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Ms Ellman: Will the hon. Gentleman give way?

Mr. Clappison: I shall let the hon. Lady respond in a minute, if she wishes. I advise her to examine the consultation document formulae. In 1997-98, Liverpool will lose about £600,000 on the Government's chosen formula and will lose more than £3 million in the following year. I shall give way, but I think that she must take issue with her Front-Bench colleagues.

Ms Ellman: I am extremely surprised to hear those comments from the hon. Gentleman. The Bill states clearly that the needs as well as the resources of areas such as Liverpool will be considered. That is a major plank of the Bill. I remind the hon. Gentleman and his honourable colleagues that they are opposing the Bill in its entirety; therefore, it is hypocritical of them to pretend that there are deficiencies in the Bill when they are opposed to the principle of more building to meet social need and provide employment.

Mr. Clappison: I accept the hon. Lady's point. She wants more spending. That is a theme that we shall no doubt hear from Labour Members on several occasions during this Parliament. The point that the hon. Lady needs to take up with her Front-Bench team--not with me, because I can see the force of the argument for the Liverpools of this world--is that her party in government has decided to spend this money and then chosen a formula for doing so that will penalise authorities such as Liverpool, the inner-London authorities and 33 of the 36 metropolitan district authorities, rather than authorities such as mine--Hertsmere--and Surrey Heath and Malvern Hills, all of which benefit from the formula chosen by the Labour party.

4.30 pm

Mr. Eric Pickles (Brentwood and Ongar): My hon. Friend has great knowledge of these matters. Will he confirm that the previous Government's formula took need into consideration, especially in Liverpool, Riverside, and that the new formula dilutes consideration of need by taking into account capital receipts? The good people of Liverpool are materially worse off under the new formula than under the previous formula.

Mr. Clappison: My hon. Friend makes an excellent point. We went to great lengths to produce a fair formula based on need. If the Government had chosen such a formula, they might have produced a different result. The alternative formula is in the Government's consultation paper. I invite the hon. Lady to look at it and do the arithmetic. She will see that her authority and many of those represented by her colleagues will lose out under the proposed formula for spending the money that has been chosen by her Ministers.

Ms Ellman: I am surprised that the hon. Gentleman persists in his deliberate misunderstanding of what is

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happening and what happened under the previous Government. Neither Liverpool's overall needs nor its housing needs were met by the previous Government. That is why there is now a major crisis in Liverpool in local authority housing and the housing stock needs to be improved. I suggest that the hon. Gentleman repent a little of the misdeeds of his Government and join us in trying to put right an injustice that has persisted for too long.

Mr. Clappison: The hon. Lady would know if she had served on Committees with me--as the Under-Secretary, the hon. Member for Greenwich and Woolwich (Mr. Raynsford), has--that I am the first to admit a mistake and repent. I put a proposition to the hon. Lady and to the Minister that the Minister may deny. Under the formula that has been chosen by the Government of two thirds need and one third cumulative capital receipts, Liverpool receives less than it would have received under the alternative formula of 100 per cent. need set out in the consultation document. The same applies to many other authorities, in inner-city areas, metropolitan districts, and so on.

Sir Paul Beresford: While my hon. Friend is in a repenting mood, will he repent a little of the formula and agree with me that it will in some aspects benefit those local authorities that have successfully pushed and promoted the right to buy and vacant sales?

Mr. Clappison: My hon. Friend makes another important point, with which I am sure that the Minister will want to deal in his reply.

Before I stray too far from the subject of debt, I emphasise that new clause 2 is important because local authorities have massive debts. We have to think as much about the repayment and servicing of those debts as we think about new spending, which the Government have undertaken in this new spending commitment. My hon. Friend the Member for Christchurch mentioned the huge proportions of total local authority debt--more than £49 billion. Within that overall total, some authorities have particularly severe problems of indebtedness.

According to figures that the Library has supplied to me based on debt per resident, some of the worst cases of debt are in authorities such as Islington, which has almost £5,000 of debt per head. Many other local authorities of a similar nature have debts running into thousands and thousands of pounds. It is important that, when we look at debt reduction overall, we also look at local authority debt reduction. As my hon. Friend the Member for Christchurch so rightly pointed out, those liabilities are going to persist long into the future for the unfortunate residents of those local authority areas. The figures are huge, and it is right that we should think about that problem.

Ms Margaret Moran (Luton, South): Will my right hon. Friend give way?

Mr. Clappison: I am neither a Privy Councillor nor an hon. Friend, but I will give way.

Ms Moran: I apologise for elevating the hon. Gentleman well above his station, but I want to draw his attention to certain facts. He speaks eloquently on the level of local authority debt, but he should perhaps be reminded that, during the period from 1990 to 1996, his Government

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allowed public sector debt to double from the equivalent of £2,200 per head to £5,600 per head; yet, in the same period, local authority debt fell from the equivalent of £899 per head to £843.

That completely contradicts the point that the hon. Gentleman is trying to illustrate and it demonstrates economic incompetence of the highest degree on the part of the previous Government, given that they also allowed house building to be cut by one third during the same period. Economic incompetence--housing incompetence.

Mr. Clappison: I might be straying from the subject of the debate, but I invite the hon. Lady to pay attention to what is said in Labour's financial statement about the repayment of the public sector borrowing requirement. On the existing figures before the Budget, we were well on course to return to repaying public sector debt by 2000. Those were the figures given by her own right hon. Friend the Chancellor.

As for debt, the overall lesson for Ministers is that, contrary to what they believed when they were in opposition, there is no such thing as a free lunch. Now they are in government, that has been confirmed--there is no such thing as a free lunch, not even if it has the blessing of the Minister without Portfolio.

Mr. Oliver Letwin (West Dorset): Before I turn to the main subject that I wish to address, I cannot refrain from mentioning that it is evident to the majority of people in this country, if not to Labour Members, that the person or persons who were mainly responsible for not attending to the needs of Liverpool under the last Administration were Mr. Hatton and his colleagues.

Sir Paul Beresford: And those who followed.

Mr. Letwin: Indeed.

The importance of the new clause lies in the fact that the Government's response will constitute an important test of their true motive in drafting the Bill in the first place. As our discussion of the Bill has revealed, the Bill's main purpose is, in the first instance, to release spending. Spending is being released in a way that enables the Government to claim that they can provide local authorities with the ability to spend money that otherwise the spending limits would not have allowed. If that were the sole purpose of the Bill, it would be a disreputable attempt by one Department of State to undermine the very effects that the Government as a whole and the Treasury are seeking to achieve globally.

We have, however, been told by Labour Members and Ministers that the purpose of the Bill goes beyond that and that it is not designed merely to allow local authorities to spend rather more in the current year and the next. They say that the intention is to permit a progressive and phased--I believe that was the word used by the hon. Member for Bolton, South-East (Dr. Iddon)--increase in the amount that can be spent on the construction industry's activities, so as to permit a sustainable, long-term development of the housing programme in this country. That is a laudable aim and I have no doubt that it is shared by all hon. Members on both sides of the House.

As I said, the new clause and the Government's response to it is a good test of the proposition that that is indeed the Government's true motivation. There can be

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no doubt that the Bill permits, not only spending, but a considerable increase--in fact, pound for pound--in the amount of net borrowing in which local authorities will be engaged. Ministers have entirely admitted that proposition.

If that is the case, the cumulative effect on the public sector borrowing requirement and on the stock of public debt in the coming years will be very noticeable. There will come a time, towards the end of this Parliament, when the Treasury, if not the Department of the Environment, will have to call a halt to that increase in PSBR and in the public debt. We are reminded, are we not, of the phrase, too happy to be quoted, of a late lamented Labour Member, Tony Crosland, when he eventually spotted that his policies were sending the PSBR in relation to local authorities out of control?

If, in this instance, the Government genuinely intend not merely to release extra expenditure to mollify their Back Benches in this first year but to create a sustained programme of development, it must follow that the Government would wish to support moves to ensure that, over the long term, debt does not go out of control, and that the increased spending is matched by a phased debt reduction programme, as recommended in the new clause. For that reason, my hon. Friend the Member for Christchurch (Mr. Chope) has said that this is a helpful clause, which the Government should be prepared to accept if they are genuinely committed to a long-term programme.

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