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GOVERNMENT ERROR RESULTS IN£12m BILL

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Oversight throws budgets into chaos...
Oversight throws budgets into chaos

An LGC exclusive by Mark Smulian

A mistake by the Office of the Deputy Prime Minister has left more than 100 councils facing an unexpected£12m bill, threatening to 'decimate' their capital spending.

Previously, councils who did not have housing revenue accounts, mainly those who transferred their housing to an association, were not expected to pay a share of their capital receipts to the ODPM.

But ministers changed this system in April 2004, requiring councils to put a share of receipts into the ODPM's housing finance pool.

However they failed to tell councils until last week, leaving them with two years' worth of unexpected debt that must be paid by 28 February.

Stephen McAllister, ODPM head of housing strategy finance, sent a letter advising councils last week.

'The ODPM is correcting an oversight,' Mr McAllister wrote. 'When it contacted local authorities with details

of how to make their pooling payments [those] that had closed their [housing revenue accounts] were not contacted.'

A midlands district said it could lose an expected£5.5m from selling land on its former housing estates.

Its finance director said: 'It will decimate our capital programme. I am stunned.'

Cotswold DC chief executive Bob Austin said: 'Clearly the councils affected need to seek legal advice.

'It is troubling to get something like this with no warning.'

The greatest alarm has arisen over whether clawback of 'preserved' right-to-buy sales will be affected.

These arise where tenants buy their home from a housing association after transfer, and many councils gain a share of this money as part of their transfer deal.

David Postlethwaite, treasurer of Tameside MBC, said:

'If [that] is affected it could cost us£8m that we have already spent or are planning to spend.'

Tewkesbury DC resources director Peter Antill said: 'It could cost£50,000, which is a lot for a small district.'

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