§ The Minister for Housing and Planning (Keith Hill)The Office of the Deputy Prime Minister consulted local authorities and others over the summer on proposals to introduce a new and fairer way of allocating management and maintenance (M&M) allowances within Housing Revenue Account (HRA) subsidy. The new approach was designed to take better account of the challenges now facing local authorities, including low demand and tackling anti-social behaviour. We also consulted on proposals about the treatment of debt charges within the HRA subsidy system in light of the new prudential borrowing regime. There was general support for our objectives, and we are today issuing final proposals for 2004–05 for consultation. These take account of a number of changes made in response to suggestions made to us by local government.
28WSThe proposed M&M allocations see significant increases for many authorities, with national increases in both management and maintenance allowances of 6 per cent. in real terms. This, and associated technical changes to the allowances to take account of rent restructuring, will provide local government with an extra £133 per dwelling compared with 2003–04.
To protect those authorities that would otherwise see a reduction in M&M allowances, the Office of the Deputy Prime Minister is proposing generous transitional protection so that all authorities receive at least an inflation level increase per dwelling for both 2004–05 and 2005–06. We intend that transitional protection should continue beyond that period, subject to the outcome of the next Spending Review.
We are also proposing that the Major Repairs Allowance should increase in line with inflation next year, and that local authorities should move their rents gradually towards their restructured rents, with average increases nationally of 1.5 per cent. in real terms.
From 2004–05, rent rebates will no longer be accounted for in the Housing Revenue Account and will no longer be subsidised through the HRA subsidy system. Instead, my right hon. Friend the Secretary of State for Work and Pensions will allocate subsidy for rent rebates alongside his responsibilities in respect of subsidy for rent allowances and council tax benefit. Rent rebate subsidy limitation will continue to operate. There will be transitional arrangements to prevent this move from the HRA to the General Fund affecting council tax payers in 2004–05.
On the capital side, the redistributive mechanism of set-aside is being replaced by pooling. Housing capital receipts will be pooled in the year they arise. Following consultation on the new subsidy arrangements, therefore, reserved receipts that have arisen in 2002–03 and 2003–04 (except those arising from large scale and small scale voluntary transfers) will not now be taken into account in the calculation of HRA subsidy entitlement.
The requirement to set aside funds from revenue for debt repayment has been abolished in the HRA, along with the corresponding subsidy element. In some cases, this will have a negative effect on authorities' finances. We are therefore proposing a new allowance, which will compensate authorities over the next three with a reducing proportion of any loss.
Copies of the draft HRA subsidy and Item 8 determinations for 2004–05, as well as the draft general determination of administration of HRA subsidy 2003 and supporting material, are being placed in the Libraries of the House, and will be available on the Office of the Deputy Prime Minister's web site www.odpm.gov.uk/ housing/consult/. These allocations are based on the most up-to-date information available to us from authorities, and may change as that information is refined. Authorities have until 16 December to comment on the draft determinations.