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Lord Rooker: We believe that the amendment is unnecessary. It is based on a concern that the overhanging debt payments are not open to scrutiny. It seeks to reduce the Secretary of State's ability to repay the appropriate amount of an authority's debt and to hamper a transfer, voted for by tenants, taking place successfully. That is the summary of the points that I wish to make. However, in view of the remarks of the noble Baroness, I want to place rather more on record.
Clause 40 allows the Secretary of State to assist one or more English local housing authorities to meet debt liabilities through a payment to the Public Works Loan Commissioners. Amendment No. 103 would require the Secretary of State to make an order before making such a payment.
Clause 122(4) would require such an order to be made by statutory instrument. The requirement to make an order before a payment could be made could prevent the Secretary of State from paying the correct amount in respect of an authority's overhanging debt following a stock transfer.
Members of the Committee will be aware that the Office of the Deputy Prime Minister is quite open about housing transfer programmes. We publish on the ODPM website a list of those authorities that apply for a place on the housing transfer programme and we announce to Parliament those that secure a place. Once a transfer takes place, details of the transfer, including the number of dwellings, the sale price, private finance and overhanging debt payment are also included on the website and are freely available from the Office of the Deputy Prime Minister.
Overhanging debt payments were originally recorded in Her Majesty's Treasury's annual accounts. Since 200203, they have been recorded in the annual accounts of the Office of the Deputy Prime Minister. Therefore, payments are open to scrutiny by Parliament and by the National Audit Office. Were any such payments to be made by the National Assembly for Wales, they would be shown in the Assembly's accounts. There are no secrets about this.
The actual amount of the overhanging debt which the Secretary of State would repay is known only at the very last moment when the housing stock transfer takes place. As a minimum, the rate for new loans from the Public Works Loan Board is reviewed weekly, with any changes impacting on a local authority's debt redemption premium and therefore on the level of an overhanging debt payment. If the amount had to be specified in an order, which would be made and would have to be laid before Parliament at least 21 days before coming into force, the amount of the debt repayment specified in the order may not be the actual amount of overhanging debt that needed to be repaid.
The payment specified in such an order might be insufficient, leaving the authority with an outstanding debt or, indeed, an excessive amount. We should be unable to consent to the transfer if the order had not been made before the transfer, as the authority would be unable to meet its housing debt obligations and would remain eligible for housing revenue account subsidy. The purpose of Clause 40 is to remove that possibility, as we believe it is inappropriate for an authority with no housing to be in receipt of ongoing housing revenue account subsidy.
As I said, I believe that the amendment is based on the concern that overhanging debt payments are not open to scrutiny. I hope that I have said enough to assure the Committee that they are indeed fully open to scrutiny.
Baroness Hanham: I thank the Minister for his reply. I understand his point; namely, that the process is open to some scrutiny. But there is no better scrutiny than an order being laid before Parliament.
The trouble with these debt repayments is that it is fairly arbitrary as to which authorities are having debts paid off. Some substantial debts are being paid off. A question also arises as to where the money is coming from that the Secretary of State is using to pay off the debts. There is a suspicion that some of the moneymoney from pooling, for examplemight find its way into those coffers. There is more than just a little concern about this.
The Chartered Institute of Public Finance and Accountancy has said that the playing field is not level and that taxpayers' money is being used in a discriminatory fashionthat is, to pay off debts. It has stated that there is also a measure of perverse incentive in the proposal, as it benefits authorities that have not maintained their housing stock in the past to a standard where the market value exceeds the historic debt; that is, authorities which, by definition, have let their housing stock run down. They will benefit from having debts paid off when they have not expended sufficient money on their stock for tenants to wish for them to be maintained.
I shall not pursue this amendment, but the Minister might like to take up the comment from the Select Committee Report which was in the evidence given by the Chartered Institute for Public Finance and Accountancy. He may have more to add on this matter.
Lord Rooker: Perhaps I may put on the record that I resent the word "arbitrary". Stock transfer takes place only after a tenants' vote. There is nothing at all "arbitrary" about the issue. It is well known that the Government have a policy. There are three ways to get the extra money to meet the decent homes standardsstock transfer, armslength management organisations or private finance initiative. They are the only ways that local authorities will receive money for meeting decent standards. That is it. The reality is that they will not get dollops of money to continue badly-managed council housing.
In answer to what the noble Baroness said about CIPFA, in commenting on the draft Local Government Bill, it suggested that these provisions will lead to greater cost to government. However, CIPFA was one of the consultees when the DTIas it wasissued its consultation paper in August 1999, which outlined the proposed options and arrangements for making overhanging debt payments. Its responses made no criticism of the principles of the proposal in respect of overhanging debt, nor any of the suggested routes for dealing with housing debt. Rather, its comments were centred on technicalities and made no mention of the cost implications to government. That is how I understand the position. I am always quite happy to receive further advice and particulars.
There is some suspicion about where the money is coming from. We are quite open about that. The noble Baroness spoke about some scrutiny. I have said how the amounts are made availablethe stock and the dwellings. The tenants are balloted and the amounts follow. The ballot is done in public. It is not a secret ballot. It is a secret ballot for the tenants, but everyone knows about the ballots and will report on them. So it is available to total scrutiny, not just some scrutiny.
The noble Baroness said: In moving Amendment No. 104, I shall speak also to Amendments Nos. 106 and 107. These are all amendments to Clause 40. As the Government and the Minister in his recent statements have made clear, and particularly when the draft Bill was published, this clause and the following clause facilitate the transfer of council housing to registered social landlords. I have no objection to that. However, I think we should look carefully at whether there is a level playing field and whether people are being given the right choice. The Bill is about local councils being given a choice. In fact, this is one of its most restrictive parts. If local authorities want to bring their houses up to a certain standard, this is one of the choices they have. It is the same for the tenants.
Clause 40 enables the Secretary of State and the National Assembly for Wales to make payments to local authorities in England so that they can meet the outstanding overhanging debts which we discussed in the previous clause. Clause 40 is about debts that arise from the Public Works Loan Commissioners. Sometimes early repayment of such loans attracts premiums or penalties. The Bill enables the Secretary of State or the National Assembly for Wales to meet these payments.
We discussed set aside on capital receipts earlier in the Bill. That is how the system is managed at the moment. In 1999 arrangements were made to pay overhanging debts. I am grateful to the Minister for the letter he sent me on these issues following Second Reading. In it he states that, since arrangements were put in place, £824 million has been paid to 10 local authorities for whole stock transfer.
That is a considerable amount of money. There may be considerable amounts involved in the future. To put the matter into context, basis credit approvals to all local authorities in England amounted to only £793 million in the year 200203 and £852 million is the estimate for the year 200304.
The noble Baroness, Lady Hanham, talked about discussions in the Select Committee of another place. One matter that came out from the National Audit Office was that this system of improving the property through large-scale voluntary transfer costs the taxpayer £1,300 more per property than if they remained with the local authority.
The inclusion of this power moves the Government further away from the level playing field that we would prefer to see. Therefore, we have tabled these amendments. The Government argue that payments made from a sum of money requested on an annual basis come from the Treasury as part of the Office of the Deputy Prime Minister's annual managed expenditure. They are made on the basis that it would otherwise have to pay ongoing housing revenue account subsidy to the local authorities. So, in practice, the overhanging debt payment is treated as a one-off payment, discharging that liability.
One canas are the Governmentpay £" million to an individual authority, or one could pay all authorities some money. We seek in these amendments to do that in order to make the situation fairer. The reduction in the liability to pay ongoing housing revenue account subsidy is the same amount.
I do not expect the Minister to accept these amendments for one moment because he has made it quite clear that the Government want to make sure that local authorities are pushed into this way of dealing with their housing. We do not agree with him and would like to see much fairer treatment across local authorities and that we do not have some local authorities getting large amounts of money. The advantage of what we propose is that it has the potential to release revenue streams within housing revenue accounts that could then be used under the prudential framework introduced in Clauses 1 to 6 and enable local authorities to finance renovation of their own stock. I recognise that the Minister will not approve of that, but I think that many people in local government would support a fairer use of this money.
If the Government wish to take powers to repay outstanding debt loans, we believe they should be applied equally between local authorities, regardless of whether a decision has been made to transfer the housing stock. The whole matter will get even worse when regional boards are distributing money to local authorities. At the moment, the Minister has said there are three ways in which people can deal with their housing stocklarge-scale voluntary transfer, arm's-length management organisations and PFIs. It seems to us that councils that go down the route of large-scale voluntary transfer get an advantage, and we want to see a fairer playing field. That is the purpose of these amendments. I beg to move.
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