My Lords, first, various questions have been raised about comments from the Treasury, when those comments may not have been heard. I am sure noble Lords will appreciate that it is not for me to comment on such rumours. What I can outline is the Government’s position on where we stand, particularly with regard to these amendments and the issue of housing debts with regard to local authorities.
It is notable that we have been talking about affordable housing; there is also an issue about affordable debt. That is the question which we cannot forget in our deliberations. I therefore regret to say that while I agreed with my noble friends on their previous amendment, on this occasion the Government cannot accept this amendment because it would put at risk the first and key priority of the Government, which is to reduce the national deficit.
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I remind the Committee that Section 171 of the Localism Act 2011—as was mentioned by the noble Lord, Lord McKenzie—provided powers for the Secretary of State to set a limit on the amount of housing debt each stock-holding local authority can hold. I will come back to his question in a moment, if I may. This was felt necessary because the self-financing settlement, which was successfully concluded in April last year, gave local authority landlords direct control over a very large rental income stream and, therefore, the potential to increase levels of borrowing beyond what we as a country can afford—a rise in borrowing far beyond that which would be accommodated within the prudential code.
Just to be clear: why have Section 171, when borrowing by local authorities is already controlled by the Local Government Act; that is, the prudential code? As the noble Lord, Lord McKenzie, pointed out, the prudential code in the Local Government Act did not take account of the actual rental stream from council housing, and therefore Section 171 and the caps. The code has worked well, but borrowing arising from self-financing must be affordable within national fiscal policies, which the prudential borrowing rules do not address.
Noble Lords and others cite this amendment as a means to increase housebuilding. The Government are completely committed to seeing an increase in housebuilding, but not if it increases public sector debt beyond that which we can afford. In response to the noble Lord, Lord McKenzie, yes, we want to see local authorities active in promoting housebuilding, but through working with housing associations and other developers to release land and maximise private investment. For example, from 2011 to 2015, 170,000 more affordable homes are being delivered with more than £19.5 billion of investment—over 75% of which is being provided by the private sector.
Moreover, if local authorities themselves want to build, I remind noble Lords that the vast majority of council landlords—139 out of 167, more than 80%—collectively have £2.8 billion of borrowing capacity within the settlement, as the noble Lord, Lord McKenzie highlighted, some of which could be used for this purpose.
It is not that we do not favour more housing; we do. Equally, it is a central priority for the Government to ensure that debt is controlled, and this has spiralled out of control. I will not do the noble Lord a discourtesy in any sense, but the important issue is that this is about ensuring fiscal responsibility in all our policies. In proposing that local authorities work with the private sector and housing associations, we believe that this is the correct way forward. As I said at the start of my comments, it is not just about affordable housing; it is also about what level of debt is affordable. On that basis, I hope that, while the noble Lord may not agree with the Government’s position, he will see fit to withdraw his amendment.