Housing Minister John Healey has unveiled plans to dismantle the current council housing finance system and replace it with a clearer, more transparent system that puts councils firmly in control and better able to respond to the needs of local tenants and residents.

Mr Healey also challenged councils to work with him and his ministerial colleagues to make these radical reforms through detailed work together. There has been wide and strong support for local self financing, particularly in local government.

The consultation on reforming the current Housing Revenue Account (HRA) subsidy system was published alongside radical new proposals to strengthen local democracy announced by Communities Secretary John Denham.

The proposals for a devolved self-financing alternative to the current system removes the need to redistribute revenue nationally whilst continuing to ensure that all councils have sufficient resources. Councils will finance their own business from their own rents and revenues, in exchange for a one-off allocation of housing debt.

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By freeing councils from the annual funding decisions in the current system, councils will be able to plan long term and improve the quality of services to their tenants. It will give councils greater capacity and freedom to respond to local needs and, in doing so, increase their responsibility and accountability to local tenants and residents.

Councils currently provide around 2 million rented homes and, alongside, housing associations they provide decent, secure and affordable accommodation for over 8 million people.

The proposals follow last month's Housing Pledge by the Prime Minister - an extra £1.5 billion to boost the number of new homes for people to rent or buy to 110,000 in the next two years: this is a fourfold increase in plans for new council homes.

Mr Healey said: "Over £33 billion has been invested in improving council and housing association homes since 1997 and by the end of next year we expect 95 per cent of these homes to be warm and weather-proof. If we are to maintain these improvements for the long term then it is imperative to reform the system which finances council housing.

"The proposals I am publishing will free councils from annual funding decisions so they can plan long term and improve the management of their homes, secure greater efficiencies and improve the quality of services to their tenants.

"The challenge now is whether local government is ready to work with me and Ministerial colleagues to make these radical reforms through detailed work together."

(CD/JM)