Government under attack after authorities discover housing PFIs receive less subsidy than alternative scheme.
The government's housing programme is under increased pressure after councils trialling £450m worth of flagship PFI housing schemes have complained of unfair treatment.

Councils backing the eight Pathfinder projects to upgrade local authority housing have discovered that they will receive up to 30% less subsidy than authorities using an alternative scheme.

This alternative scheme involves the establishment of an "arm's-length management organisation", which is independently responsible for housing repair and maintenance on a not-for-profit basis.

The subsidy arrangement for these organisations was detailed late last year in the local government white paper, and advisers to the Pathfinder projects have found that the ALMOs will receive far greater subsidies than the PFIs.

To qualify for an ALMO, a council must attain a high rating for its housing management. The level of subsidy is viewed as an incentive to attain this standard. However, the DTLR is already considering lowering the standard after a complaints from councils that failed to obtain ALMO status.

Struggles over financial issues have dogged the eight Pathfinders since they were unveiled in 1999. Pathfinder councils protested to the DTLR last year that their subsidy had fallen as it was index-linked to a sliding interest rate.

Manchester council's £90m Pathfinder is the largest in the country. Derek Martin, the council's assistant director of housing, said: "Our financial consultants picked up some information in the last couple of weeks that ALMOs are more affordable. We are talking to the DTLR about it. We want a level playing field."

Another Pathfinder council, North-east Derbyshire, echoed the argument. Paul Bradshaw, the director of community services, said: "There is annoyance that ALMOs appear to be getting far more favourable treatment than PFI."

The DTLR is believed to have raised the issue with the Treasury. A DTLR spokesperson said: "We are taking in the views of councils and talking to the Treasury on a wide range of issues."

  • Islington council is believed to have shortlisted two teams led by Circle 33 and Hyde Housing Association for its Pathfinder scheme.