Housing Revenue Account Consultation Paper (Hansard, 22 June 1999)

§ Ms Armstrong

Our proposals for reforming the Housing Revenue Account (HRA) were intended to make local authority housing management more efficient. Responses to the consultation generally welcomed the proposals to introduce resource accounting. I confirm that we intend to move to a new form of accounts witha cost of capital charge, linked to stock values, showing the resources tied up in local authority housing; a major repairs (or depreciation) allowance, paid through the subsidy system, to meet the costs of keeping the stock in good condition; and a requirement to prepare a business plan as the framework for managing the stock.

The proposal to remove rent rebates from the HRA, making it a pure landlord account, was also welcomed in principle. This will go ahead, subject to parliamentary approval of the necessary legislation. We will then have to redistribute surpluses to ensure that resources go to councils with the greatest need. We will be consulting on the detailed arrangements later in the year.

Other areas on which we will be consulting further include: the method by which valuations are to be carried out, the calculation of the major repairs (or depreciation) allowance, business plans and the detailed form of accounts. In response to points made in consultation, we intend to make the new form of accounts simpler.

On the question of the basis to be adopted for valuing housing stock for the cost of capital charge in the account, respondents overwhelmingly favoured existing use value as social housing, rather than open market value. I confirm that this will be the basis for valuation.

Authorities expressed concern that the timetable for moving to the new system was too ambitious. So we are now giving them some extra time to prepare. Authorities will be required to keep the HRA in the new form (including business plans) from 2001–02. As long as they have completed the necessary preparatory work satisfactorily, including producing satisfactory business plans, they will be eligible for additional subsidy for the major repairs allowance from that year. Rent rebates will be removed from the HRA at the same time or, if the necessary legislation has not been passed by then, as soon as it is in place.

Authorities were also concerned about the costs of the work needed to prepare for the changes, particularly valuations and the preparation of business plans. We will be making an extra £15m available through the HRA subsidy system in 2000–01 and a further £15m in 2001–02 to help with these costs, and will consult authorities on proposals for doing so later in the year.

I am grateful to all those who responded to the consultation paper. I am placing a list of the respondents, excluding any who requested confidentiality, in the House Library together with a report providing an analysis of the responses. The list and specific responses are available in the Department of the Environment, Transport and the Regions Library, Ashdown House, 123 Victoria Street, London SW1E 6DE, telephone 0171 890 3039. We will shortly be writing to authorities setting out our response 339W and the next steps in more detail. I believe that, working with local government, we can move forward to a new financial framework for local authority housing which is more suitable for the modern, high-quality tenant-focused service which we want to see.