An extra £118m, at least, will be spent this year on temporary accommodation, such as hotels and B&Bs, by councils, a Sky News investigation has found.
If trends continue, local authorities in England will spend nearly a quarter more (24%) this financial year than pre-COVID-19.
Outside London, expenditure is on track to increase by 55%.
The number of families living in temporary accommodation (TA), as a proportion of the population, has alsorisen by 8%.
Around £309m was spent by councils on TA in the six months to September, and they are expected to spend well over £618m this financial year.
That’s compared with £500m in the year to March 2020.
The true figure will be much higher because out of more than 300 local authorities contacted, through freedom of information requests, only 180 responded with comparable data.
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The biggest increases in TA spending since before the pandemic have been in Yorkshire and the Humber and the South West.
The biggest rises have been in St Helens, Rossendale, Torridge, Sunderland and Wigan.
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Torridge district council, in Devon, one of the worst affected, has a forecast for TA expenditure of £1.1m this year, an increase of more than 2,000%.
Devon is a case study in itself, bearing the brunt of external housing market pressures.
There are 70% fewer properties available to rent there than in 2018 and the cost of rented accommodation has also risen by 42%.
It is also believed that in Torridge, a “tourist hotspot”, a “significant number” of properties are being let as holiday homes.
Torridge district councillor Rachel Clarke, lead for homelessness and housing need, told of “unprecedented pressures” with “modest reimbursement” from the government.
“The council is facing significant challenges in finding affordable rented accommodation for residents in temporary accommodation, and hence their stays in TA are longer,” Ms Clarke said.
“The cost pressures associated with temporary accommodation is by far the biggest cost pressure this council faces.”
Image: Sally O’Malley and her son Ollie were evicted from their privately rented home
More children in temporary accommodation
The latest government figures also show that the number of families with children living in TA in England, outside London, has risen by more than 20%.
Sally O’Malley and her son Ollie, 12, are one of those statistics.
They lived in a hotel, followed by a B&B, after she was made homeless through a “no fault” section 21 eviction.
She was told, like many are, that she would not be eligible for help from the authorities until the day she became homeless.
Ms O’Malley, 49, who is from Leeds, was evicted from her privately rented house and describes the ordeal as “traumatising” and “hell”:
“I wouldn’t wish it on my worst enemy… horrible. We got to the stage where I really wanted to give in,” she said.
“Then I’d beat myself up cos how could I think that with Ollie? I had no fight left. I didn’t want to do one more phone call, one more email. I totally lost myself, I was drowning.”
She is now in rented accommodation paid for through her housing allowance but, as it doesn’t cover the cost of rent, is topped up by the local council.
She is one of thousands going through a cycle of eviction, homelessness, temporary accommodation and then back into an expensive private rental sector.
The councils that responded to information requests have spent £1.98bn on temporary accommodation in the past three and a half years.
Image: Sean Gillespie, a landlord in Hull, says a ‘massive housing crisis’ is on the way
Rising rental costs and falling supply
The reasons behind the rise in costs is partly down to more homelessness in some areas, but also due to the rising cost of accommodation itself.
The supply of privately rented accommodation is dropping, which is partly pushing up prices.
Some councils are also struggling to find places to put people up in, which means they are having to resort to more expensive shorter-term lets.
Sean Gillespie has a portfolio of properties to rent in Hull and blames government legislation for a lack of stock as it forces landlords to sell up.
He claims the most damaging piece of legislation has been “section 24”, which came fully into force last year and means landlords are no longer able to offset financial costs against tax.
“Can you imagine a business, any business, where you can’t offset your costs? How is that possible? It’s now possible to make a loss as a landlord and still pay tax – it’s bonkers,” he said.
“We are not taxed on our profits, we’re taxed at our turnover. Where is the spare money?… We [landlords] don’t want a new Rolex, we just don’t want to sell someone’s house.
“Because that doesn’t help anyone. I really don’t know where people are going to live. There’s going to be a housing crisis. It’s in the post, a massive crisis, it’s catastrophic.”
Alex Diner, senior researcher of housing policy at the New Economics Foundation, describes temporary accommodation as a “national scandal”.
“We are throwing far more money at the symptom of the problem and far less on addressing the root cause of it,” he said.
“It’s economically illiterate and dysfunctional that we’re allowing ever-increasing amounts of money to pay for that, rather than dealing with the problem at source and building social and affordable housing that the country so desperately needs.”
Lack of social housing the key problem
At the heart of all this is one uniting factor: a distinct lack of social housing.
Think of the housing market as a vicious circle of inequality, with two things happening at the bottom.
One: unaffordable housing has driven more and more people on low incomes into the private rented sector.
Two: social housing stock has been sold off and not replaced and therefore benefit recipients have also been forced increasingly to privately rent.
The fact is the private rental sector has become a substitute for social housing.
In the middle of it, two converging groups of people have begun to compete for the same place to live.
Government figures show 25.7% of households in the private rental sector are in receipt of housing benefit.
If we built more affordable homes, and specifically more social housing, it would slowly take the heat out of the private rented sector and ultimately market sales.
Private rental has become a precarious and increasingly unaffordable sector and is one of the main reasons why taxpayers are spending billions on temporary accommodation.
From an economic perspective it may appear nonsensical, certainly in terms of “levelling up”.
Ultimately, an overreliance on the private rented sector, as more landlords sell up, will only serve to deepen social and housing inequality.
A government spokesperson said: “Temporary accommodation is a last resort, but a vital lifeline for those at risk of sleeping rough.
“We are giving councils £316 million this year to prevent homelessness and help ensure families are not left without a roof over their heads.
“We know people are concerned about rising costs, which is why we have announced the energy price guarantee, to support household with their energy bills over the winter, and a further £37 billion of support for those struggling with the cost of living.”
Two chairs of FTSE-100 companies are vying to succeed Adam Crozier at the top of Whitbread, the London-listed group behind the Premier Inn hotel chain.
Sky News has learnt that Christine Hodgson, who chairs water company Severn Trent, and Andrew Martin, chair of the testing and inspection group Intertek, are the leading contenders for the Whitbread job.
Mr Crozier, who has chaired the leisure group since 2018, is expected to step down later this year.
The search, which has been taking place for several months, is expected to conclude in the coming weeks, according to one City source.
Ms Hodgson has some experience of the leisure industry, having served on the board of Ladbrokes Coral Group until 2017, while Mr Martin was a senior executive at the contract caterer Compass Group and finance chief at the travel agent First Choice Holidays.
Under Mr Crozier’s stewardship, Whitbread has been radically reshaped, selling its Costa Coffee subsidiary to The Coca-Cola Company in 2019 for nearly £4bn.
The company has also seen off an activist campaign spearheaded by Elliott Advisers, while Mr Crozier orchestrated the appointment of Dominic Paul, its chief executive, following Alison Brittain’s retirement.
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It said last year that it sees potential to grow the network from 86,000 UK bedrooms to 125,000 over the next decade or so.
Mr Crozier is one of Britain’s most seasoned boardroom figures, and now chairs BT Group and Kantar, the market research and data business backed by Bain Capital and WPP Group.
He previously ran the Football Association, ITV and – in between – Royal Mail Group.
On Friday, shares in Whitbread closed at £25.41, giving the company a market capitalisation of about £4.5bn.
The bosses of four of Britain’s biggest banks are secretly urging the chancellor to ditch the most significant regulatory change imposed after the 2008 financial crisis, warning her its continued imposition is inhibiting UK economic growth.
Sky News has obtained an explosive letter sent this week by the chief executives of HSBC Holdings, Lloyds Banking Group, NatWest Group and Santander UK in which they argue that bank ring-fencing “is not only a drag on banks’ ability to support business and the economy, but is now redundant”.
The CEOs’ letter represents an unprecedented intervention by most of the UK’s major lenders to abolish a reform which cost them billions of pounds to implement and which was designed to make the banking system safer by separating groups’ high street retail operations from their riskier wholesale and investment banking activities.
Their request to Rachel Reeves, the chancellor, to abandon ring-fencing 15 years after it was conceived will be seen as a direct challenge to the government to take drastic action to support the economy during a period when it is forcing economic regulators to scrap red tape.
It will, however, ignite controversy among those who believe that ditching the UK’s most radical post-crisis reform risks exacerbating the consequences of any future banking industry meltdown.
In their letter to the chancellor, the quartet of bank chiefs told Ms Reeves that: “With global economic headwinds, it is crucial that, in support of its Industrial Strategy, the government’s Financial Services Growth and Competitiveness Strategy removes unnecessary constraints on the ability of UK banks to support businesses across the economy and sends the clearest possible signal to investors in the UK of your commitment to reform.
“While we welcomed the recent technical adjustments to the ring-fencing regime, we believe it is now imperative to go further.
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“Removing the ring-fencing regime is, we believe, among the most significant steps the government could take to ensure the prudential framework maximises the banking sector’s ability to support UK businesses and promote economic growth.”
Work on the letter is said to have been led by HSBC, whose new chief executive, Georges Elhedery, is among the signatories.
His counterparts at Lloyds, Charlie Nunn; NatWest’s Paul Thwaite; and Mike Regnier, who runs Santander UK, also signed it.
While Mr Thwaite in particular has been public in questioning the continued need for ring-fencing, the letter – sent on Tuesday – is the first time that such a collective argument has been put so forcefully.
The only notable absentee from the signatories is CS Venkatakrishnan, the Barclays chief executive, although he has publicly said in the past that ring-fencing is not a major financial headache for his bank.
Other industry executives have expressed scepticism about that stance given that ring-fencing’s origination was largely viewed as being an attempt to solve the conundrum posed by Barclays’ vast investment banking operations.
The introduction of ring-fencing forced UK-based lenders with a deposit base of at least £25bn to segregate their retail and investment banking arms, supposedly making them easier to manage in the event that one part of the business faced insolvency.
Banks spent billions of pounds designing and setting up their ring-fenced entities, with separate boards of directors appointed to each division.
More recently, the Treasury has moved to increase the deposit threshold from £25bn to £35bn, amid pressure from a number of faster-growing banks.
Sam Woods, the current chief executive of the main banking regulator, the Prudential Regulation Authority, was involved in formulating proposals published by the Sir John Vickers-led Independent Commission on Banking in 2011.
Legislation to establish ring-fencing was passed in the Financial Services Reform (Banking) Act 2013, and the regime came into effect in 2019.
In addition to ring-fencing, banks were forced to substantially increase the amount and quality of capital they held as a risk buffer, while they were also instructed to create so-called ‘living wills’ in the event that they ran into financial trouble.
The chancellor has repeatedly spoken of the need to regulate for growth rather than risk – a phrase the four banks hope will now persuade her to abandon ring-fencing.
Britain is the only major economy to have adopted such an approach to regulating its banking industry – a fact which the four bank chiefs say is now undermining UK competitiveness.
“Ring-fencing imposes significant and often overlooked costs on businesses, including SMEs, by exposing them to banking constraints not experienced by their international competitors, making it harder for them to scale and compete,” the letter said.
“Lending decisions and pricing are distorted as the considerable liquidity trapped inside the ring-fence can only be used for limited purposes.
“Corporate customers whose financial needs become more complex as they grow larger, more sophisticated, or engage in international trade, are adversely affected given the limits on services ring-fenced banks can provide.
“Removing ring-fencing would eliminate these cliff-edge effects and allow firms to obtain the full suite of products and services from a single bank, reducing administrative costs”.
In recent months, doubts have resurfaced about the commitment of Spanish banking giant Santander to its UK operations amid complaints about the costs of regulation and supervision.
The UK’s fifth-largest high street lender held tentative conversations about a sale to either Barclays or NatWest, although they did not progress to a formal stage.
HSBC, meanwhile, is particularly restless about the impact of ring-fencing on its business, given its sprawling international footprint.
“There has been a material decline in UK wholesale banking since ring-fencing was introduced, to the detriment of British businesses and the perception of the UK as an internationally orientated economy with a global financial centre,” the letter said.
“The regime causes capital inefficiencies and traps liquidity, preventing it from being deployed efficiently across Group entities.”
The four bosses called on Ms Reeves to use this summer’s Mansion House dinner – the City’s annual set-piece event – to deliver “a clear statement of intent…to abolish ring-fencing during this Parliament”.
Doing so, they argued, would “demonstrate the government’s determination to do what it takes to promote growth and send the strongest possible signal to investors of your commitment to the City and to strengthen the UK’s position as a leading international financial centre”.
The Post Office will next week unveil a £1.75bn deal with dozens of banks which will allow their customers to continue using Britain’s biggest retail network.
Sky News has learnt the next Post Office banking framework will be launched next Wednesday, with an agreement that will deliver an additional £500m to the government-owned company.
Banking industry sources said on Friday the deal would be worth roughly £350m annually to the Post Office – an uplift from the existing £250m-a-year deal, which expires at the end of the year.
The sources added that in return for the additional payments, the Post Office would make a range of commitments to improving the service it provides to banks’ customers who use its branches.
Banks which participate in the arrangements include Barclays, HSBC, Lloyds Banking Group, NatWest Group and Santander UK.
Under the Banking Framework Agreement, the 30 banks and mutuals’ customers can access the Post Office’s 11,500 branches for a range of services, including depositing and withdrawing cash.
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The service is particularly valuable to those who still rely on physical cash after a decade in which well over 6,000 bank branches have been closed across Britain.
In 2023, more than £10bn worth of cash was withdrawn over the counter and £29bn in cash was deposited over the counter, the Post Office said last year.
A new, longer-term deal with the banks comes at a critical time for the Post Office, which is trying to secure government funding to bolster the pay of thousands of sub-postmasters.
Reliant on an annual government subsidy, the reputation of the network’s previous management team was left in tatters by the Horizon IT scandal and the wrongful conviction of hundreds of sub-postmasters.
A Post Office spokesperson declined to comment ahead of next week’s announcement.