Local authorities advised to raise funds in the capital markets
Councils’ sales receipts fall 66%
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Local authority capital receipts have plummeted 66 per cent in the past year.
Councils saw income from sales of their assets fall £2.6 billion to £1.4 billion in 2008/09 from £4 billion in 2007/08. At the same time they have cut expenditure on housing from 28 per cent to 25 per cent to fund education and transport projects, even though overall capital expenditure increased by 9 per cent.
The figures, released by the Communities and Local Government department, show local authorities spent £3.7 billion on housing in 2008/09, but only received £487 million from the sale of homes.
Income from the housing revenue account has increasingly been used to finance local capital expenditure. In 2004/05, councils spent £187 million of HRA income on capital expenditure. By 2008/09, that figure had risen to £228 million.
In August, Inside Housing reported that right to buy sales had dropped by 75 per cent between 2007/08 and 2008/09. Some councils said they would have to scale back environmental work and adaptations to homes as a result.
The New Local Government Network has also warned that councils will need to adapt to sharp falls in central government funding.
A report published last week, Capital contingencies: local capital finance in an era of high public debt, warns budget deficits could mean Britain’s housing stock and infrastructure crumbles. The report suggests councils should consider going directly to capital markets through bond issuance, and explore other methods of fundraising.
Chris Leslie, director of the NLGN, said: ‘The constitutional circumstances which have created a local government community almost totally reliant on Whitehall now risk leaving much of our public services and facilities bereft of investment.’
Ruth Lucas, policy consultant at the Local Government Association, said councils needed their capital receipts to pay for adaptations and decent homes work. She added: ‘One of the things that we need in the housing finance reforms is for local authorities to keep all their income from housing receipts.’
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Readers' comments (1)
Jim Paton | 06/11/2009 10:17 pm
"Income from the housing revenue account has increasingly been used to finance local capital expenditure. In 2004/05, councils spent £187 million of HRA income on capital expenditure. By 2008/09, that figure had risen to £228 million."
..and still ignoramuses in the media describe council housing as "subsidised".
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