Controversial council budget tactic leaves ‘perfect financial storm’ brewing

Thomas Cooper

Thomas Cooper - Credit: Archant

A “perfect storm” of financial trouble could be brewing after town hall finance chiefs revealed a “despicable” plan to use cash earmarked for housing to pay for social services.

From 2016, Islington Council may siphon £1.3million out of the Housing Revenue Account (HRA) – money ring-fenced to build homes and for housing services – to pay to help people manage their budgets and find work. This cash would normally come from the general fund.

To make up the shortfall in the general fund the town hall plan to freeze its debt repayments for a couple of years to give them some financial wriggle room, but the repayments come back into force in 2016.

The figures come from the 2014/15 budget papers, which will be discussed at Tuesday night’s policy and performance scrutiny committee meeting.

Cllr John Gilbert, finance spokesman for Islington’s opposition Lib Dem group, said: “What’s worrying is there is a bit of a perfect storm brewing for 2016, when this comes in and that’s exactly when they will start having to pay the debts again.

“Taking money from the revenue account is a bit of a grey area. Clearly it would be better if they did things strictly by the rules, and didn’t do any creative accounting, but I’m not going to say that it’s out of the question.

“We are a bit concerned about living today off tomorrow council tenants, and we [the Lib Dem group] will be asking some searching question’s at Tuesday’s meeting.”

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Thomas Cooper, housing campaigner, said: “It’s despicable. It’s like daylight robbery for working council tenants – they get taxed through PAYE and national insurance for social services,. Now their rent – which is meant to back into housing – is being taken for social service too.

“I doubt the people who make these decisions at the council will be paying this stealth tax.”

Caroline Russell, from the Islington Green Party, said: “It’s shocking that the council has been forced to take this drastic action because of swingeing government cuts taking away support from the most vulnerable residents.

“The Lib Dem Conservative coalition Government just doesn’t understand the needs of the people of Islington.”

An Islington Council spokesman said: “Islington has seen huge cuts from government, and we expect the government to cut housing-related support over the next few years.

“We are looking at how we fund continuing support for our tenants. Any support funded through the HRA would be for our tenants only.

“If the government doesn’t cut housing-related support for Islington, we will not need to do any of this.”