§ Mr. Tony Banks
I beg to move amendment No. 178, in page 56, line 24, leave out '75' and insert '20'.
Mr. Deputy Speaker
With this we shall take the following amendments: No. 210, in page 56, line 24, leave out '75' and insert '10'.
No. 179, in page 56, line 25, leave out '50' and insert '20'
No. 211, in page 56, line 25, leave out '50' and insert '5'.
No. 180, in page 56, line 32, leave out '100' and insert '20'.
§ Mr. Banks
These amendments relate to one of the most controversial aspects of the Bill, which sets out how the local authority must use its capital receipts, from both the disposal of housing stock and the sale of land.
In the past, as we know, local authorities have been able to use 20 per cent. of the capital receipts for capital works and the remainder for non-prescribed expenditure, or alternatively to use a further 20 per cent. of the remainder in subsequent years towards further prescribed expenditure. It is now proposed that only 25 per cent. of capital receipts from the sale of housing can be used and only 50 per cent. of capital receipts from the sale of land, while the remainder, now called the reserved part, must be applied against debt.
846 These amendments, which are a mixture of SLD and Labour amendments, seek to look once again at how much should constitute the reserved part and how much freedom the local authority should have in disposing of capital receipts that have come from the sale of what are, after all, assets accumulated by the historic effort of local authorities over many years.
It is the local authority with a mandate from the local people that decides to build houses or acquire land and it is quite absurd that the disposal of those same assets, whether voluntary or forced, should not leave the local authority the freedom to decide what next to do with its own assets.
The Government argue that local authority debt is massive and needs to be controlled, but I remind the Minister that as a proportion of the gross domestic product local authority borrowing fell from 1.4 per cent. in 1980–81 to 1 per cent. in 1985–86 and over the same period long-term local authority debt as a proportion of GDP fell from 15 per cent. to 13 per cent. Loans outstanding as a proportion of gross annual revenue expenditure fell from 135 per cent. in 1980–81 to 117 per cent. in 1986–87. The Government need to bear in mind that in reducing the part of the capital receipts available for use they are reducing the incentive to local authorities to dispose of their assets, and that is obviously contrary to the Government's intentions.
The Under-Secretary of State for the Government, the hon. Member for Rossendale and Darwen (Mr. Trippier), made a number of statements in Committee. In particular, he said:We have made it clear that we wish to provide exemptions from in-and-out transactions, which exist in the present system, and we need the regulation-making power to do so.I hope that the Minister will be a little more clear about that. He undertook to consider whether an amendment would be an appropriate way of achieving that rather than the sweeping powers that he confers upon himself in clause 50(3), (4) and (5). Has he further considered that point? If so, what are his conclusions?
Secondly, the position of a local authority that has no debt is still open to speculation. In Committee the Minister said:I accept that we have to consider what might happen when an authority has no debt … We are considering that matter carefully … We have not ruled out further amendments which would provide alternative solutions." —[Official Report, Standing Committee G, 6 April 1989, c. 737–8.]It is absurd to suggest that a local authority that has no debt must still be forced to set aside 75 per cent. of its capital receipts for future debt which becomes less and less likely to be incurred as its capital receipts accumulate because it is not allowed to use them. What does the Minister for Local Government intend to do about that?
I understand that the Under-Secretary of State for the Environment also gave an undertaking in the same debate in Committee that he would shortly list the capital receipts that would be exempt from the new rules. Can he now honour that undertaking, and, if not now, when will he be in a position to do so?
Opposition to clause 50 is strong. If a local authority is elected with a mandate to build houses, to modernise its school and to build homes for the elderly, and has the means to do so from its own resources, it is abhorrent that the Government should take it upon themselves to override that mandate and say that the local authority cannot use the resources that it has conscientiously built 847 up over the years to meet those promises. Clearly, the abolition of local government is not far off and one of the accusations that we have levelled against the Government is that they are completely undermining the process of local accountability.
When the European Parliament threatens to overrule the Government, even on such a minor matter as to whether there should be a health warning on the front rather than the side of a cigarette packet, the Government's reaction is one of outrage. They are up in arms threatening a constitutional crisis. But on this important matter—the use of capital receipts for essential projects—the Government seem willing to ride roughshod over the wishes of local people. I hope that the Minister for Local Government will address himself to those points.
§ Mr. Matthew Taylor
The Minister is eager to respond and I shall not delay him long. I support the hon. Member for Newham, North-West (Mr. Banks). The main difference between the amendments is that ours are more radical in giving local authorities greater freedom to respond to the needs of local people.
The point that I want to reinforce is that there is surely an economic absurdity in the Government's eyes in enforcing the repayment of debt. In many cases local authorities are paying fixed rates of interest as low as 6 per cent. Surely Ministers can see that it is madness to replace low interest bearing debts with higher interest rates which have resulted from the Chancellor, with the Prime Minister's help, messing up the national economy. They now seem to want to transfer those high interest rates, which we have as a result of the difficulties that the Government have got into nationally, to local authorities, quite needlessly, to the detriment of local people and local authorities.
Our amendments, the most radical put forward here tonight, are a way of meeting the requirements of local authorities. I do not accept the Minister's view that they undermine the national economy. It is crucial that such amendments are passed if local authorities are to start to tackle the real problems on a range of issues that they face within their local communities. I could outline them, but I suspect that at this time of night right hon. and hon, Members will be relieved to hear that I do not intend to do so. Nevertheless, the amendments are important.
§ Mr. Gummer
There has been, under both Labour and Conservative Governments, a clear need to control the total amount of public sector capital expenditure. There is certainly a difference of opinion between the hon. Members for Truro (Mr. Taylor) and for Newham, North-West (Mr. Banks). Neither is very near to power, but the hon. Member for Truro is much further away from it, and therefore is at liberty to make proposals that no Government could possibly adopt.
To do as the hon. Member for Truro suggests is to say that those authorities that happen to have considerable capital receipts for all kinds of historical reasons will do all the capital spending—because as they undertake that expenditure, the only way to keep the generality of public sector spending under control is to reduce the allocations that the Government make to those authorities without any capital receipts. The hon. Gentleman's recipe is just a 848 more extreme version of that presented by the Labour party. Both would mean that the very authorities having the greatest needs and the smallest chance of capital receipts would pay the cost. They are the authorities—often elected on precisely the mandate described by the hon. Member for Newham, North-West—that often depend more on central Government allocations for capital spending because, while they have no resources themselves, their needs are considerable.
The purpose of the changes we are making is to ensure that it will be easier to give to local authorities in greatest need allocations to spend on the capital projects that they must undertake. Until now, allocations have been continuously eroded because of the considerable latitude available to local authorities able to realise assets and having a considerable amount in the bank—either as a consequence of cascading or because of the value of assets they sold in any one year. They were able to spend so much that every year the Government were compelled to reduce the allocations available to others.
The odd point about the proposals of the hon. Member for Newham, North-West is that they would hit local authorities exactly like his own. The authorities that ought to be most concerned are those having large historical assets and whose allocations are restricted so that authorities in greater need may be helped. That is a much fairer system.
As to paying off debt, the hon. Member for Truro could not have studied my detailed comments. I made it clear again and again that no one is being forced to pay off advantageous loans of the 6 per cent. variety. But where local authorities realise capital, they must apply a substantial part of the resources thus realised to debt repayment—either by discharging such debts or by establishing a fund as a contra to them. Provided that local authorities build up such a fund and use the interest from it for other purposes, they do not have to pay off advantageous debts. However, they must not spend that money a second time without making provision to repay any debts already incurred.
When the hon. Member for Newham, North-West says that local government debt is not very great as a proportion of the gross national product, of course it is convenient to use those figures today because the GNP has grown so fast under this Government. It is an interesting way of using the success of the Government's economic policy as part of the judgment.
If the hon. Member for Newham, North-West had his way, the allocations to other authorities would be reduced. Many of the resources released in the way which he describes are not 100 per cent. local authority resources. Many of them have, in the past, been provided by the general taxpayer, by Government grants and the like. I have no intention of taking away those resources. I am merely saying that it is unacceptable to distort the system of the provision of capital allocations and the Government's responsibility to help local authorities with real needs by giving capital allocations. The balance that we are trying to present should help the very authorities that Opposition Members are supposed to support. Therefore, I find their amendments surprising. If the House were to pass them, it would do great harm to the very authorities which they are often most concerned to defend.
§ Mr. Allan McKay (Barnsley, West and Penistone)
I have given due consideration to the Minister's argument, but what then of the Government's promise, when they decided to sell council houses, that local authorities would be able to use their old receipts to replace the council houses which had been sold? What about the Government's promises in relation to the homeless and those who are now on extended waiting lists? What about the local authorities which always charged an economic rent and did not take anything from the rate fund? Will not the Government's proposed system take from the pockets of those local authorities the assets for which they paid over many years?
§ Mr. Gummer
None of the hon. Gentleman's comments accords with the facts. It is already true that, over the years, local authorities have been able to spend a high proportion of those assets and have spent many more millions of pounds than the assets referred to when the original statement was made by Lord Joseph. Much more than was promised has already been spent. There is no argument and the hon. Gentleman knows that.
In addition, there is no argument to suggest that those assets are being taken away from anyone. What is being said is that where debts have been incurred, and the assets on which they were incurred have been sold, at least part of the assets released should go towards the redemption of the debt. Otherwise, it would be as though someone who borrowed £8,000 for a car and then sold it said that he had £7,000 to spend. He would not because first he would have to repay the debt. We must acknowledge that it is the double spending of many of these assets which has harmed us so much.
Under the present system, the very local authorities with the needs of which Opposition Members speak are often not the ones with the assets to meet those needs. If we are to provide that money, the best way to do so is to ensure that we have greater freedom to allocate capital expenditure, which is what we are trying to do.
What the Opposition propose would do great harm to those very authorities which are most in need, which is why we are trying to change the system. Most people, other than those who are purblind, agree with what we are trying to do and believe it to be fair. That explains why the Association of Municipal Authorities has been so quiet and has not supported some of the proposals put forward by the Opposition today.
§ Mr. Tony Banks
I find it difficult to accept what the Minister says. He comes here in his saintly role and tries to suggest that he is doing the local authorities a great favour. It is difficult to find any local authorities which agree with him. I do not know to which local authorities he is dispensing his favours. I cannot find any: there are certainly none in the London Boroughs Association or the Association of London Authorities, and I am talking about Conservative, Liberal and Labour authorities in London. I am sure that the same is true of other authorities. No one seems to want his help and, therefore, I can only assume that he does not realise that his suggestion is totally unacceptable to local authorities of all political complexions.
As far as I can see, this is a final perpetration of the fraud carried out against local authorities. My hon. Friend the Member for Barnsley and Penistone (Mr. McKay) mentioned the understanding on which local authorities 850 were made to sell council houses: that all the capital receipts would be used to build new homes. That gave the idea considerable appeal for a number of authorities, but it has been gradually whittled away. Authorities are now being told that, notwithstanding any needs that they may have, they will have to use 75 per cent. of receipts for the realising of debt, without regard to their assets.
I should like the Minister to give an undertaking that he will consider the assets of each local authority against its debts. I am convinced that most if not all authorities could cover their existing debts through the value of the assets that they still hold. That seems a fairly straightforward economic proposal, which even the Minister and his hon. Friends should be able to grasp—even at this late hour.
The Minister talks about a local authority being forced to sell its own property, and then—in his words—being allowed to spend the money a second time. A council building new structures is not spending in the crude sense, but reinvesting. Against that spend comes a realisable asset.
I am not at all happy with what the Minister has said. No local authority of which I know offhand will be prepared to take the poisoned chalice that he is offering in his saintly role this evening. However, I shall not press the amendment.
§ Amendment, by leave, withdrawn.