Surplus Rental Income

Part of Clause 50 – in the House of Commons at 3:15 am on 14 June 1988.

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Photo of Simon Hughes Simon Hughes Shadow Spokesperson (Education), Shadow Spokesperson (Health) 3:15, 14 June 1988

I support the amendment. This is the last debate that we can have on housing associations on part II. I hope that it is clear by now to the Government and the public that the House considers that housing associations are important and is willing to dedicate a significant time to debate their financial future.

We have had controversial and important debates on the private rented sector. We started today's debate with the amendments and new clause which I tabled, which are linked to the subject on which the hon. Member for Leeds, West (Mr. Battle) spoke and dealing with affordable rents and where the money in the cycle of provision, from taxpayer to user, ends up.

The hon. Member for Leeds, West did a sterling job in moving the amendment. He may not have noticed that he marginally lost the battle of the roses, in that his colleague from the other side of the Pennines—the hon. Member for Knowsley, North (Mr. Howarth)—managed to outstay him slightly. Perhaps, by a slight abbreviation of the comments on this measure, the battle between Leeds and Knowsley could end up evens.

This amendment, and the first group, expose the Government's contradictory policy. The Government have argued that they want private money in housing associations. Amendment No. 85 deletes those parts of clause 50 that would allow the Government to take back money in housing association reserves. As the Government have said, the biggest housing associations —from the largest, the North housing association, with 21,000 members, to the 10th largest, the Northern Counties housing association, with 8,500 members—would be expected to be entirely self-financing, to carry their own risks, not to come to the Government for money and to bail themselves out of difficulties.

The smaller housing associations—some of which are very small—may need private money coming in and need to look to the Government for help if costs overrun. The housing association movement argues strongly that retained surpluses—which the Government want the power to take back—will be needed to fund the proposed progressive phasing out of grant for major repairs and the service deficits which many associations are incurring.

There is an important contradiction. Associations that take part in schemes funded by private borrowing as well as by public grant will be expected to bear major risks, because the grant is likely to be determined at the beginning of a scheme and will not be increased to take account of unforeseen increased costs. To expect associations to bear that risk and at the same time to take away their only prospect of building up a surplus is not only inequitable but contradicts the Government's strategy.

How can the Government tell housing associations to be financially independent and at the same time give themselves power to raid their reserves when it is vital for the associations to retain surplus rental income so as to bear the risks of private finance without raising rents? If the Government claw back those reserves, housing associations will have only one way to raise more funds, and that will be by demanding more from their tenants in increased rents. For many of those tenants housing benefit will not be available because they are working, which will mean them leaving that form of accommodation.