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Clause 11 — Use of Capital Receipts

Orders of the Day — Local Government Bill – in the House of Commons at 3:46 pm on 15th September 2003.

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Votes in this debate

Lords amendment No. 3

Photo of Nick Raynsford Nick Raynsford Minister of State (Office of the Deputy Prime Minister) (Local and Regional Government) 3:58 pm, 15th September 2003

I beg to move, That this House
disagrees with the Lords in the said amendment.

We are considering a vital issue. Agreement with the amendment would undermine one of the fundamental principles of housing finance, which allows the redistribution of housing capital receipts to the areas of greatest need. Accepting the amendment would deprive housing authorities in areas of high housing stress of the resources that they need to fulfil pressing demands for housing. Simply letting housing authorities keep their housing capital receipts, irrespective of need and of how they intended to apply them, would be an unfair and irresponsible way of allocating limited resources.

We have always taken the view that the proceeds from the sale of council housing should be used to help the areas in which housing need is greatest. That is the purpose of redistribution, and was indeed the principle underlying the legislation introduced by the previous Conservative Government and operated since 1990. The Bill repeals the part of that legislation governing the current redistribution system—the set-aside mechanism. The drawback to set-aside, as we have said many times before, is that it does not apply to all authorities. Redistribution must apply equally to all, if it is to be fair to all. This is the anomaly in the present system that our pooling proposals address.

It is simply wrong that some authorities should have more resources than others, regardless of need, simply because they happen to be rich in right-to-buy receipts or debt-free. I stress that we are not talking about funds generated by good financial management or good planning, but those generated simply because tenants have decided to buy their own house in areas where house prices are buoyant. The local authority cannot determine or manage such sales and, contrary to what was said in another place, they cannot claim any credit for them.

Photo of John Bercow John Bercow Conservative, Buckingham

I am grateful to the right hon. Gentleman for giving way. Before thirsting to reduce local authority autonomy in such a way as to allow him to pursue his redistributionist agenda, it is incumbent on him first to consider the efficacy or otherwise of existing policy. In that context, will he oblige the House by telling us what assessment he has made of the effect of the change in the rules on the use of capital receipts from the sale of council houses in the last Parliament on the size of interest repayments on local authority debt?

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

Approximately £1.2 billion received from the sale of council houses is currently brought within the overall framework, which allows the pooling to take place through the set-aside mechanism. The problem with that mechanism is that it does not apply to those authorities that are debt-free; that is just the nature of the mechanics involved. The principle of redistribution, which was argued strongly by the hon. Gentleman's own party when it was in government, and part of the approach that it adopted in the 1990 legislation, was to ensure that the receipts would be distributed to meet housing need rather than simply lying arbitrarily where they arose because of the vagaries of the housing market or the whims of tenants in particular areas.

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

In the Minister's opening remarks, he tried to suggest that all the councils that are debt-free were just lucky, because they were in areas where house prices were high and had received a large windfall from right-to-buy receipts. Surely some of those councils have managed their finances prudently, however, and worked hard to become debt-free. In some cases, they may have taken painful decisions to reach that point. Should they not now be allowed the chance to benefit from the freedoms that they have won after going through the pain of putting their finances in order?

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

Lots of other authorities have worked extremely hard to run their finances in the most efficient way possible, but, because they happen to be in areas with low house values, where capital receipts do not generate the same amount of money, they have not been able to reach the same position as those lucky enough to be located predominantly in the south-east. Frankly, it is curious for the hon. Gentleman representing the Liberal Democrats to be advocating a policy that would have a strongly redistributive effect, which favoured the affluent areas, rather than the areas of greatest need. That would be the effect of the policy that he is advocating. I can understand why the Tory party would pursue that line, but it is strange, to say the least, that the Liberal Democrats should do so.

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

The Minister quoted a figure to my hon. Friend Mr. Bercow. Will he confirm for the record that the sum involved in relation to debt-free authorities—the only ones that will be directly affected in cash terms by the measure—is about £120 million, and not £800 million, £1.8 billion or any other exaggerated figure?

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

The figure that I quoted was the total sum that we estimate will be brought within the pooling arrangements. That is similar to the set-aside. The figure for debt-free authorities is £120 million, as the hon. Gentleman rightly said. That is a significant sum, and can contribute substantially to meeting housing needs. I remind him of a little debate that we had in Committee. He will recall that I flourished a Liberal Democrat "Focus" leaflet. I do not usually do that.

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

I am afraid that I put it in the bin. I am sure that the hon. Gentleman will agree that, on the whole, that was the right course of action. The Liberal Democrats in Mole Valley argued that it was scandalous that Mole Valley council had received substantial capital receipts—probably not through any great effort of its own, but because housing in the area has a high value—but was not proposing to use those receipts to meet housing need. Instead, it intended to spend the money on other things. The Liberal Democrats in Mole Valley said that that was monstrous and wrong.

It is typical of the Liberal Democrats to say one thing to one group of people and something else to another. In Mole Valley they said it was monstrous and wrong not to spend the money on housing, but when they are confronted with a Bill that ensures that capital receipts are used for housing where the need is greatest, they oppose it, because they want to say something different to a different audience.

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

I thought that we had educated the Minister on this point in Committee. We said that it was about local democracy. The Liberal Democrats in Mole Valley were right to fight elections in that constituency on the proposition that housing receipts raised locally should be spent locally on affordable housing. That was a fair point, and it is consistent with the Liberal Democrats saying that the council should be allowed to do that. The Government want to take away the right of local authorities to spend receipts in their local area. The Minister is the one who is inconsistent. He is going against his policy of so-called new localism.

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

That was a pretty feeble effort. In Mole Valley, the Liberal Democrats campaigned on the simple principle that money from housing receipts should be used for housing. As soon as the Liberal Democrats have a chance to give effect to that principle in the House, they take a different view. It is the same old story.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

Does my right hon. Friend agree that the Liberal Democrats have the opportunity to set the record straight? With respect to national policy, will my right hon. Friend confirm that the effect on the borough of Brent of this Liberal Democrat and Tory sponsored amendment would be to take away £2.1 million from the people of Brent? What the Liberal Democrats are saying on the doorsteps about investment in local housing would drive a coach and horses through what Brent council could do, unless it was prepared, as a matter of national policy, to say that Brent people should pay higher taxes to receive the same level of service, because the Bill would put £2.1 million on to its budget.

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

My hon. Friend has hit the nail on the head. In Brent, the Liberal Democrats no doubt claim that they would do many things to help Brent, but at the same time they actively supported an amendment in the House just last week that would have exactly the effect that my hon. Friend describes. It would take £2.1 million away from the London borough of Brent that could and should be used to meet housing needs in that borough, which has enormous pressures.

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

The Minister should be careful about what he says. We cannot take away something that is not there. Language needs to be used more carefully. Is he saying that Brent is an area of low house prices, which is why it is where it is? His argument was that places in London and the south-east would be the beneficiaries of the Opposition's amendment. Is he suggesting that house prices in Brent are very low?

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

I am afraid that the hon. Gentleman does not understand the issue. There is a relationship between house prices and house values, and that is one of the important elements, but there is also housing need. Brent is an area of enormous housing need. The scale of the capital receipts that the borough receives is not proportionate to the scale of housing need in that area. Brent is one of the boroughs that will gain substantially from our proposal for a proper redistributive system that applies universally.

It should be remembered that the redistribution mechanism already applies. It applies to all authorities except those that are debt-free. The Liberal Democrats are essentially saying that they want to help very affluent, mainly Tory authorities in the south-east at the expense of areas such as Brent and a number of others. That is an extraordinary comment on a party that tries to claim that it has some pretensions to a concern for social justice.

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

The Minister will recall that in Committee we offered an opportunity to ensure that right-to-buy receipts were recycled into housing in the local authorities involved, and he rejected that opportunity.

Does the Minister at least accept that at a time when one of the most pressing housing issues facing the Government and authorities in the south-east is affordable housing for key public-sector workers, there is a close correlation between high house prices and the need for such housing?

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

Indeed. That is exactly why we have increased investment by two and a half times the amount we inherited, and why we have been concentrating on the provision of new housing in areas of stress—particularly in areas where that can be achieved with good use of brownfield sites, such as the Thames gateway—while also investing in improving housing stock in areas of less demand, where serious problems are caused by property in poor condition and the fact that people are living in unsatisfactory houses. We have a responsibility to do both those things.

We are certainly keen to expand the housing supply in areas of need, and that is part of the programme. Our objective, however, is to be fair in the allocation, not arbitrary. The problem with the hon. Gentleman's position and that of his party is that the allocation system that the Conservatives supported—although they did not support it in 1990—would arbitrarily give huge buckshee benefits to certain areas simply because they happened to be receipt-rich and with relatively low needs, while denying other areas that were receipt-poor or whose needs were too high to be met from the receipts that they had.

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

Is the Minister suggesting that, having sequestered my local authority's right-to-buy receipts, he expects nurses, policeman and school teachers who are needed in Surrey to commute daily from the Thames gateway around the M25? Is that his grand strategy for the future of the south-east?

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

No, it is not. As the hon. Gentleman will recall, I used the Thames gateway as an example to highlight the importance of using brownfield sites; but of course we are looking at brownfield sites elsewhere. What I am sure the hon. Gentleman does not want is indiscriminate building on greenfield sites in his area. That would be an entirely undesirable policy—a policy that was, as it happens, supported by the hon. Gentleman's party when it was in government: it let rip with development by private developers throughout the south-east, and particularly in the Thames valley.

Photo of Phyllis Starkey Phyllis Starkey Labour, Milton Keynes South West

Will my right hon. Friend confirm that one of the areas that would be disadvantaged by this measure is Milton Keynes? Will he join me in urging Milton Keynes council, which is of course controlled by the Liberal Democrats, to devote some of its efforts to educating Liberal Democrat Front Benchers here, to ensure that the party is not saying one thing in Milton Keynes and another in Westminster?

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

My hon. Friend is absolutely right. Milton Keynes is another of the areas that stand to lose if the amendment supported by the Liberal Democrats is passed. Of course, it is not the only one; a number of other areas stand to lose. Liverpool stands to lose substantially, as do Sutton and Basildon.

I can understand the Tories' supporting the amendment, as it will generally favour their affluent south-east strongholds, but I fail to understand why the Liberal Democrats want to harm so many areas that they control. It is either the result of a sudden burst of masochism, or an example of their being highly confused and not quite knowing what they are doing. Because they are saying one thing to one group of people and something else to another group, they forget the plot and vote for something that will have catastrophic consequences for many Liberal Democrat authorities—including Milton Keynes. 4.15 pm

Photo of John Bercow John Bercow Conservative, Buckingham

It is always a particular pleasure to joust with the Minister but the endless tergiversations and chameleon-like behaviour of the Liberal Democrats could readily absorb all the time available for debate today, and it does not seem very profitable for us to allow that to happen. The question that I would like answered is the question that I did ask, not that which I did not. Can the right hon. Gentleman simply tell me on a non-partisan basis what assessment he has made of the effect of the change made in the previous Parliament on policy towards the use of capital receipts from the sale of council houses on the level of interest repayments on local authority debt?

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

I cannot because the hon. Gentleman is asking some rather odd questions. There was no change of policy in the previous Parliament on the application of right-to-buy receipts. We have constantly said that it is right that right- to-buy receipts should be made available for and used for housing need to the extent that we operate a redistributive system, a system that, as I have said, we inherited from the previous Government. That system has remained in place since 1990. It is now being changed because of this Bill, but there has been no other change in policy.

There may have been changes in policy on some of the detailed points about the level of discount that will apply. Of course, there have been significant changes in interest rates because of the Government's prudent management of the economy, which results in a substantially better position in terms of all those people paying interest. That is to everyone's advantage. All those matters can be taken into account by economists, who will no doubt come up with a sophisticated answer to the hon. Gentleman's question, but there is no policy change along the lines that he has proposed.

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

Before we move on, can the Minister confirm who he thinks controls Basildon council?

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

I was referring to a number of authorities. There are many areas that are affected, including some Tory-controlled areas. Of course, the Tories are being a bit foolish in favouring the interests of their south-east heartlands at the expense of some of their other councils, which happen to have rather greater housing needs. No doubt the voice of Essex will be heard in due course, telling us that we should be fairer to Essex and insisting on the redistribution of capital receipts to favour Basildon. That is certainly a policy I would be happy—

Several hon. Members:

rose—

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

I must make progress.

The amendment would remove the proposed replacement for set-aside and end redistribution. We would, therefore, no longer be able to recycle housing capital receipts fairly. The alternative to a redistribution system is higher taxes, less investment or cuts in other programmes. Affordable housing for key workers, decent homes, market renewal in low-demand areas would all be put at risk. Without redistribution, the majority of local authorities—those with debt, with lower capital receipts and with greater housing investment need—will lose out. That would be irresponsible and indefensible.

Without pooling, we would probably have to continue to operate a mechanism based on the principles underlying the current system. That could be only a partial solution and would lack the transparency and simplicity of pooling. Debt-free housing authorities rich in right-to-buy receipts would retain the benefit of their housing capital receipts regardless of housing need and be able to use receipts for whatever purpose they saw fit. I mentioned earlier the interesting example of Mole Valley being a classic illustration of that.

Agreeing to the Lords amendment would perpetuate the anomaly inherent in the current system and disadvantage most of the nearly 260 local authorities with housing stock. I have quoted a number of the authorities that are affected. Let me repeat that there are currently around 40 debt-free authorities with housing stock in England. Under our proposals, pooling will apply to a proportion of their housing capital receipts, not all of it, and it will not apply to other capital receipts.

That does not mean that those authorities will have no resources to use. On the contrary, they will have access to all their other receipts and indeed to 25 per cent. of their housing capital receipts, and they will have the additional allocations that come through the new framework for distributing funding. Those depend on decisions by the regional housing boards, which will make recommendations to Ministers in a month or so, so I am not able to anticipate the precise allocations at this stage, but additional sums will be allocated in relation to need and some of those debt-free authorities will certainly be likely to qualify to some extent under those rules.

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

The Minister has said that authorities will continue to have access to 25 per cent. of their right to buy receipts. For clarity—and for those who have not gone through the tortuous Committee process—will the Minister confirm that he is quoting the draft regulation that he has published, but that the Bill allows the Secretary of State to take up to 100 per cent. of receipts?

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

We specify amounts by regulation rather than putting them in the Bill; therefore, there is that power. But, on a number of occasions, I have made it clear that our policy intention is not to change the percentage from the 75 per cent. that currently applies to the great majority of authorities in the country. It is an anomaly that a relatively small number of debt-free authorities get preferential treatment and it would be quite wrong for that to be perpetuated. That would be the effect of the amendment, which is why we ask the House to reject the Lords amendment and to restore the Bill's provisions as originally presented and discussed in Committee.

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

The Minister is talking as if it were counter-intuitive that debt-free authorities should be allowed to keep their capital receipts. To most people, it would be intuitive that somebody in debt should use their capital receipts to offset their debt and that somebody not in debt should be free to use their capital receipts as they wished. Surely that is how the great majority of people would see it.

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

I disagree profoundly. In my view, it is counter-intuitive to argue that one relatively small group of authorities should be given preferential treatment and should not be required in any way to make use of capital receipts for housing purposes when all other authorities are required to do so. That is the anomaly that we are putting right.

I am glad that the hon. Gentleman raised the question of incentives for prudent financial management; we are keen on them. The new borrowing regime in part 1 will help by enabling authorities to take a broader view of their finances and to borrow without having to get Government approval at any point. They can take regular decisions as to the advantage of borrowing on a particular project or financing it by other means without their decisions being distorted by an arbitrary factor; that is, if they remain debt free, they get a particular benefit. If they are able to organise their finances while looking at the respective merits of financing and new investment, they can take sensible decisions without being precluded from considering the borrowing option.

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

If it were the Minister's intention that debt-free authorities with housing stock should spend their money on housing, why did he not make that the law instead of taking 75 per cent. away from an authority such as Bridgnorth in my area, which is debt free and has its housing stock? If Bridgnorth undertook large-scale voluntary transfer, 75 per cent. of receipts would be taken away and spent in other local authorities elsewhere. That cannot be right.

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

Once again, the hon. Gentleman is very confused. He and his party believe that it is right to spend money on housing; we wholly agree. It is also right to ensure that allocations should reflect the needs of different areas. If the hon. Gentleman is arguing that the right way is to leave the receipts where they lie, irrespective of need, inevitably that will disadvantage substantial numbers of areas with high needs and low receipts. If he is arguing that, I wish him luck; the people of Liverpool will have an extremely jaundiced view about the Liberal Democrat proposal to take £1.5 million away from that city and from many other areas that would be badly affected by the arrangements that his party has suggested in the Lords.

Photo of Andrew Turner Andrew Turner Vice-Chair, Conservative Party

Liverpool, of course, has a declining population in comparison with many areas of the south-east. However, is not the process that the Minister is introducing analogous to saying to someone who has paid off their mortgage that they must now hand some of their money to others to help them pay off their mortgages?

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

No, it is analogous to an arrangement in which someone has provided the finance for an asset. All these houses were built with very substantial Government subsidy—in many cases, meeting the full costs—and national Government have a right to have an interest on the disposal of that asset. That would be regarded as an absolutely normal principle in any commercial operation, or, indeed, in any public service operation.

Photo of John Bercow John Bercow Conservative, Buckingham

Unfortunately, the right hon. Gentleman's position will not do; it is as perverse as his appetite for nationalisation of local decision making seems insatiable. Does he not at least concede that where a local authority has substantial debts and some resources from the sale of council houses, it has a responsibility to use the latter to pay off the former, before benefiting from other councils' legitimately acquired funds?

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

No, the right position is that every authority—not just those that the hon. Gentleman gives as examples—should have a framework that provides an incentive to repay debt and to act prudently. That is part of the framework that we are introducing, which will be reinforced by the housing revenue account subsidy system. It will enable authorities to repay debt, but it will also recognise that many authorities still have very high housing needs that must be met. It is quite wrong that areas with high needs and few resources from receipts should be penalised, as the amendment passed in another place would do. This is a matter of social justice and fairness, and of ensuring a decent housing policy that looks after the interests of people throughout the country, rather than favouring just a limited number of areas that happen to have the good fortune of substantial receipts.

I want to put the arrangements for receipts in context. The Government are now providing some £2.5 billion in investment each year, to be allocated on the advice of the regional housing boards. Some £2.5 billion in investment—more than two and a half times the amount that went into housing in 1997–98—will address the needs in all authorities, not just in some.

Finally, we have recognised the level of concern expressed by debt-free authorities about the introduction of pooling. That is why we offered them the reimbursement of a reducing proportion of the estimated £120 million in capital receipts that they would be required to pool for the next three years: 75 per cent. in 2004–05, 50 per cent. in 2005–06, and 25 per cent. in 2006–07.

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

The Minister said a moment ago that this large sum would be allocated on the advice of the regional housing boards. Will he confirm who advises on the distribution of that sum between the boards? I assume that he was referring to distribution within a region by the boards.

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

The hon. Gentleman is absolutely right. We seek a national framework to ensure a fair regional distribution overall, and we will then invite regional housing boards to make recommendations within their regions about actual distribution. The decision on the allocation between regions is ours. The regional housing boards make recommendations on decisions within regions, but they are obviously subject to the agreement of my right hon. Friend the Minister for Housing and Planning.

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

So that we can see what the flow of funds looks like, can the Minister explain the distribution between the eight English regions, by percentage, of those funds, and the distribution by region of the £120 million in capital receipts taken from debt-free authorities? If he does not have the figures in his voluminous folder, perhaps he can get hold of them.

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

I will happily provide the hon. Gentleman with answers to both those questions by writing to him. But to ensure that he has a full and fair picture, I should remind him of a third element: what the allocations are following the recommendations of the regional housing boards. That information will complete the picture by showing where the money is going to, as well as where it is coming from.

The arrangement that I have described, which gives generous transitional support to enable debt-free authorities to adjust rationally over time, is the right way forward, rather than the removal of these important provisions. I trust that, as when the House previously debated this issue, it will recognise that it is both fair and right to continue with the framework of redistribution of capital receipts, which should apply to all authorities, rather than just to an arbitrary group that happens not to be debt-free. I ask that the House resist this amendment.

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

We are now 45 minutes into the allocated time, and hon. Members will have noticed that the long summer recess has not increased the Government's appetite for the proper scrutiny of their business. We have the three most controversial groups of amendments to consider in a time-limited period of two and a half hours, and the remainder of the evening for—

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

The Under-Secretary says, "Get on with it," but I want to get on with placing on record our perplexity at the allocation of time as between the first three groups of amendments and the remainder. Why the Government could not have allowed us three, four or even five hours to debate the first three groups is completely beyond Conservative Members.

The amendment carried by the Lords was originally moved in Committee by my hon. Friends and me and was supported by the Liberal Democrats—[Interruption]—and I am grateful for that support. I described clause 11 as one of the most important in the Bill. It is also the clause that gives the lie to the Government's intentions. The Minister likes to describe the Bill as conferring new freedoms and flexibilities on local authorities, but, as drafted, the clause gives the Secretary of State the power to force local authorities to hand over to him some or all of their capital receipts, principally gained through right-to-buy sales. It is a central Government tax on local authority capital receipts: however the Minister chooses to dress it up, that is precisely what it is.

We are not talking about a tax of 10, 20 or 30 per cent. The Minister has already told us about—and the regulations that he has circulated already show—the intention to tax the receipts at 75 per cent. As I said in an earlier intervention, there is nothing in the Bill to prevent the Secretary of State from increasing the take-up to 100 per cent.

The Minister calls that "pooling", but the word does not appear anywhere in the Bill. He says that it is redistribution of capital receipts. Of course all taxation is potentially redistributive, depending on how the Secretary of State chooses to exercise his discretion in distributing the proceeds of this tax on local authorities. Undoubtedly it is a redistribution of power away from local authorities to the Secretary of State. No matter how the Minister tries to dress that up, local authorities, the Local Government Association and Opposition politicians of all parties clearly recognise that the measure goes directly against the thrust of the policy that the Government profess to be implementing through the Bill.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

In many respects, the hon. Gentleman may be said to be making a powerful case about how moneys should not be redistributed and about local democracy, but he is suggesting that the policy is being implemented by the Government to change the status quo. It is not. In fact, the previous Conservative Administration introduced the policy and decided that that was the way to pool and redistribute moneys—

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

As my right hon. Friend rightly says, they also introduced the 75 per cent. figure. Will the hon. Gentleman therefore explain to the House why there is so much outrage about what the Government are supposed to be doing, when what they are actually doing in this instance is maintaining the status quo and when it is the hon. Gentleman who wants to change it?

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

That is an extraordinary argument. The hon. Gentleman should ask the Local Government Association why there is so much outrage. If we take his point literally, he is suggesting that if we accept the Government's proposals, nothing will change. That is simply not true. Local authorities that have been free to spend their capital receipts because they are debt-free will find that 75 per cent. of those receipts will be sequestered by the Secretary of State. They will also potentially be exposed to a 100 per cent. sequestration of their right-to-buy capital receipts. In particular the 34 debt-free authorities, which have been ably represented by the capital receipts group over the course of this long battle, will feel the impact. Other local authorities do not have access to their capital receipts in the same way, precisely because they are indebted. That is another example of the Government's determined assault on well-managed, prudent councils in order to prop up their favoured authorities, including—I have to say—the odd basket case. It is also a frontal assault on the principle of localism.

The Minister's first, and rather lame, argument, which he has already deployed this afternoon, is that local authority housing stock should somehow be seen as a national rather than a local asset. The Minister says that it was originally built, all those years ago, with central Government subsidy. He is of course right, but it was also built with borrowings which, by definition, debt-free authorities have repaid. The stock's value has also been maintained and enhanced by maintenance and improvements carried out at the expense of tenants and council tax payers in many of those local authorities that have been in nil or negative housing subsidy for many years.

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

Will the hon. Gentleman confirm that the authorities would have received Government subsidy both for the repayment of the debt, because that was taken into account, and also—in many cases—for the renovation and improvement of the properties?

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

Some of the authorities may have done so, but many—as the Minister well knows—have been in negative housing subsidy. The value of the housing stock has been enhanced by the care and maintenance of the local authorities and their tenants over the years. It is those tenants and council tax payers who should benefit from a capital receipt by their local authority.

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

I shall address this issue in greater detail when I make my speech, but I am sure the hon. Gentleman would agree that we should not let the Government get away with the notion that all those houses were built and maintained solely by central Government subsidy and the taxpayer. Many of them were built under local authority initiative, decades and sometimes centuries ago, as local communities acted to provide homes for the needy in their areas. The Government are trying to rewrite history, and we should not let them get away with it.

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

The hon. Gentleman is right, but even if the Minister has a point about the original financing of the housing stocks, it is bizarre to try to rewrite the rules 30 or 40 years later by saying what was given as a grant is now subject to a clawback: it is as if the Government were saying, "Sorry, we forgot to tell you at the time."

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

If that is bizarre, can the hon. Gentleman tell me what was the logic of his party when it introduced this arrangement in 1990?

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

I do not suggest that authorities that have access to their capital receipts should be subject to a retrospective clawback, which is what the Minister's argument appears to be.

My noble Friends targeted their amendment precisely. They sought to remove the Secretary of State's power to levy a tax on capital receipts, but would have left in the Bill the power to direct the use of receipts, either for debt reduction or for capital expenditure. We can effectively demolish the Minister's second line of argument, which he deployed extensively in Committee, that many local authorities have not used their capital receipts to the full for housing or urban regeneration. We have some sympathy with that argument. Of course, to restrict those local authorities in the use of their capital receipts would be a restriction on local freedom, but—in the spirit of compromise—we were prepared to meet the Minister halfway on that. We tabled an amendment that would have allowed the Minister to direct that those receipts retained by local authorities should be used for specified purposes—housing investment and urban regeneration—which would have entirely addressed the concern that the Minister outlined. The amendment was also supported by the Liberal Democrats, but the Government rejected it.

It is a fact that it is often the areas with high property values, and thus buoyant right-to-buy capital receipts, that have the greatest need for affordable housing. I make no bones about the fact that I am thinking of constituencies such as mine and that of Mr. Davey in making that statement; we know that we are not in areas that are likely to be favoured by the Secretary of State's largesse when he redistributes the so-called pooled receipts. We know that as a consequence public services in our constituencies will suffer, as our public authorities are unable to employ the teachers, nurses, social workers and police officers whose employment our constituents have a right to expect so that they, too, can enjoy decent public services notwithstanding the high cost of delivering such services in the south-east. If the Minister thinks about it, he will find that there is a strong correlation between buoyant right-to-buy receipts, which, as he correctly says, indicate high housing demand and high house prices, and real need in the present context for the delivery of affordable housing.

At present, the most pressing housing issue facing both the country and the Government—who will be judged on whether or not they can improve public service delivery—is to provide affordable housing for people who will work at the kind of nationally negotiated salaries that the public services are able to offer. As Mr. Gardiner knows, that is a real problem in the south-east and it is worse outside than inside London, because our public sector workers do not have the benefit of London weighting, yet they often face higher living and housing costs than people who live in the outer London boroughs.

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

I would not like the hon. Gentleman to leave the list of areas that suffer a shortage of affordable housing without mentioning places like Shropshire and Cornwall where shortages exist for different reasons. Shortages in those areas are due to people either buying holiday homes or retiring to the area, yet local salaries are much lower than nationally agreed pay settlements for the public sector. There are good public sector jobs in Shropshire, but houses cost £200,000.

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

I acknowledge the hon. Gentleman's point. It is important to recognise that the issue is not confined to the south-east of England; there are other areas with buoyant right-to-buy receipts and buoyant housing markets. They all have one thing in common: they suffer from the problem of how to provide affordable housing for public sector workers.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

May I respond to the serious comments that the hon. Gentleman makes about house prices in the south-east by reference to my borough of Brent? I understand perfectly that the south-east is a high house price area, but I hope that the hon. Gentleman will reflect on and take to heart the fact that inner-city and outer-London boroughs such as Brent are subject to peculiar pressures in attracting key workers, which are not simply mirrored in house prices. The pressures of working in those environments are a disincentive to workers, so if we are to address the problems of public service delivery and key worker housing, which he rightly highlights, boroughs such as Brent, where key sector workers face complex difficulties, need the sort of investment that has meant £2.1 million to meet Brent's housing needs.

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

I do not for a minute suggest that there are no problems in boroughs such as Brent. We are all aware of the broader issues of dealing with inner and outer-city deprivation; the list of problems is endless. However, it is wrong for the Minister to characterise areas that will have that money—the 75 per cent.—taken from them as areas that do not have a problem. They are leafy, they have buoyant housing markets—

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

In Standing Committee, I cited Lord Rooker who said outside the House that it was likely that only one authority—Barking and Dagenham—of the then 34 debt-free authorities with housing stock was likely to be regarded by the Government as in housing need—[Interruption.] No doubt the Minister will correct me if that is incorrect.

Let me just tell the Minister how this looks from the point of view of an authority that will lose 75 per cent. of its capital receipts and that will have to change its plans accordingly. Runnymede borough council—my local authority—is debt free, with housing stock and good right-to-buy receipts, but it is in desperate need of investment to improve pre-war, inter-war and immediate post-war system-built housing, some of which the Minister knows about, and I am pleased to say that he has recently approved such a scheme. There is a desperate need to invest in improving the quality of some of that, frankly, life-expired housing stock, as well as a desperate need to invest in new affordable housing, precisely to allow the area's economy and public services to continue to function. Local people do not understand why the Government apparently do not recognise that need and are apparently hell bent on taking such money away from our communities and redistributing it elsewhere. We believe that there is a clear need for that housing investment to take place locally.

The proceeds of this tax on local authorities will be used to finance Government dirigisme, channelling development to specific areas. The Minister has already mentioned the Thames gateway. [Interruption.] I do not know why the Minister is shaking his head, because that information is in the public domain. The money will be spent in Ashford, the Thames gateway and Milton Keynes; it will not be spent in Runnymede. If the Minister has some good news that I was unaware of, I should be very pleased to hear it, but that looks like channelling development to the Government's priority areas at the expense of local solutions to local problems. The Minister denied this when I put it to him earlier, but I am afraid that, from where I sit in north-west Surrey, the Thames gateway looks like a massive dormitory at the end of a 40-mile stationary car park called the M25, which key workers in Surrey will have to travel to and from to find affordable housing.

The Government can go on all they like about decentralisation and local authority freedom and flexibility, but we will judge the Government by their actions, not their words. This confiscatory swipe at the capital receipts of some of the best-run local authorities in England, including those under the control of all the parties and none, shows us the Government's true colours. We had it right when we previously debated this issue in the House, when we proposed to scratch that confiscatory power from the Bill. The Lords have got it right now in deleting from the Bill a power of confiscatory taxation, which we know full well the Secretary of State proposes to use to reduce to local discretion, to fuel the redistribution pork barrel and to reinforce his wider attack on the right to buy. [Interruption.] The right-to-buy policy has given real hope and opportunity to millions of hard-working families over the past decade or so—something that the Labour party obviously cannot abide and that the Minister appears to find funny.

I urge my hon. Friends to resist the Government's crude attempt, in pursuit of their centralising and confiscatory agenda, to ignore the collective wisdom of all the Opposition parties in the House and of the majority of the House of Lords.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister) 4:45 pm, 15th September 2003

This issue has been debated more than any other during debates on the Bill in both Houses. The arguments have been explored in great detail, and the Opposition have had to think hard about the Government's arguments. The Minister will admit that the Opposition have tested the Government's arguments and thought hard about them. The Minister's problem seems to be that we have reached a different conclusion from him, and I shall set out the principles of why we have done so shortly.

The Minister sometimes cites councils and which parties control them. There is almost a scorecard, as though such things will be done by partisan analysis. [Interruption.] The Minister shakes his head, but that sounded like the point he was making in his opening remarks. That is not the right approach, and it is not one that we have adopted. The Liberal Democrat group on the Local Government Association, which I consulted widely—including representatives from all the councils that the Minister mentioned and many more—debated the matter at length before taking its decision. It knew that some councils would win and some would lose, but it wanted to decide on the right principle for the financial mechanism.

Another case in point, which the Government have mentioned, is that of Brent. For obvious reasons, Brent has raised its very pretty head in this debate—[Interruption.] I should make it clear that I was not referring to Mr. Gardiner. The Government should be careful, however, before they make opportunist points about Brent. Labour has been running Brent for a long time and has piled up some of the debts, and in recent years the Labour Government's local government finance settlements for Brent have not exactly been generous. I am sure that the hon. Member for Brent, North would concede that point, because I know, as Hansard will show, that he has not been very happy with Ministers' settlements for Brent.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

I am sure that the hon. Gentleman will recall that Brent's 1998 local government settlement for children's personal services was indeed not generous and that it had a bad effect on Brent. If we look at the Government's record, however, specifically on housing and capital allocation over the past six years, we find that the Labour council in Brent has begun the rebuilding of houses, which was left in abeyance for years by the Conservative administration in Brent and by the then Conservative Government. The record of the Labour local authority in Brent, supported by the Government, in delivering on housing need in Brent is absolutely exceptional. Last year, we had one of the largest capital allocations that we could have had. I therefore hope that the hon. Gentleman will now address the real question—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I hope that the hon. Gentleman will now conclude his intervention.

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

You are probably right, Mr. Deputy Speaker, to admonish the hon. Gentleman, but perhaps I, too, should be admonished for giving him the opportunity to make that party broadcast. At least he confirmed, however, that he was not happy with Brent's local government finance settlement from this Government.

The Government say that the proposals will get rid of an anomaly, but the anomaly can also be seen as an incentive to reduce debt and to become debt free—a sensible element to have in the local government finance system. The Government are rightly getting rid of a lot of the nonsense that they inherited from the Conservatives—the central capital controls, supplementary credit approvals and so on—and are introducing what is more or less Liberal Democrat policy: the prudential capital regime for local authority borrowing. We wholeheartedly support the Government's welcome move in that direction, which provides greater opportunities for local authorities to manage their capital affairs well. The key question, however, is whether the Government are still allowing, within those many changes, opportunities and incentives for local government to make sure that it is managing its debt well. Let us have freedom to borrow when it is appropriate, but do we really want to take away the significant incentive to run down debts? We all agree that encouraging local authorities to reduce their debt is sensible, and I do not understand why the Government are getting rid of that important incentive. That is one issue of fiscal principle.

The other issue relates to localism and centralism. The Government say that the Bill is about freedoms and flexibilities for local authorities and that it will empower and free up local authorities. They also talk about new localism. This policy goes completely in the opposite direction. The Government justify that by saying that they have to redistribute, and the two parties do not disagree on the need to redistribute; the question is how that is done. [Interruption.] The Minister points to Conservative Members, but I was not including the Conservatives in that argument. Perhaps we should do so these days, but we never quite know.

Labour and the Liberal Democrats certainly agree that it is important that central Government should be used to redistribute resources around the country, but that is not the question. The question is how we do that, and it is clear in my mind that this is not the right way to do it. National Government could provide the resources for housing in Brent and other areas, should they choose to do so, but the question is whether they should take that money off other authorities that have housing needs and that have managed their financial affairs well. Should the Government be penalising them or should they be coming up with money from elsewhere?

I want to press the Government on the idea that all council housing has somehow been funded solely by central Government. Lord Rooker was at it in the other place when he said:

"Council housing is a national asset."—[Official Report, House of Lords, 4 June 2003; Vol. 648, c. GC 198.]

I have heard council houses called many things, but I have never heard them called a national asset. It is as though council housing is some sort of nationalised industry that central Government have provided and that local authorities have nothing to do with. That is clearly not the case, whether it is on the financial level or on the level of the entrepreneurship, vigour and dynamism of the local communities that have made the provision of social housing possible.

It is all very well for the Government to say, "This money came out of the central pot." However, they decided where the central pot began and ended and where the local pot began and ended. The boundaries between national and local government funds have been vague at times and have moved over the decades. Liberal Democrats believe that local authorities should have much greater financial powers, and we would like the boundaries to be shifted from central Government and more to local government. That is one reason why we think that this measure is wrong. There should be redistribution, but there should be greater autonomy, too. This measure is a step in the opposite direction to greater autonomy.

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

Earlier, the Minister shook his head when my hon. Friend said that some of the properties go back for centuries. Many boroughs in mediaeval market towns built properties that came into the hands of councils, which turned them into flats and houses. Those properties often realise the highest possible values if they are sold. They were funded not by central Government in the 20th century, but by locally raised money or by charitable money in the 19th century.

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

I am grateful to my hon. Friend for making that point. Two councils in his constituencySouth Shropshire and Bridgnorth—are debt free and will be affected by the measure, but they have real housing need.

That brings me to my third point of principle against the Government's proposal. Housing need is sometimes a relatively subjective concept. The Government say that they have housing need indicators, but the housing need that Mr. Hammond mentioned—the need for affordable housing for key public sector workers—is a key issue. We do not know how authorities will meet that need when the money is taken from them. The Minister may say that we do not know because the Government have set up regional housing boards—a step in the right direction—which have yet to report. However, he is asking the House to take a decision on one side of the equation when we do not know the information on the other side of the equation.

The hon. Member for Runnymede and Weybridge says that he is privy to the information that Lord Rooker has said that only one of the debt-free authorities that are losing out will receive money through this process. I am not sure how Lord Rooker knows that if the regional housing boards will provide and allocate the funds. Perhaps he knows something that we do not.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

I have tried to follow the hon. Gentleman's argument closely, but I do not understand his point about the regional housing boards. Surely if those boards are to be the arbiter of genuine housing need, it is absolutely right that we take the decision on one side of the equation and not on the other. That is precisely because of the point that the hon. Gentleman made at the beginning of his remarks: this process should be free of partisan judgment and based on objective criteria. That is exactly what the regional housing boards are supposed to provide.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister) 5:00 pm, 15th September 2003

The hon. Gentleman cannot have it both ways. The Minister was trying to say that some authorities that do not have housing needs will lose and that other authorities with housing needs will win. We want to know about and to understand the housing needs, because we know from our constituencies, from which much of our information for such debates comes, that there are housing needs in the so-called leafy boroughs of suburban London. There are housing needs in rural areas such as that of my hon. Friend Matthew Green and in parts of Surrey. The Government cannot have it both ways. We want to know where housing need will be met before the money is taken away. Perhaps that information should come from the regional housing boards—I do not disagree with that. The process should be less partisan and should be based on objective criteria. However, we are being asked to make a decision before we know about the need.

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

Surely it is unlikely that there will be sufficient money to meet all the housing needs in a given region, even with the pooling of money. There will be priorities. In the west midlands, it might well be decided that Birmingham needs an extra 20,000 houses. We need only 1,500 more affordable homes in South Shropshire district council, but the district contains only 30,000 people. The suspicion in South Shropshire is that it is likely that the money for the west midlands will go to areas other than South Shropshire or Bridgnorth.

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

Over the weekend, I talked to several council leaders and councillors who will be affected by the decisions to check whether they were still happy with our position, because this is a serious moment during the passage of the Bill. They were clear that they managed their budgets and forward planning in the knowledge that when they became debt free, they could use the moneys as they wanted.

Three Rivers district council is desperately keen to meet the decent homes standard that the Office of the Deputy Prime Minister gave it and to build more affordable housing with housing associations to address its affordable housing crisis and to house some of its key public sector workers. However, it will not be able to do so because the money will be taken away and it does not think that it will be on the regional housing board's list. Councils have planned for years in the expectation that they will receive money to meet the housing needs that they know exist in their communities, but they will no longer be able to do that.

The situation is retrospective in many ways. Councils have planned and hoped for freedom so that they may make essential investment. They have even told their communities that they were making preparations, but suddenly, and without too much warning, the Government are taking the money away, which is why people are so cross. The Government and hon. Members such as the hon. Member for Brent, North must understand that.

The Government say that the transitional scheme may cushion the blow for some of the affected authorities, and indeed it will. The problem is that the scheme will last for only two or three years, after which all the money will be taken from the authorities. The situation affects not only the 38 or 40 debt-free authorities with capital receipts that the Minister mentioned. Local authorities that have been working towards becoming debt free have gone through some of the pain but will discover that the freedom that they worked for and looked forward to will be taken away.

I say to the Minister, in as friendly a way as possible, that Liberal Democrats have thought hard about the matter, as is our duty. As he said, £120 million is up for grabs throughout the country, so the way in which it is distributed and allocated is important. However, if one considers the principles of fiscal prudence and incentives to become debt free, localism versus centralism, the way in which housing needs are defined and the way in which local authorities have worked towards becoming debt free, the Minister has not made his case and we shall vote against him in the Lobby.

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

We have had a good debate on an important subject, although Mr. Hammond made several rather curious allegations, the most frequent of which was that the measure is confiscatory. By that logic, the Conservative Government who introduced the whole set-aside regime were confiscatory. He alleged that the measure represents heavy-handed government forcing local authorities to do undesirable things, yet his party, when in government, introduced measures that required local authorities to set aside capital receipts. I cannot accept his latter-day expressions of support for the idea of greater freedom for local government without reminding him of the actions of Conservative Governments.

The fundamental difference is that today we are talking about housing capital expenditure of £2.5 billion a year—two and a half times the level that we inherited when we came to power. At that stage, the redistributive mechanism that the hon. Gentleman's Government had introduced was virtually the only means of getting capital into housing.

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

If so much new money is available for housing needs, why is it necessary to take £120 million from the debt-free authorities that have worked so hard to become so?

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

If the hon. Gentleman bears with me, I will give him a full answer that deals with the inherent contradiction in his case. He seems to believe, as Liberal Democrats generally do, that it is possible to find ways out of difficult conflicts without any pain, but it is not. It may be so in the Liberal Democrat Valhalla, where everyone debates everything ad nauseam and outcomes are always pain free, but in the real world there are hard choices that require decisions. There is conflict between allowing receipts to remain where they fall and ensuring a fair allocation of housing resources. This is a testing moment for Opposition Members to show where they stand. Are they in favour of simply letting things lie according to the accidents of history, or do they want a fair distribution based on principle, not accident?

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

Is taking money away from Tory and Liberal Democrat councils and giving to it to Labour ones the hardest decision that the Minister has ever had to make?

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

It is not like that at all. It is interesting that the hon. Gentleman proposes to take money away from a substantial number of Liberal Democrat authorities. I understand exactly why Conservative Members support the measure—because, in general, Tory councils will benefit from it; it is self-interest on behalf of predominantly Tory authorities. I find it extraordinary, however, that the Liberal Democrats should argue against the interests of many of their own authorities. That is an example of the curious stance that they often take by standing on their heads on certain issues. [Interruption.] I shall come back to Mr. Davey in a moment. I want first to respond to the hon. Member for Runnymede and Weybridge.

The difference between the actions of his Government and our proposal is that we are ensuring that the principles of fair distribution apply to all local authorities, which will all be part of the same mechanism. He proposes giving special benefits to a small number—around 40—that are debt free. As we know, that is because Conservative Members see that as being in the financial interests of predominantly Conservative authorities. Let me test him on this. Why should mid-Devon be treated differently from east Devon? Why should Milton Keynes be treated differently from Watford? Why should Maidstone be treated differently from Dartford? In each case, one will lose and one will gain. Can the hon. Gentleman tell me which will be the gainers and which will be the losers? We know about Milton Keynes, because we have rehearsed that already, but can he genuinely tell me what the outcome will be in the other two cases? Of course not. We know that those authorities are in broadly similar circumstances. It just happens that one has the advantage of being debt free and the other not. Why should there be an arbitrary benefit for one as against another? That is the fatal weakness of the Opposition's position. They are proposing special treatment for a small group of authorities merely on the accident of which one happens to be debt free. Why should one authority have unrestricted access to capital receipts while the other is required to set aside 75 per cent? That is the question that I must put, and there is no credible answer to it. It illustrates the confusion of both opposition parties.

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

The Minister is taking a static one-year view when we are talking about housing and capital finance. These things do not happen from one year to the next. The span is 25 or 30 years plus, as we have discussed. The Minister cannot say that what he has said justifies his case. He must take a much longer-term view. If he did that, he might win more of us over.

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

The hon. Gentleman, for whom I have great respect, could not have made my case better. Essentially, he is arguing for special treatment for a few authorities that happen at this moment to be in a favourable position. We are taking the longer-term view and saying that there should be a framework that applies fairly throughout all authorities and ensures that resources are allocated according to need. Surely the Liberal Democrat party would say that that is a fair principle, and it is the principle that underpins our policy.

The Liberal Democrats are caught on the horns of a dilemma. On the one hand, they argue for the use of resources to meet local housing needs, but they are not prepared to follow logic and say that that means that we cannot live with the accidents of history and geography and allow buckshee gains for some authorities that at this moment have the advantage of being debt free with substantial receipts, and needs that do not outweigh their receipts.

I am not sure what my noble friend Lord Rooker said in the other place—the hon. Member for Runnymede and Weybridge quoted him—but some authorities that are debt free have significant needs that will be taken into account in the allocations that will be considered by the regional housing boards. Other authorities will have lesser needs. In our view, it is right that every authority should be assessed on the basis of needs, on the simple principle that housing allocations should be determined by need. That should not be based on the simple accident, as it were, of where the receipts arise.

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

I have listened to everything that the Minister has said. Does he understand how he is undermining the sense that he wants to convey that he is granting freedom to local authorities? Does he understand also the psychological significance of the provision? We are talking of only 40 authorities, but a message is being sent to all authorities and to the Local Government Association that the Government do not really want to let go and allow local authorities to manage their own affairs. Instead, they want to control what they do.

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

I hope that we shall shortly come on to the next group of amendments, which deals with financial management and accompany all the provisions that change radically the capital allocations system. The provisions will remove Government controls and will free local authorities to take decisions on capital allocations. The Government are making substantial moves towards giving local authorities greater freedom and flexibility. We are also a Government who have principles. One of those principles is that fairness in the allocation of resources to meet needs should be paramount. We are not resiling from that. It is sad that the other parties are prepared to argue for a framework that will give special advantage on the basis of accidents of history and geography to a few authorities, rather than taking the more rounded view.

We have offered generous transitional arrangements. We are prepared to help those authorities that are debt free because, as the hon. Member for Kingston and Surbiton said, some of them have made plans. We want to ensure that those plans are not disrupted unduly by these changes. Therefore, there was opportunity for substantial help for the impact on debt-free authorities to be smoothed over for a significant time. We remain willing to assist those authorities, but that must happen in a framework that ensures fairness to all authorities, and not be a purely arbitrary benefit for a small number that will have adverse consequences for the majority.

With those thoughts, I trust that hon. Members will vote to resist the amendment.

Question put, That this House disagrees with the Lords in the said amendment:—

The House divided: Ayes 258, Noes 154.

Division number 310 Orders of the Day — Local Government Bill — Clause 11 — Use of Capital Receipts

Aye: 258 MPs

No: 154 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly agreed to.

Lords amendment disagreed to.