UK Parliament / Open data

Deregulation Bill

I think that it is the units rather than the baseline being the proceeds of sales, but I will check with the officials and come back on that.

We publish quarterly and annually on right-to-buy one-for-one starts on-site and acquisitions, so the figures are available. I will make sure that they are circulated and put in the Library. Since the reinvigoration, there have been more than 12,600 additional local authority right-to-buy sales and, as the noble Lord, Lord McKenzie, said, councils have already reported almost 3,700 starts on-site and acquisitions of replacement homes for affordable rent. Councils have three years from the date of receiving the additional receipts in which to use them. This gives councils adequate time to leverage in additional funds and build up enough receipts to produce robust economies of scale.

The Government also publish annual statistics on preserved right-to-buy sales in England, which strike a balance between the needs to monitor the effectiveness of the policy and not to place unnecessary burdens on housing associations. As housing associations are independent organisations and stock transfer agreements are private commercial contracts, we do not mandate what those associations do with receipts that they receive from preserved right-to-buy sales. In practice, any surplus receipts retained, after costs and compensation for lost rental income, are likely to be used to support new build and other public benefits. Where receipts are shared with councils, it is our expectation that associations will work with them to develop replacement homes.

2.30 pm

I turn to Amendments 40 to 42, which the Government cannot accept for very good reasons, which I will try to explain briefly. In terms of the proposed changes to the right-to-buy discount, while the noble Lord may welcome the local flexibility envisaged in this amendment, flexibility which is in line with the Government’s commitment to decentralisation and devolution wherever possible, I believe that the system of regional discounts set under the last Government proved confusing for social tenants. Indeed, it punished those living in the wrong area, so to speak, where discounts were low and sales fell to a record low. To reverse this decline we introduced a national discount level for the cash cap of £75,000 across England when the coalition Government reinvigorated the right-to-buy scheme back in April 2012. Of course, we are committed to ensuring that the right-to-buy discount remains effective. That is why we increased the discount to £100,000 in London in March 2013.

In July 2013 we went even further to help social tenants realise their home ownership aspirations by increasing the maximum discount for a house to 70% of

its value, and the cash cap—£75,000 in England, £100,000 in London—has increased to £77,000 and £102,700 respectively. The cash cap will now increase annually in line with the consumer prices index rate of inflation. These national discount increases will ensure that social tenants across the country are not disadvantaged by where they live. Not only will the discounts ensure that take-up of the scheme continues to increase, they will ensure that sales receipts are sufficient to help fund new homes for affordable rent on a one-for-one basis nationally.

While I note the intention to reduce the maximum percentage discount to 60%, the noble Lord may be interested to know that the average percentage discount level across England for houses sold between 2012 and 2013 was 45%. That reflects, of course, the length of time that people had rented their houses before they exercised their right to buy. This coalition Government are committed to ensuring that social tenants are able to exercise their home-ownership aspirations. This part of the amendment would cause increased confusion and unfairness for social tenants.

Moving on to the part of the amendment affecting the use of capital receipts by local authorities, as part of the self-financing settlement the Government reduced the overall level of local authority housing debt by £862 million. In exchange for this significant financial benefit, local authorities must return a proportion of their right-to-buy receipts to the Exchequer under a process known as pooling. Since the introduction of the self-financing settlement in April 2012 until the middle of 2014, some £317 million of right-to-buy receipts was paid back to the Exchequer, while local authorities retained about £1 billion.

Section 11 of the Local Government Act 2003 enables the Secretary of State to make regulations about the use of capital receipts by a local authority and what amounts shall be pooled. However, the Government have decided that they want local authorities to retain as many of their capital receipts as possible so that they can invest those receipts in, for example, new social housing or other regeneration projects. The Government do not, therefore, generally pool receipts other than right to buy. We believe that we have struck a fair deal with local authorities. The Government have paid off a significant amount of housing debt and, in return, ask for an element to be returned to the Exchequer. We do not pool other housing capital receipts and this gives local authorities the flexibility to invest locally.

Finally, on the issue of the housing revenue account borrowing limits, local authorities welcomed the financial freedoms arising from the replacement in 2012 of housing subsidy with the self-financing settlement. However, the Government, and the Treasury in particular, have a duty to reduce the national deficit and cannot allow unrestricted increase of each local authority’s housing debt. That is why my right honourable friend the Secretary of State for Communities and Local Government issued the limits on indebtedness determination in 2012, which set a limit on each of the 167 stock-holding authorities’ housing debt. The amendment would render us unable to issue such a determination.

In case Members of the Committee are under the impression that local authorities have no ability to borrow for housing purposes, perhaps I can clarify. The self-financing settlement gave the local authorities with landlord responsibilities the ability to borrow about £2.8 billion. That is a significant sum, but we have listened to those who have said that some councils may need additional borrowing, perhaps because they have already borrowed up to their cap. That is why we announced in the Autumn Budget Statement some £300 million additional borrowing up to 2016-17, to support new affordable homes. We very much hope that local authorities will make use of this. We are conscious that we all need to build more homes, and £122 million is already allocated to support 1,700 affordable homes.

I hope that that answers the various questions and I urge the noble Lord to withdraw the amendment. I reiterate my promise to answer the detailed questions raised.

About this proceeding contribution

Reference

756 cc512-4GC 

Session

2014-15

Chamber / Committee

House of Lords Grand Committee

Subjects

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