Debt-free authorities take up chance to convert credit approval for loans into grant
Local authorities have gained an extra £21m to spend on housing in the coming year after a change in grant rules.

In December, councils were given the opportunity to convert basic credit approvals for loans into grant for housing without losing their debt-free status.

The offer was only of use for debt-free councils as many councils with debt already use the credits for their own borrowing.

Of England's 136 debt-free councils, which are mainly in the South, 26 took up the offer, raising £21.2m.

Only four of the 13 debt-free councils in the South-west took up the offer, bringing in an extra £1.8m of a possible £10.1m. But 22 of the debt-free councils in the South-east signed up.

Councils were offered the concession to cushion the blow of losing local authority social housing grant (HT 12 December 2003, page 11). The ending of the £500m grant in February left many housing schemes with a funding gap.

Some did not apply because they were given fewer than 11 days to decide whether to take up the offer. And some authorities said they would have lost government grant that they were given alongside the credits, regardless of whether they used them, which was intended to pay for the cost of borrowing.

Barbara Venn, housing enabling manager at North Devon council, said: "If we transferred the basic credit approvals, we'd lose revenue support grant on an ongoing basis. The impact on council finances would be quite significant. There were no specific guarantees that the money would be spent within our area."

But Kennet council in Wiltshire opted to have its credit approvals converted to grant. Housing services manager Peter Cooper said the scheme would bring an extra £310,000. "We decided having the grant outweighed the loss of the revenue support. We knew we wanted to do it but it was touch and go whether we could get a formal decision made in time."

Bernadette Stokoe, head of the southern region for the National Housing Federation, said: "The take-up in the South-west was disappointing but it is a very complex issue and may have been valid other reasons for this. Perhaps the uptake in future could be improved."

A spokeswoman for the ODPM said the government would offer the same deal to councils next year.

Source

Housing Today