Councils will be able to borrow at cheaper rates to cover the cost of the government's Housing Revenue Account (HRA) reforms, Treasury chief secretary Danny Alexander has announced.
Speaking to the Liberal Democrat party conference in Birmingham yesterday, Mr Alexander revealed that local authorities leaving the HRA subsidy system system would be able to borrow up to £13bn at preferential rates from the Public Works Loan Board.
The minister estimates the move could help council invest an extra £100m annually in housing.
Under HRA reforms initiated by the Labour government and taken on by the coalition, councils will no longer pay their council house rents into a national pool that is then distributed across authorities.
They will instead be able to retain income raised locally, but in return they have been forced to take on a share of the existing housing debt covered by the Treasury .
Under Mr Alexander's new plan, authority's will now be able to borrow advantageously to fund that debt. Councils had warned that Chancellor George Osborne's decision last year to hike up PWLB borrowing rates by 1% threatened to undermine the HRA reform plan by making town hall borrowing prohibitively expensive.
Mr Alexander said he had listened to councils concerns and acted to ensure the HRA system could be funded sensibly.
