Each autumn, after consultation, the Government publish formal guideline rents so that local authorities know where they stand on Government subsidy on the Housing Revenue Account (HRA) system.
Authorities are then free to make their own decisions on the actual rent level to set in their particular circumstances. Many authorities set actual rents below the guideline figure.
Last year, the Government were pressed to give authorities greater financial certainty and responded by giving guidance for two years rather than one—which authorities appeared to welcome. However, since recent major changes in the economic situation, the Government are under substantial pressure from local authorities which would prefer us to reconsider the two-year deal. I have already indicated that we will re-examine the guideline rents for the second year, 2010-11.
More recently, we have also had increased pressure to re-examine the guideline rents already issued for this coming year. Under normal circumstances, this is not something that I would be prepared to contemplate.
But, in, and only in the context of the present unprecedented global downturn, it is right that the Government offer real help to council tenants. I am therefore quite exceptionally prepared to offer authorities the opportunity to bid for additional subsidy, if, and only if they are preparing to revisit the level of rents set and reduce them by that amount.
We are therefore halving the national average guideline increase from 6.2 per cent. to 3.1 per cent. This will require the Department to issue new 2009-10 guideline rents for all local authorities. I am prepared to change the subsidy position of those authorities that reduce their actual average increase in rents in 2009-10 in line with the new national average.
We will be inviting authorities to let us know whether they will take this up by around the end of April. They will be able to introduce the new rent increases as soon as is practicable for them.