Local Government

HC Deb 24 October 1988 vol 139 cc135-44

Motion made, and Question proposed, That an humble Address be presented to Her Majesty, praying that the Local Government (Prescribed Expenditure) (Amendment) (No. 2) Regulations 1988 (S.I., 1988, No. 1534), dated 6th September 1988, a copy of which was laid before this House on 9th September, be annulled.—[Mr. Allen McKay.]

10.49 pm

Mr. William O'Brien (Normanton)

What is happening in local government is very important, and it is rather a pity that we have not the time needed to discuss such important regulations. They are intended to replace the regulations formerly made following the Secretary of State's announcement on 9 March that he intended to apply a further stranglehold to local government. This further tightening of the restrictions was to amend the definition of prescribed capital expenditure. When the Secretary of State foolishly made that statement on 9 March he had no idea what he was doing or what was going on, and it is because we in the Labour party realise that the Secretary of State lacks a sense of judgment that I support the motion tonight.

The Secretary of State's lack of judgment was made clear in his admission to the House on 25 April, when he said: I did not know what was going on".—[Official Report, 25 April 1988; Vol. 132, c. 105.] Yet well before 9 March, agreements were made between local authorities and the private sector, taking place with the advice and guidance of the Department of the Environment. It is also clear following his statement on 25 April that the Secretary of State took his action on 9 March without realising the full implications of his action for the position of local authorities.

Too often the House is subjected to Dispatch Box policies when major changes are made in some announcement from the Dispatch Box. On the occasion of the 9 March statement, those major changes put in jeopardy local authorities' capital investment throughout the country. Capital schemes involving the private sector were to provide houses and sheltered accommodation for the elderly, badly needed leisure centres in the communities, town and city redevelopments, harbour improvements and the dredging of docks, the building of marinas—particularly by coastal towns—the building of car parks and arrangements with housing associations to build houses and bungalows for the elderly. There were also plans by local authorities to provide extra accommodation for the staff needed to apply the poll tax next year.

There was no doubt in the minds of those who defended local government that those were the kind of schemes being programmed by the vast majority of local authorities. It is significant to note what happened following the Secretary of State's backdown, when he had to admit on 25 April that he had made a "cock-up" of his ill-considered statement. He did not know what was going on: that is what he told the House. Because of the devastating circumstances involving hundreds of local authorities, he agreed to consider the capital schemes that were in the process of going forward, so that he could issue further capital allowances. Suffice to say that over 400 applications have been received by the Department, just over half of which have been acted upon.

I ask the Minister to inform the House how many applications for additional capital allowance have been made to the Department, and how many of those have been agreed. It would be of interest to local authorities and to the House to know the total number of additional allocations made and the criteria which he has adopted in considering those further bids. We must know in which order the Department is dealing with the requests for additional capital allocations. Is there an order and, if so, is it alphabetical or is it based on the date of application? That must be answered, as some schemes were well advanced before 9 March, but were caught up in the new policies announced by the Secretary of State. We demand to know how and in what order those delayed schemes are being considered by the Secretary of State.

I shall give an illustration. The scheme planned by the Wakefield metropolitan district council for the development of the Castleford town centre has been in the pipeline for six or seven years. A series of obstacles had to be overcome by that authority, including compulsory purchase orders, the application to the Secretary of State for the urban development grant and the acquisition by the council of the freehold on the new development in exchange for the old part of the town to the developers.

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

Is my hon. Friend aware that the request for the urban development grant for Castleford town centre and the Pontefract development has now been on the Minister's desk for about two years? In that area £4 million a week have been taken away from local people's spending power since the miners' strike and the local business people have had a traumatic experience. Now, local businesses are about to close and become bankrupt, purely because they cannot go any further with the development scheme until they know whether they have obtained the urban development grant.

Mr. O'Brien

My hon. Friend the Member for Pontefract and Castleford (Mr. Lofthouse) is correct to support the point I have made, because the Secretary of State has been involved with that planned inner-town development for some time. He has been responsible for delays before and since 9 March. When will the people of Castleford be allowed to see their town centre improved and developed? I hope that the Secretary of State will address his remarks to that question. What number does that development rank in the 450 or so applications before the Secretary of State? What considerations must be undertaken before the additional capital allowance is made? We would like some answers to those serious questions.

The Wakefield metropolitan district council is also waiting for a decision on the Headlands development in the centre of Pontefract. Again, that programme was in the pipeline well before 9 March. That involves a commercial development by a private developer in partnership with the local authority and involves the building of a new school for the Church of England, substantial improvements to roads and car parking and a general inner-town redevelopment. All those proposals are in line with Government policies, but they were dramatically stopped by the Secretary of State, and one has to ask why.

There are many other schemes at risk, because of the inadequate decision of the Secretary of State and the uncertainties following his promise to consider further capital allocations for schemes submitted by local authorities. Newcastle is waiting for a decision on the provision of a multi-storey car park that involves sector finance. Westminster is waiting for a decision on a multi-million pound scheme to replace depot facilities, to renovate and repair two large housing estates and to replace a Victorian hostel for homeless men. All those plans involve private sector finance.

Greenwich has arrangements with a housing association to build 300 homes to accommodate some of the 15,000 households that are on its waiting list. Lewisham is planning a two-hall extension to accommodate the additional staff needed to implement the poll tax and the necessary additional education staff required after the abolition of the Inner London education authority. Doncaster has plans to provide offices for an additional 100 staff needed to administer the poll tax.

The Secretary of State promised that there would be consultation with the local authorities about the Government's earlier proposals, after which the new regulations would be introduced. What was the form of those consultations? If the new regulations are those now before the House, they will do nothing to help local government. They do little more than clarify the uncertainties of the earlier regulations and do not address the concerns of local government.

During the consultations, the Association of Metropolitan authorities made it clear that the proposals will result in a reduction in private sector investment in inner-city areas. Lease and leaseback schemes have been the favoured means of encouraging joint venture projects between local authorities and private developers. Such schemes have, in the main, been accepted by the Secretary of State. They are not at risk. I hope that the Minister will explain what came out of the negotiations. It would appear that no meaningful discussions took place.

Local authorities have made it clear that the implementation of the poll tax will mean that more offices will be needed to accommodate additional staff. They have stated that to reduce leasing arrangements on buildings from 20 years to three years will have a devastating effect on their ability to provide such offices. It is also clear that the additional allowance of £25 million in 1988–89 is far from adequate to compensate for the change in the regulations. How did the Government arrive at that figure? We have a maze of regulations before us that are extremely complex and difficult to interpret. We believe that the regulations provide the background to the Government's intention to change the capital control system for England and Wales in 1990–91.

Does the Minister confirm that the consultation paper, "Capital expenditure and Finance" published in July, has particular relevance to the regulations? Does he accept that the new system of regulations will enable the Secretary of State to exercise stricter controls on borrowing and expenditure through annual credit approvals?

The explanatory note on the regulations before us refers to capital receipts. Is it the Government's intention to restrict local authority use of capital receipts? At present local authorities can use all their capital receipts to finance additional expenditure. Do the Government intend to restrict local authorities' use of capital receipts for housing and other projects, arising from the July consultation paper?

Finally, will there be any new method of debt repayment by local authorities? Is the Minister aware that the new proposals in the July circular will add £800 million to local authority costs in the first year of a 100 per cent. increase to the latest poll tax figures issued by the Government?

In view of the mismatch of these regulations and the fact that there is little change from the previous regulations, I ask the Minister to withdraw paper No. 1534.

11.5 pm

Mr. Matthew Taylor (Truro)

The Social and Liberal Democrats are opposed to the statutory instrument and support the prayer against it. It must be recognised that many local authorities have been forced into some form of creative accounting because of the Government's system of capital controls. We accept, and have always accepted, that there must he a top limit on borrowing, but Government policy is too unfair and too impractical, particularly in this statutory instrument. I shall focus on the role of private enterprise, which is apparently close to the hearts of Tory Members.

Mr. Robert G. Hughes (Harrow, West)

rose—

Mr. Taylor

The hon. Gentleman should allow me to elaborate. [HON. MEMBERS: "Give way."] I shall not give way, so the hon. Gentleman can sit down and bide his time. He can hear what I have to say before he comes back and he might find it instructive.

In the 1987 manifesto, the Conservatives said: For the sake of those living in our inner cities we must remove the barriers against private investment. Many authorities see this prescribed expenditure amendment as just such a barrier to private investment because many authorities have undoubtedly kept to the required principles on capital expenditure, but believe that the best service for local people will result from leaseback deals with commercial companies. In that sense we are tonight debating a prime example of Conservative party double-speak, welcoming the combined efforts of private enterprise and local government on the one hand and blocking it on the other.

The Association of Metropolitan Authorities is concerned that the proposals will result in a reduction in private sector investment in inner-city areas. What assurances can the Minister give that that is not the case? The Royal Institution of Chartered Surveyors is concerned that a whole range of perfectly legitimate transactions could be adversely affected. Similar transactions have been a staple element of efficient property management for many years and it is important that they should not be needlessly hindered. It also states: Restrictions on leasing arrangements will also have a highly adverse effect on the leasing market and investment market generally. The Audit Commission has advised the Government that in the interests of sound estate management and to enable authorities to rationalise their property holdings. capital expenditure controls should be relaxed. It would be interesting to hear from the Minister by what means he encourages such joint venture projects between local authorities and private developers.

As a result of these new regulations many worthwhile projects have been abandoned, despite local authorities, with the private sector, undertaking the sort of enterprises that the Government say they want authorities to do. My first example concerns an excellent project to alleviate the housing crisis in Tower Hamlets. Some families have to stay in bed-and-breakfast accommodation for as long as three or four years because of the shortage of housing stock. In an effort to alleviate this, Tower Hamlets combined with private finance to provide temporary accommodation outside the borough. It would have involved a total of 2,400 people. That project has now had to be abandoned.

In Tower Hamlets, a project for 800 homes for shared ownership schemes over three years and 300 to 400 ordinary rented homes for people in Tower Hamlets provides another example. The sites were to be sold to housing associations in Globe Town. The project has now been abandoned. Both examples were genuine and enterprising ways of raising private capital to cope with the crisis of homelessness in the inner city. Both were cancelled by a Conservative Government who claim private enterprise as their own—

Mr. Robert G. Hughes

Were those the plans that the Liberal council had to abandon because they were racist?

Mr. Taylor

It would be hard to describe as racist providing people with accommodation, thereby allowing them to leave bed-and-breakfast accommodation. It is hard to describe as racist giving people the chance to own their homes—a chance that is not available to them now. That was all to be done with the aid of private enterprise in a way that the hon. Gentleman and Government Front Bench spokesmen would support.

Whatever local authorities do to comply with the new regulations, their efforts to encourage private enterprise are being undermined and thwarted by the Department of the Environment and its Ministers. Apart from the regulations, the DoE has another failure to account for: its incompetence and inability to deal with the huge amounts of direction and control it has taken on itself have resulted in delays which are also causing projects not to happen.

The last time this subject was debated in this place, my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) mentioned a scheme in Tower Hamlets which was effectively outlawed in February 1987. On 13 February of that year, Tower Hamlets wrote seeking an exemption, and, apart from the odd holding letter from the Department, having chased the application and sent a delegation, the council had waited for 14 months for a response from the DoE by the time my hon. Friend spoke. During the previous debate, the Under-Secretary of State agreed to look into the matter. I checked with Tower Hamlets today; it has still heard nothing. The council has now been waiting for 20 months for action from the Department.

This is a scheme that would house between 300 and 400 people and would save the council £7 million in bed-and-breakfast payments, yet the Government are either sitting on their backsides unwilling to act, or they cannot cope—I suspect the latter explanation is the true one—because they are so determined to control everything councils do that they cannot do the job they have set themselves.

My local authority, Carrick, as a result of stopping barter and leaseback schemes, had to revise its proposals for Truro city hall. The council made every effort to comply with the new regulations. After a meeting with the Minister we sent in the application on 9 July, the closing date for applying for an exemption. We heard nothing. In late August, the council chased up the application, only to be told that the DoE had never received it. Naturally, the council immediately sent a duplicate copy, but even as it was sent off, the council received a note from the DoE acknowledging the earlier application that had supposedly never been received.

The application had not even been processed within a reasonable time. Now my council is awaiting approval of an application made in July which will clearly fall, not by being ruled out by Government regulations, but because the Government can no longer process the applications for all the things they have decided to assume control of. I am sure there are many more examples of that. The hon. Member for Normanton (Mr. O'Brien) listed a large number of them.

The Government's actions are ill thought out and ill judged, and will wreck the ability of properly elected local government bodies which are determined to serve local residents and meet the needs that they elect them to meet. The Government are stopping them fulfilling those functions. No private company could operate like this, or be expected to put up with these sorts of delays. It would knock on the door of local government claiming back the expenses it had been put to. I remind Conservative Members that most of these schemes involve reputable sources of finance—building societies, housing associations and even large developers such as Barratt. It is not a stop on the lunatic Left. It is a stop that is immediately affecting sensible councils across the country—

Mr. Patrick McLoughlin (Derbyshire, West)

rose—

Mr. Taylor

If the hon. Gentleman wishes to defend that, of course I shall give way.

Mr. McLoughlin

On behalf of his party—whichever one he speaks for tonight—will the hon. Gentleman say whether it is his intention to have no controls on local government? Would he allow all local authorities, regardless of how reckless, stupid and idiotic they may be, to carry on with their policies and expect the Government of the day to take no action? Is that the policy that he is advocating?

Mr. Taylor

The hon. Gentleman may recall that I opened my remarks by saying that we need some controls, but not these. I remind the hon. Gentleman that the Department of the Environment issued a circular listing the councils that were involved in lease and leaseback deals which was so inaccurate, poorly judged and misinformed that on 14 April the Department had to write to the office of my hon. Friend the Member for Southwark and Bermondsey to disassociate itself from the justifications for its actions. It was not thought through properly then, and it still has not been thought through. The Government would do better to withdraw the ban now and admit that they got it wrong than to pursue it further.

11.15 pm

Mr. Harry Cohen (Leyton)

The regulations relate to the statement made by the Secretary of State for the Environment on 9 March that made all leaseback arrangements illegal. After he had finished making his statement, at about five o'clock, I quickly faxed the statement to the borough treasurer in my area—at a cost of £20 to myself—because I knew that housing projects in my borough would be affected, as would the opportunity to effect vital housing improvements. But it was impossible to avoid the block, which was to apply from midnight that day. It is a ridiculous way to govern—to announce the block in the House and to implement it from midnight without consultation. It was a scandal.

The ban scuppered the plans of local authorities to build thousands of homes, especially in London where many people are homeless and low paid and many families live in bed-and-breakfast accommodation. The ban was especially savage in London, because thousands of new homes were under consideration with the private sector under the leaseback arrangements. It was impossible for the local authority to change over to doing the job without leasing because property values in London are so high. It caused a severe problem.

Projects in my borough were affected, including the site of Leytonstone football ground, where 32 houses were to be built. They had been purchased by the Samuel Lewis housing trust, which was financed by City merchant bankers, and were to be leased back to the council for homeless families. Half had already been built and 10 homes handed over, but £1.5 million had to be paid. The local authority had no alternative but to continue funding the project and to find £1.5 million out of its other important housing projects. That was equivalent to a cut in its housing budget overnight.

At Cogan avenue in Walthamstow, 161 dwellings on council land had been sold—that is what the Government want councils to do—to London and Quadrant housing trust. The accommodation was built with privately raised finance and then leased to the council for occupation by homeless families. Without the financial security of leaseback, the 120 homes on that site cannot be built.

At Larkswood mews in Chingford, 46 dwellings have been built by Barratt and purchased by the East London housing association with private finance. They were to be leased to the council for 20 years for homeless families. Those homes have now been completed, but, because of the block, the residents can stay there for only 11 months. In effect, that site is now being used as a giant hostel. Families will be upset when they have to move. It is crazy that 46 homes with gardens are being used as a hostel. It is wrong that the council has to foot the bill for that as well as face all those problems.

I should like to make another brief point, which is that leaseback could have been used for bringing forward a scheme relating to the large-panel construction estates which are dilapidated and have structural problems, so that those estates could be put on the agenda and dealt with. Such schemes have been blocked although they offered important opportunities for the refurbishment and redevelopment of low-rise properties which would have improved the environment. It is tragic that such schemes have been blocked and it is wrong that the Government have not come up with an alternative.

The Government should stop and think again about the regulations. They should stop putting blocks on councils which are trying to address their serious local housing needs, especially when they are trying to combine with the private sector deal with a desperate housing crisis.

11.21 pm

The Minister for Local Government (Mr. John Selwyn Gummer)

We should be careful about what we are debating. We are discussing the movement from a series of short-term measures to permanent provisions. We are doing so not because we want to stop councils doing things which are valuable and not because we want to stop people going forward with capital investment, but because we want to stop people going forward with capital investment under spurious schemes.

Any Government—one of the party of the hon. Member for Leyton (Mr. Cohen) just as much as this Government—must take into account spending by local authorities. We must all have rules under which local authorities make their spending decisions. In the past, local authorities have been prepared to keep to sensible rules without too much trouble and have accepted that there are certain means of financing which are obviously nonsense and which no sensible local authority would follow.

Local authorities have started to do such things only because they have decided that it is they who will decide what the national economy should be; they who will decide what they will take from the general cake; and they who will decide what the nation owes them. But that is the Government's job. It is the Government who must decide the amount of resources available and how they should be shared out. It is obviously unfair on local authorities with high standards if they find, that some local authorities use means of increasing their allocation to their own good, but to the detriment of others.

Therefore, all that we sought to do was exclude the kind of operation that enabled local authorities to lease their own town hall and then use the money to get round the capital arrangements—the kind of operation that was clearly designed to use techniques of leaseback, riot for any sensible economic purpose but to avoid the perfectly reasonable capital spending controls that all Governments must have and which any economic policy necessitates.

The economic policy that has necessitated those capital spending controls has proved to be successful year after year. It is the economic policy which has brought down unemployment so notably, which has made us the fastest growing economy among our neighbours, which is crucial to the development of this nation and which has put Britain back where it ought to be, instead of in the slough of despond that it was in when we came to power. Therefore, it is important to defend that economic policy.

It is reasonable for the hon. Member for Normanton (Mr. O'Brien) to say that there are many things that we should like to do, but the question is whether it is reasonable for particular authorities to use financial stratagems to do things that other authorities are unable to do because they keep to the spirit of the rules. I say honestly to him that it is sad that most of the local government legislation that the Government have had to bring forward would not have had to be introduced if local authorities had obeyed the spirit of the rules instead of trying constantly to find a sneaky way round them.

It is sad that a small number of local authorities have brought the great business of local government into disrepute by using stratagems that their forefathers would not have dreamt of using, because they would have seen those techniques as beneath them, and not the sort of thing that anybody with civic pride would use. Therefore, I say to the hon. Gentleman that one has to be careful.

The hon. Gentleman gave us a list of things with which he suggested we should concern ourselves. Many were ones that we should have liked to see. I am happy to say to the hon. Member for Pontefract and Castleford (Mr. Lofthouse) that, on the proposal for Castleford town centre, which is an urban development grant scheme and associated with an "in-and-out—pipeline" application, the local authority was asked for additional information, which we received on Friday. We shall process it as rapidly as possible.

The hon. Member for Normanton should be careful with his list. He mentioned the disgraceful fact that Lewisham town hall has not been able to go ahead with its development and extension. It is true that we have had an application from the chief executive, but in his letter he admitted that the full council had voted against the scheme. Half the Labour party came down on one side and half on the other. It is difficult for us to approve an application for an allocation for a scheme that the council apparently does not support. It is a bit hard to complain that the Government are responsible for the obvious dislocation in Lewisham town hall.

At the moment we have two sets of "pipeline" and "in-and-out" schemes, as the hon. Member for Normanton knows. A large number of schemes have been proposed, many right at the last moment, so he will understand that some are still under consideration. Under the pipeline scheme we have determined 102 applications, of which 45 have been approved and 57 refused. Among those approvals are some applications that were not necessary. On the "in-and-out" scheme, 72 applications have been determined— 32 were approved or the application was unnecessary and 40 were rejected. It is reasonable to say that of the 437 schemes put to us, we have already determined 174.

We are dealing with applications broadly in order of date of receipt, but we pull out cases where there is a specific need to try to pass them more quickly because of a tender date, and so on. I assure the hon. Member for Normanton that if he gets in touch with me, I shall do my best to get through the special schemes that he wants. I should be happy to answer any questions that he wants to raise with me. I am open to consider any case where he feels that I should hurry things on because of a special reason.

If the hon. Member for Truro (Mr. Taylor) looks more closely at some of his proposals, he will see that Tower Hamlets was trying to avoid the perfectly reasonable capital controls, but it did not need to, because Tower Hamlets has 2,526 vacant dwellings. If the local authority got on with a sensible letting policy, it would not have this problem. We all know that the problem in Tower Hamlets is that it is probably unlikely that the local authority knows that it has that number of vacant dwellings. There is a difficulty there in trying to solve the problem. It would be helpful if the hon. Gentleman went to his friends in Tower Hamlets to see whether he could do something to help the local authority solve its problems rather than blaming the Government.

I assure the hon. Gentleman that we are looking at the pipeline application for Truro which involves the barter of a car park for refurbishment of the town hall. It is not the top application on the list, but when we come to it we shall do our best.

The problem with the case put by the hon. Member for Leyton (Mr. Cohen) is not that the things Leyton wants to do are awful or that they would not help people. Many of them would be helpful, but the problem is that Leyton wants to do them by avoiding its fair share of the arrangements which help councils over the country as a whole. It is not on to say, "We have found a quick and easy way round it, even if it is with a private developer, and we expect the Government to let us go ahead with a scheme that will do somebody else out of money," nor is it right to spend too much money in local government in order to hit the Government's economic strategy.

I hope that the House will accept that the regulations are reasonable and will enable us to share fairly among councils that which is available and will stop people doing things that their ancestors would never have dreamt of trying.

Question put and negatived.