By Martin Wicks

News that Newham Borough Council has requested “exceptional financial support”, due to “temporary accommodation housing pressures amounting to £100m over three years”, underlines what is at stake in the Budget due on October 30th. The government has been warned by councils that there is a likelihood of more and more of them issuing section 114 notices (a declaration that they will be unable to balance their budget). “Exceptional financial support” is in fact not support. It is either

• permission for a council to borrow, which will send it further into debt and impel them to cut services further and/or
• a “capitalisation direction” enabling a council to use capital budgets to cover day to day expenditure.

A report to Newham Cabinet highlights an anticipated overspend for the current financial year in the region of £47m, of which a forecast £31m is for Temporary Assistance and £16m for additional social care provision. It predicts a Budget gap of £175m predicted over three years, with £100m caused by temporary accommodation costs rising in Newham because of homelessness.

Newham is proposing to make cuts of £20 million, including a 20% increase in fees and charges. It is also seeking permission to sell off property assets. Other savings measures on the table include shutting some of its children’s centres and reviewing the level of council tax reduction support. Consultation will take place on proposals for a further savings totalling £70m, as part of plans to close a forecast budget gap caused by growing temporary accommodation and social care costs over the next three years.

While this crisis is in large part the result of cuts to central government funding since 2010, councils have warned that the spiralling costs of temporary accommodation will bring some of them crashing down. In August, Newham warned that by 2027/8, one third of its budget could go on temporary accommodation. Newham Mayor Rokhsana Fiaz said: “Most London boroughs have now published information which shows they face exactly the same issues as we do.”

The crisis is, of course, a national one. The Local Government Association and other organisations have written to the Chancellor highlighting the scale of their crisis, with a £6.2 billion ‘black hole’. They are “seeking immediate action to stabilise council finances and protect vital services, in particular additional funding to meet growing pressures in children’s and adult social care, special education needs and disabilities (SEND), home-to-school transport and temporary accommodation.” In addition they are calling for “restoration of revenue lost to rent caps and cuts” to Housing Revenue Accounts.

We have been told that there will be no return to austerity. Yet austerity has never been ended. The Local Housing Allowance is still frozen at 90% of the 2011 rate! Hence the growing gap between councils’ costs for temporary accommodation and what they receive from the government. For the government to break with austerity, it needs to cover the actual cost of temporary accommodation which councils face.

This is a necessary immediate step to stop councils being driven to issue section 114 notices, or sink deeper into debt with “exceptional financial support”. However, ultimately the only way to resolve the growing numbers in temporary accommodation is for the government to fund a largescale new build/acquisition programme of council housing. This is the only realistic means of getting people out of temporary accommodation into secure housing.

Secretary of State for Housing, Matthew Pennycook, has recently written to the Chair of Homes England calling on them to “maximise” social rent homes, though without increasing the Tories’ funding of its Affordable Homes Programme. While all the funding should go to social rent homes there needs to be a significant increase in funding on the scale of 100,000 social rent homes a year. If the government can find £21.7 billion for carbon capture, an unproven technology which will only impact on a handful of areas, they can find the money to fund new build/acquisitions of social rent homes which will not only begin to resolve the housing crisis but will also promote jobs all over the country.

The question posed for the government is: will it come to the rescue of local authorities by providing the funding which the LGA is calling for, or allow them to collapse? The spiralling cost of temporary accommodation is only one aspect of the financial crisis but unless it is resolved, it will drag more and more councils down.

Martin Wicks is Secretary of the Labour Campaign for Council Housing, on whose website a version of this article originally appeared.