HC Deb 24 May 1976 vol 912 cc225-34

1.10 a.m.

The Under-Secretary of State for the Environment (Mr. Guy Barnett)

I beg to move, That the New Towns (Limit on Borrowing) Order 1976, a copy of which was laid before this House on 11th May, be approved. As hon. Members will know, it is necessary to ask the House from time to time for authority to increase the total borrowing limits for the new town development corporations and for the Commission for the New Towns. Until now this has always been done by the introduction of a New Towns Money Bill, but tonight we have before us an Order under the 1975 New Towns Act. That Act raised the limit of borrowing from £1,500 million to £1,750 million, with a provision for a further increase of £500 million by Order. The present Order laid before the House will enable that increase of the borrowing limit by £500 million, bringing it to £2,250 million, to come into force seven days after the Order is made.

We propose to make the whole of the permitted £500 million increase in this one Order. Detailed and precise forecasting of spending in new towns is difficult, but if recent levels of new town borrowing continue the whole of the additional £500 million could be used up before the end of 1977 and a further Money Bill would then be required. With a level of expenditure of, on average, about £25 million a month, I hope the House will agree that it would be sensible not to take two or more bites at the £500 million cherry which the 1975 Act provided.

I am conscious that my remarks so far, with their references to very substantial sums of money, will rightly lead to questions in hon. Members' minds about whether our new town programme offers value for money and whether new town corporations are cost-effective agencies. How do we assess the value of new towns? Much depends on the price we put on human happiness, and I—and, I think, most hon. Members—would rate that very highly. New towns offer homes in an improved environment for people who have been living in cities in overcrowded conditions. They provide industry so that these people may live and work in the same locality. The standard of design and landscaping at their best, in these towns, has set an example to authorities everywhere as well as having done much to improve the quality of life for the inhabitants of new towns.

Of course, all this is very much in the realm of social costs and benefits which are notoriously difficult to quantify. But even looking with the strict eye of an accountant we can see that new towns eventually break even financially and even come into surplus. In 1974–75, for example, the Commission for the New Towns made a gross profit of nearly £5.3 million, Harlow Development Corporation a profit of £2.4 million and Stevenage £2.7 million. These surpluses have under the existing arrangements reverted to the Exchequer as the source of by far the largest proportion of all investment in the new towns. As my right hon. Friend the Minister for Planning and Local Government made clear, however, during the Second Reading of the New Towns (Amendment) Bill, our aim for the future will be that all concerned with the development of the new towns programme—the new towns as a whole, the public in general through the Exchequer, and the local community in each new town—should enjoy an appropriate share of the benefits created by public investment in the new towns.

The Second Reading of the New Towns (Amendment) Bill recently afforded an opportunity for a very full and wide-ranging debate on new town affairs. From it arose a genuine belief in the valuable contribution which the new town movement has made since 1946 to national development.

But what of the future? Mr. right hon. Friend the Secretary of State for Scotland recently announced that it was not intended to proceed with the development of Stonehouse New Town in order to give greater priority to urban renewal. In the light of that decision, hon. Members may have doubts whether the rest of the new towns programme will go ahead. Let me allay any such doubts. The present new towns programme is complementary to the improvement of the inner cities rather than competitive. Even if the birth rate continues to fall, it will not reduce housing demand for another 10 to 15 years.

Up until the end of the 1980s the new towns programme will be fulfilling the needs of people already born, who on present trends will be forming more households and of a smaller size than we would have planned for 10 or 20 years ago. To the extent that the need for rented housing exceeds supply in the conurbations, the new towns which serve them will still be an important factor in dealing with the continuing outflow of people from them. In particular, new towns will provide the avenue for those who wish to move out who must look to the public rented sector for housing. If the new towns were stopped, the outward movement from the conurbations would be largely restricted to people who can buy houses, and I believe that this is liable to be socially divisive.

Of course, the new towns programme is closely monitored and reviewed as part of the process of regional and structure planning, and in some cases a review may indicate the need either for "trimming" or for expansion of the programme of a particular town. The cases for the expansion of the programme of a particular town. The cases for the expansion of Harlow and Stevenage are currently being considered, while last year my right hon. Friend announced the postponement of Telford's ultimate targets and a reduced interim target to reflect what could reasonably be achieved up to 1986. I can assure the House that the new towns programme is not, therefore, in any way insensitive to changing demands and priorities. Moreover the money made available by Parliament continues to represent an excellent social and financial investment. I commend the Order to the House.

1.16 a.m

Mr. Michael Morris (Northampton, South)

I am grateful to the Minister for spending a few minutes explaining the Order. Just over a year ago, on 12th May, the Government sought an increase in borrowing from £1,500 million to £2,250 million. They were seeking an immediate increase of £250 million and it was anticipated that the remainder would be brought forward in instalments in 1976–77.

It appears that the necessity for the second instalment has come sooner than expected, at the front end of the financial year. I am still not too happy about why we have to move away from the £250 million tranches to £500 million—a substantial amount of money. Will the Minister please comment on whether the £250 million has gone according to plan? As the Minister must know, there are rumours that housing expenditure is unrestricted while other local expenditure, called OLE, is restricted. Will the Minister confirm or deny those rumours?

There are distinct signs that industry is slowing down in its movement to new towns and that its capital drawings are therefore slower than originally anticipated. We all know that the Government's public sector borrowing requirement is excessive and that it is causing the economy in general, and sterling in particular, great problems. Can the Minister say whether the £500 million which is being sought was included in the latest forecast by the Chancellor of the Exchequer in his Budget.

The last time we discussed the method of borrowing, the point was made that the financial effectiveness of the new towns was restrained by the Government's requirement that they must borrow over 60 years at fixed interest of 14 per cent. to 15 per cent., instead of playing the market. Officials within the development corporations are urgently asking the Government why the new towns must be restricted from short-term borrowing and playing the market. They make the valid point that the new towns are subsidising the Treasury in the sense that they must borrow short and not long-term, therefore making the operation considerably more expensive than it need be.

There is also the question of financial strategy. We know that reserves are limited. Both sides of the House accept the wholehearted commitment to the new towns concept. We see the role of new town corporations as agents moving into a situation, either in a green field site or adjacent to an industrial area, doing a job and then moving on. It is in that context that we have supported the transfer of housing assets and pushed for the sale of houses in the new towns.

I hope that we shall not be locked into the five-year prior residence requirement, which would effectively rule out all the second-generation new towns, where very few residents have been for five years. We on this side of the House accept the requirement for some residential term, but two to three years would be more appropriate. It would get over the problem of those who sought to take advantage of the market but would at the same time give some residual residence requirement.

I shall be grateful if the Minister will confirm what happens to the revenue from sales. Does it, as he said, go straight back to the Treasury or, as his right hon. Friend indicated in the debate on 12th May last year, does it go back to the credit of the New Towns Commission?

If we all see a continuing rôle for the new towns, as I think we do, and if some of us on both sides of the House see a rôle for the new towns concept in revitalising inner urban areas, we must think very hard about how we shall finance this sort of redevelopment of the inner urban areas. One has in mind particularly the dockland area. The Minister is nearer to that than I am.

There is an alternative to our remaining entirely dependent on the Treasury. In the older new towns there are considerable assets which are distinctly undervalued. The time has probably come when the Government should look again at the matter and consider whether they should be refinancing or selling off those assets to the financial institutions. I underline the words "refinancing or selling off". I am not necessarily saying that both must be done. In that way the community would benefit by realising its investment and redeploying its assets to the benefit of another community elsewhere where there is a job still to be done.

The hon. Gentleman has calmly moved a motion relating to a sum of £500 million, which by any yardstick is a massive figure. It is not just the sheer scale that is worrying. The evidence is that we are not receiving the return that we should. That is in no way to criticise the relative effectiveness of the new towns.

Perhaps we should look quickly again at the minutes of the evidence and appendices to the Expenditure Committee's Environment and Home Office Sub-Committee in the 1974 Session. Page 641 highlights some of the financial controls mentioned in the McKinsey evidence to that Committee. It describes the annual report as statutory and on the whole fairly non-controversial, and it mentions the management accounting system, which communicates the financial plans. But it goes on in paragraph 143, probably the most important paragraph of all the evidence from a financial point of view, to say: However, the full potential of the system for providing a means to evaluate and improve the performance of new towns is not being achieved. In part this is for reasons internal to the system. The Accounts do not, for example, allow easy comparisons to be made between forecast and actual results, or between current expectations and previous forecasts. Nor do they develop the key ratios and other performance measures that would identify for the new towns the areas of potential performance improvement worth detailed review. It says that it is in the use of the accounts that the greatest unrealised potential lies, in monitoring performance, analysing and challenging the plans and providing the new towns with a discipline and stimulus.

All is not entirely well in the financial area. Even at this late hour, when the number of hon. Members in the Chamber is small, we ought to reflect that we tend to react too easily to just social causes and produce a myriad of legislation which is totally uncosted.

The new towns concept has proved its value. We know they work and are generally cost effective—probably more cost effective than local government, in which many of us have served. But we do not know how cost effective they are, whether they could do better or whether some are doing better than others. The Minister's consultation document is devoid of any comment on the economic returns of new towns, and there is a lack of any meaningful financial data.

New towns have made an enormous impact on the financial situation of the local authorities in whose areas they lie. Counties like Northamptonshire find themselves caught between a rate support grant which does not anticipate the problems caused by the new towns, pressure from the Department of the Environment to build and the general meanness of the Treasury to pick up the tab.

I have raised a number of important points, though I do not expect the Minister to answer them all tonight. The time has come when Parliament has to ask his Department to substantiate the financial return which the community is getting from new towns. By any yardstick, £500 million is a very large slice of public money and it is right that the House should look seriously at the return we are getting from this investment.

1.27 a.m.

Mr. Guy Barnett

The hon. Member for Northampton, South (Mr. Morris) has raised a number of interesting and useful points, and I thank him for the way in which he has tackled this subject. I owe him an answer first for the fact that we are asking the House for £500 million at one go rather than, as he and other hon. Members may have expected, in two lots of £250 million.

There is no reason of substance why we could not have had two bites at the cherry, but the hon. Member will appreciate that one of the consequences of inflation has been rising costs and we felt it right to ask for this sum in one go because costs have risen considerably since the Bill became an Act. It might also have been difficult and inconvenient to have attempted to go for two lots of £250 million.

The hon. Member has placed me in some difficulty by raising the question of the report of the Select Committee. It was a useful report and the Government are giving its recommendations careful consideration. We expect to publish a response in the form of a White Paper before the Summer Recess. It would not be right for me to comment on the quotations referred to by the hon. Member. I accept the relevance of the point he was making, but it would be wrong for me to comment on it.

The hon. Gentleman raised an interesting point about the reasons that might lie behind the policy that the Government have adopted whereby the new town corporations are dependent upon the Treasury for borrowing money rather than being able to raise it themselves. I am advised that, certainly in the long term, the likelihood is that we would probably obtain the money at a more favourable rate than might be the case if new town corporations were to attempt to raise money on the private market and that, in general, money that comes from the Treasury is probably at a more favourable rate than might otherwise be the case.

The hon. Gentleman asked what was the present state of the game in terms of the expenditure of money to date. Since the passing of the Act. I think I can give the figures he seeks. On 20th May the net amount outstanding was roughly £1,745 million. No further borrowing is expected before the end of this month. I can also give the hon. Gentleman the estimate of the maximum likely spending during 1976–77, which according to our estimates will amount to about £350 million. I ought also to advise the House that the earliest likely date that a new Money Bill will need to be presented will be about the autumn of 1977. That is the present position concerning outstanding debt and likely spending in the future.

I am grateful to the hon. Gentleman for the general support he has given to the new towns programe in general. I accept very much what he says. He and I both recognise that there is something of a difference between the Government side of the House and his side about the question of the sale of new town houses. Admittedly that is a possible source of income for the new town corporations, and I ought perhaps to say at this stage that, as I understand it, the money that comes from the sale of houses in the ownership of the corporations would revert to the corporations but that the profit made by the corporations would revert to the Treasury.

On the other hand, although as a consequence of discussions that will take place between my right hon. Friend and chairmen of new town corporations there may be in certain new towns, and according to criteria of which the hon. Gentleman well knows, sales of corporation houses, the Government are not at all certain exactly what kind of income will arise as a consequence of this. There are a number of reasons, which I shall not go into now, which suggest that the number of sales will not be so great as to make a significant difference to the finances of new town corporations.

I hope that I have answered most, if not all, of the hon. Gentleman's points. If he has a specific point remaining, perhaps he will remind me of it.

Mr. Michael Morris

There was the rather important question of whether the public sector borrowing requirement, as stated by the Chancellor in his Budget, anticipated this quickening of the capital expenditure. Was the £500 million included in the forecast that the Chancellor gave only a few weeks ago?

Mr. Barnett

I am almost certain that it was, but I do not want to say so categorically. Perhaps I may let the hon. Gentleman know by letter as soon as possible.

1.35 a.m.

Mr. George Rodgers (Chorley)

I appreciate that it is desperately late, and I want to say only a couple of sentences. In fact the Minister has anticipated most of my questions, and I am content with that.

I appreciate particularly that there is to be a flexible attitude towards new towns in the matter of the balance of housing and industry. It is important that we should maintain a balance and be prepared to adjust our position in the light of industry that is attracted to an area in proportion to the houses avail able. It is true that all new town developments have been successful. They have attracted industry, provided housing and generated prosperity.

In my area there is the Central Lancashire New Town of Chorley. At this stage of the development there are bound to be irritations. Despite the fact that the local authority and the public welcome the development of the new town, there are problems that emerge when a project is getting off the ground. I should be grateful if my hon. Friend would say whether it will be possible for him to visit the area in the comparatively near future and discuss the problems that have arisen with myself, the new town development corporation, residents and local authorities generally.

Mr. Guy Barnett

It is very much my intention to visit a number of new towns in the near future and try to see for myself the problems on the ground. I think my hon. Friend will be glad to know that it is my intention to visit the Central Lancashire New Town on 18th June. I hope very much to see some of the problems to which my hon. Friend referred because I am convinced, as I think he is, of the necessity of maintaining a balance between homes and jobs in the new towns. That is one matter to which I shall want to pay particular attention when I visit the area, as I hope to do on the date I have mentioned.

Question put and agreed to.

Resolved, That the New Towns (Limit on Borrowing) Order 1976, a copy of which was laid before this House on 11th May, be approved.