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Housing Revenue Account Subsidies

Volume 470: debated on Tuesday 15 January 2008

4. Whether she plans to change the system of negative housing revenue account subsidies; and if she will make a statement. (178388)

There is redistribution within the housing revenue account and I believe that that is right. However, reforms are needed to the housing revenue account and we are already piloting some major changes, which will be supported by the Housing and Regeneration Bill, but we are also conducting a wider, long-term review of the housing revenue account.

I thank the Minister for her reply. She may know that I had a meeting with the Under-Secretary of State for Communities and Local Government, the hon. Member for Gloucester (Mr. Dhanda), during which I highlighted the impact of the housing revenue account on Sutton’s tenants. Thirty-seven per cent. of the rental income there is a negative subsidy. I asked the Under-Secretary a question, which I should now like to repeat to the Minister. Is she willing to freeze those subsidies at the 2007-08 level until her review of HRA is complete so that Sutton’s tenants do not pay a heavy price?

As the hon. Gentleman knows, there is a long tradition of acknowledging that some areas have been better funded in the past than others. Some areas have had their council housing funded through different mechanisms, which has put them at an advantage or a disadvantage, and there is different need in different areas. I believe that it is right that there should be some redistribution in the system.

I do not like the housing revenue account. There is a series of problems with it in enabling councils to manage their assets properly for the long term. However, it is a complex framework and, to reform it, one has to ensure that one is not disadvantaging unfairly other areas and other councils. We have set out the determination for 2008-09, which councils should have received. We will work fast on the housing revenue account review to inform next year’s determination.

I greatly welcome my right hon. Friend’s comments and the review to which she has committed the Department. The housing revenue account is not merely a problem for authorities in negative subsidy. The housing revenue account system is a problem in that an authority can get penalised for building new homes and, if tenants want to opt for improvements, they cannot pay extra rent to cover the cost. There is a fundamental dislocation between the service provided and the rents that are charged. For all those reasons, I am sure that my right hon. Friend agrees that a fundamental change in the system would benefit landlords and tenants.

My hon. Friend is right. Part of the problem with the housing revenue account is that one has to wrap one’s head in a wet towel every time one tries to work out the details. Such a complex system is not in the interests of people who run housing revenue accounts throughout the country. A system that better rewarded long-term planning and long-term decision making by local councils would be preferable. The pilots that we have established are already trying to find one way in which to approach reform, but the review will be wider and examine a range of options.