12 September 2008
Government plans to allow local authorities to opt out of the housing finance system have been dismissed as unworkable.
Instead, the Chartered Institute of Housing is urging the government to scrap the housing revenue account completely as part of a 'big bang' solution that would mean all councils with stock becoming self-financing.
The HRA redistributes rental income raised by councils according to their historic debt. The CIH claims that allowing some authorities to leave the scheme on a voluntary basis risks creating a two-tier system, with poorer councils left to cope with less money.
In its submission to the Department for Communities and Local Government, the institute calls for a one-off capital settlement based on authorities' need to spend and ability to pay. This would mean some councils taking on extra debt to help others.
But Abigail Davies, the CIH's head of policy, said they would have the incentive of gaining new long-term control over business planning. 'If councils want more responsibility and control they also need to take on greater risk,' she said. 'But that doesn't mean we would accept a system that puts people in a situation where they can't deliver.'
About 80% of councils pay more into the HRA than they receive. Councils and tenants' groups became angry after forecasts suggested the system would generate a £194m surplus for the Treasury by the end of 2008/09.
Although a timetable for reform has not been set, the CIH wants changes by the next Comprehensive Spending Review in 2011/12. Housing finance should remain ringfenced, and councils should be given more freedom to negotiate rents with tenants, it added.