House of Lords
Thursday 10 March 2016
Prayers—read by the Lord Bishop of Durham.
Death of a Former Member: Lord Evans of Parkside
My Lords, a number of important decisions on airport capacity were taken by the Government in December, including the decision to expand airport capacity in the south-east. However, we must take the time to get the location decision right.
As the Minister will be aware, various Governments have avoided taking a decision on where to put a runway in the south-east since the Second World War, so he is in good company in failing to be too precise about exactly when that decision might be taken. We are all aware of the gathering political storms which may yet blow the Government off course. If we eventually get a decision, given all the work that the Airports Commission has done over the past few years and the further work that the Government have been undertaking on specific issues, might the Minister be in a position to publish a draft national policy statement at the same time as the announcement?
The noble Baroness is quite right to mention the incredible amount of work that the Davies commission has done, which the Government have acknowledged; I have done so several times from the Dispatch Box. Of course—I say this just for clarification on the issue—we will be moving forward in summer 2016. The noble Baroness raised a point about the policy statement. Once the decision is made, there will be a consultation around the policy statement, as I am sure she is aware, and once a development order is laid there are quite specific timelines that will be followed in line with the Planning Act 2008.
Is the Minister aware that the runway would be built by now if the Government had accepted the recommendation of the last Labour Government? Is he also aware that if you go to any aviation conference in this country or overseas there is utter amazement that we cannot make a decision on such a key infrastructure project?
It was really for the Labour Government to act on the Labour Government’s own policy. The Conservative Government are very clear. My right honourable friend the Prime Minister, David Cameron, launched the Davies commission. It has reported. We have accepted the principles behind the report. We have accepted the work done behind the report. The noble Lord mentioned conferences around the world. In my capacity as Minister for Aviation Security, I attend such conferences, and I find utmost respect for British aviation and the Government’s considered position on this issue.
My Lords, as far as the position of the Labour and Conservative Governments are concerned, will my noble friend note that in 1974 the Conservative Government had all the legislation, planning permission and so on for an airport at Maplin, and Labour came in and dropped it on the grounds that the forecast had been exaggerated? If it had not done so, we would have had an airport at Maplin for many years.
My noble friend makes a very valid point. This Government have been very clear that we have accepted the principle of expansion in the south-east, and we are committed to that. In summer this year we will report back on the important environmental considerations, which must be considered as part of this important decision.
Not only does Britain need a hub airport, Britain has hub airports and they play an important part in aviation capacity around the world. In terms of orders for planes, it is really for airlines themselves to decide on a commercial basis what type of aircraft they require.
My question is on the same theme as that of the noble Lord, Lord Higgins. Will the Minister assure the House that, if perchance the referendum says no, the Government will still make the decision to press ahead with expansion in the south-east and Heathrow?
We should not convolute the issues here. In terms of the referendum specifically, it was the previous Government under our current Prime Minister who gave the commitment that the people of this country would decide, and they will decide on 23 June.
My Lords, the Minister has not said clearly whether the Government will make a decision by the Summer Recess. He may know that the CBI has estimated that Britain will lose £31 billion in trade by 2030 with the BRIC countries if our airport capacity is not expanded. I ask him to be clearer and confirm that the Government will make a decision, on whichever option—we will never find an option that keeps everyone happy. The Government must now confirm that they are going to decide by the Summer Recess.
The Government have been very clear that the reasons why we are taking further consideration are the issues of environmental mitigation, which the Davies commission mentioned, and community engagement and noise and air pollution, which we are considering very carefully. It is right that we are taking the time to consider the decision. We will conclude those further considerations by the summer. The Government are acutely aware of the point my noble friend makes about the £31 billion loss and of the need to progress on this decision.
I will write to the noble Lord on the issue of Gatwick and Stansted, but he is right to point out that existing capacity has been increased. Again, that is down to the world-beating talent and expertise that we have at NATS. Other Governments—indeed, recently I had discussions with the Government of Singapore in this respect—are also looking at deploying the expertise of NATS.
Sexual Offences: False Accusations
My Lords, there are no plans to review the law in this area. It is a very serious matter to make a false allegation relating to a sexual offence and there are strong sanctions against those who do.
My Lords, should we not now consider the reform of the law which allows someone like this man, Nick, who, hiding behind a wall of anonymity, makes allegations of a sexual nature against reputable public figures such as Lord Bramall, the late Lord Brittan and the late Mr Edward Heath, the former Prime Minister, and others, with not a shred of forensic or corroborative evidence whatever? It is simply unjust. Is it not now time that the whole issue of anonymity for the accused, and in particular the defence of the falsely accused, was put back on the national agenda and considered here in Parliament?
My Lords, I am sure that the noble Lord will accept that this is a very delicate issue. Parliament in 1976 decided that there should be anonymity both for complainant and for defendant. Parliament then abolished that in 1988. In 2010, the coalition Government considered the matter and decided, in balancing the various public interests, not to take further action. The noble Lord refers to a well-known case, and of course legitimate criticisms can be made about the handling of that matter, although we must allow the police some operational freedom. But I can say that Sir Richard Henriques, a retired High Court judge, is looking into the matter, an IPCC complaint has been made, and in due course the Government will respond to any recommendations or publications on that matter. But one must remember how difficult it is to make these allegations, and while I entirely accept what he says about those people in high places, of course no one is above the law.
My Lords, to follow on from my noble friend and enlarge on his point about whether the accusation is ultimately proved true or false, and referring back to the 1988 decision, would it not be far more equitable if either both parties had anonymity or neither did?
I accept that there is a superficial attraction about that symmetry. But I suggest that one of the important things that the public policy demands is that making a complaint should not be discouraged. It is no easy thing to make a complaint about, for example, rape or sexual offences. The possibility not only that you will be cross-examined and traduced in court but will have your name emblazoned on newspapers or other means of communication is a considerable inhibition in making that complaint. That is one of the difficult factors that Parliament took into account when deciding to retain anonymity.
My Lords, I have stated elsewhere the reasons for my conviction that Sir Edward Heath was not a child abuser. The allegations that have been published in the media to that effect have no shred of credible corroboration. Wiltshire Police are conducting an investigation, which is forecast to last for 12 months or more and which involves interviewing an extensive range of Sir Edward’s friends, colleagues, staff and former crew members and searching through 4,500 boxes of his archives. I have suggested to the chief constable of Wiltshire Police that there can be no conclusive or satisfactory outcome to this investigation. Even if, as seems likely, the police find that there is insufficient evidence to have justified a prosecution, the cloud of suspicion which has been hanging over Sir Edward’s memory would not be definitively dispelled. In the unlikely event of a finding that there is sufficient evidence, that evidence could not be tested in a court of law because Sir Edward is dead and cannot be prosecuted. It seems as if Wiltshire Police are arrogating to themselves the role not only of investigator but also of prosecutor, judge and jury in this matter. Does the Minister not agree that the investigation is a travesty of justice and a prodigious waste of police time and resources?
I am sure that there will be a lot of sympathy around the House and elsewhere for what the noble Lord says. Of course, we must not interfere with police operational independence. However, the points that he eloquently makes about proportionality in view of the death of Sir Edward and the likelihood of any significant evidence one way or another being unearthed at this stage are valuable, and I take them on board.
My Lords, there are sound public policy reasons for keeping the anonymity of a complainant throughout the trial and beyond, but are there not also sound public policy reasons for giving the trial judge the discretion, after an acquittal, to consider whether the identity of the complainant should be released if he is satisfied that it is a false accusation and not tainted by mental illness?
The noble Lord makes an important point. But of course, he will know only too well that someone who has had a false complaint made against them is vulnerable to prosecution for perjury, perverting the course of justice or wasting police time, and that an individual has the right to sue for malicious prosecution or defamation. So remedies do exist.
My Lords, is not the noble Lord, Lord Campbell-Savours, absolutely right in what he said? Is it not quite clear that the present system of protecting the innocent from having their names plastered all over the media has broken down? Does justice not require that the Government take a fresh look at this whole issue and not just leave it to the police?
At the moment, as my noble friend will appreciate, this is a matter for the police, who consider that only in exceptional circumstances will it be appropriate to name suspects. Sometimes it is true that naming a suspect provokes people to come forward who they have kept quiet about allegations for fear that they will not be believed when they accuse prominent members of the so-called establishment. However, I accept my noble friend’s point. Clearly it is a matter to which any Government will give anxious consideration in weighing up these very difficult, conflicting issues.
Arts: Business Rate Relief
My Lords, the Government are conducting a review of business rates in response to concerns that the system is in need of reform. The system should be fit for a 21st-century economy, and that is why the review, which will conclude at the Budget, is looking at all aspects of the system, including reliefs and exemptions. We recognise the important contributions that the arts and museums make to the culture of the UK, education and the economy.
My Lords, I thank the Minister for that reply, but will he acknowledge that the loss of all, or even part, of what is in effect a well-established funding stream would significantly threaten the viability of many productive and highly respected arts bodies across the country, including art centres, independent museums, orchestras, and theatres large and small—from those of an international stature to the smallest local organisations—and that in the regions it would simply deepen what is already in some areas a calamitous situation for arts and cultural services?
I note the noble Earl’s concerns but it may give him some comfort to know that the Government recognise the importance of the charitable sector and that the stringent management of costs in managing charities can make a critical difference to their viability. The Government also understand that arts and culture generates 0.4% of the UK’s GDP, as highlighted by the Centre for Economics and Business Research. Museums and galleries are a key motivator for encouraging tourism. We committed that from 2017 the business rate system would better reflect our modern economy by providing clearer billing, better information-sharing and a more efficient appeals system.
My Lords, I declare my registered interests in charities, including membership of the board of the Royal Shakespeare Company, which is currently able to take advantage of tax relief on production costs, as indeed are all other performing arts companies. Is the Minister aware that the benefit of this very welcome and indeed enlightened tax reform will be entirely lost if mandatory business rate relief is withdrawn? Can he reassure the House that the Government are not proposing to give with one hand and take away with the other?
I cannot prejudge for the noble Baroness the result of the review. However, when we launched it, we did say that we recognise that some sectors, such as charities, play an important part in the community and that the Government have no intention of increasing business rates for those deserving of relief.
Is the Minister aware that many vulnerable communities depend on charitable organisations, particularly in the light of the public service cuts? Will he give an undertaking that before any such measures may be introduced, the impact on the most vulnerable communities will be assessed and taken into account?
My Lords, given the parlous state of many of these bodies, as we have heard, have the Government made a precise assessment—or will they—of exactly how much this relief helps these organisations and how they would be affected should it be cut?
I have no doubt that the review will also cover that. However, it is pretty clear that the business rate relief does indeed help those very important charitable organisations. As the noble Earl, Lord Clancarty, mentioned, orchestras and other similar organisations rely on this business rate relief.
My Lords, does the Minister agree that organisations including theatres, art centres, galleries and independent museums could be negatively affected by these changes? Therefore, will the Minister agree that a proportion of the business rate relief should be mandatory, considering the tight finances of these very important cultural organisations?
My Lords, will the Minister clarify the position of the review with regard to arts organisations based in Wales, Scotland and Northern Ireland? Given that the arts are a devolved matter, as are some responsibilities for business rating, will the review consider the circumstances in those three areas?
The review will take account of those areas but, as the noble Lord made clear, there is devolved responsibility, particularly for business rate relief. I am thinking particularly of Scotland but I am sure that it is the same in Wales. There is of course contact with the Governments in Wales and Scotland on this matter, and this will be part of the review.
My Lords, the discussion so far has been about mandatory rate relief, which is about 80% of the rates bill met by the institutions we are talking about. However, a problem is also arising in the discretionary relief for the last 20%, which can be a very substantial amount of money in some areas. Will the Government explain what they propose to do, because over 20% of institutions reported recently that they have had cuts in that area?
Energy Security: Hinkley Point
My Lords, good progress continues to be made on the deal so that Hinkley Point can provide clean, affordable and secure energy that families and businesses can rely on now and in the future.
I thank the Minister, but he will be aware that there is a certain amount of coverage in the media: the finance director of EDF has quit; the value of EDF shares is falling; and EDF does not have a legally binding contract with the Chinese. If it does not proceed with Hinkley Point, what is the Government’s plan B for the security of our energy supply in future years, given that the support for renewables industries has been completely undermined by the Government and that there is still no commitment to the Swansea Bay tidal lagoon, which would provide energy for 120 years—three times as long as would a nuclear power station?
My Lords, EDF has said that it is working hard to take a final investment decision in the near future with the full support of the French Government. We believe—along with the Minister who took the initial decision, Ed Davey—that the Government negotiated a good deal; he repeated that this week.
My Lords, does my noble friend agree that, whatever happens at Hinkley—obviously, there are some serious problems there—we have a perfectly good and better-time nuclear programme in place and in the pipeline for the longer term? Will he accept that the real threat to our energy security, which is leading to humiliating talk for this great industrial nation that we should have to deal with power cuts, comes from the failure to build new gas turbines in sufficient quantities to ensure that our power supply is regular in the 2020s and early 2030s? Will my noble friend finally agree that this arises from the gross mishandling and mismanagement of our energy policy in recent times and in the past and that it must now be corrected? We should all give full support to the Government to get that correction in place.
My Lords, I am grateful to my noble friend for his support. My right honourable friend the Secretary of State, Amber Rudd, has made it clear that energy security is the number one priority for this Government. That is why the project at Hinkley is so important. It will deliver 7% of our energy needs.
My Lords, does the Minister agree that this is a mess of the Government’s own making? We have chosen the wrong type of reactor; costs and timescales are at least doubling and may get even more than that. More broadly, will the Minister confirm that protection is in place to ensure that UK firms keep more than 70% of the supply chain contracts for the third planned reactor and beyond and are not squeezed out by the Chinese supply chain firms, because that is the plan of the Chinese supply chains?
No, my Lords, I do not agree with that. The costs that are increasing are essentially those of EDF. We have a strike price that is agreed, constant and unchanging. I believe that it is a good deal for the Government and that the supply chain is secure. The noble Lord should know that 60% of jobs in the supply chain are already guaranteed for the UK.
My Lords, is it not sadly clear that the ability to be energy self-sufficient, where nuclear power should be making a significant contribution, is jeopardised because we are unable to build the power stations ourselves? We are dependent on the French, the Chinese and the Japanese. Let me say, in case anyone wants to disagree, I do not hold the present Administration responsible for those circumstances. However, as the Minister will recall, the Chancellor of the Exchequer made an important announcement in the Autumn Statement about support for the development of small modular reactors. Will the Minister tell the House how much support has been given to date, to whom it has gone and for what purpose?
My Lords, the noble Lord is absolutely right about the importance of small modular reactors. He will know that £250 million was announced in the spending review specifically for that purpose in this Parliament. We will bring forward proposals on that early this year—that is, in the spring.
Is the Minister aware that the Chancellor is making the situation worse by flip-flopping our energy policy from the Treasury and cancelling the carbon capture and storage project, onshore wind, the feed-in tariff arrangements, the zero-carbon homes and the Green Deal, and causing huge investor and company unrest and insecurity? We will not deliver an energy supply that is secure for the future as long as that continues. What are the Government going to do to stop the Chancellor flip-flopping energy policy and to restore investor and market confidence?
My Lords, the noble Baroness is wrong: there is no flip-flopping over energy policy. It is absolutely clear and it was set out in my right honourable friend the Secretary of State’s speech that we regard security as the number one proposal. We are ending subsidies. We are moving away from subsidies to a market-based approach, which is the right thing to do. It is important that we balance the interests of the public purse with the interests of decarbonisation and security, and that is what we are doing.
My Lords, would the Government be prepared to consider taking a significant share in the equity of EDF? Then the Company might become part of a nationalised industry owned jointly with the French. At present, we are in the process of underwriting all the risks of the Hinkley C project, so surely we should also expect to partake in any profits that might derive from that project.
My Lords, this is a commercial deal, as the noble Viscount should be aware. It is a matter for EDF if the costs increase: they are EDF costs. We have a strike price, as I have indicated, which is firm and unchanging and will guarantee us energy up to and beyond the 2030s—for 60 years from when this comes on stream.
My Lords, my noble friend has been trying to get in on several Questions for several days.
My Lords, is not one of the problems that, in negotiating with EDF on the two nuclear power stations at Hinkley and Sizewell in Suffolk—I declare my interest in the latter—the Government were outfoxed by EDF? EDF has shown an astonishingly ruthless determination to get exactly what it wants, lacking, in some cases, in integrity. To give one example, in Suffolk, in order to persuade people that there was support for its local transport plans, EDF summoned a meeting at which £20 notes were handed out and the people were filmed.
My Lords, I have no knowledge of that particular evening in Suffolk. I wish I had known about it—I could have been there. I return to the point that this is a good deal for the Government. It was a good deal when it was struck and it is a good deal now. It will provide 7% of the energy needs of the country, which is enough to power London twice over when it is fully on stream in the 2020s.
Arrangement of Business
Announcement of Recess Dates
My Lords, with the leave of the House, I will make a short Statement about business.
My noble friend the Leader of the House has today made the usual Written Statement to announce that Her Majesty the Queen will be pleased to open a new Session of Parliament on Wednesday 18 May. Parliament will be prorogued in the usual way on a date to be announced once the progress of our remaining business is certain.
It may also be for the convenience of the House if I make some remarks about recess dates. To save noble Lords clutching for their diaries, a note of the dates will be available in the Printed Paper Office. I stress that I make this Statement with the usual caveat that these dates are subject to the progress of business—they are provisional dates.
We will adjourn for the early May Day bank holiday at the end of business on Thursday 28 April and return on Tuesday 3 May. For the Whitsun Recess, we will rise at the end of business on Thursday 26 May and return on Monday 6 June. Additionally, the House will adjourn at the end of business on 15 June and return on Monday 27 June. The House will rise for the Summer Recess at the conclusion of business on Thursday 21 July and return on Monday 5 September. We will then adjourn for party conferences at the end of business on Thursday 15 September and return on Monday 10 October. That concludes my business Statement.
Patents (European Patent with Unitary Effect and Unified Patent Court) Order 2016
Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016
Register of People with Significant Control Regulations 2016
Motions to Approve
Housing and Planning Bill
Committee (5th Day)
Relevant document: 20th Report from the Delegated Powers Committee
Clause 67: Payments to Secretary of State
61: Clause 67, page 29, line 33, at end insert “which shall include—
(i) the repayment of capital debt on any high value properties sold; and(ii) the cost of replacing any high value properties sold on a one-for-one basis within the same local authority area.”
My Lords, this morning we are discussing groups of amendments concerning the high-value vacant property levy. This is a damaging mechanism to deliver a policy for the Government. The right to buy should be funded directly by the Government not indirectly by local authorities. Forcing councils to sell off their high-value stock when it becomes vacant will have a devastating and immediate impact on the number of council properties. The Bill of course undermines council housing and seeks to drive people into a narrow group of options—either buy or go to the private rented sector with much higher rents. This policy will have a detrimental effect on people on low or modest incomes who are never going to be in a position to afford to buy. It actually makes the dream of owning your own home only ever a dream. As I have said before, localism, which we heard a lot about when we were debating the Localism Bill, now an Act, in recent times seems to have gone the same way as the big society and is hardly ever mentioned. Certainly the recent actions of the Government are about anything but localism.
This clause will allow the Secretary of State to require regular payments from councils which are to be based on an estimate of income from the sale of high-value council homes. The clause gives the Secretary of State considerable powers in effect to tax councils and to define what they think is of high value in their area. The clause allows for negotiation with individual local authorities, and the negotiations must be based on the impact of the policy as a whole.
Amendment 61 seeks to put in the Bill two very important additional points. These are, first, the payment of capital debt on any property sold and,
“the cost of replacing any high value properties sold on a one-for-one basis within the same local authority area”.
If these matters are not taken into account when making a determination about the size of the payments, local authorities will be in an impossible position: having to make a payment to the Government but not being able to repay the debt on the property for the receipt is madness. Amendment 66A places a restriction on this section of the Bill coming into force until the regulations have been approved. This is necessary as these measures are so controversial and we need to be careful about what we are approving, so proper oversight is needed. The Delegated Powers and Regulatory Reform Committee highlighted this issue in its 20th report.
We on these Benches also fully support Amendments 62 and 62A proposed by the noble Baroness, Lady Bakewell of Hardington Mandeville, and the noble Lord, Lord Kerslake. They seek to make similar changes and will be spoken to by both noble Lords shortly. I shall make a further intervention in the course of the debate, but I shall now bring my remarks to a close. I beg to move.
My Lords, I rise to speak in support of this group of amendments, and specifically to Amendment 62. I and my colleagues remain totally opposed to the sale of high-value council properties in order to subsidise the right-to-buy discount for a small number of lucky housing association tenants who may well qualify for the right-to-buy scheme. We are not opposed to housing association tenants having the opportunity to buy their homes, but this should not be at a cost to council tax payers in general. The way the Government have constructed the calculations on the sale of high-value housing is nothing short of a tax on local authorities which is neither transparent nor equitable.
For the vast majority of councils, selling off their high-value homes will mean that they are unlikely to be able to discharge their duty to rehouse larger families. It is not the case that every area has a stock of homes in conservation areas, or in areas where house prices are beyond the reach even of the council officers. We heard from my noble friend Lord Greaves earlier in Committee about the prices the houses in his area are likely to fetch.
The truth is that many councils’ high-value homes are those intended to accommodate large families. Some of these families will be as a result of previous relationship breakdowns and the coming together of two people, each with their own children. Sometimes a large family will belong to a religious group or culture where large families are expected and the norm. Whatever the reason, it is a personal matter and not for public interference.
The Government should not be discriminating against these families just because they are large. Councils will still have a duty to house these families, yet are likely to have a very limited supply of suitable homes as a result of selling off their larger dwellings. This could lead to increased homelessness or perhaps families being separated as they are offered smaller, separate accommodation. If councils do have high-value homes that they can dispose of they should be allowed to keep a proportion of the proceeds to replace them with cheaper accommodation that will fulfil the function of the properties that have been sold.
Nottingham City Homes tenants have sent me a letter in which they say:
“This proposal was widely seen as ‘robbing Peter to pay Paul’. Those losing out would be people seeking to rent affordable council-owned homes who would see them sold to raise money to facilitate the sale of housing association homes at discounts to people who can afford mortgages. One tenant said ‘it’s like Robin Hood ... in reverse’. There was great scepticism that the sales would generate the revenue to meet the shortfalls in housing association finances. As a result, tenants feared:
‘High value would just be redefined to include more and more homes, so more and more got sold’.
‘I live in a council home that some might consider “high value”—why should someone who comes after me not be able to live in a council house in this neighbourhood?’
It was noted that some of the higher value properties could be bungalows, often in urgent need by people with disabilities, and often specially adapted for those with mobility problems”.
“‘Our properties have been adapted for tenants with disabilities. If they are sold then other homes will have to be adapted too, at extra cost’.
‘There will no longer be any affordable council housing in certain neighbourhoods—council housing will be marked out as something that is only in poorer areas.’”
We have probably all received the Joseph Rowntree Foundation briefing that predicts that many of the high-value homes sold by councils will be bungalows. I am not sure about the level of supply of bungalows in cities, but certainly in the Somerset market towns and villages, bungalows come at a premium. Many residents, having lived much of their adult lives and certainly their retirement in villages of their choice, do not wish to move and are desperate to downsize, but have nowhere available on their doorstep to do so. When bungalows come up for sale or for rent they are snapped up. It is extreme folly to force councils to sell off the one asset that allows people to live in their own homes longer without the need for carers or having to resort to care homes.
Last week, following an application from a very forward-thinking developer, a small development of 14 bungalows was agreed in a village. Some of these will be affordable and one is to be specifically built for disabled access. It would be a very retrograde step if these were subsequently forced to be sold off to provide the subsidy for dwellings in a town that might not even be in the same county.
Council budgets are under extreme pressure and are likely to reduce even further in the future. Councils simply to do not have the money to replace the high-value homes sold off. For all the reasons I have given above, I believe that the Government should allow a deduction from the sum realised from the sale of high-value homes to cover the cost of a one-for-one replacement. This would be in addition to the deductions already proposed in the Bill. The Minister indicated earlier in Committee that the Government’s intention on replacement was never like for like. However, I have understood that they intend the replacement to be one for one—that is what we are asking for here—and for it to be funded from the sale of high-value homes. I support the amendment.
My Lords, I shall speak in favour of Amendment 62A and the wider group in which my amendment sits. I declare my interests as chair of Peabody and president of the Local Government Association. The purpose of this amendment is to put beyond doubt the financial issue on one-for-one replacement. This is a crucial point and in making it I am following the imprecation of the former chair of the Public Accounts Committee, Margaret Hodge, to follow the money. My background, as noble Lords may be aware, is as an accountant by training.
I shall follow up three issues we discussed on Tuesday which are very relevant to this amendment. The first is the nature of the properties we are talking about in relation to forced sale. I acknowledge that it was very late in the evening, but the Minister referred to these as “surplus properties”. These are most definitely not surplus properties; indeed, they are the antithesis of surplus properties. They become vacant but there is a massive demand to take up those vacant properties. The reasons are very simple. Higher-value properties—I emphasise the word “higher” because this is a relative concept in different areas, not an absolute concept—are either larger properties, or bungalows, as we have just heard, and they are most commonly in areas of higher demand. Anybody who has worked in a local authority, as I have, will know that these are keenly sought after, to the point that tenants who are desperately in need of bigger properties will spot somebody who has left a property and come and say, “Is it possible for me to take that one up?”. So, we must be very clear that these are absolutely the most in-demand properties. That is why they end up being described as higher value, in almost all cases.
We had a long debate about the possibility of an equity loan, which I am absolutely convinced is technically capable of being done. The resistance to this proposal comes from the fact that it does not accord exactly with the Conservative Party manifesto. I am seriously concerned that we are ending up with what might be called manifesto fundamentalism. John Maynard Keynes said, “If the facts change, I change my mind”, and the facts at the time this proposal was developed have now been proved to be palpably wrong. So there is a case for thinking again, creatively and flexibly, to deal with what may be the single most divisive issue in the Bill.
I am with the noble Lord on manifesto fundamentalism: I, too, think that we should not go too far down that path, but he was asking people the other night to accept, not a cash discount but an equity loan. If people have expected a cash discount from the manifesto, I do not think they will be very pleased to get an equity loan. That is the problem, if I may explain it to the noble Lord, in terms of popular understanding.
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.
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.
My Lords, I support my noble friend Lord Kerslake—although he does not need very much support—and the thrust of the amendments in this group. I think it sensible at the beginning of our discussions on this part of the Bill to set out my thoughts on the Government’s policy for requiring councils, first, to consider selling their higher-values homes and, secondly, to pay a levy to central government based on the assumption that they actually do sell these properties whenever they become vacant.
Of course, we know few details about the calculation of the levy, which makes our debate problematic. We do not know what limits and exclusions there are on the levy, over what geographical area “high value” is to be assessed, whether the calculation is for homes of different sizes or simply on the basis of highest value, and so on. But we do know that it is intended to raise £4.5 billion per annum, so it represents a significant new tax on councils, which, in almost all cases, could be paid only by fulfilling the Government’s assumption and selling the vacant homes. As I understand it, a figure equivalent to around a third of the proceeds from sales is to be retained by councils to pay for the replacement of sold stock and cover the related administration costs, but around two-thirds of the £4.5 billion per annum will go to pay discounts for housing association tenants.
This robbing of Peter to pay Paul, as it has been described—this taxing of councils to give discounts to housing association tenants—is extraordinarily unhelpful. Instead, government needs to support local authorities as part of the drive to increase housebuilding. The underlying objection to the approach being taken by the Government is that it seeks to support increased home ownership—this time in paying for discounts to enable housing association tenants to buy, just like the earlier policy of building starter homes—but by switching resources from one budget to another instead of injecting new investment.
I see in today’s papers that Professor Wren-Lewis, professor of economic policy at Oxford, discusses the reasons why central banks are seriously thinking about setting negative interest rates in a somewhat desperate attempt to get the economy going. He says that economists around the world, including at the OECD and the IMF, are urging investment in infrastructure. Housebuilding is just the kind of infrastructure that makes so much sense while interest rates are so low. Taking money from one part of the housing budget—that concentrating on affordable accommodation for those on lower incomes—and switching it to support the entirely worthy aim of assisting first-time buyers, ignores the economic advantages of substantially increasing investment in housing.
This is not to say that the practice of selling some vacant properties to fund new development is wrong: it already represents an important means of recycling assets to deliver more homes. For example, I know of terraced houses in London that were “municipalised” in the 1970s—bought by the council for a few thousand pounds and modernised—which now need heavy remedial work but are worth about 70 times as much. It may be entirely sensible to sell one of these terraced houses when it becomes vacant and avoid the upgrading costs, using the proceeds to build four excellent retirement apartments on the site of now dilapidated garages on the council estate nearby: the four new homes could accommodate four elderly households from the estate who are struggling to cope with a three-bedroom flat, or are under pension age and need to escape the dreaded bedroom tax. When these older people downsize, four families can move into the previously underoccupied three-bedroom council homes. Encouraging local authorities to make use of the opportunity to sell a vacant property, as some are doing very creatively, is one thing; to force sales and then to remove two-thirds of the proceeds is another matter altogether.
Under the proposed compulsory sales policy in the Bill, local authorities will lose control over most of the funds where they do make a sale, and this change means several are having to rethink their important plans for building new homes accordingly. When we debated the Government’s policy for starter homes, I made the point that if subsidies to new buyers were covered by new resources, rather than by taking the resources from affordable housing for rent, the scheme would be greeted with acclaim by many of its current critics. The same considerations relate to the Government’s approach to the voluntary right to buy for housing association tenants. If the discounts were funded by central government, the arrangements would be far less contentious. It is the fact that the payment for this support must come from councils, who will lose their best homes to pay for it, that causes the extreme disquiet.
Today’s local authority housing departments and arm’s-length management organisations are demonstrating high-quality management and are far removed from some of the ineffective operations of yesteryear. The phenomenon of hard-to-let properties on council estates is a rarity today. Many councils, often through those arm’s-length management organisations, are using the freedoms now given to spending through the housing revenue accounts to do imaginative work with their local communities, creating apprenticeships and jobs, tackling anti-social behaviour and so on. Yesterday, I was judging entries for the landlord of the year award from Inside Housing magazine. I was reminded by the quality of these entries of just how far many councils have come over the past 15 years or so. However, they are now suffering the imposition of a 12% real-terms rent cut over the next four years, and hopes for increasing numbers of new homes to help the crying need for more affordable housing will be disappointed.
At every turn local authorities that have the capacity and aspiration to help in the struggle to get more homes built seem to face blockages. There is the cap—the ceiling on prudential borrowing to invest in new homes; the current restrictions on the use of right-to-buy receipts; the rent cuts over the next four years; and now the confiscation of most of the proceeds from selling vacant homes. Bristol City Council says that,
“loss of these receipts is a further loss of income to our Housing Revenue Account and compounds the impact of lower than planned rents. We have raised £3 million p.a. from the sale of these”,
“and were relying on this income in our business plan. It will impact even further on our ability to build new homes—as these receipts have been a key source of income and one of the few flexible sources”—
that is, without so many government rules. I am afraid those rules have now arrived with a vengeance.
The noble Lord, Lord Porter, expressed the view on Tuesday that, while he strongly supported the right to buy for housing association tenants, the cost of their discounts should not be borne by local authorities. There was support for this view from all sides of the House. He went on to suggest, however, that since housing associations were generating an annual surplus of some £2.5 billion, they should pay for their tenants’ discounts from these surpluses. I detect three problems with this suggestion. First, the annual sum required for the discount is estimated at some £3.5 billion, so even if every pound of the housing association surpluses were sequestrated not enough would be raised. Secondly, the Government are already raiding the housing association coffers by requiring the 12% real-terms reduction in rents over the next four years, at a cost to the housing associations of around £1.3 billion per annum. Thirdly, these surpluses are not simply cash bonuses; they must be seen alongside the outstanding debt of some £63 billion that housing associations owe to cautious lenders. The lenders require housing associations to build up reserves in case of future problems and want to see housing associations making a reasonable margin on their operations instead of just breaking even each year. If associations become less profitable in the eyes of lenders, those lenders will not lend so much and will charge higher interest rates, diminishing the development programmes of these bodies. I know the noble Lord, Lord Porter, shares the view of many of us that the overriding priority is to see more new homes built, especially those affordable to people on average and below average incomes. With that priority, scaling back the output of housing associations would not be wise.
The nub of the problem remains that the imposition of a levy that has the effect of requiring councils to sell their most valuable homes when they become vacant is a bad idea. This wrong cannot be righted by switching the burden to the housing associations. I am very much aware that the Government are keen to have their cake and eat it—to achieve the new right to buy for housing associations, but without any cost accruing to the Exchequer. But just as with starter homes, they can achieve this miraculous feat only by diminishing affordable housing to rent to generate the resources that will help different people to be home owners. This leads me to join forces with those who oppose Clause 67 in principle and to support these amendments.
My Lords, I, too, support this group of amendments. I am grateful to the noble Lord, Lord Best, for highlighting my own local authority of Bristol and the policies it has adopted over the years, which provide examples of really good practice. I must say that, in view of the fact that we are supposed to be delegating more powers to local authorities, the draconian nature of the measures in the Bill seems entirely counterproductive.
As has been said, Bristol has its own asset management plan. It has generated £3 million a year to be reinvested in areas of most need and to build social housing. The plan considers how public assets can be reinvested to provide social housing, particularly for those most in need. Those in my authority would find it totally unacceptable for their public assets again to be siphoned off to be reinvested in other areas for housing for people who are not the most in need. Before producing the Bill, the Government might have looked at some of the better schemes and good practice going on within local authorities, and the level of need for social housing and affordable housing.
The Government’s talk of creating houses to buy completely disregards the fact that many people, particularly in our cities, will never be in that position and will now find that their authorities cannot enter into those creative ways of providing new housing for people in need. My authority has entered into partnerships with the private sector, charities and housing associations for excellent refurbishment schemes of some existing stock and to create new homes for those most in need in different parts of our city. I very much support what has already been said and hope the Minister and her team will look at existing best practice and think again about the measures proposed.
My Lords, I intervene seeking clarification. I am a little perturbed about some of the new rent levels. I am sure the Minister will correct me if I am wrong but as I understand it, when a house or flat is replaced, it is replaced by a house or flat at an affordable rent, but affordable rents can be 80% of the market rent. I referred the other day to a number of flats in Westminster: a one-bedroom flat at £113 a week, a two-bed at £128 a week, a three-bed at £142 a week and a four-bed at £157 a week. That is a council house or flat in central London, and that might be a low rent. What interests me, looking at it from the consumers’ point of view, is that, to take the two-bed flat at £128 a week, on the open market, when flats have been sold off, they command rent of £450 and £500 a week. So at 80%, the new rent will be £400, charged by a public sector provider, which is three times the existing rent. In other words, it might be like for like in terms of rooms, but it is certainly not like for like in terms of rent, because the rents within the public sector will triple.
I do not think that people out there in the country have really grasped that that is the case—if my figures are correct. Perhaps the Minister, when winding up, will clarify the position. Is what I am saying accurate: that rents in the public sector, on a replacement basis, will triple in many parts of London? It is a simple question.
My Lords, we are having a very productive debate on this issue, and many other aspects of the housing problem that we face. The noble Lord, Lord Best, made the point just now that selling off high-value assets when they become vacant is not necessarily a bad thing, and indeed can be a very good thing in certain circumstances. I see him nodding and take that as assent. Because he is a long-time student of these matters, he will recall that the origin of this proposal to sell off high-value council properties was in a pamphlet produced by Policy Exchange in 2012. That was produced when those interested in housing were saying, “No government money is available in this economic situation. Therefore, we have to think of some other way to release assets which will fund more housing”. That thorough, well-worked document suggested that 20% of social housing nationwide was perhaps expensive and could be sold off. The figures in the document showed that no less than £159 billion-worth of assets could be released, and then be spent on new social housing. I emphasise “new social housing” because, as I understand the original document, it was talking about selling off expensive social housing to provide new social housing to rent or to buy. That means housing in the public sector, not private housing.
The situation changed when this idea, which was a productive one, was linked to how the right-to-buy idea would be funded. This is the link that many people are concerned about, and which has provoked so much debate. The problem here, as my intervention on the noble Lord, Lord Kerslake, alluded to, is that the manifesto commits us to extending the right to buy, which is already extant from previous council housing right-to-buy measures. There is a presumption that it would be the same. However, I agree with him that we are now in a different era: we are 30 years on from when the original right-to-buy procedure under Mrs Thatcher was introduced. The sums are much higher. I certainly agree with him, as a Keynesian economist—and certainly given my own political background—that changing facts can change your views. I could hardly disagree with that: it is a fundamental point of view. Therefore, the Government should think very hard about this point, because the fact is, as he said in his speech, the costs are huge if you are talking about a cash discount on the same basis as occurred under Mrs Thatcher’s famous right-to-buy proposals. As I understand it from what he was saying—others might go down the same path—we might want to have a mixed package which could involve some equity loan as well as cash. That is to be decided. It is one way in which the Government could maintain their manifesto commitment and not necessarily disappoint those who were hoping to get a reasonable deal out of the right to buy.
This is an area where the Government should think most carefully about what they are doing, and where the debate has contributed to their thinking. I sometimes think it might have been better if the Government had started off this Bill here, rather than in the other place, because in many ways we actually have more expertise on this subject, given that, these days, the number of people with a local government background—on both sides of the House and on the Cross Benches—is larger here than in the other place.
Is there not also a danger that that £103,900 discount could rise? If the property for sale in central London is sold as a percentage of a market price, many people in London would simply not be able to afford it. If they cannot afford it, the only people who would be able to would be those who use tenants as vehicles to buy: people from overseas who can afford to spend that amount of money. The only way to ensure that, let us say, London residents buy those properties would be to increase the discount even further, but that would further aggravate the condition the noble Lord is talking about.
That is the problem that produces the large discounts necessary to make the scheme work. The noble Lord has re-emphasised this in his remarks.
The other way of tackling this, which we have dealt with on previous days in our debates, is for the person who buys the house to pay back some of the discount they got in the initial phase over a period of 10 or 20 years or over whatever period. That may seem to many people also to be a fair way of reducing the cost and making a reasonable deal.
I shall put two other thoughts into the debate because I appreciate that we are dealing with the fundamentals of this issue at this stage. First, the Government would be wise to be as flexible as they can be in the way they negotiate with local councils in doing the deals in this area. Therefore the Bill should be as flexible as possible. Much of this will end up in a bargain between the local authority, the Government and the Department for Communities and Local Government, the details of which we cannot anticipate and do not know at this stage. The Government would be wise to write the Bill and the regulations so that they are as wide as possible to allow for local circumstances because, as the noble Lord, Lord Kerslake, pointed out, facts will change with the housing situation we are in. It is developing very rapidly. The noble Lord, Lord Campbell-Savours, made the point that house prices are increasing very rapidly in London and the situation may change even over a year. Maximum flexibility in what the Government expect from local authorities is required.
Secondly—and this may be outwith the scope of the Minister today, as I appreciate that it is really a matter for the Treasury more than Ministers of his department—the Government should think about raising the cap on local authority borrowing for housing. The way the cap works at the moment is ridiculous. It disadvantages housing investment by comparison with, for example, cycle lanes, leisure centres and things of that kind. It completely distorts the way we look at local authority funding, and that cannot be right in the present situation. It puts a cap on what local authorities can do. My understanding from some of the figuring that has been done, for example in the paper by Capital Economics for Shelter in 2014, is that local authorities could spend up to £7 billion a year more on housing if the cap on their borrowing powers was raised. I am well aware that that immediately gets into the problem we have also been wrestling with about how you define that method of dealing with the problem and at the same time keep the Government’s commitments on debt and deficit.
Looking at the paper which Capital Economics did in conjunction with KPMG and others I see that there are many ways in which the financing could be arranged so that, although the debt might increase, the deficit would not. There are ways around the situation in which the Chancellor finds himself in which he could still help with housebuilding. As the noble Lord, Lord Best, said, Professor Wren-Lewis, a distinguished economist from Oxford, and many others have already pointed out that now is the perfect time to invest in housing. As this is capital investment as opposed to current spending, it would be received very well by capital markets around the world. Whatever method you chose publicly to account for this, I do not believe that you would have a thumbs down from the capital markets. On the contrary, they may see it as an extremely sensible thing to do. Indeed, many of the larger financial organisations in the world—the IMF, the OECD et cetera—are calling for this sort of investment to boost growth at this time. There is a way of making the underlying philosophy and underlying mechanisms in the Bill work, but they will require a lot of flexibility and imagination on the behalf of the Government.
I remind the noble Lord that I knew him before he changed his views and the first of his parties. I strongly endorse the latter part of his speech but is it not really the case that, instead of imposing a mandatory scheme of local authorities, the Government should give local authorities the right to sell and encourage them to do so? It is the mandatory element across all councils in all circumstances that is surely one of the difficulties. Would he agree?
No, I would not, because, frankly, they have not done it and they would not. That is the dilemma that the Government are in: if you are really to make this work, I am afraid it is inevitable that you have to make it mandatory otherwise it will not happen. The question then is how you do that and how you translate it into more social housing.
My Lords, we have heard some very powerful speeches. I certainly do not wish to repeat, to the boredom of the House, the points made very effectively by the noble Lords, Lord Kerslake and Lord Best, but I entirely agree that the sums do not stack up.
A few months ago, the Minister took the Cities and Local Government Devolution Act through this House very skilfully, patiently and responsively. If this proposal had been part of that Bill and produced by this side, I suggest that she would have told us three things. First, she would have said, as a former local authority leader herself, that in the name of localism the sales of local authority property should be determined by those who know best—the local authority itself. She would have used that language last summer and indeed often did so, and she was right.
If local authorities decide prudently, as I think they should, to scrutinise their property stock and where appropriate to churn it—as I have certainly done in the past, selling more expensive stuff and replacing it with more effective, appropriate and numerous properties that best fit local need—the second thing that the Minister would have said, following the noble Lord, Lord Best, is that that was exactly what local authorities do and that local authorities are best placed to make that decision. What works for London does not work for Norwich; even what works for Cambridge does not work for Norwich. To have this blanket approach is anti-localism, the spirit of the very Bill that she was persuasive in encouraging the House to support last summer.
Thirdly, the Minister would have said that if local authorities decide to churn their resources, selling larger and more valuable properties—in Cambridge the average council house is worth about £350,000—then they should determine how those resources are recycled and spent. They may decide to help to build for sale—I have done that in the past—and why not if that is what their local area needs? In the name of the localism Bill that the Minister took through the House, local authorities are best placed to make that decision and should do so, not have it imposed by central government—as, to some extent, the noble Lord, Lord Horam, was arguing.
The result is that the Government have two pressures in the Bill. First, they want to increase the supply of housing, and they are absolutely right: we need to increase the supply of housing, and I do not think there is any dispute between us on that. It would help the construction industry and would help to address the demographic problems that are coming up as our populations grow and age, and as we need perhaps different sorts of housing from the sort that we have. The second motivation for the Bill, beyond increasing the supply of housing, is to increase a particular tenure, which is home ownership, as fuelled in this case by right to buy. What the Minister has to accept, as was spelled out by the noble Lords, Lord Best, Lord Kerslake and Lord Horam, is that the two flatly contradict each other. If you use the money coming from right to buy to fuel home ownership, at local authority level you will not be able to replace the stock lost.
Take your pick. The Government have two objectives, which most of us share—I certainly do—but the mechanism that the Government have set up for the funding means that the attempts to increase the housing supply in this country, including affordable housing, are subverted, undermined and sabotaged by the method of funding right to buy from the sales of more valuable property. What they should be doing is saying to local authorities, “We will encourage you to do this if this is what you think your area needs. The first call on the profits and resources from that sale of more valuable property should be, in your judgment, how best to replace your local stock”. If there are surpluses, it may well be that local authorities can come to arrangements with housing associations to help them to increase their stock too. That is what we should be doing: finding a co-operative way forward, so that if we go down this path of churning stock—with which I have no problems at all—it should first be deployed to increase the housing stock and only secondly to increase home ownership. If you use this money to produce home ownership through right to buy, you will not replace the stock.
The Government have to consider what will determine their policy: what is best suited for the country or, I am afraid, an effort to appease Tory party policy. They do not have to do it in this way but they have that choice. If they want to increase housing supply, they have to find a different mechanism from the one they are proposing in the Bill of funding RTB discounts, because it will not work—the sums simply do not work. Many of us have crawled over these figures and we know that they cannot do what the Minister hopes: fund discounts, replacement stock and brownfield sites. That cannot be done unless the mechanisms are changed by the Government. The Minister will be well advised to listen to the comments not just of the Cross-Benchers but from Members on her own side such as the noble Lord, Lord Horam.
My Lords, I will make a very brief contribution to this debate as we enter another controversial section of the Bill, which has at its root, as the noble Lord, Lord Kerslake, said, a section of the manifesto. He warned us to beware of manifesto fundamentalism. What he calls manifesto fundamentalism other people might call democracy—namely, delivering the commitments that one made during an election. If I was still in another place, going back less than a year, I would be slightly cautious about saying, “I’m very sorry but we’re not going to do what we said because that would make us guilty of manifesto fundamentalism”. Given the low esteem in which politicians are held, one has to be quite cautious before one abandons manifesto commitments. In this case, the manifesto was quite clear:
“We will fund the replacement of properties sold under the extended Right to Buy by requiring local authorities to manage their housing assets more efficiently, with the most expensive properties sold off and replaced as they fall vacant”.
That is a perfectly practical policy, although I understand from most of the contributions so far that it is fiendishly unpopular with local authorities. In fact, the policy has been softened a bit, as they do not have to sell the high-value assets; if they have other ways of meeting the levy, they can do that. As a former local councillor myself—
I would not be surprised at all if some local authorities use the discretion under the Bill not to fund all the levy by selling off high-value assets. They may have other ways of meeting their obligations, so that is a welcome concession. Having said that, I understand the strong feelings of many who have served in local government—
Not surplus but vacant—in other words, as a tenancy comes to an end, the property then becomes vacant. I accept all the arguments we have heard so far that there may be people who want to move into it, but “vacant” means that no one lives there. That is relatively clear.
Having said that, I recognise that this is a fiendishly unpopular policy in this House, but all the debate so far has focused on one side of the coin; namely, the removal of the assets from the local authority. To get the argument slightly more balanced, one needs to look at where the money goes. The proceeds will be reinvested in housing, either by helping housing association tenants to buy their homes with the discount—homes that are then going to be replaced. All the homes that are disposed of by local authorities will also be replaced; all the money will go to regenerate brownfield sites so that they can be available for housing. Therefore, all the existing housing stock remains in place, still part of the existing assets of the country, but the proceeds that are generated will generate new supply.
Can I just finish this point? The noble Lord, Lord Best, made the point very effectively that in one case you can get four times the number of units by disposing of one. It seems to me that, if one stands back and looks at the policy in macro terms, one is increasing the supply of housing stock by generating new build without diminishing the assets that exist at the moment. I accept that there is a change in tenure and that may be the point that the noble Lord, Lord Beecham, is going to make. However, in terms of housing policy, one is recycling assets in order to increase supply. The Treasury—I speak from experience—has normally been against hypothecation, but in this case it seems to have insisted on it by insisting on a linkage between revenue and expenditure, and I understand why it has done that.
Picking up what my noble friend Lord Horam said about flexibility, I think that it is important so to define high value that not all the large properties in a local authority area are disposed of. One has to retain a balance of stock. I hope that “high value” will be defined in such a way in London that local authorities in the centre of London do not find that all their properties are defined as such and they have to dispose of them. I take the point made by the noble Lord, Lord Best, and others about the situation in rural areas. I think that one needs to be flexible, but I am prepared to stand up and defend the overall principle of the policy.
Consultation is going on at the moment to discover at what rate local authority properties become vacant and the levy will be based on the normal turnover of local authority stock, so I think that it is perfectly defensible to come to an arrangement that fixes a levy. I think that there is a provision in the Bill that enables the Secretary of State, in certain circumstances, to refund the levy to the local authority. Therefore, I do not think that what the noble Lord says undermines the principle of requiring local authorities to recycle assets via the Government in order to increase the total supply of the nation’s housing stock.
Before the noble Lord sits down, I just want to make a few points. The first is that of course the party that wins in the election will seek to deliver its manifesto commitments. That is absolutely right and it is part of the democratic process, but my point is that there has already been a variation from what was in the manifesto. We are not extending right to buy to housing associations like for like; we are putting in a different, voluntary policy for the perfectly sensible reason that it allows flexibility and addresses some of the issues such as the one affecting Peabody where properties receive no public subsidy. So there has already been flexibility.
The second point is that the intent here is to give people the opportunity to buy their property, so the end is clear: so far as possible we want to give people who live in housing association properties access to purchase their property in the way described. The question I am raising concerns the commitment to the mechanism by which that is delivered. I do not think that the electorate would feel that the Government had reneged on their commitment if they said that the mechanism they thought could deliver this was based on a set of false assumptions: an assumption of turnover of properties that was twice the actual level and an assumption about the value of those vacant properties that was way over the actual figure. In those circumstances, is it not reasonable for any Government to say, “We have to look again at the means while still being committed to the ends”?
I understand the point that the noble Lord is making but he may recall an intervention that I made on Tuesday: the trouble with the alternative means of funding the commitment is that it increases the PSBR. There, you hit another real constraint from the Treasury in delivering the Government’s overall macroeconomic policy.
My Lords, we have very many reasons to be grateful to the noble Lord, Lord Kerslake, but I suspect that in years to come he may well be remembered most for giving us the term “manifesto fundamentalism”. I was going to attempt to define it, but the noble Lord has just done so in a very much better way than I could. Maybe it is something like “the irrational adherence to a manifesto detail when there is a demonstrably better way of achieving the greater policy objective in that manifesto”. I am sure that, over time, others will be able to refine that definition more, but I think that that is what we are talking about—an irrational adherence to a clearly poor way of achieving the objective.
My noble friend Lady Bakewell at the beginning of the debate—
It may well do, my Lords, but I will resist the temptation to be distracted in that direction.
At the beginning of the debate my noble friend Lady Bakewell set out the Liberal Democrats’ view on this; a view which is clearly very widely shared—dare I say it?—right across the House. We accept that the Government have a manifesto commitment to give people the right to buy their own property. However, it is the funding of that that is the problem we are debating. We are being very gentle in referring to it always as a levy, rather like the way some people used to talk about a community charge. But calling it a levy does not make it any less of a tax—and that is exactly what it is: a tax. I am grateful to the noble Lord, Lord Young, for making it very clear that it is a tax and that it does not necessarily bear any relation at all to the realities of the sale of so-called high-value properties. It is simply a tax. It is there to achieve a financial objective, not to relate particularly to the sale of high-value properties. I am not sure that the noble Lord, Lord Young, is optimistic, but perhaps he is hopeful that it might not necessarily mean the sale of high-value properties, or indeed of so many high- value properties.
I make particular reference to London. It has been recognised many times in the process of this Bill that there are very particular problems in London, not least the number of so-called high-value properties, however one defines “high value”. But an added problem—certainly a welcome problem if it is achieved—is having not a one-for-one replacement but a two-for-one replacement. However, experience thus far in London has been that the previous one-for-one replacement programme has not exactly been an outstanding success. In fact, it has not really been achieved at all. Therefore, to double that and look for a two-for-one policy—which would be welcome if it is achievable—must be doubly difficult.
Let us look for a moment at what that could mean. As has been said so many times in this debate, we again await crucial detail on how this is going to be implemented. I do not actually know whether the definition of “high value” will apply on a London-wide basis—in which case, good luck to Westminster and to Kensington and Chelsea. When we first thought that that would be the case, my own borough of Sutton thought that it probably would not have to sell any properties, but, demonstrably, that is not going to be what happens. However, we await confirmation in London of whether this will be done on a borough-by-borough basis, some sort of subregional basis or what basis at all. What is the definition of a “high-value property” in that context? There is a huge difference between, in my case, the London Borough of Sutton, or that of Barking and Dagenham, and, at the other extreme, Westminster, Kensington and Chelsea, Camden and so on. So we are going into the dark in London, with no idea what this will actually mean.
London Councils, which represents the 33 London authorities, has said that,
“it is critical that this policy delivers: An increase in housing supply … A net increase in affordable housing … No loss of London’s social mix … London’s funds reinvested in London”.
I pause for a moment on the issue of the social mix. A little while before the general election, I talked with the then chairman of Westminster Property Association, a major property developer in the City of Westminster. He wrote his own manifesto, expressing considerable concern about what he felt was happening in Westminster—his city. Before the general election and before the introduction of this policy, he said that before very long Westminster would be a city for either the very rich or the very poor, and that the great number between those two extremes—whether we call them the middle classes or whatever; the people who make up and who are active in the community—would be driven out and have to leave Westminster. That is a social conclusion with a profound effect.
This policy is not just about whether the sale of high-value properties will produce a two-for-one replacement in Sutton or somewhere else in outer London where land values are less but, crucially, whether it produces the same replacements in the City of Westminster, in Kensington and Chelsea, in Camden and so on and maintain the same social mix that is rapidly being lost. Or are we in fact accelerating the drive of people ever further away from the centre of London and therefore further away from the places where many of them have to work? Indeed, central London, as anywhere else, is dependent on people on low incomes to support our many services.
A similar problem is that the replacement homes need to be provided swiftly—not in years to come, although that would be welcome, too, but swiftly. There is inevitably a gap between the sale of the property and its replacement either by one or two similar properties. They need to be similar properties and they need to be in the same area. Again, what is the definition of an area when applied within Greater London? Does it mean a borough? Does it mean a particular part of the borough? Does it mean south London, north London? What does it mean?
I hope that the Minister will be able to give us greater clarity on when we will get those definitions and when we are going to know, because London borough councils—and I am sure this applies to local authorities throughout the country—are really worried about the effect of this policy in their area and their inability, simply through lack of knowledge and lack of detailed information, properly to be able to plan for what is to happen, however unwelcome it is. I hope that the Minister will able to go some way, if not all the way, to clarifying those important details.
My Lords, I apologise to the Committee for being late on parade this morning due to my travel arrangements.
It is tempting from these Benches to have a bit of a dig at manifesto commitments, bearing in mind that I made my maiden speech in this House in my previous incarnation here on what became known as the poll tax, so I know that political expediency often overrules practical reality.
Your Lordships will know that I come to this matter with a certain area of technical expertise in relation to development matters. It seems to me that there is more than a hint of evidence that a sale by a housing association of a property at a 20% discount is not a self-sustaining model without the cross-subsidy, notwithstanding the fact that many housing associations are involved at the commercial end of residential property development and are in competition with other private sector operators in the market for the same sites—therefore, one can reasonably suppose that they are making some developer-type profit out of that.
Given that most local authorities now no longer operate on that basis—your Lordships’ Select Committee on National Policy for the Built Environment had evidence brought before it that indicated the sharp fall-off in local authority construction of new homes; the evidence from the graphs that we were shown was incontestable—it follows that the sale of a local authority house on whatever level of value is also unlikely to be self-sustaining. More to the point, it does not have the cross-subsidy from the allied sector—or any sector really. There will either be an attrition in the numbers replaced—not one for one—or an attrition in quality, AKA size; whatever way you want to do it. It might be both. That might result in a cheapening of the housing stock to the potential detriment of the built environment and the long-term value and therefore sustainability in terms of people’s willingness to maintain and look after these places.
The noble Lord, Lord Tope, referred to something that I know as market drag, which is when something is sold and there is a period when one tries to organise where to reinvest the money and things happen. The market may move forwards or backwards, as the case may be, financing arrangements may change, opportunities that may have been counted on may disappear or new ones may arise. One therefore cannot easily say that £20 today will give £20-worth the day after tomorrow. It does not work like that because of the very high number of price-sensitive factors involved in the development world. In any event, we do not know how many high-value council house sales will take place, and we have heard that we do not know what high value is intended to mean. Is it in absolute terms—the largest four-, five- or six-bedroom house in a council’s stock? Or, more disturbingly, could it be a relative test by reference to a series of sub-categories of housing? We do not know.
When the Minister held a series of meetings before Second Reading of the Bill—and I give great credit to her for organising those—it became clear that there was a great deal of unfinished business in terms of getting the information back from local authorities about how this would work in practice. We do not have a worked model and I wonder what that means in practice. I remain to be convinced that reinvesting in social housing is more than a short-term fix. I mentioned at Second Reading that the precedents are not that great. I referred to the proceeds of council house sales. First of all, councils were able only to spend the interest that arose on the capital sum. Then they were not even able to use that and finally the Government of the day in 2000, as far as I could see and this may be an oversimplification, popped the lot into the Consolidated Fund. Thereafter, we had the business of developers somehow funding this social element because the entire stock of billions had disappeared. I do not know what it was spent on because of course the Consolidated Fund does not tell us that. The Treasury does not like hypothecated figures in its Consolidated Fund: it wants a big bank account on which it has great flexibility. I can understand that.
I feel that smoke and mirrors are involved here. What I am really getting at is that if there is a 20% discount at every turn—so that a house is sold at a discount and the money is reinvested in something else that is then discounted at another 20%—I do not see that that is viable. I would really like the Minister to ask her officials whether we could see a worked model of how that would function in practice because I strongly suspect that what is involved is forward guessing on increases in property and land prices.
As a registered valuer and thus being subject to all sorts of things that registered valuers are subject to, I absolutely proscribe forward guessing future rises in value: the value is what it is today. If I am reviewing a value the day after tomorrow, it is the value for the day after tomorrow, but on day one and on any accounting basis, to forward guess an increase in value is an extremely risky and perilous operation. But I sense that that is what lies behind this, because the numbers do not seem to add up. I fear that that is what is implicit in this. I ask the Minister again: I would really like to see a worked example of how it will be done.
I am not against the principle of the Government’s manifesto commitment, but I sure do not want to be here trying to sort out the debacle that might arise if we get into a situation of relatively static house price increases and land values, which we might. Then the year-on-year increase that might implicitly be built into this model evaporates and it fails. While I do not wish to say whether I am necessarily for or against this series of amendments, they raise a very important point about the underlying financial principles that are involved.
Does the noble Lord agree that while his figure of a 20% discount may make perfectly good sense in terms of the finances for London, in cheaper areas outside the capital a discount of £77,000 or £80,000 can represent getting on for 40% of the value of the property?
The noble Baroness is absolutely right. There is a great temptation to look at this in terms of London and the south-east which is not a model that pertains everywhere else. Somewhere like Lincolnshire is not even out of what we would call the housing recession yet, or so little out of it that it makes no difference. When you get to the position where you are reinvesting, it must be noted that certain things remain stubbornly the same across the country; construction costs and normal finance costs remain stubbornly the same. The variables are land prices on the one hand and the exit price for the finished product on the other. It is clear to me that in some parts of the country the margin is perilously thin because we are not seeing housing development in those areas. Why is that? It is because there is no economic rationale to enable it to happen.
I do not wish to be drawn specifically on London because that draws me into an area in which I would not feel comfortable about voicing an opinion on, but as a piece of general geometry, the higher value parts of London and the south-east cannot be transposed to somewhere further afield which has a completely different model. One issue is the regional imbalance that has developed over the years under a number of different Administrations; I do not point a finger on this, but it is a fact that we have a serious regional imbalance. Yesterday I chaired a small meeting that included an Italian lady who is an expert in housing finance. I asked her whether the economic imbalance between, say, the north of Italy and the Mezzogiorno is worse than it is between the north and the south of this country. She replied, “Not a bit of it. It is recognised that there is a much more acute problem here in Britain than there is in Italy”. She went on to quote some figures that I did not understand, but I pass that on for what it is worth and I hope it answers the noble Baroness’s point.
My Lords, before I speak, I should refer to my previous declarations of interest. I am not sure whether I keep having to do this because they have been set out in previous debates. Obviously my noble friend the Minister will not expect me to support taking assets from well-run councils and giving them to poorly-run housing associations, but I do support the Government’s commitment to extending the right to buy to RSL tenants and allowing councils to sell and dispose of high-value assets. Currently we have to do that via Secretary of State approval. I think that the last time my council did it, John Healey was the Secretary of State; that is how long ago it was.
First, I will put a plea in for Lincolnshire. Despite what the noble Earl, Lord Lytton, has said, Lincolnshire is not a stagnant housing market area. My own district is probably the ninth fastest housing growth area in the country in terms of prices and I urge anyone who is thinking about investing in property to come to Lincolnshire because it is a very good investment area. I also need to put a plea in for councils. In the past five years we have built more council houses than we did in the last five years of the previous Government, so councils are building more properties. I do not think that the figures the noble Earl was given reflect accurately the actual numbers that are being replaced.
If this debate is about the Government having a manifesto commitment to bring in right to buy and a commitment to sell high-value assets, they should not necessarily be seen as two policies that are tied together. Both are perfectly laudable aims, and one way to make sure that the sale of registered social landlord properties is achievable is by giving the registered social landlord only the money necessary between the capital receipt and the cost of the replacement unit. Nearly 600,000 of those units where the right to buy will be applied to the 1.3 million are where the preserved right to buy no longer exists on homes sold through large-scale voluntary transfer. Those houses went from councils to registered social landlords at little or no capital cost, so a significant public discount is already built into those homes. If that money is freed up, we would have to find a much smaller sum to be able to meet the Government’s commitment on this. I urge the Government to remember that their flagship policy of right to buy is something that can be passed on to future generations only if councils have the right to build, so taking resources from councils is not the best way of maintaining this flagship policy.
My Lords, perhaps I may just explain that I was reiterating a piece of evidence that came before the Select Committee on the National Policy for the Built Environment. I have forgotten the gentleman’s name, but I thought he was from Lincolnshire; it may be that he was not. He was a representative of one of the smaller housebuilder trade federations and he made it clear that where he came from, they were not yet out of the recession. As I say, I thought it was Lincolnshire, but if it was not and Lincolnshire is all fine and dandy, then I fully accept what the noble Lord, Lord Porter, has said.
My Lords, we should be grateful to the noble Lord, Lord Porter, for his contribution because he has clarified his position on the forced sale of high-value council homes, as well as for the distinction that he has drawn. It is particularly helpful and I hope the Minister will pay due attention to it.
The issue here was put very well by the noble Lord, Lord Horam. If there is a requirement on councils to sell off high-value homes, however they are defined—I hope the Minister even today might be in a position to define for us what a high-value home actually is—that should be for new social housing, not to fund the right to buy. I think I have interpreted accurately what the noble Lord said. I noted too the comments of the noble Lord, Lord Best. He said that requiring councils to sell high-value housing is a bad idea because it cannot be righted by switching the burden on to housing associations. I hope I have cited both noble Lords correctly.
The broad thrust is the same: that it is one thing to sell high-value council homes to reinvest in other council properties, but quite another to use that money to fund the right to buy housing association properties. We have hit upon one of the key problems in the debate on this group of amendments—it has taken some time, but it is right that it has because the issues have now come out. This is not about vacant homes; it is about an assumption in government that there is such a thing as surplus council homes. I am afraid that I simply do not believe there are surplus homes, yet I have heard in a number of places the word “surfeit” being used. It is not the case that there is a surfeit or a surplus of homes. It is very important that the Minister does not confuse vacant homes with surplus homes, because local authorities, which have the knowledge of their areas, know whether a vacant home can be re-let.
I will be really clear so that there is no doubt in the Minister’s mind: for these Benches, the forced sale of high-value council homes, reducing the social housing stock as a consequence, is a red-line issue if it is simply to be used to fund the right to buy housing association homes. There has to be a coherent policy that ensures there are enough social rented homes for people in this country to live in. As things stand, the Government’s policy will reduce the number of rented social homes in the places they are needed and it will make things much worse for the 1.6 million people on social housing waiting lists. As we have heard, it will jeopardise new housebuilding because it will erode councils’ ability to borrow. As the Minister has heard from me on several occasions, because larger homes tend to be high-value homes, because they have more bedrooms, their sell-off may well take priority over the sell-off of other homes, so larger families will suffer as a consequence.
I know that the Minister is aware of the research by the Joseph Rowntree Foundation on council bungalow sales. It warned that although such homes are often suited to the elderly or those with special requirements, 15,300 council-owned bungalows could be sold off in England by 2021. I would be grateful if the Minister responded to that. The Joseph Rowntree Foundation is a hugely respected charity and its advice should be taken very seriously. Will the Minister tell us what the Government’s response to that research is? These things really do matter, as does raising the cap for local authorities on housing investment. Again, I do not hear Ministers talking much about this, but it has been a running proposal in your Lordships’ House for several years that that cap should be raised.
The demand is there in the social rented sector for the higher-value properties that the Government will require to be sold whether there is need for them, or whether they are actually vacant. Surely it is for local government to assess its local market needs and the need for social rented housing in its areas. Surely, its position should be protected if it knows that a vacant home is required by somebody on a housing list. Finally, what do the Government think about the overall impact on local government finances? I noted the comments of the noble Baroness, Lady Hollis of Heigham. She is absolutely correct on the capacity of local government actually to fund what some on the other side believe local government is capable of funding.
I repeat: this is, for these Benches, a red-line issue. I hope very much that the Government will think again and very quickly.
My Lords, it is always a pleasure to follow the noble Lord, Lord Shipley. He knows how greatly I respect him and it was an honour to call him my noble friend for five years. But when he talks of a red line, with all the authority of a party with eight colleagues in the other place, is he telling this House that those Benches plan to deploy 100 votes here to frustrate the will of the other place? I suggest to your Lordships that that smacks rather of anti-manifesto fundamentalism.
I will clarify that matter. I agree entirely that it would have been much better had the Bill started in the House of Lords; then, some of these issues could perhaps have been put right before it reached the other place. That said, the Bill is here and we have a requirement to comment on it, amend it and vote on it. I have just said that our view on these Benches is that this is, for us, a red-line issue.
My Lords, I think the answer is yes.
I have listened with intense interest to the debate. I was not intending to intervene—I remind the House that I have interests as a leader of a London borough, and as a member of the leaders committee of London Councils—but, on looking at Clause 67(4), I point out that my local authority does not keep a housing revenue account. We are an exceptional authority, in that a former Liberal Democrat administration carried out a large-scale voluntary transfer, so we are entirely dependent on housing associations. We are not a housing authority. I became leader in a situation where a previous administration had transferred away our council stock.
It is with some diffidence that I intervene. I know that there is greater concern in London, as the noble Lord, Lord Tope, said, about some of the detailed impacts of these clauses and others, but I am aware that the Government and local authorities in the London area are having many discussions about how this will operate. I hope my noble friend will say that greater clarification is certainly needed before Report of such discussions and the details that will lie behind the Bill. Parliament really needs to have more insight into the details.
I wish to follow the comments of my noble friend Lord Porter about housing associations, although I would not perhaps put them in the characteristically sharp way that he did. I listened very carefully to the carefully scripted remarks of the noble Lord, Lord Best. I will look at his speech in Hansard tomorrow, but he appeared to say quite clearly, from a script, “Don’t look to the housing associations to make a contribution. We’re strapped for cash. We’ve got reserves, but we cannot afford to chip in, old boy, so it’s over to you”. Maybe I misinterpreted that, but I will look carefully at the record.
Of course, housing associations are vital and respected, and I welcome the partnerships that we have. Housing associations are going to the market and raising enormous amounts of money. One of my local associations raised some £100 million recently. At the same time, they are moving to separate from their close relationship—for many of them—with former local authorities. We were asked to relinquish our places on the local housing association board to facilitate the association’s financial advancement, which we were very happy to do in the broader interest of securing more finance for public resource and public investment in housing.
However, it is important that housing associations—I make no accusation in any particular way—remember that they own a public interest and must work with local authorities. They cannot be divorced from responding to the challenge that my noble friend Lord Porter put forward. It is important that we retain confidence that they are cognisant of their accountability locally. Looking at the amendment—I do not necessarily agree with it—how can we be sure that housing should be replaced in the same area? I was unable to be present at earlier discussions in Committee on this, but can I be guaranteed that my housing association will replace in my local authority area? By what accountability will that be delivered? I would like to hear the noble Lord, Lord Best, say, perhaps at a later stage, that housing associations will take all that into great consideration.
My noble friend Lord Horam talked about the need for a mandatory hammer, if you like, but with flexibility—talk softly but carry a big stick, as Teddy Roosevelt would have put it. I do not necessarily dissent from that. But my problem is that we are seeing a lot of negotiations going on, a lot of deals being cut, which, at the end of the day, we hope will respect local conditions and local authority. I want policy to be delivered by local conditions, not by the need to get figures for housing on a piece of paper in answer to a Written Parliamentary Question in the House of Commons. We want responsive, locally-led housing policy. So the more open those negotiations can be, the better. I do not like deals cut in quiet rooms with unelected officials, whether they are in City Hall or in the Treasury. So let us have a bit of flexibility and I am sure that my noble friend, by Report, will be able to shed a bit of light on what I hope will be the voluntary agreements that are emerging.
I want to cover one other point. The noble Lord, Lord Tope, spoke about London’s extraordinary diversity. Much of policy—this is implicit in the Bill, with the two-for-one and the one-for-one replacement—is dependent on and recognises a line on the map, which is the Greater London area boundary. I think that London is evolving in a strange way. Perhaps we are going back to the days when there was an LCC and an outer London. It may well be reflected in the way that votes are cast in the coming mayoral election. It is very difficult to define a single policy. I do not think that anyone in this House would say it would be easy to define a single policy for the whole of London, let alone the whole country. I worry about policy that is defined simply on the basis of a line on the map which is the edge of Greater London. There are travel-to-work areas. Look at the emerging Gatwick corridor. It might be quite legitimate to replace, even with a one-for-two policy. Is there anything wrong in replacing two houses just south of Sutton, if you like, or just outside the Sutton area, which could be for Sutton people, in the same travel-to-work area? I hope that that can be considered and that we will not allow a line on the map to dictate policy absolutely, particularly at the fringes of London.
Because of outer London’s changes and the high land values in certain places, we must look at new policies and new powers. It will have to be, in my submission, for local authorities to deal with some of the issues that arise. I will conclude with one example. In my own authority the Ministry of Defence has lately put up for sale a significant, large facility, Kneller Hall, which houses the Royal Military School of Music. It is very controversial. The rationale is money. The ministry says it wants to build houses, yes, but when probed, of course, it wants to build houses of maximum value for the Ministry of Defence and the Treasury. As I understand it—I have not had this confirmed—some of the land has already been sold to a developer before we are anywhere near a planning application. In those circumstances, do the Government not own a responsibility to play a part in this kind of policy?
The Government lecture local authorities—and we accept the responsibility—to do our best to provide affordable housing. But is there not, within the parameters of disposal of publicly-held property, a collective responsibility which the Government, government departments and government agencies should share, to put this aspect of public policy into their plans for disposals? I am straying a bit from the Bill—I was intending to bring it up in the planning stages of the Bill—so I do not expect the Minister to answer on that, but can we look, when we come to the planning area, at whether we could find ways of pressing public authorities more generally, through the planning process, to share some of the responsibilities that these clauses put upon local authorities?
Will the noble Lord expand on his first point, which concerned the situation of stock transfer authorities such as his own? I agreed with so much of what he said. Given that he has no high-value council property to enter into forced sales, as we have been discussing, to finance RTB for housing association tenants, his authority will, instead, be levied to fund it, in the absence of stock to sell. Has he made any estimate, in his budgets for the forthcoming year, of the scale of that levy and how it interacts with his ability to manage local authority finances?
Clause 67(4) says that a determination may not be made in respect of a local housing authority that does not have a housing revenue account. So I think it would be better to ask the Minister, rather than a pitiful leader of a London authority, to clarify this point when she replies. But it is actually a detail in the larger question. My authority would be very happy to make any contribution towards housing. In fact, if the LSVT had not taken place, all our council housing would probably be high value in some of the places it used to be and the housing association that now sits on it, if that were us, would be having to sell off most of it.
Yet some of us have been assured, as my noble friend says, that Clause 68(3) was drafted precisely to cover those authorities with stock transfer. In my county of Norfolk, Norwich has retained its council stock, there is limited retention in Great Yarmouth and King’s Lynn, and the other four authorities transferred their stock into housing associations. Are we saying that authorities such as Norwich are not only supposed to fund the RTB discounts for housing association tenants in their immediate locality but are also, on top of that, to cross-fund all those stock-transfer authorities so that they do not contribute to the right-to-buy discounts of housing association authorities?
Clause 68(3)(b) says that the Secretary of State may,
“treat the housing as being likely to become vacant whenever it would have been likely to become vacant if it had not been disposed of”.
The whole point of that, we were assured—I am sure the Minister will clarify this for us—was precisely so that stock-transfer authorities were levied in lieu of the fact that they do not have stock to sell, which local authorities that retain their stock may be in a position to do.
My Lords, there is a fairly simple explanation for this. An authority that has already transferred its stock, as the noble Lord, Lord True, has talked about, is in a good position, because it will not pay the levy. If, on the other hand, an authority would like, in the future, to transfer its stock, it will still pay the levy. I have an amendment later which seeks to remove that particular provision. It seems quite extraordinary that an authority cannot, in the future, transfer stock, but if it has transferred it, it will escape any levy. That seems to me to be an imbalance that we need to address.
I thank the noble Lord, Lord Kerslake, for that explanation. In that case, it means that there is going to be double the levy, not just one levy, for RTB for local authorities that have retained their stock—mainly city authorities. The cross-subsidy will come from those local authorities not just to fund RTB in their own district—we do not yet know how much redistribution there will be or on what geographical basis—but to cross-subsidise local authorities that transferred their stock five years ago, two years ago or 10 years ago. It is monstrous. You are asking those local authorities with retained stock to pay twice over for their own retained stock to fund the housing associations in their district council or unitary authority and to fund those which are not in their geographical area, are not part of their local authority and, frankly, have chosen to go down a different route.
My Lords, I hope nobody thinks that this is about one type of council cross-subsidising another type of council. This money will go nowhere near councils. That is what is wrong with this Bill: it takes money from councils and gives it to not-councils. Councils that have already transferred their stock cannot be levied because they do not have the HRA, as the noble Lord, Lord Kerslake, has already said. And, perversely, from an LGA perspective, if they choose to transfer in the future, they will still be levied. But this is not about transferring money from one council to another. Indeed, until we know whether the sale of high-value assets really will take place and what the final definition of “high value” ends up being, councils with stock may well not pay any levy even though they still have their housing stock, because they may not have any housing units in their HRA account that sit in that top third of value.
But councils with retained stock—and that stock is not coming forward as fast as government would wish—will have a levy in view until their own vacant stock is forcibly sold. That levy has to come from somewhere. Why on earth should some local authorities be expected to fund RTB discounts out of their money when other local authorities are not? What is the basic fairness in that? I absolutely take the noble Lord’s point that this is a redistribution from some local authorities but it means that those with retained stock will have to pay double the size of the levy or double the number of sales to make good the fact that a very large proportion of more rural district councils do not have any retained stock.
My Lords, the noble Lord, Lord Porter, and the noble Baroness, Lady Hollis, are in agreement on this. They both oppose the fact that this levy will be solely on those authorities that have retained stock and a housing revenue account, and that it will be a very large sum of money—£4.5 billion per annum on those councils that have retained their stock, and nothing on those councils that have transferred their stock. The noble Lord, Lord True, can read my script at his leisure. He felt I was saying that housing associations should not contribute but councils should. I am absolutely not saying that councils should carry the burden of the right-to-buy discounts for housing association tenants, as he thought that I might be. I am saying that neither councils nor housing associations should pay for this new policy and that we should see new investment, which is what we need to replace homes that are lost, and to build new homes. We need new investment.
I happen to know a bit about the Richmond Housing Partnership, which is the body to which the stock of Richmond has been transferred. It is a really excellent example of a housing association that has received the council stock and is doing extremely important things to build more homes. It is doing exactly the right thing. It would be a terrible shame if, instead of councils or the Government paying for these discounts, that organisation were taxed with a levy—that would be very detrimental to the interests of Richmond—and had to pay for the right-to-buy sales. It is making some serious economies at the moment. It is having to make efficiency gains on a big scale because its rents have been reduced due to welfare reform pressures. Nevertheless, it is doing a great job. It would be a very big shame if the idea gained any momentum at all today that housing associations were the cash cow from which could be extracted the resources to pay the £4.5 billion per annum. That would simply take resources out of the development programme for the very people for whom we need to build the new homes of tomorrow.
My Lords, I do not want to delay the Committee on a specific point, but since the noble Lord, Lord Best, has identified a housing association which I have tried not to identify, I should say that of course I have great respect for that housing association in many respects. It has done certain things that I would not have done but this is not the place to discuss that. I am sure that he has friendly views towards local authorities. Indeed, I know that he has and welcome that. But it is a fact—he has confirmed this—that the noble Lord, Lord Porter, is correct in saying that housing associations will not make a contribution to this policy.
Confusion has arisen over Clauses 67(4) and 68(3) regarding the ambiguity of the word “disposes”, and what it actually means—past or future. Perhaps Ministers might consider redrafting that whole section to make the Government’s intention much clearer.
My Lords, I intended to speak on the next group of amendments but, since my noble friend Lord True and the noble Lord, Lord Tope, have both raised the London problem, I thought that a few comments on that would be appropriate. They rightly pointed out that certain London boroughs, particularly those in central London, have a problem in terms of high-value assets and their definitions. Indeed, they mentioned Kensington and Chelsea and Westminster. I would extend this as far as the old LCC area, as my noble friend Lord True did. But, of course, the problem extends to the Corporation of London, which has relatively few council properties, most of which—if they were put on the open market— would be of extremely high value. Therefore, the definition of a high-value property is crucial not only in terms of a figure but of comparators with other London boroughs. I ask my noble friend the Minister to look very carefully at where the boundary of the defined area of high-value properties is drawn because, if it is drawn on the GLA area, we will see the total demise of social housing in central London. If it is drawn much more locally—perhaps on the LCC area, which may still be too wide in some cases—we can mitigate the problem. This issue concerns the point made by the noble Lord, Lord Tope, on the social mix in London. That social mix is very important for lots of reasons, including social cohesion, enabling people on lower pay to get to their jobs, live close to where they work and to work anti-social hours. I could go on and on—as we all could—to define the problem.
However, I add the caveat that this problem has not been created by this Bill and, sadly, is not of recent creation. As a former Member of Parliament for a part of inner London, I know with certainty that this problem has been generated over the last 30 years, and probably over the last 40 or 50 years, whereby, to obtain social housing, whether council or housing association property, a potential tenant had to be in a crisis situation. It was not enough to need low-cost housing; there was a requirement to qualify for it on grounds of disability, having a crisis housing need and being totally homeless, or having some other problems which got you up the housing list. Being on the list for long enough was not sufficient.
There are some very real problems in inner London. I know that my noble friend the Minister is very well aware of these problems, but they need to be specifically addressed and a blanket solution which covers the whole of the United Kingdom—or, indeed, England and Wales—will not solve them. We need a special and particular solution for London.
My Lords, before I respond to the amendments, I will make, as I did last week, some introductory remarks which will set today’s discussion in context and, I hope, reassure noble Lords about our proposed approach to this important issue.
For many years there has been underinvestment in housing, as my noble friend Lord Carrington and many other noble Lords have said. Recognising that the supply of housing needs to increase, as the noble Baroness, Lady Hollis, said, the Government have set a target of a million new homes by 2020-21 and are determined to do all that they can to boost housing supply. That is a key government priority. There are also many people living in housing association properties who do not have the opportunity to realise their dream of getting on to the property ladder because they do not have the right to buy. That is another key government priority. The provisions we are discussing today will support the delivery of both those priorities. I will explain how.
We know from published statements of accounts that the market value of local authorities’ housing stock in April 2014 was more than £200 billion. By requiring councils to sell their high-value housing as it falls vacant, we can realise that locked-up value to support the building of additional homes, increase housing supply and extend home ownership by funding the right-to-buy discount for housing association tenants.
Let me also be clear: this is a flagship manifesto commitment. I am not going to get into arguments today about manifesto fundamentalism. I shall leave that to other noble Lords. It took centre stage when the Prime Minister launched the manifesto because he and this Government believe passionately in the importance of building more homes, which this country needs, and helping more people achieve their dream of owning their own home.
I also want to update your Lordships’ House on the commitment I made at Second Reading when I said I would keep noble Lords informed as we made progress with the collection of data on the 1.6 million homes owned by local authorities. I understand the frustrations that have been expressed that we have not yet provided noble Lords with more details of the policy. I hope that noble Lords will understand the importance of ensuring that we have all the data and that they are correct before we make policy decisions that will inform how much individual authorities have to pay.
The majority of local authorities had provided data by the end of January 2016 but there were some outstanding issues, such as a lack of vacancy information for some areas. We have now obtained almost all the data required, and we are processing and validating them. I hope that noble Lords will understand that doing this for more than 16 million pieces of data takes time.
That is why this legislation has been designed as a clear framework for the policy, to enable us to take into account the housing that is owned by local authorities, in line with the manifesto commitment and without restrictions that are inappropriate or unnecessary. We have also been conducting an intensive engagement exercise with local authorities to understand their views about the policy, and we will reflect on those as we develop the regulations. I reiterate my commitment to your Lordships’ House that I will bring forward the detail that noble Lords want as soon as we can.
I close my introductory remarks by thanking noble Lords for their scrutiny of the Bill and by emphasising what I said on Tuesday—that this will help shape the development of this policy. I also assure noble Lords that the Government will take into account all the points that have been raised as they take forward the legislation.
I now turn to the amendments, for which I thank the noble Lords, Lord Kennedy, Lord Beecham and Lord Kerslake, and the noble Baroness, Lady Bakewell. Parts of Amendments 61 and 62A relate to components in the calculation of payments. Clause 67 already allows for costs and deductions to be set out in the determination. These will be detailed in the determination, on which we will consult local authorities, their representatives and their relevant professional bodies. I assure noble Lords that in calculating the payment, we are committed to making a deduction in respect of the transaction costs for local authorities to sell housing, and in respect of the debt supported by those properties that are taken into account in a determination. We will continue to work closely with local authorities to establish how these figures should be calculated.
Parts of Amendments 61, 62 and 62A seek to deduct the cost of replacing properties from the payments required. Clause 72—and this may go some way to addressing the point made by the noble Baroness, Lady Hollis—already provides for the Secretary of State to enter into an agreement with a local authority to retain a portion of its receipts to fund new homes. The amendments would merely make deductions from payments and would not be able to require the delivery of the additional homes that the country needs in the same way that the agreements will. The amendments would simply allow local authorities to retain the funding. So the agreement process will ensure that local authorities will deliver the houses and will achieve value for money in doing so.
The agreement process will also give local authorities a lot more freedom to build the houses that meet their communities’ needs—this has been mentioned several times today—rather than placing expectations for the new homes in the Bill. Local authorities will be able to decide on the tenure of the homes and where to build them. If, for example, an authority wanted to work with a neighbouring authority to build homes across borders, the agreement process would allow for that. I can think of an example somewhere near me where that might happen.
Amendment 62 seeks to use the definition of affordable homes from the National Planning Policy Framework up until May 2015. This would not be consistent with the definition of affordable housing in Clause 72 and elsewhere in the Bill.
Amendment 66A seeks to require another statutory instrument under this chapter. However, we think that the determination is the correct place for any formula used to be set out. The key variables that feed into the formula, including the definition of “high value”—of which more later—the definition of “vacancy” and any exclusions, are either set out in the Bill or will be set out in secondary legislation made under the Bill. This means that there will be parliamentary scrutiny of these key definitions.
In addition, the legislation sets out the overarching way that payments will be calculated. It must represent an estimate of the market value of the authority’s interest in any high-value housing that is likely to become vacant during the year, less costs and deductions that would also be set out in the determination, including transaction costs and the debt supported by the housing that is expected to be sold. Moreover, Clause 69(2) requires us to consult with local housing authorities, the LGA and relevant professional bodies before making a determination under Clause 67. Local housing authorities will therefore have an opportunity to comment on the proposed approach to the formula before the determination is made. The amendment appears to create an unnecessary hurdle that could delay the opportunity both for housing association tenants to buy their homes and for councils and housing associations to build the additional homes that the country so desperately needs.
Turning to specific questions that noble Lords have asked, the noble Lord, Lord Shipley, the noble Baroness, Lady Bakewell, and the noble Earl, Lord Lytton, all expressed concern in different ways about how the number of bedrooms might be used to define high value and how it will impact on the disposal of larger family homes. The noble Lord, Lord Shipley, and I have had discussions on this on previous occasions, but I am pleased to place some of those on the record, and to reassure him and the noble Baroness, Lady Bakewell.
As part of the data-collection exercise, we have asked local authorities to tell us not only the market value of each house but the number of bedrooms. We are intending that the formula for high value will estimate the number of homes of one, two, three and four bedrooms that fall above the threshold. Specifically, we will set out the different monetary thresholds for what constitutes high value for homes of different bedroom numbers. For example, the threshold that applies to a one-bedroom property will be completely different from that which applies to four-bedroom homes. The result of this is that in general the threshold for larger properties will be set higher than if we had set one threshold that would apply to all properties regardless of the number of bedrooms. It also means that we are not just looking at vacant larger homes, which would by their very nature be the most expensive, but are determining high value separately from the number of bedrooms.
Can the Minister also tell us whether all this information—and as a result, the Government’s estimate of the size of the levy and the contribution to be made by local authorities, according to their turnover and so on—will be available before we get to Report?
My Lords, what is absolutely certain is that this is precisely what we will be consulting local authorities on. That is why both the conversations in your Lordships’ House and those with local authorities will be so important in making these determinations.
We are here on day five in Committee on the Bill and the Government are still part-way through a consultation. Would the Minister not agree with me that it would have been much better if the Government had acted sooner and had the information ready for consideration in Committee?
If the Government are placing crucial policy decisions beyond the possibility of amendment in this House, because instead of being embedded in primary legislation they are going to be carried by SIs, any attempt to amend them in whatever form will produce synthetic outrage down the other end, and we will be told we should accept them whether we like it or not. This will not do. I absolutely understand that the Minister cannot be happy at the position in which she has been placed: she is essentially being asked to bring forward framework legislation, yet again, in which the heavy lifting will be carried out by SIs, which this House—which is supposed to scrutinise those SIs—cannot touch. Issues which could have been amendable in the appropriate way in primary legislation will be put beyond our reach.
I am grateful for the Minister’s offer to have such meetings, but of course they will probably take place long after the Bill has been enacted. She will be aware that the Delegated Powers and Regulatory Reform Committee has been highly critical of this aspect of the Bill. It has also been critical of the Government’s proposal that the negative procedure be used, rather than the affirmative procedure. I remind the Minister that the Committee said that the memorandum the department sent to the committee,
“justifies the negative procedure on the basis that ‘the range of values within which it will be possible to set the definition of “high value” will be limited by normal public law principles’”.
I confess I do not understand that, but the Committee goes on:
“We do not regard this as being even remotely persuasive”.
The Minister could at least commit the Government today to bringing forward an amendment to use the affirmative procedure as and when this ever gets before the House.
To answer the noble Lord’s point, I am well aware of what the DPRRC has said about this, and I think he will be at least partially pleased when we respond. Perhaps I could make some progress, as I am aware that I am only part-way through what I wanted to say to a number of your Lordships. If any noble Lords want to come back again after I have spoken, they are very welcome to do so.
The noble Baroness, Lady Bakewell, talked about the selling off of bungalows in particular, as reported by the Joseph Rowntree Foundation. Councils will be required to make the payment to government in respect of their high-value vacant housing. Noble Lords, including those on the Lib Dem Benches, have made their views clear on this, but under the formula approach, councils will have discretion about whether individual properties are sold as they become vacant, and we will consider the views expressed by noble Lords on all of these elements as we develop the detail.
The noble Lord, Lord Best, asked when we will know what the formula is and how much local authorities will be required to pay. We will be consulting local authorities about the formula before issuing a determination, as I have said. We have been clear that decisions informing the determination under secondary legislation must be based on up-to-date information from councils. I have made the point about the huge amount of data and the real need to get that right.
I will spend a minute talking about the consultation process itself, because I know it is causing concern among noble Lords, and that points have been made about local authorities being engaged with this. Over the past few months, there has been a series of technical briefings, which I know many noble Lords have attended—for those who have not, I recommend them—about the various provisions in the Bill. We have also engaged closely with both local authorities and other stakeholders in helping to develop the high-value vacant housing policy and understand the potential impacts at local level. All stock-owning local authorities have been invited to at least one of the following events: a ministerial meeting with local authority leaders and/or members; a local authority chief executive discussion; or a round-table discussion between local authority and DCLG officials. In total, 180 contacts from 123 local authorities have engaged with the HVA process through one of these events. Going forward, we expect to continue to engage with local authorities and a wide range of stakeholders on the policy, because it is so important to get it right before making the final determination.
The noble Lord, Lord Kennedy, the noble Baroness, Lady Bakewell, and others talked about forcing local authorities to sell off properties. We have been clear that the country needs to live within its means and that we need to find the most efficient way of using public resources to deliver our manifesto commitments. As I have said, local authority statements of accounts show that there is over £200 billion-worth of value tied up in the 1.6 million local authority homes. We want to ensure that the value is used as efficiently as possible, and we know that more expensive vacant homes can be sold to provide additional housing as well as funding the discount for right-to-buy sales. This is an efficient use of assets at a time when we need more homes across all tenures. It is about increasing the overall housing stock, not reducing it. In London, where there is the greatest housing need, the legislation provides that local authorities which enter into an agreement will need to provide at least two new affordable homes for each home that is expected to be sold. I recall giving some of the detail of that the other day.
The noble Lord, Lord Kerslake, asked why the Government are not pursuing alternative ways of funding, for example equity loans. As the noble Lord, Lord Horam, said today and as I said last Thursday, the discounts will be on the same basis as the existing right-to-buy scheme. Equity loans would not provide that same offer to those tenants. The noble Lord also questioned why I could compare this to the Government’s sale of surplus public assets. I fully agree that there is a real need for additional housing in this country, but there is no need for any council whatever to hang on to expensive homes when it could build, at a fraction of the cost, new homes which meet its housing needs just as well, if not better. It is in this spirit that the Department for Transport has brought forward land for sale around King’s Cross that is valued in the department’s account at £345 million, and the Ministry of Defence announced plans in January to release 11 sites in England that could generate £500 million and provide land for around 15,000 new homes. We need to make sure that we make the most efficient use of our assets—that is the point I want to stress.
I think the noble Lord and I will disagree on this but it is incumbent on owners, whether private owners, the Government or local authorities, to make the best use of their assets, whether that means selling expensive ones or not. I accept that we will have to agree to disagree on this but that is our view.
The noble Lord, Lord Kerslake, talked about the right to buy not delivering one-for-one replacements and questioned how the policy would do so. In the first year following reinvigoration, 354,000 additional homes were sold, and by the end of the second quarter of 2015-16 there were 4,117 new starts and acquisitions. That means that, to date, authorities are delivering a new home for every one sold.
I am intensely aware of just how long we have gone on but I cannot let that point pass. It is essential that the Minister address the analysis in the NAO memorandum, which clearly identifies the challenge here. This would all be a lot easier if we could see a set of numbers that said, “Here’s the potential receipts, here’s the potential deductions from those receipts and here’s how it will balance with the cost of the discounts”. We might then be able to have a sensible debate.
I make one last point on what the Minister said. I am absolutely up for efficient management of stock and I am very much up for a duty on local authorities to manage their stock efficiently. But this is not about efficiency; this is about a levy to pay for a government policy.
My Lords, it is both but I take the noble Lord’s point. I am sure that, as time goes on, we will discuss those figures again and again and perhaps courteously argue about who is right and who is wrong. The noble Lord does not think that the numbers add up and I have just responded to that.
The noble Lord, Lord Best, talked about the sale of high-value assets raising £4 billion per annum. The amount of receipts raised will depend on a number of factors and decisions. The Bill sets out the framework, with further detail to be provided through secondary legislation, which I know noble Lords are frustrated about. However, the Bill has flexibility through the formula approach, which enables us to continue working through the details with the sector. Once we understand what the data tell us, we will be able to consider what the detail will be and, subsequently, how this will fund the two aims of the policy: right-to-buy discounts for housing association tenants and the building of new homes. Therefore, I am very grateful for all the points that noble Lords have made today.
The noble Lord, Lord Campbell-Savours, asked whether rents will triple in London. I know London is a very expensive place to live—nobody is denying that—but I would not expect rents to triple. As I have said, the important thing is that we will take the time to talk to those implementing the policy on the ground to guard against things happening that we would not intend.
The noble Baroness, Lady Janke, who is not in her place, talked about looking at best practice. As with other housing policy, there will be a technical consultation on the detail of the determination and we would expect the relevant professional bodies to include CIPFA, the LGA, the GLA and local councils. We will of course look at what innovative local authorities such as Bristol—it is a shame the noble Baroness is not in her place—are doing, as she suggested.
The noble Lord, Lord Campbell-Savours, asked how we can justify wide boys making a quick buck, making a point about landlords taking advantage of tenants. We are aware that there are people who will seek to gain from any policy and will find ways to circumvent any safeguards we put forward. None of us could fail to be affected by the story described by the noble Baroness, Lady Hollis, on Tuesday of the elderly pensioner reluctantly buying his home to see his grandchildren due to the unscrupulous actions of his daughter-in-law. We are alert to the ways through which some people may be seeking to gain from right-to-buy sales, both under the existing scheme and the voluntary scheme with housing associations. This is one thing we are considering as we progress through the pilot this year. We want to strike a balance between guarding against abuse and overlimiting the right of individuals to buy their homes through right to buy.
The noble Baroness, Lady Hollis, also mentioned the reduction in social rents being an additional burden on housing associations. However, rents in social housing have been increasing faster over the past five years than those in the private rented sector. If this change puts more money back in the pockets of the people paying the rents, we think it is the right thing to do.
If I could just conclude, the noble Baroness can then intervene.
We are making changes in the interests of fairness to bring rent increases in the social sector back in line with those in the private rented sector. Housing associations and local authorities have already proved themselves more than capable of responding to the change.
My Lords, it would be helpful if the Minister, when she made the statement about the reduction in rents to the benefit of housing association and local authority tenants, had accepted that three-quarters of that money will go back to the Chancellor in reduced housing benefit. This is not a “helping tenants to afford their rents” policy; it is about reducing the housing benefit bill.
On a separate point, I know the Minister is trying to be helpful about the information we will no doubt get, but will we have all this key detailed information—the result of the consultation—before we get to Report, so that we do not have to rely on the statutory instrument proposal for stuff that should be in the Bill?
My Lords, regarding whether the Chancellor benefits, my point is that this will be of benefit to tenants if their rents reduce. It will make a difference to a lot of tenants.
The noble Lord, Lord Horam, asked why we do not raise the local authority borrowing cap so that councils may borrow more. This was mentioned time and again during the consultation process leading up to the local government finance settlement. We listened to the authorities and £221 million of additional borrowing was allocated to 36 councils in England. That will support around 3,000 new affordable homes.
The noble Lord, Lord Kerslake, asked whether right-to-acquire tenants would have the right to buy under the voluntary deal. Minimum eligibility has yet to be determined for the main voluntary right-to-buy scheme, but we are currently working closely with the NHF and housing associations on the implementation of the agreement. For the pilot, it has been set at a minimum of 10 years, as the noble Lord will know.
The noble Lord, Lord Tope, asked what “high value” will be set at, which is a very pertinent question. Will it be at market price? I am aware, as noble Lords have pointed out, that it is important for the legislation but has yet to be set. The definition will be informed by the data that I have talked about, which we are collecting from local authorities and the market value survey. Although we have had some information on house prices and local authority stock across the country, we felt it was important to update this information as it will be pivotal to establishing how much individual authorities will have to pay. As noble Lords will know, the definition of high value will be set out in regulations—I hear a groan going up across the House as I speak. We are currently giving careful consideration to the fairest and best way to set that definition. In doing so, to address the point made by the noble Baroness, Lady Bakewell, we will have regard to factors such as property size and geographic location. I genuinely welcome any further thoughts that noble Lords may have on this point.
The noble Earl, Lord Lytton, talked about investment in social housing being short term. We are doubling our investment in housing over this Parliament to more than £20 billion over the next five years. This is the largest housing programme by any Government since the 1970s. Under it, there will be 100,000 affordable homes to rent and 400,000 affordable homes.
The noble Lord, Lord Tope, talked about this as a levy, a tax that does not relate to the actual sale of high-value vacant stock. Local authorities prefer the use of a formula to determine payment to basing payments on actual sales. It will give local authorities greater certainty and predictability, which will help them better to manage their finances, and it will provide greater flexibility for them to choose what property they sell to make the payments.
The noble Lord, Lord Shipley, talked about his red line issue. This is part of our wider efforts to help anyone who works hard and wants to get on the property ladder to do so. I understand his concern over the links between the two policies, but it is important to remember that receipts from these sales will be used to fund the building of more homes by housing associations and local authorities, to increase overall housing supply all over the country, so that we reduce the regional imbalance of housing supply—an issue raised by the noble Earl, Lord Lytton.
I just want the Minister to understand the importance of this policy. Our red line is the compulsory or forced sale of high-value council homes when there is a need for them in the locality. That is the red line. The fact that part of the receipts might be used to build a replacement or support the purchase by the tenant of a housing association property is secondary to the issue of a local authority having the power to decide whether there is a need for that property. I hope that the Minister understands the importance of that.
I understand what the noble Lord says, and if there is particular need in an area for a specific type of housing, it is within the local authority’s gift to issue the money, as opposed to selling the property. The whole point is about increasing the housing stock across different tenures and different parts of the country.
Finally, to address a point made by the noble Baroness, Lady Hollis, about stock transfer, the policy will affect the 165 councils that own housing and operate a housing revenue account—the noble Lord, Lord Kerslake, helped here, and he is absolutely correct.
The noble Baroness is correct that the policy will apply only in those local authorities that operate their own housing revenue account.
I hope that my responses have provided some reassurance to noble Lords on some points. The Government are committed to ensuring that the calculation of payments includes deductions in respect of the transaction costs for the sale of housing and in respect of the debt supported by the housing that is expected to be sold. I hope that noble Lords are also reassured that we are committed to ensuring that a portion of receipts will be used to deliver new homes, and that the agreements process will provide as much flexibility as possible for local authorities to deliver as many new homes as they can. The amendments would not guarantee the delivery of the new homes that are desperately needed in the same way as will the agreements process. I hope that, with those comments, the noble Lord will feel free to withdraw his amendment.
My Lords, I am not sure that I declared it at the opening of the debate, but I am an elected councillor in the London Borough of Lewisham; I declare that to get it on the record, as usual.
I thank all noble Lords who have spoken in this debate. This is without doubt one of the most controversial parts of the Bill, which is reflected by the time we have spent on this one group of amendments today.
The noble Baroness, Lady Williams of Trafford, did not make a very convincing case. We are obviously not going to agree with her case why the amendments should not be supported. Virtually every contribution to the debate highlighted the problems with and deficiencies in the Government’s proposals.
I have no problem with the right to buy, but I and other noble Lords have said that the funding mechanism is truly dreadful. Having no regulations while discussing the Bill has highlighted once again how completely unsatisfactory the Government’s handling of the Bill has been so far. The mechanism is a tax on local authorities, it is an attack on council housing. The noble Baroness needs to reflect carefully on today’s debate. In particular, I hope that she will reflect on the contributions from the noble Lords, Lord Horam and Lord Porter, from her Benches, as, without doubt, we will come back to this issue on Report. I am sure that she senses the strength of feeling across the House.
I was a little surprised that the Government have, so early on, started to rely on the manifesto defence. That normally comes forward just before a vote. Here we are in Committee, with no vote in sight, but we are back to the manifesto defence. That highlights the problems that the Government have with the Bill. I hope that they will recognise that and propose some welcome amendments. With that, I beg leave to withdraw the amendment.
Amendment 61 withdrawn.
Amendments 62 and 62A not moved.
House resumed. Committee to begin again not before 3.17 pm.
Question for Short Debate
My Lords, I have waited a long time for this date with the noble Baroness—and not just today—but the timing, if not the timing for noble Lords’ speeches, has turned out to be perfect, as last week saw the Government publish no fewer than three responses to discussions about renewal of the BBC Charter.
Although it is no surprise to me or my colleagues to discover that the British public overwhelmingly support the BBC, I suspect that it is for the Government. More than 80% of people responding to the Green Paper believe that the BBC is effectively serving audiences, about 75% support the licence fee as the best method of funding the BBC and almost three-quarters believe that the BBC’s services are truly distinctive and that it has a positive wider impact on the market.
As the summary of responses document states, the response to the consultation,
“was one of the largest ever received to a government consultation, highlighting that the future of the BBC is an important issue to a great many people”.
Despite the fact that the Secretary of State paid tribute in his speech last week to,
“the hours the public put into writing”,
he struck a sour note by implying that the involvement of the organisation 38 Degrees had somehow distorted the responses. Can the Minister assure the House that the Government do not believe that 192,000 people have been nobbled?
It is vital that John Whittingdale, the Government and Parliament remember, as this process of charter renewal gathers pace, that the BBC belongs to the licence fee payer—the public, not politicians—and that the Secretary of State honours his pledge to the chair of the BBC Trust that,
“all the responses will be properly considered in their decision-making”.
What is clear is that the BBC, despite what we read in so many editorials and so many opinion pieces, is not under attack from the public. Quite the contrary: across Britain, people use the BBC services every day and very happily because it serves them well. So where do the attacks come from? To quote the much-quoted Armando Iannucci:
“We seem to be in some artificially-concocted zone of outrage”.
As I said, 75% of the respondents support the licence fee, as do we. At 40p per day, the BBC is tremendous value for the consumer. It is also great for the UK economy, generating the equivalent of £2 for every £1 of licence fee—in other words, it doubles its money. As Sir Peter Bazalgette, chair of Arts Council England, said when giving evidence to the House of Lords Communications Committee, on which I sit:
“One of the justifications for the intervention in the marketplace that is the BBC is the value of the creative industries democratically, culturally, socially and economically”.
By the way, Sir Peter was appointed chair of ITV last month, and I am reliably informed that he has not changed his views.
We do not, however, support the way in which the licence fee is set. The covert way in which the Chancellor negotiated the BBC taking on the cost of funding free TV licences for the over-75s, effectively making the BBC a vehicle to deliver elements of the welfare state—blocked by the Lib Dems when we were in coalition—was inappropriate, to say the least. Can the Minister assure us that this is the end of the process and that this is the licence fee settlement, as the BBC believed when taking on the £700 million cost of the free licences? Does she not agree that the process should, in the future, be transparent, and that the level should be recommended by the new regulatory body?
With the BBC being asked to take this financial hit, it is important that other sources of income are not undermined. Does the Minister not agree that BBC Worldwide is a crucial element to the BBC’s ability to continue to fund UK content?
A second report was Sir David Clementi’s A Review of the Governance and Regulation of the BBC. We welcome its recommendation that the BBC should have a unitary board. We on these Benches argued when the BBC Trust was established that that arrangement would only perpetuate the muddle between regulation and governance, and it has. However, it is vital that the Government ensure the appointment of a genuinely independent chair and genuinely independent non-executive directors. We should note the warning from the noble Lord, Lord Hall, that under Sir David’s proposal,
“half the board … could be appointed by the DCMS”.
Does the Minister agree that there should be an independent appointment panel, with the majority of its members drawn from outside politics and outside the Civil Service?
The third report is An Assessment of Market Impact and Distinctiveness. The call in it—repeated by the Secretary of State—for BBC1 to be more distinctive is odd, considering that the channel comes out top of independent Ofcom’s distinctiveness measures.
On the matter of market impact—“crowding out”—there seems to be particular concern in the area of online news. BBC news has higher levels of trust than any newspaper, and in the digital age it is surely more important than ever. As Sir Peter said,
“yes, it does compete and it is a market intervention, but if it is to have an impartial and independent news and information service for the country—if we believe in that—it has to have an online iteration”.
Our concerns on these Benches about BBC news are different. They are about the downward trend in investment in current affairs, noted by Ofcom in its latest review of PSB. It is vital that the BBC maintains both quality and quantity in this genre, for the reasons I have just mentioned.
There are other areas, of course, where the BBC’s choices and behaviour have been far from perfect. These include Savile, money wasted on a digital media initiative, and unacceptable pay and pay-offs for senior executives. Members of the “officer class”, as the noble Lord, Lord Hall, refers to them, have been out of step, and there are still too many layers of them. We therefore welcome the very plain pledge this week by the newly appointed head of TV channels, Charlotte Moore, that,
“Life’s going to be simpler”.
We on these Benches believe that training and skills development should be made one of the BBC’s core public purposes. It must learn the true definition of partnership: that a partner is someone you collaborate with, rather than impose on. Furthermore, if the BBC is properly to reflect the country, it has to address the problem of a lack of diversity. We need diversity at production and management level, as well as on screen. The last two issues were addressed by Charlotte Moore and must all be delivered upon.
The BBC, as well as being so popular with the British public, plays a hugely important role in promoting the UK around the world. At home, it plays a crucial part in our democracy and wider society. It is vital that it maintains its independence, its ability to inform, educate and entertain, and—we believe—its licence fee. To quote the chair of the BBC Trust:
“Charter review hangs over the BBC: a cloud of uncertainty and unease”.
Can the Minister reassure the House that we will not have to wait long for the White Paper, since the new royal charter needs to be in place by the end of the year? Does she not agree that, in future, the charter review process should be,
“decoupled from the general election cycle”,
and that charters should be set to last 10 years in order to provide stability for the BBC?
Finally, my first job at the BBC was working for a great man and a greatly missed man: Terry Wogan. He certainly knew how to entertain, but also to inform and educate. I wonder whether he would have been distinct enough if he had sought a BBC job under the world of Whittingdale? This is what he had to say about the BBC:
“The BBC is the greatest broadcaster in the world. It’s the standard that everyone measures themselves against. If we lose the BBC, it won’t be quite as bad as losing the royal family, but an integral part of this country will have gone”.
That is so right: the BBC is unique, a glorious aberration. Once it is gone, it is never coming back.
My Lords, at a conference in London earlier this week, Michael Lynton, CEO of Sony Pictures Entertainment—an American—talking about the current state of television said:
“Britain sits at the very core of this creative renaissance in television. Britain is punching far above its weight in terms of the number of writers and actors and directors who are engaged in this endeavor. And most of this talent would not exist if it were not for the BBC. The creative ecosystem that exists here in Britain is unique and would evaporate in the absence of the BBC and that absence would not only be felt here but throughout the world…We have no idea whether this renaissance is sustainable from a talent perspective. Nor do we know whether the new platforms and technologies that permitted it are economically viable in the long term. I am convinced that there is an important place for a strong and well-funded BBC in the television landscape”.
While, as many of your Lordships will know, there are a number of significant changes that I would like to see relating to the way in which the BBC is organised, this particular proverbial baby must not be thrown out with the bath-water at the same time.
My Lords, as a member of the Communications Committee, I want to emphasise that the main conclusions of our report on charter renewal echo those of the Government’s own consultation.
First, the Government received no compelling evidence for reducing the scale and scope of the BBC. Of the nearly 200,000 people responding to the consultation, 81% said that the BBC served them well.
Secondly, the committee underlined the corporation’s independence and recommended a longer term for a new charter, which would divorce renewal from the electoral cycle. Again, this is reflected in the consultation report, where nearly three-quarters of the public wanted the BBC to be totally independent. I have just visited America, watching the frenetic media coverage of the election there. It has reinforced my respect for BBC news, for its neutrality and depth. The majority of audiences here say that the BBC is their most trusted news source.
I hope that the Government will take note of these consistent views from both the public and Parliament, and respond positively as charter renewal progresses.
My Lords, last Friday I gave the Minister notice of five questions that I would like her to answer in this debate.
First, do the Government accept that the charter should be for at least 10 years? Secondly, do they accept that the BBC’s new board members should be appointed without ministerial influence and should include audience and staff representatives? Thirdly, do they accept that the BBC’s service licences should be reviewed and strengthened by the independent regulator as soon as possible? Fourthly, do they accept that the level of the licence fee should be generous and that the process of setting the level of the licence fee must be transparent, with the level to be recommended by the regulatory body? Fifthly, do they accept that there must be no further reduction or diminution in the scale and scope of the BBC’s news coverage on any platform?
The BBC has an exceptional history as a technological innovator. It is one of its core undertakings, yet less than 3% of contributors to the public consultation commented on it and there have been grumblings that, in these days of digital tech, innovation is no longer an appropriate task for the BBC. What we once thought of as broadcast and programming has now been conflated with other forms of communication, both commercial and personal, into a single notion of content delivered on multiple platforms and devices. The purposes and the values that govern the creation and delivery of this content are generally opaque and throw up increasing ethical and practical issues that are never going to diminish. In these times, the BBC has a unique role to play not only as a trusted content provider but by developing and building cutting-edge communication technology of behalf of the licence fee payer.
My Lords, the BBC has three core purposes: to inform, to educate and to entertain. Will the Minister comment on a fourth purpose, which is to interpret? Diversity has been perceived in terms of regional diversity when one could also say that ethnic and religious diversity in the country need to be taken more seriously. Religion is a primary motivator of individuals and communities, inspiring and informing their political, economic, ethical and social behaviour. It needs to be interpreted. What the world looks like when seen through a particular religious lens needs to be taken more seriously. In July 2015, Ofcom expressed concern about the diminution of attention to religion in the BBC. Can the Minister assure us that this will be taken more seriously in the charter renewal?
My Lords, we must find a better way of debating serious issues in this House, such as the future of the BBC. One-minute speeches are frankly ridiculous, but perhaps they illustrate the fundamental defect in the royal charter process. The royal charter may sound very grand, but it means that none of the Government’s proposals come to Parliament for decision. If we are serious about the independence of the BBC, we should scrap the charter, set up the BBC as a statutory corporation and resolve that no Government shall be allowed alone to determine the future of the BBC. In other words, this would be a matter for Parliament after proper debate without the 60-second speaking clock.
My Lords, I rise simply to read into the record the findings of this House’s Communication Committee. After an excellent inquiry, it concluded that it had not heard “a convincing case” for a significant reduction in the scale or scope of the BBC. It believed that:
“The BBC should not be restricted to remedying gaps for which the market does not provide”,
“must continue to be a universal broadcaster”.
For the Government to conclude otherwise would be an act of cultural vandalism for which they would never be forgiven.
My Lords, there are urgent calls for government action on the issue of investment in children’s content, that the BBC should commit 8% of the network original content spend to this and that it should not fall below £100 million per year over the next charter period, but there is strong opposition to a contestable fund for children’s content and to top-slicing of the licence fee to establish it because of the risk of the BBC doing less, the uncertainties about who would administer it, the cost of doing so and where the content will be shown. Reduced BBC budgets should not be used to fund commercial PSB activity. Any ring-fencing or top-slicing would also impede the funding of new initiatives, such as iPlay, and tie the BBC down in ways that do not take into account how children’s viewing habits are evolving. However, new money must be found to boost content for the neglected 12 to 16 year-olds, and it should be given to Channel 4 to provide competition for the BBC. If the decline in original content continues, the UK will no longer be the world leader, which will be a cost to the UK economy.
I declare my interests as stated in the register.
I declare an interest as a producer at BBC London factual.
I am concerned that the charter and its funding seem to have become separated. I share the concern of the noble Baroness, Lady Bonham-Carter, about the BBC taking on the burden of the over-75s licence fee. I fear that that the funds which are supposed to replace it will not be forthcoming.
On top of that, people are failing to pay the licence fee. There is going to be a £150 million shortfall by the end of the year in its payment. The digital licence is supposed to help close the loophole of digital viewers not paying the licence fee, but I fear that that will in no way compensate for the increasing shortfall as a new generation of viewers look elsewhere to get their content. My noble friend Lord Hall has announced 23% cuts by 2022, including a massive £80 million cut to news, on top of the 25% cut since the last charter renewal.
Everywhere I go in the world, people ask me why they cannot watch the BBC live in their country. Maybe it is time for the BBC to start supplying that audience need, thinking about taking on the streaming giants face to face and raising revenues in the process.
My Lords, recent public consultations have raised concerns that the BBC is too London-centric. While MediaCityUK in Salford helps compensate for the decline of ITV production across the north, other English regions could be better served. Scotland, Wales and Northern Ireland feel that they, too, deserve a better deal. The Campaign for Broadcasting Equality has also expressed concern about low levels of black and minority ethnic employment at the BBC. John Whittingdale has confirmed that DCMS consultations suggest that the BBC needs to do more to increase diversity and to reflect better the experience of people across all our nations and regions.
If we only get one minute each, we will waste 18 minutes of the time for this debate.
My Lords, the BBC is not perfect. I have worked for it as a documentary film-maker and have been the subject of one of its programmes. That programme turned out to be very different from what I had been led to believe, so I know that the BBC is capable of doing things in bad faith.
However, the BBC is an institution admired and trusted throughout the world. One of the reasons it is trusted is because it is independent of government, yet when its charter is up, like now, the Government of the day see their opportunity to influence it. Although the licence fee, the main source of the BBC’s funding, is paid by the British public, the Government control the licence fee and can decide how and where it will be spent and, indeed, whether it will continue to be financed by the licence fee in future. They are in a position to cajole the BBC to make programmes to their taste or to punish it if they perceive its news coverage to have an anti-Government bias. These powers are a threat to the corporation’s independence and many at the BBC today are nervous of the Government’s present intentions. As long as the BBC sticks to its remit, set out in detail in the excellent new charter review, the Government should not be allowed to interfere.
My Lords, it is essential that the BBC remains the keystone of British broadcasting, continues to play a central role in the wider creative industries and retains its reputation for quality and independence throughout the world.
The BBC should make a particular commitment to reflect the nations, regions and diverse communities of the UK. I hope the BBC will continue to meet the challenges of reflecting our modern and ever-changing Britain to ensure it remains pertinent to the concerns of the young, including those with disabilities and the BAME community, as the recent report of our Select Committee recommended, and to preserve its vital role in the life of our nation.
The BBC has a great future and there is no case to reduce its scale or scope. I hope the charter renewal process will prove an opportunity to refresh, not fracture, the BBC.
My Lords, in the past five years we have learned that a royal charter, far from being a powerful symbol and safeguard of the BBC’s independence, on the contrary enables Governments to be less accountable even than medieval kings; to amend the charter through the Privy Council, absent any public or parliamentary consultation; and to inflict unprincipled and material change on the BBC. In the process, around 25% has been abstracted from the BBC’s programme budget with no national debate whatever. We rightly condemn Turkey but this is our constitutional outrage and it simply must be put right. Changes to the BBC’s mandate must now be agreed by Parliament. The setting of the licence fee must now follow a rigorous and considered process. The noble Lord, Lord Fowler, is right. It is time to place the BBC on a statutory footing.
My Lords, I declare my interest as an ex-governor of the BBC. Given the time limit, I presume that the noble Earl, Lord Courtown, is playing the role of Nicholas Parsons to ensure no hesitation, repetition or deviation.
I want to make a couple of quick points. The new director-general—the noble Lord, Lord Hall, who is in his seat—has presided over a massive transformation programme. Some 90% of what is spent is now focused on content and delivery, and just 8% on actually running the BBC. That is a tough challenge even in the light of the Government saying that they will commit themselves to an above-inflation increase in the licence fee. Can the Minister confirm that there will be no more top-slicing of the licence fee for any situation whatever, as we have experienced in the past, and that this Government will be committing themselves to a 10-year charter renewal?
My Lords, the BBC is the best broadcaster in the world, and a great gift from us to the rest of the world. To ensure effective planning and investment, the new charter should last significantly longer than the five years that some have proposed. The proposals to top-slice the licence fee for contestable funding and to privatise BBC Worldwide should be rejected. The governance of the BBC should change broadly along the lines recommended in the Clementi review.
I hope that the Government will not be influenced by the Oliver & Ohlbaum and Oxera report into the BBC’s market impact and try to create a “market-failure only” BBC, filling the gaps left by other broadcasters. The report is flawed. A significantly less popular, more distinctive BBC would have an overall negative effect on the wider UK media sector and on UK plc, giving only a small benefit to the BBC’s direct competitors. I hope that the Government will tread with care and protect the jewel in the crown of British broadcasting.
My Lords, we live in a very materialist age where it is increasingly likely that we will know the price of everything and the value of nothing. The BBC, with its distinguished record, is in many ways priceless. Our influence and standing in the world are very much related to the profile that the BBC continues to have in our society, stretching from local communities in our own society to people in North Korea, for example, who are desperate for truth, objectivity and the rest. We risk its future as a standard-setter at our peril.
My Lords, your Lordships’ Select Committee on Communications, which I have the honour to chair, published its report BBC Charter Renewal: Reith not Revolution on 23 February. I am glad to say our report has been well received and I commend it to your Lordships. We reaffirmed the original Reithian principles for the BBC to “inform, educate and entertain”. We saw no convincing case for a significant reduction in the scale or scope of the BBC, nor for it to be restricted to remedying gaps that the market does not provide; and we said the BBC must continue to be a universal broadcaster. I was glad to see the complimentary review of our report by Peter Preston in the Guardian, which concluded:
“Their lordships helpfully chronicle something we don’t hear often enough: how good and important the BBC is to British life”.
My Lords, the BBC’s reputation is built on independence from government, yet during charter renewal it is also dependent on the judgment of government. It has a responsibility to report politics with fairness without fear or favour. Politicians have a duty to take decisions in the same manner, even though the BBC has often infuriated politicians of all parties. Recently, during the Scottish referendum, the SNP railed against the BBC. During last year’s general election, the BBC reportedly incensed the Prime Minister so much that he threatened to close it down. Yet during that same campaign, it also moved the Labour Party to make almost daily complaints. To my mind, far from being a weakness, this shows the strength of the BBC, with its editorial independence from all political parties—an organisation seeking balance even when it is impossible to achieve, and held to higher standards than any other broadcaster.
We now see proposals to allow a greater government say over the running of the BBC, but trust is a valuable and fragile commodity. Once lost, it is extraordinarily difficult to regain. The BBC is more trusted than any other media organisation. I hope that the Minister will agree that no Government should put at risk an impartial and independent BBC.
My Lords, brilliant discipline has given us short speeches but many important points, and I hope the Minister has been listening hard. I would like to make three.
The people have spoken, and such a large and passionate response has surely seen off the original plan to cut the BBC down to size. But the battle is not over. Last week the Culture Secretary’s call for the BBC to become “more distinctive” revealed the strategy: use the charter review to make it so minority-interest and “distinctive” that hardly anyone likes it at all—something that few people would miss—and then privatise it. Really?
The BBC is the keystone of the UK’s broadcasting ecology and the envy of the world. The public want the BBC to inform, educate and entertain, and to survive and thrive. Popular BBC programmes and services inform and educate as well as entertain. The BBC needs reform, but that is something that we should have confidence that it can do itself. It ain’t broke.
My Lords, this has been a wide-ranging debate and I congratulate the noble Baroness, Lady Bonham-Carter, on her timeliness. As ever, she has spoken eloquently about the positive role the BBC plays in the creative industries and in UK society as a whole. That has been echoed by my noble friend Lord Inglewood and others. I have to say that I share the concern that has been expressed about the limits of the House of Lords equivalent of speed dating—but in my comments I shall try to address the key areas.
The Government are making good progress on our consideration of the BBC’s next royal charter. Last week, as has been said, the Government published a summary of the 192,000 responses we received to our public consultation—they are all important—along with the Clementi review and a consultants’ report into the market impact of the BBC. We have also benefited a great deal from the carefully considered and well-received report from the noble Lord, Lord Best, and his noble colleagues on the Communications Committee.
To respond to a number of comments made by the noble Lord, Lord Stevenson, and others, the Government believe that the BBC is a great institution. However, as I think people understand, charter review is a once-in-10-year opportunity to look at the scale and scope of the BBC, and it is right to look at how to help the BBC and the wider media sector to thrive in future.
Sir David Clementi’s review into BBC governance is a well-rounded and thorough report that makes a clear case for a move to a unitary board. I know that many colleagues believe that appointments to the new board should be made independently. The Government, via an OCPA process, currently appoints all the members of the BBC Trust board. We need to examine what the right approach is for the future. What is clear, however, is that the appointment of the director-general, as now, ought not to be made by the Government. Given that Sir David has only just reported, the Secretary of State will be considering the arguments carefully over the next few months.
As important as governance is what the BBC does. As the noble Baroness, Lady Jay, emphasised, 81% of responses suggested that it served its audience well, and 74% suggested that the BBC’s content was of high quality. But it is important to note that not everyone responded to all 19 questions set out in the consultation. For example, only 5% of respondents commented on the BBC’s mission, purpose and values. Of those, 3% indicated that no change was needed. A comprehensive summary of all the responses received is set out in the report that the Government published last week, which noble Lords may well want to take a look at.
The noble Baroness, Lady Benjamin, argued, as she has so eloquently on many occasions, for a better deal for children’s TV. I know that she will pleased to hear that the Secretary of State had a round table last week with children’s TV producers. Obviously, we are conscious of the need to retain the BBC quality and to encourage variety and creativity in this whole area.
The right reverend Prelate the Bishop of Leeds rightly asked about the fourth issue, diversity, which has been raised by a number of people in our various consultations. The Secretary of State recently met Lenny Henry and is considering carefully how we can encourage greater diversity in what the BBC does. I also ought to respond, because I had not planned to cover it in any detail, to the comments made about regional diversity, which has also been an important part of the process and the consultation and which we will look at when we come to make decisions on the White Paper.
The report of the noble Lord, Lord Best, argued for reform of the way the licence fee settlement should be conducted and recommended that this should be set by the independent regulator. This is an interesting proposal that will be given careful consideration. But, ultimately, the licence fee is a tax, and taxation decisions are ones for Ministers. We will reflect carefully on this issue but it is unlikely that the Government will move decision-making powers for setting the licence fee away from Ministers, now or in the future.
Another proposal in the report is the removal of charter review from the electoral cycle by allowing the charter to run for 11 years and reverting to 10 years thereafter. The noble Lord, Lord Young, picked this up, as did my noble friend Lord Fowler. This view is shared by many, including the noble Lord, Lord Lester, who was kind enough to give me notice of his comments—I will write on a couple of them, as I do not think I have time to cover every single one of them—as it is seen as a way of enhancing the BBC’s independence. My noble friend Lord Fowler and the noble Lord, Lord Birt, proposed going a step further—scrapping the charter completely and setting up the BBC as a statutory body.
I will certainly try to do so. I am answering three of them as I go along, but I was conscious that noble Lords raised several points.
This view goes against those of many of the stakeholders—including the BBC—who responded to our consultation. Again, we will reflect carefully on this issue. Our current view is that at present a royal charter remains the most effective way of providing for the BBC.
The Minister may like to comment on this. A clause in the last charter says that the licence fee may not be used to fund the World Service. George Osborne then made his night raid, the BBC was required to fund the World Service through the licence fee and the charter was amended in the Privy Council. Would the Minister like to explain the constitutional rationale for that?
Obviously, there has been a good deal of comment on the agreement that was reached last year on funding. The rationale for it is clear: that economically, the BBC could not be exempted from the pressures on funding that have been imposed on every other public entity. In addition, the director-general agreed the funding package—
I will certainly consider the question further, but we are acting constitutionally—there is a BBC charter and a charter process, we are undertaking the review and consulting in an appropriate way, and we will come on to debate the proposals in due course. The Government behaved in an appropriate manner in trying to sort out the funding of the BBC, as they did last year. In many ways, as I have said on previous occasions, that has been helpful.
As I was saying, we will of course reflect carefully on these issues, and a proposal for the term of the next charter will also be set out in the upcoming White Paper.
As I have said, we are looking at the whole process at the moment. Independence is an important issue, and when we set out our plans we will come back with our ideas on how we can best ensure an independent and good future for the BBC. I wanted to respond to the points that were made in the report, because it is as well that people understand that the report’s key proposal on this point will not necessarily be accepted. However, having said that, obviously we remain in listening mode at this stage of the process and we will come back with a White Paper.
Although there has not been much comment on it, it is worth mentioning that last week the Government announced a deal with the BBC to close the iPlayer loophole, which, under current regulation, allows viewers to watch catch-up services on iPlayer without paying for a TV licence. Obviously, this will stop those who are essentially freeloading from not paying the licence fee, and the Government will bring forward secondary legislation on this point as soon as is practicable. This responds to the digital change that we have discussed in many of our different debates.
We set out our plans for funding and made it clear that there was a way forward, but we said that, in looking at the review of scope and scale, we would make sure that the plans that had been set out and agreed with the BBC made sense. I do not think I can give any commitments in particular on top-slicing, but I understand the concern. We all want a well-funded, well-run BBC—that is agreed territory.
I turn to timing, which I think will be of interest to noble Lords. Our intention is still to publish the White Paper in the first half of this year. As I said in an earlier debate, we can extend the current charter if we have to, although that is not the intention. In response, I hope, to the point made by my noble friend Lord Fowler, we will allow for debates in this House, the other place and the devolved Parliaments before the White Paper goes before the Privy Council for approval.
The most important thing is to get the charter review right, given that it is likely to set the framework for the BBC for years to come. The Government are committed to an open and transparent charter review process—a process which I believe is progressing well. I confirm again that the Government are fully aware of the importance of the BBC and of how much the public and this House value its contribution to society, to the creative industries and to the UK’s standing in the world.
The Clementi review has, I believe, provided a case for reform of the BBC’s governance and regulation, which was certainly a concern in earlier debates. The market impact report has shown that the BBC becoming more distinctive would help both commercial broadcasters and the viewing public by offering more choice. I look forward to a thriving, dynamic BBC which is respected around the world but also provides better value for money in the light of this important review.
Finally, I should say to the noble Lord, Lord Lester, that I have tried to answer his questions, although I do not think I have entirely succeeded. I will write him a letter and ensure that it is copied to other noble Lords.