The government has proposed relaxing controls on councils’ capital spending in a move that could pave the way for an effective alternative to stock transfer.
The Green Paper on modernising local government finance, published this week, proposes abolishing the need for councils to get Whitehall approval for raising loans for capital projects such as housing.

It also proposes ending restraints on capital receipt expenditure.

It follows revelations in Housing Today that DETR was considering a prudential system allowing councils to borrow (Housing Today 8 June).

Local government experts see the plans as a crucial step towards levering in extra money for housing while acknowledging there are still issues to be resolved.

Paul Lautman head of housing at the Local Government Association said: "I anticipate further discussions in particular for authorities that have large capital receipts but the least housing need. The possibility of revenue restraints being placed on such authorities is one thing that is likely to come up."

Lautman added the proposals had to be considered within the context of the arms-length management proposal in the housing Green Paper and the LGA’s own desire to give councils fund raising powers similar to housing associations through securitisation.

Jeff Zitron director at Hacas Chapman Hendy said the move was generally encouraging: "It’s still vague, however, in terms of the impact it could have on housing. But if it removes the complex rules governing borrowing that don’t make sense it has to be good."

Announcing the consultation local government minister Hilary Armstrong said: "I want to end the situation where responsible local authorities have to get permission from central government every time they want to borrow to invest in their communities."

Officials have warned the system would not mean extra money for housing in the short term at least because of the cap on rents.

Source

Housing Today