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Earl Ferrers: My Lords, the noble Baroness's amendment would mean that in addition to funding the

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tenant's discount, the corporation would fund further possible sales costs, such as she mentioned--staff time, valuation fees, legal fees and so forth.

It is right that, as in any business, the association's costs should be met from sales. That happens in the normal course of events. It is also the approach taken in the existing right to buy scheme for local authority housing. Indeed, in the voluntary purchase grant scheme for housing associations' existing stock, which started this year, the same principle is used. It has been accepted by landlords for the voluntary scheme and over 120 now take part.

Housing association landlords will be permitted to deduct the same fixed allowance as under the existing right to buy to cover their administrative costs for each sale. For houses, the allowance would be £619. For flats, it would be £1,391 in order to reflect the extra costs involved in giving estimates of service charges for repairs over the first five years.

In addition, landlords will be able to recover from their receipts the costs of valuation and survey fees. These are monitored and are subject to audit by the corporation. Typical costs, estimated by the Housing Corporation, are around 0.25 per cent. of value for valuation fees and about 0.5 per cent. for legal fees. On a £50,000 property this would be an additional £375, which I hope the noble Baroness will agree is not a vast sum. These costs would be deducted from the receipts from the sale before they went into the disposal proceeds fund. In total the Housing Corporation estimates that the costs might be in the region of £1,000 to £2,000.

I recognise the noble Baroness's concerns that this might reduce the sale proceeds which would be available for recycling into replacement properties. But overall, as a proportion of receipts, these costs are likely to be very small.

The noble Baroness was concerned that there would not be like for like because a dwelling would be sold for £60,000 and there would not be £60,000 with which to buy the next one. But one cannot regard this as an exact science. Costs and prices move up and down and interest rates move up and down. There will be gainers and losers on the side of the landlord and of the tenant. Inevitably, someone has to pay the costs. If the corporation were to pay those costs, it would increase its own costs and the result would be that it would be able to pay less for additional houses and additional grant.

The natural result would be to reduce the amount of money which would be available for the rest of the corporation's housing programme. We do not wish to make the scheme more expensive overall, or administratively cumbersome; nor, indeed, do we wish to reduce the amount of work which the housing associations can do.

I like to think that we have struck the right balance. There will be expenses which will have to be paid by the tenant in purchasing the property and expenses to be paid by the landlord in selling it. The concept of a ring-fenced replacement fund is a significant policy

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development. The corporation funds the tenant's discount through the grant. The associations' costs are met from receipts, as with the existing right to buy and the voluntary scheme.

I hope that the noble Baroness will feel on reconsideration that it is fair for each side to bear its proportion of costs. In the end the cost to the landlord is only a very small proportion of the sale proceeds. I believe that that is the best way to proceed.

Baroness Hamwee: My Lords, my concern is in relation to ensuring that stock is replaced. So those to whom I want to be fair are the prospective occupiers of replacement stock. Given that we are talking about what is in effect a compulsory purchase from a charity, it was worth raising the point again, particularly when one thinks that in the case of a compulsory purchase order from an individual the full costs would be reimbursed.

I shall feel a little better about this if, at any rate, the Government acknowledge--as I believe the noble Earl did in a way that his noble friend did not--that there are costs which have to be borne and that one cannot quite compare like with like. The exercise inevitably involves costs, and those costs will be lost from the totality of the value of the housing. Having said that and made my point in a way which is perhaps difficult to rebut because of the time in the debate at which I make it, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 25 [Application or appropriation of disposal proceeds]:

Baroness Hamwee moved Amendment No. 221E:

Page 16, line 2, after ("may") insert ("be applied in the acquisition of a replacement dwelling but otherwise may").

The noble Baroness said: My Lords, in moving Amendment No. 221E I shall speak also to Amendment No. 221F. The first of these amendments in Clause 25 seeks to tempt the Government into giving a categorical assurance that the proceeds of sale following a sale under the right-to-buy scheme will be applied in acquiring a replacement dwelling. As Clause 25(1) stands, the application of the proceeds is,

    "for such purposes and in such manner as the Corporation may determine".

I am not suggesting that the proceeds will be spent frivolously. But the direct connection between proceeds and the replacement dwelling is not present in the Bill as we should like to see it. The purpose of the second amendment, which inserts a time period, is to ensure that an association would have the right to replace the dwelling, putting a minimum time on the corporation's power to deal with the proceeds of the sale. I beg to move.

Earl Ferrers: My Lords, Amendments Nos. 221E and 221F, in the name of the noble Baroness, Lady Hamwee, concern the use of the disposal proceeds fund. In the debate on Amendment No. 221B I explained how the corporation will use its power to determine the use of this fund, the purpose of which will be to provide replacement properties for rent.

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We wish to ensure that replacements meet local need, and that local authorities are involved in any decisions made. Associations will have to inform local authorities of sales and consult them when deciding on the type and location of any new dwelling and any nomination arrangements. I am sure that we all agree that local consultation is sensible. That will be set out in the corporation's determination to ensure that all landlords comply.

Purchase grants and social housing grant will be put into the disposal proceeds funds--that is public money. It is important that the corporation should have some control over its use and be able to give detailed guidance on the procedures to be followed when it is spent. The corporation intends to consult with local authorities and others before it issues the determination which will set all that out.

I am sure that the noble Baroness shares our concern that the fund is used wisely. But Amendment No. 221E would allow associations to replace properties without reference to any further guidance, and it also appears to dilute the principle of replacement by suggesting that other uses for the fund may be specified by the corporation.

Amendment No. 221F would give a time limit of five years within which sale receipts should be recycled. Under the current provisions of the Bill the time limit will be governed by a determination which will be issued by the corporation. We agree that there needs to be a time limit, but our current view is that it should be three years rather than five.

The corporation will consult before the determination is issued. We would prefer to have the flexibility to set a time limit after the consultation has taken place, and to have the discretion to review the limit if any problems arise in practice. We believe that that will be more satisfactory than having it fixed in primary legislation. I hope that on reflection the noble Baroness, Lady Hamwee, agrees.

8.45 p.m.

Baroness Hamwee: My Lords, it is helpful to have on the record the Government's view as to the time limit, though obviously it will be a matter for the corporation and not for the Government. I do not imagine that there is any way in which the Government can require that any time limit will apply other than through their good relations with the corporation. I am not receiving any feedback in that regard so I am probably right.

With regard to the purposes for which funds are applied, as Clause 25(1) stands the normal meaning of the words is that it is as wide as can be. The provision states,

    "for such purposes and in such manner as the Corporation may determine".
I accept that it is not intended to use the funds other than for the purposes that we have been debating. I see no firm reassurance of that and do not believe that I shall get any further in making this point tonight.

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Earl Ferrers: My Lords, with the leave of the House, I do not believe that I can say much more than I have already said. This will be a matter for consultation before determination is made and the determination will obviously reflect the consultation.

Baroness Hamwee: My Lords, I thank the Minister and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 221F not moved.]

Clause 30 [General power to obtain information]:

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