Housing and Urban Development Bill [Money] (No. 2) (Hansard, 25 January 1993)

§ Mr. John Battle (Leeds, West)
We are faced tonight with another classic example of the Government making up their housing policy from day to day, and tacking a shift in direction on to the end of the Housing and Urban Development Bill because the previous direction proved to be blocked.
The Government are technically clearing the way for a change in the rules covering the voluntary transfer of local authority housing stocks and, interestingly, they are doing so in a money resolution. The irony is that the Government seem to be more concerned with cutting back money on housing than dealing with housing need and conditions. It is becoming clear that the Government have no coherent housing policy—it seems to be a part of the chaos theory governing their present policy.
The resolution and the Bill do not deal with the housing problems facing nearly all our constituents—the drastic shortage of housing to rent, and the affordability of housing in relation to people's real incomes. It is not the time and place to discuss in detail the Government new clauses, which will be brought before the Housing and Urban Development Bill Committee tomorrow morning. Obviously we shall debate them there
In The Guardian this morning, Mr. Will Hutton commented: success requires root and branch reform. This extends to the housing market with its capacity to destabilise the economic cycle and pre-empt colossal savings flows. The imperative is now reviving the rented sector—and a first move would be to permit further council house sales, only if accompanied by a matching commitment to build new rentable housing to replace what has been lost. At least that shows a clear appreciation of the need for rented housing. Not surprisingly, that is what we said about housing in our general election manifesto, and it remains our policy. Everyone except the Government seems to realise that there is a desperate need for rented housing.
The resolution makes financial adjustments to the parameters of the Housing and Urban Development Bill. Basically, the Government have got themselves into a mess over their housing policy, and especially over the large-scale transfer of local authority properties, precisely because of the problems of housing benefit which they have not faced up to in the past.
About a year ago—before the general election—Ministers were boldly declaring that after the election about 200 local authorities would willingly and speedily transfer their housing stock, lock, stock and barrel. That did not happen—it could not happen—and the Government now realise that they cannot afford to let it happen, which is what the resolution is all about. It has eventually dawned on the Government—especially on Ministers at the Department of Social Security and the Treasury—that large-scale voluntary transfer carries with 834 it a huge potential housing benefit bill for the Treasury. It is an expensive policy option, which is why the Treasury cannot sanction it. Too many transfers from local authorities would cost too much Government money, which is why the Government are tonight trying to put an instant stop to the policy. They are introducing a short-term measure, designed to ensure that large-scale voluntary transfer does not become the drain that the Treasury believes that it might.
The Treasury has drawn the line. That was clear from the introductory letter that the Minister sent to hon. Members when the large-scale voluntary transfer consultation exercise was launched on 18 November 1992. In it, the Minister for Housing and Planning said: We much regret the delay in publishing this paper, but I think it is generally realised that, because of the issues it raises"—

§ Mr. Deputy Speaker (Mr. Michael Morris)
Order. I am having some difficulty in relating the hon. Gentleman's remarks to money.

§ Mr. Battle
The very next line of the letter states: I think it is generally realised that, because of the issues it raises, it has been caught up in the discussions of the PES round. That relates precisely to money. Among other matters, the paper sets out the expected proposals to limit the number of properties transferred in a single batch.
The letter also states:
as you know, a financial imbalance has arisen in the past between central and local Government as a result of the additional Housing Benefit costs of transfers to the Exchequer. The paper proposes redressing these by means of a levy on an authority's transfer receipts after deducting the authority's notional HRA debt … The most suitable means of doing this will be amendments during the Commons stages of the Housing and Urban Development Bill. The key problem for the housing Minister was that the proposals for large scale transfer, set out by the Government during the general election, have proved to be —as it is now termed—subject to the Exchequer costs of disposal. The housing Minister is now up against the barrier of the public expenditure implications of the transfer.
The real problem lies with the Local Government and Housing Act 1989, which introduced the subsidy of rent rebates within the housing revenue account. Under that provision, better-off tenants who are not entitled to rebate are expected to subsidise those who are. The better-off council tenants have to pay for the poorer ones. The previous hon. Member for Rossendale and Darwen, who is not now a Member of Parliament, was the then Minister responsible for housing. He vehemently denied, both in the House and in Committee, that ring-fencing the housing revenue account would produce that effect.
The levy proposed in both resolutions before us is intended to level the public expenditure playing field between the transfer and retention of stock. The same objective could be achieved by ending the requirement for local authority tenants to contribute towards the rent rebate subsidy. Why should other tenants who are slightly better off and not on housing benefit have to subsidise the housing benefit of others?
Inside the ring fence set up by the Government under the 1989 Act, council tenants subsidise the rent rebates of others. However, outside that ring fence, the new housing organisation that could take over the transferred local authority stock will lose out on the cross subsidy, which is 835 what the Government have now realised. That is why they have to come to the House late at night to change the rules by tagging new clauses on to the Housing and Urban Development Bill.
I shall focus for a few moments on the housing revenue account ring fence and the system. An increasing proportion of the rents paid by tenants who are not on benefit is used to meet the rent rebate costs of others. Therefore, the public expenditure consequences to which the Government have at last woken up—despite our warnings throughout 1988—are simply the result of the way that the Government designed the subsidy system.
If the Government want to level the public expenditure playing field between transfer and stock retention, they could start by introducing measures to end local authorities' requirement to contribute towards the itnt rebate subsidy, not by imposing—as the resolutions suggest—a levy on transfer receipts.
The subsidy regime is the problem, and it has been for about 60 years. The council house subsidy regime is complex and the Government are finding it too difficult to transfer it to large-scale voluntary transfer bodies. In 1919, large-scale investment in council housing took place on the basis of a deficit subsidy system. In 1923, there was a switch to an investment subsidy system, which was for new building. In 1935, legislation introduced local authority housing revenue accounts. From 1923 to 1972, local authorities could remove deficits by raising rents or making a rate fund contribution.
What happened then? Under the Housing Finance Act 1972, introduced by a Conservative Government, there was a return to deficit subsidy and rent rebates were introduced. It was from 1955 to 1972, however, that local authorities used general housing subsidies and redistribution methods through income-related benefit.
The origins of housing benefit lie in the argument about the best way to distribute housing revenue subsidies. I think that it was Eleanor Rathbone who said in the House in 1930 that a decent rent rebate scheme would have to be devised. A key argument that was not settled then still dogs the Government, and that was whether a subsidy should reduce the standard rent for all houses irrespective of the income of tenants—a form of universal benefit system—or whether it should be restricted to tenants who qualify on the ground of low income—in other words, a means-tested system.
In Leeds, the Rev. Charles Jenkinson, the housing reformer, made a brave attempt to introduce a rent differential scheme. It was a classic attempt to have a rent rebate pool combined with full economic rents for all houses. It failed because tenants saw a basic rent increase of between 70 and 100 per cent., even before the calculation of rebates according to family income needs. Some tenants received a 100 per cent. rebate, some had to make a contribution, and others had to pay the full rent. It was—

§ Mr. Deputy Speaker
Order. I have been very tolerant. The hon. Member must get to 1993.

§ Mr. Battle
I shall bring the House somewhat closer to 1993, Mr. Deputy Speaker. In 1982, the Government shifted housing benefit from the Department of the Environment—

§ Mr. Deputy Speaker
Order. The hon. Member must not return to the speech which he has written. He must relate his remarks to the levy in 1993 and not go back to 1982.

§ Mr. Battle
We would not be in the position that we now occupy if the Government had not made such a mess—

§ Mr. Deputy Speaker
Order. The fact is that we are in this position, a position that the hon. Member must address.

§ Mr. Battle
That is precisely what I am attempting to do, Mr. Deputy Speaker.
When the Government discovered that they were paying rent rebate subsidy to more than 100 authorities where the housing revenue account was in surplus while another group of authorities were regarded by the Government as indiscriminately subsidising council housing through rate fund contributions, they realised that there was a conflict. In 1989, the ring fence round the HRA that was introduced—

§ Mr. Deputy Speaker
Order. The hon. Member is beginning to tax my patience. Before us are paving measures that relate to new clauses that are yet to be moved in Committee. He must address that issue and not take up the history that has created the present situation.

§ Mr. Battle
The Government have come here tonight to tell the House that they did not provide enough money for the Bill when it was first introduced, so it is incumbent upon them to explain why they introduced it without making full financial arrangements. The reason for that, in terms of the Government's need, is that the incorporation of rebate subsidy into the new housing revenue account system gave them renewed leverage on rents. When that is challenged by the need to provide for housing benefit, the Government find themselves in difficulty. Consequently, they have had to table a money resolution to ensure that there is enough money to change the system. They know that they cannot go ahead with a large-scale voluntary transfer under the terms that they promised the electorate at the general election. The Treasury has told the Government that it is far too expensive.
The practical effect of the Government's action is that council tenants—and this relates directly to the resolution —are paying an average of £3.85 a week towards other people's housing benefit. Councils will receive £792 million a year less in housing subsidy in 1993–94 than if benefit had been paid in full by the Government—in other words, 20 per cent. of the cost of rent rebates. Almost two thirds of council tenants now receive some help with their rents. That is equivalent to almost 1.5 million households, many of which could be affected by the new clauses for which the Government are paving the way in the resolution. The 5 per cent. real increases in rents proposed by the Government this year will push more council tenants on to housing benefit. That means that the Government will have to come back to the House because they cannot finance that proposal.
In the 260 local authorities that the Bill could affect, better-off tenants are now contributing to their neighbours' housing benefit. Fifteen councils receive no housing subsidy, not even for housing benefit. As unemployment inevitably escalates, that number is likely to rise in the months and years ahead. Following the 837 voluntary transfer in Bromley, new tenants now face a rent of about £80 a week, which is double the level for their neighbours. Many families cannot possibly afford that rent without resorting to housing benefit. That is why the Government need to pave the way for the new clauses in the resolution.
Council rents have quadrupled from £6.41 in 1979 to £27.28 in 1991, according to Government figures. It is little wonder that the cost of housing benefit has tripled to £5.9 billion during the same period. I argue that the Treasury should meet housing benefit costs, irrespective of tenure. That is what was promised when the housing benefit system was introduced in 1982. Council tenants have been uniquely discriminated against by the system. Income support should be separated out rather than passed across to ensure that some council tenants subsidise their neighbours.
The idea of rent rebates is to assist those on low incomes to pay their rents. Since 1989, the Government have blurred the crucial distinction between housing subsidy and income maintenance, with better-off tenants subsidising their poorer neighbours, precisely because the provision for housing rebates was subsumed within the new housing revenue account subsidy system. In practice, the Government are trying to match high rents with low wages. Seven out of 10 housing association tenants are on housing benefit. Six out of 10—

§ Mr. Deputy Speaker
Order. The hon. Gentleman is taking the matter very wide. Those examples are not relevant to the levy in the resolution. It is a tightly drawn motion, and it is in the interests of the House that hon. Members restrict themselves to it.

§ Mr. Battle
As I understand it, Mr. Deputy Speaker, the motion is about transfer and the introduction of a levy to reduce the level of housing benefit. The Government cannot afford to carry out the transfer of local authority properties, to which the resolution refers, without putting in a subsidy. The Government decided to impose a levy rather than tackle the issue of the ring fencing of housing benefit. I thought that that was very pertinent to the resolution.
Whether one is talking of local authorities or housing associations, if a person on full benefit takes a part-time job that pulls him up a little way through the housing taper, and then discovers that he cannot pay the rent, he is in real danger, as he moves off housing benefit, of falling behind with his rent and of losing his home. When he gets a job, he loses his home, having lost access to housing benefit. That is the fundamental inconsistency at the heart of the Government's policy, and at the heart of the measure that will tackle the issue of imposing a levy.
Like the Bill itself, tonight's resolutions are far removed from addressing the real issues of housing benefit that the Government should and could be tackling—the need for housing to rent and for assuring real affordability.
The Government are presenting no clear way forward for housing associations or local authorities. They have nothing to offer people desperate for housing to rent. There is no clear vision of housing reform or of tackling the cost of escalating housing benefit as unemployment rises and rises. Tonight's tinkering addresses a problem that is entirely of the Government's own making. It is an attempt, late in the day, to adjust an ill-thought-out policy.
838 The Institute of Housing, commenting on the large-scale voluntary transfer consultation document, stated: The Government's"—

§ Mr. Deputy Speaker
Order. Does this relate specifically to the levy? If not, it is not in order for the hon. Gentleman to give the quotation.

§ Mr. Battle
The institute specifically commented: The Government's first priority with the review should have been to maximise investment"—

§ Mr. Deputy Speaker
Order. The hon. Gentleman comes to the House with a prepared speech, which is perfectly fair, but if any part of it does not relate specifically to the resolution, it is out of order. It is no use the hon. Gentleman just carrying on, as if he will not be deterred. I am sorry, but the hon. Gentleman may not give that quotation because it is not relevant to the levy.

§ Mr. Battle
If you, Mr. Deputy Speaker, rule that referring to large-scale voluntary transfer receipts is out of order, I am somewhat surprised, because that is precisely what the measure is about. The Institute of Housing was, consulted on that matter and on the levy, and it clearly comments: The large-scale voluntary transfer"—

§ Mr. Deputy Speaker
Order. The hon. Gentleman is failing to show the relevance and the linkage. If he will demonstrate the linkage, he may be in order. He has consistently carried on without showing any linkage.

§ Mr. Battle
I gained the impression that, every time I tried to make the linkage, I was ruled out of order. Although you, Mr. Deputy Speaker, have given the impression that I am simply reading a prepared speech, if you check Hansard, you and other right hon. and hon. Members may find that I spelt out clearly that the levy is precisely about large-scale voluntary transfer receipts.
The Government say that they need the money, but our case is that it should not be used in this way; the Government should not use the money to reduce the public sector borrowing requirement. Rather, it should be used specifically for housing investment. That is why we respond to the measure in the terms that we do.
A total of £130 billion is locked in to English local authority housing stock. It should be used for general investment in new homes and to repairing and renovating existing housing stock. The money should not be used to bail out the Government's failed policies on large-scale voluntary transfers.
The question of affordability will not go away. Despite the rather bland report on the subject produced by the Housing Corporation, and quietly placed in the Library before Christmas, the real debate on affordability, from which the Government are now trying to slide away, is only just beginning. We will ensure that the House returns to these issues time and again.

§ Mr. Nick Raynsford (Greenwich)
My hon. Friend the Member for Leeds, West (Mr. Battle) rightly emphasised the strange way in which the provisions that we are debating were introduced. Following a long gestation period, a consultation paper that had been anticipated since mid-summer finally emerged in November, with a date for submissions early in January this year. On the 839 basis of the Government's response to those submissions —they have not had much time to consider them—we are now presented with proposed amendments to a Bill that would otherwise have completed its Committee stage before tonight.
A number of questions have not been answered. It is possible that Ministers will answer them in Committee tomorrow, but it is only fair to the House to expect them to answer some tonight. First, what is the expected yield of the levy that is to be introduced in the coming financial year—1993–94—and in any full financial year thereafter?
Secondly, what circumstances will involve adjustment of any levies provided for under the motion, which refers to any sums required to be paid for the Secretary of State by way of adjustment of any levies", and what sums will be involved in any such adjustment?
Thirdly, how many transfers of stock are expected to be approved in any one year—in 1993–94 and in any financial year thereafter?
Fourthly, will the transfer quota be set by reference to the number of applications received by the Department, the number of dwellings involved, the capital sums expected to be received by local authorities for the transfers, or any expected adjustment to housing benefit clawback which the Government may expect to lose as a result of the transfer of properties from local authorities to housing associations or other landlords?
Finally, where does the long title of the Bill make provision to cover the levy?

§ Mr. Derek Fatchett (Leeds, Central)
My hon. Friend the Member for Leeds, West (Mr. Battle) dealt with the way in which the levy would be used. Let me remind the House of the comments made by John Parry, director of the Institute of Housing: he said that the first priority for any Government, in relation to housing policy, should be to maximise investment. I hope that the Minister will not only respond to the points made by my hon. Friends the Members for Leeds, West and for Greenwich (Mr. Raynsford), but deal with the way in which the levy from capital receipts and the voluntary transfer of assets impedes investment in housing stock and repairs.
Those of us who represent inner-city constituencies are well aware of the current housing burden, and the problems that it creates for so many of our constituents. Representing Leeds as I do, I see the waiting list increase daily; I see the problems that that causes my constituents, especially young families. I also see the problems created by our housing department, although it is well managed. The Minister was in Leeds on Friday: he understands those problems. Indeed, he visited the Halton Moor estate in my constituency. We have a well-managed housing department but it has real difficulty in funding repairs.
The important point about the money resolution, Madam Deputy Speaker, as you will notice, is that the levy will take away capital and revenue receipts that could otherwise be used for crucial tasks in my constituency. The Under-Secretary made a fleeting visit to my constituency last Friday, accompanied by a press officer and a press release, and used that visit as a photo-opportunity, but he does not understand the deep problems that face estates such as the Halton Moor estate in my constituency. It 840 would have been useful if, after having spoken to his friends in the Home Office, he had been able to announce that the local authority would be able to borrow money in order to pay for capital projects. Had he done so—

§ The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry)
That has nothing to do with me.

§ Mr. Fatchett
The Minister should not try to chair the proceedings.
Had he done so, he would have been able to appreciate the problems of the estate as a whole and recognise that the money that has been made available by the Home Office —money that has been well received—to deal with urban crime needs to be seen as part of an overall package which involves investment in housing. A Minister who was sensitive towards housing needs would not just fly in and out of an estate. He would take the opportunity—

§ Mr. David Harris (St. Ives)
What has that to do with the money resolution?

§ Mr. Fatchett
I will explain what it has to do with the money resolution. This levy will take money away from capital receipts and capital investment for estates such as the one that I have mentioned. I want that money to be provided for my constituency. I do not want it to be used to prop up a failed Government policy. If the hon. Gentleman had read the money resolution, or had looked at the proceedings in Standing Committee, or at the failed policies of his own Government, he would not have made such an inane intervention. He would know more about what is going on with this legislation.
Those hon. Members who represent inner city constituencies and understand housing problems will be reluctant to support the money resolution. They know what the Government intend to do: they intend to penalise tenants. That has been their policy throughout their 13 years in office. As my hon. Friend the Member for Greenwich said, it is a transfer from the poor to the very poor. The transfer is unjust. There should be a broader housing revenue perspective. My hon. Friend also said that the transfer will make it impossible to deliver the quality and quantity of housing stock that is needed in the inner cities.
The Minister for Housing and Planning shakes his head, but he is in no position to do that if he considers the Government's housing record. Instead of sending his junior Minister, I suggest that he should come to Leeds. I will take him to the Halton Moor estate where he can talk to the appropriate tenants. He would then be in a position to appreciate the housing problems. I shall even offer to the Minister for Housing and Planning—something that is totally in line with the money resolution and the transfer of assets—the opportunity to come to one of my constituency advice surgeries. He would then realise how large the burden of housing problems is in inner city constituencies. It is no use for the Minister for Housing and Planning, given his background, to pretend that these policies are sensitive to the needs of my constituents. They are not. For that reason, I hope that we shall oppose the money resolution. It will have damaging effects because of the way in which it reallocates resources.
My hon. Friend the Member for Greenwich has raised a number of important points. I know that the Under-Secretary of State is anxious to address the House 841 and that only a few minutes are left for debate. I hope that he will be able to address those points. I hope, too, shat he will be able to address the point that I put to him now, which is this: how will the money resolution affect a city such as Leeds? My view is that it will take money away from the city and that it will damage tenants, investment and repairs. The Minister must answer that point.

§ The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry)
The only thing on which Conservative Members and the hon. Member for Leeds, West (Mr. Battle) would agree is that to get to 1993 one must go through 1982. The hon. Member did not enlighten the House, although we shall study his comments with considerable care. I wonder whether he cleared his speech with the shadow Treasury team, given the impact that it might have on the public sector borrowing requirement.
The speech by the hon. Member for Leeds, Central (Mr. Fatchett) showed Opposition Members' lamentable lack of understanding of large-scale transfers. When I visited the hon. Gentleman's constituency last week, I announced a considerable commitment, running into millions of pounds, for the Halton Moor estate, for which the leader of Leeds council and residents and tenants thanked the Government. Every hon. Member should visit that estate because they would see millions of pounds being invested by the Government in refurbishing properties, with new central heating and new windows being installed, electrical rewiring and new social housing being built costing millions of pounds. What the hon. Member does not appreciate—

§ Mr. Fatchett
rose—

§ Mr. Baldry
I shall not give way because the hon. Gentleman left me little time to respond to the points that he made.
The hon. Gentleman does not understand that large-scale transfers will take place only if a local authority so decides and if tenants vote for it. It must be shown to be in the interests of the majority of the tenants—[Interruption.] That is what is known as democracy. The hon. Member for Leeds, Central seems to have difficulty—

§ Madam Deputy Speaker (Dame Janet Fookes)
Order. We cannot have a conversation between—

§ Mr. Fatchett
The Minister will not give way.

§ Madam Deputy Speaker
The hon. Gentleman knows that the Minister does not have to give way and the same applies to any other hon. Member. We cannot have seated interventions becoming part of the record.

§ Mr. Baldry
It is quite clear—

§ Mr. Fatchett
rose—

§ Mr. Baldry
No, I am not going to give way. The hon. Member for Leeds, Central has not the slightest understanding of what large-scale transfers are all about.

§ Mr. Fatchett
rose—

§ Mr. Baldry
I do not intend to give way.

§ Mr. Fatchett
rose—

§ Madam Deputy Speaker
Order. I have already made the position very clear. The hon. Member for Leeds, Central must resume his seat.

§ Mr. Baldry
I do not intend to give way. The hon. Gentleman clearly does not understand what large-scale transfers are all about.
Let me make it clear to the hon. Gentleman and other Opposition Members what large-scale transfers are about. It is about the 19—

§ Mr. Fatchett
Will the Minister give away?

§ Mr. Baldry
Nineteen large-scale transfers have been completed so far—

§ Mr. Fatchett
rose—

§ Madam Deputy Speaker
Order. I do not expect to have to mention the hon. Gentleman by name again.

§ Mr. Fatchett
The Minister has mentioned me a few times by name; it is quite disgraceful.

§ Mr. Baldry
It is not surprising that I have mentioned an hon. Member who has made a speech. If I had ignored the hon. Gentleman, I am sure that he would have rather regretted that.
Nineteen large-scale transfers have been completed so far. The most recent, to the newly formed Surrey Heath housing association, took place only last week. A further three are due to take place before the new arrangements that we will discuss tomorrow come into effect. In each of the transfers, the local authority concerned has disposed of all its housing to a newly established housing association because it has decided that it is in the best interests of its tenants and a majority have voted in support of the position taken by their local authority. These transfers have been very successful. The 19 authorities are freed from management obligations to concentrate on their enabling role. Up to 25 per cent. of the capital receipts from these transfers, which totalled more than £850 million, are freely usable and have given the authorities a head start in facilitating new housing investment in their areas. The transfers have brought more than £1.3 billion of private sector investment into social housing. Not only does this help to improve the state of the housing concerned, but it frees resources for allocation to other authorities where the need may be greater. The tenants of the 100,000 properties that are now in housing association ownership continue to benefit from enhanced repair and improvement packages, from more efficient management and from a new approach to running their housing. They are real benefits: tenants, local authorities and, in some cases, community charge payers all gain from the transfer.
As those who have considered the consultation paper on transfers which we issued last November will recognise, transfers generate significant Exchequer costs, mainly in the form of housing benefit payments which follow transfer and which fall to be met by the Exchequer rather than by local authorities. That is the primary reason for the current proposals.
We are committed to a continuing programme of transfers but we cannot afford to leave transfers wholly unregulated. The number of transfers allowed to proceed must be controlled in a programme which takes into account the cost to the Exchequer of individual transfers. 843 Authorities should be expected to contribute to the additional costs, which is why we intend to apply a levy on receipts.
The responses to the consultation paper showed that authorities which responded accepted the case for changing some of the arrangements which had developed in the past few years. I have absolutely no doubt that, in considering whether they wish to apply for a large scale voluntary transfer and in consulting their tenants on whether to proceed with such a transfer and whether tenants vote for one, local authorities will of course wish to consider the levy and its impact on a particular local authority and its tenants.
It has been generally recognised that there should be a change in some of the arrangements which have developed, and that is now a priority. It is what we set out to achieve in implementing the measures covered in the resolution. The Government are committed to a continuing programme of voluntary transfers. We want them to succeed and to bring about the benefits that I have mentioned. Our proposals enable that to happen while, at the same time, they should bring into better balance the financial effects which transfers have on the Exchequer and on transferring authorities. I commend the resolution to the House.