Home truths about localism, by Tony Travers

2 Feb 11
The new housing finance policy is not about making councils 'self-financing', so much as 'self-financing subject to a government limit on borrowing'. Much more needs to be done to move to true localism

The government’s consultation document Implementing self-financing for council housing outlines proposals radically to reform the finance of English local government’s social housing.  The pros and cons of these changes for housing will be debated widely.  But for aficionados of central government’s view of local autonomy, paragraph 3.22 is a gem:

‘Self-financing will give council landlords direct control over a very large rental income stream. The prudential borrowing rules help ensure that any borrowing is affordable locally. However, our reforms must not jeopardise the Government’s first priority, which is to reduce the national deficit. Borrowing by local authorities for housing purposes is included as part of the Public Sector Borrowing Requirement and so the borrowing arising from self-financing must be affordable nationally as well as locally. The prudential rules do not address this and so we will therefore limit the borrowing for council housing in each local authority.’

This is the unblinking telling of a Great Truth.  ‘Localism’ may be important to the coalition government, but when faced with the consequences of the decision to reduce the UK’s budget deficit, it has no meaning whatsoever.  Whitehall will be setting a Council Housing Borrowing Requirement for each council individually.  The need to cut public borrowing overrules any sense of local freedom to decide spending levels.

Housing minister Grant Shapps has said: ‘This deal brings to an end a centralised system which meant councils didn’t know what funding they would get for housing from one year to the next and were unable to take key decisions on their housing stock’.  While there may be some greater discretion for councils in the government’s proposals, there will be no freedom to spend on additional housing beyond a precise number of pounds set in London.

It will always, apparently, be so.  When a government wants to flood public spending into the British economy as Labour did from 2000 to 2010 and as the Conservatives had from 1972 to 1974, local authorities are required to spend, spend, spend.  Then, following the centre’s profligacy, a public spending crisis occurs that sees Whitehall ordering an ‘all engines reverse’ manoeuvre for councils.  It is this troubled water that leads a self-proclaimed ‘localist’ government to come up with hundreds of separate Council Housing Borrowing Requirements.  This is not a good sign.

Looking ahead to the review of local government resources, it is surely important that a longer-term view is taken about the capacity of England’s local authorities to determine what they spend on housing and other services.  The new housing finance policy is not about making councils ‘self-financing’ so much as ‘self-financing subject to a government limit on borrowing’.  Much more needs to be done to produce any convincing moves towards true localism in this country.

Tony Travers is director of the Greater London Group at the London School of Economics

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