Housing Support Grant (Scotland)

Part of the debate – in the House of Commons at 9:02 pm on 23 January 1991.

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Photo of Charles Kennedy Charles Kennedy Shadow Spokesperson (Health), Party Chair, Liberal Democrats 9:02, 23 January 1991

I propose to be brief, and I shall speak mainly about the effects of these orders on several local authorities in the highlands area. It is worth underscoring at the outset the point made by the hon. Member for Glasgow, Cathcart (Mr. Maxton) in looking at the overall expenditure pattern. These orders represent in real terms, allowing for inflation, a reduction of £100 million for Scottish public housing. That is the basic position. Broken down on an individual constituency basis, although local authorities have their variations and some come off not quite so badly and others come off slightly worse, in real terms it results in a significant loss across the country as a whole.

My specific comments deal in the main with the effect of these orders on the Ross and Cromarty district council, to a lesser extent on the Inverness district council, which straddles both my constituency and that of my hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston), and on Lochaber district council as well. Within the mainland highland region—though I am sure that the hon. Member for Western Isles (Mr. Macdonald) will deal later with the specific problems faced by the island authorities—in that order of priority those are the areas most adversely affected.

Let me deal with the variation order first. The difference in Ross and Cromarty involves a reduction of about £60,000. In the Inverness district, the equivalent reduction is just under £50,000, and Lochaber will suffer a reduction some way below that figure.

As the Under-Secretary of State said in opening the debate, the main reason for this is the downward revision of the so-called pool interest rate on which the original grant calculations were based. The pool interest rate is reduced from 10·2 per cent. in the main order to 10·1 per cent. in the variation order. It is not realistic to suppose that Ross and Cromarty can secure borrowing at that rate of interest in the current economic climate. It may be possible that for Glasgow, where the sums involved are huge, special arrangements can be made, but for the small-scale rural authority, in the current economic climate and with present interest rates, there is no viable alternative.

During the current year, Ross and Cromarty's interest payments have increased by £345,000 above the amount allowed for in the housing support grant calculations. In addition, the amount of debt redeemed during the year is £177,000 higher than that allowed for in the calculations. As a consequence of the changes, the council is paying interest charges of £522,000 above the level assumed in the housing support grant calculations. For a council with a budget the size of that of Ross and Cromarty, a £522,000 downside in the housing budget is very serious.

The council has been endeavouring to make administrative savings and, of course, it has cut its expenditure on repairs and maintenance. Nevertheless, at this point—and the council gave me the figures today—it faces a deficit on the housing account of £240,000. With only three months of the financial year remaining, the only option available to the council is to fund certain repairs from capital expenditure. That will reduce the amount available for new build and for what was previously regarded as essential and often long overdue refurbishments and improvements. I hope that the Minister will comment, if not specifically on Ross and Cromarty, at least on the general point that I am making.

The Minister will know from correspondence between his office and myself that I can cite many examples, especially in Easter Ross, Alness and Tain, of much public dissatisfaction and frustration about the delays and cancellations of necessary improvements. There are also problems for the west coast, but I shall deal with those later.

The main order would result in a cash reduction in housing support grant of £133,000, again based on a further reduction in the pool interest rate, this time down to 10 per cent. The council believes that it will not be possible to fund replacement borrowings at that rate, given the same problems of the general economic climate. What does that mean for the rents being levied within the Ross and Cromarty district? I have read the excellent brief prepared by COSLA which has been circulated to hon. Members. It shows that over the next year the average rent rise will be £3.

Within the Ross and Cromarty district, the combined effect of the main order and the variation order will be that, at current expenditure levels, the increase in rent will be about £240 a year, which is £4·68 a week. That is the increase required to balance the housing account. It is significantly above even what COSLA estimates will be the average figure for Scotland. It is a 22 per cent. increase. That cannot be right in an area that already suffers higher general overheads for daily living, transport and travelling costs, and so on.

It must be emphasised that the only alternative available to the council that would avoid increasing rents by more than double the rate of inflation would be, as in the previous category, to transfer certain costs from revenue to capital. There are two main problems with that. First, it increases the cost of the work, and, secondly, it further reduces the ability to finance new build and improvement projects. It should be noted that the council's net consent for capital expenditure on housing has already been reduced by almost £600,000 between the financial years 1990–91 and 1991–92.

In essence, there are three points that I wish to stress to the Minister. In terms of the local authorities—Ross and Cromarty in particular, but the same applies to the others—the calculations on which the housing support grant decisions are based have given totally unrealistic estimates of the rates at which councils in these categories are able to borrow, given current interest rates and economic forecasts. Secondly, for Ross and Cromarty district, the level of debt redemption in both the current year and next year has been seriously underestimated. Thirdly, as a result of a substantial gap between the levels of capital charges supported by the housing support grant and those incurred by the council itself there will inevitably be an excessive burden on council house rents while at the same time reducing capital allocations and therefore creating substantial delays in carrying out much needed house improvements. That is hardly a happy or successful situation for a local authority.

Given that dampness is such a problem in public authority housing in Scotland—people have long enough memories to recall the Scottish Select Committee and they will remember the report that was done in that context—and given the difficulties of geography and climate in the north of Scotland, the position is even worse there. Also, there are the extra fuel and transport costs in new build, not least for the west coast of Scotland, and the lack of private land for public housing in many parts of the highlands. Upward pressure is being exerted on house prices as a result of people decanting from central Scotland and the south-east of England and inflating property prices in the highlands. Thus, we have rising rents and lowering standards in the public sector, further pressures on local authority budgets and personal household budgets and the likely setting back or cancellation of much needed refurbishment and repair. This results in more dampness, more condensation, more frustration and more human unhappiness. That is a miserable state of affairs.

Far from coming forward with a variation order tonight to claw back still more money from the local authorities in Scotland, the Minister should be reversing spending priorities, not just for the highlands but for many other parts of the country as well.