Housing funds could be cut to pay for transfers

Fears are growing that the Treasury will insist in the next Comprehensive Spending Review that costly future transfer programmes will have to be paid in part through cuts to other housing funds.

It is understood that Department of the Environment, Transport and the Regions (DETR) officials have told Burnley and Coventry, the two schemes in the current round with overhanging debt, that the debt will be met in full to allow the schemes to complete this year. But the move could set an expensive precedent for the rest of housing finance.

Under proposals released this summer, DETR claimed that future transfer should be funded through the transfer levy alone.

But now more homes than ever before are being lined up for transfer. Future schemes may also be more expensive since they are likely to involve overhanging debt, areas of low demand, and stock that is generally in poorer condition than earlier transfers.

HACAS director and transfer expert Jeff Zitron said: 'I would be worried about the Housing Investment Programme (HIP), but given that the HIP has been so shaved in the last few years, I would be even more worried about the Approved Development Programme.'

Chartered Institute of Housing policy director John Perry said he was concerned that the HIP would be cut to pay for future transfers. And he claimed that if it was the needs index would be 'eroded' by council's jumping the queue for resources by deciding to transfer.

Local Government Association head of housing group Paul Lautman said: 'I would not be surprised if the Treasury were pressing the department on spending proposals, but hopefully the DETR is strong enough to oppose any reduction in the overall national housing programme, and actually ensure the opposite by building on increases in current spending.'

* The transfer levy of 20 per cent will stay the same next year, it emerged this week. But the government is still considering changes to the way the levy is calculated for future years.