On 1 April 2004 legislation changing the treatment of capital receipts arising from right to buy (RTB) disposals came into force. Prior to that date, local authorities with debt were required to set-aside 75 per cent. of the capital receipt generated by an RTB disposal for repayment of that debt, and were able to use the remaining 25 per cent. of the receipt for any capital purpose. Debt-free authorities were not required to set-aside and were able to use their entire receipt for any capital purpose.
Since 1 April 2004, all local authorities have been required to pay the same proportion of RTB receipts to the Secretary of State. This process is known as “pooling”. The Government, however, have consistently invested more in housing than they have received in receipts. In 2004-05 the amount paid to government from all housing receipts (not just right to buy) was £1.7 billion. The amount invested in housing was £4.1 billion ie almost 2.5 times the amount received in receipts.