HC Deb 16 June 1976 vol 913 cc624-35
Mr. John Silkin

I beg to move Amendment No. 14, in page 11, line 16, leave out 'an undue' and insert 'a'.

Hon. Members who served on Standing Committee H will remember the amendment moved by the hon. Member for Aylesbury (Mr. Raison), or in which he played a considerable part, and in which my hon. Friend the Member for Harlow (Mr. Newens) also played a prominent part. As I have said, two amendments to Clause 9 were unfortunately declared out of order because the Money Resolution was too narrow.

It was the remark of my hon. Friend the Member for Welwyn and Hatfield (Mrs. Hayman) that triggered off my rethinking of the situation. She argued that if the Secretary of State were to have the possibility of intervening when an undue financial burden was placed upon the district council by virtue of a transfer of housing and housing related assets, she would like to know what a due burden was.

I found that question a little difficult to answer. I have spent some time considering the possibilities. A number of alternatives were suggested. I thought that the hon. Member for Aylesbury developed cold feet towards the end about the possible repercussions of his own amendment. I must admit that I felt a little that way myself. There were all sorts of difficulties. The insertion of the words "increased burden" would have produced many difficulties. In the end it seemed that the best way, bearing in mind the unanswerable question of my hon. Friend the Member for Welwyn and Hatfield, was to introduce an amendment to remove the word "undue", and to say that the Secretary of State, with the consent of the Treasury, should intervene where there was a financial burden which in his opinion warranted his intervention.

I hope that hon. Members will welcome the deletion of a word that was, to say the least, causing some anxiety. However, I know that they will want me to say a good deal more about the circumstances in which the Secretary of State is likely to use his discretion to pay grants under the clause.

At the time of transfer the housing account will be in balance. The existing rent income, plus subsidies, plus any grant being paid under Section 42 of the New Towns Act 1965, will cover the costs of loan charges, management and maintenance. Subsidies will remain constant under the Housing Rents and Subsidies Act 1975, and the payment in respect of loan charges will also remain constant. That leaves income from rents and expenditure on management and maintenance, all of which will, in the natural course of events, change over the years following transfer, and the grant formerly payable to the development corporation under Section 42 will cease, as I told the hon. Member for Aylesbury, when the property becomes the responsibility of the district council.

I think it is only right to emphasise our intention that the Exchequer assistance in lieu of Section 42 grant that we are proposing in the clause will have the purpose of helping the council in circumstances where it could otherwise keep the account balanced only by excessive increases in rents or rates. If it appears that the council could keep the account balanced without any rate fund contribution, provided it followed reasonable policies in regard to rents, management and maintenance, there will be no necessity for a Government grant. The Government surely cannot protect the ratepayers against the consequences of the council's deciding, for example, on increases in management and maintenance expenditure without a review of rents, so depriving itself of the chance of deriving any additional income from that source. It must be for the council itself to decide how it wishes to finance additional expenditure on housing, and contributions.

We must not lose sight of the fact—I regard this as a very important plus from the point of view of the district council—that the merging of the two housing stocks may enable the council to reduce its rate fund contribution. This would happen if reasonable rent policies adopted by the council provided an income more than sufficient to cover the increased management and maintenance expenditure on the transferred stock and to replace the amount at present received by corporations by way of Section 42 grant. The surplus so created would go towards reducing the deficit on the council's existing stock. This is the familiar phenomenon of older housing built at lower costs yielding a surplus to cross-subsidise the new housing. Where a district council's own housing is newer than the housing stock being transferred to it, there will be opportunities for cross-subsidisation of this nature, and this must work to the benefit of the ratepayers in the district.

In considering the phasing out of the transitional grant it will be right to look at the housing revenue accounts of the new town and the receiving district at the time of transfer, and to base the arrangements on the figures then available. But we do not expect the four commission towns to receive any Section 42 grant in this financial year except, of course, in respect of rebates.

7.45 p.m.

Decisions made by the local authority about rents, maintenance and management will be the important factor in the state of the housing revenue account of the combined stock. Looking further ahead, changes in the subsidy régime, following the housing finance review, may well be of far greater significance. The decision for the local authority is whether it wants to manage the whole public sector housing rented sector in its area on the same terms as local housing authorities are similarly managing their housing stock.

Generally speaking, housing is a service which, with the exception of inner London, has required very little rate fund support over the years. It has generally been the case that the combination of reasonable rents and Exchequer subsidies has met all the costs. Thus, thus whether it wishes to make rate fund it is most unlikely that any new town local authority to which a transfer is envisaged over the next few years will find itself forced by circumstances to make an increased rate fund contribution, except for that required towards rent rebates.

It is worth recognising that the acquisition by local authorities of good postwar housing on outstanding loan debt terms compares favourably with alternatives open to other local authorities. I made this point strongly in Committee and I think it is worth making again. For the four commission towns, annual loan charges, net of subsidy, averaged last year about £110 per dwelling. For Stevenage and Harlow the figure was about £160 per dwelling. But loan charges, net of subsidy, on new council dwellings, which are costing about £11,000 each, on average, amount to about £400 per dwelling. The comparable figure for authorities such as the London boroughs acquiring tenanted property from private landlords is about £300 per year, and that includes the cost of initial repairs and improvements.

Another comparison is with potential sale values. If sold to sitting tenants with a 20 per cent. discount—a figure that we have heard so much about today—the houses would fetch, on average, about £7,000 each, which is equivalent to about £650 per year when interest and subsidy are recalculated. I mention that to demonstrate that the transfer terms for the first generation new towns enable the local authorities to increase their housing stock at capital costs of from one-third to one-half of the true capital cost. It is with that in mind that I ask the House to approach the argument in favour of some transitional financial support by the taxpayer at large for the inhabitants of local authorities to whom new town housing is being transferred.

Mr. Michael Morris

This is probably one of the most important amendments to the Bill. I think that the experience of the majority of new towns in their relationships with county councils is that the agreement that there should not be an undue burden is not a happy one in the sense that there have been extensive wranglings with the Treasury as to exactly what the burden is and how much of it is undue and how much of it is due. How much a county can get out of the Treasury to meet the added burden that it faces has become almost an annual auction. Therefore, to that extent I welcome the removal of the word "undue" and the fact that it is no longer qualified.

We accept that the four commission towns will gain financially on the transfer. The problem comes with the newer new towns at the time when transfer is made. That is why the amendment is important. I suggest that the figure will not be £11,000 or £12,000. I checked the figures with Northampton this afternoon, and the current cost is about £15,000. I accept that the average is about £11,000 or £12,000, but there are examples in my area where the discounted sale price is about £8,000 on older property. That suggests that there would be a burden. Therefore, it is important that that situation should be covered.

A further point is that, because we shall be getting younger people in new towns, they of necessity will cost society more in terms of all the necessary provisions for young families. That will cause a burden partly on the district and partly on the county. It is important that that burden be covered.

There is a further element which the amendment will help. It is the practice of development corporations to include in their provisions, for which they get a grant from the Government, probably more facilities than are common in many district councils. Some district councils have been extremely frugal and over time have been extremely careful about the facilities that they have provided. They have been assisted by the fact that, as they are older communities. charities and other bodies have often been able to make provision for a number of quasi-social needs. We accept that when a new town is created that historic infrastructure is not provided by the charities or, indeed, by the private sector and that, therefore, the public sector must provide it. If the grant is strictly adhered to, some of the provisions will become a bit suspect. It would probably be clearer if they were covered by a separate grant payment rather than left in the clouded area of whether they come under the subsidies or not.

We welcome the amendment. It represents progress towards the view that we, supported by at least three of the right hon. Gentleman's hon. Friends, put forward. We shall be coming to another amendment which in some ways is associated with this one. Therefore, I shall reserve judgement on it until we come to it.

Mr. Newens

I welcome the amendment. My right hon. Friend and the hon. Member for Northampton, South (Mr. Morris) referred to the debate in Committee on this matter. I think that hon. Members on both sides expressed their concern about the possibility of a local authority becoming responsible for heavy increases in costs arising from the transferred properties. I feared that danger and was one of those to whom the hon. Gentleman referred who expressed that view in Committee. If transfer results in heavy increased costs falling upon new towns, many new town residents will feel that they have been made the victims of a scheme that was presented to them as being to their advantage.

Many people in new towns have the same attitude towards the Government as one of Homer's characters had towards the Greeks—"Beware of the Greeks when they come bearing gifts." Some new town residents feel that they should beware of any Government who hand over new town assets to them. I am sure that that suspicion is totally unjustified as long as my right hon. Friend is the Minister. However, the amendment, if carried, will help to set their fears at rest.

I do not conceal the fact that I should have preferred the word "increased" to be included. Nevertheless, I am prepared to settle for "undue". I still consider that the clause leaves more discretion in the hands of the Minister than I should wish. However, I believe that the amendment goes a considerable way towards what many hon. Members on both sides of the House feel ought to be done. Accordingly, I thank my right hon. Friend for introducing this change which will be in the interests of new town residents as a whole.

Amendment agreed to.

Mr. Michael Morris

I beg to move Amendment No. 19, in page 11, line 19, leave out 'determined by him with the consent of the Treasury' and insert 'of seven years'.

This amendment, which follows on from the earlier amendment, is concerned with removing the discretion of the Secretary of State and the Treasury, in connivance, to restrict the period over which they will give this grant to meet the new burden.

The important element is that a district council must of necessity plan ahead. The majority of councils are encouraged by the Department of the Environment to plan ahead for five years. They arc getting increasingly better at financial planning. We shall see what happens as a result of the Secretary of State's exhortations to the local councils. However, with the setting up of the consultative committee, we all hope that they will be brought back to their budgets.

If we ask local authorities to plan their expenditure and forecasts better and to stick to those forecasts, we owe it to those authorities which take on the financial burden of new towns to indicate for how long they are likely to get a grant. If not, and if the figures are substantial—they may be very substantial in some cases—it will cause chaos to their financial planning. In any event, if the grant is removed, even with 12 month's notice—there is no guarantee that would happen—the burden will then fall on either council rents or the ratepayers. In either case it would be unfair.

The right hon. Gentleman may ask why we have settled on seven years rather than any other period. There is no scientific basis for the seven years. As the majority of district councils are working on a five-year forecast, seven years seemed a satisfactory basis on which to conclude it without it becoming an unending drain on the Treasury's resources.

I hope that the right hon. Gentleman, who has been fairly generous on other amendments, will welcome this amendment in the spirit in which it has been moved.

8.0 p.m.

Mr. John Silkin

I am relieved by the hon. Gentleman's speech in one respect, at any rate—his explanation of the period of seven years. I was rather worried about that. I then remembered that seven years had a kind of mystical or religious significance—well before the Bible, of course. There were seven lean years and seven fat years. They had Labour Governments even in those days. There was Leah. It was Rachel who was promised to Jacob, but he had to wait seven years, and then he found that after that time he was foisted off with Leah. That was the Tory régime. We are now told that it was a mystical figure, and I am delighted to hear it.

I deal with the minor technical point first. I shall not make a technical point, but I want to ask the hon. Gentleman what he really meant, because it makes rather more sense if what I am about to propose is what he meant. The effect of what he says is that the Secretary of State makes up his mind whether to give a grant—I note the interest of Basildon, Hemel Hempstead, Harlow and other places—to the district councils for a period of seven years. The Secretary of State makes his mind up flat, and says "The righteous shall receive a seven-year grant and the others shall receive nothing at all." If that is what is intended, even the spirit, in any sense whatever, would be totally rejected by the local authorities, and by me and everyone else I know, because it would be too much of a responsibility even for a Secretary of State.

I assume that what the hon. Gentleman means is "up to a maximum of seven years." If that is so, as a basis that is much more sensible.

I seemed to get the impression from the hon. Member for Aylesbury (Mr. Raison), when we were talking about the Money Resolution, that he was trying to get a slight paring down on what he thought the Chancellor of the Exchequer and the Secretary of State might be up to between them. It is not a minimum period; it is a maximum.

Mr. Raison

I should have thought that the words of our amendment, which would read, roughly, "may make grants for a period of seven years", implied quite clearly that the seven years was a maximum, and that it did not have to be seven years but might be up to seven.

Mr. Silkin

I was not making a point; I merely wanted to be absolutely clear. That is what I thought the Opposition meant. It would be easy to redraft the amendment, which gives the Secretary of State the one power, to say "Yes, you can have a grant for seven years, or not all." However, we are debating the substance and not the drafting. I wanted to make certain that that was so.

What this comes to is that the Opposition say "Forget the Chancellor of the Exchequer and the Treasury. You, Secretary of State, have to make up your mind whether you give a grant to a district council. You can do it for only up to seven years. You must not do it beyond that. You make up your own mind without the Treasury coming into it."

In Committee I was asked for how long I thought one would need to give such a grant. My reply was that I thought that it would be between one and five years. However, I am not infallible, curious as that may seem, and it may be that I am wrong. That was why I wanted an indeterminate figure. However, I think that in giving the period of one to five years I was showing where I thought the probability, on the best advice I could get, might be.

Would it really be fair if the period in Redditch, say, were eight years, to limit the Secretary of State to seven years? For the want of one year, would the hon. Member for Bromsgrove and Redditch (Mr. Miller) really penalise the ratepayers of Redditch? I do not believe that he would do so. If I were still in my present position and if he were still the hon. Member for Bromsgrove and Redditch, would he not be coming to me at Question Time and saying "Why do you not alter the law? Redditch is suffering."

Mr. Hal Miller

If the transfer is not to take place until about 15 years after original designation, does not the Minister consider that the transfer should not be effected until the town has reached a reasonable maturity, so that it would be possible after a further period to get rid of special factors that previously operated to make the grant necessary?

Mr. Silkin

It may be so in the case of Redditch. I mentioned Redditch merely because it was a handy illustration, as I was looking at the hon. Gentleman. However, it may not necessarily be a second-generation town about which we are talking; it might be a third-generation town. There may be other new towns. The question depends on whether they have newer housing. That is not so in every case. There may be other cases. There are some new towns that might very well finish in less than the 15-year period. I do not particularly want to mention names at present, but there are some that might very well do it, either because their housing has gone ahead at such a speed that they have achieved a target ahead of when they might have done that, or because the town is not intended to be very large. There are these factors.

Opposition Members are not, therefore, being altogether realistic when they try to bind the Government to this biblical period of seven years because they want a particular set period. It is much better looked at pragmatically and empirically and treated on that level.

I come now to the most extraordinary suggestion that the Opposition have made during these debates. There have been some rather curious suggestions, as we know from the previous Division. What I find odd is that the hon. Member for Northampton, South (Mr. Morris), both by the amendment and by his speech, was saying that he was trusting me and my successors, of either party, to go right ahead and made up our own minds, without the consent of the Treasury. For a party that is forever telling us that we are supposed to cut public expenditure, that seems a rather curiously open-ended commitment. Any spending Minister is delighted if he can have as much as he likes to spend, because he has his policies and he wants them inaugurated. If he can get as much as he wants, that is marvellous. If one offers spending Ministers open cheques, one finds that they are all human and that there is so much that they want to do. However, life is not like that. Much as one would like the opportunity to go ahead without the Treasury's consent, or without even consulting the Treasury—that requirement is removed by the amendment—that is not realistic.

If the amendment were to become part of the Bill and if I or my successors, in any transfer of housing assets, were to say "Splendid. I shall give X New Town District Council the grant for seven years, and I have not bothered to say a word to the Chancellor of the Exchequer because I do not have to", the first persons to attack me and the Chancellor of the Exchequer would be Opposition Members. I would not blame them.

We must be realistic. Whoever may be involved, the matter will be handled competently and on the basis of a reasonable look at the situation and at what are reasonable rents and reasonable charges. No one will go mad on this matter, because, frankly, the money is badly needed. All that we want to do is to provide a safety net for those authorities that otherwise might find the burden too much for them, having behaved properly in every possible way. If we are to do that, however, I beg hon. Members not to put the shutter down on the time question. We simply do not know. Hon. Members really must not be so rigid or doctrinaire about this matter. For Heaven's sake, let us be realistic about it. We should have to consult the Treasury and we should have to have the Treasury's consent.

Mr. Michael Morris

I am grateful to the Minister for the way in which he has answered the amendment. It is right to place on the record the danger which all of us who represent new towns see because society has asked the old towns to take on the burden of new towns. We should not forget that, when a new town is attached to an old one, one is asking the original society to undertake an enormous transformation and upheaval. That is asking a lot. There might be a particular crisis at a point of time and it is all too easy for a Treasury Minister to make a broad cut and chop off the grant there and then. As a result, those societies which have undertaken this burden are left high and dry.

In as far as the Government will make a grant, of course we understand that in the end the Treasury has a say. It is fair to say that it is within a fairly large budget, and if the grants were held it is perfectly possible for cutbacks to be made in other areas. We are dealing with only 29, and at one point in time all 29 are unlikely to be on the go. The figures involved are unlikely to be that substantial.

There may be occasions when we might not wish to lock in a new town completely, and, in the final analysis, the Treasury must have the ultimate regard to that. I think it was right for us to put down this amendment in order to get on the record firmly and clearly that where a transfer takes place and there is a burden, only in the final resort should that grant be removed by the Treasury. I hope, as a result of the discussions we have had, that a Chancellor of the Exchequer will think warily before removing that grant and, indeed, that a Secretary of State will fight extremely hard to ensure that those grants are not removed because of the financial crisis.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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