Local Authorities' Assets: Capital Receipts (Hansard, 21 January 1985)

§ Lord Dean of Beswick
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Earl of Avon
My Lords, I can assure the noble Lord that the Government are not "holding" any of the local authorities' money. The cash from the sale of assets remains in their hands. What my right honourable friend the Secretary of State for the Environment is proposing is that the use of such receipts for additional capital expenditure by the authorities should be spread over a longer period of time than hitherto, in order to help keep total local authority capital expenditure within the levels allowed for in the Government's public expenditure plans.

§ Lord Dean of Beswick
My Lords, can the Minister give a copper-bottomed undertaking that the substantial sums of money which belong to the local authorities will not be used by the Chancellor of the Exchequer in the future to effect a further cut in income tax, which appears to be the only policy he has at present? May I further ask what in global terms are the financial sums involved in the cut from 40 per cent. to 20 per cent. this year?

§ The Earl of Avon
My Lords, I am not sure about a copper-bottomed guarantee, but I can assure the noble Lord that local authorities will be able to use this money. They can put the money on deposit, repay debt, or offset borrowing, as they have done in the past few years.
So far as the statistics are concerned, luckily the sum of £5 billion is quite easy for me to work out. It will mean that 20 per cent. of that figure will be available, which is £1 billion, whereas had it remained at 40 per cent., as it has done this year, the local authorities could have spent £2 billion.

§ Lord Ross of Marnock
My Lords, surely the whole argument for the sale of council houses was that it would give local authorities control of funds which they could spend on housing as they liked. The Government are now changing that.

§ The Earl of Avon
My Lords, we are, indeed, reducing the rate from 40 per cent. this year to 20 per cent. next year.

Noble Lords
Why?

§ Lord Grimond
My Lords, do not the Government treat receipts from the sale of the capital of nationalised industries as income and set it against the PSBR? Are not local authorities entitled to do the same thing, or are they forced to treat the sale of their capital assets as capital?

§ The Earl of Avon
My Lords, my understanding is that they treat it as capital, but this is a case where the particular sum of money which the noble Lord opposite just mentioned is out of all proportion to what it was expected to be. I am delighted that sales have successfully reached £5 billion, but obviously this is a sum of money which it is impossible to allow to be floating about.

§ Baroness Birk
My Lords, I am glad that the Minister is delighted about that, but I do not believe that the 1 million or more people on the housing waiting list, or the 80,000 homeless families, will feel very delighted; nor will those people who need improvements to their homes. Is the Minister aware of the very strong feelings expressed by a multitude of organisations concerned with construction and economics over the fact that Neddy has calculated that it will cost disproportionately more to put right the longer we delay?
Is the Minister aware also of the very strong letter sent to The Times last week by the president of the Royal Institute of British Architects, which pointed out not only that these cuts are poor value for money, but that they also inhibit recovery by the private sector, which the Government are pledged to expand? The letter explained how tragic and wrong this was for the whole of our economy, for housing, and for the people of this country.

§ The Earl of Avon
My Lords, I do not go along with everything that has been said lately about this matter. Myself I believe that opportunities exist and that the housing starts which were begun this year have been an encouraging sign that the private sector is leading the house-building industry.

§ Lord Mackie of Benshie
My Lords, did I understand the Minister to say, in reply to a previous question, that some of the £5 billion would be put on deposit and that some would be set against borrowing? Can he tell us the proportions?

§ The Earl of Avon
My Lords, it is very much up to local authorities; it is up to them to do what they like; maybe they will repay debt.

§ Lord Ezra
My Lords, is the noble Earl aware of the findings of the recent NEDC report on investment in the infrastructure? Among other things, it drew attention to the very large amount of repair and maintenance now required in the public housing sector. In view of the fact that the report was published 12 after the Government reached the decision which has been the subject of this Question, are the Government now prepared to reconsider the disbursement of those funds?

§ The Earl of Avon
My Lords, the Government are looking at the Neddy report and will be responding. Myself I believe that the World Bank's 20-nation comparative study showed a strong correlation between low tax and rapid economic and employment growth. I believe that the research which has shown that tax cuts have a better effect on job creation and price inflation than the alternative to cuts—

Noble Lords
Speech!

§ The Earl of Avon
—is right.

§ Lord Stallard
My Lords, did I understand the noble Earl to say in reply to a question a few moments ago that he was delighted local authorities had been so successful in raising the amount of money they have, and that it was because of that success that the Government are taking the stance which they are taking? Is he saying in effect that we ought to be telling local authorities they have been too successful, and that if they continue with that line of success, they might lose even more than the £5 billion? That seems to be a very strange policy.

§ The Earl of Avon
My Lords, if they are more successful, then there would be more than £5 billion.