Local Government (Prescribed Expenditure)

HC Deb 13 March 1985 vol 75 cc340-408

Mr. Speaker

We now come to the somewhat delayed debate on the local government prayer.

6.8 pm

Dr. John Cunningham (Copeland)

I beg to move, That an humble Address be presented to Her Majesty, praying that the Local Government (Prescribed Expenditure) (Amendment) Regulations 1985 (S.I., 1985, No. 257), dated 25th February 1985, a copy of which was laid before this House on 4th March, be annulled. In a speech in Los Angeles in 1952 the American politician Adlai Stevenson said: Bad administration can destroy good policy, but good administration can never save bad policy. What the Secretary of State for the Environment consistently and unerringly demonstrates, whenever he introduces his policies to the House, is his determination to have bad policy and bad administration. These regulations are no exception. This is the third occasion on which the House has had the opportunity to consider the crucial issues involved in the Government's policies for the control and reduction of local government capital expenditure which goes to investment in the built environment of Britain.

The Government's case remains deeply unconvincing. Whatever tests are applied, the policy is not only demonstrably stupid in the prevailing social and economic climate, but deeply damaging to millions of people, our infrastructure and to the future of the British economy. The arguments of the Secretary of State have few friends outside the Cabinet, almost none in local government and the building and construction industry, and are heavily criticised by professional and academic bodies involved in local government. Yet again the right hon. Gentleman has united local authority organisations against him, including those dominated by his Conservative friends.

Local authority capital expenditure has been consistently reduced in every year of the Government's term of office. In 1982–83 it was approximately half of the total a decade ago, and in real terms about £1 billion less than when the Government came to office. Ministers now argue that local authority capital expenditure must be controlled and that councils must lend their money, not spend it on projects and investments or invest it in the infrastructure. Ministers argue that that must be done so that the public sector borrowing requirement can be reduced.

In effect the Government are forcing local councils to use their money in support of the political aims and objectives of central Government. In doing so, they are preventing councils from meeting the desperate needs of the millions who are living in overcrowded and unfit housing and who need improvement grants. If today it is true that local government capital expenditure affects the PSBR, it must also have been true in 1981, when the PSBR was far higher than it is now. At that time councils were given the freedom to use 50 per cent. of their capital receipts, and were promised by the right hon. Member for Henley (Mr. Heseltine) that they would continue to be able to do so. They were also allowed to spend 100 per cent. of their receipts from other sources.

Shortly after that, during the run-up to the 1983 general election, in the now infamous quote, the Prime Minister said: We need more capital spending by local government and in the public sector generally. I agree that it is vital to maintain the nation's infrastructure, its roads, its buildings, its water supply and its drains."—[Official Report, 3 November 1982; Vol 31, c. 21.] If that was true in 1982, it is even more true today, given the deterioration that has taken place in our environment and the even worse problems now being faced by the building and construction industry.

At the same time, the Prime Minister wrote to the leader of the Association of Metropolitan Authorities expressing her anxiety that councils were underspending their capital receipts. She urged them to spend and to invest. Two years later, with far greater unemployment and a much greater need for investment in housing, schools and our inner cities, the Government make a U-turn and take further central authoritarian control of other people's money.

It is not difficult to expose the wider failures of the Government's economic policy. At present we have crisis interest rates, appalling unemployment, social deprivation and inadequate investment, yet public expenditure is taking a bigger share of national income than it did in 1979. In pursuit of their failed and perverse economic theories the Government have damagingly reduced the quality and scope of public services, while increasing the share of national income taken by public expenditure from 39.5 per cent. in 1979 to 42.5 per cent. now. That is the exact reverse of what was promised, and a result which, perhaps more clearly than anything else, demonstrates the folly, failure and crass stupidity of their policies.

The Government now propose further to control and reduce the proportion of capital receipts that councils can spend, which at present in total appear to be between £5 billion and £6 billion. The new rules will mean that councils can spend only 20 per cent. of their receipts from house sales, 30 per cent. of receipts from land disposals and 30 per cent. of other income. So much for the promise of the right hon. Member for Henley to have "a bonfire of controls".

The effect of the latest Government-imposed control will be severe, especially in housing, which accounts for two thirds of local authority capital expenditure. It will have serious implications for education, social services, recreation, roads and transport. In addition to the control, there will be an 11 per cent. cash reduction in the housing investment programme in the coming financial year. That is at a time when people in all types of housing desperately need assistance. The advice given to the House by the Secretary of State on previous occasions not only flies in the face of any sensible macro-economic argument and ignores the massive burden of evidence from industry and commerce on these issues, but deliberately conceals the appalling consequences of these proposals for millions of people. Homelessness will increase, council house waiting lists will lengthen, the alarming deterioration in private and public housing will accelerate, and thousands more families will be condemned to live in unfit, damp, cold, miserable conditions. As the director of Age Concern told me in a letter, which other hon. Members will also undoubtedly have received: Councils are cancelling planned sheltered housing. The construction of sheltered housing has been halved under the Government. Elderly people will again suffer, as will disabled people waiting for special accommodation.

The proposals bring no comfort to young people who seek a home or to those who want a grant to improve their properties. Many councils have effectively closed their lists to those seeking such assistance. Recent surveys have come up with startling quotes from Conservative-controlled councils. The Tory-controlled metropolitan borough of Sefton list under housing projects either lost or delayed: Improvement Grant applications received between April and July 1984, to be dealt with. No more applications will be dealt with except for disabled grants where action has been commenced by the Authority. Audio alarm system to a central control network for 260 elderly persons, accommodation. Environmental works to council housing estates. No major funding for housing associations. Reduced expenditure on all housing activities. The authority says that if the capital receipts are reduced, Sefton will in effect lose nearly 35 per cent. of its spending power in the coming financial year.

The story is the same for the Conservative-controlled West Lindsey district council in Lincolnshire. In 1983–84 total housing spending approached £4.5 million. That is to be reduced to less than £3 million for the current financial year, and further reduced because of restraints on capital receipts to just over £2 million in the coming financial year — effectively halving the council's expenditure on housing within two financial years.

The story is the same from Conservative-controlled South Oxfordshire and Bournemouth and, of course, from authorities under Labour control. Those results come from a survey carried out by the National Housing and Town Planning Council following the Secretary of State's announcement.

In education, the school building programme will be badly affected. As Her Majesty's inspectors reported in 1984, poor or unsuitable accommodation is already adversely affecting the performance of one quarter of all schools visited. The report states: All in all, the state of much of the school building stock is already a cause for concern and the situation is apparently worsening. Government policies and these proposals have been deluged in criticism from the building and construction industry. The Building Employers Confederation forecasts the loss of about 150,000 jobs. The British Aggregate Construction Materials Industries describes the Government's policy see-saw as extremely damaging to planning and costly for all involved. The Federation of Civil Engineering Contractors said, of a speech in November by the Chief Secretary to the Treasury, who is asleep at present: We consider many aspects of your speech to have been highly damaging and calculated to mislead the industry. It recognises the prospects for the industry and for employment as being grim as a result of the Government's policies.

After six years of this Administration, Britain comes bottom of the international league for spending on infrastructure, according to the Organisation for Economic Co-operation and Development. The importance of policies to renovate, renew and improve our infrastructure has been widely recognised and emphasised by the National Economic Development Council, the CBI, the TUC and the British Institute of Management among others. The case for increased, better-planned and sustained public capital expenditure is overwhelming. Almost everyone except the Government believes that, and recognises the major contribution that could be made to job creation, improved social conditions and better economic performance. Our inadequate and declining infrastructure and insufficient investment in it are important reasons why private sector investment is not taking place in many cases.

The Government's policy fails on social grounds. It fails on economic and industrial policy grounds, too. In addition, the Government are hopelessly wrong in terms of good local administration and the efficient use of public money. In its sixth report the Treasury and Civil Service Select Committee concludes that the rationale for existing arrangements has everything to do with the Government's desire to reduce the PSBR and too little to do with rational use of local authority assets.

That view seems to be shared by the Audit Commission, which was created by the Government to examine such matters, and which was described, at least in its infancy, by the Secretary of State, as providing councillors with a powerful new weapon in their fight to keep costs down. He soon changed his tune when the Audit Commission published its massive criticisms of his policies on local authority block grant distribution. We are told that he went along, gave the commissioners a rocket and then left in a huff. The Under-Secretary of State—the hon. Member for Bristol, West (Mr. Waldegrave)—then warned the Audit Commission publicly about its getting too much publicity for its work. He said: Auditors need to do much of their work by stealth. Success at last. The commission seems to have taken him at his word, because by stealth I have obtained—I do not know the source—a copy of its latest draft report on capital expenditure controls in local government. It is a substantial document entitled, "The Case for Reform." The commission concludes that changes in Government policy are required as a matter of urgency. It observes that serious problems exist with present policies—that will come as no surprise to many people in the Chamber. They generate waste, says the Audit Commission, and inefficiency at local level and fail to give the control that the Government profess to be seeking in the interests of their policies. Government policies, says the Audit Commission in its draft report—

The Minister for Housing and Construction (Mr. Ian Gow)

It is a draft.

Dr. Cunningham

Yes. I said at the beginning that it is a draft report. It states that Government policies have resulted in a decline in capital expenditure and its effective use, and will continue to do so unless changed.

The commission gives detailed arguments to support its conclusion—

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

In response to an intervention from my hon. Friend the Minister for Housing and Construction, the hon. Gentleman acknowledged that this is a draft. He has prefaced every quote from the document by saying, "The Audit Commission says". Does he have any evidence that the draft report in his possession has been approved by the Audit Commission? I can tell him categorically that it has not. The hon. Gentleman would be wise to await the report that comes from the Audit Commission.

Dr. Cunningham

Of course I shall wait for the Audit Commission to publish its report. It is a mystery why it has taken the commission so long to do so, given that it has been working on it and that this is the third occasion on which such matters have been debated in the House. I regard the fact that the commission has not yet published its report with some suspicion. We have been round this course before. The Secretary of State's intervention is similar to one that he made when the previous report was discussed—

Mr. Patrick Jenkin

That was quite different.

Dr. Cunningham

The right hon. Gentleman says that it was different, but he knows that that is not true. It was at the time of the draft, and remained, a damning indictment of Government policy. It would be astonishing, given the nature of these conclusions about Government policy, if, at the 11th hour, their nature, tone and content were to change. But I accept what the right hon. Gentleman says. The House will see what the published report has to say about Government policy. My guess is that it will be little different from the conclusions set out in the draft.

From whichever angle one considers the Government's bungling and incompetence over local government, the failure of their policies is all too clear. In this matter of crucial public investment our money is being misused, mismanaged and wasted in a manner that is criminal, given the problems faced by the people of Britain. Yet, in the face of all the evidence, the Secretary of State ploughs on seeking more controls and more central powers in these regulations.

I began by quoting the American politician Adlai Stevenson. It is appropriate to conclude with another quotation from America, this time by one of the founding fathers, James Madison, who, speaking in Virginia in June 1788, said: I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations. Those words accurately reflect the Government's approach to local democracy, and the regulations are yet another example of such encroachment. They should be rejected.

6.30 pm

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

I should like to begin by setting out the background to the regulations that we are considering on the Prayer moved by the hon. Member for Copeland (Dr. Cunningham). May I say at the outset that we welcome him back to the House after his illness. We are glad to see that he is in such good form.

Since 1979, three quarters of a million families have been able to buy the council houses they live in. This, together with other sales, has generated receipts over the last few years amounting to nearly £10 billion. Year by year, many of these receipts have been spent but the spending, mainly because of a hesitant start in the early years—the hon. Gentleman might have recognised that fact when he quoted what the Prime Minister said in 1982 —has not kept pace with the inflow of receipts. There is now an accumulated unspent amount of receipts of around £5 billion or more.

This sum of £5 billion of accumulated receipts has two effects. First, until it is spent it helps to reduce the aggregate debt of local authorities. The total of local authority external debt in England is now about £30 billion. Without the accumulated receipts, this figure would be several billions higher. Secondly, as the receipts are spent, the amount spent adds to the total of public expenditure and local government debt rises towards £35 billion.

There is nothing in the regulations—again, I need to make this clear after the hon. Gentleman's speech—to prevent these receipts in due course from being spent by the authorities to which they belong. The only issue, at least on this side of the House—a good many more of my hon. Friends are attending this debate than are hon. Members sitting behind the hon. Member for Copeland—is the pace at which those receipts should be spent.

Mr. Robin Maxwell-Hyslop (Tiverton)

Will my right hon. Friend give way?

Mr. Jenkin

When I have developed my argument, I shall gladly give way to my hon. Friend.

It is central to the Government's case that the pace at which those receipts should be spent must be consistent with the overall judgment of the proper level of public spending that the country can afford. That in turn is determined each year by the Government. It is subject each year to the approval of the House of Commons. The total of United Kingdom public expenditure for 1985–86 at around £132 billion was approved by this House when it voted on 6 December 1984 to approve the autumn statement and again when it voted last week on the public expenditure White Paper.

Those who argue either that it does not matter how fast those receipts are spent or, alternatively, while accepting some restraint, that they should be spent faster than the Government are planning, should recognise that any additional spending above the national cash limit will add to the overall planning total of public expenditure and therefore must add to the overall total of public borrowing. I now give way to my hon. Friend.

Mr. Maxwell-Hyslop

I am most grateful to my right hon. Friend. How can my right hon. Friend allege that that is the only issue, when I took the trouble to write, and to send a copy to the Chief Whip, telling him that there was a major issue; that last year he, with the consent of the House, imposed an open-ended commitment on local authorities to buy back defective houses in certain categories and that he is now making no provision whatsoever for meeting the obligation which he imposed? How can my right hon. Friend say that what he has told the House is the only issue when he ought to know that it is not the only issue?

Mr. Jenkin

I read my hon. Friend's letter last night and those of one or two of my other hon. Friends who have written on the same subject. My hon. Friend will find that later in my speech I shall have something to say which may be of interest to him.

Mr. Tony Banks (Newham, North-West)

Will the Secretary of State give way?

Mr. Jenkin

No, I am not going to give way.

I was making the point that, as the receipts are spent, inevitably this adds to public spending and to the overall total of public borrowing. There really is no way of arguing, as some have argued, that in some way, because there are receipts from the sale of public assets, the normal mechanisms for the control of total public spending should not apply to them. That is why, from the moment that this issue came before the House last December, the Government, in the series of debates to which the hon. Member for Copeland referred, have argued that the pace at which these accumulated receipts can be spent is central to the Government's management of the economy.

The provision made in the autumn statement and in the public expenditure White Paper for gross local authority capital spending in England next year is planned at just over £4 billion. The importance of the estimated capital receipts in that total can be gauged from the fact that just over half that figure of £4 billion will come from the receipts which will flow in to local authorities from asset sales during the year, leaving just under half as the net figure that goes into the overall planning total. Although the proportions have differed in earlier years, the principle has been the same. As the receipts have been generated, so they have been treated as negative public expenditure. Correspondingly, as they are spent they add to expenditure.

My right hon. Friend the Member for Worthing (Mr. Higgins)—both in an article in The Guardian and on other occasions—and the Select Committee of which he is the distinguished Chairman, have argued that the receipts should not be treated as negative expenditure but should be regarded instead as a method of financing public expenditure. I understand that argument, but have to say that it is not and has not been the convention on which successive public expenditure White Papers have been based under the management of successive Governments. The hon. Member for Copeland will recognise that when, in 1977, our predecessors sold some of the shares in British Petroleum for over £500 million, the receipts were treated in exactly the same way as I have described. They were treated as negative public expenditure.

It is often argued that councils should be free to spend the receipts as they arise and that it does not make any difference that they arise in one year and are spent in another. I should like to answer that point, because it is an important part of the argument. When, in the 1980 Act, we moved away from the old system of controlling borrowing project by project to the new system of controlling total capital spending, it was seen right from the outset that it would be necessary to prescribe a proportion of the receipts that could be spent in any year, leaving the balance to be carried forward to future years.

The reason for this is that each year the Government take into account the amount of receipts as they arise when fixing the national total for capital allocations, and in particular in fixing the allocations to councils with the greatest housing needs. If that were not done, many of our rundown inner cities and other poorer areas simply would not have been able to have the housing investment programme allocations of the size that they have had. Those who argue that councils with large receipts should be entitled to spend the lot must explain how, under that system, the poorer councils with fewer receipts would still receive fair allocations.

It will be within the experience of many hon. Members on both sides of the House that many of these inner city areas have been unable to generate receipts on anything like the scale of other authorities because there simply is not the same attraction to tenants of owning a flat in a rundown tower block as there is of owning a semidetached house in the suburbs or in a country town. That is a fact of life. If, therefore, councils with receipts had been free to spend all their receipts as they arose, the capital allocations made to authorities with relatively few receipts would correspondingly have had to be much lower.

Mr. Allen McKay (Barnsley, West and Penistone)

Irrespective of the right hon. Gentleman's argument—I do not believe in it—is it not a fact that my local authority had its wrist slapped for not selling council houses and that one of the things that the Secretary of State told it was that capital receipts that it generated could be used to replace stock? Now, it has stopped replacing stock. What has happened to that promise?

Mr. Jenkin

The hon. Gentleman is wrong. Nothing in the order stops the use of capital receipts. All that it does is to slow down, spread out and regulate the pace at which the capital receipts are spent. As the hon. Member for Copeland said, it is not only that the 20 per cent. may be spent—the balance is carried forward as well. The whole of the amount is eventually spent over time. I notice that the hon. Member for Barnsley, West and Penistone (Mr. McKay) did not try to argue with my proposition that, if councils had been free to spend the whole of their receipts, and if there had been no re-allocation of those receipts this year, those authorities, many of them deprived city authorities with housing problems, could not have had the allocations that they now have.

Mr. John Fraser (Norwood)

If that is true—I do not believe it to be true—why has the Secretary of State cut the housing investment programme for the inner city borough of Lambeth from around £100 million in real terms in 1979 to £34 million next year?

Mr. Jenkin

It comes ill from the hon. Gentleman to complain about cuts in local authority housing capital when, under the Government of which he was a member, it was cut in five years by 45 per cent. He should recognise that.

My hon. Friends are entitled to say, with some justice, that the system set up by the 1980 Act has not worked as it should have. For the Government, it has not delivered the cash limit, and for councils, it has not delivered the benefits that were intended in getting rid of the old system of project-by-project borrowing control. That is why we are now in discussion with the local authority associations to work out a better system that will deliver both the national cash limit and a framework in which local authorities are more free to plan their capital spending with greater certainty.

Over and over again, local authorities ask for greater certainty. They often ask that they should be able to plan their capital spending over a longer period. I understand that and it is a justifiable request. I can answer that over recent years we have gone a long way to meet this demand. For instance, both last year and again this year, when announcing the allocation for the year immediately ahead—what I might call year one—we have at the same time given firm assurances that local authorities can rely on receiving allocations of a certain amount for both year two and year three. In the figures for the allocation for this coming year—1985–86—we have delivered fully on that undertaking.

Furthermore, local authorities have a 10 per cent. Year-end tolerance that allows them to carry forward unused allocations. The position in Wales is a little different from that, and my right hon. Friend the Secretary of State for Wales, who hopes to catch your eye, Mr. Deputy Speaker, later in the debate, will deal with that point.

Mr. Chris Smith (Islington, South and Finsbury)

Why was the commitment to carry forward 80 per cent. into succeeding years not available to the Greater London council for the stock transferred from the GLC to the boroughs?

Mr. Jenkin

Perhaps the hon. Gentleman realises that that is a highly technical point. It is inappropriate to deal with it now, but if he likes, I would be happy to write to him with the explanation. For the great generality of councils, that undertaking was given for two successive years and it has been delivered.

In the debate on 27 February, my hon. Friend the Minister for Housing and Construction announced an important concession for certain low-cost home ownership schemes in England. For schemes for building under licence, building for sale and purchase for resale we had originally proposed to reduce the prescribed proportion from 100 per cent. to 30 per cent. We listened to what the local authority associations said about this, to the representations of the individual councils and to the point made by several of my hon. Friends that such a move would put at peril the future of these valuable schemes. We have decided that councils should continue to be able to use 100 per cent. of such receipts in the year of sale to match their expenditure on this project. From experience, it is estimated that this should allow over 6,000 families to benefit from these schemes next year.

We are making another small change. The new Historic Buildings Commission makes grants available to councils for the preservation of buildings in their ownership. Such sums will now score as capital receipts, 100 per cent. of which may be spent by councils on preserving our national heritage.

Mr. Teddy Taylor (Southend, East)

We appreciate all this, but is my right hon. Friend aware of the special problems faced by Southend and some other borough councils in making provision within their budget for legal obligations for the repurchase of Unity and other houses? As it is almost impossible for such councils to make a proper estimate of the cash involved, could the Secretary of State at least say that he will consider making some additional resources available for this special problem?

Mr. Jenkin

I have a great deal of sympathy with my hon. Friend's point, which is somewhat similar to the point raised by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop). Perhaps I can answer the point in this way. In making the HIP allocations for 1985–86, we took account of the need for expenditure under the Housing Defects Act. I recognise, as my hon. Friend the Member for Tiverton has pointed out, that some authorities have particular difficulties in meeting their obligations under this Act in addition to their other commitments. Therefore, I am prepared to consider sympathetically requests from authorities that cannot otherwise meet their obligations under the Housing Defects Act for additional allocations towards the cost of repurchasing or reinstatement grants. I hope that my hon. Friends will regard that as helpful.

Mr. Roger Gale (Thanet, North)

My right hon. Friend referred to the concessions that my hon. Friend the Minister for Housing and Construction made last week. Will he confirm that this also refers to sheltered housing, and in particular to joint venture schemes?

Mr. Jenkin

This certainly applies to sheltered housing if it falls within the category that I have described, but the normal sale of land for sheltered housing purposes, which was not a build for sale or a low-cost ownership, would be caught by the ordinary rule. If my hon. Friend has any particular case in mind, I should be happy to look at it as a matter of urgency, because I understand that he wishes to know how things stand.

We have already given an undertaking, in relation to my statement last July calling for restraint, that authorities that have complied with the request to restrain their expenditure this year will receive additional allocations of 5 per cent., and that will be honoured. That promise remains and we have allowed for it in our plans. It is too soon to say how much will be needed to meet that commitment, but there is a modest margin of flexibility within our plans to meet the points raised by my hon. Friend the Member for Southend, East (Mr. Taylor).

Mr. Roger Sims (Chislehurst)

Can my right hon. Friend explain the economic logic of allowing certain authorities an additional 5 per cent. capital allocation—in other words, allowing them to borrow more money for capital purposes—and not allowing them to spend the money that they already have?

Mr. Jenkin

With respect, my hon. Friend draws a distinction that is not as real as he is seeking to make it out to be, because capital receipts represent in this context an authority to spend. If the council has capital receipts and is given the extra 5 per cent., it has the authority to spend and may draw it from those capital receipts. With respect, I think that 5 per cent. is welcomed by the authorities who have complied and continue to comply with the request that I made, and I can tell my hon. Friend the Member for Chislehurst (Mr. Sims) that that will be honoured.

Local authorites which have generated capital receipts by the sale of land and council houses, or by refinancing their mortgages, or by the sale of other capital assets, retain the ownership of these receipts. They can use the cash to pay off debt and so reduce their interest charges; they can put the money on deposit and so generate interest receipts; they can use the money for internal lending to other services in the same authority; or they can lend the money to other institutions. Whichever they do, the cash stays theirs. The control is over the rate at which the receipts may he spent. That control is necessary to ensure that the aggregate of local authority capital spending year by year is in line with the national provision for capital spending made by the Government and approved by the House.

Mr. Robert Banks (Harrogate)

I am sure that my right hon. Friend will recognise the important financial contribution that local authorities make to housing associations. For instance, Harrogate borough council in this financial year has contributed £400,000 by way of loans and grants. Under this measure, in the next financial year no new loans will be available. Will my right hon. Friend consider being flexible and allowing money diverted and used in this way not to be calculated within the 20 per cent.?

Mr. Jenkin

I take note of what my hon. Friend says. I should point out that much the most important financing of housing associations is by the Housing Corporation. The figure which we have allocated for the Housing Corporation for next year is virtually the same as the figure for this year—£685 million. How far local authorities decide what proportion of their resources should go to lending to housing associations must be for them in the light of the competing priorities they face.

The hon. Member for Copeland towards the end of his speech referred to the construction industry. My answer is that the volume of local authority capital work for the construction industry will be precisely in line with the provision made in the public expenditure White Paper. These regulations are intended simply to make sure that that limit is not substantially exceeded.

Of course I understand the anxieties of the construction industry but, as I told the group of eight when I met it, and as I say to the House now, it is not right to look at public sector capital investment on its own. I must ask the hon. Gentleman to look at the total of public and private investment. Total construction output rose 4 per cent. in volume in 1983 and rose again substantially in volume in 1984. Private sector industrial and commercial orders are up over 25 per cent. year on year. Private industrial orders in the last quarter of 1984 were no less than 67 per cent. up on the corresponding quarter in 1983.

If one looks still more widely at the total level of investment in the country, one sees that this country had the highest ever total of fixed investment last year —some £55 billion, a 7.5 per cent. increase in real terms on the previous year. All the forecasts point to a further advance in total capital investment next year, and A is of the highest importance for jobs that we maintain that progress.

Dr. Cunningham

I am grateful for the kind remarks of the right hon. Gentleman about my recovery.

Why does the Secretary of State think that the building and construction industry is so concerned? It is because, last year, bankruptcies and closures were at an all-time record level, and the building and construction sector was the worst affected. Whatever he says about total fixed capital investment—which includes what the Ministry of Defence is spending on hardware and so on—it is a meaningless figure in this context. The reality is that local authorities want to spend their own money on environmental investment. They do not want to be forced by the Government to be lenders, which is what the right hon. Gentleman is making them be; they want to provide new houses and new schools and to improve the infrastructure, and the private sector of the building and construction and civil engineering industries wants them to do that also.

Mr. Jenkin

I am astonished that the hon. Gentleman should regard the figure for total capital investment—investment in the future prosperity of the country—as meaningless. If he wants public investment to be higher, I have to tell him that higher public spending would have to be matched by higher taxation or higher borrowing or both. I want to see more investment and more jobs created, but unlike the hon. Gentleman I do not see the stimulus coming mainly from public spending. I want to see it coming from a sustained and balanced economic recovery.

We are working out with the local authority associations a better system of control. We want to get that into effect as swiftly as possible. That may require legislation, but we should like to move as far as possible towards whatever new system emerges in 1986–87.

In the meantime, we have to operate on the present system under the present Act to protect the national cash limit for local authority capital spending. I believe that the difference between us is one not of principle but of timing. I accept that there are many worthwhile projects to be done and many needs to be met, but we cannot afford them all at once. If we try, the result will be a further massive public overspend at a time when total investment is at an all-time high.

For these reasons, I ask the House to reject the prayer and to stand by the public expenditure plans set out in the autumn statement and agreed by the House last December.

6.56 pm

Mr. Chris Smith: (Islington, South and Finsbury)

We have heard from the Secretary of State a supposed case for the action which he is taking under the regulations which totally fails to explain or justify the economic argument which lies behind the Government's thinking and decision. The only point which the Government appear to be making is that, when they wrote the public expenditure White Paper, they plucked a figure out of the air for total public sector spending on construction and capital work, and they are now intent on sticking to that figure. It is in order to stick to that figure that they have placed the regulations before the House.

We are therefore entitled to ask the Government why the figure has such magic properties and qualities. Why is it somehow economically essential to stick to the target for capital spending enshrined in the public expenditure White Paper? The Government have totally failed to answer that question and have told us only that it is essential to do so. I hope that when the Government sum up later they will begin to address that economic question.

In considering the Government's overall economic philosophy, I understand that they are concerned about the level of the public sector borrowing requirement, yet the measure now before the House will have at most a marginal effect on the public sector borrowing requirement. The only reference by the Secretary of State to that question was that the measure would help to reduce the aggregate of local authority debts until the moneys are spent. That has a marginal effect on interest rates and expenditure on the debt. In the context of overall local authority expenditure and capital expenditure, the effect of the public sector borrowing requirement is surely marginal.

It cannot be because of their attachment to the level of the PSBR that the Government are imposing these regulations on the House tonight. Why, then, are they doing it? What economic case do they have for sticking to this target for capital expenditure? Is it not simply that the Treasury has established a figure, in pursuance of an economic idea that is sheer madness, for the level of public expenditure as a whole, including money being spent by local authorities, which is local authority money, which does not belong to, or have any impact on, the Exchequer in relation to the level of taxation, or, in other than a marginal sense, have any effect on the PSBR?

The Treasury is seeking to make that figure stick, and we are entitled to know why. If it is anything other than an abstruse and absurd economic nostrum that leads the Treasury to determine that figure, that has not been made clear either today or in the debates that we have had on this issue in recent months. It is time for Environment Ministers to stand up to the Treasury and say, "Local authorities have needs, particularly in respect of the homeless and badly housed, which we must respect. We shall not accept, simply because we are told to accept it, the economic nostrum which the Treasury is seeking to impose."

Mr. Gerald Bermingham (St. Helens, South)

Does my hon. Friend agree that if one puts a pound note in a bank, in a year's time it is still only a pound note? It will not have rotted. On the other hand, if one fails to carry out essential housing repairs to pre-1919 property, the rot continues and within a year the cost of repairs is more than the interest on the money that the repairs would have cost a year earlier.

Mr. Smith

My hon. Friend makes an important point. At the current rate of deterioration of the housing stock it will take, it is estimated, 900 years to replace it, and the more the housing stock is allowed to deteriorate—the more faults that go unrepaired and the more dampness creeps in and so on—the more expensive it will be when finally we get round to dealing with the matter.

The Secretary of State made great play with the question of timing, saying that while local authorities could not do the work this year, they would be able to do it next year or the year after and that the money would still be there. That was the kernel of his argument, but let us consider the impact of the policy which the Government are imposing, for which, as I say, they have advanced no real economic reasoning.

My borough of Islington is a hard-hit inner city area with great housing needs. In the coming financial year, as a result of the decisions which the Government are now imposing, my council, across the spread of capital spending, will not be able to carry out about £3.5 million worth of work, and, specifically in housing, will not be able to do about £2 million worth of work which it would have done without the regulations which the Government are imposing. That comes on top of a crisis which already exists in housing in Islington. The housing investment programme allocation has been cut drastically and is now down to £29 million. That is a pitiful sum in relation to the need that exists.

If the Secretary of State is so proud of the Conservative record in housing in the last five years, why has the housing investment programme allocation for Islington been cut in real terms by 56 per cent. since the Conservatives' first full year in office, 1980–81? Although it has gone down by 56 per cent., there is not 56 per cent. less housing need in my borough. Nor has there been a 56 per cent. increase in the housing standards of those already housed by the council. That patently cannot be the case. I see the position every day as I walk through the estates and streets of my constituency.

Having exacerbated the situation to that extent, the Government, on top of that, are taking more money away from the local authority. I see one of my constituents, the hon. Member for Harlow (Mr. Hayes) wishing to intervene.

Mr. Jerry Hayes (Harlow)

The hon. Gentleman may recall that I recently made a speech in support of rate capping and that I made a vitriolic attack on his constituency of Islington, and particularly on the local council. The present policy places a further burden on the ratepayer in that, as he will be aware, councils can drive a coach and horses through the policy by introducing a system of pre-funding, by which they can have some of their capital investment in housing, but they must pay high brokerage fees. In the long run, the ratepayers have to pay those fees.

Mr. Smith

I suppose it depends on the ability of borough treasurers to indulge in creative accounting, shifting money from one year to another and generating other sources of income to enable money to be spent on worthwhile projects.

Everything that the Conservatives have done, including the wretched process of rate capping, on which they are engaged in my constituency, has meant that local authorities, to maintain essential programmes, have had to indulge in the sort of financial manoeuvrings to which the hon. Gentleman referred. If the Government had a sensible policy towards local government finance, they would not have forced that type of posture on to local authorities.

How ironic it is that in the midst of all this need—considering the money that the Government have removed from hard-pressed inner city areas such as Islington, all for the sake of maintaining a figure plucked out of the air by the Treasury in the White Paper on public expenditure—there appeared three weeks ago in the national press reports saying that the Government were preparing to underwrite to the tune of £20 million the future of three major stately homes.

I am not arguing that it is wrong for the Government to come to the rescue of Weston Park, Kedleston Hall and Lord St. Oswald's collection of Chippendale furniture. I am not saying that it is wrong for the Government to devote £20 million of public money to those eminently worthwhile causes, and I hope that in future years the public will be grateful for what is being done.

How ironic, though, that in the midst of anguished discussions about the lack of funds for local authorities to spend on the homeless and the badly housed—on people living with damp running down the walls and water coming through the roofs on estates that are badly lit, badly maintained and are a horror to live in — the Government can find money to support stately homes and a collection of Chippendale furniture. Yet they have the cheek to tell hon. Members that they will not tell the Treasury, not that it must find the money out of its own pocket, but that it must not forbid local authorities from spending money which they already have in the bank.

When Councillor Calnan, chairman of the borough's housing committee, complained about the level of the borough's housing investment programme allocation, the Minister for Housing and Construction replied, in a letter of 4 March, that he had taken full account of the particular needs of the Borough both in relation to the general level of deprivation and the condition of the Council's own housing stock, when deciding on a HIP allocation of £29.319 m". Of course, he did not take full account of the level of deprivation or the condition of the houses. All he took account of was the figure in the Treasury public expenditure White Paper. He did not come down to Islington, as he has said he will, to see the housing need and the desperate circumstances which tenants right across the constituency have to face every day of their lives. He took account only of what the Treasury wanted.

The Secretary of State talked about urgency. He said that the money was not being taken away from local authorities and that they were not being stopped completely from spending it; that they were only being prevented from spending it in the coming financial year. What he has ignored is that the money should be spent now. It will not do the same good in two or three years' time.

I should like to take the Secretary of State or the Minister for Housing to visit a family whom I saw a couple of weeks ago on the Barnesbury estate. That family, with three children are living in one bedroom. They cannot use the other bedroom in their flat because it is streaming with water. The children are in bad health. The family cannot move out of the flat because there is no suitable home with a garden to which they can move. The block of flats badly needs proper heating. It was built in the 1950s and does not have central heating. It needs insulation and double glazing. Something needs to be done about dampness in the whole block.

Those flats need to be made decent enough to live in. The people cannot enjoy a decent life because of the sort of place to which they have been consigned. I should like to take the Secretary of State and the Minister to see the circumstances in which that family are living. I should like the Secretary of State to tell them that the work cannot be done this year because the council will not be allowed to spend the money this year, but that it will be done in three, four or five years' time. That is precisely the impact of what the Secretary of State told the House today.

Mrs. Edwina Currie (Derbyshire, South)

The hon. Gentleman knows that I am sympathetic to the things that he is saying, but, in those circumstances, would it not be wise for the council to drop its considerable support for such esoteric activities as a women's committee, a peace committee and all the other ideas that it has and spend the money on improving bad housing?

Mr. Smith

I fear that the hon. Lady has perhaps been imbibing too many myths from her right hon. Friends on the Front Bench, which they seem to propagate with remarkable alacrity about my borough. We indeed have a women's committee, which does valuable work. So far as I am aware, and I am rather closer to the ground than is the hon. Lady, we do not have a peace committee. In some ways, I wish we did. It is an absurdity to suggest that because the women's committee gives very small grants to some worthwhile organisations, many of them in the ethnic minority community, it is somehow depriving families on the Barnesbury estate of the right to have repairs carried out that are desperately needed. To suggest that is nonsense, and the hon. Lady knows it.

I should like to take the Secretary of State by the hand to Bentham Court estate, which is part of the estate action programme, and show him the work which is being done to put in lifts and improve the quality of the environment dramatically. The work includes the installation of entry phones, knocking down walls to make rooms bigger and the installation of central heating to make good flats out of very old estate property. Much good work has been done already in other estates, and work has just been started at Bentham Court. The Minister should see that work and then then decide whether it should be stopped in mid-stream. Only one part of the estate has been renovated. The rest will have to wait a few more years until the amount of capital receipts catches up or the Treasury allows the Department of the Environment to give a greater allocation to local authorities. I should like the Secretary of State to tell the tenants on that estate why they must wait for work which needs to be carried out urgently.

I should also like the right hon. Gentleman to see the asbestos on the Bemerton estate. That asbestos cannot be taken out because the local authority will not have enough money to do the work. The Secretary of State should tell us whether he took that problem into account when he was making the housing investment programme allocation.

Then there are the former GLC estates. The GLC has hitherto made money available for the work which needs to be carried out on those transferred estates. The Secretary of State should meet some of the thousands of people who report every year to the local authority as homeless and in need of accommodation. The local authority has been striving valiantly to avoid the use of appalling bed-and-breakfast accommodation as the only alternative to providing a roof over people's heads, simply because there is not enough housing stock available to let.

The scale of the need in my constituency is appalling. All that the Government can offer is a further cut instead of hope and some crumbs of comfort that they might be able to make more money available for next year. They give no sign that they will recognise the size of the problem or the difficulties which far too many tenants have to face. People have to wait for years for their first chance of renting a decent local authority home at a price they can afford. The way in which the Government are treating people like that is nothing short of shoddy and appalling. All that they are offering is a further cut, in the name of a Treasury figure plucked out of the air for the public expenditure White Paper, with no economic justification behind it. All that they are offering is a nonsensical, unexplained and unjustified economic theory which will make the housing need in my constituency more desperate and more acute.

7.18 pm

Mr. Michael Latham (Rutland and Melton)

It gives me no pleasure to take part in the debate. As one who has been involved in the construction industry directly since 1967 and as a director of a private housebuilding firm since 1975, I have consistently supported Conservative environment and construction Ministers in their policy regarding sales of council houses and reforms in planning procedures and in the structure of local government. But we seem to have got into a serious muddle over the use of capital receipts. It is perhaps worth recalling briefly how the muddle has arisen.

It took local authorities some time to adapt to the new rules for capital receipts. When the money for council house sales began to flood in during 1981 and 1982, councils tended to put it in the piggy bank as savings rather than use it for capital spending. They built up large reserves of unspent receipts for the years 1980–81 and 1981–82. Indeed, in 1982 both the previous Chancellor of the Exchequer and the Prime Minister were urging local authorities to spend up to the maximum of their permitted capital resources.

Only in the last couple of years have the local authorities begun to do so, and it was not until July of last year that a formal block was placed upon their using the unspent, accumulated backlog of capital receipts. After two years of underspending, they began to catch up by the end of 1982–83, and, by 1983–84, they began to use so much of the underspent money that they were accused by the Treasury of overspending by £368 million. In the new financial year, the overspending problem was considered so grave that my right hon. Friend announced his "voluntary" standstill last July; he narrowly avoided a full-scale moratorium last September; and now we have these latest measures.

How can such highly restrictive annual bookkeeping make any sense? The money has been raised through the sale of assets. Capital receipts are already carrying the housing capital programme. Indeed, 57 per cent. of planned housing expenditure will be financed in that way, according to the autumn statement. The 60 per cent. of the housing receipts that the Government claw back under the existing HIP system has enabled the Government to allow an erosion of the value of central Government net spending to less than one half of its 1979–80 level in cash terms, and 60 per cent. in real terms. There has been a significant central Government cash reduction.

The prescribed proportion arrangements also appear very confusing. Ministers originally introduced the claw-back of 50 per cent. of receipts under pressure from those who argued that a local authority that sold a lot of houses did not necessarily need to spend all its receipts, so some could be redistributed to others in greater need. The earlier reduction from 50 per cent to 40 per cent. was made for exactly the opposite reason—that those selling houses were not reinvesting the money in capital work, and, if they were allowed to keep only 40 per cent., that would give more money to those prepared to spend it to the full. Now we are to have a 20 per cent. permitted retention level to prevent overspending by local authorities. How can any local authority make sensible long-term plans on that basis? It is not fair of Ministers to put councils in that position. The Government are like a driver with poor clutch control who makes the car lurch forward uncontrollably, stall, and then lurch forward again. The engine will seize up that way.

My more immediate concern is for the state of the construction industry. The House should not be misled by the overall figures for new orders received by contractors in 1984, which show a 4 per cent. increase over 1983. That figure conceals a 38 per cent. increase — which I entirely welcome—in industrial new orders and a 19 per cent. rise in commercial orders, but falls of 14 per cent. in public housing, 8 per cent. in private housing and 5 per cent. in public works. Housing appears to have slipped back a little further this year. The National House Building Council registration statistics, which foreshadow the Department of the Environment's private housing starts by about a month, show a 6 per cent. decline in January 1985 compared with January 1984. Various figures have been bandied around by the industry and the professional institutions about the likely financial effect of the proposed new arrangements on public construction spending. As the hon. Member for Copeland (Dr. Cunningham) said earlier, the Building Employers Confederation predicts a fall of £1.3 billion and the Institute of Housing £1.2 billion.

Whatever the ultimate outturn, it is clearly bad news for construction, which has previously been grateful to Ministers for fighting off a moratorium last September. If, as Ministers have promised — and as my right hon. Friend said again today—local authorities really are able to phase their work over the next year or so, things might not be too bad in the end. However, I am afraid that it may not be as simple as that. What worries me is that the annual Treasury accounting procedure will simply throw up another potential overspend next June, and then we shall have a full-scale moratorium. Let Ministers be in no doubt that a moratorium will kill off many medium-sized contracting companies which are effectively buying work now by tendering at suicidal prices simply to keep their businesses going.

Large civil engineering contractors are undertaking road contracts far lower in value than they have ever looked at before, thus squeezing out the medium-sized firms that rely on that work to survive. Local medium-sized building firms have also been hard pressed by the reduction in public sector house building and in new school building contracts, as numbers on the rolls have fallen sharply, and by competition from cowboys and moonlighters in the domestic improvement market since the imposition of 15 per cent. VAT. Those local firms are the backbone of the industry. Their principals have tended to be the backbone of Conservative support in the constituencies. In my work I meet many builders, not just leaders of the industry. They are deeply dismayed by the latest turn of the screw. My right hon. Friend should be under no illusion about the depth of their dissatisfaction.

One does not have to be an unreconstructed neo-Keynesian wet to favour more capital projects. We need them for their own sake, not just to reduce unemployment—although God knows, unemployment is the worst social scourge facing this country and one that the forthcoming Budget must tackle energetically and with effective compassion. No Conservative Member is advocating a mad inflationary splurge. All that some of us say is that our basic infrastructure as a nation needs steady renewal now. Hundreds of thousands of houses, including many defective council houses, need major overhaul or total reconstruction, although some of them are only a few years old. Those problems cannot be left simply to the private sector, especially as it has proved virtually impossible to prepare any schemes for private sector funding of public sector projects to which the Treasury is prepared to give its agreement.

Many of those sitting behind my right hon. Friend want to be able to support him in his difficult task of reconciling his sponsorship of the contruction industry and his overwhelming moral duty to help the badly housed with his equal duty as a Cabinet Minister to control public spending. No Conservative Member expects local authorities or the construction industry to avoid tight restraint on their spending in a difficult financial position. But we insist that administrative procedures should be clear and comprehensible and that obvious muddles are avoided.

The present policy on capital receipts bears all the marks of making up the rules as the game proceeds. It is clearly inadequate, Ministers know that it is inadequate, and I am glad that it is to be reviewed. However, the work load problem is immediate. It is no way to treat the badly housed, the local authorities or the construction industry. Therefore, I regret that I shall not be able to support my right hon. Friend tonight.

7.27 pm

Mrs. Ann Clwyd (Cynon Valley)

I have the dubious distinction of representing the constituency with the highest male unemployment rate in Wales, and also the constituency with the worst housing in Wales, if not in the whole of Great Britain. I was pleased to hear the Secretary of State say that he would take account of some authorities with particular difficulties and that he would make additional facilities available to them. I hope that the Secretary of State for Wales was listening because, so far, there has not been much evidence that he shares his right hon. Friend's view.

Nearly half the houses in my constituency are unfit for people to live in. Startling new figures that have just been published show that privately owned housing in the Cynon valley is probably the worst in Wales, if not in the whole of the United Kingdom. In some areas one in three houses lack basic facilities such as sinks, wash basins, inside toilets and baths. Nearly 9,000 privately owned houses are regarded as unfit for human habitation out of the total of 20,000 in the Cynon valley. A total of 4,000 houses lack those facilities and they also lack hot water supplies.

This is a major new survey, one of the most extensive to be carried out in the United Kingdom, of all the private houses in the Cynon valley over two years. It concluded that 8,923 houses were classified as unfit. That represents a staggering 48 per cent. of the private housing stock.

The report produced by the Cynon valley housing specialist has brought calls for urgent aid for the area—calls that we have communicated to the Secretary of State for Wales and his Ministers. The report says: Housing conditions in the Cynon valley are not typical of those for Wales or for mid-Glamorgan, and whichever indicator is used the housing stock in the valley is significantly worse than any other county and probably any other district council in Wales or in the United Kingdom. During the survey, council officials visited 18,500 of the valley's private houses—92.5 per cent. It was probably the most exhaustive survey of its kind to be carried out in the United Kingdom, and the Welsh Office has given the council considerable credit for carrying it out. It was found that 3,595 houses in the valley did not have an inside toilet—one house in five. The problem is even worse in the areas of especially high unemployment, where it is likely that at least one of the pits will shut down. That is one reason why only one out of 6,000 miners in the constituency worked during the miners' strike.

In the villages of Penrhiwceibr and Mountain Ash East, one house in three lacks basic amenities. A surprising 3,631 houses—one in five—lack a wash basin. The report also shows that 3,700 houses in the borough have no hot water supply, and that 3,000 have no bath. The report concludes: With the current level of investment it would take over 50 years to repair the private sector stock". The main conclusions are that 8,923 houses in the valley are unfit for habitation, that nearly 5,000 more are fit for habitation but classed as being out of repair, that 4,496 houses lack basic amenities and that 50 per cent. of houses will cost more than £4,500 to repair, compared with a figure of 14 per cent. for the whole of Wales.

Before the Secretary of State for Wales tells me that he would expect people in those areas to contribute towards the cost of improving their houses, I remind him that in this area the average income is among the lowest in Wales.

We took a deputation to see one of the Welsh Office Ministers. After he had listened to our case, he said that he understood the need for renovation grants as a primary instrument for tackling the problem. He suggested one or two ideas for dealing with our massive problem of deprivation, but his suggestions were merely cosmetic, and only scratched the surface of the problem. For example, the Minister suggests that we should take up the enveloping schemes. In the case of the Cynon valley, that would be merely a cosmetic approach to a serious problem.

The council has dealt with many of the comments that the Minister made when we visited him. The Minister suggested that there was a lack of council initiative in housing. He wanted to know why the council had failed to take advantage of Government money on offer between 1982 and 1984, espcially in the form of repair grants. The answer is that, in 1982, when the Government announced a more ready availability of repair grant money, the council was ill-equipped to cope with the large number of applications made, because—perhaps foolishly—the council has been too ready to obey early Government instructions to limit the numbers of staff: We just did not have the numbers available to deal with the increased numbers of applications … We did gear ourselves to this new position only to find the almost overnight withdrawal of the facility so that the full benefits of our changes of policy could not be achieved. The borough council should not be blamed for a stop-go policy. Perhaps the borough council should have been bloody-minded instead of acquiescent.

The enveloping schemes are being discussed at borough council level at the moment, but the council feels that that is a cosmetic approach rather than a basic solution to a housing problem of such major proportions.

The Welsh Office asked us why no housing action areas have been declared on the borough. The adoption of housing action areas would be merely playing with the problem. The whole of the Cynon valley should be a housing action area — not just a couple of hundred houses.

We were asked why the council had not taken advantage of improvement for sale arrangements. That concept, too, is not really relevant to an area with such massive problems. The Cynon valley is a depressed area, with the highest male unemployment rate in Wales and very low incomes per head.

The Welsh Office also asked why the council have paid no regard to Welsh Office initiatives in housing. Those initiatives seem sound in theory, but they do not work in practice. They represent an attempt to apply comparatively minor answers to a major problem.

The housing conditions survey sets out concrete and comprehensive evidence of a serious and potentially disastrous situation which can only be dealt with by a major infusion of Government finance in the shape of a long-term and consistent policy that is not liable to be altered at the whim of one Government Department. The problem is so massive that it is believed that repairs, even at present levels, would take more than 50 years to remedy the problem. The total cost would probably be not less than £110 million, with more than 50 per cent. of the properties costing more than £4,500 each to repair.

This survey is probably the first of its kind in the United Kingdom. It follows recognised Government criteria. If the problem is not recognised, properties that are now reasonable could, in about 10 years, fall into the unfit category, while properties that are currently unfit may be ready for demolition. In the Cynon valley, and indeed most of south Wales, 57.1 per cent. of private dwellings were built before 1919. Surely it will be cheaper to renew them now than to build new properties in the future.

Finally, I remind the Secretary of State for Wales of what the only major survey carried out on poverty in Wales said about housing in the Principality: There is a major problem of renewing unfit and unsatisfactory housing which demands an acceleration in clearance, rehabilitation and new building. There is the problem also of the special needs of vulnerable groups. There are higher percentages of disabled people living in the valleys of south Wales than in many other regions. Their needs are simply not being met. Almost every week, I meet at my surgery disabled people who are finding it impossible to continue to live in their houses. Many of them are prisoners in their own houses. They cannot get out because of the steepness of the terrain. The special needs of disabled people in the valleys of south Wales should surely be recognised.

The poverty report concluded: What is abundantly clear, however, is that the overall quality of the housing stock in Wales is inferior to that in almost all other parts of Britain and that the Government has no commitment to rectifying this important source of deprivation.

7.40 pm

Mr. Michael Stern (Bristol, North-West)

Bearing in mind the size of the economic factors involved, it is not surprising that we are debating the regulations as local authority spending accounts for about one quarter of total public spending. Any attempt to control public spending would therefore be meaningless without control of local authority spending, whether on capital or current account.

It is estimated that there will be an overspend of about £1 billion in 1984–85 in England alone. The unspent capital receipts, which local authorities would be free to spend at any time if the regulations were not approved, amount to about £5 billion. That is one side of the problem.

Conservative Members have noted the need for some form of control, but it is as if the views of Conservative and Labour Members were positively charged nuclear particles, which occasionally come together but immediately rush away from each other. The hon. Member for Copeland (Dr. Cunningham) and his colleagues have enunciated a concept—which we have heard before but which is no less ridiculous however many times it is proposed—that the money belongs to local authorities.

I have spent most of my political life, with a little success, convincing people that Governments do not have any money of their own.

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

They have plenty of mine.

Mr. Stern

They have only taxpayers' money. The money is held in trust. I do not know where the concept of local authorities' own money came from. The money came from ratepayers. I accept that surpluses have been made, but they result from the investment of ratepayers' money. Moreover, we are not talking about money being lost to local authorities, as it is to remain under their control. The Government are merely trying to determine the rate at which that money is spent. That has national economic consequences. It is regrettable that Opposition Members and many local authorities think that capital receipts belong to local authorities as of right. We should consider that ratepayers might like to benefit a little from capital receipts.

Mr. Simon Hughes (Southwark and Bermondsey)

Can the hon. Gentleman give just one example of a local authority, representing and elected by ratepayers, which favours the regulations?

Mr. Stern

The answer to the hon. Gentleman's question is that the myth that I have just been attempting to displace has unfortunately taken hold in many local authorities. That is true of the local authorities that I have studied, all of which are Socialist-controlled. I have not studied others.

Mr. Simon Hughes

There is not one.

Mr. Stern

The authorities that I have studied hold firmly to the myth that the money is theirs.

All hon. Members have received representations on this matter. The Building Employers Confederation has asked me to vote against the regulations. It is regrettable that many of its press releases do not meet the perceptive standards of its members. It has told me that capital receipts should properly have been used to increase investment. How has the confederation's desire been raised to the status of moral obligation? I agree that if capital receipts were used to increase investment, that would be convenient for members of the Building Employers Confederation, but it would be inconvenient for ratepayers and for builders who are active in the private sector.

Mr. Bermingham

Does the hon. Gentleman agree that local authorities have a statutory duty to house the homeless and to keep their housing stock in good repair? If local authorities are not allowed to use this money, they will not be able to meet the standards that we expect in a civilised society. Surely they have a duty to all ratepayers and their tenants.

Mr. Stern

I shall demonstrate later that local authorities can meet their statutory duty in housing within the proposed controls. I do not agree that local authorities can choose which groups they have duties towards, merely to fit the Opposition's argument. They have duties to many people. I accept that they have a duty to provide a reasonable housing service, although it has been overblown in the past. However, that duty must be matched by their duty to ratepayers.

The Building Employers Confederation says that the regulations will contribute to a significant fall in the industry's work load. Has it never heard of private sector capital spending? Is it unaware that the more money that is spent in the public sector, the less is available for the private sector?

Mr. Bill Michie (Sheffield, Heeley)

Ring it up.

Mr. Stern

I have.

Does the confederation assume that its sole employers are local authorities? I note with amusement that the confederation's circular is addressed to selected Members of Parliament. It cannot even get its selection system right.

The same hysterical language is used by the housing authority part of which I have the honour to represent. The chairman of the housing authority says that the regulations will permit only half of the programme that is needed. The local council—which, of course, is Labour-controlled—has asked all Bristol Members of Parliament to represent the interests of council tenants, home improvement grant applicants and the local building industry. I accept that these are valid and important interests, but again one is omitted. My local authority does not ask me to represent the interests of the ratepayers, the majority of whom elected that authority.

Mrs. Currie

As a serving Conservative councillor, I should point out that the three groups that my hon. Friend has just mentioned are all ratepayers, particularly the industrialists. All the groups he has mentioned, including private owner-occupiers, have benefited specifically from improvement grants on which this money has hitherto been spent.

Mr. Stern

I accept that the majority of the first two groups, and perhaps a significant number in the third group, are ratepayers. However, Bristol city council is not asking me to represent their interests in totality. It is asking me to represent one of their interests, and I was trying to point out that I am also obliged to look at the other interests.

Bristol city council's needs, as expressed in its application under the housing improvement programme, include £2.7 million for new build. The city had the option of increasing joint venture schemes at little or no cost, but it has decided to go for the more expensive option. Here, again, the ratepayers do not seem to have been considered.

It is worth noting that in Bristol home improvement grant moneys receivable in the years 1982 to 1986 are estimated to be £23.6 million. In the period 1975 to 1979, under a Labour Government, the equivalent receipts were £2.2 million. The city has a large build-up of unspent capital receipts, and I am delighted to take this opportunity to pay tribute to the Labour party in Bristol which contributed greatly to those capital receipts. Whereas 5,932 council houses have been sold since the 1980 Act came into force, an almost equal number were sold in the years prior to 1980, when there was no statutory obligation to sell. For the major part of that period, the council was Labour-controlled. Therefore, I am delighted to pay tribute to that Labour party exercise of putting the interests of ratepapers and housing ahead of party dogma.

I do not wish to embarrass the Labour party too much, because its record does not compare well with the period when the Conservative party was in control. There were certain bureaucratic delays in selling council houses, but council houses were consistently sold when Labour was in control. Similarly, it is worth noting—again, I offer some praise—that partly as a result of the groundwork laid by the Conservative administration of 1983–84, the Labour party in Bristol, which is now in control, will next week propose a rate well within the Government's guidelines. It should be praised by its opponents for doing so.

The successful policy of selling council houses has led to problems in Bristol, because 1,400 prefabricated reinforced concrete houses have been sold—nearly 10 per cent. of the overall sales of PRC houses throughout the country. That is far more than was expected. I was therefore delighted to hear my right hon. Friend's assurance about the possible additional allocation of funds in this area. I assure him that I shall encourage the leader of the council and the chairman of the housing committee to submit an application tomorrow. But I hope that I shall receive a slightly more favourable reaction than I did in December when the housing chairman wrote to me complaining about the niggardliness of the HIP allocation. When I offered to arrange a meeting with Ministers to discuss the matter further, it was turned down on the ground that they would not listen.

Let us consider whether Bristol has done so badly under the present proposals. Its share of the 1985–86 generalised needs index increase for the south-west region is up by 4 per cent.; its share of the total funds available to the region are up by 9 per cent.; and its cash allocation, in the context of controlled public spending, has fallen by 3.1 per cent., against 11.9 per cent. for the region as a whole. Is that so bad at a time when public expenditure must be controlled? It is probable that, had Bristol received the full housing improvement allocation for which it asked, it could not possibly have spent it. Nevertheless, the estimate is that in 1985–86, housing starts will be up by about 60 per cent., housing improvements by about 50 per cent., housing repairs by about 50 per cent. and grant applications by about 30 per cent. It is difficult to relate housing expenditure of that order to the stories that we have heard from Opposition Members about the effects of the regulations.

As a result of the measures that we are discussing, in 1985–86 Bristol and other local authorities will be able to spend 70 per cent. of their capital receipts. They will be able to spend 20 per cent. of previous receipts, together with 100 per cent. of net receipts from certain low-cost ownership schemes. Given the need for some Government control over capital spend, I do not consider that the limits that the Government have imposed are in any way unreasonable. They will not stop any realistic plans by Bristol. I shall be interested to hear whether a similar case can be put forward on behalf of any other local authority, because I assure Opposition Members that Bristol is by no means unique. Under the present proposals it will be able to make sensible and rational allocations for housing spend in the coming year.

I assure my right hon. Friend that I support the regulations and I am sure that the House will, too.

7.58 pm

Mr. Simon Hughes (Southwark and Bermondsey)

The hon. Member for Bristol, North-West (Mr. Stern) has convinced me of one thing. I had thought that in the coming county council elections it was fairly certain that Avon would be lost by the Labour party, but no one in Bristol with any housing need and who was perhaps among the 33 per cent. of the electorate who supported the hon. Gentleman can look to him to provide sensitive support for the predicament of local people, and I shall be happy to distribute his remarks widely throughout Bristol. Not only did he fail to respond to any of the housing needs of the people of Bristol, but he failed to produce evidence—because there is none—of any authority, its officers or members, which supported the Government's proposals.

The hon. Gentleman may know that prior to this debate there was a lobby by the Conservative-controlled Association of County Councils, the Labour-controlled Association of Metropolitan Authorities and the Conservative-controlled Association of District Councils, which unanimously condemned this blatant social and economic folly of a policy.

Mr. Stern

From his detailed knowledge of the conditions in Bristol, which of the figures that I gave does the hon. Gentleman wish to change?

Mr. Hughes

If the hon. Gentleman will linger a while, I hope that he will hear sufficient argument to persuade him that what he has said is a load of rubbish.

The trailers are for a Budget for jobs next week, but we shall believe that when we see it. These regulations are certainly against jobs. An estimated 65,000 jobs will be prevented if the regulations go through, without putting back to work any of the remaining 400,000 people in the building industry whom taxpayers are paying £600 million in dole money to keep out of work.

Unlike the rate-capping proposals, which may find favour with some of the Government's supporters, I do not believe that the regulations will make economic sense or be acceptable even to them. Four groups of people are affected. Home owners and private landlords seeking improvement and repair grants will be disappointed, council tenants seeking the repairs so desperately needed will find that that work cannot be carried out. People on waiting lists for new council homes will also be disappointed, because in many areas no new council accommodation will be built. Finally, those who rely on housing associations to build or renovate accommodation will be told that the Government will not help.

As the Secretary of State knows, this debate in some ways is the crunch—the last of the horrors of the current Department of the Environment year. The Government dallied for a long time before finding a day to slip this in, hoping that not too many Conservative Back Benchers would notice or vote against it. They even made a small concession, altering the original proposals by adding a few crumbs from the table. Nevertheless, few people will be fooled.

The Government's proposals are unprincipled, illogical, inconsistent and inept. The statistics are telling. The Secretary of State, as usual, was selective in his use of statistics. The total number of housing starts, public and private, has fallen from about 322,000 10 years ago to under 191,000 this year. Local authority capital expenditure in 1984–85 is 40 per cent. lower than in 1979–80, and next year it will be 60 per cent. lower than it was when the Government first came to office. Public expenditure on housing will be a quarter of the total when the Government came to power, and 11 per cent. down on last year.

At least £325 million would have been available if the Secretary of State had left the prescribed expenditure limits at 40 per cent. for next year as they were this year. That is because, at the Government's instigation, £1.5 billion has been accumulated in unspent capital receipts since 1981. The English house condition survey four years ago showed one quarter of the housing stock to be substantially unfit. Last year 200,000 people could have obtained improvement grants, but that figure will probably be halved in 1985. I do not advocate municipal housing as the only solution—private and public housing and the voluntary sector should rightly operate in partnership—but municipal housing starts this year will probably reach their lowest since 1919—scarcely a record for the Government to be proud of.

The effects will be felt by all categories of the population. The old are perhaps the most vulnerable. Age concern estimates that 300,000 old people are now waiting to move into decent property. By the time the Government allow the money to be spent many of them will be dead. Those people will not go to their graves thanking the Government, and even then their families will receive a pretty rotten death grant to help with the funeral expenses. The capital allocation for housing in London will have been reduced from £1,400 million when the Government came to power, to about £500 million, although the problems of the capital are as bad as, if not worse than, those elsewhere.

I will tell the hon. Member for Bristol, North-West, with his accountancy background, why the Government's proposals are illogical, inconsistent and inept. They are illogical because Government policy is based on finance-led rather than need-led economics. I could not disagree more with that principle. Finance-led as it is, there is patently a profit on capital receipts. Local authorities have been selling assets at a profit. The Government's whole economic philosophy dictates that the authorities should be able to spend that profit to regenerate the economy by reinvesting and creating more homes and jobs. The Treasury Select Committee, which is far more expert in these matters, clearly agrees with that.

The present Government are the Government of the housekeeper's budget. Rather than frittering money away from day to day, the housekeeper is advised to save up and invest capital in important things. That is just what the local authorities have done, but having done as the Government wished and saved up their money, they are now not allowed to spend it. All they can do is look through the glass inner door at all the lovely money in the town hall safe. They will not be able to do anything with it. What use are savings in the bank when the owners—they are indeed the owners because it is their money, as the Secretary of State tells us almost weekly—cannot take the money out?

The folly and illogicality of the Government's proposals extend even further, because capital receipts do not increase the public sector borrowing requirement. Maidstone district council and other local authorities are not demanding to use the money to service their debts. They want to spend the money, so it does not enter the simple PSBR equation. Lastly, local authorities will not be able to accumulate so many capital reciepts in the future, because those receipts come primarily from the right-to-buy provisions and the most desirable properties have already been sold.

I have shown that the Government's policy is illogical, but why is it inconsistent? The inconsistency is most clearly understood if one reads the oft-quoted letter of 2 November 1982 from the Prime Minister to Sir Jack Smart. The hon. Member for Copeland (Dr. Cunningham) has already referred to that letter in part. I wish to quote just one sentence. The Prime Minister wrote to the leader of the Association of Metropolitan Authorities: I feel sure you will agree that much investment is needed to plan for future economic recovery, and that the present time, when the construction industry has spare capacity is the moment to be making provision for those future needs. The housing industry has even more spare capacity now and the housing stock is much worse. The important difference is that when that letter was written we were approaching a general election, whereas now we are not. I only wish that we were. The Government might then pay attention to the voices behind them and change their policies, which their own supporters increasingly clearly regard as crazy, both politically for the Conservative party and socially for the entire country.

It is also inconsistent because the Prime Minister says through her Secretaries of State, "We want to reward the prudent councils." Rate capping is about making sure that imprudent councils are punished and that prudent ones are rewarded. It is the prudent council which save the money which are being told that they cannot spend that money.

Mr. Beaumont-Dark

The unwise virgins.

Mr. Hughes

I shall not try to rival the hon. Gentleman's expertise in that matter. No doubt that could be a subject for an Adjournment debate. We are trespassing near to going off the subject. I shall resist the temptation.

Not one of these local authorities has done anything illegal or wrong. Therefore, according to normal Government philosophy, they should not be penalised. The carrot and stick arguments just do not apply.

If the money cannot be used to put the housing stock into decent repair, how do the Government imagine that they will increase the numbers of people who will buy under the right-to-buy legislation? If people live in a place that is in a pretty grotty state, they are less likely to want to acquire responsibility for it.

The Government introduced the Housing Defects Bill, which was passed by Parliament. Although a concession has been made which, in effect, amounted to, "We shall look favourably at those authorities which have to compensate people who bought defective Airey homes and the like," there is no guarantee that that additional money will be forthcoming.

What about the ineptness of the proposals? We need only refer to the draft report—I underline that it is a "draft" report—of the Audit Commission. As the hon. Member for Copeland said, the Audit Commission made similar points before the House rose for the summer. The Secretary of State has had to eat his words.

The greatest ineptness, however, is that the proposals do not recognise our needs. The inquiry into our housing stock, which is currently chaired by the Duke of Edinburgh, is due to report in July.

Mr. Tony Banks (Newham, North-West)

He has a nice house.

Mr. Hughes

Yes, he has a nice house. I shall come to nice houses in a moment.

The provisional view of that inquiry is: the only clear message is a simple one: not enough is being done either to combat the shortage that exists, particularly in such areas as London, or to head off the looming disaster caused by the nation postponing necessary improvements and repairs to our existing homes. International comparisons reveal … that the United Kingdom has been continuously underinvesIing compared with similar nations, reaching a level in 1982 that is significantly lower than that for any comparable country. One need only look at any series of headlines in our papers to see that there is a need.

Council investment curbs 'waste millions' is the trailer to the Audit Commission's conveniently delayed report.

A few days ago another headline stated: £19 bn needed to right council house defects. The Guardian of 26 February stated: Bishops protest at 'lethal' housing. "Inside Housing" stated: Don't abandon housing morality say Catholic bishops. One headline stated: Problem flats 'need £2 bn for repairs'. Another stated: More than a million homes 'unfit to live in'. Just before Christmas the Financial Times described the Government's policy as: Scrooge rules in council housing". Whatever authority one takes, it is clearly shown that the policy is crazy. For example, Maidstone council will be able to spend only £500,000 by non-housing projects. One project will cost more than that. Why should the council sell to raise the necessary money? For example, Sefton council, which is Tory-controlled, has written to the Secretary of State saying that his measures are losing support for the Conservative party at an alarming rate.

The Tory leader of the council wrote in November: I am very concerned that the Conservative Members on Sefton Council feel that they have exhausted their capacity and, indeed, their desire to explain away rate increases of the magnitude which is indicated for next year. He continued: Our political support in this part of the world"— Merseyside— is ebbing away at an alarming rate, both in Local Government and Parliamentary terms, and we are very concerned that the whole basis of our support is being undermined by the financial difficulties we face. Eastbourne provides another appropriate example. That is the town where the Minister for Housing and Construction has his constituency, although I do not think that he lives within the boundary. In Eastbourne, 2,000 people are waiting for homes and 100 families are in desperate need of housing. That is what is happening in this so-called blue chip town on the south coast of England which is represented by the Minister for Housing and Construction. Many of his elderly constituents have been waiting two, three or four years for a transfer. Can the hon. Gentleman honestly say—I am sorry that he is not here, but I do not apologise for these remarks—when he has two homes, one of which is in London and the other in the south of England, that he can justify this poicy to the people of Eastbourne?

Mr. David Sumberg (Bury, North)

We all have two.

Mr. Hughes

Not all of us have two homes. Some of us have to make do with one. I realise that some hon. Members who do not represent London may have to have two homes.

Can any other hon. Member say that he can justify that policy? The demand for bed-and-breakfast accommodation has increased and costs more than decent housing repairs would. It does not matter whether one talks about rural areas such as Cornwall, where people are in desperate need and are living in caravans while waiting for housing, or about inner city boroughs such as mine in Southwark—the problem is the same, and people cannot believe that the Government are so insensitive.

Mr. Tony Banks

The hon. Gentlman referred to the circumstances in the constituency of the Minister for Housing and Construction. What about the circumstances in the Prime Minister's borough of Barnet? There are 5,206 people on the waiting list and no fewer than 31,000 unsatisfactory dwellings in the private sector. The right hon. Lady sold one of her houses, in Flood street, for £250,000, so she is OK.

Mr. Hughes

Every constituency tells the same tale. Transferred GLC stock will not be renovated. Tower blocks in the inner city, such as in Bermondsey, Rotherhithe, Southwark or the constituency of my hon. Friend the Member for Woolwich (Mr. Cartwright) will not be renovated because local authorities are being told that they cannot spend the money that they have and wish to spend.

Why do the Government not wait until the Audit Commission produces its report and get the answer right? Why do they not wait until the internal review, by which the Secretary of State puts so much store, is carried out? What will the Government say to assure their supporters that next year they will not be told that they can spend not 20 per cent., but zero per cent. of receipts? The percentage has been cut to 50 per cent., 40 per cent. and, with this proposal, to 20 per cent. Why not make it zero per cent. next year? Why do the Government not say that they really do not know the percentage and that perhaps there will be no money left at all?

The Government are deaf to logic, but they are politically insensitive as well. Last month the National Home Improvement Council passed a resolution, with no votes against it, calling on the Government—having deplored their policy—to change their plans completely. The National Federation of Building Trades Employers that has said that it is now useless to try to persuade the Government by reasoned argument. The only thing to do is to get to Tories where it matters — in their constituencies. The Government's policy on this issue—when Britain's housing stock is so appalling and has worsened so much under their stewardship—is indeed illogical, inconsistent and inept. But it is also immoral. I do not believe that the Government can justify it for one moment longer. I hope that the prayer succeeds and that Government Back Benchers will be brave enough to support us in putting these regulations out of court.

8.18 pm

Mr. David Sumberg (Bury, South)

I was going to begin by apologising to the hon. Member for Southward and Bermondsey (Mr. Hughes) for not commenting on his speech, but I must say that I thought his remarks about my hon. Friend the Minister for Housing and Construction and his two homes were unworthy. They showed the lack of understanding by London Members of Parliament of the need of those who serve constituencies outside London to have two homes and two bases so that they can act as proper Members.

I want to set out as concisely as I can the reasons why, for the first time since I became a Member, I shall not support the Government but shall vote for the prayer. The House should consider the background to this debate. I have no hesitation in saying that one of the Government's most successful policies and one which will live for years with those who benefited from it, is that which allows council house tenants to become home owners.

The right-to-buy law which was brought in during the Government's first term of office and which has been extended and improved during the present Parliament has given hope, freedom and encouragement to literally thousands upon thousands of council tenants. They are now free from the state and the local authority and, most importantly, they are free to move their home and thus can achieve at a time of high unemployment the essential advantage of mobility of labour.

When the arguments on this matter raged, in the House—I refer to the legislation which allows council house tenants to buy their homes — and outside, the Conservative party always maintained that its policy had two essential objectives. The first, as I have already summed it up in a Churchillian phrase, was: to set the people free. That we have done and are continuing to do.

The second objective, which was equally crucial to the success of the policy, was to translate the houses into cash so that it could then be used for the benefit of the whole community. That was the answer that we always gave to our political opponents who at the time accused us of dissipating national or, perhaps more precisely, local community resources. The right-to-buy legislation was bitterly opposed by the Opposition. It ill becomes them, therefore, to come to the House as "Johnny come latelies" complaining that local councils cannot use the money that they never wanted them to have in the first place.

Mr. Tony Banks

The Opposition still object to forcing councils to sell their council stock. The hon. Gentleman must recognise that capital receipts are based on the sale of unrequired land as well as the sale of council houses.

Mr. Sumberg

Of course I recognise that, but cash from council house sales is also an important ingredient. The cash receipts, which, as the hon. Gentleman said, come from a variety of sources, can be used by the local authorities for a variety of purposes. Some of them have already been mentioned: homes for the elderly, home improvement grants and—that much maligned and overused phrase—improving the infrastructure. They can all be used to enhance the community and are proper and better uses of public and taxpayers' resources. They will all increase employment. They all reflect great credit on the Government and the Conservative party.

There was a powerful incentive for local authorities not just to obey, or to go through the motions of obeying the law, but positively and aggressively to market the policy. My authority in Bury is a perfect example. The Conservative-controlled local council has the best record, in percentage terms, for the sale of council houses in Greater Manchester. The implementation of the regulations will affect it badly. The consequence is that Bury's spending power for 1985–86 will be reduced by some £600,000. How can I justify this to my good friends on Bury council who have steadfastly followed the Government's line on local government spending, and how can they in turn justify it to their political opponents in the council chamber?

My right hon. and hon. Friends at the Department of the Environment will argue—they already have—that this reduction is merely a postponement and that it does not abolish "at a stroke" the local authorities' right to spend—if I may use this phrase—their own money. All that is true, but a postponement, if it means anything, means that worthwhile schemes that were planned for 1985–86 will not now take place that year, and may never take place. Whatever meaning we apply to the word "postponement", genuine jobs that could have been created and could have dented the 17.5 per cent. unemployment rate in my travel-to-work area will never be created.

I have supported loyally and steadfastly the Government's actions to curb local government extravagance and I shall continue to do so, but what hurts me most about the regulations is that they do not attack our political opponents; they attack our friends. It is directed not at those local authorities which dragged their feet over the sale of council houses, which prevaricated and put obstacles in the way of anyone wanting to buy their council houses, but at authorities such as mine that faithfully, vigorously and loyally applied the policies of the Conservative party and the Government.

I regret that the course of action that I shall take affects my right hon. Friend the Secretary of State for the Environment and I am sorry that he is not in his place. He was kind enough to come and support me at the last general election and I was grateful for that, but I am afraid that he and his colleagues are, victims of Treasury policy. They are victims of policies which in this regard I find it increasingly difficult to understand.

I am not a natural rebel. Some of my right hon. and hon. Friends find it easier than I do to defy the Whip and vote against the Government. I believe that this Government are the only one that will bring economic prosperity not just to the country but the region that I have the honour to represent. When I signed early-day motion 283 on this topic I knew what I was doing and w hat the consequences could be. By signing it, I was keeping faith with my constituents and Conservative councillors in my constituency, but, above all, I was hoping against hope that even at this late hour the Government would think again. That they have not done so is something that I regret. It gives me no satisfaction, but equally it gives me no alternative.

I shall vote technically with the Opposition tonight, but they cannot be satisfied with their record in these matters. I shall, in my heart, be going into the same Lobby as those of my right hon. and hon. Friends who believe that in this instance the Government have it wrong, that a voice must be heard, and that a vote must be recorded tonight for those Conservative-controlled local authorities that in hard times have kept faith with the Government.

8.29 pm

Mr. Bill Michie (Sheffield, Heeley)

I congratulate the hon. Member for Bury, South (Mr. Sumberg) on his good and courageous speech. I agree with much of its content, but also disagree with much of it.

These regulations are an attack on local government decisions and local democracy. During the past few years local government has taken a tremendous hammering from central Government. The regulations are yet another blow to local authorities, which do their best to carry out their democratic duties to their electorates.

We have disagreements about grant-related expenditure assessments, rate capping, local government policies and many matters for which local government is responsible. Obviously, I would defend my local authority on all those issues. However, on this issue we are getting at the infrastructure not merely of the nation, but of democracy and decision making. As the hon. Member for Bury, South made clear, for some reason local authorities cannot use the money that they own. Any further reduction in the powers of local government will have an effect which even the Government would dislike. I am thinking of complete cynicism about whether it is worth taking an interest, voting or serving in local government. That would damage the nation's democracy.

I have read many of the Government's papers on the matter, but cash limits still seem to be arbitrary, and I cannot find anything fundamental on which we can have a logical discussion. I am not an accountant. I am glad of that, because the more I listen to them the more I feel that there is no soul in the world. The hon. Member for Bury, South convinced me that most accountants have no soul, let alone understanding.

The Government do not take account of the ability of local authorities to spend capital receipts from previous years. As a result, local authorities which have played by the rules and not acted illegally find that they have an excess. Nationally, local authorities exceeded cash limits in 1983–84 by £368 million. The latest estimates for 1984–85 are between £600 million and £1,500 million.

Those problems were not self-created. They resulted from authorities responding years ago to Government instructions about planning ahead. Authorities which have not acted illegally, but have carried out the wishes of central Government, now have to pay the price for it. It is bad enough that it affects local authority services, but it also affects jobs in the construction industry.

The Building Employers Confederation, which sent a letter to most hon. Members, has frequently been quoted. I read with interest the latter part of its letter, which stated: The rules governing the use of capital receipts have proved increasingly complex and cumbersome"— we do not need to be reminded of that, but it is interesting that it comes from that source— resulting first in an underspend and then in an overspend. The proposed changes represent further tinkering with the system and cannot rule out possible further disruption to local authority spending in 1985–86. Long-term capital programmes cannot be run effectively on a system designed to meet a one year cash limit. The Government's proposals will further confuse not clarify the situation and will contribute to a significant fall in the construction industry's workload. The letter then strongly urges the Government to reconsider the matter, and me to vote against the regulations, which is precisely what I shall do.

The regulations affect both big and small businesses. I had the privilege to meet a new group of small business men in Sheffield, in particular those in the construction industry, who have set up a consortium to guarantee a high standard of work and to protect clients in the public and private sectors. Over the years some of the building firms have received bad publicity, and bankruptcies have caused distress to clients. I applaud the initiative of the private builders in joining together to ensure the maintenance of high standards and guarantees. They have undertaken that at their own expense, which I also applaud. Although they are prepared to do that, they admit that from year to year they do not know whether they will have orders or jobs. Even orders in the pipeline may have to be reversed because of the regulations.

It always make me smile when I recall the 1979 election, and occasions since then, when the Prime Minister urged people to vote for a Tory Government because they would look after the private sector, especially small business men. At present, proposals such as these can do nothing but reduce the chances of small business men, no matter how hard they try to remain in business and to employ people.

The regulations also affect the Government's plans. At Question Time yesterday the Minister for Health, in answer to a question, said: We shall continue to encourage the development of services that enable people in need of care to live as normal a life as their condition allows."—[Official Report, 12 March 1985; Vol. 75, c. 139.] All hon. Members will applaud that. I recognise that money has been set aside in GREAs for that purpose. However, the Government are wrong in thinking that that can be taken in isolation. Bad housing, closing hospitals and not having the capital receipts to adapt homes, makes the position worse. Therefore, the principle may be right, but the regulations work against what the Government claim they seek to cure.

There seems to be little response to the points raised by organisations, such as the Association of Metropolitan Authorities and others. Recently, I read a resolution of Sheffield city council, passed on 9 January 1985. I fully agree with its principle. The council expresses its grave concern that, despite strong representations concerning the level of capital allocation in respect of the City's schools, this year's announcement … will … increase the difficulty of maintaining a reasonable physical environment in many Sheffield schools in line with statutory obligations … requests the Chief Executive to write to the Secretary of State for Education and Science expressing the Council's concern and reiterating the Council's request for an urgent meeting with him to press for a review of this allocation. It is obvious that such resolutions come not only from places such as Sheffield, but from many other local authorities. The regulations will have a tremendous effect on local government infrastructure.

In Sheffield the projects that will be affected are endless. In the housing sector we have an allocation loss of £4 million, which is 15.6 per cent. in cash terms, and a loss of capital receipts of £7.3 million. The proposals will affect remedial work on tower blocks that suffer from structural defects; remedial work on inter-war estate dwellings that suffer from wall-tie failure; the demolition and replacement of more than 2,000 houses, on one estate, which suffer from acute wall-tie failure, the modernisation and planned maintenance work on inter-war estate dwellings, of which 24,000 remain unmodernised; repair and renovation grants to private sector dwellings; further enveloping initiatives; and new council house buildings, especially for the elderly. I remind the House of the Government's stated willingness to look after the community and to bring more of those people into community care. Remedial work on post-war houses and the contribution of the slum clearance programme will also be affected.

The projected allocation loss for non-statutory housing in Sheffield is £800,000, or 11.1 per cent. in cash terms, and the projected loss of capital receipts is £3.7 million. Another great worry is that the council will be unable to carry out the work which any responsible authority should do for services such as the fire precaution work recommended by the county fire officer in homes for the elderly and the mentally handicapped — the most vulnerable in society. It will be unable to adapt homes for the seriously disabled, including the provision of stairlifts, downstairs toilets and ramps. That may seem like small fry, but it is not for those who live in houses where such adaptations are not made. It is a strain not only on those people but on the social services, which are criticised for spending too much in those areas. The fact that the building programme is not going ahead means that those people cannot be rehoused in more suitable accommodation. The people of Sheffield lose out in every way.

The council may also have to abandon a support unit that would allow the mentally ill to lead independent lives. It may also have to abandon special units for the elderly, which at present are geared to ensuring that the elderly believe that they have a role to play in society and that, given the opportunity, they will do so.

It is interesting to note that many of the schools that will be affected by the regulations are in the only Tory constituency in Sheffield. I wonder how the parents of the children in those schools will react? We are talking not just about knocking down a wall here and putting in a window frame there; we are talking about, for example, a new roof for King Edward secondary school, through which water is pouring at present. If it does not get a new roof, the structural damage will continue to the point where it is no longer habitable. It is obviously false economics, but, under the regulations, it is not likely to get a new roof.

The proposals will also affect the building of new schools and improvements to schools throughout the city. A great problem in the country has been the removal of asbestos from public buildings, including schools and colleges. Again, that is likely to be affected by the regulations. The council will have to abandon or delay plans for energy conservation and its proposals to integrate handicapped children into mainstream schools. We shall lose the improvement programmes for Hunter's Bar first school, Tinsley nursery and infants school and Southey Green school. The planned expansion in nursery provision will probably also go out of the window.

Despite the Secretary of State's claim this afternoon that more money is being made available, the Government cannot claim great success for their policies. There has been success in some areas, but not as much as there should have been. All caring local authorities, all persons in need of proper accommodation, whether children in schools, old-age pensioners waiting for custom-built homes, and even the Government's ex-friends—I say that because I believe that they will lose a few of them — in the building industry know that the policy is nothing short of a long-term recipe for disaster.

8.43 pm

Mr. Robin Maxwell-Hyslop (Tiverton)

Many aspects of the control of capital expenditure by local authorities have been mentioned in the debate, but one is of special concern to me. I start from the principle that if a Government pass legislation placing new expenditure burdens on local authorities, they must make proper provision for the discharge of those burdens. During 1984, the Government put through Parliament an Act which did not apply to everyone in a certain financial bracket who lived in defective houses, but to one category of those who owned defective houses—those who bought them from local authorities. The Act placed on local authorities an absolute obligation on demand to purchase back some categories of defective houses, including Woolaway and Cornish unit houses, although there are others.

However, that does not end the financial consequences which fall on local authorities. Having purchased back those houses, not at a price related to what the house-owner paid, but at a price related to the current market value, that family has to be rehoused. It cannot live in the house while it is being demolished or while its corroded steel structures are being replaced. Therefore, the council must buy back the house, rehouse the family—

The Parliamentary Under-Secretary of State for Wales (Mr. Wyn Roberts)

indicated dissent.

Mr. Maxwell-Hyslop

Of course, the family can sleep in the street? The family will be homeless, so it must be rehoused. The same problem applies to those who live in such houses, who have not exercised the right to buy. It may be true that the repair of such houses is extremely uneconomic in view of their remaining economic lives. It might be better to demolish them and to rebuild.

My complaint is that, having placed that statutory provision upon local authorities, no provision has been made in their capital allowances to discharge it. It is all very well for the Secretary of State to say that he was unaware of this until last night. That is an absurd claim; I wrote to him eight days ago and sent a copy of my letter to the Chief Whip. If he was unaware until last night, that is his fault, not mine. The matter has been discussed frequently with Ministers. The cost of the burden could represent a huge proportion of the estimated capital spend of small councils. I recommended to my right hon. Friend that expenditure under the Housing Defects Act 1984 should be outside the capital controls which this prayer seeks to annul.

It would also be extremely sensible, because the problems of councils with a minute spend are wholly different from those of councils with a large spend, to have a de minimis rule on the control of council capital expenditure, so that a council spending, for example, less than £5 million a year would not have this cumbersome mechanism, which will cost central Government a great deal to operate, thrust upon it. Councils with a posture of low capital spending have demonstrated that they do not need such cumbersome control mechanisms anyway.

In his opening speech, my right hon. Friend the Secretary of State gave some encouraging signs—that is the only word I can use—so worded as to commit himself to nothing. My right hon. Friend is extremely generous and courteous in receiving deputations. The only trouble is that nothing happens after he has received them. There is no reason to suppose that that pattern from the recent past will not be repeated in the future. The form in which he gave his undertaking, after quite adequate notice to think the matter out clearly and thoroughly and to obtain the agreement of the Treasury, was worthless. If he had intended it to be what is being asked for by many of his Back Benchers, he knows perfectly well that he could have phrased it so that it was an actual commitment.

For years Ministers have said that they will consider matters put to them sympathetically, and they do, but their sympathy is all that we get. One cannot buy back defective houses or rehouse people with sympathy. It is no good saying that if one buys back a house the person concerned can rehouse himself. What happens in the part of the country that I represent is that any houses for sale are snapped up by those retiring from the midlands. Therefore, they are priced out of the reach of local people. That option in very many cases simply does not exist. That is why what will have to happen, in the representative case, will be the council rehousing the family where there is a buy-back under the Housing Defects Act 1984.

I should like to be told by the Minister when he winds up whether I am to be invited to believe that Ministers did not think of this when they introduced the Housing Defects Act 1984. Is the Secretary of State really inviting us to believe that he did not think of it until, by a happy chance, last night he read my letter? That is not, I am afraid, a very dignified posture for Ministers to adopt, nor do I believe it to be a truthful one: yet that is the apparent import of my right hon. Friend's remarks. We want better government than this. We are entitled to expect it, and we shall not get it by voting tonight against the Prayer.

8.51 pm

Mr. Gerald Bermingham (St. Helens, South)

My constituency is situated in an area of high unemployment. I have a number of interests in this matter, which I shall gradually declare during my speech. The other day I received a letter from the director of finance in the borough pointing out the exact implications of the imposition of these regulations for the housing stock in the borough of St. Helens. Out of a total stock of 69,000 houses in the borough, 14,000 were built before 1919. A recent survey showed that 16.3 per cent. of the housing stock is unfit because it lacks certain amenities.

It would be instructive to look at the local authority's plans for the last year for which figures are available, namely, 1984–85. During that year it planned to make 2,147 toilet alterations. I am referring to houses which do not have baths or indoor toilets. One would have thought that in any reasonably civilised society in 1985 the provision of indoor toilets was a basic necessity.

The hon. Member for Bristol, North-West (Mr. Stern) gave the House a good accountancy demonstration. I have never understood balance sheets. They always seem to prove that one is making a profit, when in fact one is making a loss. The reality, however, is that my constituency is no different from any other constituency where thousands of homes have no indoor toilets. Local authorities up and down the country, regardless of whether they are Conservative or Labour-controlled, have used capital receipts to install toilets and baths in houses. As my hon. Friend the Member for Sheffield, Heeley (Mr. Michie) said, local authorities have used capital receipts to install ramps for the disabled and handles on baths, but the Government have laid regulations which will reduce the right of local authorities to spend capital receipts for this purpose.

I listened carefully to the Secretary of State's reply to the speech of my hon. Friend the Member for Copeland (Dr. Cunningham). I could not find any rationale in what he said. The House has not been given an explanation of why capital receipts are to be cut by 20 per cent. The Government say that they have been over-generous with their housing improvement grants. I asked my local authority to supply me with the figures. In 1981–82 the housing investment programme allocation for St. Helens was £5,978,000. Taking into account the effects of inflation since 1981–82, the HIP allocation for 1985–86 is £5,775,000. That is a 3 per cent. reduction on 1981–82. In fact, it is a 17.5 per cent. reduction on 1984–85, when the amount was £6,775,000. In volume terms, between 1981–82 and 1985–86 there has been a reduction of about 20 per cent. This has happened at a time when the metropolitan boroughs have been suffering from an escalation in unemployment and increasing housing needs.

According to the housing survey of 1984, council-owned properties in the borough need £27.2 million to be spent upon them to carry out outstanding repairs. This is the position in a town where many building workers are out of work. Although £27.2 million worth of repairs need to be carried out, the borough's allocation for 1985–86 is to be only £5,775,000. Furthermore, our capital receipts are being cut back. The logic of it defeats me.

As I said in an intervention to my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), it is all very well for the Government to say that councils should put the money generated from excess receipts in a bank and live off the interest or lend it to somebody else for the interest. The repairs that will not be done this year, the buildings that will not be built this year, the jobs that need to be done and were being done with capital receipts and will not be done, will cost us a little more than interest rates in excess payment next year. At the same time, we shall leave many people out of work.

According to a parliamentary answer that I received the other day, at the end of 1983, the last year for which statistics are available, out of all those out of work, 275,000 people have shown the construction industry as being their last place of work. In other words, 275,000 construction workers are on the dole, and that costs the state a lot of money. At the same time, all this work needs to be done, but the Government just say, "Cut back and do not do it." The elderly and the badly housed are the ones who will be affected most, and invariably it is the elderly who live in the worst housing conditions. At the same time, the 275,000 construction workers are on the dole. It will not cost the state anything in what I can only call their cowboy economic policies to try putting a few of these people back to work to relieve the misery and the poor housing conditions in which so many live.

If the Government are proud to run a country in which there are 1 million homes which are unfit for human habitation, of which about a quarter do not have running hot and cold water, they mark themselves as a Government without care. I hurl that charge at the Secretary of State and I wait with some interest to hear his reply at the end of the debate.

We are talking about whether repairs will be done. This applies not just to council houses, because there are millions of houses in the private sector, both rented and owned, which because of age and deterioration, need improvement grants, repair grants and insulation grants, which used to come out of the capital receipts and other HIP money. They will not get them. How often have hon. Members had people at their surgery—I have them every month—who say that they have put in for a grant but the council has told them that it does not have any money. There is not one Member of Parliament who does not face that problem.

I await with interest to see what will happen on Tuesday in the Budget. I doubt that there will be very much from our point of view. It will be another non-exercise. Ordinary people, whose houses are in need of essential repairs, will not get help in the Budget, although the money is there.

The Government's theory with the PSBR is that if they do not allow councils to spend £5 billion, that will notionally reduce the apparent local authority debt. I suppose that that looks good on paper, but are we in the business of looking good on paper, or are we in the business of making homes that are fit for people?

I declare one of my interests in this matter. In my constituency there is a large company that makes bricks. That company cannot sell its bricks unless we start doing repairs.

Mr. Tony Banks

The Secretary of State just drops them.

Mr. Bermingham

I hear my hon. Friend.

The company cannot sell its bricks unless people are investing in new build. We have heard a lot about inward investment, and I welcome industrial investment and pray that there will be more. Yes, the total investment in the country is going up, but it is not going up fast enough, and we all know that it is not creating jobs for the 4 million plus who are unemployed. In one little sector—housing—there would be funding for jobs which would not affect the Government's overall borrowing requirement. The money is there. Why on earth do we not use it? There used to be an old adage in accountancy books that one had to speculate to accumulate. I suggest that the Government speculate on housing and we might accumulate a slightly better housing stock.

I declare another interest, as Pilkington Bros., one of the largest glass manufacturers in the country, also has a factory in my constituency, and I am worried about the effect of these policies on the glass industry. That company employs 10,000 people in my constituency, and that is an awful lot of people. In last year's budgetary effort the Chancellor put VAT on housing improvements and double-glazing and there has been a 30 per cent. fall in the volume of orders. Therefore, less glass is being made. If this order goes through and we cut back further on repairs, even less glass will be used. Thus, another of our important industries will suffer from the problem of artificial cutback.

Anybody who knows anything about industry knows that price depends on volume. The more one produces, the less the unit costs, the less the price of the product and the more competitive it is. We are in the ludicrous situation that some glass is coming in from abroad at a price which is less—this is particularly true in the glasshouse type construction—than the price at which we can buy the raw materials. The Government seem not to appreciate that such industries as the brick and glass industries suffer as a result of their policies which do not take the realities into account.

The cutting back on permitted expenditure of capital receipts affects my constituency in three ways. It does not give the unemployed in my constituency the opportunity to work in the construction industry, which they desperately wish to do, it harms and affects the brick and glass industries, and above all it harms and affects those in society who are least able to defend themselves, the elderly and the poor, who are invariably the worst housed and live in the worst conditions.

I ask all hon. Members to support the prayer against the regulations. While this will not change the economic policy overnight, it will give the elderly, the handicapped and others in need the prospect of a slightly better life. I reckon that that is no bad effort for the House to make tonight.

9.6 pm

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

In a world of local authorities of different political persuasions, from the extreme Left to the Right of the Conservative party, what is it that can get Solihull to agree with Greenwich, Westminster council to agree with Barnsley, Lewisham with rural Suffolk and Essex with Sheffield? In the House today, there was a meeting of three diverse council associations representing councils from all over the country—the Association of County Councils, the Association of District Councils and the Association of Metropolitan Authorities. I know a little about councils as, indeed, all hon. Members know a little about politics. That these three organisations and some of the councils that I have mentioned can meet and agree about the problem from which they suffer, although not necessarily about its solution, I should have thought would make any Government, and particularly my own Government, reconsider whether their policy is wise.

Councillor Mrs. Kirwan of Westminster wrote a letter, not a private letter, to the Secretary of State—I think that it was sent to nearly all hon. Members—in which she said: Mr. dear Patrick, I have waited until now to write to you as I did not want to over-react to your HIP announcement until I had seen the full document. I have now seen this, and must say I am appalled at its content". Throughout the letter, a good Conservative chairman of a committee indicates that she is worried — a concern which has moved her to write to other Conservative Members of Parliament and say: I feel as though I have been kicked in the teeth—the more so as Westminster has always backed government policy and has pioneered so many new ventures in furtherance of our Conservative beliefs". One of the leading members of Solihull council—Solihull is not known as a Left-wing part of the country—has come to the House of Commons to join people from Sheffield, an area that bears no great political resemblance to Solihull; but then, Sheffield bears little political resemblance to any other area.

We must listen when such people come here united and say — as Councillor Lewis of Solihull said — that authorities need some certainty, stability and consistency. Nobody is saying that the PSBR is nonsense. Indeed, as a member of the Select Committee on the Treasury and Civil Service, and having had a modest hand in the report that the Committee issued, I appreciate that we said that the local government expenditure that was being stopped really had nothing to do with local authorities but everything to do with a global policy.

The Government, being on the make, saw a chance—not having been able to control expenditure in the way that they should properly have controlled it—and felt that it was like winning the pools; millions of pounds resulted from the activities of councils which had loyally followed the policy of selling council houses. That has indeed been one of the best policies that we have followed. The Government regarded that as a way of balancing the books.

It has been the economics of madness to tell councils one year, "Spend, spend, spend," and the next year to tell them, "Hold it. We did not mean spend, spend, spend but just spend." Is it any wonder that councils do not trust Governments? We are talking about capital projects. They sometimes take years to plan and bring to fruition. It is no good blaming councils for doing what they were asked to do two years ago and what the Government say they should not do now. It is not their fault if, once a contract is given, it costs hundreds of millions of pounds to cancel.

The Audit Commission—the report of which, being another of those private reports, has not yet come out but which many of us have read — says that about £500 million is wasted by the ridiculous policy of "Stop, start; spend, stop spending." Councils must get confused in such a situation.

Much confusion surrounds the problem about which we are talking tonight. Who of us, if we have water coming through our roofs, a damp course that has rotted or woodwork that is so wormy or rotten that one can push a finger through it, will say, "I will not see to it this year. I will do it next year or, if not, the year after that." If we do not spend £1 million his year doing such work, it will cost £1.25 million next year and probably £2 million the year after.

As the Lewisham authority, which is some way from my constituency, made clear today, even in terms of saleability—this applies whether or not one agrees with the sale of council houses, a policy with which I strongly agree—the more houses are left to decay, the less saleable they will be. It is obvious that people are less likely to want to live in a rundown area.

Throughout the land there are hundreds of thousands of pre-1918 houses. They may not be as distinguished as Weston Park, but they still need to be repaired and they, too, are people's homes. They are not as precious as monuments, but if we do not do something about them, they will stand as monuments to neglect. Then, they will have to be torn down and rebuilt at far greater cost.

There is in Britain a crisis of dilapidation. There is no city in the land, be it my city of Birmingham, or Manchester, Liverpool, Leeds or London, where dilapidation is not prevalent and accelerating. Decay is a geometric progression and although someone might say, "Let us save a few million or a billion pounds by delaying certain work," it is financial nonsense to think that by putting a figure on one side of a balance sheet, all will be well next year. Usually there is another crisis, so there is another reason not to keep the promise that was made.

Surely we should kill two birds with one stone. We should do the right thing by people and by the Government's word. The Government told local authorities to sell council houses. Barnsley said that it was against that policy. That does not surprise me. Representatives from Barnsley came on a little visit to London on one of those rackety trains. They were told that if they sold council houses they would be able to use the money for more important things. The council believed the Government. Sadly, it was wrong to do so. Now it finds that it will have to wait an extra two years to do its slum clearance.

In terms of human misery I cannot believe that cutting £1 billion off the PSBR will be as important to people in this country or to those abroad as doing something about the infrastructure. We must remember the backlog. People now in their 20s will still be living in slums when they die in their 70s; that is what the problem is about. Expenditure of at least £15 billion is needed not to cure the problem but to contain it. The Government misunderstand if they suppose that cutting £1 billion off the PSBR will cause people abroad to rub their hands and say, "What a sensible country." Should we believe figures from economists? Often I do not; the only certainty about five economists is that they usually have six opinions. It is estimated that capital expenditure of £500 million can create up to 65,000 jobs. Surely it is important to create 65,000 jobs. As failure breeds despair, so success breeds further success. The Government would benefit if people could see that their homes and their environment were being improved. The Government should be willing to do something about them instead of always talking about tomorrow, because the problem is with us today.

If the Government do nothing, they will lose on two counts. They will lose because people know that their policy is not common sense. They know that we have not really found a way to save money but that we are only delaying the solution to a problem that should have been solved yesterday. Tomorrow it will cost much more.

Let me give a few examples. South Ribble will have to cut £1.4 million from council house improvements. Cheltenham will have to cut £2 million from its renovation grants. In Derby, there will be a reduction of £3.5 million in improvement grants. In my own city of Birmingham, there will be a cut of a modest £14 million off a programme that we were trying to cope with 14 or 15 years ago. In Hertsmere, £3.5 million will not be spent on improvements; in Ipswich, the figure is £750,000. The list of dishonoured promises goes on.

It is not too late for Ministers from the Department of the Environment to ask Treasury Ministers to see the sense of spending the £5 billion. The money would not be spent recklessly. It might not even be spent in this financial year, because authorities would have to plan to spend it. They are being asked to reduce notional targets. Let us give a go-ahead and hope to local authorities. The people would gain; the Government would gain in respect and the country would gain in prosperity.

9.20 pm

Mr. Tony Banks (Newham, North-West)

The regulations represent another blatant attempt by the Government to manipulate local authorities' finances. Indeed, local authority finances are being used as a stop-go mechanism within the economy, rather in the same way as the car industry was used in the 1960s. I should have thought that by now it would have dawned on the Secretary of State that the House has become tired of the gross interference by the Government in the affairs of democratically elected local authorities.

We all know that the regulations seek further to restrict the ability of local authorities to spend their capital receipts. The Secretary of State said that about £5 million of accumulated receipts are waiting to be spent. The House has a right to ask why there is so much money waiting to be spent. The first reason was the moratorium on housing investment at the end of 1980, which so disrupted programmes that it took local authorities two years to recover. The second reason is that the Government grossly underestimated the level of receipts from council house sales.

The Opposition opposed the compulsory sale of council houses, and that remains our policy, but having been forced to sell the houses against their wishes, it is morally unjust that those local authorities are not allowed to spend the money accumulated in the banks.

Although no individual council overspent, the councils have collectively breached the Treasury's cash limit. As hon. Members on both sides of the House have said, none of those authorities has in any way acted illegally. We understand that the Government are reviewing the expenditure control system. I want to ask the Secretary of State a direct question; will he at some later stage prevent local authorities from spending their accumulated receipts altogether? Are there any thoughts in his mind, or proposals gradually coming to the surface in the Department of the Environment, which would prevent local authorities from spending accumulated receipts? If the answer is no, if there are no such proposals and if it is not his intention to produce any, by what percentage will the receipts' spending be reduced in subsequent years? The Secretary of State has made great play of the fact that the regulations do not stop spending altogether — merely even it out and slow it down—and that councils will be able to spend the accumulated capital receipts. The right hon. Gentleman must make it clear, and give a cast-iron guarantee, that the accumulated receipts—which are rising because councils are still selling houses—will be available to be spent.

The Government argue that breaking the cash limit is bad in itself. However, since the cash limit is only a number, they are also arguing that spending accumulated receipts increases public borrowing and therefore threatens the public sector borrowing requirement target. That appears odd to hon. Members on both sides of the House. If receipts are already in the bank, they need not be borrowed. Indeed, no new borrowing is involved when receipts are literally kept in a bank account gaining interest. The Secretary of State set a figure of £5 billion on accumulated receipts. What proportion of that is sitting in bank accounts? I do not think that he heard my question, so I shall repeat it. He is still not listening, but perhaps I will get through to him eventually. What proportion of the accumulated receipts is sitting in bank accounts?

If the receipts are used for other purposes, such as paying off debts and lending to other bodies, once the right to spend that has been conferred is used, they must, in effect, be borrowed back. That is the Government's argument. There are two flaws in the argument. The receipts were not spent in the years in which they accrued, so the Treasury's public sector borrowing requirement target benefited at that time, and the effect was to reduce borrowing in that year. However, as the local authorities were accumulating within the rules it seems immoral not to return the benefit to the housing programme, especially as the underspending that created the problem was caused primarily by the Government.

Mr. Patrick Jenkin

Will the hon. Gentleman give way?

Mr. Banks

No, I will not. The right hon. Gentleman refused to give way to me. That is known as poetic justice. The Secretary of State or the Minister may give the answer when he replies to the debate. If he pays attention, he may get the arguments straight for once.

Secondly, the treatment of receipts in the national accounts makes nonsense of the PSBR concept. Receipts are treated as negative spending, so the PSBR is totally unrelated to the amount borrowed. As the Treasury and Civil Service Select Committee pointed out a couple of years ago, receipts are being used by the Treasury to massage the PSBR downwards so that the Government can appear to be meeting their borrowing targets. The arguments for more investments in housing are clear and have been stated by hon. Members on both sides of the House. There is a massive need for more investment in housing. In London, the housing investment programme allocation has been cut from £560 million this year to £480 million in 1985–86. That is a cut of 19 per cent. in real terms. The London boroughs, both Tory and Labour, bid for £1,500 million.

The capital receipt cut which we are now facing is only the latest in a long series of housing cuts. Since 1979–80, the provision for local authority housing in London has been cut by well over 50 per cent. in real terms. The cumulative loss has been over £3,000 million at current prices. What, then, can one make of the 1983 Conservative general election manifesto pledge to make Britain the best housed nation in Europe? The Government have a strange way of making good that pledge. It is nothing more than a sick joke and a good illustration of the two-faced attitude of the Government.

Newham's bids for housing capital allocation for 1985–86 totalled £78.3 million. The Secretary of State has specified an allocation of £21.5 million, a reduction on Newham's 1984–85 allocation of 11 or 12 per cent. in real terms. Under the regulations, only some £4.7 million will be available from housing capital receipts.

At this point we must do some arithmetic. The specified housing capital allocation for 1985–86 is £21.574 million. That is slightly less than Newham's estimate for payments on commitments, which is £21.824 million. The £4.7 million of capital receipts is very little more than the borough's own estimate for payments on statutory grants, now running at £4.258 million.

Assuming a certain overstatement on statutory grants, the Secretary of State has in effect provided a balance of £192,000 for all other categories of new housing capital expenditure in Newham for 1985–86. That is ludicrous, when one considers the problems of the borough.

In letters sent to the London boroughs, the Department of the Environment has set out policy objectives and asked the authorities to concentrate available resources on those with special needs — the elderly, the disabled, the homeless and those who cannot afford to buy. Newham has been given £192,000 to deal with those categories. Can the Secretary of State or one of his bright officials tell our councillors which category they should choose? Should they build an additional hostel for the homeless, or preserve the existing low-cost home ownership schemes? It is choices such as those that Newham will have to make.

Mr. John Maples (Lewisham West)

The hon. Gentleman is telling us about homelessness in his borough. How many empty council properties are there in Newham?

Mr. Banks

I cannot answer that question offhand. However, many properties are empty because they are not fit to be lived in. The hon. Gentleman may not know much about Newham or about our 110 tower blocks. He may, however, have heard of Ronan Point and the Taylor Woodrow Anglian blocks. Those blocks were jerry-built, but can we get hold of Taylor Woodrow Anglian now? No. It has gone out of business. Taylor Woodrow still has money to give to the Conservative party, but Newham cannot get compensation for its jerry-building. Newham has to get people out of Ronan Point and another five TWA blocks, but the Government will not provide the money necessary to replace them and stop people living in fear.

I do not believe that Conservative Members, least of all Environment Ministers, appreciate the scale of Newham's housing problems. Housing problems are the most common ones that are brought to Members of Parliament. That is certainly the case in my advice surgery. Less than 10 per cent. of Newham's population earn enough to qualify for a mortgage—so much for moving into the private sector—but 90 per cent. of all new housing in the borough is private. Much of it is coming through the London Docklands Development Corporation. The great majority of the people of Newham cannot afford to buy those nice posh houses which are being built in a derelict part of the borough.

I shall give some more statistics. I know that statistics are boring, but these are essential to Newham. There are 4,600 people on the waiting list, 13,400 unfit dwellings, 30,000 unsatisfactory dwellings and 660 homeless households. They are boring statistics, but statistics of misery, dejection, and hopelessness. The Government have a major responsibility to try to do something about them rather than sit on their hands. The Government will not even allow Newham and other boroughs to spend their own money.

We should also consider the impact of the regulations on unemployment. Through their housing cuts, the Government are close to destroying the construction industry and home building. In London alone the number of unemployed construction workers increased from 17,000 in 1979, when this benighted Government took over, to 40,000 in 1982, when they ceased to collect the figures. It is not surprising that they ceased to collect the figures, because they are an appalling indictment of their record.

Housing investment is good at creating jobs because it is labour intensive. Moreover, those jobs go straight through to the private sector. It does not seem to have dawned on the Government that, of every £100 spent on construction, about £87 goes straight through to jobs in the private sector. The Conservative party's friends in private business are being driven to the wall by the Government's economic policies. How many jobs in the construction industry will be lost by the reduction of spending of capital receipts? I have heard 65,000 bandied around. Is that correct? I believe that the Government have a balance sheet and they should know the likely impact of the regulations on employment.

The regulations will lead to fewer homes, fewer jobs and less investment. Nobody can argue the contrary. The Government's proposal is therefore socially unjust and economically blind, and it should be rejected.

9.33 pm

Mr. Roger Freeman (Kettering)

Like my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), I voted for the public expenditure White Paper. I am sure that he also is worried about the news, which has been reported in the newspapers today, that local authority capital expenditure—principally on housing—is likely to be £1 billion in excess of the original estimate for 1984–85. If that is true, it is up by £300 million since my right hon. and learned Friend the Chief Secretary gave evidence to the Treasury Select Committee three weeks ago. That is surely evidence that the Government find it extremely difficult to estimate the level of local authority capital expenditure, and the reason is simply the method of control.

The committee which my right hon. Friend set up to look into the system of controlling local authority capital expenditure will have the best chance of affecting the total outturn in the fiscal year 1986–87. There are four reforms which I know my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) will join me in commending to the Government. I put them forward in a constructive spirit because they are designed to improve the system of controlling local authority capital expenditure.

The hon. Member for St. Helens, South (Mr. Bermingham) somewhat disparagingly referred to the Treasury and Civil Service Committee's recommendation on the treatment of asset sales as mere accounting methodology. However, I believe that it is important to treat local authority house sales and the proceeds of privatisation as a means of financing the PSBR, not because of a slavish belief in the purity of national accounting but because I am concerned about the future. Five or 10 years hence, the rate of sale of local authority houses will inevitably begin to fall because we shall run out of houses to sell. I am concerned about the effect on the planning total for local authority capital expenditure.

If receipts are regarded as a means of financing the PSBR, and if we merely look at gross capital expenditure consistently over the next decade, we shall be able fairly to allocate our national resources much more sensibly than we do under the present system, which takes into account only the net figure — that of gross expenditure less current capital receipts.

The second reform is an attempt to redress the problem to which I alluded at the outset. The Government find it difficult to forecast the outturn of local authority capital expenditure for the year because the system of control is the housing investment programme allocation plus a proportion of past and current receipts. Therefore, it is a guesstimate.

Last summer, my right hon. Friend was forced to announce a voluntary moratorium—I am sure that it was the last thing he wanted to do—because the outturn was likely to be much greater than assumed in the public expenditure White Paper. The only way to solve that problem is to have precise gross capital expenditure allocations for each local authority. That would be much fairer to the two authorities in my area — Kettering borough and Daventry district.

If central Government, in consultation with the local authorities, were to set precise amounts of allocation for each local authority, that would alleviate the great injustice done to those councils which have been successful in selling council houses. Such authorities have suffered under my right hon. Friend's proposals, even though they were inevitable, following the logic of the public expenditure White Paper for which the House voted. As a result, the authorities which have suffered the largest falls in their capital budgets for next year are those which have been successful in selling council houses.

I admit that such a system would be difficult to introduce and would require time, but it would be fairer to authorities such as the two in my constituency which have been successful in selling council houses. They would have the chance to argue with my right hon. Friend the Secretary of State for a much less sharp fall in their capital budget than the 40 per cent. to 50 per cent. that they face next year. Moreover, if there were a specific capital budget allocation for each authority my right hon. Friend the Secretary of State would not be forced into stops and starts and voluntary and even compulsory moratoria during the year, because he could be certain at the outset and would hold each authority to the exact amount allocated.

My third suggestion concerns an incentive scheme. If for national accounting purposes we treat as negative expenditure 100 per cent. of receipts, from council house sales in any given year—my right hon. Friend proposed this when the system was introduced and we must be consistent—and if there was a specific allocation of estimated receipts, my right hon. Friend could allow authorities which exceed the estimated receipts to keep and spend all the additional receipts without that having any effect on the PSBR. That would provide a modest incentive for councils to sell council houses, which the present system of allowing only 20 per cent. of current receipts to be spent does not really provide.

Finally, although many authorities accept the logic of the proposals and the need for them, they are worried because once again there is uncertainty as well as a sharp reduction in capital budgets. Many believe that far greater certainty is needed for capital expenditure. If central Government can plan ahead for three years, as the public expenditure White Paper does, surely local authorities can be given some certainty over a three-year cycle as to the amount that they will be allowed to spend.

I support my right hon. Friend's action in reducing the prescribed proportions, because I believe that it is inevitable and because I support the public expenditure White Paper, but I hope that his committee will bring greater sanity to the system of setting public expenditure capital budgets for local authorities.

9.43 pm

Mr. Jeremy Corbyn (Islington, North)

This is a very serious debate on a very serious issue. I should say at the outset that I am one of those who strongly believe that the sale of council houses by local authorities, especially those facing severe housing problems, does nothing whatever to assist the solution of long-term housing problems. It is very short-sighted of the Government to insist on the sale of council houses when they know perfectly well that those sold will be those on cottage estates, street properties, nice acquired properties and rehabilitated properties, and then to blame the authority because it cannot transfer families with children from tower blocks to street level accommodation. There is something altogether wrong with the way in which the Government seek to impose that policy on local authorities.

Because I represent an area of enormous housing deprivation and see daily the problems thereby created, I believe that the council has been told that it must hurry up the sale of council houses. It has then been told that it cannot use to the maximum the capital receipts from those sales to meet the problems of those on the housing waiting lists. The council could not even run to stand still on the existing housing allocations and capital receipts; now it is being further handicapped. My borough's housing problems can only worsen because of the Government's decision in allocating HIP money and using capital receipts.

This debate is serious because of the terrible housing problems facing people in London and other major cities, as other hon. Members have explained. Overall housing expenditure in London has decreased from the 1978–79 figure of £1.32 billion to £609 million in 1983–84. That is a constant decline brought about not because the people of London are better housed or are in less need of good housing but simply because Government policy insists that that should be so.

The make-up of new building starts and housing allocation in London as a whole is even more serious. For example, in 1975 there were 21,441 new building starts by local authorities and 4,790 new building starts in the private sector. The total numbers of starts, including other public sector starts, was 29,410. By 1979, the total was somewhat lower than 15,000 new building starts, but by 1984 there were 2,300 local authority, 3,430 public sector and 6,220 private sector new building starts in London — a total of 9,650. That makes London the worst housed city in Britain and possibly one of the worst in Europe.

We should examine other grim statistics. In 1984, a horrifying 2,090 people were in bed and breakfast accommodation and 3,470 people were in other temporary accommodation. [Interruption.] Conservative Members might find this amusing, but they are the ones who are on the payroll vote. They will go through the Division Lobby to hit further the homeless and the poorest in the inner London areas.

Mr. Robert Atkins (South Ribble)

Tell us about the wealthy Mrs. Hodge.

Mr. Corbyn

The hon. Gentleman, who always addresses the House from a sedentary position, should remember the days when he was on Haringey council, when he continually opposed expanding the housing programme and neglected the people on the housing waiting list.

Mr. Atkins

rose—

Mr. Corbyn

The hon. Gentleman can stand!

Mr. Atkins

I was intervening from a sedentary position to remind the hon. Gentleman that he comes from a council the leader of which lives in a large and expensive house in Canonbury. She has a nanny who looks after her children. Can the hon. Gentleman honestly tell the House that such a council in Islington with such a leader is anything less than hypocritical in its attitude towards housing the poor?

Mr. Corbyn

The word "hypocritical" comes easily to the hon. Gentleman's lips. If the hon. Gentleman can only make a personalised attack on one member of the council who personally has done more to achieve a high level of public sector housing in Islington than anyone else, he shows the disgraceful attitude of the Conservative party towards the poorest people in the inner city. This is a serious issue, and if the hon. Gentleman has nothing serious to say I suggest that he should not bother to intervene further.

I ask Government Members to consider what they are doing not just to London as whole but to the borough that I represent. Some months ago, the borough council made a reasonable bid for a £81 million housing investment allocation which could help towards rehabilitating existing council properties, beginning a new building programme and getting us away from the dangerous position when so many families were threatened daily with having to go into bed and breakfast accommodation because they had nowhere else to go. Instead, the council was offered rather less than half the figure it wanted.

The Government treat local authority bids in a way that almost leads us to believe that local authorities make them up when they put them in. I should like to quote from a report by the chair of Islington Housing Committee, Councillor Chris Calnan to the tenants liaison committee on 14 February: The Council's bid is not an arbitrary figure—it is based on technical and statistical advice as to all the repairs and improvements required to the Council's stock and on the demand there is for public housing for people in need. This is then translated into a costed total and becomes the Council's bid. Unfortunately, whilst the Council's officers do put much time and effort into working up the bid, the DOE operate a set of needs criteria which produce results far removed from our needs. Therefore, as previous experience has shown, the allocation we receive tends to bear little relation to the bid we submit. The allocation is £29.3 million against the submitted bid of £81 million.

Further to that, if the regulations go through tonight, the council will lose a further £3.48 million from its capital receipts. On top of the disgraceful attack on our capital housing programme we are to lose a further £3.48 million. That can only serve to harm the people of Islington in housing need still further.

Islington's housing problems are serious. Anyone who lives in an inner city area and any Member of Parliament or councillor who holds a weekly surgery must be aware of the frightening misery in which many people live. People who bring up their families in one-bedroomed flats cannot transfer out of them, and they cannot transfer from high-rise developments. Some people cannot even obtain any form of council flat. Around them they see dereliction created by the Government's policy of refusing sufficient money to rehabilitate existing properties.

We have the ludicrous position of many unemployed building workers all over London and in other major cities walking past the dereliction, often living in substandard housing or on jerry-built estates which now need major repairs, signing on at employment exchanges or claiming DHSS benefits when they are willing, able and ready to build the houses needed for themselves and the people of those areas.

All that Conservative Members can do is make jokes about councillors and councils. They should be ashamed of themselves and of their attitude towards the country's badly housed people.

Misery and desperation exists on housing estates where people have been promised improvements and where they have worked for years to reach agreement with the council on how rehabilitation work can be done and how badly designed and built estates can be made slightly more habitable. They now know that due to Government policy many of those improvements and repairs will not take place and that they will be confined to further years of misery.

I spent the whole of last Sunday morning talking to tenants on the Mayville estate in Islington. If the Minister wishes to find out about housing problems, he should go to that or any other estate in my constituency and we should be glad to show him what it is like there and the problems that people face. All those people could see the improvements that the council was doing to some of the blocks and they asked whether they would happen to their blocks or whether they would be stopped by the Government. They know what kind of Government we have and what kind of a man the Secretary of State is. He continually cuts the HIP and the council's use of its capital receipts.

There is misery in the inner cities and throughout the country. Housing is the greatest problem and misery. It is the greatest retardant of children's development and the biggest divider of communities, yet we have a Government who are now cutting capital programmes and who will not even allow local authorities to use their own capital receipts to develop and improve their housing stock. Once more there is a fundamental issue of local government democracy and of the denial of the wishes of local people. The Government seem to have a blinding desire to destroy any vestige of local democracy when it has been seen to try to provide for the needs of the people who elect local councillors. We have been faced with rate capping, the abolition of the GLC, the cancellation of elections, cuts in the housing investment programme, and now with the control of capital receipts. It is a final insult to tell local authorities, which are opposed to the sale of council houses because of the misery that it brings, that they cannot even use the receipts from that to do something for the poor people who are stuck in bed and breakfast hotels, halfway house, and temporary accommodation.

There is terrible misery. The social cost that we shall reap will be terrifying. It is ludicrous to cut public spending. Now is the time to offset the shortage of housing and homelessness against the problem of unemployment among building workers. Put together, they would solve each other's problems, and from that, we could build a better society.

9.55 pm

Mr. Roger Gale (Thanet, North)

Those who have spent the past four hours in the Chamber have heard a rhetoric of misery from Opposition Members. It is worth placing on the record the fact that the catalogue of civic housing disasters outlined by the hon. Members for Newham, North-West (Mr. Banks) and for Islington, North (Mr. Corbyn) may in part be due to the long periods of Socialist control to which those authorities were subjected.

Mr. Corbyn

Will the hon. Gentleman give way?

Mr. Gale

No, Sir.

Ten days ago, in a similar debate, I placed on record my belief that these proposals were likely to offer a disincentive to future sale and, therefore, to the generation of new money. I stated then, and I repeat tonight, that the proposals are likely to prove counter-productive. I commend to my right hon. and hon. Friends the proposals of my right hon. Friend the Member for Kettering (Mr. Freeman) which, as some of us have said, would go part of the way towards alleviating that disincentive.

I also place on record my understanding of the need to control public sector borrowing. I listened to the courageous speech of my hon. Friend the Member for Bury, South (Mr. Sumberg), but his economic argument is as unsatisfactory as that of my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark). If one wishes to sell an old car and to buy a boat, no one will stop one from doing so. However, if one also happens to be overdrawn at the bank without an arrangement when one sells the car, the bank manager is likely to say, "Before you buy the boat, where is my money?" It is all very well having money in one account, but if one is overdrawn in another—as the country is—it is right for people—in this case the Government—to object.

Mr. Simon Hughes

rose—

Mr. Gale

I sought to raise earlier a matter which causes me greater anxiety. I hope that clarification of it will enable me to support the Government tonight. I understood my right hon. Friend to suggest that it was likely that sheltered housing could be accommodated under concessions made by my hon. Friend the Minister 10 days ago. Many elderly people, especially those in seaside towns, live in under-occupied public sector housing and wait on transfer lists for accommodation in sheltered housing. It is right and desirable to rehouse them in the type of accommodation that they require. The public sector housing that they vacate should be made available for sale and full occupation.

In both my local authority areas — Thanet and Canterbury district council areas — about 150 to 200 elderly people fall into that category. In Thanet district council area, there is a parcel of land which is ideally suited for sheltered housing.

I hope that my right hon. Friend the Secretary of State for Wales can answer this point. If a local authority chooses to build sheltered housing on its own land for sale to a housing association, which in turn will let that property, will that qualify under the concession announced last week? The explanatory note on the regulations states: No proportion is prescribed in respect of dwellings built or acquired for sale or built under licence for sale. Therefore, it seems entirely reasonable that a local authority should use 100 per cent. of its receipts to build for sale to a housing association to release unoccupied public sector housing for sale and full occupation.

That is the only point that I wished to make. I hope that my right hon. Friend can confirm that I am right in my belief and thereby enable me to support the Government.

10 pm

Mr. Allen McKay (Barnsley, West and Penistone)

This is probably one of the most nonsensical proposals for local government that we have had to discuss. For a long time the Government have done their best to clobber local government with rate capping, the abolition of metropolitan county councils and the proposal to stop local authorities from using money that is rightfully theirs. Since 1981–82, when the new capital control system was introduced, the prescribed proportion has gradually been reduced in such a way that local authorities can no longer plan for the future. Perhaps next year they will be left with nothing.

I hope that the Secretary of State will address this point and say what is likely to happen next year. Will we retain the status quo as it will be after the regulations are passed? Despite people such as the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who is well known for his opposition to the Government's policies on local government, I fear that we shall not have enough support to stop the regulations from going through. Will we have the status quo next year, or will local authorities be left with nothing? The Secretary of State must give some sign of what will happen, because local authorities cannot plan capital expenditure if the Government continue to change their mind every five minutes.

It is nonsense to suggest that the spending of money which the Government encouraged local authorities to generate can affect the PSBR. Local authorities build capital programmes on their view of future needs, and then inject into them the possibility of using the capital receipts which the Government asked them to obtain. It takes a long time to build such programmes.

The regulations will affect the creation of jobs. It is estimated that £560 million would create 65,000 jobs. If the Government were really worried about unemployment, they could create jobs in the public sector industries. Central Government have failed miserably in the creation of jobs and have abdicated their responsibility for doing so to local government. But in abdicating responsibility, they have also cut the feet from under local authorities by removing money that is rightfully theirs.

The money involved in the proposed change is about £920 million; that will be the amount removed from the local authorities, which they could otherwise have used to regenerate the economies of their areas. For the second time since I have been a Member of Parliament, the local authority organisations — the Association of District Councils, the Association of Metropolitan Authorities and the Association of District Authorities — have come together, irrespective of political affinities, and denounced the Government's action.

Let me turn to some om the problems that the Association of District Councils says will arise in Amber valley, Blackpool, Charnwood, Cheltenham and Derby. These are not Labour-controlled authorities. They are controlled by the Conservatives. They are worried about the reduction in the amount of money that they will be able to spend. Hastings, Hertsmere, Ipswich, Kingston-upon-Hull, Preston, Redditch and Shepway are all concerned about the amount of money that is to be taken from them by central Government.

The housing investment programme allocation in Barnsley has been reduced to 82.2 per cent. of last year's allocation. That represents a severe cut in the amount of money that Barnsley will be able to spend. The proposed reduction in capital receipts means that the Government are reducing local expenditure by about £3.85 million. However, the vast majority of the funds to be made available are already committed to plans that have already been made. This is how local authorities work. Central Government seem to forget that local authorities have to plan their expenditure. Therefore, the result is already catastrophic.

Housing advances in 1985–86 will be severely restricted, to about £100,000. Virtually no loans will be made to housing associations. The Secretary of State referred to the Airey houses and to a relaxation in the provisions of the Housing Defects Act 1984. However, that Act relates only to owner-occupiers. Will the Secretary of State say something about the Airey houses that belong to local authorities? The decision has been taken in Barnsley, because of the condition of the Airey houses, to pull them all down. The capital receipts allocation was going to be used to replace the houses that had to be pulled down. What is to happen about those houses? Furthermore, what will be the position of owner-occupiers who depend upon grants to restore their homes? The Secretary of State said last year that if these houses could attract a mortgage, local authorities would be able to lend money for this purpose. However, these owner-occupiers have found that building societies will not lend money on them. Grants are not available, so what is to happen about those houses which are to be pulled down by the local authority and what is to happen to those who are waiting for money from the local authority to repair their homes? Only very small mandatory grants will be made available for renovation, and no discretionary grants will be made available. The grants for the insulation of houses will be at the prescribed limit.

Will the Secretary of State also deal with the condensation problems that face every local authority? There are severe condensation problems in Barnsley. The local authority depends upon capital receipts to overcome those problems. No municipalisation will take place this year. In Barnsley there are many old private houses which the landlords do not want. They would willingly get rid of them and allow the local authority to take over the responsibility for repairs, but the local authority will be unable to do so because it depends upon capital receipts.

The greatest effect of the change in the allocation will be on the pre-war housing stock, because all improvement grants are to be stopped. All new building is to come to a stop. The sheltered housing schemes have also come to an end. The local authority has had to cut its slum clearance programme to 25 houses. Because of the rate of slum clearance dictated by the Government's policy, houses in Barnsley will have a life of 3,200 years simply because Barnsley cannot carry out slum clearance.

The effect on local government will be catastrophic, unless the Government allow local authorities to spend the money that is rightfully theirs. The Secretary of State brought representatives of the local authority down to London and slapped their wrists because they would not sell council houses. The Government gave them to understand that if they did sell council houses they could spend money upon putting right these defects. The Secretary of State has reneged on that promise. He has left Barnsley in a difficult position. The results will last for generations.

10.10 pm

Mr. Anthony Steen (South Hams)

You said, Mr. Speaker, that the shorter the speech, the more accurate and disciplined the mind; and at this later stage, knowing that the Front Benches would like to make their contributions, I shall be brief.

Two principles are involved in this proposal. The first is whether the Government should intervene in local government affairs, and the second is: if so, to what extent? Regrettably, Governments have always intervened in local government affairs. Unfortunately, the Conservative Government are interfering with local government more than we should do.

It is an increasing practice that there should be more centralised control of local government expenditure. Once we have embarked on this course of action it is difficult for us to go back. If my hon. Friends wish to support the Government's economic policy, but are reluctant about this proposal, we still have an obligation to go in behind the Secretary of State and support him in the vote. Having said that, it is only right that I should air my grave reservations about the concept of more central control and central Government intervention in local government affairs.

To what extent will local government lose its initiative to sell its assets as a result of Government interference? Much of tonight's debate has been about the sale of council houses, and I should like to introduce another aspect which, although it has not been mentioned, is as important, if not more so, than some of the matters that have been raised tonight.

As my right hon. Friend the Secretary of State will know, I have waged a campaign in the House for the best part of 10 years on the sale of vacant, derelict and dormant land in the ownership of local councils. It is wrong that there should be tens of thousands of acres of wasting assets in public ownership. I know that my right hon. Friend the Secretary of State supports me in my campaign and agrees that the public sector should not hoard land which is vacant and dormant and which should be sold.

In 1971 the Secretary of State set up the land registers in the Department of the Environment. Since then, every six months, about 20 full-time staff update the register. It is particularly interesting that every six months the figure increases. In July 1982 there were 95,000 acres on the land register in public ownership which were vacant, dormant or derelict. In January 1983 the figure was 107,000, in July 1983 it had increased to 110,000, and in January 1984 it had increased to 112,000, and so it goes up.

Not all of this land is in local authority ownership. Some of it is owned by the water authorities, as my right hon. Friend knows, some by health authorities and some by the Coal Board. Some of it is owned by Government Departments—the Ministry of Defence, the Department of the Environment, the Department of Health and Social Security. I fear that the trend will not be reversed by this regulation and that if it bites it will make local authorities even more reluctant to sell the land that they are hoarding, and they will have even less incentive to do so. Far from allowing them the 50 per cent. which they now get, they will get only 30 per cent. of money so raised, and this is no way to encourage local authorities to sell a wasting asset.

I had hoped to be able to tell the House that because of the Government's initiatives the amount of dormant, derelict and vacant land in the country in local authority ownership had decreased dramatically since they introduced the registers. In fact, what I have told the House indicates that it has continued to increase. I am pleased to say that the Parliamentary Under-Secretary on 21 January indicated that he had made four directions to compel local government to sell wasting, vacant, dormant land. The House will be disappointed to learn that the amount that he has directed local authorities to sell is precisely 32 acres. Therefore, there remain some 12,100 acres on the register, and an order for 32 acres to be sold.

What concerns me is that the regulations will be an even greater disincentive to local authorities to sell wasting assets. When my right hon. Friend the Secretary of State for Wales winds up the debate perhaps he can tell the House why I am wrong and why he believes that these regulations will encourage particularly the large metropolitan districts and large urban areas to get rid of their wasting assets.

10.16 pm

Mr. Barry Jones (Alyn and Deeside)

The debate has been a thoughtful and concerned one. Hon. Members of all parties have spoken with deep concern about the likely injurious impact of the regulations.

Hanging like a pall over the debate and over the housing service is the Secretary of State's remark concerning the overall judgment of the proper level of expenditure that Britain can afford which I think is the language of public expenditure cuts.

My hon. Friend the Member for Copeland (Dr. Cunningham) outlined comprehensively the Opposition's case. My hon. Friends the Members for Islington, South and Finsbury (Mr. Smith), for Sheffield, Heeley (Mr. Michie), for St. Helens, South (Mr. Bermingham), for Newham, North-West (Mr. Banks), for Islington, North (Mr. Corbyn), and for Barnsley, West and Penistone (Mr. McKay) made committed speeches, and they, like me are concerned about the slow progress in tackling urgent housing problems.

The hon. Member for Bristol, North-West (Mr. Stern) supported the Government, and his was quite a rare speech. He supported the need to rein back spending of capital receipts. I noted, however, that he addressed the House with the aid of notes on postcards. The first postcard was a franked one, and his speech in effect showed scant real belief in the need to rein back public expenditure. I could interpret his speech as an attack on the public sector borrowing requirement.

Mr. Stern

The hon. Gentleman may not be aware that the cost of postage applies only when the franked postcard is used.

Mr. Jones

I think that it was a waste of House of Commons stationery and as an accountant the hon. Gentleman should have known better.

The hon. Member for South Hams (Mr. Steen) said that the Government are increasingly interfering in local government.

The hon. Member for Rutland and Mellon (Mr. Latham) made a speech which indicated great insight into the building industry. His was a devastating critique of Treasury accounting procedures. He predicted the seizing up of the ministerial car, as it were. He said that the Government's ministerial car, that is, the Government's engine, had poor clutch control. His was the best metaphor of the debate, and he indicated that the Government had a moral duty to the homeless. He said that the builders were dissatisfied with the Government. He predicted the bankruptcy of many builders.

The hon. Member for Southwark and Bermondsey (Mr. Hughes) made a detailed criticism of the regulations and quoted eminent churchmen to aid his case.

The hon. Member for Bury, South (Mr. Sumberg) indicated that he would not support the Government. He, too, made a courageous speech. He said that he feared the impact of the loss of £600,000 of capital receipts in the town that he represents. He was worried about the effects of a 17 per cent. unemployment rate on his constituents. He said that the Secretary of State was a victim of Treasury policy.

The hon. Member for Tiverton (Mr. Maxwell-Hyslop), another Conservative, scourged Ministers and called for a better Government. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), yet another Conservative, spoke up clearly for those living in rotten housing. The hon. Member for Kettering (Mr. Freeman), also a Conservative, expressed concern for the fall in the budget of his housing authorities.

The Association of Metropolitan Authorities in England estimates that housing authorities face a £19 billion housing repair bill. The Association of Chief Housing Officers in South Wales estimates that about £8 billion is needed for a 15-year programme to update and replace housing. The Building Employers Confederation says that 20 per cent. of all housing is in need of basic repair or improvement.

A top level inquiry headed by a member of the royal family, the report of which was published in January, says that Britain faces a serious housing crisis, with the poor suffering most of all. There is evidence, the report says, of a decline in the condition of older housing and some of the newer stock, mostly in the public sector.

It is certain that in England and Wales there is a housing crisis. The debate has told us that, and hon. Members in all parts of the House are witnesses to it. Millions of our fellow citizens are living in frustrating or degrading conditions. Tens of thousands of building workers will lose their jobs because of the regulations. The Building Employers Confederation puts the figure at 150,000 The Association of Welsh District Councils says that more jobs will be lost. Despite that, billions of pounds belonging to local authorities in England and Wales stand ready to be used to tackle the housing crisis.

In the matter of fact, offhand tones of cool city accountancy, Ministers effectively tell the House that they intend further to restrict the already unsatisfactory attack on our housing problems. That happened today. Bad housing is a festering and growing wound in British society. It enhances our social divisions, it divides the north from the south, it is unjust and it is unforgivable at a time when Britain spends £17 billion on funding a dole queue of 4 million people yet holds untold wealth from the North sea.

Do Ministers really comprehend the human consequences of the regulations? I will describe briefly some of them as they exist in Wales. Aneurin Davies does not have a bathroom. His home is also without an inside toilet. His one sink does not have a proper waste pipe. A few doors away from Mr. Davies' Cardiff road, Aberavon, home, 64-year-old Jack James bathes in a galvanised bath in the living room. His toilet is one of a mini terrace of outside loos. In Abertillery, a pensioner was moved from his house because it had no electricity or lighting. For them and thousands like them, that is home in Wales today.

Housing officials and hon. Members far too often interview sobbing old ladies who suffer interminable delays in plans to stop up leaking roofs. Officials calculate that some elderly pople will die before their homes are made draught and waterproof. In Wales, more than 40 per cent. of our housing stock was built before 1919, compared with 29 per cent. in Britain as a whole. Clearly, those houses are in urgent need of repair. The problems with the Welsh housing stock can best be appreciated by a close examination of one particularly hard hit area. My hon. Friend the Member for Cynon Valley (Mrs. Clwyd), in a compassionate and informed speech, referred to the problems faced by the Cynon Valley authority. The alarming figures which my hon. Friend quoted showed how out of touch Welsh Office Ministers have become in their assessment of the housing problems of Wales. It is insensitive to propose the implementation of the regulations in Wales. Government statistics are woefully inadequate to identify the real housing needs on the Principality. It is reasonable to assume that the Cynon Valley survey conclusions will be repeated elsewhere.

The regulations will hit the Welsh people hard. While the English proportion of receipts that can be spent is to be 20 per cent., Wales must suffer a proportion of 15 per cent. The previous proportions were equally wrong. England had 40 per cent. and Wales was down to 25 per cent. Are the proportions fixed at those levels because we trounce the English public schoolboys at Cardiff Arms Park? I hope that even at this late stage Ministers will be prepared to think again about the figures for Wales.

Mr. Simon Hughes

That last point is important, because it disproves the Government's economic argument that they wish to reduce the public sector borrowing requirement. If that was the case, they would have the same limit in Scotland, Wales and England. Because they do not, that makes it plain that there must be other reasons for their policy which they have not disclosed.

Mr. Jones

We are glad to have the full support of the sole member of the Alliance who is here this evening. I am grateful for his intervention.

In Wales the capital expenditure of districts on housing is being reduced in real terms by £80 million over two years.

There is a need for more jobs in Wales. Coupled with that is the need to tackle the very serious housing crisis. The House may know that one in five of our men are jobless. Of the 183,000 who are unemployed in Wales at least 18,000 come from the building industry. There are perhaps some 4,000 skilled building workers now jobless and 14,000 unskilled operatives on the dole. It is incredible that with the housing problems our nation faces the Government pay these workers £90 million each year in Wales to languish idle in the dole queues. That must be social and economic nonsense. A properly planned public building and renovation programme within Wales would cut our unemployment totals at a stroke. It would also be the proper, positive response to the calls from local housing authorities and the allied agencies for Government action.

The regulations are a kick in the teeth to people who are entitled to better housing conditions. In many ways, they are the most scandalous of cuts. There is already much underprivilege in Wales. The housing stock is old. Wales suffers a higher than average incidence of houses without basic amenities. House building and house repairs generate jobs. The cuts in expenditure create human misery for those who hope for a decent house and a decent family life. These cuts also foster the likelihood that jobless building workers will remain in the dole queue. The Government remain deaf to the clamour of a growing consensus across party lines that to expand housing provision would be acting in accordance with the principle of social justice. The degradation of housing in Britain is unforgivable, and the Government must carry blame for that. Their record is disgraceful. With the crucial exception of London, these cuts fall upon the most vulnerable of our people who live in the northern part of the British Isles. To deny the Welsh people both work and the right to warm, modern, decent housing borders on the criminal.

If these Ministers cannot do better, they should get out.

10.30 pm

The Secretary of State for Wales (Mr. Nicholas Edwards)

The hon. Member for Alyn and Deeside (Mr. Jones) spoke of two people—Aneurin Davies and Jack Jones. If they are in houses without basic amenities today, they must almost certainly have been in houses without basic amenities while the hon. Gentleman was an Under-Secretary of State for Wales. During his five years in the Welsh Office, the Labour Government spent £60 million on housing improvement in Wales. This Government spent £230 million on housing improvement over three years. I am entitled at least to tell the hon. Gentleman that I am not complacent about the housing conditions in Wales, but have done a great deal more about the problem than he did when he had responsibility.

Since the first of this series of debates on local authority capital expenditure, events in the financial markets and the imminence of the Budget have given it even greater significance. During the unemployment debate on Monday, a number of hon. Members, including some of my right hon. and hon. Friends, referred to the damaging effects of a 14 per cent. interest rate. My right hon. Friend the Member for Guildford (Mr. Howell) said he would like to see a lower tax burden, improved youth training schemes and a selection of the other measures that he favours. My right hon. Friend the Chancellor of the Exchequer made it clear that he also wants to see interest rates come down and a lowering of the tax burden. The building societies have already said that mortgage rates will have to rise if we cannot get interest rates down. All that is relevant to this debate because the Government's spending plans voted for by the House on 6 December 1984 will be crucial when my right hon. Friend presents his Budget.

The Treasury Select Committee, a number of my right hon. and hon. Friends and numerous commentators have emphasised the importance of providing credible spending estimates and targets that can be realised. My hon. Friend the Member for Bristol, North-West (Mr. Stern) was one of those who emphasised the crucial importance of control on local authority spending when it represents £33 billion out of a planning total of £132 billion, and when gross capital expenditure is over £5 billion.

The commentators are surely correct in saying that, having decided on expenditure totals, we should seek to ensure that they are delivered. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) took a more casual view. He said that the odd £1 billion here or there really did not matter. Indeed, he said that £15 billion should be spent. I think it unlikely that in his profession of investment analyst he takes quite as casual a view of balance sheets as he presented this evening.

Mr. Beaumont-Dark

As usual, what my right hon. Friend says is misguided and wrong. What is casual about reminding the Government of the promise that they made to councils, when they sold their council houses, that they would be able to use their balances? There is nothing worse than being casual about broken promises.

Mr. Edwards

We also gave clear and specific undertakings about our economic policy and our spending plans, and the House of Commons voted for our public expenditure plans. It is a little surprising that my hon. Friend seems to ally himself with the happy and careless proposition of the hon. Member for Southwark and Bermondsey (Mr. Hughes) that the economy should be need-based rather than finance-based. No one can run his financial affairs on that basis, and neither can the nation.

My hon. Friend was sceptical about how much it would matter to people in other parts of the world if we spent another £1 billion or £5 billion, or indeed £15 billion. I refer him to one of the comments about the situation that I have read in the past week or two. The name of Mr. Bernard Donoghue will be known to many Opposition Members because he was an adviser at No. 10 Downing street during the period of the last Labour Government. He is now a consultant to a prominent firm of City stockbrokers. Earlier this month, he put his name to a circular that, under the heading Mr. Lawson must reassure financial markets", stated: Now the financial markets expect him to reassure them on March 19th with tight monetary guidelines based on convincingly conservative assumptions and with few fiscal risks. He then talked about the importance of meeting PSBR targets.

I accept that many right hon. and hon. Members may not agree with Mr. Donoghue's view, but plenty of people in the financial markets will take that view, and the decisions that we take on the matter will affect the market.

My hon. Friend the Member for Bury, South (Mr. Sumberg) praised our right-to-buy legislation.

Mr. Jack Straw (Blackburn)

As, like the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), the right hon. Gentleman is well known as a financial expert and merchant banker, can he explain something to me? Six years ago the Government said that as the PSBR was reduced—and it has been halved in real terms— interest rates would fall. What has gone wrong?

Mr. Edwards

Even the hon. Gentleman should be willing to take some account of the pressure of the United States dollar on interest rates and the fact that at all times we have to operate in world markets in which vast sums of money are moving about.

My hon. Friend the Member for Bury, South was quite right to say that it was ludicrous for the Opposition to take credit for the receipts arising from legislation that they bitterly opposed throughout. Without those sales, we would not have been able to include the receipts in our housing allocations, and the amount that we could spend on housing would have been less. I fully understand my hon. Friends' anxiety to have a better system of control, which gives greater certainty and enables local authorities to plan their capital programmes better. I noted carefully the suggestions of my hon. Friend the Member for Kettering (Mr. Freeman), supported by my hon. Friend the Member for Thanet, North (Mr. Gale). We have already tried to meet some of the anxieties that they have expressed, and we have made arrangements to cover their point about low-cost home ownership.

Mr. Michael Foot (Blaenau Gwent)

As the right hon. Gentleman says that he has studied these constructive proposals carefully, would he care to tell us the Government's view of the proposals in today's newspapers of the right hon. Member for Old Bexley and Sidcup (Mr. Heath) for a big expansion of housing and investment, which we back fully?

Mr. Edwards

Unlike the right hon. Gentleman, who was not in the House to hear the proposals of my hon. Friend the Member for Kettering, I do not intend to comment on proposals that I have not seen or read. I intend to reply to my hon. Friends who have taken part in the debate.

Several hon. Members have referred to repairs to defective houses under the Housing Defects Act 1984. My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) was a little unfair to my right hon. Friend the Secretary of State for the Environment. Of course Ministers considered the problems of defective houses. In Wales, I was able to meet the bids for an allocation for expenditure on privately and publicly owned prefabricated reinforced concrete dwellings and to undertake that those bids will be met in full. In England, a new indicator was introduced into the index used in the allocation process. Discussions have revealed that some local authorities face serious problems which have not been covered adequately by that index. That is why my right hon. Friend undertook earlier today to consider sympathetically requests from local authorities which might not otherwise meet their obligations under the Housing Defects Act. I must ask my hon. Friend to accept that our right hon. Friend means what he said, and that he will translate it into reality for authorities such as my hon. Friend represents.

Among the measures that we have introduced to help meet the problems is the improved forward indicators. The hon. Member for Barnsley, West and Penistone (Mr. McKay) asked for assurances about the future. We have introduced those forward indicators to provide assurances about the future. A good deal of additional flexibility is provided by the ability of local authorities, under present legislation, to refinance their mortgage books. In Wales, we have encouraged local authorities to do that, and a substantial contribution has been made this year to reduce the capital overspend that would otherwise have occurred. That undoubtedly provides scope for local authorities to ease some of their problems.

My hon. Friend the Member for Thanet, North (Mr. Gale) raised a matter of great importance to his constituents. If he lets my hon. Friend the Minister for Housing and Construction have the full details of the problem faced by his local authority, they will be considered sympathetically under the exemption announced on 27 February. I hope that my hon. Friend will understand that, without the precise details, I cannot give him a more definite assurance. It may be possible to help, but we shall have to look at the details.

A number of hon. Members, even those who support stern control of public spending, have expressed secpticism about the Government's assertion that the use of accumulated receipts would prejudice our economic objectives. But almost all of them would be considerably disconcerted if there was a sudden unleasing of up to £5 billion in any one year. Indeed, my hon. Friend the Member for Kettering expressed concern about reports that the overspend might be as much as £1 billion. In fact, my right hon. Friend the Secretary of State said that the present estimate was about £750 million.

These receipts have not been lying idle. They have not just sustained further borrowing, although it is true that with the Welsh local authorities they were used to sustain substantial additional borrowing. That is one reason for the size of the present overhang. They have been temporarily invested or spent on other capital requirements of local authorities.

The hon. Member for Newham, North-West (Mr. Banks) asked how much had been placed in the banks. Less than £1 billion of local authority investment is on deposit with the banks, and only a proportion of that will arise from local authority sales.

It has not just been stored in cash in the banks, as the hon. Member for Southwark and Bermondsey suggested. It has been used. If a council sells a house and does not spend the money immediately, it either reduces its own borrowing or lends it to someone else. That helps to reduce the PSBR in that year. If it spends the money in a later year, it will have to retrieve it in order to finance expenditure, thus increasing the PSBR.

The Treasury and Civil Service Select Committee—my right hon. Friend the Member for Worthing (Mr. Higgins) in particular—has argued that capital receipts from council house sales should be treated as a means of financing the PSBR rather than as negative public expenditure. The present treatment has now existed under successive Governments for many years. While I suppose it can be argued that these conventions and practices should be re-examined, it surely cannot be argued that these long-established rules and practices should be changed ad hoc to deal with the problem that has arisen over accumulated local authority receipts and that such a decision should be taken on a vote on orders between the publication of the public expenditure White Paper and the Chancellor's Budget. That would be an odd way of increasing the confidence of the market in the Government's public expenditure figures and intentions, which I understand is the desire of the Treasury and Civil Service Select Committee.

The hon. Members for Copeland (Dr. Cunningham) and for Southwark and Bermondsey referred to press reports about what the Audit Commission plans to say in its next report. I understand that the report has not yet been agreed, let alone published. It would surely be surprising if it did not have critical things to say about the present arrangements, because I and the Government agree that these are unsatisfactory. That is exactly why we entered into discussions with the local authorities and others with the object of improving them. I made that point during the debate in December. I have made it perfectly clear that it is unsatisfactory to have a large underspend followed by a large overspend — as we had under the previous control system.

The Opposition have criticised my right hon. Friend the Prime Minister for encouraging local authorities to spend during a period when there was an underspend, but I well remember the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) asking local authorities to spend, spend, spend and break the bank. He did break the bank and had to call in the IMF. Of course we need to seek better ways of managing these matters. I listened carefully to the proposals of my hon. Friend the Member for Kettering.

I listened with a great deal of sympathy to my hon. Friend the Member for Rutland and Melton (Mr. Latham). Successive Governments under totally different control systems have faced this problem, which my hon. Friend described as poor clutch control. I would not disagree with that description. I am asr anxious as my hon. Friend to find solutions. My hon. Friend emphasised—which is more than can be said of the Opposition—the need to find a balance and to contain public expenditure. He was not simply demanding reckless expenditure without control. The use of prescribed proportions is the means that we have to control that public spending. I believe that, until we find a new system, that is the best means of avoiding the moratorium which my hon. Friend feared would come next year. If we do not take early and effective control and have a large overspend, we might have to take a decision at the worst possible moment — halfway through the year, when it would cause the greatest possible disruption to the construction industry.

Mr. Foot

rose—

Mr. Edwards

A great many hon. Members have argued for more capital spending, but they have not—[HON. MEMBERS: "Give way."] I shall not give way to the right hon. Gentleman again. He has not been present during the debate. [HON. MEMBERS: "Give way."] Very well.

Mr. Foot

The right hon. Gentleman referred to the future of the construction industry. What does he think will happen to the construction industry under the proposals that he is defending? In more general terms, what will happen to unemployment in Wales during the next 12 months, considering the fact that during the past five years unemployment in Wales has more than doubled?

Mr. Edwards

I shall tell the right hon. Gentleman something about capital expenditure in Wales, especially the relationship between current expenditure and capital spending. The CBI argues for more capital spending, while at the same time arguing for cuts in current spending. That is something that the right hon. Member for Blaenau Gwent (Mr. Foot) never does. He believes that one can spend regardless. The hon. Member for Islington, South and Finsbury (Mr. Smith) pleaded for more capital spending, but his authority is one of the worst offenders when it comes to overspending. It is now a rate-capped authority.

Between 1978–79 and the present financial year, local authority expenditure has increased by about 10 per cent. more than inflation. Had local authority current expenditure in England and Wales as a whole been limited simply to the increase in inflation since 1979, we would have had probably about £2 billion of additional resources which might have been diverted towards funding capital projects in the local authority sector.

Mr. Tony Banks

rose—

Mr. Edwards

I shall not give way again to the hon. Gentleman.

If proof is required—this is my answer to the right hon. Member for Blaenau Gwent—of the Government's willingness to divert resources to capital schemes whenever room for such a shift is created, it is necessary to look no further than Wales. As a result of the generally responsible and moderate spending policies of most Welsh local authorities, growth in current spending in Wales since 1979 has been well below half of that in England. [Interruption.] That better performance has allowed us to release resources for capital purposes in each recent year while maintaining—[Interruption.]

Mr. Gareth Wardell (Gower)

On a point of order, Mr. Deputy Speaker. Is it possible to have some order in the House? The Secretary of State is making an important statement about the Welsh economy and housing. I should be grateful if we could have some silence.

Mr. Deputy Speaker (Mr. Harold Walker)

The hon. Member is right. A great deal of distracting and disorderly noise is coming from both sides of the House. I hope that hon. Members will give the Secretary of State the opportunity to make his speech.

Mr. Allan Rogers (Rhondda)

On a point of order, Mr. Deputy Speaker. The reason why no one is listening to the Secretary of State is that he is so boring.

Mr. Edwards

I know that the hon. Gentleman is bored with the fact that in every year we have been able to allocate additional capital resources to Wales because of the modest current expenditure policies of Welsh local authorities. As a consequence, capital spending per head is nearly double that of England. That is to meet the needs of Welsh local authorities and because they have made a genuine effort to contain their current spending. Had other local authorities been willing to do the same, there would be far more scope for additional capital spending.

When in office, the previous Labour Government watched helplessly while local government increased its current expenditure in real terms year after year. They were then forced to make a desperate effort to balance the books. Between 1974 and 1979, the previous Labour Government chopped over £4.5 billion, at today's prices, off the housing capital budget—equivalent to a cut in gross spending of about 50 per cent. in England and Wales as a whole. Under the Government of which the right hon. Member for Blaenau Gwent was a prominent member, the cut in Wales alone amounted to a staggering £265 million, or 60 per cent. That record shows that capital investment on housing declined remorselessly through the five-year period involved.

Dr. Cunningham

Despite what the Secretary of State says, when will this Administration get capital expenditure back to the level which they inherited from the previous Labour Government? Why will he not be honest and admit that in every year of the previous Labour Administration capital investment was higher than in every year of this Government?

Mr. Edwards

The point that I was making was that, if we fail to control public expenditure as a whole, we shall be forced into the position into which the previous Labour Government was forced, of suddenly making massive cuts in capital expenditure and reducing it by about 50 per cent.

The hon. Members for Copeland, for Islington, South and Finsbury, for St. Helens, South (Mr. Bermingham) and for Newham, North-West talked about the condition of the housing stock and the need to spend money on it. They are in no position to criticise the Government about the condition of the housing stock because the previous Labour Government did not just produce a total reduction of about 50 per cent. in five years: they did practically nothing about the housing stock which they have cried about in today's debate.

At today's prices, the Government have spent about £3 billion on improving the private sector housing stock, and the estimated level of expenditure on improvement grants in 1984–85 is likely to be about £750 million in England, and £80 million in Wales. That is a good deal more than was spent on private sector improvements—

Mr. Foot

rose—

Mr. Edwards

I shall not give way to the right hon. Gentleman again because he was a member of a Government who did practically nothing about the condition of the housing stock. This Government will spend more this year on private sector improvements than was spent throughout the whole four years of the Government of which the right hon. Gentleman was a member.

Mr. Foot

Will the right hon. Gentleman tell us coolly and simply how many building workers have been thrown out of jobs in Wales since he took office?

Mr. Edwards

It is interesting that the right hon. Gentleman wishes to divert me from the fact that his Government grossly neglected the housing stock, about which they have complained today. I shall repeat the facts to the House. In our peak year, we spent more than £900 million, which is 10 times the amount spent by the Labour Government when they left office. To date in Wales under this Administration, 85,000 improvement grants have been completed. In England the total is 775,000. That is a record, of which we are proud and for which we take credit.

The hon. Member for Cynon Valley (Mrs Clwyd) spoke about the conditions in her constituency. She dismissed one by one the wide range of measures introduced by the Government to improve the housing stock, and said that they were meaningless. Nevertheless, her authority has failed to use the resources and measures that we have made available. I am entitled to say to her that we have done more for the housing stock in her area than any Labour Government has ever done.

In my opening remarks—

Mr. Steen

Before my right hon. Friend concludes, will he deal with the question of vacant public land, and the lack of incentive which the regulations may give to authorities?

Mr. Edwards

I entirely agree with my hon. Friend about the desirability of releasing vacant land. There is still a genuine incentive to authorities to do so. Indeed, some authorities may face problems which will encourage them to release more land to have money available quickly for their priorities. The resources will then be available to them in later years when the sale of assets may not go forward at today's pace. They will have the chance to secure not only immediate objectives, but their priorities in the years ahead.

As I said in my opening remarks, the background to the debate is the uncertainties in the financial markets, the need to keep interest and mortgage rates down, and next year's Budget. To listen to some hon. Members who painted a bleak picture of investment levels, it would be easy to overlook the fact that, as The Economist pointed out this week, during the past four years, investments will have increased faster than in any recovery for the past 25 years. It would also be easy to overlook the fact—

Mrs. Clwyd

rose—

Mr. Edwards

I am reaching the conclusion of my speech.

Mr. Barry Jones

Will the Minister give way?

Mr. Edwards

No, I am drawing my remarks to a conclusion. The total public and private fixed investment—

Mr. Barry Jones

rose—

Mr. Edwards

I will give way when I have finished this point.

It would be easy to overlook the fact that total public and private fixed investment in the economy was up by 7.5 per cent. in real terms in 1984 to about £55 billion—a record figure — and that total investment in 1985 is likely to be about £60 billion. To those who are worried about jobs and about the construction industry, I say that we should be concerned with total investment, not just with investment in one sector.

Mr. Barry Jones

Is not the background to the debate the fact that last year in Wales, the right hon. Gentleman began only 700 council houses? Why was there such a pitiful number?

Mr. Edwards

If the hon. Gentleman knew anything about it, it would be clear to him that local authorities have not regarded the building of new public housing as a priority for many years—

Mr. Barry Jones

Because the Government will not let them.

Mr. Edwards

Local authorities have decided to spend their allocations on the repair and renovation of their existing housing stock. They have not chosen — they have the freedom of choice — to spend it on new housing because they know that it is not a priority.

Mrs. Clwyd

rose—

Mr. Allan Rogers

rose—

Mr. Edwards

I will not give way, because I wish to draw my remarks to a conclusion. The hon. Gentleman has not been present—

Mr. Rogers

rose—

Mr. Deputy Speaker

Order. The Secretary of State is clearly not giving way.

Mr. Edwards

Bearing in mind the fact that only six Labour Members were in the Chamber to hear the opening speech of their Front Bench spokesman, I do not intend to give way to those who have come late to the debate.

Mrs. Clwyd

On a point of order, Mr. Deputy Speaker. The Secretary of State clearly did not understand that I took part in the debate, although he referred to some points that I made in it. Until tonight, I had always believed in the devolution of power from the centre—

Mr. Deputy Speaker

Order. That is not a point of order.

Mr. Edwards

I have already replied to the points raised by the hon. Lady, and I do not intend to elaborate.

In 1971, the Conservative Government, which operated a different control system, said this about capital expenditure in the Green Paper on local government finance: Without central Government controls aggregate expenditure could exceed the tolerable level. Any Government at any time must decide the tolerable level of expenditure in the management of the economy as a whole. With all the implications for interest rates and our other economic objectives we cannot allow aggregate expenditure to run out of control. Therefore, I ask my right hon. and hon. Friends to support the Government.

Queston put:—

The House divided: Ayes 192, Noes 313.

Division No. 159]	[11.8 pm
AYES
Adams, Allen (Paisley N)	Foot, Rt Hon Michael
Alton, David	Forrester, John
Anderson, Donald	Foster, Derek
Archer, Rt Hon Peter	Foulkes, George
Ashdown, Paddy	Fraser, J. (Norwood)
Ashton, Joe	Freeson, Rt Hon Reginald
Atkinson, N. (Tottenham)	Freud, Clement
Bagier, Gordon A. T.	Garrett, W. E.
Banks, Tony (Newham NW)	George, Bruce
Barnett, Guy	Gilmour, Rt Hon Sir Ian
Barron, Kevin	Godman, Dr Norman
Beaumont-Dark, Anthony	Gould, Bryan
Beckett, Mrs Margaret	Gourlay, Harry
Beith, A. J.	Hamilton, James (M'well N)
Benn, Tony	Hamilton, W. W. (Central Fife)
Bermingham, Gerald	Hargreaves, Kenneth
Bevan, David Gilroy	Harman, Ms Harriet
Bidwell, Sydney	Harrison, Rt Hon Walter
Blair, Anthony	Hart, Rt Hon Dame Judith
Boyes, Roland	Haselhurst, Alan
Bray, Dr Jeremy	Haynes, Frank
Brown, Gordon (D'f'mline E)	Heffer, Eric S.
Brown, N. (N'c'tle-u-Tyne E)	Hicks, Robert
Buchan, Norman	Hogg, N. (C'nauld & Kilsyth)
Callaghan, Jim (Heyw'd & M)	Holland, Stuart (Vauxhall)
Campbell, Ian	Home Robertson, John
Campbell-Savours, Dale	Howells, Geraint
Canavan, Dennis	Hoyle, Douglas
Carlile, Alexander (Montg'y)	Hughes, Robert (Aberdeen N)
Carter-Jones, Lewis	Hughes, Roy (Newport East)
Cartwright, John	Hughes, Sean (Knowsley S)
Clark, Dr David (S Shields)	Hughes, Simon (Southwark)
Clay, Robert	Janner, Hon Greville
Clwyd, Mrs Ann	John, Brynmor
Cocks, Rt Hon M. (Bristol S.)	Jones, Barry (Alyn & Deeside)
Cohen, Harry	Kaufman, Rt Hon Gerald
Coleman, Donald	Kennedy, Charles
Concannon, Rt Hon J. D.	Kilroy-Silk, Robert
Cook, Frank (Stockton North)	Kirkwood, Archy
Cook, Robin F. (Livingston)	Knox, David
Corbett, Robin	Lambie, David
Corbyn, Jeremy	Lamond, James
Cowans, Harry	Latham, Michael
Craigen, J. M.	Leadbitter, Ted
Crowther, Stan	Leighton, Ronald
Cunningham, Dr John	Lewis, Ron (Carlisle)
Davies, Ronald (Caerphilly)	Lewis, Terence (Worsley)
Davis, Terry (B'ham, H'ge H'l)	Litherland, Robert
Deakins, Eric	Lloyd, Tony (Stretford)
Dewar, Donald	Loyden, Edward
Dixon, Donald	McCartney, Hugh
Dobson, Frank	McDonald, Dr Oonagh
Douglas, Dick	McGuire, Michael
Dover, Den	McKelvey, William
Dubs, Alfred	Mackenzie, Rt Hon Gregor
Duffy, A. E. P.	McNamara, Kevin
Dunwoody, Hon Mrs G.	McWilliam, John
Eastham, Ken	Madden, Max
Evans, John (St. Helens N)	Madel, David
Ewing, Harry	Marek, Dr John
Faulds, Andrew	Marshall, David (Shettleston)
Field, Frank (Birkenhead)	Martin, Michael
Fields, T. (L'pool Broad Gn)	Maxton, John
Fisher, Mark	Maynard, Miss Joan
Flannery, Martin	Meadowcroft, Michael

Michie, William	Short, Mrs R.(W'hampt'n NE)
Millan, Rt Hon Bruce	Silkin, Rt Hon J.
Mitchell, Austin (G't Grimsby)	Sims, Roger
Morris, Rt Hon A. (W'shawe)	Skinner, Dennis
Morris, Rt Hon J. (Aberavon)	Smith, C.(Isl'ton S & F'bury)
Morrison, Hon C. (Devizes)	Smith, Rt Hon J. (M'kl'ds E)
Mudd, David	Snape, Peter
Nellist, David	Soley, Clive
Oakes, Rt Hon Gordon	Spearing, Nigel
O'Brien, William	Strang, Gavin
O'Neill, Martin	Straw, Jack
Orme, Rt Hon Stanley	Sumberg, David
Park, George	Thomas, Dafydd (Merioneth)
Parry, Robert	Thomas, Dr R. (Carmarthen)
Patchett, Terry	Thorne, Stan (Preston)
Pendry, Tom	Tinn, James
Penhaligon, David	Torney, Tom
Pike, Peter	Wainwright, R.
Radice, Giles	Wardell, Gareth (Gower)
Randall, Stuart	Wareing, Robert
Rathbone, Tim	Welsh, Michael
Redmond, M.	White, James
Rees, Rt Hon M. (Leeds S)	Wiggin, Jerry
Richardson, Ms Jo	Williams, Rt Hon A.
Roberts, Ernest (Hackney N)	Winnick, David
Robinson, G. (Coventry NW)	Winterton, Nicholas
Rogers, Allan	Woodall, Alec
Rooker, J. W.	Yeo, Tim
Rowlands, Ted	Young, David (Bolton SE)
Ryman, John
Sedgemore, Brian	Tellers for the Ayes:
Sheerman, Barry	Mr. Lawrence Cunliffe and
Sheldon, Rt Hon R.	Mr. Allen McKay.
NOES
Aitken, Jonathan	Butler, Hon Adam
Alexander, Richard	Butterfill, John
Alison, Rt Hon Michael	Carlisle, Kenneth (Lincoln)
Amery, Rt Hon Julian	Carttiss, Michael
Amess, David	Cash, William
Ancram, Michael	Chalker, Mrs Lynda
Arnold, Tom	Channon, Rt Hon Paul
Ashby, David	Chope, Christopher
Aspinwall, Jack	Churchill, W. S.
Atkins, Rt Hon Sir H.	Clark, Hon A. (Plym'th S'n)
Atkins, Robert (South Ribble)	Clark, Dr Michael (Rochford)
Atkinson, David (B'm'th E)	Clark, Sir W. (Croydon S)
Baker, Rt Hon K. (Mole Vall'y)	Clarke, Rt Hon K. (Rushcliffe)
Baker, Nicholas (N Dorset)	Clegg, Sir Walter
Batiste, Spencer	Cockeram, Eric
Bellingham, Henry	Colvin, Michael
Bendall, Vivian	Conway, Derek
Bennett, Rt Hon Sir Frederic	Coombs, Simon
Benyon, William	Cope, John
Best, Keith	Corrie, John
Biffen, Rt Hon John	Couchman, James
Biggs-Davison, Sir John	Cranborne, Viscount
Blackburn, John	Crouch, David
Blaker, Rt Hon Sir Peter	Dickens, Geoffrey
Body, Richard	Dorrell, Stephen
Bonsor, Sir Nicholas	Douglas-Hamilton, Lord J.
Bottomley, Peter	du Cann, Rt Hon Sir Edward
Bottomley, Mrs Virginia	Dunn, Robert
Bowden, A. (Brighton K'to'n)	Durant, Tony
Bowden, Gerald (Dulwich)	Edwards, Rt Hon N. (P'broke)
Braine, Rt Hon Sir Bernard	Eggar, Tim
Brandon-Bravo, Martin	Emery, Sir Peter
Bright, Graham	Evennett, David
Brinton, Tim	Eyre, Sir Reginald
Brittan, Rt Hon Leon	Fallon, Michael
Brooke, Hon Peter	Farr, Sir John
Brown, M. (Brigg & Cl'thpes)	Favell, Anthony
Browne, John	Fenner, Mrs Peggy
Bruinvels, Peter	Finsberg, Sir Geoffrey
Bryan, Sir Paul	Fletcher, Alexander
Buchanan-Smith, Rt Hon A.	Fookes, Miss Janet
Buck, Sir Antony	Forman, Nigel
Budgen, Nick	Forsyth, Michael (Stirling)
Burt, Alistair	Forth, Eric
Butcher, John	Fowler, Rt Hon Norman

Franks, Cecil	Lyell, Nicholas
Fraser, Peter (Angus East)	McCurley, Mrs Anna
Freeman, Roger	Macfarlane, Neil
Gale, Roger	MacGregor, John
Galley, Roy	MacKay, Andrew (Berkshire)
Gardiner, George (Reigate)	MacKay, John (Argyll & Bute)
Gardner, Sir Edward (Fylde)	Maclean, David John
Garel-Jones, Tristan	McNair-Wilson, P. (New F'st)
Glyn, Dr Alan	McQuarrie, Albert
Goodlad, Alastair	Major, John
Gorst, John	Malins, Humfrey
Gow, Ian	Malone, Gerald
Gower, Sir Raymond	Maples, John
Griffiths, Peter (Portsm'th N)	Marland, Paul
Grist, Ian	Marlow, Antony
Ground, Patrick	Marshall, Michael (Arundel)
Hamilton, Hon A. (Epsom)	Mates, Michael
Hamilton, Neil (Tatton)	Maude, Hon Francis
Hanley, Jeremy	Mawhinney, Dr Brian
Hannam, John	Mayhew, Sir Patrick
Harris, David	Mellor, David
Harvey, Robert	Merchant, Piers
Havers, Rt Hon Sir Michael	Meyer, Sir Anthony
Hawkins, C. (High Peak)	Miller, Hal (B'grove)
Hawkins, Sir Paul (SW N'folk)	Mills, Iain (Meriden)
Hawksley, Warren	Mills, Sir Peter (West Devon)
Hayhoe, Barney	Mitchell, David (NW Hants)
Hayward, Robert	Moate, Roger
Heathcoat-Amory, David	Monro, Sir Hector
Heddle, John	Montgomery, Sir Fergus
Henderson, Barry	Moore, John
Heseltine, Rt Hon Michael	Morris, M. (N'hampton, S)
Hickmet, Richard	Morrison, Hon P. (Chester)
Hill, James	Moynihan, Hon C.
Hind, Kenneth	Murphy, Christopher
Hirst, Michael	Neale, Gerrard
Hogg, Hon Douglas (Gr'th'm)	Needham, Richard
Holland, Sir Philip (Gedling)	Nelson, Anthony
Holt, Richard	Neubert, Michael
Hordern, Peter	Newton, Tony
Howard, Michael	Nicholls, Patrick
Howarth, Alan (Stratf'd-on-A)	Normanton, Tom
Howarth, Gerald (Cannock)	Norris, Steven
Howell, Ralph (N Norfolk)	Onslow, Cranley
Hubbard-Miles, Peter	Oppenheim, Phillip
Hunt, David (Wirral)	Oppenheim, Rt Hon Mrs S.
Hunt, John (Ravensbourne)	Ottaway, Richard
Hunter, Andrew	Page, Sir John (Harrow W)
Hurd, Rt Hon Douglas	Page, Richard (Herts SW)
Irving, Charles	Parkinson, Rt Hon Cecil
Jackson, Robert	Parris, Matthew
Jenkin, Rt Hon Patrick	Patten, Christopher (Bath)
Jessel, Toby	Patten, J. (Oxf W & Abdgn)
Johnson Smith, Sir Geoffrey	Pattie, Geoffrey
Jones, Gwilym (Cardiff N)	Pawsey, James
Jones, Robert (W Herts)	Percival, Rt Hon Sir Ian
Jopling, Rt Hon Michael	Pollock, Alexander
Joseph, Rt Hon Sir Keith	Porter, Barry
Kellett-Bowman, Mrs Elaine	Portillo, Michael
Key, Robert	Powell, William (Corby)
King, Roger (B'ham N'field)	Powley, John
King, Rt Hon Tom	Price, Sir David
Knight, Gregory (Derby N)	Proctor, K. Harvey
Knight, Mrs Jill (Edgbaston)	Raison, Rt Hon Timothy
Knowles, Michael	Rees, Rt Hon Peter (Dover)
Lamont, Norman	Renton, Tim
Lang, Ian	Rhodes James, Robert
Lawler, Geoffrey	Rhys Williams, Sir Brandon
Lawrence, Ivan	Ridley, Rt Hon Nicholas
Lawson, Rt Hon Nigel	Ridsdale, Sir Julian
Lee, John (Pendle)	Roberts, Wyn (Conwy)
Leigh, Edward (Gainsbor'gh)	Robinson, Mark (N'port W)
Lennox-Boyd, Hon Mark	Roe, Mrs Marion
Lewis, Sir Kenneth (Stamf'd)	Rossi, Sir Hugh
Lightbown, David	Rost, Peter
Lilley, Peter	Rowe, Andrew
Lloyd, Ian (Havant)	Rumbold, Mrs Angela
Lloyd, Peter, (Fareham)	Ryder, Richard
Lord, Michael	Sainsbury, Hon Timothy
Luce, Richard	St. John-Stevas, Rt Hon N.

Sayeed, Jonathan	Stewart, Andrew (Sherwood)
Scott, Nicholas	Stewart, Ian (N Hertf'dshire)
Shaw, Giles (Pudsey)	Stradling Thomas, J.
Shaw, Sir Michael (Scarb')	Taylor, John (Solihull)
Shelton, William (Streatham)	Taylor, Teddy (S'end E)
Shepherd, Colin (Hereford)	Tebbit, Rt Hon. Norman
Shepherd, Richard (Aldridge)	Temple-Morris, Peter
Shersby, Michael	Terlezki, Stefan
Skeet, T. H. H.	Thomas, Rt Hon Peter
Smith, Sir Dudley (Warwick)	Thompson, Donald (Calder V)
Smith, Tim (Beaconsfield)	Thompson, Patrick (N'ich N)
Soames, Hon Nicholas	Thome, Neil (Ilford S)
Spence, John	Thurnham, Peter
Spencer, Derek	Townend, John (Bridlington)
Spicer, Jim (W Dorset)	Tracey, Richard
Spicer, Michael (S Worcs)	Trippier, David
Squire, Robin	Twinn, Dr Ian
Stanley, John	van Straubenzee, Sir W.
Steen, Anthony	Vaughan, Sir Gerard
Stern, Michael	Viggers, Peter
Stevens, Lewis (Nuneaton)	Waddington, David
Stevens, Martin (Fulham)	Wakeham, Rt Hon John
Stewart, Allan (Eastwood)	Waldegrave, Hon William

Walden, George	Wilkinson, John
Walker, Bill (T'side N)	Wolfson, Mark
Ward, John	Wood, Timothy
Wardle, C. (Bexhill)	Woodcock, Michael
Warren, Kenneth	Young, Sir George (Acton)
Watson, John	Younger, Rt Hon George
Watts, John
Wells, Bowen (Hertford)	Tellers for the Noes:
Wells, Sir John (Maidstone)	Mr. Carol Mather and
Wheeler, John	Mr. Robert Boscawen.
Whitfield, John

Question accordingly negatived.

c408
1. BUSINESS OF THE HOUSE 41 words