§ Baroness Gardner of Parkesasked Her Majesty's Government:
Whether they have completed the review of the housing subsidy system as it applies to large-scale disposals of local authority dwellings announced in another place by the Parliamentary Under-Secretary of State (Department of the Environment) on 11th February 1988 during proceedings in Standing Committee on the Housing Act 1988.
The Minister of State, Department of the Environment (The Earl of Caithness)We are today issuing a consultation paper resulting from the review of the housing subsidy system. The review was needed to deal with anomalies in the present housing subsidy system for some authorities upon complete or partial disposal of their stock, and to achieve a more equitable and rational mechanism for taking account of disposals. Under the present rules, authorities may sometimes continue receiving subsidy on dwellings sold even if they incur no further expenditure, or may not be entitled to subsidy where they are left with residual debt.
The new proposals provide for the payment of "residual debt subsidy" (RDS) in respect of loan charges on any notional residual debt related to the dwellings sold. RDS would be paid at a rate of 75 per cent. of the loan charges for sales under the tenants' choice provisions of the Housing Act 1988, under right to buy, and in respect of individual sales. For all voluntary sales of stock to other landlords it is proposed that the rate of RDS would he 90 per cent., leaving 10 per cent. to be met from the authority's own resources, except in Wales, where it is proposed that RDS should be 90 per cent. all cases. This arrangement should give authorities an incentive to obtain a keen sale price and to take management decisions which maintain the value of the stock in advance of disposal.
For those local authorities where it is proposed to create a housing action trust (HAT), the Government intend that any losses caused by the disposal to a HAT which are not covered by subsidy entitlement following disposal should be met by the Exchequer by means of a "safety net". The idea is to ensure that no additional costs resulting from the transfer of the stock to a HAT should fall on the remaining tenants or ratepayers in the form of rent or rate increases.
It is intended that the new rules should come into effect from 1st April 1989.
Copies of the paper have been placed in the Library.