Government action to ease debt caps would allow
councils to build 60,000 much needed new homes over the next five
years, boosting Britain's GDP by 0.6 per cent.
This is the central message of Let's Get Building, published today by
the National Federation of ALMOs in association with ARCH, CIH and
the Local Government Association, with the support of the Councils
with ALMOs Group.
The report makes the case for a construction-centred stimulus to
the economy, arguing that 92p of every £1 spent on building homes
stays in the UK and, where public investment is involved, 56p of
that returns to the Exchequer, including direct savings in tax and
benefits of 36p.
But while Government action earlier this year focused largely on
boosting private construction for sale and market rent, this report
marshals the arguments for extending the stimulus to include
Estimated demand for new homes at below-market rents is at least
80,000 units per year, compared with current targets of just over
40,000, nearly all of which will be provided through the HCA
Affordable Rent programme at rents up to 80 per cent of market
Councils have the capacity within the debt ceilings imposed on HRA
borrowing to provide maybe 3,000 additional units a year over the
next five years, where needed at social rents.
However, relaxation of the debt caps would unlock the potential to
build many more, perhaps 12,000 a year according to provisional
results from the ARCH-sponsored survey of council business plans
now in progress.
This would not involve a long-term increase in council borrowing
but merely giving councils the opportunity to bring forward
borrowing that currently would not be possible for several years.
All borrowing would be within prudential limits and could be
comfortably repaid from rental income over the 30 years of the
The report also makes the case for changing the way council
borrowing for housing is treated in the public accounts, to bring
it into line with international norms. The UK is unique in Europe
in lumping together government borrowing, which is a charge against
future tax income, with borrowing by public corporations, which is
repaid from trading income and therefore has a quite different
ALMOs are public corporations. Council housing operations, because
of the HRA ring-fence, are classed by ONS as public
quasi-corporations, which behave like corporations.
The implication of changing the accounting treatment would be to
put borrowing by public corporations outside the remit of the
government's deficit reduction strategy, leaving the amount of
borrowing to be determined by prudent judgements about future
trading income - in the case of councils, the existing code on
The Chancellor's Autumn Statement is due on 5 December - a golden
opportunity to put councils at the heart of national action to
rebuild the economy.