§ Mr. Roger Sims (Chislehurst)On 18 July this year the Secretary of State for the Environment sent a letter to local authorities which was ostensibly a request to restrain their capital expenditure. In fact, the letter contained scarcely veiled threats — effectively to impose an immediate moratorium on capital expenditure of whatever character and however financed.
There followed a protracted correspondence between the leader of the council of the London borough of Bromley, Councillor Dennis Barkway, and the Department of the Environment and between me and the Department about the effect on Bromley of the moratorium, especially with regard to the use of the proceeds from the sale of assets. The Department appeared completely deaf to Bromley's case and, eventually, the stage was reached where it seemed necessary to ventilate the matter publicly and last week I applied for an Adjournment debate to do so.
Within hours of learning that I had succeeded in obtaining a debate, we heard a further announcement which was followed by a debate on Wednesday. We learnt that, far from taking into account the representations that had been made on Bromley's behalf, there was to be a further turn of the screw.
We are not talking about a council which imposes extortionate rates, which throws money about on grants to eccentric organisations or indulges in frivolous projects. The London borough of Bromley, represented in the House by my hon. Friends the Members for Ravensbourne (Mr. Hunt), for Beckenham (Sir P. Goodhart) and for Orpington (Mr. Stanbrook) has been a model of rectitude. It has consistently kept its expenditure within the grant-related expenditure assessment; and it has consistently kept its expenditure within targets. Bromley has always complied with Government requests. It has diligently carried out Government policies. It has sold council houses at the rate of 1,000 a year, and as a percentage of houses sold it is top of the league of the London boroughs.
Bromley has sold unwanted land; and it has rationalised its school properties by selling land and premises, and that has often involved politically unpopular decisions. A few days ago, the Audit Commission issued a report urging local authorities to study their holding of school properties. Bromley has done more than that; it has disposed of some of them.
Earlier this year Lord Belwin, on a visit to the borough, complimented Bromley on its asset sales policy. The council has used roughly 50 per cent. of the proceeds to pay off debt and 50 per cent. to improve the borough's housing stock. It has taken full advantage of the housing improvement and renovation grants scheme; it has supported many of the housing associations which do such good work in the borough; and it has also used the funds to improve schools and on projects such as the high street relief road—and all that not on borrowed money.
The result of the moratorium is that there has had to be deferment of several schemes involving school replacements and adaptions and road improvements, and especially affected have been improvement and renovation grants. Even with the moratorium, it is likely that in the 731 financial year 1984–85 Bromley will spend about £14 million on grants. If the present situation persists, in the next financial year Bromley will be able to spend £2 million, although there is a considerable demand for those grants, particularly for the improvement of pre-1919 houses.
A further clamp-down is proposed. We are told that some boroughs— it is not yet clear whether Bromley will qualify—may get an extra 5 per cent. allocation; in other words, an extra 5 per cent. of money that they are allowed to borrow. That would allow the building of five or six houses. Bromley would much prefer to be allowed to use its own funds to improve the thousands of properties that need such improvement.
Why has that situation arisen? Because the Government, in the shape of the Department of the Environment, although we all know that the Treasury is lurking behind it, are seeking to control all public expenditure regardless of its nature and of how it is financed. The argument centres around the magic words "public sector borrowing requirement".
How can spending money that one already has affect the PSBR? The Secretary of State says that if one sells assets, and uses the proceeds to pay off debts or make short-term loans, one is reducing the PSBR. Obviously that is right, but he goes to say that when one calls in those loans in order to spend the money that increases the PSBR.
I am not an economist, and I must say that I do not understand that argument. If it is true, it is an argument against selling assets, and we understood that the Government wanted authorities to sell assets. If one sells one's assets but, instead of loaning out the proceeds on a short-term loan, puts them in a sock under the bed until one wants the money, how does that affect the PSBR? That argument makes neither economic nor common sense. In any case, at the end of the day, the Department can still control the money that the local authority borrows.
I have referred to what Bromley does with the proceeds of the sale of those assets. It uses roughly half to pay off debts, as a result of which the borough has virtually rid itself of its rate fund debt. It uses half to finance new projects or improvement work. If the money is not immediately required for such purposes, either it is put in the bank where it earns interest or it is used for internal loans, either way helping to keep down the rates.
The argument put to us by the Secretary of State in the debate the other day was that if the councils were allowed to spend all their accumulated receipts it would immediately have a serious effect on the money markets and interest rates. That may be so if they spend the whole lot all at once, but of course they do not and would not. Any prudent and responsible council such as Bromley would spread its expenditure over a period, if only to keep within GREA.
I simply cannot see the argument for controlling capital expenditure of this character when the local authority is keeping within its target, nor can I understand why the Government are reneging on the clearly given understanding that the proceeds of the sale of council houses could be used for housing. Bromley relies heavily on capital receipts, but what incentive is there now to continue with its policy of selling assets?
This is not an unavoidable or inevitable situation. The so-called "voluntary restraint" of July and the recently 732 announced imposition of restrictions does not have to take the form proposed, nor does it have to apply to all local authorities.
I hope that the Secretary of State will abandon these further restrictions on the use of proceeds from assets. For the reasons that I have given, it is not justified. I felt unable to support the Government in the Division on Wednesday and, if the proposals come before the House unchanged in the form of an order in the new year, I may well not confine myself to abstaining.
I offer a way out to the Government. I suggest that a clear distinction should be drawn between local authorities which co-operate with the Government and those which do not. The restrictions should not apply to local authorities which keep their expenditure within GREA and within target. That is a very simple solution. It is easily applied and requires no consultation. I can say on behalf of Bromley that if the Government were prepared to agree to that Bromley would happily forgo the 5 per cent. bonus in allocation to which it hopes it is entitled.
I do not expect the Minister to make an immediate response to that suggestion. Instead, I wish him a happy, restful and well-earned Christmas. Nevertheless, I ask him to consider carefully early in the new year the arguments that I have advanced and in particular the suggestion that a distinction should be drawn between different authorities. I trust that he will respond in a manner that will help rather than hinder local authorities such as Bromley which would much prefer to work with the Secretary of State than to be at odds with him.
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§ Mr. John Hunt (Ravensbourne)I congratulate my hon. Friend the Member for Chislehurst (Mr. Sims) on securing this Adjournment debate and on the formidable case that he has presented on behalf of Bromley, which I certainly echo and endorse. The presence of all four Members of Parliament for the borough shows the strength of local feeling on this.
My hon. Friend the Member for Chislehurst has recounted the history of this. He has told the House how the Government's restraints on capital spending were received with shock, horror and alarm by Bromley council. The original moratorium has now been intensified by the Secretary of State's announcements this week and further dismay and distress has been caused.
I understand that when the axe first came down on 18 July no fewer than 1,000 improvement and renovation grants were in the pipeline. That gives the House some idea of the heartache caused by the present policy. Like my colleagues, I have received many sad and anxious letters from pensioners, young married couples and many other people who feel baffled and resentful at what has happened. Their grant applications were on the verge of approval but have suddenly been axed.
I beg my hon. Friend the Minister to consider the social and human consequences of what he and the Department are doing. My constituents will now have to wait a year or more to repair leaking and draughty homes and to make other improvements which, although being carried out for those people themselves, also improve the housing stock of this country.
We are baffled and bewildered at what has happened and we feel resentful about it because we are frankly not convinced by the Secretary of State's convoluted 733 arguments about the public sector borrowing requirement. In the debate on Wednesday my hon. Friend the Member for Grantham (Mr. Hogg) said:
Local authorities have in their possession capital receipts. They could spend them on housing or whatever, without borrowing more money and without raising extra taxation. For the life of me, I cannot see the economic objection to that"— [Official Report, 19 December 1984; Vol. 70, c. 306.]Neither can I—and my hon. Friends are still awaiting a convincing answer to that challenge, which my hon. Friend the Member for Chislehurst has repeated today. As he said, in Bromley's case the resources have been accumulated largely as a result of the council's successful council house sales policy. Now Bromley is to be penalised for its success and for carrying through the policies urged upon it by the Government. There can be no logic or justice in that.My hon. Friend the Member for Chislehurst and I were preceded as Member of Parliament for Bromley in the House by Mr. Harold Macmillan, now my noble Friend the Earl of Stockton. The House will recall that his major achievement as Minister for Housing was the completion of 300,000 houses a year. At that time there was real understanding of the housing needs of our people— a sense of compassion and concern that is sadly lacking in some quarters of the Department of the Environment today. My hon. Friend said, and I know, that the real ogre in this affair is the Treasury, but my hon. Friend the Minister and his colleagues have acquiesced in the Treasury's demands and, to that extent, they must carry a heavy share of responsibility.
I hope that this short debate will help to convince my hon. Friend the Minister of the strength of feeling in Bromley and of the need to adopt a more flexible and sympathetic approach. I hope that he will respond to the suggestions of my hon. Friend the Member for Chislehurst. Local authorities such as Bromley have backed the Government in every way. They deserve help, encouragement and support, not the kick in the teeth that these measures represent.
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§ Mr. Ivor Stanbrook (Orpington)I am grateful to my hon. Friend the Member for Chislehurst (Mr. Sims) and to the Minister for allowing me to intervene briefly in the debate. I wholeheartedly support what my hon. Friend the Member for Chislehurst said against the Government's policy, and I look forward with him to maintaining pressure on the Government, with the possible threat that we shall be forced to withhold our support from any order that seeks to implement the policy.
Many of my constituents have been disappointed and frustrated because their pending applications for home improvement grants, to which they believe they had a right and which they believed were the subject of a binding promise, have not been allowed. The Government's decision came like a thunderbolt into local negotiations for housing improvement grants, and in many cases debts have already been incurred. There was a great physical need for the repair of some houses in my constituency which was dependent on obtaining housing improvement grants. Moreover, elsewhere in the constituency, the council has correctly and under pressure from the Government carried out a policy of selling its assets, including a large school and its grounds. The council 734 expected that the money obtained from the sale would be of great value to my constituency as well as to the London borough of Bromley. Those expectations have been frustrated.
I deplore the Government's policy. The economic validity of their arguments is weak, and the political arguments go entirely the other way. By instituting such a policy the Government will cause dissatisfaction among their loyal supporters and will debase their promises. I implore the Government to reconsider this matter. I need not refer to previous occasions when there has been insufficient consultation with Members of Parliament, but I should say that the Government cannot continue indefinitely their cavalier treatment of local authorities in circumstances that reflect a turnround in Government policy. The London borough of Bromley deserves much from the Government, but it has been frustrated and insulted by the change of policy.
§ Sir Philip Goodhart (Beckenham)I am also grateful to my hon. Friend the Member for Chislehurst (Mr. Sims) and to the Under-Secretary of State for the Environment for allowing me to intervene briefly in this important Adjournment debate. I note that home improvement grants provide a notably labour-intensive form of capital spending and also help to tackle the problem of home dilapidation. I note, too, that, thanks to wise Conservative policies, there was nationally a sixfold increase in the number of houses being repaired and improved between 1978 and 1983. As one would expect, Bromley played a notable part in that expansion.
In 1978–79, Bromley council spent just under £300,000 on home improvement grants. In 1981–82 that figure had increased threefold: Bromley was spending just under £900,000 on home improvement grants. In 1984–85 that figure has increased to £12 million and will probably reach £14 million by the end of the financial year. This rate of expansion was perhaps too great to sustain, but I regret that the Government's restrictions upon capital expenditure in Bromley will result in a cutback in the home improvement programme from £14 million to less than £2 million.
As I wrote recently in a "One Nation" pamphlet, "Jobs Ahead", on both employment and housing grounds I hope that the Government will take action so that the volume of home improvements and repairs will again increase. Since the pamphlet appeared, the Government have moved in the wrong direction both for Bromley and the construction industry. I hope that the Government will think again before they bring their capital spending plans for Bromley and other local authorities before the House in the new year, otherwise I, too, may have to think again about my support for the Government's local government policies.
§ The Parliamentary Under-Secretary of State for the Environment (Mr. William Waldegrave)Nothing is more impressive than when the united parliamentary forces of an area speak to the House on such an issue as this, which is of passionate importance to the locality involved. Every single point that my hon. Friends have made about Bromley council is right. Bromley council is one of the best run councils in the land. Its leader and his group are among the most distinguished of our Conservative supporters in local government. In many 735 respects they have given us stalwart support. I mention also the personal contribution of the leader to the development of policy over the abolition of the Greater London Council. There is nothing, therefore, that I would wish to argue about in what my hon. Friends have said but I must take issue with them on the fundamental choice that faced the Government.
My Department knows better than any other Department in Whitehall about the distress, difficulty, anxiety and real problems that have been caused for local councils by this policy. I personally meet, as do my right hon. Friends, delegation after delegation. At all times we are in close touch with our friends and officials in local government. We know the costs involved for them in such decisions as this. As Members of Parliament we know about the problems. I am the Member of Parliament for an inner city constituency, and my right hon. Friend the Secretary of State represents a constituency that is not far from Bromley. Other Ministers who are here today for other debates face exactly the same pressures and problems. We come across them in our surgeries and in letters from the worried people who have been referred to this morning.
Why then do we have to continue with the pain and grief that this particular policy creates? The only point that I want to take issue with was the comment made by my hon. Friend the Member for Chislehurst (Mr. Sims) that there were deaf ears. That is not so. The Government know exceedingly well that their policy causes pain and grief for local authorities and for their supporters in many respects. But it would be wrong for me as a Minister, and perhaps even for my hon. Friends, to suggest that hidden somewhere in the depths of Government in a lair unknown to the rest of us, is an ogre who is enforcing on spending Departments a policy of his own, nothing to do with those of the Government, with no origins in the manifesto, with no backing from Cabinet Ministers, with no backing from the House, and that somehow that ogre so terrifies my Department that we have lost our wits and sought to cause unnecessary difficulties for councils such as Bromley, which is, as I say, among the best in the land. That is not so.
My hon. Friend the Member for Beckenham (Sir P. Goodhart) belongs to a distinguished group, of which I was once a proud member. Having assented to the Government's general economic strategy, I cannot now say, when it becomes inconvenient for my Department, when it begins to be troublesome to my supporters, that that policy must be abandoned. Let me reminisce briefly. In my previous Department I had some discussions with my hon. Friend about university spending. Again, I had to say that if spending is above Government plans it must be brought down.
It is not difficult to make the connection between that spending and the central economic policy of the Government. Some of my hon. Friends, not so much today but when we have debated the matter previously—we shall come back to it in the new year—have made a greater difficulty here than is necessary.
Local authorities have accumulated large amounts of money through the sale of land and houses. Some of that has already been spent. The remainder has been used in two ways. It has been loaned to people outside the council to offset the council's debts, or loaned to other accounts within the council to reduce borrowing from outside. Such legitimate strategies reduce the net borrowing of local 736 authorities and thereby they reduce the borrowing of the public sector as a whole. The figures are exceedingly large. We are talking about something in the region of £5 billion. The potential effect on public borrowing is enormous. The overhang of those figures is enormous.
This year, we were heading for an overspend of the order of £1 billion. That makes things a little different from the matter of student grants which my hon. Friend the Member for Orpington (Mr. Stanbrook) implicitly referred to, about which there was some dispute recently. In that case, at the end of the day, it was possible for the Government, moving sums of £10 million to £11 million around, to make some modification in policy which it would be absurd to describe as abandonment of any central financial strategy. The figures, although uncomfortable for the Treasury which always looks for saving, were hardly central. But we cannot treat figures of the order of £1 billion a year as marginal to the Government strategy. There is no question whatever about their effect on PSBR. The PSBR is a net figure. There is no problem about that at all.
There may be two separate problems. There may be those, like my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath), who have some difficulty with the economy policy itself. But that is a quite different category.
There may be those, such as the right hon. Member for South Down (Mr. Powell), who take the view that different parts of the PSBR have different kinds of monetary effect. That is an argument which, as often happens with the beautiful arguments of the right hon. Gentleman, may be seen to dissipate a little when it is examined more closely. We can get into some rather curious difficulties if we take the view that different parts of the PSBR have different monetary effects. The implicit guarantees to the whole of the public sector have very similar effects.
We either have to say that we are assenting to the overall Government strategy or that we are not. We can say with regard to some things that, de minimis, there will be a £10 million adjustment to meet the legitimate worries of colleagues. But can we have any hope of being taken seriously by other spending Departments in Whitehall, by our own colleagues—or, indeed, by ourselves when we wave our Order Papers at the end of Budget speeches when taxes have been cut—if we say that figures of £500 million or £1 billion are marginal to the central strategy? I would say, with respect, that we cannot.
We shall look at the suggestions made by my hon. Friends to see whether there is any marginal way in which we can make the impact better or fairer, but the central argument is that we cannot abandon a great chunk of borrowing to its own devices and allow an overspend of perhaps £1 billion this year or perhaps hundreds of millions of pounds next year.
The hon. Member for Orpington suggested that the economic argument ran one way and that the political argument ran the other way. I have to take issue with my hon. Friend. I believe that two factors are absolutely central to the legitimacy of the Government. The first is that the Prime Minister and her Cabinet, backed by Conservative Members in Parliament and by our supporters in the constituencies, have restored a genuine pride and strength to Britain's position overseas.
The second aspect, which is central to the feeling of all our supporters, is that against all seductions — some 737 from our own side and others, less attractive, from the other side of the House—we have stuck to the economic policy with which we started. Indeed, it is fair to say that we have stuck to it through thick and thin.
In my previous Department I used to have to say to our supporters, "I quite understand the importance of university spending, but at the heart of our mandate is the belief that we must stick to our guns on the broad economic policy. Are you really asking me to abandon it?" That is itself a political argument. Once the story gets about that the Government will in the end be pushed off their course, that will snap the thread that has bound us to much greater continuity of support — from the Conservative party and people outside it—than most other Governments have achieved in recent times.
§ Mr. StanbrookIt is not the legitimacy of the Government that is at stake but their credibility. They appear to be dishonouring promises on which many people, including councillors, have acted. It is not good enough to say that the economic policy of the Government made that necessary. The political argument is that the Government must keep their promises, and that they must not let down people or local authorities. That is far more important in the long run, and far more related to whether the Government will be re-elected.
§ Mr. WaldegraveI accept entirely the word "credibility". Perhaps it is a better word than "legitimacy". I am saying that the central, overriding promise of the Government was that they would see through an economic policy which we all knew, and which some people in advance believed was too difficult to follow through, and warned us that we could not do it. We are doing it, and we are sticking to it. That is the promise, both explicit and implicit, in a range of the policies that the Government have had to adopt—many of them very unpopular—and it is why it is so astonishing to the Opposition that, despite that, our support in the opinion polls does not disappear.
§ Mr. Tony Banks (Newham, North-West)Enfield, Southgate?
§ Mr. WaldegraveI should have thought that the hon. Gentleman would not want to refer to that by-election from his party's point of view. The support has remained because people have said that they understand the often difficult decisions that we have had to take. They have a justification that makes sense, tough though it is, and which is what, above all, keeps us together.
I do not believe that it is easy to break the link between this kind of capital spending out of accumulated receipts and the PSBR. That link is quite clear. The link between the PSBR and the Government's central economic policy is equally clear. Following my right hon. Friend's statement and the emergency debate after it, I heard nothing from my right hon. and hon. Friends to make me doubt the linkage between those two. I have heard plenty of people saying that we must moderate or change the 738 policy in that case. But then I run up against the argument that my hon. Friend the Member for Orpington used, only I use it in the opposite way and say that if we move away from the policy, we are lost, because we are left with the tough decisions that we have had to make over the years, having abandoned the policy, too.
I cannot resist referring briefly to the greatest of our noble Friends. Like my hon. Friend the Member for Ravensbourne (Mr. Hunt), I have a tremendous affection for Lord Stockton. However, I wonder whether, in retrospect, we shall see again that period of tremendously expanded council house building which he undertook as being the high point of his career. It is so often in those post-war housing estates that we face the most severe problems today.
Putting that aside, I want to call the noble Lord in aid because, when he was accused of having a policy of stop-go, he said in his inimitable way that he had never seen how it was possible to drive a car without using both the brake and the accelerator. That has always seemed to me to be a good answer. We had a period when there was underspend, and we tried to bring it forward and say that, without any damage to the central policy, we could afford to do more. This year, demonstrably, we are way over the top. All the indications were that we would be for next year. We decided that we had to slow down.
We are talking only about the phasing over a longer period of the spending of these receipts. If we go back into a period of underspend, the time may come to try to steer a little more spending. Inevitably, that makes very difficult the management of programmes in the councils. The interests and convenience of administration at one level are sometimes at conflict with the interests and necessities of national administration at another. This is sometimes inevitable, though it is part of the process of good government to try to diminish it as much as possible.
There is no question of the measures that we have taken having been introduced in any way as a policy aimed at Bromley or a policy which means that Bromley has failed or is at fault in some way. The policy has had to be applied nationally because of the danger to our borrowing limits. Since it derives largely from the overhang of past receipts, it is even more inconvenient for those with receipts. That, too, is inevitable. It causes problems of delay and gives us trouble over other high priorities, such as the housing improvement grants programme. However, it derives not from wilfulness or from the fact that the ogre referred to has terrified us out of our wits and out of our political senses, but from the fact that overspends of £500 million or £1 billion, directly reflected in the PSBR, cannot, if we assent to the Government's economic policy, be taken as other than matters of the deepest concern to all of us—in the Cabinet and, I hope, in the Conservative party in the House and in the constituencies.
However, I well understand the difficulties that I, like any other hon. Member, will have at the weekend in explaining matters to people who will be upset about not getting their improvement grants on time. That is a job of political leadership which we must undertake, difficult as it is.