Details of a new deal for the funding council housing have been set out in a scheme which opens the way for authorities to run their homes without central Government subsidy. It includes plans to dismantle the current Housing Revenue Account system of funding council housing in 177 local authority areas.

The Housing Minister, John Healey, said the proposals would release at least ten per cent more money in every local authority maintaining and managing housing and create funds to build more than 10,000 new council homes each year. Councils will keep all the rents they collect and any revenue from house sales.

Mr. Healey said: “This is a once and for all settlement between central and local government. It will bring council house funding up to date, replacing a system which was introduced before the Second World War. Councils will get the freedom to fund and run their council homes, without central Government subsidy. Not a single penny from rents or sales will go to Whitehall and not a single penny will subsidise other councils as the current system dictates.”

He said it was also a good deal for Central Government as it would end the complex annual round of cross-subsidy decisions. The move was immediately welcomed by the all-party Commons Select Committee for Communities and Local Government. Its chair, Dr Phyllis Starkey, said it was a radical proposal to find a workable alternative to a discredited system. She added: “”Councils now need to embrace the new system and make it work for them and their tenants. The opportunity for Councils to build significant numbers of new homes again is particularly very welcome”.