Wales loses £1bn to London in ‘rent scandal’
Sep 13 2010 by Martin Shipton, Western Mail
WELSH local authorities have been robbed of a staggering £1bn since the National Assembly was set up because of a discredited rule that forces them to send council house rent money to the Treasury.
Last night Plaid Cymru finance spokesman Jonathan Edwards said the loss of so much money to Wales was a major scandal that could not be allowed to continue.
The figures were released as union leaders today warned UK public bodies face losing up to 200,000 jobs because of the squeeze on public sector finances. Across Wales, two councils and two police forces alone have already confirmed nearly 2,000 job cuts are likely.
Mr Edwards, the MP for Carmarthen East and Dinefwr, established the scale of the £1bn loss following a Freedom of Information Act request to the Assembly Government. A similar request made to Whitehall resulted in a response that the Treasury did not hold a record of money sent it by the 22 Welsh councils.
Under existing arrangements, councils that raise more from council rents than they have to spend in maintenance on the homes must send the surplus to the UK Government. The cash is then redistributed to those local authorities which spend more on refurbishment and repairs than they receive in rent. Records of the transactions for each council are known as the Housing Revenue Account (HRA).
In England the system has been criticised on the basis that tenants in well-managed authorities have effectively been subsidising those in areas where the council has not been running its housing account efficiently. But in Wales only one council – Merthyr Tydfil – has shown a net gain since the Assembly came into being. The figures disclosed to Mr Edwards show that the other 21 councils have lost sums ranging from more than £139m in Cardiff to just under £2m in Rhondda Cynon Taf.
In June UK Housing Minister Grant Shapps described the system as a mess and confirmed the continuation of a consultation on proposed changes begun by his Labour predecessor. But the consultation, which was completed on July 6 and whose results are currently being evaluated, relates only to England.
Mr Shapps said in June: “For far too many years this unfair system has tied the hands of councils, stopping them from best meeting the housing needs of the communities they serve.”
Under his proposal, councils would keep all the rents they collect from their homes and all receipts from any sales of housing or land. In return, councils would take on some additional housing debt.
Last night Mr Edwards said: “This is a major scandal. I knew the overall figure would be high, but I am surprised and shocked to learn that Wales has lost more than £1bn.
“It’s essential that this is sorted out. It is wholly wrong that Wales – officially the poorest nation in the UK – should be losing money that ought to be available to councils to spend on improving their homes. Ultimately it’s the tenants who are missing out. In effect, Wales is subsiding local authority areas in England that are in some cases much more prosperous.
“It is to the credit of the Assembly Government that it has supplied me with the figures I was seeking. On the other hand, I think it is pretty bad that the UK Government doesn’t seem to be aware how much it has received from Welsh councils over this period.
“The HRA system doesn’t apply in Scotland and Northern Ireland, and in England the proposal is to reform it. Wales could soon be the only part of the UK where these iniquitous arrangements apply.”
Mr Edwards pointed out that the current system acted as a disincentive to councils to hold on to their homes. If they transfer ownership of the properties to a housing association, their HRA is shut down. The new social landlord is allowed to keep any surplus.
He added: “I know Deputy Housing Minister Jocelyn Davies is very concerned about this situation, which was allowed to continue for many years by the previous Labour Government. It’s crucial that pressure is brought to bear on the Westminster coalition to ensure Wales can extricate itself from these arrangements as soon as possible.”
Wrexham Council leader Aled Roberts, housing spokesman for the Welsh Local Government Association (WLGA), said: “We have been trying to get this matter resolved for years, but the previous Finance Minister at the Assembly Government didn’t seem keen to push it. It should have been resolved as long ago as 2000 or 2002. It’s high time it was sorted out, especially as Welsh councils are doing so badly out of this system.”
Figures from two years ago show that London authorities Islington and Hackney received HRA payments of more than £58m and £48m respectively. Manchester received £34m.
Meanwhile, research published today revealed more than 200,000 public sector jobs have already been axed or are at risk of being lost after massive spending cuts even before the Government unveils its spending review.
Figures from the GMB union suggest 150,000 jobs were lost or are at risk in more than 150 councils, hospitals, Government departments, police authorities and fire services across the UK.
Another 90,000 jobs are thought to be at risk because of the knock-on effect on private companies that supply goods and services.
And union leaders heading for the start of the TUC Congress in Manchester today fear the 240,000 total could double as a result of next month’s spending review.
Across Wales the biggest job losses in the pipeline, according to the GMB round-up, are at North Wales Police where 560 jobs are under threat, Powys Council (500), Carmarthenshire Council (500) and Dyfed-Powys Police (300).
Paul Kenny, GMB general secretary, said: “Current job losses already announced in the public sector of nearly 150,000 are just the tip of the iceberg heading for our services and our economy when the comprehensive spending review finally hits home next month. Unemployment and cuts in public services follow the appointment of a Tory-led government like night follows day.
“It was the excesses of the bankers, not high public spending, that caused the recession. The deficit in public finances is mainly due to the loss of 6% of national output because of the recession.”
Bob Crow, general secretary of the Rail Maritime and Transport union, said a cam-paign of civil disobedience was needed to fight spending cuts.
Dave Prentis, general secretary of Unison, said: “The Government’s swingeing cuts across the public sector are causing widespread misery. They are obsessed with making cuts no matter what the cost to jobs and services.
“There are realistic alternatives including fairer taxation, clamping down on tax dodgers and the tax havens for the super-rich. We should be looking across to the US where they are injecting money into the economy to keep it moving, not risking a double-dip recession.”
This is an issue we first raised back in March and, until we get justice, we'll keep on raising it so that we can improve our housing stock and ensure we have homes fit for the 21st Century.