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Mr. McWalter: I am grateful to you, Mr. Deputy Speaker. I thought that I had temporarily got lost, in terms of the procedure. I hope that the debate will not last too much longer, so that we can get away a bit early.
On 23 May, the Minister for Housing and Planning said:
- The majority of respondents agreed that it was right to regard local authority housing as a national programme and that assumed surpluses in authorities' housing accounts should be retained within housing and redistributed through a pooling mechanism.--[Official Report, 23 May 2000; c. 437W.]
I have little doubt that--to quote Tony--those who say that they will rob Peter to pay Paul will have the support of Paul. In this case, the Pauls are in a strong majority; but it might be sensible to consider the implications for Peter before seizing his assets. So far, the Government have suggested a 10-year phasing in of the change--that is, the removal of the negative housing subsidy of £8 million. I thank the Minister for that, but it still represents a considerable year-on-year reduction. I value the work of my council, and I passionately value the welfare of my constituents. I thank the Minister for what he has done, as far as it goes, but I want a better outcome.
A second line of attack was recently offered by the technical advisory group to the Department. The group notes that for a decade local authorities that have been borrowers have been required to put aside money to cover their debts. That generated a resource that the Government could use for a national housing initiative. Debt-free authorities, however, did not make such provision. They did not put aside money to cover their debts, because they had no debts. They spent capital receipts, as they were fully entitled to do; or they saved them, and ploughed the interest into improving the quality of life of their citizens. That is certainly what Dacorum did. New rules for resource accounting now assume that they did not spend the money, and effectively require such authorities to pass the interest to the Department even if they no longer have the interest-earning capital.
I make the point because it has particular significance for other new towns. They regard this as retrospective legislation with a vengeance. Fortunately for Dacorum and for Hemel Hempstead--the same does not apply to some other new towns--at least Dacorum still has the money. It is still receiving interest, and it could meet the bill. The only misery--in fact, a major series of pieces of misery--that the item 8 transfer could cause would lie in the fact that Dacorum might then have no capital programme. After all, it has money, so it has no need to borrow--but look! It must not spend its money, or it will not be able to make its £2 million deemed interest payments to the Department.
The item 8 transfer would also mean that Dacorum would lose £2 million from its general rate fund, as part of the overall £8 million lost. It would never be able to get a capital programme going, because--this is a crucial point--new towns lack the land assets that older councils have.
Some might think this series of penalties rather steep for a new town that makes its contribution to the £160 million a year that is raised by such towns for
the Treasury through what used to be the Commission for New Towns, and is now English Partnerships. Some might consider such a penalty an absolute injustice to an authority that has made far fewer demands than others on Treasury resources, and that has made no contribution to the public sector borrowing requirement for a decade. Some will say, "If this is what happens when things are managed well, what is the point of managing well?".The technical advisory group suggested that authorities that are debt-free should be asked not to make item 8 payments from the time of their freedom from debt. Freedom from debt does not mean that there are not major problems--including housing problems, which in my constituency are not covered by the housing revenue account.
In my constituency, the price of houses is too high to be managed on the salary of a teacher or nurse, so we have a brain drain to those parts of the country that have accommodation at more reasonable prices. We need affordable housing, but we will not get it through that other mechanism. We need support for housing, some of which will be outside the housing revenue account. A sensible Government would recognise the contribution by authorities that are not in debt and organise things appropriately.
I saw on the internet last night that Hilary Chipping from the Minister's Department has written to all local authority finance officers. She talked about the item 8 credit and said that the Department would
- write to you in October with any proposals for changes.
Hilary Chipping said in the letter to chief finance officers:
- There will be transitional arrangements.
What do I want from the debate? First, I want an assurance that the Minister understands the gravity of the situation afflicting Dacorum and other authorities that are in negative housing subsidy. Secondly, I want an assurance that, whatever happens, he will ensure that there will not be a catastrophic cut in the council's budget over whatever period. I need that assurance now, so that rational planning of services can restart. Thirdly, I want him to press for the mid-year subsidy credit ceilings to be set at zero, as his own advisory group has suggested, rather than be deemed negative. That would allow assets to be used for the good of the community that generated them. It would permit a continuing capital programme and set item 8 credits at zero.
I hope that the Minister recognises the passion with which I have dealt with the matter, which looks on the surface rather cold and technical. These are real people; these are my constituents. Dacorum is an excellent council delivering on Labour's agenda for improvement in the quality of life of our citizens. I cannot bear to see it threatened, as it is at the moment.
7.8 pm
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Chris Mullin): I thank my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) for setting out the issue so clearly. It is to his credit that he made simple some fairly complex problems. I hope that he will find my response as clear.
I acknowledge the problem and the effect on my hon. Friend's local authority in particular, and on some others. I think that he knows that the Government take the matter seriously. He will recall that I have met two delegations on the issue: one of local authority leaders and one of Members of Parliament, including my hon. Friend.
The debate is timely. We are considering the detailed arrangements for the new financial framework for local authority housing next year, and looking closely at the position of negative subsidy authorities. We have already announced that there will be transitional arrangements from April next year to assist them. We shall shortly consult on those proposals.
Perhaps I should say a few words about the system of local authority housing finance and what we will do to improve it. There is general agreement that the present finance system is difficult to understand. It fails to provide the right framework for maintaining a valuable national asset and for taking forward the important changes that we are introducing, which are designed to ensure the best use of housing, best value in the provision of services and more effective tenant participation.
The housing revenue account must change. It will move to a resource accounting basis, making more transparent the cost of capital tied up in assets and providing additional resources to maintain it over the longer term. In due course, subject to Parliament's approving the necessary legislation, we propose that it should once again become a pure landlord account, no longer confusing housing activities with the personal support given to individual tenants through rent rebates.
In tonight's short debate, I shall not explain the intricacies of the existing system or our proposed changes. They can be found in the speech made by the Under-Secretary, my hon. Friend the Member for Stretford and Urmston (Ms Hughes), on 8 February in a debate which I believe that my hon. Friend attended.
As my hon. Friend will appreciate, under the existing system, resources are lost to housing at a time when there is a continuing need for them. That will all change with the introduction of the new financial framework. First, when we introduce the major repairs allowance next year, there is likely to be a substantial change in the amount of subsidy paid to authorities. That is essential in order to provide the revenue resources that authorities need to maintain their stock. As a result, authorities that are in negative subsidy--such as Three Rivers, which is in or near my hon. Friend's constituency--could go out of negative subsidy altogether and again be entitled to receive subsidy. Others, such as Dacorum, may remain in negative subsidy but at a lower level, with more rental income retained within the housing revenue account to spend on their stock. In either case, there will be consequences for the general fund.
The system will change again when we are able to take rent rebates out of the housing revenue account. When that happens, we propose to capture all assumed
surpluses, including all those that are offset against rent rebates. We have recently confirmed our intention to introduce the pooling of those surpluses. They will then be redistributed to authorities in deficit. When that change is introduced, negative subsidy authorities will no longer be able to transfer resources to their general fund. Along with all other surplus authorities, they will be required to pay their overall surpluses into the pool for redistribution to other housing authorities. That will ensure the most effective use of scarce resources. It will mean that housing resources are retained within housing.We recognise that, for negative subsidy authorities, the changes may cause difficulties elsewhere. That is why we have said that we shall introduce measures to enable them to make the transition to the new system. Those measures will operate from next April. My hon. Friend pointed out that his local authority was attributing some of the cuts or the inability to provide services this year to the impending changes. I can say only that so far there is no basis for that as the changes do not come into effect until next April.
We are also reviewing the assumed investment rules to see whether there are any grounds for amending them next year. The local authority associations are fully involved in that review, and I understand they are keeping negative subsidy authorities informed of progress. I have already confirmed that we believe that the rules are generally sound in principle. However it may be justified to make some changes for debt-free authorities, which I
understand would include most of those in negative subsidy. That could go a long way towards reducing the difficulties that they face as they move to the new system.My hon. Friend asked three questions. The first was whether I understood the gravity of the situation. As I have explained, I do and have done for some time, thanks to his eloquence and that of others who represent the local authorities that are affected. That is why we are putting in place the transitional measures. We are aware that they must be finalised by December, to enable local authorities to make plans for the subsequent financial year.
My hon. Friend asked me for an assurance that there will be no catastrophic cuts and I can give him that assurance--but I cannot assure him that there will be no cuts. My hon. Friend asked also if I would press for the mid-year subsidy credit ceiling to be set at zero. I cannot do so, but we will be consulting on the way forward and that is one of the issues we shall be considering.
I am grateful to my hon. Friend for raising a topic of considerable importance for a number of authorities, especially the one that my hon. Friend represents. I hope that I have reassured him, at least to some extent, that his concerns and those of his local authority have not fallen on stony ground. Equally, I hope that he accepts that the changes we are making to the housing revenue account system are long overdue.
- Adjourned accordingly at fifteen minutes past Seven o'clock.
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