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Jeremy Hunt has wound up a scheme providing an extra £200 million a year for social housing in England, in a controversial move that will further squeeze the finances of cash-strapped local councils.
The Chancellor’s decision to end the policy of letting local authorities keep 100 per cent of proceeds from the sale of council homes was made as part of the budget deliberation on Wednesday.
Local government and Whitehall insiders said the change was made despite protests from the Department for Levelling, Housing and Communities to extend the policy by two years which was due to expire in April.
Whitehall insiders said internal calculations presented to the Treasury showed the policy added between £180m and £200m a year to local housing budgets.
Hunt’s Budget kept tight control on public spending to help fund a £10 billion a year cut in national insurance contributions. The UK’s fiscal watchdog expects real government spending per capita to remain unchanged for the rest of the decade.
Richard Wright, the Conservative leader of North Kesteven District Council in Lincolnshire, told the Financial Times that ending the policy would “make a huge difference to a small authority like ours”.
“There’s no money, I know, but obviously them [central government] take it away from us in the local government,” he added.
A Treasury insider confirmed the decision but said “non-renewal” of a temporary policy did not amount to a cut.
Under the right-to-buy scheme introduced by Margaret Thatcher’s Conservative government in 1980, council housing tenants can buy their homes at a discount to their market value, depending on how many years they have lived in the property.
Local councils typically return between 20 and 25% of right-to-buy revenue to central government, depending on their individual agreements.
But last year the Department of Levelling-up announced that councils could retain 100% of this revenue in the 2022-23 and 2023-24 tax years, saying the move would help councils “invest in new social homes for people local”.
The end of the policy will further increase financial strain on local councils, which are already reeling from more than a decade of cuts, with headline spending power in 2024-25 cut by more than 23%, in real terms, compared to 2010- 2025. 11, according to the Association of Local Authorities.
Bankrupt councils including Birmingham and Nottingham have announced deep cuts to services such as parks, youth support and social care in recent weeks as they struggle to make ends meet.
Two-thirds of councils surveyed by the LGA in January 2024 said they expected communities to see cuts this year, including to waste collections, road repairs, libraries and leisure services.
Local government leaders expressed surprise and disappointment at the decision, which comes at a time when the UK faces a major housing crisis, with 1 million people on the waiting list for council homes and 106,000 families in temporary accommodation, according to the LGA.
Wright said that in North Kesteven the council had retained a further £400,000 last year on post-discount sales of £1.5 million as it did not need to return the money to the Treasury.
The LGA said more than 2 million homes had been sold since the right to buy was introduced, but that a 2012 commitment to replace homes sold on a one-to-one basis had not been met. According to the LGA, 110,000 homes were sold in that period and only 44,000 replaced. A further net loss of 57,000 properties is expected by 2030.
The average amount raised from council house sales in England by local authorities in 2022-23 was just over £100,000, but covers a wide range: from £205,000 in London to £48,000 in the North East.
Darren Rodwell, the LGA’s housing spokesperson, said the Government had “missed a key opportunity” in the Budget by failing to make the 100% policy permanent.
“While the right to buy can and has enabled many to own a home, the current form has resulted in a significant loss of our social housing stock. Failure to permanently extend RTB revenue withholding will only continue to contribute to this loss,” she added.
Paul Dennett, the Labor mayor of Salford City Council, called the move “reckless” and would “further exacerbate the housing and homelessness crisis we are facing in the UK”.
More than 10,000 homes were sold under right to buy in England in 2022-23, it added, while just under 3,500 were built to replace them.
The Leveling Department did not immediately comment.