By Richard Johnstone in Manchester | 22 September 2014
Senior Labour party figures have indicated the party is unlikely to lift the current cap on local authority borrowing for housing if it wins the next election.
Restrictions to the Housing Revenue Account mean individual councils are currently capped on how much they can borrow against limits set when the central redistribution system for council rents was abolished in 2012 and replaced by a self-financing system.
Shadow chancellor Ed Balls announced in his speech to the party conference yesterday that ‘there will be no proposals for any new spending paid for by additional borrowing’ in the party’s manifesto for next May’s general election.
No spending commitments would be made without saying where the money is coming from, he said.
Following Balls’ speech, shadow chief secretary to the Treasury Chris Leslie added the next government was going to inherit a difficult economic situation that would preclude extra borrowing for new homes.
Speaking at a housing fringe event at the Labour party conference in Manchester, Leslie said that although it would be in the Treasury’s interests to increase housing supply, Labour also needed to show it could ‘live within [its] means’.
He added: ‘A lot of people say, “why don’t you just borrow more and spend”.
‘But those of us who believe in having a collective public realm for public services – whether it’s the NHS, education, housing – have to prove to the public that we can live within our means and manage efficiently those particular budgets.’
In an ideal world, injecting capital funding into social housing could ‘make a big difference’ to the housing sector, Leslie said, but ‘what I can't do is raise your expectations and promise you that straight after the election there’s will be this splurge in borrowing’.
‘That’s not going to happen – we’ve said very clearly that the proposals that we have in our manifesto will not involve additional borrowing.’
Instead, the party would look to find alternative ways to boost funding, including switching resources from areas of lower priority spending to make sure housing is prioritised.
‘From our point of view, from Ed Miliband’s point of view, we understand that housing is one of the best areas of economic stimulus that you can invest in, not least because of the construction stimulus that flows from it.
‘So we’ve very aware that we need to devise policies that can deliver that 2020 target [set by the party of 200,000 homes a year].’
These comments appear to end speculation that the party would lift the current restrictions, which both CIPFA and the Local Government Association have called to be lifted.
Chancellor George Osborne announced last December that £300m would be made available over two years from HRA allocations that had not yet been spent, although after initial deals were signed not all funds had been allocated.
