The noble Lord raises a very relevant issue, but just to be clear, what was offered in the manifesto was right to buy on a like-for-like basis, and we are not offering that. This is a sales programme under which housing associations will be able to decide not to make a property available for sale, completely at their discretion. So I am afraid the offer in the manifesto has already been retreated from. What we are seeing now is a very challenging issue. There are two choices for the Government: either they fund this properly through direct funds, or they look for a creative solution. There will be an opportunity to get a cash discount because, of course, right to acquire remains as a policy. If it was felt necessary to move more towards that policy, you could have a mix of the two. However, what we are faced with here is a policy that looked good on paper at the time of the manifesto but simply does not add up. That is why I say that we should be creative and positive about alternatives which address that issue.
My third and final point on the discussion we had relates to our long debate about the fact that, given that we are not losing a property under this scheme, we need to consider what problem arises and what injury is suffered. The crucial point is the change in tenure. The effect of right to buy in its first incarnation in the 1980s, when there was no one-for-one replacement, was effectively a halving of the number of people—between 1980 and now—who live in social rented
properties, with all the consequences that have flowed from that for rents in the private rented sector. The consequence of the shift of tenure involved in losing a social rented property and replacing it with a buy-to-let or owner-occupied property rather than another social rented property is very significant indeed, not just in aggregate but in individual neighbourhoods. Anybody who has been round an estate that has experienced a lot of right-to-buy property being turned into buy-to-let property will know just how significant the impact is on such an estate—trust me.
It is important to be very sure about one-for-one replacement in terms of not just intent but finance. We spoke in a previous debate about the experience of what has been described as the reinvigorated right-to-buy policy, which is the point at which the Government committed to replace one for one. It is important to note that this was part of an extensive discussion at a meeting of the Public Accounts Committee yesterday, which I attended. It was also included in the National Audit Office’s memorandum, which I hope noble Lords have now had a chance to look at, which proves beyond doubt the technical difficulty under the current financial regime of local authorities truly keeping up with the one-for-one replacement policy.
Having read the analysis, my personal view is that the barriers in the current model will prevent the delivery of one for one even under the current reinvigorated right-to-buy policy, and most certainly in relation to the extension of right to buy to housing associations. I shall explain why. Under the current policy, local authorities do not get the full value, or the full cost, of the one-for-one replacement; in fact, they get a third of the value of the property sold, and borrow the balance to make up the difference. In some local authorities that is possible; others either hit the cap of their right-to-buy borrowing or have other investment plans for using that funding to fund the maintenance of existing stock. Many local authorities have told me that they already have practical difficulties in delivering one for one. Indeed, a number have handed the money back to government after the three-year period. So unless we can be confident about the financial mechanism that genuinely gives local authorities the wherewithal to replace the property, we are setting this policy up to fail. This is a crucial point for me.
Therefore, the first point to make here is that the current mechanism—we do not yet know what the mechanism is in relation to the one-for-one policy for extended housing association right to buy—will not deliver one for one, never mind like for like. The second point I want to make—again, we are hampered by the lack of detail on deliverability—is that we are dealing with a potentially huge level of purchases. Shelter calculates that 221,000 housing association tenants, out of about 1.3 million who do not already have the right to buy through preserved rights on transfer, would both be keen on buying and have the financial wherewithal to do so. If everyone took up their opportunity, the cost would be more than £11 billion.
Noon
As I said the last time we spoke about this, the value of the discounts is now much higher in real terms. If you took the discounts when right to buy was introduced
in 1980 and uprated them for inflation, they would be worth just over £30,000 for a house and just over £40,000 for a flat. We are now talking about discounts that cost £78,000 outside London and £103,000 inside London. There is a more-than-doubled value and therefore a more-than-doubled cost. This is an enormous amount of money. Shelter has calculated—again, I am using Shelter’s calculations because we have no official figures on which to base this debate—that once you have taken on board receipts from forced sales, repayments on the debt, contributions to the brownfield land regeneration fund, et cetera, the net deficit would be £2.45 billion. Consequently, if we have a deficit, as I said on Tuesday, we will face major dysfunctional issues. The Chartered Institute of Housing has said that the money from forced sales would probably only just about cover the right-to-buy discounts, leaving little or no money for the replacement of the sold council properties.
Something will have to give in the execution of this policy. That is the crucial point. Either we contain demand or we fail to deliver the one-for-one policy. This uncertainty needs to be addressed now because it is already impacting on local authorities’ regeneration plans. It seems to me that if something has to give—and I am absolutely with the noble Lord, Lord Porter, on this—it should not be the capacity of local authorities to replace one for one. They should be fully recompensed in order to replace one for one. The purpose of my amendment is to say, given this uncertainty about whether the numbers add up, given the very significant consequences if we do not make one for one work, and given the reality of the current policy on reinvigorating right to buy and the difficulties that is creating in delivery, we must put this issue beyond doubt here and now in the Bill.