Saturday, 28 February 2015

Interest cut to deliver £100m boost for housing

Councils leaving the housing revenue account subsidy system are to receive a £100 million a year boost due to a cut in interest rates.

Speaking at the Liberal Democrat annual conference today (Sunday), Danny Alexander, chief secretary to the Treasury, said the Public Works Loan Board would offer a reduced interest rate on the £13 billion councils need to borrow to finance leaving the HRA.

Under plans to scrap the HRA subsidy system some councils will have to pay back historic debt to the Treasury. In return they will be able to keep income from rents, which is currently returned to government and then redistributed between local authorities.

Mr Alexander said the reduced rate of interest would effectively mean councils have an extra £100 million a year to spend on housing.

‘I’ve listened to local authority concerns that this is a one-off transaction within the public sector and should be financed as such,’ he said.

‘Let me put it simply – an extra £100 million every year that councils can then reinvest in housing.’

Mr Alexander also announced a £500 million ‘growing places’ fund to kickstart stalled infrastructure projects. He said the investment would unlock schemes to deliver thousands of homes and jobs.

‘In South Gloucestershire, £300 million of private investment, 3,000 jobs and 2,200 homes is being unlocked with £6 million of public money to build a link road,’ he said. ‘Just think what we will be able to do with £500 million.

‘Unlocking local growth by freeing businesses to grow, creating jobs, and freeing councils to build housing.’

Readers' comments (4)

  • Rick Campbell

    It's not yet the time for rejoicing as the devil will be in the detail -- just like his extra 2,000 tax inspectors who are supposed to ensure the well off pair 'their fair share'.

    This government, including the LibDems who 'took Cameron's shilling' have a strange definition of 'fair' AND their President (who didn't take Caneron's shilling) says

    "The super-rich do not need to go down Ealing high street nicking TVs in order to demonstrate their contempt for society," he added.

    "They demonstrate their contempt by not paying taxes. And let's be honest, we are sharing power with a bunch of people who think that this is OK."

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  • This is a classic demonstration of the short-terminism that so badly afflicts and blights public policy-making in the U.K. - especially in housing.

    If anything is certain for the economic prospects of the U.K., it is that interest rates at some point or other are going to have to increase, and increase, probably, very substantially and for an entire subsequent era.

    Little wonder that the U.K. Treasury wants to exploit this opportunistic window to offload housing liabilities. For local authoritities' finances it would in all likelyhood be be a significantly damaging course of action.

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  • Rick Campbell

    Please correct me if I'm wrong ...

    Was it not George "Tax my inheritance, not" Osborne who upped the Public Works Loan Board interest rate by nearly 1% last October?

    Anyone know what % of that rise/new rate £100m is?

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  • Rick Campbell

    I wonder if any taxman/woman will be allowed to sniff around the Osborne tax avoidance mechanisms?

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