HC Deb 24 July 1985 vol 83 cc1041-5 3.32 pm
Mr. Jack Straw (Blackburn)

(by private notice) asked the Secretary of State for the Environment if he will make a statement about his proposal to introduce retrospective legislation to take further control over the financial assets of local authorities.

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

Although the Government welcome the news when a council replaces its mortgage lending with private finance, it is obviously wrong when mortgages are transferred to a bank or other institution en bloc without the consent of the individual borrowers. In many cases, the risk is not transferred to the new lender. Such transactions are artificial and have been entered into only to circumvent the capital controls approved by the House.

I therefore announced yesterday, in answer to a question from my hon. Friend the Member for Lancashire, West (Mr. Hind), that we propose to legislate at the earliest opportunity to give home owners with a local authority mortgage the right to decide whether the local authority may dispose of its interest to a specified purchaser, and a transfer without consent would be invalid. So far, relatively few councils have entered into such en bloc transactions, but a good many more are in the pipeline.

Because deals can be struck swiftly, we shall ask the House, in order to give immediate protection to borrowers, to give retrospective effect to the change as from midnight last night. I wrote yesterday to the chairmen of the local authority associations offering to consult them on the details of the proposal.

Mr. Straw

Is the Secretary of State aware that his announcement, which slipped out in a written answer last night, is outrageous and ill-considered, and has nothing to do with the merits of such deals or with protecting individual mortgagors, and everything to do with the Government's crazy economic policy, under which dictatorial controls have been imposed to prevent local authorities from spending their money on capital programmes to build houses, help industry and create jobs'? If these en bloc deals are a bad idea now, why were they a good idea in February when his Department told the Financial Times that it was happy to encourage this kind of deal. Is the Secretary of State further aware of the immediate impact that his statement will have, that Calderdale will lose £3 million of planned housing starts, and that Wigan will lose £12 million? How many local authorities and housing associations will be affected? How much is involved? How many jobs will be lost? Will the policy apply to the United Kingdom or to England and Wales only?

Does the Secretary of State not understand that, to the best of my knowledge, every authority has written into these deals protection for the mortgagors? If there were technical problems in that respect, they could have been dealt with through consultation with the local authority associations.

Is not this measure a further example of the Secretary of State's vindictiveness? No such restrictions have been imposed on building societies, which normally expressly provide for the transfer of mortgages without the consent of the mortgagor. Is the Secretary of State proposing retrospective legislation to deal with that?

Is the Secretary of State further aware that to legislate retrospectively on such a matter is a gross abuse of the democratic procedure? It is the fourth time that he has done that. Does he agree that Retrospective legislation is a damned slippery slope. Let the House dig its heels in and say that it will have no more of it." —[Official Report, 2 March 1965; Vol. 707, c. 1264.]? Has he forgotten that those were his exact words in the House when he was a Back Bencher on the way up, rather than a Secretary of State on the way out?

Mr. Jenkin

It is astonishing that the hon. Gentleman should consider it perfectly proper that a local authority should sell the mortgages of all its house purchasers over their heads, without even consulting them, and transfer the obligation in forms which do not even transfer the risk When, during the debates on the Local Government Act, there was a question of transferring the Greater London council mortgages, the hon. Gentleman was one of the first to insist that that should be done only with the consent of the borrowers. His indignation is synthetic.

The hon. Gentleman has asked whether the measure applies only in England and Wales. The question that I answered yesterday applies only to England and Wales. I am not responsible for these matters in Scotland. He asked for other facts and figures. In December 1984, when we gave the House an estimate of the receipts in the year 1985–86 from the sale of local authority assets, we did not take any account of block sales of mortgages, such as we are discussing today. Therefore——

Dr. John Cunningham (Copeland)

It is their money.

Mr. Jenkin

The hon. Gentleman shouts from a sedentary position that it is their money.

Dr. Cunningham

It is.

Mr. Jenkin

The truth is it is also the mortgagor's mortgage, and he is entitled to be consulted.

Mr. John Heddle (Mid-Staffordshire)

Does my right hon. Friend agree that the way in which the Liverpool city council went cap in hand to the Banque Parisbas to sell its mortgage book for £30 million was a shabby deal to get round my right hon. Friend's prudent cash limits? Will he confirm that locked up in local authority mortgage books are £5,000 million, which are ratepayers' assets? Does he agree that it would be much better if those assets were unlocked for the benefit of the ratepayers, and if the borrowers transferred their liability to building societies and banks, which have much more sympathy and understanding for the relationship between the home owner and the borrower, and for cases of hardship and arrears? Would my right hon. Friend encourage every borrower to transfer his or her mortgage to building societies and banks accordingly?

Mr. Jenkin

I entirely agree with my hon. Friend that it is a perfectly proper and welcome transaction when a local authority, as it were, accelerates the receipt of capital assets by refinancing its mortgages to the private sector, provided it does so with the consent of the borrowers. The Government have repeatedly made it clear that we consider it an entirely appropriate way of generating capital receipts.

Many people, both inside and outside the House, were taken aback by Liverpool city council's transaction with the Banque Parisbas. There were conflicting views about the legality of the procedure, which is why we shall take an early opportunity to legislate to make the position absolutely clear.

Mr. John Cartwright (Woolwich)

Does the Secretary of State accept that the homes of many private tenants in my constituency are constantly sold over their heads from one landlord to another? If that is legal and acceptable, why should it be wrong for mortgage loans to be transferred without the individual approval of the borrower?

Mr. Jenkin

I think that most hon. Members would have been astonished if it had been said a few months ago that it would be perfectly acceptable for a local authority simply to sell a mortgage to a building society without even consulting the tenants. The hon. Gentleman took part in the debates on the Local Government Bill, when the provision was pressed hard on the Government—not that it needed to be, because we recognise the need to obtain the tenants' consent—that when GLC mortgages are transferred, that should be done with the mortgagors' consent. The disposal of freeholds on property where the tenant has a lease is an entirely different branch of the law, and does not come within this question.

Mr. Jerry Hayes (Harlow)

Does my right hon. Friend agree that the statements by the Opposition spokesman, the hon. Member for Blackburn, (Mr. Straw), show how much of an armlock the hard Left has on the Labour party? Does he further agree that not only is the hon. Member for Blackburn supporting the madcap Marxists on the Liverpool council, but he is what we all believed him to be, Mr. Hatton's poodle?

Mr. Jenkin

My hon. Friend lays bare the inherent contradictions in the attitude of those on the Opposition Front Bench, who purport to show their respectable face in the House, where they are parliamentarians believing in the rule of law, but who never fail to give aid and comfort to the wreckers who do not believe in the rule of law.

Mr. Roger Stott (Wigan)

Is the Secretary of State aware that the appalling decision that he has taken, in what can be described only as an underhand and dubious manner, will in effect deprive my local authority in Wigan of £12 million that could be spent on housing and education projects that are badly needed in that town? Can he tell me and those people how he can justify that unwarranted intrusion into legitimate local government business?

Mr. Jenkin

The hon. Gentleman might suggest to his local authority that it could secure the receipts that it hopes to get if it persuaded the borrowers that it would be right to transfer their mortgages to the institutions that the council may have in mind. If that was done, there could be no possible objection. I wish the hon. Gentleman luck.

Mr. Terry Davis (Birmingham, Hodge Hill)

Why is it wrong for a council to sell a mortgage without the consent of the borrower if it is all right for a building society to sell a mortgage without the consent of the borrower?

Mr. Jenkin

I am advised that it is almost impossible for one building society to sell a mortgage to another without the consent of the borrower—

Mr. Straw

Not true.

Mr. Jenkin

If the hon. Gentleman consults the legal textbooks on the matter—

Mr. Straw

I have.

Mr. Jenkin

—he will find that building societies are always advised to do that. Recently, one or two banks have entered into such block transactions, but the fact is that they have not succeeded in transferring the risk, and they remain in a contractual relationship with the borrowers. We are concerned with the propriety of public authorities—local authorities—and I am astonished that the hon. Gentleman should take that view.

Mr. Dave Nellist (Coventry, South-East)

May I thank the Secretary of State for his vindictive announcement this afternoon? Does he realise that it gives Back Benchers such as myself who are of relatively recent origin hope for the next Labour Government? If it is all right for the Tories retrospectively to take away powers from councils such as Liverpool, Lambeth and the others that have been mentioned today, it will be all right for the next Labour Government to reverse the decisions, rebate that money and give it back to the local authorities. In addition, they will be able to have retrospective legislation for others such as the miners who have been attacked by the Government and those who have lost their jobs. If retrospective legislation is all right for the Tories, it will be all right for Labour next time.

Mr. Jenkin

I thank the hon. Gentleman for giving me the opportunity to say that he has clearly totally misunderstood what was said in yesterday's answer and what I have said today. Nothing in the answer in any way affects the transactions entered into by Liverpool or any other transaction entered into by a council before midnight last night. We want the legislation to run from the date of the announcement, to protect the borrowers and to ensure that their consent is obtained. I hope that the hon. Gentleman will support that.

Mr. Jim Craigen (Glasgow, Maryhill)

When will Ministers stop this game of cat and mouse with local authorities? Does not the right hon. Gentleman's statement demonstrate more of the sour grapes at the Treasury that local authorities are doing what Ministers keep exhorting them to do—deal with public assets?

Mr. Jenkin

I detect behind the hon. Gentleman's question the dissatisfaction with the present capital control system that I share. He will know that I have been in discussion with local authority associations for some months now in an endeavour to find a better system which will achieve the Treasury's objective of more certain control over the total of local authority capital spending while leaving local authorities with greater certainty and flexibility, so that they can plan their capital programmes further ahead.

Mr. Anthony Steen (South Hams)

Before my right hon. Friend pours more money into the bottomless pit of Liverpool city council, will he ensure that all grants have stringent conditions attached to them so that Liverpool cannot spend money as it wishes and so that the Government have some control of public money? Will he ensure that he does not make the same mistake that Liverpool city council is making and announce in a written answer on Friday that the Government propose to go through the national park of Dartmoor on the southern route south of Okehampton?

Mr. Jenkin

I admire my hon. Friend's geographical ingenuity. I have to tell him that I have to make payments to Liverpool and any other council in accordance with the laws passed by the House.

Mr. Simon Hughes (Southwark and Bermondsey)

How many people made representations to the Secretary of State alleging that their interests were not being looked after in these transactions? How many others will lose the chance of housing this year? The right hon. Gentleman knows that the move has been supported by the Labour party and by councils such as Calderdale, which are balanced. He saw this coming but has decided to act only now. The Audit Commission told him that his Department should maximise assets for house building rather than reduce, let alone retrospectively, at the tail end of the Session, the chance of people having housing. The right hon. Gentleman has presided over a massive deficit in housing and he appears to want it to continue for the rest of the financial year.

Mr. Jenkin

The hon. Gentleman seems to be under the misapprehension that something I have said today discourages local authorities from refinancing their mortgages in the normal way. On the contrary, I have gone out of my way to stress that the Government welcome that being done when it is done in the normal way by securing the consent of the mortgagor. If Calderdale or any other county council wants to enter into such a transaction, it needs only to secure the consent of its tenants—which, if the hon. Gentleman is right, will benefit the local community and be readily forthcoming.

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