My Lords, I thank all noble Lords who have taken part in this debate. I can confirm that while certain matters have been addressed to my right honourable friend the Chancellor of the Exchequer in the other place, of course both my noble friend Lady Hanham and I will be consistent in the view which was expressed by the coalition Government that reducing the national deficit remains the priority. From that the Government cannot be deterred. I am sure the Chancellor, as he often does, will be following through Hansard the debates in which noble Lords have expressed their views.
Section 171 of the Localism Act 2011 provides powers to the Secretary of State to set a limit on the amount of housing debt each stock-holding local authority can hold. This was felt necessary because the self-financing settlement, successfully concluded in April 2012, gave local authority landlords direct control over a very large rental income stream and with it the potential to increase levels of borrowing beyond what we as a country can afford—indeed, far beyond what could be accommodated within the prudential code. I remind noble Lords that when the Local Government Act 2003, which introduced the prudential code, was enacted, local authorities did not have access to this extremely large income, which is now provided by self-financing.
Several noble Lords, including the noble Lord, Lord Best, mentioned this scheme. This 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.
Several mentions were made of housebuilding and new homes; the coalition Government remain committed to this objective. Noble Lords and others cite this amendment as a means to increase housebuilding. Let me assure noble Lords that the Government are committed to seeing an increase in housebuilding and have indeed made it easier for local authorities to build. Under self-financing we have given local authorities direct control over their rental income, some of which they may wish to invest in new homes. I remind noble Lords that the vast majority of council landlords—it is 139 out of 167, or more than 80%—have £2.8 billion of collective borrowing capacity within their settlement.
What is more, 157 authorities have taken up our offer to use additional right-to-buy receipts to deliver new homes needed in their areas, either themselves or by working with local housing associations. The noble Lord, Lord McKenzie, alluded to Labour leading the charge, to use his words, in housebuilding up and down the country. It is interesting to reflect on the 26 authorities which are delivering nearly 4,000 new homes with grant funding via the Homes and Communities Agency or the GLA. “Leading the charge” may be a slight exaggeration. If we look at those 26 authorities, three of them are Liberal Democrat and 11 are Conservative, with the remainder being Labour.
However, rather than getting into a political point here, the fact is that housebuilding is occurring. It is taking place within the limits which are being set by authorities of all political colours up and down the country. That remains reflective of the commitment that this Government have given. To put it in the wider context, in addition to that which we will deliver through the reinvigorated right to buy, 170,000 more affordable homes are being delivered between 2011 and 2015 with £19.5 billion of investment, over 75% of which is being provided by the private sector.
Several questions were raised and I will seek to answer at least some of them. Those which I do not answer, we shall of course seek to respond to in writing. Several noble Lords, including my noble friend Lord Shipley and the noble Lord, Lord Best, asked why the Government do not use the general government gross debt instead of the public sector net debt to account for housing debt—a move that would bring us into line with some of our European neighbours, as noble Lords pointed out. I remind noble Lords that the general government gross debt excludes the net debt provision of public corporations, which includes housing debt. The Government use public sector net debt as the key measure of debt because their view is that it is the best principled measure of government indebtedness. One reason for this is because the Government are generally likely to step in if public corporations cannot service their liabilities, so a focus on public sector net debt provides a fuller and more transparent picture of the Government’s total liabilities. If there are not controls over public corporations’ accrual of liabilities, it means that the Government do
not have control over their contingent liabilities, which if called upon would impact on the deficit as well as on general government gross debt.
Perhaps I could pick up on a few additional points. I believe it was my noble friend Lord Shipley who referred to the impact on financial markets. The financial markets have a view on this; the Government’s view remains that we are determined to ensure that the housing debt remains affordable. The figure of £30 billion is one which is perceived and we certainly do not wish to see any rise in that figure. The noble Lord, Lord McKenzie, mentioned various schemes and the Select Committee. On the specific points that he made on them, I will respond to him in writing if I can.
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I have a few general points. Some councils have looked at releasing land, and surveys have indicated that there is a great support for that. We welcome this and would encourage all local authorities to look to release more land for housing development. Where authorities cannot themselves afford to build, we would certainly encourage the release of land to housing associations for that purpose. We have also heard that councils are keen to invest and can do so quickly. We have heard about how they can work in partnership. We recognise that some local authorities have the willingness and capacity to deliver but equally—I come back to the point I made earlier—we cannot and should not allow them to do anything in a way that would increase public sector debt overall.
This is clearly an issue that we will return to again in future debates, but for now, I hope I have reiterated the fact that the priority of tackling the deficit means that the Government’s position remains unchanged, and we are unable to accept the amendment.