Local authorities are to be given greater freedom to raise cash to 'self finance' housing projects as part of a drive by the government to give councils greater financial freedom.
Communities secretary Ruth Kelly confirmed this week that DCLG is 'experimenting' with new funding mechanisms for housing raised hopes that the policy will soon be extended to assist larger infrastructure projects.Speaking on the BBC's Politics Show on Sunday, Kelly said, 'We're experimenting or working very closely with a handful of authorities across the country, about how they might be what we call self financing.'She added that this was 'in effect, giving them new ways in which they can raise money to build homes for people to live in'.A spokeswoman for DCLG confirmed that it was working with six local authorities on a new model under which they would no longer receive housing subsidies but could retain rents and have more freedom to lever in private investment to develop new schemes.'Work to date suggests that self financing has the potential to increase efficiency, improve asset management and lever in more private investment,' she said.Kelly's comments were welcomed by the Local Government Association. 'We welcome anything that gives local authorities more freedom to do things on the ground that will be more beneficial to a local area,' said a spokesperson.He added that the LGA was pushing for DCLG to make it easier for councils to self finance in other areas such as transport.The recent Lyons Review into local government finance recommended that councils be allowed to levy a 'Supplementary Business Rate' under which businesses would contribute to infrastructure schemes they stand to benefit from.Final decisions on funding will be made in the summer's Comprehensive Spending Review.