My opening address to the Housing Revenue Account Debate

Diolch Mrs Brooke, and may I begin by saying it’s a pleasure to serve under your chairmanship this afternoon. The topic of my debate today, the Housing Revenue Account Subsidy Scheme, aims to highlight one of the great injustices of public housing policy in Wales over the last twenty years. A policy which has led to a reported £2 billion, in cash terms – not taking into account inflation, of the rents of some of the poorest people in Wales being returned to the Treasury; led to chronic under investment in the Welsh public housing stock which is amongst the worst in Europe with the associated social and health implications; a policy which has deprived our communities of a significant cash investment; and driven the stock transfer agenda.

With the UK Department for Local Government and Communities scrapping the scheme for England in September this year, a decision we welcome wholeheartedly, there can be no justification for Welsh Local Authorities to have to continue to pay around £100m per annum to the Treasury.

Mrs Brooke, the story of the Housing Revenue Account Subsidy Scheme as far as Wales is concerned is one of great incompetence by both Tory and Labour politicians, who have failed some of the poorest people in Wales miserably. Perhaps this is not surprising, as I am reliably informed that only a very few individuals understand the full complexity of the scheme. As part of the then Conservative Government’s relentless attack on public housing, the Local Government and Housing Act of 1989 led to the confiscation by the Treasury of a large part of the rents paid by tenants. The complication of the new arrangements were hardly helped with them being labelled a subsidy – my understanding of the word is that subsidy should mean a financial benefit.

The effect of the Act was to undermine the attractiveness of public housing by running down its quality as investment was redirected from local communities. Rents in Wales were lower, and remain lower, than in England, leading to less revenue in general. The quality of housing is also generally poorer, while under the terms of the Act, Local Authorities were forced to return any surplus from expected rent after operational and maintenance costs to the Treasury rather than invest in their housing stock. This had the bizarre effect of promoting the stock transfer of public housing, a theme I will return to later.

Perhaps the word subsidy comes from that in effect what the new arrangements meant was that those Council tenants able to pay their rents were via the new funding mechanism paying for the housing benefit entitlements of others. Of course this did not apply to private rented sector tenants or to tenants of registered social landlords.

With HRA payments being used to fund housing benefit, the greater the money the Treasury could accumulate via the Scheme – the less it needed to pay out in benefit payments. Indeed, the 1989 Act allowed UK Government Ministers to actually set the expected level of rent income from each Local Authority as well as the expected level of expenditure on maintenance and management of their homes. The policy motive of the UK Government was to drive council rents up whilst decreasing expenditure on housing to increase the differential and gain maximum financial advantage from the new arrangements. As a result the standard of publicly owned housing stock in Wales significantly worsened in terms of quality.

The then Secretary of State for Wales, Peter Walker was guilty of a dereliction of duty of the greatest scale as Wales was included under the terms of the new arrangements whilst the Scottish Secretary of State, Michael Forsyth, refused to sign the Scottish clause meaning that Scotland was exempted from the 1989 Act. Considering that Housing Benefit is a UK function there was no reason at all why Scotland was excluded and Wales included apart from the ineptitude of the Wales Office and its Conservative occupants.

New Labour being New Labour continued the policies of the previous Tory Government in terms of public housing following the 1997 election for the first three years. In 2000 however, following a backlash amongst Local Authorities, the UK Government brought forward proposals to amend the scheme without legislation. To end the deduction of rents from Local Authorities, the Treasury introduced into each Housing Revenue Account an amount for spending on the renovation of properties. This new budget line was called the Major Repairs Allowance. The new allowance was set at a level to ensure that Local Authority expenditure exceeded rental income with the immediate effect of halting the Treasury’s rent grab. The increase in funding brought about by the MRA for England was from UK Government sources and the UK taxpayer and hence a Welsh equivalent should have been introduced by increasing the block grant.

However, and critically, these new changes were only applied to England. In what has been described ‘The Year of the Great Mistake’ by former Labour Welsh Government Special Adviser, Paul Griffiths in his excellent Bevan Foundation article, the Treasury again for some reason decided to make Wales a special case, and Labour in control of the Welsh Government totally missed the significance of the changes applied to the Housing Revenue Account in England. As a result since devolution, Wales has lost a further billion pounds, with an average of around a £100 million pounds per annum being siphoned off from Council rents in Wales.

It is true that the Welsh Government could have made a unilateral decision and left the money with the councils, but as devolution guidance notes insist that any policy decision must be neutral in its impact upon the Treasury, this would mean the Assembly Government finding a further £100m from its already under-funded Budget to give to the Treasury. This is therefore a change which can only be made with Treasury consent.

We in Plaid Cymru continuously make the case that Wales is ill served by the UK Government. The Barnett formula continues to under fund Wales to the tune of £300 million per annum. We welcome the announcement of a review to take place shortly. But given their attitude on Barnett and other issues, it is no surprise to us therefore that the Treasury would consider Wales an afterthought in relation to the introduction of the MRA in 2000.

However, the gross incompetence of the Welsh Government of the time is less easy to understand. Quite how successive Ministers and Welsh civil servants have failed to challenge the inequity of the situation is quite beyond me. With a Labour controlled Welsh Government more concerned with placating its London masters it’s hardly surprising that the people of Wales have been left down so badly. Indeed it has taken a Plaid Cymru Housing Minister to put this issue on the agenda. In short, the Treasury, under Labour control, threw a hospital pass to the Welsh Government in 2000, with tragic billion pound consequence for some of the poorest communities in my country.

In 2004, the Welsh Government created its own Major Repairs Allowance out of its own funds, further confusing the issue. This meant around £100m being diverted from other areas of devolved responsibility when the right course of action was to demand what was rightfully Wales’ from the Treasury. Therefore, despite the introduction of the Welsh Government sponsored MRA, the Treasury continued to rake in their £100m per annum from the HRA scheme in Wales.

As I mentioned earlier, one of the direct consequences of the Scheme has been to make the sale of publicly owned housing far more attractive – either under the terms of Right to Buy or by wholesale selling off of stock to registered social landlords – as Housing Associations are not covered by the scheme and are free to spend this money as they see fit on improving housing stock.

To date Bridgend, Ceredigion, Conwy, Merthyr, Newport, Monmouthshire, Rhondda Cynon Taff, Gwynedd and Torfaen Local Authorities have all transferred their stock to Housing Associations with many more Local Authorities seeking to follow the same path due to their inability to access funds to help meet the Welsh Housing Quality Standards set for 2012 – precisely because of the funds denied to them under the terms of the Housing Revenue Account Subsidy Scheme.

The HRA scheme has therefore had the undoubted effect of driving greater change in Wales than was ever envisaged. And not necessarily a change for the better!

My own local authority, Carmarthenshire County Council, has recently been forced to borrow money to introduce its housing plan in order to keep its stock in public ownership.

If the money from their own rents had been available to them then they would not need to go and borrow money – they would be able to use the revenue that the stock is generating in rents.

As a ring-fenced account, the money collected in this way can only be used on housing, so why is that option simply not available for local authorities in Wales?

Due to the scale of the situation it is perhaps surprising that the Treasury were unable to provide details of the HRA contribution made by Welsh Local Authorities when I asked a Parliamentary question in July. Thankfully, it seems the Welsh Government is better at keeping records of these sort of financial transactions. In response to a freedom of information request by myself the scale of the great rent robbery became clear.

As the Treasury has been unable to provide the figures, Mrs Brooke it would be useful for the record, and indeed the Treasuries records, if I outline the contribution of each Welsh Local Authority in cash terms since 1999.

To the nearest million:
Blaenau Gwent – £12 million
Bridgend – £16 million
Caerphilly – £70 million
Cardiff – £139 million
My home county of Carmarthenshire – £51 million
Ceredigion – £15 million
Conwy – £14 million
Denbighshire – £32 million
Flintshire – £62 million
Gwynedd – £53 million
Ynys Mon – £23 million
Monmouthshire – £33 million
Neath Port Talbot – £52 million
Newport – £75 million
Pembrokeshire – £63 million
Powys – £60 million
Rhondda Cynon Taff – £2 million
Swansea – £56 million
Torfaen – £71 million
Vale of Glamorgan – £56 million
Wrexham – £110 million
Merthyr was the only Welsh Council in surplus of £5 million

If the Minister wants I can provide an annual breakdown for each Local Authority for each years since 1999, but i fear we may run out of time.

It’s perhaps sobering to think that, considering the pressure on housing waiting lists, retention of these monies in Wales over the last decade could have built 10,000 brand new family houses in Wales, all at modern specifications, eco friendly and helping to address major social justice issues such as fuel poverty – addressing the terrible legacy of poor housing and associated poor health we have in Wales.

That money could also have provided enormous benefits for the local construction economy, part of the backbone of Welsh employment, and improve the circulation of money inside Wales and its poorest communities.

The Treasury will, by now, have received a letter from the Minister for Business and Budget, and from the Deputy Minister for Housing and Regeneration regarding this issue, and enclosing a report by Professor Wilcox, an expert on housing finance.

I have not been privy to that report, but I believe that it argues that Wales should have parity with Scotland, an argument with which I agree.

More than that, the decision of the new UK Government to scrap the Housing Revenue Account for England this September means there is no justification whatsoever for the Treasury insisting that the Scheme continues to apply to Wales and Wales alone.

Such is the inequity and injustice at the heart of this whole affair I believe the Treasury should make reparations based on the real terms costs of moneys accumulated over the last two decades.

At the very least Mrs Brooke the Treasury must make a clear statement that the provisions of the HRA and the great pillage of Welsh rents are to cease with immediate effect.

In terms of the UK Budget, this ever-decreasing figure, which lessens every time that a local authority transfers their housing stock, is very small.

But for the tenants who have to make do with poorer quality housing than they deserve and the local authorities who want to provide new and better quality housing for their residents, this is a significant amount of money.

It is not just the right thing to do, it is the best thing to do and it is the fair thing to do.

Diolch yn fawr

Man Trafod - Rhowch sylwad yma

Bydd eich ateb yn cael ei gymedroli, ac ni fydd yn ymaddangos yn syth. Medrwch baratoi eich testun mewn prosesydd geiriau cyn ei roi yn y bocs, ond ni fydd elfennau megis trwmder tecst a lliw yn ymddangos.