Hemel Hempstead Labour Party

Council Housing Finance

Statement from Rt Hon John Healy MP - Minister for Housing

Local authorities provide around two million rented homes and, together with housing associations, they provide decent, secure and affordable accommodation for over eight million people.

Housing suffered a long period of severe neglect. In 1997 there was a £19bn backlog of repairs to four million council and housing association homes and more than two million homes were below basic decency standards. Over £33bn has been invested in improving those homes and by the end of 2010 we expect around 95 per cent of council and housing association homes to be warm and weather-proof.

As a Government we remain fully committed to completing our comprehensive Decent Homes programme and to seeing this standard maintained. The reforms proposed in this consultation will safeguard this commitment. We will also improve the common areas of estates and will ensure that there is sufficient funding in the system to do so.

If we are to maintain these improvements for the long term then it is imperative to reform the system that finances council housing.

My intention is to dismantle the Housing Revenue Account subsidy system and replace it with a devolved system of responsibility and funding. This consultation sets out the steps required to do so, together with the timescales on which changes can be made. I want to provide more flexibility in finances and more transparency in the operation of the system. I want to devolve control from central to local government. 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.

The current national system for financing council housing makes this difficult to achieve. It reflects significant shortcomings in the relationship between central and local government despite greater funding, flexibilities and freedom for local authorities in recent years. That is why, alongside this consultation on radical reforms to the system of financing council housing, we are launching a separate consultation on local democratic renewal. This consultation aims to strengthen the involvement of citizens in their communities and reinforce the role of local authorities to help residents hold local services to account.

I am therefore proposing a devolved self-financing alternative to the current system which will remove the need to redistribute revenue nationally while continuing to ensure that all councils have sufficient resources. With these radical reforms, councils will finance their own businesses from their own rents and revenues, in exchange for a one-off allocation of housing debt.

I aim to make this a once-and-for-all settlement to create a new baseline for all local authorities currently in the HRA subsidy system, from which each will be able to sustain and maintain their homes on an equitable basis. By freeing councils from the annual funding decisions in the current system, councils will be able to plan long term and improve the management of their homes, secure greater efficiencies and improve the quality of service to their tenants. This will be a financial framework in which councils can plan and manage for the long term, in the same way that we expect of other affordable housing providers, like housing associations. It will give councils greater capacity and more freedom to respond to local needs and, in doing so, increase their responsibility and accountability to local tenants and residents.

I am grateful for the high level of interest and the high quality of contributions to our review of council housing finance to date. There is wide and strong support for a local self-financing system, particularly in local government. The challenge now is whether local government is ready to work with me and ministerial colleagues to make these radical reforms through detailed work together, or whether it will be necessary to use primary legislation to implement these changes.

My proposals offer a fair deal for all councils. They will provide a way for those councils currently paying high levels of surplus into the system to stop doing so, in exchange for some additional debt. They also offer a sustainable future for those now relying on high levels of subsidy to support historic debt and expensive-to-maintain properties. All councils will be able to plan and fund the work they do on their stock, and to implement long term development and improvement strategies. The standards and costs of council housing will also now be on a common basis with the standards and costs that we will accept in a transfer of stock to a housing association.

With greater freedom comes greater responsibility and accountability. The Tenant Services Authority will in future play a major role in ensuring that local authorities are seeking efficiency and value for money in their service delivery, providing greater openness on costs and making sure that every penny of tenants’ and taxpayers’ money is spent well.

I also want local authorities to play a bigger part in building and commissioning new affordable homes that people in their area need. I am using powers in the Housing and Regeneration Act 2008 to exclude newly-built or newly acquired dwellings from the HRA subsidy system, with immediate effect, and I am also making changes to allow councils to keep the full capital receipts from any subsequent sale of a new home.

In addition, we are giving councils access to capital grant to build. At the Budget, we announced £100m to fund some 900 new council homes. In his Housing Pledge, as part of Building Britain’s Future, the Prime Minister announced a further £1.5bn to build an extra 20,000 affordable and energy efficient homes, increasing the scale of the programme for the next two years to a £2.1bn investment for 110,000 new homes that people can afford to rent or buy.  This includes a fourfold increase in our plans for new council homes. Together, these changes will enable councils to become, once again, significant providers of new housing, with further flexibility to do more where councils can act rapidly and offer good value for money.

Any changes must balance the interests of tenants with the interests of wider taxpayers. The plans I set out in this consultation do so in a way that means we can make the radical reforms to council housing finance that are needed now.

The Rt. Hon. John Healey MP, Minister for Housing and Planning, attending Cabinet

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