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Orders of the Day

Local Government Bill

Lords amendments considered. [Queen's consent, on behalf of the Crown, signified.]

Mr. Speaker: I draw the House's attention to the fact that privilege is involved in Lords amendments Nos. 3, 6, 18 to 22, 27, 47 to 49, 53 and 54, which are to be considered today. If the House agrees to these Lords amendments, I shall ensure that the appropriate entry is made in the Journal.

Clause 11

Use of Capital Receipts

Lords amendment No. 3

3.58 pm

The Minister for Local Government, Regional Governance and Fire (Mr. Nick Raynsford): I beg to move, That this House disagrees with the Lords in the said amendment.

We are considering a vital issue. Agreement with the amendment would undermine one of the fundamental principles of housing finance, which allows the redistribution of housing capital receipts to the areas of greatest need. Accepting the amendment would deprive housing authorities in areas of high housing stress of the resources that they need to fulfil pressing demands for housing. Simply letting housing authorities keep their housing capital receipts, irrespective of need and of how they intended to apply them, would be an unfair and irresponsible way of allocating limited resources.

We have always taken the view that the proceeds from the sale of council housing should be used to help the areas in which housing need is greatest. That is the purpose of redistribution, and was indeed the principle underlying the legislation introduced by the previous Conservative Government and operated since 1990. The Bill repeals the part of that legislation governing the current redistribution system—the set-aside mechanism. The drawback to set-aside, as we have said many times before, is that it does not apply to all authorities. Redistribution must apply equally to all, if it is to be fair to all. This is the anomaly in the present system that our pooling proposals address.

It is simply wrong that some authorities should have more resources than others, regardless of need, simply because they happen to be rich in right-to-buy receipts or debt-free. I stress that we are not talking about funds generated by good financial management or good planning, but those generated simply because tenants have decided to buy their own house in areas where house prices are buoyant. The local authority cannot determine or manage such sales and, contrary to what was said in another place, they cannot claim any credit for them.

Mr. John Bercow (Buckingham): I am grateful to the right hon. Gentleman for giving way. Before thirsting to reduce local authority autonomy in such a way as to allow him to pursue his redistributionist agenda, it is

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incumbent on him first to consider the efficacy or otherwise of existing policy. In that context, will he oblige the House by telling us what assessment he has made of the effect of the change in the rules on the use of capital receipts from the sale of council houses in the last Parliament on the size of interest repayments on local authority debt?

Mr. Raynsford: Approximately £1.2 billion received from the sale of council houses is currently brought within the overall framework, which allows the pooling to take place through the set-aside mechanism. The problem with that mechanism is that it does not apply to those authorities that are debt-free; that is just the nature of the mechanics involved. The principle of redistribution, which was argued strongly by the hon. Gentleman's own party when it was in government, and part of the approach that it adopted in the 1990 legislation, was to ensure that the receipts would be distributed to meet housing need rather than simply lying arbitrarily where they arose because of the vagaries of the housing market or the whims of tenants in particular areas.

Mr. Bercow rose—

Mr. Edward Davey (Kingston and Surbiton) rose—

Mr. Raynsford: I give way to the hon. Member for Kingston and Surbiton (Mr. Davey).

Mr. Davey: In the Minister's opening remarks, he tried to suggest that all the councils that are debt-free were just lucky, because they were in areas where house prices were high and had received a large windfall from right-to-buy receipts. Surely some of those councils have managed their finances prudently, however, and worked hard to become debt-free. In some cases, they may have taken painful decisions to reach that point. Should they not now be allowed the chance to benefit from the freedoms that they have won after going through the pain of putting their finances in order?

Mr. Raynsford: Lots of other authorities have worked extremely hard to run their finances in the most efficient way possible, but, because they happen to be in areas with low house values, where capital receipts do not generate the same amount of money, they have not been able to reach the same position as those lucky enough to be located predominantly in the south-east. Frankly, it is curious for the hon. Gentleman representing the Liberal Democrats to be advocating a policy that would have a strongly redistributive effect, which favoured the affluent areas, rather than the areas of greatest need. That would be the effect of the policy that he is advocating. I can understand why the Tory party would pursue that line, but it is strange, to say the least, that the Liberal Democrats should do so.

Mr. Philip Hammond (Runnymede and Weybridge): The Minister quoted a figure to my hon. Friend the Member for Buckingham (Mr. Bercow). Will he confirm for the record that the sum involved in relation to debt-free authorities—the only ones that will be directly

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affected in cash terms by the measure—is about £120 million, and not £800 million, £1.8 billion or any other exaggerated figure?

Mr. Raynsford: The figure that I quoted was the total sum that we estimate will be brought within the pooling arrangements. That is similar to the set-aside. The figure for debt-free authorities is £120 million, as the hon. Gentleman rightly said. That is a significant sum, and can contribute substantially to meeting housing needs. I remind him of a little debate that we had in Committee. He will recall that I flourished a Liberal Democrat "Focus" leaflet. I do not usually do that.

Mr. Bercow: Where is it?

Mr. Raynsford: I am afraid that I put it in the bin. I am sure that the hon. Gentleman will agree that, on the whole, that was the right course of action. The Liberal Democrats in Mole Valley argued that it was scandalous that Mole Valley council had received substantial capital receipts—probably not through any great effort of its own, but because housing in the area has a high value—but was not proposing to use those receipts to meet housing need. Instead, it intended to spend the money on other things. The Liberal Democrats in Mole Valley said that that was monstrous and wrong.

It is typical of the Liberal Democrats to say one thing to one group of people and something else to another. In Mole Valley they said it was monstrous and wrong not to spend the money on housing, but when they are confronted with a Bill that ensures that capital receipts are used for housing where the need is greatest, they oppose it, because they want to say something different to a different audience.

Mr. Edward Davey: I thought that we had educated the Minister on this point in Committee. We said that it was about local democracy. The Liberal Democrats in Mole Valley were right to fight elections in that constituency on the proposition that housing receipts raised locally should be spent locally on affordable housing. That was a fair point, and it is consistent with the Liberal Democrats saying that the council should be allowed to do that. The Government want to take away the right of local authorities to spend receipts in their local area. The Minister is the one who is inconsistent. He is going against his policy of so-called new localism.

Mr. Raynsford: That was a pretty feeble effort. In Mole Valley, the Liberal Democrats campaigned on the simple principle that money from housing receipts should be used for housing. As soon as the Liberal Democrats have a chance to give effect to that principle in the House, they take a different view. It is the same old story.

Mr. Barry Gardiner (Brent, North): Does my right hon. Friend agree that the Liberal Democrats have the opportunity to set the record straight? With respect to national policy, will my right hon. Friend confirm that the effect on the borough of Brent of this Liberal Democrat and Tory sponsored amendment would be to take away £2.1 million from the people of Brent? What the Liberal Democrats are saying on the doorsteps about investment in local housing would drive a coach

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and horses through what Brent council could do, unless it was prepared, as a matter of national policy, to say that Brent people should pay higher taxes to receive the same level of service, because the Bill would put £2.1 million on to its budget.

Mr. Raynsford: My hon. Friend has hit the nail on the head. In Brent, the Liberal Democrats no doubt claim that they would do many things to help Brent, but at the same time they actively supported an amendment in the House just last week that would have exactly the effect that my hon. Friend describes. It would take £2.1 million away from the London borough of Brent that could and should be used to meet housing needs in that borough, which has enormous pressures.

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