HC Deb 25 April 1988 vol 132 cc100-20

`After section 79 of the Local Government, Planning and Land Act 1980 there shall be inserted the following section—

"Acquisition of leasehold etc. treated as acquisition of freehold

79A.—(1) In any case where—

  1. (a) an interest in or right over land is acquired on or after 10th March 1988, and
  2. (b) the interest or right confers a right to possession or occupation of the land, and
  3. (c) the interest or right is neither the fee simple absolute in possession nor an interest or right not exceeding one year in duration, and
  4. (d) the acquisition is neither by gift nor by deed with no consideration other than the presumed consideration imported by the deed,

then, for the purposes of this Part of this Act, the authority making the acquisition shall be treated as having acquired, for a consideration which is not in money alone, the fee simple absolute in possession in that land, subject only to the interests and rights referred to in subsection (2) below.

(2) The interests and rights referred to in subsection (1) above are those (if any) to which the interest or right which is actually acquired is subject at the time of the acquisition, excluding any which arise by virtue of a mortgage or charge to secure the payment of money.

(3) In subsection (1)(b) above—

  1. (a) `possession' has the same meaning as in the Law of Property Act 1925, that is to say, it includes receipt of rents and profits or the right to receive the same, if any; and
  2. (b) 'occupation' means occupation without possession but, subject to that, includes future occupation.

(4) Subsection (12) of section 80 below applies for the purposes of this section but where, by virtue of that subsection, an authority is taken to acquire an interest exceeding one year in duration, that interest shall not be regarded for the purposes of subsection (1)(c) above as the fee simple absolute in possession.".'—[Mr. Ridley.]

Brought up, and read the First time.

7.45 pm
The Secretary of State for the Environment (Mr. Nicholas Ridley)

I beg to move, That the clause be read a Second time.

Madam Deputy Speaker

With this it will be convenient to consider Government new clause 11—Prescribed expenditure—Government new clause 12—Share and loan capital and guarantee payments—and Government amendment No. 42.

Mr. Ridley

These new clauses and the consequential amendment in the title of the Bill were foreshadowed in the statement that I made on 9 March. Together with the regulations, they deal with two major defects that have become apparent in the existing legislation and regulations dealing with capital controls. The regulations, which are down for debate later, give effect to the statement about the leasing changes, lease and leaseback. They are temporary, in that they will hold the position until there have been consultations and further consideration. Amending regulations will be provided and these are merely a stopgap to hold the position until we have had time to consult.

First, some councils were raising money by lease and leaseback deals in order to avoid the consequences of not having balanced their revenue budgets. The law does not permit local authorities to borrow to cover revenue deficits, nor does it permit them to pledge their assets as security. It was clearly necessary to prevent them from achieving the same result and avoiding these restrictions by lease and leaseback.

Secondly, both leasing and barter were being used by more and more councils to undertake capital expenditure over and above that provided for in the Government's public expenditure plans. The measures do not prevent barter or leasing from being used, but bring such transactions within the spending limits laid down.

Mr. Rhodri Morgan (Cardiff, West)

Would the Secretary of State like to tell the House how he makes these new capital expenditure controls consistent with the encouragement given by the Secretary of State for Wales to health authorities in Wales? He said that when they contemplate building new hospitals they should organise it in such a way that the private sector builds the hospitals and leases them back to the health authorities in Wales. That is encouraging public authorities to do sale and leaseback deals with the private sector and contradicts what the Secretary of State is saying.

Mr. Ridley

All I am saying is that that has to be done within the system of capital controls and not as an addition to it. That does not mean to say that it cannot still be done, which is the point that I was making.

In broad terms, the new clauses deal with three matters. First, they bring barter fully within the capital control system. Part barter transactions have always been subject to control, so this hardly represents a major change of policy. Secondly, they amend the statutory rules that determine how much prescribed expenditure is scored when assets are acquired by leasing. Thirdly, they bring within capital controls the acquisition of share or loan capital in the making of payments under the guarantees of borrowing.

The new regulations provide that acquisition of a lease of property will be outside capital expenditure controls only if it is for less than three years, if it is not renewable for a longer period, if it is not an extension of a previous lease or if it is not part of a larger transaction. That is a fair precis of the overall effect of these clauses.

Mr. Simon Hughes

I have listened with care to what the Secretary of State said, and I heard him say that barter deals will be included in the regulations if they are entire barter deals as opposed to part barter deals. Why has such concern been expressed by the Association of District Councils which, as the Secretary of State will know, said in response to his announcement on 9 March that the new clauses will put many carefully negotiated good schemes in jeopardy?

Mr. Ridley

The reason is that district councils are doing a lot of barter deals. I have something to say later which may be of comfort to the hon. Gentleman.

I shall not go into the detail of the new clauses as my hon. Friend the Under-Secretary of State for the Environment, the hon. Member for Southampton, When (Mr. Chope), will provide any information that hon. Members ask for at the end of the debate, but I should like to enlarge on the reasons for the measures. All Governments control local authority capital expenditure, which is part of public expenditure. That is not a proposition that any political party seriously opposes. I think that the hon. Member for Copeland (Dr. Cunningham) agreed with that proposition.

A short definition of public expenditure is that it involves things that are paid for now or later out of taxation. I emphasise the words "or later". Like individuals, the Government have some scope for deferring, or advancing, the actual payments, whether by borrowing, by credit or by hire purchase, but the commitments once entered into have to be paid for eventually. It is the normal accounting convention, and has been ever since public expenditure planning was introduced in its modern form, that expenditure should be recorded when assets are acquired or when work is done and not when the payments are actually made.

That is the basic philosophy of the local authority capital control system. When capital assets move in and out of the ownership or control of the local authority sector, the full value of those assets should be counted as public expenditure. Equally, when improvements are carried out to assets already within that sector, the full cost should be counted. The amount that is counted represents the call that is being made on the nation's resources. It does not and should not depend on the precise arrangements made to finance the expenditure.

Similarly, when assets move out of the local authority sector, a capital receipt is recorded. Again, the amount of the receipt does not necessarily reflect the financial terms of the disposal. It measures the worth of the assets that have been released.

The purpose of the capital control system is to secure that public expenditure and local authority capital assets, less capital receipts from the disposal of such assets, match the public expenditure provisions that have been made. We do not intend to stop barter deals, merely to bring them within the capital control system. They have been used to avoid it; why else would authorities go to the trouble of keeping the transaction off their books?

Barter involves transfers of assets into and out of the public sector. It cannot be right that such transfers should take place outside the system under which the acquisition of assets by local authorities is controlled. Barter often does not offer good value for money. In some cases, it involves a middleman, who takes a cut. It usually involves selling to a single bidder who might not want it for himself. That is no way for a local authority to realise the best price of its assets on behalf of its ratepayers, because it cannot test the market.

Any scheme which takes place off the books is not necessarily the highest priority, nor subject to the same financial scrutiny that would apply if it was competing against other schemes within the capital control system. It may be claimed that barter schemes do not affect public expenditure, but I do not believe that. There is an opportunity cost involved. If a local authority sold a piece of surplus land for cash, public expenditure, and often public debt, would be reduced. If it swaps the land for a swimming pool, the opportunity for that reduction would be lost.

Barter was taking place on such a scale that it had to be brought under the capital control system. Since 9 March, we have been able to find out much more accurately what was happening. Two things have emerged. First, many schemes of both types are in the pipeline where commitment has been made or expenditure incurred. Secondly, the prescribed proportion rules bite harshly on some barter schemes such as land swaps and property rationalisation.

Therefore, I have two important and major relaxations to announce to the House this evening. The first concerns schemes that are in the pipeline. In my statement on 9 March, I said: I and my right hon. Friends will consider issuing additional capital allocations where we are satisfied that the agreements were not entered into for the purpose of evading capital expenditure or borrowing controls."—[Official Report. 9 March 1988; Vol. 129, c. 327.] I propose to use two criteria in interpreting what one might call cases in the pipeline. The first involves the extent to which expenditure has already been incurred or other commitments entered into, whether by the local authority or by any other party. For example, sites might have been acquired, design work might have been undertaken or tenants might have been rehoused, or perhaps there is evidence of some other commitment.

Mr. Eric S. Heffer (Liverpool, Walton)

Will the Minister give way?

Mr. Ridley

In a moment.

The second criterion is the extent to which the scheme is designed neither to increase the stock of assets over which the local authority has effective control, nor to raise money on the security of the authority's assets. If local authorities consider that schemes which were in the pipeline on 9 March meet both those criteria, they should apply to my Department for extra capital allocations.

Mr. Heffer

Has the Minister considered which local authorities fall into one category and which fall into the other? Does it mean that by chance Conservative councils are in one category—that which he will treat sympathetic-ally—and that Labour councils are in the other category?

Mr. Ridley

I have looked at that, and it does not mean what the hon. Gentleman said.

Mr. Tony Speller (Devon, North)

Will my right hon. Friend say something about the case of a small and careful local authority—the North Devon district council? The sheer scale of expenditure on harbour improvements at Ilfracombe, the building of marinas and the dredging of the docks will be far outside the capital ability of such a council. The only way that such a development can be achieved is to go to a developer—in fact, it is seeking ideas from more than one company. They involve barter between council land and developer money. If the council goes outside the normal capital expenditure controls and, although our authority is allowed to spend only some £250,000 annually, on this one occasion only it seeks to spend £2 million, and barter is essential for the finance, will this form of harbour and commercial improvement be ruled out?

Mr. Ridley

I have no knowledge of the scheme that my hon. Friend has described. If he will send me details of it, we shall certainly consider it.

I was coming to the second major relaxation which possibly could be of help in that case. Obviously, I cannot make a decision without having seen the details. It applies only to barter deals.

The representations which I have received since my statement on 9 March have also persuaded me that the existing legislation and regulations are a particular constraint on what I might call "in and out" transactions. By these I mean schemes where a particular asset is acquired so that another asset, or possibly the same asset, can be disposed of and where the disposal can happen only if the acquisition happens first. The inhibiting effect of the capital control system on property rationalisations was commented on by the Audit Commission in its report on local authority property which drew attention to the massive scope for local authorities to make better use of their property holdings.

We already have a limited back-to-back scheme under which additional allocations can be given to facilitate the acquisition of assets and their subsequent sale, as might happen when a council uses its land assembly powers to facilitate a private sector development. I propose to replace that scheme by an "in-and-out" scheme. Additional allocations will be available for three classes of transaction: first, the exchange of land for land; secondly, the replacement of existing assets held by the local authority by assets to be used for broadly similar purposes; and, thirdly, schemes in which the main intention is to facilitate investment by the private sector in assets which, when the scheme is completed, will be owned, operated and controlled by the private sector.

Mr. Dalyell

We have had difficulties with the legal advice that the Secretary of State has received from the lawyers who advise the Department of the Environment. Is it not rather difficult in law to establish [the Secretary of State seems to depend on this—motive and intention? One can deduce things from circumstantial evidence, but in law it is difficult to prove these things.

8 pm

Mr. Ridley

No, because the full nature of any agreement will be submitted and it is the ultimate objective of that agreement which we shall consider. The hon.

Gentleman might prefer me to withdraw these concessions, but I do not think that I will do so, because I believe that they will be helpful.

Mr. Matthew Taylor (Truro)

I thank the Secretary of State for his courtesy in giving way. It is not easy, hearing about such concessions in a debate like this, to understand specifically what the Secretary of State intends. He will be aware that two major projects in Carrick district council, within my area, have been affected, and the council has made representations to him. Would it be possible to make some effort about the problems of Carrick district council, and for somebody from the Department to meet an all-party delegation, as has been requested, to try to sort through these problems? Secondly, can he comment on the circumstances that arise in one case, where a major asset is in urgent need of renewal or replacement and the council is considering disposing of another asset to pay for that? That would be completely impossible within capital restraints, but the asset will otherwise waste away. Will that come within the terms of the Secretary of State's concessions?

Mr. Ridley

I cannot interpret these conditions in relation to any particular scheme, whether in theory or in detail, at the Dispatch Box tonight. That is not something for the hon. Gentleman to worry about. We shall consider any scheme that his council puts forward and see any delegation that he wishes to bring. There is now to be a period of consultation with the local authorities on these proposals, and when that is concluded the Government will bring forward new regulations which will be the opportunity to comment on the final plan.

One of the difficulties with this matter has been that, until my statement on 9 March, I did not know what was going on or how much of it was outside the law. [HON. MEMBERS: "Oh."] Of course, because local authorities took good care not to tell me because they knew perfectly well it was outside the capital controls regime. Now that we know what is going on, we can make a more sensible analysis of how to deal with it.

Mr. Tony Banks

Will the Secretary of State give way?'

Mr. Ridley

Yes, I will give way, but this is the last occasion, because I do not want to take too much time.

Mr. Banks

I am grateful to the Secretary of State. I am not surprised that he made a statement without knowing the full implications of the situation. Equally, he is now asking us to understand some fairly complicated proposals without being 100 per cent. certain of what is involved. I only hope that he is more certain than he was on 9 March. The London borough of Newham is involved in a number of leaseback and barter deals, all of which are aimed at doing something about the growing homelessness problem in the area. In general terms, would such schemes be acceptable, as we are trying to address a serious problem?

Mr. Ridley

On the hon. Gentleman's first point, a large amount of business was being transacted under both these heads, but it was carefully concealed from my Department because——

Mr. Rooker

How did the right hon. Gentleman know?

Mr. Ridley

We found out enough to be able to make the statement on 9 March. Now we know the full picture, we can consider it much more carefully, and I have already said that we will.

On the second point, the hon. Member for Newham, North-West (Mr. Banks) must study the particular schemes in relation to what I have said. I know that he cannot assimilate this and entirely understand it just like that and without some advice. However, there is an opportunity for consultation and representations before we come forward with the final regulations, which will be designed only after the matters have had public discussion.

I trust that these two major relaxations will be of considerable comfort to those hon. Members who have been alarmed by particular cases which local authorities have brought to their attention. I think that they will deal with many of those that we have already seen, and they should make for a fairer transition and an easier new regime.

Dr. Cunningham

The Secretary of State's important statement is a massive climbdown from his statement of 9 March, which he made, as he has admitted in his curiously disarming way, when he did riot know what was going on.

It is a new doctrine of Government that Ministers come to Parliament and announce major changes in capital investment programmes for the length and breadth of the country when, on their own admission, they do not know what they are talking about. That is extraordinary. Tonight, we have seen just how ill-considered arid downright wrong that politically motivated statement was. It was motivated not by any common sense, evidence or investigation into the circumstances. It was a political response, partly, I regret to say, engendered by the hon. Member for Ealing, Acton (Sir G. Young) and others. The irony of it was that the project that the hon. Member for Acton complained of was, on the admission of the Secretary of State, lawful and in order and it went ahead.

The Secretary of State should have said this in his announcement but I invite him to say it now. He should withdraw the regulations that he is asking the House to approve after 10 o'clock tonight. We knew before his statement, but it is even clearer now, that those regulations are simply a stopgap measure. Why is the Secretary of State so unclear about all this when his own Green Paper, published in 1986, asserted that the Government had had these matters under consideration since 1984? Here we are in 1988 and the Government still do not have a clear idea of what they are seeking to do and why.

The reality is that the Secretary of State has been forced to make this announcement not least because of the massive protest from his own colleagues in local government. When he made his statement on 9 March, he implied that the statement was necessary because of the activities of a handful of mainly Labour-controlled local authorities. We knew that it was not true then, and we certainly have the evidence to demonstrate that it is not true now. That is one of the reasons why the Secretary of State has backed off.

The Secretary of State has manoeuvred oddly throughout this whole business. On 9 March, certain members of the press were provided with a background briefing by officials of the Department of the Environment. That information was never presented to Parliament or published formally. It named certain projects in certain local authorities. It emerged that much of it was based on anecdotal hearsay evidence, as the Secretary of State was subsequently forced to admit.

When I asked, through my office, for a copy of the information, my private secretary received a letter from the Secretary of State's private secretary dated 10 March, which said: I attach a copy of a note which I gather our press officers gave to some members of the Press who asked for examples of the kind of local authority schemes which might be affected by the terms of the Secretary of State's announcement. This was not a note prepared with formal distribution in mind. You will see that it is a list of examples of some of the schemes that the Department has heard about from various sources, primarily MPs, councillors and press reports. It is not in any sense intended as a definitive list of such schemes. It is outrageous that the Secretary of State should make statements of such importance based on hearsay, gossip and innuendo. That is what the note confesses to. When the Secretary of State——

Mr. Butterfill

Will the hon. Gentleman give way?

Dr. Cunningham

Yes, of course I will give way in a moment when I have finished my point. The hon. Gentleman should learn about all the correspondence before he intervenes.

When the Secretary of State was challenged on these points by councillor Jack Layden, the leader of the Association of Metropolitan Authorities, he said in his reply dated 29 March: The list was a list of examples of large proposed leasing schemes. It was not intended as a full summary of available evidence and neither was it prepared for publication. However, it was given to the press. It was not prepared for publication, but it was given to the press, not Parliament.

Mr. Butterfill

As the hon. Gentleman might conceivably assent that some local authorities have deliberately tried to conceal what was going on in this area, does he suggest that the Government should employ an army of snoopers, as no doubt he would call them, to root out the details or is it not easier to proceed as my right hon. Friend the Secretary of State has proceeded, and force a situation in which the details become apparent?

Dr. Cunningham

I am not sure what the hon. Gentleman means when he says that authorities were trying to conceal what was happening. Of course these things would have to be matters for the record for members of the authority. As the hon. Gentleman is talking about concealment——

Mr. Ridley

Will the hon. Gentleman give way?

Dr. Cunningham

In a moment.

As the hon. Member for Bournemouth, West (Mr. Butterfill) is talking about concealment, I want to stress that there is far more concealment in central Government under this Prime Minister than there is in local government under the control of parties of any political persuasion. Local government is far more open than central Government ever has been and it remains so.

Mr. Ridley

Is the hon. Gentleman aware that some of the schemes appear to have been assigned and pushed through without opposition party councillors even being told? If councils will not tell their own councillors, does the hon. Gentleman believe that they will tell me?

Dr. Cunningham

We are quite familiar with these unsubstantiated allegations, unsupported by any definitive statements or evidence. We are aware of the general smear on local government. If the Secretary of State has evidence, why does he not name the authorities involved? He has made a very serious allegation. Which authority is he talking about? Will he name one, two, three or four authorities?

The hon. Member for Bournemouth, West and the Secretary of State have referred to concealment. They must think that we have very short memories. Have they forgotten about the leak of correspondence between the Secretary of State for the Environment's office and the Prime Minister's office which occurred a few days ago? There can be no better example of concealment and deception in recent political history than that. Secret memos were sent back and forth aimed at misleading not the Opposition, but Conservative Members of Parliament. If I were a Conservative Member, I would keep pretty damned quiet about concealment at the moment.

The Secretary of State said in his statement: I have to inform the House that, once again, a minority of local authorities are employing artificial devices to incur capital expenditure and to undertake borrowing over and above the levels permitted to them under the existing capital control system. Only a minority of authorities are involved". That certainly was not true then and the right hon. Gentleman knew that. All the evidence on the record now shows that that was not true. It was an attempt to mislead public opinion about those decisions in local government.

I challenged the Secretary of State later on in his statement. I asked: Will he confirm, for example, that his proposals will affect large and small local authorities right across the country, under Tory as well as Labour control? Will he confirm that the proposals will affect the capital programmes of many of those authorities, including house-building programmes, redevelopment programmes and capital expenditure on leisure centres?"—[Official Report, 9 March 1988; Vol. 129, c. 326–29.] The Secretary of State sought to imply that all that was not true.

8.15 pm
Mr. Dalyell

May I refer my hon. Friend to column 1170 of the Official Report of 22 April 1988 in respect of the leaks between the Department of the Environment and the Prime Minister which are being thoroughly investigated? If they are being thoroughly investigated, could we at some stage be told something about them?

Dr. Cunningham

As ever, my hon. Friend has made an important point. It is perhaps worth asking the Secretary of State whether his ministerial colleagues are being questioned along with the civil servants. As we know from the recent past that a number of these alleged leaks have not been leaks at all, but deliberate acts authorised by no less a person than the Prime Minister—[Interruption.] Of course we know that. Sir Crawley should observe the normal behaviour of a Parliamentary Private Secretary and be seen and not heard.

To reinforce my point about authorities under the control of different political parties, I want to list a few examples almost at random. The Association of District Councils has claimed that 150 of its members had schemes affected by the announcement. Nearly 150 local authority projects worth more than £350 million may be abandoned because of the Government's clampdown on leaseback and barter deals. Those are overwhelmingly Tory-controlled authorities—[Interruption.] The hon. Member for Lancaster (Dame E. Kellett-Bowman) is shaking her head. I will cite one or two examples. The first relates to Spelthorne. Where is the hon. Member for Spelthorne (Mr. Wilshire) now? That authority is Tory controlled. It has a scheme for a town centre redevelopment, involving the disposal of a council-owned site to provide leisure facilities. Tory-controlled Tamworth has a scheme for the modernisation of a housing estate. Tory-controlled Vale of White Horse in Oxfordshire has a scheme for major renovation works to a block of flats and the provision of new dwellings. Tory-controlled Wyre in Lancashire has a scheme for the renovation of a windmill——

Dame Elaine Kellett-Bowman

Will the hon. Gentleman give way?

Dr. Cunningham

I will not give way at the moment. I can assure the hon. Lady that I will give way, but not at the moment. I heard the hon. Member for Lancaster say, "No, no, no" from a sedentary position when I referred to Tory-controlled authorities. Presumably at that point she did not realise that I was going to refer to one rather close to home.

Dame Elaine Kellett-Bowman

May I suggest that it is rather more sensible to do up a windmill, which has lasted since the 13th century, than to lease back parking meters or sell Labour-controlled town halls as some Labour-controlled councils are doing? That cannot conceivably be described as right.

Dr. Cunningham

I agree with the hon. Lady's first point. The windmill renovation is a sensible project. However, it is a pity that the hon. Lady did not make those comments on 9 March when she almost certainly supported her right hon. Friend the Secretary of State for the Environment.

As there is apparently some dispute or lack of knowledge about Tory-controlled local authorities, what about Tory-controlled St. Albans? It has a scheme for the exchange of land with North West Hertfordshire health authority to enable hospital expansion. Can we accept that Basingstoke is Tory-controlled? Will the hon. Member for Bournemouth, West accept that Bournemouth is Tory-controlled? Bournemouth has a redevelopment scheme for a major entertainments complex and car parking. Tory-controlled North Hertfordshire and South Bedfordshire have schemes——

Mr. Simon Hughes

The hon. Member for Lancaster (Dame E. Kellett-Bowman) intervened in the hon. Gentleman's speech. He may have noticed on that list, a copy of which I have received, Lancaster district council, which has no one party in overall control, has a scheme for housing improvement which has been caught by the system. Was the hon. Lady aware that that scheme was caught? if so, is she happy that housing in her constituency will not be improved?

Dr. Cunningham

I am grateful to the hon. Member for Southwark and Bermondsey (Mr. Hughes) for finally springing the trap on the hon. Lady.

The reality is that the Secretary of State, as is often his wont, dived into the situation without the slightest idea of where he was going—without a scintilla of evidence to support his actions. He has been lambasted by Tory-controlled local authorities up and down the country and he is backing off fast. As is usual with his decisions, that is to be welcomed. Nevertheless, we shall have to read much of the small print of what he has said, because we are still not convinced that the criteria he seeks to employ are as fair and as objective as he has implied tonight.

Mr. Nicholas Winterton (Macclesfield)

I am deeply concerned about the contents of the new clauses. I do not consider myself bound to support them in the Lobbies tonight. They are new clauses tabled towards the end of debates on an important Bill. I am an honorary vice-president of the Association of District Councils, and I have received much of the briefing material to which Opposition Members have referred. I have also had a lengthy meeting with my own Macclesfield borough council, which is one of the few in the north-west having overall Conservative control. Sadly, my hon. Friend the Member for Tatton (Mr. Hamilton) could not be there, but he has been subsequently fully briefed. The new clauses will adversely affect a well-managed authority in the north-west of England, which is Tory-controlled and which, over the past 10 years, has achieved the lowest rate precept rise in the whole of Cheshire. It is often accused of penny pinching, and yet some of the most necessary and vital projects currently being planned by that authority are being jeopardised as a result of the new clauses.

My right hon. Friend has received a letter from me, and he has paid me the courtesy of responding personally because his Department has not had time to prepare a detailed reply. I shall listen to the Front Bench response to this short debate before deciding what I shall do in the Division Lobbies. However, I must tell my right hon. Friend that, as matters currently stand, I shall be voting against the new clauses. I believe that they will be very damaging to many responsible, well-managed authorities. I say to my right hon. Friend that there are also some well-managed Labour authorities. One or two of them are close to my constituency in Cheshire, in the Greater Manchester area, and it is wrong that authorities which have shown themselves to be responsible should be treated in that way.

The technicalities of the proposed changes and my right hon. Friend's concessions are complex—but, in short, they will bring further types of transactions within what I can only describe as already restricted control, whereas they were previously considered a legitimate supplement to the use of capital receipts. The need for such a supplement is illustrated by the extent of the permissible borrowing approval allowed by the Government to the Macclesfield borough council. For all non-housing projects—such as car parks, pedestrianisation, public lavatories and pavilions—the council's allocation is in the region of £387,000, to which may be added a percentage—£30 per cent., as my right hon. Friend knows—of capital receipts. That latter aspect adds a further sum, averaging £500,000, to the amont of money that my borough council can spend.

The council's current allocation for its housing improvement programme of £1.4 million is reducing and, even with capital receipts, that programme—which is much needed, much in demand and well planned—must be constantly rephased, with the result that projects are delayed. I shall quickly spell out several of those projects, though as a result of the relaxations my right hon. Friend has made tonight, one or two of them may be allowed to proceed. First, Macclesfield borough council has an ambition to create centralised headquarters. The benefits deriving from increased efficiency, better communication and avoidance of duplication are widely recognised—as I hope they will be by my right hon. Friend's Department.

In addition, a number of the council's existing offices in various parts of the town are in poor condition and require considerable capital expenditure if they are to be put into a reasonable state. Work on that scheme has proceeded for more than 12 months and we are within a week or two of the final submission of offers from the private sector. The scheme involves a commercial element, the value of which would be offset against the cost of offices. That value will now score under the proposed restrictions.

I turn to another important matter that relates also to the constituency of my hon. Friend the Member for Tatton. Our area has tremendous potential for economic growth and there is great pressure for new car parking, if that potential is to be fully exploited. In Macclesfield, the council has already agreed a lease and leaseback transaction to provide funding in due course for the Jordan Gate scheme. It is unlikely to be funded in the foreseeable future in any other way.

In Wilmslow, in the Tatton constituency, the Church street scheme is a proposed barter deal, where the freehold of the land for development will be exchanged for a decked car park, providing an additional 100 spaces in Wilmslow town centre. My hon. Friend the Member for Tatton and I know the area very well, and that development is vital if the area is to react to the demands placed upon it and to exploit fully its potential.

In Macclesfield, again, there is a proposal for the Churchill way scheme, containing a mixture of lease and leaseback, together with barter, which would provide much-needed parking spaces in the town centre. I say to any right hon. or hon. Member who does not know Macclesfield—and there may be many of them—that it is currently choking to death with cars, particularly at weekends, because there are inadequate parking facilities. With the growth of commercial development, there is demand for it. The Duke street scheme would provide 800 parking spaces under a leaseback arrangement.

It was intended to achieve a much-needed opening up of land in East Titherington by a development agreement with the private sector, encouraged by my right hon. Friend; again, there would be an element of barter and exchange for provision of costly infrastructure. That scheme is now in jeopardy.

I turn to another vital area, and it is one that my right hon. Friend may admit falls within the concessions that he made. It concerns a serious problem that arises in relation to Airey houses in the Macclesfield borough council. It is a matter with which both my hon. Friend the Member for Tatton and myself are concerned. Last year, we received numerous inquiries from tenants of those houses asking about their future. I have many Airey properties in my constituency, in the villages of Bosley, Poynton, Adlington, Lyme Green, Rainow, Lower Withington and Nether Alderley. My hon. Friend the Member for Tatton has such houses in Tabley.

Mr. Tony Banks

I am utterly convinced by the case which the hon. Gentleman is making, but did he actually explain it to the Minister prior to his announcement on 9 March, or did he do so afterwards?

Mr. Winterton

I must tell the hon. Member for Newham, North-West (Mr. Banks) that, initially, I was totally unaware that my council would be caught in that way. Indeed, I suspect that my right hon. Friend the Minister was also unaware, but he has been fair enough to say so from the Dispatch Box. Subsequently, I have naturally taken a deep interest in the matter, having served in local government for a number of years.

If I may return to the subject of Airey houses, after much tenant consultation, the council proposes, subject to planning difficulties and considerations, to demolish the Airey houses. It will do so in an interesting way, replacing them with other houses under a partnership arrangement with builders in the private sector, using private finance for the initial construction.

Tenants wishing to do so will be able to acquire their new houses at the discounted rate subject to the cost-floor provision. Those unable or not wishing to buy will continue to live in a property of their choice as secure tenants of Macclesfield borough council. Thus, the council will have to buy the properties at cost from the developer. Any remaining properties in the various locations will be sold on the open market.

8.30 pm

The proposals prior to my right hon. Friend's announcement would have enabled the council to set off 100 per cent. of sales income against the cost of acquiring properties for continued renting. That would minimise the impact on the council's housing improvement payment allocation of just £1.4 million for 1988–89. The understanding of the new arrangement requires the cost of providing the accommodation for renting to score as prescribed expenditure. This will be between £2 million and £3 million, depending on how many tenants exercise the right to buy. I am sure that I do not need to explain further to my right hon. Friend or the House how the measures in the new clauses and amendment that we are debating will adversely affect the very sound and prudent policy being implemented by my local authority.

I sometimes find it difficult to understand the Treasury when it is seeking to limit the expenditure of capital receipts. The Treasury says that it will be bad for the PSBR if that is not done, but we no longer have any problem with the PSBR, because the position is currently negative. If my right hon. Friend believes in local government, as I certainly do, he should say so, but if the Government do not believe in it any longer, they should say that it is no longer wanted. However, if we want well-managed local authorities such as mine and that of my hon. Friend the Member for Tatton, they should be encouraged and not kicked in the shins for managing not only their assets, but the local government functions for all those who live in the district.

I hope that the concessions made tonight will allow many of the proposals that I have outlined, if not all, to go forward, because they have been properly planned and properly financed. My local authority is not trying to bridge a short-term revenue problem by selling capital assets; it is trying to provide better facilities and a better infrastructure for all the people in the Macclesfield borough area, the vast majority of whom are Conservative supporters.

Mr. Terry Davis (Birmingham, Hodge Hill)

As the hon. Member for Macclesfield (Mr. Winterton) said, the new clauses have come forward very late in our proceedings. It is particularly unfortunate that we did not have the opportunity to scrutinise them in Committee.

I shall ask a specific question, which I hope will be answered by the Minister who winds up the debate. In view of the new clauses and the announcement made by the Secretary of State, I should like to know how a council will be affected if an agreement was concluded before 9 March. What I want to raise, and would have raised in Committee had it been possible, is the effect on schemes in the pipeline. There are different stages in the progress on an agreement. I appreciate that, as the Secretary of State explained, there will be some concessions; that he will look at particular schemes, and perhaps exempt them from the constraints of the new clauses. Nevertheless, I should like to know the answer to my question.

Let us suppose that a council concluded an agreement before 9 March, and it was signed, sealed but not delivered —in the sense that it had not taken effect, so that the land had not been transferred, although the agreement to do so had been made. The council, of course, would have done that in the confident belief that it was acting according to the law, as it existed before 9 March. It would have received no indication that the Secretary of State intended to change the law. Would the council be able to proceed without the scheme having been scored against its capital expenditure?

Mr. Ridley

The answer is yes. If any commitment had been undertaken, any money had been expended or any design work had been done, as I said in my speech, the scheme would clearly be in the pipeline.

Dame Elaine Kellett-Bowman

On a point of order, Mr. Deputy Speaker. The hon. Member for Copeland (Dr. Cunningham) deliberately misled the House. I have now ascertained——

Mr. Deputy Speaker

Order. I am sure that the hon. Lady did not intend to say that an hon. Member had deliberately misled the House. Will she please withdraw her remark and rephrase it?

Dame Elaine Kellett-Bowman

I shall withdraw it, Mr. Deputy Speaker. I shall say that the hon. Gentleman accidentally misled the House. The Marsh mill at Thornton is not, and never has been, on a leaseback system. It is in the capital programme, and has in no way been impeded by the action of the Government. I very much hope that the hon. Gentleman will get his facts rather straighter when discussing my borough council.

Mr. Deputy Speaker

That is a point for debate, not a point of order.

Mr. Davis

As I was saying before that intervention, I am grateful to the Secretary of State for his assurance. I shall therefore conclude my remarks. I see no point in taking up debating time in pursuing it further. The Secretary of State has given us a wide assurance in telling us that schemes that were only in the design stage, as opposed to the agreement stage, would be exempt from the restrictions, and I am grateful for that assurance.

Mr. Speller

I shall not detain the House for long. I was grateful for a helpful comment from my right hon. Friend the Secretary of State and wish to develop only two points, which may affect not only my area but other areas in the more rural parts of the west country.

First, let me say that there is dismay and consternation among good local authorities which see perfectly well the reasons to stop what might be called less intelligent councils from seeking ways around logical Government control on excessive capital expenditure. Councils such as mine—the North Devon and Mid-Devon district councils —accept that entirely, and are in no way against the principle. Nor, indeed, am I.

The danger comes when the relatively low-spending and low-resource authorities without a large ratepaying base seek a substantial development that involves occasional major expenditure, perhaps once or twice in 10 years. It is then that they are scared of being—as they would put it—capped.

My other point goes beyond that. We need to extend the harbour and build at Ilfra.combe, and the only way that we can finance that development is by using a developer's cash on our council land. I hope that there is no problem here. It is a one-off, and we hope for exemption from control on such capital expenditure. However, on the hills behind Ilfracombe we have a hydro plant and what we hope will be a large wind farm to produce for the generating board. We shall have problems there if we are not permitted to reduce rates and exchange land for development. It will involve a big development and big expenditure.

I merely ask my right hon. Friend to think kindly of authorities that have no intention of excessive spending, but which occasionally have to engage in work for which their rate-borne income could never provide. I ask my right hon. Friend to treat those authorities well. They are not trying to swap or to cheat. They are merely seeking to use their assets in a sensible, logical manner, for the economic benefit of their communities.

Mr. Simon Hughes

This has been a strange debate. First, it is clear that it is a debate about barter deals and not about leaseback. That will come later. Secondly, the Secretary of State effectively came to the House to admit that he had been taken by surprise by his own announcement. The policy of the Government had turned round, as it were, and bitten the hand that feeds it. The Government have become used in the past to making decisions first and asking questions later, but in this instance they announced the decision, made the inquiries later, and then suddenly discovered what horrible things they had done. There is, however, the consolation that perhaps occasionally messages get through.

Let us look at some of the headlines that have appeared in the specialist press in the past few weeks. Surveyor of 7 April has the headline Tories attack barter deal ban". The magazine Building, on 8 April, stated: Housebuilders rage against end of council barter deals The article below the headline began: Construction of 50,000 homes a year could be scuppered and inner city regeneration project wrecked if Government proposals to end land deals between councils and contractors go ahead. Later in the article, the director of the House-Builders Federation is quoted as saying: The Government must realise that this is a standard way of doing business, particularly in the inner cities. This could scupper as much as 25 per cent. of the housebuilding programme. If they made a mistake on this one, they could have shot the whole inner city drive in the foot". A headline in Surveyor on 21 April was: Housing for elderly and disabled under threat from Finance Bill". The finance officer of the Association of District Councils said: While the Secretary of State clearly aimed at ending the excesses of a few, he has really gone too far and is putting in jeopardy a large number of schemes". The Financial Times of today said: Nearly 150 district council projects worth more than £350 million may have to be abandoned … The schemes range in value from under £1 million to a £45 million housing development in Oxford and a £40 million redevelopment of Bournemouth's Pavilion entertainments centre. We could give many examples. Yet again, the hon. Member for Macclesfield (Mr. Winterton) showed that the evidence is contrary to what the Government thought. On some matters, the councils have done just what the Government asked. Tower Hamlets, which my colleagues control, has been trying to find money for more housing for the homeless. If it had suggested a scheme exactly on these lines, it would have been caught by the ban. I should be interested to know whether my own council of Southwark would be caught. It has not started actual work on such schemes, but if they are precluded, all that Southwark will be able to do is sell land for cash and spend 20 or 30 per cent. of the capital receipts.

That seems to fly in the face of Government policy. Other people have said that the Government's policy—whether we in the Opposition like it or not, we have to accept it—is that partnership deals with local authorities are what is required and that councils should work with the private sector and come to the best arrangements for them and the communities. Barter deals are not mortgages of the future as leaseback is—that is a different issue. They do not involve a cost to the ratepayers, because they are assessed as valuable in themselves. They offend against capital controls technically, but not fundamentally in terms of economic policy.

We do not expect the Secretary of State to apply his new concessions to every scheme. The Government entered this area of policy, like the poll tax, with the same motivation, saying, "The Government must control everything, no matter what local councils decide." The Government have now realised that that was a foolish way forward.

In the past year, many barter schemes have come before the Secretary of State. Many local authorities have asked him to confirm that one or other barter scheme is legal. Such schemes appeared then to be legal, and it appears that the Government have now accepted that they should be. I hope that the reality behind the concessions, which we welcome, is that in the event all such schemes that are good will be allowed through and eventually the Government will have the good grace to admit that they made a terrible mistake and that, quite often, local government knows what it is doing.

Mr. John Hannam (Exeter)

On Report, once or twice I have supported the principle of a clause but have been worried about the implications of the wording. I am in that position again tonight. I very much welcome the concessions announced by my right hon. Friend the Secretary of State, especially the promise of consultation before new regulations are introduced.

As my right hon. Friend stated in his announcement on 9 March, the reason is to catch a minority of local authorities … employing artificial devices to incur capital expenditure and to undertake borrowing over and above the levels permitted to them". —[Official Report, 9 March 1988; Vol. 129, c. 326.] I concur with that objective, but I fear that the legislation is drafted so widely that it will catch many worthwhile schemes across the country, as we have heard from other hon. Members in the debate.

8.45 pm

It is true that certain local authorities have used the present regulations to fund revenue deficits, using schemes such as mortgaging municipal buildings and selling off parking meters to meet current expenditure, but most local authorities, certainly my own in Exeter, have adhered strictly to the law and the intention of the law. In Exeter, we have six schemes that are affected by the revised rules. All of them relate to matters of a capital nature. They all enjoy all-party local support. They are supported by commercial interests and are generally intended for the enhancement, improvement and future prosperity of the city and the area. There is no adverse effect on the ratepayers of the city, which has the lowest district rate in Devon. It is difficult to see why those much-needed schemes, which I should like to describe, should not go ahead without delay and without undue bureaucratic delay by officials.

I look forward to looking more closely at the details of the changes announced tonight. The legislation as presently drafted appears to have been produced in haste and, in my view, needs to be withdrawn for further consideration and amendment.

The first scheme that has been affected by the revised rules concerns the relocation of the livestock market in Exeter. Exeter is not just a regional centre for administration and shopping, but it is an important centre in a large agricultural county. The city council owns and operates a thriving livestock market in a partnership arrangement with a private sector consortium of market auctioneers. The market has been on its present site since the 1930s and is now inadequate by reason of its location, its means of access and its size. It also fails to meet present-day standards of hygiene and convenience of operation.

The council, in full consultation with all interested parties and following a consultant's report, has decided to relocate the market to a new site, which the council owns. It is a complicated and costly project, estimated to cost £4.04 million. It enjoys total support from all parties in the area. It is supported by the Devon Member of the European Parliament, the market auctioneers and the National Farmers Union. The value of the existing site for redevelopment is sufficient to fund the scheme, but the existing site cannot be sold until the new market has been built. In August last year the council entered into an agreement with a merchant bank for the funding of the works in a manner that clearly did not give rise to prescribed expenditure under the law as it then stood, save for a small part of the cost, which would be funded directly by the council. The council has agreed terms for the sale of the existing site to a developer for a sum sufficient to meet the entire costs of the project. An application has been made for an EEC grant, supported by the Ministry of Agriculture, Fisheries and Food and the Member of the European Parliament, and is now at an advanced stage in its progress at Brussels.

The whole scheme may be in jeopardy, depending upon the correct interpretation of new clause 11, subsections (6) and (8), and upon the announcement by my right hon. Friend the Secretary of State. The essential point is that the agreement to construct the new market was made before 10 March 1988 and the new section will come into force as from that date. Consideration, not in money, was given for the works prior to 10 March and although the work has commenced, a considerable amount remains to be done. I must ask for the reiteration of the assurance that works carried out after 10 March, pursuant to a legally binding agreement made before that date, are not intended to be caught by new clause 11. It would be wholly unreasonable for retrospective legislation to make unlawful work that is contractually committed by an agreement made perfectly lawfully prior to 10 March. I ask for a specific assurance on that point. There is no option as such to be exercised, but there is a mechanism whereby, as the project develops, the council has to produce building contracts, which the bank enters into as we go along.

One other area of great concern in my constituency of Exeter and in other parts of the country is that we should provide sufficient car parking spaces in the central areas of the city, particularly for shoppers and tourists visiting it. That view is endorsed by the chamber of commerce and trade and the English tourist board. It should be borne in mind that a city such as Exeter is the centre of a huge tourist region. It is also a major shopping centre. It is now faced with the challenge of several regional shopping centre proposals on the outskirts of the city, where there will be a generous provision of car parking. The Secretary of State is due to determine later in the year several planning appeals and applications for those out-of-town shopping centres.

To enhance the car parking provision in the central areas, the council has proposed three schemes for the provision of new car parks. It has been decided to grant a 125-year lease for office development of council-owned land adjacent to the civic offices on terms requiring the developer to construct a 290-space car park for the council. The important point is that the council will not receive a money consideration. The value of the lease will be set—[Interruption.] Does the hon. Member for Dunfermline, West (Mr. Douglas) wish to make an intervention? He is interrupting constantly.

Mr. Douglas

We have had special pleading after special pleading by Conservative Members who voted for the introduction of the guillotine for the various stages of the Bill's passage through Parliament. I find that reprehensible.

Mr. Hannam

Having spoken for six minutes and having listened to speeches of almost interminable length from Opposition Members, I take grave offence at that sort of comment. I am outlining the important——

Mr. Tony Banks


Mr. Hannam

I shall not give way again during the remainder of my remarks. After the intervention of the hon. Member for Dunfermline, West, I realise that it would be unwise to allow another intervention and thereby prolong the debate.

I wish to continue—[interruption.] Will the hon. Member for Dunfermline, West keep quiet or seek to catch the eye of the occupant of the Chair and make his own speech? He is lowering the tone of the debate. An hon. Member was removed from the Chamber for making numerous interjections in a similar manner to that being adopted by the hon. Member for Dunfermline, West. I hope that we shall not reach that position tonight. It is virtually impossible to make a speech when there are constant interjections.

The issues that I am raising are of great relevance and I press my right hon. Friend the Secretary of State to take note of them. I can do without the interjections that the hon. Member for Dunfermline, West is making from a sedentary position. I do not know whether it is the custom north of the border——

Mr. Douglas

Will the hon. Gentleman give way?

Mr. Hannam

No, I shall not give way. I have allowed the hon. Gentleman to intervene once, and I think that in the interests of time it would be worth while if I continued with my speech. I am trying to advance some serious arguments.

The effect of the Bill will be to draw in a range of proposals from local authorities, including Exeter, that would not incur extra expenditure for the ratepayers. No loss of capital would be involved. The technical provisions of a hastily drafted clause mean that the local council in my constituency is faced with the prospect of proceeding with schemes that are in the pipeline, or schemes which have been carefully formulated, or withdrawing them. If it proceeds with the schemes and it is found that they are not eligible within the framework that we are considering, the council will find that it is necessary to lower expenditure on other worthwhile schemes.

If the schemes that the council proceeds with are found not to be falling within the letter of the law and they are withdrawn, many important projects such as car parking, the development of leisure facilities, the provision of a new shopping centre and the development of the county ground where the county show is held each year might have to be put into cold storage at a time when there is a desperate need for them to be implemented.

I hope that when my hon. Friend the Under-Secretary of State replies he will give further details of the concessions that have been announced by my right hon. Friend the Secretary of State. The debate on the Local Government (Prescribed Expenditure) (Amendment) Regulations 1988 will provide ample opportunity for Opposition Members to voice their opinions. In that debate we could further discuss the various concessions and announcements that have been made by my right hon. Friend.

Mr. Tony Banks

I shall be brief because I hope to be able to speak again on these matters when we discuss the Local Government (Prescribed Expenditure) (Amendment) Regulations 1988 after the Bill has been given a Third Reading.

If the Secretary of State had any sense of shame, he would apologise to the House for the way in which he inadvertently misled it during his announcement on 9 March. We know that that was not done with malice aforethought. It happened because he did not know the facts, but that is something that we have come to expect from the right hon. Gentleman. He stumbles around like some poor old derelict from one balls-up to another. He should re-read what was said on 9 March. I shall not spare the Secretary of State's blushes, because it is clear that my hon. Friend the Member for Copeland (Dr. Cunningham) knows so much more than he about what goes on in local government. My hon. Friend said: May I ask the Secretary of State to reconsider his announcement that these amendments will be presented to the House only on Report? The Secretary of State's response suggested that he knew all about this at the time, but he now confesses that he knew nothing when he was making his announcement. He said: Since the hon. Gentleman appears to be going to support the new amendments that I have said will be tabled, I cannot think why he wants such a great deal of time in which to debate them".—[Official Report, 9 March 1988; Vol. 129, c. 335–36.] We wanted time because we wanted to get things right. The Secretary of State has still not achieved that, and he should be ashamed of himself. At least he should apologise to the House before we move on at 9 pm.

Mr. Chope

My right hon. Friend the Secretary of State has been criticised for having announced important changes to the capital control regime on 9 March without having consultation beforehand. My right hon. Friend was right to take that course because experience shows that local authorities, when we have consulted before making an announcement, have taken advantage of the consultation period to take action to avoid consequences of the controls that we have sought to introduce.

In October 1986—[Interruption.] This may not be within the recollection of the hon. Member for Dunfermline, West (Mr. Douglas), who continues to interrupt. In October 1986, we announced our intention to bring the acquisition of vehicles, plant and machinery within the prescribed expenditure with effect from 1 April 1987. We subsequently consulted local government about the regulations to bring this into effect. Between the time of that announcement and the new regulations, local authorities entered into nearly £2 billion-worth of advance leasing deals. Many of the deals were rushed through in the laying period for the regulations. Recent reports have shown how imprudent some of the deals were. Some of the brokers who arranged them did not work out correctly the tax consequences and some authorities are now faced with substantial additional costs. Our approach in this instance is preferable to that which we adopted in October 1986.

The pipeline concession will make a great deal of difference and will go a long way to meet the anxieties which have been expressed. When the criteria are satisfied —when there is a commitment, there is no net increase in the stock of assets and it is not sought to raise money on the security of assets—the pipeline concession will apply. My hon. Friends the Members for Macclesfield (Mr. Winterton), for Exeter (Mr. Hannam) and for Devon, North (Mr. Speller) spoke about the way in which the controls will affect small councils. It is worth emphasising the way in which we already take account of the position of small district councils by——

Dr. Cunningham

Does the Minister recall the letters of Councillor Cowd, the Conservative leader of Merton borough council, to The Times and The Daily Telegraph? He will be aware that Merton was involved in one of the schemes. Councillor Cowd wrote that Merton's scheme was to unlock the authority's equity in its very substantial property holdings … the sum generated would have been actively invested to create income for the benefit of the owners of those assets, the borough's ratepayers. That is what authorities have been doing throughout the country. Does not the Minister agree that that is sensible investment? His friend at Merton seems to think that it is.

Mr. Chope

I shall not comment on the Merton scheme.

The concessions that have been announced this evening by my right hon. Friend will apply to many schemes. I hope that there will be an opportunity for the points to be discussed in detail with departmental officials when necessary. My hon. Friend the Member for Exeter raised some of those points. He has been told quite clearly that the schemes in Exeter that were in the pipeline before the announcement on 9 March will certainly not be affected by the changes. The same is probably true of some of the Macclesfield schemes. They will satisfy some of the criteria to which my right hon. Friend has referred. The same is true also in relation to north Devon schemes that satisfy the criteria that have been announced by my right hon. Friend. As other hon. Members have said, there may be an opportunity later this evening to discuss some of these points in more detail.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

It being nine o'clock, MR. DEPUTY SPEAKER proceeded to put forthwith the Question on amendments moved by a member of the Government up to the end of the Bill.

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