Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

I beg to move amendment No. 112, in

clause 40, page 17, line 39, after 'appropriate', insert 'by order'.

Mr Derek Conway (Old Bexley & Sidcup, Conservative)

With this it will be convenient to discuss

Amendment No. 113, in

clause 41, page 18, line 23, after 'appropriate', insert 'by order'.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

I fear that the habit of brief questions and answers will come to a short stop now.

Mr Desmond Swayne (New Forest West, Conservative)

Shame.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

No doubt my hon. Friend would prefer to debate the entire Bill in one sitting and go home. Sadly, the Committee would not be seen to be doing its job if we did that.

The clause refers to overhanging debts and some large sums. In a written answer to me, the Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister, the hon. Member for Harrow, East (Mr. McNulty), said that, under the clause, the

''Provision for 2003–04 is currently £616 million.''

In last Thursday's proceedings of the Committee, my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) quoted a figure of £800 million for the same year. That is some difference. Will the Minister clarify what figure is involved?

To set the matter in context, we know that some significant sums have already been paid in writing-off overhanging debt in relation to housing stock that is transferred, when debt has been accrued that is larger than the proceeds from the transfer. Some large payments have been made almost exclusively to

metropolitan boroughs. For example, I was told in a written answer that, in 1999–2000,

''£20.99 million was paid to Burnley. In 2000–01 payments were made to Coventry (£111.68 million) Calderdale (£64.59 million) and Blackburn with Darwen (£78.9 million). In 2002–03 payments have been made to St. Helens (£87.2 million), Redcar and Cleveland (£25.4 million) and Knowsley (£126.13 million).—[Official Report, 3 December 2002; Vol. 395, c. 707W.]

Large sums of debt are being written off. That is why amendments Nos. 112 and 113 would be appropriate. Subsection (1) states:

''The Secretary of State may, if he thinks it appropriate, make payments to the Public Works Loan Commissioners so as to reduce or extinguish such debt (whether then due or not) of a local authority in England to those Commissioners as he thinks fit.''

It seems to me that when one is dealing with such an important matter and with such large sums, payments should not be just at the whim of the Secretary of State; they should be made by order, which would be subject to parliamentary scrutiny. I look forward with interest to the Minister's explanation and to him clarifying what sums he has laid out in his budget.

I fully understand that that will depend on which authorities succeed in making a stock transfer. Nevertheless, in line with the previous Government's policy, the Government are seeking to encourage local authorities to make stock transfer to registered social landlords. Presumably, they are using the provisions to encourage that transfer. It would be interesting to hear from the Minister how much he expects that to cost, and for how many more authorities such huge sums are in the pipeline.

Mr Desmond Swayne (New Forest West, Conservative)

The Government are seeking not only to encourage stock transfer but to encourage housing authorities to maintain their housing stock. What concerns me, particularly in relation to the lack of transparency referred to by my hon. Friend, are the perverse incentives that may arise from those payments and to which the Select Committee drew our attention.

I already know of the difficulty caused by the failure to maintain the standard of the stock. My local authority is currently prevented from spending its resources in the acquisition of additional affordable housing, which is desperately needed, by the requirement imposed by the Minister that it use those resources to maintain the existing stock. It is quite right that the existing stock should remain at a high standard. My authority is a beacon authority that has maintained its stock very well for many years.

The policy, entirely appropriate as it may be to an authority that has not maintained its stock properly so that much of it has become uninhabitable, affects us disproportionately hard and prevents us from meeting local need. The Select Committee drew attention to what it regards as a perverse incentive in the arrangements for the maintenance of stock. I cite paragraph 31 of the Select Committee report, and the evidence given by the Chartered Institute of Public Finance and Accountancy:

''The 'playing field' is not level and taxpayers' money is being used in a discriminatory fashion. There is also a measure of 'perverse incentive' in the proposal as it benefits authorities that have not

maintained their housing stock in the past to a standard where the market value exceeds the historic debt.''

I ask the Minister to provide some reassurance as to why the criticisms levelled by CIPFA in its evidence to the Select Committee hold no force.

Dr Brian Iddon (Bolton South East, Labour)

I find the hon. Gentleman's whinging rather extraordinary. For 10 years, I was the chairman of housing in a metropolitan authority, and I can tell him that under his Government we had a 70 per cent. cut in housing finance. How can he expect metropolitan authorities to maintain their stock after such swingeing cuts?

Mr Desmond Swayne (New Forest West, Conservative)

It is entirely appropriate that Government policy should be designed—as the policy imposed on New Forest district council was—to encourage authorities to maintain their stock. I am complaining that one size does not fit all. Authorities that may not have been labouring under the disadvantage so keenly felt by the hon. Gentleman's authority, and which were able to maintain their stock, will now have imposed on them a policy that prevents them from acquiring additional stock. That policy requires them to tear out perfectly good kitchens and put in new ones, instead of building new houses for people who are in desperate housing need.

Mr Robert Syms (Poole, Conservative)

Although the explanatory notes on clauses 40 and 41 concentrate purely on housing stock transfers, the Bill does not say that clause 40 is limited to such transfers. Are there any circumstances other than the issue of stock transfer in which the clause might be used? As the Bill stands, there is no limitation on the power, and it could well be used to write off a local authority debt that has nothing to do with stock transfer or a housing issue.

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

Clause 41 follows a similar pattern to clause 40, but relates to loans from bodies other than the Public Works Loan Board. Clauses 40 and 41 allow the Secretary of State to assist one or more English local housing authorities to meet debt liabilities through a payment direct to either the public works loan commissioner or the local authority on the condition that it is transferred to a non-PWLC lender. Amendments Nos. 112 and 113 would require the Secretary of State to make an order before making such a payment. Clause 117(4) requires such an order to be made by statutory instrument.

The requirement to make an order before a payment can be made could prove highly problematic and may prevent the Secretary of State from paying the correct amount in respect of authorities' overhanging debt following a housing stock transfer. I shall briefly explain. The amount of overhanging debt that the Secretary of State would repay is known only at the very last moment when the housing stock transfer takes place. As a minimum, the rate for new loans from the PWLB is reviewed weekly, with any change impacting on local authorities' debt redemption premium, and therefore on the level of an overhanging debt payment. If the amount had to be specified in an order that would have to be laid before Parliament at least 21 days before coming into force,

the debt repayment specified in the order may not be the amount of overhanging debt that needed to be repaid. The payment specified in such an order may be either insufficient, leaving the authority with outstanding debt, or excessive.

We would be unable to consent to the transfer if the order had not been made before the transfer, as the authority would be unable to meet its housing debt obligations and would remain eligible for housing revenue account subsidy. The purpose of clause 40 is to remove that possibility, as we believe that it is inappropriate for an authority with no housing to receive ongoing housing revenue account subsidy. That is the key point to which we have already referred.

I repeat that there is no question of different treatment for different authorities. Those authorities that continue to hold housing stock will continue to qualify for subsidy. The procedures in the clause to allow overhanging debt to be written off avoid the nonsense of subsidy being paid to a local authority that no longer has any stock, but has debt because the amount that it received from the sale was less than the outstanding debt. The provisions are a purely practical arrangement designed to cover those circumstances.

I should tell the hon. Member for New Forest, West that authorities that get more from a transfer than the amount of outstanding debt will be free to retain that debt, and there is no change to the relevant provisions, as I made clear when we debated the pooling arrangements last week. We are talking not about preferential treatment, but a sensible arrangement to cope with the practicalities of transferring stock and dealing with overhanging debt. Such debts exist, and I am quite open about this, predominantly in metropolitan authorities that often have much larger debt burdens. The value of the stock is often less is such authorities, and the chance of covering the outstanding debt through the receipt is therefore smaller than in more affluent areas.

The hon. Member for Cotswold asked about the figures, and I can confirm that those that he gave for authorities were broadly right. Some £532.9 million has already been applied to write off overhanging debt, and possible further such debt payments are expected during the next couple of months in respect of Bradford and Walsall. Beyond that it is difficult to forecast, because the whole process depends on tenant votes, and if tenants voted not to transfer, any figures that I gave would be wildly out of line. The hon. Gentleman also referred to estimates. Obviously we have to make provision for such requirements, but the actual sums allocated are those that he quoted, and I can confirm those for individual authorities. I hope that I have satisfied the Committee that the arrangement is sensible.

The hon. Gentleman referred to openness, transparency and scrutiny of those substantial sums of money. We make all the figures public, and, from 2002–03, overhanging debt payments, which were originally recorded in the Treasury's annual accounts, will be recorded in the annual accounts of the Office of the Deputy Prime Minister. Payments will therefore be open to the scrutiny of Parliament and the

National Audit Office. Were any payments to be made by the National Assembly for Wales, they would be shown in the Assembly's accounts, so there is no question of secrecy, and there is proper provision for scrutiny of the sums. I hope that the hon. Gentleman will agree to withdraw the amendment.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

The Minister's explanation was helpful to the Committee. I still think that the procedure is for ministerial convenience. I do not accept the right hon. Gentleman's explanation that it would not be possible to have an order for each payment of overhanging debt. That is commonly done if the precise sum is not known when the order is passed, but the order would make provision for the sum and an estimate would be given. There is a perfectly good mechanism in this House for doing that. Having said that, we have explored what the clause does. Whether or not one agrees with the huge payments, I do not accept the Minister's explanation, but I will not ask my hon. Friends to push the matter to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Derek Conway (Old Bexley & Sidcup, Conservative)

It seems clear to me that the chances of reaching clause 73 in the next hour are reasonably remote, so I intend to suspend the sitting for a maximum of five minutes, to allow the usual channels to decide whether they want to address that issue or to make progress.

Sitting suspended.

On resuming—

Ordered,

That the programme resolution of 30 January be amended, in

the table, in column 3, leave out '11.25 am at 7th sitting'.—[Mr. Woolas.]

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

On a point of order, Mr. Conway. The Committee has made a sensible move. Clearly, whatever one thinks of programme motions, when debates in Committee take longer than expected—and the Programming Sub-Committee can never know how long a debate will take—it makes sense to have a sensible, quick procedure, such as we have had. I thank you for that, Mr. Conway, and I thank the Minister for facilitating it.

Mr Derek Conway (Old Bexley & Sidcup, Conservative)

I am grateful to the usual channels for facilitating that.

Mr Edward Davey (Kingston & Surbiton, Liberal Democrat)

I beg to move amendment No. 87, in

clause 40, page 17, line 41, leave out 'a' and insert 'each'.

Mr Derek Conway (Old Bexley & Sidcup, Conservative)

With this it will be convenient to discuss the following amendments:

No. 88, in

clause 40, page 18, line 3, leave out 'a' and insert 'each'.

No. 89, in

clause 40, page 18, line 20, at end add—

'(6) When the Secretary of State or the National Assembly of Wales makes a payment specified under subsection (1) or subsection (2) the Secretary of State or the National Assembly for Wales shall

not reduce or extinguish such debt disproportionately between authorities.'.

No. 90, in

clause 41, page 18, line 22, leave out 'a' and insert 'each'.

No. 91, in

clause 41, page 18, line 26, leave out 'a' and insert 'each'.

No. 92, in

clause 41, page 19, line 6, at end add—

'(8) When the Secretary of State or the National Assembly of Wales makes a payment specified under subsection (1) or subsection (2) the Secretary of State or the National Assembly for Wales shall not reduce or extinguish such debt disproportionately between authorities.'.

Mr Edward Davey (Kingston & Surbiton, Liberal Democrat)

The amendments follow on from a comment that the Minister made during the previous debate, when we were discussing other amendments related to the clause, and how the Government will pay overhanging debt. The amendments seek to probe the Government's position. In the Select Committee hearings and the Government's response, a question arose as to whether the clause would enable stock transfer authorities to be treated in the same way as local authorities. In other words, were the Government providing a financial incentive to council tenants to vote for a stock transfer instead of rejecting such a proposition? The issue is significant, because if the Government were to create an extra incentive, they would be making a fairly uneven playing field even more uneven, with respect to those significant decisions for many of our constituents.

The Select Committee considered the draft Local Government Bill, and subsequently a note was submitted to the Select Committee from the Office of the Deputy Prime Minister, in which, I understand, the Minister for Housing and Planning, Lord Rooker, wrote about the issue. To make the matter concrete, some people allege that the debt repayment is of such a size that it would outweigh the continuing payments from central Government to those who remain in local authority tenure through the housing revenue subsidy system. There was a question about whether those two offset, and whether council tenants, through their rents or council tax, would still be paying for part of servicing the debt.

When the Government replied to the Select Committee's point, they said:

''It has been suggested that the repayment of overhanging debt following a large scale voluntary transfer to a housing association represented a financial incentive to transfer. This is not the case. Before the transfer the Housing Revenue Account subsidy system takes into account the full cost of servicing the authority's housing attributable debt: there is no net burden on the authority. The repayment of the outstanding debt following transfer ensures that this continues to be the case.''

That is the Government's position. I have tabled the amendment to probe that, because it is not the view of CIPFA, a significant, authoritative, independent, accounting body that studies public finance. CIPFA has a different view from the Minister, and in giving evidence to the Select Committee it said:

''Points about transparency, equity and fairness can be made concerning the draft Bill's proposals for the Government to pay off 'overhanging debt.' . . . From the perspective of the tenant who remains with the local authority, part of their rental payment services the historic housing debt''.

There is a difference of view that needs to be clarified, because the sums are significant, as the hon. Member for Cotswold said. Is a financial incentive being created? Is CIPFA right that council tenants' rents actually go towards servicing some of the historic debt, or are all the costs of serving that historic debt met through the housing revenue account subsidy system? Although the memorandum that the Office of the Deputy Prime Minister submitted to the Select Committee alleges that, it provides no financial models or figures to back that up. In answering the debate, I hope that the Minister can provide those figures. If he cannot, I hope that he will provide the financial modelling and the figures to myself and other members of the Committee in writing, because there are two different opinions. If the Minister is right that a level playing field will remain and council tenants will not be penalised if they do not vote for the stock transfer, all sides can be relaxed. However, if there is any element of subsidy, there will be a matter of policy debate that should concern us. The Minister nods—I am sure that he takes the point, and I hope that he will give the reassurances that I seek.

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

Clauses 40 and 41 give the Secretary of State the discretion to assist either an individual, a number of, or all English local housing authorities to meet debt liabilities through a direct payment either to the public works loan commissioner or to the local authority on condition that it is transferred to another lender. No amendment is required to allow the Secretary of State or the National Assembly for Wales to make payments. The policy driver for clauses 40 and 41 is to assist authorities that transfer their housing stock to a registered social landlord but which need assistance to meet outstanding housing debt liabilities where the receipt is insufficient. These amendments appear to be based on the misunderstanding that we are giving favourable treatment to authorities that transfer their housing stock and for which we make an overhanging debt payment. That is not the case. I listened carefully to the comments of the hon. Gentleman and I will respond to them in detail.

All authorities are treated fairly. It is, however, for a local authority to choose whether it wishes to retain or to transfer its stock based on a rigorous option appraisal that involves tenants and other key stakeholders. If an authority or its tenants choose to retain its stock, the Government, through the housing revenue account subsidy, continues to ensure that a local authority can meet the cost of servicing its housing-attributable debt. As the hon. Member for Kingston and Surbiton will know, under the Government's rent restructuring proposals there will be in the long term a formula to guide rent policy to ensure greater consistency between the rents applicable in the case of local authorities and those of registered social landlords. In the past, there were often marked and incomprehensible variations that the public found difficult to understand and which created genuine fears and anxieties about fairness.

The point that CIPFA raised is true in that some of the tenants' rent will contribute through the housing revenue account towards all the costs that an authority incurs. However, it is not the case that as a result of voting to remain with the local authority, tenants will automatically be giving themselves a less favourable rent position than if they vote for a stock transfer. Indeed, it is often the case that when tenants vote for a stock transfer they encounter significant increases in rent that are designed to reflect improvements in stock from which tenants benefit.

These are complex matters, but I hope that the hon. Gentleman will understand that we are progressing this in a thoroughly fair and impartial manner and there is no implicit bias.

Mr Edward Davey (Kingston & Surbiton, Liberal Democrat)

Although the Minister describes a very fair situation, he has not yet answered my question. Of course, council tenants' rent will go into the pot to pay for some of the costs. The question is whether they are contributing to the full debt servicing costs. In a supplementary note to the Transport, Local Government and the Regions Select Committee on the draft Local Government Bill, HC 981–111 of Session 2001–02, Ev 103, Lord Rooker said:

''Before the transfer the Housing Revenue Account subsidy system takes into account the full cost of servicing the authority's housing attributable debt''

Is that the position or is CIPFA right when it says that part of the tenants' rent is paying to service the debt?

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

I am reluctant to get into a lengthy discussion on how the housing revenue account works, partly because it is beyond the remit of clause 40, and partly because I am not the Minister responsible for housing. That responsibility falls to my noble Friend Lord Rooker. The hon. Member will know that the housing revenue account is made up of several inputs in the form of rent income, subsidy and other items in certain cases. Housing benefit is not among those inputs. Against that there is expenditure: debt repayment and the costs of managing and maintaining housing revenue account properties. Authorities are required to ensure that their housing revenue accounts balance, but in doing so they must put in place a rent framework that meets that obligation and that is consistent with the Government's policy on rent restructuring. The point that I was making earlier remains entirely valid. A decision whether or not to transfer will not result in a bias that will favour those tenants who transfer to another landlord and disadvantage those tenants who remain with the local authority—or the other way round.

The point that the hon. Gentleman makes is interesting, but it is essentially academic because there is a level playing field. The provisions that we are putting in place will ensure fair and equitable treatment. They will take account of what would otherwise be the total nonsense of continuing to pay housing revenue account subsidy to cover the amount of outstanding debt left over after the receipts from the stock transfer had been taken into account because

there were insufficient receipts to extinguish the entire debt.

That problem prevented many metropolitan authorities from considering stock transfer before the policy was introduced, and we believe that it is right that the option should be available to all authorities and not enjoyed only by those that happen to be in the advantageous position of having relatively high capital values and relatively low outstanding debt. That is why, in the early stages of stock transfer, it was mainly southern and more affluent authorities that pursued the programme, and why other areas of the country were not able to do so.

We now have a much more level playing field, and it is now possible for a number of authorities to explore that option, which was previously denied them. They include metropolitan authorities from the midlands and the north, such as Burnley, Coventry, Calderdale, Blackburn, St. Helens, Redcar and Cleveland, Knowsley and Carlisle. That is the purpose of the policy, and I hope that the hon. Gentleman recognises that it is fair and equitable.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

The hon. Member for Kingston and Surbiton must be on to something, because those are pretty hefty incentives for authorities to want to get rid of their housing stock. In order that those payments are not seen to be arbitrary, will the Minister confirm that wherever a stock transfer takes place and there is overhanging debt, he will make such a payment?

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

I confirm that it has been our policy to do so in every case that has applied so far. What I cannot do, however, is to give an absolute undertaking of the sort asked for by the hon. Gentleman because of the process of negotiation, of which valuation is a part. Were I to say that we would automatically pick up the amount that was left as a result of the process, authorities would have no incentive to try to get the best possible value and price for their assets in order to minimise any outstanding debt; and, in some cases, to extinguish it altogether. I cannot give the hon. Gentleman the absolute guarantee that he requires, because it would not be prudent, but I assure him that we have applied the policy consistently in the past whenever debt is left after the transfer calculation has been made.

I hope that I have given the hon. Gentleman the assurance that he seeks. I hope that the hon. Member for Kingston and Surbiton, having reflected on the matter, now recognises that it would not be appropriate to press the amendments. They would have the entirely bizarre consequence of requiring all debt to be extinguished simultaneously—including debts in authorities that had perfectly acceptable and continuing arrangements in place—if the authority had no intention of transferring its stock but was perfectly happy to continue to hold its stock and to operate within the current arrangements. There would be no purpose in going through this process in such cases, and I hope that he will agree to withdraw the amendment.

Mr Edward Davey (Kingston & Surbiton, Liberal Democrat)

The amendments were useful to probe the Government's position. I, for one, certainly did not

find it convincing. The Government's proposals would give a massive incentive and a massive subsidy, which would encourage councils to transfer their stock and to vote for that proposition.

The Minister spoke of a level playing field between different regions. That is not the level playing field that we seek; we want a level playing field on the decision whether it is in the financial interests of council tenants to vote for or against a stock transfer proposition. My concern is that, despite the Minister's warm words—he was beginning to hide behind the complexities of the housing revenue account—such an incentive will exist, and it will be increased by the clause. I do not think that he was able to provide any evidence to back up the claim in Lord Rooker's note to the Select Committee that the housing revenue accounts system takes into account the full cost of serving an authority's housing. CIPFA had it right. Complex calculations might be involved because different authorities have different histories. I accept that. It is possible to imagine a situation in which a local authority will not have any incentive because the system will work in the reverse way to that which I am suggesting. All that that goes to show is what a mess it is, and how unfair the payments are. It is, as CIPFA said, indiscriminate use of taxpayers' money.

I shall not press the amendment to a vote, but I believe that we must return to the issues. If the Government want to spend a lot of taxpayers' money to promote a discriminatory housing policy, they should have the courage of their convictions and say so, instead of hiding behind complex proposals that do not receive the scrutiny that they deserve. I hope that my hon. Friends and I will return to the matter on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

I do not want to labour the clause although it is an important one and involves a lot of money. I entirely agree with the hon. Member for Kingston and Surbiton. At a time when shire counties' council tax increases are going into double figures, huge amounts of money are being redistributed to authorities that have not been well run in the past. That is an interesting use of taxpayers' money.

The types of authority whose debts can be repaid are listed in subsection (5). The commissioners can, under subsection (3), decide to extinguish the debt—we have been discussing that all morning—or reduce it by an amount to be determined by them. In other words, the payment does not have to repay the entire debt; it can pay part of it. It is in the gift of the commissioners to decide. As they are a public body, how independent are they? Or will a little direction from the Secretary of State tell them whether to extinguish the entire debt or part of it? It is another arbitrary part of an arbitrary procedure.

The explanatory notes say that the public works loans commissioners may decide what premium is required in a case in which long-term fixed interest is

higher than the commercial rate at which the authority could borrow. Is that not a recycling of public debt? The commissioners are asking for a premium that the Government are going to write off, as they will write of the total debt of the Public Works Loans Board. Will the Minister address that?

I have one more technical question. If a debt is extinguished, how does the right-to-buy exclusion work? As I understand it, the right to buy and the right to acquire schemes do not apply where the approved debt on an individual house is more than the proceeds from the right to buy or to acquire. If the total debt of the authority has been written off, presumably the debt of the individual house has been written off. I should be grateful if the Minister confirmed that and answered my other point.

Mr Desmond Swayne (New Forest West, Conservative)

At the risk of exposing my ignorance, can I ask the Minister about subsection (3), under which the commissioners may refuse to accept a payment that the Secretary of State or the National Assembly for Wales proposes to make to them? Why would they do that?

Mr Andrew Turner (Isle of Wight, Conservative)

I should like to delve a little further into the antecedents of these provisions. I am sure that the Minister will be able to explain that it is something that has been going on for a long time under Governments of both parties and is therefore entirely acceptable and it would be foolish of anyone on these Benches to question it. Even if we are perpetuating a wrong that has been done since 1997, or indeed since 1979, that is not justification—

Mr Desmond Swayne (New Forest West, Conservative)

Steady.

Mr Andrew Turner (Isle of Wight, Conservative)

I recognise my hon. Friend's concern because very few wrongs were perpetrated between 1979 and 1997, but there were occasional mild lapses when there was a failure to hold incompetent local authorities adequately to account. Indeed, much of the Bill is based on the requirement of the Minister to hold incompetent local authorities to account.

The mild lapse that I have in mind is the lapse of judgment shown by several local authorities by building up housing stock and failing to maintain it, although it was unnecessary for the authority's purposes. In those circumstances, the national taxpayer must apparently meet a huge debt. We have only to cast our minds in the direction of the Deputy Prime Minister to see the kind of building that has occurred in the constituency of a Member of Parliament. There has been excessive building of public and social housing, which was doubtless supported by Government grants and sometimes by massive capital receipts. However, such housing was not needed by local people when it was built and was certainly not needed after it was built. If such housing is left to go to rack and ruin, the only available route for a local authority is to undertake a large voluntary transfer and to try to remedy the situation by shrugging off the responsibility that it chose for itself. However, that is done at the expense of the constituents of my hon. Friend the Member for New Forest, West, for example, and doubtless the

constituents of right hon. and hon. Members throughout the country.

Writing off debt is not cost free; it is done at somebody's expense. The Bill admits that, but not very clearly. Writing off debt is done at the expense of the national Exchequer, to which many people contribute more than they can afford. The level of taxation in this country continues to rise. Much money is directed in the wrong way and wasted. The provision is a further example of money being wasted to overcome a problem that local authorities have chosen for themselves.

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

Several points have been raised and I shall try to cover them as I respond. I thought that the opening remarks made by the hon. Member for Cotswold were most unfortunate. I am sure that Conservative councillors in Carlisle will not be pleased to hear his remarks about the management of their housing. Carlisle city council is one of the authorities that transferred its stock and received the benefit of overhanging debt. Councillors on Blackburn with Darwen borough council, which was recently identified as one of 22 excellent authorities in the country, will equally feel extremely upset by his unjustified disparaging remarks about local authorities.

The clause will create an express power for the Secretary of State and the National Assembly for Wales to make payments to public works loan commissioners to repay local authority debt. Subsection (1) provides for the Secretary of State to make a payment if he thinks it appropriate in order to reduce or extinguish a local authority's debt. The term ''reduce or extinguish'' is used because writing off the debt might remove all debt owned to the Public Works Loan Board in some cases. However, there will be other cases when the authority has debt other than that relating to only the housing transfer, and it would be inappropriate to extinguish all the debt. The term reflects the circumstances of each case.

The hon. Member for Cotswold will appreciate that there are safeguards to enable the sum to be properly determined and to recognise the independence of the public works loan commissioners. There is a parallel provision in Wales, on which I will not linger.

Subsection (3) contains a provision for the commissioners to determine the amount of payment that is required to extinguish or reduce a debt, which should give the hon. Member for New Forest, West the reassurance that it will not be an arbitrary figure chosen by the Minister. The commissioners will decide the appropriate amount, and subsection (4) acknowledges their independence by providing that they may refuse to accept a proposed payment. Clearly, we hope that that will not happen and that our discussions will usually ensure agreement, but they are an independent body, and we cannot insist that they accept our payment proposals.

The clause will not have any added public expenditure or manpower implications in England and Wales. As the hon. Member for Cotswold recognised, it effectively recycles public debt. The

hon. Member for Isle of Wight asked about the valuation. Valuation assumes a rental income over 30 years for each house and expenditure over a full 30 years. The valuation also takes account of the long-term arrangements, including any potential right-to-buy receipts.

I hope that those explanations deal with the points raised by hon. Members and that the clause will stand part of the Bill.

Mr Geoffrey Clifton-Brown (Cotswold, Conservative)

The Minister failed to answer my question about the recycling aspect and the premium that will have to be paid for a high-interest loan. We take it that he has no answer, and that it is merely recycling.

The Minister sailed into an uncharacteristic, politically partisan pose when he said that I accused northern Conservative-run authorities of being badly run. It is necessarily not right that, because it has gone into debt, the housing function of a local authority has been badly run, but we know of instances of Labour-controlled authorities—Liverpool under Derek Hatton, for example—that have got themselves into huge debts because they were grossly inadequately run.

The clause is unfair. Why should capital receipts from well-run and debt-free authorities be pooled, when the debts of highly indebted authorities are being written off anyway? Are we not just robbing Peter to pay Paul when the Government have already paid Paul? I will urge my colleagues to vote against this arbitrary and unfair clause, which gives a huge incentive to highly indebted housing authorities to transfer their stock for someone else to run. They should do a better job in the first place.

Mr Desmond Swayne (New Forest West, Conservative)

I acknowledge that the Minister addressed my question, but he did not answer it. Is he suggesting that the board is under the same constraints as a bank would be in determining the nature of its loan book and perhaps resisting the customer's determination to pay off their mortgage early? Is it the same sort of provision?

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

Yes.

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

The Committee divided: Ayes 13, Noes 6.