Cuts of £220m to housing pledge not as bad as feared

The Homes and Communities Agency is to receive almost two-thirds of the £610m of missing new homes funding identified when the Coalition government came to power.

In what is likely to be seen as a victory for the HCA, which was threatened with losing all of the cash, the body will now get £390m to fund social housing, Kickstart and local authority homes which were put on hold when the missing funding was discovered.

The decision was made as part of a wider assessment by Treasury chief secretary Danny Alexander announced today of £9bn of government funding promised by Labour which had been dependent on underspends by other government departments. Alexander said that in total £1.54bn of funding would be cut.

Alexander said: “The previous Government committed to spending money it simply did not have, but this Coalition Government has taken action to address this serious situation. The decisions have not been easy, but the understanding and cooperation of my Cabinet colleagues has enabled us to act swiftly to ensure that the nation can live within its means.

The HCA’s black hole came about because £780m of Gordon Brown’s £1.5bn housing pledge was set to come from these underspends by other government departments. In May the Treasury pledged an initial £170m to cover this, but said the HCA had to wait for the review of all End Year Flexibility-dependent programmes to see if it would get any more funding.

Housing minister Grant Shapps has previously strongly criticised the Labour government for making promises with the housing pledge without securing the funding. He said: “The day I got in to office my officials sat me down and said, er, we’ve got a problem here, ’we never had that money expected from other departments’. Frankly it was irresponsible as hell to spend money that didn’t exist.”

Today’s announcement means it will miss out on £220m from the housing pledge. This is on top of £230m of cuts, to affordable housing, Kickstart, housing market renewal and gypsy and traveller funding, announced by the government within the first few weeks of taking office.

Of the £390m it will receive, £140m will go to cover existing legal commitments. Building understands the HCA is now to decide within weeks on what schemes will be going forward and which will be cut permanently.