Boost for council borrowing

Councils could soon be given the ability to borrow against rental income, a senior civil servant has suggested, repeating earlier claims made by DTLR secretary Stephen Byers (pictured).

And the power could be granted within the next few months.

Mike Wilkinson, joint head of the DTLR’s local authority finance division, hinted at the change last week.

Addressing a London conference on arm’s-length management, he also admitted that more than 200,000 homes were set to miss the government’s target for meeting decency standards by 2010.

Wilkinson said that councils with the poorest housing stock could lag behind on the decency standard, and referred to them as “the intractable ones”.

It is believed that the plan to extend councils’ borrowing powers is, at least partially, a reaction to Birmingham tenants’rejection of transfer earlier this month (Housing Today, 11 April).

Housing experts have repeatedly claimed that an extensive transfer programme was necessary in order to meet the decency target for council housing.

The Birmingham ‘no’ vote, however, has damaged confidence in ‘mega’ urban transfers.

Wilkinson also suggested that councils could be permitted to borrow against their future revenue streams as part of this summer’s comprehensive spending review.

“Rent restructuring is going to increase rental income for some local authorities. “There would be a certain satisfaction in using locally generated money to fund local projects and improvements,” Wilkinson explained.

News of what Wilkinson calls a “back of the envelope calculation” came as the government tried to pick itself up after the rejection of England’s largest transfer.

“The vote in Birmingham is causing some rethinking – it came as quite a surprise.

“Will this now mean that the transfer agenda forecasts are a bit optimistic?” Wilkinson asked.

Speaking at the same event, Ian Doolittle, a partner at law firm Trowers & Hamlins, proposed an in-house management body as “an alternative, or possibly a precursor to an arm’s-length management organistion” for local authorities.

Wilkinson pointed out, however, that funding was not currently available for such a model.

Under pressure from delegates, Wilkinson refused to back down over the DTLR’s requirement for a three-star inspection rating in order to qualify for full access to arm’s-length funding.

He said: “If the money fails to be spent, then the department is going to have to re-evaluate [the process].” No council housing service has yet received a three-star rating from the Audit Commission.