HC Deb 12 July 1995 vol 263 cc586-8W
Mr. Denham

To ask the Secretary of State for the Environment if he will publish an analysis of the leasehold exchange scheme, indicating the cash sum received by a local authority and the net effect on a local authority's(a) capital receipts and (b) total borrowing and the new mortgage required by the leaseholder utilising the leasehold exchange scheme if the original leasehold property were (i) valued at £30,000 and sold with full discount in 1986 and (ii) valued at £20,000 and sold with full discount in 1982, and the new leasehold property is currently (1) a flat valued at £40,000 and (2) a house valued at £50,000, on the same assumptions as (i) if the original property now has a nil market value. [30789]

Mr. Clappison

[holding answer 26 June 1995]: An illustrative analysis based on the examples would be as follows:

Example (i)
£ £
Surrendered flat:
Value of flat when purchased in 1986: 30,000
Maximum discount (60 per cent.): 18,000
Right to buy purchase price: 12,000
Exchange property: example (1) example (2)
Flat valued at 40,000 House valued at 50,000
Discount1 (flat 40 per cent., house 30 per cent.): 16,000 15,000
Total consideration: 24,000 35,000

Example (i)
£ £
Credit for surrendered flat: 12,000 12,000
Cash sum received by local authority: 12,000 23,000
Effect on local authority's capital receipts:
Notional receipt: 12,000 12,000
(in each case, the RTB price paid) (24,000–12,000) (35,000–23,000)
Set-aside, 75 per cent, of (in this case, total consideration minus credit for surrendered flat): 9,000 17,250
Effect on local authority's total borrowing: This would depend on the authority's policy with regard to the use of amount set aside
Effect on new mortgage required by leaseholder: The additional amount required (whether by a new loan or otherwise) in each case would be:
12,000 23,000
1 The percentage defined by paragraph A3.3A(b)(ii) of the General Consent for the Disposal of Part II Dwelling-Houses 1994.

Example (ii)
£ £
Surrendered flat:
Value of flat when purchased in 1982: 20,000
Maximum discount (60 per cent.): 12,000
Right to buy purchase price: 8,000
Exchange property: Example (1) Example (2)
Flat valued at 40,000 House valued at 50,000
Discount1 (flat 40 per cent, house 30 per cent: 16,000 15,000
Total consideration: 24,000 35,000
Credit for surrendered flat: 8,000 8,000
Cash sum received by local authority: 16,000 27,000
Effect on local authority's capital receipts:
Notional receipt: 8,000 8,000
(in each case, the RTB price paid) (24,000–16,000) (35,000–27,000)
Set-aside, 75 per cent. of (in this case, total consideration minus credit for surrendered flat): 12,000 20,250
Effect on local authority's total borrowing: This would depend on the authority's policy with regard to the use of amount set aside

Example (ii)
£ £
Effect on new mortgage required by leaseholder: The additional amount required (whether by a new loan or otherwise) in each case would be:
16,000 27,000

As in your Question, no account is taken of administrative coasts, which would also be deductible from the capital receipt before set-aside is calculated.

1 The percentage defined by paragraph A3.3A(b)(ii) of the General Consent for the Disposal of Part II Dwelling-Houses 1994.