Sector is urged to ‘grab this opportunity’ as government sets out radical plans to scrap HRA
Reviled council cash system bites the dust
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Finance experts have welcomed plans unveiled by housing minister John Healey for dismantling the deeply unpopular national system of council housing finance.
Local authorities are to be handed full control of their rents and sales income. But councils with debt-free housing departments will be required to take on portions of the £17 billion housing debt held by other authorities across the country.
Revealing the long-awaited results of the government’s housing revenue account review, Mr Healey said he planned a ‘one-off’ redistribution of debt among the 202 councils with housing stock. ‘I want to devolve control from central to local government,’ he said. ‘And, in return, I want to increase local responsibility and accountability for long-term planning, asset management, and for meeting the housing needs of local people.’
Under the current system, rents and right to buy sales income is collected nationally, and councils are paid allowances for management, maintenance and repairs.
In principle this redistributes funds to councils that would be unable to meet interest payments and other costs through rental income. But the amounts paid out are too low, with major repairs allowances falling 43 per cent short, according to experts who contributed to the HRA review.
Without reform, the rents paid to the Treasury are projected to be billions of pounds higher than allowances paid out - a gap campaigners have dubbed the ‘tenant tax’.
Steve Hilditch, an independent consultant who chaired the HRA review sessions, said: ‘For the first time in 30 years council housing has got a sustainable future, and what’s needed is for people to grab that opportunity.’
He warned that the plan would need bipartisan support to succeed. Mr Healey admitted that the radical policy change would require primary legislation that would not be passed before the general election.
‘The worst thing that could happen to this now is for it to be ripped up in the pursuit of the general election,’ said Mr Hilditch.
But Conservative shadow housing minister Grant Shapps said he had ‘grave concerns over the suggestion that responsible councils should be punished for being prudent, and will be burdened with other people’s debt’. He added: ‘I fear that this is an excuse for partisan Labour ministers to transfer funds from efficient Conservative councils to badly run Labour councils.’
David Hall, a director of consultancy Tribal, who modelled the possibilities for debt redistribution as part of the HRA review, said: ‘Those authorities are paying back into the system already - they’re paying debt, it’s just not their own, it’s another authorities’ debt.’
Richard Gates, leader of Conservative-run Waverley Council, said the proposed reforms were a ‘considerable step in the right direction’ but the debt issue had ‘not been resolved’.
‘We still think there are debates to be had about how the debt is treated,’ he added.
Mr Hall said debt redistribution would probably have to be based on a formula ‘which can only be an estimate of local authorities’ needs’.
He added: ‘They seem to be closing the door on individual negotiation [with authorities].’
A detailed consultation paper on the reforms is due to be published within the next three weeks.
‘An end to the privatisation blackmail’
Eileen Short, chair, Defend Council Housing
‘[This appears to] commit to an end to the privatisation blackmail, and to funding for self-financing councils on the same basis as would be offered by stock transfer… [But] we will continue to campaign until the legislation is passed, the money is delivered, and there’s work going on in the estates.’
Paul Bettison, chair of the Local Government Association’s environment board
‘It is good news that the government will consult on major reform of council house finance. We have campaigned hard for town halls to keep control of proceeds from council house rents and sales that could deliver 300,000 new homes in the next decade.’
Brian Reilly, deputy director of housing at Wandsworth Council, on behalf of the Association of Retained Council Housing
What is missing from the announcement is any reference to underfunding of [management and maintenance allowances] and the [major repairs allowance], recognised during the review. We would need to see the detail.’
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Readers' comments (4)
michaelbarratt council tenant | 03/07/2009 8:32 am
Like to drink strychnine or arsenic? Is not really much of a choice is it? The likely proposed alternative to HRA appears to be just as poisonous. Presently, over 80% of local authorities pay more into the HRA system than they take out. The majority of council’s retaining their housing stock can do so viably with no outside assistance if they are permitted to retain their rent and RTB receipts.
Central Government must take ownership of the problem of a minority of councils, mainly inner city authorities who lack the resources to bring their housing stock up even up to a modest standard after years of neglect (including Central government poor oversight and neglect). Central government must find external financial resources to solve the problem and stop milking otherwise viable local authorities.
Successive Governments in their haste to destroy the Institution of council housing have directed financial resources away into other sectors of the economy including housing associations that are generally more expensive to run, business rather than tenants centred, provide less security of tenure and higher rents for their tenants.
Instead of offering only the alternatives of strychnine or arsenic, perhaps Mr Healey and the Treasury should re consider direct investment in the Nations council housing stock and open the debate of the way forward to include council tenants.
For my penny’s worth, I consider council housing should remain a National asset ultimately under the jurisdiction of Central government. Given local authority housing stocks were maintained to a good National standard that reflected realistic element lifetime cycles, ACTUAL local government housing surpluses should be subject to a fair tax regime. In the name of egalitarianism and commonsense, I consider the charitable trust status of housing authorities should be scrapped forthwith and housing associations’ surpluses subject to tax.
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Ray Aggett, Council tenant | 03/07/2009 10:09 am
I tend to agree with Michael Barratt, good local management of the HRA brings very good results as I know from the improvements I have seen here in Poole. Central Government has a real opportunity to save council housing stock for the common good, let local councils/ALMOs with a good management record have the freedom to raise funds to build, improve and manage local housing stock.
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Len White | 03/07/2009 10:10 am
Once again Grant Shapps reveals how shallow he really is. Over the past 2 years the columns of Inside Housing have been packed with Tory Councils - with some justice - complaining about the HRA system and wanting local control. John Healey delivers exactly that - passing control over to local government at a time when his party controls hardly any councils - and still Shapps complains. Shapps appears to have no policy at all, and no interest in tenants, just point scoring. He says he supports councils keeping their own rents but he has no policy on outstanding debt. The Councils with high debt are mainly big cities that built homes after the war, largely under a Tory government, it has nothing whatever to do with efficiency. We should be grateful they did build to meet needs, but they are not viable under a devolved rather than the currrent national system. Either debt is redistributed, as proposed by Healey, making all councils viable, or it is brought to the centre. If Shapps wants that, he should explain where he is going to get the £1 billion plus it would cost the government to service that debt. Or is this another unfunded spending commitment?
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Derek Doran MCIH and Independent Consultant | 03/07/2009 1:43 pm
About time too.
Now tenants will be treated with respect on the key strategic issue of ownership, rather than being bullied in to transfer to an RSL.
The "leading consultants" all got this one wrong, no doubt they will be peddling the line "that this will not happen after a Tory victory at next years election". Although the election hasn't been won by anyone yet!
A victory for common sense.
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