Council Raids on Housing labeled 'jiggery pokery'

THE legal powers deployed by town halls for last month’s £35 million raid on their housing budgets could be ‘contrary’ to the aims of the law they relied on.  This was the stark warning issued by external auditors appointed by Canterbury Council, the fourth authority Inside Housing can identify as transfering cash from its housing revenue account to its general fund during September.

As reported last week, the government is investigating a series of similar multi-million pound transfers which took place throughout last month before the legal loophole was officially closed on 1 October.

Councillors in Canterbury voted last month to an irreversible transfer of almost £1 million out of its HRA, despite the auditor’s warning and protests from within its ruling Conservative group.

Simon Cook, one of two conservative councillors to vote against the transfer said it ‘smacked of the jiggery pokery that people like Amazon and Google have done to minimise their taxes’.  He added. ‘It may be legal; it just doesn’t feel right.’

Council papers reveal that its external auditor warned the authority that the ‘legal position’ of such transfers was ‘not clear cut’.

‘The transfer could be seen to be contrary to the intention of the [Local Government and Housing Act 1989] to protect tenants,’ the auditor’s statement added.

Adrian Waite, managing director of consultancy AWICS, said the intention of legislation was seen by some lawyers as essential when testing the legitimacy of legal powers.

‘Lawyers disagree about whether you have to follow the letter rather than what was actually meant,’ he said.   And Mr. Waite added:

‘Obviously, the councils transferring the money received legal advice that they could do it.  The counter argument is that they were following the letter of the law but not the intention of the law.’

The auditor’s warning is later referred to in the authority’s papers as one of several ‘risks’ to the transfer. Thes include the ‘reputational risk’ of exploiting a ‘technical loophole’ just days before it was due to be officially sealed.

Canterbury councillors were also alerted to the risk of weakening the HRA’s ‘resilience’ to future fiscal shocks, such as widely predicted increases in rent arrears as a result of the government’s welfare reforms.

Such a risk should be weighed against the financial risks faced by its general fund, officers warned councillors in the paper.

‘Members should be aware that welfare reforms are likely to increase the percentage of tenants in arrears and ultimate collection rates,’ it states.  And continues:
'But the financial risks to the HRA are minor compared with the general fund budget.  The financial pressures the general fund budget faces over the medium term are unprecedented.’
From INSIDE HOUSING by Keith Cooper (14th, October 2013)