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New Clause 12

Rent Allowances

“(1) On and after such day as the Secretary of State may by order made by statutory instrument appoint, so much of Part II of the Housing Finance Act 1972 (rent rebates and rent allowances) as requires that, in order to qualify for an allowance, a person occupying a dwelling under a Part VI letting must be a qualified person, within the meaning of section 19(12) of that Act, shall cease to have effect.

(2) The proviso to subsection (1) of section 25 of the Housing Finance Act 1972 (which, in the case of certain furnished lettings, determines the rent which is eligible to be met by a rebate or an allowance for the purposes of Schedule 3 to that Act) shall cease to have effect on the commencement date.

(3) Notwithstanding anything in subsection (2) above, in the case of a person who immediately before the commencement date was a tenant under a Part VI letting, the provisions of subsection (4) below shall apply if, for an allowance period which was current on or ended immediately before the commencement date, the tenant was entitled to an allowance towards the rent payable under the Part VI letting and, in calculating that allowance for the last week of that period which ended before the commencement date, the rent which, for the purposes of Schedule 3 to the Housing Finance Act 1972, was eligible to be met by a rebate or an allowance was that determined under paragraph (a) of the proviso to section 25(1) of that Act (the occupational element of the rent or of the residue of the rent plus 25 per cent.).

(4) If, by virtue of subsection (3) above, this subsection applies in relation to a tenant, then, subject to subsection (5) below, on and after the commencement date, if and so long as——

(a)the tenant continues to occupy as his home the dwelling to which, immediately before that date, the Part VI letting referred to in subsection (3) above applied, and

(b) the tenant continues to be entitled to an allowance towards the rent payable by him for that dwelling, and

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(c) that rent continues to include payment for the use of furniture,

the rent which, for the purposes of Schedule 3 to the Housing Finance Act 1972, is eligible to be met by a rebate or an allowance shall, in his case, be the amount of the rent which was so eligible for the week mentioned in subsection (3) above (in this section referred to as “the former eligible rent” ).

(5) If, for any week of an allowance period when, apart from this subsection, subsection (4) above would apply in relation to a tenant, that subsection shall cease to apply if——

(a) the amount determined under section 25(1) of the Housing Finance Act 1972 as the rent which is eligible to be met by a rebate or an allowance exceeds the former eligible rent, or

(b) the rent recoverable from the tenant, exclusive of any part thereof attributable to rates, is less than the former eligible rent, or

(c) part of the dwelling is sub-let and the former eligible rent either did not take account of the occupational element of any rent payable by a sub-tenant or took account of such an element which is less than the occupational element of the rent payable for that week by the sub-tenant,

and, accordingly, from the beginning of that week the rent which is eligible to be met by a rebate or an allowance shall be that determined as mentioned in paragraph (a) above.

(6) In subsection (1) of section 25 of the Housing Finance Act 1972 after the words “of the rent” there shall be inserted, in substitution for the words there inserted by paragraph 17 of Schedule 1 to the Furnished Lettings (Rent Allowances) Act 1973, the words “(or if, in the case of an allowance, any amount falls to be deducted by virtue of paragraph 14 of Schedule 4 to this Act, the occupational element of the residue of the rent remaining after deducting those amounts)” .

(7) Subsections (2) and (3) of the said section 25 shall be amended as follows:

(a) at the end of subsection (2) there shall be added the words “and

(c) less, in the case of an allowance, any amount which, in the case of the tenant concerned, is prescribed as a deduction by virtue of paragraph (c) of subsection (3) below” ; and

(b) at the end of subsection (3) there shall be added the words “and

(c) prescribe deductions from rent for the purposes of subsection (2)(c) above in the case of tenants of such descriptions as may be specified in the regulations who are for the time being in receipt of awards or grants under any provision of sections 1 to 3 of the Education Act 1962 or any other award or grant which is paid out of money provided by Parliament and is determined by the Secretary of State to be an analogous award or grant, and different provision may be made by virtue of paragraph (c) above in relation to different periods and different classes of awards or grants” .

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(8) In subsection (1) of section 26 of the Housing Finance Act 1972 (interpretation of Part II) in the definition of “tenant” after paragraph (c) there shall be inserted the following paragraph:

“(d) a person who is treated as a private tenant under a Part VI letting by virtue of subsection (8A) of section 19 of this Act”

.

(9) The said section 26 shall apply in relation to subsections (1) to (5) above as if those subsections were included in Part II of the Housing Finance Act 1972 and, without prejudice to the application of that section, the reference in subsection (3) above to a tenant under a Part VI letting includes a reference to a person who is treated as if he were a private tenant under a Part VI letting by virtue of section 19(8A) of that Act and any reference in that subsection or subsection (4) above to a Part VI letting means, in relation to a person who is so treated, the letting referred to in the said section 19(8A)” .—[Mr. Freeson.]

Brought up, and read the First time.

Mr. Freeson

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

Mr. Speaker

With the new clause we are to discuss Government new Clause 14—Rent allowances in Scotland—and Government Amendments Nos. 35, 36, 40, 53, 37, 38, 39 and 41.

Mr. Freeson

New Clause 14 is the Scottish equivalent to new Clause 12, and it will be covered by what I say about that clause. All the other amendments, with the exception of Amendment No. 53, are consequential.

The main purpose of the new clause is to bring the present provisions relating to eligibility for a rent allowance in respect of furnished tenants into line with those for unfurnished tenants, as we are in effect, from this Bill onwards, treating furnished tenants, as being in the same position in law as unfurnished tenants.

Under present legislation the rent allowance scheme has different criteria of eligibility according to whether the applicant for a rent allowance is a protected or statutory tenant under the Rent Act—broadly, a tenant of unfurnished accommodation—or whether he is a Part VI contract holder under the same Act—broadly, a tenant of a furnished letting. The main difference lies in the requirement under the Furnished Lettings (Rent Allowances) Act 1973 that the “furnished” tenant not only has to be a Part VI contract holder, but also has to be a “qualified person” .

A “qualified person” is either a person falling within a category specified by the [column 567]Secretary of State by regulations or else a person whom a local authority considers would suffer hardship if he were not granted an allowance. Under the previous Administration, the categories of qualifying persons were prescribed as those Part VI contract holders who were pensioners, or had a pensioner living in the household, handicapped persons, those with a dependent child, or persons aged 30 or over. There are also residential qualifications for some of these categories varying from three to six months. The result is that most Part VI contract holders below 30 years are not qualified persons, and so are ineligible for a rent allowance. 7.15 p.m.

However, the Bill creates a new borderline between tenancies receiving full Rent Act protection and Part VI contract holders, based mainly on whether there is an absentee or resident landlord. Most existing Part VI contract holders—600,000-odd out of over 700,000—nationally will become protected tenants. As a result they will become eligible for rent allowances under the existing provisions for such tenants since the “qualified person” criterion will no longer apply to them. But, unless some change is made, the remaining Part VI contract holders will still have to be qualified persons before they are eligible for rent allowances.

The Government consider that it is no longer right or defensible to preserve this difference in eligibility for rent allowances. The distinction between accommodation with a resident landlord and accommodation with an absentee landlord is necessary for the purposes of security of tenure but inappropriate for the purposes of rent allowances. If no change were made it would be possible for similar tenants of comparable accommodation to have different eligibilities for rent allowances.

Accordingly, this clause will abolish the “qualified person” requirement for Part VI contract holders—furnished tenants—and assimilate eligibility for rent allowances for all private tenants. Thus it is a measure both lifting certain restrictions and simplifying the rent allowance scheme. [column 568]

Another difference between the arrangements for rent allowances for furnished and unfurnished tenants is that in certain circumstances in the case of a furnished letting the rent which is eligible to be met by an allowance may be increased by a quarter compared with the eligible rent in the case of an unfurnished letting. This 25 per cent. markup was introduced to take account of the increased management costs for furnished accommodation compared to those of unfurnished accommodation. The transfer of most Part VI lettings to regulated tenancies will mean that the tenants concerned will no longer be eligible for this mark-up. Moreover, to retain it for the remaining Part VI contract holders would result in different allowances for comparable dwellings solely because of the residence of the landlord. So this difference, too, is removed by the clause, with a saving for those already receiving it.

One of the consequences of the removal of the “qualified person” requirement will be that for the first time most students under the age of 30 who are also tenants will be eligible for rent allowances. The Government consider that it would not be justifiable to make rent allowances available on the normal basis to students also in receipt of assistance from public funds, their grant sources, towards their rent. The clause therefore provides for the Secretary of State to prescribe deductions to be made to the rent eligible to be met by an allowance in the case of students in receipt of awards or grants from public funds which cover a rent allowance with in the total grant allowed.

The clause is required as a consequence of the fundamental changes in the Rent Act structure on which the legislation on rent allowances was based. We have had, as it were, to rethink the rent allowance scheme as a consequence of the Bill and that is why, regrettably, these proposals have been laid before the House at this late stage in its passage.

Mrs. Margaret Thatcher (Finchley)

I thank the Minister for his explanation. Having read the clause, I do not fully understand it. It is very lengthy. I think that in general it says that tenants of [column 569]furnished accommodation are just as eligible for rent allowances as tenants of unfurnished accommodation have been. Under our legislation, most tenants of furnished accommodation were eligible, except those under 30 who had no people dependent upon them. Has the Minister made an estimate of the cost of the extension of rent allowances in this way?

Secondly, I want to ask the hon. Gentleman a little more about the position of students. I understand from subsection (7) that the Minister will make regulations designed to prevent the overlap of financial assistance. But the position of students is not exactly simple in relation to financial assistance. Perhaps only a minority of students receive the full grant. The rest receive a reduced grant which should be supplemented by parental contribution.

Two factors arise here. First, even if one receives the full grant, it is not specifically apportioned as between rent, books, food and so on. There is only a notional apportionment, so we cannot identify the proportion of the full grant which is available for rent. That will make a difficulty when we calculate on the basis of overlapping financial provisions.

Secondly, what happens to the student who is entitled by virtue of the regulations to a substantial parental contribution? Supposing he receives only £150 in grant and that the rest is due to be paid by parental contribution? Let us suppose that that contribution is not forthcoming. Despite all the circumstances, are we to deem it as forthcoming?

Another point is the actual rent for furnished accommodation that a student will pay. That will depend upon how many people share the accommodation. As the Minister knows, many students prefer to rent houses and flats on their own. They sometimes get five or six other students in a house to share the accommodation. Supposing that they reduce the number from, for example, five persons to three persons. Each of them will thereby pay more rent. What account will be taken of that in the regulations? I mention that only because I have occasion to know the complexities attaching to students' grants, [column 570]particularly when the student relies upon a parental contribution.

If we are to have the regulations it would be helpful if the Minister could indicate in a little more detail what they are likely to contain. If they are not clear, there is bound to be trouble in the student world.

Mr. Rossi

I understand that the Minister is waiting for some information on the matters that have been put to him by my right hon. Friend the Member for Finchley (Mrs. Thatcher). In the meantime, I ask him about a matter arising out of his previous explanation that I did not quite follow.

The Minister made reference to a 25 per cent. mark-up. I think that those were the words that he used. I took that to mean that the tenants of furnished accommodation received an allowance 25 per cent. higher than tenants of unfurnished accommodation. Presumably that is because furnished accommodation is more expensive than unfurnished accommodation.

Are we to understand from the fact that the mark-up of 25 per cent. will be obviated—that is what I understood the Minister to say in terms—that in future he anticipates rent officers fixing rents for furnished accommodation at about the same level as rents for unfurnished accommodation other than the part of the rent relating to furniture? I cannot see any other reason for wanting to deprive tenants of furnished accommodation of the 25 per cent. mark-up. I may have misunderstood the Minister, and perhaps when he replies to my right hon. Friend he will be able to deal with the matter that I have raised.

Mr. Freeson

I think that I can satisfy the right hon. Lady. Initially it is proposed to prescribe a deduction of £4 a week, which broadly reflects the notional element for rent. The right hon. Lady rightly used the word “notional” . With the right hon. Lady's background, this is a matter on which she probably has expert knowledge. The deducation of £4 a week as I have said, broadly reflects the notional element for rent in the new rates of awards from September 1974.

It is important for me to stress that the deduction will be based on a notional [column 571]element since the Department of Education and Science does not break down student grants into specific elements. That is why there is the reference to notional sums.

I now turn to the position of those students—there are many of them—who receive a parental contribution. The point is covered because the deduction is based upon a notional figure which can be variable under the regulations. That is how we intend to start. It will be based upon the total grant—namely, the State contribution and the parental grant. If that were not so it would have a regressive effect, as the right hon. Lady will be quick to appreciate. I think that that covers the main point.

I do not have an estimate for this provision but we believe that the total take-up of these grants will be absorbed into the total vote-head on allowances. Both under the last administration and under this administration the estimates which have been undertaken indicate that it has not been the experience that the rent allowances take-up has reached the ceillings that have been provided. I make no implied criticism of that. That is an understandable position. Any Government must make provision for the allowance that could be available but in practice is not taken up. I am certain from information that is available to me that the relatively small additional sum involved will be absorbed into the general vote-head.

The hon. Member for Hornsey (Mr. Rossi) referred to the mark-up. Before I come to that I should put it on record that we shall be embarking upon a further spate of publicity on rent allowance take-up, in the course of which we can pick up this point. We can seek to ensure that many more of those who are entitled to such allowances, whether under the clause or under the general provisions of the rent allowances, will take up the cash awards. They are the awards that are available, although only a small minority throughout the country has so far taken them up. We shall endeavour to improve on that my undertaking a publicity campaign.

Subsection (2) provides for the abolition of the provision under which the eligible [column 572]rent may reflect the 25 per cent. mark-up. Rent allowances and rebates are based on the occupational element of the rent. That is the rent net of any sums attributable to rates, services or furiture. Where no rent has been registered for a dwelling a local authority is required, under the present scheme, to arrive at the eligible rent by estimating what it thinks to be the fair rent by reference to information available from the local rent officer, but not by reference of the case to the rent officer. In the case of furnished dwellings, the estimated fair rent could be increased by a quarter provided that does not exceed the rent actually paid. To assimilate the arrangements for furnished and unfurnished accommodation, the 25 per cent. mark-up is being abolished for the reasons already explained. This change will come into force immediately on the commencement of the Act. Therefore, no new allowances for Part VI contract holders can be calculated on the basis of the 25 per cent. mark-up.

The hon. Gentleman will appreciate that once we move furnished accommodation into rent officer calculations we are moving away from the position in which local authorities have had to make their own estimates into a situation in which a totally fair rent is to be calculated, assessed, recommended and fixed by rent officers subject to appeal procedures.

It is also necessary to take into account as a background fact the point that the hon. Gentleman frequently raised during the course of our proceedings. That position is implicit in the Docherty case. The hon. Gentleman will understand the point about the relatively residual element of value that can be attributed in most rents. We are now moving into a situation where the process will be by way of application and it will be difficult to operate a simple and direct scheme.

For the reasons that I have described we are proceeding with these provisions.

Question put and agreed to.

Clause read a Second time and added to the Bill.