Government softens blow to southern councils' grant

The government has backtracked on controversial plans to redistribute millions of pounds in housing finance funding to Northern councils at the expense of those in the South.

Proposals unveiled on Tuesday on the allocation of next year's £3.2bn management and maintenance grant will reduce the size of the gains to be made by councils in the Midlands and North.

They include measures to provide greater protection to London authorities that stand to lose out in the funding shake-up.

Last month the Association of London Government claimed the capital's councils would lose more than £1bn over the next seven years if the government went ahead with its plans to introduce a new formula for calculating management and maintenance allocations.

However, the government has now softened its line and agreed to give all councils an inflation level increase in management and maintenance allowances over the next two years.

The government has also pledged to continue "transitional protection" beyond 2005/6 for those councils facing a reduction in their management and maintenance allowances.

They’ve listened to the arguments about more protection, but they’ve stuck to their guns on the formula

Neil Litherland, Camden council

Neither of these promises featured in the government's original proposals, and Northern housing professionals fear the cost of providing them will eat into the increased management and maintenance allowances they were slated to receive.

One said: "The size of the overall pot hasn't increased, so it seems like some of the larger gains will have to be smaller to pay for the inflation rises. The government appears to have reduced the level of redistribution."

But Neil Litherland, head of housing at Camden council in north London, was disappointed the government showed no intention of making fundamental changes to the formula itself. "It seems as if they've listened to the arguments about more protection being needed, but they've stuck to their guns on the formula's basis," he said.

The move is the latest twist in a long-running dispute surrounding the reform of management and maintenance allocations.

In July, a government consultation paper delighted many northern authorities by proposing a more redistributive formula for calculating management and maintenance allowances.