CIH issues ‘reform or bust’ warning

Steve Partridge, director of financial policy at the Chartered Institute of Housing, said he estimated that 85 to 90 per cent of the 172 councils, which have retained their housing or handed it to an arm’s-length management organisation to manage, will have HRAs that are in an ‘unhealthy state’ in the next few years without financial reform or other changes.

He said: ‘If you add on capital, then - if there is not a good settlement - it is fair to say the majority of HRAs would have real difficulties.’

Speaking at a meeting of the Association of Retained Council Housing last week, Bob Ledger, head of housing at South Derbyshire Council, said several councils would see their HRAs go into deficit unless helped by government plans to allow council housing to become self-financing.

He said a good settlement was essential if councils were to keep hold of their ability to carry out other housing work such as the decent homes programme and house building.

Most councils would view a good settlement as receiving a share of the £18 billion HRA debt for England that is equal to or less than the amount they can afford to repay. Some would not want to contribute to the estimated £8 billion cost of clearing the national repairs backlog.

Mr Ledger said: ‘Without a fair financial settlement, everything else is secondary. There are people sitting around this table who will go bust in a few years. Some people are already having to cut services and spending. We are not at present, but would within the next five years if nothing changes.’

Brian Reilly, deputy director of housing at Wandsworth Council, said he suspected a voluntary deal from the government to allow council housing to become self-financing was likely to be better than anything imposed on them through legislation at a later date.

He pointed out that, under the current system, the £21 million that Wandsworth pays to the government through the subsidy system increases and the payments continue in perpetuity.

Under the reforms, though, with a reasonable settlement it was likely to eventually repay all of the redistributed debt and could then keep all income from its housing to spend on its properties.

Meanwhile consultancy firm PricewaterhouseCoopers has been commissioned to advise the Communities and Local Government department on the reforms.

The firm is understood to be looking at the amount of debt which housing revenue accounts could afford to carry if debt is redistributed between authorities as part of the settlement. The work is due to be completed by the end of this month.

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