18 June, 1924.]

[Continued.

envelope? Have you any record of the letters sent out on a certain date? For instance, if I asked, "Did you post a letter to somebody on a certain date? could you tell me whether it was posted or not? Yes, we should know whether it was posted at Whitehall or at Acton, if that is what you mean.

700. No; if I said to you, "Did you post a letter to John Smith of so-and-so on a certain day, say, the 21st June," could you tell me whether you posted it or not? We should get that answer in this way. We should see we had got a press-copy of the reply that went.

701. In a private business the clerk in charge of postage has to keep a record of the letters he posts, and he has to account for the stamps which he uses, and that account has to tally with the number of letters he posts. He enters in a record book a letter to So-and-So posted on a certain day, and he can tell. exactly what letters were posted.

Sir Henry Craik.] You could not do that at a public office. I often in my own office posted circulars to the number of 2,000 or 3,000 to different people, all franked. You could not possibly keep a list of all those.

purposes, it only means a few pounds a year. Is it worth bothering about?There is nothing in it.

Mr. Hannon.

702. Do the Post Office furnish details of that estimate of £232,570 to the Treasury before that figure is put into this list? (Mr. E. J. Strohmenger.) I cannot speak definitely as to that, but I think they do.

703. You accept the figure. You have no further right to question or interfere with it at all?-I think we should have a right to protest if we thought the figure excessive.

704. But in point of fact you have not done so?-No, we have not.

705. I think it would be very interesting to see how the Post Office compiles these charges against the Ministry of Health.

Chairman.

706. Perhaps we ought to put that question to the Treasury. I think the point on which the Committee are dissatisfied is that you appear to have no record at all of the letters, which you post? We have a record of the number of letters, but not of the weights and destinations, and so on. We have not the necessary material to ascertain the exact cost.

707. When you say you have no record of the destinations, presumably practically all are inland letters?--We have some foreign letters, of course.

708. But very few?-Relatively few.

Mr. Black.] Referring to the previous item to this on page 6, how is it that the amount has gone up by £19,000?

Chairman.] That is a question we shall have to put to the Treasury.

709. Under Sub-head F.1. on page 17 of the Estimates I see your total Estimate for grants towards housing expenses this year is £8,050,000?-(Sir Arthur Robinson.) Yes.

710. That shows a decrease of rather over half a million on last year's Esti

mate?-Yes.

711. Is that decrease due to sales ?The reason for the decrease is shortly

this: It has been very difficult to get the proper figure for the Estimate, because the actual work of carrying out these houses took longer than was anticipated; the contracts were made rather later and it took us a very considerable time to get anything like an accurate figure. That £8,627,500 which you see on the Estimates for 1923-24 was an over-estimate. This figure of £7,840,000 on this year's Estimate is about the right figure, as near as we can get it to the annual charge.

18 June, 1924.]

[Continued.

712. You over-estimated?-That is right -because of the difficulty in getting the information.

713. Then the decrease is not accounted for in any degree by the sale of houses, such as was recommended? That has no bearing on this at all.

714. As a matter of fact, have sales taken place?-To a very small extent.

715. Then except to that extent the very strong recommendations of the Geddes Committee have not been carried out? Do you wish me to deal with that point fully on this question?

716. I think it would be a convenient place, unless it would be more convenient to you to postpone it? I am prepared to give it now, if you like.

717. Yes, will you please do so, because I think it is an important point. I do not want you to deal with the policy of it, but with the finance of it?-I wanted to make it clear at first that I have not taken instructions on the point of policy from my present Minister. Therefore 1 had better explain the reasons for which the particular recommendation of the Geddes Committee with regard to sale was not carried out by the then Government or by the Government which succeeded it, if I may do it in that way.

718. Yes, if you will?-I think one can put the case in this way: first of all, these houses under the Statutes are the property of the local authorities; they are not the property of the State.

719. We quite appreciate that?—Therefore, if you want to go in for a drastic policy of sale you have either to get possession of the houses or you have to put such pressure on the local authorities as will induce them to sell the houses. The situation broadly is that the local authorities would oppose the sale of the houses, and, to secure their consent to a farreaching policy of sale, you would in effect, I think, have to adopt something like measures of compulsion by Statute. You could, for instance, say that unless the local authority sells the houses on such conditions as the Minister of Health thinks suitable you will take power to withhold grants. You could do something of that sort, which is compulsion. That position was very carefully considered by the Government, and they had before them several difficulties in the way of sales. The first difficulty, I think, in the way of sales is that in respect of the vast 48533

majority of these houses you cannot give vacant possession. You have in them usually tenants who got in there with considerable difficulty in fulfilment of pledges given by the local authorities. If you cannot sell a house of this class with vacant possession it is going to have a very considerable bearing on the price you are going to get for it. If it is to be worth your while to take the very strong step of compelling the local authoriites to sell these houses you want to be quite certain you are going to make some money out of it, otherwise it is not worth making a row about.

720. Or make some saving out of it?— Yes; that is the same thing. When you come to that question, you are selling far the houses, so as you are selling

them

721. Of course, you are not selling them at all; it is the local authority?—I am using the general "you." If you are houses selling the without vacant possession that has a radical bearing on the price, and in fact in one or two cases where sales were considered it was found to be an insuperable obstacle, the local authority were brought up against the difficulty of vacant possession they could not get round it, and they abandoned the sale for that reason. You have to consider next what sort of price for the house would make it worth your while to sell it. Your situation is that you have got these rents coming in, and I suppose you might possibly take the present capital value of the rents which you expect to obtain, and if you can sell the house for that price there would be something to be said in favour of sale; but in fact it was pretty clear from the enquiries which were made at the time that you would not get that sort of price for the house.

722. When you say "rent" do you mean the gross rent or the net rent without the subsidy, because that is a very important point?-It would be the net

rent.

723. You say you would not even get the net rent?-No.

724. You could not get 20 years' purchase of the net rent?-No, you could not. I think, partly for that reason, you could not expect a price that would make it worth your while to sell, and, if there was not going to be any money made or saved by it, it would not be worth while taking up what would have been, in view of the position of the local authorities, a

C 4

18 June, 1924.]

[Continued.

very difficult matter to carry through and two successive Governments deliberately decided that it was not worth while to carry out the Geddes Committee proposal.

725. On this point there is in a sense a direct conflict of interest between the Ministry of Health, as representing the Exchequer, and the local authorities. Clearly it is to the advantage of the Exchequer to promote sales at any price?— Broadly, that is true, I think.

726. Surely, it is so?-The Exchequer bears the liability.

727. Yes; but from the point of view of the Exchequer it is an advantage to

sell at any price? No. (Mr. E. J. Strohmenger.) Only at a price not less than the capitalised value of the rent. If the house is not sold and the rent which is now obtained continues for the whole life of the house, the Exchequer pays to the local authority the whole of the deficit or loss on letting the house. If the house is sold at the capitalised value of the rent the Exchequer has still to pay to the local authority the whole of the deficit which the local authority has incurred. Therefore, there is no gain at all. So, unless you can sell with vacant possession there is little to be gained.

728. At the capitalised value of the net rent? (Sir Arthur Robinson.) Yes. That, I think, is really a short statement of the reasons why successive Governments did not follow out the Geddes Committee's policy of sale.

729. In fact, it really comes to this, that in your opinion the local authorities could not have obtained the capitalised value of the unsubsidised rents, the net rents, of occupied houses? That is

Mr. Hannon.

732. What is the reason why there is an increase from £20,000 in sub-head F.1 (b) in the last financial year to £211,000 in the current financial year? -(Sir Anthur Robinson.) Because in the last financial year proceedings under the Act of 1923 had only just begun; that Act is only just coming into full operation.

Mr. Black.

733. Have you given to the local authorities full permission in every case to try and sell houses where they wanted to do so? Yes, we have.

734. And you have found opposition to it? The case I mentioned was a case where the local authority was desirous of selling, but they were brought up against the problem that they were not able to give immediate possession, and, that problem coming forward, the matter fell through.

735. Have you given local authorities encouragement to sell to the sitting tenants in the houses?-Yes, we have done that.

736. Yet you find it is not possible?—It has not proved in practice possible. I think the vast majority of the local authorities do not want to sell and are against the sale.

737. The position will not be improved, probably, during the course of years, because there will be to a certain extent depreciation in the value of the houses as time goes on? That is so.

738. And also the cost of keeping in repair and decorating the houses as time goes on will be much higher than it is when the houses are new?—(Mr. E. J. Strohmenger.) That is allowed for in ascertaining the deficit; we have taken credit for the net rent.

739. But, in view of the question put by the Chairman, is it reasonable to expect a capitalised value of twenty years' purchase of the net rent to-day when you are going to incur larger expenses in future? Would not it be better to take a lower price now?-The net rent is the gross rent after allowance for a repairs fund. If the repairs fund is not required now it grows and accumulates until it is wanted; so in taking the net rent you have already allowed for normal repairs during the life of the house.

18 June, 1924.]

[Continued.

Sir John Penne father.

740. You said local authorities could not sell at a fair price because the houses were occupied ?-(Sir Arthur Robinson.) I think I said they could not sell. I said one of the difficulties in selling the houses was that you could not give vacant possession.

741. But that would not prevent the local authority from selling the house to the occupier?-No.

742. And it would not prevent the Local Authority from selling the house before completion. An uncompleted house is not occupied.-But you have to remember that the local authorities have already long lists of people to whom they have given pledges; that is the trouble about it.

743. I know; but they are not compelled to allocate these houses before they are completed. But they are under strong pressure.

744. Still they would be able to sell them ?-Yes.

745. I am not trying to put words into your mouth, but am merely trying to understand you rightly. Did I understand you to say that the Exchequer would not benefit by the local authorities selling the houses?-(Mr. E. J. Strohmenger.) Unless they can get a higher price than the capitalised value of the rent.

746. A higher price?-Yes, or the same price.

747. Unless they can get, say, the capitalised value of the house?-Of the rent.

748. Can you explain that a little more? I do not quite follow it.-The Exchequer is liable under the Act of 1919 to pay the whole of the deficit on running these schemes over and above the produce of a penny rate. The deficit is ascertained by putting on one side of the account the interest and sinking fund on the loans raised for the houses, and on the other side of the account the net rent. The interest and sinking fund will go on for the whole life of the loans, and the loans for building houses are for sixty years. So, if the local authority can sell a house at no higher price than the capitalised value of the net rent, they will always have to pay the difference between the rent and the interest and sinking fund on the original loan, and the Exchequer liability will continue until the loan is paid off.

749. Then, as far as that is concerned, you think that no advantage could accrue to the Exchequer by the selling of the houses by the local authorities, even if the local authorities sold those houses to the occupiers or before completion ?-If they sold the houses before completion they would sell with vacant possession and get a much higher price than the capitalised value of the rent.

750. Probably in those circumstances they could get a price which would result in an economy to the Exchequer ?Certainly, but most of the houses are now completed and occupied. This is the Addison scheme.

Chairman.

751. What do you reckon is the average deficit per house per annum now?-£44. 752. £44 per annum is the charge which falls on the Exchequer ?-Yes.

753. At the time of the report of the Geddes Committee I think it was higher -They reckoned it at £55?-Yes; the last 20,000 houses or so were completed at a very much less cost than the cost prevailing when the Geddes inquiry was held, and a considerable sum of money was saved by delaying schemes.

754. £44 per annum you put it at now? -The estimate is £44 5s. Od. per annum per house.

755. That is reckoning how many houses in that aggregate ?--For local authorities, 170,000 houses.

Colonel Penry Williams.

756. Are there any contingent liabilities on the houses? Do the Ministry of Health keep them insured against fire, or anything like that?—Yes.

757. Supposing they were burned down, on whom would the loss fall?-On the Ministry.

758. Do they insure against that?—No, the Government do not insure.

Mr. Black.] So that all the houses that are put up in the future from now onwards will tend to minimise the loss on the whole, because the cost of building is so much less than it was?

Chairman.] That depends on whether the cost of building goes up or down.

Mr. Black.

759. Of course. When you began the scheme, a non-parlour house cost perhaps £900 and a parlour house over £1,000,

18 June, 1924.]

[Continued.

but now you are getting them for about half that? (Sir Arthur Robinson.) That is broadly true. (Mr. E. J. Strohmenger.) But this scheme has come to an end.

Sir Fredric Wise

760. The Office of Works built houses at the same time, did they not?-Yes.

761. Does the cost of them come under Sub-head F.1?—Yes.

762. So it is included in your total?Yes.

Mr. Black.

763. Do the losses shown here include the houses being put up under the Act of 1923? (Sir Arthur Robinson.) That is under F.1 (b)-a separate section.

Chairman.

764. Surely it is partly under F.1 (a)? -No; the operations under the Act of 1923 are shown under F.1 (b).

765. But Sub-head F.1 (a) says: "Section 6 (2) of the Housing etc. Act, 1923 "? That was an amendment of the provisions in the Act of 1919.

Colonel Penry Williams.

766. Under what Act are houses being built to-day?-Under the Act of 1923 in respect of far the greatest number. There are very few still left to be completed under the Act of 1919.

767. No more sanctions are being given under the old Act?-No sanctions under the Act of 1919; they are finished altogether. The sanctions now being given are under the Act of 1923.

Sir John Pennefather.

a

768. If the local authorities sold house at, say, 10 per cent. below the actual cost of its construction what effect would that have upon the Exchequer ?-(Mr. E. J. Strohmenger.) A very considerable saving.

769. In other words, if a house cost £500 and the local authority deliberately sold it for £450 what saving would that represent to the Exchequer ?—I thought you were taking the Addison houses. The average cost of a house under the Addison scheme was £1,000.

770. I was speaking of a £500 house. I presume what applies to one would apply to another if we are speaking in percentages-I estimate it at about £37 a year.

771. It would save the Exchequer £37 a year? If you could sell a house which cost £1,000 for £900.

772. But the house having cost £1,000 and the local authority having lost 10 per cent., which is £100 of capital, the local authority would have made that loss but the local authority would be free of all the expense of repairs and maintenance for future years? Clearly.

773. It would be a question as to how far that would balance in the local authority's books, but, as far as the Exchequer is concerned, the Exchequer would benefit, though I can hardly think it would benefit to the extent of £37 a year? The benefit would be the difference between £44 and the loss of £100, which is only about £6 a year. The £100 loss which the local authority would incur would have to be made good by the Exchequer under the provisions of the 1919 Act, so the only liability of the Exchequer would be the loan charges on £100.

Mr. Black.

774. What is the actual loss on the houses in Sub-head F. 1 (b) per annum making up the £210,000? (Sir Arthur Robinson.) The contribution of the Exchequer is limited to £6 a year for 20

years.

775. And the erectors of the houses pay the balance?-That is right.

776. Do you lose anything at all on the rates? Only in so far as a rate contribution in addition to the Exchequer £6 is needed to secure the houses.

Sir William Mitchell-Thomson. 777. Will you kindly explain SubHead F (2) a little further because I find it rather difficult to follow?-(Mr. E. J. Strohmenger.) Public Utility Societies borrowed 75 per cent. of the cost of building their houses from the Local Loans Fund, and at the time these houses were building money was very dear; Local Loan Stock then stood at say 52, whereas it now stands at 66. Therefore, if a Public Utility Society sells a house and wants that house released from the mortgage, it has to repay to the Local Loans Fund the capital which the Local Loans Fund lent to it. A loss would be incurred by the Local Loans Fund unless a premium on the loan was paid also.

778. Will you just illustrate that by figures? If Local Loan Stock stood at 52