Statement on the overhaul of the Housing Revenue Account System

Many members and supporters of the Welsh Tenants Federation would have seen the news reports in the Western Mail on the 13th September 2010, ‘Wales loses £1bn to London in ‘rent scandal’ by Martin Shipton. The report highlighted that over £1billion has been sent back to the HM Treasury since devolution from Council House rents.

The Housing Revenue Account Subsidy System requires that any surplus be sent back to the HM Treasury and redistributed among all England and Wales Local Authorities who still retain their stock. The report highlighted that given the condition of some of the stock in Wales this was a scandal and that the system is in need of overhaul.
An Independent reviews of Housing Revenue Account Subsidy (HRAS) and Social Sector Rent Policies were launched by the Welsh Assembly Government in 2009. The groups were set up as a consequence of the Essex review which has the objective of working collaboratively with the sector to address the common themes of the report. The joint working group looking at the HRA and Rent Setting process comprises key stakeholders and officials, the Welsh Tenants Federation among them and has met on three occasions.
In general the HRAS applies to all local authorities with housing stock and, in Wales, all authorities are in a negative subsidy position. This means that in 2010/11, approximately £78m will be collected from Welsh local authorities and forwarded on to HM Treasury.
Options for reform for Wales are currently in development, through the Review, working in conjunction with the Welsh Local Government Association and others. It is impossible to make substantial changes to the arrangements without a negotiation with the Treasury and possibly changes to primary legislation and devolved funding arrangements.
Tenants in England will be aware through the Tenants And Residents Associations Of England (TAROE), our sister organization, that the former UK Government launched a consultation in March 2010 which proposed a settlement with local government in England abolishing the HRA Subsidy in return for an allocation of debt and other conditions. If there is agreement, the former Government proposed to work towards voluntary implementation from 2011/12, subject to confirmation at the next spending review in October 2011.
Alternatively, they would seek to implement self-financing through new primary legislation as early as 2012/13. We can report that the Assembly Government is liaising closely with the Department for Communities and Local Government to monitor progress on the review in England and to ensure that provisions within the forthcoming Decentralisation and Localism Bill, announced in the Queens Speech, are appropriate for Wales and made in the Welsh context
The Welsh Tenants Federation shares the concern regarding the impact of the HRAS on local authorities in Wales. In 2003 we had a substantial debate among the 320 member organisations and produced the manifesto which supported tenants who wished to transfer their stock forming new community mutual’s or housing associations. The newly formed transfers have been able to spend 100% of their revenue with no restrictions with the overhanging debt being written off by HM Treasury. This has enabled considerable investment of £1.17bn to be levered into former council housing to meet Welsh Housing Quality Standard while creating substantial employment and regeneration opportunities. We will continue to support tenants who wish to transfer in order to get better services and standards of housing.
Steve Clarke, Managing Director, Welsh Tenants Federation