23 July 2004
MPs' demands for councils to be allowed to invest directly in housing have been firmly rejected by the Office of the Deputy Prime Minister, which this week approved two more rounds of arm's-length management organisations.
In a report on decent homes published in May, the Commons' ODPM select committee called for local authorities to receive investment allowances to bolster the new system of prudential borrowing.
But, in its response to the report, the ODPM said this would mean unacceptable increases in public spending. According to the department, prudential borrowing was never intended as a means of increasing spending on housing.
'The resources that have been made available to deliver decent homes through the Private Finance Initiative, Almo and transfer cannot simply be switched to direct investment by local authorities,' it said in a statement.
Instead, it wants councils to continue raising funds either through the PFI or through transfers to registered social landlords or arm's-length management organisations.
The ODPM confirmed this approach on July 20, one week after housing emerged as a winner in the Spending Review with a 4.1% real-terms funding increase by 2007/08. The department announced that it would approve a further two rounds of Almos.
Councils must bid to join the fifth-round programme before next January, with bidding for round six expected in late 2005. Applications for stock transfer and PFI schemes will be invited at the same time.
Housing minister Keith Hill said fourth-round Almos will receive at least 80% of the money they had applied for, although all funding is conditional on them gaining two Audit Commission inspection stars.
The MPs had argued in their report that there was no evidence that Almos or RSLs manage housing more efficiently than councils, but the ODPM said these other options would lead to higher standards. 'Where additional money is provided, the government wants to drive up performance, secure value for money, and for tenants to have more say in how the money is spent,' it added.