New Clause 3 — Use of Housing Capital Receipts — Reserved Portion

Local Government Bill — [1st Allotted Day] – in the House of Commons at 2:00 pm on 5th March 2003.

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'(1) This section applies to capital receipts paid to the Secretary of State pursuant to section 11(2)(b).

(2) The Secretary of State shall pay to each local authority which makes a payment to him of a capital receipt pursuant to section 11(2)(b) a special grant equivalent to fifty per cent. of such capital receipt paid to him for the use by the local authority solely for the purposes of—

(a) defraying the cost of capital works to any building or land in relation to which the local authority is or has been subject to a duty under section 74 of the Local Government and Housing Act 1989 (c. 42); and

(b) securing the provision of housing within the local authority area by a registered social landlord in respect of which the local authority shall have the right to nominate the occupier.

(3) Any grant which falls to be paid by the Secretary of State pursuant to subsection (2) above shall be paid in the financial year in which the Secretary of State receives the payment from the local authority pursuant to section 11(2)(b) in relation to which the grant becomes payable.'.—[Mr. Hammond.]

Brought up, and read the First time.

Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission

With this it will be convenient to discuss the following:

New clause 6—Empty homes—

'.—(1) The information obtained in relation to council tax on empty homes shall not be used to require the owner of an empty property that is in reasonable repair to give up the freedom to enjoy and manage that property as the owner wishes.

(2) Any amount raised by levying Council Tax on an empty home will be retained by the billing Authority and there shall be no substitution of any grant, subsidy or money due from central Government as a result of such a change.'.

New clause 7—Housing Revenue Account—

'.—The Secretary of State shall make an annual report to Parliament on the operation of section 90 (under which a local housing authority is required to pay to the appropriate person an equivalent amount of the Housing Revenue Account subsidy in which a negative figure occurs) stating—

(a) for each local housing authority—

(i) the amount involved, and

(ii) the amount by which rents in that authority would rise because of the operation of this clause; and

(b) to which local housing authorities he has made payments as a result of their Housing Revenue Accounts being in deficit and how much their rents are reduced because of the operation of that section.'.

New clause 16—Repayment of overhanging debt—

'The Secretary of State shall make an annual report to Parliament detailing—

(a) the amounts paid or contemplated to be paid pursuant to sections 40 and 41; and

(b) the effects of such payments on rents in relation to the voluntary transfers of council housing'.

Amendment No. 43, in page 5 [Clause 11], leave out lines 38 and 39.

Amendment No. 44, in page 5, line 38 [Clause 11], leave out

'equal to the whole or any part' and insert

'up to a maximum of 50 per cent.'.

Amendment No. 4, in page 48, line 31 [Clause 92], leave out subsection (1).

Amendment No. 35, in page 48, line 34 [Clause 92], leave out subsection (2).

Amendment No. 36, in page 73, line 12 [Clause 125], leave out '92(1)'.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

This group of new clauses and amendments addresses one of the key issues of the Bill, which was discussed in some depth in Committee—at least, in as much depth as the timetable motion permitted. The Government say that the Bill is about delivering freedoms and flexibilities to local authorities, but their actions on capital receipts, the associated debt and local authority housing grant demonstrate exactly the opposite as far as prudent, debt-free authorities are concerned. In fact, the whole approach of the first part of the Bill, mirroring the Government's conduct of their own finances, is to abandon prudence, to punish debt-free authorities and to encourage borrowing, while increasing the power of the Secretary of State in the allocation of funding by expropriating the capital receipts of local authorities from right-to-buy sales, as clause 11 seeks to do.

The Select Committee that considered the Bill in draft—one of the early examples of the draft Bill procedure—recommended that clause 11 be deleted. The Government have rejected that recommendation, which represents an early defeat for the concept of consideration of Bills in draft. We have seen draft regulations in relation to clause 11, and they have been much discussed. We know that the Government intend to sequester 75 per cent. of the capital receipts that local authorities receive from right-to-buy sales and 50 per cent. of those obtained from other transactions. The Government use language such as "pooling" and redistribution. Their notes on the clause talk about taking this money in order to redistribute it. However, nobody reading the Bill will find any reference to redistribution or pooling; they will find that the 75 per cent. tax on local authority capital receipts has to be

"paid to the Secretary of State".

Clearly, these moneys will not be available to the surrendering local authority, but what assurance do we have that they will represent net additional money at all? The Treasury, as we all know, has its own little local difficulties. It is far from apparent to me that when the Treasury and the Office of the Deputy Prime Minister formulate the overall local authority finance settlements for next year and the two subsequent years, all the money that has been skimmed off in this way will be treated as an additional resource, rather than as a substitute resource for money that would otherwise have been made available to areas in need, from central Government funding.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

The hon. Gentleman and I agreed on many aspects of this issue in Committee, but can he clarify whether, compared with the previous regime, the change that the Government propose will hit only debt-free authorities? The previous regime—it was a Conservative one—prevented many local councils from keeping their own capital receipts. Under the Conservatives, non-debt-free authorities had to pay them to the centre.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

I am grateful to the hon. Gentleman for his expression of general support. Indeed, I am glad about that because he has added his name to new clause 3, so we would expect him to support it. He is right, of course, that the principal burden of clause 11 falls on the 34 debt-free authorities.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

In saying that, the Minister is arguing that it is debt-free authorities with housing stock that the provision hits most substantially. However, it is my understanding that it will impact on indebted local authorities, to the extent that the Government do not choose—as they are empowering themselves to do through other provisions in the Bill—to pay off their debts for them.

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

The hon. Gentleman tries to draw a distinction between debt-free authorities that have housing stock, and those that do not. How can housing authorities that do not have any housing stock possibly benefit from capital receipts from house sales?

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

Of course they cannot benefit from capital receipts from housing sales—I was merely trying to contend with the Minister's constant chuntering from a sedentary position. I referred to 34 authorities and he replied with 18, and I was perhaps second-guessing some rationale for his figure. My understanding is that 34 debt-free local authorities will be particularly affected by these measures, but if the Minister has a different view, he will doubtless make his point in due course.

The Government argue that not all local authorities in receipt of capital receipts have chosen to reinvest them in housing assets, and to a limited extent that is true. That is called local decision making, but the power in the Bill is a power to tax local authorities, not an obligation to pool and to redistribute, over and above existing housing capital funding.

Photo of Peter Luff Peter Luff Opposition Whip (Commons)

As one of those who did not have the privilege of serving on this Bill in Committee, I wonder whether my hon. Friend can explain a little about the retrospective nature of the Bill's provisions. Wychavon district council, which is in my constituency, sold its housing stock some five or six years ago and repaid all its debts. It now has a substantial cash balance. Does he have any concerns about the Bill's implications for authorities such as Wychavon?

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

My hon. Friend raises an interesting point. [Interruption.] The Minister is chuntering from a sedentary position again. He seems to have an obsession with saying what I am about to say before I can say it.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

I am grateful to the Minister for his assistance. I do not think that clause 11 will pose any threat to those receipts, but I draw the attention of my hon. Friend Mr. Luff to the concern of many local authorities with positive capital balances that changes in the funding formula, and in the general tenor of the Government's approach to local authority finance, present the constant threat that unjust account will be taken of those capital funds, in such a way that the grant funding available to those authorities will be reduced.

The existing system of housing capital funding is itself being scrapped, of course—a point that I shall return to in a moment. The Government's second argument is that the stock that is being sold was originally financed centrally. Well, perhaps it was, but many debt-free authorities have received negative housing subsidy for years. It is their tenants' rent and their council tax payers' tax that has, over generations, built up the equity that exists in the housing stock that they are disposing of today—through investment, improvements, maintenance of stock, and repayment of debt.

So both the Government's arguments fail. If one believes in local democracy and the freedoms for local authorities that Ministers laughably proclaim this Bill is about, reinvestment of capital receipts from right to buy should be a local decision. The equitable ownership of the assets lies with the local community, not with the Secretary of State. The sequestration of one community's assets, even if for redistribution to another, is the antithesis of responsible and empowered local government. It is just another crude attempt by the Government to reinforce the clear thrust of their local government finance policy: to snatch from those authorities wicked enough to be prudent, well run, low taxing and debt free, in order to bail out the hopeless, the feckless and the profligate. That policy will result in average band D council taxes for the coming financial year on the homes of ordinary hard-working families in England exceeding £1,000 for the first time—a point which my hon. Friend Mr. Pickles has made.

Debt-free local authorities currently have the freedom to reinvest—or not, as they choose—their receipts from capital disposals. They, of course, will bear the brunt, but I should be grateful if the Minister would touch on the complex issue of how this measure impacts on indebted authorities. I am ready to stand corrected, but my understanding is that the notional income from set-aside receipts offsets the notional cost of the underlying debt that financed the assets that gave rise to those receipts. The Government seem to be recognising that problem in this Bill by taking powers to themselves to clear local authority debt; indeed, we shall be discussing overhanging debt in a moment. However, it appears that a local authority that has debt will have its receipts not set aside—blocked, in essence—but sequestered by the Government. It will be dependent on the largesse of the Secretary of State to clear its paper indebtedness, at least. Perhaps the Minister will clarify how that process works when he winds up the debate.

As ever, in Committee we approached this issue in the spirit of constructive compromise. We tabled amendments that recognised the Government's agenda, while resisting the extent of the asset grab that they proposed. We tried to reduce, or to limit, the percentage of the capital receipt that could be taken by the Secretary of State. We tried to ring-fence part of the local authority receipt for reinvestment in housing and regeneration within that local authority area, thus addressing one of the Government's principal purported concerns. I am afraid to say, however, that all that was in vain. The Government proved determined to attack the freedoms of debt-free authorities, and to undermine the right to buy from all sides. That is demonstrated in this Bill, which allows deduction of local authority housing and regeneration investment before the tax is calculated for other capital receipts, but not for right-to-buy receipts.

If we set clause 11 in the wider context, it is apparent that the Government are putting together a system whereby they sequestrate 75 per cent. of capital receipts from right to buy. At the same time, the right to buy itself comes under attack, in the form of a reduction in discounts, and in a clear policy agenda that seeks to limit the opportunities for ordinary hard-working families to benefit from right to buy.

Secondly, there is the introduction of a discretionary grant system, whereby the Secretary of State will pay off local authorities' indebtedness where he sees fit. Thirdly, we are all aware of the abolition of the local authority social housing grant—a measure that was well trailed but that all local authorities, without exception, understood was intended to come in on 1 April 2004. With some horror, local authorities have become aware—although they have yet to receive the courtesy of direct information from the Office of the Deputy Prime Minister—that local authority social housing grant will, in fact, be withdrawn on 1 April 2003. They became aware of that by being copied in on a letter from officials in the Office of the Deputy Prime Minister to the Housing Corporation on 8 February 2003, just three weeks before they were required by law to have set their budgets. That has caused chaos. It smacks of political vindictiveness or fiscal panic on the part of the Office of the Deputy Prime Minister. The Minister is shaking his head, so no doubt he will be defending the Office of the Deputy Prime Minister's lamentable performance in communicating with local authorities about the abolition of local authority social housing grant on 1 April 2003. Taken together, all those facts add up to a very curious idea of freedom and flexibility.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister) 2:15 pm, 5th March 2003

The hon. Gentleman has probably seen today's written ministerial statement by the Under-Secretary of State, Office of the Deputy Prime Minister, on the local authority social housing grant. Does the hon. Gentleman agree that this episode suggests a degree of incompetence in the Office of the Deputy Prime Minister that is extremely worrying? It is clear that local authorities did not expect the grant to be phased out until April 2004. Does the hon. Gentleman agree that the announcement that it will be phased out in 2003 has, in many areas, left plans for developing more affordable homes in utter chaos?

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

The hon. Gentleman is right. The announcement left councils reeling just a couple of weeks before they were due to present their budgets. There has been no clear indication of what the transitional arrangements are to be. There has been an indication that there will be transitional arrangements, but no information has been offered to allow individual authorities to assess which of their schemes will be eligible for the arrangements and which will not. That has led to what I can only describe as outrage among local authorities. The offence has been compounded by the utter discourtesy of the Office of the Deputy Prime Minister in copying in local authorities on an e-mail from an official to the Housing Corporation. There was no effort to follow that up by direct communication with the local authorities. When I contacted the office of the Minister responsible for housing immediately after this fiasco had become known to me, I was told that there would be no chance of any direct communication in the following week—the week when the House was in recess—and that the earliest that any communication would be made would be in the week the House resumed. To my knowledge, nothing has yet gone out to local authorities.

Photo of George Young George Young Chair, Standards and Privileges Committee

My hon. Friend may know that Test Valley borough council is one of the many councils to have been caught up in this. The council has written to the Office of the Deputy Prime Minister. Does my hon. Friend agree that the only satisfactory transitional arrangement would be one that put the local authority back in the position it thought it was in before the communication went out?

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

My right hon. Friend is right. A number of local authorities have suggested to the Office of the Deputy Prime Minister that the only fair transitional arrangement will be one that recognises all projects that were in local authorities' financial statements and plans at or around 10 February. From the financial information that I have seen on the amount of money available for transitional arrangements, it is clear to me that the Government will not allow anything like all of those projects to slip under the wire.

Photo of Mr Matthew Green Mr Matthew Green Liberal Democrat, Ludlow

In the information on the transitional arrangements—which has been placed in the Library today—it is clear that, instead of the £500 million provision that had been expected for this year, debt-free authorities will find that their provision has been graciously increased from £175 million to £275 million. Instead of a year, they are being given an extra three months—up to 30 June—to get schemes, together with their planning permission, through. That will allow some schemes to go ahead, but the statement by the Under-Secretary of State, Office of the Deputy Prime Minister, says:

"We do however need to ensure that the funding limits are not exceeded. If the total claims submitted by 30 June exceed the money available, the Housing Corporation will prioritise schemes with the Government Offices in terms of their contribution to the regional housing priorities."

In other words, if the limit is exceeded in my area, it will be the Government office for the west midlands that decides who will get the go-ahead.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

I am grateful to the hon. Gentleman, who is absolutely right. I have not seen that statement, and I query why it should be necessary for Ministers to table, only this morning, written ministerial statements that are obviously relevant to today's debate. When that sort of thing happens, hon. Members do not have the opportunity to examine them and discuss them with local authorities. I know from copied correspondence that I have seen that many local authorities have already invested substantial amounts of money and time in projects that will certainly not clear the hurdle that the hon. Gentleman has just informed us has been set in the written ministerial statement. That is a very serious matter. Not only its substance but the way in which it has been handled do no credit at all to the Office of the Deputy Prime Minister. The Minister for Local Government and the Regions is not, of course, directly responsible for such matters; I am sure that he would have handled them in a way that was not so grossly discourteous to local authorities. He will know that this debacle has done a great deal of damage to the relationship between his Department and local authorities.

Photo of Michael Jack Michael Jack Conservative, Fylde

Does my hon. Friend feel that, because of the state of the public finances, the actions that have been taken smack of late intervention by the Treasury? Virtually no analysis has been done of the effect of these proposals on councils, which can only move at a certain pace with future housing developments. The whole approach destroys any idea of legitimate expectations.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

My right hon. Friend is right. As he points out, local authorities have been placed in an impossible position. They have been planning, spending, making progress with projects and preparing their budgets, only to find that many of their activities have been put under a shadow on very short notice and without any official notification.

The signals from Government are utterly confusing. At the beginning of February, we heard the Deputy Prime Minister batting on about the need to build more affordable housing. In some areas, the need to build more affordable housing and to develop sustainable communities is desperate. At the same time, local authorities—which believed that they had been doing precisely the bidding of the Government in negotiating with their registered social landlords and in working up schemes to provide precisely such affordable and sustainable housing developments—have found that the rug has been pulled from under them without even the courtesy of a phone call. They have been left to pick up the pieces and, in many cases, the costs that they have already incurred.

The Government have given us a curious idea of what freedom and flexibility mean. They seem to mean that the Government take one's assets, cut off one's entitlement to grant funding for one's social housing programme, and replace that funding with grants that are at the discretion of the Secretary of State. At worst, that is open to any kind of gerrymandering; at best, it represents a huge increase in bureaucracy and a loss of local autonomy and accountability, as local authorities are forced to supplicate at the altar of the Deputy Prime Minister for funding for regeneration and social housing schemes.

Clause 11 hands the Government an £800 million pork barrel that is financed by council tenants and council tax payers. That may be why Jon Cruddas, who I am pleased to see is here, was able to vote with the Government in favour of clause 11, even though his own local authority—Barking and Dagenham—will be the single biggest loser, losing £12 million of capital receipts. Perhaps he has been given an assurance that the Secretary of State's largesse will extend to Barking and Dagenham, and his council will not be out of pocket. So much for the Secretary of State's open-minded and objective approach to funding decisions.

2.30 pm

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Does my hon. Friend agree that the Minister's body language may tell us more than his words? [Interruption.] He is now trying to appear open and wise. When my hon. Friend makes a point with which the Minister disagrees, he smiles like a crocodile and shakes his head vigorously. However, when my hon. Friend makes a point with which the Minister cannot in honesty disagree, such as the remark about the promises to Jon Cruddas or about the Treasury's intervention in the social housing grant, the Minister hunches up, buries his nose in his papers and scribbles notes.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

I do not have the expertise that my hon. Friend obviously possesses in the analysis of Ministers' body language. This particular Minister's body language is usually smiling, and I find it difficult to read anything into that, although I have discovered that smiling does not necessarily indicate agreement with or approval of what is being said. I look forward to my hon. Friend's continued interpretation, as I may find it helpful.

New clause 3 is a further attempt at compromise, following the attempts that we made in Committee and that were rejected by the Government. I am delighted that the Liberal Democrats have decided to support the new clause. It proposes that the Secretary of State should pay a mandatory special grant for social housing provision and repairs to housing stock, equivalent to 50 per cent. of what is received under the provisions of clause 11. Effectively, new clause 3 provides that 25 per cent. of right-to-buy receipts would remain in the hands of the local authority, with no restrictions on its use; 37.5 per cent. would come back to the authority in a ring-fenced special grant to be spent on social housing and repairs to stock; and 37.5 per cent. would go to the Secretary of State for redistribution, if he is generous, or to be swallowed up into the Chancellor's black hole, if he is ungenerous. More than half the receipts would remain with or return to the local authority. That is a compromise position that any reasonable Government would accept. Unless the Minister will accept it, all we have on offer from him is a set of transitional arrangements that reject the arguments in principle against this centralising measure.

During the debate in Committee, we touched on the question of receipts other than in the form of cash—in particular, in the form of nomination rights. For example, a local authority might transfer assets to a registered social landlord in exchange for nomination rights to the tenancies in those assets. The Opposition amendment in Committee proposed that such receipts should be excluded from the sequestration process.

The Bill would require local authorities to value such nomination rights and pay a levy to the Secretary of State, in cash, on receipts that have not been received in cash. That would present serious problems for local authorities. To the Minister's credit, he recognised that that was not the Government's intention, but he did not accept the amendment because he noticed many loopholes and possibilities for evasion by local authorities of his taxing plans. He said:

"I cannot give the hon. Gentleman an absolute guarantee that we will be able to produce revised regulations in time for Report stage, but that is only because of the considerable number of other pressures under which we are working."

There is obviously too much legislation. He continued:

"I undertake to write to the hon. Gentleman, setting out our thoughts on how we might address this conundrum and I will copy that letter to all Committee members."—[Official Report, Standing Committee A, 28 January 2003; c. 145.]

I am wary of accusing the Minister of not having written to me, because I did so once before and returned to my office to find the letter on the doormat. However, I have not received a letter, and I have spoken to some hon. Friends who are also not aware of having received one. I see from the body language of Mr. Davey that he has not received one either—[Interruption.] Well, I see it from his raised eyebrow language.

We needed to see how the Government intended to deal with the issue before we returned to the subject on Report. In the absence of any revised draft regulations, we needed at least to have the Minister's thoughts set out for us. If he has not been able to set them out in writing, perhaps he will take a little extra time and trouble to set them out in detail when he replies to the debate.

The second issue that I wish to raise with the Minister is the situation relating to new towns. Currently, the sale of stock transferred originally from the Commission for the New Towns or English Partnerships to new town local authorities is subject to a clawback, equivalent to 75 per cent., to English Partnerships. The Minister will know that there was a debate last week in Westminster Hall to which his colleague, the Under-Secretary of State, Office of the Deputy Prime Minister, Mr. McNulty, responded. In that debate, I raised the following question. The Government's response to the Select Committee's report on new towns, their problems and future, states:

"English Partnerships will discuss with the individual local authorities the issue of assets and liabilities, including clawback. In some circumstances, and with the agreement of the Treasury, English Partnerships might waive clawback or transfer the right to receive clawback to the respective local authority."

I asked the Under-Secretary how that process interfaces with the arrangements that are now being put in place for the Secretary of State to take 75 per cent. of all capital receipts, and I wish to put the same question to the Minister. The irony is that the new towns have long campaigned for the abolition of clawback on the basis that it would give them equal treatment with all other authorities. They will have equal treatment, but only by subjecting all other authorities to the clawback under which the new town authorities have laboured for so long.

Will the clawback waiver by EP actually operate and, if so, will the receipt that the local authority obtains be subject to the clause 11 sequestration process? If so, English Partnerships will give, only for the Secretary of State to take away. That would be a meaningless exercise. If what the Government said in their response to the Select Committee's report stands, and the new towns are exempt from the process by the waiver of clawback in specified cases, it represents a large and partisan hole in the Bill. After all, all but one of the new town authorities are controlled by the Labour party. I would be concerned if the Government were introducing a different regime for the new towns compared with all other authorities, effectively exempting some Labour-controlled authorities from the pain that they are inflicting on all other authorities. I look forward to the Minister's response on that issue.

New clause 6 is an attempt to probe the Government on the recently announced power of forced letting. It seeks to prevent information from council tax records being used as a base for a programme of forced lettings of empty property. I have two questions for the Minister. Will there be an appeal mechanism for anybody whose property is subjected to the proposed enforced letting process? Will a person who does not wish to become a landlord have the right to require the local authority to compulsorily purchase a property identified for compulsory letting?

The Government's proposals on compulsory letting represent a massive infringement of the rights of private property. The Government and Labour Members are very keen on the human rights agenda, but they cannot pick and choose from it. One of the rights guaranteed by the European convention is the right to private property. Will the Minister confirm that the Government have received specific advice that the compulsory letting of private property with no option to require its compulsory purchase would not breach rights under the convention?

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

Will the hon. Gentleman say more about why the Conservatives are so against compulsory leasing, when previous Conservative Governments have introduced legislation to promote compulsory purchase? Will he explain the difference, as he sees it?

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

I hope that all hon. Members would find any notion of compulsion slightly unsavoury, as I do. It is always better if these things can be done without compulsion. Clearly, however, compulsory purchase powers will be needed in some cases. The owner of a property may require a local authority to acquire the property, but that is different from the owner being legally required to become a landlord when he does not want to, and having no option to require the local authority to purchase the property. The distinction is clear. I hope that the Minister will explain the Government's intentions in the matter.

New clause 6(2) would establish that empty home receipts should go to local authorities rather than directly to the Government. At present, £160 million in such receipts goes to the Government, and the new clause would bring the procedure into line with what the Government propose in respect of second homes. It would also bring the procedure into line with the incentive system that the Government have extolled in relation to new clause 10.

New clause 7 relates to clause 90, which deals with negative housing revenue account surplus. The explanatory notes say that the subject is "not well understood". That is masterly understatement. The Minister will do well to find anyone who understands the concept at all, although my right hon. Friend Sir George Young may be one of the few in the House who qualifies.

Clause 90 requires a local authority to pay any negative housing revenue account subsidy to the Secretary of State. The notes say that that represents no change, and that it is required simply to deal with changes in the treatment of rent rebates.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

The Minister, in his customary helpful fashion, confirms that.

Members of Parliament are required to be suspicious, and new clause 7 therefore would require the Secretary of State to report to Parliament about the amounts paid in negative housing revenue account subsidy to him by each local authority. That would allow the House to see what the distribution effect is and, I hope, corroborate the Minister's assertion that nothing has changed.

New clause 16 addresses clauses 40 and 50. As part of its centralising approach, the Government must deal with the question of local authority indebtedness, in respect of stock whose sale receipts are to be sequestered by the Secretary of State. This is a matter for indebted, not debt-free, authorities. Currently, indebted authorities have to set those receipts aside, but the Government are proposing a tortuous system: the Secretary of State will take the receipts, and then the loans will be repaid, on behalf of the local authorities, by the Secretary of State. However, as I understand it, that repayment will remain at the Secretary of State's discretion.

The powers to make the regulations appear later in the Bill. They are framed specifically to give the Government the power to make different regulations applicable to different types of authorities, or to authorities in different areas or regions. That strikes me as an especially dangerous power for the Government to have. Again, it is the antithesis of genuinely local government and proper local financial controls. It would give the Secretary of State huge power, and the ability to exercise largesse towards favoured local authorities.

New clause 16 would force the Secretary of State to report to Parliament the amounts paid under clauses 40 and 41, and to assess any effects on rents in respect of transferred properties. For example, local authorities that discover that the Secretary of State is not likely to clear their debts may have to hold out for a higher price so that they can continue to service outstanding indebtedness. I hope that the Minister will respond to that point.

Liberal Democrat amendments Nos. 43 and 44 are essentially another way to address the iniquity of clause 11. I hope that Mr. Davey will throw his weight behind new clause 3, and not find it necessary to press amendments Nos. 43 and 44 separately. However, if he does press the amendments, we will support him in any vote that is held.

Amendments Nos. 4 and 35 deal with clause 92. The clause limits the effect of section 24(3) of the Housing Act 1985 so that it applies only to Wales, but clause 92(2) allows the Welsh Assembly to abolish it for Wales also. I assume that that is a gesture to the principle of devolution. However, the Government say that the proposal is about enabling authorities to comply with the Government's rent restructuring policies in England. The amendments have been tabled to give the Minister an opportunity to explain the policies in a little more detail, and to explain why clause 92 is needed.

My understanding of section 24(3) of the 1985 Act is not that uniform rentals—or fixed percentages for public-sector rents by comparison with private-sector rents—have to apply across the country, but that there should be an equivalence of proportionality, in a local authority area, between public sector and private sector rents across different types of dwelling. That is surely sensible. Wages in the labour market in an area are linked to local market conditions, and local private sector housing market rents are also a function of the local market conditions. My intuition is that it is appropriate to have a consistent relationship between public sector and private sector rents in an area. I readily accept that that relationship might have to be very different in areas of high demand and high prices from what it should be in areas of low demand and low prices.

In the constituency of my right hon. Friend David Davis, for example, registered social landlord rents are notorious for being higher than market rents. In many other areas—and my own constituency is one of them—RSL rents obviously have to be substantially lower than comparable private sector rents if the affordable housing market is to function. However, it is not clear why the Government need to use clause 92 to remove section 24(3) of the Housing Act 1985 in relation to England, and to give the Welsh Assembly the power to remove that section in respect of Wales.

Amendment No. 36 is a consequential amendment that does not need to be discussed.

The combined effect of the sequestration of capital receipts under clause 11, the power of the Secretary of State to distribute them as largesse to favoured authorities, changes in the local authority social housing grant, the arrangements for discretionary repayment by central Government of overhanging debt, and the Government's meddling with the formula funding grant, as well as the general thrust of their policy in respect of local authority financing—all those factors undermine the autonomy of debt-free authorities and give the lie to the Government's claim that the Bill is about freedoms and flexibilities. It is about increasing central Government control and the patronage power of the Secretary of State. It is about penalising the prudent to bail out the profligate. It is about disempowering local communities and undermining true financial accountability. It is about politically motivated hostility towards the freedom that right to buy gives ordinary working families. It is about transferring receipts from local authorities and the south-east—where most right-to-buy receipts arise and where affordable housing is desperately needed.

Clause 11 is bad. The Select Committee that considered the draft Bill recommended that is should be scrapped but the Government refused. New clause 3 makes a bad clause less bad and I commend it to the House.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister) 2:45 pm, 5th March 2003

I agreed with much of what was said by Mr. Hammond, so I will speak for fewer than the 45 minutes taken by him. As we support and can unite behind new clause 3—which addresses some of the problems created by new clause 11 and the pooling of capital receipts—and one or two other amendments tabled by Conservative Members, we shall not press our amendments to a vote.

The Government shifted their position on pooling significantly in Committee and in respect of the local authority social housing grant—today, they have changed position again. One might say that that shows flexibility on their part but to those of us who have witnessed the charade, the Government's incompetence is exceptionally worrying. It is a shame that Mr. McNulty is not in his place, because it is increasingly clear that he is not getting a grip on issues that are his responsibility. Debt-free authorities—having worked within a particular framework for many years and managed their assets properly—are now being penalised. Under pressure from arguments in Committee, the Government have brought forward a transitional arrangement package. It does not go nearly far enough, but it shows that the Government know they got it wrong.

Equally, the sustainable communities plan contained the mistake of proposing that local authority social housing grant should be abolished from April. The Government realised the damaging effect that that would have on many housing authorities—including those of the right hon. Member for North-West Hampshire (Sir G. Young) and my hon. Friend Mr. Green.

Photo of Mr Matthew Green Mr Matthew Green Liberal Democrat, Ludlow

Shropshire district council has a £4 million social housing programme for next year, using the last of its capital, which it must try to rush through in three months, including planning permission. If too many councils throughout the country do the same, it will still be at the discretion of the region to decide whether they may proceed or to prioritise something else. If that happens, it will be a scandal.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

I am grateful to my hon. Friend. The Government say that they are thinking about long-term strategies for sustainable communities, but they present policies that fall apart under initial scrutiny. A few weeks after announcing them, the Government try to patch up their collapsing framework. I hope that the Minister can assure the House that his Department's continual mistakes are not repeated.

New clause 3 seems to address the problems of clause 11 and is offered to the Government as a compromise. In Committee, my hon. Friend Sue Doughty made a powerful speech outlining that the likely effect of the proposals on her debt-free authority and others would be to prevent them from dealing with the key issue—recognised by the Government in their sustainable communities statement—of a shortage of affordable housing. New clause 3(2)(b) will ensure that grants repaid to authorities could be used to secure social housing. We explored that issue in great detail in Committee and the Government admitted that that was the case. New clause 3 enables the Government to put into practice their intention, so loyal Labour Members should support it.

New clause 6 is a bit of a curate's egg. I can support the second part but subsection (1) is bizarre, in that it goes against what was said by Conservative Members on the Select Committee that examined the problem of empty homes— when that matter was the responsibility of the then Department for the Environment, Transport and the Regions—and reported on the need to improve the quality of information. We are passionate about that issue because there are more empty homes in every region of this country than there are homeless people in every region of this country. If that huge resource were used properly, the homeless problem could be tackled quickly, cheaply and in a sustainable way.

The Select Committee said that there was a need to improve the accuracy of data on empty homes, particularly in housing investment programme returns, and to use geographical information systems to enhance the quality of information—something on which the Government are now moving. The Committee reported also a problem about the way in which council tax data could be used. The Information Commissioner took one view and Poole borough council obtained counsel's opinion that council tax data could be used for the purpose. The Committee sought clarification and called on the Government to end the confusion and bring forward legislation.

The Government have done so in the form of the Bill, but I wonder where the hon. Members for Mole Valley (Sir P. Beresford), for Epsom and Ewell (Chris Grayling), for Vale of York (Miss McIntosh) and for Leominster (Mr. Wiggin) are to be found, because they agreed to the Select Committee's report, in direct conflict with new clause 3. I hope that Conservative Front-Bench Members will sort out their position.

The Conservatives may say that new clause 6 is tightly drawn because it relates the use of such data only to the notion of compulsory leasing, a proposal that was aired in the sustainable communities plan, which we shall have to debate on another occasion. We support the Government on those proposals, provided that there are appropriate safeguards, such as those for compulsory purchase.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

It would be completely wrong for there to be no safeguards and I shall give the hon. Gentleman an example. Recently, I discussed with Jonathan Ellis, the chief executive of the Empty Homes Agency, the profile of people who leave their properties empty. The picture is mixed. Some of those people are extremely wealthy; they have a huge property portfolio and have never quite got round to dealing with it. They are absentee landlords and they simply do not bother. Others, however, are elderly and do not have enough money to maintain their property. They may be asset rich but they are income poor. They do not want the hassle of getting involved with bureaucracy. Other elderly people may be sick; they may suffer from dementia and have gone into a care home so they did not get round to putting their property to rights and letting it.

Such cases must be managed appropriately and the legislation must ensure that no local authority could treat such owners insensitively.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

I am glad that the Minister agrees.

Such provisions should not, however, prevent us from adopting a public policy whereby empty properties are used to tackle homelessness. The Conservatives should agree. They may point out, rightly, that many empty properties are in the state sector, but that is true of only 10 per cent. of empty homes in London and the south-east. Of course, even that is too much and the problem needs to be tackled. We need to hold the Government and local authorities to account for that.

In my constituency, however, 90 per cent. of empty homes are in the private sector. Yes, local authorities could do a better job by using voluntary agreements. They could promote best practice and provide grants to repair and renovate homes so that they could go back on the market. Local authorities could act in partnership with private letting companies to ensure that owners receive a rental income. However, there is a question that the hon. Member for Runnymede and Weybridge will have to face up to, because it is not covered in new clause 6. If best practice is adopted and there is an empty property strategy, if grants are offered and people are given support to use their assets, is there to be no backstop? If a person has a property that is desperately needed, should not the community take measures to put it back into useful possession? It would be difficult, even on libertarian grounds, to argue against that.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

We already have a well established procedure for compulsory purchase of property where it is required for a public policy purpose. The Government are significantly extending the scope of such procedures. My view, however, is that compulsory purchase is a different order of imposition on the rights of private property than compulsory leasing. Compulsory leasing requires an individual to finance the capital cost of an asset, of which the Government then dictates the use. That seems quite different from compulsorily purchasing a property where it is required for a public policy purpose.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

I am grateful to the hon. Gentleman for giving me an early opportunity to put right the Conservatives' flawed economic logic. The point is that the property owner will keep the asset, so that must be less damaging than compulsory purchase. We have not yet seen the final proposals, so the hon. Gentleman may have a point, but the idea currently being debated by the Empty Homes Agency and others is that the rental income will be shared with the owner. Indeed, it will all go to the owner once the state's costs have been met; for example, the costs of repair, renovation and administration. The proposals could be extremely beneficial for property owners. This is potentially a win-win situation.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

If it was in their interest, owners could do those things themselves.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

In many circumstances, people have neither the competence nor the capability to do that for a variety of reasons. I look forward to future debates with the hon. Gentleman when I can give him some concrete examples. I urge him to talk to the Empty Homes Agency, which has commissioned a MORI poll of the type of people whom we are discussing so that we have a true profile. That information will be important in getting the measure right.

It is important to safeguard people's property rights, but it is wrong that there should be whole streets where properties are left empty—there is one such street in my constituency in an area of highly priced properties—when there are such huge homelessness and housing problems. [Interruption.] The hon. Member for Runnymede and Weybridge keeps saying "Compulsory purchase". That is the illiberal position. The Liberal position is to go for compulsory leasing.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

If the hon. Gentleman would accept that there must be an option for a person who is compulsorily required to lease to require the authority to purchase his property, he may overcome my objection. Would he support such a safeguard?

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

That is a sensible proposal in principle and I hope that the Government will give it serious consideration. We might need a different regime to ensure that the system was slightly quicker than some of the compulsory purchase procedures, but the House should debate such matters to ensure that we get the legislation right. I hope that Conservative Members will at least agree that it is vital to use such resources, especially where there is high demand for housing and we need to tackle homelessness.

New clauses 7 and 16 require reports on housing revenue accounts and overhanging debt. We have no problem with that and I shall not rehearse the detailed and technical arguments with which we dealt in huge detail in Committee. We have some concerns about the way that the Government are going about housing revenue account reforms. As some of the money could go to the Secretary of State and would not be ploughed back into housing in local authorities, it is important to monitor the Government's policy. New clause 7 would do that, so we support it.

There were fierce debates in Committee about the Government's overhanging debt proposals. Following the views of the Select Committee and of the Chartered Institute of Public Finance and Accountancy, I argued that, in effect, the Government were giving local authority tenants an extra incentive to opt for a housing transfer. There was some discussion of how the analysis was to be carried out and the Minister has written to me about that issue. However, I am still not convinced that an extra bribe is not being proposed. The Liberal Democrats are not against stock transfer. In many cases, it is appropriate and we have argued for it, but the key public policy issue is that stock transfer decisions should be based on a level playing field for different types of landlord. We fear that the Government's proposals will skew the balance in favour of stock transfer simply because they have failed to win some stock transfers.

The Government's analysis is wrong. Where stock transfers were lost, it was not because there was no bribe, but because the actual proposal did not make sense and tenants were right to vote against it. Where the proposals are put to tenants in a way that makes sense to them, they vote for them. I suggest that new clause 16 is right and that the clauses on housing issues are wrong.

I said that I would touch on the local authority social housing grant because it is crucial to these issues. I want to reiterate the shock and anger in many communities. People have been labouring away—whether in public sector housing authorities, registered social landlords or other stakeholders—to try to put together proposals, often with private developers, to build affordable housing on the back of the promise that local authority social housing grant will be part of the financial package. Suddenly, the Deputy Prime Minister told the House in the middle of February that those people could not have the grant on which all their work had been done and on the basis of which their money had been invested. That was an absolute catastrophe.

We are not over-emphasising the problem: affordable homes will not be built, and we are experiencing one of the biggest crises in respect of the shortage of affordable homes probably in the past 100 years. So not enabling proposals that are already halfway down the pipeline to go through seems not only wrong, but to go completely against the thrust of the Government's policy.

Photo of Mr Matthew Green Mr Matthew Green Liberal Democrat, Ludlow

Is not the reality that the Government are effectively saying that they are not interested in those affordable homes because they are not in their priority areas? The reality is that South Shropshire will need 1,400 affordable homes by 2011. With the abolition of that scheme, one of the main ways of delivering that will have gone, and the regional body will say that places around Birmingham, or somewhere like it, have priority and people in South Shropshire should not have any social housing funds. Rural areas have very real needs, and the fear is that they will not receive the funding that they used to get because they are not one of the Government's priorities.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

My hon. Friend makes an excellent point. The problem is that the Government are trying to centralise housing policy over the regions and pick certain areas, and they do not like some areas. They are taking money from all debt-free authorities of whatever political persuasion, and they are taking the local authority social housing grant away from them, too. The Government are trying to control the nation's housing policy from Whitehall, and that cannot be right.

We are finding—this affects my hon. Friend's part of the country—that the Government sometimes put ceilings on the number of affordable houses that can be built. The councils and communities in those areas would be prepared to see more houses built, but that is being stopped by central Government. That seems to be nonsense.

I hope that the Government will not leave this issue, especially the local authority social housing grant, at the statement that we received today from the Minister. Frankly, so far as we can tell from the statement, the available grant will be cut by £225 million next year, so fewer affordable homes will be built. That is why I refer the Minister to early-day motion 824, which my hon. Friends and I tabled last night. We did not realise that we would have such an effect—a written ministerial statement being produced the very next day. Obviously, we have more influence than even we had imagined. Unfortunately, the ministerial statement does not go as far as our early-day motion, so I hope that the Minister will look at it again.

My final remarks relate to new clause 6, on empty homes, the first part of which I have been very critical. I shall end on a more consensual note by telling the hon. Member for Runnymede and Weybridge that the second part of new clause 6 is very laudable, and he will know that not only do we support it, but the Local Government Association supports it. The hon. Gentleman would like local authorities to be able to keep the council tax receipts where they decide to get rid of discounts on empty homes. That seems very sensible—it has been Liberal Democrat policy for many years.

The Government might say, "Well, we've gone some way. We have given councils the power to end the discounts on empty homes. Isn't that a good thing?" Well, I am afraid that that is only half the cake. Allowing local authorities to keep the revenue that they thereby raise would enable them to get a much greater hold on the housing issues in their areas. However, siphoning off that revenue not only gives poor incentives to local authorities, but prevents that policy from having an even more powerful effect on the housing situation. If the Minister does not like the first half of new clause 6, I hope that he will see some merit in the second half.

I have spoken for longer than I had intended, so I shall simply end my speech by saying that new clause 3 would make a major improvement to the Bill and it therefore deserves the support of not only Conservative Members and the Liberal Democrats, but other hon. Members on both sides of the House.

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government) 3:15 pm, 5th March 2003

We have had a long debate, with two speeches—one lasting about 45 minutes, the other 25 minutes. It would be nice to think that I could get through this quickly because my analysis of the two contributions is that they were both erroneous, but Mr. Davey was slightly less wrong than Mr. Hammond. If one speech was only half the length of the other, there is clearly some merit in keeping comments short.

Let me try to focus on the various issues. This is a complex range of housing matters. New clause 3 mirrors a number of amendments tabled by the Opposition in Committee. Like them, it would remove significant resources—some £600 million—from the funds that will be allocated to all authorities on the basis of their housing needs. The amendments tabled by the Liberal Democrats would either remove the power to make regulations requiring housing capital receipts to be pooled, or limit the pooling rate to 50 per cent. In other words, they are not quite as wrong the Conservatives, but their proposal is still unsatisfactory because it would reduce the amount available for distribution to authorities in need.

We have always taken the view—interestingly, so did the previous Government when Sir George Young was the relevant Minister—that it is right that a proportion of the proceeds from the sale of council housing through the right to buy should be recycled, so that it can be used in areas of greatest need. That is a fundamental principle of housing capital finance, but the amendments tabled by today's Conservative party would overturn that principle. If the amendments were passed, the very authorities that we want to help would be penalised—those with high housing need, but low capital receipts.

I believe strongly that all authorities should have access to the funding that they need to meet national housing priorities, such as affordable housing and decent homes, and pooling three quarters of housing receipts is an element in the process by which we can achieve that; removing £600 million from the national mechanism is not.

The hon. Member for Runnymede and Weybridge claimed that this was a centralising measure, interfering with local authority freedom. On the contrary, it simply applies the same principles that were the fundamental element of the previous Government's policy, but it does so consistently to every authority, rather than allowing a different logic to apply uniquely and paradoxically to debt-free authorities.

The proof of the pudding has to be in the total sums available. I put it to the hon. Gentleman that, far from reducing local authority freedom, the Government are in the business of increasing investment and allowing local authorities to do a great deal more. In 1997–98, we inherited £900 million capital investment in housing; in 2002–03, we are investing £2.5 billion in housing—about two and half times more. That is possible partly because we make proper use of the available receipts, which otherwise would not be applied.

Photo of Mr Matthew Green Mr Matthew Green Liberal Democrat, Ludlow

The Minister will accept that there may be years when the amount that the Government put into housing, or the amount collected back from capital receipts, is not enough to meet all the housing need throughout the country. The Bill is a centralising measure because somebody in the centre, at regional or national level, will decide what the priorities are for giving out what grant there is. I accept that there may be much more money going into housing, but if it does not meet total need, someone will still be making decisions on priorities—and that someone will not be the local council.

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

Housing is a national issue, and it is absurd to suggest that it should be left entirely to individual local councils to decide whether there should be policies to meet housing need in their areas. In Committee, I cited an example of the Liberal Democrats making a great fuss about the failure of a Conservative council in Surrey to use its money for housing investment—yet they still attack the Government's proposals to ensure that money is used for housing. I have to say here on the Floor of the House, as I said in Committee, that it is typical of the Liberal Democrats to look both ways. First they say that they want money invested in housing, because housing is a priority, but when the Government do something to achieve that, they complain that we are centralising.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

I am surprised that the Minister has brought that example up again, because we soundly defeated him in argument when he brought it up in Committee. My colleagues in Surrey, who were arguing against the Conservatives running the council, were speaking to the local people, because they wanted them to exercise their democratic choice at the next council elections to get rid of the Conservative administration that was mishandling the resources available to it. That is called local democracy. If the Government are to push a model in which everybody, on every issue throughout the country, should always look towards Westminster and Whitehall for a solution, they are advancing a centralised model that Stalin would have been proud of.

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

As usual, the hon. Gentleman does his case no good by overstating it. The Bill is designed to ensure that there is a larger pot of money available to enable local authorities to respond to housing need in their areas. By no stretch of the imagination can it be compared to the behaviour of the former Russian dictator whose death 50 years ago is the cause of a certain amount of newspaper comment at the moment. On reflection, the hon. Gentleman will realise that that is not a very appropriate parallel.

As hon. Members will know, because we made the announcement in Committee, we have put in place generous transitional arrangements to assist debt-free authorities—a move that was largely welcomed in Committee, albeit slightly grudgingly by some Members.

New clause 3 is to some extent unworkable. For example, I assume that the reference to special grant means a special grant under section 88B of the Local Government Finance Act 1988, which, as hon. Members will know, requires an affirmative resolution of the House. If the receipt concerned were received at the end of the financial year, there simply would not be time to go through that procedure to comply with the time scale in the new clause. I therefore hope that new clause 3 will be withdrawn.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

It ill behoves the Minister to talk about the time scale at the end of the financial year when he has just abolished local authority social housing grant with zero notice to local authorities. Moreover, if this is all about redistribution, why does the Bill not explicitly ring-fence the receipts in the hands of the Secretary of State so that they have to be redistributed as additional money, and cannot simply be lost in the big pot?

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

The hon. Gentleman will remember that we debated that matter in Committee, and I gave clear assurances that the money would be used for housing. Those assurances are on the record, and I am happy to repeat them today. It is not necessary to make additional amendments to legislation.

New clause 6 is an odd combination of two rather different proposals, as the hon. Member for Kingston and Surbiton pointed out. First, it seeks to limit what a local authority can do with council tax information concerning empty homes. The second, unrelated provision seeks to ensure that the extra money raised from removing or reducing the discount on long-term empty homes is kept by the billing authority.

I am surprised by the official Opposition's apparent commitment to supporting the freedom of the owner of an empty property to enjoy keeping the property empty. Most people on both sides of the House recognise that there is a problem with empty property, and that we need to take more effective action to bring it into use.

The hon. Member for Kingston and Surbiton made several valid points about the work of the Empty Homes Agency, and about action to incentivise the owners of empty properties to bring those properties into use. However, he went on to say that some owners were inexperienced or nervous about letting their properties, and some may be keeping properties empty out of inertia. It is therefore entirely right and proper, as the Select Committee has said, for there to be mechanisms to identify people in that position, to ensure that local authority empty property agencies, where they exist—and many local authorities run empty property units—can advise people about what can be done to bring properties into use, perhaps by putting them in touch with a local housing association that may be able to help with letting.

The provisions in the Bill are simply about using information already held by local authorities to get empty homes back into use. That is a wholly sensible and admirable proposal, which was supported by the Select Committee and has also had support from all parts of the House, so I am surprised that the Conservative party now appears to oppose it.

I agree about the importance of safeguards for council tax information, but that information cannot be used to remove the freedoms of a property owner—to require them to take tenants or to sell to someone who would occupy the property, for example. The hon. Member for Runnymede and Weybridge mentioned the reference in the communities plan to propose measures to encourage empty properties to be brought into leasing. It says:

"We plan to do more to make better use of long-term empty properties in high demand areas. We will consult during the Spring on giving local authorities powers to lease long-term empty properties to improve them and bring them back into use".

There will be full opportunity to discuss those provisions, which are not related to the Bill. The Bill is purely about information available to local authorities to enable action to be taken in line with the Select Committee's recommendation to bring the number of empty properties down. I would have thought that everyone would welcome that.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

The Minister says that he will consult in the spring about powers for local authorities to lease properties compulsorily, but there is no provision in the Bill to give effect to that. On new clause 10, however, he said that he needed to put the power relating to something that he intended to consult on in the summer into the Bill now, because otherwise there might not be another opportunity to get that power on to the statute book for a couple of years.

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

The hon. Gentleman may not be aware that my noble Friend Lord Rooker, the Minister for Housing and Planning, is preparing a piece of legislation that would provide a good opportunity for such provision. To the best of my knowledge, and I speak with some authority, there is no more local government legislation in the pipeline. As for retaining the extra money from removing or reducing the discount, we had a full debate in Committee on that question when we considered Opposition amendments to clause 75.

As the Under-Secretary of State, my hon. Friend Mr. Leslie, said at the time, we believe that there should be no financial benefit to a local authority from a decision on whether to charge full council tax on long-term empty homes. The decision should be taken entirely on housing grounds and not because of potential additional financial benefits to the authority, which could provide a perverse incentive. That would be particularly problematic in areas where there may be very low demand and genuine difficulties for people in letting property. In such cases, we believe that an authority should take decisions on the merits of the case without a potential distorting financial incentive.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister) 3:30 pm, 5th March 2003

What I do not understand about that argument is that it seems to suggest that local authorities cannot be trusted to work out the housing needs in their area and the best policies to tackle them. Although the Minister talks about freedoms and flexibilities and says that this is a decentralising Bill, he is preventing local authorities from enjoying that revenue when they are taking sensible decisions.

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

On the contrary, the policy gives local authorities the freedom to be able to reduce, and even eliminate entirely, the discount on long-term empty homes if they think that that is the right thing to do. We believe that local authorities should base their decision on a proper estimate of the impact of that withdrawal of subsidy and whether it would achieve the desired effect. That gives local authorities the freedom and the choice, and not a perverse incentive. As the hon. Gentleman will recognise, it would require the virtue of the Archangel Gabriel in some cases for local authorities to forgo potential revenue which, if it were available, they might be tempted to use in particular circumstances.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Communities and Local Government)

The Minister's argument would hold some sway were it not totally inconsistent with his policy on abolishing the discount on second homes. What is the difference between the two aspects? The only difference is that abolishing the discount on second homes could raise £60 million, whereas abolishing the discount on empty homes could raise £160 million. Is it the case that the Government simply do not trust local authorities to use that money?

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

No, that is not the case. As the hon. Gentleman knows, there is a fundamental difference, because, in areas with substantial numbers of second homes, real concern exists that many local people on modest incomes are priced out of the market. In some tourist areas, such as the west country or the Lake district, where there is a shortage of affordable housing, house prices get pushed up by the presence of many second home owners. That has serious consequences for local people in need.

It is an explicit provision of our arrangement to ensure that local authorities can use the revenue that they get from removing or reducing the discount—we must have the 10 per cent. discount to ensure that those properties can be identified as second homes—to meet local needs. The Liberal Democrats pressed us to insist that that money should be used for housing, but we said that it is better to give local authorities the freedom to decide what they should use it for. I therefore remind the hon. Member for Kingston and Surbiton that his is not the only party that supports giving freedom to local authorities and trusts them to take the decision.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Communities and Local Government)

Will the Minister at least concede that, if councils abolish some or all the discount on empty homes, they should be reimbursed for the costs of levying that council tax? Otherwise, there will be a perverse incentive not to reduce the discount on empty homes at all.

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

No. The position is that a property that is a second home has qualified for the 50 per cent. discount. Under the new arrangement, the authority will be free to decide whether to reduce that discount to anything between 50 per cent. and 10 per cent. It will have discretion as to the level of reduction. Any revenue received from that decision will accrue to that authority and to other precepting authorities when there is a county as well as a district. A fair distribution will therefore exist between different tiers of government. That is a quite separate issue from a purely housing policy-based decision as to whether it is appropriate to give an incentive to someone to bring an empty property back into use by charging the full council tax.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

Can the Minister confirm that the final decision on this matter will come when we see the regulations? Will he therefore assure the House that he will keep this aspect under review and possibly ensure that regulations will allow some variations, so that we can see whether he is right or we are right?

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

I can happily give the hon. Gentleman the assurance that the policy will be kept under review. Obviously, we keep all policies under review. Our firm view, however, is that the right way forward is that which I have set out, and that is the way in which we intend to proceed.

The requirement in new clause 7 for annual reports on the operation of clause 90 and its effects on local authority rents would achieve no substantive benefit but it would impose an unnecessary administrative burden. Housing revenue account subsidy has operated as a redistributive system for more than a decade. Like other things, it dates back to the previous Government, as it was introduced by the Local Government and Housing Act 1989. It therefore seems doubly bizarre that the Conservatives are now changing the position that they adopted when in government. Redistribution has been achieved up to now by offsetting assumed housing revenue account surpluses against rent rebates. That depended, however, on housing benefit being included in the HRA, which was highly controversial and deeply unpopular with many tenants.

In response, we took a decision to remove housing benefit from the housing revenue account, but after rent rebates are removed from the HRA, the old redistribution system will not be possible, so the new, more transparent mechanism in clause 90 is needed. For the vast majority of authorities, the clause will simply replicate the outcome of the current redistribution mechanism. The only authorities whose resources will be affected are the 18 English housing authorities that currently have an assumed HRA surplus greater than their expenditure on rent rebates.

I have mentioned the figure of 18, so I now owe an apology to the hon. Member for Runnymede and Weybridge. He suggested that there were 34 debt-free authorities, but I intervened to suggest that the figure might be 18. I apologise—I was incorrect, because I was thinking of the other group. In fact, the number of debt-free authorities with housing stock is 35. I hope that that puts the record straight.

The authorities that have an assumed HRA surplus greater than their expenditure on rent rebates are currently required to transfer the excess to their general funds, thereby effecting a transfer from council tenants to general council tax payers. In future, subject to transitional arrangements, these amounts will be pooled, thus stopping the current subsidy of council tax by council tenants. That subsidy has caused considerable anger to council tenants.

Assumed HRA surpluses and deficits for the purposes of clause 90 are calculated on the basis of assumptions about an authority's rent levels and expenditure on its stock. Contrary to the views expressed by Conservative Members, there is no link between an assumed HRA surplus and good performance or political make-up. Local authorities that had the good fortune of low investment needs and, therefore, little debt while being able to command high rents have tended to end up in assumed surplus. Likewise, deficits generally occur when investment needs and, therefore, debt levels, are higher than can be funded from reasonable rents however efficient the council is and however well it manages its affairs.

The proportion of authorities rated excellent and good by the Audit Commission under the comprehensive performance assessment is about 50 per cent. for all three main political parties. Similarly, comparable proportions of both deficit and surplus authorities equally achieve good or excellent ratings. I stress that list in case the Opposition parties are tempted to indulge in any mischief making on this point. In addition, there will be no adverse impact on council rent payers. Clause 90 will not make any difference to council rents for any authority, as we have now put in place a national framework for affordable social rents based upon the size, location and condition of properties.

The new clause is not necessary because totals of HRA surpluses collected and HRA subsidy paid to authorities in deficit will be approved by Parliament as part of our request for resources. The figures will also be recorded in the annual accounts of the Office of the Deputy Prime Minister and be open to scrutiny by both Parliament and the National Audit Office. Additionally, the start of consultation on the annual general determination of HRA subsidy has always been announced in the House and the papers made available. Copies of the final determination of HRA subsidy are also made available to the House. That will continue. There is therefore no need for the further report suggested by the new clause.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The Minister suggested that the provision would have no effect on rent levels. However, will he confirm that the framework that he is proposing involves guidance, will not be mandatory on local authorities and that an authority, such as Sunderland, that has a large HRA surplus could use the surplus to subsidise rents? Or will the framework be more mandatory and will authorities such as Sunderland not be allowed to retain the surplus to subsidise rents?

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

The hon. Gentleman is getting a little confused. The purpose of the rent restructuring framework is to ensure broad consistency across the country that will take account of the size and attraction of particular properties. It will also take account of the local housing market in different areas. The aim is to do that over time, because we cannot make sharp adjustments to issues that impact on the viability of housing organisations and people's budgets. The programme is being phased in over 10 years, and it is designed to ensure that there is a more coherent framework of rents across the country.

New clause 16 relates to the Government's policy of ensuring that all social housing is decent by 2010, and in particular the contribution that the transfer of local authority housing to registered social landlords makes towards that. The policy was set out in the housing statement, "The Way Forward for Housing" published in December 2000 and reaffirmed last month in the plan for building sustainable communities that was announced by my right hon. Friend the Deputy Prime Minister. The new clause would require the Secretary of State to report to Parliament annually on two matters. The first would be the amount of any payments made, or likely to be made, under clauses 40 and 41. Those payments are in respect of overhanging debt that may arise when an authority transfers its housing to a registered social landlord. The second would be the effect of such payments on the rents of those properties that are being transferred.

Clauses 40 and 41 allow the Secretary of State to assist one or more English local housing authorities to meet debt liabilities through a direct payment either to the public works loans commissioners or to the local authority on the condition that it is transferred to a non-PWLC lender. They confer similar powers on the National Assembly for Wales in relation to the debts of Welsh authorities. The policy driver for clauses 40 and 41 is assisting individual authorities that transfer their housing stock to a registered social landlord and need assistance to meet outstanding housing debt liabilities when the receipt is insufficient to cover them.

The amendments appear to suggest that something is not being disclosed in relation to those payments—or perhaps there is a belief that we are giving favourable treatment to authorities that transfer their housing stock and for which we make an overhanging debt payment. Neither is the case. All authorities are treated on a fair basis. It is for a local authority to choose whether it wishes to retain or transfer its stock based on a rigorous option appraisal involving tenants and other stakeholders.

If an authority or its tenants choose to retain their stock, the Government, through the housing revenue account subsidy, continue to ensure that a local authority can meet the cost of servicing its housing attributable debt. In other words, HRA subsidy continues. However, when a local authority transfers all its housing stock, it is inappropriate and, frankly, stupid for it to remain in receipt of ongoing housing revenue account subsidy. That is nonsensical. In such cases, we make an overhanging debt payment. Different authorities are not treated differently. Those that keep their stock continue to get subsidy; those that have no stock no longer get subsidy and the overhanging debt is written off. We do not select the authorities; that is the result of local choice that is possible because the Government have made a commitment to make housing transfer and a decent home available to all tenants.

When the payment is made, it is common practice for the Office of the Deputy Prime Minister to include reference to both the payment and its amount in the press notice accompanying the housing transfer. Once a transfer takes place, details of it, including the number of dwellings, the sale price, private finance and overhanging debt payment, are also included on the website and are freely available from the ODPM. Overhanging debt payments were originally recorded in the Treasury's annual accounts, but from 2002–03 they will be recorded in the annual accounts of the ODPM and reported to Parliament through that route. So payments are open to the scrutiny of Parliament and the National Audit Office.

New clause 16 would also require that the effect of an overhanging debt payment on the rents of the transferred stock should be reported. That again misses the point of the Government's rent restructuring policy, which was introduced after much consultation, and the justifications for it have been set out many times. In consenting to all housing transfers, it is a condition that the new landlord will have determined rents in line with rent restructuring policy and methodology and will meet the 2012 target. How that is delivered will have been part of the development of the transfer proposal on which tenants will have voted. Whether or not there is to be an overhanging debt payment will not have an impact on that process.

Whether the transfer is of all, or only part, of an authority's housing stock, the delivery of restructured rents by 2012 across all social housing remains the priority. So where there is a partial transfer with overhanging debt, it is our intention that there should be no impact from the transfer on the rents of those tenants who remain with the authority. Therefore, a report to Parliament on the impact of the overhanging debt payments on rents would be nugatory because in all cases there would be nothing to report. I hope that the hon. Member for Runnymede and Weybridge will not press the new clause to a Division.

Amendments Nos. 4, 35 and 36 relate to the Government's policy of encouraging authorities to restructure rents, as I have set out. The Government inherited a social rents policy that was a total shambles. In some areas, rents charged by neighbouring councils for similar properties varied by huge amounts and housing associations often charged more than half as much again for similar properties in the same area. In time, our rent restructuring policy will produce a coherent pattern of rents for social housing across England. By contrast, the Opposition's policy would make the situation even more chaotic.

If social rents were allowed to approach market levels, some housing providers in areas of low demand would be unable to operate, while in areas of high demand such as London, those on modest incomes would be priced out of the market altogether. Amendments Nos. 4, 35, and 36 would delete clause 92, which seeks to remove an obstacle to the policy of rent reform. The amendments would undermine that rent reform and restructuring policy and are therefore undesirable.

The hon. Member for Runnymede and Weybridge asked whether a local authority could look at the relationship between public and private rents in its area. The relevant legislation does not explicitly refer to an authority having regard only to its own area, so local authorities can look at a much wider area. However, we believe that that is undesirable because it inhibits the scope of rent restructuring policy, which is why we are introducing change. As for the position in Wales, he rightly identified the fact that we wish to give the National Assembly for Wales scope to reach a decision on its own merits within the Principality.

The hon. Gentleman also raised the issue of nomination rights. I apologise for the fact that he has not received a letter. I tried to ensure that all the commitments were followed up, so I shall certainly pursue that. However, I took up the issue because there was a potential anomaly and conflict with existing policy, as nomination rights are not taken into account when calculating the level of receipt. My noble Friend Lord Rooker has since agreed that, when an authority's contribution to pooling is calculated, any consideration or reduction of the receipt in respect of nomination rights will be excluded. However, I shall write to the hon. Gentleman and put that on the record.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government) 3:45 pm, 5th March 2003

Will the Minister answer my question about a possible clawback for English Partnerships and the way in which that relates to clause 11?

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government)

I will write to the hon. Gentleman on that issue. I urge him and the hon. Member for Kingston and Surbiton not to press their amendments to a vote.

Photo of Philip Hammond Philip Hammond Shadow Minister (Communities and Local Government)

As usual, I greatly enjoyed the Minister's reply to the points that he thought that I was going to make. In many cases, however, he did not address the points that I did make. The key provision in this group of amendments is new clause 3, which deals with issues raised by clause 11. Clause 11 is a centralising measure—it gives the lie to the Government's claim that the Bill delivers freedom and flexibilities to local authorities and it is the antithesis of good accountable local government. New clause 3 is a sensible compromise and has the support of both Conservative and Liberal Democrat Members. The Government have rejected it because they are bent on the redistribution of assets of prudent, debt-free local authorities. I urge my hon. Friends to support new clause 3.

Question put, That the clause be read a Second time:—

The House divided: Ayes 183, Noes 312.

Division number 101 Local Government Bill — [1st Allotted Day] — New Clause 3 — Use of Housing Capital Receipts — Reserved Portion

Aye: 183 MPs

No: 312 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.