Local Authorities (Capital Receipts)

HC Deb 04 December 1985 vol 88 cc285-7

4. Mr. Hayes

asked the Secretary of State for the Environment if he will issue for consultation a Green Paper on the spending of capital receipts from council house sales; and if he will make a statement.

The Minister of State for Housing, Urban Affairs and Construction (Mr. John Patten)

My right hon. Friend announced in reply to my hon. Friend the Member for Lewisham, East (Mr. Moynihan) on 20 November, at column 246, that the prescribed proportion of capital receipts will remain unchanged next year. My right hon. Friend hopes to publish proposals for reform of the local authority capital control system in a Green Paper early in the new year.

Mr. Hayes

Now that a wooden stake has been driven through sterling M3, will my hon. Friend assist in making a shallow grave for the policy that allows £6.3 billion of capital receipts from council house sales to lie idly in local authority bank accounts, earning interest that is used by profligate authorities in revenue spending?

Mr. Patten

The money is not lying idle. A substantial proportion of the cash from receipts has already been spent on the repaying of debt and also on repairs and maintenance. Councils are committed to spending a reasonable proportion of their capital receipts and, when they spend that money on housing, it must be replaced by further borrowing, which therefore drives up the local authority borrowing requirement, and that in turn drives up the public sector borrowing requirement, stake and all.

Mr. Simon Hughes

Will the Minister confirm that the much vaunted so-called increase of £200 million achieved by the Secretary of State in his Cabinet discussions was, when examined, found to be a net decrease of money? It was only because of an increase in housing receipts that extra money was to be available from council house sales. The Department of the Environment's budget for next year shows a cut in money for local authority housing —not a success at all. The Secretary of State's first battle was a loss to housing, not a victory.

Mr. Patten

That question is uncharacteristic of the hon. Gentleman. There is more money there, and more money will be spent. There is more money because of the allocations and the receipts plus the head room that is necessary to account for the considerable overspending —alas —that local councils are indulging in this year.

Mr. Nicholas Winterton

Does my hon. Friend accept that his reply will be disappointing to some Conservative Members, particularly those who represent boroughs which have been highly responsible and prudent and have acquired those capital receipts in response to Government requests and Government policy? Will he therefore review the matter, bearing in mind that those councils have planned their expenditure for the future based on capital receipts, and not based on borrowing and upping the rates?

Mr. Patten

My right hon. Friend the Secretary of State is doing exactly that. He is reviewing the system and will be bringing forward a Green Paper early in the new year. I pay tribute to the prudence of my hon. Friend's borough council and I remind him and all other right hon. and hon. Members that, for some reason, many councils seem to ignore the opportunities given to them to spend up to 100 per cent. of capital receipts on schemes to promote low-cost home ownership. That is a pity.

Mr. Heffer

Has not the Government's housing policy been an absolute disaster? If the Minister wants proof of that, I suggest that he reads "Faith in the City". I have a copy, but I think that most Conservative Members have not been prepared to spend £7.50 to obtain a copy. I suggest that they read the serious points in the section on housing and recognise that the policy it puts forward, which is not entirely the policy of the Labour party, would begin to deal with the problems of housing —unlike the Government's policy, which does not.

Mr. Patten

The Secretary of State has said that we are considering the report and will consider it further.

Mr. Pawsey

Is my hon. Friend aware that his answer will cause some disquiet to smaller authorities whose council house sales are less than £1 million per annum? Will he therefore consider excluding those smaller authorities from that ceiling?

Mr. Patten

I am aware of the problems for smaller authorities to which my hon. Friend refers. We are considering exactly that point in the Green Paper which is to be published early in the new year.

Mr. Rooker

Will the Minister confirm that of the "extra" £220 million of cash made available, only £160 million will be used on revenue, and that some of that will be used, not on construction, but to pay loan charges because of higher interest rates than those forecast? Is it not the case that Ministers do not know how much of capital receipt money is spent on housing? They have no information about the amount that local authorities use for housing. People outside cannot understand why £6.3 billion is in the bank when it could be spent on improvement grants for owner-occupiers, as well as putting right public sector stock.

Mr. Patten

Other adjustments are made to try to take care of the first point made by the hon. Gentleman. As to the second point, there is not £6.3 billion in the bank. A substantial amount of that cash has already been spent on repaying debt and on capitalisation of repairs and maintenance.