Housing Revenue Account (Hansard, 22 October 1990)

§ Mr. Michael Spicer

My Department is today consulting local authorities, the local authority associations and other interested bodies on proposals for determining each authority's entitlement to housing revenue account subsidy for 1991–92. The proposals include tighter rules on empty properties and give details of guideline rents, management and maintenance allowances, and some important technical changes to the rules for calculating subsidy entitlement. Comments are invited within six weeks. I am placing a copy of the consultation papers in the Library together with a list of the guidelines and allowances for each authority.

I propose to tighten the subsidy rules where councils leave houses and flats unoccupied. At present the subsidy makes some allowance for the rent income that is lost on empty properties, but this allowance takes the form of a sliding scale which also gives some extra help to authorities with higher percentages of empty property. I want to stop this. I am therefore proposing to restrict the allowance to a flat 2 per cent. of dwellings. An authority would receive the same allowance whether its empty properties are more or less than 2 per cent, so that there would be a direct financial incentive not to keep dwellings empty.

For rent guidelines I propose an average rent increase of just 2 per cent. above the allowance for inflation. This means an average increase per week of £1.84 ranging from £1.38 to £2.50 over the guideline rents which applied this year. The increases would continue the process introduced last year of encouraging authorities towards charging sensible levels of rents which better reflect the value of property in different parts of the country, while ensuring that rents remain within the reach of tenants.

For management and maintenance allowances, I propose introducing a system of targeted allowances which better reflects the nature of each authority's stock. This would help a group of about 20 authorities with the worst problems by means of a small re-distribution of allowances from all other authorities. Overall the level of allowances would be increased in order to maintain them at this year's level in real terms.

The rent guidelines and management and maintenance allowances are no more than the assumptions the Government will make in calculating each authority's subsidy entitlement. It is for each council to determine its own rent and how much to spend on management and maintenance of its stock.

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Also included are two proposals affecting local authorities' subsidy entitlement in respect of properties held on leasehold terms. First, for leases acquired after midnight tonight, I propose that the present arrangements for subsidy towards the rents payable by authorities should he replaced from 1 April 1991 by arrangements under which subsidy is payable on discounted capital costs. The effect of the change would be to bring subsidy entitlement on new leases within the aggregate limit on subsidy for new capital expenditure. This is a sensible proposal which will replace the existing, inadequate controls on the subsidy of leases with one that would allow authorities flexibility to decide between new investment and new leases within a common control total.

Secondly, also from 1 April 1991, for all leases with a term of less than three years, my right hon. Friend the Secretary of State for Social Security is proposing that any rent rebate payable will be subsidised only to the extent that the claimant's eligible rent does not exceed one and a half times the authority's average rent. This would counter an anomaly in the current arrangements under which authorities may benefit from subsidy in respect of such leases in excess of their actual costs.