Move will not lead to tax hike, says mayor

TOWN hall chiefs have dismissed fears that council tax could be set to rise because of changes to the way local authority housing is financed.

North Tyneside Council has secured new borrowing of £128m to finance its exit from the housing revenue account subsidy system, triggering fears among some residents that council tax will have to be increased to finance that move.

However, officials insist the new loan will not have an impact on council tax levels.

Borough mayor Linda Arkley, pictured, said: “It is simply not the case that this deal will have any impact on council tax.

“The council has, in fact, agreed to freeze its council tax this year.”

The housing revenue account is ring-fenced, and rent from tenants accounts for almost all its income, and that money is used to manage and maintain the council’s housing stock.

Payments on the new loan will come out of the account, dispensing with the need to find the money elsewhere, according to the council.

A council spokesperson said: “Historically, under the national subsidy system, the government influenced the rent the council had to charge and calculated how much money each authority needed to run their account each year, based upon a complex formula introduced in 2002.

“Under this system, the amount of money collected from housing rents was greater than the amount that the formula determined the council needed to run its housing service.

“Therefore, payments would be made into a national pot paid to councils judged to collect less rent than they needed.

“This all changed from April 1, 2012. Now, all councils have left the national subsidy system and will be able to retain all rents locally, instead of having to pay subsidy nationally.”

The cost of exiting the subsidy has been calculated at just over £128m, borrowed from the Public Works Loan Board, taking the council’s total debt for its housing account to more than £290m.

Mrs Arkley added: “The future cost of managing this debt is substantial but is below the amount that the council would have paid in subsidy.

“This helps release financial resources which can be used for investment in the stock in the longer term.”