Spending review boosts South and renewal areas

Deputy prime minister John Prescott will outline today how his department will spend the extra housing money pledged in the comprehensive spending review.

On Monday, chancellor Gordon Brown announced that housing spending will rise an average of 4.2% for the next three years, reaching £5.9bn in 2005/06, £1.4bn more than this year.

Housing organisations are still trying to work out how much new money will reach the sector. The National Housing Federation estimated that this amounts to £2.5bn over three years.

But the money comes with the creation of a single housing inspectorate to ensure value for money. This body will take over the inspection roles of the Housing Corporation and the Audit Commission.

Prescott's statement to parliament is expected to reveal that the lion's share of the money will go towards tackling high demand in London and fast-growing areas in the South-east such as the Thames Gateway and Ashford in Kent.

Any such expansion of housebuilding is likely to encounter fierce opposition from Kent council, which vowed to fight further development last year.

Prescott will also reveal the Housing Corporation's budget for new homes, which could rise to £800m by the end of the spending review period.

He is expected to announce more funding for arm's-length management companies and transfers, and incentives to speed up the planning process, paving the way for more homes.

It is understood that the nine neighbourhood renewal areas blighted by low demand are set to receive a £500m fund over the next three years.

The decent homes target will be extended to cover the private sector, although a Whitehall insider said that no specific date or numbers to work to had been set yet. The target will apply to families with children, people with disabilities and homeowners who cannot afford repairs.

The total housing allocation for the Office of the Deputy Prime Minister will be £4.8bn in 2002/03, £5.5bn in 2003/04, £5.7bn in 2004/05 and £5.9bn in 2005/06.

Most of the sector gave a cautious welcome to the headline figures, but some people warned that the increases were based on spending plans for 2003/04 that were already public knowledge. Growth was continuing, but at a slower pace than in the previous spending round, they said.

The Chartered Institute of Housing complained that the money would not be enough.

CIH president Andrew Gray said: "We acknowledge the further increase in funding for housing, but regrettably it is not enough to do the job.

"The government has recognised the need for more affordable housing in the South, but its plans for tackling failed housing markets in the North and for bringing all council estates up to a decent standard are not likely to be fulfilled with this level of resources."

The National Housing Federation welcomed the funding, but chief executive Jim Coulter warned the creation of a single inspector would have to be handled carefully.