One of the histories of municipalism is the history of investment in public assets.
From sewage plants and power stations, to homes and street lights. In these times of uncertainty and extreme belt-tightening, everyone agrees that we need more value from our historical assets.
In the last three months, many local authorities have been given back, with strings admittedly, a vast asset base that they had previously lost: the Housing Revenue Account. This asset’s true worth is only nominally understood. Talk to many directors of finance in private, and they will concede that the assets were valued in a way to maximise subsidy claim in the old HRA system, now abolished. The truth is that very few local authorities know the real value of their housing stock and land.
This was rational. Everyone needed to play the subsidy game, and these assets are also the homes for millions of council tenants who depend on efficient and timely investment. Ironically, it’s the new self-financing HRA that will allow this investment, unlike the old regime where spend varied wildly by Treasury edict, making long term planning worthless.
So the devolution of the HRA, technical as the detail may be, is one of most significant acts of localism of the last 25 years. We need to wake up to the implications:
Firstly, we need to look again at how we value housing, and indeed non-housing, assets, to go beyond simple disposal value to include a measure of social capital. This is hard to measure: what is the value of the hall (or library), used and managed by the community group? What is the value of that secure tenancy? But we need such metrics, as without them, hard times will lead to some very destructive financially-driven decisions.
Secondly, if we are going to continue as the long term stewards of these assets, we need to make some decisions about what we need in the future - as technology and opportunities change. We will need to use our metrics to take balanced risks.
Lastly, one of these balanced risks may be thinking about how third parties can get more from these assets for residents than the local authority. A decade of PFI and BSF deals has been a mixed bag of value-for-money. However, one lesson from these is that the governance and management of any so-called special purpose vehicles may be more important than whose balance sheet the asset sits on. This is the real lesson for the muncipalists – think about governance not ownership.
Jamie Carswell, director of investment services, Tower Hamlets Homes