Trust districts to do what’s needed

By Simone Hines | 12 October 2020

As we struggle between COVID recovery mode and moving back to being in the grip of the pandemic, councils are looking at ways they can help their communities and economies come through the totally unprecedented situation we are in.

One of the issues holding us back is the need for clarity over the future of the Public Works Loan Board (PWLB) and how this may impact on councils’ longer-term investment plans. In our Spending Review submission the Society of District Council Treasurers (SDCT) called on the Government not to implement the PWLB proposals which were consulted on over the summer, which would hamper the ability to undertake commercial investments.

Since the 2010 Spending Review district councils have been proactive in a drive towards self-sufficiency, less dependency on Government funding and finding new innovative ways of generating income. By doing this we have widened our funding base, allowing councils to be more financially independent and resilient. Our experience during COVID so far has also shown that the more traditional income streams that councils rely on – such as car parking – have been more heavily hit than commercial income. Revisions to the Prudential Code framework have strengthened the due diligence around commercial investment, ensuring councils take appropriate professional advice before entering into these investments. The proposed restrictions on commercial investments will limit this ability to generate income and district councils may need to look at further service reductions to balance the loss of income.

Rather than imposing more restrictions, the Government should recognise the direct relationship between commercialisation and funding reductions and trust and support councils in their diversification of their funding base. In the current climate it is also important to recognise that this activity is an important catalyst for the country’s growth post-COVID. Councils are well placed to drive economic growth in their areas. Many regeneration schemes have little or no profit in them because of low land values, and developers are simply not prepared to take the risk.

If the Government is serious about changing the face of town centres it needs to give councils the tools to do so – and trust us to get on with it. A lower PWLB borrowing rate would make a significant difference to the viability of schemes and hence their deliverability, and SDCT has called for a lower borrowing rate for regeneration and housing schemes.

In my authority we now have a scheme with the flexibility and diversity needed to be fit for the future. This will involve us – a district council with a net budget of £15m – borrowing nearly £60m to make the scheme happen. At the moment the borrowing costs outstrip the potential future income, but even a relatively small change in interest rates assumption makes the difference as to whether the scheme is viable. A 0.5% reduction in PWLB would save the scheme over £6m in borrowing costs and kick-start development across the town centre.

Touching on Right to Buy (RTB), those districts with Housing Revenue Accounts could deliver more if there was a fundamental review of RTB. Not only does the RTB scheme reduce affordable housing stocks, increasing waiting lists and use of temporary accommodation, the current scheme for the pooling of receipts and use of one-for-one receipts limits the ability to add new homes to councils’ stock.

The one-for-one policy allows councils to retain additional receipts from RTB if we guarantee they will be spent on additional social housing units – but only up to a maximum of 30% per unit. Between 2012/19 my authority disposed of 289 units through RTB with a value of £28m. The total RTB receipt was £13.5m, of which the district received £6.8m for general use and £2.4m as one-for-one receipts. This amounts to £33,000 per unit if one-for-one replacement was to be achieved – which is not feasible. The current rules limiting costs to be funded by one-for-one receipts to 30% also hinders the ability to maximise the number of units that can be built.

District councils know what their local areas need to recover from COVID-19 – but we also need the right tools, freedoms and flexibilities. The Government must trust us to get on and do it.

Simone Hines is president of the Society of District Treasurers and executive director of resources at Nuneaton and Bedworth BC

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Regeneration Economic growth Housing Spending Review Right to Buy Funding Coronavirus