My Lords, this proposed new clause is the same as that which my colleagues moved in Committee in another place by way of a probing amendment. It has been very powerfully moved by the now traditional triumvirate of the noble Lords, Lord Tope, Lord Jenkin and Lord Best—a powerful group indeed. In the Commons, I am bound to say, it did not elicit much information, and drew a rather aggressive diatribe from the Minister—something to
do with Labour and borrowing. Thank goodness we have a Minister at this end with whom we can have a measured and sensible discussion. We have an innate sympathy with this amendment, and would like to use the opportunity to press the Minister on some particular issues.
First, perhaps we can ask something that has been touched upon by the noble Lords, Lord Tope and Lord Jenkin; and if reported hints from senior Treasury officials at the time of the Autumn Statement that the Government were considering at least relaxing the cap are true and under active consideration, it may save us some time. I hope that they are, but perhaps the Minister can tell us whether they are.
I will also make it very clear that we accept that in the interests of macroeconomic management the Government are entitled to have powers to limit the amount of money borrowed by local authorities. In fact, the Labour Government legislated to that effect in 2003, and that power extends to setting limits on individual councils, and different limits for different kinds of borrowing.
When we were debating these provisions in what is now the Localism Act, I tried to get an answer as to why Section 171 was needed as well as Section 4 of the 2003 Act. I do not believe we ever got a satisfactory reply, so perhaps I can use the opportunity to ask again, in the hope that the Minister can now clarify the position. That is my second question.
We have had the benefit of several briefings on this matter from the LGA, the National Federation of ALMOs, CIH and others, and in particular, as has been referred to, we have had the Let’s Get Building report, which was commissioned by the National Federation of ALMOs. The case for more housing is overwhelming, and the need for more affordable housing is desperate. We can debate until the cows come home which Government have delivered what, but it is surely common ground that we need to build more, and that this is becoming increasingly urgent.
Therefore, this is not just about providing decent homes for people. The boost to the economy is surely well understood, as is the strong multiplier effect on GDP of construction and the boost to employment. Given the grim GDP figures delivered last Friday, this could not be more urgent. The need to boost construction and build more social housing is clear. The Let’s Get Building report also lays out why councils, together with ALMOs, are particularly well placed to play a role, especially in using their land assets, and to link it in with their apprenticeship and work experience scheme. Do the Government accept that analysis from the report? It would seem that at least part of the coalition does.
As the report points out, the revenue costs and savings of an expanded council new build programme are complex and depend on such factors as whether a grant from the HCA would be needed, the extent to which council tenants would require housing benefit—or universal credit in future—and the prior housing status of new tenants. To the extent that additional council housing reduces demand for supporting people in the private rented sector or temporary accommodation, there is a potential saving for the Government. Additional build also provides an opportunity to get a better
balance in the local stock offering. As the noble Lord, Lord Best, said, it is a reasonable way of dealing with underoccupation.
Of course, the crunch issue is borrowing. It is accepted that, under current rules, additional borrowing by councils will form part of public sector debt, notwithstanding that it will be effectively financed out of rental income. There may be arguments about recasting the treatment of that debt, but they are probably not for us today. As we have heard, the Let’s Get Building report proposes that additional borrowing of some £7 billion over five years would facilitate the provision of 60,000 additional homes, although the amendment does not call for this. It calls for the housing cap to be removed. Even if the Government were not minded to support the amendment, would they at least be minded to raise the level of the cap? Have they given recent consideration to this? The Minister will doubtless tell us that there is existing headroom of some £2.8 billion, but this is not evenly distributed.
It is worth putting these borrowing numbers into context. According to the December OBR report, the forecast for debt at the end of this March is £1.2 trillion. Moreover, the forecast increased by £27 billion between March and December last year. Given the upside that it could bring to GDP growth, £7 billion over five years would not seem of itself to be critical to our chances of hanging on to our AAA rating—whatever they may be—or to the Government’s chances of meeting their fiscal rules. That £7 billion over five years is within the margin of standard statistical error for public borrowing figures. As for removing the cap entirely, the evidence from CIPFA is that the introduction of prudential borrowing for councils in 2004 has been a complete success and that borrowing levels have remained modest and prudent. Total local government borrowing is in the order of some £81 billion.
The reform of council house finance from April 2012 has boosted councils’ ability to manage their housing finance more positively. They all have 30-year business plans, while average council housing debt is reported as being just over £17,000 per property. I ask the Minister: why not trust local councils on the basis of their track record to date? These are some serious questions for the Government to answer.