Clause 11 - Use of capital receipts
Local Government Bill
3:45 pm
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
I cannot, and I know that this will be one of the main thrusts of the Minister's argument—his trump card. I want to go a little deeper into the issue.
First, it is right that local communities that have contributed to the value of the housing asset over the years should be able to decide how the receipts will be spent. In most cases the historical investment will be a small part of the total investment over the life of the asset, most of which will have been contributed by tenants or local council tax payers. However, let me address head on the performance of some authorities in reinvesting their receipts in housing.
I intended to come to this question later, but I shall put it to the Minister now. Has he analysed properly and rigorously the extent to which the total cost indicators imposed by the Government constrain housing authorities in high, cost-pressure parts of the country from reinvesting in affordable housing? I do not claim to be an expert on the subject, but it seems to me that, because of the high pressures of land costs, it is difficult for local authorities in certain areas to reinvest in affordable housing, unless they are doing so off the back of planning obligations that will effectively allow them to access land at less than market rates. I wonder whether the Minister has taken full cognisance of the fact that that will be a constraint on the activities of local authorities that receive capital and cannot reinvest in affordable housing as much as they wish.
Although the power given to the Secretary of State under the Bill would apply to all authorities, it will have a disproportionate impact on those that are debt-free. That is because the current regime—I recall it well, as early in the previous Parliament I sat on the Committee in which the Minister introduced the regime for set-aside—requires 75 per cent. of receipts from the sale of council houses to be set aside, but debt-free authorities have complete freedom over how
they use capital receipts. Clearly, the shock to the system will be considerable for debt-free authorities and negligible or non-existent for indebted authorities. The latter will simply find that the 75 per cent. ceases to be a notional entry in their accounts and goes off as tax paid to the Secretary of State. The disproportionate way in which the measure will affect debt-free authorities is an important point to be considered.
The amendments are designed to probe the Government on key questions, and to determine whether the Government are motivated by the claimed failure of local authorities to invest in housing, as the Minister said on Second Reading, and, if so, what role cost constraints play in that failure to reinvest; or whether the Government are simply determined to get their hands on the money and use it for their purposes and to suit the geographical priorities determined by the Secretary of State. In relation to the former, our amendments include suggestions that will adequately address the Government's concern about ensuring that the receipts are recycled into housing in the local areas concerned. However, there may have to be adjustments to the cost control regime to achieve that.
There is a special question that relates to new towns, which the Minister mentioned earlier, but I think that that issue is almost exclusively Labour party grief. I do not think that any members of the Committee represent new towns; at least, if there are, they have not been vocal in putting the case for new towns. If I am wrong, I look forward to hearing from them in the near future. The Minister's point about the transfer of assets in relation to new towns completely ignores the fact that those so-called assets, often system-built housing that is now 30 or 35 years old, have been accruing vast maintenance liabilities throughout their life. They will require substantial investment, both in relation to housing units and supporting infrastructure, if their lives are to be extended long into this century.
I shall talk about the substantive amendments, and will not bother making reference to those that are simply consequential or paving amendments. Amendments Nos. 69 and 70 would amend subsection (1) to assert the Secretary of State's power to regulate the use of capital receipts, and to make it clear that it is a power to regulate the use of capital receipts by the authority receiving them—in other words, excluding the possibility of removing those receipts from the authority, in line with the compromise approach that we seek. There would be a constraint on the use of receipts, but the receipt would remain with the receiving authority.
Let me deal with the Liberal Democrat amendments Nos. 59 to 61. It was clever of the hon. Member for Kingston and Surbiton to table separate amendments whose aggregate effect would be to prevent clause 11 from standing part of the Bill. A clause that ended up saying that the Secretary of State
''shall not . . . interfere in the use of capital receipts by local authorities''
would probably not be worth including. It might have been more honest of the hon. Gentleman not to table
the amendments but to speak against the clause in the stand part debate. Taken together, the amendments are a resounding no to clause 11.
Amendment No. 67 is a slightly technical probing amendment. It would leave out the words ''in particular'' in subsection (2), which states:
''Regulations under subsection (1) may, in particular . . . make provision requiring an amount equal to the whole or any part of a capital receipt to be used only to meet . . . capital expenditure, or . . . debts or other liabilities . . . make provision requiring an amount equal to the whole or any part of a capital receipt to be paid to the Secretary of State.''
In other words, subsection (2) sets out two particular uses of the regulation-making power under subsection (1).
It is not clear to me, as a non-lawyer, whether the phrase ''in particular'' narrows the scope of subsection (1), or merely gives examples of the uses to which the regulation-making power under that subsection might be put. Will the Minister clarify whether the phrase ''in particular'' limits the power to only those matters described in subsection (2)(a) and (b)?
Amendment No. 62 is the meat and drink of the debate. It would leave out subsection (2)(b), which gives the Secretary of State the power to require that
''an amount equal to the whole or any part of a capital receipt . . . be paid to the Secretary of State.''
We know that the Secretary of State intends to use that power to require 75 per cent. of right-to-buy receipts and 50 per cent. of other receipts to be paid to him as a tax.