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More details to come in Budget on borrowing cap axe
The government has been unable to provide any further detail on its plans to scrap the borrowing cap, saying more information will follow in the Budget later this month.
In her speech to the Conservative Party conference yesterday, Theresa May made the surprise announcement that she would “scrap” limits on councils’ borrowing power.
More than 10 hours after her speech, the Ministry of Housing, Communities and Local Government published a short statement confirming the plans, but containing little extra detail.
On the implementation date it said: “The cap will be lifted as soon as possible, with further details confirmed in the Budget.”
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The release said the government hoped the new powers would allow councils to build “up to an estimated 10,000 additional homes a year”.
It noted that councils in areas of high affordability pressure have been invited to bid for £1bn of extra borrowing and added: “The interest in bidding for a share of the £1bn borrowing increase also showed that they are ready and willing to deliver the homes their communities need.
“Today’s move recognises that councils see the borrowing cap as the greatest barrier to building new homes.”
The statement said removing the cap would “diversify the housebuilding market”, allowing councils to take on sites private developers would consider too small.
Yesterday, Lord Gary Porter, chair of the Local Government Association, told Inside Housing the government would likely legislate to introduce the change.
He said there would be no limits placed on the amount councils could borrow, beyond the prudential rules they are legally obliged to follow.
The government was unable to confirm whether the borrowing will be available for refurbishment and investment in existing stock as well as new build.
It was also unable to confirm whether any limits or demands will be placed on councils regarding the type and tenure of homes they can build with the borrowing.
In addition, it could not confirm when the cap will be lifted, and whether it will supersede or follow the additional £1bn of headroom planned for April 2019.
More on the HRA cap announcement
Government now appears to recognise the role of councils - but it needs to scrap Right to Buy Terrie Alafat finds much to like in Theresa May’s council borrowing cap announcement, but wants the government to go much further
New council house borrowing will be under prudential rules, says Porter More details of how new council borrowing rules are likely to work, from the chair of the Local Government Association
More details to come in Budget on borrowing cap The government has been unable to provide any further detail on its plans to scrap the borrowing cap, saying more information will follow in the Budget later this month.
The HRA borrowing cap explained A useful explainer of the context to the council borrowing cap along with a timeline of the story so far
Councils say scrapping debt cap will boost house building More reaction from local authorities
Scrapping HRA cap ‘could see 100,000 homes built’ Details of estimates from Savills on the potential impact of the government’s decision
May’s HRA announcement deserves its warm welcome – but the Budget will be the real test Blogger Jules Birch picks over the announcement
Sector heralds lifting of the borrowing cap as excellent news Reaction to the HRA cap axe from across the social housing sector
Government expects annual £1bn of council borrowing once debt cap is scrapped The first indication of the amount of borrowing ministers are expecting once the cap is no more
Theresa May announces plan to scrap council borrowing cap All the details of Theresa May’s surprise announcement
May's Conservative Party conference speech: the housing bits in full
Below is the text of the housing section of Theresa May's party conference speech:
"Last year I made it my personal mission to fix another broken market: housing.
We cannot make the case for capitalism if ordinary working people have no chance of owning capital.
To put the dream of home ownership back within their reach, we scrapped stamp duty for most first-time buyers – and over 120,000 households have already benefited.
We’ve helped half a million people onto the housing ladder through other schemes like Help to Buy.
And this week we have announced that we will charge a higher rate of stamp duty on those buying homes who do not live and pay taxes in the UK, to help level the playing field for British buyers.
The money raised will go towards tackling the scourge of rough sleeping.
But the truth is that while these measures will help in the short term, we will only fix this broken market by building more homes.
And that is what we are doing.
More new homes were added to our stock last year than in all but one of the last 30 years.
But we need to do better still.
The last time Britain was building enough homes – half a century ago – local councils made a big contribution.
We’ve opened-up the £9 billion Affordable Housing Programme to councils, to get them building again.
And at last year’s conference I announced an additional £2 billion for affordable housing.
But something is still holding many of them back.
There is a government cap on how much they can borrow against their Housing Revenue Account assets to fund new developments.
Solving the housing crisis is the biggest domestic policy challenge of our generation.
It doesn’t make sense to stop councils from playing their part in solving it.
So today I can announce that we are scrapping that cap.
We will help you get on the housing ladder.
And we will build the homes this country needs."
Speech given to the Conservative Party conference on 3 October, 2018.
