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Osborne is stifling local solutions to builders' woes

Nick Golding
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Rental income should be spent on housebuilding, maintenance and improvement, says Nick Golding

LGC’s revelation that councils are increasingly using income from their housing revenue accounts for purposes largely unrelated to housing illustrates much that is wrong with both economic policy and central-local relations.

At a time of rapid population growth, Britain is facing a housing crisis - we need more housing. And, while many improvements have been made, much of our housing stock is not up to standard. Rental income from housing should be spent on housebuilding, maintenance and improvement - investment that will benefit those crying out for decent housing.

So it is therefore undesirable that councils are spending the HRA in a manner not in keeping with traditional landlord expenses. Street lighting, libraries and community centres are being funded using the HRA - costs that would normally be associated with councils’ general funds.

Local government budgets are under ever greater pressure, with the Institute for Fiscal Studies predicting grants will fall by a third between 2010-11 and 2015-16. Councils have little choice other than to break taboos - either they hit tenants, library users, vulnerable children or social care recipients because they have no other resources that could spare these groups’ pain.

But let us consider the impact of councils’ decisions to spend the HRA in this way on the government’s greatest priorities - economic growth and deficit reduction.

The building industry has been hit harder by the recession than most sectors and George Osborne recognises this, having used his Budget to guarantee mortgages for three years in an effort to kick-start housebuilding. The fact that applicants only have to put down a 5% deposit and the scheme will operate for house purchases of up to £600,000 has led many - including the Treasury select committee - to fear that it will lead to another property bubble. One might also argue that many of the beneficiaries will be wealthy and not in pressing need of government support.

So, at a time when the government is providing money for the housing of the wealthy, it is pursuing policies that are forcing councils to cut back their expenditure on housing

for those on low and modest incomes. At a time when the government has been so desperate to help the building industry that it was prepared to allow inappropriate or unsightly house extensions, it has also presided over policies that mean council landlords have less money to support their local builders and maintenance staff.

While the government scours the land for ‘shovel-ready’ projects requiring assistance, the vast majority of councils know of projects that have the potential to help both their tenants and local builders in need of support.

The need to reduce expenditure to tackle the deficit has perversely left councils in a position in which they have no choice but to cut back so deeply that they are unable to support the people who can drive the growth that will prevent similar deficits in future.

Nick Golding, acting editor, LGC

 

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