A poor start

George Osborne’s latest plans to stimulate economic growth without actually spending any money may have seemed more like a newspaper review than a Budget, but there were one or two surprises slipped into the battered old red box.

Actually, the nastier of these surprises – for the housing, as opposed to granny sector at least – was not in the Budget itself, but the Office for Budget Responsibility’s report.

The biannual peek into the nation’s financial health – running to a hefty 190 pages this time round - is really the place to find the substance on budget day. And it was the OBR, not the chancellor, which forecast that the reforms that will see councils up and down the country assume responsibility for their finances might end up costing a bob or two.

According to the OBR, the reform of the housing revenue account is likely to cost £3.5 billion in increased public sector borrowing by 2017. Anyone with a basic grasp of mental arithmetic will have already gathered that that’s a whole £3.5 billion more than the reforms were supposed to cost.

And the only way to mitigate any increase – and to ensure that Osborne delivers the cost neutral budget he had promised – would be to further cap local authority borrowing.

The figures are not yet final, but coming a matter of days before they are due to take on billions of pounds worth of extra debt, some councils – and the Chartered Institute of Housing to boot - are understandably up in arms.

Those which are most concerned are the ones which were planning on using the headroom between the debt they would take on under HRA and their borrowing cap to build new housing. These are the councils which would have most welcomed the self-financing revolution.

With a deepening housing shortage, these are the same councils which one would think the government would be bending over backwards to help out. Limiting their borrowing capacity isn’t the best way to start.