Treasury and ODPM demand £1.5bn savings from councils and RSLs

The Treasury set a target of £835m savings in the comprehensive spending review. But this refers solely to 2007/8, the final year of the three-year review period (HT 28 May, page 7).

A senior Whitehall official said: “The ODPM and Treasury have agreed similar targets for the other two years of the review.”

The precise targets for 2005/6 and 2006/7 are not known but the Whitehall official said they would “build up to £835m from a reasonably high level” . Total savings for the two years are expected to be around £700m.

Deputy prime minister John Prescott said on Tuesday that the ODPM would make “at least” £620m annual savings in the first two years of the review period. A substantial slice of this will come from the £6.45bn efficiency savings demanded of councils by the Treasury.

The £835m for 2007/8 will include £195m to be saved by housing associations and £480m by councils on capital works, management and commodities such as electricity and stationery.

It will also include 160m to be saved on the Housing Corporation’s investment programme and reinvested in meeting the ODPM’s target of building 10,000 homes.

The targets for the previous years are expected to cover the same elements.

It is understood that the 4.1% year-on-year real increase in housing funding promised by Monday’s spending review does not include any of these efficiency savings.

An extra £250m a year for building council homes was also unveiled in the review – enough for at least 2500 new homes a year.

This will be made available through the private finance initiative (HT 19 March, page 8).

Ben Denton, senior director of PFI consultant Abros, said: “This will definitely mean some of the private sector bodies who lost patience with the process will return to the market.”