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Lord Beecham: My Lords, I confess that I was puzzled by these amendments until my noble friend patiently explained them to me. She completely persuaded me and that persuasion has been reinforced by the contributions of the noble Lord, Lord Wigley, and the noble Baroness, Lady Hollins. It seems that we are dealing here with two potentially vulnerable groups of people-those who may themselves suffer from an incapacity or disability and those who care for them-and it would be sensible to give some assurance and security to both those groups in the context of the provisions of the Bill.
The amendments suggest that the Secretary of State should publish directions to the social housing regulator. The point made by the noble Baroness, Lady Gardner, is a fair one and needs to be taken into consideration. It could well form part of the directions that might be given to the social housing regulator in terms of the standards that would be set so that, where a carer remained in a property, an alternative offer of accommodation would have to be made. I should have thought that that would meet the noble Baroness's point.
I hope that the Government will respond positively to the amendment-if not tonight, then perhaps at Third Reading. I cannot see that it would in any way violate the thrust of the Government's policy. I believe from the Mencap briefing that some 500,000 to 600,000 people are living with parents or carers. Presumably they would not all be eligible for security of tenure but a significant number would be, and it is right that, given the problems that they are already confronting, they should not have the added problem of feeling insecure about their future. They are an important group in the community, and the community as a whole must take responsibility for ensuring their continued security and comfort.
I hope that the noble Baroness will respond positively-if not definitively tonight, then at Third Reading. I understand that there have been discussions with the noble Lord, Lord Rix. I assume that a potential way forward would be agreed with him and I hope that we might see that way forward, if not tonight then at Third Reading. The Opposition would certainly warmly support that.
Baroness Hanham: My Lords, I hope that we will not have to return to this at Third Reading, as I trust that I shall be able to reassure the House on these matters. I did indeed have the opportunity to talk to the noble Lord, Lord Rix, about his concerns, as well as to people at Mencap. I think that we largely reassured him, although there were one or two areas about which I know he was not content. However, we covered quite a lot of ground.
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I am immensely sympathetic to this whole problem. People who have children with learning difficulties, or anyone who looks after someone with an illness, a disability or a mental illness, have enough problems to worry about without being concerned about what will subsequently happen to the person they are caring for.
Our proposals in the Bill will enable decisions about succession to be made on a case-by-case basis. I am sure that noble Lords will be aware that at the moment carers have no right to succeed to a tenancy, even if they have given up their home. There is absolutely nothing that gives them any rights to take on the property. They can succeed only as a spouse or a family member and only in certain circumstances. Therefore, we are trying to make succession easier by giving social landlords the power to give rights as they see fit. This is important. It will be left to landlords to decide to whom they give succession rights. They can, and, I imagine, will, decide that someone who gives up a property to care for a tenant will be entitled to such a succession. Under the provisions, they can also grant succession rights to an adult child with a learning disability living with their parents when either of those parents is unable to maintain where they are. We already require landlords to publish their policies setting out the circumstances in which they will use the new flexibilities that they will have around succession, and the tenancy standard will also require them to set out their policies on how they take into account the needs of vulnerable households. That is what we are talking about today-people with needs.
The noble Baroness, Lady Gardner, spoke about the need for flexibility to recover property that had been adapted. We absolutely agree with that. Landlords can already do that and can recover property adapted for disabled people. The only thing that they must do is house the successor elsewhere. If a tenancy is granted to a carer-a successor-and the property is completely unsuitable, they must be offered an alternative. The provisions are there. The noble Baroness, Lady Wilkins, and the noble Lord, Lord Rix, may worry because we are not categorically saying that that is what will happen. What we are saying categorically is that, within the terms that we think could be adopted, landlords must now take account of the position of people who are in the property and that it does not necessarily have to be a spouse who takes the tenancy of it. The people we would worry about are those who have given up their homes or who are caring for other people without having somewhere else to go.
I hope that, with those reassurances, the noble Baroness will feel able to withdraw the amendment. I thank her for moving it on behalf of the noble Lord, Lord Rix.
Baroness Wilkins: I am grateful to the Minister for that reply and am most grateful to everybody who supported the amendments. I fear that it is still left to the discretion of the landlord and still leaves a feeling of insecurity. I would like to read the record and discuss it with the noble Lord, Lord Rix, who may want to return to the issue on Third Reading. I beg leave to withdraw the amendment.
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Clause 149 : Secure and assured tenancies: recovery of possession after tenant's death
32: Clause 149, page 146, line 5, at end insert-
"(2A) In that Part of that Schedule, in Ground 16 (vesting of tenancy in member of previous tenant's family other than his or her spouse or civil partner)-
(a) at the beginning of the first unnumbered paragraph for "The accommodation afforded by the dwelling-house" substitute "The dwelling-house is in Wales, the accommodation afforded by it",
(b) in the first unnumbered paragraph-
(i) in paragraph (a) after "tenancy)" insert "or 90 (devolution of term certain)", and
(ii) in paragraph (b) for "the date of the previous tenant's death" substitute "the relevant date", and
(c) after the first unnumbered paragraph insert-
"For this purpose "the relevant date" is-
(a) the date of the previous tenant's death, or
(b) if the court so directs, the date on which, in the opinion of the court, the landlord (or, in the case of joint landlords, any one of them) became aware of the previous tenant's death.""
Baroness Hanham: My Lords, these are government Amendments 32, 34, 35 and 36. When someone who is not a spouse or partner succeeds to a local authority property which is larger than they reasonably need, the landlord can move them to a more suitably sized property between six and 12 months after the death of the original tenant.
A government amendment tabled in Committee in response to a suggestion put forward by the Opposition dealt with the problem of a successor tenant withholding news of the death of the tenant from the landlord until after the recovery window had closed, thereby preventing the landlord reclaiming the property. It did this by enabling a court to decide whether the window is deemed to have opened six months after the original tenant died or six months after the landlord became aware of the death. However, the amendment in Committee applied only to cases in England. The Welsh Assembly Government have asked that this provision apply also to local authority tenancies in Wales. This new amendment ensures that that is the case.
Government Amendments 34, 35 and 36 are minor and technical and ensure that certain provisions apply only to England and not also to Wales, in line with our original policy intention. I beg to move.
Lord Wigley: My Lords, I intervene briefly to ask about the implications for Wales. I am grateful to the Minister for indicating that she has taken up the view supported by the National Assembly. That is very good and moves things forward. With regard to Amendment 36, the Explanatory Notes, to which I
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Lord McKenzie of Luton: My Lords, I will speak briefly, subject to anything that arises from the question raised by the noble Lord, Lord Wigley. Obviously we support the amendments. I take the opportunity to thank the noble Baroness and her team for the volume of correspondence that we have had, which has explained the government amendments and the position on amendments that were withdrawn. I will not comment on timeliness-I understand that we have had a further missive during the course of our proceedings today-but it is generally helpful to have things set down in correspondence in the way in which they have been.
Baroness Hanham: My Lords, I thank the noble Lord, Lord McKenzie of Luton, for that. A prodigious amount of work went on during the Recess. We were very conscious that, with the withdrawal of all the amendments at the end of the previous stage, it was important that noble Lords understood what we had done. I say to the noble Lord, Lord Wigley, that we made this correction in line with the Welsh Assembly's wishes that the repairing obligation change would not apply to Wales.
Clause 150 : Assured shorthold tenancies following family intervention tenancies
Clause 151 : Assured shorthold tenancies: notice requirements
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Clause 153 : Repairing obligations in leases of seven years or more
37: After Clause 153, insert the following new Clause-
"Orders for possession: cases in which Ground 8 is not available
(1) Section 7 (orders for possession) of the Housing Act 1988 is amended as follows.
(2) In subsection (3) for "subsections (5A) and (6)" substitute "subsections (5A), (6) and (6A)".
(3) In subsection (4) for "subsections (5A) and (6)" substitute "subsections (5A), (6) and (6A)".
(4) After subsection (6) insert-
"(6A) If the court is satisfied-
(a) that Ground 8 in Part 1 of Schedule 2 to this Act is established; and either
(b) that some rent is in arrears as a consequence of a delay or failure in the payment of relevant housing benefit, or
(c) the landlord is a private registered provider of social housing,
it shall not make an order for possession unless it considers it reasonable to do so."
(5) After subsection (7) insert-
"(8) In subsection (6A) above-
(a) "relevant housing benefit" means-
(i) any rent allowance or rent rebate to which the tenant was entitled in respect of the rent under the Housing Benefit Regulations 2006; or
(ii) any payment on account of any such entitlement awarded under Regulation 93 of those Regulations;
(b) references to delay or failure in the payment of relevant housing benefit do not include such delay or failure as is referable to any wilful act or omission of the tenant.""
Lord Palmer of Childs Hill: My Lords, the proposed new clause amends ground 8 of Schedule 2 to the Housing Act 1988. At present, private landlords and housing associations can use ground 8 to seek possession of accommodation let on an assured tenancy where a tenant has arrears equal to more than two months' rent. The important point is that, unlike other rent arrears grounds for possession, ground 8 is mandatory: only in this instance does the court have no discretion to decide whether it is reasonable to make an order for possession. The amendment to ground 8 is designed to give discretion to the courts in cases where housing benefit issues are outstanding. I am sure that many noble Lords have seen such examples. The court can decide to adjourn the case or suspend an order for possession. This will help to ensure that tenants are not evicted from their homes because of non-payment of, or delay in the payment of, housing benefit.
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The amendment would also prevent housing associations and other private registered providers of social housing using ground 8. The reason for this reform is that it is not appropriate for social landlords to seek to deprive the court of its discretion by mandating that it must make an outright order for possession, whatever the circumstances of the case. The Minister will know that most housing associations choose not to use ground 8, but some do. Local authorities do not have a mandatory ground for possession based on rent arrears. There is no need or justification for a mandatory arrears ground where social tenancies are concerned.
9.15 pm
I was most grateful to the Minister for writing in advance of my moving this amendment. I almost moved it in Committee. I think I was the last person standing when I was asked to withdraw and sit down in a welter of confusion, so it is rather like "Groundhog Day", and I am back again. The Minister replied very clearly about the Government's views, but I wonder whether they have quite taken into account the comments I made and those that I am going to make. It is true that housing associations should follow the rent arrears pre-action protocol and use ground 8 only as a last resort. The Minister mentioned the pre-action protocol. However because ground 8 is a mandatory ground, the protocol does not contain any effective sanction when a landlord does not comply, whereas on a discretionary ground, which is the purpose of this amendment, the court can adjourn or dismiss the case for failure to comply. The reason for this important amendment is that the Bill does not address the principal concern that it is wrong for a housing association, as a social landlord and a public body, to seek to deprive the court-that is the important point-of its powers and discretion to do what is reasonable in the particular case. If it is reasonable for an outright possession order to be made, the court will make one, and the court should be able to exercise that discretion.
A lot has been written about this very technical ground 8 procedure, but perhaps I can explain it best to those who have not followed it all by talking about a particular case as an example: the Matthews case. The problems caused by ground 8 were starkly illustrated in the case of North British Housing Association v Matthews and three other cases that were decided by the Court of Appeal in December 2004. In these cases, the housing association had brought possession proceedings on ground 8 despite being aware that the tenant had an outstanding housing benefit claim. The county court judge decided that he had no choice but to grant an outright possession order because of ground 8, yet Miss Matthews subsequently received a backdated payment of housing benefit-how many of us have dealt with problems and know that housing benefits are backdated?-which cleared her arrears completely and put her rent account into credit. Nevertheless, the possession order still stood. The Court of Appeal held that where ground 8 is involved, the county court has no power even to adjourn the hearing for a short period to await a housing benefit payment unless there are exceptional circumstances. The court was troubled by this situation, and Lord Justice Dyson spoke very eloquently about how he sympathised, but was bound by ground 8 not to exercise discretion.
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All I am asking the Minister is to reconsider whether ground 8 needs to be dealt with so that the court has discretion to evict or not evict. It is wrong for a certain class of people, very often with rent benefits that have taken a long time to come through which has given rise to the arrears. Ground 8 needs to be amended, and I hope that the Minister will take that into account. I beg to move.
Lord McKenzie of Luton: My Lords, the noble Lord, Lord Palmer of Childs Hill, makes a very interesting case. I do not propose to follow him into the detail of ground 8, but I shall comment on the fact that we are going through a period of some upheaval in relation to housing benefit, which brings a particular poignancy to the point which he raises. If we look at what is on the cards, we know that local housing allowance rates are now set at the 30th percentile of local market rents. We know that a cap on the local housing allowance rate has been introduced. We know that under the Welfare Reform Bill, local housing allowances are going to be uprated by CPI in future rather than by reference to what is happening to rents. We know that there is an increase in the non-dependant deduction, and we know that there are changes to the shared room rate as well. Each of those things creates some challenges in the administration of housing benefit.
Moreover, we are on the cusp of having something called universal benefit, and all the housing benefits will eventually be paid through that process but at a time when the Government are seeking to uncouple the administration of housing benefit from council tax benefit. The practicalities of that present a real challenge, because we know that lots of councils will have contracted out those joint arrangements and how you unpick and administer them is a really challenging issue-quite apart from the issue of whether they are going to be direct payments or how the payment of housing support is going to flow through. We know what the Government's answer is going to be because we have read it in the book that was presented to us, and I doubt that that has changed over the weeks since that appeared. The point made by the noble Lord seems to me to be especially relevant at this time because of this great upheaval around housing benefit.
Baroness Gardner of Parkes: I would like to ask a question about this amendment, which I am not entirely clear about. I have been told recently by people who have had court possession orders and eviction notices served on them that that does not really put them out of anything until the bailiffs come in. What is the position if the court grants a possession order but the bailiffs have not been instructed? I understand that there is usually quite a time lag between those two events and that the housing benefit comes through in that time, particularly when it has been delayed. How would that work in relation to those two different procedures?
Baroness Hanham: My Lords, I have all sorts of answers that were given in the letter, which I was absolutely satisfied covered everything that could possibly be raised. I am stuck on this position about the courts
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There is a well established pre-action protocol on rent arrears and the data show a steady decline in evictions of housing association tenants in recent years. However, we believe that good practice in managing rent arrears should not exclude using mandatory grounds in limited circumstances-right at the end of the road when the landlord really had not been able to come to any satisfactory conclusion. Recent independent research suggests that mandatory grounds are used sparingly, in less than 5 per cent of total housing association evictions for rent arrears. That is not a very high percentage, and indicates that it is not being used as a blunt instrument and takes proper account of the particular circumstances of the case.
There are protocols and we expect landlords to abide by them. I do not think we want to remove the mandatory aspect of ground 8 from the legislation. Under the previous Government, a working group was convened to look at the issue in detail and it commissioned independent research through the Tenant Services Authority. However, there was absolutely no unanimity among external partners that abolishing ground 8 was necessary or desirable.
Having talked long enough, I have been able to get at least a partial reply to my ignorance about what happens in the courts. The grant of possession does not necessarily mean eviction. Landlords may need to apply to the court again for an eviction order and arrears could be resolved before that point, which should have been the situation in the case mentioned by the noble Lord, Lord Palmer. If it is an arrear, time should be given for housing benefit to come through to prevent that eviction.
I think I understood the noble Lord to say that the courts felt that they had no alternative but to grant possession and to ensure eviction. I may have misunderstood him but I hope I have not. If that is the situation, I simply say again that no action should necessarily need to be taken immediately as a result of that court decision, particularly if it relates to money and it is felt that eviction is likely to come about. I am bound to say that in that scenario I would expect the landlords to have got to that situation before they apply for eviction, but there may be reasons why they have not.
We would resist removing ground 8, which leaves room for negotiation and should not have the effect of ensuring that tenants are automatically evicted as part of the court decision. If I have misunderstood anything that the noble Lord, Lord Palmer, has said, he is bound to let me know when he replies to the amendment. If necessary I will look at that position again, but I
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Lord Palmer of Childs Hill: My Lords, I thank the Minister for her detailed reply both in writing and verbally. She has not misunderstood anything but she lives, as perhaps we all do, in this utopia where all landlords are good. I am afraid that in the world in which I live not all landlords are good, and I believe that there are a modest number who will use ground 8. I hope that only a modest number will do that, but there will be some who will. There should be nothing in legislation that removes the discretion of the court to do what is right. The matter of when the bailiffs move in was raised. Those who have had experience of the courts know that that is a varied situation because it often depends on whether the landlord has set the thing in motion to get early occupation of the property.
That is particularly important at this moment. The noble Lord, Lord McKenzie, talked about when benefits-universal benefits and the like-are paid. Those of us who have been local councillors-I have been a councillor for 25 years and still am-know that local authorities and social landlords use IT systems to deal with housing benefits. For years, my local authority used Pericles, which went dreadfully wrong. It is not an indictment of any landlord that they should use a system that goes wrong, because IT systems often do, but the fact is that, with the changeover to universal benefits, which has already been mentioned in this debate, there is a great probability that housing benefits arrears will be built up unintentionally because of a changeover in computer systems. In that case, there would be the danger of ground 8 evicting people without the courts having a chance even to postpone eviction. I would ask that my noble friend the Minister looks again at how many such cases there have been and whether there is a need to tweak this in the legislation.
Lord McKenzie of Luton: Does the noble Lord agree that the issue is compounded because there will be a split of housing support, which is going via the universal credit, and council tax benefit, which is staying with local authorities? The noble Lord from his experience would know that often those systems run together and are contracted out jointly, although I do not know whether in this particular instance that is the case. Therefore, having to unpick those two systems, as well as having to build the universal credit, adds a particular dimension to the issue that he has raised.
Lord Palmer of Childs Hill: I thank the noble Lord for emphasising that point. In my view, during this volatile period there is a great danger of more notional housing arrears arising that would pose the danger of eviction. Good landlords, as my noble friend the Minister said, will be able to deal with it, and that is why I concurred with what she said. But can any noble Lord doubt that there will be some bad landlords? Some bad landlords may seek to use ground 8 knowing that the courts have no power to protect the tenant. Perhaps between now and Third Reading the Minister could
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9.30 pm
Clause 154 : Abolition of Housing Revenue Account subsidy in England
Lord Whitty: My Lords, in moving Amendment 38 I shall speak to the other amendments in the group. We have come to the housing revenue section of the Bill and my amendments would delete the lot. I suspect that if the Chief Whip were in her place she would say that I am using Committee procedures because potentially I am using a clause stand part Motion to get some clarification of the Government's intentions. In other words, this is a probing amendment and I do not expect to seek a vote on it. Indeed, I think I probably support the general direction of government policy in this area. However, it is an area that was not discussed at all in Committee and is one in which, to my knowledge, in all the copious material that the Minister has provided for us, we have not had a comprehensive statement of the Government's intention. Perhaps I missed it, but I have not seen a clear statement of where we are going on housing revenue.
Housing revenue means two different things. It means the allocation between housing authorities so that some are losers and some are winners in a national reallocation process that seems in part to be reproduced in these provisions, and it is a protection at the individual local authority level to ensure that rental and other income received for housing purposes is actually recycled for those purposes. That protection is not always quite adequate, but nevertheless it is part of the long-existing provision. On previous occasions when housing revenue stipulations have been significantly changed, there has been a whole Bill that has gone through a number of procedures. Here we are squeezing them into a very large Bill in which, to my mind at least-although again I should say that I may have missed it-the Government have not spelt out their intentions. The last Government made a start on this, and by and large I approved of the Minister's approach, but I have not seen a similar comprehensive statement of where we wish to end up.
There are a lot of complicated provisions here, particularly in regard to the formal abolition of subsidy to the balance between what the Secretary of State allocates to different authorities. No new formula has been proposed, but neither is it clear that the old formula will still operate. One has to say that the old formula was pretty opaque and gave rise to some disgruntlement in a number of local authorities. The Government owe us a clear explanation of where we are going on the housing revenue account, and if it already exists I would be grateful for it. If not, I am happy for the noble Baroness to write to me in the
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Some of my colleagues have tabled detailed amendments, but my amendments are intended to give the Government an opportunity to explain what their strategy is. At least the position will then be clear so that by Third Reading we can decide whether we agree with it or not. Given the way I am trying to use these amendments, I hope that the noble Baroness will take them as they are intended, in a spirit of inquiry, and give us greater clarification. I beg to move.
Lord Best: My Lords, the amendments of the noble Lord, Lord Whitty, would leave out a whole series of clauses that relate to the housing revenue account. I have added my name to Amendment 46, which would leave out just one of those clauses. That implies that I am happy with the others, as indeed I am.
The housing revenue account is regarded in local government circles as well past its sell-by date and there is general acclaim for its abolition. It is a significant aspect of the localism agenda that financial responsibility for council housing is to be put back into the hands of councils. In place of pooled debt and pooled rents, each council involved will henceforth assume direct responsibility for housing debt according to its ability to repay it, and it will keep all the income from rents for managing and maintaining its own council stock. Efficiency gains on its rented account will go back into improved housing provision. These are helpful reforms, but they stop well short of giving councils the full financial independence that could enable proper asset management of their housing resources and harness significant prudential investment in new homes. These freedoms are enjoyed by even the smallest housing association.
Amendment 46, in leaving out Clause 158, would remove the restriction on councils that want to borrow prudentially-knowing that they can repay what they borrow-for housing purposes. When councils move to a self-financing regime with the housing revenue account buyout on 1 April 2012, they will face new restrictions on borrowing for housing purposes-a new capping regime-despite the continued presence of the prudential code that has operated perfectly well since 2003. The chairman of the Local Government Group points out that it has demonstrated on many occasions that councils have a strong record of sound financial management and manage borrowing responsibly in accordance with the prudential code. He says that local government's view is that these rules to which it adheres provide sufficient protection that councils will undertake only borrowing that is affordable, and that imposing a cap on councils' ability to borrow for affordable housing will severely restrict their ability to invest in an increased number of affordable homes, which government wants to see. Paradoxically, housing associations are being encouraged at exactly the same time to borrow a lot more to replace the shortfall resulting from smaller grants. A lot of housing associations are borrowing more, but not councils, which must accord with the new cap. The Local Government Group says
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Lord McKenzie of Luton: My Lords, I suppose that there are not many people who like to collect together at this hour to discuss local housing finance, but it falls to us to do it. We understand that the amendment of my noble friend Lord Whitty is probing in nature to try to gain an understanding of where the Government currently stand on this issue. If I have to be fair to the Government-I try not to be-I think that they have been quite active in putting out consultations; there is one due in November if my understanding about the final figures which will be debated with local government is correct. Of course, they have built on the prospectus that was issued in March last year under the previous Government.
As with the noble Lord, Lord Best, we support the thrust of most of these clauses except for Clause 158. They provide the framework for the self-financing scheme for local authority housing stock which will replace the existing housing revenue account subsidy system. As noble Lords have recognised, the current subsidy system is based on a range of assumptions about local authority housing stock, covering rental income, maintenance and management costs, costs of service in debt and of major repairs. An authority will either receive a subsidy from the notional calculation if it was in deficit or pay to the Exchequer amounts when the calculation showed a surplus.
When the current subsidy system started, no local authority was in surplus but, as I understand it, by 2008-09 the system overall had tipped into surplus with the aggregate of amounts paid to the Exchequer exceeding the aggregate of subsidy payments. The reforms reflected in these clauses were initiated by the last Labour Government. As my noble friend recognised, the current system had become a source of discontent for a variety of reasons, particularly because it is complex and lacks transparency, with changes from year to year making it difficult to plan effectively over the long term. We believe it is right to change that, which is why we support the thrust of these amendments.
The reform consulted on by the previous Government involved a devolved, self-financing system where there is no redistribution of revenues in return for a one-off allocation of debt to local authorities. This allocation would be based on each authority's ability to service the debt and maintain its housing stock. In essence, this represents a deal between central government and local authorities. In return for allocating excess debts to local authorities, the latter will obtain greater spending power over the long term through retention of future rent increases. It represents a transfer of risk from the Government to local authorities.
My noble friend Lord Whitty will doubtless recall that the proposition for a self-financing regime proposed by the then Housing Minister, John Healey, included the one-off distribution and allocation of housing debt. All rents and receipts from the sales of housing
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Noble Lords will be aware that the principle of moving to a self-financing regime was overwhelmingly supported by local authorities. As these clauses make clear, the coalition Government are proceeding with the self-financing option and the basic method of debt allocation is to be as set out in the March 2010 prospectus-that is as I understand it but the Minister will tell me if I am wrong.
However, there are some differences and some major concerns, which are reflected in subsequent amendments. In particular, the discount rate to be used is 6.5 per cent not 7 per cent. This may seem a small difference but the effect is for central government to be some £1.2 million to the good and to remove much of the headroom that would have been in the system for building additional council housing. As the noble Lord, Lord Best, has said, the plan to cap the overall borrowing of each authority at a level linked to opening debt runs contrary to the spirit of localism and the self-financing concept.
We would argue that central government already have powers under the Local Government Act 2003. I should be grateful if the Minister could specifically deal with this. Section 3 of that Act talks about a local authority determining and keeping under review how much money it can afford to borrow. Section 4 gives the Secretary of State, by regulations for national, economic reasons, power to set limits in relation to the borrowing of money by local authorities. If that is on the statute book already, we do not need Clause 158. I agree with my noble friend and with the noble Lord, Lord Best, that that should not stand part of the Bill.
As for rents, retaining the approach of convergence with RSLs by 2015 is all very well, but the impact of changes to housing benefit, the urban benefit cap, the non-dependant reductions upratings and the 2013 room- size criteria for the working-age tenants create additional uncertainty and risk. Reversal of the plans for local authorities to retain all the receipts from right to buy should not be accepted, and we will debate that shortly.
Although my noble friend is right to challenge these provisions, we consider that it is right for the self-financing regime to proceed. However, as ever, the devil is in the detail and we look forward to an update from the Minister.
9.45 pm
Lord Shutt of Greetland: My Lords, I thank the three noble Lords who have addressed this issue, particularly the noble Lord, Lord Whitty, for the way in which he addressed the several deletions. I am told that reference to housing finance did not enter the ranks in Second Reading and that there were no amendments the like of that proposed by the noble Lord, Lord Whitty, in Committee. It is interesting that
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Lord McKenzie of Luton: If the Minister will permit me to intervene, amendments were tabled in Committee dealing with Clause 158. The noble Lord, Lord Best, had one that we put our name to.
Lord Shutt of Greetland: Indeed, but there was not the wholesale abolition of the entirety of the clauses in the Bill on this whole issue of housing finance. I know that the amendment was moved in a probing way-I accept that-but it was not done at that point.
I understand the sense that there is a fundamental change here, and there is a need. I undertake that a document will be provided that sets out the change in simple terms. That is what the noble Lord, Lord Whitty, is asking for. He is saying, "I can't cope with all this lot-what's it all about?". So there is a need for a simple document explaining that change. However, if we accepted his amendment, we would be stuck with a discredited and underfunded system for financing council housing instead of moving to self-financing, which is the culmination of a long-held ambition held by local government for councils to take full responsibility for their rental income and the management of their housing assets for the benefit of their tenants. It has been overwhelmingly supported in two public consultations, was originally a Labour Party policy and enjoys broad cross-party support.
Under the current system, Whitehall makes a series of complex annual decisions about what councils should raise in rents and what they should spend on their homes. Government then redistributes income between councils with an increasingly large profit being made for the Exchequer in the last few years as the methodology assumes that rents are rising significantly faster than costs. The result is that councils have no certainty about future income and no ability to plan long term as well as insufficient funding to maintain their houses to a decent standard. Through the Localism Bill, we will replace that subsidy system with one in which councils keep their own rents, thereby providing a direct link between the rent that councils charge and the services that they deliver. Tenants will, therefore, be able to hold their landlord to account. Councils will on average have 14 per cent more to spend on their stock than under the current system. This increase in funding is to meet the real costs required for management, maintenance and major repairs as identified in independent research.
I have some notes here that refer to a later amendment, but it is perhaps appropriate to deal with points raised by the noble Lord, Lord Best, about Clause 158. It is not a minor or technical part of these reforms, but instead is integral to protecting the Government's central fiscal priority to bring public borrowing under control. I appreciate that many councils do not like that restriction, but our reforms must support national fiscal policy. Self-financing will give local authorities direct control over a large income stream, which could potentially be used to finance a large increase in public sector debt. Prudential borrowing rules have been effective to date in ensuring that local authority borrowing
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I am aware that the borrowing cap will place pressures on some councils in the early years of self-financing. These pressures, however, should be seen in the context of a deal that significantly increases funding for all council landlords at a time when other parts of the public sector are facing a very tight fiscal position.
I think that that covers the point that has been raised. It really is a case of the national position and the problems of the fiscal position affecting local authorities in terms of the restrictions that we have with our national economic situation. I hope, particularly on the basis that we will be able to produce a simple document of explanation, that this will be acceptable to the noble Lord to enable him to withdraw the amendment.
Lord McKenzie of Luton: Before the Minister sits down, could he deal with the point about the existing powers that the Government have under the 2003 Act, for national economic reasons and by regulations, to limit borrowing by local authorities? Why do they need the additional provisions of Clause 158? Do they not have those powers, or why are those powers insufficient?
Lord Shutt of Greetland: I am afraid that I will have to write to the noble Lord about that. I do not have a firm answer as to why that should be the case, although it may well be that someone is sending me a document
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in order to ensure that the local authority does not borrow more than it can afford. While this power provides powers to cap local authority debt, it links local caps to local affordability. Our concern is not that councils will act in ways that are imprudent locally but that on aggregate these borrowing decisions may be unaffordable nationally. That is the situation there. If that does not cover the point, though, as I indicated earlier, I will write.
Lord Whitty: My Lords, I am grateful to the Minister for his offer to explain all this to me in simple language. I now understand that this is all about self-financing, which I have supported in the past and therefore continue to support. It is just that, due to the way the clause reads, it seemed to me that the one-off payment was not the result of a deal but was by the unilateral decision of the Secretary of State. Maybe that is the way that it has to be expressed in legislation, but I am grateful for the offer of a paper clarifying that. I still think that the points raised by the noble Lord, Lord Best, need a fuller riposte, and maybe the Minister could come up with that as well. In the mean time, though, I beg leave to withdraw the amendment.
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