I recently wrote about the need to re-open the 2012 ‘debt settlement’ which was part of the introduction of the new Council Housing Finance system, ‘self financing’. The government is implementing a cut of 1% a year for Council tenants for four years from 2016. Inside Housing magazine has just reported that ARCH, the Association of Retained Council Housing, is calling on the government to cut the ‘debt’ by £6 billion.
As I explained previously (See “Starving Council Housing of Funds”) the level of ‘debt’ that each Council was given was based in part on an assessment of how much income they would take in over 30 years from tenants’ rent. Since the government is proposing to cut rents this means that Councils will have far less money than was estimated in their business plans. It also means that they will have more debt than they can cope with. Because of the loss of income Councils will have to scale back on the amount of work they have planned for the maintenance and renewal of their housing stock. This will lead to a backlog of necessary work and a deterioration in the standard of their homes.
Whilst there is a good case for writing off the whole ‘debt’ (over many years tenants have more than paid for the cost of building) this is obviously something which the Tories will not do. However, the demand of ARCH is an important point of support for a campaign to press the government to at least compensate Councils for the loss of money resulting from the rent cut.
When most people hear the word ‘debt’ they assume this is the result of borrowing. However, this wasn’t the case for Council housing ‘debt’ which was imposed on Councils in 2012. The ‘debt’ level was the result of what you might describe as creative accountancy by the Treasury.
Since the ‘debt’ distributed was based on an assessment of income over 30 years, then clearly if the amount of income shrinks because of government policies, then the ‘debt’ of each Council needs to be written off as a result of their loss of income. This is both logical and fair. ARCH itself, to which Councils with housing stock, has over 30 Conservative Council affiliates. If they can recognise the need to cut £6 billion off of the burden of Council Housing Revenue Accounts then there should be no reason why Swindon Council should not support this demand. Swindon Tenants Campaign Group will be calling on them to do just that.
September 24th 2015