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In response to the final question of the noble Baroness, Lady Maddock, in all justice, I cannot say in detail how the housing boards and the regional strategy will work. The housing boards have been set up. We have not been prescriptive about the centre; they were more or less set out in community plans. They differ slightly in some regions, which is fine. They are all working on their first housing strategy, which they will provide to Ministers by July. Some strategies have been launched in draft form and are being consulted on at present. There will not be a "big bang" next year. We want a seamless change from one system to the other, so a lot of money will already be pre-allocated through the Housing Investment Programme and the Housing Corporation's Approved Development Programme. It will take a few years to change from one system to the other; we do not want a hiatus in the process. Nevertheless, we do not have a figure for how much money will be available, so unfortunately I cannot give it. Authorities that think they will lose cannot prove that that will happen. One does not automatically assume that debt-free authorities will receive nothing at all. That is a false assumption.
I shall deal with the central issues and put on record the formal response. I realise that the provision is controversial for some people, but it is only a technical adjustment of pooling. In many respects, pooling already exists. This is a technical extension of it. For those who check the dictionary, I accept that it is more than an adjustment; it is an extension.
This group of amendments, and the ones in the groups that follow, are concerned with the treatment of capital receipts, and with limiting the housing capital receipts that may be subject to pooling, or removing the power to pool housing capital receipts altogether. If the amendments were agreed, it would mean the end of the clause.
Amendment No. 45 would remove the Secretary of State's power to make regulations on the use of capital receipts. That would have very serious implications for the framework within which authorities manage their financial affairs. The Secretary of State could not, for example, specify that capital receipts could not be used to meet revenue expenditure. Frankly, I do not believe that that is the purpose of those who tabled the amendment. Instead, authorities could use capital receipts for any purpose. They could dispose of much-needed housing stock and use it to fund the day-to-day running of the authority. They could use capital assets for short-term purposes, to subsidise council tax levels, rather than investing them in public services.
At present, local authorities may use capital receipts only for new capital expenditure or for repaying debt. That system prevents authorities from disposing of assets and then using the proceeds to meet running costs. It is a fundamental principle that underpins the capital finance system in local government and it remains our policy.
We propose to make regulations to ensure that when authorities spend their capital receipts they do so only to fund capital expenditure and to secure increased capital investment. They will also be free to use the receipts instead to pay off old debts and credit liabilities. Those are sensible and responsible limitations which exist to prevent abuse of an authority's capital assets. We do not believe it is right to see authorities selling the family silver to meet ordinary day-to-day expenditure. That is the exact complaint that the late Harold Macmillan made against the government of the noble Baroness, Lady Thatcher. I am sorry to introduce those political notes in our debate.
Lord Rooker: That is the result of long years of opposition in another placescarred years. All we had to do in those days was to use one Tory against another. We did not have the votes ourselves. The late Harold Macmillan was wonderful in talking about real people and the one-nation Tory, with the smashing up of the country by the then government. He had represented the North of the country. He knew about poverty and poor housing conditions, and he tried to do something about it. However, I digress.
Capital receipts also come in the form of loan repayments, which may have been financed by the authority through borrowing. The Chancellor's "golden rule" demands that such repayments be used only for capital investment. We achieve that by defining the repayment of capital loans and grants as a capital receipt and by requiring that it can be used only to fund further capital expenditure or to repay debt. Those amendments would prevent us from doing so.
If we were to accept the amendment, only housing receipts would be subject to the requirements that I outlined earlier. Local authorities could use their non-housing receiptsfor example, by selling off school buildingsto meet day-to-day revenue expenditure, to subsidise rent or council tax levels or to pay salaries. Again, we are being asked to support a breach of a core principle of local government finance. In this case, additionally, the amendment distinguishes between different types of receipt. There is no logic to that distinction and no reason to support it.
Amendment No. 47 would remove altogether the Secretary of State's power to make regulations to pool capital receipts. That would mean that pooling could not operate as it must if authorities are to have the resources that they need to meet our pressing housing priorities nationally. I remind the noble Baronesses that redistribution is a fundamental principle of housing capital finance, and these amendments would overturn it. We have always taken the view, as have other administrations, that it is right for a portion of the proceeds from the sale of council housing to be available for use in areas of greatest need. That is exactly what the current arrangements do, with the notable exception that they do not include the increasing number of debt-free authorities.
The present system works by requiring local authorities to set aside a portion of housing capital receipts, such as those from the sale or disposal of housing revenue account assets. That portion is 75 per cent of receipts from the sale of council dwellings and 50 per cent of receipts from other assets such as land. As the amounts set aside may be used only to repay debt or other credit liabilities, that then reduces the level of interest that they are required to pay. That, in turn, brings down the amount of revenue support for debt charges that authorities receive from central government by way of housing revenue account subsidies.
That frees up subsidy resources to support new borrowing by housing authorities generally. The amount of that new borrowing is determined as part of the annual Housing Investment Programmethe HIP roundtaking account of the assessed priority for capital investment in each authority's area. The net effect is that the current set-aside mechanism allows us to redistribute spending power to where it is most needed at the time. I challenge anyone to say that that is a bad system.
Debt-free authorities do not have to set aside any portion of the capital receipts that they receive from right-to-buy sales. Those authorities have been effectively exempt from the redistribution system. They may use all of their receipts for whatever capital purpose they wish, regardless of their relative need to spend.
We do not accept that some authorities should routinely be able to spend significantly more than other authorities, regardless of the condition of their stock or their other housing needs, simply because they are debt-free and rich in receipts. They are rich in capital receipts primarily from right-to-buy sales. They have nothing to do with right-to-buy sales. Such sales do not occur because of good financial management by a local authority, but simply because people in that area decided to exercise their right to buy. The local authority does not make that decision; it cannot be the result of an authority's management of the sale of assets, such as a redundant school or other buildings, as part of the prudent financial approach with which local government is famed. Right-to-buy sales are wholly different, because they are outside the control of the council; the tenant has full control.
Some authorities happen to be debt-free because of good fortune, not good financial management. Some happen to have inherited assets. Others may have been remiss in meeting responsibilities in their area, so they simply have not incurred debt. Some authorities did nothing about transport services or providing school meals. They kept council tax levels down because they did not spend any money and did not provide services. I shall not name the councils concerned, as they have improved a lot in recent years, particularly as political control has changed. The suggestion that there is an absolute parallel between efficient management and debt-free status is inaccurate. In a nutshell, an authority is not necessarily good because it is debt-free. In the same way, an authority in debt is not therefore badly managed. There are other reasons why authorities are good, bad and excellent, which are wholly unconnected with their debt-free or debt-bearing status.
If we choose not to retain some form of redistribution, authorities with debt or lower capital receipts are denied a fair share of housing resources, even though their need for housing investment may be greater. I must ask those promoting the amendment, whether in Committee or on Report, to think about authorities in debt that might have housing need, rather than simply those without debt, which are the authorities that are crying at present.
Authorities under the control of all political parties are in debt; it is not a party matter. I shall not read out all the authorities in debt because it would take up time unnecessarily. For convenience, I shall name one from each party. If we choose not to retain some form of redistribution, authorities in debt, such as the Labour authority of Blackpool, the Liberal Democrat authority of Milton Keynes and the Conservative authority of Medway, are denied a fair share of the housing resources. I could mention other authorities that I have visited in the past where housing investment is needed. Therefore, one must look at the situation in the round, considering all authorities in need. Redistribution is a good thing. So it must be right for the proceeds of the sale of housing assets to be available for use in areas with the greatest need.
Without pooling, there are only three alternatives: higher tax, less investment by the most needy authorities or cuts in other programmes. Those are the consequences of abandoning pooling. I am not trying to make a challenge today, but if the matter comes back on Report, I will demand that those who promote such amendments say which of those alternatives they promote in their stead. That is the only fair way. The consequences for those authoritiesI could list othersof moving such amendments would be very unfair.
The current provision for capital receipts applies to all other local authorities where a proportion of receipts must be set aside. We are ending that provision; instead there will be a pooling mechanism. If it is right that all other authorities in the country should be part of the pooling mechanism, there is no logical reason why debt-free authorities should not be, too.
We do not propose to pool 100 per cent of receipts. Our proposals are in line with the current arrangements, which I have already mentioned. Authorities will still be free to keep 25 per cent of receipts from right-to-buy sales and 50 per cent of receipts from other sales. We also propose to allow all authorities to retain all non-right-to-buy receipts used to provide affordable housing or to support regeneration schemes. That is wholly consistent with the general thrust of housing policy. It is a very good example of saying that the local decision is the one that counts. If an authority wants to fund affordable housing or regeneration schemes, there is a mechanism whereby it can get money from non-right-to-buy receipts.
It is of paramount importance that, in the longer term, all authorities should have access to the maximum funding to meet national housing priorities such as affordable housing and decent homes. The Government provide significant additional resources to help in that regard. Since 1997, the total amount provided to local authorities in England has increased two-and-a-half times, from just under £1 billion to £2.5 billion. But the arrangements proposed in Clause 11 and the draft regulations are central to our efforts to achieve the necessary investment while being fair to all authorities. Those areas that generate the most receipts will still retain significant amounts to use as they see fit. All authorities will be eligible to benefit from the resources available nationally on the basis of their needs.
We recognise that some authorities will need time to adjust to the new arrangements, where the national resources are shared equitably among all authorities. We have therefore decided to institute transitional funding for existing debt-free authorities, as those are the authorities most affected by pooling. Under the special arrangements, a proportion of the total resources expected to be pooled by debt-free authorities will be earmarked to them, in addition to any other resources that they may be allocated, provided that they use it for housing.
An authority with housing stock that is debt free when the new capital finance is introduced will receive up to a given percentage of its share of the total capital receipts, which we have estimated will be paid into the pool by debt-free authorities. That percentage will be 75 per cent in year one, 50 per cent in year two and 25 per cent in year three.
Clause 11 relies on the negative resolution procedure. That is consistent with the position under the present capital finance system, which, as I have said before, depends heavily on secondary legislation. I shall not repeat the point that I made, but the Delegated Powers and Regulatory Reform Committee made no comment on the power. Therefore, my earlier remarks apply equally to the amendment.
I have no apology to make whatever for the redistributive effect, and the pooling effect on the debt-free authorities. I have listened to everyone who wants to speak to me on the matter with respect to authorities since it was first highlighted. It is one issue that I have
I could not defend the passing of the amendments to those authorities, because it looks thoroughly selfish in the interests of housing. I do not accept that the authorities should claim the credit for the right-to-buy sales, because they do not manage those. They should not claim that it was their money that paid for the houses in the first place. Council housing is a national asset. I understand the vagaries of finance in different authoritiesit varies from town to town and city to city. However, by and large, it is a national programme. As I have freely said, it is not confiscation, but genuinely nationalising to share the resource up for the national kitty, based on those authorities with the greatest need.
In regionalising housing finance, and looking at the system that will come forward, clearly we are taking a much broader view across the region. I cannot give the amount of money. For some reason or another, as I went through the answer, I had a figure in my mind, but the amendments all got messed up again todaysince we left on Monday, different amendments have been joined together. The noble Baroness is umm-ing and ah-ing, but I assure her that Amendments Nos. 45, 47, 50 and 52 were not in the same group when I left the Moses Room on Monday. Therefore, I had separate sets of speaking notes.
I tore up my original speaking notes, and threw away the authority list that was provided to me, I might add. I remember a figure of what the effect would be. I think that it was £750 million. That will be relevant to a later amendment, so I shall come to it in greater detail. We are not talking about a tiny sum of money; it is substantial. As I was asked the question, I thought that I should put as much on record as possible.
That is a rather long response, but the provisions are an important part of the Bill. I am not in any way critical of the amendments, but I have more than adequately made the case for the arrangements in the Bill.
Baroness Hanham: I thank the Minister for his enormously detailed reply. Housing capital finance is probably one of the most arcane and difficult areas of local government finance with which to get to grips. One unfortunate aspect of the matter is the expectation raised by the provisionson other amendments, we will come to the proposals for the annexation of the moneythat there will be a change from money being set aside to pay debt to being pooled into a pot and cast
I want to make one thing clear. The Minister made a lot of political points, and I shall not join in those arguments particularly. The capital receipts group was only a small part of my amendment. I recognised within that that transitional arrangements had already been agreed in the Commons. That is what I said, and that will be in Hansard. Those transitional arrangements will relate only to any capital arrangements that take place after the passing of the Bill. They will not be retrospective, so the starting point will be the date of Royal Assent. That will not cheer anyone up all that much, but it may make an inroad.
I want to read very carefully what the Minister said about all the pooling arrangements. My gut feeling is that the provision is not the same little tweaking to the current capital housing finance regulations that the Minister suggests. It does not look like it in the Bill, and it does not sound like it from what the Minister said. I tend to look at an egg as I see it, and what I think that I see is the shape of the egg and the shape of the argument. What is inside tends to be a different matter. It would be better if I withdrew the amendment for the time being, but I have not the slightest doubt that we will return to it at a later stage. I beg leave to withdraw the amendment.