A £27 MILLION windfall to bring Bury's council houses up to scratch is one step closer.

The Government has welcomed Bury's bid to set up an ALMO -- Arm's Length Management Organisation -- to run its housing estates.

Ministers have also promised that Bury will receive at least 80 per cent of the money it has bid for.

However, the deal depends on Bury's housing service getting a two-star rating from inspectors who will be in the town next June. If they approve, the new ALMO could be operating by the autumn.

A shadow ALMO board, called Six Town Housing, has been set up comprising councillors, tenants' representatives and independents.

Bury's ALMO proposal covers its 8,936 tenanted dwellings of which 2,055 (23 per cent) do not meet the "decent homes" standard. The Government wants to bring all council and housing association homes up to this standard by 2010.

Under an ALMO, tenants would keep the council as their landlord, but their homes would be managed by an arm's-length company. Such a move would bring in money to improve the homes, as councils are unable to raise such huge sums.

ALMOs have been criticised by a Parliamentary select committee for not necessarily delivering the benefits the Government claims.

Members said the money used on them -- as well as large-scale stock transfers and Private Finance Initiative schemes -- could be given directly to councils to improve their houses. However, ministers say this would lead to an unacceptable increase in public expenditure.

They also say that ALMOs show an average 20 per cent improvement in their performance.