Tuesday, 01 December 2015

Concerns grow over spending review settlement

Housing chiefs are anxiously waiting for clarity on several key issues for the sector, as George Osborne starts to put the final touches to the government’s spending priorities.

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The chancellor is set to reveal on Wednesday how Whitehall will make £11.5 billion of savings from current spending between April 2015 and April 2016.

The severity of these targeted cuts means that any eventual settlement with individual government departments will be tight, leading to fears that housing could receive a rough deal.

Inside Housing’s Grant Britain Homes campaign has taken the sector’s call for grant subsidy to the Treasury, with indications that some more funding will be made available for affordable housing.

However, most in the sector believe that the £2 billion called for by the Chartered Institute of Housing and National Housing Federation won’t be met, given the huge competition for capital expenditure in a weak economy.

Landlords have also been calling for certainty over the duration and method of calculation of rents.

Mr Osborne pledged to fix the formula for 10 years at April’s Budget, but there are now concerns about whether this will be delivered upon.

Housing associations and councils can currently increase rents based on the retail price index plus 0.5 per cent plus up to £2 a week, and a continuation would offer confidence in long-term income streams.

However, a source close to rent-setting negotiations has warned that Conservative ministers are reluctant to commit to more than two years of rental certainty.

One proposal that is understood to be on the table is a mechanism that would allow developing housing associations to charge higher rents than organisations that do not build homes.

Spending reviews set departmental budgets for current and capital spending over several years. It is then up to departments to decide how best to manage and distribute this spending within their areas of responsibility.

‘We have got to stick at the economic plan that is reducing our debts, making our businesses more competitive, helping to create jobs, making sure Britain can win the global race,’ Mr Osborne told the BBC’s Andrew Marr Show on Sunday.

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