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Baroness Hamwee: My Lords, I am sure that it meets with the approval of those Members of the House who are left, who consist largely of those who spoke against this provision at the previous stage. I am delighted that the Government have taken this view of the matter. It was probably, although I have not gone back and checked Hansard, one of those occasions when at least one of us asked what might happen if the other lot were in control. I very much welcome what the Government have done. I hope that it does not sound patronising if I say that it is a very mature response to the situation—I do not mean that to be patronising.

Baroness Hanham: My Lords, the Minister has made a welcome contribution to this debate. I thank him for his efforts.

On Question, amendment agreed to.

Clause 11 [Budget Monitoring: Greater London Authority]:

Baroness Hanham moved Amendment No. 29:

The noble Baroness said: My Lords, we had a considerable discussion in Committee on the use of capital receipts. We discussed at length the difficulties of part of those capital receipts being clawed back, and we also discussed the problems associated with local authorities having to hand over capital receipts and then having insufficient money to maintain the stock that they still held. One of the serious things that has happened over the years is that where local authorities have been responsible for housing stock they have not had sufficient capital to maintain it.

The amendments are intended to deal with that, especially Amendment No. 32, so that where a local authority is to hand over capital receipts to the Secretary of State, 50 per cent of that should be either held back by the local authority or returned to it specifically to deal with the cost of any capital works to any building or land which a local authority has a duty to maintain, or for a local registered landlord to have access to some of the money to repair property that is being used, effectively, for social housing purposes. That is the purpose of the amendments. I beg to move.

Baroness Maddock: My Lords, the intention of my amendments, which are grouped, is similar, although they are couched differently.

Clause 11 gives the Secretary of State the right to pool capital receipts—75 per cent of receipts from the sale of council houses and 50 per cent from other assets. We debated that in Committee and the noble Lord, Lord Rooker, argued that authorities' receipts from right-to-buy sales were a windfall and that the income does not arise from active asset management

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but from tenants' decisions to buy their homes. To many of those involved, that does not justify sequestration of all the receipts for redistribution.

Local authorities are under constant pressure to provide new, affordable housing and to make the necessary investment to bring houses up to the decent home standards. The more homes that an authority sells, the greater the need for use of capital receipts. Our amendments are a compromise. They are intended to try to persuade the Government that if local authorities are going to use the receipts for housing purposes, they should not be sequestered by the Government and redistributed.

The noble Lord, Lord Rooker, also argued that redistribution is an essential part of the housing capital finance system. It is a complex system that already incorporates an element of redistribution, but it is rather different: it does not take money from local authorities to redistribute it; it just does not distribute so much money in the first place.

There is concern about the matter. Even if the Minister is not minded to agree to any of our amendments—they may not be perfectly worded—I hope that he will agree to the principle. Even if he does not, those who will be affected want to know how the Government intend to roll forward their proposals. How will the pooled housing capital receipts be redistributed? We understand that those figures will not be available until the autumn. Many people also fear that the Government may take real money away from authorities and that any funds returned will be in the form of approval to borrow rather than actual grant.

The Government have made transitional arrangements. We understand that in the first year 75 per cent of what authorities pay into the capital receipts pool will be returned to them, provided that it is spent on housing; and that that will fall to 50 per cent and 25 per cent in succeeding years.

I am also grateful to the Minister for a copy of the letter that he sent to the right reverend Prelate the Bishop of Guildford, in which he outlines a little more of his thinking. He states:

    "It is wrong that a local authority rich in receipts with a relatively low housing need uses those receipts to artificially reduce their council tax while a less fortunate authority with far greater housing need is starved of funds".

I do not think that any of us disagree with that statement, but I remind the Minister that we have built the fewest number of houses since 1924 in this country. It is not houses in the private sector that make up the reduction. We have been building similar numbers of homes in the private sector year on year. However, it is in the public sector that housing has not been built. The right reverend Prelate goes on to say that without pooling receipts for all authorities, the alternatives are either higher taxes, less investment and cuts in other programmes. The programme has been cut for at least the past 20 years.

If the Government are short of money, I would remind the Minister that since this Government came to power, house price increases have meant that their

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take from stamp duty has been extra billions every year. Therefore, I do not find a shortage of money a compelling argument.

I hope that the Minister will look at this favourably. It seems to me that because of the cutbacks in social housing, every authority is having a problem providing affordable homes, particularly for key workers. They should be allowed to keep that money if they are investing it in affordable housing.

Lord Rooker: My Lords, I appreciate we have turned to an issue that we discussed in Committee. However, that is not a complaint on my part because this is a very important issue for local government.

These amendments are concerned with the treatment of capital receipts and limiting the housing capital receipts that may be subject to pooling or removing the power to pool housing capital receipts altogether.

Perhaps I may briefly outline how it appears to us that each of the amendments would operate. Amendment No. 29 would remove the Secretary of State's power to pool capital receipts. This would result in many authorities not getting the resources they need to meet the pressing demand for housing. That would be unacceptable.

The redistribution of housing capital receipts has been, and will remain, a fundamental principle of housing capital finance. It is right that a portion of the proceeds from the sale of council housing is available for use in the areas of greatest housing need. The current arrangements do this by requiring local authorities to set aside a percentage of their housing capital receipts.

The flaw in this system is that debt-free authorities are exempt. They do not have to set aside any of the capital receipts they receive and therefore they do not contribute to the redistribution system that lies at the heart of housing finance. Unlike other authorities, they hold on to the receipts and they can use them for whatever purpose they want. As I said repeatedly in Committee, such authorities did not manage the acquisition of receipts. The receipts were a result of the decision of the tenants, not a result of prudent management by the council. These funds are generated not because of good management and planning.

Redistribution must apply to all if it is to be fair to all. It is unacceptable that some authorities should have more resources to spend than others regardless of their needs, but simply because they are debt-free and happen by chance to be rich in right-to-buy receipts. Other authorities—of all political persuasions—that have debt and lower capital receipts but greater housing investment need will lose out if they are denied redistribution. Their citizens will also lose out. That is indefensible.

It is right that the resources generated by the sale of council housing stock should be recycled and made available for the areas of greatest need. This amendment would remove our ability to do that. The alternatives are higher taxes, less investment or cuts in other programmes.

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I accept what the noble Baroness, Lady Maddock, has just said but we are putting things right with the sustainable communities plan that my right honourable friend, the Deputy Prime Minister, is taking forward.

Amendment No. 32 is a half-way house. It would oblige the Secretary of State to hand back 50 per cent of pooled capital receipts to local authorities, but again with absolutely no regard to their relative housing need. This would, at a stroke, remove 600 million from the amount available for redistribution to housing authorities for investment in social housing. The effect would be the same as the amendment to which I have just referred. Those authorities who, through no fault of their own, do not happen to have large amounts of right-to-buy receipts falling in their laps will suffer.

That the funds would be ring-fenced for housing is neither here nor there. The redistribution of resources has to be targeted to housing need. The amendment does not do that.

As I have said on many occasions, it is right that the resources generated by the sale of council housing stock should be recycled and made available to the areas of greatest need. It is right that the proportion of capital receipts to be recovered is 75 per cent for dwellings and 50 per cent for land and other assets. That mirrors the level of set-aside that exists now and strikes the correct balance between the amount to be recovered to the pool and the amount that remains available to the local authority for capital use.

Amendment No. 30, like Amendment No. 29, seeks to remove the Secretary of State's power to pool capital receipts, with the negative consequences that I have outlined. However, the amendment goes further than simply denying the authorities the resources they require to meet pressing housing needs. It would allow authorities to use all the receipts from the sale of council housing for any purpose they see fit. For instance, they could bank the receipts and use the interest generated to pay for the running costs of council services and so reduce the level of council tax. As a late eminent Member of the House once said, that is selling off the family silver—or, in this case, much needed social housing to meet ordinary day-to-day expenditure. It is just not fair.

Amendment No. 31 would omit subsection (5) from Clause 11 so that the Secretary of State could not set-off any amount payable under the clause against any amount he is liable to pay the authority. It has been suggested that subsection (5) is a power enabling abuse of the pooling system for political ends. That is not true.

As I explained in Grand Committee, subsection (5) is simply an administrative measure. It is designed to deal with the situation where a local authority is liable to pay the Secretary of State a sum of money and, at the same time, he is due to pay it a sum of money. Clause 11(5) simply allows us to give the authority the difference between the two. That then saves the authority the trouble of making a cash transfer. I emphasise the point that it would have no other financial effect on the authority and would not affect

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the level of overall resources available to that authority. It is not a back-door method of penalising the authority in any way, shape or form.

Removal of the clause would not stop either the payment of capital receipts to the Secretary of State or the payment of subsidy grant to authorities, but simply make the process more administratively burdensome. I cannot believe that that is the intention.

I appreciate that I have used exactly the same arguments as in Committee. The trouble is that the same amendments have been tabled and we have not changed our arguments, except, of course, where we have accepted what was said in Committee—but in this case we have not.

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