Local Authority Capital Expenditure (England)

HC Deb 18 December 1984 vol 70 cc164-79 3.45 pm

The Secretary of State for the Environment (Mr. Patrick Jenkin)

With permission, Mr. Speaker, I will make a statement about local authority capital expenditure in England in the coming financial year. My right hon. Friend the Secretary of State for Wales will be making a statement later.

Since May 1979, local authorities in England have sold more than 600,000 homes to their tenants. The success of this policy, coupled with sales of other assets, has generated very substantial capital receipts which local authorities have been able to spend over a period of time. This statement is about the consequences for next year's capital spending programme.

On 18 July I explained to the House that in 1983–84 there had been an overspend of £368 million on the main local authority cash limit for capital expenditure. I warned that we could be heading for a much larger overspend this year. That was why I had to ask local authorities to exercise restraint.

Most authorities have complied with my request and I am grateful to them, but some have chosen to ignore it. So although the amount of the overspend this year has certainly been reduced it is still likely to be higher than in 1983–84 and I must therefore maintain my appeal for restraint for the rest of this financial year.

Consequent upon the Government's decisions published by my right hon. Friend the Chancellor in his autumn statement, I have to announce that plans for local authority capital spending in England for next year will be just over £4 billion. Receipts are expected to be about £2.1 billion and the cash limit on net expenditure is therefore being set at £1.95 billion. This net figure forms part of the Government's public expenditure planning total for next year. Any excess would be a potential charge on the contingency reserve.

Unless corrective action is taken, local authorities could well breach the cash limit next year as happened in 1983–84 and is happening this year. The problem arises because the accumulated reserves of capital receipts are now estimated at some £5 billion.

Those reserves belong to the local authorities. [HON. MEMBERS: "Hear, hear!"] What is at issue is the pace at which they may be spent. To reduce the risk of overspending next year we have to reduce the proportion of receipts which an authority may spend in any one year. For housing receipts, the prescribed proportion will be reduced from 40 per cent. to 20 per cent. from next April. For other receipts—for example, from the sale of land —the proportion will be 30 per cent. Local authorities will continue to have the right to use the balance of their receipts, but spread over a longer period. Without these changes, there is little doubt that there would have been substantial overspending next year. This in turn would be bound to lead to disruptive mid-year corrective action. It is clearly in the interests of local authorities to reduce that risk.

We shall be notifying individual authorities of their allocations shortly. I am honouring the assurance that I gave last year that housing allocations would be at least 80 per cent. of those for the present year.

Authorities that have complied in full with my request for restraint this year will receive an extra allocation next year amounting to an extra 5 per cent. across all service blocks. I estimate that this may add about £100 million to the total of allocations.

To help local authorities to plan their capital programme we are increasing from 2 per cent. to 5 per cent. the right to carry forward an underspend of the national cash limit from one year to the next. There will also he a margin of 5 per cent. above the cash limit up to which no corrective action within the year will be sought.

Subject to the same sort of provisos as last year, I can repeat last year's assurance that for the housing and other services blocks, allocations for 1986–87 will be at least 70 per cent. of those for the current year. For 1987–88, authorities can count on receiving at least 80 per cent. of 1985–86 allocations.

Apart from those assurances, the decisions that I have announced today relate only to 1985–86. I am consulting the local authority associations about possible changes to the system for the longer term.

Hon. Members

Resign!

Dr. John Cunningham (Copeland)

Is the Secretary of State aware that his statement will be received with horror by people on housing waiting lists, by those waiting for improvement grants, and by workers and management in the building industry? Does not his announcement represent another humiliating defeat for himself and his Department at the hands of the Treasury? Will the right hon. Gentleman confirm that, stripped of the jargon, he has today announced a cut of £400 million in housing investment and the freezing of £1.2 billion of local authorities' own assets—their own money? Will not the consequences of this decision be appalling for all those in difficulty in the housing sector—for people wanting homes as well as those engaged in the industry?

Does not the statement show to be sheer hypocrisy the comments of the Minister for Housing and Construction last Friday? The Minister said: Homelessness is taken into account in deciding housing investment".—[Official Report. 14 December 1984; Vol. 69, c. 1339.] Does the statement not mark the introduction of another draconian control by the freezing of local authorities' own cash in the bank? Will the Secretary of State tell us how his statement will help the homeless, the building and contruction industry or unemployed building workers? What credible macro-economic arguments can he adduce to support his decision?

Is the right hon. Gentleman aware that there are 1.25 million households on local authority waiting lists, almost 200,000 households living in overcrowded accommodation, 2,500,000 dwellings requiring repairs and 78,000 households which are homeless at present?

Mr. Greville Janner (Leicester, West)

The Government do not care.

Dr. Cunningham

The right hon. Gentleman's announcement today will have a catastrophic effect on owner-occupiers, more than 100,000 of whom are currently waiting for improvement grants. Will the right hon. Gentleman assure us that we shall have a debate on his announcement in Government time so that the House can debate these crucial issues and decide whether it will agree with what has been announced today?

Will the right hon. Gentleman also confirm that, in the best year of the Government's housing policy, there were 214,000 starts, a figure which fell short by 50,000 of the lowest total achieved under the preceding Labour Government? Will the right hon. Gentleman also recognise that the current building programme is heading for the lowest number of completions of council houses ever recorded, and the second lowest total for all housing completions?

The statement is a kick in the teeth for the building and construction industry. It flies in the face of all the advice that the right hon. Gentleman and his ministerial colleagues have received, right across the board, from employers' federations, the Royal Institute of British Architects, the CBI, the TUC, Shelter, the Shelter Housing Aid Centre, the Institute of Housing and everyone concerned with housing problems.

Will the right hon. Gentleman finally admit that his statement is yet another blow to the shire counties, because their authorisation for expenditure of their own receipts is reduced from 50 per cent. to 30 per cent.—and that in a week when the Audit Commission urged that capital investment by education authorities should be increased to meet the problems of education, especially in the shire counties?

Since the Government came to office, there has been a 64 per cent. cut in real terms in housing investment programmes. Even when capital receipts are taken into account, the figure is still 54 per cent. The Government are now spending less than 50 per cent. of what the Labour Government spent on Britain's housing needs. It is a disgrace.

Mr. Jenkin

The hon. Gentleman does not seem, even now, to have hoisted on board the fact that it has been the Government's policy consistently since we took office in 1979 to—

Mr. Willie W. Hamilton (Fife, Central)

To cut everything.

Mr. Jenkin

—to help the private sector to recognise that the great majority of people wish to become owner-occupiers. It is in the context of the expansion of owner-occupation that the success of the Government's policy is to be seen.

The hon. Gentleman seems to be under the illusion that, somehow, the announcement that I have made today represents a further reduction in spending on housing beyond what was announced in the autumn statement. He is quite wrong and he ought to know that the figure which was agreed last month for housing investment was £3.055 billion. It remains £3.055 billion. The measures that I have announced today are intended to ensure that that figure of £3.055 billion is delivered. As for the effect on the building industry, perhaps I might remind the hon. Gentleman that its output grew last year by 4 per cent. in real terms. It has grown by a further 4 per cent. this year and the latest forecast, which has taken account of the autumn statement, says that that output is likely to be maintained or even increased slightly next year. The forecast was produced by the Building Materials Producers Association.

The hon. Gentleman referred to homelessness. He might note that there are today more than 25,000 local authority homes which have been empty for more than one year. [HON. MEMBERS: "They need repairs."] They are homes that local authorities could well use to deal with the problem of homelessness. As for improvement grants, I made it clear when the autumn statement was published that the Government gave a substantial boost to home improvement grants to the private sector and that the number increased tenfold over what had been done by the Labour Government. However, we did not see that as a permanent feature of housing policy—it was a two-year boost. The hon. Gentleman asked whether there would be a debate. That is a matter to be fixed through the usual channels, but the change in the prescribed proportion requires to be made by order.

Hon. Members

Resign.

Several hon. Members

rose—

Mr. Speaker

Order. I understand, and even hear, the strong feelings of hon. Members on this matter, but another statement and an important Estimates debate are to follow, I propose to allow questions on this statement to continue for half an hour before I call the next statement.

Mr. Geoffrey Rippon (Hexham)

Into what state of decay is our physical environment to be allowed to sink before the Government recognise the distinction between just spending money and investing it to create real jobs and real wealth? Will we have to wait for a typhoid epidemic or some other disaster before the Government will permit essential expenditure on infrastructure in our towns and cities?

Mr. Jenkin

The Government maintain a substantial programme of spending on infrastructure. Because my right hon. and learned Friend chose to mention typhoid, may I remind him that only this year we announced a significant increase in the capital investment in the water industries. I hope that that investment has his approval. A higher proportion of local authority capital expenditure is, rightly, spent on the refurbishment and renovation of defective housing stock. Only this year, we added a new factor to the generalised needs index to take account of the obligations of local authorities to improve defective housing.

Mr. Simon Hughes (Southwark and Bermondsey)

How is it that the Secretary of State can tell the House, as he did in July, that capital spending makes a valuable contribution to this country's infrastructure and then be party to a policy which, a few years ago, first told off local authorities for not spending their capital, then provided them under the right-to-buy law with an opportunity to have more capital to spend, and now tells them that they cannot do as they choose with the money which, as the right hon. Gentleman says, is theirs? That leaves 800,000 people without homes this Christmas. How is that justifiable by any Government's policy at any time?

Mr. Jenkin

The hon. Gentleman has ignored the fact that since the system of capital control was introduced, it has always been recognised that local authorities could spend in any one year only a proportion of their receipts and that the balance would be carried forward for spending in another year. The proportions that operated during the last couple of years have led to a substantial capital overspend on the national cash limit. I have announced a reduction in the proportions that may be spent in one year, but the local authorities will keep their receipts and will be entitled to spend them in the years ahead. The local authorities will phase their spending more sensibly to be within the Government's cash limits. That is a perfectly sensible policy.

Mr. Francis Pym (Cambridgeshire, South-East)

Does my right hon. Friend appreciate that this highly restrictive policy will be greeted by local government with a sense of injustice? Is this not another example of central direction and control? Is there any prospect of my right hon. Friend unlocking historic receipts which represent a substantial fund of assets that could be invested for the benefit of the community and, incidentally, help employment? Can my right hon. Friend hold out any hope that he will establish a long-term basis upon which the relationship with local government can be conducted unmolested by frequent ad hoc intervention by the Government?

Mr. Jenkin

Taking the last point first, my right hon. Friend will have heard that I am discussing with the local authority associations revised arrangements for the capital control system, which is not perfect and cannot be in operation for next year. I hope that a satisfactory arrangement can be operated in the years ahead. My right hon. Friend talked about unlocking capital receipts, but, in recent years, local authorities have made substantial use of their capital receipts. Our problem is that the overhang could give rise to a large potential overspend on the national cash limit which forms part of the public expenditure total. As my right hon. Friend knows, for years it has been the practice of successive Governments when drawing their bottom line to include a maximum figure for local authority capital spending. I am trying to ensure that that figure will be delivered and not substantially overspent.

Mr. Merlyn Rees (Morley and Leeds, South)

In the face of the decay of housing in part of my constituency, did the Secretary of State instigate this policy and take it into Cabinet, or can it be called the revenge of the Chancellor of the Exchequer?

Mr. Jenkin

The right hon. Gentleman should not read some of the nonsensical statements in the press about that. Before the autumn statement, the Cabinet agreed the total of £3.055 billion to be spent on the housing programme next year by local authorities, new towns and the Housing Corporation. That is the figure that stands today. I have announced measures to ensure that the cash limit is not substantially overspent. The Government of whom the right hon. Gentleman was a distinguished Member followed that practice. It is a responsible practice. On 6 December, the House approved the autumn statement and its figures. It is necessary to ensure that those figures can be delivered, and that is what I have announced today.

Mr John Heddle (Mid-Staffordshire)

Will my right hon. Friend confirm that £2.3 billion is locked up in local authority coffers in long-term mortgages granted to people who have exercised their right to buy? In view of falling interest rates, would it not be in the interests of those council's ratepayers, as much as in the interests of the borrowers of those mortgages, if that money were made available to building societies, thereby releasing money for local authorities to spend?

Mr. Jenkin

I can confirm the figure of £2.3 billion on the local authority books. If local authorities can sell their mortgage books to building societies or other financial institutions, there would be an addition to their receipts and a prescribed proportion of those receipts could be added to the sums local authorities spend on capital investment.

Mr. David Winnick (Walsall, North)

Is the Secretary of State aware that, because of his Christmas message today, tens of thousands of families continue to live in housing misery and some 25 per cent. of all building workers will remain on the dole? Is the right hon. Gentleman aware that, if he had the slightest sense of self-respect he would resign rather than allow the Chancellor to have this victory over him today?

Mr. Jenkin

The hon. Gentleman seems to forget that I am announcing capital expenditure by local authorities of more than £4 billion. That is a substantial sum by any standard. In these circumstances, and when the building industry is happily expanding—it has grown by 4 per cent. in two successive years—it is not unreasonable that the public sector should be expected to live within the cash limits that my right hon. Friend the Chancellor has published.

Mr. Peter Tapsell (East Lindsey)

When these matters were discussed in Cabinet, did my right hon. Friend tell his colleagues that this country urgently needs a major new house building programme to provide homes for the homeless and jobs for the jobless?

Mr. Jenkin

I am sure that my hon. Friend recognises that, overwhelmingly, people want to buy and live in the homes they own. It is right, therefore, that the private sector of the building industry should be given every encouragement to provide those homes for potential home owners. There is, of course, a need for housing for special groups — the disabled, elderly, and so on —[Interruption.] The programme I have announced allows substantial sums to be invested next year by local authorities and the Housing Corporation to provide for those special needs. I do not regard it as part of the normal duty of local authorities to provide huge volumes of new housing for general occupation.

Mr. Dave Nellist (Coventry, South-East)

What sort of house do you live in?

Mr. Speaker

Order.

Mr. Donald Stewart (Western Isles)

Is the Secretary of State aware that many of us accepted the principle of the sale of council houses as rational and reasonable and, in fact, in some ways overdue? That sale was sought on the basis of the fact that the receipts from the sales would accrue to local authorities. What the Secretary of State is doing today will be regarded by those local authorities as a sordid swindle.

Mr. Jenkin

The right hon. Gentleman is quite wrong. Nothing that I have said takes that money away from the local authorities. All that I am asking them to do—many people would regard it as a sensible way to spend capital money—is to phase spending over a number of years, so that the total of capital spending is in accordance with the Government's overall spending priorities.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

Does my right hon. Friend understand that most local authorities will look upon this as yet another hammer blow against their freedoms of action? Does he further understand, or has anyone advised him, about the housing decay and the infrastructure that decays by the day in our cities? Will he explain to the House how it can be harmful to the economy to turn one capital asset into repairing and maintaining other capital assets? Does he not understand that, if we go on as we are now, with these voodoo economics, where we stick pins in all those people who carried out the policies that most of us believed in, we shall have no freedoms left, we shall have no homes left, and we shall have no sound and sane cities left. Will he change those policies at last and restore some sense and balance between local and central Government?

Mr. Jenkin

I admire the inventiveness of my hon. Friend's language more than the economic logic of his argument. My hon. Friend has considerable understanding of financial matters. He will be aware, therefore, that local authorities, which have used accumulated receipts to pay off loans or reduce the overall balance between their borrowing and lending, and which now want to use those receipts to undertake new capital expenditure, will inevitably have to increase their net borrowing to finance it. That is bound to bring pressure upon the public sector borrowing requirement. Although it is entirely right that substantial sums should nevertheless be spent on housing and other local authority capital projects — I have already given the House the figures—it is necessary to phase it over a number of years and not to allow substantial sums to be concentrated in a single year and so put the borrowing requirement under pressure.

Mr. J. D. Concannon (Mansfield)

Does the Secretary of State hold clinic mornings in his constituency ? If he does, he must realise that more and more people are going to see their Member of Parliament about not having a house, or about a house that is falling down and requires repairs, and about a lack of grant? Will the Minister answer those points, and at the same time inform me and many other people why anyone should want to be a councillor under this Government?

Mr. Jenkin

Local authorities have a wide measure of discretion in what they spend—

Mr. Beaumont-Dark

Can you hear?

Mr. Jenkin

—but most local authorities have always recognised that for revenue and capital spending they live within the broad limits which the Government propose and the House approves. All I am asking this year is that, after two years—[Interruption.] No, what I am asking—it is for the House to decide—is that after two years when the local authorities capital cash limit was substantially overspent and involved substantial claims on the contingency reserve, and faced with the potential overspend next year, we should take steps to do what we can to keep it under control. That is a reasonable thing, which any Government faced with the same problem would do.

Mr. Fred Silvester (Manchester, Withington)

As there is apparently now some £5 billion accumulated reserves, can my right hon. Friend explain why we should be asking councils to pursue our policy of selling council houses, when plainly that is no longer of much benefit to them? Will he be kind enough to explain to me why those reserves cannot be used to help the manifest deterioration of the housing stock which is visible in many of our large cities?

Mr. Jenkin

On the first point, the main engine for the sale of council houses has been the right to buy. That gives the tenant the right to demand, subject to the legislation, that he should be entitled to buy the house in which he lives. That right to buy is unimpaired. It is as strong as ever. It will result in substantial further sales of council houses to their tenants. I know that that has a great deal of support on both sides of the House. The question of how far and how fast local authorities may spend their accumulated capital receipts must be considered in the context of the public expenditure programme as a whole. It would make no sense to allow the expenditure to become bunched, as there is every prospect that it would, so as substantially to exceed the cash limit which the Chancellor has established, and which was approved by the House when it approved the autumn statement. It would throw the Government's economic planning into disarray.

Mr. Eddie Loyden (Liverpool, Garston)

The Secretary of State will be aware that, during his visit to Liverpool, he recognised that Liverpool had the worst housing in the United Kingdom. What prospect does that local authority have of improving it, in view of the fact that today he is turning the screws again on local authorities, ignoring their needs, and further damaging the construction industry, in which there is unemployment of about 30 per cent. in that area?

Mr. Jenkin

I am well aware of the serious housing conditions in Liverpool. I and my hon. Friend the Minister for Housing and Construction have been to see them. I hope that the leaders of Liverpool city council will now agree to resume discussions with officials of my Department in the normal way, as every other local authority has done, so that we can agree a sensible HIP allocation. There is no sense in starting to shout and indulge in slogans accusing me of breaking promises when I have done no such thing.

Mr. Robin Maxwell-Hyslop (Tiverton)

My right hon. Friend will remember that the Housing Act 1980 contained a special provision designed to prevent houses in designated rural areas migrating from homes into holiday homes. Will he therefore exempt the operation of the buy-back provisions from the capital controls? The sums of money involved are small, but, without that exemption, the will of Government and Parliament in that respect could, in practice, be frustrated.

Mr. Jenkin

I understand the importance which my hon. Friend attaches to that matter. I shall, if I may, write to him about it.

Mr. Janner

What possible logic can there be in requiring a city such as Leicester, as the Minister has now done, to freeze its housing money after last week requiring it to use its reserve to put down the rates? When a council is thereby forced to cut its contracts and to go back on its contractual obligations, who will pay the penalties? Will it be the Government or the ratepayer? Who will benefit? Will it be the unemployed?

Mr. Jenkin

The ratepayers of Leicester will benefit because Leicester city council, having built up substantial revenue reserves, is only to be asked to disgorge some of them for the benefit of its ratepayers. It has nothing to do with capital reserves.

Mr. Michael Latham (Rutland and Melton)

What calculation has my right hon. Friend made of the effect of this economically incomprehensible statement on the number of unemployed in the construction industry?

Mr. Jenkin

The economics of this statement are in support of a policy that my hon. Friend has supported consistently for the past five years — that the Government should keep their borrowing and spending under tight control. That is the policy upon which we are engaged with the support of a large number of people in this country. Capital spending by local authorities next year at over £4 billion is as provided in the autumn statement. All that I am asking is that the spending of the accumulations of capital should be spread over a reasonable period. That is why I am proposing the alteration to the prescribed proportion.

Mr. John Cartwright (Woolwich)

Will the Secretary of State accept that thousands of council tenants in constituencies such as mine will never be able to afford to buy their homes and are condemned to live in damp, vandalised, substandard accommodation? Does he accept that thousands of building trade workers are looking for a job, and that local authorities are sitting on more than £4 billion of capital receipts? In those circumstances how can he justify preventing local councils from spending their money on what needs to be done now, not at an unspecified date in the future?

Mr. Jenkin

The hon. Gentleman should know that in many inner cities there have been between 40 and 50 successful examples of housing estates, where councils have entered into partnership with private developers to refurbish the estate. I hope that more councils will see that as a solution to the problem of their run-down inner city estates. Regarding the second part of the hon. Gentleman's question, I have nothing to add to what I have already said.

Mr. Richard Tracey (Surbiton)

Is my right hon. Friend aware that the housing stock in the royal borough of Kingston upon Thames is extremely well managed, and that that council began selling council houses to tenants before many other councils? Will he ensure that the council is not penalised because of the profligacy of authorities represented by many Labour Members? Will he guarantee that the council will be able to carry out Government policy by renovating run-down, inter-war stock and providing improvement grants for owner-occupiers?

Mr. Jenkin

My hon. Friend will have noticed that I announced an additional 5 per cent. to the allocations of the majority of authorities which complied with my request for restraint last year. He will also note—the point was impressed hard on us by a number of those who came to see my hon. Friends and me about the request for restraint—that the complaint was made that we were penalising authorities that had already sold assets and had receipts, to the advantage of those that still had assets to sell. The new prescribed proportions that I announced today will apply equally to in-year receipts and accumulated receipts. Therefore, there will be no discrimination against those who have already acquired them.

Mr. Terry Davis (Birmingham, Hodge Hill)

When the Secretary of State says that he has not announced any new cuts in housing expenditure in his statement, is he saying that the figures for housing expenditure in the Chancellor's autumn economic statement included the prescribed proportion of accumulated capital receipts? Or will he admit that in announcing a reduction in that proportion today from 40 per cent. to 20 per cent., he has announced a new cut in housing expenditure?

Mr. Jenkin

The hon. Gentleman is wrong. I have announced measures that will be necessary to deliver the housing figures that were in the autumn statement. The autumn statement included figures for local authority capital expenditure, and the measures are to prevent a substantial overspend of those figures.

Viscount Cranborne (Dorset, South)

I am sure that my right hon. Friend will accept that the powers enjoyed by local authorities are derived from powers given to them by the House. However, is he not worried that at a time of recession capital expenditure has been cut more than current expeniture, and that as a result, the type of investment that can lead us out of the recession has been needlessly clocked?

Mr. Jenkin

My hon. Friend is absolutely right. He will know that during the past four or five years local authority revenue expeniture has substantially exceeded the guidelines laid down by the House. For that reason, we have inevitably had to consider other areas of expenditure to keep the Government's total within the limits approved by the House. I entrirely agree with my hon. Friend that if we can get local authorities' current expenditure down —we are doing that through rate capping—we can take an easier view of their capital spending.

Mr. Derek Foster (Bishop Auckland)

Why does not the Secretary of State come clean? Is he not forcing local authorities to increase their balances so that he can further cut their grants next year? Is he aware that not even the Prime Minister defines overspending as spending one's own money?

Mr. Jenkin

The hon. Gentleman is confusing revenue balances with capital balances. They have nothing to do with each other.

Mr. Colin Shepherd (Hereford)

Is my right hon. Friend aware that a number of reasonable district councils are becoming increasingly frustrated at seeing their reasonable ambitions thwarted in spite of the fact that they are based on the successful implementation of a very popular policy? Will he consider their exasperation? Do I understand that the implications of his remarks are that if his number-crunching does not come out right this year, he will consider a moratorium next year?

Mr. Jenkin

In answer to my hon. Friend's first point, I am well aware of the disappointment of authorities. He is right to mention small district authorities, which may not have large capital expenditure programmes but whose programmes are dear to their hearts. I ask that programmes are phased over a period of years so that in aggregate the spending does not exceed the limits laid down by the Government. On my hon. Friend's second point, I hope that the measures I have taken will avoid any severe mid-term disruption. I have already said that we agree that there can be a 5 per cent. margin, with no question of coming to the House and asking for futher restraint. If an excess goes substantially beyond that, I do not rule out the need to come to the House and ask for restraint.

Mr. Jack Ashley (Stoke-on-Trent, South)

Is the Secretary of State aware that if we accept the Treasury cuts —they are Treasury cuts—his Christmas message, as clear as a bell, will be no homes for the homeless? Instead of passively accepting the Treasury's decision, why does he not recognise, in the light of our exchanges this afternoon, that nearly the entire House is against the Treasury, and that it can be defeated? If he mobilises hon. Members on both sides, he can ensure that the Treasury treats these cuts as it treated the proposed cuts in student grants.

Mr. Jenkin

I hear what the right hon. Gentleman says. I would quarrel with him in his use of the word "passive". I recognise that the measure will be a disappointment to local authorities because they will be asked to spread their capital spending over a longer period than they had hoped. I ask the right hon. Gentleman to accept that the measure is in the interest of the overall management of public spending and that it is part of the policy that the Government have followed for many years.

Mr. Den Dover (Chorley)

If the Secretary of State sincerely believes that construction has increased during the past few years, why has the number of building workers out of work increased? Is he fully prepared to listen to the view of the construction industry, which will be exasperated and frustrated, and will show sheer disbelief at his announcement?

Mr. Jenkin

I assure my hon. Friend that I took many opportunities to listen to the views of the construction industry. The figures that I quoted about the 4 per cent. in real terms expansion last year, the further 4 per cent. in real terms expansion this year, and the prospects of maintaining or even increasing that growth next year, are accepted by the construction industry. They represent a welcome turn-round from earlier years.

Mr. Reg Freeson (Brent, East)

Is it not the case that DoE officials have great doubts about those statistics? Will the Secretary of State please tell the House and my constituents in Brent how many of the 1,000 families who are living in bed and breakfast accommodation and other temporary hostels will be rehoused if the Government continually cut capital expenditure? Will he tell the construction industry and the House how we shall carry out the £10 billion worth of work on faulty houses and the £20 billion of expenditure required on private housing to bring them up to a decent standard? How does he expect that work to be done while he cuts capital expenditure?

Mr. Jenkin

To take the right hon. Gentleman's last point, the Government have never accepted and do not accept, that it is the responsibility of the taxpayer to maintain private houses. It is the responsibility of their owners. However, for people at the bottom of the incomes scale there can be a limited system of housing improvement grants, and I ask the right hon. Gentleman to await the consultation paper that we shall publish soon. There was a full debate on homelessness in the House on Friday and I commend to the right hon. Gentleman the speech made then by my hon. Friend the Minister for Housing and Construction.

Mr. Roger Sims (Chislehurst)

Is it not true that authorities such as Bromley, which have enthusiastically carried out the Government's policy of selling houses and land, are being positively penalised by the Government? Can my right hon. Friend explain, in layman's terms that non-economists can understand, why he will prevent authorities such as Bromley from carrying out projects that would create local employment, that would be paid from their resources and that could not possibly affect the PSBR?

Mr. Jenkin

I must ask my hon. Friend to accept that it has been a continuing policy of the Government for five years to try to control the general level of public spending and borrowing. There is no way in which that can exclude capital spending. I share my hon. Friend's aim, whereby, by achieving better control over local authority revenue overspending, we could devote more resources to capital spending. But until we can do that I must ask local authorities to live within the overall cash limit that the Government have laid down and that the House has approved.

Several Hon. Members

rose—

Mr. Speaker

Order. I said that I would end questions on this statement at 4.30 pm, but there appears to be great interest in it. Therefore, I propose to allow questions to continue for not more than another 10 minutes. Then we must move to the next statement, in fairness to those who are anxious to speak later.

Mr. Simon Hughes

On a point of order, Mr. Speaker.

Mr. Speaker

I do not think I shall take a point of order now. It simply takes up time.

Mr. D. N. Campbell-Savours (Workington)

Can the Secretary of State advise me about what I should tell my constituents in my surgery this Saturday when they ask me why the local authority is refusing to give them improvement grants, to repair their homes or to carry out modernisation, when they know that next year Allerdale district council will be carrying at least £3.5 million in its balances on capital receipt account? How can we answer the complaints of those constituents who have a genuine grievance and who demand action from the public authorities?

Mr. Jenkin

The first answer that the hon. Gentleman should give to his constituents is that it is for the local authority to determine its priorities within the overall spending limits that have been laid down. The hon. Gentleman should be able to explain to his constituents that there cannot be unlimited spending either on capital or revenue accounts, and that inevitably, if the figures are to add up at the end of the day, the Government are responsible for laying down the rate at which capital receipts can be spent—[Interruption.] I understand their problems, but it is the primary responsibility of those who own their homes to maintain them, not to ask the taxpayer to do so.

Dr. Keith Hampson (Leeds, North-West)

Does my right hon. Friend accept that what really matters is not a Treasury forecast of what might become an overspend but the creation of jobs, and that there are few more sensible ways of doing that than by renovating the housing stock, which is not import-intensive? Is he aware that many of his colleagues sympathise with him, in that he and not the Chancellor has been forced to come to the House to present this defence? Does he not believe that the power of the Treasury has increased, is increasing and should be diminished?

Mr. Jenkin

I assure my hon. Friend that my announcement today is the policy of Her Majesty's Government, as determined by the Cabinet. There is no question of it being the policy of one Minister or another. My hon. Friend knows that there must be a limit on public spending if we are to maintain the strategy on which we have embarked. That must include capital spending. We cannot stand by idly and allow massive overspend on local authority capital accounts or any other capital accounts. That is the purpose of cash limits.

Mr. Max Madden (Bradford, West)

Should not two broad conclusions be drawn from the statement: first, that the Secretary of State has no support from Conservative Members for his miserable statement; and, secondly, that the Government and the Conservative party no longer give a damn about the poor and deprived who live in desperate housing need in the many deprived areas of Britain?

Mr. Jenkin

I refute completely the second part of the hon. Gentleman's question. We are making provision for more than £4,000 million of local authority and Housing Corporation investment, which will provide overwhelmingly for those at the bottom of the incomes scale. I hope that the hon. Gentleman will withdraw that accusation. On the first part of the hon. Gentleman's question, I am bound to say that I did not expect a warm welcome for my statement, but it is part of the responsibilities of office to come to the Chamber and tell people the truth.

Mr. Robert Jackson (Wantage)

In his statement last week my right hon. Friend clobbered many local authorities run by his friends. What steps has he taken with this announcement not to clobber the same authorities?

Mr. Jenkin

I hope that my hon. Friend recognises the fact that we have deliberately set aside a sum that we estimate to be about £100 million to be added to the allocations of the responsible authorities which complied with my request of last July. I hope that that goes some way to meeting my hon. Friend's anxiety.

Mr. Jim Callaghan (Heywood and Middleton)

Is the Secretary of State aware that earlier this year an all-party delegation of members of Rochdale borough council visited the Minister for Housing and Construction to express their grave anxiety about the housing stock in the Rochdale area? Is he further aware that, following our invitation, the Minister for Housing and Construction visited the borough and, at my personal invitation, visited the worst housing estate that I have ever seen — the Back o' the Moss estate—where he saw the dreadful conditions in which those human beings must exist? What Christmas message of good cheer do I have to take back to those good people?

Mr. Jenkin

I hope that the hon. Gentleman will take time off during the Christmas recess to inspect in neighbouring Oldham the former Strinesdale estate, which conformed precisely to the description of the estate that he has just given but which, with the help of the private sector, has been substantially refurbished and is now a pleasant place in which to live. I hope that Rochdale borough council and many other councils that have similar estates will try to achieve in partnership with the private sector what they have been clearly unable to achieve on their own.

Mr. Tony Marlow (Northampton, North)

Did not my right hon. Friend hit the nail on the head in his previous answer? Is not the reality that £4,000 million is a hell of a lot of money? It amounts to £75 for every man, woman and child in the country, which every year represents £6 a week for a family of four? Is not the worst housing crisis in those areas, with largely Labour-controlled authorities, where housing resources have been violently mismanaged? Is not the answer to the problems of the taxpayer, the ratepayer and the homeless to privatise large sections of public authority housing?

Mr. Jenkin

I hope that we shall achieve greater private investment in inner city housing. There have been some successful pioneer schemes by several local authorities. My hon. Friend is right to say that that is the way in which we shall bring new hope and life to many decrepit, run-down areas.

Mr. Allan Roberts (Bootle)

Is the Secretary of State aware that the most pitiful aspect of his statement is that he seems to lack all knowledge of what is happening on the ground? Is he aware that Lawrie Barratt and others in the building industry have recently said that the joint venture schemes that the right hon. Gentleman has just described will no longer be able to continue as a result of the imposition of 15 per cent. VAT on building charges? Is he aware that the Sefton Conservative-controlled county council is one of the wax models into which he is sticking pins? Is he aware that there are already cases of dysentry in the Church Street estate in my constituency because that local authority, following his request for voluntary restraint, introduced a moratorium and has not got the money to put the drains or the houses right? Is he aware that today he has announced the death of the public sector building programme and that this is a worthy Christmas present from this Government to the homeless and the badly housed.

Mr. Jenkin

The hon. Gentleman is talking a great deal of rubbish. To describe expenditure of £4,000 million as the death of the public sector building programme is hyperbole which goes even beyond the hon. Gentleman's normal standard. My right hon. and hon. Friends and I are aware of many of the difficult housing conditions in our inner cities but we have to recognise that, over the years, despite the expenditure of large sums of public money, many of those problems have become worse. I point out the contrast where the private sector has come in, and many black spots have been turned into nice places in which to live.

Mr. Patrick Nicholls (Teignbridge)

Will my hon. Friend accept that effectively he is being accused of a cut in national investment? Will he put that accusation into perspective by confirming what I understand is the position, which is that last year there was an increase in both public and private investment and that, if current trends are followed, there will be an increase in that investment next year as well?

Mr. Jenkin

My hon. Friend is quite right. Construction output in the first three-quarters of this year is around £750 million up on the same period a year ago and the latest figures for new orders show a 6 per cent.

increase in the 12 months up to the end of October over the previous 12 months. Private industrial orders are up by 30 per cent. and private commercial orders are up by 11 per cent. Hon. Members should bear those figures in mind when they complain about the impact on the construction industry.

Mr. Jeff Rooker (Birmingham, Perry Barr)

What has happened since November 1982? The Prime Minister said then, in the debate on the Queen's Speech: We need more capital spending by local government and in the public sector generally."—[Official Report, 3 November 1982; Vol. 31, c. 21.] Today, the Minister has announced a major change in Government policy. Does the right hon. Gentleman accept that the figures that he has just given for the construction industry show how badly the construction industry has been affected? Today, it is working at a level that is 50 per cent. lower than in 1974. Will he put a figure to the question that he was asked earlier about the effect of today's announcement on jobs? Does he agree that the effect, counting the indirects, will mean 100,000 fewer jobs in construction and building next year?

Is it not desirable that we should, whatever the mix of public and private investment, get housing building starts back to the level of even the lowest year under the last Labour Government? Does the Minister accept that we should improve, maintain and repair the housing stock at a rate that is at least equal to the rate at which it is deteriorating? I should like, and I think that the House would welcome, firm solid answers to those questions.

Does the Minister know what it is like to be homeless on a waiting list, knowing that the local authority does not have the money either to build or repair? Why has the Minister launched such an attack on young owner-occupiers, who have been encouraged to buy both in the public and private sectors on the firm Government promise that there would be improvement and repair grants to put in inside toilets, proper bathrooms, kitchens and to re-wire electrical systems? Why has the Minister produced such a policy today? In the 11 years that I have been in the House, this is the most contemptible and disgraceful statement that I have ever heard from any Minister.

Mr. Jenkin

The hon. Gentleman has asked many questions, some of which were repeats of questions that have already been asked—

Mr. Rooker

But not answered.

Mr. Jenkin

They were answered earlier in the exchanges.

The hon. Gentleman's last point was about home improvements grants policy. The Government have made it clear that the system of mandatory grants for essential amenities is an important part of our housing provision. That will remain, and I hope that those who have bought houses without basic amenities will be able to apply for those grants. They are mandatory. On the wider discretionary improvement grants, there is no question of anybody having been promised that there would for all time—

Mr. Rooker

Yes they were.

Mr. Jenkin

No. The hon. Gentleman should examine what has been said. There is no question of any promise that for all time there would be a system of discretionary grants, whether on the miserable level left behind by the Labour Government, or on the very much higher level that we achieved last year and the year before. It is primarily the responsibility of home owners to maintain their houses, and it is not the responsibility of the general body of taxpayers. That principle is warmly supported in many parts of the House.

Several Hon. Members

rose—

Dr. Cunningham

On a point of order, Mr. Speaker.

Mr. Speaker

Order. I normally take points of order at the end. Does this point of order rise directly out of the statement?

Dr. Cunningham

Yes, Mr. Speaker. I rise on a point of order to give you and the House notice that, following the next statement, I shall be seeking the Adjournment of the House under Standing Order No. 10 so that we can have an immediate opportunity to discuss the implications of this statement.

Mr. Dennis Skinner (Bolsover)

On a point of order, Mr. Speaker. This is a point of order rising out of the statement.

We all understand that you have a somewhat difficult task, Mr. Speaker, when a Minister has to come to the Dispatch Box, and we understand that it is your job to select the people to ask him various questions. On this occasion, we understand that it was even more difficult. We realise that your job is to provide balance and to call a number of hon. Members supporting the Government and a number of hon. Members against. Is it not reaching a sordid level when Tory Whips have to go round to nobble a few people at the fag end of questions to get people to support the Government because everybody else is against them?

Mr. Speaker

Order.

Mr. Marlow

Further to that point of order, Mr. Speaker.

Mr. Speaker

Order. The last point of order was spurious, but in fairness, and as the hon. Member for Bolsover (Mr. Skinner) called for balance, I shall take the further point of order.

Mr. Marlow

Further to that point of order, Mr. Speaker. The last remark made by the hon. Member for Bolsover (Mr. Skinner) was about Whips talking to Government Back Benchers. The Whips may have spoken to Back Benchers, but they did not speak to me.

Mr. Concannon

On a point of order, Mr. Speaker. I shall be brief, and, as you know, Mr. Speaker, I do not usually raise points of order. However, I notice that the Leader of the House has been toing and froing during the statement and I wonder whether the right hon. Gentleman is prepared to make a statement on the future of this announcement, which has found few friends in the House? I understand that the Leader of the House has been out talking to the Patronage Secretary, and I have seen him out of the corner of my eye talking to you, Mr. Speaker.

Mr. Speaker

Order. I have no idea why hon. Members leave the Chamber.