Today's route map to deliver a more transparent and accountable system of council house financing that places councils firmly in the driving seat is part of the Government's wider programme of devolving more financial freedom to councils.
As part of this Mr Shapps announced an extra £116million funding allocated each year for councils to pay for disabled adaptations to homes and an extra half a billion per year for councils to spend on their stock. He said that these reforms will ensure councils can plan effectively for the long term - enabling them to unlock over £6 billion estimated efficiency savings over 30 years which they will be able to plough into new investment.
Following the review announced in the Coalition Agreement, Ministers announced in October that they would replace the Housing Revenue Account subsidy system where councils are required to pay council house rents to Whitehall which decided how best to redistribute it. This meant that councils had no certainty about future income, no ability to plan long term and little incentive to be more efficient.
This opaque, centralised system will be replaced with one that provides a direct link between the rents councils charge, the money they spend, and the services they deliver. This means tenants and local taxpayers will be able to hold their landlord to account for the cost and quality of their housing. This will be achieved via a reallocation of housing debt after which councils will retain all the rental income they collect.
The Localism Bill, to be published shortly, will include measures to repeal the existing subsidy system and replace it with powers for the Secretary of State to introduce self-financing. Subject to Parliamentary approval these changes will begin in April 2012. The current system will continue to run during 2011/12.
Grant Shapps said:
"For far too long, councils have been frustrated in their efforts to meet the housing needs of their tenants by a discredited system for financing council housing. Our new approach will devolve power and sufficient resources to councils to enable them to offer a better service to tenants. And tenants and local taxpayers will be able to hold their landlord to account for the cost and quality of their housing.
"Today I am setting out the steps we will take to deliver this more transparent and accountable system fairly and openly based on accurate valuations. These reforms are part of our wide-ranging programme of pushing power away from Whitehall to town halls and local areas. We estimate that by putting councils firmly in control of council house finance they can unlock over £6 billion of efficiency savings which they will be able to plough into new investment.
"We are committed to helping the most vulnerable people in our communities so as part of this deal I am pleased to announce an extra £116 million a year to help councils prioritise adaptations for disabled residents. This will make a huge difference to thousands of people across the country - in many cases ensuring they can continue to live independent lives. We are also correcting decades of under-funding in the sector by providing around half a £ billion of extra funding for councils to spend on their stock each year."
