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Matthew Green: I would not like the hon. Gentleman to leave the list of areas that suffer a shortage of affordable housing without mentioning places like Shropshire and Cornwall where shortages exist for different reasons. Shortages in those areas are due to people either buying holiday homes or retiring to the area, yet local salaries are much lower than nationally agreed pay settlements for the public sector. There are good public sector jobs in Shropshire, but houses cost £200,000.

Mr. Hammond: I acknowledge the hon. Gentleman's point. It is important to recognise that the issue is not confined to the south-east of England; there are other areas with buoyant right-to-buy receipts and buoyant housing markets. They all have one thing in common: they suffer from the problem of how to provide affordable housing for public sector workers.

Mr. Gardiner: May I respond to the serious comments that the hon. Gentleman makes about house prices in the south-east by reference to my borough of Brent? I

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understand perfectly that the south-east is a high house price area, but I hope that the hon. Gentleman will reflect on and take to heart the fact that inner-city and outer-London boroughs such as Brent are subject to peculiar pressures in attracting key workers, which are not simply mirrored in house prices. The pressures of working in those environments are a disincentive to workers, so if we are to address the problems of public service delivery and key worker housing, which he rightly highlights, boroughs such as Brent, where key sector workers face complex difficulties, need the sort of investment that has meant £2.1 million to meet Brent's housing needs.

Mr. Hammond: I do not for a minute suggest that there are no problems in boroughs such as Brent. We are all aware of the broader issues of dealing with inner and outer-city deprivation; the list of problems is endless. However, it is wrong for the Minister to characterise areas that will have that money—the 75 per cent.—taken from them as areas that do not have a problem. They are leafy, they have buoyant housing markets—

Phil Hope: They may have high housing need.

Mr. Hammond: In Standing Committee, I cited Lord Rooker who said outside the House that it was likely that only one authority—Barking and Dagenham—of the then 34 debt-free authorities with housing stock was likely to be regarded by the Government as in housing need—[Interruption.] No doubt the Minister will correct me if that is incorrect.

4.45 pm

Let me just tell the Minister how this looks from the point of view of an authority that will lose 75 per cent. of its capital receipts and that will have to change its plans accordingly. Runnymede borough council—my local authority—is debt free, with housing stock and good right-to-buy receipts, but it is in desperate need of investment to improve pre-war, inter-war and immediate post-war system-built housing, some of which the Minister knows about, and I am pleased to say that he has recently approved such a scheme. There is a desperate need to invest in improving the quality of some of that, frankly, life-expired housing stock, as well as a desperate need to invest in new affordable housing, precisely to allow the area's economy and public services to continue to function. Local people do not understand why the Government apparently do not recognise that need and are apparently hell bent on taking such money away from our communities and redistributing it elsewhere. We believe that there is a clear need for that housing investment to take place locally.

The proceeds of this tax on local authorities will be used to finance Government dirigisme, channelling development to specific areas. The Minister has already mentioned the Thames gateway. [Interruption.] I do not know why the Minister is shaking his head, because that information is in the public domain. The money will be spent in Ashford, the Thames gateway and Milton Keynes; it will not be spent in Runnymede. If the Minister has some good news that I was unaware of, I should be very pleased to hear it, but that looks like channelling development to the Government's priority

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areas at the expense of local solutions to local problems. The Minister denied this when I put it to him earlier, but I am afraid that, from where I sit in north-west Surrey, the Thames gateway looks like a massive dormitory at the end of a 40-mile stationary car park called the M25, which key workers in Surrey will have to travel to and from to find affordable housing.

The Government can go on all they like about decentralisation and local authority freedom and flexibility, but we will judge the Government by their actions, not their words. This confiscatory swipe at the capital receipts of some of the best-run local authorities in England, including those under the control of all the parties and none, shows us the Government's true colours. We had it right when we previously debated this issue in the House, when we proposed to scratch that confiscatory power from the Bill. The Lords have got it right now in deleting from the Bill a power of confiscatory taxation, which we know full well the Secretary of State proposes to use to reduce to local discretion, to fuel the redistribution pork barrel and to reinforce his wider attack on the right to buy. [Interruption.] The right-to-buy policy has given real hope and opportunity to millions of hard-working families over the past decade or so—something that the Labour party obviously cannot abide and that the Minister appears to find funny.

I urge my hon. Friends to resist the Government's crude attempt, in pursuit of their centralising and confiscatory agenda, to ignore the collective wisdom of all the Opposition parties in the House and of the majority of the House of Lords.

Mr. Edward Davey: This issue has been debated more than any other during debates on the Bill in both Houses. The arguments have been explored in great detail, and the Opposition have had to think hard about the Government's arguments. The Minister will admit that the Opposition have tested the Government's arguments and thought hard about them. The Minister's problem seems to be that we have reached a different conclusion from him, and I shall set out the principles of why we have done so shortly.

The Minister sometimes cites councils and which parties control them. There is almost a scorecard, as though such things will be done by partisan analysis. [Interruption.] The Minister shakes his head, but that sounded like the point he was making in his opening remarks. That is not the right approach, and it is not one that we have adopted. The Liberal Democrat group on the Local Government Association, which I consulted widely—including representatives from all the councils that the Minister mentioned and many more—debated the matter at length before taking its decision. It knew that some councils would win and some would lose, but it wanted to decide on the right principle for the financial mechanism.

Another case in point, which the Government have mentioned, is that of Brent. For obvious reasons, Brent has raised its very pretty head in this debate—[Interruption.] I should make it clear that I was not referring to the hon. Member for Brent, North (Mr. Gardiner). The Government should be careful, however, before they make opportunist points about Brent. Labour has been running Brent for a long time and has piled up some of the debts, and in recent years

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the Labour Government's local government finance settlements for Brent have not exactly been generous. I am sure that the hon. Member for Brent, North would concede that point, because I know, as Hansard will show, that he has not been very happy with Ministers' settlements for Brent.

Mr. Gardiner: I am sure that the hon. Gentleman will recall that Brent's 1998 local government settlement for children's personal services was indeed not generous and that it had a bad effect on Brent. If we look at the Government's record, however, specifically on housing and capital allocation over the past six years, we find that the Labour council in Brent has begun the rebuilding of houses, which was left in abeyance for years by the Conservative administration in Brent and by the then Conservative Government. The record of the Labour local authority in Brent, supported by the Government, in delivering on housing need in Brent is absolutely exceptional. Last year, we had one of the largest capital allocations that we could have had. I therefore hope that the hon. Gentleman will now address the real question—

Mr. Deputy Speaker (Sir Michael Lord): Order. I hope that the hon. Gentleman will now conclude his intervention.

Mr. Davey: You are probably right, Mr. Deputy Speaker, to admonish the hon. Gentleman, but perhaps I, too, should be admonished for giving him the opportunity to make that party broadcast. At least he confirmed, however, that he was not happy with Brent's local government finance settlement from this Government.

The Government say that the proposals will get rid of an anomaly, but the anomaly can also be seen as an incentive to reduce debt and to become debt free—a sensible element to have in the local government finance system. The Government are rightly getting rid of a lot of the nonsense that they inherited from the Conservatives—the central capital controls, supplementary credit approvals and so on—and are introducing what is more or less Liberal Democrat policy: the prudential capital regime for local authority borrowing. We wholeheartedly support the Government's welcome move in that direction, which provides greater opportunities for local authorities to manage their capital affairs well. The key question, however, is whether the Government are still allowing, within those many changes, opportunities and incentives for local government to make sure that it is managing its debt well. Let us have freedom to borrow when it is appropriate, but do we really want to take away the significant incentive to run down debts? We all agree that encouraging local authorities to reduce their debt is sensible, and I do not understand why the Government are getting rid of that important incentive. That is one issue of fiscal principle.

The other issue relates to localism and centralism. The Government say that the Bill is about freedoms and flexibilities for local authorities and that it will empower and free up local authorities. They also talk about new localism. This policy goes completely in the opposite

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direction. The Government justify that by saying that they have to redistribute, and the two parties do not disagree on the need to redistribute; the question is how that is done. [Interruption.] The Minister points to Conservative Members, but I was not including the Conservatives in that argument. Perhaps we should do so these days, but we never quite know.

Labour and the Liberal Democrats certainly agree that it is important that central Government should be used to redistribute resources around the country, but that is not the question. The question is how we do that, and it is clear in my mind that this is not the right way to do it. National Government could provide the resources for housing in Brent and other areas, should they choose to do so, but the question is whether they should take that money off other authorities that have housing needs and that have managed their financial affairs well. Should the Government be penalising them or should they be coming up with money from elsewhere?

I want to press the Government on the idea that all council housing has somehow been funded solely by central Government. Lord Rooker was at it in the other place when he said:

I have heard council houses called many things, but I have never heard them called a national asset. It is as though council housing is some sort of nationalised industry that central Government have provided and that local authorities have nothing to do with. That is clearly not the case, whether it is on the financial level or on the level of the entrepreneurship, vigour and dynamism of the local communities that have made the provision of social housing possible.

It is all very well for the Government to say, "This money came out of the central pot." However, they decided where the central pot began and ended and where the local pot began and ended. The boundaries between national and local government funds have been vague at times and have moved over the decades. Liberal Democrats believe that local authorities should have much greater financial powers, and we would like the boundaries to be shifted from central Government and more to local government. That is one reason why we think that this measure is wrong. There should be redistribution, but there should be greater autonomy, too. This measure is a step in the opposite direction to greater autonomy.

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