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A tale of two rioters

Picture the scene.  Two 15 year olds caught up in the riots.  Both enter a building and steal something, no violence involved but it’s clearly burglary.  Both are caught by CCTV, arrested, charged, and brought before the Courts. Both are sentenced to 6 months in jail.  The justice system has worked.
But there is one difference between the two children.  One lives with his parents in a small terraced house that they bought 25 years ago and have brought their three children up in.  No-one in the family has been in trouble before.  The other lives with his parents in a small terraced house that they got from the council 25 years ago and have brought their three children up in.  No-one in the family has been in trouble before.
What does justice have to say about this?  Both have been dealt with, punished seriously for their crime.  Both will have the blight of a criminal conviction and prison sentence hanging over them for years to come.  But it’s fair treatment.
The first boy, when released, will return to his family in their family home and try to take up his life.  There is some security and stability as he rebuilds.  It’s hard but possible.
The second boy, when released, finds that his family has been evicted by the council from the family home because of his crime.  They were declared intentionally homeless, so they won’t be rehoused.  They have taken two private rented rooms in a shared house at a cost of nearly twice the council rent they were paying.  Dad thinks he can’t afford to keep working.  The youngest child is bedwetting, a result of the trauma of eviction say the medics.  Mum is suffering from depression and is struggling to keep her job.  They are not able to take the oldest boy in.  He drifts off to stay on someone’s sofa.  There is no security and stability from which to build.  It’s very hard and it feels almost impossible.
What does justice have to say about this?  None of this is fanciful; anyone involved in housing knows that this story reflects the reality.
There is no doubt that the mood is about retribution.  Polls show that more people want tenants evicted than don’t.  But neighbours who are home owners or private tenants probably don’t want anyone convicted of a serious crime living next to them either.  And the determination of some councils to evict, and the government’s determination to make it easier for them, will not apply more generally to your common or garden murderer or rapist or burglar.
It may allow politicians to sound tough.  It may be what people want.  But it isn’t justice.   It’s double punishment, it’s guilt by association, it’s discrimination on the grounds of tenure, pure and simple.
Labour, nationally and locally, should have nothing to do with it.

This post by Steve Hilditch follows previous posts on the riots and the aftermath by Steve and Tony Clements here here here here and here.  We are keen to see these issues debated as widely as possible.  This post has also appeared at LabourList where there are also a number of comments and a bit of debate.
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Simplistic solutions are not the answer

Maybe it’s understandable that people want to lash out after the appalling behaviour of those involved in looting and violence during the riots last week.  But there is also a risk of a dangerous authoritarian response.  This not only includes proposed changes to the nature of policing that have always been resisted before – bringing in the army, rubber bullets, water cannon and public whipping of members of the underclass just in case they were rioters (sorry I made the last one up) – but also wider and wider forms of punishment such as removing benefits from perpetrators.
Suddenly on Thursday the debate focused on council tenants, as Tony discussed in his post on Red Brick, and the issue is leading the news today.  Councils of all political persuasions knee-jerked in favour of evicting perpetrators who are or live with council tenants, and Wandsworth appears to have been the first to issue a notice of seeking possession.  Mr Bandwagon himself, Grant Shapps, was quickly on to it, saying if necessary we could have new laws by the Autumn if the existing power isn’t strong enough.  In his article in Inside Housing Shapps says:  ‘As things currently stand, whilst thuggish behaviour against neighbours or in the immediate vicinity of their home provides a ground for evicting a tenant, looting or other criminal activity by tenants further from their homes can’t usually be taken into account.  People who commit anti-social behaviour should feel the consequences regardless of whether their actions are taken within the immediate vicinity of their home or further afield.
And Mr Bullingdon (did he or didn’t he take drugs and smash places up, I can’t remember?) David Cameron joined in, saying council tenants were subsidised (they aren’t) so they have additional responsibilities to behave.  Branding a whole class of people, not for the first time, he said: “I think for too long we have taken too soft an attitude to people who loot and pillage their own community.  If you do that you should lose your right to housing at a subsidised rate“.

Bullingdon boys don't even know which end of the broom is upSimplistic solutions?  Bullingdon boys don’t even which end of the broom is up.

The existing law indeed may not give Shapps and Cameron what they want, as the always excellent Nearly Legal website briefed.  To get a possession order the landlord will
have to demonstrate that nuisance was caused or an indictable offence committed
‘in the locality’.  It is a discretionary ground for possession so the courts would decide on the merits of the case.
In my view the criminal justice system exists to assess evidence and context and impose sentences on those found guilty.  The question we have to ask is why the crime of looting a High Street should be punished by removal of housing, but only if the perpetrator is a council tenant?  The riots have nothing specifically to do with housing or council estates.  Why aren’t we debating removing NHS benefits or free school meals?  Or parking permits or driving licences?  Or tax relief for pension contributions?  Or access to higher education?  Or child benefit?
Housing associations seem to have reacted much more sensibly than some councils on this one.  Peabody’s Stephen Howlett, said he thought courts were likely to find eviction of tenants caught up in the riots disproportionate: “We want the strongest action to be taken against those involved, but our preference is for the criminal justice system to be the
focus.”  The measures risked simply moving the problem to another area, or pushing tenants further into poverty: “These people have to live somewhere, so if they are evicted you risk just exporting the problem.”  He had talked to a mother on the Pembury estate in Hackney who was was “terrified that she and her younger child would be made homeless as a result of her 17-year-old who she could not keep under control“.  He added: “This is not simple. We have to be very careful.”
The only reason tenure-based punishment has gained traction amongst politicians and some parts of the media is that it reflects pre-existing prejudice that council tenant = underclass = rioter.  It is part and parcel of the scapegoating and stereotyping of social tenants in general and council tenants in particular.  It often seems to be the case that council tenants are singled out for extra punishment or additional requirements to behave in a particular way.  Eviction for anti-social behaviour – not applied to other tenures, not
even to RTB lessees or their private tenants -.was only an acceptable policy because it involved ASB in the dwelling or the locality, that is the place where the tenancy existed, but it is now proving to be the thin end of the wedge.
There is no information that council tenants were disproportionally involved in the riots, so far this is a knee-jerk reaction not based on evidence.  From what I’ve seen so far, some were tenants and some weren’t.  Tottenham for example is a genuine mixed tenure community with both middle class and working class home ownership and private renting and housing association renting as well as council housing, from which rioters could have been drawn.  It would be ludicrous to suggest owner occupied households containing a perpetrator should be foreclosed or lose their exemption to capital gains tax on their properties.
Fortunately Ed Miliband has been taking a more considered approach.  I agree with him when he says:   “These issues cannot be laid at the door of a single cause or a single Government. The causes are complex. Simplistic solutions will not provide the answer. We can tackle the solutions only by hearing from our communities…… They want us to go out and listen to them in thinking about the solutions that are necessary. Before any of us say we know all the answers or have simple solutions, we should all do so.”

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A decent result for council housing

It has been a long time coming, but the end of the national HRA (housing revenue account) subsidy system for council housing is now in sight.  A new government paper Self financing: Planning the transition clarifies some of the detail, updates the figures that will be used, and crucially sets the timetable for implementation – 28 March 2012 will be the day on which many billions of pounds will move around between CLG, the Public Works Loans Board and individual local authorities to implement the scheme.
Although the technicality of the new paper will give anyone except a public finance accountant and a few experts a headache, the core proposals are still much the same as
proposed by the Labour Government. Radical change has been made possible due to the fact that the council housing system as a whole has moved into significant surplus, surpluses that are projected to grow in future.
The current system involves central government notionally collecting all rents and
redistributing the income between councils with housing stock according to
increasingly complex formulae.  The system has become unsustainable, with some councils losing 50% of their rent income to the national pool, and volatile, with annual determinations making longer term planning very difficult.  The central problem was the bad distribution of historic debt – councils that have built most in the past had large debts they couldn’t sustain from local rent income.  The new system redistributes the debt permanently between councils, according to their ability to support it within 30 year business plans, removing the need for annual redistribution.
‘Self-financing’, as it is called in the jargon, is a genuinely localist move, supported by all
of the political parties and by the vast majority of councils with stock. It is a major success for the housing lobby, and especially CIH, who have argued for this change for many years to give council housing a sustainable future and to bring key decisions over finance and services closer to tenants.
Of course there are still risks and there are elements of the package that could be improved.  There may be dangers in the detail of the redistribution formula that I wouldn’t be able to spot with binoculars, but some others will.  One change made by the current government has been to retain the rule that 75% of capital receipts from the right to buy will go to central government rather than stay locally as Labour had decided.  They also imposed a cap on borrowing, limiting the scope for councils to use their surpluses to build new homes, and spiking the ambitions of some councils to become major builders again.
The funding arrangements to complete the decent homes programme also do not seem to be adequate for the job.
It must be said that there are dangers as well as opportunities arising from local control of the housing revenue account. The ring fence is retained but, given that the general fund at most councils is under severe strain, some Directors of Finance and politicians will look avariciously at the HRA and seek to move funds across.
Tenants will need to be vigilant and alert to the many tricks of the trade, and scrutinise carefully all arrangements such as recharging of overheads and central council costs and service level agreements.   If council housing is to be a self-financing business in future, the core principle must be that rent income is used for the benefit of tenants and not
council taxpayers generally.
The long-predicted total demise of council housing has been averted. Campaigning tenants and a few councils who were determined to hold on to their stock can take much of the credit for that.  Councils with stock should now be able to adopt a sustainable business plan for the future, making decisions locally, with their tenants, to improve their management and performance.  Some councils are building again, admittedly in small numbers, and more have the potential to do so.
Given the politics of council housing over the last 30 years, this is a good result.

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How come Scotland can build council houses then?

Peter Hetherington writes in the Guardian that more than faith is needed to build council houses, and asks why Scotland manages to build almost as many as England when its housing market is a tenth of the size of its southern neighbour?
The reasons are set out in today’s UK Housing Review Briefing, which updates many of the figures in the annual publication and draws attention to recent trends. One of these is that the 32 councils in Scotland built over a thousand houses last year, and may well build the same number or more this year, while English council house building will probably peak at only a little higher than this, before heading back to the miserable output levels of 2-3 years ago.
So why is this? It turns out that the answer is in the spending rules. Scottish councils have several big advantages over their English cousins.
First, they’ve had local control of council housing finances for years, for the simple reason that Scotland stopped subsidising council housing revenue accounts and so the ridiculous ‘HRA subsidy’ system which is in its last year of operation south of the border fell into disuse in Scotland many years ago.
Second, they have had no rents policy for council housing, which may have been an oversight but has had the happy side-effect of low rents which councils can now raise – if they choose to – to pay for new investment.
And third, a quirk in the spending formula by which the Treasury controls Holyrood means that any extra borrowing is counted as what’s called ‘Annual Managed  Expenditure’ (AME) rather than the more tightly controlled Departmental Expenditure Limits (DEL). In England and Wales, the opposite applies.
Even more surprisingly, councils are predicted to soon have the same building potential as Scottish housing associations. This is, of course, because their borrowing is cheaper than new borrowing by associations. It’s counted as public borrowing, though, which doesn’t worry Holyrood but might one day trouble the Treasury if volumes are perceived to get too high.
Even after council housing finance reform in England in April next year, councils will still be restricted in what they can do and won’t be able to emulate Scotland. In theory, English councils can also borrow prudentially, but HM Treasury is placing a cap on their borrowing from April onwards so they won’t be able to use this freedom to the extent they could support from their income. Some will continue building, but most won’t be able to do so on any scale.
There’s a sting in this tale, of course: someone is paying for the new houses and while there is a grant system in Scotland part of the cost falls on rents. So existing tenants are partly paying for the new homes. However, so far there has been no suggestion that Scotland follows England in jacking rents up to 80 per cent of market levels – or anywhere near them. So the pain is probably tolerable and councils must judge that they have tenants on their side.
The odd thing is that it’s in England rather than Scotland that the government is making a big fuss about cutting red tape and freeing up councils to do more. Looking north of the border might be a bit unpalatable since May’s elections, but even so the English housing minister could take a leaf out of Scotland’s spending rulebook.

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John Wheatley and the Origins of Council Housing

Council housing has a rich history.  It transformed the housing conditions of millions of people.  It owed its origins to a small number of visionary pioneers.  In a special post, Steve Schifferes recalls the life of a pivotal figure, John Wheatley.
John Wheatley, a leader of the “Red Clydeside” group of Labour MPs in the 1920s, was a key figure in the development of housing policy in the UK, and the architect of the 1924 Housing Act which built nearly 500,000 homes in the interwar years and put council housing on a firm financial and political basis for the next 50 years.
At a time when the very concept of council housing is under unprecedented attack, it is useful to look again at Wheatley’s legacy.
Wheatley’s concern about housing stemmed from his own impoverished background as the son of an Irish miner in the Lanarkshire coalfields. Wheatley himself went down the pits at age 12, and lived in a one-room terraced house with his eight brothers and sisters, parents, and lodgers.  The children all slept together in a bed that was rolled out at night. There was only a communal toilet and water had to be hauled from a common tap. Wheatley later described the degrading conditions of such housing in his pamphlet ‘Mines, Miners, and Misery’, where he blamed the mine owners for dehumanising their workforce.
Wheatley managed to escape from the pits through self-education and eventually managed to become a successful businessman, setting up a printing firm which printed religious calendars and local papers. His financial success allowed him the freedom to carry out his political activities without interference, and he was able to subsidize the printing of leaflets and the organisation of meetings.
Wheatley had not started out as socialist but as an Irish Nationalist, and was a leading member of the United Irish League in Glasgow before he joined the Independent Labour Party in 1906. Wheatley was also a devout Catholic, and his first act was to set up a Catholic Socialist Society, to convince the Irish Catholic community that there was no incompability between religion and socialism. He ran foul of the Catholic establishment in the City, and in 1912 an angry mob converged on his houses to burn him in effigy for his heretical beliefs – an event he watched with equanimity from his front porch.
Wheatley soon became active in local politics, serving as a councillor for Shettleston, and when it was amalgamated with Glasgow, as leader of the Labour group on the City Council. Glasgow had the worst housing of any major UK city, with the majority of its population living in unheathly one or two room tenement blocks with little sanitation. Death rates for the poorer wards were very much higher than in the affluent West End. And housebuilding had virtually ceased as the “housing famine” increased, putting pressure on accommodation and rents.
From the outset, Wheatley argued that only the government could supply the answer to the housing problem by building reasonably priced housing for workers. He sought to capitalise on the successful activities of the Glasgow City council to help subsidise the cost of building such housing, proposing that the surplus from the municipal tramways be used to build “Eight pound (per year) cottages for Glasgow citizens.” 
What transformed the housing issue in Glasgow was the First World War. As a major munitions centre, Glasgow’s population expanded rapidly with an influx of workers to the shipyards and armaments factories. The result was a squeeze on housing, especially affecting existing tenants whose husbands were in the armed forces.  The ILP under Wheatley – despite its anti war stance – began agitating over the evictions of servicemen’s wives, calling the landlords the “huns at home.” By October 1915 they had built a mass movement, led by women, of rent strikers who prevented evictions and marched on the sherriff’s court. When the workers at the Parkhead Forge (led by a Wheatley ally, David Kirkwood) threatened to go on strike to support the rent strikers, the government conceded and introduced rent control throughout the UK for the duration of the war. 
Wheatley himself was always clear that rent control was a temporary measure due to the failure of the private rented sector, and the real answer was the provision of state-subsidised housing. In 1922 he was elected to Parliament, and in 1924 he had a chance to put his ideas into practice when he was appointed Minister of Health in the first Labour government.
There had already been two failed attempts to involve the national government in the provision of housing after the war – the Addison Act in 1919, which aimed at providing “Homes Fit for Heroes” but fell victim to the Geddes Axe and was cut by the Coalition Government as too expensive. In 1923 Neville Chamberlain introduced a housing act designed to subsidise private sector provision, but little housing was built.
Wheatley built the foundations of his housing policy carefully, first working to gain an agreement between builders and the building trades on the expansion of the apprentice system to ensure there was the workforce to expand housing production. He also sought agreement with building materials suppliers to limit any price increases, and carefully consulted the local authorities.  Under Wheatley’s plans, local authorities would receive long term 40 year subsidies to build council housing under municipal control with a guarantee against any losses.  Wheatley aimed to eliminate the housing shortage in ten years, with house building rising from 135,000 per year to 450,000 houses per year in the final year of his plan. Wheatley aimed at a high standard of housing suitable for skilled workers and available to all, “homes not hutches” as he called it.
Wheatley fell out with the Labour leadership under Ramsay MacDonald over his attitude to the 1926 General Strike, and due to his left wing views was not reappointed in the 1929 Labour government – and remained a fierce critic of its orthodox economic policy in the face of the growing world economic crisis. He died in 1930, just before the Labour government fell and the pound was devalued.
MacDonald joined a new National government dominated by the Conservatives.  That government abolished the Wheatley Act as too expensive and returned to a policy of slum clearance with its emphasis on the rehousing of “slum dwellers” in houses and flats of lower quality. This led to a number of rent strikes by existing tenants, who objected to having their rents increased in order to subsidize the rents of the new tenants, who at that time could not afford council housing.
Wheatley’s legacy lived on, however, through the post World War II expansion of council house building – and council housing became the basis for Labour’s rise to power in the major urban centres.
Steve Schifferes is Professor of financial journalism at City University.  Formerly a producer at London Weekend Television and a BBC journalist, he also worked at Shelter, the National Campaign for the Homeless.

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Just because it’s a council house doesn’t mean it’s not yours

As one who rails against the constant mischaracterisation of council housing and council tenants in the media (and by some housing professionals), watching a serious but entertaining history of council housing was a joy. 
Michael Collins’ ‘The Great Estate: The Rise and Fall of the Council House’ not only traced the history of council housing from the building of the Boundary Estate in Shoreditch in 1893 to the demolition of the Heygate Estate in 2011 but did so through a riveting mix of analysis, archive footage and personal histories.  It’s a highly recommended watch for anyone with an interest in housing, available on i-player.
I thought Collins made some excellent points in a thread running throughout the programme about the importance of creating neighbourhoods and not just estates of homes, what he called the sense of belonging, and his description of Aneurin Bevan’s concept of a classless new society based on council housing.  His criticism of the government’s move towards temporary tenancies was all the more powerful in this context – it will destroy, as he said, the sense of permanence that gives people a reason to make an investment in their homes and estates.
Jimmy McGovern made the point forcefully – despite being a tenant, ‘it was our house not the councils, that’s why we looked after it…… Just because it’s a council house doesn’t mean it’s not yours.’  Tell that to the government and the modern providers who see tenants as transitory occupiers of their (the landlords’) homes. 
I also agree with Collins that utopian architecture, government subsidies for high rise, and jerry building caused huge problems, helped spoil the reputation of council estates as places to live and failed the ‘sense of belonging’ test.  I would also add bad housing management to the list.   
Where I depart from Collins is in his analysis of the impact of the 1977 homelessness legislation.  It is not accurate to say it ‘jettisoned policies that favoured locals’ or that it led to the rehousing of ‘itinerant’ people.  The vast majority of people rehoused were on local waiting lists and qualified under local connection rules, and having worked as a senior manager in one of the boroughs with the greatest numbers of homeless people, I think his claims that the system was abused are wildly exaggerated. 
Of course there were changes on the demand side – as home ownership became an option for many, and as private renting contracted – but for council housing these were less important than what happened to supply.  Collins says rightly that Thatcher passed the ‘death sentence’ on council housing, but he does it only in passing.  It was the collapse in supply, starting after the 1976 IMF crisis but hugely intensified under Thatcher, that changed the nature of council housing and ended Bevan’s dream.  The sector was made to become, as some Tories acknowledged then and some still do today, a residual tenure moving rapidly towards the American model, and with the same consequences.
Nor is it all bad today, or even normally bad.  There are millions of people happily living in council homes at affordable rents, with the security of tenure that helps give them that crucial sense of belonging.  And there are millions more who would be only too delighted to receive an offer to join them.
See another blogger’s view of the programme – Jules Birch of Inside Housing – here.

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HRA ring fence: the need for scrutiny

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

In previous posts we welcomed the Government’s decision to implement John Healey’s proposals to reform council housing finance through ‘self-financing’.  We expressed a couple of doubts about the new proposals, notably that the Government had abandoned Labour’s plan to allow councils to retain all of their capital receipts from council house sales.

One other noteworthy distinction between the two sets of plans concerns the operation of the Housing Revenue Account ‘ring fence’ – ie the rules governing transfers between the HRA, which records income and expenditure on council housing, and the General Fund, which covers the rest of council spending. 

John Healey’s ‘Prospectus’ published a year ago showed the need for gradual reform of the way the ring fence operates to make the system fairer for tenants.  It showed that at least 40% of general management costs are incurred on what it defined as ‘non-core’ services, services that arguably should not be met from rents but from the general income of the council.  This one statistic makes a mockery of any accusation that tenants are ‘subsidised’.  Therefore, over time, it was proposed that non-core services should be regarded as services provided by the landlord but funded from sources other than rent.  The consultation showed virtually unanimous support for the continuation of the ring fence and the Prospectus proposed that new updated guidance should be issued.

In the Tory proposals ‘Implementing self-financing for council housing’ published in February 2011 the ring fence merits a single paragraph.  On the principle it accepts that the system should ensure that ‘council taxpayers do not subsidise services specifically for the benefit of tenants and that rent is not used to subsidise functions which are for the benefit of the wider local community’ – although that statement is open to several interpretations.  My concern is that it states ‘In line with our emphasis on localism we do not intend to issue new guidance on the operation of the ring-fence. We expect local authorities to take their own decisions, rooted in the principle that ‘who benefits pays’.’  The last guidance was issued in 1995 when council housing finance was very different from today.

Although the legal position will not change, the lack of guidance, the dilution of Labour’s plans for independent regulation of council housing, and the message the government is sending out that the operation of the ring fence is down to local discretion, combine to create a real danger for tenants.  Council Finance Directors and local politicians of all hues will look enviously at a fairly well-funded HRA and see opportunities to shift resources to help their beleaguered General Funds. 

The ring fence is easily breached and open to manipulation.  In one council I worked with, there were more than 60 types of transaction between the HRA and the General Fund.  These ranged from recharges for council overheads and democratic costs, to dozens of service level agreements with charges for items like central accountancy and HR, to procurement of office furniture, to rent for council premises.  Then there are age-old practices where council tenants are charged twice, as rent payers and as council tax payers, for a single service – for example paying towards general street lighting but also paying extra for lighting on estate roads. 

These charges have often been set historically with little challenge.  One of the many benefits of ALMOs was that the process of setting up the management agreement required recharges and SLAs to be identified and renegotiated, a process sharpened by the need to obtain 2 stars in the inspection, which led to better services and significant cost reductions.  My fear is that local discretion will reverse this progress and cost tenants dear over time.  The temptation will be just too great – and it will undermine the move towards council housing being run as a self-financed business within the council, with services paid for out of rents in a very transparent way.  The case for central guidance is strong.

Tenants have been vigilant on this in the past – witness the ‘Daylight Robbery’ campaign a few years back.  In future, detailed tenant scrutiny of the local arrangements will be essential, and well-informed campaigning tenants groups could make a real difference.

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Self-financed council housing – will it do what it says on the tin?


Senior housing policy expert writing under a pseudonym.

I hesitate to say that the government has published its final proposals for the self-financing of council housing, since they’ve made so many announcements about it they are rivalling the quantity issued by the previous government.  And strangely enough, despite this the broad shape of the package is pretty much the same as that put forward by John Healey when he offered his ‘prospectus’ last year.  One key difference, of course, is that a prospectus implies choice, whereas the current package will – after a bit of negotiation around the edges – be imposed by statute from April 2012, on all 171 councils that still have housing stock.

On the face of it, the figures involved look alarming, and no doubt some on the left will use them to oppose self-financing outright, as they did when Labour put it forward.  The headline figure is that councils will take on around £19bn of new debt, to enable them (in effect) to buy their way out of the system.  While the LGA originally demanded that all ‘historic’ debt be written off, this was always an unlikely call on public funds, even more so with Mr Osborne in charge at the Treasury.  More recently, among local authorities there has been gradual and – almost – universal acceptance of the principle that extra debt would have to be taken on as the price for escaping from the so-called ‘subsidy’ system. (The word ‘subsidy’ increasingly means, of course, that tenants subsidise the Exchequer, not the other way round.)  And the other side of the coin is that a minority of councils will have part of their debt paid off.

Inevitably, the Treasury had its fingers in this pie well before the general election.  The cap on each council’s borrowing, which restricts them to the levels to be included in the settlement itself, was already envisaged in Labour’s prospectus.  Not only that, but it was always likely that the Treasury would ensure that it kept the surpluses the government would have earned from council housing in the future, however much these are correctly argued to amount to ‘daylight robbery’ from tenants. 

In terms of the arithmetic, the spreadsheet experts have so far concluded that the current deal is similar to, and perhaps even a bit better than, the one in John Healey’s prospectus.  However, whatever the overall deal, what will matter to authorities is how their individual figures work out. Given that there is a fair amount of local detail in the latest paper, this is where the focus of interest on the figures is likely to shift.

There is already a danger, of course, that hard-pressed councils whose revenue support grant has been cut are looking at their housing revenue accounts to see if they can help make up the shortfall.  Labour was alive to this, and included updated guidance about maintaining the ‘ring fence’ around the HRA in its prospectus.  In the current document, the guidance has been dropped and there is only a brief reminder that the ring fence needs to be kept.  It seems to me that it’s always been down to tenants to be vigilant on this issue.  Their vigilance needs to be even greater when, after April next year, the only income to the HRA will be their rents.  The first call on rents will be to pay the debt charges, then maintain the stock, then run the landlord service.  Councils and tenants can’t afford to let any of their rental income be siphoned off to make good cuts elsewhere.

There remain several points of contention about the caveats in the overall deal the government has put on the table, and all of these are a result of those greedy Treasury fingers looking for the meat in the pie.  The new one to emerge as part of Mr Shapps’ package is that councils will have to continue paying three-quarters of right to buy receipts back to government.  Labour can hardly rail against this iniquity, since they introduced it, but credit was due to John Healey that through his package it would have been brought to an end.  The Treasury have locked their fingers round this tasty morsel, and must now somehow twist the settlement so that it reflects 30 years of future stock losses through right to buy.  This introduces a high and unnecessary degree of uncertainty, since predictions of right to buy sales are invariably wrong.

The Treasury also wants the facility to reopen the settlement if circumstances change.  One of these might of course be a wayward forecast of the effects of the right to buy, but the very prominence of this caveat is making councils think that ‘self-financing’ might be maintained only as long as it suits the Treasury.  This is not what the deal is supposed to be about.

However, it’s the debt cap that really grates with councils, in part because of the context of overall spending cuts.  If it was a bad idea under Labour, it’s a far worse one when grants from central government and other sources of finance apart from borrowing are likely to be extremely scarce, to put it mildly.

The debt cap, the continued repayment of receipts and the constant threat that the settlement might be reopened are all eroding councils’ supposed autonomy.  Interestingly, as was revealed last month, councils have an unlikely ally in the deputy prime minister, who is said to have asked for councils’ borrowing powers to be reconsidered in a letter to Eric Pickles about the imminent local government finance review. 

Of course, if the Treasury were to listen, at last, to the case for taking council borrowing out of the main national accounts, they could use self-financing to get council debt off the government’s books completely.  Council housing is anyway now classified as outside government by the Office for National Statistics. Because most of its income comes from charges (rents).  Where councils have ALMOs, these are considered separate public corporations (like, say, the BBC). Taken together with likely changes to the accountancy rules about housing revenue accounts and the separating out of housing debt, this could be the moment for the Treasury to take a step towards giving council housing – like housing associations – real autonomy.  However, none of us will be holding our breath.

Blog Post

One cheer and one HuRrAh

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

In trying to look beyond this government’s irksome habit of claiming credit for things agreed before the Election, at least it can be said that the snail’s pace move towards the abolition of the housing revenue account national subsidy system continues in vaguely the right direction. 

Having announced already that he planned to stick with most of John Healey’s proposals, announced it again as part of the November consultation on the reform of social housing, and announced it yet again as part of the Localism Bill package, Grant Shapps has now announced a ‘route map’  towards reform – in advance of a more detailed announcement next month!  The route map makes it clear that more detail will emerge over the next year before implementation in 2012, no doubt offering Mr Shapps further opportunities to announce his great, but inherited, reform.  Who said spin was dead?

Brought up on a council estate in Kenton, Newcastle, I have always had an emotional belief in council housing, and have often been outraged at the stigma attached to the tenure, the appalling media misrepresentations, and the snobbery.  Although what Thatcher did to council housing was unforgiveable, I was hugely disappointed that it turned out to be not very New Labour either.  But the rationale for council housing is not just emotive.  Based on a system of rent pooling, so that surpluses from older homes cross-subsidise the cost of new ones, it was also a robust financial model.  It could have provided hundreds of thousands if not millions of extra homes if it had been managed properly over the past 30 years.   

The Tories’ failure to invest in managing and maintaining the council stock left Labour with a huge problem in 1997, including a backlog of disrepair estimated at around £19billion and an incoherent rent policy.  Labour made some well meaning attempts at reform, such as the introduction of rent restructuring, the Major Repairs Allowance and the Decent Homes Programme, but funding for the latter carried the clear political price tag that direct management of the stock by councils was unacceptable to the government. 

As some councils in the national HRA subsidy system had large historic debts and others had none, the system was unbalanced and rent pooling became unmanageable.  It also became increasingly unpopular with tenants and councils in those areas where a third or even a half of local rents were taken for distribution elsewhere.  Despite producing growing surpluses nationally, all of the participants were unhappy with the outcome, even those that gained from redistribution.  As an annual system, there was no certainty about income and it was impossible for councils to plan long term and improve efficiency.  Tenants simply could not engage with the key decisions that affected their homes and communities because they were only understood by a tiny number of civil servants and professionals.  In its latter years, the Labour government became less hostile to the idea that council housing should have a long term future, and understood that a more local system suited the times.  It embarked on the hugely complex exercise of unravelling the system.

The Localism Bill contains powers to implement the local system proposed by Labour.  In future, councils will keep their rental income and use it locally to manage and maintain their own homes and service their debt.  To get to the point where all councils have sufficient income to meet these costs, there will be a one-off payment between central government and each council, which will reallocate existing housing debt between councils in a final settlement based on 30 year business plans for each landlord.  This is possible because the national system is in surplus – ie tenants are paying more in rent than council housing costs to run.

Communities and Local Government department’s task is complicated: they have to incorporate the implications of the new government’s shifting policies, for example on rents, as well as making important assumptions about inflation and the ‘discount rate’ (currently assumed to be 6.5%) used to determine the ‘net present value’ of each council’s housing business. 

I have 2 main concerns.  First, John Healey planned to allow councils to keep their right to buy capital receipts, whereas the Tories will retain the current system that returns 75% of net receipts to the Treasury.  There will also be a cap on councils’ overall housing borrowing.  Hope that HRA reform would trigger a resurgence in council housebuilding has been dashed.  The overall receipt to the Treasury from all the various calculations is currently projected to be around £6.5b, but tenants may come to view this as being paid for out of a large rent increase next year of over 7%.

Secondly, Labour would have localised the HRA within the clear framework of the regulatory regime.  There would have been an external check, through the Tenant Services Authority, and a place for tenants to go if, for example, their council set up backdoor arrangements that took funds out of the HRA to benefit the general fund.  It is still not clear how regulation will operate without the TSA, and this will make tenants in some areas nervous about what their landlords will get up to.   

At least we can look forward to further announcements.