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ARCH gears up Matthew Warburton - 03/04/2012

Gears 300

Self-financing is a momentous change for councils with housing.  For the first time in more than a generation, it opens up the opportunity for council housing to become a vibrant, dynamic and growing sector.  But it also presents councils with new risks and problems, including remembering skills that have not been exercised for many years.  And self-financing is not yet safe from the threat of future government tinkering.  ARCH is gearing up to help councils meet both these challenges.


The small print of the Budget statement includes a clear threat to reopen the self-financing settlement.  Paragraph 1.223 of the Budget Report reads:


The Office for Budget Responsibility currently forecasts that this reform[self-financing]will increase public borrowing more than originally estimated.  These estimates are very uncertain but if they do not change then Government will take action to address the increase in public debt.


Given that every council has been set a debt ceiling precisely in order to prevent an excessive increase in public debt, this is an extraordinary statement.  The Government and the OBR need to answer two questions: on what assumptions were the original estimates based? And, on what evidence have they been revised? 


It seems unlikely that the OBR has collected and analysed the business plans of the 169 councils with housing, or even a representative sample of them.  Yet only these plans can provide the basis for an accurate estimate of the capital spending and borrowing implications of self-financing. 


ARCH will be carrying out its own analysis of a sample of plans, both to prepare its own estimate of the likely impact on borrowing, and to begin a dialogue with member councils on shared issues and challenges where ARCH may be able to help.

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