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Lord Bassam of Brighton: The noble Baroness gave an interesting speech. I know she has a great passion about these matters—housing being one of her interests. I appreciate where she is coming from on this issue, but there is a disagreement between us. We must acknowledge and accept that.

The noble Baroness has described the effect of Clause 40. In our view no amendment is required because the clause allows the Secretary of State, or in

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Wales the National Assembly, to make payments in respect of all authorities' debts, in proportion to those authorities' debts at the time.

As is understood by the Committee, the policy behind Clause 40 is to assist individual authorities who transfer their housing stock to a registered social landlord, but need assistance to meet outstanding housing debt liabilities where the receipt is insufficient to do so.

I think the amendments are based on a misunderstanding that we are somehow giving favourable treatment to those authorities which transfer their housing stock and for which we make an overhanging debt payment. That is not the case. My noble friend explained that there are three ways in which local authorities can take forward their policy in terms of investing back into the stock through ALMOs, through the PFIs or through this route. We think that provides the basis of fair and reasonable choice.

We say that clearly all authorities are treated on a fair basis. It is up to the local authority to choose whether it wishes to retain or to transfer its stock, based on a rigorous option appraisal which will involve tenants and other key stakeholders. If an authority or its tenants choose to retain its stock, the Government, though the housing revenue account subsidy, continues to ensure that a local authority can meet the cost of servicing its attributable debt.

However, where a local authority has transferred its stock, we believe it is inappropriate for an authority that has no housing to remain in receipt of ongoing housing revenue account subsidy. That would make a nonsense of the scheme.

That approach would be undermined by the amendments which are offered forward as a scheme to remove the Secretary of State's broad discretion and to require us to make payments to reduce or extinguish all English authorities' debts where the Secretary of State considered it appropriate to make such a payment for one authority.

The amendments would similarly constrain the National Assembly for Wales. It is a policy matter for the Secretary of State, or in Wales the National Assembly, to decide whether and how to contribute towards meeting local authorities' debt liabilities. The Secretary of State and the National Assembly should have the discretion to decide whether to make such a payment, or whether to leave it to authorities to use their own resources to pay off debts if those resources are sufficient. The amendments would of course take away that discretion.

Clause 40 is drafted sufficiently broadly to allow us to reduce or extinguish authorities' debts in other circumstances. By constraining the Secretary of State to reduce all authorities' debts proportionately, if he wished to reduce one authority's debts, the amendments would effectively prevent the use of the powers in Clause 40. So there is a clear divide here in policy terms. I have set out clearly our position. While

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I respect what the noble Baroness has said with regard to this, we simply disagree. We do not think she has the matter right.

Baroness Maddock: I thank the Minister for his not totally unexpected reply to my amendment. One issue he failed to address was the extra cost per property in doing it that way.

Lord Bassam of Brighton: I have the response to that. The 1,300 per dwelling was over 30 years and represents the cost of private finance. That comes from the NAO report and is in that sense a hypothetical calculation. Our argument is simple: over time, the benefits of the housing transfer, including bringing forward works and better performance, outweigh the costs. That is how we see it and that is how we think it will work in practice.

Baroness Maddock: I thank the Minister for filling us in on that matter. Does that mean that we do not take an awful lot of notice of National Audit Office reports? He seemed to dismiss it rather lightly.

I still think there is a large question mark here over whether some local authorities should end up in the position—

7.15 p.m.

Lord Bassam of Brighton: I invite the noble Baroness to agree at least to the proposition that the sum over 30 years which I described is pretty good value. Surely she is not saying that it is not.

Baroness Maddock: It was not that; it was the Minister's throwaway comments about the National Audit Office. However, let us forget that; it is not important. It is what comes of making throw-away comments to oneself—it is not always a good idea in such circumstances.

I appreciate that the Government approach the matter from different points of view. I think that there is a case to be made for creating a more level playing field for local authorities that are trying to improve their stock. Large sums are involved. That is not necessarily the fault of local authorities—very often it occurs because the housing is located in parts of the country with much lower housing costs. That is one of the reasons why their stock is not in good condition. I also remember the years when many local authorities were starved of the ability to spend money on housing. So the history is not simple.

I certainly do not think that local authorities should be penalised because they find themselves in that situation. However, I am concerned that some of them which do find themselves there are able to get out of it more easily than others which have been trying desperately to improve their properties. We may return to the issue. Given the Minister's comments, I may be able to improve the amendments. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Baroness Hanham moved Amendment No. 105:

    Page 18, line 18, at end insert—

"( ) Any payments made by the Secretary of State under subsection (1) must not be financed by monies recouped from debt free councils via capital receipts."

The noble Baroness said: In moving Amendment No. 105 I shall also speak to Amendment No. 110. However, I shall not do so if that mucks up the Minister's speaking notes.

Lord Rooker: We have gone much more slowly than we should have today. I want to pull stumps. I shall not move that we adjourn until we agree to Clause 42 stand part. Amendment No. 110 will therefore be the last amendment that we debate today. After that, we will still have to agree that the clause stand part. However, given that there are only four groups of amendments left, I am quite happy to mix and match. If the noble Baroness wants to speak to Amendment No. 110 in moving Amendment No. 105 I will reply to them together. I have not read Amendment No. 110 but I shall now.

Baroness Hanham: It will be very enlightening. The purpose of the two amendments is to ensure that the capital receipts of debt-free authorities—which the Committee discussed last week, and which cannot benefit from these provisions—are not taken by the Secretary of State to be used to pay off the debts of perhaps less prudent authorities.

The first purpose of the amendments is to enable the Government to spell out in detail the circumstances in which they might intend to use the powers under this section. The Liberal Democrat amendments have probed, as we have in other clauses in the Bill, why the Government feel the need for selective powers at all and how we can prevent injustice and political decision-making. However, it is vital that the objective criteria that will govern the exercise of these powers are published. It is simply not good enough for the Minister to say—I do not know whether he is saying this—that these are reserve powers.

The amendments specifically attempt to prevent what would be an abuse of power—for the Government to seize the capital receipts of well-run, debt-free councils and use them to bail out the less prudent. Not only would that be wrong in principle, it would create a moral hazard for both good councils and bad ones. Why should any council seek to be a debt-free council and operate responsibly if it feared that its reward would be to see its capital receipts, or at least a proportion of them, creamed off? I beg to move.

Lord Rooker: A quick perusal of my speaking notes answers why the noble Baroness, Lady Hanham, has done me the favour of speaking to Amendment Nos. 105 and 110 together. My speaking notes for the two amendments are nearly identical. I can therefore comfortably cope with the grouping. However, and by

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the way, I do not want to give the impression that I think that the Opposition are speeding up. I still think that we have gone very slowly today.

Baroness Hanham: It has been perfectly normal.

Lord Rooker: No; we have gone very slowly. There are only three more sittings and we want to scrutinise the Bill properly.

Clause 40 allows the Secretary of State to assist one or more English authorities to meet debt liabilities through a payment direct to the Public Works Loan Commissioners. Both in Committee and on Report in another place, and through this amendment, there has been a suggestion that the pooling provisions in Clause 11 could apply to housing transfer receipts. It has also been suggested that there is a direct link between the money paid in respect of overhanging debt and the money likely to be collected through the pooling proposals. That is mistaken.

For the record, I hope that it is now recognised that receipts from a large-scale voluntary transfer by an authority that is debt free will not be subject to the pooling provisions. When a housing transfer takes place we expect the local authority to use the receipt as provision against any housing attributable debt. Any receipt over and above that will be subject to the already existing large-scale voluntary transfer levy, which is currently set at 20 per cent. As is prescribed in Section 136 of the Leasehold Reform, Housing and Urban Development Act 1993 this levy is paid into the Consolidated Fund.

Resources for making overhanging debt payments are not held within the Office of the Deputy Prime Minister provision for capital allocations. They are requested on an annual basis from the Treasury as part of the ODPM's annually managed expenditure and will not be found from the pooled receipts. That reflects the ODPM's liability to pay ongoing housing revenue account subsidy to a local authority with housing attributable debt which in practice the overhanging debt payment discharges. It also reflects the difficulty in knowing the level of resources required in advance. As such, the resources are not available to fund capital expenditure.

Since arrangements were put in place in December 1999 we have paid 824 million to the Public Works Loan Commissioners in respect of whole stock transfers in 10 local authorities. All that has taken place prior to proposals for pooling of capital receipts in this Bill.

We have made clear during passage of the Bill that redistribution is a fundamental principle of housing capital finance and that that can be delivered through pooling. 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. Recycling those resources back into housing means that other authorities with lower capital receipts will receive a fair share of housing resources where their need for housing investment is greater. For that reason, when the new capital finance system comes into force, the

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present system of set-aside will end, to be replaced by an explicit pooling system. That is the simplest way of providing the additional resources to contribute to housing investment nationally. It is not a reserve from which overhanging debt payments will be made.

I hope that the noble Baroness will accept that explanation. We have already debated Clause 11, but I fully accept that it is controversial and that we will return to it on Report. The above remarks are equally applicable to Amendment No. 110, which seems to be word perfect the same as Amendment No. 105.

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