Clause
23
Powers
to
borrow
Question
proposed, That the clause stand part of the
Bill.
Sir
George Young:
I have one or two small points. Looking at
subsection (1) about the short-term borrowings of the HCA, will those
fall within the financial limits referred to in clause 26 or will they
be outside the £2,300 million that is set as the financial
limit? Perhaps the Minister could clarify whether they are within the
overall limit.
Subsection
(1) refers to the short-term management of the HCA’s finances.
In the days when we used to have bank managers and I used to talk to
them, I often found that their interpretation of a short-term
arrangement was somewhat different from my own. I wonder whether there
is a definition of a short-term arrangement that would make it
absolutely clear whether borrowing fell within subsection (1), or
whether it was on a longer term
arrangement.
Turning
to subsection (2), which is more serious for long-term borrowing, I am
intrigued about the HCA’s rather restrictive line of credit. It
has to borrow either from the Secretary of State or the European
Investment Bank. I am not one of those in my party who gets frantically
excited about matters European, but it would be helpful to have an
explanation of why the European Investment Bank, alone among many other
banks, has the privileged status of being the only one that can lend
serious money to the HCA.
Mr.
Wright:
I will be short and sweet. In
respect of the right hon. Gentleman’s first point about whether
short-term borrowings will fall within limits as per clause 26, I can
confirm that they will. On his point about the restricted nature of the
agency’s borrowings via the Secretary of State or the European
Investment Bank, may I point out to him that that is deliberate and in
common with former arrangements with organisations such as English
Partnerships to ensure that we are not compromised in respect of public
borrowing requirements and state aid? I hope that that reassures the
right hon. Gentleman.
Question put and agreed
to.
Clause
23
ordered to stand part of the
Bill.
Clause
24
Loans
by the Secretary of
State
Question
proposed, That the clause stand part of the
Bill.
5.45
pm
Sir
George Young:
I want to reflect on what the Minister said
just before he sat down, because it may come up again under clause 25.
It would be helpful if he could explain something about clause 24. I
ask the question out of ignorance. I assume that the HCA will get some
cash from the Government as well as having access to loans. Am I right
in thinking that the money that it spends will not just be raised by
borrowing, but that there will also be a cash budget for the HCA? If
so, in what circumstances will the money spent by the HCA be spent out
of the cash that is voted to it by the Government and in what
circumstances will the money that it spends have to be recovered by a
loan, either from the European Investment Bank or the
HCA?
In
respect of clause 2, when the HCA has to pay interest to the Secretary
of State, presumably on the long-term borrowing, it would be helpful if
the Minister could confirm that that is the arrangement under which the
Housing Corporation and English Partnerships are funded. I should be
interested to know the rate of interest that the predecessor
organisations have to pay to the Secretary of State on the money that
is outstanding by way of loan.
Mr.
Wright:
I am grateful, I think, to the right hon.
Gentleman for his questions. I shall give the Committee examples of
instances in which the agency needs access to its finances but that is
not possible. In such circumstances a loan from the Secretary of State
may be the best way forward. I can confirm to the right hon. Gentleman
that the agency will receive a grant; it will not raise money solely
through borrowing. We expect that the vast majority of spending by the
agency will be funded by the grant and that borrowing will probably not
be the
norm.
The
agency needs flexibility in order to achieve its objectives and a grant
will be available from central Government. That flexibility is
important to ensure that it can have a loan if necessary, which is very
much in keeping with former regimes. For example, until 1998 the
Housing Corporation provided loans to registered social landlords to
help to develop new social housing. Those loans were funded by
short-term borrowing from the national loans fund; the
corporation’s remaining loans portfolio, which covers core
ownership loans and guarantees, is part-funded by short-term borrowings
from the national loans fund, which is at present about £1.4
million. The reason for the borrowing is purely historical, as all
loans were funded by
borrowings.
The
right hon. Gentleman wanted to get a flavour of how often that sort of
borrowing takes place. English Partnerships has never borrowed or
received a loan from the Secretary of State. As I said a moment ago,
the Housing Corporation’s borrowing is largely historical but
remains current in that respect. The Department did not provide any
grant in aid as financial assistance to fund redemption of the loans in
the Housing Corporation’s loan portfolio. Any borrowing from the
new town development corporations was funded from the national loans
fund.
The proposal
provides flexibility and another source of reasonable and prudent
funding, but it will probably not be the norm in how the agency funds
its
activities.
Question
put and agreed
to.
Clause 24
ordered to stand part of the
Bill.
Clause
25
Guarantees
by the Secretary of State
Question proposed, That
the clause stand part of the
Bill.
Sir
George Young:
I have another short intervention on loans
that are guaranteed by the Secretary of State. The Minister said that
in an earlier life he was an auditor. That means he has removed the
excuse of ignorance for the question that I am about to put to him.
Will the guarantees given by the Secretary of State under this clause
score so far as the public sector borrowing requirement is concerned?
Will they form part of the calculation towards the golden rule? The
clause makes it quite clear that if the Secretary of State gives a
guarantee, Parliament has to be told about it, so the information will
be in the public domain. It would be helpful to know whether the
guarantees given under this clause will go towards the total liability
of the Government and therefore score against the PSBR and the
Chancellor’s golden rule?
Mr.
Syms:
As we discussed under clause 22, the HCA can give
guarantees or indemnify the projects. Under clause 25 would this be
under the financial limit of £2,300 million or above it? In
other words, it is possible to have a cash borrowing limit for the HCA
but have additional liabilities on its balance sheet. How would that be
treated?
Mr.
Wright:
I will answer the hon. Gentleman first because
that is the easier question. The £2,300 million is the absolute
limit. Everything is contained within that. In respect of the right
hon. Gentleman’s question, I was a very bad auditor which is why
I had to become a Member of Parliament. I cannot provide a great deal
of clarification on his very pertinent point about the golden rule. If
he allows, I will look into that and try to find inspiration in the
short to medium term and then respond to him and provide information to
the
Committee.
Question
put and agreed
to.
Clause 25
ordered to stand part of the
Bill.
Clause
26
Financial
limits
Alistair
Burt:
I beg to move amendment No. 3, in
clause 26, page 13, line 2, leave
out ‘£2,300 million’ and insert
‘£1,000
million’.
The
Chairman:
With this it will be convenient to discuss
amendment
No. 4, in
clause 26, page 13, line 5, leave
out ‘£3,000 million’ and insert
‘£1,500
million’.
Alistair
Burt:
The aim of the amendment is to elicit from the
Minister an explanation of why the financial limits are as they are. I
should be grateful if he could set that
out.
Lembit
Öpik:
I just want to highlight the complete
pointlessness of subsection (3). Subsection (1)
states:
“The
current borrowings of the HCA must not exceed £2,300
million.”
Subsection (3)
states:
“But an
order under subsection (2) may not specify an amount of more than
£3,000
million.”
As the Minister
said himself, what is to stop anybody through an order changing the
legislation to any amount at all? There is no prospect of subsection
(3) doing anything useful. The amendments offer different sums. I think
that the amount the HCA spends will end up being far in excess of
£2.3 billion or indeed £3 billion. If it gets its
momentum and if the house building programme that we need in this
country is to benefit significantly from the investment through the
HCA, the sums will have to be far higher than what has been put forward
here.
The Minister,
being so keen to maintain a frugalness of content in the Bill, needs to
explain why subsection (3) is there. There may be an administrative
reason. Perhaps there is a standard precedent in legislation of which I
am not aware. But in the absence of those,
while subsection (1) is meaningful, because it indicates some initial
HCA borrowing limit, subsection (3) is meaningless, because it could be
changed at any
time.
Sir
George Young:
I have a simple question
for the Minister. He referred to the borrowings of the organisations
that will form the HCA—the Housing Corporation, English
Partnerships and the Commission for the New Towns—and I think he
said that there were some outstanding borrowings in some of those
organisations. Will those borrowings be rolled into the borrowings of
the HCA, or will the HCA start with a blank sheet of paper so that the
£2,300 million will refer only to liabilities that it itself
incurs? Will it have responsibility for the debts of its predecessor
organisations?
Mr.
Syms:
I wish to make a similar point. Evidently, the
organisations to which my right hon. Friend referred already have an
external borrowing limit. Is the £2,300 million new money or is
there a sort of net difference? Are these additional resources or are
they the resources of the organisations that are forming the HCA? What
are the external limits of English Partnerships, of the Housing
Corporation and of the Commission for the New Towns? What I am trying
to get at is this: is it new money or is it
reannounced?
Mr.
Wright:
That was an interesting point about borrowing
limits, certainly from my point of view as a former auditor and
accountant. I reiterate what I have said in earlier discussions. The
power of the homes and communities agency to borrow is an important
part of its financial powers, because it gives it additional
flexibility. I refer to borrowing either on a short-term basis from
anyone or on a longer-term basis from the Secretary of State or the
European Investment
Bank.
Let
me clarify the point made by the hon. Member for Poole. The amounts
that we are proposing for the borrowing limits of the HCA are those
currently available to the Housing Corporation. Those amounts were
increased from those originally allowed in the Housing Associations Act
1985 by the Housing Act 1988. The agency will be a bigger agency than
the Housing Corporation. It does not seem reasonable to expect the new
agency to do more than the combined roles of its constituent parts
while at the same time restricting its ability to borrow to less than
that of its constituent parts. We have taken the view that retaining
access to this amount of borrowing is reasonable, given the breadth and
wide variety of work being undertaken by the new agency. It seems
reasonable; it does not seem excessive. It will not be the main source
of its funding. I therefore hope that the hon. Member for North-East
Bedfordshire will withdraw the
amendment.
Alistair
Burt:
I may well do that, but before we leave the
amendment, can the Minister give an indication of what the main sources
of funding will be for the HCA? Where will it get its money
from?
Mr.
Wright:
The main source of funding, as I thought I had
made clear earlier, is grant in aid from central Government. That will
be the main source of funding, I imagine, that the agency receives. I
hope that that clarifies the matter.
Sir
George Young:
I may have missed this, but I did not catch
from the Minister whether the HCA would take over the existing
liabilities of the organisations from which it is
composed.
Mr.
Wright:
My strong understanding is that the existing
borrowings will be transferred to the new agency. It is essentially a
residual rump from former borrowings. I am sure that if I have got that
wrong, I will be corrected, and I will make the Committee aware of
that, but that is my strong understanding. It is a residual rump that
is not material, but I am happy to provide clarification if I have got
that
wrong.
Alistair
Burt:
I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
26 ordered to stand part of the
Bill.
5.59
pm
Sitting
suspended for a Division in the
House.
6.14
pm
On
resuming—
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