The Labour Campaign for Council Housing is calling for support for an Open Letter on resolving the local government and housing crises. Without a break from austerity, the housing crisis will not be resolved, argues Martin Wicks.

With a general election not far away and local government finances spiralling out of control, the question is posed as to 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 built in austerity in order to pay for National Insurance cuts. Media reports suggest that the Labour leadership has yet to decide whether or not to stick to Tory spending plans, as New Labour did in 1997. The labour movement needs to demand that it doesn’t, or the consequences would be:

• Maintaining the current government’s parsimonious funding for its Affordable Homes Programme,
• Imposing a freeze of Local Housing Allowance from 2025 and
• Enacting the £19 billion cuts for ‘unprotected’ departments, including local government, which faces a £4 billion shortfall just for what remains of this financial year and 2024-25.

Although Housing Revenue Accounts are ‘ring-fenced’ within a council’s General Fund, and not directly impacted by the GF’s deteriorating financial crisis, they cannot fail to be affected. As a senior councillor told a recent meeting of ours, “councils that collapse won’t be building many council homes.”

Acute shortage of council housing

The acute shortage of council housing is one of the key factors in the rise in the numbers in temporary accommodation; now more than 100,000 households, including 131,000 children, at a cost of £1.7 billion. There are now less than 1.6 million council homes left in England. There are more than 1.2 million households on the waiting list, yet in 2021/2 under 52,000 new tenancies were handed out.

Unfortunately, because of the Labour leadership’s economic approach, Shadow Housing Minister Matthew Pennycook has said that Labour will not increase the funding of the Tories’ Affordable Homes Programme. In response to Inside Housing magazine’s call for all political parties to commit to 90,000 social rent homes a year, he said that Labour could not commit to it because it was “unfeasible”.

Yet the rising number of households in temporary accommodation are not going to get mortgages. Nor is the younger generation (those unable to call on ‘the bank of mum and dad’), forced to live in often poor and expensive private rented accommodation. Only a large scale council house building/acquisitions programme will liberate them from insecure housing.

The only commitment in relation to social housing numbers from the Labour leadership is that they will achieve ‘net positive’ – that is more will be built than are lost from Right to Buy. Yet if there is no increased funding for building/acquiring new homes, ‘net positive’ will be insufficient to increase available stock at a scale that can begin to cut the numbers on the waiting lists and in temporary accommodation.

Local Housing Allowance

Despite an election year increase in Local Housing Allowance, the government has programmed in a freeze from 2025. The LHA freeze is one of the key factors driving the financial crisis of some councils. In addition, they have all faced a 12-year freeze of LHA for housing homeless households in private accommodation. They only get the 2011 rate! No wonder that, in the example of Worthing, they have £2.1 million income to cover a £5 million bill, leaving them a £2.9 million deficit. This has to be covered by the GF, from an income of just over £14 million. This widening gap between income and actual cost is growing all over the country.

Because of the cost of temporary accommodation, more councils are using their own housing as temporary accommodation for homeless people to save money. But this means that those on the waiting list have to wait longer. The problem can be resolved only by increasing the council housing stock.

Review the ‘self-financing regime’

In its submission to the Autumn Statement, the Local Government Association called for a review of the ‘self-financing regime’, the financial system for council housing introduced in 2012. Their call is based on:

• The loss of projected rent income as a result of government policies such as the four- year rent cut;
• The increased discounts for RTB which quadrupled sales;
• Councils are now expected to carry out additional fire safety measures resulting from the Grenfell Fire;
• Probable improvements (with cost implications) of the Decent Homes Standard following a review;
• Retro-fitting and decarbonisation of existing homes.

Housing Revenue Account income is far less than was projected in 2012 and councils are being asked to do far more with no extra funding. These measures are simply beyond the means of HRAs which have no other significant income than tenants’ rent and service charges. The LGA estimates that decarbonisation of council housing will cost at least £23 billion. This is impossible without central government grant. A Labour government cannot decarbonise housing stock without dealing with existing council housing.

Continued austerity would leave HRAs under-funded, without the resources to improve the stock and deal with issues like damp and mould and retro-fitting. We have explained the roots and scale of this under-funding in our submission to an All-Party Parliamentary Group on Council Housing Inquiry on the need for funding for existing and new council housing.

Section 114 notices

Following the announcement of another council, Bradford, being on the verge of a Section 114 notice, the chair of the Special Interest Group of Municipal Authorities has said that “the financial viability of the whole sector is at risk.” The LGA estimates that up to a fifth of councils are in danger of issuing a Section 114 notice this year or next (a declaration that they will be unable to balance their budget). 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.”

Without a Labour government increasing funding for local authorities, based on annual assessments of social needs, more councils will fall over, with drastic social consequences.

‘No more money’?

The idea that there is ‘no more money’ available is only true if Rachel Reeves’ self-imposed straitjacket applies: the arbitrary fiscal rules and the refusal to increase taxes other than the marginal ones already announced. Keeping the current regressive taxation system is a choice, not a necessity.

Our history tells us that doing what is necessary can be paid for. The Attlee government launched the NHS and built a million council homes at a time when the debt to GDP ratio was 250%, as compared to 100% today. They also faced the argument that it could not be afforded, yet Bevan tripled the grant for building homes, and extended it from 40 to 60 years. Attlee made social security payments in full from day one rather than introducing it in stages as Beveridge himself proposed.

“Repudiate Hunt’s disastrous cuts”

Our Open Letter calls on Labour to “repudiate Hunt’s disastrous cuts” because the alternative is to impose them on already fragile public services including local government. It proposes these practical policies as necessary steps to prevent a collapse of local authorities and to begin to resolve the housing crisis:

• A commitment from Labour that it will not implement these cuts but will fund local government on the basis of social needs, assessed annually (the Tories abandoned the annual assessment of needs in 2013).
• End the freeze of LHA and cover the actual costs which councils face for temporary accommodation.
• Significantly increase the funding available in the Affordable Homes Programme and end Right to Buy to stop the loss of stock.
• Carry out the review of the ‘self-financing regime’ which the LGA has called for, and 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 seriously the issue of the climate crisis.

Without a a shift in Labour policy, neither the local government nor housing crisis will be resolved.

Just as poor housing has social, health and financial costs, so does failure to decarbonise our housing stock. It will cost more in future than taking action now. We can’t afford not to do what is necessary. A Labour government needs to break with austerity, not maintain it.

This is a critical issue for the wider labour movement. We are asking for trades unions, trades councils, as well as Labour members and councillors to support the Open Letter as a focus for campaigning for the governmental action which is necessary to tackle the ‘poly crisis’ that we suffer from.

If you and your organisation would like to support the Open Letter email us at: labourcouncilhousingcampaign@gmail.com

Martin Wicks is Secretary, Labour Campaign for Council Housing.

Open Letter

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 as 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 Labour 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 re-impose 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 30^th percentile and covering the full cost 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 Attlee 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.

Image: Nuneaton Borough Council housing. https://www.flickr.com/photos/lydiashiningbrightly/2989944672. Creator: Lydia. Licence: CC BY 2.0 DEED. Attribution 2.0 Generic.