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Local Authority Housing Revenue Account

Volume 483: debated on Tuesday 18 November 2008

2. If she will hold discussions with Treasury Ministers to ensure that revenue from the local authority housing revenue account is directed to social housing. (236263)

The current review of council housing finance is a joint review between my Department and the Treasury. It includes a thorough exploration of the housing revenue account—HRA—subsidy system. DCLG and Treasury Ministers regularly discuss the progress of the review.

Council tenants in the borough of Kettering pay £12 million a year in council rent, £3 million of which goes into the Treasury coffers and is not reinvested in council housing in Kettering. Why should council tenants in my constituency pay £1 in extra stealth tax for every £4 they pay in council rent?

I know that the hon. Gentleman and his constituents are concerned about this, and the Government recognise that the current system can be unpopular and perceived as unfair. That is precisely why we undertook the review of council house financing. The review of the HRA subsidy system will look at how local authority housing is financed. It will cover such issues as the recycling of rental income subsidies and the concept of negative subsidy, and I hope that that will address the concerns of the hon. Gentleman and his constituents.

After years of neglect by the previous incumbents in government, there has been substantial investment in social housing in my area. Slum houses have been removed and new buildings have been put up that are far more suitable for the people in our community, and we thank the Minister and this Government for that—[Interruption.] It needs to be said—[Interruption.]

Thank you, Mr. Speaker. On this point, can my hon. Friend reassure me that in the current investment in social housing, which is part of a massive rolling programme, young people who are doing skilled work at college are employed in local projects, so we can take full advantage of that significant investment?

I thank my hon. Friend for that challenging question; I agree with her completely on this. When we came to power in 1997, some £21 billion of spending was needed to refurbish the council housing stock. That was disgraceful, and a terrible legacy of the previous Tory Government. By the end of 2010, we will have spent in the region of £40 billion—a once-in-a-generation opportunity to refurbish a generation of council housing. My hon. Friend will be pleased to hear that in the next comprehensive spending review about £8.4 billion—a 50 per cent. increase—will be provided in order to provide the social and affordable housing that this country needs.

Is the Minister aware that social housing depends hugely on the health of the private sector? A huge part of social housing is a by-product of housing that is in the marketplace. Given the recession that we are entering, is he aware that the Housing Corporation is permitted to finance only up to 40 per cent. of social housing developments, and that the rest must come from sale-for-market properties or from borrowing? Given the dependence of social housing on the private sector, would it not be intelligent to raise the 40 per cent. limit so that the Housing Corporation could make a proportionately bigger contribution to social housing? Would that not be a good recommendation for the Treasury’s pre-Budget statement?

I thank the right hon. Gentleman for his question. He is a former housing Minister, and I know that he is well versed in these arguments. His point is well made, and my response to his question is twofold. First, we are aware of the need for a vibrant construction industry. The £1 billion package that my right hon. Friend the Secretary of State announced in September is part of a package to help the construction industry prepare for the upturn and manage the current difficulties.

The right hon. Gentleman mentioned the grant regime. The Housing Corporation—as of 1 December, the Homes and Communities Agency—is looking at that issue, and Sir Bob Kerslake, the chief executive designate, is keen to have increased flexibility to ensure that delivery can happen on the ground so that we can help the industry to provide more houses, particularly social and affordable housing.

I am sure that my hon. Friend will agree that problems with the housing revenue account, among other difficulties, lead to a great deal of uncertainty about financial wherewithal for organisations such as Sheffield Homes, the ALMO—arm’s length management organisation—that runs homes in Sheffield. It also leads to a disconnect between the rents charged and services provided to tenants collectively and individually. Is he committing the Government in principle to a reform of the housing revenue accounts system, and could he give us some idea for his timetable on that?

I thank my hon. Friend. He is a former housing portfolio holder in Sheffield, and is well versed in these matters. He is absolutely right: there is a great deal of volatility with regard to planning, particularly in the repair and maintenance of council houses, which we need to address. He is also right that in the current national system, there is a disconnect between rents paid for by tenants and the services provided. I am not in the business of tinkering around the edges of the housing revenue accounts system; it needs wholesale, fundamental change. My hon. Friend asked about the time scale, and the review will report to Ministers in the spring of 2009, with a hope to introduce some sort of legislative vehicle in 2010.

Can the Minister do more as a matter of urgency to help local authorities and even housing associations to buy up unsaleable flats and other developments for social housing? That would help the economy, the housing market, which needs a lot of help at the moment, and our constituents who need social housing.

I absolutely agree with the hon. Gentleman, but that is happening already. Throughout the country, £200 million has been provided to allow it to happen. We have said that more is possible; the Homes and Communities Agency will be actively engaged in the process. I would temper that by saying that the public sector does not want to buy inferior quality. We need high quality, so it is important that the public sector is well provided for with adequate space standards.