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Jeremy Hunt has wound down a scheme that delivered an extra £200mn a year for social housing in England, in a controversial move that will further squeeze the finances of cash-strapped local councils.
The chancellor’s decision to end a policy of letting local authorities keep 100 per cent of the revenues from sales of council homes was taken as part of the deliberations for his Budget on Wednesday.
Local government and Whitehall insiders said the change was made despite representations from the Department of Levelling Up, Housing and Communities to extend the two-year policy that was due to expire in April.
Whitehall insiders said internal calculations submitted to the Treasury showed that the policy delivered between £180mn to £200mn a year to local housing budgets.
Hunt’s Budget maintained a tight grip on public spending to help finance a £10bn a year cut in national insurance contributions. The UK fiscal watchdog forecast real public spending per head would be flat for the rest of the decade.
Richard Wright, the Conservative leader of North Kesteven District Council, in Lincolnshire, told the Financial Times that the end of the policy would “make a huge difference in a small authority like ours”.
“There’s ‘no money’, I know, but of course they [central government] take it away from us in local government,” he added.
A Treasury insider confirmed the decision but said “not renewing” a temporary policy did not amount to a cut.
Under the Right to Buy scheme introduced by Margaret Thatcher’s Conservative government in 1980, tenants of council houses can buy their homes at a discount to their market value, depending on how many years they have lived in the property.
Local councils have typically returned between 20 per cent and 25 per cent of Right to Buy revenues to central government, depending on their individual agreements.
But last year the levelling up department announced that councils could keep 100 per cent of these receipts in the 2022-23 and 2023-24 tax years, saying the move would help councils “invest in new social homes for local people”.
The end of the policy will heap further financial stress on local councils, which are already reeling from more than a decade of cuts, with core spending power in 2024-25 cut by more than 23 per cent, in real terms, compared to 2010-11, according to the Local Government Association.
In recent weeks bankrupt councils, including Birmingham and Nottingham, have announced deep cuts to services such as parks, youth support and social care, as they struggle to balance their books.
Two-thirds of councils surveyed by the LGA in January 2024 said they expected communities would see cutbacks this year, including waste collection, road repairs, libraries and leisure services.
Local government leaders expressed surprise and disappointment over the decision, which comes at a time when the UK faces an acute housing crisis, with 1mn people on council house waiting lists and 106,000 households in temporary accommodation, according to the LGA.
Wright said that in North Kesteven the council had retained an additional £400,000 last year on post-discount sales of £1.5mn as result of not having to hand money back to the Treasury.
The LGA said that more than 2mn homes had been sold since Right to Buy was introduced, but that a 2012 commitment to replace sold homes on a one-to-one basis had not been honoured. In that period, 110,000 homes had been sold and only 44,000 replaced, according to the LGA. It expects a further net loss of 57,000 properties by 2030.
The average amount raised by local authority sales of council houses in England in 2022-23 was just over £100,000, but covering a wide range — from £205,000 in London to £48,000 in the North East.
Darren Rodwell, housing spokesperson for the LGA, said the government had “missed a key opportunity” at the Budget by failing to make the 100 per cent policy permanent.
“Whilst the Right to Buy can and has delivered home ownership for many, the current form has resulted in a significant loss of our social housing stock. Failing to extend the retention of RTB receipts permanently will only continue to contribute to this loss,” he added.
Paul Dennett, Labour mayor of Salford council, called the move “reckless” and one that would “further exacerbate the housing and homelessness crisis we’re facing in the UK”.
More than 10,000 homes had been sold under Right to Buy in England in 2022-23, he added, while just under 3,500 had been built to replace them.
The levelling up department did not immediately comment.