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After the deduction of the contribution to debt, net rent income is available for spending on revenue services, revenue contributions to capital, to support borrowing and or to fund the equivalent of depreciation and is determined locally. The approach would be close to the financial regime of Registered Social Landlords whilst still under public ownership and therefore could assist in greater comparisons between the sectors and is consistent with other mechanisms to remove the differences between the sectors: for example 30 year business planning, rent restructuring and the proposed common tenancy. for more info: Act Conveyancing Sydney

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Assuming such an approach could be adopted, the key initial issue would be to determine the method by which debt is restructured or taken over. Debt restructure: an approach where debt is physically restructured such that some authorities pick up the debt of other authorities sounds administratively burdensome and potentially complicated by the need to move loans around the country. Key to the approach would be the determination of how much each HRA should pay into the “pool” and to ensure that no council was left with lower a level of flexibility than they currently have.

Government takeover of debt: an approach which saw loans novated to the government and HRAs making a contribution to the servicing costs has similarities to the pooling approach above. Again, the charge on assets would need to be set as far as possible so that no HRA was left with lower levels of flexibility. We have no feel for the extent of savings which may be achievable but this could provide for increased spending power by councils in the context of existing PSBR limits. Government takeover may have an impact on the General Fund debt remaining with councils and this could have diseconomies of scale which would need exploring.

Under government takeover, with a charge on assets to cover debt servicing, we would need to avoid the charge being used as a future policy instrument to increase levies for public expenditure purposes, and would need to ensure that regulation statute prescribed that the charge must only be based on the costs of servicing debt from the point of takeover.