Affordable Housing Schemes (Hansard, 5 March 2003)

§ The Minister of State, Office of the Deputy Prime Minister (Lord Rooker)

LASHG was an unfair funding mechanism that did not allocate funds to areas of greatest need, consistently underspent nationally and gave unfair advantage to debt-free local authorities.

As part of the measures outlined in Sustainable Communities: building for the future, we have decided to abolish LASHG to allow a more strategic use of resources. The change is to take effect from 1 April 2003.

We understand the concerns that have been raised over the timing of this change and recognise the difficulties this is causing for the planning of schemes coming forward over the next few months. However, it would be indefensible to retain the current arrangements at a time when there are pressing housing priorities that are not getting sufficient funding.

We are also clear that there should be no hiatus in housing investment. We are therefore putting in place transitional arrangements to cover schemes that could have gone ahead in 2003–04 if we had continued with a £500 million provision for LASHG.

The transitional arrangements will be as follows:

for debt-free authorities, provision will be increased from £175 million to £275 million; the money will be allocated by the Housing Corporation direct to the RSL;

for with-debt authorities, revenue support of up to £11 million will be provided to compensate them for the loss of investment income (at an interest rate of 4 per cent) they would have 110WA expected on repayments from the Housing Corporation for schemes supported by their own resources; this will fund up to a further £275 million of investment in 2003–04; this money will be paid through a special grant under Section 88b of the Local Government Finance Act 1988.

These arrangements will cover schemes which will have already started by 31 March 2003. We are also extending the deadline for submitting bids for new schemes to the Housing Corporation for three months to 30 June 2003 provided that schemes have planning permission, are approvable and are programmed to draw down the start-on-site tranche of grant by the end of January 2004. We do however need to ensure that the funding limits are not exceeded. It' the total claims submitted by 30 June exceed the money available, the Housing Corporation will prioritise schemes with the government offices in terms of their contribution to the regional housing priorities.

Transitional funding will therefore support investment in housing of up to £550 million. This is an increase of £50 million on the provision for LASHG in 2002–03 and is higher than in any previous year. It is fully in line with the measures we have set out in the Sustainable Communities Plan to increase substantially the resources made available for delivering sustainable communities for everyone.