The Government has decided not to write off housing debt, but instead has put forward two options that they hope could get rid of the ?18 billion debt that is hindering finance reform, Inside Housing has reported.
The Government has said on the situation that it shouldn?t burden the taxpayer: ?It would be unaffordable and unfair to ask the general taxpayer to support this debt in future.? It said that the huge debt was due to building and maintaining council housing.
The Government will need a new way of handling the debt if it wants to do away with the HRA (Housing Revenue Account) subsidy, which is the system the councils use, and instead allow them to retain the money they gain from housing.
One idea suggested by a consultation is the reallocation of debt to local authorities according to their ability to generate revenue from their housing. However, even though the benefit would be the responsibility of councils and therefore free from central government control, there are questions such as the impact it would have on their ability to borrow to invest in housing and how the risk would be managed.
The second idea is to charge councils to maintain the debt that the Government would inherit. It?s less risky but also means the councils? freedom is restricted.
The Government could get the ball rolling with terms for a voluntary, self financing alternative to the HRA subsidy system by the spring of next year, but only if all stock-owning local authorities agree to the plan. If not, then the Government can expect to wait until 2012/13.
