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Surplus Funds Of New Town Corporations

Volume 885: debated on Wednesday 5 February 1975

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6.30 p.m.

I beg to move Amendment No. 4, in page 3, line 17, leave out from 'surplus' to 'after' in line 18 and insert 'on capital account'.

The clause as it stands could be summed up as a "grabbing profits from the new towns" clause. If a new town development corporation makes a considerable profit, it should not inevitably go to the Government. It is only fair that if a new town development corporation makes a fair profit, it should be enabled to use it to improve the amenities of the new town.

The new towns make a tremendously significant contribution to Scotland. During the summer months many visitors to Scotland are taken specially to see them as models worthy of copying in other countries. We believe that the new towns are worthy examples for other places. I ask the Government to think again and perhaps to have a more general and nationalistic approach to the matter.

Although I did not have the good fortune to be a member of the Committee that considered the Bill, I have read the Committee proceedings. This matter was discussed at some length, and, moreover, since the Committee proceedings, my hon. Friend the Under-Secretary has written to the hon. Member for Glasgow, Cathcart (Mr. Taylor) and to other members of the Committee explaining the Government's thinking behind this provision and why they did not think it desirable that we should accept the amendment. In those circumstances, I do not wish to make a long speech about the amendment. I simply remind the House of the background against which the provision has been inserted in the Bill.

I shall not make anything of the fact that this provision was put into the English Act in 1972 by the former Conservative Government, because I accept that for this Government to follow the provisions of the previous Government in any respect would probably be the weakest argument for any provision we might be making.

Apart from that, there are substantial and reasonable arguments in favour of including this provision in the Bill. It is discretionary. In the event of a new town having a surplus, there is no obligation on the Secretary of State to provide for the surplus to be paid into the Consolidated Fund. Before there was any question of using this provision—it is not likely to be used in the near future—there will of course be consultations with the development corporation concerned.

The principle that surpluses may be recovered is already part of our existing new towns legislation. The 1968 Act, for example, provides that when a new town corporation is wound up any surpluses from the winding up should be paid into the Exchequer. That is a reasonable provision, because it takes account of the history of new town financing, which has been done very largely at the expense of the taxpayer.

We must remember that apart from loans made to the new towns, the development corporations already receive substantial Exchequer grants, apart from what is done to eliminate their housing deficits. For example, during the year to 31st March 1974, £1·8 million was paid to the new towns in Scotland by way of grants additional to the usual housing subsidies which are paid to public authorities. The effect of the financing arrangements for the new towns is that, for good reasons—because the new towns make an important contribution to economic development in Scotland and because they also provide admirable housing for the people who live in them—the taxpayer has taken on special obligations towards them. That being so, and the taxpayer having invested considerable sums in new towns, it seems utterly reasonable that if and when the new towns begin to make surpluses there should at least be a discretionary provision—not obligatory or mandatory on the Secretary of State or the new towns—that, if the circumstances justify it and the surpluses are not required either for writing down the loans or for capital expenditure, they shall be paid back to the Government, from whom the original investment came.

As regards the present position in Scotland, East Kilbride and Stonehouse is earning a surplus on general revenue account. It is not earning a true surplus since it is still in deficit on its housing revenue account. However, on the general revenue account the surplus, with our approval, is at present being used to reduce the need for new borrowing in East Kilbride for ongoing development.

There will be considerable capital expenditure in building up the new town of Stonehouse. None of the other new towns is likely to be in a real surplus position before the 1980s except perhaps in respect of the effect on new towns of the Government's new policy for land which we shall have the opportunity of debating later in the Session. However, in the event of surpluses becoming available, it seems to us only right that one of the possibilities for dealing with them should be that they be paid back to the Exchequer. That is the sole, limited and inoffensive purpose of the provision. Therefore, I cannot accept the amendment.

6.45 p.m.

I hope that by raising this matter both during in Committee and now we shall make the Government think about something which, for the second time, is unfair to the new towns.

The Minister did not deal with our amendment. He gave us an interesting dissertation on the letter sent to us by his hon. Friend, but he did not deal with the difference between capital and revenue.

I did not deal with that because the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) did not deal with it either when he moved the amendment, so I thought that that was not a point to which the Opposition attached any importance.

I am afraid that the Minister could not have been listening. That was the precise point to which my hon. Friend referred when speaking about repayment. We feel that it is unfair if the Government decide to take money from new towns with a surplus on capital account and deny them the right even to take the sum off the accumulated debt. If the Minister of State lent me £1,000—which is very unlikely—and I paid £500, I think it is fair and reasonable to regard that debt as being £500.

This proposal seems unfair. I had hoped by this amendment to make the Government look again at something which appears to be very unfair to the new towns.

I do not want to make heavy weather of this. I met all the new town chairmen and chief executives within the last fortnight to discuss problems relating to new towns. The Bill and this provision are well known to them. I have received no complaints about them. As I understand it, the new towns are not the least unhappy about this provision.

Amendment negatived.