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Minister’s hint at HRA flexibilities ahead of Budget 24/10/2017 Labelled as Development, Finance

Speculation is mounting that we may see some flexibilities in the HRA debt cap in the Autumn Budget.

 

Calls were made for the lifting of HRA debt caps during a debate in the House of Lords on the 12 October on the issue of housing availability and affordability and in responding to the debate on behalf of the government, George Young (Government Spokesperson in the Lords for the Cabinet Office) said in regard to borrowing caps:

 

A number of noble Lords mentioned the borrowing capacity of local authorities and wanted the ceiling lifted or abolished. There is still around £3.4 billion of borrowing capacity available to local housing authorities. Some £300 million of additional borrowing was made available to councils in England in 2013, but only £144 million was taken up by councils. There are also substantial reserves, not just in the housing revenue accounts of local authorities but in the reserves of those councils that have transferred their stock over to housing associations. The Government responded to the Economic Affairs Committee's report. We had a debate on it, which I think I may have answered. In response to the noble Lord, Lord Kennedy, and others, on the issue of raising the capital on local authority borrowing, we will look seriously at any request from councils that will result in a significant investment in additional housing. - (Hansard 12.10.17 column 339)

 

Communities Secretary Sajid Javid added to such speculation during an interview for the Andrew Marr Show on 22 October in which he suggested the government should take advantage of historically low interest rates to borrow to invest in infrastructure and housing.

 

He said he wanted to see the government "sensibly borrow more to invest in the infrastructure that leads to more housing" hinting that there may be some announcements in the coming Autumn Budget saying "We are looking at new investments and there will be announcements, I'm sure, in the Budget covering housing" and going on to say: "But what I want to do is make sure that we are using everything we have available to deal with this housing crisis, and where that means we can, for example, sensibly borrow more to invest in the infrastructure that leads to more housing and take advantage of some of the record low interest rates we have, I think we should absolutely consider that."

 

ARCH Chief Executive John Bibby comments:

 

Notwithstanding that ARCH has made the case for the lifting of HRA borrowing caps to allow councils to build new social rented homes, at this stage I would caution against any great expectation that there will be a general lifting of HRA borrowing caps. The Secretary of State in his interview placed emphasis on infrastructure rather than housing and defended the extra £10bn for Help to Buy when asked whether it might not be better to spend it directly on providing new homes.

 

We have been here many times before in the run-up to Budgets, only to see small incremental steps on the day itself and if there is to be any new money for housing in the Autumn Budget I suspect it will in the main be directed at the private sector to generate increased supply in the owner-occupied sector and possibly private "Build for Rent" Schemes.  If there is to be any further support to councils to build new build new social housing beyond the extra £2bn allocation to the Affordable Housing Programme announced at the Conservative Party Conference I suspect we might see some limited lifting of HRA caps where this forms part of a "Bespoke Housing Deal" and/or initiatives to promote the idea of "Fixed Term Council Housing" to be sold off after 10 to 15 years - an idea proposed in the Conservative Party Manifesto at the last election. 

 

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