APPLICATION OF PART IV (Hansard, 6 November 1989)

Mr. Hunt
I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker
With this, we may discuss Lords amendments Nos. 21 to 45, 46 and amendment (a) thereto, 47 to 80 and 311 to 317.

Mr. Hunt
These are technical amendments. Part IV replaces a ramshackle collection of legislative provisions spread across 31 Acts of Parliament dating back to 1875.

§ Mr. Tony Banks
Aha! The last Labour Government.

Mr. Hunt
Part IV replaces the present capital control system which, in recent years, has served the interests of neither central nor local government.
The regulation-making powers concerning the reserved part of capital receipts have been widened. We intend to use them to give exemptions, by regulations, in the new system for what are known as in-and-out schemes in the present system. We are consulting on our proposals. We have also announced proposed exemptions that will help local authorities to dispose of land for subsidised rented housing.
We have taken a regulation-making power to allow local authorities that have set aside more than sufficient sums to repay all their debt to use the surplus for specified purposes. We intend to allow debt-free authorities generally to spend all their future receipts, with the exception of receipts from large-scale housing transfers or other housing sales that are not to sitting tenants. We hope to reach a decision on the treatment of such housing transfers shortly.
I believe that the new system of capital finance will ensure a much fairer and more rational distribution of capital resources between local authorities.

§ Mr. Murphy
I do not agree with the Minister's latter comments, but we welcome some of the changes that have been made in another place.
806 I shall concentrate on amendment (a) to the Lords amendment No. 46. The fact that my comments will be short and that we will not press the amendment to a Division does not indicate its significance. The amendment would reduce from 75 per cent. to 50 per cent. the reserved part of capital receipts. As a result, local authorities would be able to spend the money that they were responsible for creating. They built the houses. They provided the initiative and the houses that are being sold. It is clear to any sensible person that receipts from sales of those houses should go back to the local authority areas. The amendment asks the Government, yet again, to consider reducing the amount of capital receipts that is reserved, so that half of the money can be put back into the local authority area which generated it.
District councils in Wales recently highlighted the depressed level of provision for housing in Wales, which is at a very low £80 million net. We must also consider the problems of people who are waiting for houses. Some 70,000 people in Wales alone are waiting to be housed. Only this week it was announced that homelessness in the Principality has risen by some 20 per cent. The possibility of houses being built for the homeless, the disabled, single people and elderly people could be achieved at a stroke if these capital controls were altered.
Local authority associations are pressing the Government to allow them to retain the additional spending power of receipts as a major incentive to themselves. I agree. They also draw attention to the bad effects of restricting the use of receipts.
These arguments were well expressed in Committee, and they were highlighted again in the other place. This is the last time when we can tell the Government that the issue of capital receipts is by no means technical, but one that affects the lives of millions of people.
The Government have said that if the amount of spending power from receipts increases, the amount available for distribution through credit approvals, on the basis of needs, decreases. Thus, high need, low capital receipt authorities will be disadvantaged if the reserved part provisions are relaxed. Ministers have been quick to point out that local authority associations that represent those high need, low resources authorities have not been vociferous in their opposition to the Government's proposals. That is not the case. Local authority associations in general think that the aggregate provision is inadequate to deal with today's housing problems.
We believe that a reduction in the reserve part of housing capital receipts from 75 per cent. to 50 per cent. would generate £900 million spending power in one year. I believe that the Government would change their mind as quickly as possible if they considered what that sum of money could do to alleviate our housing problems.
The local government associations have voiced great concern about the timing of the introduction of the new capital control system in 1990–91. The Minister, and all hon. Members who have been involved with local government, would agree that one of the problems in the past has been the inability to plan for housing or any sort of capital provision over a number of years. Unless Parliament and Government give local authorities the opportunity to spend money in a planned programme, well in advance, nothing substantial will be achieved.
The Government should reconsider such changes so that local authorities in Wales and England can plan their housing provision for years to come.

§ Mr. Tony Banks
The sale of council houses and the way in which local authorities have been effectively conned by the Government is now becoming palpably clear even to the most myopic Conservative Members.
The policy was effectively sold on the ground that the money that local authorities got in capital receipts from the sale of council housing could then be applied to the building of further council housing. There was a certain symmetry in that argument that appealed to Conservative Members and even to some Labour Members. We now realise that that is no longer the case. Gradually the amount of money that can be applied in any given year has been steadily reduced, but. until the most recent changes, at least it still meant that 100 per cent. of capital receipts over a period of time could be used for further capital investment in council housing stock. That is no longer the case and tonight is the final twist in Government policy. Conservative Members used the Government's argument about the sale of council housing to justify accepting it hook, line, and sinker. I hope that they now realise that they have been conned by their Government.
A vigil is now being held outside No. 10 Downing street for homeless people in London. The plight of the homeless in London has now reached a crisis level that one could never have dreamt of in one's worst nightmares five years ago. The Government must realise that the situation in London is so dire that unless local authorities are allowed to go back to the full construction of council housing one trembles to think what London will be like in five years time.
Surely the Government must realise that their sale of council housing policy, linked to a refusal to allow local authorities to use capital receipts for further construction, is a disaster. It was a twist and a con from the start; now it has turned into a tragedy for millions of people who are desperately anxious for improved accommodation.
There are now hundreds of thousands of homeless in London and they will be pointing their fingers at the Government and blaming them for the housing crisis that now afflicts London and the nation.

§ Mr. David Hunt
It is a question of getting the balance right. Part IV of the Bill is designed to redress the balance between spending from allocations and receipts to ensure not only that needs are met, but that those authorities that generate receipts get a reasonable benefit from doing so.
The hon. Member for Torfaen (Mr. Murphy) pointed out that my predecessors highlighted the fact that similar amendments in the past would have resulted in a cut of £900 million in credit approvals. That means that £900 million less would be targeted on the authorities that need to house the homeless. No doubt the answer would be simple to the hon. Member for Newham, North-West (Mr. Banks)—let local authorities spend the receipts, but do not cut the credit approvals. That may be the Labour party's response, but it is not the response of any party which aspires to responsible control of public expenditure, and it certainly will not be this Government's response.
808 We have heard a lot about local authorities being unable to spend their own resources on their own priorities. Let us be plain about what those resources are. They are the proceeds of assets which the local authority has sold, the original purchase of which was mainly financed by borrowing. The cost of that borrowing has been, and often still is, supported by the national tax payer through housing subsidy, Government grant and the like. Why should that continue once the asset has been sold? We are not taking the resources away, but simply saying that it is right that some of them should be used to repay the authority's debt.
12.15 am
It is not as if we are stopping local authorities using any of their receipts for new capital expenditure, because next year local authorities will be able to spend nearly £4 billion from their receipts. That is a huge sum in anybody's terms.

§ Mr. Soley
Does the Minister realise that all his hon. Friends in the Association of District Councils which are Conservative controlled, as well as Lady Anson, who is a Conservative and chairs that organisation, think that he is totally wrong and that the Government should do what my hon. Friend the Member for Torfaen (Mr. Murphy) suggests? Why does he say that all Conservative-controlled ADCs have got it so badly wrong and he is the only person to have it right?

§ Mr. Hunt
With due respect to the hon. Gentleman, his analysis is badly wrong. I am saying that the Government believe that what we are proposing represents the right balance between targeting resources on needs and having a proper incentive and reward for generating receipts, which is why I urge the House to resist the Opposition amendment.