Barking and Dagenham Council today welcomed the announcement by government that the council will be able to keep some of the money it currently hands over to the treasury - and will now be able to use the cash to fund new housing and housing refurbishment in the borough.

Housing Minister John Healey today announced changes to the controversial housing subsidy system, the Housing Revenue Account (HRA), which Barking and Dagenham Council has campaigned to change.

Until today the council had to pay back more than £20 million of its rental income to Whitehall every year - money that could be used to refurbish and repair council properties.

Today's announcement means the council will be able to keep 10 per cent - around £2.2 million of its rental income, rather than give it back to the government - to spend on housing build and renewal.

The council has already started building the first council houses in the borough for 25 years. 63 new council houses for local families will be built and the council has also bid to the government agency, the Homes and Communities Agency for funding to build a further 191 new council homes - with construction starting next year if the bid is successful.

Cllr Liam Smith, Leader of the Council, said: "The government's announcement is great news for Barking and Dagenham. We have long campaigned for reform of the HRA and while it isn't everything we would have liked, it would be foolish to turn our noses up at an extra £2 million that we can use to improve our housing stock.

"The council has been pressing for change to this subsidy system for years. As well as lots of quiet lobbying behind the scenes, I'm sure local residents who took part in the ‘Tax on Tenants' campaign, and last year's ‘Stand Up For Local Housing' rally in Westminster played their part in Mr Healey's announcement.

"All the people who backed those campaigns, especially those who came with us to the Westminster rally can be very proud. Their efforts have played a major part in this decision.

"As a result of today's announcement there will be more investment in council house building by this council, and more investment in bringing existing properties up to decent home standards. That can only be good news for the people of this borough."

Cllr Phil Waker, cabinet member for housing, added: "The task ahead for us now is two fold - firstly we have to press for even more reforms to housing finance, secondly we have to continue to bid for every available penny of funding out there to build new council houses.

"This announcement means we can not only build more new houses, but also can make a serious start in improving, and hopefully redeveloping, some of our housing estates that are most in need. We have wanted to do these things for years but it is only now that the funding has started to become available and we intend to grab the opportunity."