The Housing Revenue Account ring fence – 'new' guidance
The HRA ring fence is integral to the way Council housing finances work.
The HRA is ring fenced, by statute, from the rest of a Council's finances. On the one hand, the HRA must be self-sufficient – it must not operate at a loss; on the other hand, it cannot subsidise the Council's General Fund.
But it is easy enough to state these principles but difficult to apply them in practice.
There are inevitably ambiguities – which the financial and political pressures on both sides of the ring fence exacerbate.
Guidance is therefore vital – and so last month's publication by the Ministry of Housing, Communities and Local Government is welcome. It replaces and updates the circular issued by the then Department of the Environment in 1995 – yes, 1995!
Much of course has changed in the intervening 25 years, not least the abolition of the HRA subsidy system in 2012 and its replacement with so-called Self-financing.
When the Labour government proposed the new system in its pre-election 'Prospectus' for Council housing, it annexed draft revised guidance on the operation of the HRA ring fence. The new Conservative government introduced Self financing but did not issue the revised guidance – presumably because of its dislike for 'red tape'.
The draft guidance however remained influential. It encouraged the application of the 'Who benefits?' test, i.e. if tenants benefit then the HRA bears the cost; if not, the General Fund should do so – allowing, of course, for the sharing of shared benefits. High level, but neat and sensible.
The 2010 draft also listed various Core, Core Plus and Non-Core Services. In simple terms, Core Services were seen as HRA costs, Core-Plus as shared (HRA and General Fund) costs and Non-Core as General Fund costs.
This approach has informed our advice over recent years – and it is reflected in our Unofficial HRA Manual, which many readers will have seen.
The new guidance is essentially a combination of the 1995 circular and the 2010 draft. The use of old text creates one or two awkward 'joins' but nothing that creates real uncertainty.
And there is little of substance that is new – as befits guidance which was not the subject of at least recent consultation. Most of the important text can be traced back to 2010 or indeed 1995.
In particular the lists of services are as before, save that the maintenance of tenants' gardens is now Core Plus instead of Non-Core and the rather confusing references to other sources of funding have been dropped.
It is a shame that a few, random but useful details in the 1995 circular have been jettisoned, in the interest of cohesion; but overall it is a sensible and straightforward document.
Whether it really helps with day to day decision-making is the only lingering question. MHCLG understandably refers to the value of "local flexibility" in addressing the "substantial 'grey' area … where differing and perhaps unique local circumstances will suggest different solutions."
And whereas the 1995 circular was supported by a HRA (Subsidy) Manual there is no such Manual now – and there hasn't been one since 2006-7. That is why we produced our own Unofficial HRA Manual. We are revising it to take account of recent changes, including this latest ring fence guidance. Please let me know if you would like a copy when it is available.