“Labour council groups, CLPs and affiliated unions need to raise the alarm and demand that Labour commits to increased funding, both for local government services and for council housing.”
Will a Labour government come to the rescue of local government? What is it proposing to do to stop the collapse of local authorities and to help them tackle the housing crisis? As it stands at the moment it has no plans for resolving the financial crisis that councils are facing, both in their general funds and their housing revenue accounts. Unless Labour commits to significantly increased funding then, under a Labour government, councils will face a continuation of austerity rather than an end to it.
As a result of the austerity programme begun by the coalition government, more and more councils are issuing section 114 notices (a declaration that they will be unable to balance their budget, a legal duty they have) or warning of the danger, in some cases, the inevitability, of issuing one, next year, if not this. At the end of August, SIGOMA, the Special Interest Group of Municipal Authorities, said that 1 in 10 of its members were considering issuing a section 114 notice this year, whilst one in five said it could be possible in the next year. The latest of them was Leicester. The Mayor announced that without government support they would have to issue a section 114 notice in 18 months. Labour authorities in Birmingham, Nottingham and Slough have had commissioners sent it and face huge cuts. Birmingham reportedly needs to make £200 million cuts in the next two years.
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Councils are simply running out of money as a result of the loss of grant from central government, increasing demand for services, high inflation, and in some cases the increasing cost of paying for temporary accommodation because of rising homelessness. In it’s submission to the Chancellor prior to his Autumn Statement, the Local Government Association cites these pressures:
- Rising costs and demand pressures in children’s social care – budgets up by 13.6 per cent in 2023/24 compared to 2022/23 with further upward pressure on in-year spend.
- Escalating costs of home to school transport for children with special educational needs and disabilities – budgets up by 23.3 per cent whilst pressures continue.
- Increasing costs of homelessness services with multiple contributory factors, including asylum and resettlement, pushing budgets up by 19.9 per cent with pressures ongoing.
The LGA predicts a £4 billion funding gap just for 2023/4 and 2024/25.
Although council housing revenue accounts (HRAs) are ‘ringfenced’ in a council’s general fund, the financial crisis of local authorities impacts on them. In campaigning for the funding necessary to improve the quality of existing council housing and to start building on a large scale, we should recognise that we are unlikely to win that funding if a Labour government implements, in effect, if not in name, a policy of austerity when it is elected. Rachel Reeves ‘fiscal conservatism’ will impact on council services in general as well as council housing.
‘Net positive’ but no increase in funding
At the National Housing Federation housing summit, Shadow Housing Minister Matthew Pennycook said that Labour would go ‘net positive’ on social rent in the ‘early years’ of a Labour government. In other words it would build more than were sold off under RTB and were demolished. However, he made clear that Labour would not increase the funding available for the current government’s Affordable Homes Programme (2021-26). He did say that the AHP would be “repurposed” so that most of it would fund social rent homes, rather than “affordable rent” (AR) or shared ownership(SO). However, since the grant for social rent is higher than for AR or SO then there might be less homes funded.
We also know that currently there is no Labour commitment to
- ending “affordable rent” (up to 80% of market rent) – Matthew has previously described this as unaffordable for many;
- increase the Local Housing Allowance, which has been frozen since 2020;
- end fixed term tenancies;
- end Right to Buy;
- stop above inflation rent increases.
Although the National Policy Forum final document said that Labour would encourage councils without council housing to start building again they will be unable to do so without central government grant, and some commitment to make it available on an ongoing basis rather than councils having to compete in piecemeal fashion, year by year.
Keir Starmer’s recent announcement that Labour would build 1.5 million homes over a parliamentary term, was silent on any tenure breakdown. There is no target for council housing or for social rent homes.
Temporary accommodation
Local authorities cannot deal with the housing crisis without a significant increase in funding. The crisis around temporary accommodation illustrates the problem. Because of insufficient council housing – its numbers decline every year as a result of Right to Buy – councils are having to place increasing numbers of homeless people in temporary accommodation; in the private rented sector, in hotels, hostels, bed and breakfast. The steeply rising cost of this, combined with the Local Housing Allowance (LHA) freeze, means that councils are having to cover the growing gap between LHA and the actual cost of temporary accommodation with their diminishing resources. This is one reason why some councils are using part of their council stock as temporary accommodation. That inevitably means that people on the waiting list have to wait longer.
Some local authorities without council housing are warning that the scale of costs for temporary accommodation are pushing them down the road of issuing a section 114 notice. The emergency meeting of councils on temporary accommodation and homelessness, which took place recently, produced a statement calling for additional funding from government, an end to the LHA freeze and its increase at least to the 30th percentile.
Review the ‘self-financing’ regime
The LGA, in its Autumn Statement submission has called on the government to review the ‘self-financing regime’ for HRAs, introduced in 2012. The ‘debt settlement’ brought in under that system, and government policies since then, have meant that HRAs have far less rent income than was projected in 2012. The LGA says that “The settlement is now ten years old, and its underlying income and expenditure assumptions have both been superseded.” So HRAs have insufficient funding to maintain and renew existing council housing and to do all the things that they are now being asked to do:
“The additional costs to deliver net zero, compared to what is currently provided for in HRA business plans is £23 billion over 30 years. The sector-wide requirement to achieve building safety standards for tall buildings and buildings housing vulnerable residents is also estimated to be £7.7 billion. Other additional unanticipated expenditure costs include an updated Decent Homes Standard, the professionalisation of social housing staff and the future requirement for councils to pay for the cost of social housing regulation.”
LGA, Letter to Jeremy Hunt
Without adequate funding for HRAs then councils will be unable to improve the condition of housing stock nor build /buy the homes needed to address the homelessness crisis. If Labour is to take seriously the decarbonisation of existing stock then it needs to fund councils to carry out the work at the level of its whole stock. The simply don’t have the resources to do that.
Poor quality housing and over-crowding has always been associated by ill-health and premature death1. High private sector rents impoverish tenants. Investment in council housing will
- prevent ill-health resulting from poor living conditions, saving the NHS money;
- tackle decarbonisation of existing homes;
- cut the costs of heating homes, enabling tenants to spend more on necessities such as food and heating; and
- provide extra work and tax receipts.
It will provide growth which is socially and environmentally healthy, as opposed to the domination of the housing market by speculative building by the big builders.
Raise the alarm
The key question for Labour councillors is what are they going to do to press the Labour leadership to commit to coming to the rescue of councils when in government? There needs to be a return to a funding system which is based on an annual assessment of social needs (abandoned by the coalition in 2013). Without that we face inadequate services which leave many people who need them, without any. Without increased funding of staff, and more staff, the intolerable pressures they work under will drive more of them to leave, exacerbating the shortages which already exist.
Both Labour council groups, CLPs and affiliated unions need to raise the alarm and demand that Labour commits to increased funding, both for local government services and for council housing.
Whilst the ‘ringfence’ of council housing gives some protection from the deepening financial crisis of general funds, the deterioration of council housing and the service councils provide to tenants is guaranteed unless the under-funding of HRAs is addressed. Shouldn’t the LGA Labour group, for instance, be picking up on the LGA’s call for a review of the ‘self-financing regime’ and demanding that Labour commits to it?
The homelessness crisis which is driving some councils to the financial brink because of the cost of temporary accommodation, will not be resolved unless there is a renaissance of council housing – the only means of liberating people from the private sector. Labour’s first priority should be providing social rent homes rather than setting a target for home ownership which is wrong in principle and undeliverable. They should be rescuing local government because the social consequences of them not doing so will be disastrous, both in relation to housing and the wider services they provide. If they allow local authorities to collapse then the very people they want to vote for them will suffer the consequences.
Martin Wicks
November 15th 2023
1In addition to the death of Awaab Ishak, the Guardian has just reported that Thousands of babies and toddlers falling sick from damp homes in Britain, NHS doctor warns | Children | The Guardian
Labour Campaign for Council Housing 