Inside Housing’s investigations into councils moving money from rent accounts to their general funds have shown up some questionable practices (Inside Housing, 11 October). But to turn this into an argument against giving councils wider powers to invest in council housing would be to confuse two separate issues.
Even after these revelations, I believe there are a number of reasons why the call to relax or drop the borrowing caps that limit investment is stronger than ever. The most important is that it frees up the potential to build 60,000 more homes over five years, as shown in last year’s Let’s get building report by the National Federation of ALMOs.
The evidence of questionable practices relates to housing revenue and to surpluses, not to new debt. New borrowing has to be for investment, and it would be blatant abuse for a council to borrow to build, for example, a school and charge the costs to the housing revenue account. It is impossible to believe that this would be permitted by internal auditors and even if it were it would be picked up in external audit and the council would risk penalties.
While abuse in the way tenants’ rents are spent should be exposed, the evidence suggests only a minority of councils are culpable and the main loophole identified has already been closed. Calling for a halt to any move to widen borrowing powers would penalise all councils for the practices followed by what seems to be a small minority. And even these councils were operating within their interpretation of the law.
For me the potential danger arising from this story is that it hands yet another argument to those opposed to wider borrowing powers. Because the issue is so complicated, it is all too easy to put forward spurious reasons for not going ahead – as demonstrated when a motion at the Liberal Democrat conference was defeated partly because of a nonsense argument that changing borrowing rules would bring all the finance used to rescue the banks back onto the government’s books.
There is already plenty of scope for confusion in this area and we need to avoid creating even more. It’s a complicated and technical issue: politicians find it difficult to understand and are easily put off. I believe we should continue to back the case for wider borrowing powers, not just because the rules are wrong, but because they prevent homes being built. If housing output in England is to be at least doubled, the extra contribution that councils could make shouldn’t be dismissed.
Original post: Inside Housing