BURNHAM : 'Tenant tax' costs North Wales tenants £30 million

10.00.00pm GMT Thu 12th Mar 2009

North Wales councils will pay a total of £30 million to the Treasury this financial year as part of a housing subsidy system that penalises tenants in 17 of the 18 local authorities in Wales that still retain Council housing.

The Housing Revenue subsidy system has developed over a period of time and was originally designed to prevent council housing accounts making a loss. It is meant to be revenue neutral however last year UK Government coffers benefited to the tune of £194 million after it had paid out surpluses to over 50 Councils, all but one of which is situated in England.

Hackney (which received over £48 million), Islington (over £58 million) and Manchester (£34 million) together received a positive subsidy in excess of the amount clawed back from Wales.

In Wales, the two biggest payments to the Treasury were made by Cardiff and Wrexham Councils, who lost £12.7m and £11.2m respectively from their housing revenue account. Merthyr Tydfil was alone in receiving a £293,500 payment.

According to the Welsh Liberal Democrat Shadow Housing Minister, Peter Black, the system is in need of reform: "We know that there is a £3 billion bill faced by local Councils in getting their housing stock up to the Welsh Housing Quality Standard

"In the vast majority of cases the only way that they are able to do that is by transferring the homes to a not-for-profit community mutual housing association simply because they are not generating enough revenue to finance repairs. Every penny that is taken off Councils by this ludicrous system means that there is less money to make Council houses wind and waterproof, install decent bathrooms and kitchens and improve their energy efficiency.

"This money is being taken directly from the rents of Welsh tenants and used to subsidise housing in London and other big English cities. The Treasury is also benefiting at the expense of tenants across the UK. There is no longer any logic in the way that the subsidy system operates and it needs reform. What is most disturbing is that this Labour-Plaid government fails to acknowledge this.

"The English Housing Minister has recently issued a consultation paper that proposes changing the housing subsidy system so as to encourage Councils to start building new Council homes however the Assembly Government is not engaging in this exercise. They should be using that consultation to argue for the end to a subsidy system that is costing tenants so much money."

Aled Roberts, Welsh Lib Dem leader of Wrexham council and WLGA housing spokesperson said:

"There has been a failure by the Labour-Plaid government to engage with the review being undertaken in England on Housing Subsidy. This is very disappointing given that the majority of our councils are net contributors to the Treasury. Wales is losing money to the Treasury; while the Deputy Housing Minister is fully aware of this, she isn't doing anything about it.

"The Scottish local authorities were exempt from the subsidy regime when the system was introduced in 1989 and currently Welsh authorities are paying £94 million to the Treasury to reimburse London boroughs and some metropolitan authorities.

"I want answers from the Deputy Housing Minister as to why she is allowing money to be clawed back from Welsh councils to the Treasury, especially at a time when councils will face even bigger cuts in their budgets."

Eleanor Burnham, Welsh Lib Dem AM for North Wales said: "North Wales councils are having to pay out an average of £5 million because of this absurd system. Why the Welsh Deputy Housing Minister has failed to grasp the nettle on this is quite beyond me.

"There are people in North Wales desperate for safe, secure housing and they are being let down very badly by this Labour-Plaid Government. It isn't as if this is a new initiative. I sincerely hope that by us raising this issue as we are today the Deputy Minister will realise the extent of the impact this scandalous system is having on councils and their tenants. She needs to do the decent thing and undertake a review as a matter of urgency".