Receipts release may create 13,000 construction jobs

The Government's plan to allow the phased release of up to œ5 billion of capital receipts from the sale of council houses will provide a massive boost to the construction industry, though the mechanism for their release is still far from clear.

The Royal Institution of Chartered Surveyors estimates that the receipts could be worth around œ600 - œ800 million a year until 2002. Some 13,000 construction jobs could be created from this one initiative alone.

The move has been greatly welcomed by the Local Government Association, which represents local authorities, and the National Housing Federation, which represents housing associations.

The new Bill will amend the Local Government and Housing Act 1989 to allow ministers to issue credit approvals that take account of capital receipts set aside to repay debt. At the moment there are restrictions on the amount of money councils can spend from their capital receipts.

Borrowing private finance against the receipts may affect the PSBR, a move resisted by the Conservatives. It is unclear how this problem will be resolved as yet. A Treasury spokesman said that the way round the problem should be made clear in the forthcoming Budget.

The location of the receipts and the mechanism for their release will also cause some difficulties. The local authorities with the most receipts do not tend to be the ones most in need of repairing their housing stock or adding new housing.

One way round this would be for the Government to weight the local authority funding regime in favour of those with severe housing problems and few capital receipts.

The actual mechanism for releasing the receipts will also require detailed consultation with the industry. In theory the money could be used exclusively by local authorities for their housing. However, some might be channelled to housing associations via housing action trusts or regeneration grants.

Alternatively local authorities could work closely with associations in partnership ventures. One problem facing local authorities is that they no longer have housing development departments. Large housing associations, on the other hand, have experienced teams ready to move immediately.

Another problem facing local authorities is how to balance spending between repair and maintenance of their existing stock and how much to spend on building new homes. Repair and maintenance would benefit many smaller construction firms, while new build programmes would tend to go to larger housebuilding firms.