CIPFA disappointed at missed house building opportunity

27-06-2013

The Chancellor of the Exchequer today made an announcement that £3bn would be made available from 2015 to allow housing associations to build new affordable homes.

Responding, Alison Scott, CIPFA’s Local Government Policy Lead, commented,

“CIPFA welcomes the announcement today of additional capital over the three years from 2015 for housing associations to deliver 165,000 new affordable homes.

“However, we are disappointed that the Government has missed a major opportunity to further extend the potential to build. Local councils are key providers of social housing. CIPFA, together with many other organisations, has long called for a relaxation of the borrowing cap which significantly limits councils’ power to borrow for housing.

“A relaxation would enable those councils which have some ‘headroom’ or borrowing capacity in their business plans to build new, affordable houses, thus providing an added boost to stimulating the housing sector and the local economy.”

“CIPFA understand the sensitivities around borrowing in the current climate – but the many years of local authority borrowing under the Prudential Code have clearly proved that Local Authorities can be trusted to act prudently with regard to borrowing.”

 

ENDS

Contact: Matthew Patterson

CIPFA Press Office

t 0207 543 5787

e Matthew.Patterson@cipfa.org.uk

Notes to Editors:

  • The borrowing cap or was imposed by the government when self-financing, the new housing finance system, was introduced in April 2012. Under self-financing, councils are no longer dependent on annual announcement of government subsidy for their housing programmes but instead can retain their rental income from tenants and plan and control their spending over a thirty year period. 
  • The legislation which introduced the borrowing cap is the Localism Act 2011, which (amongst other things) set a cap or limit on the level of borrowing that an authority can take on in respect of its housing expenditure or Housing Revenue Account. The limit is different for each council (the calculation is set out in the “Limits on Indebtedness Determination 2012” at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/6252/2077606.pdf)
  • CIPFA’s Prudential Code, introduced back in 2003, says that under prudential borrowing, a local authority must only borrow when and if the debt repayments and interest are affordable. Government regulations (The Local Authorities (Capital Finance and Accounting) Regulations 2003) state that authorities must have regard to CIPFA’s Prudential Code.

 

About CIPFA

CIPFA, the Chartered Institute of Public Finance and Accountancy, is the professional body for people in public finance. Our 14,000 members work throughout the public services, in national audit agencies, in major accountancy firms, and in other bodies where public money needs to be effectively and efficiently managed. As the world’s only professional accountancy body to specialise in public services, CIPFA’s portfolio of qualifications are the foundation for a career in public finance. They include the benchmark professional qualification for public sector accountants as well as a postgraduate diploma for people already working in leadership positions. They are taught by our in-house CIPFA Education and Training Centre as well as other places of learning around the world. We also champion high performance in public services, translating our experience and insight into clear advice and practical services. They include information and guidance, courses and conferences, property and asset management solutions, consultancy and interim people for a range of public sector clients. Globally, CIPFA shows the way in public finance by standing up for sound public financial management and good governance. We work with donors, partner governments, accountancy bodies and the public sector around the world to advance public finance and support better public services. This includes the development of local professional qualifications in African countries like Lesotho and Nigeria and in Europe in post conflict states in the Balkans.