Uttlesford to take on �85m debt if housing finance system is revamped

GOVERNMENT plans to revamp the entire housing finance system has been welcomed in principle by Uttlesford District Council – although it could saddle the local authority with �85m worth of debt.

GOVERNMENT plans to revamp the entire housing finance system has been welcomed in principle by Uttlesford District Council - although it could saddle the local authority with �85m worth of debt.

Housing minister John Healey wants to scrap the Housing Revenue Account (HRA) subsidy system which sees central government collect housing revenue from all local authorities before redistributing the funds.

It will be replaced by a system based on a self-funding model. Effectively, local authorities will keep all revenue from rents and sales of its properties - essentially keeping greater control and management of their own accounts.

However, the existing �25 billion housing debt will also be redistributed among those councils.

Uttlesford's chief finance officer, Stephen Joyce, said: "This change replaces the current system which requires us to hand over almost half of tenants' rents to central government for redistribution to other councils. Under the proposed new system all rents would be retained in Uttlesford so in principle this is a good thing.

"However, the price is that we inherit �85 million of other councils' historic debt. While this in itself is unfair, if the cost of servicing the debt is lower than the amount we had to pay over to central government under the previous system, then the change could be good news for Uttlesford."

The reform proposal - which is under consultation until July - could be introduced by April 2011 if it receives broad, voluntary support from councils in the subsidy system. If a number decide to reject it, then government would be required to go though the legislative process.

According to social housing magazine, Inside Housing, almost 70 per cent of the 177 councils that have responded to consultation agree with the plans - with only two per cent indicating that they would oppose it.

The Local Government Association has welcomed the proposal although, according to the chairman of its environment board, Cllr Gary Porter, it will look "very closely at the detail to ensure reform allows them to deliver long term solutions to housing problems".

Mr Joyce endorsed that point, stressing that more investigation is needed before Uttlesford commits to, or rejects the plans.

"A detailed financial analysis has to be undertaken to establish exactly what the effect will be so at this stage we are not in a position to be precise about what this means for Uttlesford and whether or not we support the change," he said.

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