at their Annual Conference [Paragraph F (d) 2] on Monday
this week, Liberal Democrats voted for councils to be able to pool
borrowing limits, allowing councils with housing investment needs
but no headroom to benefit from the headroom available to other
councils. An amendment to scrap borrowing limits altogether was
rejected on the advice of party leader Nick Clegg.
The motion also called for an urgent review of public borrowing
definitions to examine whether the liabilities of public trading
corporations, which would include council housing operations, could
be taken off balance sheet, in line with practice elsewhere in
Europe, "thereby allowing councils with a sustainable business
model to invest in building more homes for rent".
In arguing for the conference to reject the amendment to scrap
debt caps, Clegg made clear that he saw no prospect of getting
Conservative agreement to such a policy. By implication, he may
believe that debt cap pooling, on the other hand, has some chance
of becoming government policy. However, it is unclear how such an
arrangement could work. While the potential benefit to councils
without headroom are clear, there is no obvious incentive for
councils which currently have headroom to give it up.
There are various reasons why councils with borrowing headroom may
not currently be planning to use it all, but one of them is that it
provides a cushion against unforeseen investment needs in the
future, a safety net they will not be keen to see removed. Any
compulsion to share headroom should be rejected as contrary to the
spirit of self-financing; it could become the first step on a road
back to a subsidy system.
However, it is clear from the ARCH survey of council
business plans that councils are currently planning to use less
than half the headroom available to them. What could work is for
government to agree to a selective raising of borrowing limits for
councils with no headroom, secure in the knowledge that this could
be safely assumed not to lead to overall council borrowing
exceeding the amounts prescribed by the current borrowing
The second part of the motion is entirely in line with the
argument of the ARCH-supported publication 'Let's Get
Building'. In the long run, this approach has the best prospect
of putting council housing investment once and for all beyond
Treasury interference, but it remains to be seen how much progress
can be made with the policy this side of the general election.