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Debt and privatisation

The Addison Act of 1919 had given council housing a national character, funded nationally through the ring-fenced Housing Revenue Account (HRA). Borrowing was at a low rate linked to government gilts to offset risk. HRA debt was pooled with other council debt and interest charged was based on the average across the entire local authority borrowings, not on specific loans. 

Meanwhile, lending for capital works was under the control of internal auditors working to the Prudential Code of the Chartered Institute of Public Finance and Accountancy, deploying cash from the rest of the council services. Property valuation was based on existing use value rather than on open market auction.

All that ended with the Localism Act of 2011. The traditional HRA model was replaced by a system of self-financing to bring council borrowing in line with international practices, especially those of other EU countries, as argued by the Chartered Institute of Housing. 

A prime aim was the financial convergence of council housing and housing associations. Public was merged with private, prudent planning was replaced with high-interest loans, refinancing and market risk. Housing associations were promoted as more politically astute, financially more agile. Estate agent Savills claimed their success so far made them a model for council housing and ALMOs – arms’ length management organisations. 

Councils were deliberately prevented from improving their so-called “sink estates”: borrowing was capped, nor could they realise the profits from right-to-buy, most of which went to the Treasury. Yet they still bore all the responsibility for financial decisions. 

Attempts were made, despite tenants’ votes, to transfer stock to housing associations or ALMOs – all done in the name of “modernisation”. But in reality it was anti-democratic privatisation by stealth.

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