WITHOUT a break from austerity the housing crisis will not be resolved. With a general election not far away and local government finances spiralling out of control, the question is posed of whether a Labour government will come to the rescue of local authorities or continue with austerity.

The Guardian editorial on the government’s Autumn Statement was right when it said that the next government “has either to repudiate Jeremy Hunt’s disastrous cuts or enact them.” The statement built-in austerity to pay for National Insurance cuts.

Media reports suggested that the Labour leadership had yet to decide whether or not to stick to Tory spending plans, as New Labour did in 1997.

However, the Times says: “Rachel Reeves suggested that she had no choice but to accept the assumption that public spending will rise by just 1 per cent overall from 2025, meaning significant cuts to unprotected departments.” This would be disastrous.

We need to press them to break with austerity or the consequences would be: maintaining the current government’s parsimonious funding for its Affordable Homes Programme; imposing a freeze of Local Housing Allowance from 2025 and enacting the £19 billion cuts for “unprotected” departments, including local government, which faces a £4 billion shortfall for just what remains of this financial year and 2024-25.

Although housing revenue accounts are “ring-fenced” within a council’s general fund (GF), and not directly impacted by the GF’s deteriorating financial crisis, they cannot fail to be affected. As a senior councillor told a recent meeting of ours “councils that collapse won't be building many council homes.”

Acute shortage of council housing

The acute shortage of council housing is one of the key factors in the rise in the numbers in temporary accommodation; now more than 100,000 households, including 131,000 children, at a cost of £1.7bn.

There are now less than 1.6 million council homes left in England. There are more than 1.2m households on the waiting list, yet in 2021-22 under 52,000 new tenancies were handed out.

Unfortunately, because of the Labour leadership’s economic approach, shadow housing minister Matthew Pennycook has said that Labour will not increase the funding of the Tories’ Affordable Homes Programme.

In response to Inside Housing magazine’s call for all political parties to commit to 90,000 social rent homes a year, he said that Labour could not commit to it because it was “unfeasible.”

Yet the rising number of households in temporary accommodation are not going to get mortgages. Nor is the younger generation, unable to call on “the bank of mum and dad,” forced to live in the often poor and expensive private rented accommodation.

Only a large-scale council house building or acquisitions programme will liberate them from insecure housing.

The only commitment in relation to social housing numbers from the Labour leadership is that they will achieve “net positive” — that is, more will be built than are lost from right to buy.

Yet if there is no increase in funding for building or acquiring new homes, “net positive” will be insufficient to increase available stock at a scale that can begin to cut the numbers on the waiting lists and in temporary accommodation.

Local Housing Allowance

Despite an election-year increase in Local Housing Allowance (LHA), the government has programmed in a freeze from 2025. The LHA freeze is one of the key factors driving the financial crisis of some councils.

In addition, they have all faced a 12-year freeze of LHA for housing homeless households in private accommodation. They only get the 2011 rate! No wonder that, in the example of Worthing, they have £2.1m income to cover a £5m bill, giving them a £2.9m deficit.

This has to be covered by the GF, from an income of just over £14m. This widening gap between income and actual cost is growing all over the country.

Because of the cost of temporary accommodation, more councils are using their own housing as temporary accommodation for homeless people to save money. But this means that those on the waiting list have to wait longer. The problem can only be resolved by increasing the council housing stock.

Review the ‘self-financing regime’

In its submission to the Autumn Statement the Local Government Association called for a review of the “self-financing regime” — the financial system for council housing introduced in 2012.

Its call is based on: the loss of projected rent income as a result of government policies such as the four-year rent cut; the increased discounts for right to buy which quadrupled sales; councils are now expected to carry out additional fire safety measures resulting from the Grenfell fire; probable improvements (with cost implications) of the Decent Homes Standard following a review; and retrofitting and decarbonisation of existing homes.

Housing Revenue Account (HRA) income is far less than was projected in 2012 and councils are being asked to do more with no extra funding. These measures are simply beyond the means of HRAs which have no other significant income than tenants' rent and service charges.

The LGA estimates that decarbonisation of council housing will cost at least £23bn. This is impossible without a central government grant. A Labour government cannot decarbonise housing stock without dealing with existing council housing.

Continued austerity would leave HRAs underfunded, without the resources to improve the stock and deal with issues like damp and mould and retrofitting.

We have explained the roots and scale of this under-funding in our submission to an all-party parliamentary group on council housing inquiry on the need for funding for existing and new council housing.

Section 114 notices

Following the announcement, two more councils, Bradford and Middlesbrough, being on the verge of a section 114 notice, the chair of the Special Interest Group of Municipal Authorities, has said that “the financial viability of the whole sector is at risk.”

The LGA estimates that up to a fifth of councils are in danger of issuing a Section 114 notice this year or next (a declaration that they will be unable to balance their budget).

A representative of the LGA told the levelling-up, housing and communities committee: “We are probably at an inflexion point, where the number of authorities contemplating issuing 114 notices is becoming more general, as opposed to the specific reasons we have seen thus far […] there is a general understanding that if not this year, next year, about half of the authorities will be in distress. That is a significant number.”

Without a Labour government increasing funding for local authorities, based on annual assessments of social needs, more councils will fall over, with drastic social consequences.

‘No more money?’

The idea that there is “no more money” available is only true if Rachel Reeves’s self-imposed straitjacket applies; the arbitrary fiscal rules and the refusal to increase taxes other than the marginal ones already announced.

Keeping the current regressive taxation system is a choice, not a necessity. Our history tells us that doing what is necessary can be paid for. The Attlee government launched the NHS and built a million council homes at a time when the debt-to-GDP ratio was 250 per cent, as compared to 100 per cent today.

They also faced the argument that it could not be afforded, yet Nye Bevan tripled the grant for building homes and extended it from 40 to 60 years. Clement Atlee made social security payments in full from day one rather than introducing it in stages as William Beverage himself proposed.

Repudiate Hunt’s disastrous cuts

Our open letter calls on Labour to “repudiate Hunt’s disastrous cuts” because the alternative is to impose them on already fragile public services including local government. It proposes a number of practical policies as necessary steps to prevent the collapse of local authorities and to begin to resolve the housing crisis.

Without a shift in Labour policy, neither the local government nor housing crises will be resolved. Just as poor housing has social, health and financial costs, so does failure to decarbonise our housing stock.

It will cost more in future than taking action now. We can't afford not to do what is necessary. A Labour government needs to break with austerity, not maintain it. This is a critical issue for the wider labour movement.

We are asking for trades unions, trades councils, as well as Labour members and councillors to support the open letter as a focus for campaigning for the governmental action which is necessary to tackle the “poly-crisis” that we suffer from.

Martin Wicks is secretary of the Labour Campaign for Council Housing.

If you and your organisation would like to support the open letter email: Labourcouncilhousingcampaign@gmail.com.