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This is an extremely controversial issue in the country, in local government and in those areas that still have council housing, which, increasingly, are places where tenants have had the option of various kinds of stock transfers but have opted to stay with their local authority. As a result, the Government carried out what I understand was called the opt-out pilot. The result, published in March 2008, shows that councils that are still running traditional council housing will have a 43 per cent shortfall in funding for management, maintenance and repair of their homes in the next 30 years, which is clearly a very serious matter. Council housing is being underfunded. Those of us who believe in council housing think the system is unfair in the use of receipts and in funding, particularly the fact that those local authorities are not eligible for the social housing grant. At the moment, a majority of councils with traditional council housing are in a position of so-called negative subsidy, meaning that there is a subsidy paid to the Exchequer by council tenants. Continuation of the present system would increase that; it is suggested that if the system were to continue—which is unlikely without some changes—there would be a subsidy to the Exchequer from council tenants of something like £1 billion by 2022.

The current financial regime, as I have just said, sees a majority of housing authorities with traditional council housing in negative subsidy. Between 1990 and 2003, some £13 billion has been taken from rents to

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subsidise other government spending. The Government brought in the major repairs allowance to address part of the problem—that traditional council housing was simply not kept in a proper state of repair, other than day-to-day repairs. It has gone some way towards solving the problem but nothing like far enough.

This is all ironic really because, traditionally, going back many years—as, regrettably, some of us can—the debates about subsidising or funding council housing were all a question of the balance between rent and rate levels. Every year, every housing authority had the debate, which was often politically controversial and controversial locally in other ways, and people made those decisions locally. The position has been very different for quite some time, as it is a long time since councils were able to set their own rent levels. In effect, the system is now determined from above, and councils operate it. Some of us may think that that is deplorable as a matter of principle, but it is the position that we are now in.

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In 2008-09, it is estimated that council tenants will pay around £6.1 billion in rent and, of this, £3.4 billion will be returned to the councils and kept by them for management and maintenance, while £1.3 billion can be spent on repairs through the major repairs allowance. That still leaves a £1.4 billion subsidy to the Exchequer in a single year out of the rents paid by council tenants. In addition, capital receipts from the right-to-buy system simply have not been ploughed back into council housing or, indeed, into social housing; £45 billion has been raised and only one-quarter of that has been recycled into improving public housing, according to a report from the Joseph Rowntree Foundation in December 2005.

We all know that a substantial subsidy is being paid through stock transfer. I have talked in the House previously—and I shall not repeat it now—about what happened in my own authority in Pendle when the council decided, against my wishes, and the tenants voted for a stock transfer to a housing association called Housing Pendle, which is nevertheless doing a good job. A large amount of money was spent on that, a lot of which did not go into housing. For example, Pendle Council is now a debt-free authority as a direct result of that stock transfer. That does not seem a sensible way in which to run the public finances, whatever short-term advantages there are to some parts of the system.

Debt write-off in the past seven years has resulted in £2.5 billion on stock transfers. An increasing amount is spent on gap funding, with an estimate of £387 billion by 2012. As we all know, if you do not transfer, you do not get anything like the same amount of money to spend on your houses. In Pendle’s case, it was a comparison of £45 million with £10 million up to 2010; without the transfer it would not have been possible to maintain houses of a decent standard beyond then, which is why people went for it. So it is bribery, blackmail and bullying—but it is astonishing the number of places in which the tenants are not accepting that and are voting to stay with their local authorities in traditional council housing.



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The present system cannot go on. The Government’s answer is to put more pressure on councils to transfer but, whether we like it or not, there will be a lot of places in which the tenants do not agree with that and the councils do not agree with it—and good luck to them, I say. But the management and maintenance allowances of £1.3 billion are too low; the major repairs allowance, at £950 million, is too low; and, in particular, the inability to apply for the social housing grant is a substantial barrier to the expansion of council housing in those areas—which means, effectively, the expansion of the main system of social housing in those areas.

The present state of the housing market may be temporary or medium term, but it is probably not long term. Nevertheless, it is becoming clear that if the Government are to meet their target of 3 million new homes by 2020, they will have to bring on board the 200-odd local authorities that still have traditional council housing in areas where that is seen locally as the future and where the tenants will continue voting for it. Unless the Government are able to bring local authorities into the system, they will not build all the new social housing required and will certainly not meet the target of 3 million new homes.

By and large, council housing has been a tremendous success in this country in the 80 years or so—it is rather more than that—since it was introduced. It has a real future in those areas where people want to continue it. The way in which the Government are discriminating against it now is a cause for great concern. Without trying to be party political about the issue, I hope that they will manage to change their policies significantly over the next couple of years. I beg to move.

Lord Dixon-Smith: I have considerable sympathy with what the noble Lord, Lord Greaves, is saying. This is a classic example of the increasing and increasingly detailed interference that has occurred for local authorities over the past decade in particular; in fact, it began before that. I do not like the term “council housing” in the modern context—it is discriminatory—but the issue behind all this is whether council housing is social housing. It is, and there is no getting away from that. In other respects, we will look later in the Bill at creating what is called the single domain, under which housing, whether owned and managed by councils, ALMOs or housing associations, will all be subject to the same regulatory regime and we will get some unification. I well understand that that is complicated because the basis of funding for local authorities is dramatically different from anything else. However, we are talking about social housing and there is a case for having all social housing treated in the same way, with regard not just to regulation but to access for funding. There is a quid pro quo to that argument, which is that some of the privileged positions that council houses might enjoy—there have been such constraints that they no longer enjoy them—would have to go, even if they are only theoretical advantages. I am not sure whether the amendment would get us to where we probably need to be, but it is certainly a subject worthy of further exploration.



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The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Andrews): This is an important area of debate. As the noble Lord, Lord Greaves, said, there was a serious debate on it in another place. He rightly described it as controversial. It is not something that has simply divided parties; I acknowledge that some people in my own party take a similar view to the one that he took today. I agree that council housing, or social housing as we now know it, has been a fantastic success without which we would never have been able to house the sorts of people who could not have afforded a home of their own. It is a very proud tradition. We must recognise that, but times and aspirations change, as do challenges. The increasing challenge on the Government to enable people to buy their own homes and provide additional social housing has required us to look at things in a different way. I will come on to that.

There are a lot of issues in and around the future of social housing and the issues raised by the Hills report and so forth that are worthy of a serious and long debate. They are outside the scope of this Bill but nevertheless relevant. I will address the wider issues raised by the noble Lord before I get on to the amendment. He raised many issues about the funding of the HRA system such as the implications of incomes, transfers, rents and so forth. I would like to put on record that we are engaged in a major review of council housing finance as a whole. It is looking at all aspects of this area, including issues around investment. I will write to the Committee with details of that review—its terms of reference and the issues that it is addressing. Without going into a detailed response to those parts of the noble Lord’s speech, I can answer many of the issues or at least address them in the context of what we are doing in that review.

The amendment itself needs to be addressed because the notion is that it might clarify the issue or at least prompt a change by making it clear that local housing authorities may be given financial assistance by the HCA. Quite simply, the problem with the amendment is that Clause 22 is drafted broadly so that the HCA may provide financial assistance to any person, in any form, with Secretary of State consent. By “any form” we mean grants or loans. If we were to name local authorities and specify them above any other body or organisation, that could lead to the beginning of a list with all sorts of other bodies attempting to add themselves to that privileged position. We all know how we feel about lists in legislation. The broader point of whether local authorities themselves should be eligible for social housing grants, for the reasons given by the noble Lord, goes to the heart of the debate that we have had over the past few years.

Because local authorities have not been treated as eligible for social housing grants, the bare numbers are rather dramatic. It is undoubtedly true that the vast majority of new social housing has been built by housing associations, and local authorities have built fewer than 300 new council homes in England in each of the past nine years. Part of the context is that the housing authorities and local authorities themselves have become different sorts of agencies, moving away from providing and managing to becoming place-making

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organisations where housing policy—the assessment of need and the distribution of resources—has become a more important and clear role.

The reason we have looked to housing associations for investment in social housing has nothing to do with ideology or discrimination. The noble Lord said that we have treated local authorities unfairly, but we have been fair to those people who need homes. The simple fact is that housing associations have been able to deliver 30 per cent more social housing for the same amount of public grant because they have been able to lever in private borrowing and reserves. That is not to do with excluding local authorities from housing, but about getting value for money and getting the maximum output for the people in need. Indeed, that ambitious target of 70,000 more social homes by 2010-11, would be at risk without that leverage.

The noble Lord may ask why the Government do not do both. Why do they not enable local authorities to build and at the same time develop the housing association sector in that way? However, with scarce resources and with another major investment in the Decent Homes funding, for example, one has to get as much impact for limited resources as possible. Using the RSL sector in this way has been hugely effective.

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Things have recently changed. We have changed the bidding rules so that, last year, for the first time, 10 ALMOs and other local authority companies prequalified to bid for social housing grant. Three ALMOs—in Derby, Sheffield and Brent—were among the successful bids announced in February. But we still believe that value for money is critical in these expensive areas of policy. While the rules were changed to allow bids to be made, we did not change the criteria for assessing them. ALMOs and SPVs have to compete on the same value-for-money criteria within the same bidding competition as housing associations. That ensures that we support the best schemes for public money.

I have been talking so far about social housing grant, but we need to look wider than that. If council schemes involving housing association partners were to be replaced with in-house schemes, the question that those who oppose this policy have to answer is: where would the additionality come from to get the extra resource that builds the houses that people need? In addition to social housing grant and partly to answer that question, the Bill also removes financial disincentives to local authorities building traditional council housing within the housing revenue account. The noble Lord referred to the Prime Minister's words on that. When we come to Clause 312, I am sure that we will have another lively debate on this. Clause 312 exempts new supply from the HRA subsidy system. It allows councils to keep the rental operating surpluses from these homes that are currently redistributed nationally. We expect that to make a small but significant increase in the number of homes built via this route. It will rise from the low hundreds to perhaps several thousands. We will announce separately plans to consult

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on those changes to regulations regarding whether councils should also keep the full capital receipts on any subsequent sale of new properties.

Because of the explanation that I have given in terms of the resource that we have and the challenges that we face, we are not currently proposing to invite councils to bid for social housing grant in their own right. We need to consider the question of additionality, but we also need to evaluate how some of the reforms that we are proposing will impact and we need to see how they might be promoted and assessed. By setting out the simple set of principles that have guided us, I hope that housing associations will continue to play a key role, but that we also see housing authorities playing an important and growing role in helping to deliver the objects of the HCA. It is a question of being pragmatic and of assessing how we can best do this. It is also, genuinely, a reflection of the changing role of local authorities in terms of assessing the housing needs of their local communities and the many roles and challenges that are on them in providing for the various needs of the whole community, not just in housing but in community development. I appreciate the opportunity to put that on record. I do not expect the noble Lord to agree, but I hope that he will be able to withdraw the amendment on the basis of the argument.

Viscount Eccles: I ask a small technical question. The Minister referred to subsection (1), which relates to a very wide power to give financial assistance to any person. I have been brought up on the assumption that in such circumstances Treasury approval would be required. I have pursued this briefly in other Committee sessions and I dare say that I shall pursue it again. Where has the Treasury gone?

Lord Dixon-Smith: As a result of what the noble Baroness said, perhaps I may raise a point that I have raised previously. As one stage she definitely implied that some of the funding allocated by the Government was competed for by the local authorities or housing associations. I have no difficulty with that as a means of selecting those who will make the best use of that funding. But what happens next? In other words, presumably they cannot apply again for similar funding for the next 40 or 50 years, or however long it takes, to give all the other authorities who might have failed at first a chance to get access to that funding. Otherwise, if funding goes only to the most efficient, smartest and—perhaps I will not say most loquacious—most plausible authorities, you could have a situation in which some social housing was extremely well maintained and some, through no fault of those who managed it, became effectively neglected. I am sure that the Government have thought that through, but I would like the noble Baroness to tell me how they have done it.

Baroness Andrews: I will deal first with the Treasury point. The answer to the noble Viscount, Lord Eccles, is exactly the same as the answer we gave in our previous discussion. Modern advice from parliamentary counsel on legislation is that we do not need to specify the Treasury on the face of the Bill, because that is implicit in the whole business of accountability.



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Lord Brooke of Sutton Mandeville: As a matter of curiosity, when did this change in behaviour occur? Were it to have occurred during the chancellorship of the present Prime Minister, it would be a salient fact.

Baroness Andrews: I cannot answer that, I shall check with my officials and come back and write a letter to the noble Lord. On the second matter, raised by the noble Lord, Lord Dixon-Smith, which I was not trying to evade, I was not certain whether he was talking about housing associations bidding for Housing Corporation funds or local authorities, which, as I said, are not eligible to bid for social housing grant funds; but we have changed the conditions—

Lord Dixon-Smith: The question related to funding for social housing. If that excludes local authorities, so be it, but the principle is the same wherever it is applied. If only the best keep getting the funding, what happens to the rest?

Baroness Andrews: The bidding process for housing associations is conducted on an annual basis and there are rolling programmes. Some housing associations bid very regularly for the funds as they come forward. Local authorities have not been eligible to bid for social housing grant, which was a change in policy. However, we have made changes to allow ALMOs and local companies to bid when local authorities are working through them, which is slightly different because they are at arm’s length, and that is why we are piloting such schemes. The other money available to local authorities has been for the Decent Homes programme for the repair and modernisation of council housing stock. Perhaps it would help if I set out these processes, which are complex, and how they relate to each other, in a letter to the noble Lord.

Lord Greaves: I am grateful to everyone who has taken part and to the Minister for setting out government policy. I did not expect her to do other than that, but she rightly reminded us that a major review is taking place, which is precisely why I used the phrase “in the next couple of years”, during which there may well be changes in policy. There is an increasingly major debate taking place on this matter and, as the Minister said, it is taking place very much within the Labour Party, as it is everywhere else. There is hope that perhaps minds are being changed a little and my reason for tabling the amendment was partly to contribute to that process and to the debate. I accept that for technical reasons the amendment cannot be accepted in its present form; it is a means of facilitating our debate.

I deliberately moved it in a fairly low-key and non-political way. In other forums, we might have had a bit more of a go at one another—I would certainly have had a go at the Government and the Labour Party—but this is not the place to do it. Nevertheless, expectations have been raised by what senior politicians have said, particularly the Prime Minister, and there is considerable dismay among people who are finding out that it perhaps does not mean what they thought—I shall put it no more strongly than that.



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The fundamental question is: will it be possible for local authorities that still have traditional council housing to build new council housing to contribute to the 3 million target? At the moment, the answer appears to be, “No, it will not, except in very special circumstances in a very few places”.

The Minister spoke about additionality that comes from building by RSLs and housing associations, and there is no doubt that there are schemes where that is the case. There is no doubt also that finding it is more difficult for them and that, in many cases, housing associations cannot build without social housing grant as part of the package. It is therefore quite clear that local authorities, too, will not be able to build without social housing grant.

The Minister raised a much wider debate about local authorities and what she called place-making—it is not a word that I would use, but I recognise that it is part of the new Labour jargon. I think that I understand what it means; that is: “rather than being providers”. This is a much wider debate about the role of local authorities, which some of us think that Nicholas Ridley started off a long time ago when he thought that local authorities should have just one meeting a year to enable everybody else to do things. I am not suggesting that the Government are in any way going as far as that, because in many areas they are giving local authorities more powers and resources.

Enabling and providing are not alternatives; it is possible to do both. The mix should depend on what the people in each area—that is, the electors, the residents and the elected councillors—want. That would differ, which is fine. However, that is part of a much wider debate into which I shall not go any further.

The Minister touched on the important issue of where the extra resources would come from. If the social housing sector is going to make a significant contribution to the 3 million houses, and perhaps an increasing proportion given the state of the private housing market, extra resources will be needed. That is a question to which the Government will simply have to face up. If they do not provide the extra resources, they will not get the extra houses and many of us think that they will not hit the 3 million target.

I am grateful to the Minister for what she said. We look forward to her detailed explanation of how the system and the financing will work. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Dixon-Smith moved Amendment No. 76:

(a) the circumstances in which the assistance must be repaid, or otherwise made good, to the HCA, and the manner in which that is to be done including arrangements in respect of interest and security;(b) the circumstances in which the HCA is entitled to recover the proceeds or part of the proceeds of any disposal of land or investment in respect of which the assistance was provided.

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