Housing Expenditure (Hansard, 24 November 1983)

§ Mr. Patrick Jenkin

Following discussions with the local authority associations in the Housing Consultative Council on 21 November and with the chairman of the Housing Corporation, I am able to announce final decisions on housing capital and current expenditure for 1984–85.

Total provision for housing capital expenditure in 1984–85, including forecast housing capital receipts next year of £1,596 million, and a sum carried forward as a result of introducing end-year flexibility on the local authority capital cash limit, is £3,274 million. I have decided to allocate those resources as follows:

	£ million
Local authorities	2,522
Housing corporation	687
New towns	60
Homeloan	5

The gross provision for local authorities includes £35 million for insulation grants under the homes insulation scheme and for the administrative costs of that scheme. I am today announcing, in answer to a question by my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey), details of a proposed extension of the homes insulation scheme. The effects of that have been taken into account in making provision for expenditure of £35 million under the scheme.

Capital resources next year for the Housing Corporation include net provision for £617 million plus estimated capital receipts of £70 million. This will maintain provision for a substantial level of investment by the corporation.

The new towns' share of resources again reflects the fact that the publicly-rented programme in the new towns has virtually ended. The remaining investment is concentrated on providing sites for private development, on shared ownership and on repair and improvement of dwellings prior to transfer to local authorities.

The provision of £2,522 million for local authorities incorporates carry-forward as a result of introducing end-year flexibility on the cash limit in the terms announced on 17 November. It also includes forecast capital receipts 244W of £1,465 million. Details of those forecast receipts and of the underlying assumptions were given yesterday in reply to the hon. Member for Pontefract and Castleford (Mr. Lofthouse).

I have decided, following consultations with the local authority associations, to change the prescribed proportion for most housing capital receipts from 50 per cent. to 40 per cent. from 1 April 1984. I shall lay before the House in due course revised Local Government (Prescribed Expenditure) Regulations to give effect to that change. The change will allow an extra £130 million to be added to the amount available for housing investment programme allocations which are distributed in accordance with housing need. The HIP total for 1984–85 is £1,853 million compared with £1,801 million in 1983–84. Authorities will, in addition, be able to reinvest their capital receipts, albeit at the reduced prescribed proportion. On the basis of our forecasts, authorities will be able to undertake at least an extra £666 million of investment in this way in 1984–85. I recognise that, since the change will apply also to accumulated capital receipts, it might disrupt the investment plans of some authorities whose 1984–85 programmes relied on full use of their capital receipts at the existing prescribed proportion. I have therefore made arrangements to hold back £50 million from the available allocation total to provide for supplementary allocations to authorities which find themselves in such circumstances. Any part of the £50 million not used for this purpose will be distributed more generally to other authorities. I shall aim to make these supplementary allocations before the beginning of the financial year.

The initial housing investment programme allocation total for 1984–85 is therefore £1,803 million. I have discussed with the local authority associations the method of distributing that total between individual authorities. Each authority is today being informed of its own allocation. Authorities are also being informed of the procedure and the criteria for making supplementary allocations following the reduction on the prescribed proportion of housing capital receipts. I have placed copies of the letter to authorities and of the schedule of initial allocations in the Library and the Vote Office. I have also placed in the Library details of the method by which those allocations were determined.

For future years, as I made clear in my reply to my hon. Friend the Member for Stockport (Mr. Favell) on 17 November—[Vol. 48: c. 525–27]—I have assured authorities that they may plan their forward housing programmes on the basis that their allocations for 1985–86 and 1986–87 will be at least 80 per cent. and 70 per cent. respectively of those being notified to them today for 1984–85. In the same way as for the assurance given last year for the 1984–85 allocation, authorities will be required to show that they can justify the need for that level of expenditure. The assurances for 1985–86 and for 1986–87 are based on the assumptions that average rents in both years will rise in line with prices and that total housing capital receipts will be at least £1,300 million. I am not at this stage extending the same assurance to the GLC, although I shall consult the London boroughs about whether it should subsequently be extened to that council as regards its responsibilities for the transferred stock for 1985–86. This assurance provides authorities with a three-year capital programme. I believe it will be invaluable as an aid to the forward planning essential for investment.

245W

As regards housing current expenditure, I have considered carefully the views of the local authority associations on the consultation papers which I issued on reckonable income and on reckonable expenditure on management and maintenance for 1984–85. I have decided to determine an increase in the local contribution for housing subsidy purposes of 75p a dwelling a week. It is for authorities themselves to decide how to finance that contribution. On management and maintenance, I have decided to increase the expenditure counting towards the subsidy calculation by 5 per cent. over the level assumed for 1983–84.