§ 4.30 p.m.
§ The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman)
My Lords, I beg to move that the Bill be now read a second time.
In opening the debate, perhaps I may say, first, how much I look forward to the maiden speeches of my noble friends Lord Dixon and Lord Lofthouse of Pontefract. Both noble Lords have extensive experience 1459 in another place, but pre-dating that experience they have distinguished records in local government. I am sure that they will have a great deal to say on tonight's measure that will be of value to the House.
The Government were elected, having made an unequivocal pledge to release resources long denied to local authorities to help them meet housing need by building new houses and rehabilitating old ones. With this Bill, the Government are laying the legislative framework that will allow them to honour that commitment.
I begin by making it quite clear why the Government have put the release of additional resources for housing right at the top of their agenda. Since 1979, over £22 billion has been raised through the sale of council housing. The sale of subsidised housing helped many people realise long cherished dreams of home ownership. But the proceeds of those sales did very little to help those in need who remained behind within the public or private rented sectors. Very little of the money raised went back into housing to provide new homes for the homeless or to take care of the homes of the tenants who were never in a position to buy their own homes.
Far from helping those people, the previous Administration exacerbated their plight by imposing year-on-year cuts on housing capital programmes. Exchequer support for capital spending, which stood at £4.3 billion as recently as 1992–93, had fallen to planned spending of just £1.7 billion this year. The impact of cuts on this scale can be seen in damp homes and in leaking roofs, rotting windows and doors, inadequate kitchens and bathrooms, and in patch and mend repairs.
The impact can also be seen in the substantial fall in the Housing Corporation's approved development programme, the main means by which new social housing has been provided in recent years. The approved development programme stood at well over £2 billion in 1992–93. By the end of the century, however, planned spending had been reduced to just £560 million.
It is not within the power of this Government to reverse years of cuts and neglect overnight. But we are determined to take immediate action to begin to tackle the problems that we have inherited.
The Local Government Finance (Supplementary Credit Approvals) Bill will provide the legislative foundation for a capital receipts initiative that can begin to reverse the decline. In itself, the Bill is a straightforward, short, three clause enabling measure. Clause 1 concerns Section 55(3) of the Local Government and Housing Act 1989. This clause specifically states that set aside receipts cannot be taken into account when determining the amount of a credit approval issued to a local authority. Clause 1 of this Bill will remove that prohibition in respect of the issue of supplementary credit approvals. Its simple objective is to allow us to issue supplementary credit approvals in a way that takes account of set aside receipts, as well as of assessed housing need.
1460 Clause 2 replaces a current duty on Ministers with a power. In this instance, it is power to specify the period during which an authority must set aside sums from revenue to meet certain types of capital expenditure. Clause 3 simply provides the short title for the Bill and limits its effects to England and Wales.
The Government are determined to tackle some of the major problems of social decay and deprivation; to govern for the many and not for the few. This is the agenda that underpins our initiatives in education and in health. As our manifesto commitment made clear, we are equally determined to tackle the problems we have inherited in housing.
However, our manifesto recognised the importance of taking action within a sound, prudently managed economy. That does not blunt our ambition; it focuses it. Increasing local authority spending, however it is done, increases public expenditure. With that in mind, we are determined to ensure that the additional public expenditure we are releasing is targeted as effectively as possible to secure the greatest benefit possible.
Noble Lords will know that within the tight public expenditure controls adopted by the Government, we have nevertheless provided for over £800 million of additional resources to be distributed in England and Wales under the capital receipts initiative. An additional £174 million will be released to local authorities in England in 1997–98, followed by a further £610 million in 1998–99. In Wales, almost £10 million will be released this year, with a further £33 million released in 1998–99. This is an excellent start, and it underlines the Government's commitment to tackling the very real housing problems which this nation faces.
I should perhaps take this opportunity to assure your Lordships that the resources provided by the Chancellor will support local authority capital spending and any revenue costs which flow from that. This was, I know, an issue of particular interest to the noble Lord, Lord Bowness. I would like to make it quite clear today that we do not envisage this initiative exerting any upward pressure on council taxes or local authority rent levels.
I have stressed the importance the Government attach to the tight control of public expenditure. That places a premium on securing the very best value for the additional public expenditure we have provided. Simply releasing local authorities' set-aside capital receipts where they lie will not achieve that end.
As I am sure noble Lords participating in the debate will be aware, since 1990, local authorities with outstanding debt have been required to set aside 75 per cent. of the receipt from the sale of housing assets and 50 per cent. of the receipt from sales of land and other assets. But the receipts generated over this period have not always been generated in the areas of highest need.
There is a further complication. Over time, some authorities have chosen to repay outstanding debt with the capital receipts they were required to set aside. Such authorities now retain little, if any, of the set-aside generated over the years. Birmingham, for example, has 1461 put aside capital receipts of over £100 million since 1990, but it has used this to repay debt and now has no set-aside receipts.
But the capital finance rules have not obliged authorities to repay debt in this way. Indeed, they provide authorities with the scope to adopt very different debt management and receipts strategies. It has been left to the individual authority to take a view on where the balance of advantage lies for them in the light of their specific circumstances. As a result, there is a great deal of variation in the way local authorities have applied their set-aside receipts.
These considerations led us to conclude that simply releasing the receipts where they lie would not meet our objective of directing resources where they were needed most. Clearly, authorities which set aside significant receipts over time will reasonably expect to have those receipts recognised when resources are released. But that cannot be and should not be the sole criterion.
What is needed is a mechanism that allows us to distribute the additional public expenditure being provided, striking a balance between the receipts set aside by individual local authorities and the relative housing need of those authorities. We have concluded that the best way to do this is to distribute the additional resources in the form of supplementary credit approvals. The first clause of this Bill will allow that.
Perhaps I may now say a little about how we intend to apply the additional flexibility provided by Clause 1. Our proposals for the implementation of a capital receipts initiative in England were set out in a consultation paper, which was issued to all English local authorities, to the Local Government Association, and to other interested parties on 19th June. A parallel consultation paper for Wales in broadly the same terms, but taking into account different local government finance rules and local authority government reorganisation, was issued on 2nd July.
In those consultation papers we set out proposals for distributing one-third of the additional supplementary credit approvals in accordance with the proportion of eligible receipts set aside by each local authority since April 1990, when the present capital finance regime came into operation. That recognises the expectations of authorities which have generated significant receipts over a period of time.
We propose to distribute the balance of the supplementary credit approvals in accordance with assessed housing need. That will ensure that those authorities facing the most pressing problems are given additional resources to begin to tackle them. That seems to us to be fair and equitable. I should make it quite clear, however, that this is a proposition on which we are particularly keen to hear the views of local authorities. We look forward to receiving their comments, and those of all other interested parties, in the course of the consultation exercise.
However, we have made it very clear that our priority is to help local authorities most effectively tackle housing and housing-related regeneration priorities. We recognise that that might be achieved through a range of methods which will differ from area to area and 1462 which might include: renovations and improvements to local authority housing; private sector renovation; the provision of new social housing in partnership with registered social landlords; improving the energy efficiency of local authority and private sector housing and reducing CO2 emissions—an issue that was discussed earlier; and tackling the problems of the neighbourhood, for example, by encouraging or promoting mixed tenure development.
Programmes related solely to physical improvements and development, however, will not always result in long-term sustainable change; indeed, I believe we have all experienced and seen evidence of that. Very often, associated non-housing projects will also be necessary. These may include works which help reduce crime and vandalism on estates and which improve residents' ability to acquire jobs. We have therefore proposed that a proportion of the resources being provided should be available to support housing-related regeneration projects where they will directly benefit the inhabitants of the housing scheme.
When local authorities draw up schemes, we are also eager that they ensure, whenever possible, that those schemes contribute to the Government's welfare to work initiative and help to combat social exclusion.
We do not wish to deflect local authorities from meeting priority local needs, but we do want them to put their strategies into the wider context. That means providing opportunities for young unemployed people, perhaps through environmental task force placements, and helping them acquire skills and qualifications. As our policies to support our welfare to work agenda develop, we shall look to local authorities to take every opportunity to play an integral role.
We wish to generate an atmosphere of trust and partnership between central and local government—a theme to which some of us will return during the debate later this evening. In the first instance, it will be for individual authorities, within the framework that I have outlined, to determine local priorities. We do not intend to be prescriptive, each scheme should be tailored, rightly, to meet local circumstances. But we are determined to ensure that authorities apply resources wisely and well.
We expect authorities to be able to demonstrate that the works they have undertaken represent good value for money. They will need to show government and local people how the wider local and national policy objectives, to which they are committed, have been met.
We want to see resources directed where they are meeting need most effectively. We have therefore emphasised that we will be taking account of how authorities have used resources when resources are next distributed in future years. Local and national taxpayers have a right to expect no less.
Perhaps I may now turn to Clause 2 of the Bill. The clause amends Section 54(4) of the Local Government and Housing Act 1979, concerned with the issue of a supplementary credit approval in respect of capitalised revenue expenditure. The clause replaces the obligation 1463 on the Secretary of State to impose an amortisation period not exceeding seven years with a power to specify an amortisation period.
Opposition spokesmen in another place sought to impute all sorts of nefarious motives to the Government in introducing this clause. I hope to reassure your Lordships that, although somewhat technical in nature, it has, I believe, a simple, credible and very reasonable purpose.
This is a measure to deal with exceptional circumstances, where an authority is facing severe revenue difficulties but has an urgent need to undertake significant revenue expenditure. It is right that the Secretary of State should have the power to help such an authority by allowing the revenue cost to be spread over several years through borrowing.
However, the present rules allow the cost to be spread over no more than seven years. In each of those years, one seventh of the sum borrowed has to be found from revenue and set aside to repay the debt. That can be both harsh and mechanistic for an authority with the greatest need for help. Harsh—because it continues to impose a significant revenue burden on an authority that is, by definition, already facing severe difficulties; and mechanistic—because only limited account can be taken of the authority's individual circumstances.
We believe it is right that the Secretary of State should be able to use his discretion to decide the length of the repayment period and so tailor the arrangement to suit the circumstances of the authority concerned and its particular problems. Clause 2 achieves that end.
Perhaps I may turn briefly to Clause 3 which reflects an amendment made in another place to bring about commencement of the legislation immediately on Royal Assent. I am aware that such swiftness departs from convention; but, in this instance, we believe that it is fully merited. If the additional resources provided by the Government are to be spent this year and used effectively to tackle urgent needs, we must give local authorities as much time as we can to prepare and implement their plans. The Government's capital receipts initiative, underpinned by this Bill, will help local councils utilise the skills of our people to build and refurbish homes to meet grave housing need. The resources will begin to redress years of chronic under-investment in housing.
The Government have found the additional public expenditure needed to support the initiative. With this Bill, we have brought forward the legislation which will ensure that expenditure can be distributed fairly.
§ Moved, That the Bill be now read a second time.—(Baroness Hayman.)
§ 4.48 p.m.
My Lords, first, I believe I should declare an interest as a member of a local authority. Like the Minister, I should like to say how much we look forward to the maiden speeches of the noble Lords, Lord Dixon and Lord Lofthouse of Pontefract. With their long and distinguished careers in another place, I believe that they may be actually more at ease than I am 1464 at this particular moment. As this is the first time that I have faced the noble Baroness across the Dispatch Box, other than briefly at Question Time, perhaps I may belatedly congratulate her on her appointment. I promise this afternoon to try to know my 1990s from my 1960s.
I thank the Minister for her explanation of the Bill, which is far from simple. However, despite her explanations, I have to tell the noble Baroness that the Bill is still not, to my mind, as clear in its objectives as it should be. Indeed, a number of the questions raised as it went through its passage in another place remain unanswered. Further, I submit that it travels under false colours. If we did not know the strength of feeling of the right honourable Secretary of State for the Environment, Transport and the Regions, one might describe it as a flag of convenience.
I shall refer to the Labour Party manifesto. I believe that noble Lords opposite will be prepared to hear it quoted against them if they are prepared to pray it in aid on other occasions. The manifesto referred to the phased release of capital receipts from council house sales. However, I submit that the Bill does not release a single penny from the accumulated receipts; rather it will give local government the chance to borrow more and increase their indebtedness.
That manifesto phrase is worthy of being referred to the trading standards department as I doubt whether there is anyone in local government who did not think that not only accumulated receipts but also the proceeds of future sales were to be included. However, it seems from the debate in the other place that it is only the accumulated receipts that are affected. The requirement of setting aside 75 per cent. of housing receipts and 50 per cent. of non-housing receipts still stands unless an authority is not in debt. Therefore, despite the much heralded new approach nothing is to change as regards future receipts, and none—I repeat none—of the accumulated receipts will be released.
What we have instead is a system which will encourage fresh and additional borrowing. That additional borrowing in the first year is, I understand, to be £200 million, rising to £700 million in the following year for the whole of the United Kingdom. That small amount is no doubt good news for public borrowing but it will not go far to meet the high aspirations of the Government as outlined by Ministers in another place when they spoke of building new houses, getting people back to work and providing extra leverage to address the needs of individuals and communities. How is this extra power of borrowing to be determined as between authorities? It appears that it is to be determined by the Government according to an as yet undecided method of assessment of need and the amount of set aside receipts.
It is clear—as the Minister has indicated this afternoon—that in many cases the greatest need is to be found where there are the least receipts. Are the authorities which have the greatest receipts to be prejudiced in the granting of supplementary approvals? The Bill does not restrict itself to housing receipts although again in debates in the other place it was said that the powers would be used only in respect of housing receipts. If that is so, why does the Bill not restrict itself 1465 to housing receipts and why did the Government resist an amendment which would have made that clear? Could it be that the intention is to authorise still more borrowing by local authorities at a later date? It has been admitted that the £200 million represents new money but in view of the Government's commitment to the current spending plans it would be fair to local government and indeed to the House to tell us exactly where other savings will be made to finance this measure. How will the necessary revenue support to local government be found to support that borrowing?
I turn now to another aspect of the matter which I believe will be, or should be, of considerable concern to local government. There will already be disappointment that the receipts are not to be released, that future receipts are not to be released and that the amount is so small. The manifesto referred to local decision making being,less constrained by central government and also more accountable to local people".Indeed this afternoon the Minister spoke about not being prescriptive. Yet the money to be allocated to the United Kingdom will be distributed on the sort of conditions described by the Minister in the other place in the following terms:We propose not simply to hand over the resources and leave people to get on with it, but to distribute supplementary credit approvals on the basis of one third according to historic receipts and the remaining two thirds in accordance with assessed needs … We shall expect local authorities to monitor their expenditure carefully, so that they can confirm that the money is being well spent—they will receive help from Government officers, including the Audit Commission. If they cannot do so, their future allocations will be reduced".—[Official Report, Commons, 17/6/97; col. 126.]Of course I welcome a commitment to value for money, but we on this side of the House have always done so. These words seem to me to say to local government that if the Government do not approve of the locally determined policy the tap will be turned off.
As a former member of the Audit Commission, the reference to that commission gives me cause for concern. The powers over local authorities in so far as they exist have been exercised by individual auditors independent of government and of the Audit Commission. However, this reference, and indeed similar references in the Government's paper on compulsory competitive tendering, brings the prospect of an Audit Commission view on policies—rather than on financial prudence, efficiency, effectiveness, or economy—closer. That is something which I believe that the Audit Commission, local government and ultimately the Government may come to regret.
I hope therefore that when the Minister replies she will be able to give us answers to some of the following questions. Why is borrowing to take the place of the release of receipts? Why does the Bill not apply to future receipts? Is it true that as it does not, local authorities will have more accumulated receipts after this legislation than before? What criteria will be used to judge need? Will the allocation not be to the detriment of those who have accumulated substantial receipts? How will the additional cost be paid for? I accept what the Minister has said; namely, that it will not be paid for through an upward pressure on council 1466 tax. However, everything has to be paid for somewhere, and presumably this assurance means that the overall level of government grant fully to fund this extra borrowing will have to be increased. How does the Minister expect her officials and/or the Audit Commission to approve or disapprove individual local authority schemes?
I heard the Minister's concerns as regards harsh and mechanistic procedures, but how does she justify the extension of local authority borrowing powers for revenue spending when I believe, from my experience in local government, that to be as debt free as possible is an aim that most responsible local government have been working towards for a long time? I am well aware of and can understand the ambitions of local authorities to benefit from the good management of their resources and the consequential use of the proceeds. However, I also understand the difficulty in permitting total freedom so to do. I have never believed, as some seem to do, that the money from the sale of council housing and from other assets has been standing idle and has not been put to good use. That income has been used in aid of the council tax and debt has been repaid. As the Minister has indicated, it has been used in other ways all to the benefit of the local and national economy.
We believe that it would be fairer and more sensible to use capital receipts for debt repayment. When we were in government we sought to encourage new providers of social housing and encourage the private sector to invest in council house estates through large-scale voluntary transfer. Some £4 billion was invested. I submit that that amount would not have been found by local or national government. I again thank the Minister for her explanation of this Bill, but it masquerades as an answer to these problems. However, increasing local authority borrowing and powers to borrow makes it a poor Bill, and therefore it does not have the support of this side of the House.
§ 4.58 p.m.
§ Lord Dixon
My Lords, I start on a personal note and thank all my colleagues for the get well messages I received when I was in hospital recently. They were greatly appreciated.
I chose to make my maiden speech on this small three-clause but important Bill because I have a great interest in housing as a former chairman of a local authority housing committee. House building is probably one of the most labour intensive industries in this country. I know that from experience because in the late 1960s I built my own home. I worked in the shipyards as a carpenter during the day and worked every night, every holiday and every weekend for 16 months to build my house. Therefore I know how much work goes into building a house.
We have thousands of building workers out of work. We have thousands of people who require houses and who need to have their houses renovated. We have councils throughout the country sitting on billions of pounds. It does not take a Philadelphia lawyer or a genius to work out that if councils were allowed to spend some of that money, building trade workers 1467 would be taken off the unemployment register and people who desperately need houses would be able to obtain them and those who need to have their houses modernised would be able to do so. This is not new or old Labour policy; it is common sense Labour policy. Since 1979 more than £22 billion has been raised from the sale of council houses and very little has been reinvested in housing. The Bill will ensure that some of the money raised will go back into housing so that tenants and homeless people will know that they will benefit from the opportunities of decent homes.
The measure is to be phased to match the capacity of the building industry and to meet the requirements of sound economic management, as the Minister said. I can well understand that, because I recall the early 1970s through the Heath administration. People were allowed grants for the installation of bathrooms and indoor toilets and to put hot and cold water in their houses. However, a finishing date was placed on the claiming of the grants. What happened, my Lords? The industry became overheated. Housing material prices spiralled out of control. Anyone who could get their hands on a ladder or barrow became a builder overnight, and some shoddy work was done.
I wish to concentrate some of my remarks on the area where I was born and bred and which I have served as a councillor and a Member of Parliament for the past 35 years. I refer to South Tyneside metropolitan district which comprises the towns of South Shields, Jarrow and the Boldons.
§ Lord Evans of Parkside
§ Lord Dixon
My noble friend Lord Evans of Parkside gives me support by shouting, "Hear, hear!" when I refer to South Tyneside. He and I were brought up in Jarrow. We served apprenticeships in Tyne shipyards. He became a fitter; I became a ship's carpenter. We served our National Service in the Royal Engineers. He became chairman of the Confederation of Shop Stewards Committee; I became secretary. We were both elected to the local authority. He became leader of Hebburn Council; I became leader of Jarrow Council. On local government reorganisation, we were both elected to South Tyneside Council. He became chairman of the Planning Committee; I became chairman of the Housing Committee. We both went to the House of Commons; and we both entered this honourable House together. When we were getting our beans on toast in Hawthorn Leslies canteen, little did we know that our careers would finish up here.
Unemployment in South Tyneside in May of this year was 13.5 per cent., as opposed to the national average of 5.7 per cent. That represents the highest unemployment rate in Great Britain. Among those unemployed are joiners, bricklayers, plasterers, and electricians—all people who build houses. In 1996, South Tyneside Council had a housing application list of 8,725. That means that 8,725 households were waiting for houses, not 8,725 individuals. A further 4,066 tenants were on its transfer list.
1468 Since 1990 the council has set aside housing receipts on the sale of council houses totalling £23,709,000, and in addition in April 1990 had a further £7,557,000 in set-aside assets. The Minister mentioned only those receipts from 1990. Will the Bill take into consideration the receipts under the 1980 Act when giving supplementary credit approvals? Perhaps the Minister will explain when she winds up.
South Tyneside Council has been starved of resources for 18 years. In 1978–79, when I was chairman of the Housing Committee, the HIP allocation at 1997 prices was £41,362,000. We were building and modernising hundreds of houses. The HIP allocation for this year is £3,899,000, with an additional SRB allocation of £764,000, making a total of £4.5 million, or one-ninth of what the council received from the previous Labour Government for maintaining, building and modernising houses.
Perhaps I may give a recent illustration of how the cut-back in housing finance over the past 18 years has affected the council house stock. A fortnight ago I was invited to the 21st anniversary party at Martin Hall pensioners sheltered accommodation in Jarrow. I was invited because 21 years ago as chairman of the South Tyneside Housing Committee I opened the complex. Although the accommodation was clean and weatherproof, the building was virtually the same as it had been when I opened it 21 years ago. No modern adaptations or alterations had been carried out; and the lifts promised many years ago were still awaited. That was not because the council did not wish to carry out the work but because it did not have the resources to do so.
The building and refurbishment programme which South Tyneside is putting together will provide much needed jobs and training in an area which has the highest unemployment in Great Britain. It will allow sensible authorities like South Tyneside to get on with the job they were elected to do. The Bill will assist in the Government's two main objectives: jobs and social justice. I welcome the Bill, and congratulate the Government on the speed with which they have brought it about.
Finally, perhaps I may digress slightly. About seven years ago, while serving in another place I was asked to join the House of Commons tug-of-war team for the annual contest between the Commons and the Lords. Along with other Members of various parties, I willingly agreed. The only thing we had in common was that we were all about the 17-stone mark. I immediately started training in Strangers' Bar on Federation Special. A captain from the Royal Marines showed us techniques of how to use the rope in a tug-of-war. I looked forward to the night when we were to have the contest between the Commons and the Lords, thinking that it was a one-horse race. When I arrived at College Green I had my first glimpse of the House of Lords team. They were massive, like house ends. I said to one of my colleagues, Jimmy Hood, "The Barbarians mustn't have a match on this week". Needless to say, we were well and truly beaten; and it took a week before my arms finally got 1469 back into their sockets. Since that night I have always had the greatest respect for the strength of this honourable House.
§ 5.8 p.m.
§ Lord Dean of Beswick
My Lords, the very pleasant duty falls to me of congratulating my noble friend and colleague Lord Dixon on his down to earth speech, full of facts. It seemed strange when he mentioned former chairmen of large housing authorities. Including myself, there are four or five of us—so we have not done too badly. The next speaker, my noble friend Lord Lofthouse of Pontefract, a former Deputy Speaker, is another chairman of housing in Wakefield, Yorkshire. I first met him some years ago. The only difference between us is an age gap. I was four or five years in front of my noble friends. Nevertheless, I am sure that we shall all want to listen to my noble friend Lord Dixon as often as he wishes to speak because he will have some useful contributions to make. I have no doubt that my noble friend and colleague Lord Lofthouse of Pontefract will do the same.
I was somewhat puzzled by the speech of the Opposition spokesman, the noble Lord, Lord Bowness. For some years I had the privilege of leading on housing in your Lordships' House for my party in Opposition. I became completely fed up with asking Ministers in the former government when we would have a housing policy which would produce houses to let. I never received an answer. Here we have a shadow Minister, in almost his maiden speech, castigating the new Government who are putting forward a policy which has been requested for years as though it is not the thing to do.
I wish to wind the clock back a little to indicate what was going on under the previous government's jurisdiction. A number of independent reports over a period of years were commissioned and produced by politically independent people. The first was Faith in the City, produced under the auspices of the noble Lord, Lord Runcie. It drew the conclusion that the main problem in the country was a lack of low-rent housing so that people could get some sort of home to live in. Almost concurrently, another committee was studying the same problem under the aegis of His Royal Highness the Duke of Edinburgh. That committee was also non-political, and it put forward the same views; namely, that somebody had to produce some housing. Who was it to be? It would certainly not be the private sector. But the government at the time, deliberately and as an act of policy, stopped local government building houses. I became sick and tired of asking why. I was informed by a succession of Ministers, "Oh, we've got something in its place. It will now be the Housing Corporation and the voluntary sector". Their eventual target was supposed to be some 60,000 houses a year. The two reports I mentioned, and organisations such as Shelter, were asking for 100,000 houses a year up to the turn of the century just in order to stand still. The then government did nothing at all. Had they continued with the building policies that they inherited in 1979 and not 1470 sabotaged matters as they did, there would have been between ½ million and a million more houses to rent in the public sector.
What was the then government's claim to success? It was the sale of council houses. That policy has run its course. Of course it was a success. They almost literally gave some houses away. For recipients the discounts were so large that they were treated marvellously. But does anyone really believe that it is possible to take over 1 million houses out of the housing pool in the rented sector and not exacerbate the problem of homelessness? That is absolute rubbish. Those houses are no longer there for rent. People may say that they would not have been there anyway, that people would still have been living in them. But a percentage of those would have been available. The building programme could have been continued and could have provided the housing that was being asked for. We should have been in a much healthier position than is the case today.
I wonder whether the Opposition are really serious about their proposals for housing. If they have a policy, what is it? It is obvious that they did not have a policy over the past few years and have not produced one. Yet they carp at the policy before us today.
The noble Lord, Lord Dixon, was quite right. There is a building force available—tens of thousands of builders are still on the dole—and money is available. I shall not go into detail, but I believe that in this Bill the Government are starting to unlock those funds at a rate at which they can be absorbed and used objectively. As the former chairman of a housing committee, I know that the noble Lord was right when he spoke about over-heating and cowboys in the industry. That is the last thing we want.
I hope that this measure is only a very small start in dealing with a very big problem. If we do not treat it in a massive way as it starts to accelerate, we shall be in trouble by the millennium. We shall hardly have made any indent on the problem as it stands today. The Government have started out correctly in introducing this Bill in order to move matters forward. I compliment the Minister on her detailed explanation of the Bill. It is rather sad to hear a carping criticism from a noble Lord representing the Opposition—who have done nothing since 1979 except sabotage everybody else's ideas and efforts to deal with a problem that was looming larger, and is larger than ever today. This Government have inherited the problem and have begun to tackle it. They should be commended, not criticised, for this measure.
§ 5.14 p.m.
§ Lord Lofthouse of Pontefract
My Lords, it is a pleasure to have the opportunity of making my maiden speech in this House after many years in the other place and in local government. When I first came to this place I wondered how I should settle down. It tended to worry me a little—until, about a fortnight before I had the privilege of being sworn in, I visited the other place and sat in the Gallery. I received something of a shock. Looking down into the Chamber I did not know anybody. When I arrived in this place it was a great 1471 comfort to see many familiar, kind and welcoming faces. It took me back many years to my time in the other place.
I should like, first, to say a big thank you to both the Clerk of the Parliaments and Black Rod, and to all their staff, for the kindness and guidance that they have shown to me and to other noble Lords since we entered this place, and would specially thank the noble Lords, Lord Mason and Lord Gregson, who supported me in my introduction to this Chamber.
I shall plead for a little tolerance since it is five and a half years since I was able to stand in the Houses of Parliament and make a speech. So there is, I am sure, a small amount of ringrust there. If it shows through too keenly, I crave your Lordships' tolerance.
I welcome the Bill. In doing so, I recognise that Clause 1 will allow capital receipts to be taken into account in determining future supplementary credit approvals. As your Lordships will be aware, the local government Act of 1989 effectively prevented government from re-issuing the set-aside capital receipts. The new clause makes it legally possible for the Government now to release those set-aside receipts.
It is interesting to note that the legislation does not specify specifically housing receipts; conversely, it does not preclude general fund receipts. The noble Lord, Lord Bowness, on the Opposition Benches referred to that. No doubt noble Lords will be interested to hear what my noble friend the Minister has to say about whether in future years the receipts can be extended and used for general fund purposes such as leisure, education and social services.
Clause 2, the requirement on Ministers to stipulate the period of time over which loans are to be repaid (SCA), effectively gives local authorities permission to take out loans up to the amount of the SCA. Previously, Ministers stipulated that such loans were to be repaid over, say, 10, 20 or 30 years, depending on the type of expenditure funded from such loans. I welcome the fact that that extra constraint has now been removed from the proposed legislation. It therefore provides more freedom for local government. That helps local councils to become more accountable for their actions and also allows them to maximise the financial consequences of their borrowing. This is another step in the right direction. It will allow local government to become more self-sufficient.
The noble Lord on the Opposition Benches kindly referred to myself and my noble friend Lord Dixon, and suggested that we probably have more knowledge on this subject through our work in the other place. I thought that something of a nicety and it was much appreciated. But, listening to the noble Lord's speech, he tended to prove that his knowledge was limited on the Bill that is before us.
The release of £200 million in the current year and a further £700 million next year, as announced in the Chancellor's Budget on 2nd July, demonstrates that the Government are sincere in keeping their manifesto promises. The available funding is part of the Government's intention to release the capital receipts 1472 that currently sit in local authority bank accounts. I hope that your Lordships will agree that it is sensible to make such available resources work for the community by ensuring more investment in the housing stock within such communities.
I believe that it is equally sensible that the Government have not restricted local authorities unduly into prescribing where such funds are to be used. It will be left to local authorities' discretion to use resources to meet the highest priority need.
The Government's proposal to use the supplementary credit approval arrangements—that is, to give borrowing permission to local authorities rather than merely allowing authorities to spend the actual cash—is sensible. It overcomes the problem where some authorities have high need and only relatively low cash available. The recognition of housing need in the weighting of distribution is also to be welcomed. The proposed proportion of two-thirds housing need to one-third actual receipts appears very reasonable.
The fact that the Government have undertaken to underwrite the revenue consequences on either the housing revenue account or the general fund, depending on where individual authorities actually spend the resources, will ensure that effectively such additional spending is "free spend". If actual receipts had been used, there would be no long-term call on revenue accounts to repay the loan charges. Ensuring that the revenue consequences are reimbursed from central government should give a neutral impact on the finances of local councils. There may be a problem if loans are over, say, 20 years, with ensuring that such revenue support continues for 20 years. One of the advantages of capital grants/receipts is that there are no ongoing revenue consequences.
I welcome the Government's commitment to release all set-aside receipts during the life of the Government. By that commitment, the Government have avoided the danger of over-inflating the economy by allowing the release of funds accumulated during the previous government's administration to be carried out on a manageable basis. That should ensure that authorities have the ability to maintain value for money. If too much had been released too soon, the construction industry would have been in a most generous supply and demand situation and the consequence would be that tender prices would inevitably increase due to the over-supply of resources. By phasing in such a release in a manageable and realistic manner, authorities should still be able to ensure that the construction industry will compete for the available work. Hopefully, the additional work will aid unemployment and the return to work initiatives. Indeed, the consultation proposal outlines such initiatives as being an integral central policy plank of the initiative.
I welcome the fact that in order to sustain communities and ensure pride for the local population, the Government are also allowing up to 15 per cent. of resources to be used for regeneration-linked housing purposes. Again, such an initiative will aid the return to work scenario and could also be used to aid security and crime prevention.
1473 I believe that if there is any aspect which could be enhanced in the current proposals, it is that an indication—say a minimum of 90 per cent.—of future years' allocations should be notified to local authorities as soon as possible, ideally at least two years in advance.
The biggest single problem facing local authorities under the current capital control regime is that they only receive the following year's allocation each December. Most capital schemes are by nature large-scale and expensive and the contract period can often exceed 18 to 24 months. Such large schemes require a lead-in time of about 40 to 45 weeks. The most effective way of managing such large-scale projects is to have security and knowledge of the funding arrangements for the period when actual work and therefore expenditure is incurred. The wealth is very welcome to local authorities with the vast run-down and shortage of housing throughout the country, not least in my own area which is a metropolitan district council, and with the disrepair and lack of new build. To people who criticise and say that the Bill does not go far enough, I say that it is a start, a responsible start, and I wish it a speedy passage through the House and into legislation.
§ 5.25 p.m.
§ Baroness Hamwee
My Lords, I have the happy task of following the noble Lord, Lord Lofthouse of Pontefract, and thanking him on behalf of the whole House. He has had a distinguished career and that distinction will, I know, be to the benefit of this House on many occasions. I also congratulate him on having given to Dod a photograph which is clearly up-to-date and recognisable.
I welcome too the fact that we have in this House another northerner with so much local government experience. However, I say that through slightly gritted teeth as a Lancastrian. We are enjoined not to thank all maiden speakers, but I cannot forbear at least saying that if the speech of the noble Lord, Lord Dixon, was typical, I look forward to more to come. Like the noble Lord, Lord Bowness, I have to declare an interest as a serving councillor.
As has been said, housing was the Conservatives' biggest privatization: 1.6 million homes and the figure I have is £28 billion though a slightly different figure has already been mentioned this afternoon. The privatisation, though not of itself objectionable, had no parallel programme for the replacement of stock and that was objectionable. Therefore, I and these Benches welcome the Bill. But it is not a Bill about the release of capital receipts; it is a Bill about the mechanism for some spending or, as I would prefer to say, investment.
I am bound to make some of the same points as the noble Lord, Lord Bowness, but I hope that the Minister will hear a different tone in what I have to say. I have often wondered whether restrictions on local authorities' use of capital receipts were because central government were concerned about the effect on the public sector borrowing requirement and on council tax levels, both of which to a great extent are artificial matters. Alternatively, was it because of a concern about a power base at local 1474 government level, capital assets being power? Therefore, the previous government were quite happy to see that power base reduced and not replaced.
The Chartered Institute of Housing analogy is that if an individual sells a house, he will only pay off his mortgage if he does not need a new house. Similarly, local authorities should be in a position where they can put housing need before debt repayment. In any event, I support investment in housing. As an aside, I hope soon to see that local authorities will be free to borrow from private capital markets to support that programme. I make that comment in the context of being one of those who is not at all concerned about who provides the housing. I do not subscribe to the dogma that local authority housing is good and all other is bad. But I should like to see local authorities being able to play a full part.
I said that the Bill is not about the release of capital receipts, nor, unhappily, is it about local decisions. It encapsulates a centralised approach. As the Minister said, local authorities and other interested parties have been consulted. I believe that the response date for that consultation is the end of this month. I therefore wish to ask the Minister how the responses will feed into the final stages of the Bill. She may say that it is an enabling Bill and that therefore it is not necessary for us to know too much detail about the responses. But we shall have the opportunity to conclude the Bill after those responses have been made. I should be interested to know how those of us outside government can ascertain whether the responses include matters which ought usefully to he reflected in the legislation.
I understand that the balancing act which the Government have carried out is necessary because of the availability of funds and assessment of need not falling neatly into the same geographical areas. But local housing authorities will not be assessing need. The consultation document refers to a one-third to two-thirds approach, one-third reflecting the proportion of set aside receipts and two-thirds being need. I have heard or read somewhere that that is to become 50/50. I do not know whether that was a matter of rumour—the Minister shakes her head. The consultation papers say that the one-third to two-thirds approach is for the current financial year. But there is not much left of the current financial year or will not be by the time the approvals become available.
The general needs index, which I understand will be the basis for assessing need, is not regarded as a perfect measure. For instance—indeed, perhaps most particularly—it does not include homelessness figures. To put it another way, it omits one very important indicator of need. I believe that the Government are looking at that matter but until the index is changed, many local housing authorities, including outer London boroughs, of which my authority is one, will lose out.
I understand that future allocation will be made on the basis of reports from the government officers. Over the years there have been many criticisms about government officers being portrayed as representing some kind of devolution of power. Of course, that is not so. They are a geographical placement of the department's civil servants. I am concerned about matters of transparency and accountability—judging their judgment of the need.
1475 As has been said, the spending which will be allowed is not just to go toward housing. I welcome that and the recognition that successful housing is about more than roofs. I do not underestimate the importance of the contribution to the whole community, though I wonder what the limitation of spending on regeneration to "the housing scheme"—I emphasise "the" housing scheme—will mean. I look forward to the widest interpretation of "housing purposes"-for instance, energy efficiency.
That is all perhaps a little over-idealistic when one considers the need for repairs and new homes. The Minister said, and I understand, that one cannot reverse overnight the effects of the previous government's programme or lack of programme. The repairs backlog in England and Wales on remaining council stock is of the order of £9 billion. Many housing authorities have already acknowledged that they have no hope of undertaking new build, because unless their existing stock is repaired, they will lose that stock as well.
As to numbers, the then Department of the Environment told us a couple of years ago that the number of households in England would grow by 4.4 million in the years between 1991 and 2016, and that that growth would require 176,000 new homes. The last government set the social lettings target at 60,000 units a year, often failing to meet that target, whereas most experts said that the true need was for at least 100,000 units a year. The so-called "release" of capital receipts would, I believe, allow a maximum of 40,000 units a year; in other words, barely enough to compensate for budget cuts that we have seen recently, including the 1996 Budget cut. Noble Lords will be well aware that the Government effectively have accepted cuts to the Housing Corporation's programme as part of their commitment to the previous government's spending targets. I look forward to any words that can give us hope for an increase of significance in the future.
I should like to think that the view ahead could be made a little rosier. I urge the Government to reconsider what is to be done with future receipts from sales of council houses. That matter has already been raised this afternoon. Sales have fallen from their peak but are still generating something of the order of £1 billion a year. I urge them to be used—invested is the term I prefer—on repairs or new build of social housing and not set aside.
I also urge the Government to reconsider what is to be done with non-housing receipts. We are told that education is the Government's number one priority. So why, for instance, is there not a phased release of non-housing receipts for education purposes? I dare say the Minister will respond by referring to the resources for education announced in the Budget. But many education authorities will receive very little once the bidding process is complete although those authorities want to spend on education.
Finally, authorities can invest most effectively if they can plan ahead. That point was made by the noble Lord, Lord Lofthouse of Pontefract. It is important to know as soon as possible how much is to be released not just this year and next year but in subsequent years. To use figures from the Chartered Institute of Housing, £1 billion 1476 released for five years would renovate 280,000 council homes or build 140,000 new homes through housing associations, which could use private funding as well, or build 70,000 new council homes. At the same time it would create something like 20,000 jobs over that five-year period, as noble Lords have already pointed out, with consequent savings in benefits and increased income from tax.
The Government have a great chance to do some very real good. The Bill is a first step. But it seems to me that it is a little like the step of a toddler who seems about to take a great stride but hesitates and then, at the last moment, while everyone is watching and holding their breadth, just manages the first few inches. The Bill is not about capital receipts; nor is it about local authorities using their own money. It is about giving permission to borrow to a limited extent. The supplementary credit approvals announced in the Budget are a tottering first step. We on these Benches look forward to confident strides forward.
§ 5.37 p.m.
My Lords, in the midst of such expertise, I feel extremely humble. I shall speak of the maiden speeches later. For the moment, let me say that I find it hard to think of anything to add to the speech of my noble friend Lord Bowness, with his great depth of experience. I enormously look forward to the replies that the Minister will give to him. The noble Baroness, Lady Hamwee, is one of the few Members on her Benches who still understands what it means to be in opposition, to test and question the Government. Many of her colleagues seem to believe that they are now in juxtaposition or perhaps even post-position. The noble Baroness has long commanded my admiration and certainly will continue to do so so long as she tests the Government in the way that she has done this afternoon.
I too wonder what is happening to the Government with this Bill. How quickly they have abandoned the golden rule that borrowing should be for capital expenditure. Indeed, they provide a clause in the Bill whereby borrowing will be for revenue. I find that surprising. I hope too, with my colleagues, that the definition of need will be settled, at least before we return to the Bill in October, and that we shall all understand how need is to be defined and who is to measure it. I hope that the noble Baroness, if not now, will then be in a position to expound on how the systems under the Bill will apply to Wales in the future, presuming that at that stage Wales is on the way to having a devolved assembly. It seems to me that the Bill falls slap bang in the middle of the division of controls between central and local or devolved government. It will be fascinating to know how the Government envisage it working in the future.
We were treated to two excellent maiden speeches. I greatly enjoyed the speech of the noble Lord, Lord Lofthouse of Pontefract, though I believe he is reading and believing some of the Government's propaganda more than he ought. He will come to realise as he spends more time here that nobody can sack him and nobody is likely to promote him either. He can speak his own mind and be critical of the Government, unlike his colleagues in the other place who tremble at 1477 the thought of Mr. Mandelson. Here he is a free agent and we look forward to hearing a great deal more from him.
I can say exactly the same to the noble Lord, Lord Dixon. I was on the edge of my seat for every moment of his speech. I listened to it with rapt attention and should his name appear on the Order Paper again to speak, I shall do my best to make sure that I listen to him. I can reassure him that it is possible to obtain beans on toast—I am sure that many of his colleagues can show him where to obtain an excellent plate of it; it is something on which most of us were brought up and most of us insist on. However, I retain one burning question in my mind from his speech: is his house still standing?
§ Lord Dixon
Yes, my Lords, and it will stand for many years to come.
§ 5.42 p.m.
§ Baroness Hayman
My Lords, it has been an interesting debate, even though a brief one. As the noble Lord, Lord Lucas, said, it was enlivened by two excellent maiden speeches. I rather guessed the contributions that would be made by my noble friends Lord Dixon and Lord Lofthouse of Pontefract. I did not quite anticipate the trenchancy of those contributions, nor the wonderful vision of the tug-of-war contest that was evoked. My noble friend needs no lectures from the noble Lord, Lord Lucas, about exercising his judgment in regard to speaking his mind on government policies. I felt that the support he gave to this initiative was wholehearted, and greatly welcomed from the Front Bench. They were two outstanding speeches, showing clearly to those of us in this House the value of being rooted in experience of local and national politics and of the building trade, if I can put it in that way. The contributions that will be made by both my noble friends in the future will be looked forward to from all sides of the House.
It has been an interesting debate and one in which we were accused of over-caution, on the one side, and of flying under a flag of convenience, not speaking our mind or explaining what we were doing, on the other. I should like to try to deal with both of those criticisms.
The noble Baroness, Lady Hamwee, talked about first tottering steps. I would rather take tottering steps and stay on my feet than take large strides and fall flat on my face. We have always recognised that this is a limited beginning after many years of frustration, which I well understand, among local authorities.
My noble friend Lord Dixon asked whether we would be taking into account the pre-1990 receipts that were generated. I have to tell him in all frankness that that will not be possible. We have a large challenge in dealing with the receipts generated post-1990 under the present financial regime for capital receipts. We simply cannot put the clock back for £23 billion of expenditure. But we do intend to start now in putting the clock forward and reinvigorating the contribution that government can make to the housing needs that were so clearly explained by my noble friend Lord Dean, the two maiden speakers and the noble Baroness, Lady Hamwee. It is a start; it is a limited start, but one that we believe is nonetheless valuable.
1478 The main criticism focused once again on the mechanism that is being used and why we have not simply released capital receipts. I reiterate what I said in my opening remarks and what the noble Lord, Lord Bowness, acknowledged in his speech. Were we simply to release receipts where they lie, that would not ensure that the badly needed resources were available where they were most needed. That is for two reasons. One is that receipts were not always generated in areas of highest need; the other is that different regimes for dealing with the set-aside receipts are employed by different local authorities. It would be quite wrong and arbitrary not to take into account housing need and what has been generated rather than what is now in the coffers in terms of this initiative.
I was asked by the noble Lord, Lord Bowness, and by the noble Baroness, Lady Hamwee, about non-housing receipts and their treatment. They came at the question from slightly different viewpoints. From the noble Baroness there was a plea for greater release for a wider range of projects, as I understand it. From the noble Lord, Lord Bowness, there was the suspicion that we were not being completely frank and were somehow hiding a non-housing need, a non-housing plan under a housing Bill. Perhaps I may make the position quite clear.
It is our specific objective in the first instance and in this measure to facilitate a capital receipts initiative for housing and housing associated regeneration projects. In that context it is right that we should take into account housing receipts in terms of the money generated. However, the Bill would also be available to facilitate the release of additional resources related to set-aside of non-housing receipts. We believe that that is right and proper. We should not in this Bill limit the Government's capacity to launch further non-housing initiatives in future years.
Perhaps at this point I may reassure the noble Baroness, Lady Hamwee, that we are anxious that issues such as energy efficiency which come completely within the broad ambit of government policies should be facilitated by this measure. We would certainly encourage local authorities to do that.
The other main issue raised in the debate was the relationship between local and central government: whether we were being too didactic and too prescriptive. I say to the noble Lord, Lord Bowness, that the concept of partnership between government at local and national level is something that we have lost over past years. The view has grown up through the experience of the past 18 years that there must either be prescription and central control or total local autonomy; there is no way of bringing those two together. We reject that attitude. It is imperative if we are to achieve what are demanding targets and ambitions under difficult and restrained circumstances that we have a concerted effort. We are trying to set out clearly what are the overall national priorities for this receipt which is national public expenditure that is being generated.
§ Lord Dean of Beswick
My Lords, I am glad that the Minister has raised that point because it was ever thus before when the huge housebuilding programmes were under way. It was a partnership between national 1479 government and local government. The housing investment programme was carried out on that basis. Local authorities did not get everything they wanted but things were done on an acceptable basis. There was always the fallback position that, through the operation of the housing investment programme, the government could stop a local authority doing something silly.
§ Baroness Hayman
My Lords, I am grateful to my noble friend for that helpful contribution. It is important to recognise that there is a national framework for this programme but that we are being open and are consulting local authorities both about issues like phasing and also about allowing them to set their own priorities in relation to their local need, whether it is a regeneration programme or a new-build programme or whether it is renovation of properties or energy efficiency measures. We are interested in allowing them scope to do that. However, it is important—and it is a responsibility of government—to monitor the effectiveness of that programme, to see how public money is spent and to disseminate good practice. There is a good deal of scope for that as well.
I was slightly surprised that the noble Lord, Lord Bowness, was so concerned about the role of the Audit Commission. I believe that the Audit Commission has a valuable function to fulfil here. Certainly, my experience in the NHS is that the Audit Commission has not in the past confined itself only to accounting matters. It has carried out value-for-money studies that are comparative and those have proved extremely important both in making all of us within that service question what we were doing and also in terms of being able to disseminate good practice.
We recognise that this is a limited measure. We recognise and have always been clear that it has effects on the public sector borrowing requirement. Those effects were made clear in the Chancellor of the Exchequer's Budget. I understand the point that was made by noble Lords about planning ahead and certainty. We tried to cover that at least in terms of giving both the 1997–98 and 1998–99 figures in the Budget.
Noble Lords participating in the debate asked about new receipts. I understand their interest, because we are creating a new stream of capital receipts even now. Straightforward release would give us exactly the same problems as have led to us using this mechanism of supplementary credit approvals, because they are not necessarily being generated in the areas of most housing need. However, we will be continuing to monitor the level of receipts and the extent to which these offset new expenditure by authorities. We shall be looking closely at the function and the future of existing set-aside rules during the comprehensive spending review.
Perhaps I may respond to one further point. If I have missed out other points I shall certainly write to those noble Lords who have contributed. I was asked how housing need is to be assessed. The consultation paper makes it clear that need will be 1480 measured by the generalised needs index. I understand the reservations that were expressed about that, but it is the measure already employed to distribute housing capital resources to authorities. In order to get the proposal up and running for this year we have had to take some fairly clear, already definable criteria and implement them. But we are willing and we are publishing the consultation document in order to be able to listen to what people have to say. Nothing is ever perfect. I would not suggest that this year's programme will be the best. I hope it will be better next year and better the year after that. However, we can improve it by listening to constructive contributions from local authorities and from others who comment on the paper.
I do not believe we have been dodging our manifesto commitments in introducing the Bill. I believe we have been fulfilling them in responsible and sensible ways. In the manifesto we stated that we would be reinvesting in building new homes and rehabilitating old ones. On 13th May the Municipal Journal described the Bill as,an important, practical and symbolic measure which signals the new administration's commitment to economic development and job creation and recognises the strategic local authority role in developing partnerships with the private sector and housing associations for the provision of social housing".For too long social housing was a Cinderella service under the previous administration. My noble friend Lord Dean referred to targets. I betray my age if I say that I remember when a Tory Prime Minister was aiming for 500,000 homes a year in terms of fulfilling responsibilities. We take our responsibilities about housing very seriously. This country used to take a pride in its council housing. Good quality homes were there for those who needed them, giving them a base from which to work and support their families. Those homes have been allowed to decline—in some cases so badly that no one can now live in them—so vulnerable families have to live in small flats while perfectly adequate houses go to rack and ruin. It is wasteful in terms of people's lives and wasteful financially and it is the cause of great social concern.
The capital receipts initiative will not, as I have said before—we are clear about this and do not pretend otherwise—at one stroke reverse all the years of decline. It will not solve all the housing problems that are out there. But it is a start. I am pleased that this is the first piece of legislation over which the noble Lord, Lord Bowness, and I have crossed swords. I congratulate him on his responsibilities, as he was kind enough to congratulate me. It is the commitment to housing and to the social problems that are engendered by bad housing that will underline much of the policy that I shall be putting forward on behalf of my department. Our priority for making use of the new power provided in the Bill is to issue resources under this initiative, taking account both of the receipts that were set aside from the sale of council houses and the housing need of various areas. I commend the Bill to the House.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.