Part 7: Housing Finance Etc
Sections 87 and 88: Local housing strategies and statements, and Housing Revenue Account business plans
215.A local housing strategy is the local housing authority’s vision for housing in its area. It sets out objectives and targets and policies on how the authority intends to manage and deliver its strategic housing role and provides an overarching framework against which the authority considers and formulates other policies on more specific housing issues.
216.In England, local housing strategies are currently prepared by local housing authorities. They are set out in specific documents – dissemination of the housing strategy to key service users, key stakeholders and other interested parties is an important part of the strategic housing role. These documents are made available to and appraised by the Government Offices for the Regions to ensure they are “fit for purpose” i.e they are capable of delivering the local authority’s housing function to the standard demanded by Government. They are currently sent to the Government Offices pursuant to section 65 of the Local Government and Housing Act 1989. In Wales, the Welsh Assembly Government has asked local housing authorities to have local housing strategies in place by April 2004. Previously, it asked authorities to prepare annually a “housing strategy and operational plan”.
217.There has not, until now, been a statutory provision which specifically requires local housing authorities to have a housing strategy. Section 87 puts local housing strategies on a statutory basis to reflect the Government’s belief that a robust strategy is essential to the delivery of local authorities' housing functions.
218.Local housing strategies are among a number of housing plans, policies and strategies which local authorities are required or asked to prepare by central Government or the Welsh Assembly Government. One is the non-statutory Housing Revenue Account business plan, relating to the management of the authority’s own housing stock, prepared by local housing authorities in England who maintain a Housing Revenue Account. These are also submitted by authorities to the Government Offices for the Regions. Others are the Homelessness Strategy prepared by local housing authorities in England and Wales pursuant to the Homelessness Act 2002 and the reports on home energy conservation measures prepared under the Home Energy Conservation Act 1995.
219.The current guidance on local housing strategies in England and Wales stresses the importance of addressing all relevant issues, including homelessness and energy efficiency of housing stock in the strategy. Local housing strategies are also expected to be consistent with the community strategies prepared by authorities under section 4 of the Local Government Act 2000.
220.In many cases there may be considerable overlap between the material included in the different documents and it may not always be properly linked.
221.It is expected that a document prepared by an authority under subsection (2) of section 87 will be known as the “Local Housing Strategy”. But it will be for the authority to decide what to call such a document in the light of its contents. The section enables a local housing authority to be required to include in its Local Housing Strategy material that is currently set out in separate documents. However even where an authority is not required to do that, it will normally have the freedom to include in its Local Housing Strategy some or all of the material that would otherwise be set out in separate documents. Accordingly, an authority will be free to produce just a single housing document, or a number of documents, as best suits its local circumstances.
222.Section 87 therefore draws a distinction between formulating and having a strategy, and promulgating this, e.g. through a document recording or setting out that strategy.
223.If the authority was required only to prepare a statement setting out that authority’s policy or strategy on housing or related matters, then if the authority had formulated no such policy or strategy, it would simply prepare a statement saying that it had no such policy or strategy on that particular issue.
224.Section 87(1) allows the appropriate person (defined in section 124 as the Secretary of State, in relation to authorities in England, and the National Assembly for Wales, in relation to authorities in Wales) to require local housing authorities to have a strategy on certain specified matters relating to housing. In order to have such a strategy, authorities will have to have considered the relevant issues and formulated policies to achieve certain ends. Subsection (1)(b) provides that requirements can be imposed as to the ends the strategy must achieve (e.g. the availability of better quality housing in the authority’s area), the formulation of policy for the purposes of the strategy (e.g. that it must be consistent with any national housing strategy or an authority’s community strategy) and the review of the strategy (e.g. that the strategy must be reviewed after a certain period of time).
225.In practice the requirements which the Secretary of State and National Assembly for Wales propose to impose under section 87(1) are unlikely to differ from what authorities are asked to do on a non-statutory basis for their local housing strategies at present. If authorities have already formulated the relevant policies and strategies (albeit that they were not compelled to do so by an explicit statutory provision) then section 87(1) will not have the effect of imposing any further burdens on the authorities.
226.Section 87(2)(a) will allow the appropriate person to require the authority to set out the strategy which it has formulated in accordance with section 87(1), and submit it to him at such time as he may specify. Section 87(3) allows the appropriate person to impose requirements with respect to the contents and form of this and its supply by the authority to the appropriate person in accordance with subsection (2).
227.Section 88 makes it clear that the appropriate person can, in imposing requirements as to the contents of any document prepared for the purposes of section 87, require the inclusion of material relating to property in the authority’s Housing Revenue Account, designated as the authority’s Housing Revenue Account business plan. This would set out how the authority manages its housing stock and performs its role as a landlord. If an authority in England is required to submit to the Secretary of State (in practice the relevant Government Regional Office), a document whose contents include the Housing Revenue Account business plan, the plan (although not necessarily any other material in the statement) may be taken into account in calculating HRA subsidy in accordance with section 89.
228.Different requirements as to the formulation of local housing strategies, and the preparation and submission of documents evidencing them, may be imposed on different authorities. Differing requirements as to how often an authority may be required to revise its strategy, or submit a document evidencing it to the appropriate person may be imposed, depending on an assessment of the authority’s performance. Authorities which no longer keep a Housing Revenue Account (e.g. if they have disposed of all their housing stock) will not be required to prepare a Housing Revenue Account business plan.
229.Unless the power under subsection (3) of section 87 is exercised so as to require authorities to include no more material in the statement than the strategy formulated under subsection (1), authorities will be free to incorporate other material in the same document, in addition to any material they are required to include under section 87. The decision as to what if any additional material to include will be for authorities to take depending on their individual circumstances. If local housing authorities decide to include additional material evidencing plans, strategies or policies which they are statutorily required to have, parts of the statement would then have to be updated as and when those other strategies, plans or policies were required to be reviewed or updated.
230.The types of plans, policies and strategies which it is anticipated that authorities may wish to incorporate in a single document, along with the local housing strategy required under section 87(1), include the Homelessness Strategy prepared under the Homelessness Act 2002, and the reports on home energy conservation measures prepared under the Home Energy Conservation Act 1995.
231.The Secretary of State in addition to imposing formal requirements pursuant to sections 87 and 88, proposes to issue guidance to local housing authorities. The National Assembly for Wales guidance issued in June 2002 has conveyed this advice to local authorities in Wales The guidance will assist authorities to understand how they may comply with the formal requirements imposed as to the preparation of housing strategies and the documents evidencing those strategies, and as to how they might incorporate other material into documents prepared for the purposes of section 87(2). The guidance may be issued in a single document along with the formal requirements themselves.
Schedule 7: Minor and consequential amendments: paragraph 81
232.Paragraph 81 of Schedule 7 amends the Homelessness Act 2002. It clarifies that the requirement to publish certain material produced under that Act applies to the original homelessness strategy prepared under section 1 of the Act, as well as revisions to that material prepared under section 3. It makes clear that the duty to publish only relates to the material prepared under that Act (and not to the whole of any document containing such material). This amendment means that if a local authority decided to meet the requirements of the Homelessness Act 2002 by including its homelessness strategy prepared under that Act in the same document as a housing strategy it is required to have under section 87, there is no obligation to publish the whole of that document. In practice the local authority may find it desirable to publish the entire document on housing related matters.
Section 89: Housing Revenue Account subsidy: payment and calculation
233.Under the Act, rent rebates will be removed from the Housing Revenue Account (HRA) from April 2004 and will be met by rent rebate subsidy payable under the Social Security Administration Act 1992 (see the amendments made to that Act by Schedule 7 to the Act). This section amends sections 79 and 80 of the Local Government and Housing Act 1989 (“the 1989 Act”), in relation to the continued calculation and payment of HRA subsidy in respect of the remaining costs falling on the HRA.
234.The section substitutes a new section 79(2) of the 1989 Act. The new subsection confirms that payment of HRA subsidy may be made subject to conditions, including conditions as to the supply of HRA business plans (see section 88), determined by the Secretary of State or the National Assembly for Wales. The new section 79(2) refers to the “appropriate person”. For England this is the Secretary of State and for Wales this is the National Assembly for Wales. See the amendment made by subsection (6) of the section.
235.The section amends section 80 of the 1989 Act so that HRA subsidy may be calculated in such manner as the Secretary of State or the Assembly may determine rather than in accordance with formulae. Such a determination may, among other things, provide that all or part of the amount is to be calculated in accordance with formulae, or that any part which is not so calculated may be calculated by reference, for example, to an assessment of the authority’s HRA business plan, the authority’s discharge of its housing functions or such other matters as the Secretary of State or the Assembly may determine. This will provide greater flexibility in calculating the amount of HRA subsidy payable to authorities. It for example, allows the Secretary of State and the Assembly to target additional subsidy to authorities which provide better services to their tenants, perhaps by establishing arm’s length housing management organisations
236.The amendments in section 80 of the 1989 Act also provide that calculations may be made on the basis of information received on or before such date as the Secretary of State/the Assembly may specify, and on the basis of assumptions. This ensures that there can be certainty about the amounts of subsidy for a year, and that any delay by authorities in supplying the required information need not delay the subsidy calculations, which could affect authorities’ budget setting processes.
Section 90: Housing Revenue Account subsidy: negative amounts
237.This section inserts a new section 80ZA into the Local Government and Housing Act 1989 (“the 1989 Act”).
238.The new section 80ZA provides that where the calculation of HRA subsidy under sections 79 and 80 of the 1989 Act (as amended by section 89) results in an overall negative amount, the authority concerned shall
pay that amount to the Secretary of State or the Assembly; and
charge the costs of doing so to its HRA. The costs will fall to be met from rental and other income in the HRA.
239.This ensures that authorities which are able to generate surplus rental income, even though incurring management and maintenance etc expenditure comparable with other authorities, make a contribution towards meeting the costs incurred by authorities which cannot generate sufficient rent income to meet such costs.
240.This is effectively what happened under the HRA subsidy arrangements for financial years up to and including 2003-04, whereby the surplus was set off against that part of subsidy attributable to rent rebates. But those arrangements are not consistent with the new financial framework for local authority housing (including resource accounting), and have not been well understood. That is why rent rebates are being removed from the HRA from 1st April 2004. Following that the previous redistributive mechanism will no longer be available.
241.There is provision as to the timing and manner of such payments (including provision for payment by instalments), and for the Secretary of State and the Assembly to charge interest where any payments are made late, and to charge for any other costs associated with pursuing late payments. The amendment made by this section to section 141(8) of the Local Government Finance Act 1988 means that any amounts payable by an authority (including interest and other costs) may, in accordance with regulations, be set off by the Secretary of State or the Assembly against specified amounts payable by him/the Assembly to the authority concerned e.g. by way of revenue support grant.
242.Section 80(2) of the 1989 Act is repealed by subsection (2) of this section. For financial years up to and including 2003-04 section 80(2) provided that, where an authority’s HRA subsidy calculation was a negative amount, an equivalent positive amount was to be transferred from their HRA to some other revenue account of the authority, other than the Housing Repairs Account. The effect of this was that housing resources (e.g. rents) were used to meet non-housing expenditure for some authorities in England.
Section 91: Housing Revenue Accounts etc: adaptation of enactments
243.This section inserts a new section 87A into the Local Government and Housing Act 1989 (“the 1989 Act).
244.The new section 87A allows the Secretary of State and the National Assembly for Wales, by order, to amend, repeal or re-enact sections 74 to 76 and 78 of and Schedule 4 to the 1989 Act, and make such consequential etc provisions as may be necessary. Any order made by the Secretary of State for England is subject to affirmative resolution of each House of Parliament.
245.The new section provides a mechanism whereby, subject in England to Parliament’s approval, changes to the HRA may be made as and when required to reflect new circumstances or to improve the financial arrangements for local authority housing. The new section is an extended version of the previous power which enabled Schedule 4 to the 1989 Act (which was introduced by Part 6 of that Act) to be amended by order subject only to negative procedure.
Section 92: Local housing authority houses: rents
246.Subsection (1) of this section limits the effect of section 24(3) of the Housing Act 1985 so that it applies only in relation to Wales (instead of in relation to both England and Wales). Section 24(3) requires authorities, when setting their rents, to have regard to the principle that rents of houses of any class or description should bear broadly the same proportion to private sector rents as the rents of houses of any other class or description. In certain circumstances, the requirements of section 24(3) might have made it difficult for authorities to comply in the longer term with the Government’s rent restructuring policy in England.
247.Subsection (2) of the section allows the National Assembly for Wales to make an order at some time in the future repealing section 24(3) as, after the amendment made by subsection (1) of the section, section 24(3) only applies in relation to Wales. Section 123(1) would allow the Assembly to include in such an order the consequential repeal of section 24(4) of the Housing Act 1985.
Schedule 7: Minor and consequential amendments
Paragraphs 31, 33 to 39 and 60
248.Paragraph 31 of Schedule 7: This paragraph is intended as a transitional provision, to provide flexibility in deciding how to recover any overpaid HRA subsidy paid for rent rebates. It amends section 80A of the Local Government and Housing Act 1989 (‘the 1989 Act’), so that amounts of HRA subsidy overpaid (by the First Secretary of State or National Assembly for Wales) in respect of rent rebates granted to tenants of houses within an authority’s Housing Revenue Account (‘HRA rent rebates’) may be recovered by withholding or reducing rent rebate subsidy payable (by the Secretary of State for Work and Pensions) under section 140A(2) of the Social Security Administration Act 1992. This paragraph enables the Secretary of State for Work and Pensions to recover overpaid subsidy for HRA rent rebates from authorities, even where the original subsidy was paid as part of HRA subsidy. This will be in addition to the powers of the First Secretary of State and Assembly to recover overpaid HRA subsidy in respect of HRA rent rebates by withholding HRA subsidy payable in future in respect of e.g. management and maintenance.
249.Paragraph 33 of Schedule7: This paragraph amends Schedule 4 to the Local Government and Housing Act 1989 (“the 1989 Act”) which makes provision for the keeping of the Housing Revenue Account. Schedule 4 to the 1989 Act sets out the items to be debited and credited to that account.
250.Sub-paragraph (4) means that the amount of rent rebates granted for the year to tenants of property in the HRA will no longer be debited to that account. Sub-paragraph (2), read with the repeal of section 140D(2) of the Social Security Administration Act 1992 (in paragraph 38 of Schedule7), means that the authority will no longer transfer an amount to the HRA from another of its accounts where it has exercised its discretion under section 134(8) of the Social Security Administration Act 1992 to grant a higher rent rebate than would otherwise be granted (e.g. by disregarding war disablement or war widows’ pensions in calculating an individual’s benefit entitlement).
251.Sub-paragraph (5) inserts a new debit item 10, Sums directed by the Secretary of State or the National Assembly for Wales. This authorises the giving of directions requiring an authority to carry a specified amount, or an amount calculated in accordance with a prescribed formula, from its Housing Revenue Account to another revenue account (other than its Housing Repairs Account). While the 1989 Act currently provides a power to direct an authority to transfer a sum to its HRA from another revenue account (Item 10 of Part 1 of Schedule 4), there is no direct equivalent authorising directions requiring transfers from the HRA. A separate direction-making power will remove the need to use determinations under Item 8 of Part 2 of Schedule 4 to effect such transfers, which would further complicate what is already a complex determination.
252.The power to direct the transfer of sums from the HRA to another account may be used where an authority has chosen to increase the rents of dwellings in the HRA above the level at which rent rebate subsidy may be paid in respect of property in the HRA under the Social Security Administration Act 1992. HRA subsidy currently paid by the National Assembly for Wales and the First Secretary of State in respect of rent rebates for tenants of dwellings is subject to a “rent rebate subsidy limitation” policy. This means that where an authority increases its rents above a certain level, it must meet additional benefit costs itself, rather than receiving subsidy for them. It is proposed that rent rebate subsidy limitation will continue to apply when HRA tenants’ rent rebates are subsidised by rent rebate subsidy paid under the SSAA 1992 instead of as before through HRA subsidy. Rent rebate subsidy limitation will operate from April 2004 by including provision for a deduction, from the amount of subsidy which would otherwise be paid, in the order under section 140B of the SSAA 1992 setting out how rent rebate subsidy is calculated.
253.If the authority chooses to set its rents above the limit rent set out in the policy of rent rebate subsidy limitation, then it is considered appropriate that the costs that will not be subsidised should be met by the authority out of its HRA, rather than out of some other account. The extent to which these rebates are unsubsidised would be a consequence of a decision by the authority in its landlord role, and therefore the associated costs should be met by its landlord account, that is, its HRA. A direction under the new debit item 10 inserted by sub-paragraph (5) would allow an appropriate transfer of resources from the HRA to another revenue account in the authority’s general fund (or council fund in Wales) to which rent rebates would be debited.
254.Sub-paragraph (3) substitutes a new item 9 for the current Item 9 of Part 1 of Schedule 4 (credits) to allow for amounts under the new Item to be calculated in accordance with formulae. This brings that Item in line with the new Item 10 of Part 2 of that Schedule (debits), which it mirrors.
255.Paragraphs 34 to 39 of Schedule 7: These paragraphs make minor and consequential amendments to the Social Security Administration Act 1992 (“the SSAA 1992”).
256.Paragraph 35 of Schedule 7 corrects the reference in section 134(2) of the SSAA 1992 to the subsections in that section which prescribe when housing benefit takes the form of a rent rebate and when it takes the form of a rent allowance. This amendment is deemed to have come into force on 1st April 1997 when the amendment to section 134 under the Housing Act 1996, which inserted new subsections referring to rent rebates and allowances, took effect.
257.Paragraph 36(a) repeals the second sentence of section 140B(2) of that Act (exclusion of “Housing Revenue Account rebates” paid by housing authorities in England and Wales from the amount of relevant benefit). Paragraph 39 deletes the definition of “Housing Revenue Account rebate” from section 140G of the SSAA 1992 since there will no longer be any such rebates debited to the HRA. The repeal of the second sentence in section 140B(2) and the definition of Housing Revenue Account rebates will ensure that in calculating rent rebate subsidy, the Secretary of State is not prevented from taking into account any rent rebates which had been debited to the HRA in earlier years, e.g. where such rebates had been overpaid, and a deduction needs to be made in respect of the overpayment.
258.Paragraph 36(b) of Schedule 7 repeals subsection (7) of section 140B of the SSAA 1992. The powers under the other provisions of section 140B to calculate the amount of rent rebate subsidy, rent allowance subsidy and council tax benefit subsidy payable, and in particular to pay additional amounts or deduct amounts from the subsidy which would otherwise be payable, are broad. The Secretary of State may determine such additions and deductions by reference to such matters as he thinks fit, including, for example, the amount of relevant benefit paid by the authority during a previous year, or the rents of dwellings in the HRA (for the purposes of a deduction for rent rebate subsidy limitation in respect of rent rebate subsidy payable for rent rebates to tenants of HRA dwellings). Subsection (7) did not confer any additional power on the Secretary of State, and made the true extent of the Secretary of State's powers unclear.
259.Paragraph 37 of Schedule 7 inserts a new subsection (1A) into section 140C of the SSAA 1992. Section 140C(1) of the SSAA 1992 allows the Secretary of State to impose conditions, subject to which subsidy will be paid, in respect of claims, records, certificates, audit or otherwise. Conditions can be imposed under section 140C(1) requiring authorities to provide the Secretary of State with information. Where such conditions are imposed, the new subsection (1A) expands the kind of information that can be required. This will enable the Secretary of State to require the authority to provide information necessary for the Secretary of State to carry out any of his functions relating to subsidy. These functions include making an order setting out how subsidy will be calculated (including any rent rebate subsidy limitation deduction), as well as calculating the amount of subsidy payable under an order.
260.Conditions imposed under subsections (1) and (1A) of section 140C of the SSAA 1992 could require authorities to provide information to the First Secretary of State or to the National Assembly for Wales, as well as to the Secretary of State for Work and Pensions. The First Secretary of State in England and the National Assembly in Wales could continue to collect information as part of monitoring the policy of rent rebate subsidy limitation. They could then pass the information on to the Secretary of State for Work and Pensions along with representations as to the form of rent rebate subsidy limitation formulae. This would be possible as an alternative to requiring authorities to send that information directly to the Secretary of State for Work and Pensions. Information which authorities may be required to supply under this section could include the level of rents set by an authority for any year, the amount of rent rebates granted to tenants of property within the HRA, or information relating to rent restructuring for an authority in England.
261.Paragraph 60 of Schedule 7 makes a consequential amendment to section 122(4) of the Housing Act 1996, as a result of amendments made by the Social Security Administration (Fraud) Act 1997 to section 140B of the Social Security Administration Act 1992. The amendments made in 1997 resulted in provisions in section 140B being shuffled between its subsections. As a result section 122(4) no longer refers correctly to the subsections of section 140B. The amendments made by paragraph 60 of Schedule 7 mean that readers do not have to rely on section 17(2)(a) of the Interpretation Act 1978 to interpret section 122(4) because section 122(4) will now refer correctly to the subsections of section 140B under which the Secretary of State may include provision in an order for additions to or deductions from subsidy, or deduct subsidy which he considers it would be unreasonable to pay. Paragraph 60 is deemed to have come into force on 1st July 1997 when the amendments to section 140B of the Social Security Administration Act 1992 made by the Social Security Administration (Fraud) Act 1997 came into force.
262.The amendment in paragraph 38 of Schedule 7 omitting section 140D(2) needs to be read with the repeal of item 5 of Part 1 of Schedule 4 to the Local Government and Housing Act 1989 (see paragraph 33(2) of Schedule 7 to the Act).
263.The SSAA 1992 extends to (i.e. forms part of the law of) Scotland. The effect of section 129 of the Act is that the amendments will have effect in relation to the SSAA 1992 as operating throughout England, Wales, and Scotland. This means that all the amendments to the SSAA 1992 will also form part of the law of Scotland. It should be noted that sections 140A to 140G of the SSAA 1992 are not devolved matters in Scotland (see paragraph 1(2)(e) of Schedule 4 to the Scotland Act 1998).