Government accused of moving goal posts in council rent deal

14 October, 2013 No Comments

MP Julian Huppert has accused the government of moving the goal posts and potentially leaving Cambridge City Council £22 million out of pocket following a deal on council house rents.

The city council agreed to take a debt of £213 million from the Treasury in return for keeping the £11 million it was paying a year through the government’s Housing Revenue Account to help regenerate deprived areas.

The debt would be recouped from council house rents and rents would also be updated to match those paid by Housing Association tenants through a target rent system.

But the government is now threatening to freeze the target rent process which potentially could leave the city council unable to meet its 30-year business plan by £22 million.

Julian told Parliament during a debate in the House of Commons on Local Authority Finance: “Cambridge had been debt-free and was having to pay a huge amount of, in effect, tax from council tenants in Cambridge to support council housing in the rest of the country.

“We made a deal with the Government based on the idea that we would move average rents towards the target rents. The Government is now threatening to freeze that process.”

He said if the target rent process were frozen it would mean different rents would be charged for identical neighbouring council houses.

“That simply does not make sense on a practical level and it would also cost the council and the housing account £22 million over the period of the business plan,” he said.

“More importantly, it breaks the faith that existed. This debt was taken on with an understanding of what the rules would be. If the Government is going to change those rules, it is very hard for us to keep our side of the understanding.”

Julian said later: “The city council made this deal with the government in good faith. Now it is moving the goal posts and threatening to go back on its side of the deal. This could leave the city council in an extremely difficult position and not make sense in practical terms.”

Julian also spoke out during the debate about a move to allow councils to spend money raised through the right-to-buy council housing scheme which he said was welcome but tied up in red tape.

“It is great that we can spend right-to-buy money on replacement housing,” he said. “The money that there is now is tied up with red tape, however. It can be used to cover only a third of the cost of the replacement, so two-thirds match funding has to be found from somewhere.”

He added that the two-thirds cannot include any other grant money and it has to be spent within three years or it goes back to the government. The Treasury’s refusal to lift the borrowing cap makes it very hard for councils to spend the money to build the houses, he said.

Julian also added that the huge cut in government funding facing the city council in 2015 was much higher than the national average and “hits residents’ expectations”.

“Councils such as Cambridge City Council have received low funding for many years and have trimmed off fat again and again,” he said. What is left is muscle and bone, and we are already cutting into that. Cambridge City Council faces a cash-terms cut of almost 15 per cent in 2015-16. That figure is much higher than the national average, and it obviously hits residents’ expectations.”

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