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§ Mr. O'BrienI beg to move amendment No. 188, in page 76, line 22, at end insert—
'(4) In making a determination under paragraph (3) above, the Secretary of State shall determine a standard rate of residual debt subsidy applicable to all disposals falling under paragraph (1) above.'.
§ Mr. Deputy Speaker (Sir Paul Dean)With this, it will be convenient to discuss amendment No. 189, in page 76, line 27, at end insert—
`(5) Where a disposal to which this section applies is made under sections 74 or 104 of the Housing Act 1988 or section 32 or 43 and section 106a and Schedule 3A of the Housing Act 1985, and where the terms of such a disposal include a disposal cost or other payment by the local authority, the Secretary of State shall, in respect of each year to which the cost or payment relates, issue a Supplementary Credit Approval under section 46 above equal to not less than 75 per cent. of the cost or payment in that year.'.
§ Mr. O'BrienWe have been considering tenant extortion. Now we are considering dowries to people who take over council house estates. Amendment No. 189 continues the debate on dowries. A dowry is a capital payment from a local authority to another landlord when council houses are transferred to a housing action trust, or are dealt with under the change of landlord provisions in the Housing Act 1988, or are the subject of large-scale voluntary transfer. Payment would arise when the transfer took place at negative value.
Where such a dowry is payable, the amendment provides that the capital cost should not come from a council's housing investment programme allocation or basic credit approval. The Government would have to issue a supplementary credit approval to a value of not less than 75 per cent. of the dowry.
The Government have been vacillating on the issue for nearly a year. We want to know when a decision is to be taken. The Government are in a terrible mess. The only formal application for a tenant's choice transfer is in Westminster—a Tory-controlled authority. It seems that that Tory council will have to pay the tenants £30 million, which it does not have. It has embarrassed the Government.
In Committee, we were given a completely unsatisfactory answer by the Under-Secretary of State for the Environment, the hon. Member for Surrey, South-West (Mrs. Bottomley). She said that supplementary credit approvals would be issued in the case of housing action trusts but that a decision had not yet been reached on tenant's choice transfers. She said nothing at all about voluntary transfers. That substantiates my claim that the Government are in difficulties with Westminster city council about the subsidies that will have to be paid under the dowry allocation.
Amendment No. 188 would amend clause 73, which provides for residual debt subsidy to be paid to local authorities for the costs relating to the disposal of houses and other properties. A consultation paper was issued by the Department of the Environment and the Welsh Office in January 1989. It proposes that the rate of residual debt subsidy will vary according to the type of proposal. The consultation paper refers to
No clear or logical reason was given by the Under-Secretary of State for the Environment in Committee as to why the rate for tenant's choice disposals should be less than for voluntary transfers, or disposals to housing action trusts.
"Tenants' Choice and Right to Buy — 75 per cent. Voluntary Transfers to Other Landlords — 90 per cent. Housing Action Trusts — 100 per cent." What is the relevance of the different arrangements? Does the Minister not agree that in disposals to a housing action trust and in disposals under tenant's choice a local 975 authority is being forced by the Government to dispose of part of its stock? What possible argument is there for the rates of subsidy to be different?
The Government seem to have accepted the principle that forced disposals should attract a higher rate of subsidy. I refer to the Under-Secretary of State's comments about the Secretary of State's initiative on housing action trusts. Why, therefore, do voluntary transfers attract a higher rate of subsidy—90 per cent. in this case—when another type of forced disposal, tenant's choice, attracts only 75 per cent? In what way are the problems and uncertainties in Wales different from the problems and uncertainties in England? Does the Minister not accept that the cost of a disposal is exactly that, whether it occurs in Wales or in England? What is the outcome of the further considerations?
I ask the Minister to explain why different subsidies are being paid. Would it not be fairer and more just to apply the same subsidy to all houses disposed of?
§ Mr. FraserI am grateful to my hon. Friend the Member for Normanton (Mr. O'Brien) for reminding the House that if houses are transferred under the housing action scheme, the residual debt subsidy will be 100 per cent. under what he described as the dowry—and, I hope, 100 per cent. of the debt, apart from the dowry, under the original loan charges. The Minister knows how important that is in my constituency. Under the housing action trust scheme, the Government propose to do more than was done in the 18th century when the Highlands were cleared— they intend to take out of local authority stock 2,144 homes in two housing action areas.
When I asked the Under-Secretary of State about this, I was told that the maximum cost of the two housing action schemes would be £132 million. That gives some idea of the scale of the meanness of the housing investment programme. Lambeth's housing investment programme amounts to about £20 million per year. That has to cover the massive housing needs of the homeless and those on the waiting list and the improvement of about 48,000 homes. The Minister's own expert's assessment of the cost of improving two estates alone was £132 million. What that expert believes ought to be spent on two estates is about six times more than the annual allocation for the whole of Lambeth's housing requirements.
The cost of essential improvements to a house or flat in a housing action trust area is about £60,000. The maximum that could be obtained under the right-to-buy arrangements would, because of the discount, be about £30,000, but it would probably be much less than that. There would need to be a huge dowry of about £30,000 per house—about £60 million in total—if one took that as the measure of the dowry which would be paid if a housing action trust took over. There is another even more pessimistic way of looking at it. The rents of about £20 per week on that estate would support capital debt of about £10 million, taking a modest 10 per cent. interest rate. The amount to be spent on the estate is £132 million, so the amount needed to service that debt would be much higher. The dowry would be enormous—possibly about £100 million.
I am trying to give an idea of the scale of the dowries. They would be enormous if the housing action trust scheme went ahead. If a dowry adversely affected the 976 minimal housing investment programme in Lambeth, we could forget about doing anything about housing, despite the 20,000 people on the waiting lists and the 1,200 homeless families, about 500 of whom live in expensive bed-and-breakfast accommodation. I ask the Minister to confirm what my hon. Friend the Member for Normanton said by saying that the residual debt subsidy for housing action trust schemes in my constituency will be 100 per cent. I want the hon. Gentleman to give a solemn undertaking that there will be no further diminution in Lambeth's housing investment programme because of any dowry to be paid under the HAT scheme.
I apologise because in a sense this may be a highly theoretical debate as there is no way that my tenants will vote for these measures anyway.
§ Mr. TrippierI listened carefully to the hon. Member for Norwood (Mr. Fraser) and I suspect that his last sentence devalued the currency of the rest of his speech. He must realise that his comments are in direct conflict with the statements of his hon. Friend the Member for Normanton (Mr. O'Brien). The hon. Member for Norwood is talking about forced disposals, but he and I know better than that. We know that one of the concessions which was given was that there should be two votes for housing action trust tenants. They can choose, first, whether they should have a housing action trust. They will have a second chance to vote with their feet to opt for various alternatives, for example, a tenants' co-operative, housing association, private landlord or return to local authority control. Let us have no more nonsense about forced disposal. It is equally mad to suggest that tenants' choice is a forced disposal. The choice is placed in the tenants' hands. That is not a forced disposal.
The points raised by the hon. Member for Norwood were rather technical, and I shall deal with them briefly. Another concession that we made with regard to housing action trusts was to say that there would be no further financial penalty on a local authority if it wished to reacquire the houses that had temporarily been in the ownership of the HAT while they were improved. I stand by that statement, as does my right hon. Friend the Secretary of State. We are anxious to get that point across to tenants.
It is a matter for tenants because each tenant will have the opportunity to vote. The consultants are still talking to various tenants on the estates. Because the money about which we are talking is more than that which the local authority would receive in the form of the HIP allocation —which the hon. Member for Norwood said was an enormous sum—I should have thought that it was sensible for that money to be accepted. I have made it clear that, if they wish, many of those tenants can go back to the local authority and it would not be penalised financially. This is an opportunity of a lifetime, and I hope that tenants will be sensible about it.
This money is specifically allocated in a budget within the Department of the Environment for HATs. I have made it clear that if tenants do not want it, that sum of money will be available elsewhere, and I am glad to say that some interest has been sparked in other authorities, not all of which are Conservative-controlled. I do not want that to happen. The money should be targeted in the area that the hon. Member for Norwood represents. I think that deep down he believes that. He knows that that work 977 needs to be done. The local authority can certainly repurchase the properties, and I am delighted to have played a part in discussions on that matter. The hon. Gentleman should help us and make it clear to tenants that this is a good deal.
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I turn to the points made by the hon. Member for Normanton. Recent developments in our policies for new capital and revenue regimes in local government mean that a residual debt subsidy is neither needed nor appropriate from 1 April 1990. From that date, loan charges will be taken 100 per cent. into the subsidy calculation. Sales receipts must be set aside partly for the reduction of debt. Any debt left after that will automatically be taken into account for subsidy.
There is still, however, a case for residual debt subsidy to be paid in this financial year while the housing subsidy arrangements are, I admit, much less generous. We now propose to limit it to those authorities that are not eligible for main housing subsidy. We would limit it also to multiple sales only—the sales of individual properties normally cover the outstanding debt. RDS would therefore be available for tenants' choice and HATs and also for voluntary large-scale transfer. Our new proposals for RDS will not have any permanent effect on main housing subsidy.
I apologise to the hon. Member for Norwood, who asked me a specific question—whether the proposals will in any way affect the HIP allocation that is available for Lambeth. The answer is no. That is another undertaking that I can give him.
There have been persuasive arguments for 100 per cent. RDS. Taking those into account, we have concluded that, for 1989–90, a single rate of subsidy set at 100 per cent. of the loan charges on any residual outstanding debt would be more appropriate and would, moreover, fall into line with the rate of HRA subsidy payable under the new financial regime from April 1990. Suitable amendments reflecting this and the other changes will be made to the Bill in another place. In view of that, I maintain that amendment No. 188 is not necessary and therefore should be withdrawn.
Amendment No. 189 proposes that supplementary credit approvals under the new capital finance system should be issued to cover 75 per cent. of any disposal costs or other payments made in transfers of local authority stock to a HAT, or under the tenants' choice procedures or in respect of voluntary disposal of stock. I am sorry that I cannot give the hon. Member for Normanton all the comfort that he seeks. We are considering how best to deal with problems in funding the disposal costs that may arise because of transfer of local authority stock to the various recipients which I have recently catalogued. We issued a consultation paper earlier this week, so it is obviously premature for me to say more before further comments are received.
In the case of a voluntary transfer, the local authority has full control over the timing of a disposal and can arrange the timing to suit its financial position. Indeed, it is for the local authority to decide whether the disposal takes place at all. As the local authority is in control of timing, there should normally be no reason for it to incur a disposal cost that it had not expected the year before.
In those circumstances, I hope that the hon. Member for Normanton will see fit to withdraw his amendment.
§ Mr. O'BrienSome of the Minister's points were interesting. We look forward to the amendments that will be tabled in another place, and obviously we shall consider them carefully.
We are witnessing legislation on the hoof. We have heard about a change in legislation which has never before been presented to the House. What is behind that change in policy on this special issue of housing? The Minister has given an assurance that the HIP allocation will not be affected by residual debt subsidy. We shall carefully watch what happens.
I cannot accept that there would be no compulsory disposal. What the Secretary of State said earlier will, to a large degree, influence compulsory disposal. We shall carefully monitor what happens when we have had time to consider all that has been said by the Secretary of State and the Minister.
Because the Minister has assured us that suitable amendments will be introduced in another place, and because a consultative document is to be released, I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.