Written Statement - Welsh Housing Quality Standard and Housing Revenue Account Subsidy

It is vitally important that Welsh Local Authorities are able to meet Welsh Housing Quality Standards (WHQS) by 2012 or a deadline agreed with Welsh Ministers. This is to ensure a basic standard of property for our tenants. The results of the recently published monitoring report indicate that 78% of registered social landlords will achieve WHQS in full by 2012, but only 39% of Local Authorities are expected to do so.

One of the main difficulties that local authorities face in funding WHQS work is the Housing Revenue Account Subsidy system (HRAS) that operates in England and Wales to manage council housing finance. There has been concern for many years at the substantial transfers from local government in Wales to HM Treasury, via the Welsh Government, as a result of this system. These currently amount to some £73M per annum.

My colleague Jane Hutt, as Minister for Business and Budgets in the previous government, wrote to the Chief Secretary to the Treasury prior to the Assembly election voicing the unfairness that is perceived in Wales about this situation. The letter provided an analysis that if there was a parity in approach between England and Wales, then these transfers would disappear, and sought a settlement enabling the HRAS to be brought to an end.

The Chief Secretary to the Treasury has now replied.  His letter indicates that the differences in negative subsidy between England and Wales relate to the way Major Repairs Allowance was set up in England in 2001. At that time, the then UK department responsible, the Department for Environment, Transport and the Regions, took a reduction in its budget while a corresponding increase in Annually Managed Expenditure for Major Repairs meant that negative subsidies in England were much lower than in Wales.

The critical point in the Chief Secretary’s letter is that at that time no reduction was made in the Welsh Government’s budget that corresponded to the reduction in the DETR’s budget. This letter is the first time that the UK Government has put this on the record.  It means that it is now difficult to continue to argue that Wales was disadvantaged in that process.

However, I am committed to work with Jane Hutt and negotiate firmly with the UK Government to find the best possible way forward for Wales. We understand the UK Government’s constraints to achieve a “financially neutral” settlement, but we will also commission research to demonstrate the need for funds to meet the backlog of repairs in the Welsh Housing stock and the WHQS. If there is to be any final payment from Wales to end the HRAS it must be at an affordable level and provide a better way forward than continuance of the status quo.