Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Memoranda

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.


  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".


  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.


  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.


  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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