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An eye on the future Matthew Warburton - 20/07/2012

eye_on_future_300A survey by auditing firm Baker Tilley, it was reported this week, found that half of ALMOs had been asked to cut costs by 6-12 per cent over the last twelve months, twice as much as the average of 2-5 per cent revealed by an earlier survey of housing associations.

In most cases, pressure from the local authority was cited as the main motivating factor. Staff costs have been most affected; all ALMOs responding to the survey reported a drop in head count compared with the previous year.

Given a ring-fenced HRA, opportunities to use revenue savings to help relieve General Fund pressures are limited. As Philip Toni, finance director at Wolverhampton Homes, is quoted as saying, savings are most likely to stay within the housing account and be used to support additional capital expenditure.

Self-financing puts most councils with housing - with or without ALMOs - in a situation where there is no driving imperative to cut housing management expenditure. Housing departments are largely insulated from the pressure for cuts being experienced by other parts of the council hit by the withdrawal of government grant.

But it would be a mistake to think that they can afford to ease up on the search for savings. There may be no immediate fall in income that demands a cut in spending, but failure to liberate resources to maintain and improve the housing stock can build up serious trouble in the future.

Part of learning to operate within the context of a 30-year business plan is recognising and acting on the fact that future risks must be taken just as seriously as those which are clear and present. The planning horizon must extend beyond next year, or the next election, to look much further ahead.

The not-so-distant future, however, includes a major threat to HRA income from HB reforms and the move to Universal Credit. Somehow councils must contrive to find resources for the likely sharp increase in rent collection costs and bad debts, and to beef up their welfare advice, in a context of cuts.

The main losers from the government's welfare reforms will be the households whose HB entitlement is cut. But if councils fail to manage the impact of the changes effectively, the impact will ultimately fall on other tenants - present and future - whose homes will not get the investment they need.

Self-financing was intended to provide a once-in-a-generation opportunity to end the cycle of disinvestment and decay that has afflicted council housing for so long and enable councils to ensure that their homes are maintained to an acceptable modern standard throughout their lives. That opportunity must not be  allowed to slip away.

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