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Waverley Borough Council Committee System - Committee Document

Meeting of the Council held on 18/02/2003

Summary & Purpose
This report advises Members of Government proposals to abolish LA SHG from 1st April 2003 and considers the implications for Waverley Borough Council.





[Wards Affected: All]

Note pursuant to Section 100B(5) of the Local Government Act 1972

(Exempt) Annexe 2 contains exempt information by virtue of which the public is likely to be excluded during the item to which the report relates, as specified in Paragraph 12 of Part I of Schedule 12A to the Local Government Act 1972, viz:-

Any instructions to counsel and any opinion of counsel (whether or not in connection with any proceedings) and any advice received, information obtained or action to be taken in connection with:-

(a) any legal proceedings by or against the authority, or

(b) the determination of any matter affecting the authority,

(whether, in either case, proceedings have been commenced or are in contemplation).
Summary and Purpose

This report advises Members of Government proposals to abolish LA SHG from 1st April 2003 and considers the implications for Waverley Borough Council.

1. On 10th February 2003, the Office of the Deputy Prime Minister copied local authorities a letter to the Housing Corporation which explained that LA SHG will be abolished as from 1st April 2003.

2. This report explains the financial consequences of the change, together with the response to date from officers.


3. LA SHG is an arrangement whereby local authorities can support Registered Social Landlords (RSLs) with grants to provide affordable housing. Peculiarly, the grant given to the RSL is immediately refunded from the Housing Corporation on the same day. From a local authority point of view, LA SHG is a tremendous scheme in that affordable homes are provided and the money is refunded to the authority.

4. In the case of debt free authorities, the refunded LA SHG could be used for other non-housing capital purposes or retained to generate interest. For an authority with debt, the refunded LA SHG has to be set aside to repay debt.

5. In Waverley’s case, the Council has used LA SHG for many years. With debt free status in 2001, Members had the choice of how to spend the refunded grant. The Council chose to use it to reduce the Superannuation Fund deficit given the benefits available to the General Fund from the high returns offered.

Government Proposals

6. In the ‘Way Forward on Housing Finance’, a consultation paper, the Government outlined its opposition to LA SHG stating ‘ The Department sees little merit in seeking to perpetuate such a complex regime, assuming the introduction of the new, simplified capital finance system’. This statement links the abolition clearly with the new capital finance system which will not be introduced before 1st April 2004. On this basis, Waverley and other authorities have assumed that LA SHG would continue until 31st March 2004.

7. This assumption seemed all the more reasonable in that the Government has not published its response to comments made by authorities to the consultation paper. It therefore came as a great shock when officers were copied in on a letter between the ODPM and the Housing Corporation on 10th February 2003. This leaves just 6 weeks before the changes are due to take place.

8. The letter attached (see Annexe 1) is inaccurate and implies the abolition will only have a significant impact on debt free authorities. This is not the case. The letter goes on to discuss transitional arrangements. From discussions with other authorities it is clear that they have been formulated by the ODPM in isolation.

Effect on Waverley Borough Council

9. The abolition of LA SHG from 1st April 2003 will have a significant impact on the Council’s financial strategy. In terms of the General Fund Revenue budget this will not be felt until 2004/05, and there is no need to amend the report at Appendix A.1 of the Council agenda.

10. However, in view of the impact in future years it is necessary to reconsider whether the new LA SHG schemes for 2003/04 in Appendix A.3 should proceed if abolition occurs on 1st April 2003. It is suggested that the new schemes be deferred until the Executive considers the full impact of the changes, when further ODPM guidance has been issued on precise transitional arrangements.

Waverley’s Response To Date

11. Given the extremely short notice of the proposed abolition of LA SHG, just 6 weeks, the Chief Executive in consultation with the Leader, sought a legal view of whether the change was reasonable, and fairly considered before it was announced. This is attached at (Exempt) Annexe 2.

12. As the leading authority in the Capital Receipts Group (CRG) officers took the opportunity to raise the matter at a meeting at Portcullis House on 12th February. Other CRG members were equally appalled at the timing and manner of the proposal and several agreed at a local authority level to oppose it by contacting the ODPM, local MPs, and the press. In addition, the Opposition spokesperson on Local Government, Philip Hammond MP, who was at the CRG meeting agreed to raise the issue with the Secretary of State at the Local Government Bill Standing Committee on 13th February.

13. As an alternative proposal, some CRG members as individual local authorities asked that abolition of LA SHG be delayed until 1st April 2004. If this is not agreeable, robust transitional arrangements will be necessary to reflect the complex contractual issues between local authorities, the Housing Corporation and RSLs.

14. As spokesperson for Housing with the Society of Local Authority Chief Executives (SOLACE), the Chief Executive was authorised and has written to the ODPM outlining SOLACE opposition to the proposed abolition from 1st April 2003.

Resource/environmental implications

15. If the proposals are implemented, revenue implications on the General Fund will arise in 2004/05, from the inability to utilise LA SHG as approved in the Financial Strategy. In addition, the Council will have to re-assess its approach to supporting RSLs.


The Council is asked to:

1. note the Government's proposal to abolish LA SHG from 1st April 2003;

2. note the actions of officers in response to the proposal to replace recommendation 10 in Appendix A.3 of the Council agenda;

3. note that there are no financial implications on the General Fund Revenue Estimates for 2003/04;

4. note the view of the Head of Legal Services referred to in (Exempt) Annexe 2 to this addendum; and

5. amend recommendation 10 to approve the 2003/04 LA SHG Capital Programme, but if the abolition of LA SHG occurs from 1st April 2003, the Programme be deferred and a full evaluation of options be considered by the Executive.
Background Papers (DoF)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.

Name: Paul Wenham Telephone: 01483 523238
E-mail: pwenham@waverley.gov.uk