Borrowing curbs to stay

Housing minister Lord Falconer this week poured cold water on his boss DTLR secretary Stephen Byers' suggestion that housing authorities will be able to borrow money for repairs and modernisation against their stock.

Any cash raised by borrowing against housing assets is extremely unlikely to be ring-fenced for investment in housing, Falconer told Housing Today.

Byers, faced by trade union officials outraged by government plans to introduce more private investment in public services, addressed delegates at the conference.

"When councils want to invest in their housing stock as an alternative to going into the private sector, we deny them the opportunity of doing that," he said.

"We will introduce legislation which will change the capital rules which will allow local government to raise money in that prudent way."

Byers was referring to ex-local government minister Hilary Armstrong's announcement last year that a new "prudential system for local council borrowing" will be introduced.

This would remove the need for Whitehall approval on loans for capital projects (Housing Today, 21 September 2000). The system would also allow councils to borrow against their housing assets without central government permission.

A white paper setting out the government's intentions will be released later this year, said a DTLR spokeswoman.

But Falconer told Housing Today that the central options for housing investment remained those outlined in the housing Green paper.

The main option for councils that want to retain ownership of their homes was the £460m set aside for arm's-length companies, he added.

"It's about changing local government finance rather than housing finance," Falconer explained.

"There will be a potential regime for borrowing by a local authority against its housing stock."

But no general permission for borrowing against rental income to invest in housing would be given to councils, he said.

The DTLR spokeswoman said no decisions had yet been made on how housing would fit into the relaxed borrowing rules.

Chartered Institute of Housing policy director John Perry said the chance of councils raising significant money for housing on the basis of their assets was almost nil.

Changes to the rent and subsidy system are needed, he explained, but went on to add that these "are not on the cards".

"In practice, council housing will not be able to benefit from borrowing rules changes because of the rent regime," Perry said. "If they raise rents they will lose subsidy," he added. "This will not allow them to build new houses."