By David Williams
5 October 2010
Councils have welcomed a government pledge to press ahead with plans to scrap the Housing Revenue Account but have warned ministers not to saddle local authorities with unsustainable levels of debt in the process.
Housing minister Grant Shapps outlined plans to give councils greater financial freedom this morning, allowing them to keep receipts from their tenants’ rents, and from the sale of land and homes.
Currently, under the HRA, the cash collected goes to Whitehall and is then redistributed to councils.
The future of council housing finance had been uncertain since the formation of the coalition government. A full announcement will be made as part of the Comprehensive Spending Review on October 20, and written into the localism bill, expected in November.
Shapps said: ‘For far too long councils have been left hamstrung in their efforts to meet the housing needs of their residents by a council house finance system that is outdated and no longer fit for purpose.’ He said the new system would be more transparent and would better serve the needs of local communities.
Gary Porter, chair of the Local Government Association’s housing and environment board, said: ‘Reform of the outdated, inefficient system of housing finance has long been talked about – now is the time for action.
‘But, while councils need to be given financial
independence, they must not be made to inherit unreasonable levels of
additional debt that could cripple their efforts to get Britain building
again.'
Under plans outlined in March by Shapps’s Labour predecessor, John Healey, councils would be released from the HRA system in return for taking on around £3.6bn of public housing debt held by central government.
The LGA had indicated that councils would be willing to agree to those terms – but Shapps’ announcement today gave no indication of whether a similar deal will be offered.
The Chartered Institute of Housing said it was 'delighted' that the 'unfair and archaic' HRA was being scrapped.
Chief executive Sarah Webb said: 'The steps [the housing minister] has announced today will remove a millstone from around the neck of local authorities who have been anxious for a sustainable approach to their housing finances.
'When councils are allowed to retain the income from rents and house sales we believe they will be able to make better and more locally-based decisions for the benefit of their tenants and the wider community.'
