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Autumn Statement: Borrowing cap increase ‘massively disappointing’

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  • by Colin Marrs
  • in 151 News
  • — 5 Dec, 2013

Local government finance experts expressed disappointment today at the government’s announcement of of a relatively small increase in the amount councils can borrow through their housing revenue accounts (HRAs). In today’s Autumn Statement George Osborne announced that he will increase HRA borrowing limits by just £150 million in 2015-16 and £150 million in 2016-17.  He also said the offer will be linked to councils undertaking to dispose of what the Treasury calls “high value vacant stock”.

Richard Parker, head of advisor PwC’s housing finance team, told Room151: “It is a step in the right direction, but £300 million is only around one per cent of the total HRA debt. It is not going to have a huge impact and there was an opportunity to be a bit more ambitious.”

Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy (CIPFA), said: “CIPFA has long campaigned for the HRA borrowing cap to be lifted to allow local authorities to build the homes their communities need. It’s therefore massively disappointing to see it increased by only £150 million next year, but also that this money comes with a host of strings attached with the government creating a complex competition before authorities can hope to see the benefits.”

Chartered Institute of Housing chief executive, Grainia Long, said: “Increasing local authority borrowing caps by £7 billion, rather than £300 million, would allow councils to build 75,000 new homes over five years, creating 23,500 jobs and creating £5.6 billion of economic activity.” She dubbed the rise “far too modest”, saying there was a risk that any gains could be offset by the requirement to sell high-value social housing and a drive to expand the Right to Buy, also announced today.

The Treasury said that the raised borrowing cap could fund around 10,000 new affordable homes and would form part of the Local Growth Fund (LGF), allocated to councils through local enterprise partnerships (LEPs).

In documents released alongside the statement, the department said: “The government will prioritise bids on the basis of their value for money, and would expect partnership working with housing associations or through joint ventures. “The government also expects bids to contribute public sector land, and disposal of high-value vacant stock to drive competitive bids.”

Mike Jones, chairman of the Local Government Association’s environment and housing board, put a brave face on whilst reacting to the announcement. He said:  “While today’s announcement does not go as far as we would like it to, it demonstrates that councils have been listened to and that government recognises local authorities can do much more when given greater independence. This will provide a glimmer of hope to people facing lengthy waits for a council home.”

As part of the statement, Osborne also announced the scrapping of controversial plans to top-slice cash from the New Homes Bonus except for £70 million for the London LEP. The Chancellor also said that councils in Scotland and Wales will be allowed to apply for funding through the Public Works Loan Board (PWLB) of up to £400 million. The cash, aimed at supporting infrastructure projects, will be available between 2014 and 2016. The government has also announced that nearly £800 million of borrowing at the PWLB project rate will be available to English LEPs as part of growth deals.

Also of interest to local authorities was the news that councils would not be asked to make any more savings on top of the cuts to budgets already announced, on the basis that local authorities freeze council tax between 2014 and 2016.

Paul Dossett, head of local government at accountancy firm Grant Thornton UK, said that it was not clear what would happen to those councils who raise their council tax. He said: “The ability for local politicians to decide on local taxes is, in our view, vital if local government is indeed to remain local, vibrant and accountable, and not just perceived  as a second string Whitehall outpost.”

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