Clause 97: Housing Revenue Account
subsidy: negative amounts
46. The Committee welcomes the Government's proposals
to separate rent rebate subsidy from Housing Revenue Account (HRA)
a number of witnesses expressed concerns about the effect of Clause
97, which would require local authorities to pay over negative
subsidy to the Secretary of State. For example, Wolverhampton
City Council told us that, despite being one of the most deprived
areas in the country, the Council pays about £10m of so-called
"surplus subsidy" into its General Fund under the existing
Housing Subsidy system (the equivalent of £1 per tenant per
day). The council is concerned that it may have to make similar
payments to the Secretary of State under the new arrangements.
The Minister's interpretation of Wolverhampton's position is different
from the council's. In the Minister's view, the system only requires
the council to set aside its notional surplus on the Housing Revenue
Account for major repairs. Nonetheless CIPFA said in its written
evidence to the Committee that,
"The proposal to redistribute excess rental
income between local authorities raises questions of equity."
It continued, "Arguably, equity would dictate that rents
should be reduced to match expenditure and that redistribution
and equity should be achieved centrally through housing revenue
account subsidy. The assumption behind these proposals seems to
be that housing is a national service and that money from one
area can be readily moved around the country." 
The Chartered Institute of Housing also expressed
concern about the proposals on the grounds that housing authorities
only have freedom to generate extra resources at the margin -
and most of that remaining flexibility will be "squeezed
out" by the proposals in the draft Bill.
47. The Committee is concerned that the proposals
in Clause 97 of the Bill mean that the "nearly poor"
are being asked to subsidise the rents for other "nearly
poor" people. Accordingly, the Committee believes that the
Government should reconsider their proposals to introduce negative
Housing Revenue Account subsidy arrangements.