Orders of the Day — Local Government Finance (Supplementary Credit Approvals) Bill

Part of the debate – in the House of Commons at 6:14 pm on 17th June 1997.

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Photo of Peter Luff Peter Luff Conservative, Mid Worcestershire 6:14 pm, 17th June 1997

In many ways, this is rather a melancholy debate for Opposition Members. The roll call of former Conservative Members displaced by Labour Members includes many who would have spoken with passion about social conditions. Bob Hughes, who was referred to so eloquently by the hon. Member for Harrow, West (Mr. Thomas), David Nicholson, Alistair Burt and William Waldegrave are fine upholders of the tradition of one-nation Conservatism. Therefore, it is a slightly melancholy occasion, redeemed in part by the knowledge that my former colleagues have been replaced by so many fine speakers on both sides of the House.

I do not know how you recall your own maiden speech, Mr. Deputy Speaker. I do not look back on mine with particular pride, but every hon. Member who has made a maiden speech today has that privilege. We have heard a series of fine speeches.

I hope that the hon. Member for Stretford and Urmston (Ms Hughes) will not take it amiss if I take her to task about one aspect of her fine remarks. She talked about the record of Conservative councils. My constituency is contiguous with Wychavon district council. Under the Conservatives, it took advantage of large-scale voluntary transfer of its housing stock. To their credit, the Labour and Liberal Democrat parties that sadly took control of Wychavon two years ago embraced the policies of the Conservative group and, as a result, at least 1,000 new units of social housing will be built in Wychavon, which would not have happened otherwise. That is the effect of the previous Government's policies. They were improving the condition of housing in Britain and Conservative Members have nothing of which to be ashamed.

I found the Liberal Democrat position on the Bill rather difficult to understand. The hon. Member for Torbay (Mr. Sanders) seemed to say that it was not the right way to tackle the housing crisis. He preferred a housing investment programme based on need—the previous Government's policy—but said that he would support the Bill in any case. That is a typical example of trying to have your cake and eat it.

I pay particular tribute to my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond). I am always interested in Runnymede, where my grandfather's ashes were scattered in the 1930s. My hon. Friend made a particularly eloquent speech, which addressed the hard questions about the Bill very effectively. He repeated the comments of my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) about the Bill being something of a smokescreen and not really telling the truth.

Capital receipts will still be locked up and will appear on councils' balance sheets when the Bill has taken effect. We are talking not about capital receipts, but about increased borrowing powers for councils. That is all the Bill is about; the capital receipts will still be there. I would dread having to explain that to special interest groups in my constituency. I shall probably be lucky enough not to have to do so, as my local authority is debt-free as a result of large-scale voluntary transfers, but certainly the hon. Member for Worcester (Mr. Foster) will have some difficulty explaining to the Council of Churches there exactly why, despite his promises to the contrary, capital receipts will not be released, but will still appear on the balance sheet. It will be a difficult argument for the Labour party to support.

I am glad that we are having this debate, however. The Bill is essentially a technical and enabling measure; its clauses do not even mention housing. The House gets too few opportunities to discuss housing, which, in my view, is perhaps the most important political priority for hon. Members on both sides of the House. It lies at the root of so many other problems involving health, education and crime.

I am depressed to hear Labour Members talking about the Bill as if the only answer to housing problems were more public money, more taxpayers' money and more borrowing. It is not the only answer. The previous Government showed that the use of private money has a crucial role, particularly through large-scale voluntary transfer and partnership with housing associations. There is also another dimension that has not been discussed—I shall not do so at length, because I would be ruled out of order. It is the attempt to reduce the demand for housing by, for example, keeping families together.

I am not one of those who think that we should accept as a given the level of housing demand in our society. It is a measure not only of increased affluence and aspiration, but of real social problems. The solution to some of those problems is not just to throw more houses at them.

I seriously hope that when the Government consider how to use the supplementary credit approvals mechanism that the Bill gives them, they will, when it comes to new building, concentrate their resources not on council housing but on housing association properties, for the simple and practical reason that—even though I have my own objections to council ownership of houses—by doing so, we shall get more houses.

Shelter said helpfully in its briefing note: New homes for people in housing need could be developed by housing associations or by local authorities. Housing associations are able to raise private finance, and therefore would be able to build more homes for the same amount of money. If housing associations are to build new homes, safeguards"— I think that this will strike a chord with the Labour party— must be developed to ensure that the rents are affordable and that the homes are let to people in housing need, including homeless households.Local authorities should have a role to play in determining spending priorities in their areas. Shelter's way forward for new Labour involves no sell-out of socialist principles. If the Government decide to allow councils to spend the money on their own direct provision, such a route would provide more houses than might otherwise be so.

There is a problem with the Bill. The sum that it will release for new housing is relatively modest: about £5 billion phased over a period—I am not quite sure how long, but over, say, five years, which is about £1 billion a year.

I am one of those who attach importance to decent housing. I am therefore inclined to believe the Chartered Institute of Housing's estimate that the backlog of disrepair in the council sector amounts to about £20 billion. The Bill will not contribute a huge amount even to the sum that the institute estimates. Although I am sure that the Government will lay the blame at the door of the previous Government, they now have to solve the problem. If they try to pretend that the Bill will enable them to make a major contribution to solving the housing problem that they say exists, they will find that they cannot stack up the argument.

The Chartered Institute of Housing estimates that there is a need for about 120,000 new social units of housing each year for the next 10 years. It estimates that £5 billion will provide only about 140,000 new housing association homes, or many fewer council homes or, if all the money were used for improvement, only about 280,000 council homes would be improved. The Government must not make exaggerated claims for the Bill.

I am afraid that such a claim is typical of the Government—quick-fix mechanisms suggested as a solution to all our problems. We saw last week, under the Bill to abolish the assisted places scheme, the suggestion that the money could solve all the problems in our primary sector. It certainly cannot; more money will be needed. The Government say that the reduction in bureaucracy in the health service that they have pledged to achieve will solve the waiting list problem. That is not so either. In each of the three areas of education, health and housing, they will have to find new money if they are to make the impact that they say they want to make. There is no point in their pretending that the Local Government Finance (Supplementary Credit Approvals) Bill will enable them to meet their real objectives.

I am particularly concerned about the lack of clarity in the mechanism that will be provided as a result of the Bill becoming an Act. I want to press the Front-Bench spokesman on whether future in-year or just historic receipts will be part of the programme. That is important. If the programme includes just historic receipts, new receipts will pile up and will not be used in any sense, even in the rather distorted, clever, smokescreen approach of increasing capital applications—supplementary credit approvals—on the back of the receipts.

The Government have a problem. They do not have enough money to do what they want. The receipts are inadequate to solve the problems that they say exist. Every pound that they spend through the Bill's mechanism represents increased public expenditure and will count against the public sector borrowing requirement, as the Deputy Prime Minister and the Labour party now accept, having denied it time and again in the past. Distribution mechanisms will have to be complex to overcome the uneven distribution of receipts. As my right hon. Friend the Member for Skipton and Ripon, the former Minister, said, there was some revelation of what they might be in the Minister of State's opening speech, but no clarity. The devil will be in that detail.

It will not do for the Government to try to pretend that there will be no impact on council tax payers. I see the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Greenwich and Woolwich (Mr. Raynsford), on the Treasury Bench. In an interview in the Financial Times on 7 February, he said: This is not a no-cost option. He went on to say that there would be an impact on council tax. That is inevitable. The receipts are not lying idle in local authority coffers. They are generating interest payments that are used for a variety of purposes, such as keeping council tax down and improving services. Something has to give. One does not get something for nothing in this world—a point that I am afraid the Government have still not woken up to.

There is a fundamental unfairness about what the Government are planning to do through the Bill. The enthusiastic sellers of council houses—the ones that put in the most effort, the efficient local authorities—will not necessarily be the ones that benefit. We do not know enough about the mechanism by which supplementary credit approvals will be distributed. We have had only the most limited indication of how housing need will be taken into account in awarding supplementary credit approvals.

We know that there are better mechanisms; we already have them. The housing investment programme does precisely what the Liberal Democrats were calling for: it allocates according to need. In a funny way, it is the most socialistic way. Such a mechanism should be used. It is extraordinary that such great play has been made of releasing capital receipts—which the Bill does not—to conceal the fact that the bulk of money will still flow through the previous Conservative Government's mechanisms, such as the housing investment programme and the estates renewal challenge fund.

For my money, the best route of all is large-scale voluntary transfer. It is the real way forward that enables councils to concentrate on the enabling role, which I know Wychavon has taken to heart and is operating effectively in my constituency.

My worry is that playing with capital receipts could lead many local authorities that might have been thinking of going down the route of large-scale voluntary transfer to abandon their plans to do so. That would be a tragedy. LSVTs are the real way forward, to enable councils to get out of council housing and to fulfil their obligation effectively, by increasing the role of housing associations and the private sector in the provision of social housing in their areas. The Bill does not encourage housing associations. I hope that some of the conditions that are set subsequently will prove me wrong.

The Government should be doing more to promote the private rented sector. I fear that, if they decide to encourage council housing instead at relatively low rents, we shall not see the growth in the private rented sector that we ought to see, which would bring real increased mobility in the labour market and social benefits.

The Government must answer a host of key questions, which they have not done in the Bill. We must take an awful lot on trust. Exactly how will the phasing occur, and over what period—how much each year? Exactly what will be the methodology for distribution? If I understood the Minister correctly, we had a hint that one third of the money would be allocated according to possession of receipts and two thirds according to need. How will that need be measured? What will the money be spent on—repairs, regeneration, new build? Who will carry out those tasks—councils or housing associations? So much is unanswered. We must accept the inevitable passing of the Bill with those questions remaining unanswered. I hope that in his winding-up speech, the Under-Secretary will be able to give a firm undertaking that he will come back to the House with a firm statement on exactly the details that will be used in settling such important questions.

I must push the Government on the ring-fencing of the money for housing. We have heard before that the Government's priorities are education, education, education. The money from the Bill should be ring-fenced for housing, and I hope that we shall be given that clear assurance. We need more money for housing, although, as I have made clear, I should prefer it to be provided through other routes. I am sure that there will be huge pressure on Ministers from local authorities to allow them to use supplementary credit approvals on the back of receipts for other worthwhile social purposes. I should like an assurance that the Government will seek to resist that pressure.

I am not convinced by the Bill. It is a shallow deceit and I do not think that it deserves to become law. Although it will, the Government should be under no illusion. We shall keep them up to the mark on delivering the promises that they seek to make on the back of the Bill.