At our meeting in December to discuss the local government and housing crises it was agreed that we would produce an Open Letter to the Labour leadership on action necessary to prevent the collapse of local authorities and to begin to resolve the housing crisis. With a general election not far away and local government finances spiralling out of control, the question is posed of whether a Labour government will come to the rescue of local authorities or continue with austerity. The Guardian Editorial on the government’s Autumn Statement was right when it said that the next government “has either to repudiate Mr Hunt’s disastrous cuts or enact them”. The Statement imposed more austerity in order to pay for National Insurance cuts. Media reports suggested that the Labour leadership hasn’t decided on whether or not to stick to Tory spending plans, as New Labour did in 1997. However, an article yesterday in the Times suggests that the leadership is proposing to stick to Tory spending plans. This would be disastrous. We need to press them to break with austerity or the consequences will be that a Labour government would:
1. Maintain the current grossly inadequate funding of the Affordable Homes Programme
Council housing has suffered the consequences of austerity with a huge cut in grant for building and the inroduction of “affordable rent” (up to 80% of market rent). Higher discounts for Right to Buy meant councils lost more rent from a fourfold increase in sales. In the Autumn Statement there was no more money for council housing. Yet Shadow Housing Minister Matthew Pennycook has said that Labour will not increase the parsimonious funding of the Affordable Homes Programme currently available. In response to the magazine Inside Housing’s call for all political parties to commit to funding 90,000 social rent homes a year, he said that Labour could not commit to it; it was ‘unfeasible’. But without an increase in funding for council house building the homelessness crisis will be protracted. The more than 100,000 households in temporary accommodation are not going to get mortgages. Nor is the younger generation forced to live in the often poor and expensive private rented accommodation, unless they have recourse to the ‘bank of mum and dad’. Only a large scale council house building/acquisitions programme will liberate them from insecure housing. Labour’s first housing priority should be social rent council homes.
We need a commitment from Labour to significantly increase the funding available in the Affordable Homes Programme for social rent homes.
2. Implement a freeze of local housing allowance from 2025
The very idea of a return to a freeze of local housing allowance is anathema to councils for whom there is a growing gap between the cost of temporary accommodation and the funding they receive from LHA. For some it is one of the key factors in their rapidly deteriorating financial situation. Moreover, councils have had a 12 year freeze of LHA for placing homeless households in private sector accommodation. They only get the LHA rate for 2011! No wonder, as the case of Worthing illustrates, with a bill of £5 million for temporary accommodation, but only £2.1 million in LHA, they have to cover the gap of £2.9 million from their general fund revenue of only £14 million. All over the country the gap is rising.
We need a commitment from Labour that they will end the freeze of LHA and cover the actual costs which councils face for temporary accommodation.
3. Impose a £19 billion cut in “unprotected” departments, including local government
The unprecedented crisis of local government is rapidly approaching a tipping point. The LGA estimates a shortfall of funding of £4 billion for what remains of this financial year and 2024-25. A representative of the LGA told the Levelling-up, Housing and Communities Committee that:
“We are probably at an inflection point, where the number of authorities contemplating issuing 114 notices is becoming more general, as opposed to the specific reasons we have seen thus far […] there is a general understanding that if not this year, next year, about half of the authorities will be in distress. That is a significant number.”
Following the announcement of another council, Bradford, being on the verge of a section 114 notice, the chair of SIGOMA (Special Interest Group of Municipal Authorities) has said that “the financial viability of the whole sector is at risk”.
Labour councils are looking to a Labour government to come to their rescue, not impose a new phase of austerity which would mean more cuts and a financial collapse of local authorities. Moreover, as one councillor said at our meeting, “if councils collapse they won’t be building much council housing”.
We need a commitment from Labour that they will not implement these cuts but commit to funding local government on the basis of social needs, assessed annually.
Review of the ‘self-financing regime’
The Local Government Association has called for a review of the funding system for housing revenue accounts because
- Government policies have led to HRAs having far less income than was planned for in 2012 when the new financial system was introduced;
- HRAs now face additional costs because of safety measures resulting from the Grenfell Tower fire, probable improvements in the Decent Homes Standard, and the need for decarbonisation of existing homes;
- HRAs have insufficient funding to do all these things.
The LGA explained that
“Income within the HRA is not only now lower than that provided for in the self-financing settlement, but this income is now expected to cover both higher costs and higher standards of stock and service delivery.”
Without government grant there is no way that retro-fitting and decarbonisation of the whole stock can happen.
We need a commitment from Labour to carry out this review and to fund HRAs on the basis of needs. An emergency programme of decarbonisation of existing council homes is necessary if a Labour government is to take decisive action in relation to the climate crisis.
Right to Buy
In an article in the Financial Times recently it was reported that Labour would cut the discounts for Right to Buy back to the level they were in 2012. The Leadership’s resistance to ending RTB, long since ended in Scotland and Wales, was based on the fear that the Tories would accuse Labour of “being opposed to aspiration”. Yet the Tories are likely to do the same in response to decreased discounts designed to make it harder for people to buy.
Whilst cutting the discount will cut the number of sales there is a consequence which the leadership does not appear to have thought of. Given the shortage of funding available for building new homes councils have tended to use RTB receipts to buy ex-council properties. Cut the discount back to 2012 levels and council receipts will shrink significantly, so they will be able to acquire far less properties. Given that Matthew Pennycook has said there will be no additional funding for the Affordable Homes Programme this is likely to mean that the cut in discount would have less effect than imagined in terms of housing stock numbers.
It is better to end RTB, stopping the loss of stock completely. That would mean that for the first time since 1980 every new build or acquisition would increase the number of available homes. Councils would no longer have to struggle to keep up with the homes lost.
We need a commitment to end Right to Buy to stop the loss of stock.
“There is no more money”
The idea that there is “no more money” for these things is false. The leadership has created an economic and financial straight-jacket on a future Labour government. It combines the so-called ‘fiscal rules’ (said to be non-negotiable and “from which we will not deviate”) with a commitment not to raise taxes, other than the very limited ones already committed to (ending VAT relief for private schools, abolishing non-dom, taxing the ‘carry’ on private equity). Now, in the Times Rachel Reeves had said that Labour will support any tax cuts by the government in its Spring Budget, so long as they are within her fiscal rules. She told the Times that Labour would “have to do less” if Tory spending commitments meant there was less money to spend.
Maintaining the regressive taxation system is a choice, not a necessity. We need to, and can, move back to a progressive one. If the Atlee government could set up the NHS and build a million council homes when debt to GDP ratio was 250%, there is no reason why we cannot do what is necessary to tackle the ‘poly crisis’ we face. A continuation of austerity will mean that the housing crisis will be not be resolved.
What you can do
Read our Open Letter below. If you agree with it and would like to add your name and help our campaign, email us at labourcouncilhousingcampaign@gmail.com
- If you are a Labour councillor propose your Labour Group supports it;
- Propose your union branch/organisation supports it and lobby your national union;
- Propose your Trades Council supports it;
- If you have a Labour MP lobby them on the Open Letter and its proposals.
Martin Wicks
January 2024
Resolving the local government and housing crises
An Open Letter to the Labour leadership
“The government’s Autumn Statement set in train a new phase of austerity, to pay for NI cuts. We believe the Guardian editorial was correct in saying that the next government must either “repudiate Hunt’s disastrous cuts, or enact them.” “Unprotected” departments, including local government, face an effective £19 billion cut and Local Housing Allowance will be frozen from 2025.
Both council General Funds and Housing Revenue Accounts are grossly under-funded. The LGA has reported that nearly a fifth of councils are in danger of declaring a section 114 notice either this year or next. Even those councils which are not in imminent danger are having to spend an increasing majority of their funding on social care, the demand continues to rise. According to the LGA the median for social care takes up 63.9% of all spending (excluding education). For some it is 80% and more.
We suggest that our Party should repudiate Hunt’s disastrous cuts because the alternative is to impose them on already fragile public services including local government. To stick to Tory spending plans would mean more austerity for local government, a freeze of LHA from 2025 and maintaining the inadequate funding of the current government’s Affordable Homes Programme.
Already spiralling costs of temporary accommodation are pushing councils to the brink and making rents unaffordable for many. To reimpose a freeze would exacerbate the housing crisis and the financial crisis of local government.
Labour councils are looking to a Labour government to come to their rescue. Not only should a Labour government not enact Hunt’s cuts but it should commit to:
- Funding local authorities on the basis of annual assessment of needs.
- Rather than freezing LHA, increasing it at least to the 30th percentile and covering the full cost of rent paid by local authorities for temporary accommodation.
- Increase the Affordable Homes Programme funding available for building/acquiring council housing, without which there can be no large scale council housing programme. This is critical for resolving the homelessness crisis.
- End Right to Buy, as in Scotland and Wales, to stop the loss of stock.
- Review the ‘self-financing regime’ (the LGA has demanded this of the current government) with a view to funding HRAs adequately to improve the quality of homes.
- Implement an emergency programme for decarbonisation of all council homes.
We cannot agree that there is ‘no money left’. That is only true if the regressive taxation system we currently have is left in place rather than moving back to a progressive one. Our own history teaches us that doing what is necessary can be paid for. The Atlee government launched the NHS and built a million council homes in a far worse situation than we face. Debt to GDP ratio then was 250% rather than 100%.
We agree with the LGA, which has told the government that they need to “Provide long-term funding for local government that reflects current and future demands for services.” This will be necessary “to halt the long-term decline in council services.”
As SIGOMA chair Stephen Houghton told Labourlist in July, “Labour must reverse council cuts and base funding on need, not local wealth….Giving public services the funding they need is crucial to underpinning a functioning society, while helping to tackle issues such as poverty, inequality and insecure housing goes to the very heart of our mission as a movement.”
You can download a PDF here;
Labour Campaign for Council Housing 