Lords block bid to remove cap on councils' housing borrowing

Published by Max Salsbury for 24dash.com in Housing and also in Central Government, Finance, Local Government

The House of Lords yesterday blocked an effort to lift the cap on the amount councils can borrow to invest in housing.

Four peers had proposed amending the Growth and Infrastructure Bill by removing the borrowing cap on local authorities' housing revenue accounts.

Lib Dem Lord Shipley said: "The UK uses a much wider measure of public debt than other countries. Council housing is a trading activity and international regulations already permit this to be discounted from government borrowing levels, although unfortunately the UK does not currently adopt such an approach and I remain puzzled as to why it does not.

"Council housing has been self-financing since April last year, and that is welcomed. The average debt on a home is just over £17,000. There is clearly scope for additional borrowing against the asset represented by the existing housing stock."

However, the proposed amendment was defeated after Conservative Lord Ahmad of Wimbledon said "reducing the national deficit remains the priority. From that the government cannot be deterred".

Speaking on behalf of the government, the peer continued: "The government use public sector net debt as the key measure of debt because their view is that it is the best principled measure of government indebtedness.

"One reason for this is because the government is generally likely to step in if public corporations cannot service their liabilities, so a focus on public sector net debt provides a fuller and more transparent picture of the government's total liabilities.

"If there are not controls over public corporations' accrual of liabilities, it means that the government do not have control over their contingent liabilities, which if called upon would impact on the deficit as well as on general government gross debt."