Memorandum by Surrey Local Government
Association (SLGA) (HOU 05)
This memorandum is submitted by the Surrey Local
Government Association which represents the County Council and
all 11 boroughs and districts in Surrey.
1. BACKGROUND
The Association submitted evidence to the Committee's
predecessor committee. As we explained then, the provision of
affordable housing and housing for key workers is of vital importance
in Surrey and we have done significant work on the issue here.
We welcome the opportunity to add to our previous
evidence in particular focussing on the Government's announcements
over the summer in relation to housing finance. These are causing
us great concern. They will be extremely damaging to the provision
of affordable and key worker housing, particularly in areas of
high demand and high cost, such as the South East.
The comments in this submission relate to:
(i) The increase in funding, announced in
the July Spending Review, for housing from £4.8 billion in
the current year to £5.9 billion by 2005-06 for both new
housing provision, renewal strategies, creation of regional housing
bodies and further reforms and substantial new investment in housing
benefit administration.
(ii) The Government's Consultation Paper
on "The Way Forward for Housing Capital Finance".
2. COMPREHENSIVE
SPENDING REVIEW—THE
JULY ANNOUNCEMENT
It is unclear how much of the additional £1.1
billion over the next four years is to be allocated to new housing
provision or bringing stock back into use. It is equally unclear
whether the £1.1 billion is wholly new money or a consolidation
of various announcements made over the last 12 months (eg special
key worker housing allocation). Even assuming the most optimistic
scenario, namely that the £1.1 billion increase by year four
is wholly available for new affordable and key worker housing
provision, this only provides for an increase of some £275
million per annum. Assuming this is allocated on a regional basis,
but with 50 per cent of the monies applied to London and the South-East,
(experiencing the most significant shortages of affordable and
key worker housing), they are, at £137.5 million, going to
produce less than 1,000 new homes per annum by 2005-06. At the
individual local authority level this would barely represent a
handful of additional properties by the year 2005-06. Clearly,
if the sums are smaller than this and a significant element of
the £1.1 billion worth of betterment is double counting or
used for non new housing provision, then the numbers will fall
back still further.
3. THE GOVERNMENT'S
CONSULTATION "THE
WAY FORWARD
FOR HOUSING
CAPITAL FINANCE"
However, perhaps more important is the Consultation
Paper from the Office of the Deputy Prime Minister, dated 2nd
August, entitled "The Way Forward for Housing Capital Finance",
which seeks observations from all local authorities by 18th October
2002. The Consultation Paper deals with two specific proposals
surrounding the introduction of the new housing capital finance
regime:
— The operation of the proposed housing
capital receipt pooling regime; and
— the future of the Local Authority
Social Housing Grant (LASHG).
These will be particularly damaging to local
authorities' ability to provide affordable and key worker housing.
The Government states that the housing capital
receipt pooling regime is intended to be a simpler and more flexible
successor to the current housing set aside system. It should be
noted that the Government sees the ownership and use of HRA (Housing
Revenue Account) assets in a different way to that traditionally
adopted by councils. With the increasing preponderance of debt
free authorities (often as a result of pursuing prudent financial
policies), authorities have significant flexibility as to the
use of capital receipts from housing disposals and in effect are
excluded from participating in any redistributive mechanisms.
The Government's proposals would change this position in that
the new capital receipts pooling regime would apply to all councils.
The Government states that the current 75 per cent set aside rules
(for those authorities only with debt) for sales of HRA dwellings,
does not encourage the active management of that asset base. The
Government therefore proposes that all future right to buy receipts
would be the subject of pooling (although the precise percentage
has yet to be determined). This will obviously reduce the available
receipts in the high cost areas where new affordable and key worker
provision is being desperately urged upon local authorities by
Government so as to safeguard and enhance the delivery of public
services.
The criteria proposed for redistribution from
the central pool is inevitably going to be based upon need and
deprivation indicators of one sort or another, with the prospect
of no monies being available in the very areas where they are
needed to underpin a range of public services and economic activity.
The likely contribution rate to the pool is 75 per cent. It is
still unclear from the Consultation Paper what other types of
capital receipts generated locally will also be drawn into the
pooling arrangements. Whether restricted solely for right to buy
receipts or extended to all receipts, this represents a major
diminution of local available resources and substantially compromises
local authorities' ability to respond to local social, economic
and key worker requirements.
As part of the same Consultation Paper, it is
proposed to replace the existing, very complex Local Authority
Social Housing Grant regime with either resources channelled through
the Approved Development Programme (via the Housing Corporation),
or by way of grants that individual local authorities would make
to Registered Social Landlords. The present rules, although acknowledged
to be complex and little understood by many, have provided significant
resources to assist in the provision of affordable and key worker
housing in areas of high cost and high demand. Under the proposed
new regime there seem to be very few incentives for local authorities
to support Registered Social Landlords where outright grants are
the only option. There would be considerable costs to individual
local authorities in terms of interest lost on receipts and the
application of scarce local capital resources. The result of all
this will simply be that the existing, already modest programme
by RSLs and LASHG would reduce to almost nothing, particularly
when taken together with the pooling of capital receipts by Government
and the loss of capital monies available locally.
4. CONCLUSION
In summary, the Association believes the various
actions proposed by Government and announced during the summer,
when taken together, are likely to have a substantial negative
impact, particularly in areas of high demand and high cost. They
run totally contrary to the Government's stated aim of improving
the availability of affordable and key worker housing in areas
such as London and the South East.
We would be happy to provide any further information
for the Committee and to give evidence to any of your meetings
if that would be helpful.
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