This means that Clause 10, which was intended to cover persons who have failed to secure release and their assignees and the like, and not joint tenants or landlords, will, as intended, have no application as between joint tenants or landlords. I beg to move Amendment No. 74.

    On Question, amendment agreed to.

    Page 10, line 6, leave out from (""assignment"") to end of line 8 and insert ("includes equitable assignment and in addition (subject to section ( Assignments in breach of covenant or by operation of law)) assignment in breach of a covenant of a tenancy or by operation of law;").

    Page 10, line 8, at end insert:

    (""authorised guarantee agreement" means an agreement which is an authorised guarantee agreement for the purposes of section 12;").

    Page 10, line 8, at end insert:

    (""collateral agreement", in relation to a tenancy, means any agreement collateral to the tenancy, whether made before or after its creation;").

    Page 10, line 10, at end insert (", and references to a covenant (or any description of covenant) of a tenancy include a covenant (or a covenant of that description) contained in a collateral agreement;").

    Page 10, line 10, at end insert:

    (""landlord" and "tenant", in relation to a tenancy, mean the person for the time being entitled to the reversion expectant on the term of a tenancy and the person so entitled to that term respectively;").

    Page 10, line 13, at end insert:

    (""new tenancy" means a tenancy which is a new tenancy for the purposes of section 1;").

    Page 10, line 18, at end insert:

    ("but does not include a mortgage term;").

    The noble and learned Lord said: I spoke to Amendment No. 75 with Amendment No. 29, to Amendment No. 76 with Amendment No. 53, to Amendments Nos. 77 to 79 with Amendment No. 74, to Amendment No. 80 with Amendment No. 53 and to Amendment No. 81 with Amendment No. 74. With the leave of the Committee, I beg to move Amendments Nos. 75 to 81.

    On Question, amendments agreed to.

    [ Amendment No. 82 not moved.]

    Page 10, line 39, at end insert:

    ("() Where two or more persons jointly constitute either the landlord or the tenant in relation to a tenancy, any reference in this Act to the landlord or the tenant is a reference to both or all of the persons who jointly constitute the landlord or the tenant, as the case may be (and accordingly nothing in section 10 applies in relation to the rights and liabilities of such persons between themselves).").

    The noble and learned Lord said: I spoke to this amendment with Amendment No. 74. I beg to move.

    On Question, amendment agreed to.

    [ Amendment No. 84 not moved.]

    Clause 19, as amended, agreed to.

    Clause 20 agreed to.

    Clause 21 [ Repeals and consequential amendments]:

    Page 11, line 1, at beginning insert:

    ("(1ZA) The enactments specified in Schedule (Consequential amendments) are amended in accordance with that Schedule, the amendments being consequential on the provisions of this Act.").

    The noble and learned Lord said: Clause 21 of the Bill provides for repeals and consequential amendments, and revision of the Bill has resulted in there being more consequential amendments than before and some rearrangement of those which were already in the clause. Amendment No. 85 paves the way for Amendments Nos. 86, 87 and 89.

    Amendment No. 85 provides for there to be a new schedule of consequential amendments, and Amendment No. 86 deletes the consequential amendments presently in subsection (2) of Clause 21, which are moved to that schedule. Amendment No. 87 changes the references in subsection (3) of Clause 21, consequential on Amendments Nos. 85 and 86.

    Finally, Amendment No. 89 introduces the new schedule of consequential amendments. I have referred earlier to two matters contained in this schedule, and it may be helpful to remind the Committee of them. The first matter is the consequential amendment of Sections 34 and 35 of the Landlord and Tenant Act 1954 to ensure that, when the courts fix the terms of new business tenancies under that Act, they take properly into account the effect of the removal of privity of contract liability and the other effects of this legislation.

    The second matter concerns trustees, and addresses a point raised by the noble Lord, Lord Graham of Edmonton, at Second Reading. There is an amendment to the Trustee Act 1925 consequential on the provisions concerning authorised guarantee agreements, which extends to trustees and personal representatives in their representative capacity the same protection in respect of the possibility of liability under an authorised guarantee agreement as they have' under the present law in respect of the possibility of privity of contract liability. I believe that the noble Lord may have been speaking on that occasion on behalf of another, but the point is dealt with. beg to move Amendment No. 85.

    I should like to take this opportunity to thank my noble and learned friend and his officials for their help over the past few weeks and this evening. I also wish to thank all those who have taken part in the Committee proceedings. I admit that, having been given due warning by the noble Lord, Lord Irvine of Lairg, that he might have a slight problem with one of my amendments, I saved my voice. Although I did not speak to all the amendments of my noble and learned friend the Lord Chancellor, I was in total agreement with them.

    On Question, amendment agreed to.

    Page 11, line 3, leave out subsection (2).

    Page 11, line 25, leave out subsection (3) and insert:

    ("(3) Subsections (1ZA) and (1) do not affect the operation of—

  • (a) section 77 of, or Part IX or X of Schedule 2 to, the Law of Property Act 1925, or
  • (b) section 24(1) (b) or (2) of the Land Registration Act 1925,
  • in relation to tenancies which are not new tenancies.").

    Page 11, line 27, at end insert:

    ("() In consequence of this Act nothing in the following provisions, namely—

  • (a) sections 78 and 79 of the Law of Property Act 1925 (benefit and burden of covenants relating to land), and
  • (b) sections 141 and 142 of that Act (running of benefit and burden of covenants with reversion),
  • shall apply in relation to new tenancies.").

    The noble and learned Lord said: I spoke to Amendments Nos. 86 and 87 with Amendment No. 85 and to Amendment No. 88 with Amendment No. 1. With the leave of the Committee, I should like to move these amendments en bloc.

    On Question, amendments agreed to.

    Clause 21, as amended, agreed to.

    Before the Schedule, insert the following new schedule:

    ("Schedule

    Consequential Amendments

    Trustee Act 1925 (c.19)

    1. In section 26 of the Trustee Act 1925 (protection against liability in respect of rents and covenants), after subsection (1) insert—

    "(1A) Where a personal representative or trustee has as such entered into, or may as such be required to enter into, an authorised guarantee agreement with respect to any lease comprised in the estate of a deceased testator or intestate or a trust estate (and, in a case where he has entered into such an agreement, he has satisfied all liabilities under it which may have accrued and been claimed up to the date of distribution)—
  • (a) he may distribute the residuary real and personal estate of the deceased testator or intestate, or the trust estate, to or amongst the persons entitled thereto—
  • (i) without appropriating any part of the estate of the deceased, or the trust estate, to meet any future liability (or, as the case may be, any liability) under any such agreement, and
  • (ii) notwithstanding any potential liability of his to enter into any such agreement; and
  • (b) notwithstanding such distribution, he shall not be personally liable in respect of any subsequent claim (or, as the case may be, any claim) under any such agreement.
  • In this subsection "authorised guarantee agreement" has the same meaning as in the Landlord and Tenant (Covenants) Act 1995."

    Law of Property Act 1925 (c.20)

    2. In section 77 of the Law of Property Act 1925 (implied covenants in conveyances subject to rents), for subsection (2) substitute—

    "(2) Where in a conveyance for valuable consideration, other than a mortgage, part of land affected by a rentcharge is, without the consent of the owner of the rentcharge, expressed to be conveyed subject to or charged with the entire rent, paragraph (B) (i) of subsection (1) of this section shall apply as if, in paragraph (i) of Part VIII of the Second Schedule to this Act—
  • (a) any reference to the apportioned rent were to the entire rent; and
  • (b) the words "(other than the covenant to pay the entire rent)" were omitted.
  • (2A) Where in a conveyance for valuable consideration, other than a mortgage, part of land affected by a rentcharge is, without the consent of the owner of the rentcharge, expressed to be conveyed discharged or exonerated from the entire rent, paragraph (B) (ii) of subsection (1) of this section shall apply as if, in paragraph (ii) of Part VIII of the Second Schedule to this Act—

  • (a) any reference to the balance of the rent were to the entire rent; and
  • (b) the words ", other than the covenant to pay the entire rent," were omitted."
  • Landlord and Tenant Act 1954 (c.56)

    3. At the end of section 34 of the Landlord and Tenant Act 1954 (rent under new tenancy) insert—

    "(4) It is hereby declared that the matters which are to be taken into account by the court in determining the rent include any effect on rent of the operation of the provisions of the Landlord and Tenant (Covenants) Act 1995."

    4. —(1) The existing provisions of section 35 of that Act (other terms of new tenancy) shall constitute subsection (1) of that section.

    (2) After those provisions insert—

    "(2) In subsection (1) of this section the reference to all relevant circumstances includes (without prejudice to the generality of that reference) a reference to the operation of the provisions of the Landlord and Tenant (Covenants) Act 1995"").

    The noble and learned Lord said: I spoke to this amendment with Amendment No. 85. I beg to move

    On Question, amendment agreed to.

    Remaining schedule agreed to.

    House resumed: Bill reported with amendments.

    Criminal Procedure (Scotland) Bill Hl

    Reported from the Joint Committee with amendments, and recommitted to a Committee of the Whole House.

    Criminal Procedure (Consequential Provisions) (Scotland) Bill Hl

    Reported from the Joint Committee with amendments, and recommitted to a Committee of the Whole House.

    Criminal Law (Consolidation) (Scotland) Bill Hl

    Reported from the Joint Committee with amendments, and recommitted to a Committee of the Whole House.

    Proceeds Of Crime (Scotland) Bill Hl

    Reported from the Joint Committee with amendments, and recommitted to a Committee of the Whole House.

    House adjourned at eighteen minutes before eleven o'clock.