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Matthew Green: Earlier, the Minister shook his head when my hon. Friend said that some of the properties go back for centuries. Many boroughs in mediaeval market towns built properties that came into the hands of councils, which turned them into flats and houses. Those properties often realise the highest possible values if they are sold. They were funded not by central Government in the 20th century, but by locally raised money or by charitable money in the 19th century.

Mr. Davey: I am grateful to my hon. Friend for making that point. Two councils in his constituency—South Shropshire and Bridgnorth—are debt free and will be affected by the measure, but they have real housing need.

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That brings me to my third point of principle against the Government's proposal. Housing need is sometimes a relatively subjective concept. The Government say that they have housing need indicators, but the housing need that the hon. Member for Runnymede and Weybridge (Mr. Hammond) mentioned—the need for affordable housing for key public sector workers—is a key issue. We do not know how authorities will meet that need when the money is taken from them. The Minister may say that we do not know because the Government have set up regional housing boards—a step in the right direction—which have yet to report. However, he is asking the House to take a decision on one side of the equation when we do not know the information on the other side of the equation.

The hon. Member for Runnymede and Weybridge says that he is privy to the information that Lord Rooker has said that only one of the debt-free authorities that are losing out will receive money through this process. I am not sure how Lord Rooker knows that if the regional housing boards will provide and allocate the funds. Perhaps he knows something that we do not.

Mr. Gardiner: I have tried to follow the hon. Gentleman's argument closely, but I do not understand his point about the regional housing boards. Surely if those boards are to be the arbiter of genuine housing need, it is absolutely right that we take the decision on one side of the equation and not on the other. That is precisely because of the point that the hon. Gentleman made at the beginning of his remarks: this process should be free of partisan judgment and based on objective criteria. That is exactly what the regional housing boards are supposed to provide.

5 pm

Mr. Davey: The hon. Gentleman cannot have it both ways. The Minister was trying to say that some authorities that do not have housing needs will lose and that other authorities with housing needs will win. We want to know about and to understand the housing needs, because we know from our constituencies, from which much of our information for such debates comes, that there are housing needs in the so-called leafy boroughs of suburban London. There are housing needs in rural areas such as that of my hon. Friend the Member for Ludlow (Matthew Green) and in parts of Surrey. The Government cannot have it both ways. We want to know where housing need will be met before the money is taken away. Perhaps that information should come from the regional housing boards—I do not disagree with that. The process should be less partisan and should be based on objective criteria. However, we are being asked to make a decision before we know about the need.

Matthew Green: Surely it is unlikely that there will be sufficient money to meet all the housing needs in a given region, even with the pooling of money. There will be priorities. In the west midlands, it might well be decided that Birmingham needs an extra 20,000 houses. We need only 1,500 more affordable homes in South Shropshire district council, but the district contains only 30,000

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people. The suspicion in South Shropshire is that it is likely that the money for the west midlands will go to areas other than South Shropshire or Bridgnorth.

Mr. Davey: Over the weekend, I talked to several council leaders and councillors who will be affected by the decisions to check whether they were still happy with our position, because this is a serious moment during the passage of the Bill. They were clear that they managed their budgets and forward planning in the knowledge that when they became debt free, they could use the moneys as they wanted.

Three Rivers district council is desperately keen to meet the decent homes standard that the Office of the Deputy Prime Minister gave it and to build more affordable housing with housing associations to address its affordable housing crisis and to house some of its key public sector workers. However, it will not be able to do so because the money will be taken away and it does not think that it will be on the regional housing board's list. Councils have planned for years in the expectation that they will receive money to meet the housing needs that they know exist in their communities, but they will no longer be able to do that.

The situation is retrospective in many ways. Councils have planned and hoped for freedom so that they may make essential investment. They have even told their communities that they were making preparations, but suddenly, and without too much warning, the Government are taking the money away, which is why people are so cross. The Government and hon. Members such as the hon. Member for Brent, North must understand that.

The Government say that the transitional scheme may cushion the blow for some of the affected authorities, and indeed it will. The problem is that the scheme will last for only two or three years, after which all the money will be taken from the authorities. The situation affects not only the 38 or 40 debt-free authorities with capital receipts that the Minister mentioned. Local authorities that have been working towards becoming debt free have gone through some of the pain but will discover that the freedom that they worked for and looked forward to will be taken away.

I say to the Minister, in as friendly a way as possible, that Liberal Democrats have thought hard about the matter, as is our duty. As he said, £120 million is up for grabs throughout the country, so the way in which it is distributed and allocated is important. However, if one considers the principles of fiscal prudence and incentives to become debt free, localism versus centralism, the way in which housing needs are defined and the way in which local authorities have worked towards becoming debt free, the Minister has not made his case and we shall vote against him in the Lobby.

Mr. Raynsford: We have had a good debate on an important subject, although the hon. Member for Runnymede and Weybridge (Mr. Hammond) made several rather curious allegations, the most frequent of which was that the measure is confiscatory. By that logic, the Conservative Government who introduced the whole set-aside regime were confiscatory. He alleged that the measure represents heavy-handed government forcing local authorities to do undesirable things, yet his

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party, when in government, introduced measures that required local authorities to set aside capital receipts. I cannot accept his latter-day expressions of support for the idea of greater freedom for local government without reminding him of the actions of Conservative Governments.

The fundamental difference is that today we are talking about housing capital expenditure of £2.5 billion a year—two and a half times the level that we inherited when we came to power. At that stage, the redistributive mechanism that the hon. Gentleman's Government had introduced was virtually the only means of getting capital into housing.

Mr. Davey: If so much new money is available for housing needs, why is it necessary to take £120 million from the debt-free authorities that have worked so hard to become so?

Mr. Raynsford: If the hon. Gentleman bears with me, I will give him a full answer that deals with the inherent contradiction in his case. He seems to believe, as Liberal Democrats generally do, that it is possible to find ways out of difficult conflicts without any pain, but it is not. It may be so in the Liberal Democrat Valhalla, where everyone debates everything ad nauseam and outcomes are always pain free, but in the real world there are hard choices that require decisions. There is conflict between allowing receipts to remain where they fall and ensuring a fair allocation of housing resources. This is a testing moment for Opposition Members to show where they stand. Are they in favour of simply letting things lie according to the accidents of history, or do they want a fair distribution based on principle, not accident?

Mr. Davey: Is taking money away from Tory and Liberal Democrat councils and giving to it to Labour ones the hardest decision that the Minister has ever had to make?

Mr. Raynsford: It is not like that at all. It is interesting that the hon. Gentleman proposes to take money away from a substantial number of Liberal Democrat authorities. I understand exactly why Conservative Members support the measure—because, in general, Tory councils will benefit from it; it is self-interest on behalf of predominantly Tory authorities. I find it extraordinary, however, that the Liberal Democrats should argue against the interests of many of their own authorities. That is an example of the curious stance that they often take by standing on their heads on certain issues. [Interruption.] I shall come back to the hon. Member for Kingston and Surbiton (Mr. Davey) in a moment. I want first to respond to the hon. Member for Runnymede and Weybridge.

The difference between the actions of his Government and our proposal is that we are ensuring that the principles of fair distribution apply to all local authorities, which will all be part of the same mechanism. He proposes giving special benefits to a small number—around 40—that are debt free. As we know, that is because Conservative Members see that as being in the financial interests of predominantly Conservative authorities. Let me test him on this. Why

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should mid-Devon be treated differently from east Devon? Why should Milton Keynes be treated differently from Watford? Why should Maidstone be treated differently from Dartford? In each case, one will lose and one will gain. Can the hon. Gentleman tell me which will be the gainers and which will be the losers? We know about Milton Keynes, because we have rehearsed that already, but can he genuinely tell me what the outcome will be in the other two cases? Of course not. We know that those authorities are in broadly similar circumstances. It just happens that one has the advantage of being debt free and the other not. Why should there be an arbitrary benefit for one as against another? That is the fatal weakness of the Opposition's position. They are proposing special treatment for a small group of authorities merely on the accident of which one happens to be debt free. Why should one authority have unrestricted access to capital receipts while the other is required to set aside 75 per cent? That is the question that I must put, and there is no credible answer to it. It illustrates the confusion of both opposition parties.

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