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Lord Bassam of Brighton moved Amendment No. 1:



"( ) The power under subsection (7) is not to be read as limited to the specification of an existing document."

The noble Lord said: My Lords, Amendments Nos. 1, 3 and 4 have a similar purpose. They relate to Clauses 3, 15, and 21 which all include powers for the Secretary of State to make regulations referring to published codes of practice to which authorities are to have regard. These powers are crucial to our aim of basing the new capital finance system on independent codes of practice and accounting standards. The purpose of the amendments is to ensure that any revised editions of such codes are also covered by the regulations and thus apply immediately and automatically.

Much attention has already been focused on Clause 3 during Parliament's consideration of the Bill. It is the clause that underpins the prudential borrowing system. Authorities are required to determine their own affordable borrowing limits, and, in doing so, may be required to have regard to codes of practice specified in regulations. In the draft regulations under the power, we have of course specified the Prudential Code for Capital Finance in Local Authorities, an often-read document, which is being specially prepared by the Chartered Institute of Public Finance and Accountancy, CIPFA.

The regulations under Clauses 15 and 21 also refer to CIPFA codes. Clause 15 is a power to specify general guidance and in this case we have named CIPFA's Treasury Management Code. The code is already widely used by authorities and sets out practice in such areas as investment and the management of debt.

Clause 21 deals with the accounting practices to be followed by authorities and enables the Secretary of State to specify proper practices. Here the regulations identify two other well established CIPFA codes: the Statement of Recommended Practice and the Best Value Accounting Code, which together lay down the basis of local government financial management and accounting.

We always intended that the regulations should refer automatically to new editions of these codes as they are published. It would be undesirable to have to make amended regulations whenever one of the codes was reissued. That could create uncertainty about the legal status of a new edition of a code. Also, any need for each revised edition to be approved by the Government might cast doubt upon our commitment to accounting practice as the basis for the capital

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finance system. Our policy here has the full support of local government and has been endorsed in another place.

This is an important issue, and we have recently reviewed the drafting of these three clauses. We now consider that the treatment of new editions of the codes should be clarified. These technical amendments therefore expand each clause to state that the references to codes are not limited to the existing editions. They simply ensure that the original policy intention is properly and effectively implemented. I beg to move.

Baroness Hamwee: My Lords, I have no objection to the amendments. But the more a Bill lists what might be included in provisions, the more one is in doubt about the things that are not listed. Although I understand what the Minister is saying, I find the approach quite difficult. If the Secretary of State specifies that an order or provision is wide open, let it be so, rather than suggest that it is in some way limited. Sometimes I find this approach more confusing than helpful.

Lord Bassam of Brighton: My Lords, I know that the noble Baroness rarely gets confused. We think that we have clarified the situation. I take the point that she makes, but I do not think that it has great bearing on the issue.

On Question, amendment agreed to.

Clause 11 [Use of capital receipts]:

Baroness Hanham moved Amendment No. 2:


    Page 5, line 35, leave out paragraph (b).

The noble Baroness said: My Lords, we have discussed the amendment twice: in Committee and on Report. My final remarks on Report were that I thought it likely that we would return to the matter, so here we are; we do not like summer holidays to get in the way of a good discussion. On Report the Minister said that the difficulty with the same amendment being tabled was that he had nothing new to say. But it seems to us that if you have a simple formula, you should stick to it. That is why we have made no attempt to look for different words.

Clause 11(2)(b) would enable the Secretary of State, by regulation, to snatch all or any part of a local authority's capital receipts. We know that the purpose behind that would be to pool those resources and redistribute them to other authorities not prudent or fortunate enough to have access to their own receipts.

There are three reasons for our concerns about that. The first is that debt-free councils could lose only what they have been able to raise from disposal of their housing stock. There are not many of them, but they feel very strongly that they have managed their affairs well and should not be penalised in that way, by ministerial whim.

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Other local authorities which are not in the same position may still need to support the provision of affordable housing or to maintain property that they still own. We made the point previously that to strip local authorities of such capital receipts jeopardises their ability to maintain their own property.

Under the Government's plans to create thousands of new homes, the money collected from these authorities is a drop in the ocean. But for small-scale development these receipts, in good hands and prudent councils, would potentially provide great flexibility.

The Minister has made the point on several occasions that some local authorities—those that would benefit from the redistributed resources—do not have such capital receipts, to which we must ask: why not? The policy for discounted sales to tenants, which the Labour Party did not much like for quite a long time but then embraced, has been available to all authorities for many years now. It seems hard that those who have implemented the policy vigorously and obtained capital receipts should have to support those who may have been less enthusiastic and more dilatory in their ability to do so. I beg to move.

Baroness Hamwee: My Lords, we support the amendment because we oppose the provision that it would ameliorate. To continue the theme of my earlier remarks, and to be utterly clear, we would have preferred to say that the Secretary of State may not make provisions through regulations that the whole or part of a capital receipt be paid to him. Perhaps that does not affect the thrust of the amendment.

The Bill is about freedoms and flexibilities. The clause seems to give with one hand and to take away with the other. I am aware that the Government said during the passage of the Bill that the provision is perfectly reasonable on the basis that receipts arise because the grant originally came from the Government. But some authorities received negative housing subsidies for decades and many have invested in their housing stock the income that they have received from lettings.

My analogy is that, if I give a gift, I do not expect to be able to say after 15 years or so, "You did jolly well: the stock market went up, you invested and got more than I thought you might get, so give me some back". If you make a grant and hand over money, in an environment where noble Lords on all sides say that local authorities should have greater freedom, autonomy and discretion, let the money follow what the mouth says. We support the noble Baroness's amendment.

Lord Hanningfield: My Lords, I support my noble friend Lady Hanham and what the noble Baroness, Lady Hamwee, said. I support particularly the point that the Bill is supposed to be about freedoms and flexibilities for local government. Although it gives some flexibilities and freedoms, there are one or two issues on which local government, as a united front across all parties, feels that more is being taken away

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than is given. This is one such issue. I hope that the Government, even at this late stage, could think again about this aspect of the Bill.

Lord Rooker: My Lords, it is quite right, the theme of the Bill is freedoms and flexibilities. Although we are dealing with the same issue as we dealt with previously, and my answers will be the same, the arguments in favour of amendments are getting slightly weaker. My arguments are as robust as ever. The noble Baronesses would have difficulty arguing the case that they have just made to certain local authorities, and certainly to the tenants of some local authorities. But this is an important part of the Bill and I welcome the opportunity to discuss the amendment.

The amendment seeks to remove the Secretary of State's power to pool capital receipts. This would mean that many authorities would not get the resources they need to meet pressing demands for housing. Therefore, it is plainly unacceptable to the Government. My noble friends and I have said before that the redistribution of housing capital receipts has been, is, and will continue to be, a fundamental principle of housing capital finance. We believe that it is right that a portion of the proceeds from the sale of council housing be recycled for use in areas where housing need is greatest.

As has been explained before, the current arrangements are that local authorities are required to set aside a portion of their housing capital receipts. The flaw in that arrangement is that debt-free authorities are exempt from the requirement to set aside any portion of their right-to-buy receipts. Not having to set aside a portion of the housing capital receipts means that they are not contributing to the redistribution system that lies at the heart of the housing capital finance regime. Indeed, they may retain the receipts and use them for whatever purpose they wish.

For the avoidance of doubt, I repeat that an authority with debt is not necessarily good and an authority that is debt free is not necessarily bad—and vice versa. There is nothing intrinsically good or bad about being debt free: it is sometimes an historical accident of finance. The fact remains that debt-free authorities have been able to use certain money more than once and for expenditure other than on housing. We are determined to channel that money into housing.

I also wish to make the point, which I believe was raised by the noble Baroness, Lady Hanham, that these funds are not necessarily generated by good management of the council—by good planning, for example. They are raised because tenants are exercising their right to buy. As the noble Lady said, some authorities are more dilatory than others. However, if the local authority stops people exercising their right to buy, there is an adequate system of appeal. The local authority must obey the law, and rightly so.

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On the other hand, some authorities have not done as well as others because their stock is rubbish and their tenants do not want to buy it, even at the knock-down prices that they are offered. It is therefore not fair to say that authorities have not done well if they have not generated enough receipts. That is an unfair portrayal of local authority housing, which is very uneven throughout the country. The authority has no influence on the disposals. It does not manage them. Therefore, the authority should not be able to claim credit for them. The disposals are solely in the hands of tenants who exercise their right to buy.

We believe that redistribution must apply to all if it is to be fair to all. It is unacceptable that some authorities should have more access to resources than others, regardless of their need, simply because they happen to be rich in right-to-buy receipts and are debt free. Without redistribution, local authorities with debt, lower capital receipts and a greater housing investment need will lose out. That is irresponsible and it would be quite indefensible to allow that to happen.

The current means of redistribution based on set-aside will cease to be available when the new capital finance system is introduced. Pooling is the mechanism that will replace it and redistribute housing capital receipts for all local authorities.

I am aware—and I make no apology for this—that these are exactly the same arguments that I used on Second Reading, in Committee and on Report. As the noble Baroness, Lady Hanham, said, the case is virtually the same, although I believe that the noble Baroness introduced a weakness by chastising authorities with low capital receipts by saying that it is their fault because they were dilatory in the selling. The selling is not theirs to control; it is the tenants'. Perhaps the stock is rubbish and the tenants will not take it off the local authorities' hands.

My arguments have not changed, because we think that it is right that the resources generated by the sale of council housing stock be recycled and made available for the areas of greatest need. The amendment would remove our ability to do that. The alternatives, as I have told the House before, are higher taxes, less investment in housing or cuts in other programmes. I have not heard from either of the proponents of this amendment which one of those three they recommend. Clearly, they are not prepared to put their names to higher taxes or to stand up in this House and say, "Let's have less investment in certain areas". They are certainly not prepared to stand up in this House and name the areas of local expenditure that should be cut to pay for their amendment—and I am not surprised.

If the amendment is pressed, the noble Lords who tabled the amendment are duty bound to say which alternative they would put in its place. They are not prepared to do that, so I hope that they will not press the amendment. It has been round the course several times. Some parts of local government think that the measure does not offer 100 per cent freedom of flexibility but there is a general view that it is very close to that. It is good governance and good use of public

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funds placed in areas based on housing need. That is all that this is. It is not confiscation, but a method of re-directing money to areas of the greatest housing need. With all due respect, I do not understand how anyone can seriously oppose that policy.


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