George Young (North West Hampshire, Conservative)

I want to reflect on what the Minister said just before he sat down, because it may come up again under clause 25. It would be helpful if he could explain something about clause 24. I ask the question out of ignorance. I assume that the HCA will get some cash from the Government as well as having access to loans. Am I right in thinking that the money that it spends will not just be raised by borrowing, but that there will also be a cash budget for the HCA? If so, in what circumstances will the money spent by the HCA be spent out of the cash that is voted to it by the Government and in what circumstances will the money that it spends have to be recovered by a loan, either from the European Investment Bank or the HCA?

In respect of clause 2, when the HCA has to pay interest to the Secretary of State, presumably on the long-term borrowing, it would be helpful if the Minister could confirm that that is the arrangement under which the Housing Corporation and English Partnerships are funded. I should be interested to know the rate of interest that the predecessor organisations have to pay to the Secretary of State on the money that is outstanding by way of loan.

Iain Wright (Parliamentary Under-Secretary, Department for Communities and Local Government; Hartlepool, Labour)

I am grateful, I think, to the right hon. Gentleman for his questions. I shall give the Committee examples of instances in which the agency needs access to its finances but that is not possible. In such circumstances a loan from the Secretary of State may be the best way forward. I can confirm to the right hon. Gentleman that the agency will receive a grant; it will not raise money solely through borrowing. We expect that the vast majority of spending by the agency will be funded by the grant and that borrowing will probably not be the norm.

The agency needs flexibility in order to achieve its objectives and a grant will be available from central Government. That flexibility is important to ensure that it can have a loan if necessary, which is very much in keeping with former regimes. For example, until 1998 the Housing Corporation provided loans to registered social landlords to help to develop new social housing. Those loans were funded by short-term borrowing from the national loans fund; the corporation’s remaining loans portfolio, which covers core ownership loans and guarantees, is part-funded by short-term borrowings from the national loans fund, which is at present about £1.4 million. The reason for the borrowing is purely historical, as all loans were funded by borrowings.

The right hon. Gentleman wanted to get a flavour of how often that sort of borrowing takes place. English Partnerships has never borrowed or received a loan from the Secretary of State. As I said a moment ago, the Housing Corporation’s borrowing is largely historical but remains current in that respect. The Department did not provide any grant in aid as financial assistance to fund redemption of the loans in the Housing Corporation’s loan portfolio. Any borrowing from the new town development corporations was funded from the national loans fund.

The proposal provides flexibility and another source of reasonable and prudent funding, but it will probably not be the norm in how the agency funds its activities.