Previous Section Back to Table of Contents Lords Hansard Home Page


Baroness Hanham moved Amendment No. 46:



"( ) a trust established to improve amenities or services within the local authority area,"

The noble Baroness said: The amendment moves us a little further down Clause 11. The purpose of the amendment is to probe reasons for the restrictive list of purposes to which a council may apply a capital receipt. Such powers are circumscribed at the moment by subsections (2)(a)(i) and (ii). The Minister referred to them in his previous reply. As the Bill is supposed to be about freedoms, do the Government consider that it should contain a few more freedoms and flexibilities?

I want to make a suggestion. What if a council had a civic trust specifically set up to improve the amenities of an area? Many councils have. Would that be permitted under the provisions? Would the Government want to prevent the creation of such trusts for, for example, conservation purposes, or improving street scenes or the environment? Would that not be a proper use of capital receipts? Would long-term improvement not be a sensible use of capital provision?

That is something to which my noble friend Lord Hanningfield alluded when he talked about street lights, but the point was rather subsumed in maintenance and councils' proper use of their money, either revenue or capital. There are cases in which the

4 Jun 2003 : Column GC200

improvement of the street scene goes beyond street lamps. Some of it would require capital expenditure from capital receipts, and why not? I beg to move.

Lord Rooker: I can be brief on the amendment, I hope. I thought that the purpose of local authorities was to run services and improve amenities. I thought that that was what they collected their council tax for, and why they functioned. I am not quite sure why they need trusts set up to do that. However, if the idea behind the amendment is that the money put into the trust from the capital receipts would escape the pooling, I have to draw the Committee's attention to subsection (2)(b), because such money would still be required for pooling. The trust may be a great idea, but it would still be required for the pool.

Furthermore, giving money to a trust for capital purposes would also count as capital expenditure under subsection (2)(a)(i). Giving for revenue expenditure again would breach the principle in the case of a capital receipt. In other words, if a capital receipt is put into a trust for revenue services, that breaches the rules of local authority spending.

I am not sure what the purpose of the trust is. If the idea of the Central Office whiz-kid who dreamt this one up was to have a trust and avoid the pooling, I am sorry, but it will not avoid the pooling. It would not work anyway. If capital money goes into a trust for revenue, that would breach the rules in the first place.

Lord Hanningfield: Can I give an example to the Minister? It is not to do with housing in any way. In the East of England, we are going to have a big new art gallery. I have considered setting up a trust by selling some artworks owned by Essex County Council to invest in more contemporary art and sculpture. Therefore, we are selling capital assets to put in a trust, to buy more capital assets. One can do that under the present system, but one did not want to get caught up in some of the legislation, which looks to handicap trusts.

We are talking about something that benefits the community—about the setting up of a permanent long-term trust, with investments coming in, perhaps including individual contributions, to improve the quality of life in the eastern region. I gave the example because I thought that it could be caught up in the legislation and we would be prevented from doing it.

Lord Rooker: The noble Lord has raised a specific example on which, off the top of my head, I dare not comment. What I have said all along is that, if something is okay now, it should be okay when the Bill has been passed, but I cannot be certain of that. Selling paintings is not selling housing. It is not right-to-buy sales, but capital. On selling one set of paintings to buy another set of paintings, I do not have a clue.

Lord Hanningfield: The Minister will understand our concern, because the legislation refers to capital sales, which cover a wide spectrum. Therefore, one

4 Jun 2003 : Column GC201

wants to make it absolutely clear that the legislation does not catch something that I am sure that he, too, would think desirable.

Lord Rooker: I shall have to take advice on that. I cannot give an answer on the buying and selling of paintings. One has to be careful. The value of the painting is what someone is prepared to pay for it. Local authorities going into the art market ought to be really careful about it—that is all that I can say.

Baroness Hanham: My noble friend Lord Hanningfield is a very good example of a Central Office whiz-kid. I am not sure that he will necessarily relish the description, but I shall tweak and tease him about it in future.

The matter is quite a good exam question. It is a test of what the rules, and possibly the regulations, which we are assured now that we will never see, will be all about and reflect. I leave the Minister sucking the end of his pen. He has failed the test so far, but no doubt he will be able to recover before Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 47 not moved.]

Baroness Maddock moved Amendment No. 48:


    Page 5, line 33, at end insert—


"( ) Regulations made under subsection (2)(b) may include only the following in relation to payments to the Secretary of State—
(a) in relation to the disposal of dwellings, the maximum amount that can be specified is 25 per cent of the capital receipt; and
(b) in relation to the disposal of any other asset, the maximum amount that can be specified is 15 per cent of the capital receipt."

The noble Baroness said: The amendment is tabled in my name and that of my noble friend Lady Hamwee. The Minister talked earlier about matters in Clause 11 being a technical extension of the present situation. The amendment attempts to make that rather less of an extension. It is in line with part of the draft regulations, in which the Government state that, in relation to the disposal of dwellings, the maximum amount of capital receipt that can be specified is 75 per cent, whereas we propose that it be 25 per cent that basically goes into the pool. In relation to the disposal of another asset, the Government's figure was 50 per cent, and we suggest 15 per cent.

We have had a series of amendments this afternoon, the first of which would have totally disabled the clause. Then we had various others to try to lessen the effects of the clause. Amendment No. 48 would not totally remove money to be pooled in the way explained very graphically by the Minister, but it would reduce the amount.

I do not intend to speak at great length; we have discussed the issues surrounding the clause rather a lot. The clause emphasises the fact that the Government still do not really trust local authorities. The Bill itself proposes a prudential capital regime, which people across the board think is a step in the right direction.

4 Jun 2003 : Column GC202

However, the clause seems to many of us to go against that. The Government clearly did not want to give local authorities the freedom that they would have had under the old legislation in conjunction with the new, so they have brought in new measures, which the Minister described as a technical extension.

The new regime imposes quite a big restriction and penalties on local authorities that have managed their finances well. I agree with points made by the Minister. He said that simply because an authority is debt free, that does not mean that it manages its finances well. We could all agree with that; that is not the point of many of the arguments that we have used this afternoon. However, I am afraid that debt-free authorities might look at the legislation as it stands and question whether they will sell off land and housing—whether they will use their capital receipts—so that they can provide further housing.

I listened to the Minister, and I think that he reassured me—I will look at the report again—that if local authorities wanted to invest in housing, they would not be penalised. However, there is a fear that people may have a disincentive to manage their finances as well as in the past. The Minister probably does not need to reassure me again.

I believe that the amendment is a compromise between the Government's position and that of many people outside Parliament, with regard to the use of capital receipts. I do not expect that the Minister will take it up, but it is one answer to many of the criticisms made on the way in which the Government have proceeded on the issue. The real problem is whether the Government really believe that local authorities can be trusted. Our amendment would give them quite a bit more trust than the Government are prepared to do. I beg to move.

4.45 p.m.

Baroness Hanham: I tabled Amendment No. 49, which does not seek to do what the Liberal Democrat amendment suggests, although I have some sympathy with how they are trying to look at the issue. The draft regulations have recently been published. It is very clear from them that there will be 75 per cent attrition for housing and housing land. Both amendments try to ameliorate that position, but the Minister has already made it pretty clear that he is not in ameliorating mood. Between them, they might go quite a long way towards making the provisions more palatable, but I think that neither is the final word on the matter.


Next Section Back to Table of Contents Lords Hansard Home Page