Government loosens purse strings for top-performing authorities

Grants for recycling, neighbourhood wardens and transport were also affected by the Office of the Deputy Prime Minister's decision to abandon ring-fencing for a total of £34m of grants to the 22 best-performing councils.

Homelessness groups are sanguine about the plans, saying their initial fears that the moves would lead to reduced funding have largely been allayed.

The move, announced on Tuesday, is part of the government's drive to loosen purse strings for councils that received an "excellent" rating under the Audit Commission's comprehensive performance assessment.

Homelessness accounts for £10m of the total, and makes up the bulk of the grants for many of the London boroughs affected.

Westminster receives £3.5m to spend on homelessness, Camden £1.8m, Kensington and Chelsea £1.6m and Hammersmith and Fulham £1.3m. These boroughs will henceforth be free to spend this money as they see fit.

The councils that have been given the flexibilities have been working well

Chris Hampson, head of policy, Look Ahead Housing and Care

Homelessness organisations had feared that councils rated "excellent" would divert funds away from rough-sleeper projects unpopular with the electorate (HT 19 December 2002, page 11).

But subsequent discussions with councils allayed their fears.

Chris Hampson, head of policy and strategy at Look Ahead Housing and Care, said: "We are working very closely with a couple of the councils. The councils that have been given the flexibilities have been working extremely well. They have the freedom to shift funds about but early indications are that they are not councils we would worry about."