£84m debt will ‘benefit’ district council
09:41 20 February 2012
District housing bosses are being ‘forced’ by Whitehall to borrow £85million over the next 30 years a Budleigh councillor has said.
Former mayor Tom Wright was briefing colleagues at last week’s town council meeting about how the overhaul of the Housing Revenue Account, the Government’s system of funding council housing, would affect district coffers.
But, despite the massive sum, he said that East Devon District Council would ultimately be better off - and end up with an extra £2million a year to spend on council housing.
Currently, councils pay all the rents and receipts from sales of their council housing stock into a pot of money which is then redistributed to ‘poorer’ councils in Devon.
This amounts to around £6million a year, totalling £180million over 30 years.
But it has been argued that this system puts financially sound councils, like East Devon, at a disadvantage.
So the Labour Government decided that councils should retain all their rent income and receipts from right-to-buy sales and rent.
And, instead of paying into a pot every year, they can borrow £84,782,000 off the Government in one go, and pay it off over 30 years.
This effectively slashes the cost in half and after interest payments are deducted Councillor Wright said it left EDDC with around £2m extra to spend on social housing.
He said: “From March 28, East Devon District Council will be forced to borrow from the Government the sum of just over £84m.
“We are being forced to borrow it. It is to go into the housing budget.
“Up until now, every year we have (the district council) been required to pay around £6million into a central government fund which is then dispersed to other less well-off districts.
“As a result of taking out this loan, we will not have to make any other dispersments.
“The interest charges will be three to four million, so we will have two million more per year to go into our pockets plus a facility to use that can be invested into social housing.
“East Devon District Council is a well run authority which is financially responsible.
“Over 30 years it should work out as a benefit.”