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5 Mar 2003 : Column 849—continued
Mr. Hammond: I am grateful to the Minister for his assistance. I do not think that clause 11 will pose any threat to those receipts, but I draw the attention of my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) to the concern of many local authorities with positive capital balances that changes in the funding formula, and in the general tenor of the Government's approach to local authority finance, present the constant threat that unjust account will be taken of those capital funds, in such a way that the grant funding available to those authorities will be reduced.
The existing system of housing capital funding is itself being scrapped, of course—a point that I shall return to in a moment. The Government's second argument is that the stock that is being sold was originally financed centrally. Well, perhaps it was, but many debt-free authorities have received negative housing subsidy for years. It is their tenants' rent and their council tax payers' tax that has, over generations, built up the equity that exists in the housing stock that they are disposing of today—through investment, improvements, maintenance of stock, and repayment of debt.
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So both the Government's arguments fail. If one believes in local democracy and the freedoms for local authorities that Ministers laughably proclaim this Bill is about, reinvestment of capital receipts from right to buy should be a local decision. The equitable ownership of the assets lies with the local community, not with the Secretary of State. The sequestration of one community's assets, even if for redistribution to another, is the antithesis of responsible and empowered
local government. It is just another crude attempt by the Government to reinforce the clear thrust of their local government finance policy: to snatch from those authorities wicked enough to be prudent, well run, low taxing and debt free, in order to bail out the hopeless, the feckless and the profligate. That policy will result in average band D council taxes for the coming financial year on the homes of ordinary hard-working families in England exceeding £1,000 for the first time—a point which my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) has made.Debt-free local authorities currently have the freedom to reinvest—or not, as they choose—their receipts from capital disposals. They, of course, will bear the brunt, but I should be grateful if the Minister would touch on the complex issue of how this measure impacts on indebted authorities. I am ready to stand corrected, but my understanding is that the notional income from set-aside receipts offsets the notional cost of the underlying debt that financed the assets that gave rise to those receipts. The Government seem to be recognising that problem in this Bill by taking powers to themselves to clear local authority debt; indeed, we shall be discussing overhanging debt in a moment. However, it appears that a local authority that has debt will have its receipts not set aside—blocked, in essence—but sequestered by the Government. It will be dependent on the largesse of the Secretary of State to clear its paper indebtedness, at least. Perhaps the Minister will clarify how that process works when he winds up the debate.
As ever, in Committee we approached this issue in the spirit of constructive compromise. We tabled amendments that recognised the Government's agenda, while resisting the extent of the asset grab that they proposed. We tried to reduce, or to limit, the percentage of the capital receipt that could be taken by the Secretary of State. We tried to ring-fence part of the local authority receipt for reinvestment in housing and regeneration within that local authority area, thus addressing one of the Government's principal purported concerns. I am afraid to say, however, that all that was in vain. The Government proved determined to attack the freedoms of debt-free authorities, and to undermine the right to buy from all sides. That is demonstrated in this Bill, which allows deduction of local authority housing and regeneration investment before the tax is calculated for other capital receipts, but not for right-to-buy receipts.
If we set clause 11 in the wider context, it is apparent that the Government are putting together a system whereby they sequestrate 75 per cent. of capital receipts from right to buy. At the same time, the right to buy itself comes under attack, in the form of a reduction in discounts, and in a clear policy agenda that seeks to limit the opportunities for ordinary hard-working families to benefit from right to buy.
Secondly, there is the introduction of a discretionary grant system, whereby the Secretary of State will pay off local authorities' indebtedness where he sees fit. Thirdly, we are all aware of the abolition of the local authority social housing grant—a measure that was well trailed but that all local authorities, without exception, understood was intended to come in on 1 April 2004. With some horror, local authorities have become aware—although they have yet to receive the courtesy of direct information from the Office of the Deputy Prime
Minister—that local authority social housing grant will, in fact, be withdrawn on 1 April 2003. They became aware of that by being copied in on a letter from officials in the Office of the Deputy Prime Minister to the Housing Corporation on 8 February 2003, just three weeks before they were required by law to have set their budgets. That has caused chaos. It smacks of political vindictiveness or fiscal panic on the part of the Office of the Deputy Prime Minister. The Minister is shaking his head, so no doubt he will be defending the Office of the Deputy Prime Minister's lamentable performance in communicating with local authorities about the abolition of local authority social housing grant on 1 April 2003. Taken together, all those facts add up to a very curious idea of freedom and flexibility.
Mr. Edward Davey: The hon. Gentleman has probably seen today's written ministerial statement by the Under-Secretary of State, Office of the Deputy Prime Minister, on the local authority social housing grant. Does the hon. Gentleman agree that this episode suggests a degree of incompetence in the Office of the Deputy Prime Minister that is extremely worrying? It is clear that local authorities did not expect the grant to be phased out until April 2004. Does the hon. Gentleman agree that the announcement that it will be phased out in 2003 has, in many areas, left plans for developing more affordable homes in utter chaos?
Mr. Hammond: The hon. Gentleman is right. The announcement left councils reeling just a couple of weeks before they were due to present their budgets. There has been no clear indication of what the transitional arrangements are to be. There has been an indication that there will be transitional arrangements, but no information has been offered to allow individual authorities to assess which of their schemes will be eligible for the arrangements and which will not. That has led to what I can only describe as outrage among local authorities. The offence has been compounded by the utter discourtesy of the Office of the Deputy Prime Minister in copying in local authorities on an e-mail from an official to the Housing Corporation. There was no effort to follow that up by direct communication with the local authorities. When I contacted the office of the Minister responsible for housing immediately after this fiasco had become known to me, I was told that there would be no chance of any direct communication in the following week—the week when the House was in recess—and that the earliest that any communication would be made would be in the week the House resumed. To my knowledge, nothing has yet gone out to local authorities.
Sir George Young (North-West Hampshire): My hon. Friend may know that Test Valley borough council is one of the many councils to have been caught up in this. The council has written to the Office of the Deputy Prime Minister. Does my hon. Friend agree that the only satisfactory transitional arrangement would be one that put the local authority back in the position it thought it was in before the communication went out?
Mr. Hammond: My right hon. Friend is right. A number of local authorities have suggested to the Office of the Deputy Prime Minister that the only fair
transitional arrangement will be one that recognises all projects that were in local authorities' financial statements and plans at or around 10 February. From the financial information that I have seen on the amount of money available for transitional arrangements, it is clear to me that the Government will not allow anything like all of those projects to slip under the wire.
Matthew Green: In the information on the transitional arrangements—which has been placed in the Library today—it is clear that, instead of the £500 million provision that had been expected for this year, debt-free authorities will find that their provision has been graciously increased from £175 million to £275 million. Instead of a year, they are being given an extra three months—up to 30 June—to get schemes, together with their planning permission, through. That will allow some schemes to go ahead, but the statement by the Under-Secretary of State, Office of the Deputy Prime Minister, says:
- "We do however need to ensure that the funding limits are not exceeded. If the total claims submitted by 30 June exceed the money available, the Housing Corporation will prioritise schemes with the Government Offices in terms of their contribution to the regional housing priorities."
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