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Lord Lucas: My Lords, we fully support the spirit behind this amendment but we do not believe that an amendment to the Bill is necessary to achieve the effect.

The Local Authorities (Goods and Services) Act 1970, to which the noble Lord, Lord Williams, refers, provides for the Secretary of State to designate by statutory instrument those organisations which are to be considered as "public bodies", and therefore able to trade with local authorities. Local authorities are able to engage in trade with registered housing associations because an order has been made designating this.

We agree with the noble Lord, Lord Williams, that it would be eminently sensible for local authorities to be able to trade with registered social landlords, and we shall be actively pursuing this. With the introduction of a wider range of social landlords, as part of this Bill, we shall, of course, need to consider precisely how this should apply.

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The arrangements for adding to the list of public bodies under the Local Authorities (Goods and Services) Act 1970 have worked well in the past. I am sure that the noble Lord accepts that what is important is that local authorities should be able to trade with registered social landlords, not the mechanisms to achieve this. Given that we already have the powers under the 1970 Act I hope that the noble Lord will feel able to withdraw his amendment.

Lord Williams of Elvel: My Lords, I am again grateful to the noble Lord, Lord Lucas, for his response. The Government certainly have the powers and I am grateful to him for his appreciation of the problem. I look forward to the appropriate orders being produced in the course of time. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lucas moved Amendment No. 236:

Page 146, leave out lines 4 to 11 and insert--
"Realisation of value of Corporation's loans portfolio.
76A.--(1) The Corporation may, and if so directed by the Secretary of State (under section 76) shall, enter into arrangements of a description approved by the Secretary of State for the purpose of realising the value of the whole or part of its loans portfolio.
(2) The arrangements may provide for--
(a) the transfer of any estate or interest of the Corporation, or
(b) the creation or disposal of economic interests not involving a transfer of an estate or interest,
and may extend to such incidental or ancillary matters as the Corporation or the Secretary of State considers appropriate.
(3) In this section the Corporation's "loans portfolio" means the Corporation's rights and obligations in relation to any loans or related securities.
(4) Nothing in the terms of any loan or related transaction entered into by the Corporation shall be construed as impliedly prohibiting or restricting the Corporation from dealing with its loans portfolio in accordance with arrangements under this section.".").

The noble Lord said: My Lords, in moving this amendment I shall speak at the same time to Amendment No. 237. The first of the amendments affects the corporations in England and Wales and the second amendment introduces similar provisions for Scottish Homes.

Housing associations fund development primarily from a mixture of loan and government grant. For the last eight years they have raised that loan finance on the market. Prior to that, housing associations borrowed money from the housing corporations who in turn borrowed money from the National Loans Fund. The loans were typically for 60 years; so there is a considerable debt outstanding. Its overall face value is about a billion pounds.

The Government have announced that they plan to re-finance this public sector borrowing. We are currently exploring the prospects for selling the loan portfolio. N. M. Rothschild and Sons Ltd were recently appointed as advisers on this proposal and Ministers expect to take a decision on whether to sell, and, if so, how that sale might best be effected, in two to three months' time.

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The existing provisions in the Bill place responsibility on the Secretary of State for directing the corporations to sell. This makes it clear where responsibility lies. It is particularly appropriate because, in effect, the corporations are acting as government's agent in handling these loans.

The revised provisions in these amendments reflect two factors which have become clear in the work already undertaken by the corporations to examine and describe their portfolios and in the preliminary inquiries by Rothschild. The first is that there is, as yet, no certainty about the best ways in which the latent value of these loans could be realised. It will not be possible to take a view on the best approach for several months. It is quite possible that some loans will not be suitable for sale and that there may need to be intermediate activity prior to sale in order to produce the most cost-effective solution. The provisions of subsections (2) and (3) of Amendment No. 236 ensure that the corporations should be able to take such steps short of outright sale as are sensible to achieve this. Any decision will be taken in the light of the best interests of the taxpayer.

The second point deals with a potential problem. A standard form of charge used by the corporation in the 1970s had a rather curious provision to the effect that,

    "the Corporation may at any time after its power of sale has become exercisable transfer the benefit of this legal charge to any person".
It might be argued that the corporation could not transfer the charge prior to the power of sale becoming exercisable. Leading counsel has advised the Housing Corporation that this is not so and there should be no inhibition on sale. But any prospectus would have to draw attention to this scintilla of doubt. This is not satisfactory from the point of view of either the vendor or the purchaser who may be uncertain as to their position. It will certainly not be satisfactory if the taxpayer finds that the value of the loans cannot be realised because of this technicality. Therefore subsection (4) puts the position beyond doubt.

None of this will disadvantage the borrower, or the tenant, as the terms of any loans will apply whoever holds them.

Amendment No. 237 has precisely the same effect in respect of Scottish Homes, reflecting the different wording of the Scottish legislation. I beg to move.

The Earl of Balfour: My Lords, may I ask my noble friend to take one factor into consideration. Can I ask him to look at the penultimate clause in the Bill at page 124. I think he will see that the provisions of the Housing Act 1988 relating to registered housing associations do not extend to Scotland. While it is important that this amendment be considered, perhaps between now and Third Reading he will look at the extant clause.

Lord Williams of Elvel: My Lords, perhaps I can remind the noble Earl, Lord Balfour, that we have to deal with the government amendment as it stands at the

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moment. It introduces a very interesting concept. I understand that Rothschild is looking into the whole question of disposing of the corporation's portfolio. The purpose of the amendment, as the noble Lord, Lord Lucas, quite properly described, is to allow the Government, plus Rothschild, to get on with the business. But it seems odd that at Report stage in your Lordships' House, the Bill having gone through another place and having gone through Committee in our House, the Government appear to be introducing an amendment which allows Rothschild--acting for the Government--to enter into any arrangements of any description for the purpose of realising the value of whole or part of the loans portfolio of the corporation.

I can only say that, faced with this amendment at this time of night, I do not wish to argue the point. I would have wished to argue the point in Committee had the Government produced the amendment at that time. In my experience as a banker, there is something pretty odd about the Government producing an amendment at this time of night at this stage in order to shuffle off the loan portfolio of the corporation.

It is not only the loan portfolio. The amendment provides for,

    "the transfer of any estate or interest of the Corporation",
of which there are many

    "or the creation or disposal of economic interests not involving a transfer of an estate or interest",
so any guarantee, or whatever

    "and may extend to such incidental or ancillary matters as the Corporation or the Secretary of State considers appropriate".

Although I am anxious to get on with the business this evening, I find the amendment rather difficult to swallow.

Lord Lucas: My Lords, obviously, I do not want to try and persuade the noble Lord, Lord Williams, to accept an amendment which is defective, but I hope that that is not what we have here. I hope that the limitations of subsection (1), which states the purpose for which these powers are required, effectively limit the way in which the powers that appear in subsection (2) are used. Subsection (1) states:

    "for the purpose of realising the value of the whole or part of its loans portfolio".
After that restriction is then drawn widely to enable a rather diverse, and perhaps in some ways strange, portfolio to be dealt with effectively. As a point of detail, Rothschild will not enter into the arrangements. It will simply advise on them.

In general all I can offer as a comment is better late than never. It is best that we have the powers set out in this Bill which enable the loan portfolio to be dealt with properly. I apologise to the noble Lord for the fact that we did not pick up these difficulties earlier and give him time to test me on them at Committee stage. But I believe we have got them right now.

Turning to the question asked by my noble friend Lord Balfour, I am advised that it is "an elephant" or perhaps that should have been "irrelevant". However, given my noble friend's reputation as

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someone who can pick up mistakes made by the Government, I shall certainly look at the point in detail and write to him.

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