Many events and decisions have come under scrutiny in light of the Grenfell Tower catastrophe. These include the use flammable cladding, compromised compartmentation and inadequate building regulations. But another issue that deserves public scrutiny is the fact that the borough’s housing account is in debt.

Kensington and Chelsea is a rich borough that should have been able to avoid the disaster at Grenfell Tower, partly because of the £274m in reserves it is said to have.

But housing is paid for by councils out of their housing revenue accounts (HRAs). These were ringfenced in 1980 by Margaret Thatcher – so that any other money a council has cannot be used to fund council housing.

So despite its reserves, the borough’s financial situation when it comes to housing is dire. Kensington council estimates it needs £146m to renew key components of its council housing over the next five years, but only £59m is available within the housing account (pdf) - a shortfall of £87m. Given this level of underfunding councils will spread what resources they have as thinly as possible.

The refurbishment of Grenfell Tower was carried out by Rydon at the cost of £8.77m, after the preferred contractor gave a price of £11.27m, because the lower price was considered value for money. Any public inquiry should consider whether the cheaper contract was responsible for the disastrous outcome. There is, of course, no excuse for any council to carry out shoddy and dangerous work, but underfunding makes this more likely.

Decisions of successive governments must also come under scrutiny here – not necessarily to allocate blame, but to understand the financial decisions that may have led to this disaster and how to correct them in the future.

Kensington and Chelsea is not alone; when the government introduced self-financing for council housing in 2011, it placed an additional debt of £13bn (pdf) on 136 councils. This debt was based on an estimate of the rent and service charges they would collect over 30 years. But since then, government policies have blown a hole in councils’ business plans. This includes the introduction of a 1% annual rent cut over four years. The aim was to cut expenditure on housing benefit but the Local Government Association estimated that the cuts could cost councils £2.6bn.

When self-financing was introduced the government gave itself the power to reopen the debt settlement, or in other words to cut down a council’s debt if national policy had an impact on its income.

In the light of Grenfell Tower councils should, as a matter of urgency, demand that this happens.

The rent income councils are collecting bears no comparison with the estimated income on which the debt settlement was based. At the very least their debt should be cut in line with the money they have lost as a result of central government policies since 2012.

Councils have insufficient funds to maintain and renew their existing housing stock. The financial crisis faced by housing accounts is undoubtedly one link in the chain that led to a catastrophe. Correcting this will be pivotal in ensuring no similar tragedy can happen again.

Martin Wicks is the secretary of the Swindon tenants campaign group

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