Radical proposals to change the way council housing is funded are a "policy of our times" and in line with the government's localism agenda, according to local government leaders.

Martin Wheatley, Programme Director at the Local Government Association, said plans to allow councils to keep all the money they raise in rents and sales of housing assets fit in perfectly with wider government priorities, including prudent public spending.

Consultations over the future of the housing revenue account (HRA) subsidy system, launched prior to the general election, continue until 6 July. As part of a one-off settlement, some councils will take on extra debt and pay it off over 30 years.

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Speaking at the Chartered Institute of Housing's annual conference in Harrogate, Mr Wheatley said 'self financing' would put tenants and councillors in charge of spending local money and provide long-term benefits to the Treasury. "It provides an immediate receipt for central government and closes off future liabilities," he said.

While borrowing by some councils would increase, there was no reason to believe this threatened general economic goals. “There is view that councils might be reckless, but I don't think the people who believe that have met the housing finance directors that I've met," he added.

Mr Wheatley urged councils to have a "realistic discussion" over the proposals made in March by former housing minister John Healey and not reject them solely because it would mean taking on extra debt.

Brian Reilly, Deputy Director of housing at the London borough of Wandsworth, said the council was behind self financing even though it would take on an extra £457m in debt. At present, the council is debt-free, but would pay an estimated £600m into the HRA system over the next 30 years if no changes are made. "It's about local choices. We can choose what we do with this headroom," he told delegates yesterday.

The coalition government says it will review the HRA system once consultations close next month.

(CD/GK)