Clause 11 - Use of capital receipts
Local Government Bill
3:45 pm
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
I beg to move amendment No. 66, in
clause 11, page 5, line 4, at beginning insert
'Subject as provided in subsection (2)'.
Mr Win Griffiths (Bridgend, Labour)
With this it will be convenient to discuss the following amendments:
No. 59, in
clause 11, page 5, line 4, leave out from 'State' to end of line 5 and insert
'shall not in any circumstances interfere in the use of capital receipts by local authorities.'.
No. 69, in
clause 11, page 5, line 4, after 'use' insert 'by a local authority'.
No. 70, in
clause 11, page 5, line 5, leave out 'a' and insert 'that'.
No. 60, in
clause 11, page 5, line 6, leave out subsection (2).
No. 61, in
clause 11, page 5, line 6, leave out from beginning to end of line 22.
No. 67, in
clause 11, page 5, line 6, leave out 'in particular'.
No. 51, in
clause 11, page 5, line 7, leave out from beginning to end of line 10.
No. 62, in
clause 11, page 5, line 11, leave out from beginning to end of line 12.
No. 3, in
clause 11, page 5, line 11, leave out from 'requiring' to 'of' and insert
'such amount as the Secretary of State shall specify, being not more than 20 per cent.'.
No. 40, in
clause 11, page 5, line 12, at end insert—
'(c) make provision requiring an amount not exceeding sixty per cent. of a capital receipt to be used only to meet capital expenditure in connection with the local authority's functions under part II of the Housing Act 1985 (provision of housing).'.
No. 63, in
clause 11, page 5, line 12, at end insert—
'(2A) Regulations made under subsection (2)(b) may only include the following in relation to payments to the Secretary of State—
(a) in relation to the disposal of dwellings, the maximum amount that can be specified is 25 per cent. of the capital receipt; and
(b) in relation to the disposal of any other asset, the maximum amount that can be specified is 15 per cent. of the capital receipt.'.
No. 39, in
clause 11, page 5, line 14, after '2(b)', insert 'and 2(c)'.
No. 25, in
clause 11, page 5, line 15, after 'of', insert 'an interest in'.
No. 41, in
clause 11, page 5, line 20, leave out subsection (5).
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
This is one of the most important clauses in the Bill. The large number of amendments that have been tabled bear witness to the intensity of interest in it. They have all been grouped together, which is perhaps inevitable if a clause is relatively short and has a focused purpose.
I think of this clause as the expropriation clause. It drives a coach and horses through the Government's claim that the Bill is about giving freedoms to local authorities. The Transport, Local Government and the Regions Committee said clearly that it should be deleted from the Bill. It is another piece of the Government's plan to siphon off resources from good, prudent councils and hand them to Labour-controlled councils, including the odd basket case.
The power in subsection (2)(a) allows the Secretary of State to direct the use of non-housing receipts for purposes of either capital expenditure or debt reduction. Draft regulation 17 is permissive in that it allows either. Would the Minister confirm that the intention is that the Secretary of State should be able to specify by regulations to either subsection (2)(a)(i) or subsection (2)(a)(ii) and that it is merely an expression of his current generosity of mind that the draft regulation allows either debt reduction or capital expenditure?
The power in subsection (2)(b) is the power to sequester housing receipts from local authorities. In the terminology of the guff that the Government put out and Ministers repeat at the Dispatch Box, that is called redistribution. There is nothing in the Bill about redistribution. It mentions an amount equal to a part or a whole of a receipt being payable to the Secretary of State. That is sequestration by any other name. The redistribution will be entirely at the discretion of the Secretary of State at a later stage. The Minister might like to comment on a report that the Minister for Housing and Planning said—outside of Parliament—that of the 34 debt-free authorities that make up the capital receipts group, only one, Barking and Dagenham, is an authority likely to be considered to be in housing need by the Government. There is likely to be a wholesale redistribution away from that group of authorities to another, more favoured, group.
I shall spell out how I understand that the provision will work. The Minister will have the pleasure of correcting me if I am wrong in saying that 75 per cent. of right-to-buy receipts will be sequestered by the Secretary of State. Of other housing receipts, including large-scale voluntary transfer receipts, 75 per cent. will be sequestered after taking into account certain allowances that give local authorities an opportunity to reinvest part of the proceeds in housing and urban
regeneration before the Secretary of State takes his cut. If that scenario is right, I cannot square it with the comments that the Minister made in the last debate, when he told the hon. Member for Kingston and Surbiton that when we came to this debate we would see that clause 11 would not remove the funding that local authorities might wish to reinvest in housing within their areas. If the source of that funding is right-to-buy receipts, the proposal, together with the draft regulations, would remove 75 per cent. of it from the authority and give it to the Secretary of State to be used in his absolute discretion.
Some of the amendments are alternatives to each other, and some seek to probe the Government's reasoning behind the drafting. Our initial reaction is to oppose the provisions of the clause, especially subsection (2)(b). However, we are realists and, in order to move forward, we think that it is worth exploring what the Government are trying to achieve and what their objections to the present system are, in order to establish whether there is any scope for compromise. Unless the Minister demonstrates a willingness to alter his position, we shall vote against the clause on stand part, because the suggestion that the Secretary of State can take one community's assets and move them elsewhere in the country is wrong in principle. Money raised from the sale of council houses should stay in the community and be spent according to locally determined priorities for housing and urban regeneration.
The Opposition do not accept the argument that borrowing, supported by central Government, has necessarily funded the provision and upkeep of authorities' housing stock. Some authorities have received negative housing subsidy for decades, and all authorities, whether they originally received housing subsidy or not, will have invested substantial amounts of their own tenants' money and, in some cases, council tax or, before that, ratepayers' money in that housing stock. The proceeds of sale of those housing assets should be reinvested locally and should not become part of a national resource, to be directed around the country on the Secretary of State's whim.
Dr Brian Iddon (Bolton South East, Labour)
In affluent areas such as the south and south-east, where the Government in the past have invested in housing and the price of housing has gone up to what I consider, from a northern perspective, to be astronomical levels, is it not fair that the Government should have a share in that extra money to reinvest in housing in other parts of the country where there is greater need?
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
No. If the hon. Gentleman thinks it through, he will realise that, if the values of housing units have gone up, that gives rise to precisely the problem that hon. Members representing those high-pressure areas of the country face every day. Fire fighters, to take a topical case, teachers or social workers, who are effectively paid on national salary scales, do not stand a chance of being able to buy a property. Therefore, people in other parts of the country that do not suffer the same house price pressures who could expect to get on the housing
ladder and buy a property are forced to look to the social housing sector. The need for additional social housing goes much further up the income scale in parts of the south-east that are suffering from high house-price pressures than in other parts of the country. There is a real need in such areas to ensure not simply that people are decently housed, but, increasingly, that the public services, which the Government talk about and talk about, can be delivered.
I assure the hon. Gentleman that if he comes to Surrey, or even to the constituency of the hon. Member for Kingston and Surbiton, he will find that it is increasingly difficult, if not impossible, to recruit the appropriate people to staff those services, because they cannot afford to live in the area if they have to buy market housing.
Dr Brian Iddon (Bolton South East, Labour)
I am following the hon. Gentleman's argument with interest and I have sympathy with some of the things that he is saying, but can he say, hand on heart, that all the money being caught by local authorities from right-to-buy sales and other capital sales is being reinvested in housing and not in other areas of local authority expenditure?
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.
Mr Jon Cruddas (Dagenham, Labour)
Has the hon. Gentleman any estimate of the prospective redistribution that the Government's proposal will amount to? At the moment, we lack figures; we have no estimates of the scale of the redistribution.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
The Minister is probably in a better position than I am to give such figures—he nods knowingly—but it is probably relevant to consider only the 34 debt-free authorities, because the other authorities would be in the same position anyway. We are talking about some £100 million per annum in respect of the 34 debt-free authorities, including Barking and Dagenham, which is by far the largest. Its figure would be about £12 million per annum.
To put that in context, the national figure for all authorities would be about £1.6 billion per annum, so we are talking about a small proportion of the total. With regard to meeting national housing need, it is a relatively insignificant sum, especially if one considers that part of it will presumably be recycled to the authorities that pay the tax, certainly to Barking and Dagenham. However, it is a very significant sum for individual authorities, many of which are quite small. The hon. Member for Guildford spoke about Waverley, which is a small authority. My local authority, Runnymede, is debt-free and a very small authority.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
For the sake of clarity, I should point out that our figures show that, if all the amendments were accepted, they would reduce the amount of money available for redistribution to spend on housing nationally by more than £1 billion a year.
Even if we were to limit it to those that are simply restricting the amounts that can be pooled, that would result in a reduction of more than £800 million, and merely exempting debt-free authorities would still cost some £120 million. Those are substantial sums of money, which would have a dramatic effect on the overall housing programme.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
The relevant figure is the last one that the Minister quoted—the £120 million. To discuss any other figure is to confuse the issue, given that local authorities are required to set aside—[Interruption.] It is my amendment, and, if the Minister does not mind, I will say that I am fairly pleased with my off-the-cuff estimate of £100 million, if the Minister's own departmental resources have come up with £120 million. I believe that that figure is within an acceptable margin of estimating error, given that I am on the hoof in a Standing Committee.
Mrs Valerie Davey (Bristol West, Labour)
The Minister gave us some interesting figures, and suggests that the money would not be available for housing investment. Does the hon. Gentleman understand that to mean, as I do, that the money could still be used for housing investment, but that it would be up to the local authorities that were selling those assets to decide how they wanted to invest them?
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
Yes. In tabling the amendments I have deliberately sought to suggest ways of reaching a compromise on that matter. This is not just a party political debate. The Minister will be aware that some of his Labour colleagues who supported the capital receipts group are concerned about the matter. They hope that it will be possible to find a compromise that will delight no one but that everyone will be able to tolerate.
It has generally been accepted by Labour Members to whom I have spoken that the most likely form of compromise acceptable to the authorities concerned, and that might also appeal to the Minister, would be to ring-fence a proportion of those receipts for housing use within the authorities that had received them. In a spirit of compromise, our amendment No. 40 seeks to do precisely that. However, on the basis of the interventions that the Minister has made so far, I am not optimistic that he will seek a compromise—although I hope that I shall be proved wrong.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
As my hon. Friend reminds me, it is the Minister's birthday. That may turn out to be a happy coincidence of timing for the many people in local authority areas in the south-east who are in work and in relatively well paid jobs, but who are unable to get themselves on to the housing ladder with the housing market as it is at present. Those people desperately need to see more resources invested in affordable housing in their areas.
The Liberal Democrats have indicated their support for amendment No. 62, which would delete subsection (2)(b), and we will want to vote on that amendment. If there was any equity in the world, and if the results of votes in this place depended on the
force of the arguments, we would be confident of winning that vote. However, since there is not much equity in the world, and certainly not in the way in which this place works, and since it will be apparent to anyone with only a passing acquaintance of this place that the outcome of votes has nothing to do with the validity of the arguments put in favour or against, we have sought to find a compromise. That is the point that we have reached in tabling amendments Nos. 3 and 40, as the hon. Gentleman helpfully suggested.
Amendment No. 3 would limit the amount of tax for national redistribution that the Secretary of State could levy under subsection (2)(b) to 20 per cent.
It is a big concession in principle to suggest that the Secretary of State should have any right to sequester those receipts. Leaving aside our attempt at a practical compromise, let us consider the Minister's argument logically. He said that many of the housing assets were originally financed by central grant or by borrowing supported by central funding. There is a grain of truth in that in some cases, but not all. It may be equitable for some sort of a levy on housing receipts, which goes back to the central pot in recognition of the original seed corn that was invested. The Minister's Department is in a better position than I am to make detailed estimates, but even the most superficial analysis shows that the huge ongoing investment over many decades in much of the council housing stock has been a charge on rent payers, local ratepayers and council tax payers.
The measure is not about redistribution and pooling between authorities, but about the Treasury taking a levy. Nothing in the Bill guarantees that that levy will be recycled into expenditure on housing that would not otherwise have been made. The Treasury will spend the funds on housing that it would have to have funded anyway because of pressures in the system.
Amendment No. 40 would set aside a further 60 per cent. of the capital receipt—after the 20 per cent. taken by the Secretary of State—for housing reinvestment within the recipient authority area. That is a big compromise on the principle that local authorities and communities should decide how to spend the receipts, but it is our attempt at a compromise or consensus to which the Government can agree. It is far from giving the freedom and flexibility that the Government talk about in connection with the Bill, but it is a less bad outcome if the national levy is 20 per cent., 60 per cent. is ring-fenced for housing in the recipient authority and 20 per cent. is a free capital receipt for debt-free authorities to spend as they wish.
I have already raised the issue of total cost indicators and their constraints on recipient authorities in spending the 60 per cent. I hope that the Minister will address the matter in due course.
A similar effect to that of the amendments could be achieved by changing the regulations, extending them to allowances that local authorities can set against a receipt before they calculate the levy payable to the Secretary of State. Thus, spending on affordable housing and urban regeneration could be set against
right-to-buy receipts before calculating the Secretary of State's take. I suspect that if the Minister is in a mood to compromise, it will be on the regulations rather than on the Bill. Conservative Members will listen carefully to him if he is inclined to take that route. Although we would prefer the changes to be in the Bill, we could live with changes to the regulations if they are on the same lines. That would be a sensible compromise.
I hope that the Government will not blindly pursue their two principal targets: first, debt-free authorities, who will have their freedom of the past five years in respect of their capital receipts dramatically removed—from a bureaucratic point of view, that might be seen as order and sanity restored with Whitehall triumphant and in control of how the capital receipts are spent—and, secondly, the right to buy.
We have already seen that the Deputy Prime Minister is gunning for the right to buy. His behaviour is based on the wholly fallacious assertion that the right to buy reduces the availability of affordable housing to rent. The right to buy does not have that effect—indeed, if receipts are properly recycled the right to buy can increase the availability of affordable housing to rent. Although it reduces the total stock, the stock is irrelevant: what matters to people in need of housing is their chance of getting a house. Having a huge stock of houses occupied in perpetuity by people who may no longer be in need—they may be in very much less need than some people on housing waiting lists—or on particularly low incomes is not an effective or efficient system. However, the Government persist in continually reasserting the fallacy. I will not go further down that route now, but we may have an opportunity later to discuss the ins and outs of housing finance and how expanding the right to buy will increase the number of available lettings of affordable houses, which is what we all want to achieve.
Finally, amendment No. 63, tabled by the Liberal Democrats, is essentially a variant on amendment No. 3, but the principle is the same. The amendment offers a compromise percentage figure restricting the Secretary of State's powers under subsection (2)(b). I am sure that the hon. Member for Kingston and Surbiton would agree that that is an imperfect solution, but it is better than the Government's proposal.
Amendment No. 41 is different and stands distinct from the other amendments in the group. It would delete subsection (5), which states that the Secretary of State may set off any amounts receivable by him under clause 11 against any amounts payable by him to a local authority. That seems a rather Big Brother approach. In the real world, people do not have statutorily enshrined set-off powers. Many commercial contracts, and certainly property-related contracts and transactions, which is what we are talking about, specifically exclude a power of set-off. Yet the Government, who have been spouting repeatedly—in the circumstances, I had better not say, ''at some length''—about the need to mirror ordinary accounting practice and, by implication, standard
practices in the commercial world, would give themselves this power of set-off.
I have already voiced one concern about that in relation to clause 10, namely, that there may be deemed to be receipts that have not actually been received in cash, but which the Secretary of State—not through malice, but just because there is a machine running somewhere—will automatically set off against payments due to be made to the local authority. Subsection (5) should be removed and the Government should not seek a specific statutory provision to deal with the way in which debtors and creditors behave towards each other in relation to the making and timing of payments. That is wholly unnecessary and goes against the grain of the Minister's suggestion that the new regime will mimic the real world as far as reasonably possible.
Mrs Valerie Davey (Bristol West, Labour)
I shall not detain the Committee for too long, for the simple reason that the hon. Member for Runnymede and Weybridge made a very long speech, I agreed with much of it, and I support many of his amendments, just as he supports many of the Liberal Democrat amendments. Furthermore, my hon. Friend the Member for Guildford wants to catch your eye, Mr. Griffiths, and the Minister is itching to reply to the debate—I know that because he has a ''Focus'' leaflet in his folder. It is always reassuring to know that he is about to quote some Liberal Democrat wisdom, but perhaps I can set out the party's official position first.
The background to the clause is that the Government still do not trust local authorities and do not want to give them any freedom. The Bill proposes the prudential capital regime, which is a good thing and a step in the right direction. However, in introducing it the Government saw that some controls over capital receipts would have to be relaxed—those controls could not be implemented in the same old way, because that might give local authorities more freedom over how they used their capital receipts. The Government could not have that, so they had to invent a new mechanism for clawing back and redistributing the money. Indeed, as the hon. Member for Runnymede and Weybridge said, they have gone further by introducing an extra levy on debt-free authorities. So, when we hear the Government's rhetoric about how the Bill frees local authorities, let us remember that the clause imposes some very big restrictions as well as an extra punitive levy on authorities that manage their finances well.
The hon. Gentleman put his finger on it when he talked about the Treasury, which is, of course, behind that measure. It cannot stand the idea that some public sector body somewhere will have some money because it managed its affairs properly. The Treasury does not want to give such bodies any freedom; it wants to grab the money and bring it back to the centre. That is clear to Liberal Democrat Members.
Mr Jon Cruddas (Dagenham, Labour)
Does the hon. Gentleman not concede that the fuller picture—we will presumably get it later this month, when we have the communities plan and the like—will not preclude the possibility of additionality? That is true even of debt-free councils, such as Barking and Dagenham, which enjoys a
certain exceptionalism in this debate? Using that as an illustration winds things up while precluding the possibility of painting the fuller picture. There are opportunities as well as tensions for certain authorities.
Mrs Valerie Davey (Bristol West, Labour)
The hon. Gentleman makes a fair point, and I was coming to it. The Government are expected to announce in the near future how they will spend all the money that was earmarked for housing in last July's spending review. That money will be welcome if, as we hope, the Government make the right decisions when allocating it. However, that makes our point stronger. If they are going to give money to authorities that need housing investment, especially for affordable and social housing, why do they need extra provisions to take money from councils?
As we have heard, people are worried because councils in the south-east and London get huge receipts. They believe that that is unfair because councils in the north of England do not have the same advantage when investing in social housing. However, as the hon. Member for Runnymede and Weybridge said, councils in the south-east and London face huge costs in providing affordable housing and land is very expensive. The fact that their receipts are high mirrors and balances the fact that affordable housing provision is expensive. There is a self-regulating mechanism, but the Government do not want it to operate. They want to interfere, as is so often the case.
Mr Jon Cruddas (Dagenham, Labour)
To take that a bit further, the Government are presumably not ignorant of the pressures in the south-east, which relate primarily to key workers. We have seen press reports about their plans for regenerating the Thames gateway and their creative approach to housing in the area, which will involve strong proportionality in terms of social housing. That means that the issue is centre stage politically and economically. If the hon. Gentleman concedes that the proposals in the Bill will not preclude additionality from also being part of the fuller picture, is there not a case for saying that the issues are being wound up for what I acknowledge are politically expedient reasons? The proposals will allow a much more creative approach to confronting issues in the south-east, some of which are experienced by my community, the hon. Gentleman's and those of many of his colleagues.
Mrs Valerie Davey (Bristol West, Labour)
I believe that the hon. Gentleman represents an area whose council will be hit by the measures. I understand that he is in a difficult position. I have already accepted that when the communities plan is announced there may be money for his and other areas—and, I hope, for my area, if we are lucky—but that is not the point. As the hon. Member for Runnymede and Weybridge said, many of the assets have been built up over many years through management of the money of tenants and local taxpayers and by debt-free authorities running their affairs prudently over a long period.
It seems bizarre that the Government should implement the new system now. If their rhetoric
about freedom and flexibility is to reach its logical conclusion, such authorities should be encouraged. That brings me to a major point that the hon. Gentleman did not touch on: creation of incentives in the system. For this reason I am sceptical as to whether some of the Minister's figures will be realised. Will debt-free local authorities faced with this legislation encourage the sell-off of housing or housing land? No. They will not try to promote such selling as they might have done in the past because they will see that money going out of their area.
These provisions will create an incentive against good and efficient management of capital assets. We may see a paralysis in the management of capital assets by the local authorities most affected, and those whom the Government hope will receive money from the redistribution mechanism might not receive any, so both sides will lose. Rather than a win-win situation there will be a lose-lose situation. That cannot be a sensible way to proceed.
So whatever is written in the ''Focus'' leaflet that the Minister is going to wow us with, my friends who edited that leaflet will not necessarily have focused on the wider picture.
Mrs Valerie Davey (Bristol West, Labour)
There are so many accusations of pre-emptive rebuttal. I am not sure whether I want to go down the pre-emptive route, as the Government seem to.
On the incentive point, as the hon. Member for Runnymede and Weybridge and I start to analyse the mechanism the Government are promoting, it begins to fall apart, so it is not surprising that there has been great opposition to it outside the Committee. We have heard speeches in the Chamber opposing the proposals from Conservative and Liberal Democrat Members, and on Second Reading from the Labour Benches. The Local Government Association, with Labour, Conservative and Liberal Democrat councils, have opposed them.
Mrs Valerie Davey (Bristol West, Labour)
I will give way in a moment. The Capital Receipts Group has a number of debt-free councils opposed to the measures. In the Government's analysis of respondents to the draft Local Government Bill, 134 respondents wrote to the Government to say that it constituted a bad set of proposals. There is widespread opposition to them from people who have analysed them. They fear that it will not be a good move either for local government or for housing investment.
Mr Jon Cruddas (Dagenham, Labour)
Did the hon. Gentleman say that Labour within the LGA was opposed to the proposals? My understanding is that the Labour group did not vote on the issue because it was a redistributive issue, but the majority composed of Liberal Democrats and Conservatives produced the subsequent LGA position.
Mrs Valerie Davey (Bristol West, Labour)
I cannot give the hon. Gentleman a full answer on that point—perhaps the hon. Member for
Runnymede and Weybridge will do so—but it strikes me as a way of trying to evade responsibility. The Labour group on the LGA is very powerful and it could have changed the LGA's line if it had chosen to do so. Instead, it has allowed the LGA to be in outright opposition to this clause, and I think that it was right to do so.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
The hon. Gentleman is absolutely right. It is worth placing on record that the LGA is a Labour-controlled organisation—the majority of its membership is Labour. The LGA has rejected clause 11.
Mrs Valerie Davey (Bristol West, Labour)
I have to correct the hon. Gentleman on one point. I do not believe that there is a Labour majority on the LGA, although Labour clearly has more votes than any other party at the moment. I give way to the Minister, who may correct us with some exact information.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
I hope that I can cast a bit of light on this. I understand that, for obvious reasons, the LGA does not normally comment on matters that involve the distribution of resources between authorities. The Liberal Democrats and the Conservatives in the LGA supported the view that was carried, but the Labour group did not support it. That was an unfortunate example of a political division within the LGA on a matter of distribution. Such things would normally be avoided. That is the information that we have on what happened.
Mrs Valerie Davey (Bristol West, Labour)
We are in danger of getting away from the point, and arguing over who voted for what and when. I understand that the Labour group in the LGA was not in outright opposition to this clause and that there was disagreement within the group.
I want to deal with these amendments—in particular, with amendment No. 62. The hon. Member for Runnymede and Weybridge quoted from a brief from the Capital Receipts Group, which regards this as the key amendment. The amendment would delete clause 11(2)(b), thus removing the power of the Secretary of State to receive and then redistribute receipts. When one considers this matter and acknowledges, as the hon. Gentleman did, that it especially penalises debt-free authorities, one begins to see that the amounts involved are relatively small. For debt-free authorities, the amounts are extremely small in the context of overall housing budgets—especially when one considers the amount of money involved in the communities plan. It is therefore even more bizarre that the Government have decided to push this provision through, in the face of opposition both in Parliament and in the local government family. It is a sledgehammer to crack a nut, it creates disincentives, and it is a bad precedent for the Government's approach to low-debt and debt-free councils.
I hope that the Committee will support amendment No. 62, which I intend to press to a Division. The amendment would right the most odious part of this clause.
Mrs Valerie Davey (Bristol West, Labour)
The hon. Gentleman says that it is his amendment, but I believe that my name is at the top of it. Look at the amendment paper.
Mrs Valerie Davey (Bristol West, Labour)
Thank you, Mr. Griffiths.
There are many amendments to which I could speak in detail. Amendment No. 59 deals with a point of principle. My party is concerned by the whole idea of central Government interference in capital receipts. That has been a problem with previous Governments for many years. When Labour was in opposition, it talked of allowing councils to spend their receipts from council house sales, but in government, it has acted differently. The Government have put onerous rules and limitations on councils. We maintain our opposition to central Government interference.
Amendments Nos. 60, 61 and 51 delete various parts of the clause, all abhorrent to us. If the Minister accepts one or more of the amendments, the clause will be improved.
Amendment No. 63 closely resembles the Conservative amendment No. 3 in that it refers to the draft regulation and attempts to reduce the negative impact of the measures by limiting the percentage of capital receipts that will be paid into the pool and to the Secretary of State. I hope that that gives the Minister a way out.
It has been interesting watching the hints in the Minister's body language during this debate. I think that we might be about to witness a change of policy by the Government, or at least a finessing of existing policy—
Mrs Valerie Davey (Bristol West, Labour)
Indeed. I hope that that is the case, because if the Minister presses ahead with the clause as it stands, he will face opposition not only today in Committee and later on Report, but in the other place and throughout the country.
Mr David Curry (Skipton and Ripon, Conservative)
I am loth to delay the revelation of the unfocused ''Focus'' leaflet that the Minister is apparently about to demonstrate to us. No one should be surprised by what the Government are doing, because it is entirely of a piece with what they have done until now. The local government settlement which has just been announced and which is to be debated by the House next Wednesday includes resource equalisation, which is a redistributive mechanism that has had an especially serious effect on my local authority. I see you nod sympathetically, Mr. Griffiths; no doubt you have been subject to the same problem. Now, we have before us another redistributive mechanism.
The Government are determined to get hold of capital receipts and redirect them. We will not have to wait long to hear the reasons why. Before long, the Deputy Prime Minister will reveal something called the communities programme. The Government constantly use the word community—it is one of the latest buzzwords, although it usually obfuscates entirely the meaning of whatever it has been applied to. That programme is, in essence, the Government's housing
programme. It has two major legs, the first of which is the imposition of heavy housing targets in precisely the areas of greatest stress—the south-east, which the hon. Member for Kingston and Surbiton has been talking about, parts of the south-west, and the Stansted-Cambridge corridor. Lest there be any misunderstanding, I should say that my principal home is near Saffron Walden. I, therefore, have a substantial interest. We are to have not merely an airport with 93 extra runways imposed upon us, but God knows how many thousands of houses as well. If we carry on at that rate, the Minister will succeed in extending Hackney to the Isle of Ely, which he appears determined to do. The answer to the interesting question of how the Government are to deliver that policy is that they will do so by raiding local authorities' receipts to help their own housing building programme.
The other leg of the programme—this is where the hon. Member for Bolton, South-East (Dr. Iddon), whose performance has been similar to that of his local football team—
Mr David Curry (Skipton and Ripon, Conservative)
I shall not wait with bated breath. I am a long-standing Bolton supporter, but I have gladly taken the precaution of never watching the team in action ever since they lost—unfairly, I thought—to Blackpool in the 1953 cup final, which I watched on my Gran's television in Burton-on-Trent.
The other leg of the Government's programme is demolishing houses in the north. That is desperately needed. There is not a single housing market in England, but several, and the major division is caused by the problems experienced in many of the northern cities. Everywhere, people are moving out of cities into surrounding areas, which creates a problem of financial resources being drained from some of the big metropolitan areas—hence the resource equalisation programme—and leaves large amounts of housing for which there is no market and which have to be demolished.
An interesting question is: where does one fit into the other? Is it intended to redistribute from what the explanatory notes call ''richer authorities''? I always try to avoid reading explanatory notes, because they are usually even more obscure than the text of the Bill itself. The notes refer to redistribution
''from richer authorities to those in areas with a greater need for new housing investment'',
but the areas with that greater need can themselves be very rich authorities.
Mr David Curry (Skipton and Ripon, Conservative)
The areas might include authorities in Surrey, as hon. Members on both Front Benches have said, or in the east of England. In terms of the geometry of council tax provision, the area surrounding the Stansted-Cambridge corridor must be fairly rich. It is, therefore, entirely possible that the
redistribution will be from the rich to the rich, or from the rich to the richer.
Another indicator suggests that redistribution might go another way. When the Deputy Prime Minister introduced his much-heralded but probably relatively small-scale changes to the right-to-buy programme, he identified areas of housing stress, a handful of which are strongly grouped in the London metropolitan area. Perhaps those are the areas of housing stress that he has in mind, but they do not necessarily coincide with the areas in which the Government are to impose major house building targets.
The Government are clearly not going to act against large-scale voluntary transfer receipts. It will be interesting to see how the LSVT programme, which was at the heart of the Government's housing Green Paper two or three years ago, will fit into the new programme to be announced by the Deputy Prime Minister. Will it still hold the centre ground? I hope that it will, because the right hon. Gentleman has nobly continued the policies on LSVT receipts that I inaugurated. However, the programme has seen some serious faltering. Birmingham, a hopelessly incompetent Labour authority, made a hopelessly incompetent fist of selling its transfer to local people—a recent report might well influence the way in which LSVTs are presented to the electorate in future—Sheffield has done a bunk, and several local authorities are thinking hard about whether they want to engage in LSVTs because of the problems of winning the acceptance of local tenants. If LSVT is sustained as one of the centrepieces of Government policy, it will be interesting to see how new life is breathed into it. So far, the arm's length companies have barely moved forward.
Mr Patrick Hall (Bedford, Labour)
We can talk about the details for hours, but at the core is surely the overriding need to identify and meet housing needs. If the right hon. Gentleman agrees with that, will he explain the way in which the clause would preclude housing needs being met? As he says, there are needs in all sorts of areas, rich and poor, and there is nothing to prevent them from being met. Will he explain why that could not be done?
Mr David Curry (Skipton and Ripon, Conservative)
My first observation is that this is a remarkable Committee because it contains five members of the Select Committee on Environment, Food and Rural Affairs who bring to the Bill a particular knowledge of rural affairs, which the hon. Gentleman exemplifies. Secondly, of course the purpose of the provision is to direct housing receipts into housing programmes that are not necessarily in the areas in which the receipts are generated—I give the Government credit for at least knowing what they think they are trying to do. Whether that is the right thing to do and whether there is a particular moral imperative attached to housing that other matters on which local authorities might want to spend money lack, those are separate questions.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
The right hon. Gentleman seemed to hesitate over whether the policy to redistribute receipts to areas of greater need is an appropriate one. As I understand it, that was the policy that he pursued
when he was the Minister responsible for housing. Has he changed his mind?
Mr David Curry (Skipton and Ripon, Conservative)
All Governments pursue redistributive policies—we all know that. The whole local government finance system is based on redistributive principles. The key is whether the formula identifies the needs, which is why we have a formula-driven system. The Government looked hard at the possibility of not having a formula-driven system and of using instead a system driven by performance and plan, but they drew back from that on the grounds that such a system might not meet needs. The question is where does the balance of reasonableness lie?
My point is that it is entirely possible that there will be needs that a local authority wants to meet—and which the Government have imposed a duty on it to meet—which are just as much of an imperative as housing. For example, the Environment, Food and Rural Affairs Committee is currently considering the problem of waste and its handling. There is no doubt that the Government will catastrophically miss their waste targets. So, no doubt new obligations will soon be imposed on local authorities, for the collection, sifting, sorting and recycling of waste. That will be an imperative. It would be a perfectly legitimate use for local authority capital receipts, particularly if we could get away from the absurd system in which the collection and disposal of waste are in the hands of different local authorities.
Mr Andrew Turner (Isle of Wight, Conservative)
Does my right hon. Friend agree that another example would be the provision of residential care in nursing homes for elderly people? There is great demand from the Government to reduce bed blocking in hospitals.
Mr David Curry (Skipton and Ripon, Conservative)
I agree. The Government's curious approach of taking £100 million from the NHS to give to local authorities to pay in fines to the NHS is the nearest thing to a tautology erected into a political mechanism that I have ever come across. It is absurd thinking.
We have discussed local authorities' ability to raise capital receipts—provided they can finance them, as the Minister said. I happened to be at North Yorkshire county council offices on Friday. I said to the treasurer, in my innocent way, ''You'll be looking forward to using those freedoms, won't you?'' He said, ''You must be joking. There's no way on earth that we could afford to finance any additional borrowing. We don't have the resources.'' That is partly because resource equalisation has spun some of them away from the local authority. That would be a legitimate purpose. Another would be assisting with a school refurbishment or a rebuilding programme. Since we are in the age of ''education, education, education'', is that a moral imperative less important than housing? There is, in the end, a perfectly good case for telling local authorities that they are elected, they are accountable and they can take decisions about the receipts.
I am interested in what the Minister expects with regard to right-to-buy receipts. My understanding is that they run to something between £1.4 billion and £1.6 billion a year. The current year—the one that is
coming to a close—has been quite a rich one, perhaps heading for a figure of £1.6 billion. No doubt that is because the threat by the Deputy Prime Minister to restrict sales has had what one might call the Lawson effect, of accelerating them. I hope that the gap between the announcement and its implementation will produce a monsoon of new applications for the right to buy. It would serve the Deputy Prime Minister right. Still, I should be interested to know the Minister's estimates, whether the changes made by the Deputy Prime Minister will influence them and whether the Deputy Prime Minister intends to extend the areas of what he calls housing stress. In some places, such as Leeds, the local authorities believe that there was a surge in applications in the expectation of housing stress.
This is the sort of debate in which one rather wishes that the Minister could have replied before anyone asked a question, because what he says is undoubtedly likely to provoke even more questions. I have given my preliminary thoughts and will be interested to hear the Minister's response.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
On a point of order, Mr. Griffiths. There are now seven minutes left until the scheduled end of the sitting. We are in the middle of consideration of clause 11. The Programming Sub-Committee resolution has a knife in the Bill at the end of Thursday's proceedings, after clause 73. On the face of it, that makes it look as if we shall not debate the important business improvement district and non-domestic rates provisions.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
We could sit a little later.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
The Minister suggests, from a sedentary position, that we stay later. In view of the new sitting hours of the House, the difficulty that some hon. Members will have is that it will be impossible to table amendments for Thursday if the Committee sits until the House rises.
I seek your guidance, Mr. Griffiths, on how a member of the Committee can propose the reconvening of the Programming Sub-Committee, with a view, perhaps, to repositioning the knife that is due to fall at 5 pm on Thursday. Perhaps a later sitting could be allowed on Thursday, to ensure that the important matters of BIDs and non-domestic rates can be debated.
Mr Win Griffiths (Bridgend, Labour)
My own feeling is that it is for the members of the Committee who normally discuss these matters to come to an arrangement for the rest of the week.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
Further to that, Mr. Griffiths, is there a formal mechanism by which a member of the Committee can propose that the Programming Committee be reconvened?
Mr Win Griffiths (Bridgend, Labour)
In a sense, the hon. Gentleman has made that view known. People appreciate the difficulties that we are running into and I am sure, from the body language of the Government Whip, that he is willing to confer while we continue with the proceedings. There is no need to worry about arranging something.
Ms Sue Doughty (Guildford, Liberal Democrat)
We touched on some reasons why the clause will cause local authorities problems. I get the impression that the Government do not accept the fact that, for years, local authorities have subsidised housing and received negative housing subsidies. In order to maintain the housing stock, they have had to draw upon council taxes and rents. We are considering assets that have been substantially maintained by the income derived from tenants, and are discussing the worst sort of redistributive taxation: income derived from the poorer members of society is to be redistributed to pay for other people who are also less affluent.
We seem to have a misconception about the need in more affluent areas. It seems to be thought that because some people in a local area are rich, a council is rich, therefore all the people who live there are affluent. Yet the housing need is substantial; the national average for vacant dwellings is 2.9 per cent. The hon. Member for Bolton, South-East will be interested to know that in the north-west it is 4.7 per cent., while in the south-east it is only 1.3 per cent.
We have talked about key workers. The hon. Member for Runnymede and Weybridge mentioned teachers, the police and other workers whom we cannot keep in the south-east because they do not get houses. When we go down the income groups, we see the additional problem that essential workers, such as bus drivers, trainee nurses and postmen, are not even classified as key workers and do not qualify for any schemes. There is no logic in saying that an authority's money that might provide housing for postmen and bus drivers should go somewhere else to pay for the workers in that area.
I am concerned about what happens when a local authority does not spend its housing budget in a particular year, not because it has no intention of doing so but because it is waiting for a piece of land to come up. Because of the shortage of building land, councils have to find not only the money to build on the land but the land itself. Whether they are investing through housing associations or directly in housing, they can experience delays. Can the Minister assure us that councils that have prepared a strategic housing plan are not penalised if they are unable to proceed in a given year due to a shortage of land?
The Minister keeps trying to suggest to us that it is not all that bad, so I hope that he is going to say something helpful about debt-free local authorities. Some councils that are unable to build houses tell tenants or would-be tenants that they can direct them to empty homes in the north-west or in Coventry. Sadly, life is not like that. We sometimes have to bus people from the other side of London to clean our hospitals, but a hospital cleaner working at the Royal Surrey county hospital is not much use to us living in a house in Coventry.
Mr David Borrow (South Ribble, Labour)
Does the hon. Lady agree that part of the problem in meeting housing need, particularly in the south-east, arises from the planning regime and the ''not in my back yard'' attitude of some local authorities that makes them resistant to freeing up land for new housing? As long as that attitude persists, the price of existing
housing is pushed up, causing considerable problems for the people the hon. Lady is talking about.
Ms Sue Doughty (Guildford, Liberal Democrat)
I would be a little happier if I could say that that was the problem, but clearly it is not. There have always been problems about housing regimes and whether green belts should be preserved, but the economics of building houses on the commercial market is such that it is difficult to obtain planning gains unless a reasonable number of executive houses are built. Guildford has struggled for many years to get a planning regime that would allow it to build the sort of houses that we badly need. The hon. Gentleman says ''NIMBY'', but we are trying to build those houses. The problem is liberating the money.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
I think that the hon. Member for South Ribble (Mr. Borrow) is trying to get at the suggestion that some authorities are resistant to the housing numbers that the Government seek to impose on them. I have a vital interest as another Surrey Member and, for clarity, I ask the hon. Lady to understand her position and her party's position in relation to the proposed housing allocations for Surrey.
Ms Sue Doughty (Guildford, Liberal Democrat)
We are moving away from the subject under discussion. My party wants to build affordable housing, as well as social housing through housing associations, through councils wherever the opportunity presents itself. Like many councils, Guildford is not particularly enamoured with taking up further land for executive housing.
The Bill is about building houses for those in greatest need, not about building houses for executives. That is where the problem arises. Before my council in Guildford went debt-free, the chief executive would come to me and say, ''We have all this money in the bank and we cannot spend it'', which is why it went debt-free in the first place. It was not a policy of not wanting to spend it, but of being unable to spend it.
If the Minister is giving us these areas of hope, does that mean that the Government will look as favourably on local authorities in affluent areas as on those in less affluent areas?
Mr Paul Goodman (Wycombe, Conservative)
I have a particular inquiry to put to the Minister, which he will perhaps allow me to put in this way. The Minister's leitmotiv has been that one of the main aims of the Bill is to decentralise—to allow local councils more flexibility, more freedom and more discretion. As my hon. Friend the Member for Runnymede and Weybridge has pointed out from the Front Bench and the hon. Member for Kingston and Surbiton, the Liberal Democrat spokesman, has also pointed out, it is impossible to reconcile that objective with clause 11, because the clause appears to represent an attempt to transfer money from well-run councils in the south-east to other councils that are less well run. I note in passing, as my hon. Friend pointed out, that the clause contains no reference to pooling. Subsection (2)(b), a key part of the clause, simply says baldly that provision can be made
''requiring an amount equal to the whole or any part of a capital receipt to be paid to the Secretary of State.''
What is truly significant about the Minister's proposal is that it is clear that many local authorities are willing to meet him more than halfway. A few moments ago, my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) made a valid and powerful point about the obligations that local authorities necessarily have to meet. He argued strongly that housing is only one of their obligations.
The submissions that members of the Committee will have received, and the Minister will have read, reveal that some councils are willing to be bound. For example, the Capital Receipts Group, to which the hon. Member for Guildford has alluded, said that
''Most members of the group''—
of which Wycombe district council is one—
''already ring-fence their housing capital receipts for housing investment and would be prepared to accept a statutory requirement for them to do so''.
The Minister will presumably be aware that Wycombe district council has stated:
''We therefore propose an alternative system where authorities should retain their capital receipts and be given control of their own resources, based on a commitment to deliver.''
It is not as though local authorities, including mine in Wycombe, are not willing to meet him halfway, and I should like him to make it clear to the Committee whether he is willing to meet them.
What possible sense can there be in a proposal that, as far as I can see, would transfer money from, for example, my area in High Wycombe, where it is badly needed for housing for public sector workers on low wages or for poorer people, many of whom are members of particularly poor ethnic-minority groups? I want the Minister to explain why money should be transferred from those relatively deprived groups of people, who are poor albeit that they live in better-off areas, to other groups of people elsewhere in the country, who may either be equally poor, in which case I do not see the element of social justice, or be richer than them.
The point has been well made in Committee by the hon. Members for Guildford and for Dagenham (Jon Cruddas) that not everyone in a relatively well-off area is well off. There are poor people in well-off areas who will be hit particularly hard by the draconian clause. I hope that the Minister can satisfy my hon. Friends and me on the matter.
Mr Robert Syms (Poole, Conservative)
Not since Henry VIII and the dissolution of the monasteries have we seen such a grab for land. There is genuine concern about the proposal among a range of local authorities, that have managed their capital assets in what they thought was the best way they could. I share the concerns of my hon. Friends and the Liberal Democrats that the change will lead to worse husbanding of resources.
I can understand the Government's concern to switch resources around, but I am extremely sceptical about the policy's impact. Local people should be left with maximum flexibility, so I am concerned by the clause. I look forward to the Minister justifying the grab for cash.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
The debate has been long and florid, and it has ranged widely. We have had some extreme hyperbole: a moment ago, the hon. Member for Poole said that ''never since Henry VIII has there been such a land grab''. I will bring us back to reality by looking closely at the clause, in which there are two key principles. First, we need to meet housing needs more effectively. There is general agreement that a lot more should be done to tackle housing needs throughout the country, particularly in the areas of greatest pressure. We need to ensure that people on low incomes who would otherwise find it hard to get affordable accommodation are helped to secure better housing. That must be an objective.
The second objective relates to the pooling of resources drawn from the disposal of capital assets to ensure that those are used to best effect to help boost our housing programme. There is some debate about that but the principle of having some degree of pooling has been there for a long time. It was very much part of the policy pursued when the right hon. Member for Skipton and Ripon was Housing Minister in the mid 1990s. A set-aside provision existed then and it remains in place today. For the vast majority of local authorities there will be no significant change. In place of set-aside there will be pooling, but the percentages that we propose for pooling will be exactly the same as the current set-aside percentages. I will come to the question of debt-free authorities in a moment. We are conscious of the strength of feeling. I hope that my proposals will help to provide a sensible way forward that people will agree is a sound and reasonable compromise.
Before I do that I shall look briefly at the amendments. Apart from amendment No. 25, the amendments are primarily concerned with limiting the capital receipts that may be subject to pooling or removing the power to pool altogether, which would be a fundamental and radical change that would certainly frustrate any attempt to ensure that resources were directed towards areas of greatest need.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
Just so that the Minister does not inadvertently mislead the Committee, may I point out that not all the amendments aim to limit the capital receipts subject to pooling. Some of them are directed towards limiting the amount of the pooling levy that can be imposed.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
No. I accept that. I was trying to do this as quickly as possible as time is short.
The combined effect of amendments Nos. 62, 66, 67, 69 and 70 would be that regulations under clause 11 could not require authorities to pay any amounts to the Secretary of State. They could make provision only about the use by a local authority of a capital receipt obtained by that authority, such use being limited to the purposes cited in subsection (2)(a). Amendments Nos. 59 and 60 appear to go much further and would mean that the Secretary of State would have no power to make regulations with regard to capital receipts. Amendments Nos. 61 and 62 would allow him that power but would respectively either allow him to make no provision about the uses to which the receipts could be put or not allow him to require them to be pooled.
Amendment No. 63 would appear to seek to restrict the Secretary of State's powers in the regulations under the clause so that he could specify only that a small proportion of capital receipts would be subject to pooling: 25 per cent. in the case of a dwelling and 15 per cent. in the case of other housing assets. We have no idea where the figures came from. Perhaps the people responsible for the amendment might explain why those are regarded as suitable. Amendment No. 3 would have a similar effect. It would limit the amount that could be subject to pooling to 20 per cent. Amendments Nos. 39 and 40 are aimed at allowing the regulations to specify that up to 60 per cent. of a capital receipt shall be used only to meet capital expenditure in connection with a local authority's housing functions under part II of the Housing Act 1985. Part II deals with the provision of housing by a local authority and amounts so used would not be available for pooling.
Finally, amendment No. 41 would omit subsection (5) so the Secretary of State could not set off any amount payable under the clause against any amount that he is liable to pay to the authority. This is not a Machiavellian attempt to apply set-off—an abuse in the construction industry with which the hon. Member for Poole will be familiar. I certainly was when I was Construction Minister. It is simply an administrative convenience to ensure that we do not have cheques flying in two different directions, one from the local authority to the Government and another from the Government to the local authority. It is administratively sensible. There is no evil intent, despite the suspicions that lurk on the Opposition Benches.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
The Minister asked where the percentage figures come from. I can only speak for amendment No. 3, but the 20 per cent. in that amendment is designed to mirror the levy on large-scale voluntary transfers, which I understand is 20 per cent.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
I can only say that I was raising the question about the figures of 25 per cent. and the 15 per cent., which seem entirely arbitrary and are probably off the top of the Liberal Democrat heads.
Mrs Valerie Davey (Bristol West, Labour)
Could the Minister, in return, explain why he thinks 75 per cent. and 50 per cent. make any sense, other than that they come from the previous legislation?
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
The hon. Gentleman has just made the point—those are the existing arrangements. As I said earlier, there is no change whatever for the vast majority of councils. Despite the huge hyperbole, the great exaggerations, the forecasts of doom and disaster, there is no effective change from the current arrangements for the vast majority of local authorities except for the 30-odd debt-free authorities. It is pooling rather than set-aside: it is a different terminology, but the effect is the same. That is why we opted for our figures—a rather better and more plausible reason than the Liberal Democrats have.
I come now to the effect of the amendments. They have a common theme: they would result in pooling not operating, as we believe it must if all authorities are to have the resources that they need to meet pressing national housing priorities. Some of the amendments would also have serious implications for the framework within which authorities manage their financial affairs. For example, the Secretary of State would not be able to specify that capital receipts could not be used to meet revenue expenditure, thereby allowing leakage to the subsidising of council tax rather than the money being invested in important new housing provision.
It must be right for the proceeds from the sale of council housing to be available for use in areas of greatest need. That is exactly what the current arrangements do, and it is exactly what was done under the capital receipts initiative that we announced in 1997. Indeed, the hon. Member for Runnymede and Weybridge was a member of the Committee that considered those arrangements early in that Parliament. That initiative distributed some £5 billion of accumulated receipts in a proportionate arrangement, with two thirds being allocated in relation to need and one third in relation to where the receipts originated, which is not that different from the figures under the proposed set-aside regime. The principle of redistribution is important, and without it the vast majority of authorities with urgent housing need would be left without sufficient resources. Most authorities understand that and the part that pooling plays.
It has been suggested that debt-free authorities should nevertheless be able to keep some or even all of their receipts to meet their spending needs, but we do not propose pooling 100 per cent. of receipts. Authorities will still be able to keep 25 per cent. of receipts from right-to-buy sales and 50 per cent. of other receipts. Pooling will not apply—there has been confusion about this—to any future LSVT receipts.
As the draft regulations make it clear, we intend to allow all authorities to retain other non right-to-buy receipts if they are used to provide affordable housing or to support regeneration schemes under the in-and-out provisions. Again, there is no change. However, some authorities are rich in receipts, primarily from right-to-buy sales that occur not because of good management or good asset management but simply because people choose to buy housing in the area, which often is to do with other factors. I do not accept that those authorities should routinely be able to spend significantly more than other authorities simply because they are debt-free. That seems to be perverse and unfair, and I am sure that my hon. Friends will agree.
Liberal Democrat Members will have noticed that I have been clutching a piece of paper. It is a Liberal Democrat Focus leaflet. I do not have much time for them, such is the sad plight of the party in my constituency, I am pleased to say that I rarely see them on my patch. This leaflet comes from Mole Valley. It gives an interesting insight into what Liberal Democrats are saying there and why the policy that their parliamentary representatives are pursuing in the
Committee would frustrate what they are trying to achieve.
Mole Valley Liberal Democrats say that the provision of affordable housing is currently the most urgent problem facing Dorking. I am sure that they are right; I have no reason to doubt it. It then says that, in the face of that crisis, Mole Valley Conservative councillors plundered £4 million from the funds that the council raised from the sale of council housing, which the council has carefully protected in order to invest in affordable homes. What do the Liberal Democrats say? They say that instead of diverting the money, councils should invest it directly in more effective housing programmes. We agree. Why, then, do they oppose provisions that will ensure that capital receipts are not used for other purposes but are applied for housing investment?
Mrs Valerie Davey (Bristol West, Labour)
For the Minister for Local Government to denigrate local democracy is a real shame.
Dr Brian Iddon (Bolton South East, Labour)
I thank my right hon. Friend the Minister for that information. I suspect that it is not an isolated example. Have the Government monitored the value of capital receipts that were received in that way but have leaked out of the housing sector?
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
I gave some figures on Second Reading and could go into that in some detail now. However, as we are very short of time, I ask my hon. Friend to bear with me and allow me to provide more detailed figures in due course.
The comments of the hon. Member for Kingston and Surbiton were interesting. I made no criticism whatsoever of Liberal Democrat councillors—in fact, I agreed with them. However, I did criticise the Liberal Democrat party for opposing policies that would achieve the effect that their local councillors in Mole Valley want. It is typical of the Liberal Democrat party to play things both ways. They say one thing to one group of people but something else to a different audience.
We want effective local democracy but we also want effective housing provision. That involves difficult choices, which we are not frightened to make. We do not say one thing to one group of people and another thing to another group.
Mrs Valerie Davey (Bristol West, Labour)
The Minister is skating on very thin ice. There is a distinction between this place or Whitehall deciding all housing policy for the whole of the country, and elected representatives having debates in their own area and being held to account by the people who elected them. The latter is the position of my party, but the Government's position is to centralise everything and denigrate and undermine local democracy.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
The hon. Gentleman is getting rather excited. That is not the case at all. I am simply saying that we agree with his party's local councillors in Mole Valley. If he agreed with them, he would support measures to ensure that capital receipts were not squandered on other things.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
No, we need to make some progress.
The amendments could reduce the amount available for redistribution by a considerable amount. In earlier exchanges, I explained that the overall effect would be to reduce the amount available for redistribution by more than £1 billion a year. Even the amendments that seek to limit the amounts that can be pooled would result in a reduction of more than £800 million a year, and just exempting debt-free authorities would still cost some £120 million every year. Money from the sale of assets that taxpayers have funded for years, in one way or another, would not be available to meet the most pressing national housing needs.
Mr Philip Hammond (Runnymede and Weybridge, Conservative)
In his exchange with the hon. Member for Kingston and Surbiton, the Minister sought to make a case for ring-fencing receipts for housing use. He singularly failed to make a case for pooling them. Is he indicating that he is moving towards a same authority ring-fencing solution as a compromise?
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
I urge the hon. Gentleman to be patient and bear with me. He may hear something that he will enjoy. Perhaps he will not enjoy it, but he may be interested, in any case.
It is of paramount importance that in the longer term all authorities should have access to maximum funding to meet national housing priorities, such as affordable housing and decent homes. The Government provide significant additional resources to help achieve that. Since 1997, the total amount provided to local authorities in England has increased by two and a half times, from just under £1 billion to £2.5 billion—so much for the argument about no additional funds and all the talk about confiscation. It is a rapidly expanding programme, and we are ensuring that more money is used to meet housing needs.
The arrangements proposed in clause 11 and the draft regulations are central to our efforts to achieve the necessary investment and are fair to all authorities. The amendments would jeopardise the long-term needs of many for the benefit of the few, whereas we propose a system that is fair to all. The areas that generate the most receipts will retain significant amounts to use as they see fit, and all authorities will be eligible to benefit from the resources available nationally for their needs. This will not happen without clause 11. We understand that some authorities may need time to adjust to the new circumstances under which national resources are shared equitably among all authorities. The Government have, therefore, decided that there should be transitional arrangements for debt-free authorities with housing stock; by that I mean those that are debt-free when the present capital finance regime comes to an end. Those are the authorities most affected by pooling since they will in future be contributing to the national funding of housing priorities, mainly by way of right to buy receipts. They are the only authorities to which the provisions make a material difference.
We propose to introduce special arrangements in the housing investment programme so that a proportion of the total resources expected to be
pooled by those authorities will, for a transitional period, be earmarked for them as part of the annual capital round. Ring-fencing is a difficult issue here. The argument is that all the housing cases suggest that those amounts should be made available, provided that they are used for housing; in other words, ring-fenced. However, the Government seek to reduce ring-fencing. Looking at the matter objectively, I have concluded that as this is proposed as a transitional arrangement to be phased out over time, ring-fencing would be acceptable as it will not be permanent. That is consistent with our approach to ring-fencing generally.
The transitional arrangement will enable authorities to earmark sums annually, provided that they are used for housing. Those sums will be in addition to other resources that they may be allocated. The proportion of the earmarked funds will reduce each year from 75 per cent. in year one to 50 per cent. in year two to 25 per cent. in year three; transitional measures will cease from the fourth year. All pooled resources will be available for distribution to all authorities. The earmarked amounts will be allocated to debt-free authorities when their circumstances have been assessed. We will provide further details when the communities plan has been published. I hope that hon. Members will see that we genuinely seek a compromise that reconciles conflicting aspirations and needs while remaining true to the principles that there must be a focus on meeting housing needs and that a pooling system is in place to ensure that resources from housing can be used to best effect to support housing.
Mr David Curry (Skipton and Ripon, Conservative)
Will the Minister treat debt-free authorities collectively so that the terms will apply to them collectively or will the arrangements apply to each authority individually? It is not clear.
Mr Nick Raynsford (Minister of State (Local and Regional Government), Office of the Deputy Prime Minister; Greenwich and Woolwich, Labour)
The aim is that the arrangements will apply to each authority individually.
Amendment No. 25 is a technical amendment that clarifies the extent of clause 11. It seeks to put beyond doubt that any capital receipt that a local authority derives from the disposal of housing land, including the disposal of it by an interest in that land, may be subject to the pooling requirement provided in clause 11(2)(b). It is consistent with the wording of clause 9(1) and will put beyond doubt, for example, that the disposal by an authority of its mortgage portfolio for housing revenue account properties is subject to pooling. That replicates current arrangements under which 50 per cent. of the capital receipts from the sale of mortgage portfolios is set aside as provision for credit liabilities. Ensuring that a proportion of the capital receipts arising from the sale of mortgage portfolios is pooled will guarantee consistency with the treatment of other right-to-buy receipts. I hope that hon. Members will accept that the amendments are not appropriate and should be withdrawn, apart from Government amendment No. 25, which I commend to the Committee.
Mr Phil Woolas (Oldham East and Saddleworth, Labour)
Is it possible under Standing Orders to hold a meeting of the programmed Sub-Committee at the end of this meeting?
Mr Win Griffiths (Bridgend, Labour)
Yes, provided that we have a quorum there is no problem in holding such a meeting. Members are formally warned about that now.
Further consideration adjourned.—[Mr. Woolas.]
Adjourned accordingly at twenty-nine minutes past Five o'clock till Thursday 30 January at five minutes to Nine o'clock.