LRC calls for Labour to commit to cancelling council housing ‘debt’

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The National Executive of the Labour Representation Committee, chaired by FBU General Secretary Matt Wrack1, has passed a resolution supporting Swindon Tenants Campaign Group’s call (see our new pamphlet) for Labour to:

  • Press the government to reopen the 2012 ‘debt settlement’ and write off council housing debt in line with the significant loss of rental income resulting from government policies since 2012;

  • Commit to cancelling so-called council housing debt if elected to government.

The LRC agreed to write to the Labour leadership calling on them to support these proposals. It also agreed to circulate its affiliated organisations to ask them to do likewise. More


“The case for cancelling council housing ‘debt’”



Swindon Tenants Campaign Group’s new pamphlet, The case for cancelling council housing ‘debt’, aims is to raise awareness of the scale of the funding crisis which existing council housing is facing and to promote measures which will resolve this crisis. It calls on Labour to address this crisis by

  • Pressing the government to reopen the ‘debt settlement’ of 2012, and

  • Committing to cancel the Council housing ‘debt’ if elected to office.

Below we explain why these measures are necessary.

Council housing funding crisis

Council housing is facing a serious funding crisis. Government policies since 2010 are responsible for a significant decline in the income local authorities collect from tenants’ rent. In 2012 a new council housing finance system, self-financing, was introduced. Under this system local authority Housing Revenue Accounts1 receive no subsidy. Their income is overwhelmingly from tenants’ rent and service charges (around 91%)2. In ending the old housing subsidy system, the government divided up what it said was the national council housing debt, and redistributed it amongst councils. More than £13 billion extra debt was imposed on 136 local authorities, whilst 34 had some debt relief. Councils have to repay the principal (the original ‘loan’) and pay interest annually. So hundreds of millions of pounds a year have to be paid to the government’s Public Works Loan Board. This is money which cannot be spent on the upkeep of homes. Swindon was given an extra £138.6 million debt which costs more than £9 million a year to service. Even an authority like Leicester, which was one of the 34 which had their debt reduced, still pays £9 million a year to service theirs. More

Starving Council housing of funds: An update

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Swindon Council’s June Cabinet meeting had before it a Medium Term Financial Plan for the Housing Revenue Account (HRA), the separate account for Council housing. Since there is no government subsidy for the HRA it is entirely dependent for its income on rent and service charges paid by its tenants. However, the rent it charges is determined by central government. So it has no direct control over its income. For instance, the current government decided that Councils would have to cut rent by 1% each year for the next four years. This has completely disrupted planning to maintain the standard of housing. Government rent setting regulations had previously set increases for ten years at the level of the Customer Price Index + 1%. However, this commitment was abandoned and the rent cut imposed. As a result the loss of rent was expected to be £22.8 million. Subsequently the government decided to allow Councils to exclude supported accommodation for elderly and disabled people from the rent cut (at least for this year) and allow them to increase rent under the old formula. Swindon increased rent for these people by 0.9%. However, the loss of rent overall during those four years is still estimated at around £22 million. (Read on below or dowmload a PDF here starvingchupdate )

Why Labour should write-off the fictional Council housing ‘debt’


In order to stop the rise in Housing Benefit payments the government has imposed on local authorities which still own their Council housing stock, a 1% cut in tenants’ rent, for four years, starting in April of this year. By this and other policies Council housing is being seriously under-funded. In order to understand the extent of the problem and what to do about it it’s necessary to appreciate how Council housing is financed under the system known as ‘self-financing’.


In April 2012 a new Council Housing finance system, ‘self-financing’, was introduced. The system had been designed by the New Labour government just before it lost the 2010 General Election and was implemented by the coalition government. Housing Minister Grant Shapps said that the new system would “give Councils the resources they need to manage their own housing stock for the longer term – correcting decades of under-funding”. In fact under-funding was not corrected but built into the new system (see Appendix). Most Councils did have more money than they had under the previous system because what was known as a ‘negative subsidy’ was ended. In 2005 the Audit Commission reported that 82% of local authorities were subject to ‘negative subsidy’, meaning they received no government subsidy and had to make a payment to central government from their rent income. According to the Audit Commission at the time this comprised some £630 million a year. Whilst some of this was redistributed to other Councils, in the four years from 2008 tenants’ rents subsidised the Treasury to the tune of almost £1.5 billion1. It was predicted that if the old system, the ‘housing subsidy system’, continued, then eventually all local authorities would suffer from ‘negative subsidy’, largely as a result of year on year rent increases above the level of inflation.

(Read on below or download a PDF here chdebtwriteoff )

‘High value’, ‘higher value’, what’s in a word?

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A worrying amendment to the government’s Housing and Planning Bill may have an even bigger impact on the number of Council homes which could be sold off on the market. The Bill included the enforced sale of ‘high value’ homes when they become vacant. Prior to the General Election a conservative party document referred to “the most expensive third of all properties in their area”. The Conservative Manifesto itself referred to “the most expensive Council properties being sold off and replaced” when they became vacant.

Councils have been awaiting regulations from the minister determining how ‘high value’ would be measured. However, the government has now proposed an amendment which refers to “higher value stock”. The amendment, by implication could mean anything above the average value. Even worse another amendment tabled this week states that the government will be able to “use any category of housing that the secretary of state considers appropriate as a comparator”. This would in effect give the minister the absolute power to not only determine how much stock Councils had to sell, but to change the regulation at will if he thought that they weren’t selling enough. Clearly, the proposed amendments are in breach of their manifesto.

If implemented this could not only decimate Council housing numbers but lead to the deterioration of the remaining stock. Under the new financial system, ‘self-financing’, introduced in 2012, Councils were given a ‘debt’ level which was based on an assessment of how much rent Councils were expected to take in over 30 years. The more homes that are sold the more rent is lost. Councils are already losing a great deal of rent as a result of the 1% rent cut which central government is imposing over the next 4 years. Swindon will lose more than £22 million. More

Suspend ‘debt’ payment


Suspend ‘debt’ payment

The heading of the Advertiser article, “Fears rent cut may hit home repairs budget” was misleading. It is not just a fear. The loss of income from rent will hit the budget for replacing components such as kitchens, bathrooms, roofs etc. The article neglected to point out how much money would be cut despite the fact that our press release included a table showing the cuts in spending for these components. For instance in 2016/17 £2.150 million will be spent on installing new kitchens. However, in each of the following two years only £1 million will be spent. The cuts over 2 years, in comparison with spending in 2016/17 will be: aids & adaptions – minus £400,000, bathrooms – minus £720,000, central heating – minus £990,400, kitchens – minus £2,300,000, roofs – minus £852,000. This adds up to a cut of £5,262,400 over the two financial years 2017/18 and 2018/19. More

Underfunding of Council housing

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Media Release: Swindon Tenants Campaign Group March 14th 2016

Tenant reps on Swindon Council’s Housing Advisory Forum (HAF) opposed the 3 year Housing Investment Programme which officers were recommending for the Cabinet to agree. The programme includes major cuts in replacement of housing components such as kitchens and bathrooms (see table below). Tenants opposed it because it would create a significant backlog of work, which would cost more in the future.

The cuts included in the proposed programme are the result of two things:

  • the loss of rental income resulting from central government policies, including the decision to cut ‘social housing’ rents by 1% a year for 4 years, beginning in April 2016;

  • a significant increase in spending on non-traditional (prefabricated) stock .

The rent cut alone means that Swindon is expected to take in £22.8 million less rent than it had planned for. The government has imposed the rent cut not because of any concern for tenants but to cut housing benefit paid to ‘social housing’ tenants. It has taken no account of the financial impact on local Housing Revenue Accounts. More

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