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Retrofitting sprinklers will lead to service cuts without government funding, warns CIPFA
Local government borrowing rules mean councils taking out loans to retrofit sprinklers will have to cut back on other housing spending unless the government provides funding, the Chartered Institute of Public Finance and Accountancy (CIPFA) has warned.
Under the current Prudential Code, agreed following self-financing rules introduced by the government in 2012, councils can only take on borrowing which is “affordable, prudent and sustainable”.
In the case of the Housing Revenue Account, this means debt taken on to build new homes is justified by the extra rental income generated.
But sprinklers provide no extra income and come with a maintenance price tag as well as the borrowing cost – leading CIPFA to warn that in the absence of government funding, cutbacks to other programmes will be required to make the borrowing affordable.
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Ken Lee, chair of the CIPFA housing panel, said: “Asking if there will be available borrowing to pay for sprinklers is really the wrong question. As long as it is not caught by the borrowing caps, accessing borrowed money at competitive rates is not the issue for local councils.
“The question should be who will pay the financing and interest costs because this will be a new and unavoidable spending commitment that will have to displace some other existing and presumably currently important items of council spend. That is the real question that needs to be addressed.”
Councils have previously issued similar warnings, but this is the first time CIPFA – which is currently updating the prudential code – has voiced concerns.
Inside Housing revealed in December that half of England’s social housing high rises could have sprinkler systems retrofitted, with several of the biggest stock-retaining councils planning to carry out the work.
Government has so far refused any requests to provide funding for sprinklers.
Conservative-run Wandsworth Council, which has £24m plans to install sprinklers in its 100 tallest tower blocks, plans to recover some of the cost from leaseholders through service charges.
Labour-run Brent Council and Sheffield City Council are considering similar moves for their own retrofit programmes.
However, not all council leases will allow for this use of service charges and any such attempts are likely to be met with fierce opposition from leaseholders.
