Don’t push us off the precipice

By Cllr Sharon Taylor | 29 October 2019

On 9 October, we received the shocking news of another government sideswipe at local government funding. Overnight, and with no prior notice or consultation, the Treasury had added an increase of 1% to the cost of borrowing from the Public Works Loan Board (PWLB), and thus for many of us requiring a very significant and difficult re-calculation of the housing business plans attached to our Housing Revenue Accounts.

Long-term planning for housing spend is essential, whether that is to undertake the continuous improvement to our existing housing stock or to provide the desperately needed new council homes for the families on our waiting lists. For my council the 30-year business plan had literally just been completed the week before, incorporating the borrowing we needed, and could reasonably pay back, to enable both programmes. It is important to note that this is not the first complete revision we have had to undertake as government rent policy introduced in 2016 at a stroke took £225m out of our housing business plan.

In Stevenage we have delivered 174 new homes in the last 18 months and had hoped to accelerate the pipeline of a further 300 homes to cope with the increasing levels of homelessness we are facing as a result of the lack of affordability in the private rented sector. Our careful calculations about the level we could afford to borrow from the PWLB were blown out of the water by this unexpected rate rise and will require a huge recalculation of our housing plans. It will almost certainly affect our ability to build good quality, affordable homes at the scale we need to meet the demand for our area.

There is a further impact for councils’ house building plans. In order to spend our right to buy receipts to deliver new housing (and we only keep a third of the discounted price) the retained receipts must be match-funded by the local authority and where housing plans had intended to do that through borrowing, this rate rise may mean councils will not have sufficient match funding, not be able to spend within the Government’s strict time limits and more right to buy receipts will have to be returned to the Government.

There is also a potential impact to the emerging General Fund budgets for the coming year where these had taken into account prudential borrowing for commercial property in order to achieve income to help us support our valued services.

With more than 60 pence in every pound cut from local government funding, we have all been seeking ways of supporting the services we provide and which are so important to our local communities. We cannot increase council tax, which for next year is capped at 2%, the return on increases to fees and charges is a limited pot as if charges are increased too steeply there is simply a diminishing return as people cut back on the services they use.

For many councils, this year is the first when they receive no revenue support grant from government at all. That is why some councils have looked to invest in commercial property using borrowing from the PWLB which then delivers an income stream. There have been various approaches to this with most councils using their investments to support their local economy.

There are, of course, some notable exceptions to this where councils have made very high levels of investments in commercial property but if these are outliers, it must surely have been within the Government’s scope to tackle the exceptional cases rather than use the blunt instrument of a penalty for the whole of local government.

It is astonishing that at a time when Government is urging local government to help tackle a desperate housing crisis, when they have cut our funding to a level that many councils are on the edge of a dangerous financial precipice and when they are constantly stressing that we should be seeking innovative solutions to help us through the financial puzzle we all face, that they unbelievably pull this particular rug out from under our feet with no prior notice. It is long past time that we had a proper compact between central and local government which required such changes in policy to be discussed between both parties.

We must make the strongest possible representations to the Treasury that this rate rise could have untold consequences to the delivery of affordable homes and to the ability of councils to steer a path through the troubled waters of local government funding. I hope they will have a rapid re-think and a proper debate with local government about why they felt this move to be necessary.

Cllr Sharon Taylor is leader of Stevenage BC

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