4 thoughts on “The downside of toppling a totem of Thatcherism

  1. I can see what you’re getting at but there is balance between a reduction in the right to buy – which was slowing down anyway (at least in my local authority) and an increase in revenue from retaining the rents from properties which would have been sold off. Another significant factor on the HRA (and general fund) was the decision to increase Public Works Loan Board interest by 1% – that will add to borrwoing costs for councils.

    • You are right and I had picked up on that but felt there were enough complex financial considerations in the mix without adding that one! It will have a significant impact on new debt repayments and actually might disincentivise new house building?
      Another issue that possibly I should have mentioned but again, no space, was the external pressure to keep rent rises low. A lot of councils did 0% or below inflation increases this year to reflect people’s financial circumstances. That will continue, or at least will have to be thought about, thus reducing again capacity to raise revenue through other routes.
      It’s everything taken together that spells trouble ahead. And actually, having looked at SG data again, your council Renfrewshire did what Edinburgh did – need to go change the post! – ie take money from HRA reserves to put into depleted general fund reserves. But no CFCR from reserves? There will be more of this going on, where HRA reserves are big. Losing RTB receipts not fatal in itself but combine it with role they play in CFCR and enabling debt repayment and accumulation of reserves, it is an important consideration. Even if RTB abolished 2 years ago, when reserves bigger, debt repayment still down, impact might have been less noticeable in short term and councils would have had time to plan for life without their income stream. I’m sure they have done that but always easier to do when other sources of money available! Timing is everything and as long as Thatcher doesn’t have the last laugh then I for one am glad to see RTB being phased out, even partially.

  2. However, the ending of the right to buy is for new tenants and new properties – exisiting tenants still retain their right to buy (as long is its not new housing stock that they are wanting to buy). In effect RTB is still there and this move will decrease its use and maintain new properties within council (and housing association) housing stocks. It may also lead to an increase in building as the threat of RTB to new houses is removed.

    • Indeed, Kenny, but the only thing that will result in an increase in building is the availability of dosh to do it, either borrowed or grant. Ending RTB might enhance the culture and appetite as you point out. And yes limiting RTB will soften blow but ultimately this will cause problems down the line in a fairly major way potentially, as well as adding to all the other current financial pressures. Existing tenants less likely to exercise RTB on existing properties anyway surely on basis that many will not be in financial position to and if had been going to do it, would have done it by now? Be interesting actually to see the impact of change on this group of tenants…

      Which is not to say I oppose end of RTB! Not at all. Just sometimes wonder if consequences of such policy moves are fully thought through and then continencies made to deal with them. Years of experience of working with SG officials suggest not!

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