New Clause 4 - Housing revenue account

Deregulation Bill – in a Public Bill Committee at 3:00 pm on 25th March 2014.

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‘In section 171 of the Localism Act 2011 (which makes provision about limits on indebtedness in relation to local housing authorities’ housing revenue accounts) for subsections (1) to (5) substitute—

“(1) A local housing authority that keeps a Housing Revenue Account shall keep under review the amount of housing debt that it holds.

(2) In doing so, the local housing authority must have regard to—

(a) any determination made by it under section 3 of the Local Government Act 2003 (duty to determine affordable borrowing limit); and

(b) any guidance issued or approved by the Secretary of State under this section in relation to the amount of housing debt that a local housing authority may hold.”.’.—(Kelvin Hopkins.)

Brought up, and read the First time.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I beg to move, That the clause be read a Second time.

I move the new clause on behalf of my hon. Friend the Member for Derby North, who is unable to be here. I agree strongly with his view and the new clause, which would remove the local authorities’ housing borrowing cap. That progressive measure would go a long way to solving some of our housing problems. Meeting housing need and demand locally will not be achieved through the current operating model. The private sector has shown that it cannot and will not deliver on the scale required. Over the last 40 years, it has averaged 130,000 completions a year, but housing associations are also constrained in what they can do. We need to build at least 200,000 units per annum, and it has even been suggested that 300,000 units a year would be more realistic. That can happen only if councils play a full part in delivery, including being able to build on their own account, as they did when I was deputy chair of a housing committee in Luton some 40 years ago.

Removing the borrowing cap would be a progressive move and would align council borrowing for housing with the wider approach to local government borrowing. That approach means that local government can borrow only what it can afford to pay back, a principle enshrined in the prudential code. Removal of the cap is supported by many organisations, especially the Local Government Association, which is an all-party organisation with significant support from Conservative and Liberal Democrat Members as well as Labour Members.

Other organisations that support removal of the cap include Shelter, the Select Committee on Communities and Local Government, the Home Builders Federation, the Federation of Master Builders, the Chartered Institute of Housing, the National Housing Federation, London Councils, the National Federation of Builders, the National Federation of Arm’s Length Management Organisations and the Association of Retained Council Housing. It has widespread support.

The Government dipped their toe in the water following the 2013 autumn statement, when they announced that borrowing limits for the housing revenue account would be raised by £150 million a year in 2015-16 and 2016-2017. The Local Government Association, and many of us, welcomed that announcement, but it is a tiny amount. £150 million might provide 500 extra houses a year, but we are talking about hundreds of thousands being needed.

The new clause is progressive and I hope that it will find favour. We may not vote on it this afternoon, but I like to think that my hon. Friends on the Front Bench will lobby for it to be included at least in our next manifesto and, who knows, perhaps in those of other parties. It is certainly desperately needed because the shortage of council housing is causing a crisis throughout the country.

Photo of Oliver Heald Oliver Heald The Solicitor-General

Local authorities welcomed the financial freedoms arising from the replacement of housing subsidy with the self-financing settlement in 2012. However, the Government have a duty to reduce the national deficit and cannot allow unrestricted increase of local authority housing debt. That is why the Secretary of State for Communities and Local Government issued the limits on indebtedness determination in 2012, which set a limit on each of the 167 stockholding authorities’ housing debt. The new clause would render the Government unable to issue such a determination and keep to it.

Some members of the Committee may be under the impression that local authorities have no ability to borrow for housing purposes, but in fact the self-financing settlement gave local authorities with landlord responsibilities the ability to borrow about £2.8 billion. That is not insignificant. Some councils are close to their cap and so may need additional borrowing. That is why in the autumn statement we announced £300 million of extra borrowing up to 2016-17 to support around 10,000 affordable homes. Additional borrowing will be allocated following a competitive bid process.

Quite a lot of help has been given. In the circumstances, I urge the hon. Gentleman to withdraw the new clause.

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

Again, in the spirit of making progress I will keep my remarks brief. I welcome the contribution of my hon. Friend the Member for Luton North, and appreciate that he is moving the new clause on behalf of our hon. Friend the Member for Derby North, who is held up elsewhere. My hon. Friend the Member for Luton North has a long track record—I did not realise it was 40 years—and a great passion for housing matters.

The Opposition support the building of more homes. Along with the Leader of the Opposition, my right hon. Friend the Member for Doncaster North (Edward Miliband), the shadow Housing Minister, my hon. Friend the Member for Wolverhampton North East (Emma Reynolds), has set out an ambitious but pragmatic target of 200,000 new homes to be built each year under the next Labour Government. We are seeing that being delivered at the local authority level. Labour councils are outbuilding Conservative councils two to one. I am not sure about Liberal Democrat councils—I am not sure whether that party has any left.

Tom Brake rose—

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

I am happy to put the hon. Gentleman right. There is a Liberal Democrat council in the London borough of Sutton. It has been Liberal Democrat controlled since 1986.

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

I am most grateful to discover that there is a place somewhere in the United Kingdom that still thinks that Liberal Democrats are doing a decent job. All the evidence shows that across the country Labour local authorities are outstripping—[Interruption.] The hon. Member for Macclesfield says “spending”. I had not realised that the Conservative party was so pathologically opposed to public spending that it does not believe building homes for our constituents should be encouraged. I regret that that is the Conservative party position, and I suspect that the people of Macclesfield will not necessarily share that view in 14 months’ time at the general election.

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

I will give way “in a moment”, to use a phrase that has been heard previously in Committee.

We have commissioned Sir Michael Lyons to lead a housing review. He is looking at, for example, how we can get local authorities to work together and how we can see better partnership between local authorities and housing associations to build more homes.

Photo of Oliver Heald Oliver Heald The Solicitor-General

Does the hon. Gentleman accept that the self-financing settlement was welcomed by councils? The hon. Member for Luton North has asked us to go a bit further, but there is substantial provision available for building housing.

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

I hope the Solicitor-General would agree with the words of a famous and very good Prime Minister:

“A lot done, a lot to do.”

We are not satisfied with the progress being made and I suspect that in his quieter moments the Solicitor-General would agree.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Cabinet Office)

Does my hon. Friend agree that the top-slicing of local authority building grants so that Whitehall can dole the money out in a way that supports house building in the south, where house prices are higher, rather than in the north, makes the fact that Labour councils are building more all the more desirable and does not reflect well on the Government?

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs) 3:15 pm, 25th March 2014

My hon. Friend is entirely right. We are only eight weeks away from local authority elections in England and the rate of house building will be an important issue on doorsteps up and down the country—north and south. As my hon. Friend the Member for Luton North said, we are simply not building enough new homes. We absolutely agree that a target of 200,000 homes is both necessary and achievable, and that remains our commitment.

I am grateful that my hon. Friend indicated that the new clause was probing. We have certainly set out our position clearly and look forward to the debate continuing on the doorstep over the next eight weeks.

Kelvin Hopkins rose—

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. I think I recall that the Minister invited the hon. Gentleman to withdraw the new clause, but in view of the previous contribution, the Minister should perhaps invite him again.

Photo of Oliver Heald Oliver Heald The Solicitor-General

I should perhaps say one final word. If the hon. Member for Dunfermline and West Fife is not prepared to resist the new clause, he is saying that Labour is back to its old ways of allowing a rise in public sector debt by borrowing far more money than the country can afford. If that is really what he is saying, we will be happy to debate that on the doorsteps. I call on the hon. Member for Luton North to withdraw the new clause, because it is not in the Labour party’s interests.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I could have gone on at much greater length about council housing and what is needed. To reassure the Solicitor-General, the LGA says that the total level of borrowing would be small relative to the national debt. I should emphasise that we are talking about the prudential code and that local authorities would only borrow what they could afford to repay. The amount of money that goes back into Government coffers following such spending, including from workers coming off the dole and then paying taxes, would mean a tremendous inflow to the Treasury. The actual costs to the national Exchequer would be very small indeed. The proposal would make a tremendous contribution to solving a national housing crisis.

Photo of Thomas Docherty Thomas Docherty Shadow Minister (Environment, Food and Rural Affairs)

I am grateful to my hon. Friend for letting me intervene, because the Solicitor-General threw an accusation at the Opposition Front Bench and then ran away. Perhaps he is feeling a bit of a feartie today and will not take an intervention. I just want to  clarify to my hon. Friend, so that the Law Officer does not mislead the public as to the Opposition Front-Bench team’s position, that it is with some regret that we could not support him today, but we thank him for raising such an important issue. Even the Law Officer can hopefully see the logic of that position.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I thank my hon. Friend for his kind words, but what I really want is a substantial increase in council house building. I should have said at the beginning that I am active supporter of a group called Defend Council Housing, which does a great job in trying to revive council housing and emphasising that the solution to our housing problems means a return to the situation that pertained before 1972, when council housing provided millions of families with decent homes in which to bring up their children. That is what we ought to return to. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.