Councils are attempting to slash up to £10bn from the debt they took on under self-financing reforms to compensate for the impact of the social housing rent cut.

David Hall, a council finance expert who worked with the government to produce the original proposals for self-financing reforms in 2008, has made a submission on behalf of several authorities to the Parliamentary Scrutiny Unit, which provides advice on draft bills, in order to reopen the £27bn Housing Revenue Account (HRA) debt settlement.

The submission proposes an amendment to the Welfare Reform and Work Bill in order to protect councils from a 1% cut to social rents for four years which Mr Hall calculates will cost them £3bn.

The original 2012 HRA debt settlement, under which councils took on debt in return for the freedom to keep rental income, was premised on long-term inflation-linked rents. Councils argue that had the rent cut been factored into the settlement calculations, local authorities would have taken on around £10bn less debt – around £17bn.

The local authorities said the government should therefore “revisit the calculation used to determine each authority’s HRA debt and repay the difference”. The proposed amendment was submitted to a Commons committee scrutinising the bill on Thursday.

“I feel quite strongly that the principle of HRA reform and the fact that it’s to do with localism has not been carried forward,” said Mr Hall.

Lynne Pennington, divisional director of housing at Labour-led Harrow Council, said she was “hopeful” that the proposal would get parliamentary support. She said the rent cut will “undermine the business plans for many local authorities who felt that HRA reform heralded a new lease of life”.

However, a Department for Communities and Local Government spokesperson said: “We have no intention of re-opening the self-financing settlement.”

Source – Inside Housing