Independence...Integrity...Value

Self Financing – Planning the Transition

July 2011

Communities & Local Government published a policy document: ‘Self-Financing – Planning the Transition’ on 28th July 2011. This paper updates the policy and implementation arrangements set out in the document ‘Implementing self- Financing for Council Housing’ published in February 2011 and follows papers issued by the former Labour government as well as the current coalition government.

This paper summarises ‘Self-Financing – Planning the Transition’.

The purpose of the policy document is to:

  • Provide local authorities with the detailed information they need to prepare for and achieve a successful transition to self-financing
  • Provide an update on the wider policy and accounting context within which self-financing will operate

The policy document contains sections on:

  • The Valuation
  • Limit on indebtedness
  • The payment arrangements
  • Closing down the subsidy system
  • Accounting and regulatory framework
  • Improving accountability and the decent homes standard
  • Related policy developments
  • Transfer policy
  • Consents and disposals

The main issues arising from this policy document for local authorities are:

  • The likely increase in the self-financing valuation at the time of the draft determination in November 2011 and the consequent need to carry out a sensitivity analysis surrounding the level of the valuation and other risks in business plans
  • The practical arrangements for making and receiving payments and taking out loans
  • The mechanism for depreciation and calculating the transfer to the major repairs reserve on which a consultation paper is expected from the Chartered Institute of Public Finance & Accountancy.
  • How the two loans pools will operate. A consultation paper on this is expected from the Chartered Institute of Public Finance & Accountancy.
  • How local authorities will be able to address the achievement of the Decent Homes Standard (where this has not already been achieved) in the absence of sufficient capital grants, the presence of the debt cap and the government’s new approach to the financing of stock transfers.

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