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Baroness Blackstone: My Lords, I am grateful that for the first time so far in this debate I have been asked a question which was not hostile but one which sought genuinely to find out the Government's position. The noble Lord and I come from a similar background--sociologists from the LSE. I share with him the wish that we should have an open system of higher education. I share his view also that it has to be differentiated. Indeed, it already is differentiated. That system must continue. The Dearing Committee recommends that much of the expansion should be in the form of sub-degree courses which will be provided in further education colleges. That is something about which we shall want to consult over the summer to obtain the views of all those involved.

Baroness Dean of Thornton-le-Fylde: My Lords--

Lord Annan: My Lords--

The Lord Privy Seal (Lord Richard): My Lords, a Cross-Bencher, I think.

Lord Annan: My Lords, following on from the comments of the noble Lord, Lord Dahrendorf, will the Minister say whether there is to be differentiation among universities; that is to say, between those which will be funded for research and those which it is acknowledged will do valuable work but nevertheless are not research institutes? Following that, will the dual funding of research by the HEFC and the research councils continue? It is regarded as important by the universities that it should.

Baroness Blackstone: My Lords, yes, it is no part of the Government's intention to change the differentiation

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that already exists so far as concerns research funding. The Dearing Committee makes a number of proposals about dual funding. It is our intention to think about them. We have made no decisions as yet. We shall want to hear the views of the universities, the research councils and the users of research in business and industry about the best, most effective and value-for-money way of funding research.

Baroness Dean of Thornton-le-Fylde: My Lords, perhaps I may first declare an interest as a member of the Dearing Committee. I have listened to the contributions with a great deal of interest. My noble friend the Minister will be pleased to know that my question is not a hostile one. I strongly support her Statement today. There are 93 recommendations in the report, and of course funding has understandably attracted the attention.

As a member of the Dearing Committee I learnt quickly that the golden age of so-called free tuition in higher education is a misnomer. It has not been around for a long time. Less than 50 per cent. of students have free tuition. That golden age did little for the members of our community in the needy social groups.

I welcomed the Statement and I welcome the leaflet that my noble friend's department has issued and which I have just seen. I welcome the debates that we are to have in the future. Funding is important for the whole compact, because this is a compact. The 93 recommendations are a compact covering excellence, diversity, collaboration, standards and a world-class learning regime in the UK.

Lord Richard: My Lords, my noble friend should ask a question.

Baroness Dean of Thornton-le-Fylde: My Lords, I finish by asking my noble friend a direct question. One of the key principles of the report is that if a student is to make a contribution to his or her tuition, the principle must be that an added contribution to the tuition should remain within the HE sector, recognising that a great deal of HE work is delivered in further education colleges. Will my noble friend refer to that, please?

Baroness Blackstone: My Lords, as I said in the Statement, the universities will benefit from the changes. It is our intention that the savings made will be provided to increase opportunity, quality and access for students to the further and higher education system.

Lord Beloff: My Lords, the Minister will be aware that I was a constant critic of the previous government's attitude towards higher education, including the appointment of Sir Ron Dearing. I shall have to wait until the two-day debate of the noble Lord, Lord McNally, to see whether I was justified. Perhaps I may ask one precise, technical question. Will the £1,000 which is to be charged to most students be paid by them directly to their university--will they come with a cheque on the first day

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of the academic year--or is it a notional contribution which the department will pay to the universities and ultimately recover from the student?

Baroness Blackstone: My Lords, yes. The £1,000 will be paid direct to the university by the parent. Clearly students from low income backgrounds will not be paying any contribution for tuition. Therefore a mechanism must be found to make up the loss of that for those universities which have large numbers of low income students compared with those universities which have large numbers of high income students.

Baroness Lockwood: My Lords, I welcome this Statement and my noble friend's response to some of the questions. Might I have a little further clarification on the participation rate? Is there a target, or will universities be free to make their own programmes and recruit according to those programmes? May we be assured that there will be continuity of funding policy for the universities, because the most difficult problems with which universities have been faced over the past few years have been the changes and the stop/go policies in relation to recruitment? Can they be assured that they can plan and go ahead with their policies without interruption?

Baroness Blackstone: My Lords, one of the most unfortunate aspects of the previous government's treatment of higher education was to indulge in rapid expansion, decide that they did not have sufficient money to fund it and then to stop the expansion. As a former head of an academic institution, I can speak with some feeling about that. It certainly makes planning very difficult.

We do not have a target rate as regards participation. The Dearing Committee does not have one either, but it mentions an overall and general goal of reaching 40 to 45 per cent. We wish to consult on that during the summer and to obtain people's views. Certainly we will hope eventually to raise the ceiling which has been placed on universities as regards the recruitment of students, but I can give no date for that.

Lord Richard: My Lords, lest it be left unanswered, and so that it does not become set into the fabric of discussions on the Dearing Report, at this stage we do not propose a two-day debate on it.

Local Government Finance (Supplementary Credit Approvals) Bill

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

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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.

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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

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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

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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 CO 2 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

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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.

Lord Bowness: 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

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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

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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

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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

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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.

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