§ Mr. Robert B. Jonesasked the Secretary of State for the Environment what conclusions he has reached on the consultations dated 19 September and 18 December 1986 about housing subsidy; and if he will make a statement.
§ Mr. John PattenAfter consultation with the local authority associations and the Audit Commission, I have decided to proceed with the proposals which were put to the local authority associations in September about sinking fund rates, in order to limit the payment of housing subsidy in advance of need. These proposals affect cases in which authorities decide to slow down repayments of debt by increasing the accumulation rate for their sinking funds. In future, in order to strike a better balance for subsidy purposes between short term and long term considerations, such authorities will be required (in the absence of exceptional circumstances) to use their actual sinking fund rate in subsidy calculations, if it is 8 per cent. or lower; and to use a notional rate of 8 per cent. for subsidy purposes, if their actual sinking fund rate is higher than 8 per cent. Applications currently with the Department will be decided in accordance with the previous practice for 1985–86 and 1986–87, but the revised treatment will apply to those authorities from 1 April 1987. Proposals are being made today to the other authorities concerned for modifying previous special determinations, as from 1 April 1987, to accord with the revised treatment. I emphasise that these decisions relate solely to payment of housing subsidy, and do not imply a Government view about what sinking fund rate may be appropriate for different authorities.
In relation to capitalisation of repairs, the proposals put to the local authority associations in December were designed primarily to prevent a risk of double subsidy where extensive use of capitalisation depresses an authority's revenue expenditure on management and maintenance below the notional amount allowed in the subsidy calculations. I have concluded that these proposals ought to proceed, but in order to allow the authorities most directly affected time to adjust they will have the opportunity of applying for a special determination which would allow them to use, for 1987–88 only, an alternative method of preventing double subsidy suggested by the local authority associations which will spread the impact on their finances over a longer period.