Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I beg to move amendment No. 38, in

clause 10, page 5, line 2, at end add—

'( )(a) No regulation may be made under this section in respect of a disposal the consideration for which is wholly in the form of housing nomination rights.

(b) Regulations under this section in respect of disposals consideration for which consist partly of money payable to the authority or consideration other than housing nomination rights and partly of housing nomination rights may not apply section 9 in respect of that part of the consideration which consists of housing nomination rights.'.

It is necessary to look at regulation 16 in connection with this. For some reason, the regulations do not run in a chronological sequence through the Bill so regulation 16 is made under the powers given to the Secretary of State in clause 10. The explanatory notes make it clear that the intention of the clause is to provide that where a local authority makes a disposal in kind, it shall be treated as having made a disposal for money, the money being the equivalent value of the consideration in kind. If a disposal is made under value, it will be treated as having been made for money at the full value.

That bites most obviously and immediately where local authorities quite properly dispose of land to a registered social landlord at an undervalue and receive in exchange nomination rights in respect of the housing that will be built on that land. If I

understand the Bill correctly, such a disposal will give rise to a notional receipt by the authority, which will be subject to the Government's levying regime under clause 11. That seems wholly inappropriate and contrary to Government policy.

Mr. Raynsford indicated assent.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The Minister nods his heads, so that is not what will happen in practice. That is the essence of the concern. It seems sensible to have the reserve power against avoidance by creating non-money receipts to avoid paying the levy. I am an out and out opponent of the levy, but I am also a proponent of the theory that if we are to have law, it must not have any loopholes. Somehow we need to get sales at undervalue of housing land to registered social landlords out of this trap.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

After the apocalyptic visions of the previous debate, I can tell the hon. Member that he has put his finger on an extremely important issue that has given us some pause for thought. I hope that I can explain why we are proceeding in this way and why his amendment is neither necessary nor helpful. We entirely agree that there must a reserve power to cover avoidance; otherwise the system simply would not work. We equally recognise that there is currently an important provision that makes it possible for local authorities to pass land at a value well below its market value to registered social landlords in order to enable development to take place and to get the benefit in the form of nomination rights. We have no wish to cut across such sensible arrangements, which are all part of the proper process of ensuring that assets are used to best effect to provide housing for people in need.

Under the present system, housing nomination rights are exempted by regulations from the set-aside requirement. We have to find a way forward, but the broad exemption proposed by the amendment would not be satisfactory because it could invite attempts at evasion of the pooling rules. The right place for dealing with this is in the regulations where it is possible to target a relaxation more precisely. The regulations do not at present include any provision of this kind. I want to make it clear to the Committee that this is a first draft and that we are looking sympathetically at options involving nomination rights that would continue to encourage good partnerships between local authorities and registered social landlords.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

It is not just that regulation 16 does not include such a provision, because the explanatory notes on it use the example of housing nomination rights to show how an authority would have to calculate an equivalent monetary value. The notes say:

''For example, an authority might sell vacant HRA land to the private sector in return for rights to nominate tenants to some of the dwellings to be developed on the site. In such a case, the authority must work out what it would have received if the sale had been for cash and apply the pooling percentage to that amount.''

Until very recently, the Department not only missed the point but specifically intended that housing nomination rights as consideration should be captured. Will the Minister tell us what caused the change and when it occurred?

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

The Department has rightly been working on two principles. First, authorities should be aware of the value of any land that they pass across and should have an idea of how much they are giving as subsidy. Secondly, we have been keen to ensure that the new regime should not be subverted by arrangements always to seek nomination rights rather than a cash receipt or other consideration in order to evade the provisions of the subsequent clause. That is why the regulation is as currently drafted but, as I told the Committee, we are conscious of potential damage to good partnership arrangements between local authorities and registered social landlords in order to provide affordable housing in areas in which it is most needed.

We intend to revisit the matter to provide the comfort that the hon. Gentleman wants to ensure that such partnerships may continue while covering ourselves against the risk of evasion. We are not in a position to identify precisely how we will achieve that, but it is our intention. Given that assurance, I hope that the hon. Gentleman will withdraw the amendment.

Mr Robert Syms (Poole, Conservative)

I have a worry. I served on North Wiltshire district council and Wiltshire county council for several years. There are times, especially in rural areas, when it is extremely difficult to provide local services. In such circumstances, it is not unusual for parish, district and county councils to put resources together to make such a provision.

The county council owned bits of land that it sometimes put into a deal, although not for a receipt but for the provision of a local service that it deemed to be a good thing for the local community. I would be worried about the value of such land that the Government would presume.

If there are no unitary authorities, it is sensible for tiers of local government to work together, which is sometimes the only way for provision to be made, given authorities' sparse resources. A community centre or a leisure centre could be provided by a town or district council because of the gift or sale of land at a reduced rate by a county council that had county farms or a bit of land at the edge of a school. I hope that the Minister appreciates our worries that the Government's possible intervention might make it more difficult for authorities to be creative when making provision for the people whom all authorities are trying to serve, albeit at various tiers.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

I shall resume a speech that was otherwise rapidly reaching its end. I agree wholeheartedly that it is right to encourage creative relationships among different tiers of government and voluntary organisations for the provision of housing. We do not intend to cut across that. As the hon. Member for Runnymede and Weybridge said, there is a need to balance that against a loophole that would make the capital receipts pooling arrangement non-viable. I am committed to exploring ways of trying to deal with that problem in a way that does not cut across good, sensible partnership arrangements that deliver affordable housing where it is needed through the kind of arrangement that the hon. Member for Poole (Mr. Syms) described.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

My hon. Friend the Member for Poole has raised an important point. I was looking at the narrow point about transfers to registered social landlords and thinking specifically about housing. My hon. Friend's point was about the wider issue, which, if we defined it, would be the use by a local authority of an asset that it holds for its own purposes, but which would be injected into some other partnership. If the Minister is to resolve this problem, he must find a way for such a transaction not to be treated as a disposal. Perhaps the answer would be for the local authority to grant long leases at nominal rents and premiums, or something along those lines. That issue must be resolved.

I was concerned to hear the Minister use the word ''evasion'' in what turned out to be the false closing of his speech. He talked about wanting to make sure that whatever method he put in place to ensure that the arrangements whereby local authorities dispose of land in exchange for housing nomination rights, it would not be used as a vehicle for the evasion of capital receipts pooling.

The term ''pooling regime'' is bizarre; there is nothing in the Bill about it. In fact, it is a levy by the Secretary of State on local authorities. There is, however, no reference to pooling anywhere. I wonder whether the Minister's words are carefully chosen and whether he intended to imply that some level of disposals for housing nomination rights would be acceptable. The example that he gave, however, referred to a local authority's always disposing of its assets for nomination rights, rather than for cash, and he described that as evasion. [Interruption.] I think that if he reads the record he will find that he did. That description implies that there will be a quantitative limit on the ability of local authorities to carry out such transactions.

I take what the Minister said as I think it was intended—as a genuine recognition that regulation 16 as it is drafted is not right and that the power under clause 10 must be used differently. It would be appropriate to withdraw the amendment, but will the Minister assure the Committee that before Report he will come back with a revised draft regulation? It would not be satisfactory if we left a bad, sweeping power in clause 10. That would be an example of precisely the thing about which we are concerned—a badly drafted regulation has been recognised in a ministerial assertion, but there is no remedy in sight. We would, in any case, need to have a substantive debate about that issue some months down the line after a new regulation is drafted. I hope that the Minister will be able to reassure the Committee.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

I cannot give the hon. Gentleman an absolute guarantee that we will be able to produce revised regulations in time for Report stage, but that is only because of the considerable number of other pressures under which we are working. I undertake to write to the hon. Gentleman, setting out our thoughts on how we might address this conundrum and I will copy that letter to all Committee members. I hope that the hon. Gentleman will accept that as an indication of our good faith.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I am grateful to the Minister, but the key thing is that having flagged up our concern, which the Minister has effectively acknowledged is legitimate in the context of the regulation as it is drafted, we need to see how the Government intend to use the power before the parliamentary passage of the Bill has finished. If that cannot be done before Report Stage, it should be done before the Bill is considered in the other place, so that we have the opportunity to debate it during the parliamentary progress of the Bill, rather than during a debate on a statutory instrument.

Mrs Valerie Davey (Bristol West, Labour)

I have been listening closely to the hon. Gentleman's remarks. He has done the Committee a great service by bringing the matters to the Minister's attention. The Minister has responded positively.

With respect to overall housing policy, much of which is contained elsewhere in the Bill, the Government are effectively giving large subsidies to councils that are transferring their stock to registered social landlords. It appears that the Government were going the other way.

Is the hon. Member for Runnymede and Weybridge concerned, as I am, that there may be a lack of consistency in the policy? When the Government draft the regulations, about which he teased out information, they should bear that in mind and ensure that authorities that seek to promote registered social housing in that way are not disadvantaged but, if anything, encouraged.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The hon. Gentleman is right. In fairness to the Minister, he has implicitly recognised that draft regulation 16 cuts across the intention of Government policy. For that reason, he has indicated that he will consider redrafting it. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I have a very quick question, which is less important but not entirely redundant as a result of what the Minister said. Would the Minister clarify whether the powers under clause 10 can be used retrospectively—I know that that is an emotive term—to catch disposals and non-monetary receipts for which a local authority had contracted prior to the legislation coming into force? I see that all the members of the Minister's support services have carefully averted their eyes. If he cannot get the answer that he needs at this moment, perhaps he would be kind enough to write to me.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

The hon. Gentleman asks a good question. Let me say right away that it is not our intention that the provision should have retrospective effect, as I shall make clear in the debate on the next clause. On the specific issue as to whether, technically, there might be a problem, I shall seek further advice and write to the hon. Gentleman.

Mr Robert Syms (Poole, Conservative)

I have just one further small point. Sometimes, when a county council decides that it has a surplus school in a village, it is not entirely clear who actually owns it. Many schools were set up by local

charities that may have predated the county council or were provided by local landowners, so there is often endless debate as to what can be done with an asset or whether it is legitimate for the county council to sell it. I hope that the Minister takes that into account before he drafts the policy.

Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich & Woolwich, Labour)

I remind the hon. Gentleman that county councils are not housing authorities. It is unlikely that they would have an asset of that nature that could be treated as a housing capital receipt and, therefore, the provisions are not likely to apply.

Question put and agreed to.

Clause 10 ordered to stand part of the Bill.