By Richard Johnstone in Glasgow | 16 September 2013
Liberal Democrat leader Nick Clegg today said he ‘understands’ the need to build more homes across the country, and pledged to examine what could be done to free councils to build more homes.
Speaking at the LibDem party conference’s debate on the economy, the deputy prime minister indicated the government would consider allowing councils to pool available borrowing within the self-financing Housing Revenue Account system.
Individual councils are currently capped on how much they can borrow against the HRA limit, which were set when the central redistribution system for council rents was abolished last year and replaced by a self-financing system.
A motion passed by the conference said that the number of homes could be ‘dramatically increased’ by allowing authorities to pool their borrowing limits. This would allow ‘councils who want to build more houses but are at their borrowing limit to do so’.
However, a motion calling for the borrowing limits to be lifted entirely was rejected by conference delegates.
Clegg said he shared the frustrations about ‘the failure of our country to build more houses and particularly more affordable houses’. He would be ‘more than happy to sit down with our colleagues in the Local Government Association and find a way through’ the current borrowing restrictions, which are frequently blamed for the small amount of social housing construction.
However, he added that a LibDem party vote to lift the cap would not lead to ‘a single extra affordable home being built’. Allowing the pooling of borrowing limits was ‘what we can do now’.
An amendment calling for the government’s deficit reduction plan to be ‘rebalanced’ to allow for extra spending on jobs and growth was also defeated in a conference vote today.
Clegg insisted the government has not committed to cut the deficit at ‘some breakneck speed’, but would do so be the middle of the next parliament. However, he said that ‘messing about’ with the government’s economic plan could hit jobs.
Alison Scott, CIPFA’s local government policy lead, said: 'It’s encouraging to see that Nick Clegg and the Liberal Democrats are ready to look at council house building limits.
'CIPFA, together with many other organisations, has long called for a relaxation of the borrowing cap which significantly limits councils’ power to borrow for housing.
'A relaxation would enable those councils which have some "headroom" or borrowing capacity in their business plans to build new, affordable houses, thus providing an added boost to stimulating the housing sector and the local economy.
'CIPFA understand the sensitivities around borrowing in the current climate – but the many years of local authority borrowing under the Prudential Code have clearly proved that local authorities can be trusted to act prudently with regard to borrowing.'
